110864.23
12.99 10-K
AMENDED AND RESTATED CREDIT AGREEMENT - Page 178
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-753
PENN VIRGINIA CORPORATION
One Radnor Corporate Center, Suite 200
100 Matsonford Road
Radnor, PA 19087
Registrant's telephone number, including area code: (610) 687-8900
Incorporated in I.R.S Employer Identification Number
VIRGINIA 23-1184320
Securities registered pursuant to section 12(b) of the Act: None
Securities Registered pursuant to Section 12(g) of the Act:
Title of Each Class Name of Exchange on which registered
Common Stock, $6.25 Par Value New York Stock Exchange
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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of the voting stock held by non-
affiliates of the Corporation at February 28, 2000 was
$133,026,881, based on the closing price of $16.375 per share. As
of that date, 8,123,779 shares of common stock were issued and
outstanding. The number of shareholders of record of the
registrant was 851 as of February 28, 2000.
DOCUMENTS INCORPORATED BY REFERENCE:
Part Into
Which Incorporated
(1) Proxy Statement for Stockholder Meeting Part III
on May 2, 2000
Penn Virginia Corporation and Subsidiaries
Part I
1.Business
2.Properties
3.Legal Proceedings
4.Submission of Matters to a Vote of Security Holders
Part II
5.Market for Registrant's Common Equity and Related Stockholder
Matters
6.Selected Financial Data
7.Management's Discussion and Analysis of Financial Condition and
Results of Operations
8.Financial Statements and Supplementary Data
9.Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
Part III
10. Directors and Executive Officers of the Registrant
11. Executive Compensation
12. Security Ownership of Certain Beneficial Owners and
Management
13. Certain Relationships and Related Transactions
Part IV
14. Exhibits, Financial Statement Schedules and Reports on Form
8-K
Part 1
ITEM 1 - BUSINESS
General
Penn Virginia Corporation ("Penn Virginia" or the "Company") is
a Virginia corporation founded in 1882. The Company is engaged in
the exploration, development and production of oil and natural gas
and the collection of royalties and overriding royalty interests
on various oil and gas properties; the leasing of coal mineral
rights and the collection of related royalties.
Penn Virginia explores for, develops and produces crude oil,
condensate and natural gas in the eastern and southern portions of
the United States. The Company had proved reserves of 359,000
barrels of oil and condensate and 185.2 billion cubic feet of
natural gas at December 31, 1999.
The Company owned mineral rights to 488 million tons of mineable
and merchantable coal reserves located in central Appalachia at
December 31, 1999. Its coal reserves include both surface and
underground mineable seams. The reserves are generally high
quality, low-sulfur bituminous coal and are leased to various
operators.
Financial Information
The Company operates in two primary business segments: (1) oil
and gas and (2) coal royalty and land management. Financial
information concerning the Company's business segments can be
found in Note 15 (Segment Information) of the Notes to the
Consolidated Financial Statements of Penn Virginia Corporation
which is included in this report.
Oil and Gas
Overview
Penn Virginia's oil and gas properties are located in the
eastern and southern portions of the United States. At December
31, 1999, the Company had 187.4 Bcfe of proved reserves (185.2 Bcf
of natural gas) including 173.1 Bcfe of working interests and 14.3
Bcfe of royalty interests.
Oil and Gas Production
During 1999, 32,000 barrels of oil and condensate and 8,679 MMcf
of natural gas, net to the Company's interest, were produced
compared with 30,000 barrels and 8,056 MMcf in 1998. Prices
received by the Company were $14.47 and $11.17 per barrel and
$2.46 and $2.54 per Mcf for oil and gas in 1999 and 1998,
respectively.
Exploration and Development
The Company drilled 50.8 net wells in 1999 of which 40.1 were
development and 10.7 were exploratory. A total of 3.5 net wells
were non-productive. The successful wells drilled in 1999
contained 14,162 MMcfe of proved developed producing reserves. In
December 1999, the Company purchased a 20 percent interest in a
Texas onshore gulf coast exploration project for an initial cost
of $2.4 million. The project covers 35,000 acres and evidences
Penn Virginia's strategy to expand and diversify its oil and gas
operations outside of the eastern United States through strategic
acquisitions, drilling and exploration.
Transportation
Penn Virginia transports its natural gas to market on various
gathering, transmission and pipeline systems owned primarily by
third parties. The Company's natural gas is gathered principally
by Consolidated Natural Gas "CNG" and Columbia Natural Resources
"CNR". These two primary providers gathered 38 percent and 37
percent of the Company's natural gas for 1999 and 1998,
respectively. Interruptible gathering rates have increased over
the years as pipelines have implemented the mandatory unbundling
of gathering services (Federal Energy Regulatory Commission Order
636) from other transportation services. CNG's interruptible
gathering rates remain unchanged at 19.4 cents per MMbtu for 2000.
CNR's interruptible gathering rates increased from 27 cents to 32
cents per MMbtu, effective February 2000.
The majority of Penn Virginia's natural gas production is
transported to market primarily on two major transmission systems.
Columbia Gas Transmission and CNG Transmission transport 57
percent and 30 percent, respectively, of the Company's natural gas
production. Production could be adversely affected by shutdowns
of the pipelines for maintenance or replacement as pipeline
flexibility is limited. Additionally, the Company acquired
certain oil and gas properties in Mississippi for $13.7 million,
which included a gathering line that transports 10 percent of the
Company's current production.
Marketing
Penn Virginia generally sells its natural gas using the spot
market, commodity derivative contracts and short-term fixed price
physical contracts. From time to time, the Company enters into
commodity derivative contracts or fixed price physical contracts
to mitigate the risk associated with the volatility of natural gas
prices. In April 1997, Penn Virginia executed a contract for a
participating forward swap for 5,000 MMbtu's per day with a floor
price of $2.10 per MMbtu and a re-entry price of $2.48 per MMbtu
for the period of May 1997 through October 1999. In September
1998, the Company completed a second participating forward swap
for an additional 5,000 MMbtu's per day with a floor price of
$2.10 per MMbtu and a re-entry price of $2.35 per MMbtu for the
period of November 1997 through October 1999. Currently, Penn
Virginia is not utilizing any commodity derivative contracts;
however, the Company may use contracts in the future to reduce the
risk of price fluctuations. For additional information, see "Item
7. - Management's Discussion and Analysis of Financial Condition
and Results of Operations - Oil and Gas."
Coal Royalty and Land Management Operations
Overview
Penn Virginia owned 163,000 acres of coal and timber bearing
land in central Appalachia at December 31, 1999. The Company
earns coal royalty revenue, based on long-term lease agreements
with several coal mining operators which generally require royalty
payments to Penn Virginia based on a minimum annual payment, a
minimum dollar royalty per ton and/or a percentage of the coal's
selling price. The Company does not operate coal mines.
The Company's timber assets consist of various hardwoods,
primarily red oak, white oak, yellow poplar and black cherry. The
Company owns 199 million board feet of standing saw timber.
Coal Production
Several operators mined 8.6 million tons of coal from Penn
Virginia's properties in 1999 and paid an average royalty of $2.05
per ton, compared with 5.3 million tons mined in 1998 at an
average royalty of $2.03 per ton.
At December 31, 1999, the Company's mineable and merchantable
coal reserves in central Appalachia were estimated at 488 million
tons. At December 31, 1999, the Company's central Appalachia
properties had operators actively mining a total of 31 separate
lease locations.
Timber Production
The Company sold 9.0 MMbf board feet in 1999 for an average
price of $175 per Mbf, compared with 8.0 MMbf board feet at an
average price of $185 per Mbf in 1998. Timber is harvested in
advance of lessee mining to prevent loss of the resource. Timber
is sold in competitive bid sales involving individual parcels and
also on a contract basis, whereby Penn Virginia pays independent
contractors to harvest timber while the Company directly markets
the product.
Investments
The Company holds equity investments, primarily in Norfolk
Southern Corporation. The Company's 3,307,200 shares of Norfolk
Southern Corporation generated dividends of $2.6 million in 1999,
1998 and 1997. The fair value of the Company's equity portfolio
at December 31, 1999 was $67.8 million compared with $104.8
million at December 31, 1998. See Note 4 (Investments and Other
Income) of the Notes to the Consolidated Financial Statements for
additional information.
Risks Associated with Business Activities
General
Government Regulations
Each of Penn Virginia's businesses is subject to extensive rules
and regulations promulgated by various federal, state and local
government agencies. Failure to comply with such rules and
regulations can result in substantial penalties. The regulatory
burden increases the Company's cost of doing business and affects
its profitability. Although the Company believes it is in material
compliance with all rules, regulations and laws, there can be no
assurance that new interpretations of existing rules, regulations
and laws will not adversely affect the Company's business and
operations.
Competition
The energy industry is highly competitive. Many of the Company's
competitors are large, well-established companies with
substantially larger operating staffs, greater capital resources
and established long-term strategic positions.
Oil and Gas
Prices
Penn Virginia's revenues, profitability and future rate of
growth are highly dependent on the prevailing prices for oil and
gas, which are affected by numerous factors that are generally
beyond the Company's control. Crude oil prices are generally
determined by global supply and demand. Natural gas prices are
influenced by national and regional supply and demand. A
substantial or extended decline in the prices of oil or gas could
have a material adverse effect on the Company's revenues,
profitability and cash flow and could, under certain
circumstances, result in an impairment of the Company's oil and
gas properties.
Exploratory Drilling
Both development and exploratory drilling involve risks.
However, exploratory drilling involves greater risks of dry holes
or failure to find commercial quantities of hydrocarbons than does
development drilling. The Company anticipates the number of
exploratory prospects drilled in the short and long-term may
increase, compared with historical amounts. Consequently, it is
likely that the Company will experience increased levels of
exploration expense in 2000 and beyond.
Transportation
Penn Virginia's natural gas production is transported to market
primarily on two major transmission systems. Columbia Gas
Transmission and CNG Transmission transport 57 percent and 30
percent, respectively, of the Company's natural gas production.
Production can be adversely affected by shutdowns of the pipelines
for maintenance or replacement, as pipeline flexibility is
limited.
Coal Royalty and Land Management
Operating Risks
Penn Virginia's coal royalty stream is impacted by several
factors, which the Company generally cannot control. The number
of tons mined annually is determined by an operator's mining
efficiency, labor availability, geologic conditions, financial
stability, ability to market coal and ability to arrange reliable
transportation to the end-user. Coal emissions are regulated by
various federal and state agencies which affect the quality of
coal that can be burned within compliance guidelines.
Investments
The value of the Company's investment portfolio is subject to
market price fluctuations.
Employees
Penn Virginia had 64 employees at December 31, 1999. The
Company considers its relations with its employees to be good.
Executive Officers of the Company
Below is a list of executive officers of the Company
including their ages and positions held. Each officer is elected
annually by the Board of Directors and serves at the pleasure of
the Board of Directors.
<TABLE> Office
NAME Age Office Held Since
<S> <C> <C> <C> <C>
A. James Dearlove 52 President and Chief 1996
Executive Officer
Steven W. Tholen 49 Vice President and 1995
Chief Financial Officer
Keith D. Horton 46 Vice President, 1996
Eastern Operations
James O. Idiaquez 52 Vice President, 1998
Corporate Development
Nancy M. Snyder 47 Corporate Secretary and 1997
General Counsel
Ann N. Horton 41 Principal Accounting 1995
Officer and Controller
</TABLE>
A. James Dearlove - Mr. Dearlove is the President and Chief
Executive Officer. He has served in various capacities with the
Company since 1977 including Vice President since 1986, Senior
Vice President since 1992 and President since 1994. Mr. Dearlove
was elected to the Company's Board of Directors effective February
6, 1996. He was appointed Chief Executive Officer in May 1996. He
also serves as director of the Powell River Project and the
National Council of Coal Lessors.
Steven W. Tholen - Mr. Tholen is a Vice President and the
Chief Financial Officer. He joined the Company in 1995.
Previously, he served in various capacities at Cabot Oil and Gas
Corporation, most recently as Treasurer.
Keith D. Horton - Mr. Horton was elected Vice President, Eastern
Operations in February 1999 and has served as an executive officer
for the Company since 1996. He also serves as President of the
Company's oil and gas, and coal and land management subsidiaries.
He has served in various capacities with the Company since 1981.
Mr. Horton serves as Chairman of the Central Appalachian Section
of the Society of Mining Engineers. He also serves as a director
of the Virginia Mining Association, Powell River Project and the
Virginia Coal Council.
James O. Idiaquez - Mr. Idiaquez has served as Vice President,
Corporate Development for the Company since October 1998. From
1978 to 1998, Mr. Idiaquez served in various management
capacities, including corporate planning and acquisitions and
divestitures, with Burlington Resources, Inc. and The Louisiana
Land & Exploration Company.
Nancy M. Snyder - Ms. Snyder has served as Corporate Secretary
and General Counsel since joining the Company in 1997.
Previously, Ms. Snyder was in private and firm practices in the
areas of general corporate and securities law.
Ann N. Horton - Mrs. Horton has served as Principal Accounting
Officer and Controller of the Company since 1995. She has served
in various capacities with the Company and its subsidiaries since
1981.
The following terms have the meanings indicated below when used
in this report.
Bbl - means a standard barrel of 42 U.S. gallons liquid volume
Bcf - means one billion cubic feet
Bcfe - means one billion cubic feet equivalent with one barrel of
oil or condensate converted to six thousand
cubic feet of natural gas based on the estimated relative energy
content
Gross - acre or well means an acre or well in which a working
interest is owned
Mbbl - means one thousand barrels
Mbf - means one thousand board feet
Mcf - means one thousand cubic feet
MMbf - means one million board feet
MMbtu - means one million British thermal units
MMcf - means one million cubic feet
Net - acres or wells is determined by multiplying the gross
acres or wells by the working interest in those
gross acres or wells
Proved
Reserves- means those estimated quantities of crude oil,
condensate and natural gas that geological and engineering
data demonstrate with reasonable certainty to be
recoverable in future years from known oil and gas
reservoirs under existing economic and operating conditions
ITEM 2 - PROPERTIES
Facilities
Penn Virginia Corporation is headquartered in Radnor,
Pennsylvania with additional offices in Duffield, Virginia;
Charleston, West Virginia; and Houston, Texas. The Company
believes its leased properties are adequate for current needs.
Title to Properties
Penn Virginia believes it has satisfactory title to all of its
properties in accordance with standards generally accepted in the
oil and gas and coal royalty and land management industries.
As is customary in the oil and gas industry, the Company makes
only a cursory review of title to farmout acreage and to
undeveloped oil and gas leases upon execution of any contracts.
Prior to the commencement of drilling operations, a thorough title
examination is conducted and curative work is performed with
respect to significant defects. To the extent title opinions or
other investigations reflect defects, Penn Virginia cures such
title defects. If the Company was unable to remedy or cure any
title defect of a nature such that it would not be prudent to
commence drilling operations on a property, the Company could
suffer a loss of its investment in the property. Penn Virginia
has obtained title opinions on substantially all of its producing
properties and believes that it has satisfactory title to such
properties in accordance with standards generally accepted in the
oil and gas industry. Prior to completing an acquisition of
producing oil and gas leases, the Company obtains title opinions
on all material leases. Penn Virginia's oil and gas properties
are subject to customary royalty interests, liens for current
taxes and other burdens that the Company believes do not
materially interfere with the use or affect the value of such
properties.
Of the 163,000 acres of coal and timber bearing land, Penn
Virginia owns 70 percent in fee and 30 percent in mineral.
Additionally, the Company leases over 25,000 acres of coal and
timber bearing land from third parties.
Oil and Gas
Production and Pricing
The following table sets forth production, sales prices and
production costs with respect to the Company's properties for the
years ended December 31, 1999, 1998 and 1997.
<TABLE>
1999 1998 1997
<S> <C> <C> <C>
Production
Oil and condensate (Mbbls) 32 30 38
Natural gas (MMcf) 8,679 8,056 7,755
Average sales price
Oil and condensate ($/Bbl) $14.47 $11.17 $17.39
Natural gas ($/Mcf) 2.46 2.54 2.81
Production cost
Operating cost per Mcfe $0.46 $0.46 $0.42
Production taxes per Mcfe 0.25 0.28 0.26
Total production cost per Mcfe $0.71 $0.74 $0.68
Hedging Summary
Natural gas prices ($/Mcf):
Actual price received $2.50 $2.61 $2.87
for production
Effect of hedging activities (.04) (.07) (.06)
Average price $2.46 $2.54 $2.81
</TABLE>
Proved Reserves
Penn Virginia had proved reserves of 359,000 barrels of crude
oil and condensate and 185.2 Bcf of natural gas at December 31,
1999. The present value of the estimated future cash flows
discounted at 10 percent (Pre-tax SEC PV10 Value) at December 31,
1999 was $136 million. At December 31, 1999, the Company had 240
gross (139 net) proved undeveloped drilling locations.
<TABLE>
Natural Pre-tax
Oil and Natural Gas SEC PV10
Condensate Gas Equivalents Value
(Mbbls) (Bcf) (Bcfe) ($MM)
<S> <C> <C> <C> <C>
1999
Developed 326 138 140 $116
Undeveloped 33 47 47 20
Total 359 185 187 $136
1998
Developed 313 118 120 $ 73
Undeveloped 28 46 46 8
Total 341 164 166 $ 81
1997
Developed 364 110 112 $110
Undeveloped 60 61 61 31
Total 424 171 173 $141
</TABLE>
The standardized measure of discounted future net cash flows,
which represents the present value of future net revenues after
income taxes discounted at ten percent, was $119 million, $76
million and $119 million at December 31, 1999, 1998 and 1997,
respectively. The weighted average prices used to determine
proved reserves at December 31, 1999, 1998 and 1997 were ($/Bbl)
$21.78, $9.70 and $15.50, respectively, for oil and condensate and
($/Mcf) $2.69, $2.14 and $3.11, respectively, for natural gas.
For information on the changes in standardized measure of
discounted future net cash flows, see "Note 17. Supplementary
Information on Oil and Gas Producing Activities (Unaudited)" in
"Item 8. - Financial Statements and Supplementary Data."
In accordance with the Securities and Exchange Commission's
guidelines, the engineers' estimates of future net revenues from
the Company's properties and the pre-tax SEC PV10 value thereof
are made using oil and natural gas sales prices in effect at the
dates of such estimates. The prices are held constant throughout
the life of the properties except where such guidelines permit
alternate treatment, including the use of fixed and determinable
contractual price escalations. Net proved oil and gas reserves
for the three years ended December 31, 1999 were estimated by
Wright and Company, Inc. Prices for natural gas and, to a lesser
extent, oil are subject to substantial seasonal fluctuations and
prices for each are subject to substantial fluctuations as a
result of numerous other factors. See "Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
Proved reserves are the estimated quantities of natural gas and
condensate that geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions.
Proved developed reserves are proved reserves that can be expected
to be recovered through existing wells with existing equipment and
operating methods. There are numerous uncertainties inherent in
estimating quantities of proved reserves and in projecting future
rates of production and timing of development expenditures,
including many factors beyond the control of the Company. Reserve
engineering is a subjective process of estimating underground
accumulations of oil and natural gas that cannot be measured in an
exact manner, and the accuracy of any reserve estimate is a
function of the quality of available data and of engineering and
geological interpretation and judgement. The quantities of oil
and natural gas that are ultimately recovered, production and
operating costs, the amount of timing of future development
expenditures and future oil and natural gas sales prices may all
differ from those assumed in these estimates. Therefore, the pre-
tax SEC PV10 value amounts shown above should not be construed as
the current market value of the estimated oil and natural gas
reserves attributable to the Company's properties. The
information set forth in the foregoing tables includes revisions
of certain volumetric reserve estimates attributable to proved
properties included in the preceding year's estimates. Such
revisions are the result of additional information from subsequent
completions and production history from the properties involved or
the result of a decrease (or increase) in the projected economic
life of such properties resulting from changes in production
prices.
Acreage
The following table sets forth the Company's developed and
undeveloped acreage at December 31, 1999. The Company's acreage is
located in the eastern and southern portions of the United States.
<TABLE>
Gross Acreage Net Acreage
(in thousands)
<S> <C> <C>
Developed 312 162
Undeveloped 129 50
Total 441 212
</TABLE>
Wells Drilled
The following table sets forth the gross and net number of
exploratory and development wells drilled during the last three
years. The number of wells drilled means the number of wells spud
at any time during the respective year. Net wells equal the number
of gross wells multiplied by Penn Virginia's working interest in
each of the gross wells. Productive wells represent either wells
which were producing or which were capable of commercial
production.
<TABLE>
1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Development Gross Net Gross Net Gross Net
Productive 61 38.1 56 37.0 53 42.0
Non-productive 2 2.0 3 3.0 1 1.0
63 40.1 59 40.0 54 43.0
Exploratory
Productive 16 9.2 15 8.1 31 16.0
Non-productive 3 1.5 3 1.5 5 3.0
19 10.7 18 9.6 36 19.0
Total 82 50.8 77 49.6 90 62.0
</TABLE>
The four gross (2.0 net) wells under evaluation at the end of
1998 were non-productive.
Productive Wells
The number of productive oil and gas wells in which Penn
Virginia had an interest at December 31, 1999 is set forth below.
Productive wells are producing wells or wells capable of
commercial production.
<TABLE>
Operated Wells Non-Operated Wells Total
Gross Net Gross Net Gross Net
<S> <C> <C> <C> <C> <C> <C>
Oil 10 10 6 2 16 12
Gas 780 656 400 61 1,180 717
Total 790 666 406 63 1,196 729
</TABLE>
Coal Royalty and Land Management
Penn Virginia's coal reserves and timber assets at December 31,
1999 covered 163,000 acres, including fee acreage, in central
Appalachia. The coal reserves are in various surface and
underground seams.
Penn Virginia's mineable and merchantable coal reserves are
estimated at 488 million tons as of December 31, 1999. Mineable
and merchantable coal reserves means coal that is economically
mineable using existing equipment and methods under federal and
state laws now in effect. Reserve estimates are adjusted annually
for production, unmineable areas, acquisitions and sales of coal
in place. The majority of the Company's reserves are high in
energy content, low in sulfur and suitable for either the steam or
metallurgical markets.
The amount of coal a lessee can profitably mine at any given
time is subject to several factors and may be substantially
different from "mineable and merchantable reserves." Included
among the factors that influence profitability are the existing
market price, coal quality and operating costs.
The Company's timber assets consist of various hardwoods,
primarily red oak, white oak, yellow poplar and black cherry. At
December 31, 1999, the Company owned 199 million board feet of
standing saw timber.
Coal Reserves
The following table sets forth the coal reserves that are owned
by the Company. The reserves are estimated internally by the
Company's engineers.
<TABLE>
1999 1998 1997
(in million tons)
<S> <C> <C> <C>
Beginning of year 384.7 379.8 357.6
Production (8.6) (5.3) (5.4)
Additions, deletions, revisions 112.3 10.2 27.6
End of year 488.4 384.7 379.8
</TABLE>
ITEM 3 - LEGAL PROCEEDINGS
The Company is involved in various legal proceedings arising in
the ordinary course of business. While the ultimate results of
these cannot be predicted with certainty, Company management
believes these claims will not have a material effect on the
Company's financial position, liquidity or operations.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders
during the fourth quarter of 1999.
PART II
ITEM 5 - MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER
MATTERS
Common Stock Market Prices And Dividends
High and low closing stock prices and dividends for the last two
years were:
<TABLE>
1999 1998
Cash Cash
Sales Price Dividends Sales Price Dividends
High Low Paid High Low Paid
<S> <C> <C> <C> <C> <C> <C>
Quarter Ended:
March 31 $20-3/4 $16-11/16 $0.225 $29-1/4 $26-7/8 $0.225
June 30 $21-11/16 $17-5/16 $0.225 $30 $25-7/8 $0.225
September 30 $23-1/16 $20-1/2 $0.225 $26-11/32 $21-1/8 $0.225
December 31 $21 $16-1/8 $0.225 $23-1/2 $18-3/8 $0.225
</TABLE>
The Company's common stock is traded on the New York Stock
Exchange under the symbol PVA.
ITEM 6 - SELECTED FINANCIAL DATA
Five Year Selected Financial Data
<TABLE>
Year Ended December 31, 1999 1998 1997(a) 1996(a) 1995(a)
(in thousands except per share data)
<S> <C> <C> <C> <C> <C>
Revenues (b) $47,135 $38,144 $41,132 $34,102 $38,890
Operating income 20,715 10,266 18,719 13,212 5,855
Net income $14,504 $ 9,591 $16,018 $13,040 $10,084
Per common share:
Net income, basic $ 1.73 $ 1.15 $ 1.93 $ 1.51 $ 1.18
Net income, diluted 1.71 1.13 1.88 1.50 1.18
Dividends paid $ 0.90 $ 0.90 $ 0.90 $ 0.90 $ 0.90
Weighted average 8,406 8,310 8,302 8,694 8,538
shares outstanding
Total assets $274,011 $256,931 $247,230 $229,514 $206,001
Long-term debt $78,475 $37,967 $31,903 $21,233 $12,700
Stockholders' equity $154,343 $170,259 $163,704 $160,211 $147,357
</TABLE>
(a) All weighted average share and per share data have been
restated to reflect the two-for-one split of the Company's
common stock in August 1997.
(b) Certain reclassifications between revenues and operating
expenses have been made to conform to the current year
presentation.
SUMMARIZED QUARTERLY FINANCIAL DATA
Quarterly financial data for 1999 and 1998 were as follows:
<TABLE>
1999 1998
Quarters Ended Quarters Ended
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mar.31 June 30 Sept.30 Dec.31 Mar.31 June 30 Sept.30 Dec.31(b)
Revenues (c) $9,509 $10,437 $12,306 $14,883 $9,050 $9,941 $9,779 $9,374
Operating 3,835 4,042 5,430 7,408 3,760 4,266 4,335 (2,095)
Income
(loss)
Net income $2,915 $3,165 $3,945 $4,479 $3,152 $3,666 $3,442 $(669)
(loss)
Net income
per share,
basic (a) $0.35 $0.38 $0.47 $0.53 $0.38 $0.44 $0.41 $(0.08)
Net income
per share,
diluted (a) $0.35 $0.37 $0.46 $0.53 $0.37 $0.43 $0.41 $(0.08)
Weighted average
shares
outstanding 8,371 8,410 8,423 8,423 8,278 8,291 8,308 8,354
</TABLE>
(a) The sum of the quarters may not equal the total of the
respective year's net income per share due to changes in the
weighted average shares outstanding throughout the year.
(b) Operating income for fourth quarter of 1998 included a
noncash charge relating to impairments of certain oil and gas
properties of $4.6 million ($3.7 million after tax) primarily due
to a decline in commodity prices and a restructuring charge of
$0.6 million ($0.4 million after tax).
(c) Certain reclassifications between revenues and operating
expenses have been made to conform to the current year
presentation.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following review of operations and financial condition of
Penn Virginia Corporation and subsidiaries should be read in
conjunction with the Consolidated Financial Statements and Notes
thereto.
Overview
Penn Virginia's net income for 1999 was $14.5 million with
operating income of $20.7 million. The comparable 1998 results
were net income of $9.6 million and operating income of $10.3
million. Revenues for 1999 were $47.1 million, a 24 percent
increase over 1998 and net income was $14.5 million, or $1.71 per
share (diluted), a 51 percent increase over the 1998 level of $9.6
million, or $1.13 per share (diluted). The 1999 increases were a
direct result of increased production of natural gas and higher
levels of coal royalties. The Company's 1998 financial
performance was adversely impacted by a noncash charge relating to
impairments of certain oil and gas properties of $4.6 million
($3.7 million after tax) primarily due to a decline in commodity
prices and a restructuring charge of $0.6 million ($0.4 million
after tax).
During 1999, Penn Virginia successfully expanded its oil and gas
operations into Mississippi and the Texas onshore gulf coast and
began an ambitious exploration program. As a result of a
strategic coal acquisition, the Company's coal reserves grew by 27
percent to 488 million tons.
Management believes its natural gas operations will be expanded
over the next several years through a combination of exploitation,
exploration and acquisition of new properties. In July 1999, Penn
Virginia acquired certain oil and gas properties in Mississippi
for $13.7 million. The acquisition, which is 99 percent natural
gas, added 23.3 Bcfe in proved reserves and provides numerous
future drilling locations, which is the primary focus of the
Company's 2000 drilling program. The majority of the low-risk
developmental drilling locations are in the Selma Chalk formation
at a depth of 6,900 feet. In December 1999, the Company purchased
a 20 percent working interest in a Texas onshore gulf coast
exploration project for $2.4 million. The project is in its
initial phases and is comprised of a portfolio of drilling
prospects with varying risk/reward characteristics.
Historically, Penn Virginia has focused most of its operations
in the eastern United States and particularly in Appalachia.
However, the Company believes continued growth opportunities,
especially in oil and natural gas, will be enhanced by a presence
outside the Appalachian Basin. In the fourth quarter of 1998, the
Company opened a regional office in Houston, Texas for the purpose
of establishing a meaningful, non-Appalachian presence in oil and
natural gas.
The Company continued its aggressive drilling program in 1999 by
drilling 82 gross (50.8 net) wells. In 1999, Penn Virginia
produced a record 8,871 MMcfe of oil and natural gas, which was an
eight percent increase over 1998.
Penn Virginia participates in the coal industry exclusively
through its royalty position. The Company leases the rights to
mine its coal reserves to various operators who pay a minimum
annual payment, a minimum dollar royalty per ton and/or a
percentage of the sales price. Since the Company does not mine
the coal, the coal royalty and land management segment tends to
have relatively high margins. Coal royalty and land management
segment revenues increased $7.1 million, or 49 percent, to $21.5
million in 1999. The increase was attributable to enhanced
production from lessees due to the completion of the unit train
loadout facility, start-up operations from some lessees and
acquisitions.
In April 1999, Penn Virginia completed a $5.2 million state-of-
the-art coal loadout facility in Virginia. The facility
accomodates 100 rail car unit trains which can be loaded in
approximately four hours, thus generating substantial savings for
the Company's lessees. The loadout is primarily utilized by the
Company's lessees and provides them a competitive advantage by
reducing delivery costs to their principal customers.
Additionally, the loadout facility has accelerated the cash flow
received by the Company, primarily due to increased production
from lessees.
In September 1999, Penn Virginia completed a $30 million
acquisition which included over 90 million tons of high quality
coal reserves, as well as oil and gas leases, timber assets, a
short line railroad and a coal loading dock on the Kanawha River.
The acquisition covers over 24,000 acres and complements the
existing asset base of the Company's Coal River Properties. The
Company continues to diversify its coal customer base by adding
additional lessees and by searching for additional coal reserve
acquisition opportunities.
At December 31, 1999, the Company owned 3,307,200 shares of
Norfolk Southern stock, which decreased in priced from $31.6875
per share at December 31, 1998 to $20.50 per share, reducing the
value of the investment by $37.0 million, or $24.1 million after
tax. See Note 4 (Investments and Dividend Income).
Results of Operations
Consolidated Net Income
Penn Virginia's 1999 net income was $14.5 million, compared with
$9.6 million in 1998 and $16.0 million in 1997. Revenues for 1999
were $47.1 million, a 24 percent increase over 1998 and net income
was $14.5 million, or $1.71 per share (diluted), a 51 percent
increase over the 1998 level of $9.6 million, or $1.13 per share
(diluted). The 1999 increases were a direct result of increased
production of natural gas and higher levels of coal royalties.
Net income for 1998 included a noncash charge relating to
impairments of certain oil and gas properties of $4.6 million
($3.7 million after tax) primarily due to a decline in commodity
prices and a restructuring charge of $0.6 million ($0.4 million
after tax).
Income before income taxes includes a gain of approximately $2.0
million on the sale of non-strategic oil and gas properties in
November 1997.
<TABLE>
Selected Financial Data
1999 1998 1997
(in millions, except share data)
<S> <C> <C> <C>
Revenues $47.1 $38.1 $41.1
Operating costs and expenses 26.4 27.9 22.4
Operating income 20.7 10.3 18.7
Net income 14.5 9.6 16.0
Earnings per share, basic 1.73 1.15 1.93
Earnings per share, diluted 1.71 1.13 1.88
</TABLE>
Oil and Gas Segment
The oil and gas segment explores for, develops and produces
crude oil and natural gas in the eastern and southern portions of
the United States. The Company also owns mineral rights to oil and
gas reserves.
<TABLE>
Selected Financial and Operating Data
1999 1998 1997
(in thousands, except as noted)
<S> <C> <C> <C>
Revenues
Oil and condensate $ 463 $ 335 $ 661
Natural gas sales 21,384 20,482 21,849
Gain on the sale of property - 2 1,889
Other 1,095 289 469
Total Revenues 22,942 21,108 24,868
Expenses
Lease operating expenses 4,090 3,761 3,356
Exploration expenses 1,699 488 1,439
Taxes other than income 2,165 2,343 2,069
General and administrative 2,148 3,153 2,675
Operating Expenses 10,102 9,745 9,539
Depreciation, depletion
and amortization 6,951 6,460 5,920
Loss on the sale of properties - 6 4
Impairment of properties - 4,641 -
Total Expenses 17,053 20,852 15,463
Operating Income $5,889 $ 256 $9,405
Production
Oil and condensate (MBbls) 32 30 38
Natural gas (MMcf) 8,679 8,056 7,755
Prices
Oil and condensate ($/Bbl) $14.47 $11.17 $17.39
Natural gas ($/Mcf) 2.46 2.54 2.81
Hedging Summary
Natural gas prices ($/Mcf):
Actual price received for
production $ 2.50 $ 2.61 $2.87
Effect of hedging activities (.04) (.07) (.06)
Average price $2.46 $ 2.54 $ 2.81
</TABLE>
The oil and gas segment had operating income of $5.9 million in
1999 compared with $0.3 million in 1998 and $9.4 million in 1997.
Revenues. Oil and gas revenues increased $1.9 million, or nine
percent, from 1998 to 1999 primarily due to a $0.8 million
increase in natural gas sales and a $0.8 million increase in other
income. Natural gas production increased eight percent, offset by
a three percent decrease in average price per Mcf. The production
increase is a result of an acquisition in Mississippi and the
Company's 1999 drilling program. Other operating income increased
$0.8 million due to $0.4 million received for the final settlement
of a 1995 contract dispute and $0.2 million for reimbursement of
lost production caused by third party pipeline damages.
Revenues for the oil and gas segment decreased $3.8 million, or
15 percent, from 1997 to 1998. The change resulted from a 10
percent decrease in average natural gas prices recognized by the
Company, offset by a three percent increase in production.
Additionally, a $2.0 million gain on the sale of oil and gas
properties was included in 1997 revenues.
The Company, from time to time, hedges the price received for
market-sensitive production through the use of swaps with
purchased options. Gains and losses from hedging activities are
included in natural gas revenues when the hedged production
occurs. The Company recognized a loss of $0.4 million in 1999 and
$0.5 million in 1998 and 1997 on hedging activities.
Operating expenses. Production costs, consisting of lease
operating expense and taxes other than income, increased from $6.1
million in 1998 to $6.3 million in 1999. On a Mcfe basis,
production costs decreased from $0.74 per Mcfe in 1998 to $0.71
per Mcfe in 1999. The decrease on a Mcfe basis resulted from less
tax being paid due to the relocation of the offices of the oil and
gas segment.
Exploration expenses increased from $0.5 million in 1998 to $1.7
million in 1999. The increase is attributable to charges relating
to seven gross (3.5 net) nonproductive, exploratory wells and
preliminary field costs incurred in 1999. Additionally, the
Company's exploration program included $0.3 million in seismic
expenditures.
General and administrative expenses decreased from $3.2 million
in 1998 to $2.1 million in 1999. The decrease primarily relates
to the Company's 1998 plan to reduce administrative and
operational overhead costs in its oil and gas subsidiary. In
connection with the plan, the Company recorded a pre-tax charge to
general and administrative expense totaling $0.6 million in 1998
related to severance costs for six employees and a lease
cancellation penalty. The Company completed its restructuring
plan in August 1999. There were no adjustments to the liability
recorded in 1998 that resulted in an adjustment to net income in
1999.
The oil and gas segment's operating expenses increased $0.2
million, or two percent, in 1998. In the fourth quarter of 1998,
the Company's management approved the aforementioned $0.6 million
plan to reduce administrative and operational overhead costs in
its oil and gas subsidiary. Lease operating expenses increased
$0.4 million as a result of increased production and additional
operating expenses associated with the Company's new coalbed
methane wells. These 1998 increases were offset by a $0.9 million
decline in exploration expenses due to a reduction in dry hole
costs.
Depreciation, depletion and amortization. Oil and gas
depreciation, depletion and amortization increased to $7.0 million
in 1999 but remained relatively constant on a unit basis at $0.79
per Mcfe in 1999, compared with $6.4 million, or $0.78 per Mcfe,
in 1998.
Oil and gas depreciation, depletion and amortization increased
$0.5 million to $6.4 million in 1998, compared with $5.9 million
in 1997. The change was attributable to the decrease in natural
gas pricing used in the 1998 year-end reserve reports, which
caused negative reserve revisions and, consequently, a higher
depletion rate using the units-of-production method.
Impairment of oil and gas properties. In accordance with SFAS
No. 121, the Company reviews its oil and gas properties for
impairment whenever events and circumstances indicate a decline in
the recoverability of their carrying value. In the fourth quarter
of 1998, the Company estimated the expected future cash flows of
its oil and gas properties and compared such future cash flows to
the carrying amount of the oil and gas properties to determine if
the carrying amount was recoverable. For those oil and gas
properties which the carrying amount exceeded the estimated
undiscounted future cash flows, an impairment was determined to
exist; thus, the Company adjusted the carrying amount of the
respective oil and gas properties to their fair value as
determined by discounting their estimated future cash flows. The
factors used to determine fair value included, but were not
limited to, estimates of proved reserves, future commodity
pricing, future production estimates, anticipated capital
expenditures and a discount rate commensurate with the Company's
internal rate of return on its oil and gas properties. As a
result, the Company recognized a noncash pre-tax charge of $4.6
million ($3.7 million after tax) related to its oil and gas
properties in the fourth quarter of 1998.
Coal Royalty and Land Management Segment
The coal and land segment includes Penn Virginia's mineral
rights to coal reserves, its timber assets and its land assets.
<TABLE>
Selected Financial and Operating Data
1999 1998 1997
(in thousands, except as noted)
<S> <C> <C> <C>
Revenues
Coal royalties $17,624 $10,705 $11,355
Timber 1,667 1,600 1,488
Gain on the sale of property 280 70 94
Other 1,976 2,014 682
Total Revenues 21,547 14,389 13,619
Expenses
Operating costs 221 96 74
Exploration expenses 268 549 314
Taxes other than income 506 352 259
General and administrative 2,623 2,184 1,764
Operating Expenses 3,618 3,181 2,411
Depreciation, depletion
and amortization 1,269 589 516
Total Expenses 4,887 3,770 2,927
Operating Income $16,660 $10,619 $10,692
Production
Royalty coal tons produced by
lessees (thousands) 8,603 5,278 5,422
Timber sales (Mbf) 9,020 7,981 7,933
Prices
Royalty per ton $2.05 $2.03 $2.09
Timber sales price per Mbf $ 175 $ 185 $ 172
</TABLE>
Revenues. Coal royalty and land management segment revenues
were $21.5 million in 1999, $14.4 million in 1998 and $13.7
million in 1997, representing a 49 percent increase from 1998 to
1999 and five percent increase from 1997 to 1998. The $7.1
million increase in 1999 was attributable to enhanced production
from existing lessees due to the completion of the unit train
loadout, start-up operations for some lessees and acquisitions.
The $0.7 million increase from 1997 to 1998 primarily resulted
from a $0.8 million receipt for the sale of coal reserves as a
result of a power line relocation that was recognized in other
operating income. The Company, from time to time, receives
reimbursement for circumstances that inhibit mining reserves in a
certain location.
Operating expenses. The coal royalty and land management
segment's operating expenses increased $0.4 million, or 13
percent, to $3.6 million, compared with $3.2 million in 1998.
General and administrative expenses increased $0.4 million in 1999
due to legal fees incurred by the Company to pursue the potential
recovery of coal reserves and the addition of three additional
employees in the Charleston, West Virginia office relating to the
Company's September 1999 acquisition. Exploration expenses
decreased $0.3 million to $0.2 million in 1999 primarily due to
increased 1998 costs incurred to maintain a mine on a terminated
lease.
The coal royalty and land management segment's operating
expenses increased 28 percent in 1998 to $3.2 million, compared
with $2.5 million in 1997. The $0.7 million increase from 1997 to
1998 primarily resulted from a $0.4 million increase in general
and administrative due to personnel additions related to the
opening of an office in Charleston, West Virginia during the last
half of 1997. Furthermore, a slight increase in legal costs were
incurred during 1998 to protect the Company's interests relating
to a lease termination by a lessee and a lessee bankruptcy.
Corporate and Other
Dividends. Dividend income of $2.6 million in 1999 remained
constant, compared with $2.6 million in 1998 and 1997. Penn
Virginia's holdings primarily consist of 3,307,200 shares of
Norfolk Southern Corporation.
Proved Reserves
Oil and Gas. In 1999, Penn Virginia added 14.2 Bcfe of proved
developed oil and gas reserves from its 82 gross (50.8 net) well
drilling program, replacing 122 percent of 1999 production.
The Company acquired 23.4 Bcfe of proved oil and gas reserves
(12.8 Bcfe of proved developed reserves) during 1999 for $14.1
million. The acquisition cost was $0.60 per proved Mcfe.
Penn Virginia's total proved reserves at year-end 1999 increased
21.5 Bcfe, or 13 percent, to 187.4 Bcfe primarily due to
acquisitions. Proved developed reserves increased 20.2 Bcfe, or
17 percent, to 140.2 Bcfe. Proved undeveloped reserves increased
1.2 Bcfe to 47.1 Bcfe. Proved undeveloped reserves of 9.3 Bcfe
were drilled and converted to proved developed reserves during
1999. At year-end 1999, proved developed reserves comprised 75
percent of the Company's total proved reserves, compared with 72
percent at year-end 1998. The Company has 139 net proved
undeveloped drilling locations at year-end 1999, compared with 141
locations at year-end 1998.
Coal Royalty and Land Management. Penn Virginia's mineable and
merchantable coal reserves were 488 million tons at year end 1999,
compared with 385 million tons at year-end 1998. The Company
purchased over 90 million tons of coal reserves during 1999.
Mineable and merchantable coal reserves means coal that is
economically mineable using existing equipment and methods under
federal and state laws now in effect.
Market Risk
Marketable Equity Securities. At December 31, 1999, the
Company's marketable equity securities, consisting primarily of
Norfolk Southern Corporation common stock, were recorded at their
fair value of $67.8 million, including net unrealized gains of
$65.0 million. The closing stock price for Norfolk Southern
Corporation was $20.50 and $31.69 per share at December 31, 1999
and 1998, respectively. At February 28, 2000, the closing price
for Norfolk Southern Corporation was $13.94. The fair value of the
Company's marketable equity securities is significantly affected
by market price fluctuations. See Note 4 of the Notes to
Consolidated Financial Statements.
Interest Rate Risk. The carrying value of Penn Virginia's debt
approximates fair value. At December 31, 1999, the Company had
$78.5 million of long-term debt, primarily represented by an
unsecured revolving credit facility (the "Revolver") totaling
$77.7 million. The Revolver matures in June 2003 and is governed
by a borrowing base calculation that is redetermined semi-
annually. The Company has the option to elect interest at (i)
Libor plus a Eurodollar margin ranging from 100 to 150 basis
points, based on the percentage of the borrowing base outstanding
or (ii) the greater of the prime rate or federal funds rate plus
50 basis points. As a result, the Company's 2000 interest costs
will fluctuate based on short-term interest rates relating to the
Revolver.
Hedging Activities. Penn Virginia's price risk program permits
the utilization of fixed-price contracts and financial instruments
(such as futures, forward and option contracts and swaps) to
mitigate the price risks associated with fluctuations in natural
gas prices as they relate to the Company's anticipated production.
These contracts and/or financial instruments are designated as
hedges and accounted for on the accrual basis with gains and
losses being recognized based on the type of contract and exposure
being hedged. Realized gains and losses on natural gas financial
instruments designated as hedges of anticipated transactions are
treated as deferred charges or credits, as applicable, on the
balance sheet until recognized. Net gains and losses on such
financial instruments, including accrued gains or losses upon
maturity or termination of the contract, are recognized in
operating income concurrently with the hedged transaction.
In April 1997, Penn Virginia executed a contract for a
participating forward swap for 5,000 MMbtu's per day with a floor
price of $2.10 per MMbtu and a re-entry price of $2.48 per MMbtu
for the period of May 1997 through October 1999. In September
1997, the Company completed a second participating forward swap
for an additional 5,000 MMbtu's per day with a floor price of
$2.10 per MMbtu and a re-entry price of $2.35 per MMbtu for the
period of November 1997 through October 1999. The Company hedged
34 percent of its 1999 production and recognized an opportunity
cost of $0.4 million, which offset oil and gas revenues. To date,
the Company has not hedged crude oil prices. At December 31,
1999, no contracts were in place; however, Penn Virginia
constantly reviews market conditions and may alter its hedged
positions at any time.
Capital Resources and Liquidity
Cash flows from Operating Activities
Funding for the Company's activities has historically been
provided by operating cash flows and bank borrowings. Net cash
provided from operating activities was $25.1 million in 1999,
compared with $19.2 million in 1998 and $19.7 million in 1997.
The Company's consolidated cash balance increased to $0.7 million
in 1999 from $0.2 million in 1998.
Cash flows from Investing Activities
The Company used $58.7 million in investing activities in 1999,
compared with $18.3 million in 1998 and $15.8 million in 1997.
Capital expenditures, including acquisitions and noncash items,
totaled $60.7 million, compared with $23.6 million in 1998 and
$23.2 million in 1997. The following table sets forth capital
expenditures, including acquisitions and noncash items, made by
the Company during the periods indicated.
<TABLE>
Year ended December 31,
1999 1998 1997
<S> <C> <C> <C>
Oil and gas (in thousands)
Acquisitions $16,620 $3,557 $ 163
Development 9,189 8,527 10,446
Exploration 2,587 1,534 3,061
Support equipment and
facilities 209 171 114
Coal royalty and land management
Lease acquisitions 30,094 6,260 9,203
Support equipment and
facilities 1,861 3,532 199
Other 91 42 6
Total capital expenditures $60,651 $23,623 $23,192
</TABLE>
In July 1999, Penn Virginia acquired certain oil and gas
properties in Mississippi for $13.7 million. The acquisition,
which is 99 percent natural gas, added 23.3 Bcfe of proved
reserves and provides numerous future drilling locations, which is
the primary focus of the Company's 2000 drilling program. In
December 1999, the Company purchased a 20 percent interest in a
Texas onshore gulf coast exploration project for $2.4 million.
The project is in its initial phases and is comprised of a
portfolio of drilling prospects with varying risk/reward
characteristics.
The Company drilled 38.1 net successful development wells, 9.2
net successful exploratory wells and 3.5 net non-productive wells
in 1999 compared with 37.0 net successful development wells, 8.1
net successful exploratory wells and 4.5 net non-productive wells
in 1998. The 2.0 net wells under evaluation at the end of 1998
were non-productive.
In September 1999, the Company completed an acquisition which
included over 90 million tons of high quality coal reserves as
well as oil and gas leases, timber assets, a short line railroad
and a coal loading dock on the Kanawha River in West Virginia.
The $30 million acquisition complements the Company's existing
Coal River Properties located on the inland river system in West
Virginia.
Capital expenditures for 2000, before lease and proved property
acquisitions, are expected to be $22 to $24 million including $21
to $23 million for the oil and gas segment and $1 million for the
coal royalty and land management segment. The Company plans to
drill approximately 50 to 60 net development wells and 10 to 20
exploratory wells. Management continually reviews the Company's
drilling expenditures and may increase, decrease or reallocate
amounts based on industry conditions.
Penn Virginia is actively seeking oil and gas acquisitions, as
well as coal reserve acquisitions, both in the eastern United
States, and in other areas of the U.S. The Company opened an
office in Houston, Texas during the fourth quarter of 1998 with
the primary purpose of acquiring oil and gas properties. The
Company's acquisition efforts in both the oil and gas segment and
coal royalty and land management segment are reflected in the 1999
financial results.
In 1999, the Company received payments on long-term notes
receivable of $1.7 million and $0.3 million from the sale of
property and equipment.
Management believes its cash flow from operations, portfolio of
investments and sources of debt financing are sufficient to fund
its 2000 planned capital expenditure program.
Cash flows from Financing Activities
Net cash provided (used) by financing activities was $34.1
million in 1999, compared with $(1.5) million in 1998 and $(5.0)
million in 1997.
Penn Virginia has a $120 million unsecured revolving credit
facility (the "Revolver") with a final maturity of June 2003. The
Revolver contains financial covenants requiring the Company to
maintain certain levels of net worth, debt-to-capitalization and
dividend limitation restrictions, among other requirements. The
outstanding balance on the Revolver was $77.7 million and $37.1
million at December 31, 1999 and 1998, respectively. Management
believes its portfolio of investments and sources of funding are
sufficient to meet short and long-term liquidity needs not funded
by cash flows from operations.
Other Issues
Year 2000. Historically, most computer systems, including
microprocessors embedded into field equipment and other machinery,
utilized software that recognized a calendar year by its last two
digits. At January 1, 2000, it was anticipated that these systems
would require modification to recognize a calendar year by four
digits. The Year 2000 issue has caused no disruption to the
Company's mission-critical facilities or operations, and resulted
in no material costs. Penn Virginia will remain vigilant for Year
2000 related problems that may yet occur. The Company anticipates
that the Year 2000 problem will not create material disruptions to
its facilities or operations, and will not create material costs.
Accounting for Derivative Instruments and Hedging Activities.
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133") which establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively
referred to as derivatives) and for hedging activities. It
requires that an entity recognize all derivatives as either assets
or liabilities in the statement of financial position and measure
those instruments at fair value. If certain conditions are met, a
derivative may be specifically designated as (a) a hedge of the
exposure to changes in the fair value of a recognized asset or
liability or an unrecognized firm commitment, (b) a hedge of the
exposure to changes in the fair value of the exposure to variable
cash flows of a forecasted transaction, or (c) a hedge of the
foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale
security, or a foreign-currency-denominated forecasted
transaction.
In June 1999, FASB issued SFAS No. 137 which deferred the
effective date of SFAS No. 133 for all fiscal quarters of all
fiscal years beginning after June 15, 2000. Given its low levels
of derivative activity, the Company does not expect adoption to
have a significant impact on the Company's financial position,
results of operations or liquidity.
Environmental Matters
Penn Virginia's operating segments are subject to various
environmental hazards. Several federal, state and local laws,
regulations and rules govern the environmental aspects of the
Company's business. Noncompliance with these laws, regulations and
rules can result in substantial penalties or other liabilities.
The Company does not believe its environmental risks are
materially different from those of comparable companies or that
cost of compliance will have a material adverse effect on
profitability, capital expenditures, cash flows or competitive
position. There is no assurance that changes in or additions to
laws, regulations or rules regarding the protection of the
environment will not have such an impact. The Company believes it
is materially in compliance with environmental laws, regulations
and rules.
In conjunction with the leasing of property to coal operators,
all environmental and reclamation liabilities are the
responsibility of the lessees. However, if the lessee is not
financially capable of fulfilling those obligations, there is a
possibility the appropriate authorities would attempt to assign
those liabilities to the landowner. The Company would vigorously
contest such an assignment.
