SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 4, 1996
Berry Petroleum Company
(Exact name of registrant as specified in its charter)
Delaware 1-9735 77-0079387
(State or other (Commission IRS Employer
jurisdiction of File Number) Identification No.
incorporation)
28700 Hovey Hills Road, P.O. Bin X, Taft, CA 93268
(Address of principal executive offices)
Registrant's telephone number, including area code (805) 769-8811
N/A
(Former name or former address, if changed since last report)
<PAGE> 2
Item 5. Other Events.
On December 4, 1996 Berry Petroleum Company entered
into a three-year unsecured revolving line of credit agreement in
the amount of $150 million with NationsBank of Texas. The
initial borrowing base will be $50 million which can be
redetermined periodically based on the needs of the Company,
agreement with the Bank and approval of the Company's Board of
Directors. Initial borrowings under the agreement will bear
interest at LIBOR plus 60 basis points, with a committment fee on
the unused portion of the borrowing base of 20 basis points.
Item 7. Financial Statements and Exhibits.
(a). Financial Statements. None required.
(b). Exhibits.
10.1 Credit Agreement, dated as of December
1, 1996, by and between the Registrant and
NationsBank of Texas, N.A.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.Date:
December 18, 1996 BERRY PETROLEUM COMPANY,
a Delaware corporation
By: Kenneth A. Olson,
Corporate Secretary and
Treasurer
CREDIT AGREEMENT
among
BERRY PETROLEUM COMPANY
as Borrower,
NATIONSBANK OF TEXAS, N.A.
as Agent
and
The Financial Institutions Listed on Schedule 1 Hereto,
as Banks
$150,000,000
dated
December 1, 1996
<PAGE>
ARTICLE I TERMS DEFINED . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . 1
SECTION 1.2. Accounting Terms and Determinations . . . . 16
SECTION 1.3. Petroleum Terms . . . . . . . . . . . . . . 17
ARTICLE II THE CREDIT . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.1. Commitments . . . . . . . . . . . . . . . . 17
SECTION 2.2. Method of Borrowing . . . . . . . . . . . . 20
SECTION 2.3. Method of Obtaining Letters of Credit . . . 23
SECTION 2.4. Notes . . . . . . . . . . . . . . . . . . . 24
SECTION 2.5. Interest Rates. . . . . . . . . . . . . . . 24
SECTION 2.6. Mandatory Repayments
after Conversion Date. . . . . . . . . . . . 25
SECTION 2.7. Voluntary Prepayments . . . . . . . . . . . 25
SECTION 2.8. Mandatory Reduction of Commitments. . . . . 26
SECTION 2.9. Voluntary Reduction of Commitments
and Prepayment of Loans. . . . . . . . . . . 26
SECTION 2.10. Termination of Commitments; Final
Maturity; Maturity of Eurodollar and
Competitive Bid Loans. . . . . . . . . . . . 26
SECTION 2.11. Application of Payments . . . . . . . . . . 26
SECTION 2.12. Commitment Fee. . . . . . . . . . . . . . . 26
SECTION 2.13. Agency Fee. . . . . . . . . . . . . . . . . 27
ARTICLE III BORROWING BASE . . . . . . . . . . . . . . . . . . 27
SECTION 3.1. Reserve Report; Proposed Borrowing Base . . 27
SECTION 3.2. Scheduled Redeterminations of the
Borrowing
Base; Procedures and Standards . . . . . . . 27
SECTION 3.3. Special Redetermination . . . . . . . . . . 28
SECTION 3.4. Borrowing Base Deficiency . . . . . . . . . 28
SECTION 3.5. Initial Borrowing Base. . . . . . . . . . . 29
ARTICLE IV GENERAL PROVISIONS . . . . . . . . . . . . . . . . 29
SECTION 4.1. Delivery and Endorsement of Notes . . . . . 29
SECTION 4.2. General Provisions as to Payments . . . . . 29
SECTION 4.3. Computation of Interest . . . . . . . . . . 30
SECTION 4.4. Overdue Principal and Interest. . . . . . . 30
SECTION 4.5. Capital Adequacy. . . . . . . . . . . . . . 30
SECTION 4.6. Taxes . . . . . . . . . . . . . . . . . . . 31
SECTION 4.7. Limitation on Number of Eurodollar Loans
and Competitive Bid Loans. . . . . . . . . . 31
<PAGE>
SECTION 4.8. Foreign Lenders, Participants, and
Assignees. . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.9. Replacement of a Bank . . . . . . . . . . . 32
ARTICLE V SPECIAL PROVISIONS REGARDING EURODOLLAR LOANS . . . 32
SECTION 5.1. Funding Losses. . . . . . . . . . . . . . . 32
SECTION 5.2. Basis for Determining Interest Rate
Applicable
to Eurodollar Loans Inadequate . . . . . . . 32
SECTION 5.3. Illegality of Eurodollar Loans. . . . . . . 33
SECTION 5.4. Increased Cost of Eurodollar Loans. . . . . 33
SECTION 5.5. Alternative Loans Substituted for
Affected Eurodollar Loans. . . . . . . . . . 34
SECTION 5.6. Discretion of Banks as to Manner of
Funding . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VI CONDITIONS . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.1. Conditions to Initial Borrowing and
Participation in Letter of Credit Exposure . 35
SECTION 6.2. Conditions to Each Borrowing and
Participation
in Letter of Credit Exposure . . . . . . . . 36
SECTION 6.3. Materiality of Conditions . . . . . . . . . 37
ARTICLE VII REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 37
SECTION 7.1. Corporate Existence and Power (Borrower). . 37
SECTION 7.2. Existence and Power (Subsidiaries). . . . . 37
SECTION 7.3. Corporate and Governmental
Authorization; Contravention . . . . . . . . 37
SECTION 7.4. Binding Effect. . . . . . . . . . . . . . . 38
SECTION 7.5. Financial Information . . . . . . . . . . . 38
SECTION 7.6. Litigation. . . . . . . . . . . . . . . . . 38
SECTION 7.7. ERISA . . . . . . . . . . . . . . . . . . . 38
SECTION 7.8. Taxes and Filing of Tax Returns . . . . . . 39
SECTION 7.9. Ownership of Properties Generally . . . . . 40
SECTION 7.10. Mineral Properties. . . . . . . . . . . . . 40
SECTION 7.11. [intentionally deleted] . . . . . . . . . . 40
SECTION 7.12. Licenses, Permits, Etc. . . . . . . . . . . 40
SECTION 7.13. Compliance with Law . . . . . . . . . . . . 40
SECTION 7.14. Full Disclosure . . . . . . . . . . . . . . 41
SECTION 7.15. Corporate Structure . . . . . . . . . . . . 41
SECTION 7.16. Environmental Matters . . . . . . . . . . . 41
SECTION 7.17. Burdensome Obligations. . . . . . . . . . . 42
SECTION 7.18. Fiscal Year . . . . . . . . . . . . . . . . 42
SECTION 7.19. No Default. . . . . . . . . . . . . . . . . 42
SECTION 7.20. Government Regulation . . . . . . . . . . . 42
SECTION 7.21. Insider . . . . . . . . . . . . . . . . . . 42
<PAGE>
SECTION 7.22. Gas Balancing Agreements and Advance
Payment Contracts. . . . . . . . . . . . . . . . . . 42
ARTICLE VIII AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . 43
SECTION 8.1. Information . . . . . . . . . . . . . . . . 43
SECTION 8.2. Maintenance of Existence. . . . . . . . . . 45
SECTION 8.3. Right of Inspection . . . . . . . . . . . . 45
SECTION 8.4. Maintenance of Insurance. . . . . . . . . . 46
SECTION 8.5. Payment of Taxes and Claims . . . . . . . . 46
SECTION 8.6. Compliance with Laws and Documents. . . . . 46
SECTION 8.7. Operation of Properties and Equipment . . . 46
SECTION 8.8. Environmental Law Compliance. . . . . . . . 47
SECTION 8.9. ERISA Reporting Requirements. . . . . . . . 47
SECTION 8.10. Additional Documents. . . . . . . . . . . . 48
ARTICLE IX NEGATIVE COVENANTS . . . . . . . . . . . . . . . . 48
SECTION 9.1. Incurrence of Debt. . . . . . . . . . . . . 49
SECTION 9.2. Restrictions on Distributions . . . . . . . 49
SECTION 9.3. Negative Pledge . . . . . . . . . . . . . . 49
SECTION 9.4. Consolidations and Mergers. . . . . . . . . 49
SECTION 9.5. Asset Dispositions. . . . . . . . . . . . . 49
SECTION 9.6. Amendments to Organizational Documents. . . 49
SECTION 9.7. Use of Proceeds. . . . . . . . . . . . . . 50
SECTION 9.8. Investments . . . . . . . . . . . . . . . . 50
SECTION 9.9. Transactions with Affiliates. . . . . . . . 50
SECTION 9.10. ERISA . . . . . . . . . . . . . . . . . . 50
SECTION 9.11. Hedge Transactions. . . . . . . . . . . . . 50
SECTION 9.12. Fiscal Year . . . . . . . . . . . . . . . . 50
SECTION 9.13. Change in Business. . . . . . . . . . . . . 51
ARTICLE X FINANCIAL COVENANTS . . . . . . . . . . . . . . . . 51
SECTION 10.1. Minimum Consolidated Tangible Net Worth
of Borrower. . . . . . . . . . . . . . . . . . . . . 51
ARTICLE XI DEFAULTS . . . . . . . . . . . . . . . . . . . . . 51
SECTION 11.1. Events of Default. . . . . . . . . . . . . 51
ARTICLE XII AGENT . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 12.1. Appointment and Authorization. . . . . . . 53
SECTION 12.2. Agent and Affiliates . . . . . . . . . . . 53
SECTION 12.3. Action by Agent. . . . . . . . . . . . . . 54
SECTION 12.4. Consultation with Experts. . . . . . . . . 54
SECTION 12.5. LIABILITY OF AGENT . . . . . . . . . . . . 54
<PAGE>
SECTION 12.6. Delegation of Duties . . . . . . . . . . . 54
SECTION 12.7. Indemnification. . . . . . . . . . . . . . 55
SECTION 12.8. Credit Decision. . . . . . . . . . . . . . 55
SECTION 12.9. Successor Agent. . . . . . . . . . . . . . 55
ARTICLE XIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . 56
SECTION 13.1. Notices. . . . . . . . . . . . . . . . . . 56
SECTION 13.2. No Waivers . . . . . . . . . . . . . . . . 56
SECTION 13.3. Expenses; Documentary Taxes;
Indemnification . . . . . . . . . . . . . . . . . . 56
SECTION 13.4. Right and Sharing of Set-Offs. . . . . . . 57
SECTION 13.5. Amendments and Waivers . . . . . . . . . . 58
SECTION 13.6. Survival . . . . . . . . . . . . . . . . . 58
SECTION 13.7. Limitation on Interest . . . . . . . . . . 58
SECTION 13.8. Invalid Provisions . . . . . . . . . . . . 59
SECTION 13.9. Waiver of Consumer Credit Laws . . . . . . 59
SECTION 13.10. Successors and Assigns . . . . . . . . . . 59
SECTION 13.11. TEXAS LAW. . . . . . . . . . . . . . . . . 60
SECTION 13.12. [Intentionally Deleted]. . . . . . . . . . 60
SECTION 13.13. Counterparts; Effectiveness. . . . . . . . 60
SECTION 13.14. No Third Party Beneficiaries . . . . . . . 61
SECTION 13.15. COMPLETE AGREEMENT . . . . . . . . . . . . 61
SECTION 13.16. WAIVER OF JURY TRIAL . . . . . . . . . . . 61
EXHIBITS
EXHIBIT A FORM OF COMMITTED NOTE
EXHIBIT B FORM OF COMPETITIVE BID NOTE
EXHIBIT C FORM OF COMPETITIVE BID REQUEST
EXHIBIT D FORM OF NOTICE OF COMPETITIVE BID REQUEST
EXHIBIT E FORM OF COMPETITIVE BID
EXHIBIT F FORM OF REQUEST FOR COMMITTED LOANS
EXHIBIT G FORM OF REQUEST FOR LETTER OF CREDIT
EXHIBIT H FORM OF CERTIFICATE OF OWNERSHIP
EXHIBIT I FORM OF CERTIFICATE OF FINANCIAL OFFICER
EXHIBIT J FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
SCHEDULES
SCHEDULE 1 FINANCIAL INSTITUTIONS
SCHEDULE 2 INVESTMENT GUIDELINES
SCHEDULE 3 LITIGATION
SCHEDULE 4 ENVIRONMENTAL DISCLOSURE
SCHEDULE 5 PRINCIPAL SHAREHOLDERS
<PAGE> 1
THIS AGREEMENT (herein so called) is entered into effective as of
the 1st day of December, 1996, among BERRY PETROLEUM COMPANY, a Delaware
corporation ("Borrower"), NATIONSBANK OF TEXAS, N.A., as Agent ("Agent"),
and the financial institutions listed on Schedule 1 hereto as Banks
(individually a "Bank" and collectively "Banks").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Banks provide Borrower with a
revolving/term credit facility and Banks are willing to provide such
facility on the terms and subject to the conditions hereinafter set
forth; and
WHEREAS, pursuant to Article XII of this Agreement, NationsBank of
Texas, N.A. has been appointed Agent for Banks hereunder.
NOW, THEREFORE, in consideration of the premises, the
representations, warranties, covenants and agreements contained herein,
and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Borrower, Agent and Banks agree as
follows:
ARTICLE I
TERMS DEFINED
SECTION 1.1. Definitions. The following terms, as used herein,
have the following meanings:
"Additional Interest" has the meaning set forth in Section 2.5(d).
"Adjusted Eurodollar Rate" applicable to any Interest Period, means
a rate per annum equal to the quotient obtained (rounded upwards, if
necessary to the next higher 1/100 of 1%) by dividing (i) the applicable
Eurodollar Rate by (ii) 1.00 minus the Eurodollar Reserve Percentage.
"Advance Payment Contract" means any contract whereby 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 Mineral Interests owned by
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 "take
or pay" provision in any gas sales or
<PAGE> 2
purchase contract or any other similar contract shall not, in and of itself,
constitute such contract as an Advance Payment Contract for the purposes
hereof.
"Affiliate" means, as to any Person, any Subsidiary of such Person,
or any other Person which, directly or indirectly, controls, is
controlled by, or is under common control with, such Person and, with
respect to Borrower, means, any director or executive officer of Borrower
and any Person who holds ten percent (10%) or more of the voting stock of
Borrower. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common
control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of voting securities or partnership interests, or by
contract or otherwise.
"Agent" means NationsBank of Texas, N.A. in its capacity as agent
for Banks hereunder or any successor thereto.
"Agreement" shall mean this Agreement as the same may hereafter be
modified, amended or supplemented pursuant to Section
13.5.
"Applicable Environmental Law" means any Law affecting any real or
personal property owned, operated or leased by Borrower or any Subsidiary
of Borrower or any other operation of Borrower or any Subsidiary of
Borrower in any way pertaining to health or the environment, including,
without limitation, health and environmental Laws, and further including
without limitation, (a) the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986 (as amended from time to time,
herein referred to as "CERCLA"), (b) the Resource Conservation and
Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980,
the Solid Waste Recovery Act of 1976, the Used Oil Recycling Act of 1980,
the Solid Waste Disposal Act of 1980, and the Hazardous and Solid Waste
Amendments of 1984 (as amended from time to time herein referred to as
"RCRA"), (c) the Safe Drinking Water Act, as amended from time to time,
(d) the Toxic Substances Control Act, as amended from time to time, (e)
the Clean Air Act, as amended from time to time, (f) the Occupational
Safety and Health Act of 1970, as amended from time to time, and (g) any
Laws which may now or hereafter require removal of asbestos or other
hazardous wastes or impose any liability related to asbestos or other
hazardous wastes. The terms "hazardous substance", "petroleum",
"release" and "threatened release" have the meanings specified in CERCLA,
and the terms "solid waste" and "disposal" (or "disposed") have the
meanings specified in RCRA; provided, that in the event either CERCLA or
RCRA is amended so as to broaden the meaning of any term defined thereby,
such broader meaning shall apply subsequent to the effective date of such
amendment with respect to all provisions of this Agreement; and provided
further, that to the extent the Laws of any nation, province, state or
political subdivision of any of the foregoing in which any real or
personal property owned, operated or leased by Borrower or any Subsidiary
of Borrower is located establish a meaning for "hazardous substance",
"petroleum", "release", "solid waste" or "disposal" which is broader than
that specified in either CERCLA or RCRA, such broader meaning shall
apply.