Forward-Looking Statements
Statements included in this report which are not historical
facts (including any statements concerning plans and objectives of
management for future operations or economic performance, or
assumptions related thereto) are forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, and Section 27A of the Securities Act of 1933, as
amended. In addition, Penn Virginia and its representatives may
from time to time make other oral or written statements which are
also forward-looking statements.
Such forward-looking statements include, among other things,
statements regarding development activities, capital expenditures,
acquisitions and dispositions, drilling and exploration programs,
expected commencement dates of coal mining or oil and gas
production, projected quantities of future oil and gas production
by Penn Virginia, projected quantities of future coal production
by the Company's lessees producing coal from reserves leased from
Penn Virginia, costs and expenditures as well as projected demand
or supply for coal and oil and gas, which will affect sales
levels, prices and royalties realized by Penn Virginia.
These forward-looking statements are made based upon
management's current plans, expectations, estimates, assumptions
and beliefs concerning future events impacting Penn Virginia and
therefore involve a number of risks and uncertainties. Penn
Virginia cautions that forward-looking statements are not
guarantees and that actual results could differ materially from
those expressed or implied in the forward-looking statements.
Important factors that could cause the actual results of
operations or financial condition of Penn Virginia to differ
include, but are not necessarily limited to: the cost of finding
and successfully developing oil and gas reserves; the cost of
finding new coal reserves; the ability to acquire new oil and gas
and coal reserves on satisfactory terms; the price for which such
reserves can be sold; the volatility of commodity prices for oil
and gas and coal; the risks associated with having or not having
price risk management programs; Penn Virginia's ability to lease
new and existing coal reserves; the ability of Penn Virginia's
lessees to produce sufficient quantities of coal on an economic
basis from Penn Virginia's reserves; the ability of lessees to
obtain favorable contracts for coal produced from Penn Virginia
reserves; Penn Virginia's ability to obtain adequate pipeline
transportation capacity for its oil and gas production;
competition among producers in the coal and oil and gas industries
generally and in the Appalachian Basin in particular; the extent
to which the amount and quality of actual production differs from
estimated mineable and merchantable coal reserves and proved oil
and gas reserves; unanticipated geological problems; availability
of required materials and equipment; the occurrence of unusual
weather or operating conditions including force majeure or events;
the failure of equipment or processes to operate in accordance
with specifications or expectations; delays in anticipated start-
up dates; environmental risks affecting the drilling and producing
of oil and gas wells or the mining of coal reserves; the timing of
receipt of necessary governmental permits; labor relations and
costs; accidents; changes in governmental regulation or
enforcement practices, especially with respect to environmental,
health and safety matters, including with respect to emissions
levels applicable to coal-burning power generators; risks and
uncertainties relating to general domestic and international
economic (including inflation and interest rates) and political
conditions; the experience and financial condition of lessees of
coal reserves, joint venture partners and purchasers of reserves
in transactions financed by Penn Virginia, including their ability
to satisfy their royalty, environmental, reclamation and other
obligations to Penn Virginia and others; changes in financial
market conditions; changes in the market prices or value of the
marketable securities owned by Penn Virginia, including the price
of Norfolk Southern common stock and other risk factors detailed
in Penn Virginia's Securities and Exchange commission filings.
Many of such factors are beyond Penn Virginia's ability to control
or predict. Readers are cautioned not to put undue reliance on
forward-looking statements.
While Penn Virginia periodically reassesses material trends and
uncertainties affecting Penn Virginia's results of operations and
financial condition in connection with the preparation of
Management's Discussion and Analysis of Results of Operations and
Financial Condition and certain other sections contained in Penn
Virginia's quarterly, annual or other reports filed with the
Securities and Exchange Commission, Penn Virginia does not intend
to review or update any particular forward-looking statement,
whether as a result of new information, future events or
otherwise.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PENN VIRGINIA CORPORATION
March 22, 2000 By: /s/ Steven W. Tholen
(Steven W. Tholen,
Vice President and
Chief Financial Officer)
March 22, 2000 By: /s/ Ann N. Horton
(Ann N. Horton, Controller and
Principal Accounting Officer)
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
/s/ Robert Garrett Chairman of the Board March 22, 2000
(Robert Garrett) and Director
/s/ Richard A. Bachmann Director March 22, 2000
(Richard A. Bachmann)
/s/ Lennox K. Black Director March 22, 2000
(Lennox K. Black)
/s/ John D. Cadigan Director March 22, 2000
(John D. Cadigan)
/s/ A. James Dearlove Director and March 22, 2000
(A. James Dearlove) Chief Executive Officer
/s/ Peter B. Lilly Director March 22, 2000
(Peter B. Lilly)
/s/ Marsha R. Perelman Director March 22, 2000
(Marsha R. Perelman)
/s/ Joe T. Rye Director March 22, 2000
(Joe T. Rye)
/s/ John A. H. Shober Director March 22, 2000
(John A. H. Shober)
<PAGE>
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Penn Virginia Corporation and Subsidiaries
Index to Financial Section
Management's Report on Financial Information 29
Reports of Independent Public Accountants 30
Financial Statements and Supplementary Data 31
<PAGE>
Management's Report on Financial Information
Management of Penn Virginia Corporation is responsible for the
preparation and integrity of the financial information included in
this annual report. The financial statements have been prepared in
accordance with generally accepted accounting principles, which
involve the use of estimates and judgments where appropriate.
The corporation has a system of internal accounting controls
designed to provide reasonable assurance that assets are
safeguarded against loss or unauthorized use and to produce the
records necessary for the preparation of financial information.
The system of internal control is supported by the selection and
training of qualified personnel, the delegation of management
authority and responsibility, and dissemination of policies and
procedures. There are limits inherent in all systems of internal
control based on the recognition that the costs of such systems
should be related to the benefits to be derived. We believe the
corporation's systems provide this appropriate balance.
The corporation's independent public accountants, Arthur Andersen
LLP, have developed an understanding of our accounting and
financial controls and have conducted such tests as they consider
necessary to support their opinion on the financial statements.
Their report contains an independent, informed judgment as to the
corporation's reported results of operations and financial
position.
The Board of Directors pursues its oversight role for the
financial statements through the Audit Committee, which consists
solely of outside directors. The Audit Committee meets regularly
with management, the internal auditor and Arthur Andersen LLP,
jointly and separately, to review management's process of
implementation and maintenance of internal controls, and auditing
and financial reporting matters. The independent and internal
auditors have unrestricted access to the Audit Committee.
A. James Dearlove Steven W. Tholen
President and Vice President and
Chief Executive Officer Chief Financial Officer
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Penn Virginia Corporation:
We have audited the accompanying consolidated balance sheets of
Penn Virginia Corporation (a Virginia corporation) and
subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of income, shareholders' equity and cash
flows for each of the three years in the period ended December 31,
1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Penn Virginia Corporation and subsidiaries as of December 31,
1999 and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally accepted
in the United States.
ARTHUR ANDERSEN LLP
Houston, Texas
February 16, 2000
<PAGE>
<TABLE>
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
1999 1998 1997
(in thousands, except share data)
<S> <C> <C> <C>
Revenues
Oil and condensate $ 463 $ 335 $ 661
Natural gas 21,384 20,482 21,827
Coal royalties 17,624 10,705 11,364
Timber 1,667 1,600 1,493
Dividends 2,646 2,646 2,646
Gain on the sale of property 280 72 1,983
Other 3,071 2,304 1,158
47,135 38,144 41,132
Expenses
Operating expenses 4,311 3,857 3,431
Exploration expenss 2,146 1,189 1,753
Taxes other than income 2,795 2,788 2,431
General and administrative 8,775 8,234 8,240
Loss on the sale of property - 7 9
Impairment of oil and gas
properties - 4,641 -
Depreciation, depletion and
amortization 8,393 7,162 6,549
26,420 27,878 22,413
Operating Income 20,715 10,266 18,719
Other (income) expense:
Interest expense 3,298 2,017 2,317
Interest income (1,354) (3,421) (3,534)
Gain on sale of securities - (14) (50)
Other (63) (269) (301)
Income from operations before
income taxes 18,834 11,953 20,287
Income tax expense 4,330 2,362 4,269
Net Income $ 14,504 $9,591 $16,018
Net income per share, basic $1.73 $1.15 $1.93
Net income per share, diluted $1.71 $1.13 $1.88
Weighted average shares
outstanding, basic 8,406 8,310 8,302
Weighted average shares
outstanding, diluted 8,480 8,463 8,500
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
1999 1998
(in thousands, except share data)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 657 $ 225
Accounts receivable 6,880 5,682
Current portion of long-term notes
receivable 816 364
Current deferred income taxes 155 577
Other 813 680
Total current assets 9,321 7,528
Investments (Note 4) 67,816 104,819
Long-term notes receivable (Note 5) 3,518 3,079
Property and Equipment
Oil and gas properties, wells and
equipment, using the successful
efforts method of accounting 185,048 157,558
Other property and equipment 82,772 52,455
Less: Accumulated depreciation,
depletion and amortization 76,553 68,745
Net property and equipment (Note 6) 191,267 141,268
Other assets 2,089 237
Total assets $ 274,011 $256,931
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt
(Note 7) $ 34 $ 31
Accounts payable 1,570 1,397
Accrued expenses 5,470 5,039
Taxes on income - 576
Total current liabilities 7,074 7,043
Other liabilities (Note 11) 5,854 2,875
Deferred income taxes 28,265 38,787
Long-term debt (Note 7) 78,475 37,967
Total liabilities 119,668 86,672
Commitments and contingencies (Note 16)
Shareholders' equity
Preferred stock of $100 par value -
Authorized 100,000 shares; none issued - -
Common stock of $6.25 par value -
16,000,000 shares authorized;
8,921,866 shares issued 55,762 55,762
Other paid-in-capital 8,096 8,441
Retained earnings 60,860 53,924
Accumulated other comprehensive income 42,017 65,985
166,735 184,112
Less:498,238 shares in 1999 and
555,050 in 1998 of common stock
held in treasury, at cost 11,142 12,403
Unearned compensation - ESOP 1,250 1,450
Total shareholders' equity 154,343 170,259
Total liabilities and shareholders'
equity $274,011 $ 256,931
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands, except share data)
Accumulated
Other Other
Shares Common Paid-in Retained Comprehensive
Outstanding Stock Capital Earnings Income
<S> <C> <C> <C> <C> <C>
Balance at 12/31/96 4,341,240 $ 27,817 $ 36,138 $43,240 $60,441
Two-for-one common
stock split 4,341,240 27,817 (27,817) - -
Dividends paid
($0.90 per share) - - - (7,445) -
Exercise of stock
options 12,464 - 9 - -
Purchase of treasury
stock (420,618) - - - -
Allocation of ESOP shares - - 101 - -
Net income - - - 16,018 -
Other comprehensive
income, net of tax - - - - 3,059
Balance at 12/31/97 8,274,326 55,634 8,431 51,813 63,500
Dividends paid
($0.90 per share) - - - (7,480) -
Stock issued as
compensation 5,357 - 26 - -
Exercise of stock options 87,133 128 (114) - -
Allocation of ESOP shares - - 98 - -
Net income - - - 9,591 -
Other comprehensive income,
net of tax - - - - 2,485
Balance at 12/31/98 8,366,816 55,762 8,441 53,924 65,985
Dividends paid
($0.90 per share) - - - (7,568) -
Stock issued as
compensation 7,878 - (13) - -
Exercise of stock options 48,934 - (365) - -
Allocation of ESOP shares - - 33 - -
Net income - - - 14,504 -
Other comprehensive loss,
net of tax - - - - (23,968)
Balance at 12/31/99 8,423,628 $ 55,762 $8,096 $ 60,860 $ 42,017
Penn Virginia Corporation and Subsidiaries Consolidated Statements of
Shareholders' Equity (in thousands,except share data) continued below.
</TABLE>
<TABLE>
Unearned Total
Treasury Compensation Stockholders' Comprehensive
Stock ESOP Equity Income (Loss)
<S> <C> <C> <C> <C>
Balance at 12/31/96 $(5,575) $(1,850) $160,211
Two-for-one common
stock split - - -
Dividends paid
($0.90 per share) - - (7,445)
Exercise of stock options 279 - 288
Purchase of treasury stock (8,728) - (8,728)
Allocation of ESOP shares - 200 301
Net Income - - 16,018 $16,018
Other comprehensive income,
net of tax - - 3,059 3,059
Balance at 12/31/97 (14,024) (1,650) 163,704 19,077
Dividends paid
($0.90 per share) - - (7,480)
Stock issued as
compensation 120 - 146
Exercise of stock options 1,501 - 1,515
Allocation of ESOP shares - 200 298
Net Income - - 9,591 $9,591
Other comprehensive income,
net of tax - - 2,485 2,485
Balance at 12/31/98 (12,403) (1,450) 170,259 12,076
Dividends paid
($0.90 per share) - - (7,568)
Stock issued as
compensation 176 - 163
Exercise of stock options 1,085 - 720
Allocation of ESOP shares - 200 233
Net Income - - 14,504 $14,504
Other comprehensive loss,
net of tax - - (23,968) (23,968)
Balance at 12/31/99 $(11,142) $(1,250) $154,343 $(9,464)
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<TABLE>
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
1999 1998 1997
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $14,504 $9,591 $16,018
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation, depletion and amortization 8,393 7,162 6,549
Impairment of oil and gas properties - 4,641 -
Gain on the sale of securities - (14) (50)
Gain on the sale of property and equipment (280) (65) (1,983)
Deferred income taxes 2,805 923 2,169
Dry hole expense 1,115 58 949
Interest income (1,306) (3,336) (2,833)
Other 22 597 175
25,253 19,557 20,994
Changes in operating assets and liabilities:
Accounts receivable (1,198) 1,721 (2,548)
Other current assets (133) (136) (116)
Accounts payable and accrued expenses 604 (1,277) 358
Deferred income - (279) -
Taxes on income (576) 432 136
Other assets and liabilities and investments 1,105 (781) 881
Net cash flows provided by operating
activities 25,055 19,237 19,705
Cash flows from investing activities:
Proceeds from the sale of securities - 17 -
Proceeds from the sale of property and equipment 299 79 3,957
Payments received on long-term notes receivable 1,670 2,253 3,456
Producing properties acquired (13,921) (3,351) (82)
Lease acquisitions (32,793) (3,512) (9,284)
Capital expenditures (13,937)(13,806) (13,826)
Net cash flows used in investing
activities (58,682)(18,320) (15,779)
Cash flows from financing activities:
Dividends paid (7,568) (7,480) (7,445)
Proceeds from long-term borrowings 44,500 9,100 19,513
Repayment of long-term borrowings (3,990) (5,100) (8,917)
Purchases of treasury stock - - (8,728)
Issuance of stock 1,117 1,957 589
Net cash flows provided by (used in)
financing activities 34,059 (1,523) (4,988)
Net decrease in cash and cash equivalents 432 (606) (1,062)
Cash and cash equivalents - beginning of year 225 831 1,893
Cash and cash equivalents - end of year $ 657 $ 225 $ 831
Supplemental disclosures:
Cash paid during the year for:
Interest $2,980 $2,065 $2,243
Income taxes $2,100 $1,100 $ 930
Noncash investing activities:
Note receivable for sale of property and equipment $1,255 $ - $ - Note receivable
exchanged for:
Other property and equipment $ - $2,954 $ -
Deferred revenue $ - $1,296 $ -
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE>
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Operations
Penn Virginia Corporation ("Penn Virginia" or the "Company")
explores for, develops and produces crude oil, condensate and
natural gas in the eastern and southern portions of the United
States.
The Company owns land and mineral rights to mineable and
merchantable coal reserves and timber located in central
Appalachia. The coal reserves are leased to various operators who
mine and market the coal. Penn Virginia collects royalties based
on the lessee's production and sale of reserves. Timber is sold
in competitive bid sales involving individual parcels and also on
a contract basis, where Penn Virginia pays independent contractors
to harvest timber while the Company directly markets the product.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of
Penn Virginia Corporation and all wholly-owned subsidiaries. The
Company owns and operates its undivided oil and gas properties and
manages its coal reserves through its wholly-owned subsidiaries.
The Company accounts for its ownership interest in oil and gas
properties using the proportionate consolidation method, whereby
the Company's share of assets, liabilities, revenues and expenses
is included in the appropriate classification in the financial
statements. Intercompany balances and transactions have been
eliminated in consolidation. In the opinion of management, all
adjustments have been reflected that are necessary for a fair
presentation of the consolidated financial statements. Certain
amounts have been reclassified to conform to the current year's
presentation.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging
Activities," which establishes accounting and reporting standards
for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to
as derivatives) and for hedging activities. It requires an entity
to recognize all derivatives as either assets or liabilities in
the statement of financial position and measure those instruments
at fair value. If certain conditions are met, a derivative may be
specifically designated as (a) a hedge of the exposure to changes
in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to
changes in the fair value of the exposure to variable cash flows
of a forecasted transaction, or (c) a hedge of the foreign
currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for-sale security, or a
foreign currency denominated forecasted transaction.
In June 1999, the FASB issued SFAS No. 137 which deferred the
effective date of SFAS No. 133 for all fiscal quarters of all
fiscal years beginning after June 15, 2000. Given its low levels
of derivative activity, the Company does not expect adoption to
have a significant impact on the Company's financial position,
results of operations or liquidity.
Use of Estimates
Preparation of the accompanying consolidated financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities in the consolidated
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
Cash and Cash equivalents
The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash
equivalents.
Investments
Investments consist of equity securities. The Company classifies
its equity securities as available-for-sale. Available-for-sale
securities are recorded at fair value based upon market
quotations. Unrealized holding gains and losses, net of the
related tax effect, on available-for-sale securities are excluded
from earnings and are reported as a separate component of
stockholders' equity until realized. A decline in the market
value of any available-for-sale security below cost that is deemed
other than temporary, is charged to earnings in the period it
occurs resulting in the establishment of a new cost basis for the
security. Dividend income is recognized when earned. Realized
gains and losses for securities classified as available-for-sale
are included in earnings and are derived using the specific
identification method for determining the cost of securities sold.
Notes Receivable
Notes receivable are recorded at cost, adjusted for amortization
of discounts or accretion of premium. Discounts and premiums are
amortized over the life of the notes receivable using the
effective interest rate method.
Oil and Gas Properties
The Company uses the successful efforts method of accounting for
its oil and gas operations. Under this method of accounting, costs
to acquire mineral interests in oil and gas properties, to drill
and equip development wells including development dry holes, and
to drill and equip exploratory wells that find proved reserves are
capitalized. Capitalized costs of producing oil and gas fields
are amortized using the unit-of-production method based on
estimates of proved oil and gas reserves on a field-by-field
basis. Oil and gas reserve quantities represent estimates only
and there are numerous uncertainties inherent in the estimation
process. Actual future production may be materially different
from amounts estimated and such differences could materially
affect future amortization of proved properties. Estimated costs
(net of salvage value) of plugging and abandoning oil and gas
wells are reported as additional depreciation and depletion
expense using the units-of-production method.
The costs of unproved leaseholds are capitalized pending the
results of exploration efforts. Unproved leasehold costs are
assessed periodically, on a property-by-property basis, and a loss
is recognized to the extent, if any, the cost of the property has
been impaired. As unproved leaseholds are determined to be
productive, the related costs are transferred to proved
leaseholds. Exploratory costs including exploratory dry holes,
annual delay rental and geological and geophysical costs are
charged to expense when incurred.
Other Property and Equipment
Other property and equipment is carried at cost and includes
expenditures for additions and improvements, which substantially
increase the productive lives of existing assets. Maintenance and
repair costs are expensed as incurred. Depreciation of property
and equipment is generally computed using the straight-line method
over their estimated useful lives, varying from 3 years to 20
years. Coal in place is depleted at a rate based upon the cost of
the mineral properties and estimated mineable and merchantable
tonnage therein. When an asset is retired or sold, its cost and
related accumulated depreciation are removed from the accounts.
The difference between undepreciated cost and proceeds from
disposition is recorded as gain or loss.
Impairment of Long-Lived Assets
In accordance with SFAS No.121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of",
the Company reviews its long-lived assets to be held and used,
including proved oil and gas properties accounted for using the
successful efforts method of accounting, whenever events or
circumstances indicate that the carrying value of those assets may
not be recoverable. SFAS No.121 requires an impairment loss be
recognized when the carrying amount of an asset exceeds the sum of
the undiscounted estimated future cash flows. In this
circumstance, the Company recognizes an impairment loss equal to
the difference between the carrying value and the fair value of
the asset. Fair value is estimated to be the present value of
expected future net cash flows from proved reserves, utilizing a
risk-adjusted rate of return.
Concentration of Credit Risk
Substantially all of the Company's accounts receivable at
December 31, 1999 result from oil and gas sales and joint interest
billings to third party companies in the oil and gas industry.
This concentration of customers and joint interest owners may
impact the Company's overall credit risk, either positively or
negatively, in that these entities may be similarly affected by
changes in economic or other conditions. In determining whether
or not to require collateral from a customer or joint interest
owner, the Company analyzes the entity's net worth, cash flows,
earnings and credit ratings. Receivables are generally not
collateralized. Historical credit losses incurred by the Company
on receivables have not been significant.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash
equivalents, marketable securities, natural gas swaps, accounts
receivable, notes receivables, accounts payable and long-term
debt. The carrying values of cash, marketable securities, accounts
receivables and payables, and long-term debt approximate fair
value. See Note 5 for a discussion of notes receivable.
The Company, from time to time, enters into derivative financial
instruments to mitigate its exposure to natural gas price
volatility. The derivative financial instruments, which are
placed with a major financial institution the Company believes is
a minimum credit risk, take the form of swaps with purchased
options. These derivative financial instruments are designated as
hedges and realized gains and losses from the Company's price risk
management activities are recognized in natural gas revenues when
the associated production occurs.
The fair value of open derivative financial instruments is
determined by comparing the New York Mercantile Exchange forward
prices at year-end with the appropriate location differential
adjustment to the contractual prices designated in the derivative
financial instruments. The Company had no outstanding derivative
financial instruments at December 31, 1999. The fair value of the
Company's open derivative contracts at December 31, 1998 was $0.1
million.
Oil and Gas Revenues
Natural gas revenues generally are recorded using the entitlement
method in which the Company recognizes its ownership interest in
natural gas production as revenue. If the Company's sales exceed
its ownership share of production, the differences are recorded as
deferred revenue. Natural gas pipeline balancing receivables are
recorded when the Company's ownership share of production exceeds
sales. At December 31, 1999 and 1998, the Company's receivables
included $1.3 million and $0.9 million of natural gas pipeline
imbalances, respectively.
Royalties
Coal royalty income is recognized on the basis of tons sold by
the Company's lessees and the corresponding revenue from those
sales. All coal leases are based on an annual minimum payment due
or a percentage of the gross sales price.
Income Tax
The Company accounts for income taxes in accordance with the
provisions of SFAS No. 109, "Accounting for Income Taxes." This
statement requires a company to recognize deferred tax liabilities
and assets for the expected future tax consequences of events that
have been recognized in a company's financial statements or tax
returns. Using this method, deferred tax liabilities and assets
are determined based on the difference between the financial
statement carrying amounts and tax bases of assets and liabilities
using enacted tax rates.
<PAGE>
3.
Acquisitions
In September 1999, the Company successfully completed the
purchase of fee mineral and lease rights for coal reserves and
related assets in West Virginia. The $30 million acquisition was
funded by borrowings from the Company's revolving credit facility
(the "Revolver") and accounted for at fair value. The operations
have been included in the Company's statement of income as of the
closing date. The following unaudited proforma results of
operations have been prepared as though the aforementioned
acquisition had been completed on January 1, 1998. The unaudited
proforma results of operations consist of the following as of
December 31, 1999 (in thousands, except share data):
<TABLE>
1999 1998
<S> <C> <C>
Revenues $ 51,528 $44,079
Net income $ 15,005 $10,013
Net income per share, diluted $ 1.77 $ 1.18
</TABLE>
In July 1999, Penn Virginia acquired certain oil and gas
properties in Mississippi for $13.7 million. The acquisition was
funded by borrowings from the Company's Revolver and was accounted
for at fair value. The operations are included in the Company's
statement of income as of the closing date.
4. Investments and Dividend Income
The cost, gross unrealized holding gains and fair value of
available-for-sale securities were as follows (in thousands):
<TABLE>
Gross
Unrealized
Holding Fair
At December 31, 1999 Cost Gains Value
<S> <C> <C> <C>
Available-for-sale
Norfolk Southern Corporation $2,839 $64,959 $67,798
Other - 18 18
$2,839 $64,977 $67,816
At December 31, 1998
Available-for-sale
Norfolk Southern Corporation $2,839 $101,958 $104,797
Other - 22 22
$2,839 $101,980 $104,819
</TABLE>
The Company owned 3,307,200 shares of Norfolk Southern
Corporation stock at December 31, 1999. Dividend income from the
Company's investment in Norfolk Southern Corporation was $2.6
million for the three years ended December 31, 1999, 1998 and
1997. The closing stock price for Norfolk Southern Corporation
was $20.50 and $31.6875 per share at December 31, 1999 and 1998,
respectively.
<PAGE>
5. Notes Receivable
The Company has two notes receivable collateralized by property
and equipment. During 1999, the Company received a $1.3 million
note receivable for a portion of the proceeds relating to a
property and equipment sale.
Maturities of notes receivable are as follows (in thousands):
<TABLE>
December 31,
1999 1998
<S> <C> <C>
Current $ 816 $ 364
Due after one year through five years 2,876 1,853
Thereafter 642 1,226
$4,334 $3,443
</TABLE>
The fair value of the Company's notes receivable at December 31,
1999 and 1998 was $6.9 million and $5.3 million, respectively.
6. Property and Equipment
Property and equipment includes (in thousands):
<TABLE>
December 31,
1999 1998
<S> <C> <C>
Oil and gas properties $185,048 $157,558
Other property and equipment:
Land 1,813 694
Timber 188 188
Coal properties 73,081 45,176
Other equipment 7,690 6,397
267,820 210,013
Less: Accumulated depreciation,
depletion and amortization (76,553) (68,745)
Net property and equipment $191,267 $141,268
</TABLE>
In accordance with SFAS No. 121, the Company reviews its proved
oil and gas properties and other long-lived assets for impairment
whenever events and circumstances indicate a decline in the
recoverability of their carrying value. In the fourth quarter of
1998, the Company estimated the expected future cash flows of its
oil and gas properties and compared such future cash flows to the
carrying amount of the oil and gas properties to determine if the
carrying amount was recoverable. For certain oil and gas
properties, the carrying amount exceeded the estimated
undiscounted future cash flows; thus, the Company adjusted the
carrying amount of the respective oil and gas properties to their
fair value as determined by discounting their estimated future
cash flows. The factors used to determine fair value included,
but were not limited to, estimates of proved reserves, future
commodity pricing, future production estimates, anticipated
capital expenditures and a discount rate commensurate with the
Company's internal rate of return on its oil and gas properties.
As a result, the Company recognized a noncash pre-tax charge of
$4.6 million ($3.7 million after tax) related to its oil and gas
properties in the fourth quarter of 1998. There were no
impairments of oil and gas properties in 1999 or 1997.
7. Long-Term Debt
Long-term debt consists of the following (in thousands):
<TABLE>
December 31,
1999 1998
<S> <C> <C>
Revolving credit, variable rate of 7.5%
at December 31, 1999, due in 2003 $77,650 $37,100
Other 859 898
78,509 37,998
Less: current maturities (34) (31)
Total long-term debt $78,475 $37,967
</TABLE>
Revolving Credit Facility
In August 1999, the Company amended and restated its agreement
with a group of major U.S. banks for a $120 million unsecured
revolving credit facility (the "Revolver") with a final maturity
of June 2003. The Revolver is governed by a borrowing base
calculation and will be redetermined semi-annually. The Company
has the option to elect interest at (i) Libor plus a Eurodollar
margin ranging from 100 to 150 basis points, based on the
percentage of the borrowing base outstanding or (ii) the greater
of the prime rate or federal funds rate plus 50 basis points. The
Revolver allows for issuance of letters of credit which are
limited to no more than $10 million. The financial covenants
require the Company to maintain levels of net worth, debt-to-
capitalization and dividend limitation restrictions. The Company
is currently in compliance with all of its covenants.
Line of Credit
The Company has a $5 million line of credit with a financial
institution due in December 2000, renewable annually. The Company
has an option to elect either a fixed rate LIBOR loan, floating
rate LIBOR loan or base rate loan.
The aggregate maturities applicable to outstanding debt at
December 31, 1999 are as follows (in thousands):
2000 $ 34
2001 37
2002 40
2003 77,693
2004 46
Thereafter 658
8. Accrued Expenses
Accrued expenses are summarized as follows (in thousands):
<TABLE>
December 31,
1999 1998
<S> <C> <C>
Pension $ 140 $ 453
Compensation 715 594
Accrued oil and gas royalties 752 392
Taxes other than income 878 873
Post-retirement health care 203 841
Interest 324 -
Accrued restructuring charges - 552
Accrued drilling costs 1,086 348
Other 1,372 986
$5,470 $5,039
</TABLE>
In 1998, the Company's management approved a plan to reduce
administrative and operational overhead costs. In connection with
such a plan, the Company recorded a pre-tax charge to general and
administrative expense totaling $0.6 million related to severance
costs for six employees and a lease cancellation fee. The plan to
reduce administrative and operational overhead costs was completed
in August 1999. There were no adjustments to the liability
recorded in 1998 that resulted in an adjustment to net income for
1999.
9. Income Taxes
The provision for income taxes from continuing operations is
comprised of the following (in thousands):
<TABLE>
Year ended December 31,
1999 1998 1997
<S> <C> <C> <C>
Current income taxes
Federal $1,525 $1,341 $1,677
State - 98 423
Total current 1,525 1,439 2,100
Deferred income taxes
Federal 2,426 901 2,438
State 379 22 (269)
Total deferred 2,805 923 2,169
Total income tax expense $ 4,330 $ 2,362 $ 4,269
</TABLE>
The difference between the reported income tax expense and income
tax expense computed by applying the statutory tax rate to income
from operations before income taxes is as follows (in thousands):
<TABLE>
Year ended December 31,
1999 1998 1997
<S> <C> <C> <C>
Computed at statutory tax rate $6,592 $4,150 $7,100
State income taxes, net of federal income
tax effect 246 78 100
Dividends received deduction (648) (648) (648)
Non-conventional fuel source credit (1,471) (1,525) (1,510)
Percentage depletion (414) (350) (416)
Other, net 25 657 (357)
Total income tax expense $ 4,330 $2,362 $ 4,269
</TABLE>
The tax effects of temporary differences that give rise to
significant portions of the net deferred tax liability consist of
the following (in thousands):
<TABLE>
December 31,
1999 1998
<S> <C> <C>
Deferred tax assets:
Other long-term liabilities $1,936 $ 954
Alternative minimum tax credits 7,329 6,560
State tax loss carryforwards 938 881
Other 565 1,514
Total deferred tax assets 10,768 9,909
Deferred tax liabilities:
Notes receivable (1,169) (1,143)
Investments (22,745) (35,693)
Oil and gas properties (12,012) (10,611)
Other property and equipment (1,823) -
Other (1,129) (672)
Total deferred tax liabilities (38,878) (48,119)
Net deferred tax liability $ (28,110) $(38,210)
Deferred tax assets-current $ 155 $ 577
Deferred tax liabilities-noncurrent (28,265) (38,787)
$ (28,110)$ (38,210)
</TABLE>
As of December 31, 1999, the Company had available for federal
income tax purposes, alternative minimum tax credits of
approximately $7.3 million which can be carried forward
indefinitely as a credit against the regular tax liability.
The Company has various state tax loss carryforwards of $10.7
million which, if unused, will expire from 2014 to 2019.
10.Pension Plans and Other Post-retirement Benefits
The Company and its wholly-owned subsidiaries provided a
noncontributory, defined benefit pension plan, which was frozen in
1996, and early retirement programs (the "Plans") for eligible
employees. Benefits were based on the employee's average annual
compensation and years of service.
The Company sponsors a defined benefit post-retirement plan that
covers employees hired prior to January 1, 1991 who retire from
active service. The plan provides medical benefits for the
retirees and dependents and life insurance for the retirees. The
medical coverage is noncontributory for retirees who retired prior
to January 1, 1991 and may be contributory for retirees who retire
after December 31, 1990.
A reconciliation of the changes in the benefit obligations and
fair value of assets for the two years ended December 31, 1999 and
1998 and a statement of the funded status at December 31, 1999 and
1998 is as follows (in thousands):
<TABLE>
Pension Post-retirement
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Reconciliation of benefit obligation:
Obligation - beginning of year $ 11,701 $11,474 3,112 $3,665
Service cost - - 14 15
Interest cost 748 792 206 213
Benefits paid (1,083) (1,143) (366) (297)
Actuarial (gain) loss (754) 578 (129) (484)
Other - - 99 -
Obligation - end of year 10,612 11,701 2,936 3,112
Reconciliation of fair value of plan assets:
Fair value - beginning of year 10,468 9,653 1,698 1,615
Actual return on plan assets 982 1,604 221 387
Employer contributions 271 442 26 -
Participant contributions - - 8 3
Benefit payments (1,083) (1,143) (366) (298)
Administrative expenses (44) (88) (9) (9)
Fair value - end of year 10,594 10,468 1,578 1,698
Funded status:
Funded status - end of year (18) (1,233) (1,358) (1,414)
Unrecognized transition obligation 26 30 - -
Unrecognized prior service cost 55 60 92 -
Unrecognized (gain) loss (1,189) (351) (249) 53
Net amount recognized $ (1,126)$(1,494) $ (1,515)$ (1,361)
</TABLE>
The following table provides the amounts recognized in the
statements of financial position at December 31, 1999 and 1998 (in
thousands):
<TABLE>
Pension Post-retirement
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Accrued benefit liability $(1,542) $(2,050) $(1,515) $(1,361)
Other long-term assets 81 91 - -
Accumulated other comprehensive
income 335 465 - -
Obligation - end of year $ (1,126) $(1,494) $(1,515) $(1,361)
</TABLE>
The following table provides the components of net periodic
benefit cost for the plans for the two years ended December 31,
1999 and 1998 (in thousands):
<TABLE>
Pension Post-retirement
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Service cost $ 80 $ 80 $ 14 $ 15
Interest cost 749 792 206 213
Expected return on plan assets (949) (869) (47) (43)
Amortization of prior service cost 6 6 7 -
Amortization of transitional
obligation 4 4 - -
Recognized actuarial loss 13 6 - -
Net periodic benefit cost $ (97)$ 19 $ 180 $ 185
</TABLE>
The assumptions used in the measurement of the Company's benefit
obligation were as follows:
<TABLE>
Pension Post-retirement
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Discount rate 7.50% 6.75% 7.50% 6.75 %
Expected return on plan assets 9.50 9.50 3.00 3.00
</TABLE>
Since the benefits accrued under the defined benefit plan were
frozen in 1996, it is not necessary to assume a rate of
compensation increase. For measurement purposes, an 8.0 percent
annual rate increase in the per capita cost of covered health care
benefits was assumed for 1999. The rate is assumed to decrease
gradually to 5.5 percent for 2004 and remain at that level
thereafter.
Assumed health care cost trend rates have a significant effect on
the amounts reported for post-retirement benefits. A one percent
change in assumed health care cost trend rates would have the
following effects for 1999 (in thousands):
<TABLE>
One percent One percent
increase decrease
<S> <C> <C>
Effect on total of service and
interest cost components $ 9 $(8)
Effect on post-retirement benefit
obligation 128 (116)
</TABLE>
11. Other Liabilities
Other liabilities are summarized in the following table (in
thousands):
<TABLE>
December 31,
1999 1998
<S> <C> <C>
Post-retirement health care $1,312 $ 520
Deferred income 2,793 842
Pension 1,402 1,409
Other 347 104
$ 5,854 $2,875
</TABLE>
12. Earnings Per Share
The following is a reconciliation of the numerators and
denominators used in the calculation of basic and diluted earnings
per share ("EPS") for income from continuing operations for the
three years ended December 31, 1999.
<TABLE>
1999 1998
Income Shares PerShare Income Shares PerShare
(Numerator)(Denominator)Amount (Numerator)(Denominator) Amount
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Income from
continuing
operations $14,504 8,406 $1.73 $9,591 8,310 $1.15
Dilutive
Securities:
Stock options - 74 - 153
Diluted EPS:
Income from
continuing
operations $14,504 8,480 $1.71 $ 9,591 8,463 $1.13
</TABLE>
<TABLE>
1997
Income Shares Per Share
(Numerator) (Denominator) Amount
(in thousands, except per share amounts)
<S> <C> <C> <C>
Basic EPS:
Income from continuing
operations $16,018 8,302 $1.93
Dilutive Securities:
Stock Options - 198
Diluted EPS:
Income from continuing
operations $16,018 8,500 $1.88
</TABLE>
Antidilutive stock options are precluded from the computation of
diluted EPS; however, such options could potentially dilute basic
EPS in the future.
13.Stock Option and Stock Ownership Plans
Stock Option Plans
The Company has several stock option plans (collectively known as
the "Plans") which allow incentive and nonqualified stock options
to be granted to key employees and officers of the Company and
nonqualified stock options to be granted to directors of the
Company. Options granted under the Plans may be exercised at any
time after one year and prior to ten years following the grant,
subject to special rules that apply in the event of death,
retirement and/or termination of an optionee. The exercise price
of all options granted under the Plans is at the fair market value
of the Company's stock on the date of the grant.
The following table summarizes information with respect to the
common stock options awarded under the Plans and grants described
above.
<TABLE>
1999 1998 1997
Shares Shares Shares
Under Weighted Avg. Under Weighted Avg. Under Weighted Avg.
Options Exercise Price OptionsExercise Price Options Exercise Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
Beginning
of year 1,002,800 $18.65 1,036,500 $18.19 397,950 $33.63
Effect of
Stock Split - $ - - $ - 397,950 $16.82
Granted-Options 91,800 $ 20.27 80,600 $25.06 281,600 $ 22.10
Exercised-
Options 49,000 $16.44 96,901 $18.53 34,000 $ 16.25
Cancelled 31,100 $23.84 17,399 $21.56 7,000 $28.50
Outstanding,
End
of year 1,014,500 $18.74 1,002,800 $18.65 1,036,500 $ 18.19
Weighted average of fair
value of options granted
during the year $ 6.02 $8.50 $ 7.50
</TABLE>
The following table summarizes certain information regarding
stock options outstanding at December 31, 1999:
<TABLE>
Options Outstanding Options Exercisable
Weighted
Avg. Weighted Number Weighted
Range of Number Remaining Avg. Exercisable Avg.
Exercise Outstanding Contractual Exercise at Exercise
Price at 12/31/99 Life Price 12/31/99 Price
<S> <C> <C> <C> <C> <C>
$15 to $19 621,600 6.2 $ 16.52 609,800 $16.46
$20 to $24 339,800 7.4 $ 21.55 259,800 $21.92
$25 to $30 53,100 7.9 $ 26.82 53,100 $26.82
</TABLE>
The Company applies the intrinsic value method for reporting
compensation expense pursuant to Accounting Principles Board
Opinion No. 25 "Accounting for Stock Issued to Employees" to its
stock-based compensation plans. Had compensation expense for the
Company's stock-based compensation plans been determined in
accordance with the fair value method pursuant to SFAS No. 123
"Accounting for Stock-Based Compensation", the Company's proforma
net income and earnings per share would have been as follows:
<TABLE>
1999 1998 1997
<S> <C> <C> <C>
Net Income (in thousands) $14,111 $9,022 $14,208
Earnings per share, basic $ 1.68 $ 1.09 $ 1.71
Earnings per share, diluted $ 1.66 $ 1.07 $ 1.67
</TABLE>
The fair value of the options granted during 1999 is estimated on
the date of grant using the Black-Scholes option-pricing model
with the following assumptions: a) dividend yield of 4.4 percent
to 4.6 percent b) expected volatility of 38.6 percent, c) risk-
free interest rate of 4.8 percent to 4.9 percent and d) expected
life of eight years.
The fair value of the options granted during 1998 is estimated on
the date of grant using the Black-Scholes option-pricing model
with the following assumptions: a) dividend yield of 3.4 percent
to 4.2 percent b) expected volatility of 37.7 percent to 38.8
percent, c) risk-free interest rate of 4.7 percent to 5.7 percent
and d) expected life of eight years.
The fair value of the options granted during 1997 is estimated on
the date of grant using the Black-Scholes option-pricing model
with the following assumptions: a) dividend yield of 3.6 percent
to 4.1 percent b) expected volatility of 36.8 percent, c) risk-
free interest rate of 6.2 percent to 6.7 percent and d) expected
life of 10 years.
The effects of applying SFAS No. 123 in this proforma disclosure
are not indicative of future amounts.
Employees' Stock Ownership Plan
In 1996, the Board of Directors extended the Employees' Stock
Ownership Plan ("ESOP"). All employees with one year of service
are participants. The ESOP is designed to enable employees of the
Company to accumulate stock ownership. While there are no employee
contributions, participants receive an allocation of stock which
has been contributed by the Company. Compensation costs are
reported when such shares are released to employees. The ESOP
borrowed $2.0 million from the Company in 1996 and used the
proceeds to purchase treasury stock. Under the terms of the ESOP,
the Company will make annual contributions over a 10-year period.
At December 31, 1999, the unearned portion of the ESOP ($1.3
million) was recorded as a contra-equity account entitled
"Unearned Compensation-ESOP."
Shareholder Rights Plan
In February 1998, the Board of Directors adopted a Shareholder
Rights Plan designed to prevent an acquirer from gaining control
of the Company without offering a fair price to all shareholders.
Each Right entitles the holder to purchase from the Company one
one-thousandth of a share of Series A Junior Participating
Preferred Stock, $100 par value, at a price of $100 subject to
adjustment. The Rights are not exercisable or transferable apart
from the common stock until ten days after a person or affiliated
group has acquired fifteen percent or more, or makes a tender
offer for fifteen percent or more, of the Company's common stock.
Each Right will entitle the holder, under certain circumstances
(such as a merger, acquisition of fifteen percent or more of
common stock of the Company by the acquiring person or sale of
fifty percent or more of the Company's assets or earning power),
to acquire at half the value, either common stock of the Company,
a combination of cash, other property, or common stock or other
securities of the Company, or common stock of the acquiring
person. Any such event would also result in any Rights owned
beneficially by the acquiring person or its affiliates becoming
null and void. The Rights expire in February 2008 and are
redeemable at any time until ten days following the time an
acquiring person acquires fifteen percent or more of the Company's
common stock at $0.001 per Right.
14. Accumulated Other Comprehensive Income
Comprehensive income represents certain changes in equity during
the reporting period, including net income and other comprehensive
income, which includes, but is not limited to, unrealized gains
from marketable securities and futures contracts, foreign currency
translation adjustments and minimum pension liability adjustments.
Reclassification adjustments represent gains or losses from
investments realized in net income for each respective year. For
the three years ended December 31, 1999, the components of
accumulated other comprehensive income are as follows (in
thousands):
<TABLE>
Accumulated
Net unrealized Minimum other
holding gain - pension comprehensive
investments liability income
<S> <C> <C> <C>
Balance at December 31, 1996 $61,215 $ (774) $60,441
Unrealized holding gain,
net of tax of $1,370 2,546 - 2,546
Reclassification adjustment,
net of tax of $17 (33) - (33)
Pension plan adjustment,
net of tax of $294 - 546 546
Balance at December 31, 1997 63,728 (228) 63,500
Unrealized holding gain,
net of tax of $1,383 2,568 - 2,568
Reclassification adjustment,
net of tax of $5 (9) - (9)
Pension plan adjustment,
net of tax of $40 - (74) (74)
Balance at December 31, 1998 66,287 (302) 65,985
Unrealized holding loss,
net of tax of $12,951 (24,052) - (24,052)
Pension plan adjustment,
net of tax of $46 - 84 84
Balance at December 31, 1999 $ 42,235 $ (218) $ 42,017
</TABLE>
15. Segment Information
Penn Virginia's operations are classified into two operating
segments:
Oil and Gas - crude oil and natural gas exploration,
development and production.
Coal Royalty and Land Management - the leasing of mineral
rights and subsequent collection of royalties and the
development and harvesting of timber.
<TABLE>
Coal Royalty
and Land Corporate
Oil and Gas Management and Other Consolidated
(in thousands)
<S> <C> <C> <C> <C>
December 31, 1999
Revenues $22,942 $21,547 $2,646 $47,135
Operating income(loss) 5,889 16,660 (1,834) 20,715
Identifiable assets 120,954 83,975 69,082 274,011
Depreciation, depletion
and amortization 6,951 1,269 173 8,393
Capital expenditures 28,605 31,955 91 60,651
</TABLE>
<TABLE>
Coal Royalty
and Land Corporate
Oil and Gas Management and Other Consolidated
(in thousands)
<S> <C> <C> <C> <C>
December 31, 1998
Revenues $21,108 $14,389 $2,647 $38,144
Operating income (loss) 256 10,619 (609) 10,266
Identifiable assets 102,698 63,424 90,809 256,931
Depreciation, depletion
and amortization 6,460 589 113 7,162
Capital expenditures 13,789 9,792 42 23,623
</TABLE>
<TABLE>
Coal Royalty
and Land Corporate
Oil and Gas Management and Other Consolidated
(in thousands)
<S> <C> <C> <C> <C>
December 31, 1997
Revenues $24,868 $13,619 $2,645 $41,132
Operating income (loss) 9,405 10,692 (1,378) 18,719
Identifiable assets 99,073 46,950 101,207 247,230
Depreciation, depletion
and amortization 5,920 516 113 6,549
Capital expenditures 13,784 9,402 6 23,192
</TABLE>
Operating income is total revenue less operating expenses.
Operating income does not include certain other income items, gain
(loss) on sale of securities, unallocated general corporate
expenses, interest expense and income taxes. Identifiable assets
are those assets used in the Company's operations in each segment.
Corporate assets are principally cash and marketable securities.
For the year ended December 31, 1999, two customers of the oil
and gas segment accounted for $9.6 million, or 20 percent, and
$6.9 million, or 13 percent, respectively of the Company's
consolidated net revenues. For the year ended December 31, 1998,
one customer of the oil and gas segment accounted for $4.8
million, or 13 percent, of the Company's consolidated revenues.
16. Commitments and Contingencies
Rental Commitments
Minimum rental commitments under all non-cancelable operating
leases, primarily real estate, in effect at December 31, 1999 were
as follows (in thousands):
Year ending December 31,
2000 $ 401
2001 159
2002 117
2003 82
2004 73
Total minimum payments $ 832
Legal
The Company is involved, from time to time, in various legal
proceedings arising in the ordinary course of business. While the
ultimate results of these proceedings cannot be predicted with
certainty, Company management believes these claims will not have
a material effect on the Company's financial position, liquidity
or operations.
17. Supplementary Information on Oil and Gas Producing Activities
(Unaudited)
The following supplementary information regarding the oil and gas
producing activities of Penn Virginia is presented in accordance
with the requirements of the Securities and Exchange Commission
(SEC) and the SFAS No. 69 "Disclosures about Oil and Gas Producing
Activities". The amounts shown include Penn Virginia's net working
and royalty interests in all of its oil and gas operations.
Capitalized Costs Relating to Oil and Gas Producing Activities
<TABLE>
Year Ended December 31,
1999 1998 1997
(in thousands)
<S> <C> <C> <C>
Proved properties $41,084 $35,842 $32,491
Unproved properties 3,959 1,408 1,202
Wells, equipment and facilities 137,176 117,688 112,339
Support equipment 2,829 2,620 2,455
185,048 157,558 148,487
Accumulated depreciation and depletion (69,495) (62,545) (56,099)
Net capitalized costs $ 115,553 $ 95,013 $ 92,388
</TABLE>
Costs Incurred in Certain Oil and Gas Activities
<TABLE>
Year Ended December 31,
1999 1998 1997
(in thousands)
<S> <C> <C> <C>
Proved property acquisition costs $14,069 $3,351 $73
Unproved property acquisition costs 2,551 206 90
Exploration costs 3,171 2,022 3,346
Development costs and other 9,398 8,698 10,560
Total costs incurred $ 29,189 $ 14,277 $14,069
</TABLE>
Results of Operations for Oil and Gas Producing Activities
The following schedule includes results solely from the
production and sale of oil and gas and a noncash charge for
property impairments. It excludes general and administrative
expenses and gains or losses on property dispositions. The income
tax expense is calculated by applying the statutory tax rates to
the revenues after deducting costs, which include depletion
allowances and giving effect to oil and gas related permanent
differences and tax credits.
<TABLE>
Year Ended December 31,
1999 1998 1997
(in thousands)
<S> <C> <C> <C>
Revenues $21,847 $20,817 $22,488
Production costs 5,092 4,746 5,425
Exploration costs 1,699 488 1,439
Depreciation and depletion 6,951 6,460 5,920
Impairment of oil and gas properties - 4,641 -
8,105 4,482 9,704
Income tax expense 1,864 1,062 2,807
Results of operations $ 6,241 $ 3,420 $6,897
Oil and Gas Reserves
</TABLE>
The following schedule presents the estimated oil and gas
reserves owned by Penn Virginia. This information includes Penn
Virginia's royalty and net working interest share of the reserves
in oil and gas properties. Net proved oil and gas reserves for
the three years ended December 31, 1999 were estimated by Wright
and Company, Inc. All reserves are located in the United States.
There are many uncertainties inherent in estimating proved
reserve quantities, and projecting future production rates and the
timing of future development expenditures. In addition, reserve
estimates of new discoveries are more imprecise than those of
properties with a production history. Accordingly, these estimates
are subject to change as additional information becomes available.
Proved oil and gas reserves are the estimated quantities of crude
oil, condensate and natural gas that geological and engineering
data demonstrate with reasonable certainty to be recoverable in
future years from known reservoirs under existing economic and
operating conditions at the end of the respective years. Proved
developed oil and gas reserves are those reserves expected to be
recovered through existing equipment and operating methods.
Net quantities of proved reserves and proved developed reserves
during the periods indicated are set forth in the tables below:
<TABLE>
Oil and Natural
Proved Developed and Condensate Gas
Undeveloped Reserves: (MBbls) (MMcf)
<S> <C> <C>
December 31, 1996 454 175,448
Revisions of previous estimates 10 (10,538)
Extensions, discoveries and other additions 3 17,848
Production (38) (7,755)
Purchase of reserves - 304
Sale of reserves in place (5) (3,745)
December 31, 1997 424 171,562
Revisions of previous estimates (53) (11,978)
Extensions, discoveries and other additions - 7,885
Production (30) (8,056)
Purchase of reserves - 4,495
Sale of reserves in place - (35)
December 31, 1998 341 163,873
Revisions of previous estimates 31 2,106
Extensions, discoveries and other additions - 4,661
Production (32) (8,679)
Purchase of reserves 19 23,237
December 31, 1999 359 185,198
Proved Developed Reserves:
December 31, 1997 364 110,259
December 31, 1998 313 118,146
December 31, 1999 326 138,283
</TABLE>
The following table sets forth the standardized measure of the
discounted future net cash flows attributable to the Company's
proved oil and gas reserves. Future cash inflows were computed by
applying year-end prices of oil and gas to the estimated future
production of proved oil and gas reserves. Natural gas prices were
escalated only where existing contracts contained fixed and
determinable escalation clauses. Contractually provided natural
gas prices in excess of estimated market clearing prices were used
in computing the future cash inflows only if the Company expects
to continue to receive higher prices under legally enforceable
contract terms. Future prices actually received may materially
differ from the estimates in the standardized measure.
Future production and development costs represent the estimated
future expenditures (based on current costs) to be incurred in
developing and producing the proved reserves, assuming
continuation of existing economic conditions. Future income tax
expenses were computed by applying statutory income tax rates to
the difference between pre-tax net cash flows relating to the
Company's proved oil and gas reserves and the tax basis of proved
oil and gas properties. In addition, the effects of statutory
depletion in excess of tax basis, available net operating loss
carryforwards and alternative minimum tax credits were used in
computing future income tax expense. The resulting annual net cash
inflows were then discounted using a 10 percent annual rate.
<TABLE>
December 31,
1999 1998 1997
(in thousands)
<S> <C> <C> <C>
Future cash inflows $ 505,685 $354,567 $539,781
Future production costs 151,220 123,007 144,129
Future development costs 30,431 26,128 36,537
324,034 205,432 359,115
Future income tax expense 58,068 28,031 70,033
Future net cash flows 265,966 177,401 289,082
10% annual discount for estimated
timing of cash flows 146,703 101,737 169,987
Standardized measure of discounted
future net cash flows $ 119,263 $ 75,664 $ 119,095
</TABLE>
Changes in Standardized Measure of Discounted Future Net Cash
Flows
<TABLE>
Year Ended December 31,
1999 1998 1997
(in thousands)
<S> <C> <C> <C>
Sales of oil and gas, net of
production costs $(16,755) $(16,071) $(17,063)
Net changes in prices and production
costs 32,111 (57,646) (35,686)
Extensions, discoveries and other
additions 4,090 4,906 14,318
Development costs incurred during the
period 5,330 5,289 3,070
Revisions of previous quantity estimates 1,709 (6,735) (9,036)
Purchase of minerals-in-place 20,438 2,896 270
Sale of minerals-in-place - (26) (4,990)
Accretion of discount 8,116 14,059 17,548
Net change in income taxes (11,526) 12,006 701
Other changes 86 (2,109) (3,328)
Net increase (decrease) 43,599 (43,431) (34,196)
Beginning of year 75,664 119,095 153,291
End of year $ 119,263 $ 75,664 $119,095
</TABLE>
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEMS 10, 11, 12 AND 13 - DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY, EXECUTIVE OFFICERS OF THE COMPANY, EXECUTIVE
COMPENSATION, SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT, AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except for information concerning executive officers of the
Company included as an unnumbered item in Part 1, in accordance
with General Instruction G(3), reference is hereby made to the
Company's definitive proxy statement to be filed within 120 days
after the end of the fiscal year covered by this report.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) Financial Statements
1. Financial Statements - The financial statements
filed herewith are listed in the Index to Financial
Statements on page 28 of this report.
2. All schedules are omitted because they are not required,
inapplicable or the information is included in the consolidated
financial statements or the notes thereto.
3. Exhibits
(3.1) Articles of Incorporation of the Company.
(3.2) Articles of Amendment of Articles of Incorporation of
the Company.
(3.3) Amended bylaws of the Company.
(4) Rights Agreement dated as of February 11, 1998
between Penn Virginia Corporation and American Stock
Transfer & Trust Company, as Agent (incorporated by
reference to Exhibit 1.1 to the Company's Registration
Statement on Form 8-A filed with Securities and Exchange
Commission on February 20, 1998. (Commission File No. 0-
753)).
(10.1) Amended and restated Credit Agreement dated July 30,
1999 among Penn Virginia Corporation and Chase Bank of Texas
National Association, as Agent and First Union National Bank,
First National Bank of Chicago and PNC Bank National Association.
(10.2) Penn Virginia Corporation and Affiliated
Companies Employees' Stock Ownership Plan, as amended
(incorporated by reference to Exhibit 19 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1986 (Commission File No. 0-753)).
(10.3) Penn Virginia Corporation and Affiliated
Companies' Employees' Retirement/Savings Plan
(incorporated by reference to Exhibit 18(b) to the
Company's Registration Statement on Form S-8 filed with
the Securities and Exchange Commission on May 13, 1991
(Registration No. 33-40430)).
(10.4) The Company has adopted a policy concerning
severance benefits for certain senior officers of the
Company. The description of such policy is incorporated
herein by reference to the description of such policy
contained in the Company's definitive Proxy Statement
dated March 27, 2000.
(10.5) Penn Virginia Corporation 1994 Stock Option
Plan, as amended.
(10.6) Penn Virginia Corporation 1995 Directors'
Stock Option Plan, as amended.
(10.7) Penn Virginia Corporation 1999 Employee Stock
Incentive Plan.
(21) Subsidiaries of the Company.
(23.1) Consent of Arthur Andersen LLP.
(27) Financial Data Schedule. (Exhibit 27 is submitted
as an exhibit only in the electronic format of this
Annual Report on Form 10-K submitted to the Securities
and Exchange Commission.)
(b) Reports on Form 8-K
On October 8, 1999, Penn Virginia Corporation filed
one report on Form 8-K. The report involved an
acquisition on September 24, 1999 and was filed under
"Item 5. Other Events."
EXHIBIT 3.1
ARTICLE 1. The name of the corporation is Penn Virginia
Corporation.
ARTICLE 2. The purposes for which the corporation is organized
are to do any one or more of the following:
(a) buy, sell, own, lease, process, refine and otherwise deal
in and with coal, oil, gas, timber and minerals and in the lands,
leases and other property related to any of them;
(b) buy, sell, make, process and otherwise deal in and with
property of any kind and description, for its own account or for
the account of others; and render services of every kind and
description; and
(c) engage in any other business or activity not prohibited
by law or required to be stated in the Articles of Incorporation.
ARTICLE 3. The number of directors, not less than three, shall be
fixed by the bylaws, and in the absence of a bylaw fixing the
number, the number shall be 11.
ARTICLE 4. Stockholders shall not have pre-emptive or other
rights to subscribe for, purchase or receive any proportionate
share of the unissued stock of the corporation.
ARTICLE 5. The corporation shall have perpetual existence.
ARTICLE 6. The aggregate number of shares which the corporation
has authority to issue is 16,100,000 shares, divided into two
classes consisting of 100,000 shares of Preferred Stock of the par
value of $100 per share (herinafter called "Preferred Stock") and
16,100,000 shares of Common Stock of the par value of $6.25 per
share (hereinafter called "Common Stock").
The following is a description of each class of shares, and a
statement of the preferences, qualifications, limitations,
restrictions and the special or relative rights granted to or
imposed upon them (except those which the board of directors is
authorized to fix as hereinafter provided):
A. PREFERRED STOCK
(a)Issue in Series. The shares of Preferred Stock from time
to time may be divided into and issued herein and in the
resolution of the board of directors providing for the issue. All
shares of any one series of Preferred Stock shall be identical,
and all series of Preferred Stock shall rank equally and be
identical except as permitted hereunder.
(b)Creation of Series. The board of directors of the
corporation shall have the authority by resolution to divide the
Preferred Stock into one or more series, and to fix and determine
with respect to each series (i) the rate of dividend, the time of
payment and the dates from which dividends shall be cumulative,
and the extent of participation rights, if any; (ii) any right to
vote with holders of the shares of any other series or class and
any right to vote as a class, either generally or as a condition
to specified corporate action; (iii) the price at and the terms
and conditions on which shares may be redeemed; (iv) the amounts
payable upon shares in the event of voluntary or involuntary
liquidation; (v) sinking fund provisions for the redemption or
purchase of shares; and (vi) the terms and conditions on which
shares may be converted, if the shares of any series are issued
with the privilege of conversion.
1. COMMON STOCK
(c)Dividends. Holders of Common Stock shall be entitled
to receive such dividends as may be declared by the board of
directors, except that the corporation will not declare, pay
or set apart for any dividend on shares of Common Stock
(other than dividends payable in Common Stock), or directly
or indirectly make any distribution on, redeem, purchase or
otherwise acquire any such shares, if at the time of such
action the corporation is in default with respect to any
dividend payable on or any sinking or purchase fund
requirement relating to shares of Preferred Stock.
(d)Distribution of Assets. In the event of the voluntary or
involuntary liquidation of the corporation, holders of Common
Stock shall be entitled to receive pro rata all of the remaining
assets of the corporation available for distribution to its
stockholders after all amounts to which the holders of Preferred
Stock are entitled have been paid or set aside in cash for
payment.
ARTICLE 7. CERTAIN SIGNIFICANT TRANSACTIONS.
Section 1.Higher Vote for Certain Significant Transactions.
A.Higher Vote for Certain Significant Transactions.
In addition to any affirmative vote required by law or these
Articles of Incorporation, except as otherwise expressly provided
in Section 2 of the Article 7:
(i)any merger or consolidation of the corporation or any Subsidiary
(as hereinafter defined) with (a) any Related Person (as
hereinafter defined), or (b) any other corporation
(whether or not itself a Related Person) which is, or
after such merger or consolidation would be, an
Affiliate (as hereinafter defined) of a Related Person;
or
(ii)any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of
transactions)to or with any Related Person or any Affiliate
of any Related Person of any assets of the corporation or any
Subsidiary having an aggregate Fair Market Value (as
hereinafter defined) of $1,000,000 or more; or
(iii)the issuance or transfer by the corporation or any
Subsidiary (in one transaction or a series of transactions)
of any securities of the corporation or any Related Person or
any Affiliate of any Related Person in exchange for cash,
securities or other property ( or a combination thereof)
having an aggregate Fair Market Value of $1,000,000 or more;
or
(iv)the purchase by the corporation or any Subsidiary (in one
transaction or a series of transactions within a two-year
period) of any outstanding shares of capital stock of the
corporation which entitle the holder thereof to vote
generally in the election of directors (the "Voting Stock")
in exchange for cash, securities or other property (or a
combination thereof) having an aggregate Fair Market Value of
$1,000,000 or more; or
(v)the adoption of any plan or proposal for the liquidation
(partial or complete) or dissolution of the corporation
proposed by or on behalf of a Related Person or any Affiliate
of any Related Person; or
(vi)any reclassification of securities (including any reverse
stock split), or recapitalization of the corporation, or any
merger or consolidation of the corporation with any of its
Subsidiaries or any other transactions (whether or not with
or into or otherwise involving a Related Person) which has
the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity or convertible securities of the corporation or any
Subsidiary which is directly or indirectly owned by any
Related Person or any Affiliate of any Related Person;
shall require the affirmative vote of the holders of at least
90% of the voting power of the then outstanding shares of
Voting Stock, voting together as a single class. Such
affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage may
be specified, by law or in any agreement with any national
securities exchange or otherwise.
B. Definition of "Significant Transaction." The term
"Significant Transaction" as used in this Article 7 shall
mean any transaction which is referred to in any one or more
of clauses (i) through (vi) of paragraph A of this Section 1.
Section 2. When Higher Vote is Not Required.
The provisions of Section 1 of this Article 7 shall not be
applicable to any particular Significant Transaction, and
such Significant Transaction shall require only such
affirmative vote as is required by law, the Bylaws of the
corporation, and any other provision of these Articles of
Incorporation, if all of the conditions specified in either
of the following paragraphs A and B are met:
A.Approval by Continuing Directors. The Significant
Transaction shall have been approved by a majority of the
Continuing Directors (as hereinafter defined) the in office.
B.Price and Procedure Requirements. All of the
following conditions shall have been met:
(i)The aggregate amount of the cash and the Fair Market
Value as of the date of the consummation of the Significant
Transaction of consideration other than cash to be received
per share by holders of the Company's Common Stock in such
Significant Transaction shall be at least equal to the
highest of the following:
(a)(if applicable)the
highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers'
fees)paid by the Related Person for any shares of
Common Stock acquired by it (a)within the two-year
period immediately prior to the first public
announcement of the proposal of the Significant
Transaction (the "Announcement Date") or (b)in the
transaction in which it became a Related Person,
whichever is higher;
(b)the Fair Market Value per share of Common Stock on
the Announcement Date or on the date on which the
Related Person became a Related Person (such latter
date is referred to in this Article 7 as the
"Determination Date"), whichever is higher;
(c)the earnings per
share of Common Stock for the four full consecutive
fiscal quarters immediately preceding the Announcement
Date as to which financial results have been published
by the corporation, multiplied by the then highest
price/earnings multiple (if any) of such Related Person
or any of its Affiliates as customarily computed and
reported in the financial community;
(d)(if applicable)the price per share equal to the Fair
Market Value per share of Common Stock determined
pursuant to paragraph (B)(I)(b) of this Section 2,
multiplied by a fraction the numerator of which is the
highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers'
fees)paid by the Related Person for any shares of
Common Stock acquired by it within the two-year period
immediately prior to the Announcement Date and the
denominator of which is the Fair Market Value per share
of Common Stock on the first day in such two-year
period upon which the Related Person acquired any
shares of Common Stock; and
(e)the highest Fair Market Value per share of Common
Stock in the one-year period immediately prior to the
Announcement Date.
(ii)The consideration to be received by the holders of
Common Stock in such Significant Transaction shall be
either cash or the same type of consideration used by
the Related Person in acquiring the largest portion of
its holdings of Common Stock prior to the Announcement
Date.
(iii)After such Related Person has become a Related
Person, and prior to the consummation of such
Significant Transaction: (a) there shall have been (1)
no reduction in the annual rate of dividends paid on
the Common Stock (except as necessary to reflect any
subdivision of the Common Stock), except as approved by
a majority of the Continuing Directors, and (2) and
increase in such annual rate of dividends as necessary
to reflect any reclassification (including any reverse
stock split), recapitalization, reorganization or other
similar corporate transactions which has the effect of
reducing the number of outstanding shares of Common
Stock, unless the failure to so increase the annual
rate is approved by a majority of the Continuing
Directors; and (b) such Related Person shall not have
become the beneficial owner of any additional shares of
Voting Stock except as part of the transaction which
results in such Related Person becoming a Related
Person.
(iv)After such Related Person has become a Related
Person, such Related Person shall not have received the
benefit, directly or indirectly (except proportionately
as a shareholder of the corporation), of any loans,
advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages
provided by the Corporation, whether in anticipation of
or in connection with such Significant Transaction or
otherwise.
(v)A proxy or information statement describing the
proposed Significant Transaction and complying with the
requirements of the Securities Exchange Act of 1934 and
the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations)
shall be mailed to public shareholders of the
corporation at least 30 days prior to the consummation
of such Significant Transaction (whether or not such
proxy or information statement is required to be mailed
pursuant to such Act or subsequent provisions).
SECTION 3. Certain Definitions.
For the purposes of this Article 7:
A. A "person" shall mean any individual, firm,
corporation or other entity.
B. "Related Person" shall mean any person (other than
the corporation or any Subsidiary) who or which:
(i)is the beneficial owner, directly or indirectly, of
more than 10% of the voting power of outstanding Voting
Stock; or
(ii)is an Affiliate of the corporation and at any time
within the two-year period immediately prior to the date
in question was the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the
then outstanding Voting Stock;
(iii)is an assignee of or has otherwise succeeded to any
shares of Voting Stock which were at any time within the
two-year period prior to the date in question
beneficially owned by any Related Person, if such
assignment shall have occurred in the course of a
transaction or series of transactions not involving a
public offering within the meaning of the Securities Act
of 1933.
If two or more persons shall at any time be "Related
Persons," each Related Person whose involvement in a
transaction causes it to be a Significant Transaction shall
be treated as: (i)"the Related Person" for purposes of the
application of the price and procedure requirements of
paragraph B of section 2 of this Article 7 to such
Significant Transaction, and (ii) as "the Related Person in
question" for purposes of determining whether a person is a
Continuing Director with respect to such Significant
Transaction.
C.A person shall be a "beneficial owner" of any Voting Stock:
(i)which such person or any of its Affiliates or
Associates (as hereinafter defined) beneficially owns,
directly or indirectly, or
(ii)which such person or any of its Affiliates or
Associates has (a) the right to acquire (whether such a
right is exercisable immediately or only after the
passage of time),pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or
otherwise, or (b) the right to vote pursuant to any
agreement, arrangement or understanding; or
(iii)which are beneficially owned, directly or
indirectly, by any other person with which such person
or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of any shares
of Voting Stock.
D.For the purposes of determining whether a person is a
Related Person pursuant to paragraph B of the section 3, the
number of shares of Voting Stock deemed to be outstanding
shall include shares deemed owned by such person through
application of paragraph C of this Section 3 but shall not
include any other shares of Voting Stock which may be
issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
E."Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of
1934, as in effect on March 21, 1984.
F."Subsidiary" means any corporation of which a majority
of any class of equity security is owned, directly or
indirectly, by the corporation; provided, however, that for
the purposes of the definition of Related Person set forth in
paragraph B of this Section 3, the term "Subsidiary" shall
mean only a corporation of which a majority of each class of
equity security is owned, directly or indirectly, by the
corporation.
G."Continuing Director" means (i) any person who was a
member of the Board of Directors of the Company (the "Board")
as of May 1, 1984, or (ii) any member of the Board who is not
affiliated with the Related Person in question and was a
member of the Board prior to the time that the Related Person
in question became a Related Person, or (iii) a successor of
a Continuing Director who is unaffiliated with the Related
Person in question and is recommended to succeed a Continuing
Director by a majority of Continuing Directors then on the
Board.
H."Fair Market Value" means: (i) in the case of stock,
the highest closing sale price during the 30-day period
immediately preceding the date in question of a share of such
stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or if such stock is not quoted on the
Composite Tape, on the New York Stock Exchange, or if such
stock is not listed on such Exchange, on the principal United
States securities exchange registered undeer the Securities
Exchange Act of 1934 on which such stock is listed, or, if
such stock is not listed on any such property on the date in
question as determined by the Board in good faith exchange,
the highest closing bid quotation with respect to a share of
such stock during the 30-day preceding the date in question
on the National Association of Securities Dealers, Inc.
Automated Quotations System or any similar system then in
use, or if no such quotations are available, the fair market
value on the date in question of a share of such stock as
determined by the Board in good faith; and (ii) in the case
of property other than cash or stock, the fair market value
of such property on that date in question as determined by
the Board in good faith.
I.In the event any significant Transaction involves a
merger in which the corporation is the surviving corporation,
the phrase "consideration other than cash to be received" as
used in paragraph B(i) of Section 2 of this Article shall
include the shares of any other class of outstanding Voting
Stock retained by the holders of such shares.
SECTION 4.Miscellaneous.
A.The Continuing Directors of the corporation shall have
the power and duty to determine for the purposes of this
Article 7, on the basis of information known to them after
reasonable inquiry, (i)whether a person is a Related Person,
(ii)the number of shares of Voting Stock beneficially owned
by any person, (iii)whether a person is an Affiliate or
Associate of another (iv)whether the assets which are the
subject of any Significant Transaction have, or the
consideration to be received or paid by the corporation or
any Subsidiary for the issuance, transferor purchase of any
securities in any Significant Transaction has, an aggregate
Fair Market Value of $1,000,000 or more, and (v)any other
matter relating to the applicability or effect of this
Article 7.
B.Nothing contained in this Article 7 shall be construed
to relieve any Related Person from any fiduciary obligation
imposed by law.
C.In the event any section, paragraph (or portion
thereof) of this Article 7 shall be found to be invalid,
prohibited or unenforceable for any reason, the remaining
provisions of this Article 7 shall be deemed to remain in
full force and effect, and shall be construed as if such
invalid, prohibited or unenforceable provision had been
stricken herefrom or otherwise rendered inapplicable, it
being the intent of the corporation and its shareholders that
each such remaining provision (or portion thereof) of this
Article 7 remain, to the fullest extent permitted by law,
applicable and enforceable as to all shareholders, including
Related Persons, notwithstanding any such finding.
ARTICLE 8. Any provision in these Articles of Incorporation
or in the Bylaws of the corporation to the contrary
notwithstanding, no provision of Articles 7 or 8 of these
Articles shall be altered, amended, supplemented or repealed
by the shareholders of the corporation, and no provision of
the Bylaws or of these Articles of Incorporation inconsistent
with any such provisions shall be adopted by the shareholders
of the corporation, except by the affirmative vote of the
holders of at least 90% of the outstanding shares of capital
stock of the corporation entitled to vote generally in the
election of directors, considered for this purpose as one
class, provided that an amendment the effect of which is
solely to add additional minimum price or procedural
requirements to those already enumerated in paragraph B of
Section 2 of Article 7 may be adopted in the manner otherwise
prescribed by statute to the other provisions of these
Articles of Incorporation.
EXHIBIT 3.2
ARTICLES OF AMENDMENT
OF
THE ARTICLES OF INCORPORATION
OF
PENN VIRGINIA CORPORATION
Under Section 13.1-639 of the Virginia Stock Corporation Act
FIRST: The name of the Corporation is Penn Virginia Corporation
SECOND: The amendment adopted is to add a new Paragraph to the
end of Article Six to read as follows:
(e) Establishment of Series. There is hereby established a
series of the Company's authorized Preferred Stock, to be
designated as the "Series A Junior Participating Preferred Stock,
par value $100 per share." The designation and number, and
relative rights, preferences and limitations of the Series A
Junior Participating Preferred Stock, insofar as not already fixed
by any other provision of these Articles of Incorporation, shall
be as follows:
Section 1. Designation and Number of Shares. The shares
of such series shall be designated as "Series A Junior
Participating Preferred Stock," and the number of shares initially
constituting such series shall be 15,000.
Section 2. Dividends and Distributions.
(a) Subject to the prior and superior rights of
the holders of any shares of any series of preferred stock of the
Company ranking prior and superior to the shares of Series A
Junior Participating Preferred Stock, the holders of shares of
Series A Junior Participating Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends
payable in cash on the first day of January, April, July and
October in each year or such other quarterly payment date as shall
be specified by the Board of Directors (each such date being
referred to herein as a "Quarterly Dividend Payment Date'),
commencing o the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a share of the Series A
Junior Participating Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (I) $0.01 or
(ii) subject to the provision for adjustment hereinafter set
forth, 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable
in kind) of all non-cash dividends or other distributions other
than a dividend payable in shares of Common Stock or a subdivision
of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock, $6.25 par value (the
"Common Stock"), of the Company since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of the Series A Junior Participating
Preferred Stock. In the event the Company shall at any time after
February 11, 1998 (the "Rights Declaration Date") (I) declare any
dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding shares of Common Stock, or (iii) combine
the outstanding shares of Common Stock into a smaller number of
shares, then in each such case the amount to which holders of
shares of Series A Junior Participating Preferred Stock were
entitled immediately prior to such event shall be adjusted by
multiplying such amount by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such
event.
(b) The Company shall declare a dividend or distribution on
Series A Junior Participating Preferred Stock as provided in
paragraph (a) above immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend payable in
shares of Common Stock); provided, however, that, in the event no
dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $0.01 per share on the Series A Junior Participating
Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c)Dividends shall begin to accrue and be
cumulative on outstanding shares of Series A Junior Participating
Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Junior
Participating Preferred Stock, unless the date of issue of such
shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders
of shares of Series A Junior Participating Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such quarterly
Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Junior
Participating Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among
all such shares at the time outstanding. The Board of Directors
may fix a record date for the determination of holders of shares
of Series A Junior Participating Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon,
which record date shall be no more than 30 days prior to the date
fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of
Series A Junior Participating Preferred Stock shall have the
following voting rights:
(a) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Junior Participating
Preferred Stock shall entitle the holder there to 1,000 votes on
al matters submitted to a vote of the shareholders of the Company.
In the event the Company shall at any time after the Rights
Declaration Date (I) declare any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the number of
votes per share to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a
fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock outstanding
immediately prior to such event.
(b) Except as otherwise provided herein or by law, the
holders of shares of Series A Junior Participating Preferred Stock
and the holders of shares of Common Stock shall vote together as
one class on all matters submitted to a vote of shareholders of
the Company.
(c) (i) If at any time dividends on any Series A Junior
Participating Preferred Stock shall be in arrears in an amount
equal to six (6) quarter dividends thereon, the occurrence of such
contingency shall mark the beginning of a period (herein called a
"default period") which shall extend until such time when all
accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all
shares of Series A Junior Participating Preferred Stock then
outstanding shall have been declared and paid or set apart for
payment. During each default period, all holders of shares of
Series A Junior Participating Preferred Stock with dividends in
arrears in an amount equal to six (6) quarterly dividends thereon,
voting as a class together with holders of any other shares of
preferred stock of the Company upon which like voting rights have
been conferred and are then exercisable, irrespective of series,
shall have the right to elect two (2) Directors.
(ii) During any default period, such voting right
of the holders of shares of Series A Junior Participating
Preferred Stock may be exercised initially at a special meeting
called pursuant to subparagraph (iii) of this Section 3(c) or at
any annual meeting of shareholders, and thereafter at annual
meetings of shareholders, provided that such voting right shall
not be exercised unless the holders of ten percent (10%) in number
of shares of preferred stock having the voting rights set forth
above that are outstanding shall be present in person or by proxy.
The absence of a quorum of the holders of Common Stock shall not
affect the exercise by the holders of such preferred stock of such
voting right. At any meting at which the holders of such
preferred stock shall exercise such voting right initially during
an existing default period, they shall have the right, voting as a
class, to elect Directors to fill such vacancies, if any, in the
Board of Directors as may then exist up to two (2) Directors or if
such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special
meeting does not amount to the required number, the holders of
such preferred stock shall have the right to make such increase in
the number of Directors as shall be necessary to permit the
election by them of the required number. After the holders of
such preferred stock shall have exercised their right to elect
Directors in any default period and during the continuance of such
period, the number of Directors shall not be increased or
decreased except by vote of the holders of such preferred stock as
herein provided or pursuant to the rights of any equity securities
ranking senior to or pari passu with the Series A Junior
Participating Preferred Stock.
(iii) Unless the holders of such preferred stock
shall, during an existing default period, have previously
exercised their right to elect Directors, the Board of Directors
may order, or any shareholder or shareholders owning in the
aggregate not less than ten percent (10%) of the total number of
shares of such preferred stock outstanding, irrespective of
series, may request the calling of a special meeting of the
holders of such preferred stock, which meeting shall thereupon be
called by the President, a Vice President or the Secretary of the
Company. Notice of such meeting and of any annual meeting at
which holders of Preferred Stock are entitled to vote pursuant to
this Paragraph (c)(iii) shall be given to each holder of record of
such preferred stock by mailing a copy of such notice to him at
his last address as the same appears on the books of the Company.
Such meeting shall be called for a time not earlier than 20 days
and not later than 60 days after such order or request or in
default of the calling of such meeting within 60 days after such
order or request, such meeting may be called on similar notice by
any shareholder or shareholders owning in the aggregate not less
than ten percent (10%) of the total number of shares of such
preferred stock outstanding. Notwithstanding the provisions of
this Paragraph (c)(iii), no such special meeting shall be called
during the period within 60 days immediately preceding the date
fixed for the next annual meting of the shareholders.
(iv) In any default period, the holders of
Common Stock, and other classes of stock of the Company, if
applicable, shall continue to be entitled to elect the whole
number of Directors until the holders of such preferred stock
shall have exercised their right to elect two (2) Directors voting
as a class, after the exercise of which right (x) the Directors so
elected by the holders of such preferred stock shall continue in
office until their successors shall have been elected by such
holders or until the expiration of the default period, and (y) any
vacancy in the Board of Directors may (except as provided in
Paragraph (c)(ii) of this Section 3) be filled by vote of a
majority of the remaining Directors theretofore elected by the
holders of the class of stock which elected the Director whose
office shall have become vacant. References in this Paragraph (c)
to Directors elected by the holders of a particular class of stock
shall include Directors elected by such Directors to fill
vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default
period, (x) the right of the holders of such preferred stock as a
class to elect Directors shall cease, (y) the term of any
Directors elected by the holders of such preferred stock as a
class shall terminate, and (z) the number of Directors shall be
such number as may be provided for in the Certificate or by-laws
irrespective of any increase made pursuant to the provisions of
Paragraph (c)(ii) of this Section 3 (such number being subject,
however, to change thereafter in any manner provided by law or in
the Certificate or by-laws). Any vacancies in the Board of
Directors effected by the provisions of clauses (y) and (z) in the
preceding sentence may be filled by a majority of the remaining
Directors.
(d) Except as set forth herein, holders of
shares of Series A Junior Participating Preferred Stock shall have
no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(a) Whenever quarter dividends or other
dividends or distributions payable on the Series A Junior
Participating Preferred Stock as provided in Section 2 herein are
in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A
Junior Participating Preferred Stock outstanding shall have been
paid in full, the Company shall not
(i) declare or pay dividends on, make any
other distributions on, or redeem or purchase or otherwise acquire
for consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any
other distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Junior Participating Preferred
Stock, except dividends paid ratably on the Series A Junior
Participating Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire
for consideration shares of any stock ranking on a parity (either
as to dividends or upon dissolution, liquidation or winding up) to
the Series A Junior Participating Preferred Stock; or
(iv) purchase or otherwise acquire for
consideration any shares of Series A Junior Participating
Preferred Stock, or any shares of stock ranking on a parity with
the Series A Junior Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by publication
(as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(b) The Company shall not permit any subsidiary
of the Company to purchase or otherwise acquire for consideration
any shares of stock of the Company unless the Company could, under
Section 4(a) herein, purchase or otherwise acquire such shares at
such time and in such manner.
Section 5. Reacquired Shares. Any Series A Junior
Participating Preferred Stock purchased or otherwise acquired by
the Company in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued
preferred stock of the Company and may be reissued as part of a
new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors.
Section 6. Liquidation, Dissolution or Winding Up.
(a) Upon any liquidation (voluntary or
otherwise), dissolution or winding up of the Company, no
distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating
Preferred stock unless, prior thereto, the holders of shares of
Series A Junior Participating Preferred Stock shall have received
an amount equal to $1,000 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or
not declared, to the date of such payment (the "Series A
Liquidation Preference"). Following the payment of the full
amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A
Junior Participating Preferred Stock unless, prior thereto, the
holders of shares of Common Stock shall have received an amount
per share (the "Common Adjustment") equal to the quotient obtained
by dividing (I) the Series A Liquidation Preference by (ii) 1,000
(as appropriately adjusted as set forth in subparagraph (c) below
to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number
in clause (ii), the "Adjustment Number"). Following the payment
of the full amount of the Series A Liquidation Preference and the
Common Adjustment in respect of all outstanding shares of Series A
Junior Participating Preferred Stock and Common Stock,
respectively, holders of shares of Series A Junior Participating
Preferred Stock and holders of shares of Common Stock shall
receive their ratable and proportionate share of the remaining
assets to be distributed in the ratio of the Adjustment Number to
1 with respect to such Preferred Stock and Common Stock, on a per
share basis, respectively.
(b) In the event, however, that there are not
sufficient assets available to permit payment in full of the
Series A Liquidation Preference and the liquidation preferences of
all other series of preferred stock, if any, which rank on a
parity with the Series A Junior Participating Preferred Stock,
then such remaining assets shall be distributed ratably to the
holders of such parity shares in proportion to their respective
liquidation preferences. IN the event, however, that there are
not sufficient assets available to permit payment in full of the
common Adjustment, then such remaining assets shall be distributed
ratably to the holders of shares of Common Stock.
(c) In the event Company shall at any time after
the Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the
Adjustment Number in effect immediately prior to such event shall
be adjusted by multiplying such adjustment Number by a fraction,
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock outstanding
immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the
Company shall enter into any consolidation, merger, combination or
other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same
time be similarly exchanged or changed in an amount per share
(subject to the provision for adjustment hereinafter set forth)
equal to 1,000 times the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed
or exchanged. IN the event the Company shall at any time after
the Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the
outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of
shares, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of
shares of Series A Junior Participating Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock outstanding immediately prior to
such event.
Section 8. No Redemption. The shares of Series A
Junior Participating Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating
Preferred Stock shall rank junior to all other series of the
Company's Preferred Stock as to the payment of dividends and the
distribution of assets, except that the Series A Junior
Participating Preferred Stock shall rank on a parity with the
Series A Junior Participating Preferred Stock of the Company as to
dividends and the distribution of assets.
Section 10. Amendment. The Certificate, including,
without limitation, this resolution, shall not hereafter be
amended, either directly or indirectly, or through merger or
consolidation with another corporation, in any manner that would
materially alter or change the powers, preferences or special
rights of the Series A Junior Participating Preferred Stock so as
to affect them adversely without the affirmative vote of the
holders of a majority or more of the outstanding shares of Series
A Junior Participating Preferred Stock, voting separately as a
class.
Section 11. Fractional Shares. Series A Junior
Participating Preferred Stock may be issued in fractions of a
share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of
all other rights of holders of shares of Series A Junior
Participating Preferred Stock.
THIRD: This amendment of the Articles of Incorporation
was duly adopted by the Board of Directors of the Corporation on
February 11, 1998, without shareholder action, which shareholder
action was not required.
IN WITNESS WHEREOF, the undersigned has executed these
Articles of Amendment as of this 11th day of February, 1998.
PENN VIRGINIA CORPORATION
By_________________________
/s/ Steven W. Tholen
Vice President and Chief
Financial Officer
EXHIBIT 3.3
ARTICLE 1 SHAREHOLDERS
Section 1. Meetings.
A. Annual Meeting. Unless otherwise fixed by the board of
directors the annual meeting of shareholders for the election of
directors and for other business shall be held on the first Tuesday
of May in each year or, if that day is a legal holiday, on the
first subsequent business day.
B. Special Meetings. Special meetings of the shareholders
may be called at any time by the chief executive officer, or a
majority of the board of directors.
C. Place. Meetings of the shareholders shall be held at
such place in Philadelphia, Pennsylvania or elsewhere, as may be
fixed by the board of directors in the notice of meeting.
D. Adjournments. A Public Announcement of an adjournment of
an annual or special meeting shall not commence a new time period
for the giving of shareholder notices provided herein. For
purposes of these Bylaws, "Public Announcement" includes without
limitation (i) a press release reported by the Dow Jones News,
Associated Press or a comparable national news service, or (ii) a
document filed with the Securities and Exchange Commission.
E. Organization. The Chairman of the Board of Directors,
or, in the absence of the Chairman of the Board of Directors, such
other officer or board member as the Board of Directors may
designate, shall preside at each meeting of shareholders and may
adjourn the meeting from time to time. The Secretary or an
Assistant Secretary shall act as secretary of the meeting and keep
a record of the proceedings thereof. The Board of Directors of
the Company shall be entitled to make such rules or regulations
for the conduct of meetings of shareholders as it shall deem
necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the
meeting shall have the right and authority to prescribe such
rules, regulations and procedures, and to do all such acts as, in
the judgement of such chairman, are necessary, appropriate or
convenient for the proper conduct of the meeting, including
without limitation, establishing an agenda or order of business
for the meeting, establishing rules and procedures for maintaining
order at the meeting and the safety of those present, limiting the
participation in such meeting to shareholders of record of the
Company and their duly authorized and constituted proxies, and
such other persons as the chairman shall permit, restricting entry
to the meeting after the time fixed for the commencement thereof,
limiting the time allotted to questions or comments by
participants, and regulating the opening and closing of the polls
for balloting on matters which are to be voted on by ballot.
Unless, and to the extent, determined by the Board of Directors or
the chairman of the meeting, meetings of shareholders shall not be
required to be held in accordance with the rules of parliamentary
procedure.
Section 2. Notice.
Written notice of the time and place of all meetings of
shareholders and of the purpose of each special meeting of
shareholders shall be given to each shareholder entitled to vote
thereat at least ten days before the date of the meeting, unless a
greater period of notice is required by law in a particular case.
Section 3. Voting.
A. Voting Rights. Except as otherwise provided herein, or
in the Articles of Incorporation, or by law, every shareholder
shall have the right at every shareholders' meeting to one vote for
every share standing in his name on the books of the Company which
is entitled to vote at such meeting. Every shareholder may vote
either in person or by proxy.
B. Election of Directors. At each annual meeting the
shareholders shall elect at least seven but not more than ten
directors who shall constitute the entire Board.
C. Nomination of Directors. Nominations for the election of
directors may be made by the Board of Directors or by any
shareholder (a "Nominator") entitled to vote in the election of
directors. Such nominations, other than those made by the Board
of Directors, shall be made in writing pursuant to timely notice
delivered to or mailed and received by the Secretary of the
Company as set forth in this Section 3C. To be timely in
connection with an annual meeting of shareholders, a Nominator's
notice, setting forth the name and address of the person to be
nominated, shall be delivered to or mailed and received at the
principal executive offices of the Company not less than 90 days
nor more than 180 days prior to the earlier of the date of the
meeting or the corresponding date on which the immediately
preceding year's annual meeting of shareholders was held;
provided, however, that with respect to the annual meeting of
shareholders to be held in 1998, notice by the shareholder to be
timely must be delivered not later than the tenth day following
the day on which Public Announcement of the date of such meeting
is first made by the Company. To be timely in connection with any
election of a director at a special meeting of the shareholders, a
Nominator's notice, setting forth the name and address of the
person to be nominated, shall be delivered to or mailed and
received at the principal executive offices of the Company not
later than the close of business on the tenth day following the
day on which notice of the date of the meeting was mailed or
Public Announcement of such meeting was made, whichever first
occurs. At such time, the Nominator shall also submit written
evidence, reasonably satisfactory to the Secretary of the Company,
that the Nominator is a shareholder of the Company and shall
identify in writing (i) the name and address of the Nominator,
(ii) the number of shares of each class of capital stock of the
Company of which the Nominator is the beneficial owner, (iii) the
name and address of each of the persons, if any, with whom the
Nominator is acting in concert and (iv) the number of shares of
capital stock of which each such person with whom the Nominator is
acting in concert is the beneficial owner pursuant to which the
nomination or nominations are to be made. At such time, the
Nominator shall also submit in writing (i) the information with
respect to each such proposed nominee that would be required to be
provided in a proxy statement prepared in accordance with
Regulation 14A under the Securities Exchange Act of 1934, as
amended, and (ii) a notarized affidavit executed by each such
proposed nominee to the effect that, if elected as a member of the
Board of Directors, he will serve and that he is eligible for
election as a member of the Board of Directors. Within 30 days
(or such shorter time period that may exist prior to the date of
the meeting) after the Nominator has submitted the aforesaid items
to the Secretary of the Company, the Secretary of the Company
shall determine whether the evidence of the Nominator's status as
a shareholder submitted by the Nominator is reasonably
satisfactory and shall notify the Nominator in writing of such
determination. If the Secretary of the Company finds that such
evidence is not reasonably satisfactory, or if the Nominator fails
to submit the requisite information in the form or within the time
indicated, such nomination shall be ineffective for the election
at the meeting at which such person is proposed to be nominated.
The presiding person at each meeting of shareholders shall, if the
facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures
prescribed by these Bylaws, and if he should so determine and so
declare, the nomination shall be disregarded. The requirements of
this Section 3C shall be in addition to any other requirements
imposed by these Bylaws, by the Company's Articles of
Incorporation or by law and in no event shall the periods
specified herein be in derogation of other time periods required
by law.
Section 4. Quorum.
The presence, in person or by proxy, of the holders of a majority
of the outstanding shares of stock of the Company entitled to vote
at a meeting shall constitute a quorum. If a quorum is not
present, no business shall be transacted except to adjourn to a
future time.
Section 5. Shareholder Proposals.
No proposal by a shareholder may be voted upon at a meeting of
shareholders unless the proposing shareholder shall have delivered
or mailed in a timely manner (as set forth herein) and in writing to
the Secretary of the Company (A) notice of such proposal, (B) the
text of the proposed alteration, amendment or repeal, if such
proposal relates to a proposed change to the Company's Articles of
Incorporation or Bylaws, (C) evidence reasonably satisfactory to the
Secretary of the Company of such shareholder's status as such and of
the number of shares of each class of capital stock of the Company
of which such shareholder is the beneficial owner, (D) a list of the
names and addresses of other beneficial owners of shares of the
capital stock of the Company, if any, with whom such shareholder is
acting in concert, and the number of shares of each class of capital
stock of the Company beneficially owned by each such beneficial
owner and (E) an opinion of counsel, which counsel and the form and
substance of which opinion shall be reasonably satisfactory to the
Board of Directors of the Company, to the effect that the Articles
of Incorporation or Bylaws resulting from the adoption of such
proposal would not be in conflict with the laws of the Commonwealth
of Virginia if such proposal relates to a proposed change to the
Company's Articles of Incorporation or Bylaws. To be timely in
connection with an annual meeting of shareholders, a shareholder's
notice and other aforesaid items shall be delivered to or mailed and
received at the principal executive offices of the Company not less
than 90 nor more than 180 days prior to the earlier of the date of
the meeting or the corresponding date on which the immediately
preceding year's annual meeting of shareholders was held; provided,
however, that with respect to the annual meeting of shareholders to
be held in 1998, notice by the shareholder to be timely must be
delivered not later than the tenth day following the day on which
Public Announcement of the date of such meeting is first made by the
Company. To be timely in connection with the voting on any such
proposal at a special meeting of the shareholders, a shareholder's
notice and other aforesaid items shall be delivered to or mailed and
received at the principal executive offices of the Company not later
than the close of business on the tenth day following the day on
which such notice of date of the meeting was mailed or Public
Announcement was made whichever first occurs. Within 30 days (or
such shorter period that may exist prior to the date of the meeting)
after such shareholder shall have submitted the aforesaid items to
the Secretary of the Company, the Secretary shall determine whether
the items to be ruled upon by the Secretary are reasonably
satisfactory and shall notify such shareholder in writing of such
determination. If such shareholder fails to submit a required item
in the form or within the time indicated, or if the Secretary
determines that the items to be ruled upon by the Secretary are not
reasonably satisfactory, then such proposal by such shareholder may
not be voted upon by the shareholders of the Company at such meeting
of shareholders. The presiding person at each meeting of
shareholders shall, if the facts warrant, determine and declare at
the meeting that a proposal was not made in accordance with the
procedures prescribed by these Bylaws, and if he should so determine
and so declare the proposal shall be disregarded. The requirements
of this Section 5 shall be in addition to any other requirements
imposed by these Bylaws, by the Company's Articles of Incorporation
or by law and in no event shall the periods specified herein be in
derogation of other time periods required by law.
ARTICLE 2 DIRECTORS
Section 1. Term of Office.
Each director elected at an annual meeting of the shareholders
shall hold office until the next annual meeting, unless properly
removed or disqualified, and until such further time as his
successor is elected and has qualified.
Section 2. Powers.
The business of the Company shall be managed by the board of
directors which shall have all powers conferred by law and these
bylaws. The board of directors shall elect, remove or suspend
officers, determine their duties and compensations, and require
security in such amounts as it may deem proper.
Section 3. Meetings.
A. Regular Meetings. Regular meetings shall be held at such
times as the board shall designate by resolution. Notice of
regular meetings need not be given.
B. Special Meetings. Special meetings of the board may be
called at any time by the chief executive officer and shall be
called by him upon the written request of one-third of the
directors. Written notice of the time, place and the general
nature of the business to be transacted at each special meeting
shall be given to each director at least three days before such
meeting.
C. Place. Meetings of the board of directors shall be held
at such place as the board may designate or as may be designated in
the notice calling the meeting.
Section 4. Quorum.
A majority of the number of directors in office immediately before
the meeting begins shall constitute a quorum for the transaction of
business at any meeting and, except as provided in Article VII, the
acts of a majority of the directors present at any meeting at which
a quorum is present shall be the acts of the board of directors.
Section 5. Vacancies.
Vacancies in the board of directors shall be filled by vote of a
majority of the remaining members of the board though less than a
quorum. Such election shall be for the balance of the unexpired
term or until a successor is duly elected by the shareholders and
has qualified.
ARTICLE 3 BOARD COMMITTEES
Section 1. Executive Committee.
The board of directors by resolution of a majority of the number of
directors then in office may designate three or more directors to
constitute an executive committee, which, to the extent provided in
such resolution, shall have and may exercise all the authority of
the board of directors except to approve an amendment of the
Company's articles of incorporation or a plan of merger or
consolidation. If an executive committee is so designated it will
elect one of its members to be its chairman.
Section 2. Compensation and Benefits Committee.
The board of directors by resolution of a majority of the number of
directors then in office may designate three or more outside
directors to constitute a compensation and benefits committee,
which shall have such power and authority as may be provided in
such resolution.
Section 3. Other Committees.
The board of directors by resolution of a majority of the number of
directors then in office may create or disband other committees, as
deemed to be proper.
ARTICLE 4 OFFICERS
Section 1. Election.
At its first meeting after each annual meeting of the shareholders,
the board of directors shall elect a president, treasurer and
secretary, and such other officers as it deems advisable. Any two
or more offices may be held by the same person except the offices
of president and secretary.
Section 2. Chairman and President.
A. Chairman. The chairman shall preside at all meetings of
the board and of the shareholders. If so designated by the board
of directors, the chairman shall be the chief executive officer.
B. President. The president shall be either the chief
executive officer or the chief operating officer of the Company, as
designated by the board of directors. The president shall have
such duties as the board of directors and the chairman of the
Company shall prescribe.
Section 3. Other Officers.
The duties of the other officers shall be those usually related to
their offices, except as otherwise prescribed by resolution of the
board of directors.
Section 4. General.
In the absence of the chairman and president, the person who has
served longest as vice president or any other officer designated by
the board shall exercise the powers and perform the duties of the
chief executive officer or chief operating officer or both.
The chief executive officer or any officer or employee authorized
by him may appoint, remove or suspend agents or employees of the
Company and may determine their duties and compensation.
ARTICLE 5 INDEMNIFICATION
Section 1. Right to Indemnification.
Subject to Section 3, the Company shall indemnify any person who was
or is a party or threatened to be a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, and whether formal or informal, and
whether or not by or in the right of the corporation, by reason of
the fact that he is or was a director or officer of the Company, or,
while a director or officer of the Company, is or was serving at the
request of the Company as a director, officer, partner, trustee,
administrator, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise, for expenses (including attorney's fees), judgments,
fines, penalties, including any excise tax assessed with respect to
an employee benefit plan, and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit
or proceeding, to the fullest extent and manner permitted by the
Virginia Corporation Law as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Company to provide broader
indemnification rights than permitted prior to such amendment).
Section 2. Advance of Expenses.
Subject to Section 3, expenses incurred by a director or officer of
the Company in defending a civil or criminal action, suit or
proceeding shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay
such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Company.
Section 3. Procedure for Determining Permissibility.
The procedure for determining the permissibility of indemnification
pursuant to Article 5 (including the advance of expenses), shall be
that set forth in Section 13.1-701.B of the Virginia Corporation
Law, provided that, if there has been a change in control of the
Company between the time of the action or failure to act giving
rise to the claim for indemnification and such claim, then at the
option of the person seeking indemnification, the permissibility of
indemnification shall be determined by special legal counsel
selected jointly by the Company and the person seeking
indemnification. The reasonable expenses of any director or
officer in prosecuting a successful claim for indemnification, and
the fees and expenses of any special legal counsel engaged to
determine permissibility of indemnification, shall be borne by the
Company.
Section 4. Contractual Obligation; Inuring of Benefit.
The obligations of the Company to indemnify a person under this
Article V, including the obligation to advance expenses, shall be
considered contractual obligations of the Company to such person,
subject only to the determination of permissibility as set forth in
the preceding Section, and no modification or repeal of any
provision of this Article V shall affect, to the detriment of such
person, the obligations of the Company in connection with a claim
based on any act or failure to act occurring before such
modification or repeal. The obligations of the Company to
indemnify a person under this Article V, including the obligation
to advance expenses, shall inure to the benefit of the heirs,
executors and administrators of such person.
Section 5. Insurance and Other Indemnification.
The board of directors of the Company shall have the power but
shall not be obliged to (a) purchase and maintain, at the Company
expense, insurance on behalf of the Company and its director,
officers, employees and agents against liabilities asserted against
any of them, including the Company's obligations to indemnify and
advance expenses, to the extent that power to do so is not
prohibited by applicable law, and (b) give other indemnification to
the extent not prohibited by applicable law.
ARTICLE 6 CERTIFICATES OF STOCK
Section 1. Share Certificates.
Every shareholder of record shall be entitled to a share
certificate representing the shares held by him. Every share
certificate shall bear the corporate seal and the signature of the
president or a vice president and the secretary or an assistant
secretary or treasurer of the Company.
Section 2. Transfers.
Shares of stock of the Company shall be transferable on the books of
the Company only by the registered holder or by duly authorized
attorney. A transfer shall be made only upon surrender of the share
certificate. Any restrictions which are deemed to be imposed on the
transfer of the Company's securities by the Shareholder Rights
Agreement dated as of February 11, 1998 between the Company and
American Stock Transfer & Trust Company, as it may be amended from
time to time, or by any successor or replacement rights plan or
agreement, are hereby authorized.
ARTICLE 7 AMENDMENTS
These bylaws may be changed at any regular or special meeting of
the board of directors by the vote of a majority of the number of
directors in office immediately before the meeting or at any annual
or special meeting of shareholders by the vote of the shareholders
entitled to vote as required by law. Notice of any such meeting of
shareholders shall set forth the proposed change or a summary
thereof.
EXHIBIT 10.1
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of July
30, 1999, among PENN VIRGINIA CORPORATION, a Virginia corporation
(the "Borrower"), the Banks (as hereinafter defined), FIRST UNION
NATIONAL BANK (f/k/a First Union National Bank of North Carolina),
a national banking association ("First Union") acting in its
capacity as syndication Agent for the Banks (in such capacity, the
"Syndication Agent"), THE FIRST NATIONAL BANK OF CHICAGO, a
national banking association ("First National") acting in its
capacity as documentation agent for the Banks (in such capacity,
the "Documentation Agent"), CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION (f/k/a Texas Commerce Bank National Association), a
national banking association ("Chase") acting in its capacity as
agent for the Banks (in such capacity, the "Agent"), and PNC BANK,
NATIONAL ASSOCIATION, a national banking association ("PNC").
PRELIMINARY STATEMENTS
WHEREAS, this Agreement is an amendment and restatement
of that certain Credit Agreement (the "Initial Credit Agreement")
dated as of August 2, 1996 among the Borrower, the Banks party
thereto, and Agent;
WHEREAS, Borrower and its Subsidiaries (as herein
defined) have requested that the Banks increase for the Borrower,
the amount of the revolving credit facility set forth in the
Initial Credit Agreement, on the terms and subject to the
conditions stated herein, the proceeds of which will be used (i)
to provide working capital to the Borrower and its Subsidiaries
for exploration and production, (ii) to finance capital
expenditures and acquisitions of the Borrower and its Subsidiaries
and (iii) to provide letters of credit for the account of the
Borrower and its Subsidiaries;
WHEREAS, Borrower owns, either directly or indirectly,
one hundred percent (100%) of the issued and outstanding capital
stock of each of Concord Land Company, a Delaware corporation
("Concord"), Lexington Land Company, a Delaware corporation
("Lexington"), Penn Virginia Holding Corp., a Delaware corporation
("PVHC"), Penn Virginia Equities Corporation, a Delaware
corporation ("Equities"), Penn Virginia Oil & Gas Corporation, a
Virginia corporation ("PVOG"), Penn Virginia Coal Company, a
Virginia corporation ("PVCC"), and Savannah Land Company, a
Delaware corporation ("Savannah");
WHEREAS, the Banks are willing, upon and subject to the
terms and conditions stated herein, to make such revolving credit
facility available to the Borrower and its Subsidiaries.