<PAGE> 3
"Applicable Margin" means, on any date, with respect to each Type of
Loan, the amount determined in accordance with the table below by
reference to the ratio of (a) Outstanding Credit on such date, to (b) the
Borrowing Base in effect on such date; provided, that, so long as the
Outstanding Credit is equal to or less than $50,000,000, the Applicable
Margin for Base Rate Loans shall be 0% and the Applicable Margin for
Committed Eurodollar Loans shall be .60%:
Ratio of Outstanding Applicable Margin Applicable Margin for
Credit to Borrowing Base for Base Rate Loans Committed Eurodollar Loans
<= .50 to 1 0% .60%
>.50 to 1 <= .75 to 1 0% .75%
> .75 to 1 .25% 1.00%
"Approved Petroleum Engineer" means DeGolyer and MacNaughton or any
other reputable firm of independent petroleum engineers as shall be
selected by Borrower and approved by the Required Banks, such approval
not to be unreasonably withheld.
"Authorized Officer" means, as to any Person, its Chief Executive
Officer, its President, its Chief Financial Officer, any of its Vice
Presidents, its Treasurer or its Corporate Secretary.
"Availability" means, as of any date, the remainder of (a) the
Borrowing Base in effect on such date, minus (b) the Outstanding Credit
on such date.
"Bank" means any financial institution reflected on Schedule 1
hereto as having a Commitment and its successors and permitted Assignees,
and "Banks" shall mean all of Banks.
"Base Rate" means the floating rate of interest established from
time to time by Agent as its "prime rate" of interest, which rate is not
the lowest rate of interest charged by Agent, each change in the Base
Rate to become effective without notice to Borrower on the effective date
of each such change.
"Base Rate Loan" means a Loan bearing interest with reference to the
Base Rate.
"Borrower" means Berry Petroleum Company, a Delaware corporation.
"Borrowing" means a Competitive Bid Borrowing or a Committed
Borrowing.
"Borrowing Base" has the meaning set forth in Section 3.2 hereof.
"Borrowing Base Deficiency" means, as of any date, the amount, if
any, by which the Outstanding Credit on such date exceeds the Borrowing
Base in effect on such date; provided, that, for purposes of determining
the existence and amount of any Borrowing Base Deficiency, Letter of
Credit Exposure will not be deemed to be outstanding to the extent it is
secured by cash or U.S. Treasury securities in the manner contemplated by
Section 2.1(b).
<PAGE> 4
"Borrowing Base Properties" means (a) the Mineral Interests owned by
Borrower on the Closing Date located in the South Midway Sunset, North
Midway Sunset and Montalvo Fields, in Kern and Ventura Counties,
California, and (b) any other Proved Mineral Interest acquired by
Borrower after the Closing Date in a single transaction for a cash
purchase price in excess of $1,000,000.
"Closing Date" means December 1, 1996.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committed Borrowing" means a borrowing consisting of simultaneous
Committed Loans of a single Type and having the same Interest Period from
each of Banks distributed ratably among Banks in the manner described in
Section 2.1(a).
"Committed Loan" means a Loan from a Bank to Borrower pursuant to
Section 2.2.2, which shall be a Base Rate Loan or a Eurodollar Loan.
"Committed Note" means a promissory note of Borrower payable to the
order of a Bank, in substantially the form of Exhibit A hereto,
evidencing the aggregate indebtedness of Borrower to such Bank resulting
from Committed Loans made by such Bank to Borrower, together with all
modifications, extensions, renewals and rearrangements thereof; and
"Committed Notes" means all Committed Notes.
"Commitment" means, with respect to each Bank, the amount indicated
opposite the name of such Bank on Schedule 1 hereto, as such amount is
reduced from time to time in accordance with the provisions hereof.
"Commitment Fee Percentage" means, on any date, a per annum
percentage determined in accordance with the table below by reference to
the ratio of (a) the Outstanding Credit on such date, to (b) the
Borrowing Base in effect on such date; provided, that, so long as the
Outstanding Credit is equal to or less than $50,000,000, the Commitment
Fee Percentage shall be .20%:
Ratio of Outstanding Commitment Fee
Credit to Borrowing Base Percentage
<=.50 to 1 .20%
> .50 to 1 <= .75 to 1 .25%
> .75 to 1 .35%
"Commitment Percentage" means, with respect to each Bank, the
percentage determined by dividing its Commitment by the Total Commitment.
"Competitive Bid" means an offer by a Bank to make a Competitive Bid
Loan pursuant to Section 2.2.1.
<PAGE> 5
"Competitive Bid Availability" means, on any date, the remainder of
(a) (i) seventy-five percent (75%) of the Borrowing Base in effect on
such date, or (ii) if the Borrowing Base is then $50,000,000 or less, one
hundred percent (100%) of the Borrowing Base in effect on such date,
minus (b) the Outstanding Credit on such date.
"Competitive Bid Borrowing" means a borrowing hereunder consisting
of a single Competitive Bid Loan from a Bank or simultaneous Competitive
Bid Loans from each Bank whose Competitive Bid, as all or as part of such
Competitive Bid Borrowing, has been accepted by Borrower under the
bidding procedure described in Section 2.2.1.
"Competitive Bid Loan" means a Loan from a Bank to Borrower pursuant
to the bidding procedure described in Section 2.2.1.
"Competitive Bid Note" means a promissory note of Borrower payable
to the order of a Bank, in substantially the form of Exhibit B hereto,
evidencing the aggregate indebtedness of Borrower to such Bank resulting
from the Competitive Bid Loans made by such Bank to Borrower, together
with all modifications, extensions, renewals and rearrangements thereof;
and "Competitive Bid Notes" means all Competitive Bid Notes.
"Competitive Bid Rate" means, as to any Competitive Bid made by a
Bank pursuant to Section 2.2.1, the fixed rate of interest offered by the
Bank making such Competitive Bid expressed as a decimal to no more than
four decimal places.
"Competitive Bid Request" means a request for Competitive Bids to be
made pursuant to Section 2.2.1 which Competitive Bid Request shall be in
the form of Exhibit C.
"Consolidated Net Income" means, for any Person for any period,
consolidated net earnings (after income taxes) of such Person and its
Consolidated Subsidiaries for such period, determined in accordance with
GAAP.
"Consolidated Subsidiary" or "Consolidated Subsidiaries" means, for
any Person, any Subsidiary or other entity the accounts of which would be
consolidated with those of such Person in its consolidated financial
statements.
"Consolidated Tangible Net Worth" means, for any Person at any time,
the consolidated shareholder's equity of such Person at such time, less
the consolidated Intangible Assets of such Person at such time. For
purposes of this definition "Intangible Assets" means the amount (to the
extent reflected in determining such consolidated shareholder's equity)
of all unamortized debt discount and expense, unamortized deferred
charges, goodwill, patents, trademarks, service marks, trade names,
copyrights and organization expenses.
"Conversion Date" means November 30, 1999.
<PAGE> 6
"Debt" means, for any Person at any time, without duplication, (a)
all obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (c) all other indebtedness (including capitalized lease
obligations, other than usual and customary oil and gas leases) of such
Person on which interest charges are customarily paid or accrued, (d) all
Guarantees by such Person, (e) the unfunded or unreimbursed portion of
all letters of credit issued for the account of such Person, (f) any
amount owed by such Person representing the deferred purchase price of
property or services other than accounts payable incurred in the ordinary
course of business and in accordance with customary trade terms, and (g)
all liability of such Person as a general partner of a partnership for
obligations of such partnership of the nature described in (a) through
(f) preceding.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice, lapse of time or both would,
unless cured or waived, become an Event of Default.
"Distribution" by any Person, means (a) with respect to any stock
issued by such Person or any partnership interest of such Person, the
retirement, redemption, purchase, or other acquisition for value of any
such stock or partnership interest, (b) the declaration or payment of any
dividend or other distribution on or with respect to any stock or any
partnership interest of any Person, and (c) any other payment by such
Person with respect to such stock or partnership interest.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which national banks in Dallas, Texas, are authorized by Law
to close.
"Domestic Lending Office" means, as to each Bank, its office located
at its address identified on Schedule 1 hereto as its Domestic Lending
Office or such other office as such Bank may hereafter designate as its
Domestic Lending Office by notice to Borrower and Agent.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means any corporation or trade or business under
common control with Borrower as determined under section 414(b), (c), (m)
or (o) of the Code.
"Eurodollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings
in dollar deposits) in London.
"Eurodollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address identified on Schedule 1
hereto as its Eurodollar Lending Office or such other office, branch or
affiliate of such Bank as it may hereafter designate as its Eurodollar
Lending Office by notice to Borrower and Agent.
<PAGE> 7
"Eurodollar Loan" means a Loan bearing interest with reference to
the Adjusted Eurodollar Rate. Each Eurodollar Loan having a different
Interest Period shall be deemed to be a separate Eurodollar Loan.
"Eurodollar Rate" applicable to any Interest Period means the rate
per annum determined by Agent (rounded upward, if necessary, to the next
higher 1/100th of 1%) at which deposits in dollars are offered to Agent
by first class banks in the London interbank market at approximately
10:00 a.m. (Dallas, Texas time) two (2) Eurodollar Business Days before
the first day of such Interest Period in an amount approximately equal to
the principal amount of the Eurodollar Loan to which such Interest Period
is to apply and for a period of time comparable to such Interest Period.
Agent shall determine the Eurodollar Rate and shall notify Borrower and
Banks as soon as practicable.
"Eurodollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by
the Board of Governors of the Federal Reserve System (or any successor)
for determining the maximum reserve requirement for a member bank of the
Federal Reserve System in Dallas, Texas in respect of "Eurocurrency
liabilities" (or in respect of any other category of liabilities which
includes deposits by reference to which the interest rate on Eurodollar
Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to
United States residents). The Adjusted Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Events of Default" has the meaning set forth in Section 11.1.
"Exhibit" refers to an exhibit attached to this Agreement and
incorporated herein by reference, unless specifically provided otherwise.
"Financial Officer" of any Person means its Chief Financial Officer;
provided, that if no Person serves in such capacity, "Financial Officer"
shall mean the highest ranking executive officer of such Person with
responsibility for accounting, financial reporting, cash management and
similar functions.
"Fiscal Quarters" means the three month periods ending on March 31,
June 30, September 30 and December 31.
"Fiscal Year" means the period from and including January 1 of each
year to and including December 31 of such year.
"Fully Funded" means, with respect to any Bank at the time in
question, that such Bank is prohibited from making any further Loans
pursuant to the Single Bank Credit Limit.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the American Institute of
Certified Public Accountants acting through its
<PAGE> 8
Accounting Principles Board or by the Financial Accounting Standards Board
or through other appropriate boards or committees thereof and which are
consistently applied for all periods after the date hereof so as to properly
reflect the financial condition, and the results of operations and changes in
financial position, of Borrower and its Consolidated Subsidiaries, except
that any accounting principle or practice required to be changed by the
said Accounting Principles Board or Financial Accounting Standards Board
(or other appropriate board or committee of the said Boards) in order to
continue as a generally accepted accounting principle or practice may be
so changed.
"Gas Balancing Agreement" means any agreement or arrangement whereby
Borrower or any of its Subsidiaries or any other party having an interest
in any hydrocarbons to be produced from Mineral Interests in which
Borrower or any of its Subsidiaries have a right to take more than its
proportionate share of production therefrom.
"Governmental Authority" means any court or governmental department,
commission, board, bureau, agency, or instrumentality of the United
States or of any state, commonwealth, nation, territory, possession,
county, parish, or municipality, whether now or hereafter constituted or
existing.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of
any other Person and, without limiting the generality of the foregoing,
any obligation, direct or indirect, contingent or otherwise, of such
Person (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by
virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement conditions, by "comfort letter" or other
similar undertaking of support or otherwise) or (b) entered into for the
purpose of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part), provided that the term
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business.
"Hedge Transaction" means a transaction pursuant to which Borrower
or its Subsidiaries hedge the price to be received by them for future
production of hydrocarbons, including price swap agreements under which
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 Borrower or
its Subsidiaries a fixed price for the same or similar amount of
hydrocarbons.
"Initial Reserve Report" means that certain Appraisal Report dated
February 12, 1996 prepared by DeGolyer and MacNaughton as of December 31,
1995, setting forth an engineering and economic analysis of certain
Mineral Interests owned by Borrower on the Closing Date, including,
without limitation, the Mineral Interests described in clause (a) of the
definition of "Borrowing Base Properties."
<PAGE> 9
"Interest Period" means: (a) with respect to each Borrowing
comprised of Eurodollar Loans, the period commencing on the date of such
Borrowing and ending one (1), two (2), three (3) or six (6), and, if
available to Banks, nine (9) or twelve (12) months thereafter, as
Borrower may elect in the applicable Request for Committed Loans;
provided that:
(i) any Interest Period which would otherwise end on a day
which is not a Eurodollar Business Day shall be extended to
the next succeeding Eurodollar Business Day unless such
Eurodollar Business Day falls in another calendar month, in
which case such Interest Period shall end on the next preceding
Eurodollar Business Day;
(ii) any Interest Period which begins on the last Eurodollar
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall, subject to clause
(iii) below, end on the last Eurodollar Business Day of a
calendar month; and
(iii) if any Interest Period includes a date on which any payment
of principal of such Loans is required to be made hereunder,
but does not end on such date, then (A) the principal amount
of each Eurodollar Loan required to be repaid on such date
shall have an Interest Period ending on such date, and
(B) the remainder of each such Eurodollar Loan shall have an
Interest Period determined as set forth above; and
(b) with respect to each Competitive Bid Borrowing, the period
commencing on the date of such Borrowing and ending 7, 30, 60 or 90 days
thereafter as Borrower may elect in the applicable Competitive Bid
Request; provided, that:
(i) any Interest Period (other than an Interest Period
determined pursuant to clause (ii)(A) below) which would
otherwise end on a day which is not a Domestic Business Day
shall be extended to the next succeeding Domestic Business
Day; and
(ii) if any Interest Period includes a date on which any payment
of principal of the Loans is required to be made hereunder,
but does not end on such date, then (A) the principal amount
of each Competitive Bid Loan required to be repaid on such
date shall have an Interest Period ending on such date, and
(B) any remainder of each such Competitive Bid Loan shall have
an Interest Period determined as set forth above; and
(iii) no Interest Period shall extend past the thirtieth (30th)
day prior to the Conversion Date.
"Investment" means, with respect to any Person, any loan, advance,
extension of credit, capital contribution to, investment in or purchase
of the stock or other securities of, or interests
<PAGE> 10
in, any other Person; provided, that "Investment" shall not include current
customer and trade accounts which are payable in accordance with customary
trade terms.
"Investment Guidelines" means the guidelines in effect on the date
hereof for investment of Borrower's cash and cash equivalents which have
been adopted by Borrower's Board of Directors, a true and correct copy of
which is attached hereto as Schedule 2.
"Issuer" has the meaning set forth in Section 2.1(b).
"Laws" means all applicable statutes, laws, ordinances, regulations,
orders, writs, injunctions, or decrees of any state, commonwealth,
nation, territory, possession, county, township, parish, municipality or
Governmental Authority.
"Lending Office" means as to any Bank its Domestic Lending Office or
its Eurodollar Lending Office, as the context may require.
"Letters of Credit" means letters of credit issued for the account
of Borrower pursuant to Section 2.1(b).
"Letter of Credit Exposure" of any Bank means such Bank's aggregate
participation in the unfunded portion and the funded but unreimbursed
portion of Letters of Credit outstanding at any time.
"Letter of Credit Fee" means, with respect to any Letter of Credit
issued hereunder, a fee in an amount equal to the greater of (a) $500, or
(b) a percentage of the stated amount of such Letter of Credit
(calculated on a per annum basis based on the stated term of such Letter
of Credit) determined in accordance with the table below by reference to
the ratio of (i) the Outstanding Credit on the date of issuance of such
Letter of Credit, to (ii) the Borrowing Base in effect on such date;
provided, that, so long as the Outstanding Credit is equal to or less
than $50,000,000, the Letter of Credit Fee shall be the greater of (y)
$500, or (z) .60% of the stated amount of such Letter of Credit
(calculated on a per annum basis):
Ratio of Outstanding Per Annum Letter of
Credit to Borrowing Base Credit Fee
<= .50 to 1 .60%
> 50 to 1 <= .75 to 1 .75%
> .75 to 1 1.00%
"Letter of Credit Fronting Fee" means, with respect to any Letter of
Credit issued hereunder with a stated amount of $1,000,000 or greater, a
fee equal to one tenth of one percent (.10%) of the stated amount of such
Letter of Credit.
<PAGE> 11
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Agreement, Borrower and its Subsidiaries
shall be deemed to own subject to a Lien any asset which is acquired or
held subject to the interest of a vendor or lessor under any conditional
sale agreement, capital lease or other title retention agreement relating
to such asset.
"Loan" means a Committed Loan, a Competitive Bid Loan, a Base Rate
Loan or a Eurodollar Loan and "Loans" means Committed Loans, Competitive
Bid Loans, Base Rate Loans, Eurodollar Loans, or any combination thereof.
"Loan Papers" means this Agreement, the Notes, and all other
certificates, documents or instruments delivered in connection with this
Agreement, as the foregoing may be amended from time to time.
"Margin Regulations" means Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System, as in effect from time to time.
"Margin Stock" means "margin stock" as defined in Regulation U.
"Material Agreement" means any material written or oral agreement,
contract, commitment, or understanding to which a Person is a party, by
which such Person is directly or indirectly bound, or to which any assets
of such Person may be subject, which is not cancelable by such Person
upon notice of thirty (30) days or less without liability for further
payment other than nominal penalty.
"Maximum Lawful Rate" means, for each Bank, the maximum rate (or, if
the context so permits or requires, an amount calculated at such rate) of
interest which, at the time in question would not cause the interest
charged on the portion of the Loans owed to such Bank at such time to
exceed the maximum amount which such Bank would be allowed to contract
for, charge, take, reserve, or receive under applicable Laws after taking
into account, to the extent required by applicable Laws, any and all
relevant payments or charges under the Loan Papers. To the extent the
Laws of the State of Texas are applicable for purposes of determining the
"Maximum Lawful Rate," such term shall mean the "indicated rate ceiling"
from time to time in effect under Article 1.04, Title 79, Revised Civil
Statutes of Texas, 1925, as amended, or, if permitted by applicable law
and effective upon the giving of the notices required by such Article
1.04 (or effective upon any other date otherwise specified by applicable
law), the "quarterly ceiling" or "annualized ceiling" from time to time
in effect under such Article 1.04, whichever Agent (with the approval of
the Required Banks) shall elect to substitute for the "indicated rate
ceiling," and vice versa, each such substitution to have the effect
provided in such Article 1.04, and Agent (with the approval of the
Required Banks) shall be entitled to make such election from time to time
and one or more times and, without notice to Borrower, to leave any such
substitute rate in effect for subsequent periods in accordance with
subsection (h)(1) of such Article 1.04.
<PAGE> 12
"Mineral Interests" means rights, estates, titles, and interests in
and to oil, gas, sulphur, or other mineral leases and any mineral
interests, royalty and overriding royalty interest, production payment,
net profits interests, mineral fee interests, and other rights therein,
including, without limitation, any reversionary or carried interests
relating to the foregoing, together with rights, titles, and interests
created by or arising under the terms of any unitization, communization,
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.
"Minimum Consolidated Tangible Net Worth" means the sum of (a)
$74,000,000, plus (b) seventy five percent (75%) of any increase in the
shareholders equity of Borrower resulting from the issuance of equity
securities by Borrower after the Closing Date.
"Moody's" means Moody's Investor Services, or any successor thereto.
"Note" means a Competitive Bid Note or a Committed Note and "Notes"
means all Competitive Bid Notes and all Committed Notes.
"Obligations" means all present and future indebtedness, obligations
and liabilities, and all renewals and extensions thereof, or any part
thereof, of Borrower or any of its Subsidiaries to any Bank arising
pursuant to the Loan Papers, and all interest accrued thereon and costs,
expenses, and attorneys' fees incurred in the enforcement or collection
thereof, regardless of whether such indebtedness, obligations and
liabilities are direct, indirect, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several.
"Outstanding Credit" means, on any date, the sum of (a) the
aggregate outstanding Letter of Credit Exposure on such date including
the aggregate Letter of Credit Exposure related to Letters of Credit to
be issued on such date, plus (b) the aggregate outstanding principal
balance of all Loans on such date, including the outstanding principal
balance of all Loans to be made on such date.
"Over Funded Bank" means any Bank which holds Committed Loans and
Letter of Credit Exposure which, when considered in the aggregate, exceed
its Commitment Percentage of the sum of (a) all Committed Loans, and (b)
the aggregate outstanding Letter of Credit Exposure of all Banks.
"Participant" has the meaning given such term in Section 13.10
hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
<PAGE> 13
"Permitted Encumbrances" means with respect to any asset:
(a) Liens (if any) securing the Notes in favor of Banks;
(b) Minor defects in title which do not secure the payment of
money and otherwise have no material adverse effect on the value or
operation of the subject property, and for the purposes of this
Agreement, a minor defect in title shall include easements, rights-of-
way, servitudes, permits, surface leases and other similar rights in
respect of surface operations, and easements for pipelines, streets,
alleys, highways, telephone lines, power lines, railways and other
easements and rights-of-way, on, over or in respect of any of the
properties of Borrower or its Subsidiaries that are customarily granted
in the oil and gas industry;
(c) Inchoate statutory or operators' liens securing
obligations for labor, services, materials and supplies furnished to
Mineral Interests which are not delinquent (except to the extent
permitted by Section 8.5);
(d) Mechanic's, materialmen's, warehouseman's, journeyman's
and carrier's liens and other similar liens arising by operation of Law
in the ordinary course of business which are not delinquent (except to
the extent permitted by Section 8.5);
(e) Liens for Taxes or assessments not yet due or not yet
delinquent, or, if delinquent, that are being contested in good faith in
the normal course of business by appropriate action, as permitted by
Section 8.5;
(f) Lease burdens payable to third parties which are deducted
in the calculation of discounted present value in the Reserve Report
including, without limitation, any royalty, overriding royalty, net
profits interest, production payment, carried interest or reversionary
working interest and which have been disclosed to Agent in writing;
(g) Liens securing Debt incurred to finance the acquisition of
the assets which are the subject of such Liens; provided, that the
aggregate outstanding balance of all Debt secured by such Liens shall not
exceed $2,000,000 at any time; and
(h) Liens in effect on the Closing Date encumbering cash and
cash equivalents in any aggregate amount not to exceed $2,000,000
securing certain obligations of Borrower to Governmental Authorities.
"Permitted Investments" means (a) readily marketable direct
obligations of the United States of America, (b) fully insured time
deposits and certificates of deposit with maturities of one year or less
of any commercial bank operating in the United States having capital and
surplus in excess of $50,000,000, (c) commercial paper of a domestic
issuer if at the time of purchase such paper is rated in one of the two
highest ratings categories of S&P or Moody's, or of a comparable or
higher quality of any other rating agency acceptable to Banks, (d) to the
extent not permitted under clause (a) through (c) preceding, Investments
which are permitted pursuant
<PAGE> 14
to the Investment Guidelines as in effect on the date hereof, or as amended
hereafter, provided that no Investments in equity securities will constitute
Permitted Investments under this clause (d), and no Investments in debt
securities will constitute Permitted Investments under this clause (d) unless
such securities are rated "A-1" or higher by Moody's or "A+" or higher by S&P,
or of a comparable or higher quality of any other rating agency acceptable to
Banks and (e) other Investments in Persons engaged primarily in the business
of the acquisition, development and production of Mineral Interests or the
production, refining, processing, transportation or marketing of hydrocarbons
and businesses reasonably related thereto; provided, that, the sum of (i) the
aggregate amount of outstanding Investments made pursuant to this clause
(e), plus (ii) the aggregate amount of capital expenditures made by Borrower
and its Subsidiaries to purchase assets used in the transportation, processing,
refining or marketing of petroleum products (in each case measured on a cost
basis), shall not exceed $15,000,000 at any time.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
Government Authority.
"Plan" means an employee benefit plan within the meaning of section
3(3) of ERISA, and any other similar plan, policy or arrangement, whether
formal or informal and whether legally binding or not, under which
Borrower or an ERISA Affiliate has any current or future obligation or
liability or under which any present or former employee of Borrower or an
ERISA Affiliate, or such present or former employee's dependents or
beneficiaries, has any current or future right to benefits resulting from
the present or former employee's employment relationship with Borrower or
an ERISA Affiliate.
"Proved Mineral Interests" means Proved Producing Mineral Interests,
Proved Nonproducing Mineral Interests, and Proved Undeveloped Mineral
Interests.
"Proved Nonproducing Mineral Interests" means all Mineral Interests
which constitute proved developed nonproducing reserves.
"Proved Producing Mineral Interests" means all Mineral Interests
(including all acreage subject to such Mineral Interests that may be
perpetuated beyond the primary term therefor) which constitute proved
developed producing reserves.
"Proved Undeveloped Mineral Interests" means all Mineral Interests
which constitute proved undeveloped reserves.
"Quarterly Date" means the last day of each March, June, September
and December.
"Redetermination" means any redetermination of the Borrowing Base
pursuant to Section 3.2 or 3.3 hereof.
"Refunding Borrowing" means a Borrowing made solely for the purpose
of refinancing Loans which are then outstanding, including any Borrowing
made to refinance Eurodollar Loans
<PAGE> 15
or Competitive Bid Loans on the expiration of the Interest Period applicable
thereto. Refunding Borrowings may be Base Rate Borrowings or Eurodollar
Borrowings.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Part 221, as in effect from time to
time.
"Request for Committed Loan(s) has the meaning set forth in Section
2.3.2(a).
"Request for Letter of Credit" has the meaning set forth in Section
2.3(a).
"Required Banks" means (a) so long as no Default has occurred which
is continuing, Banks holding at least sixty-six and two-thirds percent
(66 2/3%) of the Total Commitment, and (b) during the continuance of any
Default, Banks holding at least sixty-six and two-thirds percent (66
2/3%) of the Outstanding Credit.
"Reserve Engineer's Letter" means, with respect to each Reserve
Report, a letter addressed to Borrower from the Approved Petroleum
Engineer which prepared such Reserve Report setting forth the scope of
such Reserve Report, the methodology employed in the preparation of such
report and a summary of the reserve data set forth in such report.
"Reserve Report" means an unsuperseded engineering analysis of the
Mineral Interests owned by Borrower, in form and substance acceptable to
the Required Banks, prepared by an Approved Petroleum Engineer in
accordance with customary and prudent practices in the petroleum
engineering industry and Financial Accounting Standards Board Statement
69; provided, however, that in connection with any Special
Redetermination requested by Borrower, the Reserve Report shall be in
form and scope mutually acceptable to Borrower and Required Banks. For
purposes of Section 7.10, the Initial Reserve Report shall be considered
a Reserve Report.
"Reserve Report Summary" means, with respect to any Reserve Report,
a summary in form, substance and scope reasonably acceptable to Required
Banks of the reserve data included in such Reserve Report.
"S&P" means Standard & Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc., or any successor thereto.
"Schedule" means a "schedule" attached to this Agreement and
incorporated herein by reference, unless specifically indicated
otherwise.
"Scheduled Redetermination" means any Redetermination of the
Borrowing Base pursuant to Section 3.2.
"Section" refers to a "section" or "subsection" of this Agreement
unless specifically indicated otherwise.
<PAGE> 16
"Sharing Percentage" means, with respect to any Bank at any time,
the percentage determined by dividing (a) the sum of (i) such Bank's
aggregate Letter of Credit Exposure at such time, plus (ii) the
outstanding principal balance of all Loans held by such Bank at such
time, by (b) the Outstanding Credit at such time.
"Single Bank Credit Limit" has the meaning set forth in Section
2.1(a).
"Special Redetermination" means any Redetermination of the Borrowing
Base pursuant to Section 3.3.
"Subsidiary" means, for any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting
power to elect a majority of the Board of Directors or other persons
performing similar functions (including that of a general partner) are at
the time directly or indirectly owned, collectively, by such Person and
any Subsidiaries of such Person. The term Subsidiary shall include
Subsidiaries of Subsidiaries (and so on).
"Taxes" means all taxes, assessments, filing or other fees, levies,
imposts, duties, deductions, withholdings, stamp taxes, capital
transaction taxes, foreign exchange taxes or other charges, or other
charges of any nature whatsoever, from time to time or at any time
imposed by Law or any Governmental Authority. "Tax" means any one of the
foregoing.
"Termination Date" means November 30, 2003.
"Total Commitment" means the aggregate of all Banks' Commitments.
"Type" means with reference to a Loan, the characterization of such
Loan as a Base Rate Loan or a Eurodollar Loan based on the method by
which the accrual of interest on such Loan is calculated.
"Under Funded Bank" means any Bank which is not Fully Funded and
which holds Committed Loans and Letter of Credit Exposure which, when
considered in the aggregate, are less than its Commitment Percentage of
the sum of (a) all Committed Loans held by all Banks, and (b) the
aggregate Letter of Credit Exposure of all Banks.
SECTION 1.2. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted,
all accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared in
accordance with GAAP, applied on a basis consistent with the most recent
audited consolidated financial statements of Borrower and its
Consolidated Subsidiaries delivered to Banks except for changes concurred
in by Borrower's independent certified public accountants and which are
disclosed to Agent on the next date on which financial statements are
required to be delivered to Banks pursuant to Sections 8.1(a) or (b);
provided that, unless the Required Banks shall otherwise agree in
writing, no such change shall modify or affect the manner in which
compliance with the covenants contained in Article X are computed such
that all such
<PAGE> 17
computations shall be conducted utilizing financial information presented
consistently with prior periods.
SECTION 1.3. Petroleum Terms. As used herein, the terms "proved
reserves," "proved developed reserves," "proved developed producing
reserves," "proved developed nonproducing reserves," and "proved
undeveloped reserves" have the meaning given such terms from time to time
and at the time in question by the Society of Petroleum Engineers of the
American Institute of Mining Engineers.
ARTICLE II
THE CREDIT
SECTION 2.1. Commitments. (a) Each Bank severally agrees, subject
to Section 2.1(c) and the other terms and conditions set forth in this
Agreement, to lend to Borrower from time to time amounts not to exceed in
the aggregate at any one time outstanding, the amount of such Bank's
Commitment reduced by an amount equal to the sum of such Bank's Letter of
Credit Exposure. Loans made pursuant to this Section 2.1(a) shall be
Committed Loans or, solely at the option of each Bank and subject to all
restrictions and limitations set forth herein, Competitive Bid Loans.