NOW THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Certain Defined Terms. As used in this Credit
Agreement, the following terms shall have the following meanings:
"ABR Borrowing" shall mean a Borrowing comprised of ABR
Loans.
"ABR Loan" shall mean any Revolving Credit Loan bearing
interest at a rate determined by reference to the Alternate Base
Rate in accordance with the provisions of Article II.
"Accommodation Obligation," as applied to the Borrower or
any of its Subsidiaries, shall mean any Contractual Obligation,
contingent or otherwise, of the Borrower or such Subsidiary of
the Borrower with respect to any Indebtedness or other obligation
or liability of another, including, without limitation, any such
Indebtedness, obligation or liability directly or indirectly
guarantied, endorsed (other than endorsements of negotiable
instruments for collection or deposit in the ordinary course of
business), co-made or discounted or sold with recourse by the
Borrower or such Subsidiary of the Borrower, or in respect of
which the Borrower or such Subsidiary of the Borrower is
otherwise directly or indirectly liable, including Contractual
Obligations (contingent or otherwise) arising through any
agreement to purchase, repurchase, or otherwise acquire such
Indebtedness, obligation or liability or any security therefor,
or to provide funds for the payment or discharge thereof (whether
in the form of loans, advances, stock purchases, capital
contributions or otherwise), or to maintain solvency, assets,
level of income, or other financial condition, or any "keep
well," "take-or-pay," "throughput" or other similar arrangement
or to make payment other than for value received.
"Advance Payment Contract" shall mean any contract whereby
the Borrower or any of its Subsidiaries either (a) receives or
becomes entitled to receive (either directly or indirectly) any
payment (an "Advance Payment") to be applied toward payment of
the purchase price of Hydrocarbons produced or to be produced
from Oil and Gas Interests owned by the Borrower or any of its
Subsidiaries and which Advance Payment is paid or to be paid in
advance of actual delivery of such production to or for the
account of the purchaser regardless of such production, or (b)
grants an option or right of refusal to the purchaser to take
delivery of such production in lieu of payment, and, in either of
the foregoing instances, the Advance Payment is, or is to be,
applied as payment in full for such production when sold and
delivered or is, or is to be, applied as payment for a portion
only of the purchase price thereof or of a percentage or share of
such production; provided that inclusion of the standard
provisions in any gas sales or purchase contract or any similar
contract shall not, in and of itself, constitute such contract as
an Advance Payment Contract for the purposes hereof.
"Affiliate" shall mean, when used with respect to any
Person, each other Person that directly or indirectly controls or
is controlled by or is under common control with such Person. As
used in this definition, "control" means the possession, directly
or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities
or partnership or other ownership interests, by contract or
otherwise) and shall include, without limitation, any Person who
beneficially owns more than fifty percent (50%) of the equity of
the other Person and, as to any general or limited partnership,
any general partner thereof.
"Agent" shall have the meaning assigned to that term in the
introduction to this Credit Agreement and shall include any
successor agent appointed in accordance with Section 9.6 of this
Credit Agreement.
"Alternate Base Rate" shall mean, for any day, a rate per
annum (rounded upwards, if necessary, to the next 1?100 of 1%)
equal to the greatest of (a) the Prime Rate in effect on such day
and (b) the Federal Funds Effective Rate in effect on such day
plus 1?2 of 1%. For purposes hereof: "Prime Rate" shall mean,
as of a particular date, the prime rate of interest per annum
most recently announced by the Agent, automatically fluctuating
upward or downward with and at the time specified in each such
announcement without notice to the Borrower or any other Person;
each change in the Prime Rate shall be effective on the date such
change is announced; which Prime Rate may not necessarily
represent the Agent's lowest or best rate actually charged to a
customer; "Federal Funds Effective Rate" shall mean, for any day,
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published by the Federal Reserve
Bank of New York for such day on the next succeeding Business Day
or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for the day of such
transactions received by the Agent from three federal funds
brokers of recognized standing selected by it. If for any reason
the Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain
the Federal Funds Effective Rate for any reason, including,
without limitation, the inability or failure of the Agent to
obtain sufficient quotations in accordance with the terms hereof,
the Alternate Base Rate shall be determined without regard to
clause (b) of the first sentence of this definition, as
appropriate, until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate
due to a change in the Prime Rate or the Federal Funds Effective
Rate shall be effective on the effective date of such change in
the Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Eurodollar Margin" shall mean, with respect to
each Eurodollar Borrowing:
(a) on each day on which the Utilized Percentage of
Borrowing Base is less than fifty percent (50%), one percent
(1.00%) per annum;
(b) on each day on which the Utilized Percentage of
Borrowing Base is equal to or greater than fifty percent (50%)
but less than seventy-five percent (75%), one and one-quarter
percent (1.25%) per annum;
(c) on each day of which the Utilized Percentage of
Borrowing Base is equal to or greater than seventy-five percent
(75%), one and one-half percent (1.50%) per annum.
"Approved Petroleum Engineer" shall mean Wright & Company,
Inc. or such other reputable firm(s) of independent petroleum
engineers as shall be approved by the Majority Banks.
"Available Borrowing Base" shall mean the Total Borrowing
Base minus the Existing Debt.
"Available Commitment" shall mean at any time, an amount
equal to the Available Borrowing Base in effect at that time, or,
if the Borrower has notified the Agent of its Designated
Borrowing Base pursuant to the provisions of Section 3.3, the
Available Designated Borrowing Base in effect at that time.
"Available Designated Borrowing Base" shall mean the
Designated Borrowing Base minus Existing Debt.
"Bank" shall mean each of the financial institutions whose
name appears on the signature pages to this Credit Agreement and
the Persons which from time to time become a party hereto in
accordance with Section 10.9.
"Bankruptcy Code" shall mean the Bankruptcy Reform Act of
1978 as codified under 11 U.S.C. 101, et seq.
"Benefit Plan" shall mean any employee benefit plan subject
to Title IV of ERISA maintained by the Borrower or any ERISA
Affiliate with respect to which the Borrower or such ERISA
Affiliate has a fixed or contingent liability.
"Board" shall mean the Board of Governors of the Federal
Reserve System of the United States.
"Borrower" shall mean Penn Virginia Corporation, a Virginia
corporation.
"Borrowing" shall mean a borrowing comprised of simultaneous
Revolving Credit Loans of the same Type made to the Borrower on
the same date by the Banks, (or resulting from conversions or
continuations on a given date pursuant to Section 2.4), and, in
the case of Eurodollar Loans, having the same Eurodollar Interest
Period, distributed ratably among the Banks in the manner
described in Article II. A Borrowing is an "ABR Borrowing" if the
Revolving Credit Loans comprising such Borrowing are ABR Loans,
and a "Eurodollar Borrowing" if the Revolving Credit Loans
comprising such Borrowing are Eurodollar Loans.
"Borrowing Base Assets" shall mean, collectively, the (i)
Oil and Gas Interests, (ii) Coal Interests, (iii) dividends with
respect to the Norfolk Common Stock and (iv) any other property
owned by the Borrower or Restricted Subsidiary (x) which the
Borrower has requested that the Banks consider in their
determination of the Total Borrowing Base and (y) which the
Banks, in their sole discretion, have considered for purposes of
determining the Total Borrowing Base (as evidenced by a notice to
such effect delivered by the Agent to the Borrower).
"Borrowing Base Deficiency" shall mean, as of any date, the
amount, if any, by which the Utilized Credit on such date exceeds
the Available Commitment in effect on such date.
"Borrowing Base Asset Reports" shall mean the reports
required to be delivered to the Banks pursuant to Section 3.1
which shall include the Reserve Report, the Coal Reserve Report
and a report setting forth the aggregate amount of all
outstanding Consolidated Debt.
"Borrowing Base Notice" shall mean a written notice sent to
the Borrower by the Agent pursuant to Section 3.2 notifying the
Borrower of the Total Borrowing Base and the Available Borrowing
Base.
"Borrowing Base Period" shall mean (a) initially, the period
from the Effective Date through November 30, 1999; and (b)
thereafter, each six month period beginning on June 1 or December
1 of each year.
"Borrowing Date" shall mean, with respect to each Borrowing,
the Business Day upon which the proceeds of such Borrowing are
made available to the Borrower by the Banks.
"Borrowing Request" shall mean, with respect to each
Borrowing, a request made pursuant to Section 2.2 which request
shall be in the form of Exhibit A.
"Business Day" shall mean any day (other than a day which is
a Saturday, Sunday or legal holiday in the State of Texas on
which banks are open for business in Houston, Texas; provided,
however, that, when used in connection with a Eurodollar Loan or
Eurodollar Borrowing, the term "Business Day" shall also exclude
any day on which banks are not open for dealings in dollar
deposits in the interbank eurodollar market.
"Capital Lease" shall mean, when used with respect to any
Person, any lease in respect of which the obligations of such
Person constitute Capitalized Lease Obligations.
"Capitalized Lease Obligations" shall mean, when used with
respect to any Person, without duplication, all obligations of
such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal
property, or a combination thereof, which obligations shall have
been or should be, in accordance with GAAP, capitalized on the
books of such Person.
"Cash Equivalents" shall mean, when used in connection with
the Borrower or any Subsidiary of the Borrower, such Borrower's
or such Subsidiary's Investments in:
(a) Government Securities due within one year from the
date of acquisition thereof;
(b) Readily marketable direct obligations of any State
of the United States or any political subdivision of any
such State given on the date of such investment a credit
rating of at least A2 by Moody's Investors Service, Inc. or
A by S&P, in each case due within one year from the date of
acquisition thereof;
(c) Certificates of deposit issued by, money market
deposit accounts with, eurodollar deposits through, bankers'
acceptances of, and repurchase and reverse repurchase
agreements covering Government Securities executed by a Bank
or any other bank doing business in and incorporated under
the laws of the United States or any state thereof whose
deposits are insured through the FDIC, or any successor
thereto, and having (either itself or its holding company)
on the date of such Investment combined capital, surplus and
undivided profits of at least $400,000,000, or any offshore
branch of such bank, in each case maturing within one year
from the date of acquisition thereof;
(d) Certificates of deposit issued by, money market
deposit accounts with, eurodollar deposits through, bankers'
acceptances of, and repurchase and reverse repurchase
agreements covering Government Securities executed by First
American Bank, N.A. having an aggregate market value at any
one time not in excess of $3,000,000, in each case maturing
within one year from the date of acquisition thereof;
(e) Commercial paper of a Bank or such Bank's holding
company or of any other bank or bank holding company given
on the date of such Investment a credit rating of at least P-
1 by Moody's Investors Service, Inc. and A-1 by S&P, or of
corporations doing business in and incorporated under the
laws of the United States or any state thereof given on the
date of such Investment a credit rating of at least P-1 by
Moody's Investors Service, Inc. and A-1 by S&P, in each
case, maturing within one year from the date of acquisition
thereof; and
(f) "Money-market mutual funds" investing at least 95%
of the mutual fund assets in instruments of the types
described in subparagraphs (a) through (e) above.
"Chase" shall mean Chase Bank of Texas, National
Association, a national banking association.
"Closing Date" shall mean July 30, 1999.
"Coal Interests" shall mean any and all rights,
estates, titles and interests in the Coal Leases, all
royalty interests, net profits interests, carried
interests and any and all other interests in coal,
whether any of the same be real or personal, now owned
or hereafter acquired by the Borrower or its
Subsidiaries, directly or indirectly, and all
properties, rights and interests covered thereby,
whether arising by contract, by order, or by operation
of laws, which now or hereafter include all or any part
of the foregoing.
"Coal Leases" shall mean those coal mining leases
described on Schedule 5.6 hereto.
"Coal Reserve Report" shall mean a report in form
and substance satisfactory to each Bank, which Coal
Reserve Report shall be dated as of the next preceding
December 31, and shall (i) review the material coal
reserves attributable to the Coal Leases of the
Borrower and its Subsidiaries (and showing any material
additions to or deletions from the Coal Interests
covered by the previous Coal Reserve Report and made by
the Borrower and its Subsidiaries since the date of the
previous Coal Reserve Report), (ii) set forth the
quality of the coal reserves attributable to the Coal
Interests covered in said Coal Reserve Report, (iii)
contain a reasonably detailed five (5) year forecast of
the rate of production and net income with respect to
the coal reserves covered by said Coal Reserve Report
as of the date of such Coal Reserve Report, (iv) set
forth the current material terms of all Coal Leases
with respect to the Coal Interests described in said
Coal Reserve Report, (v) contain a status report on all
material permits relevant to the Coal Interests
described in said Coal Reserve Report, and (vi) set
forth the capital expenditure plans of PVCC. Each Coal
Reserve Report shall be prepared by personnel of the
Borrower and its Subsidiaries, which Coal Reserve
Report shall provide the current status of the
information set forth in the immediately preceding Coal
Reserve Report.
"Code" shall mean Internal Revenue Code of 1986,
as amended from time to time, and the regulations
promulgated thereunder.
"Commitment" shall mean, when used with reference
to any Bank at the time any determination thereof is to
be made, the commitment of such Bank to extend credit
to the Borrower by means of Revolving Credit Loans,
which subject to Sections 2.9 and 8.2, shall be an
amount equal to the amount set forth opposite the name
of such Bank under the heading "Amount of Commitment"
on Schedule 1.1 to this Credit Agreement.
"Commitment Fee Rate" shall have the meaning
specified in Section 2.5(a) hereof.
"Commitment Percentage" shall mean, with respect
to each Bank, the percentage determined by dividing its
Commitment by the Total Commitment.
"Commitment Transfer Supplement" shall mean a
Commitment Transfer Supplement entered into by a Bank
and an Eligible Assignee, and accepted by the Agent,
substantially in the form of Exhibit B attached hereto.
"Communications" shall have the meaning specified
in Section 10.2.
"Concord" shall mean Concord Land Company, a
Delaware corporation and a wholly-owned Subsidiary of
Borrower.
"Consolidated" shall refer to the consolidation
of any Person, in accordance with GAAP, with its
properly Consolidated Affiliates. Reference to a
Person's Consolidated financial statements, financial
position, financial condition, liabilities, etc. refer
to the consolidated financial statements, financial
position, financial condition, liabilities, etc. of
such Person and its properly Consolidated Affiliates;
provided, however, that such consolidation of
Unrestricted Subsidiaries shall be excluded from the
financial calculations contained in Section 7.15.
"Consolidated Assets" shall mean, when used with
respect to the Borrower and its Restricted
Subsidiaries, all items which should be classified as
assets on the Consolidated financial statements of the
Borrower delivered to the Agent pursuant to Section
6.1, all as determined in conformity with GAAP.
"Consolidated Capitalization" shall mean, when
used with respect to the Borrower and its Restricted
Subsidiaries, an amount equal to the sum of (i)
Consolidated Equity plus (ii) Consolidated Funded Debt.
"Consolidated Cash Flow" shall mean, with respect
to the Borrower and its Restricted Subsidiaries for a
particular period, without duplication, the sum of (i)
Consolidated Net Income of such Person during such
fiscal period plus (ii) the Borrower's Consolidated
depreciation, depletion, amortization and other non-
cash items reducing Consolidated Net Income during such
period, all determined in accordance with GAAP.
"Consolidated Debt Service" shall mean, with
respect to the Borrower and its Restricted Subsidiaries
for a particular period, the sum of (i) the
Consolidated Interest Expense, including all fees paid
with respect to letters of credit, of the Borrower and
its Restricted Subsidiaries paid during such period by
the Borrower and its Restricted Subsidiaries plus (ii)
the total scheduled principal payments on Consolidated
Funded Debt owing by the Borrower and its Restricted
Subsidiaries on a Consolidated basis, paid during such
period, all as determined in accordance with GAAP.
"Consolidated EBITDA" shall mean, for a particular
period, an amount equal to (a) all amounts which, in
accordance with generally accepted accounting
principles consistently applied, would be included as
Consolidated income from continuing operations of the
Borrower and its Restricted Subsidiaries on a
Consolidated basis before income taxes and
extraordinary items, if any, for such period, plus (b)
the aggregate amount which, in accordance with
generally accepted accounting principles consistently
applied, was deducted in determining the Consolidated
operating income from continuing operations under
clause (a) in respect of interest expense,
depreciation, depletion, amortization and other non-
cash items reducing said Consolidated operating income
of the Borrower and its Restricted Subsidiaries
determined on a Consolidated basis for such period.
"Consolidated Equity" shall mean, with respect to
the Borrower and its Restricted Subsidiaries, at
anytime, the Consolidated Assets of the Borrower less
the Consolidated Liabilities of the Borrower.
"Consolidated Funded Debt" shall mean, without
duplication and with respect to the Borrower and its
Restricted Subsidiaries, at anytime, Debt in any of the
following categories:
(a) Debt of such Person for borrowed money or for
the deferred purchase price of property or
services;
(b) Debt of such Person which is evidenced by a
note, bond, debenture or similar instrument,
but excluding bonds or deposits posted in
favor of the United States of America or any
state securing reclamation obligations,
obligations to plug abandoned wells or seal
abandoned mines or obligations to clean up
and restore the land on which such wells or
mines are located;
(c) all obligations of such Person under
Capitalized Lease Obligations;
(d) all obligations of such Person in respect of
letters of credit and acceptances issued or
created for the account of such Person,
except letters of credit in favor of the
United States of America or any state
securing reclamation obligations, obligations
to plug abandoned wells or seal abandoned
mines or obligations to clean up and restore
the land on which such wells or mines are
located;
(e) all liabilities secured by any Lien on any
property owned by such Person even though
such Person has not assumed or otherwise
become liable for the payment thereof;
(f) all obligations to pay production payments
and to make capital contributions under joint
venture or other similar agreements; and
(g) all Accommodation Obligations of such Person
with respect to Consolidated Funded Debt
described in subclauses (a) through (f)
above.
"Consolidated Interest Expense" shall mean, with
respect to the Borrower and its Restricted
Subsidiaries, for any fiscal period, the aggregate of
all costs, fees and expenses paid by the Borrower and
its Restricted Subsidiaries in such fiscal period for
Consolidated Funded Debt, which are classified as
interest expense on the Consolidated financial
statements of the Borrower and its Restricted
Subsidiaries, all as determined in conformity with
GAAP.
"Consolidated Liabilities" shall mean, when used
with respect to the Borrower and its Restricted
Subsidiaries, all items which should be classified as
liabilities on the Consolidated financial statements of
the Borrower delivered to the Agent pursuant to Section
6.1, all as determined in conformity with GAAP.
"Consolidated Net Income" shall mean, for any
period, the net earnings (or loss) after taxes of the
Borrower and its Restricted Subsidiaries on a
Consolidated basis for such period determined in
conformity with GAAP.
"Consolidated Tangible Net Worth" shall mean, with
respect to the Borrower and its Restricted
Subsidiaries, at any time, the Consolidated Equity of
the Borrower, at such time, less the Borrower's
Consolidated Intangible Assets with a value of greater
than $1,000,000 at such time. For purposes of this
definition, "Intangible Assets" shall mean the amount
(to the extent reflected in determining Consolidated
Equity) of all unamortized debt discount and expense,
unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, copyrights and
organization expenses.
"Contractual Obligation" as applied to any Person,
shall mean any provision of any stock or other
securities issued by that Person or any indenture,
mortgage, deed of trust, contract, undertaking,
document, instrument or other agreement or instrument
to which that Person is a party or by which it or any
of its properties is bound, or to which it or any of
its properties is subject (including, without
limitation, any restrictive covenant affecting such
Person or any of its properties).
"Credit Agreement" shall mean this Amended and
Restated Credit Agreement dated as of July 30, 1999,
among the Borrower, the Agent and the each of the
Banks, as said agreement may be amended, modified,
supplemented, and/or extended from time to time.
"Debt" shall mean, 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, and whether or not
required to be considered pursuant to GAAP. Debt
includes, without limiting the foregoing, (a)
indebtedness of such Person for borrowed money or for
the deferred purchase price of property or services or
which is evidenced by a note, bond, debenture or
similar instrument, (including Environmental
Liabilities or liabilities to the PBGC), (b) all
obligations of such Person under Capitalized Lease
Obligations, (c) all obligations of such Person in
respect of letters of credit and acceptances issued or
created for the account of such Person, (d) all
liabilities secured by any Lien on any property owned
by such Person even though such Person has not assumed
or otherwise become liable for the payment thereof, (e)
all Accommodation Obligations of such Person, (f) all
obligations to pay production payments and to make
capital contributions under joint venture or other
similar agreements, (g) all net payments or amounts
owing by such Person in respect of Hedge Transactions,
interest rate protection agreements, foreign currency
exchange agreements, commodity swap agreements or other
interest, exchange rate or commodity hedging
arrangements, and (h) liabilities in respect of
Unfunded Vested Liabilities. The Debt of a Person shall
include the Debt of any partnership or joint venture in
which such Person is a general or venture partner. The
Debt of a Person shall not include (i) trade payables
and expense accruals incurred or assumed in the
ordinary course of such Person's business, provided
such payables have not remained unpaid for a period of
ninety (90) days after the same became due unless such
Person is diligently contesting same in good faith or
(ii) bonds, letters of credit or deposits posted in
favor of the United States of America or any state
securing reclamation obligations, obligations to plug
abandoned wells or seal abandoned mines or obligations
to clean up and restore the land on which such wells or
mines are located.
"Debtor Relief Laws" shall mean the Bankruptcy
Code and all other applicable dissolution, liquidation,
conservatorship, bankruptcy, moratorium, readjustment
of debt, compromise, rearrangement, receivership,
insolvency, reorganization, or similar debtor relief
laws from time to time in effect affecting the rights
of creditors generally.
"Default" shall mean any Event of Default and the
occurrence of any event or condition which would with
the giving of any requisite Default Notice and/or the
passage of time or both constitute an Event of Default.
"Default Rate" shall mean the interest rate
described in Section 2.8.
"Designated Borrowing Base" shall have the meaning
assigned to that term in Section 3.3.
"Determination Date" shall mean (a) each December
1 and June 1, and (b) with respect to any Special
Determination, the first day of the first month which
is not less than twenty (20) Domestic Business Days
following the date of a request for a Special
Determination.
"Distribution" shall mean any dividend payable in
cash or property with respect to any shares of capital
stock of the Borrower or any Subsidiary of the Borrower
(other than dividends payable in shares of the same
class of common, preferred or other capital stock as
the shares upon which the dividend is being paid), any
other distribution made with respect to any shares of
capital stock of the Borrower or any Subsidiary of the
Borrower, or any purchase, redemption or retirement of,
or other payment with respect to, or sinking or other
analogous fund for the purchase, redemption,
defeasance, retirement or other acquisition of, any
shares of capital stock of the Borrower or and
Subsidiary of the Borrower.
"Documentation Agent" shall have the meaning
assigned to that term in the introduction to this
Credit Agreement.
"Dollars" and the symbol "$" shall mean the lawful
currency of the United States.
"Effective Date" shall mean the date on which all
of the conditions precedent to the making of the
Revolving Credit Loans set forth in Section 4.1 are
first satisfied or waived by the Banks and the initial
Revolving Credit Loans are made.
"Eligible Assignee" shall mean any of (i) a Bank
or any Affiliate of a Bank; (ii) a commercial bank
organized under the laws of the United States, or any
state thereof having total assets in excess of
$1,000,000,000; (iii) a commercial bank organized under
the laws of any other country which is a member of the
OECD, or a political subdivision of any such country
having total assets in excess of $1,000,000,000,
provided that such bank is acting through its main
office or a branch or agency located in the country in
which it is organized or another country which is also
a member of the OECD having total assets in excess of
$1,000,000,000; (iv) the central bank of any country
which is a member of the OECD or (v) a finance company,
insurance company or other financial institution or
fund having total assets in excess of $1,000,000,000,
provided that a holder, either directly or indirectly,
of capital stock or of any right to acquire capital
stock of the Borrower or any Affiliate of the Borrower
shall not be an Eligible Assignee.
"Environmental Laws" shall mean any applicable
federal, state, or local statute, law, rule,
regulation, ordinance, code, permit, consent, approval,
license, written policy or rule of common law now or
hereafter in effect and in each case as amended, and
any judicial or administrative interpretation thereof,
including any judicial or administrative order,
injunction, consent decree or judgment, or other
authorization or requirement whenever promulgated,
issued or modified, including the requirement to
register underground storage tanks, well plugging and
abandonment requirements, and oil and gas waste
disposal requirements relating to:
(i) emissions, discharges, spills,
migration, movement, releases or threatened
releases of pollutants, contaminants, Hazardous
Materials, or hazardous or toxic materials or
wastes into or onto soil, land, ambient air,
surface water, ground water, watercourses,
publicly owned treatment works, drains, sewer
systems, wetlands or septic systems;
(ii) the use, treatment, storage, disposal,
handling, manufacturing, transportation, or
shipment of Hazardous Materials or hazardous
and?or toxic wastes, material, products or by-
products containing Hazardous Materials (or of
equipment or apparatus containing Hazardous
Materials); or
(iii) otherwise relating to pollution or
the protection of human health or the environment,
including, without limitation, the Comprehensive
Environmental Response, Compensation, and
Liability Act of 1980, 42 U.S.C. 9601 et seq.,
as amended, the Resource Conservation and Recovery
Act, 42 U.S.C. 6901 et seq., as amended, the
Hazardous Materials Transportation Act, 49 U.S.C.
1801 et seq., as amended, the Clean Water Act,
33 U.S.C. 1251 et seq., as amended, the Toxic
Substances Control Act, 15 U.S.C. 2601 et seq.,
as amended,; the Clean Air Act, 42 U.S.C. 7401
et seq., as amended, the federal Water Pollution
Control Act, 33 U.S.C. 1251 et seq., as amended,
the Safe Drinking Water Act, 42 U.S.C. 300f et
seq., as amended, the Atomic Energy Act, 42 U.S.C.
2011 et seq., as amended, the Natural Gas
Pipeline Safety Act of 1968, 49 U.S.C. 1671 et
seq., as amended, the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. 136 et
seq., as amended, and the Occupational Safety and
Health Act, 29 U.S.C. 651 et seq., as amended,
and all comparable statutes of the States of
Kentucky, Pennsylvania, Tennessee, Virginia and
West Virginia, and all comparable local
governmental regulations in such states, and other
environmental, conservation or protection laws in
effect in any jurisdiction where any real Property
of the Borrower or any Subsidiary of the Borrower
is located.
"Environmental Liabilities" shall mean with
respect to any Person, any and all liabilities,
responsibilities, losses, sums paid in settlement of
claims, obligations, charges, actions (formal or
informal), claims (including, without limitation,
claims for personal injury or for real or personal
property damage), liens, administrative proceedings,
damages (including, without limitation, loss or damage
resulting from the occurrence of an Event of Default),
punitive damages, consequential damages, treble
damages, penalties, fines, monetary sanctions,
interest, court costs, response and remediation costs,
stabilization costs, encapsulation costs, treatment,
storage, or disposal costs, groundwater monitoring or
environmental sampling costs, other causes of action
and any other costs and expenses (including, without
limitation, reasonable attorneys', experts', and
consultants' fees, costs of investigation and
feasibility studies and disbursements in connection
with any investigative, administrative or judicial
proceeding) , whether direct or indirect, known or
unknown, absolute or contingent, past, present or
future arising under, pursuant to or in connection with
any Environmental Law, or any other binding obligation
of such Person requiring abatement of pollution or
protection of human health and the environment.
"Environmental Lien" shall mean a Lien in favor of
any Governmental Authority for (i) any liability under
Environmental Laws or (ii) damages arising from, or
costs incurred by such Governmental Authority in
response to, a Release or threatened Release of a
Hazardous Substance into the environment.
"Equities" shall mean Penn Virginia Equities
Corporation, a Delaware corporation and a wholly owned
Subsidiary of the Borrower.
"ERISA" shall mean the United States Employee
Retirement Income Security Act of 1974, as amended from
time to time, together with all rules and regulations
promulgated with respect thereto.
"ERISA Affiliate" shall mean any (i) corporation
which is a member of the same controlled group of
corporations (within the meaning of Section 414(b) of
the Code) as the Borrower, (ii) partnership or other
trade or business (whether or not incorporated) under
common control (within the meaning of Section 414(c) of
the Code) with the Borrower, (iii) member of the same
affiliated service group (within the meaning of Section
414(m) of the Code) as the Borrower or (iv) other
Person required to be aggregated with the Borrower or
an ERISA Affiliate thereof, as defined above, pursuant
to Section 414(o) of the Code.
"Eurocurrency Liabilities" shall have the meaning
assigned to that term in Regulation D.
"Eurodollar Borrowing" shall mean a Borrowing
comprised of Eurodollar Loans.
"Eurodollar Interest Period" shall mean, with
respect to each Eurodollar Borrowing, a period of one,
two, three or six months, as specified in the Borrowing
Request submitted pursuant to Section 2.2 with respect
thereto, beginning on and including the date specified
in such Borrowing Request (which must be a Business
Day) and ending on the date which corresponds
numerically to such beginning date one, two, three or
six months thereafter (or if such month has no
numerically corresponding date, on the last Business
Day of such month); provided that each Eurodollar
Interest Period which would otherwise end on a day
which is not a Business Day shall end on the next
succeeding Business Day unless such next succeeding
Business Day is the first Business Day of a calendar
month, in which case such Eurodollar Interest Period
shall end on the Business Day next preceding such
numerically corresponding day. No Eurodollar Interest
Period may be elected which would end after the
Maturity Date.
"Eurodollar Loan" shall mean any Revolving Credit
Loan bearing interest at a rate determined by reference
to the Eurodollar Rate in accordance with the
provisions of Article II.
"Eurodollar Rate" shall mean, with respect to each
Eurodollar Loan comprising part of a Eurodollar
Borrowing and with respect to the related Eurodollar
Interest Period, the rate of interest per annum
(rounded upward to the nearest 1/16 of one percent)
determined pursuant to the following formula:
Eurodollar (Unadjusted)
Eurodollar Rate = 1.00 - Eurodollar
Reserve Percentage
"Eurodollar Reserve Percentage" of any Bank with
respect to any Eurodollar Interest Period for any
Eurodollar Loan of such Bank shall mean, the reserve
percentage (expressed as a decimal) equal to the
maximum aggregate reserve requirements (including all
basic, emergency, supplemental, marginal and other
reserves and taking into account any transitional
adjustments or other scheduled changes in reserve
requirements) specified under regulations issued from
time to time by the Board of Governors of the Federal
Reserve System and then applicable to assets or
liabilities consisting of and including Eurocurrency
Liabilities having a term approximately equal or
comparable to such Eurodollar Interest Period.
"Eurodollar (Unadjusted)" shall mean, with respect
to each day during each Eurodollar Interest Period
pertaining to each Eurodollar Loan comprising a
Eurodollar Borrowing, the rate per annum equal to the
rate at which Chase is offered Dollar deposits at or
about 11:00 A.M., Houston, Texas time, two Business
Days prior to the beginning of such Eurodollar Interest
Period in the interbank eurodollar market where the
eurodollar and foreign currency and exchange operations
in respect of its Eurodollar Loans are then being
conducted for delivery on the first day of such
Eurodollar Interest Period for the number of days
comprised therein and in an amount comparable to the
amount of the Eurodollar Borrowing to be outstanding
during such Eurodollar Interest Period.
"Event of Default" shall have the meaning
specified in Section 8.1.
"Existing Debt" shall mean, at the time of
determination, the aggregate principal then outstanding
on Consolidated Funded Debt described in Schedule 7.1.
"Existing Litigation" shall mean all actions,
suits, proceedings, governmental investigations or
arbitration disclosed in Schedule 5.10 hereto.
"Existing Plans" shall have the meaning specified
in Section 7.9.
"FDIC" shall mean the Federal Deposit Insurance
Corporation (or any successor).
"Federal Funds Effective Rate" shall have the
meaning specified in the definition of the term
"Alternate Base Rate".
"Fiscal Quarter" shall mean a three-month period
ending on the last day of December, March, June or
September of any year.
"Fiscal Year" shall mean a twelve-month period
ending on December 31 of any year.
"GAAP" shall mean generally accepted accounting
principles set forth in the opinions and pronouncements
of the Accounting Principles Board of the American
Institute of Certified Public Accountants and
statements and pronouncements of the Financial
Accounting Standards Board or in such other statements
by such other entity as may be approved by a
significant segment of the accounting profession, which
are consistent with those applied in the preparation of
the financial statements of the Borrower referred to in
Section 5.9(a).
"Gas Balancing Agreement" shall mean any agreement
or arrangement whereby any Person having an interest in
any Hydrocarbons to be produced from the Oil and Gas
Interests of the Borrower and its Subsidiaries has a
right to take more than its proportionate share of
production therefrom.
"Government Securities" shall mean readily
marketable direct full faith and credit obligations of
the United States or obligations unconditionally
guaranteed by the full faith and credit of the United
States (or by any agency thereof to the extent such
obligations are backed by the full faith and credit of
the United States).
"Governmental Approval" shall mean any
authorization, consent, approval, license, lease,
ruling, permit, certification, exemption, filing for,
or registration by or with any Governmental Authority
required by the Borrower or any Subsidiary of the
Borrower in connection with (i) the execution, delivery
and performance of the Loan Documents by any of such
Persons and the borrowing of any funds under this
Credit Agreement, (ii) the validity or enforceability
of the Loan Documents and the exercise by the Agent or
any Bank of its rights and remedies thereunder, and/or
(iii) the acquisition, maintenance, ownership and
operation of the Borrowing Base Assets.
"Governmental Authority" shall mean any nation or
government, any federal, state, province, city, town,
municipality, county, local or other political
subdivision thereof or thereto and any department,
commission, board, bureau, instrumentality, agency or
other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or
pertaining to government.
"Hazardous Substances" shall mean (1) hazardous
materials, hazardous wastes, and hazardous substances
including, but not limited to, those substances,
materials and wastes listed in the United States
Department of Transportation Hazardous Materials Table,
49 C.F.R.. 172.101, as amended, or listed by the
federal Environmental Protection Agency as hazardous
substances under or pursuant to 40 C.F.R. Part 302, as
amended, or substances, materials, contaminants or
wastes which are or become regulated under any
Environmental Law, including without limitation, those
substances, materials, contaminants or wastes as
defined in the following statutes and their
implementing regulations: the Hazardous Materials
Transportation Act, 49 U.S.C. 1801 et seq., as
amended, the Resource Conservation and Recovery Act, 42
U.S.C. 6901 et seq., as amended, the Comprehensive
Environmental Response, Compensation and Liability Act,
42 U.S.C. 9601 et seq., as amended; the Toxic
Substances Control Act, 15 U.S.C. 2601 et seq., as
amended; the Clean Air Act, 42 U.S.C. 7401 et seq., as
amended, the federal Water Pollution Control Act, 33
U.S.C. 1251 et seq., as amended, the Occupational
Safety and Health Act, 2 U.S.C. 651 et seq., as
amended, the Safe Drinking Water Act, 42 U.S.C. 300f
et seq., as amended and the Natural Gas Pipeline Safety
Act of 1968, 49 U.S.C. 1671 et seq., as amended; (2)
all substances, materials, contaminants or wastes
listed in all comparable statutes of the States of
Kentucky, Pennsylvania, Tennessee, Virginia and West
Virginia and in comparable local Requirements of Law in
such states; (3) acid gas, sour water streams or sour
water vapor streams containing hydrogen sulfide or
other forms of sulfur, sodium hydrosulfide and ammonia;
(4) Hydrocarbons; (5) natural gas, synthetic gas, and
any mixtures thereof; (6) asbestos and?or any material
which contains 1% or more, by weight, of any hydrated
mineral silicate, including but not limited to
chrysotile, amosite, crocidolite, tremolite,
anthophylite and?or actinolite, whether friable or non-
friable; (7) PCB's, or PCB containing materials or
fluids; (8) radon; (9) naturally occurring radioactive
material, radioactive substances or waste; (10) salt
water and other oil and gas wastes and (11) any other
hazardous or noxious substance, material, pollutant,
emission, or solid, liquid or gaseous waste.
"Hedge Transaction" shall mean a transaction
pursuant to which the Borrower or any of its
Subsidiaries fix the price to be received by them for
future production of Hydrocarbons, including price swap
agreements under which the Borrower or its Subsidiaries
agree to pay a price for a specified amount of
Hydrocarbons determined by reference to a recognized
market on a specified future date and the contracting
party agrees to pay the Borrower or its Subsidiaries a
fixed price for the same or similar amount of
Hydrocarbons.
"Highest Lawful Rate" shall mean, as of a
particular date and as to any Bank, the maximum
nonusurious interest rate that may under applicable law
then be contracted for, charged or received by such
Bank in connection with its Revolving Credit Loans.
"Hostile Acquisition" shall mean any transaction
in which the Borrower or its Subsidiaries, directly or
indirectly, purchases or offers to purchase or acquire,
in any transaction or series of transactions, an
aggregate of 5% or more of the equity securities or
controlling interest of any Person, for any type of
consideration, without the prior written consent of
such Person or such Person's Board of Directors or
controlling body.
"Hydrocarbons" shall mean oil, gas, casinghead
gas, condensate, distillate, liquid hydrocarbons,
gaseous hydrocarbons and all products separated,
settled and dehydrated therefrom and all products
refined therefrom, including, without limitation,
kerosene, liquified petroleum gas, refined lubricating
oils, diesel fuel, drip gasoline, natural gasoline,
helium, sulfur and all other minerals.
"Immaterial Oil and Gas Interests" shall have the
meaning assigned to that term in Section 5.6 hereof.
"Initial Borrowing Base Asset Reports" shall mean
(i) the Reserve Report covering the Oil and Gas
Interests of the Borrower and its Subsidiaries prepared
as of December 31, 1998, by the Approved Petroleum
Engineer, and (ii) the Coal Reserve Report covering the
Coal Interests of the Borrower and its Subsidiaries
prepared as of December 31, 1998, by the personnel of
the Borrower and its Subsidiaries, complete and correct
copies of which have been furnished by the Borrower to
the Banks.
"Initial Credit Agreement" shall mean the Credit
Agreement dated as of August 2, 1996, among the
Borrower, the Agent and the each of the Banks thereto,
as said agreement may be amended, modified,
supplemented, and/or extended from time to time.
"Initial Financial Statements" shall mean (i) the
audited annual Consolidated financial statements of the
Borrower and its Consolidated Subsidiaries dated as of
December 31, 1998 and (ii) the quarterly Consolidated
financial statement of the Borrower and its
Subsidiaries dated as of March 31, 1999, copies of
which Initial Financial Statements have heretofore been
delivered by the Borrower to the Banks.
"Interest Payment Date" shall mean any date
interest is due pursuant to the provisions of Section
2.7(b) hereof.
"Investment" shall mean, as applied to the
Borrower or a Subsidiary of the Borrower, any direct or
indirect purchase or other acquisition by the Borrower
or such Subsidiary of stock, partnership interest or
other equity interest, or of a beneficial interest
therein, of any other Person, and any direct or
indirect loan, advance (other than deposits with
financial institutions available for withdrawal on
demand, prepaid expenses, advances to employees and
similar items made or incurred in the ordinary course
of business), or capital contribution by the Borrower
or such Subsidiary to any other Person, including all
Debt and accounts owed by that other Person which are
not current assets or did not arise from sales of goods
or services to the Borrower or such Subsidiary in the
ordinary course of business. The amount of any
Investment shall be determined in conformity with GAAP.
"IRS" shall mean the Internal Revenue Service or
any successor agency.
"Issuing Bank" shall mean Chase.
"Lending Office" shall mean, with respect to each
Bank, the branch or branches (or Affiliate or
Affiliates) from which such Bank's Eurodollar Loans or
ABR Loans, as the case may be, are made or maintained
and for the account of which payments of principal of,
and interest on, such Bank's Eurodollar Loans or ABR
Loans are made.
"Letter of Credit" shall mean a Standby Letter of
Credit requested to be issued under the Letter of
Credit Commitment.
"Letter of Credit Application" shall mean the
application to the Issuing Bank by the Borrower for the
issuance of a Standby Letter of Credit in substantially
the form of Exhibit C hereto.
"Letter of Credit Commitment" shall mean with
respect to each Bank, the lesser of (a) such Bank's
Commitment Percentage of $10,000,000 and (b) such
Bank's Commitment.
"Letter of Credit Exposure" of any Bank shall mean
such Bank's aggregate participation in the unfunded
portion of Letters of Credit outstanding at any time.
"Lexington" shall mean Lexington Land Company, a
Delaware corporation and a wholly-owned Subsidiary of
PVCC.
"Lien" shall mean, with respect to any asset, (a)
any mortgage, deed of trust, production payment,
deposit, lien, charge, pledge, security interest, claim
or encumbrance of any kind (whether voluntary or
involuntary, affirmative or negative, and whether
imposed or created by operation of law or otherwise)
upon such asset, (b) the interest of a vendor or a
lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to
such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party
with respect to such securities but excluding any right
of offset which arises without agreement in the
ordinary course of business.
"Loan Documents" shall mean this Credit Agreement,
each of the Notes, the Subsidiary Guaranty, the Letters
of Credit, the Letter of Credit Applications and
reimbursement agreements executed in connection
therewith, each Compliance Certificate, each Notice of
Conversion or Continuance, each Borrowing Request, all
Reserve Reports, all Borrowing Base Asset Reports, all
legal opinions and when executed and delivered by the
parties thereto, all other agreements, certificates,
instruments and documents executed in connection with
the Credit Agreement, as the same may be amended,
modified, supplemented or extended from time to time.
"Loan(s)" shall mean all Revolving Credit Loans.
"Majority Banks" shall mean those Banks holding
more than 66-2?3% of the Utilized Credit, or, if no
Utilized Credit is outstanding, at least 66-2?3% of the
Total Commitment.
"Margin Stock" shall have the meaning given to
such term under Regulation U.
"Material Adverse Effect" shall mean (a) a
material adverse effect on the business, assets,
operations or condition (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole, (b)
material impairment of the ability of the Borrower or
any of its Subsidiaries to perform timely any of its
respective Obligations under any Loan Document to which
it is or will be a party, or (c) material impairment of
the rights of or benefits available to the Banks under
any Loan Document.
"Material Contract" shall mean any contract,
agreement or instrument to which the Borrower or any of
its Restricted Subsidiaries is a party (i) which calls
for payments to or from the Borrower or any Subsidiary
of the Borrower of an amount in excess of $2,000,000
during any twelve month period or (ii) pursuant to
which the Borrower or any Subsidiary of the Borrower
acquires any right to an interest in real or personal
property or a right to obtain services if the Borrower
or such Subsidiary's inability to obtain any such right
could reasonably be expected to result in a Material
Adverse Effect.
"Material Restricted Subsidiaries" shall mean
those certain Restricted Subsidiaries with Borrowing
Base Assets greater than $2,000,000.
"Maturity Date" shall mean June 30, 2003, or the
earlier date of termination in whole of the Commitments
or as extended pursuant to the provisions contained in
Section 2.21 hereof.
"Multiemployer Plan" shall mean a "multiemployer
plan" as defined in Section 4001(a)(3) of ERISA to
which the Borrower or any ERISA Affiliate is making or
accruing an obligation to make contributions, or has
within any of the preceding five (5) plan years made or
accrued an obligation to make contributions.
"Norfolk Common Stock" shall mean the common stock
of the Norfolk Southern Corporation, par value of
$1.00.
"Notes" shall mean the promissory notes of the
Borrower dated the Effective Date payable to the order
of each Bank, substantially in the form of Exhibit D.
"Notice of Conversion or Continuation" shall mean
a Notice of Conversion or Continuation in the form of
Exhibit E signed by a Responsible Officer of the
Borrower.
"Obligations" shall mean all obligations,
liabilities and indebtedness of every nature of the
Borrower and its Subsidiaries from time to time owing
to any Bank under any Loan Document to which the
Borrower or such Subsidiary is a party, including,
without limitation, (a) the due and punctual payment of
(x) the principal of and interest on the Revolving
Credit Loans, Letters of Credit and reimbursement
obligations under Letter of Credit Applications, when
and as due, whether at maturity, by acceleration, upon
one or more dates set for prepayment or otherwise,
including, to the extent permitted by applicable law,
interest that accrues after the commencement of any
proceeding by or against the Borrower or any of its
Subsidiaries under the Bankruptcy Code and all other
applicable Debtor Relief Laws and (y) all other
monetary obligations of the Borrower and its
Subsidiaries to any Bank under this Credit Agreement
and each of the other Loan Documents to which the
Borrower or such Subsidiary is a party, including any
and all fees, costs, expenses and indemnities and (b)
the due and punctual performance of all other
obligations of the Borrower and its Subsidiaries under
this Credit Agreement and each other Loan Document to
which the Borrower or such Subsidiary is a party.
"Obligation" means any part of the Obligations.
"Oil and Gas Interests" shall mean any and all
rights, estates, titles and interests in any oil and
gas wells, oil, gas, sulfur and other mineral
leaseholds and fee interests, all overriding royalty
interests, mineral interests, royalty interests, net
profits interests, oil payments, production payments,
carried interests and any and all other interests in
Hydrocarbons, whether any of the same be real or
personal, now owned or hereafter acquired by the
Borrower or its Subsidiaries, directly or indirectly
together with rights, titles and interests created by
or arising under the terms of any unitization,
communitization, and pooling agreements or
arrangements, and all properties, rights and interests
covered thereby, whether arising by contract, by order,
or by operation of laws, which now or hereafter include
all or any part of the foregoing.
"Opinion of the Borrower's Counsel" shall mean the
favorable written legal opinion of Nancy Snyder, legal
counsel to the Borrower and its Subsidiaries, dated as
of the Closing Date, and in form and substance
satisfactory to the Agent.
"Participants" shall have the meaning assigned to
that term in Section 10.9 hereof.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation or any entity succeeding to all or any of
its functions under ERISA.
"Permitted Liens" shall mean with respect to the
Borrower or any Subsidiary of the Borrower:
(a) Liens (if any) securing the Notes in favor of
the Banks;
(b) Inchoate Liens incident to construction or
maintenance of real property or with respect to the
conduct of the Borrower's business with respect to the
Coal Interests and the Oil and Gas Interests, or Liens
incident to construction or maintenance of real
property, now or hereafter filed of record for which
adequate reserves with respect thereto are maintained
on its books in accordance with GAAP and which are
being diligently contested in good faith by appropriate
proceedings and have not proceeded to judgment,
provided that, by reason of nonpayment of the
obligations secured by such Liens, no such real
property is subject to a material risk of loss or
forfeiture prior to judgment;
(c) Liens for taxes and assessments on real
property which are not yet past due, or Liens for taxes
and assessments on real property for which adequate
reserves with respect thereto are maintained on its
books in accordance with GAAP and which taxes and
assessments are being diligently contested in good
faith by appropriate proceedings and have not proceeded
to judgment, provided that, by reason of nonpayment of
the obligations secured by such Liens, no such real
property is subject to a material risk of loss or
forfeiture prior to judgment;
(d) Imperfections and irregularities in title to
any property which in the aggregate do not materially
impair the marketability or use of such property for
the purposes for which it is or may reasonably be
expected to be held;
(e) Easements, exceptions, reservations, or other
agreements for the purpose of pipelines, conduits,
cables, wire communication lines, power lines and
substations, streets, trails, walkways, drainage,
irrigation, water, and sewerage purposes, dikes,
canals, ditches, the removal of oil, gas, coal, or
other minerals, and other like purposes affecting real
property which in the aggregate do not materially
burden or impair the marketability or use of such real
property for the purposes for which it is or may
reasonably be expected to be held;
(f) Non-consensual Liens imposed by Law,
including carrier's, mechanics', landlord's,
warehousemen's or other similar Liens, other than those
described in clauses (b) or (c) above, arising in the
ordinary course of business with respect to obligations
which are not delinquent or are being diligently
contested in good faith by appropriate proceedings,
provided that, if delinquent, adequate reserves with
respect thereto are maintained on its books in
accordance with GAAP and, by reason of nonpayment, no
property is subject to a material risk of loss or
forfeiture prior to judgment;
(g) Liens consisting of pledges or deposits made
in the ordinary course of business in compliance with
workers' compensation, unemployment insurance and other
social security laws or regulations;
(h) Liens consisting of deposits of property to
secure the performance of bids, trade contracts (other
than for Debt), leases (other than Capitalized Lease
Obligations), statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a
like nature incurred in the ordinary course of
business;
(i) Lease burdens payable to third parties which
are either (i) deducted in the calculation of
discounted present value of the Oil and Gas Interests
covered in the Reserve Reports including, without
limitation, any royalty, overriding royalty, net profit
interests, production payment, carried interest or
reversionary working interest which has been disclosed
to the Agent in writing, or (ii) which burden
properties which are not included in the Reserve
Reports or the Coal Reserve Reports;
(j) Liens arising under operating, pooling or
unitization agreements of a scope and nature customary
in the oil and gas industry;
(k) Liens arising under, in connection with or
related to farm-out, farm-in, joint operating or area
of mutual interest agreements or other similar or
customary arrangements, agreements or interests,
incurred in the ordinary course of business and to the
extent such Liens are limited in recourse to (x) the
properties subject to such interests or agreements, (y)
the Hydrocarbons produced from such properties and (z)
the proceeds of such Hydrocarbons;
(l) Purchase money Liens upon or in any property
acquired by the Borrower or any of its Subsidiaries in
the ordinary course of business to secure the deferred
portion of the purchase price of such property or any
indebtedness incurred to finance the acquisition of
such property provided, however, that (i) no such Lien
shall be extended to cover property other than the
property being acquired (ii) the Debt secured thereby
is permitted pursuant to Section 7.1(h);
(m) All other non-consensual Liens arising in the
ordinary course of the Borrower's or such Subsidiaries'
business or incidental to the ownership of their
properties;
provided that no Permitted Lien referred to above shall
(i) secure any Debt except for Debt permitted pursuant
to subparagraphs (a), (e) or (h) of Section 7.1 hereof
or (ii) in the aggregate materially detract from the
marketability of the material Borrowing Base Assets or
materially impair the use thereof in the operation of
the business of the Borrower or such Subsidiary.
"Person" shall mean an individual, partnership,
corporation (including a business trust), joint stock
company, trust, unincorporated association, joint
venture or other entity, or a foreign state or
political subdivision thereof or any agency of such
state or subdivision.
"Prime Rate" shall have the meaning specified in
the definition of the term "Alternate Base Rate."
"Proved Developed Behind Pipe Hydrocarbon
Reserves" shall mean Proved Hydrocarbon Reserves which
are recoverable from zones behind casing in existing
wells, which will require additional completion work or
a future recompletion prior to the start of production.
"Proved Developed Non-Producing Hydrocarbon
Reserves" shall mean the summation of Proved Developed
Behind Pipe Hydrocarbon Reserves and Proved Developed
Shut-in Hydrocarbon Reserves.
"Proved Developed Producing Hydrocarbon Reserves"
shall mean those Proved Hydrocarbon Reserves which are
recoverable from completion intervals currently open
and producing to market. Improved recovery reserves
are considered to be producing only after an improved
recovery project has been installed and is in
operation.
"Proved Developed Shut-in Hydrocarbon Reserves"
shall mean Proved Hydrocarbon Reserves that are
recoverable from completion intervals open as of the
date of estimation, but which are not producing as of
such date.