Notwithstanding the foregoing, Borrower shall not be entitled to obtain
Loans from a Bank and no Bank shall be permitted to make Loans to
Borrower in an amount which would cause the sum of (i) all Loans held by
such Bank, and (ii) such Bank's Letter of Credit Exposure to exceed such
Bank's Commitment Percentage of the Borrowing Base then in effect (the
limitation in this sentence is hereinafter referred to as the "Single
Bank Credit Limit"). Each Committed Borrowing (i) shall be in an
aggregate principal amount of $1,000,000 or any larger integral multiple
of $100,000 (except that any Base Rate Committed Borrowing may be in an
amount equal to the Availability), and (ii) shall be made (A) first, by
any Bank which is an Under Funded Bank to the extent necessary to
eliminate the under funded position of such Bank, and (B) then, from
Banks ratably in accordance with their respective Commitment Percentages;
provided, that to the extent any Bank's ability to make any Committed
Loan on the occasion of any Committed Borrowing is limited as a result of
the Single Bank Credit Limit, such Bank shall make a Committed Loan in
the maximum amount it is permitted to make without violating such limit
and the remaining Banks which are not subject to such limitation shall
make Committed Loans in an aggregate amount equal to the remaining
portion of such Committed Borrowing. Such Committed Loans shall be made
by such unlimited Banks ratably based on the amount of each such
unlimited Bank's Commitment Percentage relative to the aggregate
Commitment Percentages of all such unlimited Banks. Any Competitive Bid
Loans held by any Bank which are to be refinanced pursuant to a Committed
Borrowing will not be deemed to be outstanding for purposes of
determining the amount of Committed Loans to be made by each Bank as part
of such Committed Borrowing. Subject to the foregoing limitations and
the other provisions of this Agreement, Borrower may obtain Borrowings
under this Section 2.1(a), and repay Loans and request new Borrowings
under this Section 2.1(a); provided, that any partial repayment of
Committed Loans shall be applied first, to the Committed Loans held by
each Over Funded Bank
<PAGE> 18
to the extent necessary to eliminate the over funded position of each such
Bank (each such partial repayment shall be allocated to the Over Funded Banks
ratably based on the amount of Committed Loans held by each Over Funded Bank),
and second, to each Bank in accordance with its Commitment Percentage.
Borrower shall not be permitted to obtain Borrowings hereunder after the
Conversion Date other than Refunding Borrowings.
Each Bank which is an Under Funded Bank at the time an Event of
Default occurs shall be irrevocably and unconditionally obligated, for so
long as such Event of Default shall be continuing, to purchase from each
Over Funded Bank at par, a non-recourse participation interest in all
outstanding Committed Loans and all Letter of Credit Exposure held by
each Over Funded Bank in an amount which (after giving effect to the
simultaneous fulfillment of the obligations pursuant to this paragraph of
all other Under Funded Banks) will result in the elimination of the under
funded position of each Under Funded Bank and the over funded position of
each Over Funded Bank. Each Under Funded Bank will pay the purchase
price for each participation interest required to be purchased by it
pursuant to this paragraph by wire transfer of immediately available
funds promptly upon being advised by Agent of the occurrence of an Event
of Default, but in all events within two (2) Domestic Business Days
following demand by any Over Funded Bank.
Borrower's right to request Competitive Bid Loans and the right of
each Bank to make Competitive Bid Loans hereunder shall also be subject
to the following restrictions: (i) no Bank shall be permitted to make
Competitive Bid Loans at any time that the ratio of the Outstanding
Credit to the Borrowing Base then in effect is greater than .75 to 1,
(ii) no Bank shall be permitted to make Competitive Bid Loans after the
Conversion Date, and (iii) no Bank shall be permitted to make Competitive
Bid Loans with an Interest Period expiring on or after the thirtieth
(30th) day prior to the Conversion Date.
(b) Agent, or such Bank designated by Agent which (without
obligation to do so) consents to the same ("Issuer") will, from time to
time until the ninetieth (90th) day prior to the Conversion Date, upon
request by Borrower, issue Letters of Credit for the account of Borrower
so long as (i) the sum of (A) the total Letter of Credit Exposure then
existing and (B) the amount of the requested Letter of Credit does not
exceed twenty five percent (25%) of the Borrowing Base then in effect,
and (ii) Borrower would be entitled to a Committed Borrowing under
Section 2.1(a) in an amount greater than or equal to the requested Letter
of Credit. Not less than three (3) Domestic Business Days prior to the
requested date of issuance of any such Letter of Credit, Borrower shall
execute and deliver to Issuer, Issuer's customary letter of credit
application. Each Letter of Credit shall be in the minimum amount of
$5,000 and shall be in form and substance acceptable to Issuer. No
Letter of Credit shall have an expiration date later than the earlier of
(i) thirty (30) days prior to the Conversion Date, or (ii) one (1) year
from the date of issuance. Upon the date of issuance of a Letter of
Credit, Issuer shall be deemed to have sold to each other Bank, and each
other Bank shall be deemed to have purchased from Issuer, a
participation in the related Letter of Credit and Letter of Credit
Exposure equal to the amount of any Committed Loan which such Bank would
be required to make under Section 2.1(a) if Borrower were requesting a
Committed Borrowing on such day in the amount of such Letter of
<PAGE> 19
Credit. Issuer shall notify each Bank by telephone, teletransmission or telex
of each Letter of Credit issued pursuant to the terms hereof. If any Letter
of Credit is presented for payment by the beneficiary thereof, Agent
shall cause a Committed Borrowing comprised of Base Rate Loans to be made
to reimburse Issuer for the payment under the Letter of Credit, whether
or not Borrower would then be entitled to a Committed Borrowing pursuant
to the terms hereof, and each Bank which participated in such Letter and
Letter of Credit Exposure shall be obligated to make a Base Rate Loan
equal to the amount of its participation interest. At the time of
issuance of each Letter of Credit, Borrower shall pay to Agent in respect
of such Letter of Credit (a) the applicable Letter of Credit Fee, and (b)
to the extent the stated amount of such Letter of Credit is equal to or
in excess of $1,000,000, the applicable Letter of Credit Fronting Fee.
Agent shall distribute the Letter of Credit Fee payable upon the issuance
of each Letter of Credit to Banks participating in such Letter of Credit
and Letter of Credit Exposure based on the relative amounts of their
participation in such Letter of Credit and Letter of Credit Exposure and
Agent shall distribute the Letter of Credit Fronting Fee to the Issuer of
such Letter of Credit for its own account.
Upon the occurrence of any Event of Default, and at the times
required by Section 3.4 hereof, Borrower shall deposit with Agent cash or
readily marketable United States Treasury securities with a maturity of
one year or less in such amounts as Agent may request, up to a maximum
amount equal to the aggregate existing Letter of Credit Exposure of all
Banks. Any cash or securities so deposited shall be held by Agent for
the ratable benefit of all Banks with Letter of Credit Exposure as
security for such Letter of Credit Exposure and as security for the Base
Rate Loans to be made pursuant to this Section 2.1(b) upon any payment of
any related Letter of Credit, and Borrower will, in connection therewith,
execute and deliver such security agreements in form and substance
satisfactory to Agent which it may, in its discretion, require. As
drafts or demands for payment are presented under any Letter of Credit,
Agent shall apply such cash (and liquidate such treasury securities and
apply the cash proceeds thereof) to satisfy such drafts or demands. When
either (i) all Letters of Credit have expired, the Obligations have been
repaid in full and the Commitments of all Banks have been terminated, or
(ii) all Events of Default have been cured to the satisfaction of the
Required Banks, Agent shall release to Borrower any remaining cash and
securities deposited under this Section 2.1(b).
Whenever Borrower is required to make deposits under this Section
2.1(b) and fails to do so on the day such deposit is due, Agent or any
Bank may, without notice to Borrower, make such deposit (whether by
transfers from other accounts maintained with any Bank or otherwise)
using any funds then available to any Bank of Borrower, any guarantor, or
any other person liable for all or any part of the Obligations.
(c) No Bank will be obligated to lend to Borrower or incur
Letter of Credit Exposure, and Borrower shall not be entitled to borrow
any amount or obtain Letters of Credit hereunder in an amount which would
cause the Outstanding Credit to exceed the Borrowing Base then in effect
under Article III. Nothing in this Section 2.1(c) shall be deemed to
limit any Bank's obligation to fund Base Rate Loans with respect to its
participation in Letters of Credit
<PAGE> 20
in connection with any Committed Borrowing comprised of Base Rate Loans made
as a result of the drawing under any Letter of Credit.
SECTION 2.2. Method of Borrowing.
2.2.1. Competitive Bid Procedure. (a) In order to request
Competitive Bids, Borrower shall hand deliver, telex or telecopy to Agent
a duly completed Competitive Bid Request, to be received by Agent not
later than 12:00 noon (Dallas, Texas time), three (3) Business Days
before the date specified for a proposed Competitive Bid Borrowing. No
Base Rate Loan or Eurodollar Loan shall be requested, or made pursuant
to, a Competitive Bid Request. A Competitive Bid Request that does not
conform substantially to the format of Exhibit C may be rejected at
Agent's sole discretion, and Agent shall promptly notify Borrower of such
rejection by telex or telecopier. Each Competitive Bid Request shall in
each case refer to this Agreement and specify (y) the Borrowing date of
such Competitive Bid Loans (which shall be a Domestic Business Day) and
the aggregate principal amount thereof (which shall not be less than
$5,000,000 or greater than the Competitive Bid Availability on such
Borrowing date and shall be an integral multiple of $100,000) and (z) the
Interest Period with respect thereto. Promptly after its receipt of a
Competitive Bid Request that is not rejected as aforesaid, Agent shall
invite by telex or telecopier (in the form set forth in Exhibit D hereto)
Banks to bid, on the terms and conditions of this Agreement, to make
Competitive Bid Loans pursuant to such Competitive Bid Request.
(b) Each Bank may, in its sole discretion, make one
or more Competitive Bids to Borrower responsive to each Competitive Bid
Request. Each Competitive Bid by a Bank must be received by Agent via
telex or telecopier, in the form of Exhibit E hereto, not later than
10:00 a.m. (Dallas, Texas time), two (2) Domestic Business Days before
the date specified for a proposed Competitive Bid Borrowing. Competitive
Bids that do not conform substantially to the format of Exhibit E may be
rejected by Agent after conferring with, and upon the instruction of
Borrower, and Agent shall notify Bank of such rejection as soon as
practicable. Each Competitive Bid shall refer to this Agreement and (x)
specify the principal amount (which shall be in a minimum principal
amount of $1,000,000 and in an integral multiple of $100,000 and which,
subject to the conditions set forth in Section 2.1, may equal the entire
principal amount of the Competitive Bid Borrowing requested by Borrower)
of the Competitive Bid Loan that Bank is willing to make to Borrower, (y)
specify the Competitive Bid Rate at which Bank is prepared to make the
Competitive Bid Loan and (z) confirm the Interest Period with respect
thereto specified by Borrower in its Competitive Bid Request. If
<PAGE> 21
any Bank shall elect not to make a Competitive Bid, such Bank shall so notify
Agent via telex not later than 10:00 a.m. (Dallas, Texas time), one (1)
Domestic Business Day before the date specified for a proposed
Competitive Bid Borrowing; provided, however, that failure by any Bank to
give such notice shall not cause such Bank to be obligated to make any
Competitive Bid Loan as part of such Competitive Bid Borrowing. A
Competitive Bid submitted by a Bank pursuant to this paragraph (b) shall
be irrevocable.
(c) Agent shall promptly notify Borrower and each Bank by telex or
telecopier of all the Competitive Bids made, the Competitive Bid Rate and
the principal amount of each Competitive Bid Loan in respect of which a
Competitive Bid was made and the identity of Bank that made each bid.
Agent shall send a copy of all Competitive Bids to Borrower and each Bank
for their records as soon as practicable after completion of the bidding
process set forth in this Section 2.2.1.
(d) Borrower may in its sole and absolute discretion, subject only
to the provisions of this Section 2.2.1(d), accept or reject any Competitive
Bid referred to in paragraph (c) above; provided, however, that the aggregate
amount of the Competitive Bids so accepted by Borrower may not exceed the
principal amount of the Competitive Bid Borrowing requested by Borrower.
Borrower shall notify Agent by telex or telecopier whether and to what extent
it has decided to accept or reject any or all of the bids referred to in
paragraph (c) above, not later than 10:00 a.m. (Dallas, Texas time), one (1)
Domestic Business Day before the date specified for a proposed Competitive Bid
Borrowing; provided, however, that (w) the failure by Borrower to give
such notice shall be deemed to be a rejection of all the bids referred to
in paragraph(c) above, (x) Borrower shall not accept a bid made at a
particular Competitive Bid Rate if Borrower has decided to reject a bid
made at a lower Competitive Bid Rate, (y) if Borrower shall accept bids
made at a particular Competitive Bid Rate but shall be restricted by
other conditions hereof from borrowing the principal amount of all
Competitive Bid Loans in respect of which bids at such Competitive Bid
Rate have been made, then Borrower shall accept a pro rata portion of
each bid made at such Competitive Bid Rate based as nearly as possible on
the respective principal amounts of Competitive Bid Loans for which such
bids were made, and (z) no bid shall be accepted for a Competitive Bid
Loan unless such Competitive Bid Loan is in a minimum principal amount of
$1,000,000 and an integral multiple of $100,000. Notwithstanding the
foregoing, if it is necessary for Borrower to accept a pro rata
allocation of the bids made in response to a Competitive Bid Request
(whether pursuant to the events specified in clause (y) above or
otherwise) and the available principal amount of
<PAGE> 22
Competitive Bid Loans to be allocated among Banks is not sufficient to enable
Competitive Bid Loans to be allocated to each Bank in a minimum principal
amount of $1,000,000 and in integral multiples of $100,000, then Borrower
shall select Banks to be allocated such Competitive Bid Loans and shall round
allocations up or down to the next higher or lower multiple of $100,000
as it shall deem appropriate. A notice given by Borrower pursuant to
this paragraph (d) shall be irrevocable.
(e) Agent shall promptly notify each bidding Bank whether or not its
Competitive Bid has been accepted (and if so, in what amount and at what
Competitive Bid Rate) by telex or telecopier sent by Agent, and each
successful bidder will thereupon become bound, subject to the other applicable
conditions hereof, to make the Competitive Bid Loan in respect of which its
bid has been accepted. After completing the notifications referred to in the
immediately preceding sentence, Agent shall notify each Bank of the aggregate
principal amount of all Competitive Bids accepted.
(f) No Competitive Bid Borrowing shall be made within five (5)
Business Days of the date of any other Competitive Bid Borrowing unless
Borrower and Agent shall mutually agree otherwise.
(g) If Agent shall at any time have a Commitment hereunder and
shall elect to submit a Competitive Bid in its capacity as a Bank, it shall
submit such bid directly to Borrower at least one half of an hour earlier
than the latest time at which the other Banks are required to submit their
bids to Agent pursuant to paragraph (b) above.
(h) All notices required by this Section 2.2.1 shall be made
in accordance with Section 13.1.
2.2.2. Method of Committed Borrowing. (a) In order to
request Committed Loans, Borrower shall hand deliver, telex or telecopy
to Agent a duly completed Request for Committed Loans prior to 12:00 noon
(Dallas, Texas time), (i) at least one (1) Domestic Business Day before
the date specified for a proposed Base Rate Borrowing, and (ii) at least
three (3) Eurodollar Business Days before the date of a proposed
Eurodollar Borrowing. Each Request for Committed Loans shall be
substantially in the form of Exhibit F hereto, and shall specify:
(i) the date of such Committed Borrowing, which
shall be a Domestic Business Day in the case of a
Committed Borrowing comprised of Base Rate Loans or
a Eurodollar Business Day in the case of a Committed
Borrowing comprised of Eurodollar Loans;
<PAGE> 23
(ii) the aggregate amount of such Committed Borrowing;
(iii) whether the Loans comprising such Committed
Borrowing are to be Base Rate Loans or Eurodollar
Loans; and
(iv) in the case of a Committed Borrowing comprised
of Eurodollar Loans the duration of the Interest
Period applicable thereto, subject to the provisions
of the definition of Interest Period.
(b) Upon receipt of a Request for Committed Loans,
Agent shall promptly notify each Bank of the contents thereof and the
amount of the Committed Borrowing to be loaned by such Bank pursuant
thereto, and such Request for Committed Loans shall not thereafter be
revocable by Borrower.
(c) Not later than 12:00 noon (Dallas, Texas time) on
the date of each Committed Borrowing, each Bank shall (except as
provided in Section 2.2.2(d)) make available that portion of such
Committed Borrowing allocated to such Bank pursuant to Section 2.1
(a) in Federal or other funds immediately available in Dallas, Texas
to Agent at its address referred to in Section 13.1. Notwithstanding
the foregoing, if Borrower delivers to Agent a Request for Committed
Loans prior to 10:00 a.m. (Dallas, Texas time) on a Domestic Business
Day requesting a Committed Borrowing comprised of Base Rate Loans on
such day, each Bank shall use its best efforts to make available to
Agent that portion of such Committed Borrowing allocated to such
Bank pursuant to Section 2.1 by 1:00 p.m. (Dallas, Texas time) on
the same day. Unless Agent determines that any applicable condition
specified in Section 6.2 has not been satisfied, Agent will make the
funds so received from Banks available to Borrower at Agent's
aforesaid address.
(d) If any Bank makes a new Committed Loan hereunder
on a day on which Borrower is to repay all or any part of an
outstanding Loan from much Bank, such Bank shall apply the proceeds
of its new Committed Loan to make such repayment and only an amount
equal to the difference (if any) between the amount being borrowed
and the amount being repaid shall be made available by such Bank to
Agent or remitted by Borrower to Agent, as the case may be.
SECTION 2.3. Method of Obtaining Letters of Credit. (a) Borrower
shall give Agent notice (a "Request for Letter of Credit") prior to 12:00
noon (Dallas, Texas time) at least three Domestic Business Days before
the date Borrower requests that a Letter of Credit be issued. Each
Request for Letter of Credit shall be substantially in the form of
Exhibit G attached hereto
<PAGE> 24
and shall be accompanied by the executed, complete letter of credit
application and agreement referenced in Section 2.1(b).
(b) Upon receipt of a Request for Letter of Credit, Agent
shall promptly notify each Bank of the contents thereof and of the
material provisions of the related letter of credit application and
agreement. Agent shall provide a copy of the Request for Letter of
Credit and the original counterpart of the letter of credit application
and agreement to the proposed Issuer.
(c) Provided that the proposed Issuer agrees to issue the
requested Letter of Credit, and provided further that Agent has not
determined that a condition to such issuance referred to in Section 6.2
has not been satisfied, not later than 12:00 noon (Dallas, Texas time) on
the date Borrower requests that such Letter of Credit be issued, the
Issuer shall issue such Letter of Credit and deliver the same to the
beneficiary thereof and shall promptly thereafter provide notice thereof
to each other Bank.
SECTION 2.4. Notes. The Committed Loans of each Bank shall be
evidenced by a single Committed Note payable to the order of such Bank in
an amount equal to such Bank's Commitment. The Competitive Bid Loans of
each Bank shall be evidenced by a single Competitive Bid Note payable to
the order of such Bank in an amount equal to such Bank's Commitment.
SECTION 2.5. Interest Rates. (a) Each Committed Base Rate Loan
shall bear interest on the outstanding principal balance thereof at a
rate per annum equal to the sum of the Applicable Margin plus the Base
Rate in effect from day to day, each change in the Base Rate to be
effective without notice to Borrower on the effective date of each such
change, provided that in no event shall the rate charged hereunder or
under the Notes exceed the Maximum Lawful Rate. Interest on each Base
Rate Loan shall be payable as it accrues on each Quarterly Date.
(b) Each Eurodollar Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Applicable Margin
plus the applicable Adjusted Eurodollar Rate; provided that in no event
shall the rate charged hereunder or under the Notes exceed the Maximum
Lawful Rate. Interest on each Eurodollar Loan having an Interest Period
of one, two or three months shall be payable on the last day of the
Interest Period applicable thereto. Interest on each Eurodollar Loan
having an Interest Period of six, nine, or twelve months, shall be
payable on the last day of the Interest Period applicable thereto and on
each Quarterly Date during such Interest Period.
(c) Each Competitive Bid Loan shall bear interest at a rate
per annum equal to the fixed rate of interest offered by Bank making such
Competitive Bid Loan in such Bank's Competitive Bid and accepted by
Borrower pursuant to Section 2.2.1; provided, that in no event shall the
rate charged hereunder or under the Notes exceed the Maximum Lawful Rate.
Interest on each Competitive Bid Loan shall be payable on the last day of
the Interest Period applicable thereto.
<PAGE> 25
(d) In addition to the interest which accrues and is payable
on Competitive Bid Loans pursuant to Section 2.5(c) above, on any date
that (i) the Borrowing Base is greater than $60,000,000, and (ii) the
ratio of (a) Outstanding Credit, to (b) the Borrowing Base in effect on
such date, equals or exceeds .75 to 1, additional interest ("Additional
Interest") shall accrue on the outstanding principal balance of all
Competitive Bid Loans at the rate of .25% per annum; provided, that, in
no event shall Additional Interest be charged hereunder or under the
Competitive Bid Notes to the extent that such Additional Interest causes
the aggregate interest charged hereunder or under the Competitive Bid
Notes to exceed the Maximum Lawful Rate. All Additional Interest which
accrues on Competitive Bid Loans shall be payable on the same day as, but
in addition to, the interest which is otherwise payable on such
Competitive Bid Loans pursuant to Section 2.5(c).
(e) With respect to Committed Loans, Agent shall determine
each interest rate applicable to the Committed Loans in accordance with
the terms hereof. Agent shall promptly notify Borrower and Banks by
telex, telecopy or cable of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest
error.
(f) Notwithstanding the foregoing, if at any time the rate of
interest calculated with reference to the Base Rate, any Competitive Bid
Rate accepted by Borrower or the Adjusted Eurodollar Rate hereunder
together with any Additional Interest, if applicable, (the "contract
rate") is limited to the Maximum Lawful Rate, any subsequent reductions
in the contract rate shall not reduce the rate of interest on the
affected Loan below the Maximum Lawful Rate until the total amount of
interest accrued equals the amount of interest which would have accrued
if the contract rate had at all times been in effect. In the event that
at maturity (stated or by acceleration), or at final payment of any Note,
the total amount of interest paid or accrued on such Note is less than
the amount of interest which would have accrued if the contract rate had
at all times been in effect with respect thereto, then at such time, to
the extent permitted by law, Borrower shall pay to the holder of such
Note an amount equal to the difference between (i) the lesser of the
amount of interest which would have accrued if the contract rate had at
all times been in effect and the amount of interest which would have
accrued if the Maximum Lawful Rate had at all times been in effect, and
(ii) the amount of interest actually paid on such Note.
SECTION 2.6. Mandatory Repayments after Conversion Date. On each
Quarterly Date after the Conversion Date (commencing with the Quarterly
Date immediately following the Conversion Date), Borrower shall make a
mandatory prepayment of the principal of the Loans then outstanding in an
amount equal to one sixteenth (1/16th) of the aggregate principal balance
of all Loans outstanding on the Conversion Date.
SECTION 2.7. Voluntary Prepayments. Borrower may, subject to
Section 5.1 and the other provisions of this Agreement, upon three (3)
Business Days advance notice to Agent, prepay the principal of Loans then
outstanding in whole or in part. Any partial prepayment shall be in a
minimum amount of $500,000 and shall be in an integral multiple of
$100,000 and, to the extent made after the Conversion Date (a) may not be
reborrowed hereunder, and (b) shall
<PAGE> 26
be applied to the mandatory prepayments required by Section 2.6 hereof in
the inverse order of maturity.
SECTION 2.8. Mandatory Reduction of Commitments. The Total
Commitment shall reduce (and the Commitments of each Bank shall reduce
ratably) on the Conversion Date to an amount equal to the aggregate
principal balance of all Loans outstanding on the Conversion Date. The
Total Commitment shall reduce thereafter (and the Commitments of each
Bank shall reduce ratably) (a) on each Quarterly Date in an amount equal
to the mandatory prepayment required to be made on such date pursuant to
Section 2.6, and (b) on the date of each voluntary prepayment make
pursuant to Section 2.7 after the Conversion Date, by the amount of such
voluntary prepayment.
SECTION 2.9. Voluntary Reduction of Commitments and Prepayment of
Loans. Borrower may, by notice to Agent five (5) Domestic Business Days
prior to the effective date of any such reduction, reduce the Total
Commitment (and thereby reduce the Commitment of each Bank ratably) in
amounts not less than $5,000,000 or any larger multiple of $5,000,000.
On the effective date of any such reduction, Borrower shall, to the
extent required as a result of such reduction, make a principal payment
on the Loans in an amount sufficient to cause the principal balance of
all Loans then outstanding to be equal to or less than the Total
Commitment as thereby reduced. Notwithstanding the foregoing, Borrower
shall not be permitted to voluntarily reduce the Total Commitment to an
amount less than the aggregate Letter of Credit Exposure of all Banks.
SECTION 2.10. Termination of Commitments; Final Maturity; Maturity
of Eurodollar and Competitive Bid Loans. The Total Commitment (and the
Commitment of each Bank) shall terminate, and the entire outstanding
principal balance of all Loans, all interest accrued thereon, all accrued
but unpaid fees hereunder and all other outstanding Obligations shall be
due and payable in full on the Termination Date. All Eurodollar Loans
and Competitive Bid Loans shall be due and payable on the expiration of
the Interest Period applicable thereto; provided, that, to the extent
permitted by Section 2.1(a) and 6.2, such Loans may be refinanced on such
date pursuant to a Refunding Borrowing.
SECTION 2.11. Application of Payments. Each repayment pursuant to
Sections 2.6, 2.7, 2.9, 2.10, 3.4 or 4.5 shall be made together with
accrued interest on the amount repaid to the date of payment, and shall
be applied to payment of the Loans of Banks in accordance with Section
4.2 and the other provisions of this Agreement.
SECTION 2.12. Commitment Fee. On the Conversion Date, on each
Quarterly Date prior to the Conversion Date, and, in the event the
Commitments are terminated in their entirety prior to the Conversion
Date, on the date of such termination, Borrower shall pay to Agent, for
the ratable benefit of each Bank based on each Bank's Commitment
Percentage, a commitment fee equal to the Commitment Fee Percentage
(applied on a per annum basis and computed on the basis of actual days
elapsed and as if each calendar year consisted of 365 days) of the
average daily Availability for the Fiscal Quarter (or portion thereof)
ending on such Quarterly Date.
<PAGE> 27
SECTION 2.13. Agency Fee. Borrower shall pay to Agent and its
Affiliates such other fees and amounts as Borrower shall be required to
pay to Agent and its Affiliates from time to time pursuant to any
separate agreement between Borrower and Agent or such Affiliates. Such
fees and other amounts shall be retained by Agent and its Affiliates, and
no Bank (other than Agent) shall have any interest therein.
ARTICLE III
BORROWING BASE
SECTION 3.1. Reserve Report; Proposed Borrowing Base. As soon as
available and in any event by March 1 of each year, Borrower shall (a)
make or cause to be made available to Agent and each Bank for its review
and inspection at Borrower's offices in Taft, California and at the
offices of the Approved Petroleum Engineer a Reserve Report prepared as
of the immediately preceding December 31, and (b) deliver to Agent and
each Bank a Reserve Summary and a Reserve Engineer's Letter prepared with
respect to such Reserve Report. Simultaneously with the delivery to
Agent and each Bank of each Reserve Summary and Reserve Engineer's
Letter, Borrower shall notify each Bank of the amount of the Borrowing
Base which Borrower requests become effective on the next April 1 (or
such date promptly following April 1 as Required Banks shall elect).
SECTION 3.2. Scheduled Redeterminations of the Borrowing Base;
Procedures and Standards. Based in part on the Reserve Report made
available to Banks pursuant to Section 3.1, Banks shall redetermine the
Borrowing Base on or prior to the next April 1 (or such date promptly
thereafter as Required Banks shall elect). Any Borrowing Base which
becomes effective as a result of any Redetermination of the Borrowing
Base shall be subject to the following restrictions: (a) such Borrowing
Base shall not exceed the Borrowing Base requested by Borrower pursuant
to Sections 3.1 or 3.3 (as applicable), (b) such Borrowing Base shall not
exceed the Total Commitment then in effect, (c) to the extent such
Borrowing Base represents an increase from the Borrowing Base in effect
prior to such Redetermination, such Borrowing Base shall be approved by
all Banks, and (d) any Borrowing Base which represents a decrease in the
Borrowing Base in effect prior to such Redetermination shall be approved
by Required Banks. Subject to Banks consistent application of their
respective standards for similar credits (which may vary from Bank to
Bank) each Redetermination shall be made by Banks in their sole
discretion. Without limiting such discretion, Borrower acknowledges and
agrees that Banks (i) may make such assumptions regarding appropriate
existing and projected pricing for hydrocarbons as they deem appropriate
in their sole discretion, (ii) may make such assumptions regarding
projected rates and quantities of future production of hydrocarbons from
the Borrowing Base Properties as they deem appropriate in their sole
discretion, (iii) may consider the projected cash requirements of
Borrower, (iv) are not required to consider any asset other than
Borrowing Base Properties, and (v) may make such other assumptions,
considerations and exclusions as Banks deem appropriate in the exercise
of their sole discretion. Promptly following any Redetermination of the
Borrowing Base, Agent shall notify Borrower of the amount of the
<PAGE> 28
Borrowing Base as redetermined, which Borrowing Base shall be effective as of
the date of such notice, and shall remain in effect for all purposes of
this Agreement until the next Scheduled or Special Redetermination.
SECTION 3.3 Special Redetermination. (a) In addition to Scheduled
Redeterminations, Required Banks shall be permitted to make a Special
Redetermination of the Borrowing Base once in each Fiscal Year if (i)
Required Banks have determined, in their sole discretion, that the
discounted present value of the Borrowing Base Properties has decreased
by twenty five percent (25%) or more since the effective date of the most
recent Redetermination (and in making such determination, Banks may make
such assumptions regarding appropriate existing and projected pricing for
hydrocarbons and rates and quantities of future production of
hydrocarbons as such Banks deem appropriate in their sole discretion),
and (ii) either (A) a Borrowing Base Deficiency will exist after such
Special Redetermination is made, or (B) the Borrowing Base in effect
after such Special Redetermination is made will be at least twenty five
percent (25%) less than the Borrowing Base in effect prior to such
Redetermination. Any request by Required Banks pursuant to this Section
3.3(a) shall be submitted to Agent and Borrower.