"Proved Hydrocarbon Reserves" shall mean those
recoverable Hydrocarbons which have been proved to a
high degree of certainty by reason of existing
production, adequate testing, or in certain cases by
adequate core data and other engineering and geologic
information on zones which are present in existing
wells or in known reservoirs. Reserves that can be
produced economically through the application of
established improved recovery techniques are included
in the proved classification when (a) successful
testing by a pilot project or the operation of any
installed program in that reservoir or one in the
immediate area with similar rock and fluid properties
provides support for the engineering analysis on which
the project or program was based, and (b) it is
reasonably certain the project will proceed. Reserves
to be recovered by improved recovery techniques that
have yet to be established through repeated
economically successful applications are included in
the proved category only after successful testing by a
pilot project or after the operation of an installed
program in the reservoir provides support for the
engineering analysis on which the project or program
was based. Improved recovery includes all methods for
supplement natural reservoir including (1) pressure
maintenance, (2) cycling and (3) secondary recovery in
its original sense. Improved recovery also includes
the enhanced recovery methods of thermal, chemical
flooding, and the use of miscible and immiscible
displacement fluids.
"Proved Reserves" shall mean the meaning assigned
to that term in the definition of "Reserve Report".
"Proved Undeveloped Hydrocarbon Reserves" shall
mean Proved Hydrocarbon Reserves that are recoverable
(i) by new wells on undrilled acreage, (ii) by
replacement wells on previously drilled and producing
acreage or (iii) from existing wells where a relatively
large expenditure is required for recompletion and from
acreage where the application of an improved recovery
technique is planned and the costs required to place
the project in operation are relatively large. Proved
Undeveloped Hydrocarbon Reserves on undrilled acreage
shall be limited to those drilling units offsetting
productive units that are reasonably certain of
production when drilled. Proved Hydrocarbon Reserves
for other undrilled units are Proved Undeveloped
Hydrocarbon Reserves only where it can be demonstrated
with certainty that there is continuity of production
from the existing productive formation.
"PVCC" shall mean Penn Virginia Coal Company, a
Virginia corporation and a wholly owned Subsidiary of
the Borrower.
"PVHC" shall mean Penn Virginia Holding Corp., a
Delaware corporation and a wholly-owned Subsidiary of
Borrower.
"PVOG" shall mean Penn Virginia Oil & Gas
Corporation, a Virginia corporation and a wholly owned
Subsidiary of the Borrower.
"Register" shall have the meaning specified in
Section 10.9(f) hereof.
"Regulation D" shall mean Regulation D of the
Board (respecting reserve requirements), as the same is
from time to time in effect, and all official rulings
and interpretations thereunder or thereof.
"Regulation U" shall mean Regulation U of the
Board (respecting margin credit extended by banks), as
the same is from time to time in effect, and all
official rulings and interpretations thereunder or
thereof.
"Regulation X" shall mean Regulation X of the
Board (respecting borrowers who obtain margin credit),
as the same is from time to time in effect, and all
official rulings and interpretations thereunder or
thereof.
"Release" shall mean any release, spill, emission,
leak, injection, deposit, disposal, discharge,
dispersal, leaching or migration of any Hazardous
Substance into the environment or into or out of any
real property of the Borrower or any Subsidiary of the
Borrower, including the movement of Hazardous
Substances through or in the air, soil, surface water,
groundwater and?or land in violation of Environmental
Laws.
"Remedial Action" shall mean actions required by a
Governmental Agency to (i) clean up, remove, treat or
in any other way address Hazardous Substances in the
environment, (ii) prevent the Release or threat of
Release or minimize the further Release of Hazardous
Substances so they do not migrate or endanger or
threaten to endanger public health or welfare or the
environment or (iii) perform pre-remedial studies and
investigations and post-remedial monitoring and care.
"Reportable Event" shall mean any of the events
described in Section 4043 or Section 4068(f) of ERISA
for which the thirty (30) day notice requirement of 29
C.F.R. 2615.3 has not been waived.
"Requirements of Law" shall mean any federal,
state or local law, rule or regulation, permit or other
binding determination of any Governmental Authority
applicable to the Borrower or any of its Subsidiaries
or any of their respective properties or assets.
"Reserve Report" shall mean a report in form and
substance satisfactory to each Bank, which Reserve
Report shall be dated as of the next preceding December
31 or June 30, as the case may be, and shall review at
least 80% of the Proved Reserves attributable to the
Oil and Gas Interests of the Borrower and its
Subsidiaries (and showing any material additions to or
deletions from the Oil and Gas Interests covered by the
previous Reserve Report made by the Borrower and its
Subsidiaries since the date of the previous Reserve
Report), shall set forth the Proved Developed Producing
Hydrocarbon Reserves, Proved Developed Behind Pipe
Hydrocarbon Reserves, Proved Developed Shut-In
Hydrocarbon Reserves and Proved Undeveloped Hydrocarbon
Reserves (the "Proved Reserves") attributable to the
Oil and Gas Interests and a projection of the rate of
production and net income with respect to the Proved
Reserves as of the date of such Reserve Report, all in
accordance with the guidelines published by the
Securities and Exchange Commission. Each Reserve
Report to be submitted prior to March 31 in each such
year shall be prepared by the Approved Petroleum
Engineer. The Majority Banks shall have the right to
approve of the composition of the Oil and Gas Interests
covered in the Reserve Report to be prepared by the
Approved Petroleum Engineer. Each Reserve Report to be
submitted prior to October 1 in each year may be
limited to information prepared by personnel of the
Borrower or its Subsidiaries, which Reserve Report
shall provide the current status of the information set
forth in the immediately preceding Reserve Report.
"Responsible Officer" shall mean, as to any
Person, its Chairman, Vice-Chairman, President,
Executive Vice President(s), Senior Vice President(s)
or Vice President duly authorized to act on behalf of
such Person.
"Restricted Subsidiary " shall mean each
Subsidiary of the Borrower that, at the particular time
in question, (i) owns directly or indirectly any
material assets or any interest in any other Restricted
Subsidiary and (ii) has been designated as a Restricted
Subsidiary by the Borrower or has not been designated
as an Unrestricted Subsidiary by the Borrower either
(i) on Schedule 5.16 hereto or (b) in accordance with
the terms and provisions of this Credit Agreement. The
Unrestricted Subsidiaries on the Effective Date are
listed on Schedule 5.16 hereto. A Restricted
Subsidiary shall remain such (even if it no longer owns
directly or indirectly any interest in any of the
material assets or any interest in any other Restricted
Subsidiary) until designated as an Unrestricted
Subsidiary in accordance with the terms and provisions
of this Agreement.
"Revolving Credit Loan(s)" shall have the meaning
provided in Section 2.1(a).
"S&P" shall mean Standard & Poor's Corporation.
"Savannah" shall mean Savannah Land Company, a
Delaware corporation and a wholly-owned Subsidiary of
PVCC.
"Special Determination" means any determination of
the Borrowing Base pursuant to Section 3.4.
"Standby Letter of Credit" shall mean a Letter of
Credit which represents an obligation to the
beneficiary on the part of the Issuing Bank (a) to
repay money borrowed by or advanced to or for the
account of the Borrower or any of its Subsidiaries or
(b) to make payment on account of any indebtedness
undertaken by the Borrower or any of its Subsidiaries
or (c) to make payment on account of any default by the
Borrower or any of its Subsidiaries in the performance
of an obligation.
"Subordinated Intercompany Notes" shall mean,
collectively, (i) that certain subordinate advancing
promissory note dated February 11, 1998 issued by
Borrower payable to the order of Savannah in the
original principal sum of $75,000,000,(ii) that certain
subordinate advancing promissory note dated February
11, 1998 issued by PVCC payable to the order of
Savannah in the original principal sum of $75,000,000,
(iii) that certain subordinate promissory note dated as
of December 31, 1998 issued by PVCC payable to the
order of PVHC in the original principal sum of
$40,918,000, and (iv) that certain subordinate
promissory note dated as of December 31, 1998 issued by
PVOG payable to the order of PVHC in the original
principal sum of $42,156,000.
"Subsidiary" shall mean as of any date of
determination and with respect to any Person, any
corporation, partnership, joint venture or other entity
whether now existing or hereafter organized or acquired
of which the securities, partnership units or other
ownership interests having ordinary voting power, in
the absence of contingencies, to elect a majority of
the board of directors or other persons performing
similar functions (including that of a general or
venture partner) are at the time directly or indirectly
owned by such Person and?or one or more Subsidiaries of
such Person.
"Subsidiary Guarantors"shall mean Concord,
Equities, Lexington, PVCC, PVOG, PVHC, and Savannah and
any such other Person who has been accepted by the
Banks to guarantee and has guaranteed some or all of
the Obligations, including all Material Restricted
Subsidiaries of the Borrower which now or hereafter
execute and deliver an Instrument of Joinder of the
Subsidiary Guaranty in the form of Exhibit C to the
Subsidiary Guaranty pursuant to the provisions of
Section 6.11.
"Subsidiary Guaranty" shall mean the guaranty of
the Obligations executed by each Subsidiary of the
Borrower in favor of the Agent for the benefit of the
Banks to secure the Obligations substantially in the
form of Exhibit F, either as originally executed or as
the same may from time to time be supplemented,
modified, amended, renewed, extended or supplanted.
"Swing Loans" shall have the meaning assigned to
such term in Section 7.1(g).
"Syndication Agent" shall have the meaning
assigned to that term in the introduction to this
Credit Agreement.
"Termination Event" shall mean (i) a Reportable
Event with respect to any Benefit Plan (other than a
"reportable event" that is not subject to the provision
for 30 days notice to the PBGC); (ii) the withdrawal of
the Borrower from a Benefit Plan during a plan year in
which the Borrower was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA; (iii) the
imposition of an obligation on the Borrower under
Section 4041 of ERISA to provide affected parties
written notice of intent to terminate a Benefit Plan in
a distress termination described in Section 4041(c) of
ERISA; (iv) the institution by the PBGC of proceedings
to terminate a Benefit Plan; (v) any other event or
condition which would constitute grounds under Section
4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit
Plan; or (vi) the occurrence of an event described in
Section 4068(f) of ERISA with respect to a Benefit
Plan.
"Total Borrowing Base" shall mean, at the
particular time in question, the amount determined by
the Agent and the Majority Banks in accordance with the
provisions of Article III.
"Total Commitment"shall mean $120,000,000 as the
same may be reduced from time to time pursuant to
Section 2.9.
"Type," when used in respect to any Revolving
Credit Loan or Borrowing, refers to the Rate by
reference to which interest on such Revolving Credit
Loan or on the Revolving Credit Loans comprising such
Borrowing is determined. For purposes hereof, "Rate"
shall include the Eurodollar Rate and the Alternate
Base Rate.
"Unavailable Commitment" shall have the meaning
specified in Section 2.5(d) hereof.
"Unavailable Fee Rate" shall have the meaning
specified in Section 2.5(d) hereof.
"Unfunded Vested Liabilities" shall mean, with
respect to any Benefit Plan at any time, the amount (if
any) by which (i) the present value of all vested
nonforfeitable benefits under such Benefit Plan exceeds
(ii) the fair market value of all Benefit Plan assets
allocable to such benefits, all determined as of the
then most recent valuation date for such Benefit Plan,
but only to the extent that such excess represents a
potential liability of an ERISA Affiliate to the PBGC
or such Benefit Plan under Title IV of ERISA.
"United States" and "U.S." each shall mean United
States of America.
"Unrestricted Subsidiary" shall mean each
Subsidiary of the Borrower which is (i) designated as
an Unrestricted Subsidiary on Schedule 5.16 hereto or
(ii) designated as an Unrestricted Subsidiary by the
Borrower at any time after the Effective Date;
provided, however, that a Subsidiary may not be
designated as an Unrestricted Subsidiary by Borrower if
(i) at the time of such designation there exists a
Borrowing Base Deficiency or a Default or Event of
Default or (ii) such designation would trigger either a
Borrowing Base Deficiency or a Default or an Event of
Default. An Unrestricted Subsidiary shall remain such
until designated as a Restricted Subsidiary in
accordance with the terms and provisions of this
Agreement.
"Unused Availability" shall mean at any time, an
amount equal to the Available Commitment in effect at
that time, minus the Utilized Credit.
"Utilized Credit" shall mean, at any time, without
duplication, the sum of (i) the aggregate principal
amount then outstanding on Revolving Credit Loans, plus
(ii) the aggregate principal amount then outstanding on
Swing Loans, plus (iii) the aggregate Letter of Credit
Exposure, plus (iv) the aggregate amount of payment
theretofore made by the Issuing Bank in respect to
Letters of Credit and not theretofore reimbursed by the
Borrower to the Issuing Bank or deemed a Revolving
Credit Loan pursuant to Section 2.3(d).
"Utilized Percentage of Borrowing Base" shall mean
on any date an amount equal to (i) the Utilized Credit
on such day minus the aggregate principal amount then
outstanding on Swing Loans divided by (ii) the
Available Borrowing Base on such day.
"Withholding Taxes" shall have the meaning
provided in Section 2.17(a).
SECTION 1.2. Accounting Terms. All terms of an
accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time;
provided, however, that, for purposes of determining
compliance with any covenant set forth in Article VII,
such terms shall be construed in accordance with GAAP
as in effect on the date of this Credit Agreement,
applied on a basis consistent with the application used
in the audited financial statements referred to in
Section 5.9(a).
SECTION 1.3. Interpretation.
(a) In this Credit Agreement, unless a clear
contrary intention appears:
(i) the singular number includes the plural
number and vice versa;
(ii) reference to any gender includes each
other gender;
(iii) the words "herein," "hereof" and
"hereunder" and other words of similar import
refer to this Credit Agreement as a whole and
not to any particular Article, Section or
other subdivision;
(iv) reference to any Person includes such
Person's successors and assigns but, if
applicable, only if such successors and
assigns are permitted by this Credit
Agreement, and reference to a Person in a
particular capacity excludes such Person in
any other capacity or individually, provided
that nothing in this clause (iv) is intended
to authorize any assignment not otherwise
permitted by this Credit Agreement;
(v) reference to any agreement, document or
instrument means such agreement, document or
instrument as amended, supplemented or
modified and in effect from time to time in
accordance with the terms thereof and, if
applicable, the terms hereof, and reference
to any Note includes any Note issued pursuant
hereto in extension or renewal thereof and in
substitution or replacement therefor;
(vi) unless the context indicates otherwise,
reference to any Article, Section, Schedule
or Exhibit means such Article or Section
hereof or such Schedule or Exhibit hereto;
(vii) the words "including" (and with
correlative meaning "include") means
including, without limiting the generality of
any description preceding such term;
(viii) with respect to the determination of
any period of time, the word "from" means
"from and including" and the word "to" means
"to but excluding;" and
(ix) reference to any law means such as
amended, modified, codified or reenacted, in
whole or in part, and in effect from time to
time.
(b) The Article and Section headings herein and
the Table of Contents are for convenience only and
shall not affect the construction of this Credit
Agreement.
(c) No provision of this Credit Agreement shall be
interpreted or construed against any Person solely
because that Person or its legal representative drafted
such provision.
ARTICLE II
REVOLVING CREDIT LOANS
SECTION 2.1. Revolving Credit Loans. (a) Subject
to the terms and conditions and relying upon the
representations and warranties set forth herein and in
the other Loan Documents, each Bank agrees, severally
and not jointly, to make its Commitment Percentage of
loans to the Borrower (collectively, the "Revolving
Credit Loans"), at any time and from time to time on
and after the Effective Date and up to, but excluding,
the Maturity Date, provided, a Bank's Commitment
Percentage of the aggregate amount of the Utilized
Credit at any one time shall not exceed such Bank's
Commitment and provided, further, that the aggregate
amount of the Utilized Credit shall at no time exceed
the lesser of the (i) Total Commitment and (ii)
Available Commitment. Except as otherwise provided in
this Credit Agreement, the Revolving Credit Loans shall
mature and be due and payable in full on the Maturity
Date. Subject to the terms and provisions hereof, the
Borrower may borrow, repay and reborrow hereunder.
Each Borrowing shall be made in accordance with the
procedures set forth in Section 2.2 and shall be in an
aggregate principal amount (x) in the case of an ABR
Borrowing, $500,000 or a whole multiple of $100,000 in
excess thereof (or, if then Unused Availability is less
than $500,000, such lesser amount) and (y) in the case
of a Eurodollar Borrowing, $1,000,000 or a whole
multiple of $500,000 in excess thereof. The Revolving
Credit Loans may from time to time be (i) Eurodollar
Loans, (ii) ABR Loans, or (iii) a combination thereof,
as determined by the Borrower and notified to the Agent
in accordance with Sections 2.2 and 2.4.
b) Subject to the terms and conditions and
relying upon the representations and warranties herein
set forth, the Issuing Bank agrees to issue Letters of
Credit upon the request of the Borrower for the account
of the Borrower or any Subsidiary of the Borrower at
any time and from time to time on and after the
Effective Date and up to, but excluding, the earlier of
the Maturity Date and the termination of the Letter of
Credit Commitments in accordance with the terms hereof.
Each Bank (other than the Issuing Bank) severally
agrees, on the terms and conditions hereinafter set
forth, to purchase participations in the Letters of
Credit issued by the Issuing Bank pursuant to Section
2.3 in an aggregate amount not to exceed such Bank's
Letter of Credit Commitment. Notwithstanding the
foregoing, the aggregate undrawn face amount of all
Letters of Credit at any time outstanding shall not
exceed the aggregate Letter of Credit Commitments of
all the Banks, and no Letter of Credit will be issued
if immediately after such issuance the Utilized Credit
would exceed the Available Commitment then in effect.
On each day during the period commencing with the
issuance by the Issuing Bank of any Letter of Credit
and until such Letter of Credit shall have expired or
been terminated, and, irrespective of whether such
Letter of Credit has expired or terminated, if same has
been drawn upon and the amount so drawn has not been
reimbursed to the Issuing Bank, the Commitment of each
Bank shall be deemed to be utilized for all purposes
hereof in an amount equal to such Bank's Commitment
Percentage of the undrawn face amount of such Letter of
Credit, plus the aggregate amount of all unreimbursed
drawings.
SECTION 2.2. Borrowing Procedure for Revolving
Credits.
(a) In order to effect a Borrowing(s), the
Borrower shall submit a Borrowing Request in writing or
by telecopy (or telephone notice promptly confirmed in
writing or by telecopy) to the Agent, (i) in the case
of a Eurodollar Borrowing, not later than 11:00 a.m.,
Houston, Texas time, three (3) Business Days before the
Borrowing Date specified in the Borrowing Request for
such proposed Eurodollar Borrowing(s) and (ii) in the
case of an ABR Borrowing, not later than 12:00 noon,
Houston, Texas time, on the Borrowing Date specified in
the Borrowing Request for such proposed ABR Borrowing.
Such Borrowing Request shall be irrevocable and shall
in each case refer to this Credit Agreement and specify
(w) whether the Borrowing(s) then being requested are
to be Eurodollar Borrowing(s), or ABR Borrowing(s), or
a combination thereof, (x) the Borrowing Date of such
Borrowing(s) (which shall be a Business Day), (y) the
aggregate principal amount of such Borrowing(s) and (z)
in the case of Eurodollar Borrowings, the Eurodollar
Interest Periods with respect thereto. If no
Eurodollar Interest Period with respect to any
Eurodollar Borrowing(s) is specified in any such
Borrowing Request, then the Borrower shall be deemed to
have selected a Eurodollar Interest Period of one (1)
month's duration. The Agent shall promptly advise the
Banks of any Borrowing Request given pursuant to this
Section 2.2 and of each Bank's Commitment Percentage of
the requested Borrowing(s) by telecopy (or telephone
notice promptly confirmed in writing or by telecopy).
(b) Each Bank may at its option make any
Eurodollar Loan by causing any Lending Office of such
Bank to make such Eurodollar Loan; provided, however,
that any exercise of such option shall not affect the
obligation of the Borrower to repay such Eurodollar
Loan in accordance with the terms of this Credit
Agreement and the applicable Notes.
(c) No later than 1:00 p.m., Houston, Texas time,
on the Borrowing Date specified in each Borrowing
Request, each Bank will make available to the Agent its
Commitment Percentage of the Revolving Credits
comprising the Borrowing(s) requested to be made on
such date, in Dollars and immediately available funds.
Upon fulfillment of the applicable conditions set forth
in Article IV, the Agent will make the proceeds of each
Borrowing so requested available to the Borrower by
crediting the amounts so received to a general deposit
account maintained by the Borrower with Chase Bank of
Texas, National Association, on the Borrowing Date or,
if a Borrowing shall not occur on such Borrowing Date
because any condition precedent herein specified shall
not have been met, the Agent will return the amounts so
received to the respective Banks as soon as
practicable. All Borrowings shall be made by the Banks
pro rata in accordance with such Bank's Commitment
Percentage of the Revolving Credits comprising such
Borrowing. Unless the Agent shall have received notice
from a Bank prior to the date of any proposed Borrowing
Date that such Bank will not make available to the
Agent such Bank's Commitment Percentage of such
Borrowing, the Agent may assume that such Bank has made
its Commitment Percentage available to the Agent on
such Borrowing Date in accordance with this paragraph
(c) and the Agent, in reliance upon such assumption,
may, (but under no circumstances shall the Agent be
obligated to) make available to the Borrower on such
Borrowing Date a corresponding amount. If and to the
extent that such Bank shall not have made its
Commitment Percentage of such Borrowing available to
the Agent, such Bank and the Borrower severally agree
to repay to the Agent forthwith on demand such
corresponding amount together with interest thereon,
for each day from the date such amount is made
available to the Borrower until the date such amount is
repaid to the Agent at (i) in the case of the Borrower,
the interest rate applicable to the Revolving Credits
comprising such Borrowing and (ii) in the case of such
Bank, the Federal Funds Effective Rate. If such Bank
shall repay to the Agent such corresponding amount,
such amount shall constitute such Bank's Commitment
Percentage of such Borrowing for purposes of this
Credit Agreement.
(d) No Eurodollar Borrowing may be made if, after
giving effect to such Eurodollar Borrowing, there would
be more than six (6) Eurodollar Borrowings outstanding
at such time.
SECTION 2.3. Issuing the Letters of Credit. (a)
In order to effect the issuance of a Letter of Credit,
the Borrower shall submit a Borrowing Request and a
Letter of Credit Application in writing by telecopy to
the Agent (who shall promptly notify the Issuing Bank)
not later than 12:00 noon, Houston, Texas time, two (2)
Business Days before the date of issuance of such
Letter of Credit. Each such Borrowing Request and
Letter of Credit Application shall be signed by the
Borrower, specify the Business Day on which such Letter
of Credit is to be issued, and specify the availability
for Letters of Credit under the Letter of Credit
Commitment and the Available Commitment as of the date
of issuance of such Letter of Credit and the expiry
date thereof which shall not be later than the earlier
of (i) twelve (12) months from the date of issuance of
such Letter of Credit and (ii) the Maturity Date;
provided, however, that the Borrower may request
evergreen Letters of Credit that automatically renew on
their expiry date for an additional one year period so
long as the final expiry date thereof is on or before
the Maturity Date.
(b) Upon satisfaction of the applicable
terms and conditions set forth in Article IV, the
Issuing Bank shall issue such Letter of Credit to the
specified beneficiary not later than the close of
business, Houston, Texas time, on the date so
specified. The Agent shall provide the Borrower and
each Bank with a copy of each Letter of Credit so
issued. Each such Letter of Credit shall (i) provide
for the payment of drafts, presented for honor
thereunder by the beneficiary in accordance with the
terms thereon, at sight when accompanied by the
documents described therein and (ii) be subject to the
Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce
Publication No. 500, (and any subsequent revisions
thereof approved by a Congress of the International
Chamber of Commerce) (the "UCP") and shall, as to
matters not governed by the UCP, be governed by, and
construed and interpreted in accordance with, the laws
of the State of Texas.
(c) Upon the issuance date of each
Letter of Credit, the Issuing Bank shall be deemed,
without further action by any party hereto, to have
sold to each other Bank, and each other Bank shall be
deemed, without further action by any party hereto, to
have purchased from the Issuing Bank, a participation,
to the extent of such Bank's Commitment Percentage, in
such Letter of Credit, the obligations thereunder and
in the reimbursement obligations of the Borrower due in
respect of drawings made under such Letter of Credit.
If requested by the Issuing Bank, the other Banks will
execute any other documents reasonably requested by the
Issuing Bank to evidence the purchase of such
participation.
(d) Upon the presentment of any draft for
honor under any Letter of Credit by the beneficiary
thereof which the Issuing Bank determines is in
compliance with the conditions for payment thereunder,
the Issuing Bank shall promptly notify the Borrower,
the Agent and each Bank of the intended date of honor
of such draft and the Borrower hereby promises and
agrees, at the Borrower's option, to either (i) pay to
the Agent for the account of the Issuing Bank, by 1:00
p.m., Houston, Texas time, on the date payment is due
as specified in such notice, the full amount of such
draft in immediately available funds or (ii) request a
Revolving Credit Loan pursuant to the provisions of
Sections 2.1 and 2.2 of this Credit Agreement in the
full amount of such draft, which request shall specify
that the Borrowing Date is to be the date payment is
due under the Letter of Credit as specified in the
Issuing Bank's notice. If the Borrower fails timely to
make such payment because a Revolving Credit Loan
cannot be made pursuant to Section 2.1(a) and Article
IV, each Bank shall, notwithstanding any other
provision of this Credit Agreement (including the
occurrence and continuance of a Default or an Event of
Default), make available to the Agent for the benefit
of the Issuing Bank an amount equal to its Commitment
Percentage of the presented draft on the day the
Issuing Bank is required to honor such draft. If such
amount is not in fact made available to the Agent by
such Bank on such date, such Bank shall pay to the
Agent for the account of the Issuing Bank, on demand
made by the Issuing Bank, in addition to such amount,
an amount equal to the product of (i) the average daily
Federal Funds Effective Rate per annum during the
period referred to in clause (iii) of this sentence
times (ii) the amount of such Bank's Commitment
Percentage of the presented draft times (iii) the
number of days that elapse from the day the Issuing
Bank honors such draft to the date on which the amount
equal to such Bank's Commitment Percentage of the
presented draft becomes immediately available to the
Issuing Bank divided (iv) by 360. Upon receipt by the
Agent from the Banks of the full amount of such draft,
notwithstanding any other provision of this Credit
Agreement (including the occurrence and continuance of
a Default or an Event of Default) the full amount of
such draft shall automatically and without any action
by the Borrower, be deemed to have been an ABR
Borrowing as of the date of payment of such draft.
Nothing in this paragraph (d) or elsewhere in this
Credit Agreement shall diminish the Borrower's
obligation under this Credit Agreement to provide the
funds for the payment of, or on demand to reimburse the
Issuing Bank for payment of, any draft presented to,
and duly honored by, the Issuing Bank under any Letter
of Credit, and the automatic funding of a Revolving
Credit Loan as in this paragraph provided shall not
constitute a cure or waiver of the Event of Default for
failure, timely to provide such funds as in this
paragraph agreed.
(e) In order to induce the issuance of
Letters of Credit by the Issuing Bank and the purchase
of participations therein by the other Banks, the
Borrower agrees with the Agent, the Issuing Bank and
the other Banks that neither the Agent nor any Bank
(including the Issuing Bank) shall be responsible or
liable (except as provided in the following sentence)
for, and the Borrower's unconditional obligation to
reimburse the Issuing Bank through the Agent for
amounts paid by the Issuing Bank, as provided in
Section 2.3(d), on account of drafts so honored under
the Revolving Credit Letters of Credit shall not be
affected by, any circumstance, act or omission
whatsoever (whether or not known to the Agent or any
Bank (including the Issuing Bank) other than a
circumstance, act or omission resulting from the gross
negligence or willful misconduct of the Agent or any
Bank). The Borrower agrees that any action taken or
omitted to be taken by the Agent or any Bank (including
the Issuing Bank) under or in connection with any
Letter of Credit or any related draft, document or
property shall be binding on the Borrower and shall not
put the Agent or any Bank (including the Issuing Bank)
under any resulting liability to the Borrower, unless
such action or omission is the result of the gross
negligence or willful misconduct of the Agent or any
such Bank. The Borrower hereby waives presentment for
payment (except the presentment required by the terms
of any Letter of Credit) and notice of dishonor,
protest and notice of protest with respect to drafts
honored under the Letters of Credit. The Issuing Bank
agrees promptly to notify the Borrower whenever a draft
is presented under any Letter of Credit, but failure to
so notify the Borrower shall not in any way affect the
Borrower's obligations hereunder. Subject to Section
2.19 and 2.22, if while any Letter of Credit is
outstanding, any law, executive order or regulation is
enforced, adopted or interpreted by any public body,
governmental agency or court of competent jurisdiction
so as to affect any of the Borrower's obligations or
the compensation to any Bank in respect of the Letters
of Credit or the cost to such Bank of establishing
and?or maintaining the Letters of Credit (or any
participation therein), such Bank shall promptly notify
the Borrower thereof in writing in accordance with
Section 2.13(c) or 2.17, as the case may be, and within
ten (10) Business Days after receipt by the Borrower of
such Bank's request (through the Agent) for
reimbursement or indemnification or within thirty (30)
days after receipt of a notice in respect of
Withholding Taxes under Section 2.17 hereof,
accompanied by a certificate from such Bank setting
forth the basis for such reimbursement or
indemnification and the calculation thereof in
accordance with Section 2.14(c) or 2.17, as the case
may be, the Borrower shall reimburse or indemnify such
Bank, as the case may be, with respect thereto so that
such Bank shall be in the same position as if there had
been no such enforcement, adoption or interpretation,
unless the Borrower notifies the Agent of its good
faith contest to, and dispute of, the requested amount
and such Bank's basis therefor and?or calculation
thereof. The foregoing agreement of the Borrower to
reimburse or indemnify the Banks shall apply in (but
shall not be limited to) the following situations: an
imposition of or change in reserve, capital maintenance
or other similar requirements or in excise or similar
taxes or monetary restraints, except a change in
franchise taxes imposed on such Bank or in tax on the
net income of such Bank.
(f)In the event that any provision of a Letter
of Credit Application is inconsistent with, or in
conflict of, any provision of this Credit Agreement,
including provisions for the rate of interest
applicable to drawings thereunder or rights of setoff
or any representations, warranties, covenants or any
events of default set forth therein, the provisions of
this Credit Agreement shall govern.
SECTION 2.4. Conversions or Continuation of
Borrowings.
(a)Subject to the other provisions of this Credit
Agreement, the Borrower may elect from time to time to
convert (i) all or any part of Eurodollar Loans which
comprise part of the same Eurodollar Borrowing to a
Borrowing comprised of ABR Loans and (ii) all or any
part of ABR Loans which comprise part of the same
Borrowing to a Borrowing comprised of Eurodollar Loans,
provided, however, in each case that any such
conversion of Revolving Credit Loans comprising a
Eurodollar Borrowing shall, subject to the second
following sentence, only be made on the last day of a
Eurodollar Interest Period with respect thereto. All
or any part of a Borrowing may be converted as provided
herein, provided that no Borrowing may be converted
into a Eurodollar Borrowing when any Default or Event
of Default has occurred and is continuing.
(b)Any Eurodollar Borrowing may be continued as
such effective upon the expiration of the Eurodollar
Interest Period with respect thereto; provided, that no
Eurodollar Borrowing may be continued as such when any
Default or Event of Default has occurred and is
continuing, but shall be automatically converted to an
ABR Borrowing on the last day of then current
Eurodollar Interest Period with respect thereto.
(c) In order to elect to convert or continue a
Borrowing, or any portion thereof, under this Section
2.4, the Borrower shall deliver an irrevocable Notice
of Conversion or Continuation to the Agent not later
than 1:00 p.m., Houston, Texas time, (i) at least three
(3) Business Days in advance of the proposed conversion
or continuation date in the case of a conversion to, or
continuation of, a Eurodollar Borrowing and (ii) at
least one (1) Business Day in advance of the proposed
conversion date in the case of a conversion to an ABR
Borrowing. Each such Notice of Conversion or
Continuation shall be by telecopy (confirmed thereafter
by a delivery of the original of such Notice of
Conversion or Continuation by United States mail or a
reputable courier) and shall specify (v) the date of
the requested conversion or continuation (which shall
be a Business Day), (w) the amount and the Borrowing to
be converted or continued, (y) whether a conversion or
continuation is requested, and, if a conversion, into
what Type of Borrowing and (z) in the case of a
conversion to, or a continuation of, a Eurodollar
Borrowing, the requested Eurodollar Interest Period.
Promptly after receipt of a Notice of Conversion or
Continuation under this Section 2.4, the Agent shall
provide each Bank with a copy thereof.
(d) No Borrowing, or any portion thereof, may be
converted into an Eurodollar Borrowing if, after giving
effect to such conversion, there would be more than six
(6) Eurodollar Borrowings outstanding at such time.
(e)If the Borrower shall fail to deliver a timely
Notice of Conversion or Continuation with respect to
any Eurodollar Borrowing, the Borrower shall be deemed
to have elected to convert such Eurodollar Borrowing to
an ABR Borrowing on the last day of the Eurodollar
Interest Period with respect to such Eurodollar
Borrowing.
(f)For purposes of this Section 2.4, Borrowings
having different Eurodollar Interest Periods,
regardless of whether they commence on the same date or
are of the same Type shall be considered Borrowings of
different Types.
SECTION 2.5. Fees.
(a)In consideration of each Bank's commitment to
make Revolving Credit Loans, the Borrower will pay to
Agent for the account of each Bank a commitment fee
determined on a daily basis by applying the applicable
Commitment Fee Rate to such Bank's Commitment
Percentage of the difference between (i) the Available
Commitment and (ii) the aggregate outstanding principal
amount of all Revolving Credit Loans, on each day from
the Effective Date to but excluding the Maturity Date.
This commitment fee shall be due and payable in arrears
on the first day of the next succeeding Fiscal Quarter,
on the date of each reduction in the Total Commitment
and at Maturity (by acceleration or otherwise). The
applicable "Commitment Fee Rate" shall be based on the
Utilized Percentage of Borrowing Base in effect on each
such day and calculated pursuant to the following
table:
Utilized Percentage of Applicable Commitment
Borrowing Base Fee Rate
Less than fifty percent three-tenths of one
(50%) percent (0.30%) per
annum
Equal to or greater than three-tenths of one
fifty percent (50%) but percent (0.30%) per
less than seventy-five annum
percent (75%)
Equal to or greater than three-eighths of one
seventy-five percent (75%) percent (0.375%) per
annum
(b)In consideration of each Bank's commitment to
participate in Letters of Credit, the Borrower will pay
to Agent for the account of each Bank a letter of
credit fee equal to the greater of (i) $500.00 and (ii)
a fee determined by applying the applicable Letter of
Credit Fee Rate to the face amount of each Letter of
Credit from the date of issuance thereof to the date on
which such Letter of Credit expires. All such Letter
of Credit fees shall be payable in full in advance of
the issuance of such Letter of Credit. The Agent shall
pay to each Bank its Commitment Percentage of such
Letter of Credit fee. The applicable "Letter of Credit
Fee Rate" shall be based on the Utilized Percentage of
Borrowing Base in effect on each such day and
calculated pursuant to the following table:
Utilized Percentage of Applicable Letter of
Borrowing Base Credit Fee Rate
Less than fifty percent one percent (1.00%) per
(50%) annum
Equal to or greater than one and one-quarter
fifty percent (50%), but percent (1.25%) per
less than seventy-five annum
percent (75%)
one and one-half percent
Equal to or greater than (1.50%) per annum
seventy-five percent (75%)
(c)the Borrower agrees to pay to the Issuing Bank
as a fronting fee for the issuance of each Letter of
Credit, an amount equal to one-eighth of one percent
(.125%) per annum of the face amount of each Letter of
Credit from the date of issuance thereof to the date on
which such Letter of Credit expires or is terminated.
(d)the Borrower shall pay to Agent for the ratable
account of each Bank an unavailable commitment fee
determined on a daily basis by applying the applicable
Unavailable Fee Rate to such Bank's Commitment
Percentage of the Unavailable Commitment on each day
from the Effective Date to but excluding the Maturity
Date. The term "Unavailable Commitment" shall mean an
amount equal to the positive difference, if any,
between the Total Commitment and the Available
Commitment then in effect. This unavailable commitment
fee shall be due and payable in arrears on the first
day of the next succeeding Fiscal Quarter, on the date
of each reduction in the Total Commitment and at
Maturity (by acceleration or otherwise). The
applicable "Unavailable Fee Rate" shall be based on the
Utilized Percentage of Borrowing Base in effect on each
such day and calculated pursuant to the following
table:
Utilized Percentage of Applicable Unavailable
Borrowing Base Fee Rate
Less than fifty percent three-twentieths of one
(50%) percent (0.15%) per
annum
Equal to or greater than three-twentieths of one
fifty percent (50%) but percent (0.15%) per
less than seventy-five annum
percent (75%)
three-sixteenths of one
Equal to or greater than percent (0.1875%)
seventy-five percent (75%)
(e)the Borrower shall pay when due to
the Agent and each of the Banks such other
fees as shall have been separately agreed by
the Agent and the Borrower in writing.
(f)All computations of fees hereunder
shall be calculated on the basis of a year of
360 days and the actual number of days
elapsed.
SECTION 2.6. Notes.
(a)The Revolving Credit Loans made by
each Bank shall be evidenced by a single Note
duly executed and delivered by the Borrower,
dated the Closing Date, with the blanks
appropriately completed, payable to the order
of such Bank in a principal amount equal to
such Bank's Commitment as set forth in
Schedule 1.1.
(b)Each Bank is hereby authorized by the
Borrower, at its option, to endorse on the
schedule attached to its Note (or on a
continuation of such schedule attached to its
Note and made a part thereof) or in its
internal records relating to its Note an
appropriate notation evidencing the date and
amount of each Revolving Credit Loan
evidenced thereby, the date and amount of
each payment of principal or interest in
respect thereof and such other information
provided for on such schedule. The aggregate
unpaid principal amount so recorded shall be
presumptive evidence of the principal amount
owing by the Borrower to such Bank and unpaid
under its Note. The failure of any Bank to
make such a notation or any error therein
shall not in any manner affect the obligation
of the Borrower to repay the Revolving Credit
Loans made by such Bank in accordance with
the terms of its Note and this Credit
Agreement.
SECTION 2.7. Interest on Revolving
Credit Loans and Payment Dates.
(a)Subject to the provisions of Section
2.8, the Revolving Credit Loans shall bear
interest as follows:
(i)The Revolving Credit Loans
comprising each Eurodollar Borrowing
shall bear interest (computed on the
basis of the actual number of days
elapsed over a year of 360 days) at
a rate per annum equal to the lesser
of (i) the Highest Lawful Rate and
(ii) the Eurodollar Rate for the
Eurodollar Interest Period in effect
for such Borrowing plus the
Applicable Eurodollar Margin with
respect to such Eurodollar Loans.
(ii) The Revolving Credit Loans
comprising any ABR Borrowing shall
bear interest at a rate per annum
equal to the lesser of (i) the
Highest Lawful Rate and (ii) the
Alternate Base Rate (if the
Alternate Base Rate is based on the
Prime Rate, computed on the basis of
the actual number of days elapsed
over a year of 365 or 366 days, as
the case may be; if the Alternate
Base Rate is based on the Federal
Funds Effective Rate, computed on
the basis of the actual number of
days elapsed over a year of 360
days).
(b) Interest on each Revolving Credit Loan
shall be payable by the Borrower (i) in respect of each
Revolving Credit Loan comprising part of an ABR
Borrowing, quarterly in arrears on the last Business
Day of each calendar quarter, (ii) in respect of each
Revolving Credit Loan comprising part of a Eurodollar
Borrowing, on the last day of the Eurodollar Interest
Period applicable to such Eurodollar Borrowing, and, in
the case of a Eurodollar Interest Period for Eurodollar
Borrowings of six (6) months, on the date occurring
three (3) months from the first day of such Interest
Period and on the last day of such Eurodollar Interest
Period, (iii) in respect of each Revolving Credit Loan
accruing interest at the Default Rate, on demand and
(iv) in respect of all Revolving Credit Loans, on any
prepayment or conversion (on the amount prepaid or
converted), at maturity (whether by acceleration or
otherwise) and, after maturity, on demand.
(c)Interest in respect of the unpaid principal
amount of each Revolving Credit Loan shall accrue from
(and including) the date of the making of such
Revolving Credit Loan to (but not including) the date
on which such Revolving Credit Loan shall be paid in
full.
(d)The Agent shall, upon determining a Eurodollar
Rate for any Eurodollar Interest Period with respect to
a Eurodollar Borrowing, promptly notify the Borrower
and the Banks thereof.
SECTION 2.8. Interest on Overdue Amounts. If the
Borrower shall fail to pay the principal of or interest
on any Revolving Credit Loan or any other amount when
due hereunder, the Borrower shall on demand from time
to time pay interest, to the extent permitted by law,
on such defaulted amount from the date of such Event of
Default up to (but not including) the date of actual
payment (after as well as before judgment) at a rate
per annum (the "Default Rate") equal to the lesser of
(i) the Highest Lawful Rate and (ii) (x) in the case of
ABR Borrowings, the Alternate Base Rate plus two
percent (2%) per annum or (y) in the case of Eurodollar
Borrowings, the Eurodollar Rate for the Eurodollar
Interest Period in effect for such Borrowing plus the
Applicable Eurodollar Margin with respect to such
Eurodollar Loans plus two percent (2%) per annum, in
either case, computed on the basis of the actual number
of days elapsed over a year of 365 or 366 days, as the
case may be.
SECTION 2.9. Voluntary Termination and Reduction
of the Total Commitment.
(a) Subject to Section 2.11. The Borrower may
permanently terminate, or from time to time in part
permanently reduce, the Total Commitment upon at least
five (5) Business Days' prior irrevocable written or
telecopy notice (or telephone notice promptly confirmed
in writing) to the Agent (which notice the Agent shall
promptly transmit to each of the Banks). Such notice
shall specify the date and the amount of the
termination or reduction of the Total Commitment. Each
partial reduction of the Total Commitment shall be in a
minimum aggregate principal amount of $5,000,000 and in
integral multiples of $1,000,000 (or a lesser amount
equal to the excess of the Total Commitment over the
sum of the Utilized Credit).
(b) Simultaneously with any termination or
reduction of the Total Commitment pursuant to this
Section 2.9, the Borrower shall pay to the Agent for
the account of each Bank the commitment fees on the
amount of the Available Commitment and/or the
Unavailable Commitment so terminated or reduced,
accrued through the date of such termination or
reduction. After a reduction of the Total Commitment
hereunder, the commitment fees with respect of the
"Unavailable Commitment" shall thereafter be calculated
on the Total Commitment as so reduced.
SECTION 2.10. Voluntary Prepayment of Revolving
Credit Loans.
(a) the Borrower shall have the right at any time
and from time to time to prepay the Revolving Credit
Loans, in whole or in part, (i) in the case of
Eurodollar Loans upon at least three (3) Business Days'
prior written or telecopy notice (or telephone notice
promptly confirmed in writing) to the Agent, provided,
however, that in the event the Borrower prepays
Eurodollar Borrowing in whole or in part on a day which
is not the last day of the Eurodollar Interest Period
applicable thereto, the provisions of Section 2.15
shall apply or (ii) in the case of an ABR Loan, upon at
least one (1) Business Day's prior written or telecopy
notice or telephone notice promptly confirmed in
writing) to the Agent; provided, however, that each
such partial prepayment shall be in a minimum principal
amount of $1,000,000 and in integral multiples of
$1,000,000 (or a lesser amount equal to the sum of the
aggregate principal amount of all Revolving Credit
Loans outstanding).
(b) Each notice of prepayment under subsection
(a) above shall (i) specify the prepayment date, the
principal amount of such prepayment, which Revolving
Credit Loans are to be prepaid, and in the case of
Revolving Credit Loans comprising Eurodollar
Borrowings, the specific Borrowing(s) pursuant to which
such Revolving Credit Loans were made and the
Eurodollar Interest Period applicable thereto, (ii) be
irrevocable and (iii) commit the Borrower to prepay
such Revolving Credit Loan(s) by the amount stated
therein on the date stated therein. All prepayments
under this Section 2.10 shall be subject to Section
2.15 (as to prepayments of Eurodollar Loans), but
otherwise without premium or penalty. All prepayments
under this Section 2.10 shall be accompanied by accrued
interest on the principal amount being prepaid to the
date of payment.
SECTION 2.11. Mandatory Payments on Revolving
Credit Loans.
(a) If at any time there shall occur a Borrowing
Base Deficiency, the Borrower shall, at its election,
either (1) prepay (no later than sixty (60) calendar
days after the applicable Determination Date) the
principal of the Revolving Credit Loans on a pro rata
basis in an aggregate amount equal to such Borrowing
Base Deficiency (together with accrued interest on the
principal amount of the Revolving Credit Loans so
prepaid to the date of prepayment), (2) if such
condition arises, in part or in whole, by reason of a
Designated Borrowing Base being in effect, increase the
Designated Borrowing Base by an amount equal to the
lesser of (i) such excess or (ii) the difference
between the Available Borrowing Base and the Designated
Borrowing Base or (3) any combination of (1) and (2) or
any other solution acceptable to the Majority Banks.
The Borrower shall give prompt written notice to the
Agent of each election made by it pursuant to this
Section 2.11(a). If the Borrower shall fail to give
notice to the Agent as aforesaid, the Borrower shall be
deemed to have elected to prepay the Revolving Credit
Loans in accordance with clause (1) of the first
sentence of Section 2.11(a).
(b)On the date of any reduction of the Total
Commitment pursuant to Section 2.9, the Borrower shall
pay or prepay Revolving Credit Loans in an amount equal
to the Borrowing Base Deficiency, if any, created by
such reduction.
(c) With respect to each payment of principal
required to be made pursuant to this Section 2.11, the
Borrower may designate, by written notice to the Agent
on or before the date of such payment, the Types of
Revolving Credit Loans which are to be paid and, in the
case of Eurodollar Loans, the specific Eurodollar
Borrowing(s) pursuant to which made and the Eurodollar
Interest Periods applicable thereto, provided that (i)
payments of Eurodollar Loans may only be made on the
last day of an Eurodollar Interest Period applicable
thereto unless all ABR Loans have been paid in full;
and (ii) if any payment of Eurodollar Loans made
pursuant to a single Eurodollar Borrowing shall reduce
the outstanding Revolving Credit Loans made pursuant to
such Eurodollar Borrowing to an amount less than
$1,000,000, such Eurodollar Borrowing shall immediately
be converted into ABR Loans. In the absence of a
designation by the Borrower as described in the
preceding sentence, the Agent shall apply the amount of
such payment first to the payment of all outstanding
ABR Loans and second to the payment of the outstanding
Eurodollar Loans.
(d)The unpaid principal amount of all Revolving
Credit Loans shall be due and payable in full on the
Maturity Date.
SECTION 2.12. Alternate Rate of Interest. In the
event, and on each occasion, that on the day three (3)
Business Days prior to the commencement of any
Eurodollar Interest Period for a Eurodollar Borrowing,
the Agent shall have reasonably determined (which
determination shall be final and binding upon the
Borrower) that (i) Dollar deposits in the principal
amounts of the relevant Eurodollar Loans comprising
such Eurodollar Borrowing are not generally available
in the interbank eurodollar market, or (ii) by reason
of any changes arising after the date of this Credit
Agreement affecting the interbank eurodollar market,
adequate and fair means do not exist for ascertaining
such Eurodollar Rate on the basis provided for in the
definition of the Eurodollar Rate, or (iii) by reason
of any other circumstance affecting a Bank or the
interbank eurodollar market or the position of such
Bank in such market, the Eurodollar Rate will not
adequately and fairly reflect the cost to any Bank of
making or maintaining its Eurodollar Loan during such
Eurodollar Interest Period and such unreflected cost is
not paid by the Borrower pursuant to Section 2.13(a)the
Agent shall, as soon as practicable thereafter, give
written notice of such determination to the Borrower
and the Banks. In the event of any such determination,
any request by the Borrower for a Eurodollar Borrowing
pursuant to Sections 2.2 or 2.4 shall, until the
circumstances giving rise to such notice no longer
exist, be deemed to be a request for a Borrowing
comprised of ABR Loans.
SECTION 2.13. Change in Circumstances.
(a) Notwithstanding any other provision herein
but subject to Section 2.19, if after the Effective
Date the introduction of any applicable law or
regulation or any change in applicable law or
regulation or in the interpretation or administration
thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance
by the Banks with any applicable guideline or request
from any central bank or Governmental Authority
(whether or not having the force of law) (i) shall
change the basis of taxation of payments to any Bank of
the principal of or interest on any Revolving Credit
Loan made by such Bank or of any other fees or amounts
payable hereunder (other than changes in the rate of
tax imposed on the overall net income of, including
penalties and interest in respect thereof, or franchise
taxes based on the net income of, such Bank or its
Lending Office), (ii) shall impose, modify or deem
applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the
account of, or credit extended by, any Bank or (iii)
shall impose on any Bank or the interbank eurodollar
market any other condition affecting this Credit
Agreement or any Eurodollar Loan made by such Bank, and
the result of any of the foregoing shall be to increase
the cost to such Bank of making or maintaining any
Eurodollar Loan or to reduce the amount of any sum
received or receivable by such Bank hereunder (whether
of principal, interest or otherwise) in respect thereof
by an amount deemed in good faith by such Bank to be
material (provided that the foregoing shall not apply
to increases resulting from general increases in
interest rates or general increases in such Bank's
administrative expenses or overhead), then the Borrower
shall pay to such Bank such additional amount or
amounts as will compensate such Bank for such
additional costs incurred or reductions suffered in
accordance with paragraph (c) below. Notwithstanding
the foregoing, in no event shall any Bank be permitted
to receive any compensation hereunder constituting
interest in excess of the Highest Lawful Rate.
(b) If any Bank shall have determined that the
applicability of any law, rule, regulation or guideline
adopted pursuant to or arising out of any changes after
the date hereof to the July 1988 report of the Basle
Committee on Banking Regulations and Supervisory
Practices entitled "International Convergence of
Capital Measurement and Capital Standards" or the
adoption or effectiveness after the date hereof of any
law, rule, regulation or guideline regarding capital
adequacy, or any change in any of the foregoing, or any
change in the interpretation or administration in any
of the foregoing by any Governmental Authority, central
bank or comparable agency charged with the
interpretation or administration thereof, or compliance
by such Bank (or its Lending Office) or such Bank's
holding company with any request or directive regarding
capital adequacy (whether or not having the force of
law) of any such Governmental Authority, central bank
or comparable agency, has or would have the effect of
reducing the rate of return on such Bank's capital or
on the capital of such Bank's holding company, as a
consequence of its obligations under this Credit
Agreement to a level below that which such Bank or such
Bank's holding company could have achieved but for such
adoption, change or compliance (taking into
consideration such Bank's policies and the policies of
such Bank's holding company with respect to capital
adequacy) by an amount deemed in good faith by such
Bank to be material, then such Bank shall promptly
notify the Borrower in writing of the occurrence of any
such event, such notice to state in reasonable detail
the reasons therefor and the additional amount required
to compensate such Bank for the reduction in its rate
of return and the Borrower and such Bank or (as the
case may be) the Agent shall thereafter attempt to
negotiate in good faith, within thirty (30) days of the
day on which the Borrower receives such notice, an
adjustment payable hereunder that will adequately
compensate such Bank or the Agent in light of these
circumstances. If the Borrower and such Bank or the
Agent are unable to agree to such adjustment within
thirty (30) days of the date on which the Borrower
receives such notice, then the Borrower shall pay,
subject to Section 2.19, to such Bank or the Agent, as
the case may be, an amount that will, in such Bank's or
the Agent's reasonable determination, provide adequate
compensation to such Bank or such Bank's holding
company (or the Agent or the Agent's holding company,
as the case may be) for any such reduction in
accordance with paragraph (c) below. Notwithstanding
the foregoing, in no event shall any Bank be permitted
to receive any compensation hereunder constituting
interest in excess of the Highest Lawful Rate.