(b) In addition to Scheduled Redeterminations, Borrower shall
be permitted to request a Special Redetermination of the Borrowing Base
once in each Fiscal Year. Such request shall be submitted to Agent and
Required Banks and at the time of such request Borrower shall (i) make,
or cause to be made, a Reserve Report available to Agent and the Banks
for their review and inspection at Borrower's offices in Taft,
California, and at the offices of the Approved Petroleum Engineer, and
(ii) deliver to Agent and each Bank a Reserve Summary and Reserve
Engineer's Letter prepared with respect to such Reserve Report. Together
with such request, Borrower shall also notify each Bank of the Borrowing
Base requested by Borrower in connection with such Special
Redetermination;
(c) Any Special Redetermination shall be made by Banks in
accordance with the procedures and standards set forth in Section 3.2;
provided, that, no Reserve Report, Reserve Summary or Reserve Engineer's
Letter will be required to be made available or delivered to Banks in
connection with any Special Determination requested by Required Banks
pursuant to clause (a) above.
SECTION 3.4. Borrowing Base Deficiency. If a Borrowing Base
Deficiency exists after giving effect to any Redetermination, Borrower
shall be obligated to eliminate such Borrowing Base Deficiency over a
period not to exceed six (6) months from the effective date of such
Redetermination by making six (6) mandatory, equal, consecutive, monthly
payments of principal on the Loans, each of which shall be in the amount
of one sixth (1/6th) of such Borrowing Base Deficiency. The first of
such six (6) payments shall be due on the thirtieth (30th) day following
the effective date of each such Redetermination and each subsequent
payment shall be due on the same day of each month thereafter (or if
there is no corresponding day of any subsequent month, then on the last
day of such month). If a Borrowing Base Deficiency cannot be eliminated
pursuant to this Section 3.4, by prepayment of all outstanding Loans in
full (as a result of outstanding Letter of Credit Exposure),
simultaneously with each principal payment required
<PAGE> 29
pursuant to this Section 3.4, Borrower shall deposit cash or U.S. Treasury
securities with a maturity of one year or less with Agent, to be held by
Agent to secure outstanding Letter of Credit Exposure in the manner
contemplated by Section 2.1(b), in an amount at least equal to one sixth
(1/6th) of the aggregate amount of cash or Treasury securities which must be
deposited with Agent to fully eliminate such Borrowing Base Deficiency.
SECTION 3.5. Initial Borrowing Base. The Borrowing Base shall be
$50,000,000 for the period commencing on the Closing Date and ending on
the effective date of the first Redetermination after the Closing Date.
ARTICLE IV
GENERAL PROVISIONS
SECTION 4.1. Delivery and Endorsement of Notes. Simultaneously
with the execution of this Agreement, Agent shall deliver to each Bank
the Notes payable to such Bank referenced in Section 6.1(a). Each Bank
may endorse (and prior to any transfer of its Note shall endorse) on the
schedules forming a part thereof appropriate notations to evidence the
date and amount of each Loan made by it, the Interest Period applicable
thereto, and the date and amount of each payment of principal made by
Borrower with respect thereto, provided that the failure by any Bank to
so endorse its Note shall not affect the liability of Borrower for the
repayment of all amounts outstanding under such Note together with
interest thereon. Each Bank is hereby irrevocably authorized by Borrower
to endorse its Note and to attach to and make a part of any Note a
continuation of any such schedule as required.
SECTION 4.2. General Provisions as to Payments. (a) Borrower
shall make each payment of principal of, and interest on, the Loans and
all fees payable hereunder shall be paid not later than 12:00 noon
(Dallas, Texas time) on the date when due, in Federal or other funds
immediately available in Dallas, Texas, to Agent at its address referred
to in Section 13.1. Agent will promptly (and if such payment is received
by Agent by 10:00 a.m., and otherwise if reasonably possible, on the same
Domestic Business Day) distribute to each Bank its share (as determined
in accordance with the other provisions of this Agreement) of each such
payment received by Agent for the account of Banks. Whenever any payment
of principal of, or interest on, Base Rate Loans or Competitive Bid Loans
or of fees shall be due on a day which is not a Domestic Business Day,
the date for payment thereof shall be extended to the next succeeding
Domestic Business Day (subject to the definition of Interest Period).
Whenever any payment of principal of, or interest on, the Eurodollar
Loans shall be due on a day which is not a Eurodollar Business Day, the
date for payment thereof shall be extended to the next succeeding
Eurodollar Business Day (subject to the definition of Interest Period).
If the date for any payment of principal is extended by operation of Law
or otherwise, interest thereon shall be payable for such extended time.
Borrower hereby authorizes Agent to charge from time to time against
Borrower's accounts with Agent any amount then due.
<PAGE> 30
(b) Prior to the occurrence of an Event of Default, all
principal payments received by Banks on Competitive Bid Loans shall be
applied to the Competitive Bid Loans directed by Borrower, and all
principal payments received by Banks in respect of Committed Loans shall
be applied to the Committed Loans of each Bank in the manner required
pursuant to Section 2.1(a) hereof. Any payments so received by any Bank
shall, to the extent consistent with the foregoing, be applied, first, to
Loans with Interest Periods ending on the date of such payment, then to
Base Rate Loans next maturing, then to Eurodollar Loans or Competitive
Bid Loans (as Borrower shall elect but in the absence of such election,
in such order as Agent shall elect), next maturing until such principal
payment is fully applied with such adjustments in such order of payment
as Agent shall specify in order that each Bank receives its ratable share
of each such payment.
(c) After the occurrence of an Event of Default, all amounts
collected or received by Agent or any Bank in respect of the Obligations
shall be applied first to the payment of all proper costs incurred by
Agent in connection with the collection thereof (including reasonable
expenses and disbursements of Agent), second to the payment of all proper
costs incurred by Banks in connection with the collection thereof
(including reasonable expenses and disbursements of Banks), third to the
reimbursement of any advances made by Banks to effect performance of any
unperformed covenants of Borrower under any of the Loan Papers, fourth to
the payment of any unpaid agency fees required pursuant to Section 2.13,
fifth to the payment of any unpaid fees required pursuant to Sections
2.1(b), and 2.12 and sixth, to payment of the Loans to each Bank in
accordance with each Bank's Sharing Percentage.
SECTION 4.3. Computation of Interest. Interest payable on the
Loans hereunder shall be computed based on the number of actual days
elapsed assuming that each calendar year consisted of 360 days.
SECTION 4.4. Overdue Principal and Interest. Any overdue principal
of and, to the extent permitted by Law, overdue interest on any Loan
shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the lesser of (a) the sum of three percent (3%) plus
the Base Rate, or (b) the Maximum Lawful Rate.
SECTION 4.5. Capital Adequacy. Notwithstanding any provision
contained herein to the contrary, if, with respect to all or any portion
of any Commitment, any Law is hereafter promulgated or adopted regarding
capital adequacy, or any change is hereafter made or adopted with respect
to any existing Law regarding capital adequacy, or any ruling or
interpretation regarding capital adequacy is hereafter made by any
Governmental Authority or central bank or other comparable authority, or
any Bank complies with any request or directive hereafter made by any
Governmental Authority or central bank or other comparable authority
regarding capital adequacy (whether or not having the force of Law), and
the effect of any of the foregoing is to cause a reduction in the rate of
return on such Bank's capital as a consequence of such Bank's obligations
hereunder to a level below that which such Bank otherwise could have
achieved (taking into consideration its policies with respect to capital
adequacy) by an amount deemed by such Bank to be material (and such Bank
may, in determining such amount, utilize such
<PAGE> 31
assumptions and allocations of costs and expenses as such Bank shall deem
reasonable and may use any reasonable averaging or attribution method), then,
such Bank shall notify Borrower and Agent and deliver to Borrower and Agent a
certificate setting forth in reasonable detail (a) the Law (or change therein
or change in interpretation thereof) giving rise to such request for
compensation, and (b) the calculation of the amount necessary to
compensate such Bank therefor, which certificate shall constitute prima
facie evidence of the contents thereof. Borrower shall promptly pay such
amount to such Bank; provided, however, that no Bank shall make any
request for compensation under this Section 4.5, and Borrower shall not
be obligated to compensate any Bank under this Section 4.5 for any
reduction on the rate of return on such Bank's capital for any period
prior to the 180th day prior to the date of any notice requesting
compensation delivered pursuant to this Section 4.5.
SECTION 4.6. Taxes. All amounts payable by Borrower under the Loan
Papers (whether principal, interest, fees, expenses, or otherwise) to or
for the account of each Bank shall be paid in full, free of any
deductions or withholdings for or on account of any Taxes. If Borrower
is prohibited by Law from paying any such amount free of any such
deductions and withholdings, then (at the same time and in the same
manner that such original amount is otherwise due under the Loan Papers)
Borrower shall pay to or for the account of such Bank such additional
amount as may be necessary in order that the actual amount received by
such Bank after deduction and/or withholding (and after payment of any
additional Taxes due as a consequence of the payment of such additional
amount, and so on) will equal the amount such Bank would have received if
such deduction or withholding were not made.
SECTION 4.7. Limitation on Number of Eurodollar Loans and
Competitive Bid Loans. Unless otherwise agreed by Agent with the consent
of the Required Banks, there may be no more than an aggregate of ten (10)
Eurodollar and Competitive Bid Loans outstanding at any time.
SECTION 4.8. Foreign Lenders, Participants, and Assignees. Each
Bank, Participant (by accepting a participation interest under this
Agreement), and Assignee (by executing an Assignment and Assumption
Agreement) that is not organized under the laws of the United States of
America or one of its states (a) represents to each Agent and Borrower
that (i) no Taxes are required to be withheld by Agent or Borrower with
respect to any payments to be made to it in respect of the Obligations
and (ii) it has furnished to Agent and Borrower two duly completed copies
of either U.S. Internal Revenue Service Form 4224, Form 1001, Form W-8,
or other form acceptable to Agent that entitles it to exemption from U.S.
federal withholding Tax on all interest payments under the Loan Papers,
and (b) covenants to (i) provide Agent and Borrower a new Form 4224, Form
1001, Form W-8, or other form acceptable to Agent upon the expiration or
obsolescence of any previously delivered form according to applicable
laws and regulations, duly executed and completed by it, and (ii) comply
from time to time with all applicable laws and regulations with regard to
the withholding Tax exemption. If any of the foregoing is not true or
the applicable forms are not provided, then Borrower and Agent (without
duplication) may deduct and withhold from interest payments under the
Loan Papers any United States federal-income Tax at the maximum rate
under the Code, and Borrower shall not have to pay such withheld funds to
the applicable Bank, Participant or Assignee to satisfy Section 4.6
hereof.
<PAGE> 32
SECTION 4.9. Replacement of a Bank. If any Bank has requested
compensation or reimbursement in accordance with the terms of Sections
4.5, 4.6 or 5.4 hereof or any Bank has notified Agent and Borrower that
its obligations to make Eurodollar Loans has been suspended pursuant to
Section 5.3 hereof, and (a) such request or notification is not the
result of any uniform changes in the statutes or regulations for capital
adequacy or eurodollar deposits generally, (b) there exists no Default or
Event of Default hereunder, and (c) the Borrower and such Bank are unable
to reach a written agreement regarding such request or suspension within
30 days following written notice by such Bank to the Borrower and Agent
of such request or suspension, then after the expiration of 30 days
following the delivery of the notice under Sections 4.5, 4.6, 5.3 or 5.4,
Borrower may replace such Bank in whole with an Assignee reasonably
acceptable to Agent pursuant to an Assignment and Assumption Agreement in
accordance with Section 13.10 hereof. Until such time as any Bank is
replaced by Borrower, the Borrower shall reimburse or compensate such
Bank in accordance with the terms of Sections 4.5, 4.6, or 5.4.
ARTICLE V
SPECIAL PROVISIONS REGARDING EURODOLLAR LOANS
SECTION 5.1. Funding Losses. If Borrower makes any payment of
principal with respect to any Eurodollar Loan (whether pursuant to
Sections 2.6, 2.7, 2.9, 2.10, 3.4, 11.1, the remaining provisions of this
Article V or as a voluntary or mandatory prepayment or otherwise) on any
day other than the last day of an Interest Period applicable thereto, or
if Borrower fails to borrow any Eurodollar Loan or Competitive Bid Loan
after notice has been given to any Bank in accordance with Section 2.2,
Borrower shall reimburse each Bank on demand for any resulting loss or
expense incurred by it, including (without limitation) any loss incurred
in obtaining, liquidating or employing deposits from third parties, or
any loss arising from the reemployment of funds at rates lower than the
cost to such Bank of such funds and related costs, which in the case of
the payment or prepayment prior to the end of the Interest Period for any
Eurodollar Loan or Competitive Bid Loan shall include the amount, if any,
by which (i) the interest which such Bank would have received, absent
such payment or prepayment for the applicable Interest Period exceeds
(ii) the interest which such Bank would receive if the amount of such
Eurodollar Loan or Competitive Bid Loan were deposited, loaned, or placed
by such Bank in the interbank eurodollar market on the date of such
payment or prepayment for the remainder of the applicable Interest
Period. Such Bank shall promptly deliver to Borrower and Agent a
certificate as to the amount of such loss or expense, which certificate
shall be conclusive in the absence of manifest error.
SECTION 5.2. Basis for Determining Interest Rate Applicable to
Eurodollar Loans Inadequate. If on or prior to the first day of any
Interest Period the Required Banks advise Agent that the Adjusted
Eurodollar Rate as determined by Agent will not adequately and fairly
reflect the cost to such Banks of funding their Eurodollar Loans for such
Interest Period, Agent shall give notice thereof to Borrower and Banks,
whereupon the obligations of Banks to make
<PAGE> 33
Eurodollar Loans shall be suspended until Agent notifies Borrower that the
circumstances giving rise to such suspension no longer exist. Unless
Borrower notifies Agent at least two (2) Domestic Business Days before the
date of any Eurodollar Borrowing for which a Request for Committed Loans has
previously been given that it elects not to borrow on such date, such
Borrowing shall instead be made as a Base Rate Loan.
SECTION 5.3. Illegality of Eurodollar Loans. (a) If, after the
date of this Agreement, the adoption of any Law or any change therein, or
any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Bank
(or its Eurodollar Lending Office) with any request or directive (whether
or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any Bank (or
its Eurodollar Lending Office) to make, maintain or fund its Eurodollar
Loans and such Bank shall so notify Agent, Agent shall forthwith give
notice thereof to the other Banks and Borrower. Until such Bank notifies
Borrower and Agent that the circumstances giving rise to such suspension
no longer exist, the obligation of such Bank to make Eurodollar Loans
shall be suspended. Before giving any notice to Agent pursuant to this
Section 5.3, such Bank shall designate a different Eurodollar Lending
Office if such designation will avoid the need for giving such notice and
will not, in the judgment of such Bank, be otherwise disadvantageous to
such Bank. If such Bank shall determine that it may not lawfully
continue to maintain and fund any of its outstanding Eurodollar Loans to
maturity and shall so specify in such notice, Borrower shall immediately
convert the principal amount of each such Eurodollar Loan to a Base Rate
Loan of an equal principal amount from such Bank (on which interest and
principal shall be payable contemporaneously with the unaffected
Eurodollar Loans made by the other Banks).
(b) No Bank shall be required to make any Loan hereunder if
the making of such Loan would be in violation of any Law applicable to
such Bank.