(c) Any Bank requesting compensation pursuant to
Section 2.13(a) or (b) hereof shall deliver to the
Borrower a certificate of such Bank setting forth such
amount or amounts as shall be necessary to compensate
such Bank or its holding company as specified in
paragraphs (a) or (b) above, as the case may be, such
certificates to state, in reasonable detail, the
reasons therefor, and such certificate shall be, in the
absence of manifest error, prima facie evidence that
such amount(s) are due and owing. In preparing such
certificate, such Bank may employ such assumptions and
allocations of costs and expenses as it shall in good
faith deem reasonable and may be determined by any
reasonable averaging and attribution method. The
Borrower shall pay to such Bank the amount shown as due
on any such certificate within thirty (30) Business
Days after the Borrower's receipt of the same. Any
decision by a Bank not to require payment of any
interest, cost or other amount payable under this
Section 2.13 or to calculate any amount payable by a
particular method, on one occasion, shall in no way
limit or be deemed a waiver of such Bank's right to
require full payment of any interest, cost or other
amount payable hereunder, or to calculate any amount
payable by another method, on any other or subsequent
occasion.
SECTION 2.14. Change in Legality.
(a) Notwithstanding any other provision herein
contained to the contrary, if (x) any change in any law
or regulation or in the interpretation thereof by any
Governmental Authority charged with the administration
or interpretation thereof shall make it unlawful for
any Bank or its Lending Office to make or maintain its
Commitment Percentage of any Eurodollar Borrowing or to
give effect to its obligations as contemplated hereby
with respect to its Commitment Percentage of any
Eurodollar Borrowing or (y) at any time the Majority
Banks reasonably determine the making or continuance of
any Bank's Revolving Credit Loans comprising a portion
of any Eurodollar Borrowing has become impracticable as
a result of a contingency occurring after the date
hereof which adversely affects the interbank eurodollar
market or the position of such Bank in such market, as
the case may be, then, and in any such event, such Bank
shall, promptly after making such determination, give
written or telecopy notice (or by telephone promptly
confirmed in writing) to the Borrower and the Agent of
such determination (which notice the Agent shall
promptly transmit to each of the other Banks);
provided, however, that before giving any such notice,
such Bank shall use reasonable good faith efforts to
designate a different Lending Office to make or
maintain its Eurodollar Loans if such designation will
avoid the need to suspend such Bank's obligations to
make or maintain Eurodollar Loans and will not be
otherwise disadvantageous to such Bank. Thereafter
each such affected Bank may (i) declare that such
affected Bank will no longer make Eurodollar Loans
(subject to paragraph (b) below) whereupon any request
by the Borrower for a Eurodollar Borrowing shall, as to
such Bank only, be deemed a request for an ABR Loan;
and (ii) require that all outstanding Eurodollar Loans
made by such affected Bank(s) be converted into ABR
Loans at the end of the applicable Eurodollar Interest
Period or such earlier time as may be required by
applicable Requirements of Law, in each case by giving
the Agent written or telecopy notice (or by telephone
promptly confirmed in writing) thereof (which notice,
in the case of subclause (ii) above shall specify which
affected Eurodollar Loans are to be converted);
provided, however, that all Banks whose Eurodollar
Loans are affected by the circumstances described above
shall be treated in the same manner.
(b) In the event any Bank shall exercise its
rights under (a) above, all payments of principal which
would otherwise have been applied to repay the
Eurodollar Loans that would have been made, converted
or continued by such Bank or the converted Eurodollar
Loans of such Bank shall instead be applied to repay
the ABR Loans made by the Bank in lieu of, or resulting
from the conversion of, such affected Eurodollar Loans.
SECTION 2.15. Funding Losses. Without
duplication of other provisions contained herein, the
Borrower shall indemnify each Bank against any loss or
reasonable expense which such Bank may sustain or incur
as a consequence of (i) any failure by the Borrower to
fulfill on the Borrowing Date for any Borrowing
hereunder the applicable conditions set forth in
Article IV, (ii) any failure by the Borrower to borrow
hereunder after a Borrowing Request pursuant to this
Article II has been given, (iii) any failure by the
Borrower to convert or continue a Borrowing hereunder
after a Notice of Conversion or Continuation pursuant
to this Article II has been given, (iv) any payment,
prepayment, continuance or conversion of a Eurodollar
Borrowing required or permitted by any other provision
of this Credit Agreement including, without limitation,
payments made due to the acceleration of the maturity
of the Notes pursuant to Section 8.1, or otherwise made
on a date other than the last day of the applicable
Eurodollar Interest Period, (v) any default in the
payment or prepayment of the principal amount of any
Eurodollar Borrowing or any part thereof or interest
accrued thereon, as and when due and payable (at the
due date thereof, by notice of prepayment or otherwise)
including, but not limited to, any loss or reasonable
expense sustained or incurred or to be sustained or
incurred in liquidating or employing deposits from
third parties acquired to effect or maintain such
Bank's Commitment Percentage of any Eurodollar
Borrowing or any part thereof as a Eurodollar
Borrowing. Such loss or reasonable expense shall
include, without limitation, an amount equal to the
excess, if any, as reasonably determined by such Bank
of (i) its cost of obtaining the funds for its
Commitment Percentage of the Eurodollar Borrowing being
paid, prepaid or converted or not borrowed (based on
the Eurodollar Rate applicable thereto) for the period
from the date of such payment, prepayment, continuance
or conversion or failure to borrow to the last day of
the Eurodollar Interest Period for such Eurodollar Loan
(or, in the case of a failure to borrow, the Eurodollar
Interest Period for the Eurodollar Loan which would
have commenced on the date of such failure to borrow)
over (ii) the amount of interest (as reasonably
determined by such Bank) that would be realized by such
Bank in reemploying the funds so paid, prepaid,
continued or converted or not borrowed for such period
or Eurodollar Interest Period, as the case may be,
provided that such Bank will use its reasonable efforts
to reemploy funds in investments of similar quality. A
certificate of such Bank signed by an officer setting
forth in reasonable detail any amount or amounts which
such Bank is entitled to receive pursuant to this
Section 2.15 shall be delivered to the Borrower. The
Borrower shall pay to such Bank the amount shown as due
on any certificate within thirty (30) Business Days
after its receipt of the same. Notwithstanding the
foregoing, in no event shall any Bank be permitted to
receive any compensation hereunder constituting
interest in excess of the Highest Lawful Rate. Without
prejudice to the survival of any other obligations of
the Borrower hereunder, the obligations of the Borrower
under this Section 2.15 shall survive the date of
termination of this Credit Agreement and the payment in
full of the Obligations.
SECTION 2.16. Method of Payments Pro Rata
Treatment.
(a) the Borrower shall make each payment
hereunder and under the Notes delivered hereunder not
later than 1:00 p.m., Houston, Texas time, on the day
when due in lawful money of the United States (in
freely transferable Dollars) to the Agent for the
account of the Banks entitled thereto at the Agent's
address referred to in Section 10.2 in immediately
available funds and any funds received by the Agent
after such time shall, for all purposes hereof
(including the following sentence), be deemed to have
been paid on the next succeeding Business Day. Except
as otherwise specifically provided herein, the Agent
shall thereafter cause to be distributed on the date of
receipt thereof to each Bank in like funds its
Commitment Percentage (or, if the Revolving Credit Loan
of such Bank with respect to which such payment is
being made is not of the same Type as the Revolving
Credit Loans of the other Banks with respect to which
such payment is being made, such Bank's appropriate
share) of the payments so received for the account of
such Bank's Lending Office for the Revolving Credit
Loan in respect of which such payment is made.
(b) Except as otherwise provided herein, (i) each
Borrowing comprised of Revolving Credit Loans hereunder
shall be obtained from the Banks, each payment of fees
shall be paid for the account of the Banks and each
partial reduction of the Total Commitment under Section
2.9 shall be applied to the Commitments of the Banks,
in each case simultaneously and pro rata in accordance
with each Bank's Commitment Percentage, (ii) each
conversion of a Borrowing comprised of Revolving Credit
Loans of a particular type shall be made pro rata among
the Banks according to their respective Commitment
Percentage of such Borrowing and (iii) each payment and
prepayment of principal of or interest on any Revolving
Credit Loans will be made to the Agent for the account
of each of the Banks simultaneously and pro rata in
accordance with their respective Commitment Percentage
of unpaid principal amounts of such Revolving Credit
Loans made by the Banks.
(c) Whenever any payment hereunder or under the
Notes (including principal of or interest on any
Revolving Credit Loan or any fees or other amounts),
shall be stated to be due on a day other than a
Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time
shall in such case be included in the computation of
payment of interest, fee or other amount, as the case
may be; provided, however, if such extension would
cause payment of interest on or principal of a
Eurodollar Loan to be made in the next following
calendar month, such payment shall be made on the next
preceding Business Day.
SECTION 2.17. Taxes.
(a) All payments of principal, interest,
expenses, reimbursements, compensation, commitment,
arrangement or administration fees and any other amount
from time to time due hereunder, under the Notes or any
other Loan Document made by the Borrower shall be made
free and clear of and without deduction for any present
or future tax, levy, impost or any other charge, if
any, of any nature whatsoever now or hereafter imposed
by any Governmental Authority, excluding, however, in
the case of the Agent and each Bank, any such taxes,
levies, costs or charges imposed on or measured by the
gross receipts, capital or overall net income of the
Agent or such Bank or such Bank's Lending Office by any
jurisdiction in which the Agent or such Bank or such
Bank's Lending Office is located (all such non-excluded
taxes, levies, costs, imposts, deductions, charges or
withholdings being herein called "Withholding Taxes").
If any Withholding Taxes are required to be withheld
from any amounts payable to the Agent or any Bank
hereunder or under the Notes, and if such withholding
does not result from the breach by such Bank of its
agreement set forth in subsection (b) below or would
not be required if such Bank's representation and
warranty set forth in subsection (c) below were true,
then, to the extent that any such Withholding Taxes are
a liability of, or credited to, the account of the
Borrower, the Borrower shall pay to the Agent or such
Bank, on the date of each such payment, such additional
amounts as may be necessary in order that the net
amounts received by the Bank after such deduction or
withholding shall equal the amounts which would have
been received if such deduction or withholding were not
required; provided, however, that all amounts payable
under this Section 2.17 which constitute interest under
applicable law shall not exceed an amount which would
result in the payment of interest at a rate in excess
of the Highest Lawful Rate. Whenever any Withholding
Taxes are withheld by the Borrower as aforesaid, as
promptly as possible thereafter, the Borrower shall
send to the Agent for its own account or for the
account of such Bank, as the case may be, a certified
copy of an original official receipt received by the
Borrower showing payment thereof. If the Borrower
fails to pay any Withholding Taxes so withheld by it
when due to the appropriate taxing authority or fails
to remit to the Agent the required receipts or other
required documentary evidence, the Borrower shall
indemnify the Agent and the Banks for any incremental
taxes, interest or penalties that may become payable by
the Agent or any Bank as a result of any such failure.
The agreements in this Section 2.17 shall survive the
termination of this Credit Agreement and the payment of
the Notes and all other Obligations.
(b) Each Bank that is not incorporated under the
laws of the United States of America or a state thereof
(including each Eligible Assignee that becomes a party
to this Credit Agreement pursuant to Section 10.9) that
is entitled to receive payments under this Credit
Agreement and the Notes without deduction or
withholding of any United States federal income taxes
or is entitled to an exemption from backup withholding
tax agrees that, prior to the first date on which any
payment is due to it hereunder, it will deliver to the
Borrower and the Agent, as the case may be, (i) two (2)
duly completed copies of United States IRS Forms 1001
or 4224 or successor applicable form, as the case may
be, certifying in each case that such Bank is entitled
to receive payments under this Credit Agreement and the
Notes payable to it, without deduction or withholding
of any United States federal income taxes, and (ii) an
IRS Forms W-8 or W-9 or successor applicable form, as
the case may be, to establish an exemption from United
States backup withholding tax. Each Bank which
delivers to the Borrower and the Agent IRS Forms and/or
applicable certification pursuant to the preceding
sentence further undertakes to deliver to the Borrower
and the Agent two (2) additional duly completed copies
of the said IRS Forms or applicable certification, or
successor applicable forms, or other manner of
certification, as the case may be, on or before the
date that any such form expires or becomes obsolete or
after the occurrence of any event requiring a change in
the most recent form previously delivered by it to the
Borrower, and such extensions or renewals thereof as
may reasonably be requested by the Borrower,
establishing that such Bank is entitled to receive
payments under this Credit Agreement without deduction
or withholding of any United States federal income
taxes, unless in any such case a Requirement of Law
(including, without limitation, any change in any
Requirement of Law) has occurred prior to the date on
which any such delivery would otherwise be required
which renders all such forms inapplicable or which
would prevent such Bank from duly completing and
delivering any such form with respect to it and such
Bank advises the Borrower that it is not capable of
receiving payments without any deduction or withholding
of United States federal income tax, and in the case of
a Forms W-8 or W-9, establishing an exemption from
United States backup withholding tax.
(c) Each Bank (including each Eligible Assignee
that becomes a party to this Credit Agreement pursuant
to Section 10.9) represents and warrants to the
Borrower that each Lending Office of such Bank
hereunder will be entitled to receive payments of
principal of, and interest on, the Revolving Credit
Loans made by such Bank from such Lending Office
without withholding or deduction for or on account of
any United States federal income taxes.
SECTION 2.18. Sharing of Payments and Setoffs.
Each Bank agrees that if it shall, through the exercise
of a right of banker's lien, setoff or counterclaim
against the Borrower (pursuant to Section 8.3 or
otherwise), including, but not limited to, a secured
claim under Section 506 of Title 11 of the United
States Code or other security or interest arising from,
or in lieu of, such secured claim, received by such
Bank under any applicable bankruptcy, insolvency or
other similar law or otherwise, or by similar means,
obtain payment (voluntary or involuntary) in respect of
any Revolving Credit Loan or Revolving Credit Loans
(other than pursuant to Sections 2.13, 2.15 or 2.17) as
a result of which the unpaid principal portion of its
Revolving Credit Loans shall be proportionately less
than the unpaid principal portion of the Revolving
Credit Loans of any other Bank, it shall simultaneously
purchase from such other Banks at face value a
participation in the Revolving Credit Loans of such
other Banks, so that the aggregate unpaid principal
amount of Revolving Credit Loans and participations in
Revolving Credit Loans held by each Bank shall be in
the same proportion to the aggregate unpaid principal
amount of all Revolving Credit Loans then outstanding
as the principal amount of its Revolving Credit Loans
prior to such exercise of banker's lien, setoff,
counterclaim or other event was to the principal amount
of all Revolving Credit Loans outstanding prior to such
exercise of banker's lien, setoff, counterclaim or
other event; provided, however, that if any such
purchase or purchases or adjustments shall be made
pursuant to this Section 2.18 and the payment giving
rise thereto shall thereafter be recovered, such
purchase or purchases or adjustments shall be rescinded
to the extent of such recovery and the purchase price
or prices or adjustment restored without interest. The
Borrower expressly consents to the foregoing
arrangements and agrees that any Bank holding a
participation in a Note deemed to have been so
purchased may exercise any and all rights of banker's
lien, setoff or counterclaim with respect to any and
all moneys owing by the Borrower to such Bank as fully
as if such Bank had made a Revolving Credit Loan
directly to such the Borrower in the amount of such
participation.
SECTION 2.19. Limitation on Reimbursement;
Mitigation.
(a) Notwithstanding the provisions of Section
2.13 if any Bank fails to give notice to the Borrower
of any event that would obligate the Borrower to pay
any amount owing pursuant to Section 2.13 within 180
days after such Bank obtains knowledge of such event,
and subsequently gives notice to the Borrower of such
event, the Borrower shall pay only such amounts for
costs incurred for the one hundred eighty-day period
immediately prior to such notice.
(b) Any Bank claiming any additional amounts
payable pursuant to Sections 2.13 or 2.17 or any Bank
subject to Sections 2.12 or 2.14 shall use reasonable
efforts (consistent with its internal policy and legal
and regulatory restrictions) to change the jurisdiction
of its lending office for the Revolving Credit Loans,
if the making of such a change would avoid the need
for, or reduce the amount of, any such additional
amounts which may thereafter accrue under Sections 2.13
or 2.17 or would avoid the unavailability of Eurodollar
Loans under Sections 2.12 or 2.14 and would not, in any
such case, in the judgment of such Bank, be otherwise
disadvantageous.
SECTION 2.20. Use of Proceeds. (a) The proceeds
of the Revolving Credit Loans and Letters of Credit may
be used (i) to provide working capital to the Borrower
and its Subsidiaries, (ii) to finance capital
expenditures and acquisitions (other than acquisitions
of Margin Stock) of the Borrower and its Subsidiaries
and (iii) to provide for letters of credit for the
account of the Borrower and its Subsidiaries. The
proceeds of all Swing Loans shall be used solely for
cash management purposes of the Borrower.
(b)No portion of the proceeds of any Revolving
Credit Loan made under, or any Letter of Credit issued
pursuant to, this Credit Agreement shall be used by the
Borrower to purchase or carry Margin Stock, or in any
manner that might cause the borrowing or the
application of such proceeds to violate Regulation U,
Regulation T, or Regulation X or any other regulation
of the Board or to violate the Securities Exchange Act
of 1934, in each case as in effect on the date or dates
of such borrowing and such use of proceeds.
(c)No portion of the proceeds of any Revolving
Credit Loan under this Credit Agreement shall be used
by the Borrower, directly or indirectly, for a Hostile
Acquisition.
SECTION 2.21. Mandatory Termination of Total
Commitment; Extension of Maturity Date. (a) The Total
Commitment shall terminate on the Maturity Date, and
any Revolving Credit Loans then outstanding (together
with accrued and unpaid interest thereon) shall be due
and payable on such date.
(b) At any time after March 1 but on or before
May 1 of each calendar year, commencing with the
calendar year 2000, the Borrower may request that the
Banks extend the Maturity Date for successive periods
of one year. The Banks in their sole discretion may
agree to extend or decline to extend the Maturity Date;
however, if the Banks have not responded to such
request in writing by June 1 of the year of the
Borrower's request such request shall be deemed to have
been denied. In the event the Banks agree to such
request, the Borrower, the Agent and the Banks shall
execute a written amendment and extension agreement in
form reasonably acceptable to the Agent and the Banks
evidencing such extension and the agreed upon terms and
conditions of such extension together with such other
documents as the Agent and the Banks shall reasonably
request.
SECTION 2.22. Replacement of Banks. If any Bank
(an "Affected Bank") shall have (i) failed to fund any
Revolving Credit Loan that such Bank is obligated to
fund hereunder and such failure has not been cured,
(ii) requested compensation from the Borrower under
Sections 2.13 or 2.17 to recover costs or taxes
incurred by such Bank which are not being incurred
generally by the other Banks, (iii) given notice
pursuant to Sections 2.12 or 2.14 that such Bank has
suspended the Borrower's right to elect Eurodollar
Loans from such Bank for reasons not generally
applicable to the other Banks or (iv) failed to approve
the recommended Total Borrowing Base and Available
Borrowing Base of the Majority Banks, then, in any such
case and in addition to any other rights or remedies
available to the Borrower, the Borrower may give
written notice to such Affected Bank of the occurrence
of an event set forth in subsections (i), (ii), (iii)
or (iv) of this Section 2.22, and during the sixty (60)
day period following such notice, the Borrower may make
written demand on such Affected Bank (with a copy to
Agent and each other Bank), for such Affected Bank to
assign to one or more financial institutions (a
"Replacement Bank"), all of such Affected Bank's rights
and obligations under this Agreement and the other Loan
Documents (including such Affected Bank's Commitment
and all Revolving Credit Loans owing to such Affected
Bank), provided, such assignment shall be consummated
in accordance with and shall be subject to the terms of
Section 10.9). Pursuant to Section 10.9, upon any such
assignment, such Affected Bank shall cease to be a
party hereto, provided, however, such Affected Bank
shall continue to be entitled to the benefits of
Sections 2.13, 2.15, 2.17 and 8.4 accruing with respect
to such Affected Bank prior to such assignment, as well
as any fees accrued for its account and not yet paid.
If an Eligible Assignee cannot be obtained within the
sixty (60) day period following said notice to the
Affected Bank, to assume the Commitment of such
Affected Bank, and provided that no Default or Event of
Default shall have occurred and be continuing, then the
Borrower may prepay immediately all Revolving Credit
Loans of such Affected Bank and terminate such Affected
Bank's entire Commitment hereunder provided, however,
that in the event the Borrower makes any prepayment
pursuant to this sentence, then on the date of such
prepayment, the Total Commitment of the Banks shall be
permanently reduced by the amount of such Affected
Bank's Commitments and the Commitment Percentage of
each other Bank shall be redetermined based upon the
amount each such other Bank's Commitment is of the
Total Commitment as so reduced.
ARTICLE III
BORROWING BASE
SECTION 3.1. Borrowing Base Asset Reports. As
soon as available and in any event by March 31 and
October 1 of each year commencing October, 1999, the
Borrower shall deliver to each of the Banks the
Borrowing Base Asset Reports prepared as of the
immediately preceding December 31 and June 30
respectively.
SECTION 3.2. Determination of Total Borrowing
Base. Based in part on the Borrowing Base Asset
Reports delivered pursuant to Section 3.1 the Banks
shall determine the Total Borrowing Base and the
Available Borrowing Base to be in effect on the next
succeeding Determination Date. Such determination
shall be made in good faith by the Banks in their sole
discretion in accordance with their respective
customary practices and standards for loans of this
nature, which may vary from Bank to Bank. In
connection with the determination of the Total
Borrowing Base and upon the receipt of each Borrowing
Base Asset Report, the Agent shall submit to the Banks
in writing on or before May 1 or November 1, as the
case may be, the Agent's recommendation as to the Total
Borrowing Base and the Available Borrowing Base which
the Agent has determined should be available to the
Borrower pursuant to the Total Commitment as of the
next succeeding June 1 or December 1, as the case may
be (each such date being a "Determination Date"). Each
Bank shall submit to the Agent in writing on or before
May 15 or November 15, as the case may be, such Bank's
approval or disapproval of the Agent's recommended
Total Borrowing Base and any such disapproval shall
state the maximum Total Borrowing Base acceptable to
such Bank. If the Agent has not received such notice
from a Bank on or before the close of business on May
15 or November 15, as the case may be, such Bank shall
be deemed to have approved the Agent's recommended
Total Borrowing Base. In the event the Majority Banks
approve the Agent's recommended Total Borrowing Base,
the Total Borrowing Base approved by the Majority Banks
shall become effective on the next succeeding
Determination Date and shall remain in effect until the
next Determination. In the event the Majority Banks do
not approve the Agent's recommended Total Borrowing
Base, the Banks shall consult with each other in order
to agree on the Total Borrowing Base to be effective on
such Determination Date. In the event the Majority
Banks are unable to agree on the Total Borrowing Base
to be effective on the next succeeding Determination
Date prior to May 25 or November 25, as the case may
be, the Total Borrowing Base which becomes effective on
the next Determination Date shall be the weighted
average of the Total Borrowing Bases, requested by the
Banks in the notices referred to in the fourth sentence
of this Section 3.2 and shall remain in effect until
the next Determination. The Agent shall notify the
Borrower of the Total Borrowing Base to become
effective on each Determination Date by providing the
Borrower a Borrowing Base Notice no later than 2:00
p.m., Houston, Texas time three days prior to such
Determination Date.
Without limiting the right of the Banks to
determine in good faith the Total Borrowing Base in
their sole discretion, the Borrower acknowledges and
agrees that subject to the Banks' consistent
application of their respective standards for similar
loans, the Banks (i) may make such assumptions
regarding appropriate existing and projected pricing
for Hydrocarbons and coal as they deem appropriate in
their sole discretion, (ii) may make such assumptions
regarding and/or modifying projected rates and/or
quantities of future production of (y) Hydrocarbons
from Oil and Gas Interests and (z) coal from Coal
Interests owned by the Borrower and the Subsidiary
Guarantors as they deem appropriate in their sole good
faith discretion, (iii) may consider the projected cash
requirements of the Borrower and its Subsidiaries,
including, without limitation, obligations under
Consolidated Debt, and other debt service and lease
obligations of the Borrower and its Subsidiaries,
general and administrative expenses and distributions
in respect of equity, (iv) are not required to consider
any asset other than Borrowing Base Assets, (v) will
give no consideration to any asset owned by an entity
other than the Borrower or a Subsidiary Guarantor and
(vi) may make such other assumptions, considerations
and exclusions as each Bank deems appropriate in the
exercise of its good faith sole discretion, it being
recognized that the ultimate determination to be
reached is more predicted upon the aggregate amount of
credit available hereunder which, at the time of the
determination, each Bank determines should be available
as reasonably expected to be repayable by the Borrower,
considering all then existing and projected other items
which are expected to be payable or repayable, without
undue risk of failure to timely repay. Notwithstanding
anything contained herein to the contrary, the
borrowing base value given by the Banks to the Norfolk
Common Stock (together with the borrowing base value
given by the Banks to all other Margin Stock, if any,)
shall never exceed twenty-five percent (25%) of the
Total Borrowing Base.
SECTION 3.3. The Designated Borrowing Base. The
Borrower may designate a borrowing base amount for each
Borrowing Base Period, which borrowing base amount
shall be equal to or less than the Available Borrowing
Base set forth in the most recent Borrowing Base Notice
delivered to the Borrower (the "Designated Borrowing
Base"), provided, however, that the Designated
Borrowing Base can never be less than $75,000,000
(i.e., if the Available Borrowing Base is less than
$75,000,000, then the Borrower shall not be permitted
to designate a Designated Borrowing Base). The initial
Designated Borrowing Base for the first Borrowing Base
Period is $110,000,000. The Borrower shall elect to
have a Designated Borrowing Base take effect for any
Borrowing Base Period by giving notice to the Agent
within five Business Days after its receipt of a
Borrowing Base Notice for a Borrowing Base Period;
provided that if the Borrower has elected a Designated
Borrowing Base for a Borrowing Base Period, the
Borrower may, at any time prior to the end of such
Borrowing Base Period, by giving five Business Days'
prior written notice to the Agent, elect to increase
the Designated Borrowing Base for that Borrowing Base
Period to an amount not greater than the amount of the
Available Borrowing Base originally included by the
Agent in the Borrowing Base Notice for such Borrowing
Base Period; provided further that if the Borrower so
elects to increase the Designated Borrowing Base, then
all commitment fees payable pursuant to Section 2.5
below with respect to the Borrowing Base Period in
which such increase took place shall be calculated as
if the increased Designated Borrowing Base had been in
effect for the entire Borrowing Base Period.
SECTION 3.4. Special Determination of Total
Borrowing Base. In addition to the redeterminations of
the Total Borrowing Base pursuant to Section 3.2, (i)
within five (5) days following receipt of notice (given
pursuant to Section 6.1(l)) of a planned asset sale,
transfer or disposal of Borrowing Base Assets other
than those sales permitted under Section 7.8, or (ii)
the Borrower elects not to cure defects in title at the
request of the Majority Banks pursuant to Section 6.14,
the Majority Banks may request an additional
redetermination of the Total Borrowing Base and the
Available Borrowing Base in connection with such sale
or defects in title. In the event the Majority Banks
request such a Special Determination, the Agent shall
promptly deliver notice of such request to the Borrower
and the Borrower shall, within ten (10) days of such
request, deliver to the Banks the Borrowing Base Asset
Reports prepared as of the last day of the calendar
month preceding the date of such request. Upon receipt
of such Borrowing Base Asset Reports the Banks shall
redetermine the Total Borrowing Base and the Available
Borrowing Base in accordance with the procedure set
forth in Section 3.2 which Total Borrowing Base and
Available Borrowing Base shall become effective on the
Determination Date applicable to such Special
Determination and shall remain in effect until the next
Determination.
SECTION 3.5. Initial Total Borrowing Base;
Initial Available Borrowing Base.
During the period from the Effective Date to September
1, 1999, the Total Borrowing Base shall be $110,000,000
and the Available Borrowing Base shall be $110,000,000.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions Precedent to the
Revolving Credit Loans. The obligation of each Bank to
make its initial Revolving Credit Loan or for the
Issuing Bank to issue its initial Letter of Credit is
subject to the satisfaction of the following conditions
precedent:
(a)The Agent shall have received, duly authorized,
executed and delivered by each Person that is a party
thereto, in form and substance satisfactory to the
Banks, each of the following:
(i) each of the following Loan Documents
(together with all exhibits thereto) dated on
or as of the Effective Date:
(aa) this Credit Agreement;
(bb) each of the Notes; and
(cc) the Subsidiary Guaranty;
(ii) a certificate of the Secretary or
Assistant Secretary of the Borrower, dated the
Effective Date, certifying as to (aa) the
adoption and continuing effect of resolutions
of the board of directors of the Borrower
authorizing the transactions contemplated
hereby and by the other Loan Documents; (bb)
the Articles of Incorporation of the Borrower,
(cc) the Bylaws of the Borrower and all
amendments thereto, and (dd) the incumbency of
all officers of the Borrower who will execute
or have executed any document or instrument
required to be delivered hereunder, containing
the signature of same;
(iii) a certificate of the Secretary or
Assistant Secretary of each Subsidiary
Guarantor, dated the Effective Date and
certifying as to (aa) the adoption and
continuing effect of resolutions of the board
of directors of such Subsidiary Guarantor
authorizing the transactions contemplated
hereby and by the other Loan Documents; (bb)
the Articles (or Certificate, as the case may
be) of Incorporation of such Subsidiary
Guarantor and all amendments thereto, (cc) the
Bylaws of the such Subsidiary Guarantor and
all amendments thereto, and (dd) the
incumbency of all officers of such Subsidiary
Guarantor who will execute or have executed
any document or instrument required to be
delivered hereunder, containing the signature
of same;
(iv) with respect to the Borrower, a
certificate of existence and good standing
from the Secretary of State of the State of
Virginia dated no more than 5 days prior to
the Effective Date;
(v) with respect to PVHC, a certificate of
existence and good standing from the Secretary
of State of the State of Delaware dated no
more than 5 days prior to the Effective Date.
(vi) with respect to PVOG, a certificate of
existence and good standing from the Secretary
of State of Virginia dated no more than 5 days
prior to the Effective Date and certificates
of authorization to do business and good
standing in the States of West Virginia,
Kentucky, Tennessee, Illinois and Indiana.
(vii) with respect to PVCC, a certificate of
existence and good standing from the Secretary
of State of Virginia dated no more than 5 days
prior to the Effective Date and certificates
of authorization to do business and good
standing in the States of West Virginia and
Kentucky;
(viii) with respect to Equities, a
certificate of existence and good standing
from the Secretary of State of Delaware dated
no more than 5 days prior to the Effective
Date;
(ix) the Opinion of the Borrower's Counsel;
(x)(aa) the Initial Borrowing Base Asset
Reports and (bb) such other information
regarding the Borrowing Base Assets as the
Agent or any Bank may reasonably request;
(xii) (aa) the Initial Financial Statements
and (bb) such other financial information,
regarding the Borrower or any of its
Subsidiaries as the Agent or any Bank may
reasonably request. All of such financial
statements and financial information shall be
satisfactory to the Banks;
(xiii) for its account and for the account of
each Bank, as applicable, all fees and
expenses due and payable hereunder on or
before the Effective Date and invoiced to the
Borrower in writing prior to the Effective
Date;
(xiv) a Federal Reserve Form U-1, as the case
may be, with respect to the Commitment of each
Bank; and
(xv) such other certificates, opinions,
documents and instruments relating to the
transactions contemplated hereby as may have
been reasonably requested by the Agent or any
Bank.
(b) (i) the representation and warranties of the
Borrower contained in Article V hereof and, in all
material respects, in each of the other Loan Documents
to which the Borrower is a party shall be true and
correct in all material respects on the Effective Date
both before and after giving effect to the making of
the initial Revolving Credit Loans; (ii) the
representations and warranties of each Subsidiary
contained in any Loan Document to which such Subsidiary
is a party are true and correct in all material
respects on the Effective Date both before and after
giving effect to the initial Revolving Credit Loans;
(iii) no Default or Event of Default shall have
occurred and be continuing on the Effective Date either
before or after giving effect to the making of the
initial Revolving Credit Loans, (iv) no material
litigation (other than Existing Litigation) is pending
or, to the best knowledge of the Borrower after due
inquiry, threatened against the Borrower or any
Subsidiary of the Borrower and no material adverse
development has occurred in any Existing Litigation,
and (v) no events or state of affairs which could
reasonably be expected to result in a Material Adverse
Effect shall have occurred since December 31, 1998;
(c) A search, made no more than 30 days prior to
the Effective Date, of the Uniform Commercial Code
filing offices in each relevant jurisdiction shall have
revealed no filings or recordings with respect to the
Borrowing Base Assets (except Permitted Liens) in favor
of any Person. The Agent shall have received a copy of
the search reports received as a result of such search
and fully executed releases effectuating the
termination of any and all Liens (other than Permitted
Liens) pertaining to any of the Borrowing Base Assets;
(d) Such other conditions precedent which the
Agent may reasonably have requested or required.
SECTION 4.2. Additional Conditions Precedent. No
Bank has any obligation to make any Revolving Credit
Loan (including its initial Revolving Credit Loan) and
the Issuing Bank has no obligation to issue any Letter
of Credit (including the initial Letter of Credit)
unless the following conditions precedent have been
satisfied:
(a) The Agent shall have received, in form and
substance satisfactory to the Agent, a certificate of
the Borrower and of each Subsidiary signed by a
Responsible Officer of the Borrower and of each
Subsidiary, dated as of the Borrowing Date, certifying
that (aa) the representations and warranties of the
Borrower and each Subsidiary contained in Article V
hereof and, in all material respects, in each of the
other Loan Documents to which the Borrower or such
Subsidiary is a party, are true and correct in all
material respects (both before and after giving effect
to the making of such Revolving Credit Loan or the
issuing of such Letter of Credit) on and as of the
Borrowing Date as if made on and as of such date (or,
if stated to have been made solely as of an earlier
date, were true and correct as of such earlier date);
(bb) no event or state of affairs which could
reasonably be expected to result in a Material Adverse
Effect has occurred since the fiscal year end of the
Fiscal Year for which audited financial statements
conforming to the requirements of Section 6.1(b) have
been delivered to the Banks pursuant to Section 6.1(b);
(cc) no Default or Event of Default then exists either
before or after giving effect to the making of such
Revolving Credit Loan or the issuing of such Letter of
Credit; and (dd) no new material litigation (other than
Existing Litigation) is pending or, to the best
knowledge of the Borrower after due inquiry, threatened
against the Borrower or any Subsidiary and no material
adverse development has occurred in any Existing
Litigation.
(b) the Borrower shall have complied with the
provisions of Section 2.2 and/or 2.3, as applicable;
(c) The Maturity Date shall not have occurred;
(d) The sum of (i) the amount of the requested
Borrowing and/or the face amount of the requested
Letter of Credit plus (ii) the Utilized Credit shall
not exceed the Available Commitment then in effect.
(e) The making of such Revolving Credit Loans or
the issuance of such Letters of Credit shall not result
in the Borrower's, any of its Subsidiary's or any
Bank's being in noncompliance with or in violation of
Regulation U, and shall not be prohibited by any
Requirements of Law.
SECTION 4.3. General. All of the agreements,
instruments, reports, opinions and other documents and
papers referred to in this Article IV (except for the
Notes and the Letters of Credit), unless otherwise
expressly specified, shall be delivered to the Agent in
sufficient counterparts for each of the Banks. As soon
as practicable after receipt of such documents the
Agent shall deliver such documents to each of the
Banks.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and each Bank to
enter into this Credit Agreement and to make the
Revolving Credit Loans, the Borrower represents and
warrants as to itself and each of its Subsidiaries, to
the Agent and each Bank that the following statements
are true, correct and complete.
SECTION 5.1. Organization; Corporate Powers. Each
of the Borrower and each of its Subsidiaries (a) is a
corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation or organization, (b) is duly qualified to
do business as a foreign corporation and is in good
standing in each other jurisdiction in which such
qualification and good standing are necessary in order
for it to conduct its business and own its properties
as conducted and owned (except only for jurisdictions
in which the failure to be so qualified or in good
standing would not, individually or in the aggregate,
result in (i) the loss of any privileges in such
jurisdiction which are material to the Borrower or such
Subsidiary or their respective businesses, or (ii) a
material liability to the Borrower or such Subsidiary,
and (c) has all requisite power and authority to own
its property and assets and to carry on its business as
now conducted and as proposed to be conducted.
SECTION 5.2. Authority. Each of the Borrower and
each of its Subsidiaries has the corporate power and
authority and legal right to execute, deliver and
perform each of the Loan Documents executed by, or to
be executed by, the Borrower or such Subsidiary and
each other agreement or instrument contemplated thereby
to which it is or will be a party and, with respect to
the Borrower, to borrow hereunder. The execution,
delivery and performance of each of the Loan Documents
to which the Borrower or any of its Subsidiaries is or
will be a party and the consummation of the
transactions contemplated thereby, and, with respect to
the Borrower, the borrowing of funds under this Credit
Agreement, have been duly approved by the board of
directors of each such Person and no other corporate
proceedings on the part of such Person are necessary to
consummate such transactions. This Credit Agreement
constitutes, and each of the other Loan Documents to
which the Borrower or any of its Subsidiaries is a
party when executed and delivered by such Person, will
constitute the legal, valid and binding obligation of
such Person, enforceable against such Person in
accordance with its terms, except as enforceability
thereof may be limited by bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or
other similar laws relating to creditors' rights
generally and by general principles of equity which may
limit the right to obtain equitable remedies
(regardless of whether such enforceability is
considered in a proceeding in equity or at law).
SECTION 5.3. Use of Proceeds. The Borrower's
uses of the proceeds of the Revolving Credit Loans
shall be as set forth in Section 2.20.
SECTION 5.4. No Conflict. The execution,
delivery and performance by the Borrower and each
Subsidiary of the Borrower of the Loan Documents to
which the Borrower or such Subsidiary of the Borrower
is a party, the compliance by the Borrower or such
Subsidiary of the Borrower with the terms and
provisions thereof and the consummation of each of the
transactions contemplated thereby, do not and will not
(i) require any consent or approval of the stockholders
of the Borrower or any of its Subsidiaries, or any
authorization, consent or approval by any Governmental
Authority or (ii) by the lapse of time, the giving of
notice or otherwise, (a) constitute a violation of any
Requirement of Law binding on the Borrower or such
Subsidiary of the Borrower or a breach of any provision
contained in the articles or certificate of
incorporation or bylaws of the Borrower or such
Subsidiary of the Borrower, (b) constitute a breach of
any material provision contained in any Material
Contract to which the Borrower or such Subsidiary of
the Borrower is a party or by which the Borrower or
such Subsidiary of the Borrower is bound, or (c) result
in or require the creation or imposition of any Lien
whatsoever upon any of the properties or assets of the
Borrower or such Subsidiary of the Borrower (other than
Permitted Liens).
SECTION 5.5. Gas Balancing Agreements and Advance
Payment Contracts. As of the Effective Date, (a) the
net gas imbalance to the Borrower and PVOG (considered
in the aggregate) under all Gas Balancing Agreements to
which the Borrower or PVOG is a party or by which any
Oil and Gas Interests owned by the Borrower or any of
its Subsidiaries is bound, is not in excess of
$500,000, and (b) the aggregate amount of all Advanced
Payments received by the Borrower or PVOG under Advance
Payment Contracts which have not been satisfied by
delivery of production does not exceed $500,000.
SECTION 5.6. Borrowing Base Assets. (a) The
Borrower and/or PVOG have good and defensible title to
all Oil and Gas Interests described in the Initial
Borrowing Base Asset Report other than Immaterial Oil
and Gas Interests, free and clear of all Liens except
Permitted Liens. With the exception of Immaterial Oil
and Gas Interests, all such Oil and Gas Interests are
valid, subsisting, and in full force and effect, and
all rentals, royalties, and other amounts due and
payable in respect thereof have been duly paid. Except
with respect to Immaterial Oil and Gas Interests, but
without regard to any consent or non-consent provisions
of any joint operating agreement covering any of the
Proved Reserves of the Borrower and PVOG, the
Borrower's (and PVOG's) share of (a) the costs for each
of the Proved Reserves described in Initial Borrowing
Base Asset Report is not greater than the decimal
fraction set forth in the Initial Borrowing Base Asset
Reports, before and after payout, as the case may be,
and described therein by the respective designations
"working interests", "WI", "gross working interest",
"GWI", or similar terms, and (b) production from,
allocated to, or attributed to each such Proved
Reserves is not less than the decimal fraction set
forth in the Initial Borrowing Base Asset Reports,
before and after payout, as the case may be, and
described therein by the designations net revenue
interest, NRI, or similar terms. Except with respect
to Immaterial Oil and Gas Interests, each well drilled
in respect of each Proved Developed Producing
Hydrocarbon Reserves described in the Initial Borrowing
Base Asset Reports (y) is capable of, and is presently,
producing Hydrocarbons in commercial quantities, and
the Borrower or PVOG is currently receiving payments
for its share of production, with no material funds in
respect of any thereof being presently held in
suspense, other than any such funds being held in
suspense pending delivery of appropriate division
orders, and (z) has been drilled, bottomed, completed,
and operated in compliance with all applicable
Requirements of Law and no such well which is currently
producing Hydrocarbons is subject to any penalty in
production by reason of such well having produced in
excess of its allowable production. For purposes of
this Section 5.6(a), "Immaterial Mineral Interests"
means Oil and Gas Interests which, in the aggregate, do
not represent more than two percent (2%) of the
discounted present value of all Oil and Gas Interests
as set forth in the Initial Reserve Report.
(b)The Borrower and/or PVCC have good and
defensible title to all material coal assets described
in that certain reserve report dated December 30, 1998
and issued to the Agent as of March 31, 1999 (the "Coal
Interests"), free and clear of all Liens except
Permitted Liens. All such Coal Interests are valid,
subsisting, and in full force and effect, and all
rentals, royalties, and other amounts due and payable
in respect thereof have been duly paid.
(c) As of the Effective Date, Equities has good
and marketable title to 3,307,200 shares of Norfolk
Common Stock (the "Norfolk Securities"), free and clear
of all Liens, options, warrants, puts, calls, or other
rights of the issuer or third persons.
SECTION 5.7. Ownership of Properties Generally.
With respect to all other properties and assets of the
Borrower and its Subsidiaries not covered by Section
5.6 above, the Borrower and each of its Subsidiaries
have good and defensible fee simple or leasehold title
to all material properties and assets purported to be
owned by them, including, without limitation, all
assets reflected in the balance sheets referred to in
Section 5.9 (a) and all assets which are used by the
Borrower and its Subsidiaries in the operation of their
respective businesses, and none of such properties or
assets is subject to any Lien other than Permitted
Liens. Neither the Borrower nor any Subsidiary of the
Borrower owns any real property or leasehold interests
in any real property located on tribal lands.
SECTION 5.8. No Defaults.
(a)Neither the Borrower nor any Subsidiary of the
Borrower is a party to any Contractual Obligation that
has resulted or is reasonably likely to result in a
Material Adverse Effect.
(b)(i) No Default or Event of Default exists and
(ii) neither the Borrower nor any Subsidiary of the
Borrower is in default with respect to any Material
Contract.
SECTION 5.9. Financial Position; No Material
Adverse Change.
(a)The Borrower has heretofore furnished to the
Agent and the Banks its Consolidated balance sheet, and
the related Consolidated statements of income, cash
flows and shareholders' equity of the Borrower and its
Subsidiaries (x) as of and for the Fiscal Year ended
December 31, 1998, audited by and accompanied by the
unqualified opinion of Arthur Andersen, independent
certified public accountants, and (y) as of and for the
Fiscal Quarter ended March 31, 1999, certified by a
Responsible Officer of the Borrower. Such financial
statements present fairly the financial condition and
results of operations of the Borrower and its
Subsidiaries as of such dates and for such periods.
Such financial statements were prepared in accordance
with GAAP applied on a consistent basis.
(b)Neither the Borrower nor any Subsidiary of the
Borrower has any material contingent liabilities,
material liabilities for taxes, unusual and material
forward or long-term commitments or material unrealized
or anticipated losses from any unfavorable commitments,
except as referred to or reflected or provided for in
the Consolidated balance sheets of the Borrower or as
otherwise disclosed to the Banks in writing.
(c)the Borrower has disclosed to the Banks in
writing any and all facts which, in the reasonable good
faith judgment of the Borrower, could reasonably be
expected to result in a Material Adverse Effect.
SECTION 5.10. Litigation; Adverse Effects.
(a) There are no actions, suits, proceedings,
governmental investigations or arbitrations, at law or
in equity, before or by any Governmental Authority,
pending or, to the best knowledge of the Borrower,
probable of assertion against the Borrower or any
Subsidiary of the Borrower or any property of the
Borrower or any Subsidiary of the Borrower, which if
adversely determined, is likely to result in a material
judgment or liability not fully covered by insurance
and/or could reasonably be expected to result in a
Material Adverse Effect.
(b)None of the business, properties, or operations
of the Borrower or any Subsidiary of the Borrower are
materially and adversely affected by any fire,
explosion, accident, strike, lockout or other labor
dispute, drought, storm, hail, earthquake, embargo, act
of God, or of the public enemy or other casualty
(whether or not covered by insurance).
SECTION 5.11. ERISA. A summary of all currently
existing Benefit Plans are listed on Schedule 5.11
hereto. The Borrower and each of its Subsidiaries is in
compliance in all material respects with the applicable
provisions of ERISA and the regulations and published
interpretations thereunder. No Reportable Event has
occurred as to which the Borrower or any Subsidiary of
the Borrower was required to file a report with the
PBGC, and the present value of all benefit liabilities
and benefit assets under each Benefit Plan (based on
those assumptions used to fund such Benefit Plan) is as
set forth in the Initial Financial Statements delivered
to the Banks. Neither the Borrower nor any Subsidiary
of the Borrower has any ERISA Affiliates (other than
the Borrower and its Subsidiaries) or Multiemployer
Plans.
SECTION 5.12. Payment of Taxes. The Borrower has
filed, and has caused each of its Subsidiaries to file,
all federal, state and local tax returns and other
reports required by Requirements of Law to have been
filed by the Borrower or such Subsidiary of the
Borrower and has paid (prior to delinquency) all taxes
and other similar charges and assessments that are due
and payable including extensions, except taxes, charges
and assessments which are being diligently contested in
good faith by appropriate proceedings and any Lien
arising thereunder constitutes a Permitted Lien. No
Responsible Officer of the Borrower or any Subsidiary
of the Borrower has knowledge of any proposed tax
assessment against the Borrower or any Subsidiary of
the Borrower that is reasonably likely to result in a
Material Adverse Effect.
SECTION 5.13. Environmental Matters. Except as
could not reasonably be expected to result in material
liability to the Borrower or any Subsidiary of the
Borrower:
(a)The Borrower and each of its Subsidiaries is in
compliance with all applicable Environmental Laws;
(b)Each of the Borrower and each of its
Subsidiaries has obtained all consents and permits
required under all applicable Environmental Laws to
operate its business as presently conducted or as
proposed to be conducted, if and at the time required
by applicable Environmental Laws, and all such consents
and permits are in full force and effect and the
Borrower and its Subsidiaries is in compliance with all
terms and conditions of such approvals;
(c) Neither the Borrower nor any Subsidiary of
the Borrower nor any of the property or operations,
either past or present, of the Borrower or any
Subsidiary of the Borrower is subject to any order from
or agreement with any Governmental Authority or private
party respecting (i) failure to comply with any
Environmental Law or any Remedial Action or (ii) any
Environmental Liabilities arising from the Release or
threatened Release of a Hazardous Substance into the
environment except those orders and agreements with
which the Borrower or such Subsidiary of the Borrower
is in compliance with;
(d)None of the operations of the Borrower or any
Subsidiary of the Borrower is subject to any judicial
or administrative proceeding alleging a violation of,
or liability under, any Environmental Law;
(e)To the best knowledge and belief of the
Borrower, none of the operations of the Borrower or any
Subsidiary of the Borrower is the subject of any
investigation by any Governmental Authority evaluating
whether any Remedial Action is needed to respond to a
Release or threatened Release of a Hazardous Substance
into the environment;
(f)Neither the Borrower nor any Subsidiary of the
Borrower has filed any notice under any Environmental
Law indicating past or present treatment, storage or
disposal of a Hazardous Substance under 40 CFR Part 261
or any state or local equivalent;
(g)Neither the Borrower nor any Subsidiary of the
Borrower has filed any notice under any applicable
Environmental Law reporting a Release of a Hazardous
Substance (other than minor or de minimis emissions)
into the environment;
(h)There is not now, nor, to the best knowledge
and belief of the Borrower has there ever been, on or
in any property of the Borrower or of any Subsidiary of
the Borrower:
(i)any generation, treatment, recycling,
storage or disposal of any Hazardous Substance
under 40 CFR Part 261 or any state or local
equivalent,
(ii) any underground storage tanks or
surface impoundments,
(iii) any friable asbestos-containing
material, or
(iv) any polychlorinated biphenyls (PCBs)
used in hydraulic oils, electrical
transformers or other equipment, except in
compliance with all applicable Environmental
Laws;
(i) Except for those commitments and agreements
entered into by the Borrower or any Subsidiary of the
Borrower in the ordinary course of business in
compliance with all material requirements of applicable
Environmental Laws, there have been no written
commitments or agreements involving the Borrower or any
Subsidiary of the Borrower from or with any
Governmental Authority or any private entity
(including, without limitation, the owner of the
property or any portion thereof) relating to the
generation, storage, treatment, presence, Release, or
threatened Release of any Hazardous Substance on or
into any of the properties of the Borrower or any
Subsidiary of the Borrower or the environment
(including off-site disposal of toxic wastes or
Hazardous Substances) or any Remedial Action with
respect thereto;
(j)Neither the Borrower nor any Subsidiary of the
Borrower has received any pending or unresolved written
notice or claim to the effect that it is or may be
liable to any Person as a result of the Release or
threatened Release of a Hazardous Substance into the
environment;
(k)Neither the Borrower nor any Subsidiary of the
Borrower has any known liability in connection with any
material Release or material threatened Release of any
Hazardous Substances into the environment; and
(l)To the best knowledge and belief of the
Borrower, no Environmental Lien has attached to any
properties of the Borrower or any Subsidiary of the
Borrower.
SECTION 5.14. Governmental Regulation. Neither
the Borrower nor any Subsidiary of the Borrower is
subject to regulation under the Interstate Commerce
Act, the Investment Company Act of 1940, the Public
Utility Holding Company Act of 1935, the Federal Power
Act or any other Requirements of Law such that its
ability to incur indebtedness is limited or its ability
to consummate the transactions contemplated by this
Credit Agreement and the other Loan Documents or any
document executed in connection therewith is impaired.
SECTION 5.15. Disclosure. All information
contained in any financial statements, Reserve Reports,
Coal Reserve Reports, Borrowing Base Asset Reports,
certificates, exhibits, schedules, operating statements
and any other written statements and written
information (excluding estimates and forecasts)
furnished by or on behalf of the Borrower or any
Subsidiary of the Borrower to the Banks and the Agent,
(taken as a whole) in connection with any transaction
contemplated hereby or by any other Loan Document on or
prior to the date this representation is made or deemed
made, was, and will be, true and correct in all
material respects and does not, and will not, contain
any material misstatement of fact or omit to state a
material fact necessary in order to make the statements
contained therein, in light of the circumstances under
which they were made, not misleading.
SECTION 5.16. Subsidiaries. As of the Effective
Date, Schedule 5.16 contains a complete and accurate
(a) list of all Subsidiaries of the Borrower, (b)
description of the issued and outstanding capital stock
of each Subsidiary of the Borrower and (c) the record
owners of such capital stock. Except as set forth on
Schedule 5.16, neither of the Borrower nor any
Subsidiary of the Borrower is a partner or joint
venturer in any partnership or joint venture or a
member of any unincorporated association.
SECTION 5.17. Solvency. Neither the Borrower nor
any Subsidiary of the Borrower (i) is "insolvent"
(within the meaning of Section 101(32) of the
Bankruptcy Code, Section 2 of the Uniform Fraudulent
Conveyance Act or Section 2 of the Uniform Fraudulent
Transfer Act) or will become insolvent as a result of
the incurrence of any obligation under any Loan
Document to which it is a party; (ii) has unreasonably
small capital (after giving effect to the transactions
contemplated in any Loan Document to which it is a
party) for the conduct of its existing and contemplated
business and (iii) is able to perform its contingent
obligations and other commitments as they mature in the
normal course of business.
SECTION 5.18. Business. The Borrower and its
Restricted Subsidiaries have not conducted and are not
conducting any business other than business relating to
the exploration, development, financing, acquisition,
ownership, operation, maintenance, storage,
transporting and marketing of the Oil and Gas
Interests, the Coal Interests and timber interests,
land management, and related activities as currently
conducted.
SECTION 5.19. Material Contracts. Schedule 5.19
lists all Material Contracts to which the Borrower or
any of its Subsidiaries is a party or by which it or
its properties is bound (including, without limitation,
all amendments, supplements, waivers and other
agreements amending, supplementing or otherwise
modifying or clarifying such agreements) but excluding
(a) the Loan Documents, (b) leases and operating
agreements related to the Borrowing Base Assets and (c)
agreements and plans relating to employee benefits.
The Borrower and each of its Subsidiaries have complied
in all material respects with all obligations required
to be performed by them under all Material Contracts,
except to the extent a failure to comply could not
reasonably be expected to result in a Material Adverse
Effect. The Borrower is not aware of any default by
any other party to any Material Contract.
SECTION 5.20. Licenses, Permits, Etc. The
Borrower and each of its Subsidiaries possess such
valid franchises, certificates of convenience and
necessity, operating rights, licenses, permits,
consents, authorizations, exemptions and orders of
Governmental Authorities, as are necessary to carry on
their respective businesses as now conducted and as
proposed to be conducted, except to the extent a
failure to obtain any such item could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 5.21. Fiscal Year. The Borrower's Fiscal
Year is January 1 through December 31.
SECTION 5.22. Year 2000. Any reprogramming
required to permit the proper functioning, in and
following the year 2000, of (a) the Borrower's and its
Subsidiaries' computer systems and (b) equipment
containing embedded microchips (including systems and
equipment supplied by others or with which Borrower's
or its Subsidiaries' systems interface) and the testing
of all such systems and equipment, as so reprogrammed,
will be completed by September 30, 1999. The cost to
the Borrower and it Subsidiaries of such reprogramming
and testing and of the reasonably foreseeable
consequences of year 2000 to the Borrower and its
Subsidiaries (including, without limitation,
reprogramming errors and the failure of others' systems
or equipment) will not result in a Default or a
Material Adverse Effect.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as this Credit Agreement shall remain
in effect or the principal of or interest on any
Revolving Credit Loan, or any Letter of Credit, or any
reimbursement obligation with respect to any Letter of
Credit, or any commitment or other fee, expense,
compensation or any other amount payable under any Loan
Document shall remain unpaid or outstanding or the
Banks shall have any Commitments hereunder, unless the
Majority Banks shall otherwise consent in writing, the
Borrower covenants and agrees that:
SECTION 6.1. Information. The Borrower shall
deliver, or cause to be delivered, to the Banks at the
Borrower's sole expense:
(a)As soon as practicable, and in any event within
fifty (50) days after the end of each Fiscal Quarter in
each Fiscal Year of the Borrower (but within ninety-
five (95) days after the end of the last Fiscal Quarter
in each Fiscal Year or one hundred five (105) days
after the end of the last Fiscal Quarter in such Fiscal
Year upon the Borrower's timely filing of a Form 12b-25
with respect to the Borrower's Form 10-K for that
Fiscal Year), the unaudited Consolidated balance sheet
of the Borrower and its Subsidiaries as at the end of
such quarterly period and year to date period then
ended, and the related unaudited Consolidated
statements of income, cash flows and shareholders'
equity for such quarterly period and for the portion of
the Fiscal Year ended with the last day of such
quarterly period, and in each case setting forth
comparative figures for the related periods in the
prior Fiscal Year, all in reasonable detail prepared in
a manner satisfactory to the Agent and the Banks, and
certified by a Responsible Officer of the Borrower
responsible for the administration of the finances and
accounting practices of the Borrower that such
financial statements fairly present the Consolidated
financial condition and results of operations of,
respectively, the Borrower and its Subsidiaries in
accordance with GAAP for the Fiscal Quarter and year to
date period then ended, subject to changes resulting
from normal year-end audit adjustments.
(b)Within ninety-five (95) days after the close of
each Fiscal Year of the Borrower (or one hundred five
(105) days after the close of each such Fiscal Year
upon the Borrower's timely filing of a Form 12b-25 with
respect to the Borrower's Form 10-K for that Fiscal
Year), the audited Consolidated balance sheet of the
Borrower as of the end of such Fiscal Year and the
related audited Consolidated statements of income, cash
flows and shareholders' equity of the Borrower for such
Fiscal Year, setting forth the comparative figures for
the preceding Fiscal Year all audited by KPMG Peat
Marwick or other independent certified public
accountants of recognized national standing reasonably
satisfactory to the Majority Banks and accompanied by
(x) an unqualified opinion of such accountants to the
effect that such Consolidated financial statements
present fairly, in all material respects, the financial
position and results of operations and cash flows of
the Borrower and its Subsidiaries, on a Consolidated
basis, in accordance with GAAP, and (y) a certificate
of such accountants certifying that in the course of
its regular audit of the financial statements of the
Borrower, which audit was conducted in accordance with
generally accepted auditing standards, such accounting
firm has obtained no knowledge of any Default or Event
of Default, or if in the opinion of such accounting
firm a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof.
(c) Together with the delivery of statements
referred to in paragraphs (a) and (b) above, a
Compliance Certificate, in form and substance
satisfactory to the Agent, signed by a Responsible
Officer of the Borrower responsible for the
administration of the finances and accounting practices
of the Borrower, stating that the signer has reviewed
the terms of this Credit Agreement and the other Loan
Documents and that in the course of the performance of
his duties, he would normally have knowledge of any
condition or event which would constitute an Event of
Default or Default and stating whether or not he has
knowledge of any such condition or event and, if so,
specifying each such condition or event of which he has
knowledge and the nature thereof and any corrective
action taken or proposed to be taken with respect
thereto. Such Compliance Certificate shall set forth
the calculations required to establish compliance with
the financial covenants set forth in Section 7.15 for
the fiscal period covered by such financial statements.
(d)Promptly and in any event within three (3)
Business Days after any Responsible Officer of the
Borrower obtains knowledge thereof, notice of (i) the
institution of or threat in writing of, any material
action, suit, proceeding, governmental investigation or
arbitration against or affecting the Borrower or any
Subsidiary of the Borrower not previously disclosed in
writing to the Banks or any material adverse
development in any action, suit, proceeding,
governmental investigation or arbitration already
disclosed to the Banks or (ii) the occurrence of any
event which constitutes a Default or Event of Default,
such notice to specify the nature and period of
existence of such Default or Event of Default, and what
action the Borrower and/or such Subsidiary has taken,
are taking or propose to take with respect thereto.
(e)promptly upon the mailing thereof to the
stockholders of the Borrower generally, copies of all
financial statements, reports and proxy statements so
mailed;
(f)promptly upon the filing thereof, copies of all
final registration statements, post effective
amendments thereto and annual, quarterly or special
reports which the Borrower shall have filed with the
Securities and Exchange Commission; provided, that the
Borrower must deliver, or cause to be delivered, any
annual reports which the Borrower shall have filed with
the Securities and Exchange Commission, within one
hundred (100) days after the end of each Fiscal Year of
the Borrower (or one hundred five (105) days after the
end of such Fiscal Year upon the Borrower's timely
filing of a Form 12b-25 with respect to the Borrower's
Form 10-K for that Fiscal Year), and any quarterly
reports which the Borrower shall have filed with the
Securities and Exchange Commission, within fifty (50)
days after the end of each of the first three (3)
quarters of each Fiscal Year of the Borrower;
(g)promptly upon request therefor by the Agent,
such title opinions and other information in either the
Borrower's possession, control or direction regarding
title to the Borrowing Base Assets as are appropriate
to determine the status of title with respect thereto;
(h) promptly upon receipt of same, any notice
or other information received by the Borrower or any
Subsidiary of the Borrower indicating any potential,
actual or alleged (i) non-compliance with or violation
of the requirements of any Environmental Law which
could result in liability to the Borrower or any
Subsidiary for fines, clean up or any other remediation
obligations or any other liability in excess of
$1,000,000 in the aggregate; (ii) release or threatened
release of any toxic or hazardous waste, substance, or
constituent, or other substance into the environment
which release would impose on the Borrower or any
Subsidiary of the Borrower a duty to report to a
governmental authority or to pay cleanup costs or to
take remedial action under any Environmental Law which
could result in liability to the Borrower or any
Subsidiary of the Borrower for fines, clean up and
other remediation obligations or any other liability in
excess of $1,000,000 in the aggregate; or (iii) the
existence of any Environmental Lien arising under any
Environmental Law securing any obligation of the
Borrower or any Subsidiary of the Borrower to pay
fines, clean up or other remediation costs or any other
liability in excess of $1,000,000 in the aggregate.
Without limiting the foregoing, the Borrower shall
provide to Agent, promptly upon request, copies of all
environmental consultants or engineers reports received
by the Borrower or any Subsidiary of the Borrower which
involves the investigation, remediation or response
action with respect to any circumstance or condition
which would require delivery of a notice or other
information to the Banks pursuant to this
Section 6.1(h);
(i)In the event any notification is provided by
the Borrower to any Bank or the Agent pursuant to
Section 6.1(h) hereof or the Agent or any Bank
otherwise learns of any event or condition under which
any such notice would be required, then, upon request
of the Majority Banks, the Borrower shall, within
ninety (90) days of such request, cause to be furnished
to each Bank a report by an environmental consulting
firm acceptable to Agent and the Majority Banks,
stating that a review of such event, condition or
circumstance has been undertaken (the scope of which
shall be reasonably acceptable to Agent and the
Majority Banks) and detailing the findings,
conclusions, and recommendations of such consultant.
The Borrower shall bear all expenses and costs
associated with such review and updates thereof, as
well as all remediation or curative action which (y)
the Borrower and/or any Subsidiary of the Borrower is
required by contract or law to make or (ii) is
recommended by any such environmental consultant and
undertaken by the Borrower;
(j)Promptly (but in all events within three (3)
Domestic Business Days) after any Responsible Officer
becomes aware of the occurrence of any Default), a
certificate of a Responsible Officer setting forth the
details thereof and the action which the Borrower is
taking or proposes to take with respect thereto;
(k)Promptly (but in all events within three (3)
Domestic Business Days) after any Responsible Officer
becomes aware of same), notice of any material adverse
change in the business, financial condition, operations
or prospects of the Borrower, any Subsidiary Guarantor
or of the Borrower and its Subsidiaries taken as a
whole;
(l)Promptly (but in all events within three (3)
Domestic Business Days) after any Responsible Officer
becomes aware of same), notice of the intended sale,
transfer, encumbrance or other disposition of any
Borrowing Base Asset other than a sale, transfer,
encumbrance or other disposition permitted pursuant to
Section 7.8; and
(m) From time to time such additional
information regarding the financial position or
business of the Borrower and its Subsidiaries as the
Agent, at the request of any Bank, may reasonably
request.
SECTION 6.2. Business of the Borrower. The
primary business of the Borrower and its Subsidiaries
on a Consolidated basis is and will continue to be the
acquisition, exploration for, development, production,
transportation, processing and marketing of
Hydrocarbons, coal and accompanying elements.
SECTION 6.3. Corporate Existence. The Borrower
shall, and shall cause each of its Subsidiaries to,
maintain its (i) existence and good standing in the
jurisdiction of its organization or incorporation and
(ii) qualification and good standing in all
jurisdictions in which such qualification and good
standing are necessary in order for the Borrower or
such Subsidiary to conduct its business and own its
property as conducted and owned in such jurisdiction
except where the failure to be so qualified or in good
standing would not, individually or in the aggregate,
result in a Material Adverse Effect.
SECTION 6.4. Right of Inspection. The Borrower
will permit, and will cause each Subsidiary of the
Borrower to permit, any officer, employee or agent of
the Agent or any of the Banks to visit and inspect any
of the assets of the Borrower and its Subsidiaries,
examine the Borrower's and its Subsidiaries' books of
record and accounts, take copies and extracts
therefrom, and discuss the affairs, finances and
accounts of the Borrower and its Subsidiaries with the
Borrower's and its Subsidiaries' officers, accountants
and auditors, all at such reasonable times and as often
as the Agent or any of the Banks may reasonably desire,
all at the expense of the Borrower.
SECTION 6.5. Maintenance of Insurance. The
Borrower will maintain or cause to be maintained, and
will cause each Subsidiary of the Borrower to maintain
or cause to be maintained (and will use all reasonable
good faith efforts to cause all operators of Borrowing
Base Assets to maintain or cause to be maintained) at
all times, insurance covering such risks as are
customarily carried by businesses similarly situated.
SECTION 6.6. Payment of Taxes and Claims. The
Borrower will pay, and will cause each of its
Subsidiaries to pay, (a) all taxes imposed upon it or
any of its assets or with respect to any of its
franchises, business, income or profits before any
material penalty or interest accrues thereon and (b)
all material claims (including, without limitation,
claims for labor, services, materials and supplies) for
sums which have become due and payable and which by law
have or might become a Lien (other than a Permitted
Lien) on any of its assets; provided, however, no
payment of taxes or claims shall be required if (i) the
amount, applicability or validity thereof is currently
being contested in good faith by appropriate action
promptly initiated and diligently conducted in
accordance with good business practices and no material
part of the property or assets of the Borrower or any
of its Subsidiaries are subject to levy or execution,
(ii) the Borrower as and to the extent required in
accordance with GAAP, shall have set aside on its books
reserves (segregated to the extent required by GAAP)
deemed by it to be adequate with respect thereto, and
(iii) to the extent the amount of the contested taxes
or claims are in excess of $1,000,000 (in the
aggregate), the Borrower has notified the Agent of such
circumstances, in detail satisfactory to the Agent.
SECTION 6.7. Compliance with Laws and
Documents. The Borrower will comply, and will cause
each of its Subsidiaries to comply, with all
Requirements of Law, their respective certificates (or
articles) of incorporation, bylaws and similar charter
documents and all Material Contracts to which the
Borrower or any of its Subsidiaries is a party, if a
violation, alone or when combined with all other such
violations, could reasonably be expected to result in a
Material Adverse Effect.
SECTION 6.8. Operation of Properties and
Equipment. (a) the Borrower will maintain and operate,
and will cause each of its Subsidiaries to maintain and
operate, their respective material properties,
including without limitation all of the Borrowing Base
Assets, in a good and workmanlike manner, and, (i) with
respect to the Oil and Gas Interests, observe and
comply with all of the terms and provisions, express or
implied, of all oil and gas leases relating to such Oil
and Gas Interests so long as such Oil and Gas Interests
are capable of producing Hydrocarbons and accompanying
elements in paying quantities, and (ii) with respect to
the Coal Interests, observe and comply with all of the
terms and provisions, express or implied, of all Coal
Leases relating to such Coal Interests so long as such
Coal Leases are capable of producing coal and
accompanying elements in commercial quantities.
(b) The Borrower will comply, and will cause each
of its Subsidiaries to comply, in all material respects
with all Material Contracts.
(c) The Borrower will maintain, preserve and
keep, and will cause each of its Subsidiaries to
maintain, preserve and keep, at all times, all material
equipment used with respect to their respective
businesses in proper repair, working order and
condition, and make all necessary or appropriate
repairs, renewals, replacements, additions and
improvements thereto so that the efficiency of such
operating equipment shall at all times be properly
preserved and maintained; provided that no item of
operating equipment need be so repaired, renewed,
replaced, added to or improved, if the Borrower shall
in good faith determine that such action is not
necessary or desirable for the continued efficient and
profitable operation of the business of the Borrower
and its Subsidiaries.
SECTION 6.9. Environmental Law Compliance and
Indemnity. The Borrower will comply, and will cause
each of its Subsidiaries to comply, in all material
respects with all Environmental Laws binding on the
Borrower or such Subsidiary, including, without
limitation, (a) all licensing, permitting, notification
and similar requirements of Environmental Laws, and (b)
all provisions of all Environmental Laws regarding
storage, discharge, release, transportation, treatment
and disposal of Hazardous Substances. The Borrower
will promptly pay and discharge when due, and will
cause each of its Subsidiaries to promptly pay and
discharge when due, all debts, claims, liabilities and
obligations with respect to any clean-up or remediation
measures necessary to comply with Environmental Laws
binding on the Borrower or any Subsidiary of the
Borrower. The Borrower hereby agrees to indemnify,
defend and hold harmless each of the Banks, the Agent
and their respective agents, affiliates, officers,
directors, and employees from and against any and all
claims, losses, demands, actions, causes of action, and
liabilities whatsoever (including without limitation
reasonable attorney's fees and expenses, and costs and
expenses reasonably incurred in investigating,
preparing or defending against any litigation or claim,
action, suit, proceeding or demand of any kind or
character) arising out of or resulting from the
contamination by any Hazardous Substance or
environmental pollutant in violation of, or
noncompliance with, any federal, state or local
Environmental Laws, including without limitation
violation of the Comprehensive Environmental Response,
Compensation and Liability Act, as amended from time to
time, or of the Resource Conservation and Recovery Act,
as amended from time to time, except to the extent that
such claim, loss, demand, action, cause of action, or
liability was caused by the gross negligence or willful
misconduct of the indemnified party requesting
indemnification pursuant to this Section 6.9.
SECTION 6.10. ERISA Reporting Requirements. The
Borrower shall furnish or cause to be furnished to
Agent:
(a)Promptly and in any event (i) within fifteen
(15) days after the Borrower or any ERISA Affiliate
knows or has reason to know that any ERISA Event
described in clause (a) of the definition of ERISA
Event or any event described in section 4063(a) of
ERISA with respect to any Benefit Plan of the Borrower
or any ERISA Affiliate has occurred, and (ii) within
ten (10) days after the Borrower or any ERISA Affiliate
knows or has reason to know that any other ERISA Event
with respect to any Benefit Plan of the Borrower or any
ERISA Affiliate has occurred or a request for minimum
funding waiver under section 412 of the Code with
respect to any Benefit Plan of the Borrower or any
ERISA Affiliate has been made, a written notice
describing such event and describing what action is
being taken or is proposed to be taken with respect
thereto, together with a copy of any notice of event
that is given to the PBGC;
(b)Promptly and in any event within two (2)
Business Days after receipt thereof by the Borrower or
any ERISA Affiliate from the PBGC, copies of each
notice received by the Borrower or any ERISA Affiliate
of the PBGC's intention to terminate any Plan or to
have a trustee appointed to administer any Benefit
Plan;
(c)Promptly and in any event within fifteen (15)
days after the receipt by the Borrower of a request
therefor by a Bank, copies of any annual and other
report (including Schedule B thereto) with respect to a
Benefit Plan filed by the Borrower or any ERISA
Affiliate with the United States Department of Labor,
the IRS or the PBGC;
(d)Promptly, and in any event within ten (10)
Business Days after receipt thereof, a copy of any
correspondence the Borrower or any ERISA Affiliate
receives from the Plan Sponsor (as defined by section
4001(a)(10) of ERISA) of any Benefit Plan asserting
withdrawal liability pursuant to section 4219 or 4202
of ERISA upon the Borrower or any ERISA Affiliate, and
a statement from a Responsible Officer of the Borrower
or such ERISA Affiliate setting forth details as to the
events giving rise to such withdrawal liability and the
action which the Borrower or such ERISA Affiliate is
taking or proposes to take with respect thereto;
(e) Notification within three (3) Business Days
after the Borrower or any ERISA Affiliate knows or has
reason to know that the Borrower or any such ERISA
Affiliate has or intends to file a notice of intent to
terminate any Benefit Plan under a distress termination
within the meaning of section 4041(c) of ERISA and a
copy of such notice; and
(f)Promptly after receipt of written notice of
commencement thereof, notice of all (i) claims made by
participants or beneficiaries with respect to any
Benefit Plan and (ii) actions, suits and proceedings
before any court or governmental department,
commission, board, bureau, agency or instrumentality,
domestic or foreign, affecting the Borrower or any
ERISA Affiliate with respect to any Benefit Plan,
except those which, in the aggregate, if adversely
determined could not result in a Material Adverse
Effect.
SECTION 6.11. Subsidiary Guaranty. The Borrower
will cause each of its Material Restricted Subsidiaries
hereafter formed or acquired to execute and deliver a
joinder of the Subsidiary Guaranty promptly following
such formation or acquisition.
SECTION 6.12. Permits, Licenses. The Borrower
shall, and shall cause each Subsidiary to, maintain all
material assets, consents, licenses, patents,
copyrights, trademarks, service marks, trade names,
permits and other approvals and authorizations
necessary to conduct its business, including, without
limitation all consents, permits, licensees and
agreements material to the Borrowing Base Assets.
SECTION 6.13. Additional Documents. The Borrower
will cure promptly, and will cause each of its
Subsidiaries to cure promptly, any defects in the
creation and issuance of each Note, and the execution
and delivery of this Credit Agreement and the other
Loan Documents and, at the Borrower's expense, the
Borrower shall promptly and duly execute and deliver,
and cause each Subsidiary of the Borrower to promptly
execute and deliver, to each Bank, upon reasonable
request, all such other and further documents,
agreements and instruments in compliance with or
accomplishment of the covenants and agreements of each
the Borrower and each Subsidiary of the Borrower in
this Credit Agreement and the other Loan Documents as
may be reasonably necessary or appropriate in
connection therewith.
SECTION 6.14. Title Assurances. The Borrower
shall furnish or cause to be furnished to the Agent
such information in its possession or reasonably
available to it with respect to title to the Borrowing
Base Assets as the Majority Banks may reasonably
request and shall cooperate with the Agent and its
counsel in analyzing such title. Where appropriate in
the opinion of the Majority Banks and at the request of
the Majority Banks, the Borrower shall correct material
defects in such title, or, if the Borrower elects not
to correct such defects in title, the Banks shall be
entitled to an immediate redetermination of the Total
Borrowing Base pursuant to Section 3.4.
ARTICLE VII
NEGATIVE COVENANTS
So long as this Credit Agreement shall remain
in effect or the principal of or interest on any
Revolving Credit Loan, or any Letter of Credit, or any
reimbursement obligation with respect to any Letter of
Credit, or any commitment or other fee, expense,
compensation or any other amount payable under any Loan
Document shall remain unpaid or outstanding or the
Banks shall have any Commitments hereunder, unless the
Majority Banks shall otherwise consent in writing, the
Borrower covenants and agrees that:
SECTION 7.1. Debt. The Borrower shall not, and
shall not permit any of its Restricted Subsidiaries to,
create, incur, assume or otherwise become or remain
liable with respect to, any Debt, except for:
(a) Debt arising hereunder and under the other
Loan Documents;
(b) Unsecured Debt outstanding on the Effective
Date and described in Schedule 7.1, in each case in a
principal amount at any one time outstanding not to
exceed the amount set forth on Schedule 7.1 hereof;
(c) Endorsements of negotiable instruments for
collection in the ordinary course of business;
(d) Current liabilities (exclusive of Debt) for
accounts payable and expense accruals incurred or
assumed in the ordinary course of business, provided
such accounts payable have not remained unpaid for a
period of ninety (90) days after the same became due
unless currently being contested in good faith or by
appropriate proceedings;
(e) Liabilities for taxes, assessments,
governmental charges or levies not yet due and payable;
(f) Liabilities incurred under Hedge Transactions
permitted pursuant to Section 7.14 hereof;
(g) Unsecured Debt incurred by the Borrower
pursuant to a line(s) of credit entered into by the
Borrower after the Effective Date with any Bank or any
other financial institution, provided, however, that
(i) the terms, covenants and conditions of said line(s)
of credit may be no more burdensome or onerous on the
Borrower and its Subsidiaries than the terms,
conditions and covenants contained in this Credit
Agreement, (ii) at the time said Debt is incurred, the
aggregate principal amount of all advances, including
the proposed advance (the "Swing Loans") made to the
Borrower by any Bank or any such other financial
institution pursuant to such line(s) of credit does not
exceed at any one time outstanding $5,000,000.00, (iii)
after giving pro forma effect to any proposed Swing
Loan, the aggregate amount of the Utilized Credit does
not exceed the Available Commitment, and (iv) the
proceeds of all Swing Loans are used by the Borrower
solely for cash management purposes. Swing Loans shall
not be considered a utilization of the Total Commitment
or the Commitment of such Bank hereunder for purposes
of calculating the commitment fee due pursuant to the
provisions of Section 2.5(a), but shall be included in
the determination of the Utilized Credit; provided,
however, that if an advance made pursuant to the Swing
Loans affects either the Applicable Eurodollar Margin
or the Unavailable Fee Rate, Borrower shall provide
Bank with written notice of such effect prior to each
advance of funds made pursuant to the Swing Loans;
(h)Purchase money Debt in respect of property
acquired by the Borrower and its Subsidiaries (other
than the Restricted Subsidiaries) in the ordinary
course of business provided, however, that the
aggregate amount of all Debt incurred by the Borrower
and its Subsidiaries pursuant to this Section 7.1(h)
and Section 7.1(i) shall not exceed $5,000,000 at any
one time outstanding;
(i)Additional unsecured Debt not permitted by
subclauses (a) through (h), provided, however, that the
aggregate amount of all Debt incurred by the Borrower
and its Subsidiaries (other than the Restricted
Subsidiaries) pursuant to this Section 7.1(i) and
Section 7.1(h) shall not exceed $5,000,000 at any one
time outstanding;
(j)Unfunded Vested Liabilities with respect to any
Existing Plan, provided, however, that (x) such
Existing Plan at all times meets all applicable funding
requirements contained in Section 412 of the Code and
(y) Borrower is at all times in compliance with Section
7.15(b); and
(k) Unsecured subordinated Debt outstanding under
the Subordinated Intercompany Notes and any other
intercompany Debt among Borrower and any of the
Restricted Subsidiaries which have executed a
Subsidiary Guaranty.
It is understood and agreed that Borrower shall
not permit any of its Restricted Subsidiaries to
create, incur, assume or otherwise become or remain
liable with respect to, any Indebtedness or
Accommodation Obligations, except for that incurred
under subparagraphs (a), (c), (d), and (e) above.
SECTION 7.2. Restrictions on Distributions. The
Borrower will not directly or indirectly declare or pay
or incur any liability to pay, and the Borrower will
not permit any of its Restricted Subsidiaries to
directly or indirectly declare or pay, or incur any
liability to pay any Distributions, except that:
(a)The Borrower may pay Distributions to its
shareholders from funds legally available for such
purpose, provided, however, that if the Utilized
Percentage of the Borrowing Base exceeds seventy-five
percent (75%), the Borrower will not, directly or
indirectly, declare or make, or incur any liability to
make, Distributions to its shareholders in any Fiscal
Quarter in excess of an amount equal to (x) fifty-five
percent (55%) of Consolidated EBITDA for the previous
four (4) Fiscal Quarters for which financial statements
have been delivered to the Banks pursuant to Section
6.1 less (y) the aggregate amount of quarterly
Distributions made to its shareholders during such four
(4) fiscal quarter period.
(b) It shall be a condition to each
Distribution permitted by the provisions of Section
7.2(a) that at the time such Distribution is made: (i)
no payment of principal, interest, fees or other amount
required hereunder or under the Loan Documents has
become due and has not been paid, (ii) no Default or
Event of Default (other than as described in clause (i)
of this proviso) has occurred, is continuing and has
not been waived by the Majority Banks (or if required
under Section 10.1, all of the Banks) has occurred or
would occur as a result of the making of such
Distribution, (iii) no Borrowing Base Deficiency exists
or is reasonably expected to exist as of the next
Determination Date, and (iv) after giving effect to the
proposed Distribution the Borrower is in compliance
with covenants contained in Section 7.15 as of (and as
if the most recently ended Fiscal Quarter of the
Borrower had ended on) the date such Distribution is
made.
Notwithstanding the foregoing, (i) any Subsidiary
Guarantor may make Distributions to the Borrower or any
other Subsidiary Guarantor, (ii) any Subsidiary of the
Borrower may make Distributions to the Borrower, (iii)
Powell River Rail Corporation may make Distributions to
the Borrower and its other shareholders so long as the
Borrower owns 80% or more of the capital stock or
equity interests of Powell River Rail Corporation, and
(iv) Borrower may make Distributions, loans or
Investments in an amount not to exceed $10,000,000 in
the aggregate to any Unrestricted Subsidiaries or
Restricted Subsidiaries that have not executed a
Subsidiary Guaranty pursuant to this Credit Agreement.
The Borrower will not enter into or become subject to,
and the Borrower will not permit any of its
Subsidiaries to enter into, or become subject to, any
agreement or order of any Governmental Authority which
prohibits or restricts in any way the right of any of
the Borrower's Subsidiaries to make Distributions to
the Borrower.
SECTION 7.3. Negative Pledge. The Borrower will
not create, incur, assume or suffer to exist, and the
Borrower will not permit any Restricted Subsidiary of
the Borrower to create, incur, assume or suffer to
exist, any Lien on any asset of the Borrower or any of
its Restricted Subsidiaries other than Permitted Liens.
The Borrower will not enter into or become subject to,
and the Borrower will not permit any Restricted
Subsidiary of the Borrower to enter into or become
subject to, any agreement (other than this Credit
Agreement) that prohibits or otherwise restricts the
right of the Borrower or any of its Restricted
Subsidiaries to create, incur, assume or suffer to
exist any Lien in favor of Agent for the benefit of the
Banks on any of the Borrower's or any of its Restricted
Subsidiaries' assets.
SECTION 7.4. Consolidation, Mergers and
Acquisitions; Fundamental Changes. The Borrower shall
not, and shall not permit any of its Subsidiaries to,
merge or consolidate with or acquire substantially all
of the outstanding capital stock or assets of any other
Person or liquidate, wind up or dissolve (or suffer any
liquidation or dissolution), or convey, lease, sell,
transfer or otherwise dispose of, in one transaction or
series of transactions, all or any substantial part of
its business, property or assets, whether now or
hereafter acquired, except for transactions in the
nature of a consolidation and/or merger (i) involving
the Borrower in which the Borrower is the surviving
entity, or (ii) involving a Subsidiary Guarantor in
which the surviving entity is a wholly owned Restricted
Subsidiary of the Borrower and has duly executed and
delivered a joinder to the Subsidiary Guaranty pursuant
to Section 6.11, or (iii) involving any other wholly
owned Subsidiary of the Borrower in which such wholly
owned Subsidiary is the surviving entity, subject in
each case to the condition that immediately after such
merger or consolidation and after giving effect and pro
forma effect thereto for the immediately preceding
twelve-month period, no Event of Default or Default
shall have occurred, exist or be continuing. The
Borrower shall not, and shall not permit any of its
Subsidiaries to, purchase, redeem, retire or otherwise
acquire for value any of its capital stock now or
hereafter outstanding.
SECTION 7.5. Investments. The Borrower shall
not, and shall not permit any of its Restricted
Subsidiaries to, make, directly or indirectly, any
Investments, except:
(a) Investments existing on the date hereof and
disclosed on Schedule 7.5;
(b) Investments consisting of Cash Equivalents;
(c) Accounts receivable from customers in the
ordinary course of business;
(d) Investments by the Borrower in wholly owned
Subsidiaries provided such Subsidiaries have executed
and delivered a Subsidiary Guaranty in favor of the
Agent;
(e) Margin deposits in connection with any Hedge
Transaction permitted pursuant to Section 7.14;
(f) Acquisitions permitted under Section 7.4
hereof;
(g) Investments in connection with or related to
farm-out, farm-in, joint operating, joint venture or
area of mutual interest agreements, gathering systems,
pipelines or other similar or customary arrangements
entered into in the ordinary course of business;
(h)investments by the Borrower, directly or
indirectly, in Powell River Rail Corporation, provided,
however, that all Investments made by the Borrower in
Powell River Rail Corporation pursuant to this Section
7.5(h) shall not exceed $5,000,000 in the aggregate; or
(j) An Investment in capital stock (other than
Margin Stock) issued by a United States corporation
(other than Westmoreland Coal Company, Westmoreland
Resources, Inc. and Powell River Rail Corporation) in
the same line of business(es) as the Borrower and its
Subsidiaries provided such Investment is not a Hostile
Acquisition and subject in each case to the condition
that immediately after such Investment and after giving
effect and pro forma effect thereto for the next
succeeding twelve-month period, no Event of Default or
Default shall have occurred, exist or be continuing.
SECTION 7.6. Transactions with Affiliates. The
Borrower shall not, and shall not permit any of its
Subsidiaries to, enter into, or be a party to any
transaction with any affiliated Person, except for (i)
the transactions provided for in the Loan Documents, or
(ii) transactions entered into pursuant to the
reasonable requirements of such Person's business and
upon such fair and reasonable terms as could reasonably
be obtained in a arm's length transaction with an
unaffiliated Person in accordance with prevailing
industry customs and practices.
SECTION 7.7. Agreements. The Borrower shall not,
and shall not permit any of its Subsidiaries to, enter
into any contract, agreement or transaction which at
the time such contract, agreement or transaction was
entered into materially and adversely affects (i) the
business, property, assets, operations, condition
(financial or otherwise) of the Borrower or any
Subsidiary of the Borrower, (ii) the ability of the
Borrower or any Subsidiary of the Borrower to perform
timely its obligations under this Credit Agreement and
the other Loan Documents to which it is a party or
(iii) a Subsidiary's ability to perform timely its
material covenants and obligations under any Subsidiary
Guaranty to which it is a party.
SECTION 7.8. Sales of Assets. The Borrower shall
not, and shall not permit any of its Subsidiaries to,
sell, assign, transfer, lease, convey or otherwise
dispose of any of its assets or properties, whether now
owned or hereafter acquired, or any income or profits
therefrom, or enter into any agreement to do so,
except:
(a) sales of inventory in the ordinary course of
its business;
(b) sales or dispositions of worn out or obsolete
tools or equipment no longer used or useful in the
business of the Borrower or such Subsidiary of the
Borrower;
(c) sales of Oil and Gas Interests and/or Coal
Interests used in the determination of the Borrowing
Base for fair market value on an arm's length basis in
an aggregate amount for both Oil and Gas Interests and
Coal Interests for the Borrower and its Subsidiaries
not to exceed $10,000,000 during any Fiscal Year,
provided, however, that at the time of such sale no
Event of Default has occurred and is continuing and no
Borrowing Base Deficiency then exists;
(d) sales of the Norfolk Common Stock for fair
market value on an arm's length basis in an aggregate
amount not to exceed $50,000,000 during any Fiscal
Year;
(e) sales of the common stock of Westmoreland Coal
Company; or
(f) sales of assets not used in the determination
of the Borrowing Base, which sales shall not exceed
$30,000,000 in the aggregate.
SECTION 7.9. ERISA. (a) With the exception of the
Benefit Plans described on Schedule 5.11 (the "Existing
Plans"), neither the Borrower nor any Subsidiary of the
Borrower shall create, adopt or become bound by any
Benefit Plan. The Borrower shall not, and shall not
permit any of its Subsidiaries to, engage in a
"prohibited transaction", as defined in Section 406 of
ERISA or Section 4975 of the Code, with respect to any
Existing Plan or knowingly consent to any other
"interested party" or any "disqualified person", as
such terms are defined in Section 3(14) of ERISA and
Section 4975(e)(2) of the Code, respectively, engaging
in any "prohibited transaction", with respect to any
Existing Plan, or permit any Existing Plan maintained
by the Borrower or such Subsidiary of the Borrower to
incur any "accumulated funding deficiency", as defined
in Section 302 of ERISA or Section 412 of the Code,
unless such incurrence shall have been waived in
advance by the IRS; or terminate any Existing Plan in a
manner which could result in the imposition of a Lien
on any property of the Borrower or such Subsidiary of
the Borrower pursuant to Section 4068 of ERISA; or
breach any fiduciary responsibility imposed under Title
I of ERISA with respect to any Existing Plan; engage in
any transaction which would result in the incurrence of
a liability under Section 4069 of ERISA; or fail to
make contributions to any Existing Plan which results
in the imposition of a Lien on any property of the
Borrower or such Subsidiary of the Borrower pursuant to
Section 302(f) of ERISA or Section 412(n) of the Code,
if the occurrence of any of the foregoing events would
result in liability to the Borrower or any of its
Subsidiaries of $2,000,000 or more. The Borrower shall
not, and shall not permit any of its Subsidiaries to,
materially increase the benefits provided under any
Existing Plan. The Borrower shall not, and shall not
permit any of its Subsidiaries to (nor will any trade
or business, whether or not incorporated, that is a
member of a group of which the Borrower or such
Subsidiary of the Borrower is a member and which is
treated as a single employer under Section 414 of the
Code) sponsor, maintain or contribute to any
Multiemployer Plan(s). The Borrower shall not, and
shall not permit any of its Subsidiaries to, become a
member of any other group which is treated as a single
employer under Section 414 of the Code.
SECTION 7.10. Sales and Leasebacks. The Borrower
shall not, and shall not permit any of its Subsidiaries
to, become liable, directly or by way of Accommodation
Obligation, with respect to any lease or any property
(whether real or personal or mixed) whether now owned
or hereafter acquired, (i) which the Borrower or such
Subsidiary of the Borrower has sold or transferred or
is to sell or transfer to any other Person or (ii)
which the Borrower or such Subsidiary of the Borrower
intends to use for substantially the same purposes as
any other property which has been or is to be sold or
transferred by the Borrower or such Subsidiary of the
Borrower to any other Person in connection with such
lease.
SECTION 7.11. Margin Regulation. The Borrower
shall not use or permit any other Person to use any
portion of the proceeds of any credit extended under
this Credit Agreement in any manner which might cause
the extension of credit or the application of such
proceeds to violate the Securities Act of 1933 or
Securities Exchange Act of 1934 (each as amended to the
date hereof and from time to time hereafter, and any
successor statute) or to violate Regulation U, or
Regulation X, or any other regulation of the Federal
Reserve Board, in each case as in effect on the date or
dates of such extension of credit and such use of
proceeds.
SECTION 7.12. Amendment to Organizational
Documents. The Borrower will not enter into or permit,
and the Borrower will not permit any of its
Subsidiaries to enter into or permit, any modification
or amendment of its certificate or articles of
incorporation, bylaws or other charter documents other
than amendments, modifications and waivers which are
not, individually or in the aggregate, material. The
Borrower will not enter into or permit, and the
Borrower will not permit PVCC, Savannah or PVHC to
enter into or permit, any modification or amendment of
the Subordinated Intercompany Notes without the express
written consent of the Banks.
SECTION 7.13. Fiscal Year; Fiscal Quarter. The
Borrower shall not, and shall not permit any of its
Subsidiaries to, change its Fiscal Year or any of its
Fiscal Quarters.
SECTION 7.14. Hedge Transactions. The Borrower
will not enter into, and the Borrower will not permit
any of its Restricted Subsidiaries to enter into, any
Hedge Transactions which would cause the amount of
Hydrocarbons which are the subject of Hedge
Transactions in existence at such time to exceed one
hundred percent (100%) of the Borrower's and its
Restricted Subsidiaries' anticipated production from
Proved Developed Producing Hydrocarbon Reserves during
the term of such existing Hedge Transactions and no
such Hedge Transactions requires the Borrower or any
Restricted Subsidiary of the Borrower to put up money,
assets, letters of credit or other security against the
event of its nonperformance prior to actual default by
the Borrower or such Subsidiary in performing its
obligations thereunder.
SECTION 7.15. Financial Covenants. From and
after the Effective Date, the Borrower on a
Consolidated basis shall not:
(a)Permit its Consolidated Tangible Net Worth at
any time to be less than the sum of (i) $135,000,000
plus, if positive (ii) forty percent (40%) of
Consolidated Net Income for the period from the
Effective Date plus, if any, (iii) seventy-five percent
(75%) of the net proceeds from the sale of equity
securities of the Borrower and its Restricted
Subsidiaries for the period from the Effective Date, on
a Consolidated basis;
(b)Permit its Consolidated Funded Debt to exceed
sixty percent (60%) of its Consolidated Capitalization
at any time; or
(c)Permit its ratio of Consolidated Cash Flow to
Consolidated Debt Service at the end of any Fiscal
Quarter to be less than 3.5 to 1.0, to be calculated at
the end of each Fiscal Quarter, for the four-Fiscal
Quarter period ending with such Fiscal Quarter.
SECTION 7.16. Subsidiary Guarantors as
Subsidiaries of Borrower. At all times, Borrower shall
directly or indirectly through a wholly-owned
Subsidiary retain full, absolute and unencumbered title
to all of the issued and outstanding securities of each
of the Subsidiary Guarantors.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Events of Default. If any of the
following events, acts, occurrences or conditions (each
an "Event of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay when due any
payment of any principal of the Revolving Credit Loans;
or
(b) The Borrower shall fail to pay when due the
payment of any accrued interest on the Revolving Credit
Loans and such failure shall continue for two (2)
Business Days; or (ii) the Borrower shall fail to pay
when due the payment of any fee, expense, compensation,
reimbursement or other amount when due under this
Credit Agreement, the Notes or any other Loan Document
or other agreement or document contemplated by or
delivered pursuant to or in connection with this Credit
Agreement or such Loan Document or any material
document executed in connection therewith and, in any
event, such failure shall continue for five (5)
Business Days after the earlier of (y) notice thereof
from the Agent or any Bank to the Borrower and (z)
discovery thereof by the Borrower; or
(c) The Borrower or any Subsidiary of the
Borrower shall fail to perform or observe any term,
covenant or agreement contained in Sections 6.1(c),
6.1(d)(ii), 6.11 or Article VII of this Credit
Agreement; or
(d) The Borrower or any Subsidiary of the
Borrower shall fail to perform any term, covenant or
agreement contained in this Credit Agreement other than
those referenced in subsections (a), (b) or (c) of this
Section 8.1 or in any other Loan Document to which it
is a party and, in the case of any such failure that is
capable of being remedied, such failure shall not have
been remedied within thirty (30) days after the earlier
of (i) notice thereof from the Agent to the Borrower
and (ii) discovery thereof by a Responsible Officer of
the Borrower or such Subsidiary of the Borrower; or
(e) Any Subsidiary shall fail to perform any
term, covenant or agreement contained in the Subsidiary
Guaranty other than those referenced in subsections
(a), and (b) of this Section 8.1, and, in the case of
any such failure that is capable of being remedied,
such failure shall not have been remedied within thirty
(30) days after the earlier of (i) notice thereof from
the Agent to such Subsidiary and (ii) discovery thereof
by a Responsible Officer of such Subsidiary; or
(f) Any Termination Event occurs which would
subject the Borrower or any Subsidiary of the Borrower,
to a liability in excess of $2,000,000, or the plan
administrator of any Benefit Plan applies under Section
412(d) of the Code for a waiver of the minimum funding
standards of Section 412(a) of the Code which would
subject the Borrower or any Subsidiary of the Borrower,
to a liability in excess of $2,000,000; or
(g) Any representation or warranty made or
incorporated by the Borrower or any Subsidiary of the
Borrower in any Loan Document to which such Person is a
party or in any certificate, agreement or instrument
delivered in connection with, any Loan Document shall
prove to have been incorrect or misleading in any
material respect when made or deemed made; or
(h) The Borrower or any Subsidiary of the
Borrower, shall (i) fail to pay any Debt having a
principal amount in excess of $2,000,000 (other than
the amounts referred to in subsections (a) and (b) of
this Section 8.1) owing by such Person, or any interest
or premium thereon, when due (or, if permitted by the
terms of the relevant document, within any applicable
grace period), whether such Debt shall become due by
scheduled maturity, by required prepayment, by
acceleration, by demand or otherwise unless effectively
waived or consented to in accordance with the documents
evidencing such Debt or (ii) fail to observe or perform
any material term, covenant or condition on its
respective part to be performed under any agreement or
instrument evidencing, securing or relating to any such
Debt, when required to be performed, and such failure
shall continue after the applicable grace period, if
any, specified in such agreement or instrument if the
effect of any failure is to cause, or to permit the
holder or holders of such Debt or a trustee on its or
their behalf (with or without the giving of notice, the
lapse of time, or both), to cause such Debt to become
due prior to its stated maturity; or
(i) Any Loan Document shall, at any time after
its execution and delivery and for any reason, cease to
be in full force and effect or shall be declared to be
null and void, or the validity or enforceability
thereof shall be contested by any Person party thereto
(other than the Agent or any Bank) or any such Person
party thereto (other than the Agent or any Bank) shall
deny that it has any or further liability or obligation
thereunder, or the Obligations shall be subordinated
for any reason; or
(j) The Borrower or any Subsidiary of the
Borrower shall be adjudicated insolvent, or shall
generally not pay, or admit in writing its inability to
pay, its debts as they mature, or make a general
assignment for the benefit of creditors, or any
proceeding shall be instituted by any such Person
seeking to adjudicate it insolvent, seeking
liquidation, dissolution, winding-up, reorganization,
arrangement, adjustment, protection, relief or
composition of it or its debts under any Debtor Relief
Law, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its
property, or any such Person shall take any corporate
action in furtherance of any of the actions set forth
above in this Section 8.1(j); or
(k) Any proceeding of the type referred to in
Section 8.1(j) is filed, or any such proceeding is
commenced against the Borrower or any Subsidiary of the
Borrower, or any such Person by any act indicates its
approval thereof, consent thereto or acquiescence
therein, or an order for relief is entered in an
involuntary case under the bankruptcy law of the United
States, or an order, judgment or decree is entered
appointing a trustee, receiver, custodian, liquidator
or similar official or adjudicating any such Person
insolvent, or approving the petition in any such
proceedings, and such order, judgment or decree remains
in effect for sixty (60) days; or
(l) A final judgment or order for the payment of
money in excess of $2,000,000 and not covered by
insurance shall be rendered against the Borrower or any
Subsidiary of the Borrower and the same shall not be
discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be
procured, within thirty (30) days from the date of
entry thereof, or the Borrower or any Subsidiary of the
Borrower shall not, within said period of thirty (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
(m) (i) Any Environmental Liability shall have
been asserted under any applicable Environmental Law
against the Borrower or any Subsidiary of the Borrower
or (ii) any Release of any Hazardous Substance shall
have occurred, and such event could form the basis of
an Environmental Liability against the Borrower or any
Subsidiary of the Borrower; which in either case could
reasonably be expected to result in liability to the
Borrower or any Subsidiary of Borrower in excess of
$2,000,000;
THEN, (x) upon the occurrence of any Event of Default
described in Section 8.1(j) or Section 8.1(k) with
respect to the Borrower or any Subsidiary of the
Borrower (i) all of the Commitments shall automatically
terminate, and the Borrower shall deposit with the
Agent cash equal to the aggregate face amount of all
outstanding Letters of Credit issued hereunder and (ii)
the entire unpaid amount of all Obligations shall
automatically become immediately due and payable,
without presentment for payment, demand, protest,
notice of intent to accelerate, notice of acceleration
or further notice of any kind, all of which are hereby
expressly waived by the Borrower and each of its
Subsidiaries and the obligation of each Bank to make
any Revolving Credit Loan hereunder shall thereupon
terminate and (y) upon the occurrence of any other
Event of Default, the Agent shall at the request, or
may with the consent, of the Majority Banks, (i) by
written notice to the Borrower declare all of the
Commitments to be terminated, whereupon all of the
Commitments and the obligations of each Bank to make
any Revolving Credit Loan hereunder shall forthwith
terminate, and the Borrower shall deposit with the
Agent cash equal to the aggregate face amount of all
outstanding Letters of Credit issued hereunder and (ii)
by written notice to the Borrower declare the entire
unpaid amount of all Obligations to be forthwith due
and payable, whereupon all Obligations shall become and
be forthwith due and payable, without presentment for
payment, demand, protest, notice of intent to
accelerate, notice of acceleration or further notice of
any kind, all of which are hereby expressly waived by
the Borrower and each Subsidiary of the Borrower. The
Borrower hereby grants to the Agent for the ratable
benefit of the Banks a security interest in, and Lien
on, any Dollars delivered to the Agent pursuant to this
Section 8.1, as security for the Obligations.
SECTION 8.2. Remedies. If any Default or Event of
Default shall occur and be continuing, the obligations
of the Banks to make Revolving Credit Loans, and of the
Issuing Bank(s) to issue Letters of Credit, under this
Credit Agreement shall terminate immediately. If any
Event of Default shall occur, the Agent for the ratable
benefit of the Banks, may (and upon the request of the
Majority Banks shall) protect and enforce the Banks'
rights and remedies under the Loan Documents by any
appropriate proceedings, including proceedings for
specific performance of any covenant or agreement
contained in any Loan Document, and the Banks may
enforce the payment of any Obligations due or enforce
any other legal or equitable right. All rights and
remedies and powers conferred upon the Agent and/or the
Banks under the Loan Documents shall be deemed
cumulative and not exclusive of any other rights,
remedies or powers available under the Loan Documents
or at law or in equity.
SECTION 8.3. Right of Setoff. In addition to any
rights now or hereafter granted under applicable law or
otherwise, and not by way of limitation of any such
rights, upon the occurrence and during the continuance
of any Event of Default, each Bank is hereby authorized
at any time or from time to time, to the fullest extent
permitted by law and without presentment, demand,
protest or other notice of any kind to the Borrower or
to any other Person, any such notice being hereby
expressly waived, to set off and apply any and all
deposits (general or special, time or demand,
provisional or final) at any time held, and other Debt
at any time owing, by such Bank (including, without
limitation, by Affiliates, branches or agencies of such
Bank wherever located) to or for the credit or the
account of the Borrower against any of and all the
Obligations, including, without limitation, all
interests in Obligations purchased by such Bank
pursuant to Section 2.18, and all other claims of any
nature or description arising out of or in connection
with this Credit Agreement or any other Loan Document,
irrespective of whether or not such Bank shall have
made any demand under this Credit Agreement or the
Notes or other Loan Documents and although such
Obligations, liabilities or claims, or any of them,
shall be contingent or unmatured. Such Bank agrees
promptly to notify the Borrower after any such setoff
and application made by such Bank, but the failure to
give such notice shall not affect the validity of such
setoff and application. The rights of the Banks under
this Section 8.3 are in addition to other rights and
remedies (including, without limitation, other rights
of setoff) which the Banks may have. Notwithstanding
any other provisions of this Credit Agreement, the
provisions of this Section 8.3 (except for the
provisions of this sentence) will not apply to any
amounts held by the Borrower or any Subsidiary of the
Borrower for the benefit of working interest owners
and/or royalty owners for the purpose of paying ad
valorem taxes, development costs and/or operating costs
or for the purpose of making distributions to the
revenue interest owners of revenues from various Oil
and Gas Interests.