SECTION 5.4. Increased Cost of Eurodollar Loans. If, after the
date hereof, the adoption of any applicable Law or any change therein, or
any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Bank
(or its Lending Office) with any request or directive (whether or not
having the force of Law) of any such authority, central bank or
comparable agency:
(a) shall subject any Bank (or its Lending Office) to any Tax
with respect to its Eurodollar Loans, or its Notes or its obligation to
make Eurodollar Loans or shall change the basis of taxation of payments
to any Bank (or its Lending Office) of the principal of or interest on
its Eurodollar Loans or any other amounts due under this Agreement in
respect of its Eurodollar Loans or its obligation to make Eurodollar
Loans (except for changes in the rate of Tax on the overall net income of
such Bank or its Lending Office imposed by the jurisdiction in which such
Bank's principal executive office or Lending Office is located); or
<PAGE> 34
(b) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal
Reserve System, but excluding with respect to any Eurodollar Loan any
such requirement included in an applicable Eurodollar Reserve Percentage)
against assets of, deposits with or for the account of or credit extended
by, any Bank's Lending Office or shall impose on any Bank (or its Lending
Office) or the London interbank market any other condition affecting its
Eurodollar Loans, its Notes or its obligation to make Eurodollar Loans;
and the result of any of the foregoing is to increase the cost to such
Bank (or its Lending Office) of making or maintaining any Eurodollar
Loan, or to reduce the amount of any sum received or receivable by such
Bank (or its Lending Office) under this Agreement or under its Notes with
respect thereto, by an amount deemed by such Bank to be material, then,
within five (5) days after demand by such Bank (with a copy to Agent),
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction. Each Bank
will promptly notify Borrower and Agent of any event of which it has
knowledge, occurring after the date hereof, which will entitle such Bank
to compensation pursuant to this Section 5.4 and will designate a
different Lending Office if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the judgment of
such Bank, be otherwise disadvantageous to such Bank. A certificate of
any Bank claiming compensation under this Section 5.4 and setting forth
the additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In determining such amount,
such Bank may use any reasonable averaging and attribution methods.
SECTION 5.5. Alternative Loans Substituted for Affected Eurodollar
Loans. If (a) the obligation of any Bank to make Eurodollar Loans has
been suspended pursuant to Section 5.3 or (b) any Bank has demanded
compensation under Section 5.4 and Borrower shall, by at least five (5)
Eurodollar Business Days prior notice to such Bank through Agent, have
elected that the provisions of this Section 5.5 shall apply to such Bank,
then, unless and until such Bank notifies Borrower that the circumstances
giving rise to such suspension or demand for compensation no longer
apply:
(a) all Loans which would otherwise be made by such Bank as
Eurodollar Loans shall be made instead as Base Rate Loans (on which
interest and principal shall be payable contemporaneously with the
unaffected Eurodollar Loans of the other Banks), and
(b) after each of its Eurodollar Loans has been repaid, all
payments of principal which would otherwise be applied to repay such
Eurodollar Loans shall be applied to repay its Base Rate Loans.
SECTION 5.6. Discretion of Banks as to Manner of Funding.
Notwithstanding any provisions of this Agreement to the contrary, each
Bank shall be entitled to fund and maintain its funding of all or any
part of its Loans in any manner it sees fit, it being understood,
however, that for the purposes of this Agreement all determinations
hereunder shall be made as if such Bank had actually funded and
maintained each Eurodollar Loan during the Interest Period for
<PAGE> 35
such Eurodollar Loan through the purchase of deposits having a maturity
corresponding to the last day of such Interest Period and bearing an
interest rate equal to the Eurodollar Rate for such Interest Period.
ARTICLE VI
CONDITIONS
SECTION 6.1. Conditions to Initial Borrowing and Participation in
Letter of Credit Exposure. The obligation of each Bank to make a Loan on
the initial Borrowing and to participate in Letter of Credit Exposure
hereunder is subject to the condition precedent that, on or before the
date of such Borrowing or issuance of such Letter of Credit, Agent shall
have received the following, in form and substance satisfactory to the
Required Banks:
(a) a Committed Note and a Competitive Bid Note payable to the
order of each Bank, each in the amount of such Bank's Commitment, duly
executed by Borrower, dated the date hereof;
(b) a copy of the Certificate of Incorporation, and all
amendments thereto, of Borrower accompanied by a certificate that such
copy is true, correct and complete, and dated within twenty (20) days of
the Closing Date, issued by the Secretary of State of the State of
Delaware, and accompanied by a certificate of the Secretary of Borrower
or such Subsidiary that such copy is true, correct and complete on the
date hereof;
(c) a copy of the Bylaws, and all amendments thereto, of
Borrower accompanied by a certificate of the Secretary of Borrower that
such copy is true, correct and complete as of the date hereof;
(d) certain certificates and other documents issued by the
appropriate Governmental Authorities of such jurisdictions as Agent has
requested, relating to the existence of Borrower and to the effect that
Borrower is in good standing with respect to the payment of franchise and
similar Taxes and is duly qualified to transact business in such
jurisdictions;
(e) a certificate of incumbency of all officers of Borrower who
will be authorized to execute or attest to any Loan Paper, dated the date
hereof, executed by the Secretary of Borrower;
(f) copies of resolutions approving the Loan Papers and
authorizing the transactions contemplated by this Agreement and the other
Loan Papers, duly adopted by the Board of Directors of Borrower
accompanied by certificates, dated the date hereof, of the Secretary of
Borrower that such copies are true and correct copies of resolutions duly
adopted at a meeting of or (if permitted by applicable Law and, if
required by such Law, by the Bylaws of Borrower) by the unanimous written
consent of the Board of Directors of Borrower, and that such
<PAGE> 36
resolutions constitute all the resolutions adopted with respect to such
transactions, have not been amended, modified, or revoked in any respect,
and are in full force and effect as of the date hereof;
(g) the results of a review of the status of title to the
Borrowing Base Properties which review shall not reflect that the
representations and warranties contained in Section 7.10 are inaccurate
in any respect;
(h) payment of the fees and other amounts then due pursuant to
Section 2.12;
(i) an opinion of Nordman, Cormany, Hair & Compton, counsel for
Borrower dated the date hereof, favorably opining as to the
enforceability of each of the Loan Papers and otherwise in form and
substance satisfactory to Agent and Banks;
(j) an opinion of Gardere & Wynne, L.L.P., special counsel for
Agent, dated the date hereof in form and substance satisfactory to Agent;
(k) a certificate signed by an Authorized Officer stating that
(i) the representations and warranties contained in this Agreement are
true and correct in all respects, and (ii) no Default has occurred and
none is in existence;
(l) a Certificate of Ownership Interests signed by an
Authorized Officer of Borrower in the form of Exhibit H attached hereto;
and
(m) such other documents, instruments, agreements and actions
as may reasonably be required by Agent and each Bank.
SECTION 6.2. Conditions to Each Borrowing and Participation in
Letter of Credit Exposure. The obligation of each Bank to make Loans on
each Borrowing and to participate in Letter of Credit Exposure hereunder
is subject to the satisfaction of each of the following conditions:
(a) timely receipt by Agent of a Competitive Bid Request, a
Request for Committed Loans or a Request for a Letter of Credit (as
applicable);
(b) immediately before and after giving effect to such
Borrowing or issuance of such Letter of Credit, no Default shall have
occurred and be continuing and the making of any Loan in connection with
such Borrowing or the issuance of the requested Letter of Credit (as
applicable) shall not cause a Default;
(c) the representations and warranties of Borrower contained
in this Agreement shall be true and correct on and as of the date of such
Borrowing or issuance of such Letter of Credit (as applicable);
<PAGE> 37
(d) the amount of the requested Borrowing or the amount of the
requested Letter of Credit shall not exceed the Availability;
(e) no material adverse change in the business, financial
condition, operations or prospects of Borrower or any of its Subsidiaries
shall have occurred; and
(f) the making of such Loans or the issuance of such Letter of
Credit shall be permitted by applicable Law.
Each Borrowing hereunder shall be deemed to be a representation and
warranty by Borrower on the date of such Borrowing as to the facts
specified in Sections 6.2(b) through (e).
SECTION 6.3. Materiality of Conditions. Each condition precedent
herein is material to the transactions contemplated herein, and time is
of the essence in respect of each thereof.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Agent and each Bank as follows:
SECTION 7.1. Corporate Existence and Power (Borrower). Borrower
(a) is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, (b) has all corporate
power and all material governmental licenses, authorizations, consents
and approvals required to carry on its businesses as now conducted and as
proposed to be conducted, and (c) is duly qualified to transact business
as a foreign corporation in each jurisdiction where a failure to be so
qualified could have a material adverse effect on the business, financial
condition, operations or prospects of Borrower and its Subsidiaries
considered as a whole.
SECTION 7.2. Existence and Power (Subsidiaries). Each Subsidiary
of Borrower (a) is a corporation, limited liability company or
partnership duly incorporated or organized (as applicable) validly
existing and in good standing under the laws of its state of
incorporation or organization (as applicable), (b) has all corporate,
limited liability company or partnership power (as applicable) and all
material governmental licenses, authorizations, consents and approvals
required to carry on its businesses as now conducted and as proposed to
be conducted, and (c) is duly qualified to transact business as a foreign
corporation, foreign limited liability company or foreign partnership (as
applicable) in each jurisdiction where a failure to be so qualified could
have a material adverse effect on their respective financial condition or
operations.
SECTION 7.3. Corporate and Governmental Authorization;
Contravention. The execution, delivery and performance of this
Agreement, the Notes and the other Loan Papers by Borrower are within
Borrower's corporate powers, when executed will be duly authorized by all
necessary corporate action, require no action by or in respect of, or
filing with, any Governmental
<PAGE> 38
Authority and do not contravene, or constitute a default under, any provision
of applicable Law (including, without limitation, the Margin Regulations) or
of the Certificate of Incorporation or bylaws of Borrower or of any agreement,
judgment, injunction, order, decree or other instrument binding upon Borrower
or any of its Subsidiaries or result in the creation or imposition of any
Lien on any asset of Borrower or any of its Subsidiaries.
SECTION 7.4. Binding Effect. This Agreement constitutes a valid
and binding agreement of Borrower; the Notes and the other Loan Papers
when executed and delivered in accordance with this Agreement, will
constitute valid and binding obligations of Borrower; and each Loan Paper
is enforceable against Borrower in accordance with its terms except as
(i) the enforceability thereof may be limited by bankruptcy, insolvency
or similar laws affecting creditors rights generally, and (ii) the
availability of equitable remedies may be limited by equitable principles
of general applicability.
SECTION 7.5. Financial Information. (a) The most recent annual
audited consolidated balance sheet of Borrower and the related
consolidated statements of operations and cash flows for the fiscal year
then ended, copies of which have been delivered to each of Banks, fairly
present, in conformity with GAAP, the consolidated financial position of
Borrower as of the end of such fiscal year and its consolidated results
of operations and cash flows for such fiscal year.
(b) The most recent quarterly unaudited consolidated balance
sheet of Borrower delivered to Banks, and the related unaudited
consolidated statements of operations and cash flows for the portion of
Borrower's fiscal year then ended, fairly present, in conformity with
GAAP applied on a basis consistent with the financial statements referred
to in Section 7.5(a), the consolidated financial position of Borrower as
of such date and its consolidated results of operations and cash flows
for such portion of Borrower's fiscal year.
(c) Except as disclosed in writing to Banks prior to the
execution and delivery of this Agreement, since the date of the most
recent quarterly consolidated balance sheet and consolidated statements
of operations and cash flow delivered to Banks, there has been no
material adverse change in the business, financial position, results of
operations or prospects of Borrower or any of its Subsidiaries.
SECTION 7.6. Litigation. Except for matters disclosed on Schedule
3 attached hereto, there is no action, suit or proceeding pending
against, or to the knowledge of Borrower, threatened against or affecting
Borrower or any of its Subsidiaries before any Governmental Authority in
which there is a reasonable possibility of an adverse decision which
could materially adversely affect the business, financial condition,
operations or prospects of Borrower and its Subsidiaries considered as a
whole, or which could in any manner draw into question the validity of
the Loan Papers.
SECTION 7.7. ERISA. Neither Borrower nor any ERISA Affiliate
maintains or contributes to any Plan other than those disclosed to Agent
in writing. Neither Borrower nor any ERISA Affiliate maintains or has
ever maintained or been obligated to contribute to any Plan
<PAGE> 39
covered by Title IV of ERISA or subject to the funding requirements of Section
412 of the Code or Section 302 of ERISA, or a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA. Each Plan maintained by Borrower or any
ERISA Affiliate is in compliance in all material respects with the
applicable provisions of ERISA, the Code and any other applicable Federal
or state law, rule or regulation. All returns, reports and notices
required to be filed with any regulatory agency with respect to any Plan
have been filed timely. Neither Borrower nor any ERISA Affiliate has
failed to make any contribution or pay any amount due or owing as
required by the terms of any Plan. There are no pending or, to the best
of Borrower's knowledge, threatened claims, lawsuits, investigations or
actions (other than routine claims for benefits in the ordinary course)
asserted or instituted against, and neither Borrower nor any ERISA
Affiliate has knowledge of any threatened litigation or claims against,
the assets of any Plan or its related trust or against any fiduciary of a
Plan with respect to the operation of such Plan that are likely to result
in liability of Borrower having a material adverse effect on the
business, financial condition, operations or prospects of Borrower and
its Subsidiaries considered as a whole. Each Plan that is intended to be
"qualified" within the meaning of section 401(a) of the Code is, and has
been during the period from its adoption to date, so qualified, both as
to form and operation and all necessary governmental approvals, including
a favorable determination as to the qualification under the Code of such
Plan and each amendment thereto, have been or will be timely obtained.
Neither Borrower nor any ERISA Affiliate has engaged in any prohibited
transactions, within the meaning of section 406 of ERISA or section 4975
of the Code, in connection with any Plan which would result in liability
of Borrower having a material adverse effect on the business, financial
condition, operations or prospects of Borrower and its Subsidiaries
considered as a whole. Neither Borrower nor any ERISA Affiliate
maintains or contributes to any Plan that provides a post-employment
health benefit, other than a benefit required under Section 601 of ERISA,
or maintains or contributes to a Plan that provides health benefits that
is not fully funded. Neither Borrower nor any ERISA Affiliate maintains,
has established or has ever participated in a multiple employer welfare
benefit arrangement within the meaning of section 3(40)(A) of ERISA.
SECTION 7.8. Taxes and Filing of Tax Returns. Borrower and each of
its Subsidiaries have filed all material tax returns required to have
been filed and have paid all Taxes shown to be due and payable on such
returns, including interest and penalties, and all other Taxes which are
payable by such party, to the extent the same have become due and
payable, other than Taxes with respect to which a failure to pay would
not have a material adverse effect on the business, financial condition,
operations or prospects of Borrower and its Subsidiaries considered as a
whole. Borrower does not know of any proposed material Tax assessment
against it or any of its Subsidiaries, and all Tax liabilities of each of
Borrower and its Subsidiaries are adequately provided for. Except as
hereinafter disclosed in writing to Banks, no income tax liability of
Borrower or any of its Subsidiaries has been asserted by the Internal
Revenue Service for Taxes in excess of those already paid which assertion
is reasonably expected to be ultimately resolved in a manner adverse to
Borrower and which, if so resolved, will have a material adverse effect
on the business, financial condition, operations or prospects of Borrower
and its Subsidiaries considered as a whole.
<PAGE> 40
SECTION 7.9. Ownership of Properties Generally. Borrower and each
of its Subsidiaries have good and valid 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 7.5 (a) and (b) and all assets which are used by
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 Encumbrances.
SECTION 7.10. Mineral Properties. Borrower has good, indefeasible,
record title to all Mineral Interests described in the Reserve Report,
free and clear of all Liens except Permitted Encumbrances. All such
Mineral 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. Without regard to any consent or non-
consent provisions of any joint operating agreement covering any of
Borrower's Proved Mineral Interests, Borrower's share of (a) the costs
for each Proved Mineral Interest described in the Reserve Report is not
greater than the decimal fraction set forth in the Reserve Report, 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 Mineral Interest is not less than
the decimal fraction set forth in the Reserve Report, before and after
payout, as the case may be, and described therein by the designations net
revenue interest, NRI, or similar terms. Each well drilled in respect of
each Proved Producing Mineral Interest described in the Reserve Report
(y) is capable of, and is presently, producing hydrocarbons in
commercially profitable quantities, and Borrower is currently receiving
payments for its share of production, with no 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 Laws 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.