SECTION 8.4. Indemnity. The Borrower shall
indemnify the Agent and each Bank and each Affiliate
thereof and their respective directors, officers,
employees, shareholders and agents (each an
"Indemnitee") from, and hold each of them harmless
against, any and all losses, liabilities, claims,
damages, expenses, penalties, actions, judgments,
suits, costs or disbursements of any kind or nature
whatsoever that are asserted against an Indemnitee by
any Person if such losses, liabilities, claims,
damages, expenses, penalties, actions, judgments,
suits, costs or disbursements arise out of or result
from (i) any use by the Borrower of the proceeds of any
extension of credit by the Banks hereunder or (ii) any
investigation, litigation or other proceeding
(including any threatened investigation or proceeding)
relating to the foregoing or arising out of or based
upon any Loan Document or any of the transactions
contemplated by any Loan Document, and the Borrower
shall reimburse such Indemnitee, within ten (10)
Business Days after receipt of a composite statement of
account for any reasonable expenses (including
reasonable legal fees) incurred in connection with any
such investigation or proceeding; but excluding any
such losses, liabilities, claims, damages, expenses,
penalties, actions, judgments, suits, costs or
disbursements which are proximately caused by such
Indemnitee. Without prejudice to the survival of any
other Obligations of the Borrower hereunder and the
other Loan Documents, the Obligations of the Borrower
under this Section 8.4 shall survive the termination of
this Credit Agreement, the payment in full of the
Obligations and/or assignment of the Notes.
ARTICLE IX
THE AGENT
SECTION 9.1. Authorization and Action. The
general administration of the Loan Documents and any
other documents contemplated by this Credit Agreement
shall be by the Agent or its designees. Each of the
Banks authorizes the Agent to take such actions on its
behalf and to exercise such powers and to perform such
duties as are expressly delegated to the Agent by the
terms of this Credit Agreement and the other Loan
Documents, together with such powers as are reasonably
incidental thereto. Notwithstanding any provision to
the contrary elsewhere in this Credit Agreement, the
Agent shall not have any duties or responsibilities,
except those expressly set forth herein, or any
fiduciary relationship with any Bank, and no implied
covenants, functions, responsibilities, duties,
obligations or liabilities on the part of the Agent
shall be read into this Credit Agreement or otherwise
exist against the Agent.
(b)The provisions of this Article IX are solely
for the benefit of the Agent and the Banks, and neither
the Borrower nor any Subsidiary of the Borrower shall
have any rights as a third party beneficiary or
otherwise under, or be bound by, the provisions of this
Article IX.
(c)In performing its functions and duties
hereunder and under the other Loan Documents, the Agent
shall act solely as the agent of the Banks and the
Agent does not assume nor shall it be deemed to have
assumed any obligation or relationship of trust or
agency with or for the Borrower, any Subsidiary of the
Borrower or any of their respective successors and
assigns.
SECTION 9.2. Agent's Reliance; Exculpatory
Provisions, Etc.
(a) Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to any
Bank for any action taken or omitted to be taken by it
or them under or in connection with this Credit
Agreement or the other Loan Documents (i) with the
consent or at the request of the Majority Banks or if
required under Section 10.1, all of the Banks or (ii)
in the absence of its or their own gross negligence or
willful misconduct (it being the express intention of
the parties that the Agent and its directors, officers,
agents and employees shall have no liability for
actions and omissions under this Section 9.2 resulting
from their sole ordinary or contributory negligence).
Without limitation of the generality of the foregoing,
the Agent: (i) may treat the payee of each Note as the
holder thereof until the Agent receives a Commitment
Transfer Supplement from such payee in accordance with
the terms of Section 10.9; (ii) may consult with legal
counsel (including counsel to the Borrower),
independent public accountants and other experts
selected by it and shall not be liable for any action
taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants
or experts; (iii) makes no warranty or representation
to any Bank and shall not be responsible to any Bank
for any statements, warranties or representations made
in or in connection with this Credit Agreement or the
other Loan Documents; (iv) except as otherwise
expressly provided herein, shall not have any duty to
ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions
of this Credit Agreement or the other Loan Documents or
to inspect the property (including the books and
records) of the Borrower or its Subsidiaries; (v) shall
not be responsible to any Bank for the due execution,
legality, validity, enforceability, genuineness,
sufficiency or value of this Credit Agreement or the
other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; (vi)
shall incur no liability under or in respect of this
Credit Agreement or the other Loan Documents by acting
upon any notice, consent, certificate or other
instrument or writing (which may be by telegram,
telecopier, cable or telex) reasonably believed by it
to be genuine and signed or sent by the proper party or
parties, (vii) shall incur no liability to any Bank or
the Issuing Bank as a result of any act or failure to
act in respect of a Letter of Credit that would not
form the basis for liability against the Agent acting
either as the Agent or the Issuing Bank with respect to
such Letter of Credit, in an action between the Agent,
in either such capacity, and either the customer
arranging for such Letter of Credit, the beneficiary
thereof or the holder of the draft drawn thereunder and
(viii) the provisions of this Section 9.2 shall survive
the termination of this Credit Agreement and?or the
payment or assignment of any of the Obligations. The
Agent shall be fully justified in failing or refusing
to take any action under this Credit Agreement or any
other Loan Document unless it shall first receive such
advice or concurrence of the Majority Banks (or if
required under Section 10.1, all of the Banks) as it
deems appropriate or it shall first be indemnified to
its satisfaction by the Banks against any and all
liability and expense (other than that resulting from
its own gross negligence or willful misconduct) which
may be incurred by it by reason of taking or continuing
to take any such action. The Agent shall in all cases
be fully protected in acting, or in refraining from
acting, under this Credit Agreement and the other Loan
Documents in accordance with a request of the Majority
Banks or all of the Banks, as the case may be, and such
request and any action taken or failure to act pursuant
thereto shall be binding upon all of the Banks and all
future holders of the Notes.
(b)Neither the Agent nor any of its directors,
officers, employees, or agents shall have any
responsibility to any Person on account of the failure
or delay in performance or breach by any of the Banks
or the Borrower or any Subsidiary of the Borrower or
any of their respective Obligations under this Credit
Agreement, the Notes, the Loan Documents or any related
agreement or document or in connection herewith or
therewith.
SECTION 9.3. The Agent in its Individual Capacity
and Affiliates. With respect to its Commitment, any of
the Revolving Credit Loans made by it and/or the Notes
issued to it as a Bank, Chase shall have the same
rights and powers under this Credit Agreement or the
other Loan Documents as any other Bank and may exercise
the same as though it were not the Agent. The terms
"Bank" or "Banks" shall, unless otherwise expressly
indicated, include the Agent in its individual
capacity. Chase and its Affiliates may accept deposits
from, lend money, act as trustee under indentures of,
and generally engage in any kind of business with, the
Borrower, its Subsidiaries and/or any Person who may do
business with or own securities of the Borrower or any
Subsidiary of the Borrower, all as if it were not the
Agent and without any duty to account therefor to the
other Banks.
SECTION 9.4. Bank Credit Decision. Each Bank
acknowledges and agrees that it has, independently and
without reliance upon the Agent or any other Bank and
based on the financial statements and other information
referred to in Section 5.9 and such other documents and
information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Credit
Agreement. Each Bank also acknowledges and agrees that
it will, independently and without reliance upon the
Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or
not taking action under this Credit Agreement and the
other Loan Documents.
SECTION 9.5. Indemnification and Reimbursement.
The Agent shall not be required to take any action
hereunder or to prosecute or defend any suit in respect
of this Credit Agreement or the other Loan Documents
unless indemnified to the Agent's satisfaction by the
Banks against loss, cost, liability and expense. If
any indemnity furnished to the Agent shall become
impaired, it may call for additional indemnity and
cease to do the acts indemnified against until such
additional indemnity is given. In addition, the Banks
agree to indemnify the Agent (to the extent not
reimbursed by the Borrower), ratably according to the
respective principal amounts of the Notes then held by
each of them (or if no Notes are at the time
outstanding, ratably according to either (i) the
respective amounts of their Commitments, or if no
Commitments are outstanding, (ii) the respective
amounts of the Commitments immediately prior to the
time the Commitments ceased to be outstanding), from
and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or
asserted against the Agent in any way relating to or
arising out of this Credit Agreement or any action
taken or omitted by the Agent under this Credit
Agreement or the other Loan Documents (including,
without limitation, any action taken or omitted under
Article II of this Credit Agreement); provided, that no
Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross
negligence or willful misconduct. Each Bank agrees,
however, that it expressly intends, under this Section
9.5, to indemnify the Agent ratably as aforesaid for
all such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses
and disbursements arising out of or resulting from the
Agent's ordinary or contributory negligence. Without
limitation of the foregoing, each Bank agrees to
reimburse the Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including
reasonable counsel fees) incurred by the Agent in
connection with the preparation, execution,
administration, or enforcement of, or legal advice in
respect of rights or responsibilities under, this
Credit Agreement and the other Loan Documents to the
extent that the Agent is not reimbursed for such
expenses by the Borrower. The provisions of this
Section 9.5 shall survive the termination of Credit
Agreement and?or the payment or assignment of any of
the Obligations.
SECTION 9.6. Successor Agent. The Agent may
resign at any time by giving written notice thereof to
the Banks and the Borrower and may be removed as Agent
at any time for cause by the Majority Banks. Upon any
such resignation or removal, the Majority Banks shall
have the right to appoint from among the Banks a
successor Agent (with the consent of the Borrower which
shall not be unreasonably withheld or delayed, provided
that if an Event of Default shall have occurred and be
continuing the consent of the Borrower need not be
obtained). If no successor Agent shall have been so
appointed by the Majority Banks, and shall have
accepted such appointment, within 30 calendar days
after the retiring Agent's giving of notice of
resignation or the Majority Banks' removal of the
retiring Agent, then the retiring Agent may, on behalf
of the Banks and with the concurrence of the Borrower,
appoint a successor Agent, which shall be an Eligible
Assignee. Upon the acceptance of any appointment as
Agent hereunder and under the other Loan Documents by a
successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its
duties and obligations under this Credit Agreement and
the other Loan Documents. After any retiring Agent's
resignation or removal as Agent hereunder and under the
other Loan Documents, the provisions of this Article IX
shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this
Credit Agreement and the other Loan Documents.
SECTION 9.7. Notice of Default. The Agent shall
not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder
unless the Agent shall have received notice from a Bank
or the Borrower referring to this Credit Agreement,
describing such Default or Event of Default and stating
that such notice is a "notice of default." If the
Agent receives such a notice, the Agent shall promptly
give notice thereof to the Banks; provided, however, if
such notice is received from a Bank, the Agent also
shall give notice thereof to the Borrower. The Agent
shall be entitled to take action or refrain from taking
action with respect to such Default or Event of Default
as provided in Section 9.1 and Section 9.2.
SECTION 9.8. Delegation of Duties. The Agent may
execute any of its duties under this Credit Agreement
or the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-
fact selected by it with reasonable care.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Amendments and Waivers. Neither
this Credit Agreement or any other Loan Document to
which the Borrower or any Subsidiary is a party nor any
terms hereof or thereof may be amended, supplemented,
waived or otherwise modified except in accordance with
the provisions of this subsection. Any provision of
this Credit Agreement or any other Loan Document may be
amended, supplemented, waived, or otherwise modified if
and only if such amendment, supplement, waiver or other
modification (x) is in writing, (y) is signed by the
Majority Banks (if the Banks are a party thereto) or by
the Agent with the consent of the Majority Banks (if
the Agent is a party thereto and the Banks are not) and
(z) is signed by each other party thereto except that
in the case of a waiver, the party whose performance is
being waived need not be a signatory; provided no such
amendment, supplement, waiver or other modification
shall do any of the following unless signed by all of
the Banks (if the Banks are a party thereto) and by the
Agent with the consent of all of the Banks (if the
Agent is a party thereto and the Banks are not):
(i) extend the Maturity Date, the date of
payment of any principal, interest or fees, or
the date of payment of any required principal
prepayment;
(ii) reduce the amount of any principal,
interest or fees, the rate of interest paid
with respect to any unpaid principal, interest
or fees, or the amount of any fee payable to
the Banks hereunder;
(iii) change the amount of any Commitment of
any Bank;
(iv) amend, modify, or waive any of the
conditions set forth in Article IV (other than
any condition which refers therein to the
Majority Banks);
(v) amend, modify or waive any provision
which calls for the consent of, the approval
of, or direction from all of the Banks;
(vi) amend, modify or waive any provision
contained in Article III.
(vii) amend, modify or waive any provision of
this Section 10.1 or the definition of
Majority Banks;
(viii) release any Subsidiary Guarantor from
its obligations under the Subsidiary Guaranty;
or
(ix) consent to or permit the assignment or
transfer by the Borrower or any Subsidiary of
the Borrower of any of its rights and
obligations under this Credit Agreement or any
other Loan Document to which it is a party
(other than as a result of a permitted merger
or consolidation pursuant to Section 7.4 which
refers therein to the Majority Banks);
and provided, further, without the prior written
consent of the Agent, no such amendment, supplement,
waiver or modification shall amend, supplement, waive
or otherwise modify any provision of Article IX or any
other provision of any Loan Document if the effect
thereof is to affect the rights or duties of the Agent;
and provided, further, that no amendment, waiver or
consent shall, unless in writing and signed by the
Issuing Bank in addition to the Banks required above to
take such action, affect the rights and duties of the
Issuing Bank with respect to the Letters of Credit and
the Letter of Credit Applications, if any, outstanding
under this Credit Agreement. Any such amendment,
supplement, modification or waiver shall apply to each
of the Banks equally and shall be binding upon the
Banks, the Agent, all future holders of the Notes and
Obligations, and all parties to the Loan Document so
amended, supplemented, waived or otherwise modified.
SECTION 10.2. Notices, Etc. Notices, consents,
requests, approvals, demands and other communications
(collectively "Communications") provided for herein
shall be in writing (including telecopy, telegraphic,
telex or cable communications) and mailed, telecopied,
telegraphed, telexed, cabled or delivered:
If to the Borrower or any of its Subsidiaries,
to it at:
Penn Virginia Corporation
100 Matsonford Road, Suite 200
Radnor, Pennsylvania 19087
Telephone Number: (610) 687-8900
Telecopy Number: (610) 687-3688
Attention: Steven W. Tholen
Vice President and Chief Financial Officer
If to the Agent, to it at:
Chase Bank of Texas, National Association
600 Travis, CTH-20-86
Houston, Texas 77002
Telephone Number: (713) 216-4147
Telecopy Number: (713) 216-4117
Attention: Bob Mertensotto
Vice President
If such notice to the Agent relates to
fundings or payments, with a copy to:
Muniram Appana
Agency Services
Chase Bank of Texas, N.A.
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Telephone Number: (212) 552-7943
Telecopy Number: (212) 552-7490
If to any Bank, as specified on Schedule 1.1
hereto or in the appropriate Commitment
Transfer Supplement pursuant to Section 10.9.
All Communications, except as otherwise expressly
provided in the Loan Documents, must be in writing and
must be mailed, telecopied or delivered, to the
appropriate party at the address set forth herein or
other applicable Loan Document or, as to any party to
any Loan Document, at any other address as may be
designated by it in a written notice sent to all other
parties to such Loan Document in accordance with this
Section 10.2 and (b) any notice, request, demand,
direction, or other communication given by telecopier
must be confirmed within 48 hours by letter mailed or
delivered to the appropriate party at its respective
address. Except as otherwise expressly provided in any
Loan Document, any notice, request, demand, direction,
or other communication required or permitted by any
Loan Document given in compliance with this Section
10.2 shall be effective when received or delivered.
SECTION 10.3. No Waiver; Remedies Cumulative. No
failure on the part of the Agent or any Bank or any
holder of a Note to exercise, and no delay in
exercising, any right, power or privilege hereunder or
under any other Loan Document and no course of dealing
between the Borrower, its Subsidiaries, or any of them
and the Agent or any Bank or any holder of any Note
shall operate as a waiver thereof; nor shall any single
or partial exercise of any such right, power or
privilege, or any abandonment or discontinuance of any
steps to enforce such right, power or privilege,
preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. No
notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or
demand in similar or other circumstances. The remedies
herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 10.4. Costs, Expenses and Taxes.
(a) The Borrower agrees to pay within ten (10)
Business Days after presentation of a composite
statement of account, all reasonable costs and expenses
of the Agent in connection with: (i) the negotiation,
preparation, distribution, execution and delivery of
this Credit Agreement, the Notes and the other Loan
Documents and the documents and instruments referred to
therein, (ii) the syndication, management and agenting
of the Revolving Credit Loans, (iii) the Agent's review
and due diligence (including, without limitation, the
review of the material Oil and Gas Interests and Coal
Interests, and (iv) the negotiation, preparation,
distribution, execution and delivery of any amendment,
supplement, modification, waiver or consent relating to
any of the Loan Documents to which the Borrower or any
Subsidiary of the Borrower is a party (including,
without limitation, as to each of the foregoing, the
reasonable fees and disbursements of legal counsel).
(b) The Borrower shall pay all reasonable out-of-
pocket costs and expenses of the Agent and each Bank in
connection with (i) the preservation of their rights
under, and enforcement of, the Loan Documents to which
the Borrower or any Subsidiary of the Borrower is a
party and the documents and instruments referred to
therein and (ii) any workout, restructuring or
rescheduling of the Obligations or any proceeding under
any Debtor Relief Law with respect to the Borrower or
any Subsidiary of the Borrower (including, without
limitation, in each case, the reasonable fees and
disbursements of counsel for the Agent and the Banks
and allocated costs of internal counsel).
(c) The Borrower shall pay, and hold the Agent
and each of the Banks harmless from and against, any
and all present and future stamp, excise, and other
similar taxes and fees with respect to the foregoing
matters and hold the Agent and each Bank harmless from
and against any and all liabilities with respect to or
resulting from any delay or omission (other than to the
extent attributable to the Agent or such Bank) to pay
such taxes.
(d) Without prejudice to the survival of any
other obligations of the Borrower hereunder, under the
other Loan Documents, the obligations of the Borrower
under this Section 10.4 shall survive the termination
of this Credit Agreement and the payment in full of the
Obligations for a period of fifteen (15) months.
SECTION 10.5. Governing Law. This Credit
Agreement, the Notes and, unless otherwise specified
therein, all other Loan Documents and all other
documents executed in connection herewith or therewith,
shall be deemed to be contracts and agreements executed
by the Borrower, the Agent and the Banks under the laws
of the State of Texas and of the United States and for
all purposes shall be construed in accordance with, and
governed by, the laws of said State and of the United
States. Without limitation of the foregoing, nothing
in this Credit Agreement, the Notes or any other Loan
Document shall be deemed to constitute a waiver of any
rights which any Bank may have under applicable federal
legislation relating to the amount of interest which
such Bank may contract for, take, receive or charge in
respect of any Revolving Credit Loans, including any
right to take, receive, reserve and charge interest at
the rate allowed by the law of the state where such
Bank is located. The Agent, the Banks and the Borrower
further agree that insofar as the provisions of Article
1.04, Subtitle 1, Title 79, of the Revised Civil
Statutes of Texas, 1925, as amended, are applicable to
the determination of the Highest Lawful Rate with
respect to the Notes, the indicated rate ceiling
computed from time to time pursuant to Section (a) of
such Article shall apply to the Notes; provided,
however, that to the extent permitted by such Article,
the Agent may from time to time by notice from the
Agent to the Borrower revise the election of such
interest rate ceiling as such ceiling affects then
current or future balances of the Revolving Credit
Loans outstanding under the Notes. The provisions of
Chapter 15 of Subtitle 3 of the said Title 79 do not
apply to this Credit Agreement or the Notes issued
hereunder.
SECTION 10.6. Interest. Each provision in this
Credit Agreement and each other Loan Document is
expressly limited so that in no event whatsoever shall
the amount paid, or otherwise agreed to be paid, to the
Agent or any Bank for the use, forbearance or detention
of the money to be loaned under this Credit Agreement
or any Loan Document or otherwise (including any sums
paid as required by any covenant or obligation
contained herein or in any other Loan Document which is
for the use, forbearance or detention of such money),
exceed that amount of money which would cause the
effective rate of interest to exceed the Highest Lawful
Rate, and all amounts owed under this Credit Agreement
and each other Loan Document shall be held to be
subject to reduction to the effect that such amounts so
paid or agreed to be paid which are for the use,
forbearance or detention of money under this Credit
Agreement or such Loan Document shall in no event
exceed that amount of money which would cause the
effective rate of interest to exceed the Highest Lawful
Rate. Anything in this Credit Agreement, any Note or
any other Loan Document to the contrary
notwithstanding, with respect to each Note the Borrower
shall never be required to pay unearned interest on
such Note or ever be required to pay interest on such
Note at a rate in excess of the Highest Lawful Rate,
and if the effective rate of interest which would
otherwise be payable with respect to such Note would
exceed the Highest Lawful Rate, or if the holder of
such Note shall receive any unearned interest or shall
receive monies that are deemed to constitute interest
which would increase the effective rate of interest
payable by the Borrower with respect to such Note to a
rate in excess of the Highest Lawful Rate, then (i) the
amount of interest which would otherwise be payable by
the Borrower with respect to such Note shall be reduced
to the amount allowed under applicable law and (ii) any
unearned interest paid by the Borrower or any interest
paid by the Borrower in excess of the Highest Lawful
Rate shall be in the first instance credited on the
principal of such Notes with the excess thereof, if
any, refunded to the Borrower. It is further agreed
that, without limitation of the foregoing, all
calculations of the rate of interest contracted for,
charged or received by any Bank under the Notes held by
it, or under this Credit Agreement or the other Loan
Documents, are made for the purpose of determining
whether such rate exceeds the Highest Lawful Rate
applicable to such Bank (such Highest Lawful Rate being
the Bank's "Maximum Permissible Rate"), shall be made,
to the extent permitted by usury laws applicable to
such Bank (now or hereafter enacted), by (a)
characterizing any non-principal payment as an expense,
fee or premium rather than as interest and (b)
amortizing, prorating and spreading in equal parts
during the period of the full stated term of the
Revolving Credit Loans evidenced by said Notes all
interest at any time contracted for, charged or
received by such Bank in connection therewith.
SECTION 10.7. Survival of Representations and
Warranties. All representations, warranties and
covenants contained or incorporated herein or made in
writing by the Borrower or any Subsidiary of the
Borrower in connection herewith shall survive the
execution and delivery of this Credit Agreement, the
Notes and the other Loan Documents.
SECTION 10.8. Binding Effect. This Credit
Agreement shall become effective when it shall have
been executed by the Borrower, the Agent and each of
the Banks and shall be binding upon and inure to the
benefit of the Borrower and the Banks and their
respective successors and assigns, whether so expressed
or not, provided, that the undertaking of the Banks to
make Revolving Credit Loans to the Borrower shall not
inure to the benefit of any successor or assignee of
the Borrower.
SECTION 10.9. Successors and Assigns;
Participation; Eligible Assignees.
(a)This Credit Agreement shall be binding upon and
inure to the benefit of the Borrower, the Banks, the
Agent, all future holders of the Notes and their
respective successors and assigns, except that the
Borrower may not assign or transfer any of its rights
or obligations under this Credit Agreement without the
prior written consent of each Bank.
(b) Any Bank may, in the ordinary course of its
commercial banking business and in accordance with
applicable law at any time sell to one or more banks or
other entities ("Participants") participating interests
in any Revolving Credit Loan owing to such Bank, any
Note held by such Bank, any Letter of Credit Exposure
held by it, any Commitment of such Bank, including such
Bank's Commitment Percentage of the Letter of Credit
Commitment, or any other interest of such Bank
hereunder and under the other Loan Documents. In the
event of any such sale by a Bank of participating
interests to a Participant, such Bank's obligations
under this Credit Agreement to the other parties to
this Credit Agreement shall remain unchanged, such Bank
shall remain solely responsible for the performance
thereof, such Bank shall remain the holder of any such
Note for all purposes under this Credit Agreement and
the other Loan Documents, and the Borrower and the
Agent shall continue to deal solely and directly with
such Bank in connection with such Bank's rights and
obligations under this Credit Agreement and the other
Loan Documents. The Borrower agrees that if amounts
outstanding under this Credit Agreement and the Notes
are due or unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an
Event of Default, each Participant shall be deemed to
have the right of setoff in respect of its parti
cipating interest in amounts owing under this Credit
Agreement and any Note to the same extent as if the
amount of its participating interest were owing
directly to it as a Bank under this Credit Agreement or
any Note, provided that such Participant shall only be
entitled to such right of setoff if it shall have
agreed in the agreement pursuant to which it shall have
acquired its participating interest to share with the
Banks the proceeds thereof as provided in Section 8.3.
The Borrower also agrees that each Participant shall be
entitled to the benefits of Sections 2.13, 2.15, 2.17
and 10.4 with respect to its participation in the
Commitments and the Utilized Credit outstanding from
time to time, provided, that no Participant shall be
entitled to receive any greater amount pursuant to such
sections than the transferor Bank would have been
entitled to receive in respect of the amount of the
participation transferred by such transferor Bank to
such Participant had no such transfer occurred.
(c) Any Bank may, in the ordinary course of its
commercial banking business and in accordance with
applicable law at any time sell to any Bank or any
Affiliate thereof and, so long as no Event of Default
has occurred and is continuing, with the consent of the
Borrower and the Agent (which in each case shall not be
unreasonably withheld) and if an Event of Default has
occurred and is continuing, without the consent of the
Borrower, to one or more Eligible Assignees, all or any
part of its rights and obligations under this Credit
Agreement, its Commitment, including, without
limitation, its Commitment Percentage of the Letter of
Credit Commitment, the Revolving Credit Loans owning to
it, the Note(s) held by it, the Letter of Credit
Exposure held by it (in respect of any such Bank, the
"Credit Exposure"), pursuant to a Commitment Transfer
Supplement, substantially in the form of Exhibit B,
provided, however, that (i) the parties to such
Commitment Transfer Supplement shall have executed and
delivered to the Agent for its acceptance and recording
in the Register, a Commitment Transfer Supplement,
together with the Note(s) subject to such assignment,
(ii) each such assignment shall be of a constant, and
not a varying, percentage of the transferor Bank's
Credit Exposure, i.e., any such assignment shall
include a constant percentage of, inter alia the rights
and obligations of such transferor Bank with respect to
its Commitment, including, without limitation, its
Commitment Percentage of the Letter of Credit
Commitment, the Revolving Credit Loans owning to it,
the Note(s) held by it, and the Letter of Credit
Exposure held by it, (iii) the amount of each such
assignment (determined as of the date Commitment
Transfer Supplement with respect to such assignment is
delivered to the Agent) shall be in a minimum principal
amount of $5,000,000 and (iv) if the transferor Bank
has retained any Commitment hereunder, such transferor
Bank's remaining Commitment shall be at least
$5,000,000 after giving effect to such assignment. Upon
such execution, delivery, acceptance and recording,
from and after the Transfer Effective Date determined
pursuant to such Commitment Transfer Supplement, (x)
the Eligible Assignee thereunder shall be a party
hereto and, to the extent provided in such Commitment
Transfer Supplement, have the rights and obligations of
a Bank hereunder with a Commitment as set forth
therein, and (y) the transferor Bank thereunder shall,
to the extent provided in such Commitment Transfer
Supplement, be released from its obligations under this
Credit Agreement (and, in the case of a Commitment
Transfer Supplement covering all or the remaining
portion of a transferor Bank's rights and obligations
under this Credit Agreement, such transferor Bank shall
cease to be a party hereto. Such Commitment Transfer
Supplement shall be deemed to amend this Credit
Agreement to the extent, and only to the extent,
necessary to reflect the addition of such Eligible
Assignee and the resulting adjustment of Commitment
Percentages arising from the purchase by such Eligible
Assignee of all or a portion of the rights and
obligations of such transferor Bank under this Credit
Agreement and the Notes. On or prior to the Transfer
Effective Date determined pursuant to such Commitment
Transfer Supplement, the Borrower, at its expense,
shall execute and deliver to the Agent in exchange for
the surrendered Note a new Note to the order of such
Eligible Assignee in an amount equal to the Commitment
and Revolving Credit Loans assumed by it pursuant to
such Commitment Transfer Supplement and, if the
transferor Bank has retained a Commitment and Revolving
Credit Loans hereunder, a new Note to the order of the
transferor Bank in an amount equal to the Commitment
and Revolving Credit Loans retained by it hereunder.
Such new Notes shall be in the form of the Notes
replaced thereby.
(d)The Agent shall maintain at its address
referred to in Section 10.2 a copy of each Commitment
Transfer Supplement delivered to it and a register (the
"Register") for the recordation of the names and
addresses of the Banks and the Commitment of, the
principal amount of the Revolving Credit Loans owing
to, and the Letter of Credit Exposure of, each Bank
from time to time. The entities in the Register shall
be conclusive, in the absence of manifest error, and
the Borrower, the Agent and the Banks may treat each
Person whose name is recorded in the Register as the
owner of the Revolving Credit Loan and/or the Letter of
Credit Exposure recorded therein for all purposes of
this Credit Agreement. The Register shall be available
for inspection by the Borrower and the Bank at any
reasonable time and from time to time upon reasonable
prior notice.
(e)Upon its receipt of a Commitment Transfer
Supplement executed by a transferor Bank and an
Eligible Assignee (and, in the case of an Eligible
Assignee that is not then a Bank or an affiliate
thereof, by the Borrower and the Agent) together with
payment to the Agent of a registration and processing
fee of $2,500, the Agent shall (i) promptly accept such
Commitment Transfer Supplement and (ii) on the Transfer
Effective Date determined pursuant thereto, record the
information contained therein in the Register and give
notice of such acceptance and recordation to the Banks
and the Borrower.
(f)The Borrower hereby authorizes each Bank to
disclose to any Participant or Eligible Assignee and
any prospective Eligible Assignee any and all financial
information in such Bank's possession concerning the
Borrower and its Affiliates which has been delivered to
such Bank by or on behalf of the Borrower pursuant to
this Credit Agreement or which has been delivered to
such Bank by or on behalf of the Borrower in connection
with such Bank's credit evaluation of the Borrower and
its Affiliates prior to becoming a party to this Credit
Agreement, provided that, prior to any such disclosure,
each such Eligible Assignee or Participant or proposed
Eligible Assignee or Participant shall agree in writing
to be bound by the confidentiality provisions contained
in Section 10.11;
(g) If, pursuant to this section, any interest
in this Credit Agreement or any Note is transferred to
any Eligible Assignee which is organized under the laws
of any jurisdiction other than the United States or any
state thereof, the transferor Bank shall cause such
Eligible Assignee, concurrently with the effectiveness
of such transfer, (i) to represent to the transferor
Bank (for the benefit of the transferor Bank, the Agent
and the Borrower) that under applicable law and
treaties no taxes will be required to be withheld by
the Agent, the Borrower or the transferor Bank with
respect to any payments to be made to such Eligible
Assignee in respect of the Revolving Credit Loans, (ii)
to furnish to the transferor Bank (and, in the case of
any Eligible Assignee registered in the Register, the
Agent and the Borrower) either U.S. Internal Revenue
Service Form 4224 or U.S. Internal Revenue Service Form
1001 (wherein such Eligible Assignee claims entitlement
to complete exemption from U.S. federal withholding tax
on all interest payments hereunder) and (iii) to agree
(for the benefit of the transferor Bank, the Agent and
the Borrower) to provide the transferor Bank (and, in
the case of any Eligible Assignee registered in the
Register, the Agent and the Borrower) a new Form 4224
or Form 1001 upon the expiration or obsolescence of any
previously delivered form and comparable statements in
accordance with applicable U.S. laws and regulations
and amendments duly executed and completed by such
Eligible Assignee, and to comply in all material
respects from time to time with all applicable U.S.
laws and regulations with regard to such withholding
tax exemption; and
(h)Nothing herein shall prohibit any Bank from (i)
pledging or assigning any Note to any Federal Reserve
Bank in accordance with applicable law or (ii) selling
or assigning its Notes and its rights under the Credit
Agreement and the other Loan Documents to any Person
after the occurrence and during the continuance of an
Event of Default.
SECTION 10.10. Separability. Should any clause,
sentence, paragraph or section of this Credit Agreement
or any other Loan Document be judicially declared to be
invalid, unenforceable or void, such decision will not
have the effect of invalidating or voiding the
remainder of this Credit Agreement or such other Loan
Document, as the case may be, and the parties hereto
agree that the part or parts of this Credit Agreement
or such Loan Document so held to be invalid,
unenforceable or void will be deemed to have been
stricken here from or therefrom and the remainder will
have the same force and effectiveness as if such part
or parts had never been included herein or therein.
SECTION 10.11. Confidentiality. Each Bank and
the Agent acknowledge that any information furnished to
it directly by the Borrower is and shall be
confidential unless designated otherwise by the
Borrower (however, such Bank or the Agent may disclose
or furnish any or all of such information to its
employees, officers, board members, auditors, counsel
and agents after informing them of the confidential
nature of such information), and each Bank and the
Agent agrees that (i) it will maintain, and direct its
employees, officers, board members, auditors, counsel
and agents to maintain, the confidentiality of such
information, (ii) it will not disclose, and will direct
its employees, officers, board members, auditors,
counsel and agents not to disclose, in any event such
information to any third party (except as herein set
forth) and (iii) it will not use, and will direct its
employees, officers, board members, auditors, counsel
or agents not to use such information for any purposes
other than as contemplated by this Credit Agreement;
provided, however, that such Bank or the Agent or its
employees, officers, board members, auditors, counsel
or agents may disclose any such information that is (i)
in the public domain or that becomes part of the public
domain after the execution hereof, as a result of
filing or recording with any Governmental Authority or
for any other reason other than as a result of any
action of a Bank or the Agent or their respective
employees, officers, board members, auditors, counsel,
agents or Affiliates, (ii) in the possession of such
Bank or the Agent as a result of disclosure by a third
party, except to the extent that the Person making such
disclosure is aware that such third party is bound by a
confidentiality obligation to the Borrower, (iii)
required in such Bank's or the Agent's good faith
judgment to be disclosed in order to comply with any
applicable Requirement of Law, in order to comply with
legal process, or in order to comply with the request
of any Governmental Authority having authority or
purported authority to regulate the Agent or such Bank,
provided, such Bank or the Agent will give notice to
the Borrower of any such requirement, (iv) permitted to
be disclosed to an Eligible Assignee or prospective
Eligible Assignee pursuant to Section 10.9(i) or (v)
disclosed in connection with any suit or other
proceeding brought by the Agent or such Bank against
the Borrower or any Subsidiary of the Borrower or by
the Borrower or any Subsidiary of the Borrower against
the Agent or such Bank. Each Bank and the Agent agrees
that if it is required by any applicable Requirement of
Law to disclose any confidential information, such Bank
or the Agent will, as soon as practicable notify the
Borrower of the applicable Requirement of Law and the
date on which a response to the same is due from it,
provided that this sentence shall not apply to any
disclosure the Agent or any Bank is required by
applicable Requirements of Law to make to any
Governmental Authority having authority to regulate the
Agent or such Bank.
SECTION 10.12. Marshalling; Recapture. Neither
the Agent nor any Bank shall be under any obligation to
marshal any assets in favor of the Borrower or any
other Person or against or in payment of any or all of
the Obligations. To the extent any Bank receives any
payment by or on behalf of the Borrower, which payment
or any part thereof is subsequently invalidated,
declared to be fraudulent or preferential, set aside or
required to be repaid to the Borrower or its estate,
trustee, receiver, custodian or any other party under
any Debtor Relief Law, state or federal law, common law
or equitable cause, then to the extent of such payment
or repayment, the obligation or part thereof which has
been paid, reduced or satisfied by the amount so repaid
shall be reinstated by the amount so repaid and shall
be included within the liabilities of the Borrower to
such Bank as of the date such initial payment,
reduction or satisfaction occurred.
SECTION 10.13. Representation by the Banks. Each
of the Banks represents that it is the present
intention of such Bank to acquire its Notes for its own
account or for the account of its Affiliates and not
with a view to the distribution or sale thereof,
subject, nevertheless to the necessity that such Bank
remain in control at all times of the disposition of
property held by it for its own account; it being
understood that the foregoing representations shall not
affect the characterization of the Revolving Credit
Loans as commercial lending transactions.
SECTION 10.14. No Third Party Beneficiaries. The
agreement of each Bank to make its Revolving Credit
Loans on the terms and conditions set forth in this
Credit Agreement, is solely for the benefit of the
Borrower, and no other Person (including any obligor,
contractor, subcontractor, supplier or materialman
furnishing supplies, goods or services to or for the
benefit of the Borrower) shall have any rights
hereunder, as against the Agent or any Bank, under any
other Loan Document, or with respect to the Revolving
Credit Loans or the proceeds thereof.
SECTION 10.15. Execution in Counterparts. This
Credit Agreement may be executed in any number of
counterparts and by different parties hereto in
separate counterparts, each of which when so executed
shall be deemed to be an original and all of which
taken together shall constitute one and the same
agreement.
SECTION 10.16. Jurisdiction; Consent to Service
of Process.
(a) Each party to this Credit Agreement hereby
irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of any
Texas State court or Federal court of the United States
of America sitting in Harris County, Texas, in any
action or proceeding arising out of or relating to this
Credit Agreement or the Loan Documents, or for
recognition or enforcement of any order or judgment,
and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of
any such action or proceeding may be heard and
determined in such Texas State court, or to the extent
permitted by law, in such Federal court in Harris
County, Texas. Each party to this Credit Agreement
irrevocably consents to the service of process out of
any Texas State court or Federal court of the United
States of America sitting in Harris County, Texas in
any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage
prepaid, to such party at its address referred to in
Section 10.2. Each Party to this Credit Agreement
agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any
other manner provided by law. Nothing in this Credit
Agreement shall affect any right that the Agent or any
Bank may otherwise have to bring any action or
proceeding relating to this Credit Agreement or the
Loan Documents against the Borrower or any Subsidiary
of the Borrower or its respective properties in the
courts of any other jurisdiction.
(b)Each party to this Credit Agreement hereby
irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any
objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding
arising out of or relating to this Credit Agreement or
the Loan Documents in any Texas State or Federal court
sitting in Harris County, Texas. Each Party to this
Credit Agreement hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or
proceeding in any such court.
SECTION 10.17. Credit Agreement Governs
Conflicts. To the fullest extent possible, the terms
and provisions of the Loan Documents shall be read
together with the terms and provisions of this Credit
Agreement so that the terms and provisions thereof do
not conflict with the terms and provisions of this
Credit Agreement; provided, however, notwithstanding
the foregoing, in the event that any of the terms of
provisions of the Loan Documents conflict with any
terms or provisions of this Credit Agreement, the terms
or provisions of this Credit Agreement shall govern and
control for all purposes, provided that the inclusion
of additional terms and provisions, supplemental rights
or remedies in favor of the Agent in any Loan Document
shall not be deemed to be a conflict with this Credit
Agreement.
SECTION 10.18. Jury Trial. EACH PARTY TO ANY LOAN
DOCUMENT, IN EACH CASE FOR ITSELF, ITS SUCCESSORS AND
ASSIGNS, IRREVOCABLY WAIVES TO THE FULLEST EXTENT
PERMITTED BY LAW, ITS RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF ANY LOAN DOCUMENT. The scope of the foregoing
waiver is intended to be all-encompassing of any and
all disputes that may be filed in any court and that
relate to the subject matter of this transaction,
including, without limitation, contract claims, tort
claims, breach of duty claims, and all other common law
and statutory claims. Borrower acknowledges that these
waivers are a material inducement to Agent's and each
Bank's agreement to enter into a business relationship,
that Agent and each Bank has already relied on this
waiver in entering into this Credit Agreement, and that
Agent and each Bank will continue to rely on this
waiver in related future dealings. Borrower further
warrants and represents that it has reviewed this
waiver with its legal counsel, and that it knowingly
and voluntarily agrees to this waiver following
consultation with legal counsel. THE WAIVER IN THIS
SECTION 10.18 IS IRREVOCABLE, MEANING THAT IT MAY NOT
BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
SUPPLEMENTS, OR REPLACEMENTS TO OR OF THIS OR ANY OTHER
LOAN DOCUMENT. In the event of litigation, this Credit
Agreement may be filed as a written consent to a trial
by the court.
SECTION 10.19. FINAL AGREEMENT OF THE PARTIES.
THIS CREDIT AGREEMENT (INCLUDING THE EXHIBITS HERETO),
THE NOTES AND THE OTHER LOAN DOCUMENTS TO WHICH THE
BORROWER OR ANY OF ITS SUBSIDIARIES IS A PARTY
CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION
26.02(A) OF THE TEXAS BUSINESS AND COMMERCE CODE, AND
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
THERE ARE NO ORAL AGREEMENTS BETWEEN THE
PARTIES.
IN WITNESS WHEREOF, the parties hereto have
caused this Credit Agreement to be executed by their
respective officers thereunto duly authorized, as of
the date first above written.
BORROWER:
PENN VIRGINIA CORPORATION
By:
_________________________
/s/Steven W. Tholen,
Vice President
and Chief Financial Officer
AGENT:
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION,
(formerly known as
Texas Commerce Bank National Association)
as Agent
By:_________________________________
Name:________________________________
Title:_______________________________
BANKS:
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION,
(formerly known as Texas Commerce Bank National
Association)
By:_________________________________
Name:_______________________________
Title:______________________________
FIRST UNION NATIONAL BANK
(formerly known as First Union
National Bank of North Carolina),
as a Bank and as Syndication Agent
By:__________________________________
Name:________________________________
Title:_______________________________
THE FIRST NATIONAL BANK OF
CHICAGO, as a Bank and as
Documentation Agent
By:__________________________________
Name:________________________________
Title:_______________________________
PNC BANK, NATIONAL ASSOCIATION
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1
SECTION 1.1. Certain Defined Terms 1
SECTION 1.2. Accounting Terms. 24
SECTION 1.3. Interpretation. 24
ARTICLE II REVOLVING CREDIT LOANS 25
SECTION 2.1. Revolving Credit Loans 25
SECTION 2.2. Borrowing Procedure for Revolving Credits 26
SECTION 2.3. Issuing the Letters of Credit. 27
SECTION 2.4. Conversions or Continuation of Borrowings 29
SECTION 2.5. Fees 30
SECTION 2.6. Notes 32
SECTION 2.7. Interest on Revolving Credit Loans
and Payment Dates 32
SECTION 2.8. Interest on Overdue Amounts 33
SECTION 2.9. Voluntary Termination and Reduction of the
Total Commitment 33
SECTION 2.10. Voluntary Prepayment of Revolving
Credit Loans 34
SECTION 2.11. Mandatory Payments on Revolving Credit Loans34
SECTION 2.12. Alternate Rate of Interest 35
SECTION 2.13. Change in Circumstances 35
SECTION 2.14. Change in Legality 37
SECTION 2.15. Funding Losses 38
SECTION 2.16. Method of Payments Pro Rata Treatment 39
SECTION 2.17. Taxes 40
SECTION 2.18. Sharing of Payments and Setoffs 41
SECTION 2.19. Limitation on Reimbursement; Mitigation 42
SECTION 2.20. Use of Proceeds 42
SECTION 2.21. Mandatory Termination of Total Commitment;
Extension of Maturity Date 42
SECTION 2.22. Replacement of Banks 43
ARTICLE III BORROWING BASE 44
SECTION 3.1. Borrowing Base Asset Reports 44
SECTION 3.2. Determination of Total Borrowing Base. 44
SECTION 3.3. The Designated Borrowing Base. 45
SECTION 3.4. Special Determination of Total
Borrowing Base. 45
SECTION 3.5. Initial Total Borrowing Base; Initial Available
Borrowing Base. 46
ARTICLE IV CONDITIONS PRECEDENT 46
SECTION 4.1. Conditions Precedent to the Revolving
Credit Loans 46
SECTION 4.2. Additional Conditions Precedent 48
SECTION 4.3. General 49
ARTICLE V REPRESENTATIONS AND WARRANTIES 49
SECTION 5.1. Organization; Corporate Powers 49
SECTION 5.2. Authority 50
SECTION 5.3. Use of Proceeds 50
SECTION 5.4. No Conflict 50
SECTION 5.5. Gas Balancing Agreements and Advance Payment
Contracts 51
SECTION 5.6. Borrowing Base Assets 51
SECTION 5.7. Ownership of Properties Generally 52
SECTION 5.8. No Defaults 52
SECTION 5.9. Financial Position; No Material Adverse
Change 52
SECTION 5.10. Litigation; Adverse Effects 52
SECTION 5.11. ERISA 53
SECTION 5.12. Payment of Taxes 53
SECTION 5.13. Environmental Matters 53
SECTION 5.14. Governmental Regulation 55
SECTION 5.15. Disclosure 55
SECTION 5.16. Subsidiaries 55
SECTION 5.17. Solvency 55
SECTION 5.18. Business 56
SECTION 5.19. Material Contracts 56
SECTION 5.20. Licenses, Permits, Etc 56
SECTION 5.21. Fiscal Year 56
SECTION 5.22. Year 2000 56
ARTICLE VI AFFIRMATIVE COVENANTS 57
SECTION 6.1. Information 57
SECTION 6.2. Business of the Borrower 60
SECTION 6.3. Corporate Existence 60
SECTION 6.4. Right of Inspection 60
SECTION 6.5. Maintenance of Insurance 60
SECTION 6.6. Payment of Taxes and Claims 60
SECTION 6.7. Compliance with Laws and Documents 61
SECTION 6.8. Operation of Properties and Equipment 61
SECTION 6.9. Environmental Law Compliance and Indemnity 61
SECTION 6.10. ERISA Reporting Requirements 62
SECTION 6.11. Subsidiary Guaranty 63
SECTION 6.12. Permits, Licenses. 63
SECTION 6.13. Additional Documents 63
SECTION 6.14. Title Assurances 63
ARTICLE VII NEGATIVE COVENANTS 63
SECTION 7.1. 64
SECTION 7.2. Restrictions on Distributions 65
SECTION 7.3. Negative Pledge 66
SECTION 7.4. Consolidation, Mergers and Acquisitions;
Fundamental Changes 66
SECTION 7.5. Investments 67
SECTION 7.6. Transactions with Affiliates 67
SECTION 7.7. Agreements 67
SECTION 7.8. Sales of Assets 68
SECTION 7.9. ERISA 68
SECTION 7.10. Sales and Leasebacks 69
SECTION 7.11. Margin Regulation 69
SECTION 7.12. Amendment to Organizational Documents 69
SECTION 7.13. Fiscal Year; Fiscal Quarter 69
SECTION 7.14. Hedge Transactions 69
SECTION 7.15. Financial Covenants 70
ARTICLE VIII EVENTS OF DEFAULT 70
SECTION 8.1. Events of Default 70
SECTION 8.2. Remedies 73
SECTION 8.3. Right of Setoff 73
SECTION 8.4. Indemnity 74
ARTICLE IX THE AGENT 74
SECTION 9.1. Authorization and Action 74
SECTION 9.2. Agent's Reliance; Exculpatory Provisions, Etc75
SECTION 9.3. The Agent in its Individual Capacity and
Affiliates 76
SECTION 9.4. Bank Credit Decision 76
SECTION 9.5. Indemnification and Reimbursement 76
SECTION 9.6. Successor Agent 77
SECTION 9.7. Notice of Default 78
SECTION 9.8. Delegation of Duties 78
ARTICLE X MISCELLANEOUS 78
SECTION 10.1. Amendments and Waivers 78
SECTION 10.2. Notices, Etc 79
SECTION 10.3. No Waiver; Remedies Cumulative 80
SECTION 10.4. Costs, Expenses and Taxes 81
SECTION 10.5. Governing Law 81
SECTION 10.6. Interest 82
SECTION 10.7. Survival of Representations and Warranties 83
SECTION 10.8. Binding Effect 83
SECTION 10.9. Successors and Assigns; Participation;
Eligible Assignees 83
SECTION 10.10. Separability 86
SECTION 10.11. Confidentiality 86
SECTION 10.12. Marshalling; Recapture 87
SECTION 10.13. Representation by the Banks 87
SECTION 10.14. No Third Party Beneficiaries 87
SECTION 10.15. Execution in Counterparts 87
SECTION 10.16. Jurisdiction; Consent to Service of Process87
SECTION 10.17. Credit Agreement Governs Conflicts 88
SECTION 10.18. Jury Trial 88
SECTION 10.19. FINAL AGREEMENT OF THE PARTIES 89
SCHEDULES
Schedule 1.1 - Name and Address of the Banks and
Commitment Amounts
Schedule 5.11 - Summary of Existing Benefit Plans
Schedule 5.16 - Subsidiaries
Schedule 7.1 - Description of Existing Debt as of the
Effective Date
Schedule 7.5 - Description of Existing Investments
EXHIBITS
Exhibit A - Form of Borrowing Request
Exhibit B - Form of Commitment Transfer Supplement
Exhibit C - Form of Letter of Credit Application
Exhibit D - Form of Note
Exhibit E - Form of Notice of Conversion or Continuation
Exhibit F - Form of Subsidiary Guaranty
EXHIBIT 21
PENN VIRGINIA CORPORATION
SUBSIDIARIES OF REGISTRANT
<TABLE>
NAME PERCENTAGES STATE
<S> <C> <C>
Penn Virginia Holding Corp. 100% Delaware
Penn Virginia Coal Company 100% Virginia
Penn Virginia Equities Corporation 100% Delaware
Penn Virginia Oil & Gas Corporation 100% Virginia
Penn Virginia Energy Co. 100% Virginia
Concord Land Company 100% Delaware
Kanawha Rail Corp. 100% Virginia
Paragon Coal Corporation 100% Virginia
Savannah Land Company 100% Delaware
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report dated February 16, 2000, included in
the Annual Report of Penn Virginia Corporation on Form 10-K for
the year ended December 31, 1999, into Penn Virginia Corporation's
previously filed Registration Statements Nos. 33-40430, 33-59647,
33-59651 and 33-96463 on Form S-8.
ARTHUR ANDERSEN LLP
Houston, Texas
March 29, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 657
<SECURITIES> 0
<RECEIVABLES> 6,880
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,321
<PP&E> 267,820
<DEPRECIATION> 76,553
<TOTAL-ASSETS> 274,011
<CURRENT-LIABILITIES> 7,074
<BONDS> 0
0
0
<COMMON> 55,762
<OTHER-SE> 98,581
<TOTAL-LIABILITY-AND-EQUITY> 274,011
<SALES> 41,138
<TOTAL-REVENUES> 47,135
<CGS> 4,311
<TOTAL-COSTS> 4,311
<OTHER-EXPENSES> 22,109
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,298
<INCOME-PRETAX> 18,834
<INCOME-TAX> 4,330
<INCOME-CONTINUING> 14,504
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,504
<EPS-BASIC> 1.73
<EPS-DILUTED> 1.71
</TABLE>