SECTION 7.11. [intentionally deleted]
SECTION 7.12. Licenses, Permits, Etc. 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,
except to the extent a failure to obtain any such item would not have a
material adverse effect on the business, financial condition, operations
or prospects of Borrower and its Subsidiaries considered as a whole.
SECTION 7.13. Compliance with Law. The business and operations of
Borrower and its Subsidiaries have been and are being conducted in
accordance with all applicable Laws other than violations of Laws which
do not (either individually or collectively) have a material adverse
effect on the business, financial condition, operations or prospects of
Borrower and its Subsidiaries considered as a whole.
<PAGE> 41
SECTION 7.14. Full Disclosure. All information heretofore
furnished by Borrower (or any other party in its behalf) to Agent or any
Bank for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all such information hereafter
furnished by Borrower or in its behalf to Agent or any Bank will be,
true, complete and accurate in every material respect or (to the extent
disclosed) based on reasonable estimates on the date as of which such
information is stated or certified. Borrower has disclosed to Banks in
writing any and all facts (other than facts of general public knowledge)
which might reasonably be expected to materially and adversely affect the
business, financial condition, operations or prospects of Borrower and
its Subsidiaries considered as a whole or the ability of Borrower and its
Subsidiaries to perform their obligations under this Agreement and the
other Loan Papers.
SECTION 7.15. Corporate Structure. Borrower does not have any
Subsidiaries on the Closing Date.
SECTION 7.16. Environmental Matters. Except for matters disclosed
on Schedule 4 hereto, no real or personal property owned or leased by
Borrower or any Subsidiary of Borrower (including, without limitation,
Borrower's and its Subsidiaries Mineral Interests) and no operations
conducted thereon, and to Borrower's knowledge, no operations of any
prior owner, lessee or operator of any such properties, is or has been in
violation of any Applicable Environmental Law other than violations which
neither individually or in the aggregate will have a material adverse
effect on Borrower and its Subsidiaries taken as a whole. Except for
matters disclosed on Schedule 4 hereto, neither Borrower, any Subsidiary
of Borrower, nor any such property or operation is the subject of any
existing, pending or, to Borrower's knowledge, threatened action, suit,
investigation, inquiry or preceding with respect to Applicable
Environmental Laws which could, individually or in the aggregate, have a
material adverse effect on Borrower and its Subsidiaries taken as a
whole. All notices, permits, licenses, and similar authorizations,
required to be obtained or filed in connection with the ownership or
operation of each tract of real property and each item of personal
property owned, leased or operated by Borrower or any of its
Subsidiaries, including, without limitation, notices, licenses, permits
and authorizations required in connection with any past or present
treatment, storage, disposal, or release of hazardous substances,
petroleum, or solid waste into the environment, have been duly obtained
or filed except to the extent the failure to obtain or file such notices,
licenses, permits and authorizations would not have a material adverse
effect on Borrower or any of its Subsidiaries taken as a whole. To
Borrower's knowledge, all hazardous substances, generated at each tract
of real property and by each item of personal property owned, leased or
operated by Borrower or any of its Subsidiaries have been transported,
treated, and disposed of only by carriers maintaining valid permits under
RCRA and all other Applicable Environmental Laws. Except for matters
disclosed on Schedule 4 hereto, there has been no release or threatened
release of any quantity of any hazardous substances or petroleum on, to
or from any real or personal property owned, leased, or operated by
Borrower or any Subsidiary which was not in compliance with Applicable
Environmental Laws other than releases which would not, individually or
in the aggregate, have a material adverse effect on Borrower and its
Subsidiaries considered as a whole. Except for matters disclosed on
Schedule 4 hereto, neither Borrower nor any Subsidiary has any contingent
liability in connection with any release or threatened release of any
hazardous
<PAGE> 42
substance, petroleum, or solid waste into the environment which
could reasonably be expected to have a material adverse effect on
Borrower and its Subsidiaries considered as a whole.
SECTION 7.17. Burdensome Obligations. Neither Borrower, any
Subsidiary of Borrower, nor any of their respective properties, is
subject to any Law or any pending or threatened change of Law or subject
to any restriction under its certificate (or articles) of incorporation
or bylaws or under any agreement or instrument to which Borrower or any
Subsidiary of Borrower is a party or by which Borrower or any Subsidiary
of Borrower or any of their respective properties may be subject or
bound, which is so unusual or burdensome as to be likely in the
foreseeable future to have a material adverse effect on the business,
financial condition, operations or prospects of Borrower and its
Subsidiaries considered as a whole. Without limiting the foregoing,
neither Borrower nor any of its Subsidiaries is a party to or bound by
any agreement or subject to any order of any Governmental Authority which
prohibits or restricts in any way the right of a Subsidiary of Borrower
to make Distributions.
SECTION 7.18. Fiscal Year. Borrower's Fiscal Year is January 1
through December 31.
SECTION 7.19. No Default. Neither a Default nor an Event of
Default has occurred or will exist after giving effect to the
transactions contemplated by this Agreement.
SECTION 7.20. Government Regulation. Neither Borrower nor any of
its Subsidiaries is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Interstate
Commerce Act (as any of the preceding acts have been amended), the
Investment Company Act of 1940 or any other law which regulates the
incurring by Borrower of Debt, including, but not limited to laws
relating to common contract carriers or the sale of electricity, gas,
stream, water or other public utility services.
SECTION 7.21. Insider. Neither Borrower nor any of its
Subsidiaries is, nor any officer of Borrower or its Subsidiaries, and no
Person having "control" (as that term is defined in 12 U.S.C. Section
375(b) or regulations promulgated thereunder) of Borrower or any
Subsidiary is an "executive officer", "director" or "shareholder" having
"control" (as that term is defined in 12 U.S.C. Section 375(b) or
regulations promulgated thereunder) of any Bank or any bank holding
company of which any Bank is a Subsidiary or of any Subsidiary of such
bank holding company.
SECTION 7.22. Gas Balancing Agreements and Advance Payment
Contracts. On the date of this Agreement, (a) the net gas imbalances to
Borrower and its Subsidiaries (considered in the aggregate) under all Gas
Balancing Agreements to which Borrower or any of its Subsidiaries is a
party or by which any Mineral Interest owned by Borrower or any of its
Subsidiaries is bound, is not in excess of $500,000, and (b) the
aggregate amount of all Advance Payments received by Borrower or any of
its Subsidiaries under Advance Payment Contracts which have not been
satisfied by delivery of production does not exceed $500,000.
<PAGE> 43
ARTICLE VIII
AFFIRMATIVE COVENANTS
Borrower agrees that, so long as any Bank has any commitment to lend
or participate in Letter of Credit Exposure hereunder or any amount
payable under any Note remains unpaid or any Letter of Credit remains
outstanding:
SECTION 8.1. Information. Borrower will deliver, or cause to be
delivered, to each of Banks:
(a) as soon as available and in any event within ninety (90)
days after the end of each Fiscal Year, consolidated and consolidating
balance sheets of Borrower as of the end of such Fiscal Year and the
related consolidated and consolidating statements of income and changes
in financial position for such Fiscal Year, setting forth in each case in
comparative form the figures for the previous Fiscal Year, all reported
by Borrower in accordance with GAAP and audited by a firm of independent
public accountants of nationally recognized standing and acceptable to
Agent;
(b) (i) as soon as available and in any event within forty-
five (45) days after the end of each of the first three (3) Fiscal
Quarters of each Fiscal Year, consolidated and consolidating balance
sheets of Borrower as of the end of such Fiscal Quarter and the related
consolidated and consolidating statements of income and changes in
financial position for such quarter and for the portion of Borrower's
fiscal year ended at the end of such Fiscal Quarter, setting forth in
each case in comparative form the figures for the corresponding quarter
and the corresponding portion of Borrower's previous Fiscal Year. All
financial statements delivered pursuant to this Section 8.1(b) shall be
certified as to fairness of presentation, GAAP and consistency by a
Financial Officer of Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in Sections 8.1(a) and (b), a certificate of a
Financial Officer in the form of Exhibit I attached hereto, (i) setting
forth in reasonable detail the calculations required to establish whether
Borrower was in compliance with the requirements of Article X on the date
of such financial statements, (ii) stating whether there exists on the
date of such certificate any Default and, if any Default then exists,
setting forth the details thereof and the action which Borrower is taking
or proposes to take with respect thereto, (iii) stating whether or not
such financial statements fairly reflect the business and financial
condition of Borrower as of the date of the delivery of such financial
statements, (iv) setting forth the aggregate amount of all Investments
made by Borrower which are outstanding on the date of such certificates
which are of the type described in clause (d) of the definition of
"Permitted Investments", herein contained, (v) setting forth (A) the
amount of net gas imbalances under Gas Balancing Agreements to which
Borrower or any of its Subsidiaries are parties or by which any Mineral
Interests owned by Borrower or any of its Subsidiaries are bound, and
(B) the aggregate amount of all Advance Payments received under Advance
Payment Contracts to which Borrower or any of its Subsidiaries are
parties or by which
<PAGE> 44
any Mineral Interests owned by Borrower or any of its Subsidiaries
are bound which have not been satisfied by delivery of production, if
any, and (vi) setting forth a list and description of Hedge Transactions
to which Borrower or any of its Subsidiaries is then a party, including
a calculation of Borrower's and its Subsidiaries' termination liability
assuming each of such Hedge Transactions was terminated as of such date
(whether or not such Hedge Transactions are then terminable but without
giving effect to penalties for early termination, if any);
(d) promptly upon the mailing thereof to the stockholders of
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(e) promptly upon the filing thereof, copies of all final
registration statements, post-effective amendments thereto and annual,
quarterly or special reports which Borrower shall have filed with the
Securities and Exchange Commission; provided, that Borrower must deliver,
or cause to be delivered, any annual reports which Borrower shall have
filed with the Securities and Exchange Commission, within ninety (90)
days after the end of each Fiscal Year of Borrower, and any quarterly
reports which Borrower shall have filed with the Securities and Exchange
Commission, within forty-five (45) days after the end of each of the
first three (3) Fiscal Quarters of each Fiscal Year of Borrower;
(f) promptly upon request therefore by any Bank, such title
opinions and other information in its possession, control or direction
regarding title to the oil and gas properties owned by Borrower or its
Subsidiaries as are appropriate to determine the status thereof;
(g) promptly upon receipt of same, any notice or other
information received by Borrower or any Subsidiary of Borrower indicating
any potential, actual or alleged (i) non-compliance with or violation of
the requirements of any Applicable Environmental Law which could result
in liability to Borrower or any Subsidiary for fines, clean up or any
other remediation obligations or any other liability in excess of
$2,000,000 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 Borrower or any
Subsidiary a duty to report to a governmental authority or to pay cleanup
costs or to take remedial action under any Applicable Environmental Law
which could result in liability to Borrower or any Subsidiary for fines,
clean up and other remediation obligations or any other liability in
excess of $2,000,000 in the aggregate; or (iii) the existence of any Lien
arising under any Applicable Environmental Law securing any obligation to
pay fines, clean up or other remediation costs or any other liability in
excess of $2,000,000 in the aggregate. Without limiting the foregoing,
Borrower shall provide to Banks promptly upon receipt of same copies of
all environmental consultants or engineers reports received by Borrower
or any Subsidiary of Borrower which would render the representation and
warranty contained in Section 7.16 untrue or inaccurate in any respect;
provided, however, that no report shall be required to be delivered if
such report is subject to an attorney-client privilege or contains
information or discloses facts which could result in liability to
Borrower or any Subsidiary of Borrower for fines, cleanup and any other
remediation obligations or any other liability of less than $2,000,000 in
the aggregate;
<PAGE> 45
(h) in the event any notification is provided by Borrower to
any Bank or Agent pursuant to Section 8.1(g) hereof or Agent or any Bank
otherwise learns of any event or condition under which any such notice
would be required, then, upon request of Required Banks, Borrower shall
deliver to Agent and each Bank such information regarding such event,
condition or circumstance as Agent or Required Banks shall reasonably
require;
(i) immediately upon any Authorized Officer becoming aware of
the occurrence of any Default, a certificate of an Authorized Officer
setting forth the details thereof and the action which Borrower is taking
or proposes to take with respect thereto;
(j) on or before thirty (30) days following the expiration of
each month, reports of net production volume and prices received for each
Borrowing Base property by field during the preceding calendar month;
(k) notify Agent within thirty (30) days of any change in
Borrower's Investment Guidelines;
(l) promptly notify Banks of any material adverse change in
the business, financial condition, operations or prospects of Borrower or
any of its Subsidiaries; and
(m) from time to time such additional information regarding
the financial position or business of Borrower and its Subsidiaries as
Agent, at the request of any Bank, may reasonably request.
SECTION 8.2. Maintenance of Existence. Borrower, shall, and shall
cause each Subsidiary to, at all times (a) maintain its corporate,
partnership or limited liability company existence in its state of
incorporation or organization except to the extent any Subsidiary ceases
to be in existence as a result of a merger or consolidation expressly
permitted pursuant to Section 9.4, and (b) maintain its good standing and
qualification to transact business in all jurisdictions where the failure
to maintain good standing or qualification to transact business could
have a material adverse effect on the business, financial condition,
operations or prospects of Borrower or any of its Subsidiaries.
SECTION 8.3. Right of Inspection. Borrower will permit and will
cause each of its Subsidiaries to permit any officer, employee or agent
of Agent or any of Banks to visit and inspect any of the assets of
Borrower and its Subsidiaries, examine Borrower's and its Subsidiaries'
books of record and accounts, take copies and extracts therefrom, and
discuss the affairs, finances and accounts of Borrower and its
Subsidiaries with Borrower's and its Subsidiaries' officers, accountants
and auditors, all at such reasonable times and as often as Agent or any
of Banks may desire, all at the expense of Borrower; provided, that,
prior to the occurrence of an Event of Default neither Agent nor any Bank
will require Borrower or any of its Subsidiaries to incur any
unreasonable expense as a result of the exercise by Agent or any Bank of
its rights pursuant to this Section 8.3.
<PAGE> 46
SECTION 8.4. Maintenance of Insurance. Borrower will, and will
cause each of its Subsidiaries to (and will use its best efforts to cause
all operators of Mineral Interests owned by Borrower and its
Subsidiaries) at all times maintain or cause to be maintained insurance
covering such risks as are customarily carried by businesses similarly
situated.
SECTION 8.5. Payment of Taxes and Claims. Borrower will, 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 Encumbrance) 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 Borrower or any of its Subsidiaries are subject to
levy or execution, (ii) 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) Borrower has notified Agent of such
circumstances, in detail satisfactory to Agent.
SECTION 8.6. Compliance with Laws and Documents. Borrower will and
will cause each of its Subsidiaries to comply with all Laws, their
respective certificates (or articles) of incorporation, bylaws and
similar organizational documents and all Material Agreements to which
Borrower or any of its Subsidiaries are a party, if a violation, alone or
when combined with all other such violations, could have a material
adverse effect on the business, financial condition, operations or
prospects of Borrower or any of its Subsidiaries.
SECTION 8.7. Operation of Properties and Equipment. (a) Borrower
will, and will cause each of its Subsidiaries to, maintain, develop and
operate their respective Mineral Interests in a good and workmanlike
manner, and observe and comply with all of the terms and provisions,
express or implied, of all oil and gas leases relating to such Mineral
Interests so long as such Mineral Interests are capable of producing
hydrocarbons and accompanying elements in paying quantities.
(b) Borrower will, and will cause each of its Subsidiaries to,
comply in all respects with all contracts and agreements applicable to or
relating to their respective Mineral Interests or the production and sale
of hydrocarbons and accompanying elements therefrom, except to the extent
a failure to so comply could not have a material adverse effect on the
business, financial condition, operations or prospects of Borrower or any
of its Subsidiaries.
(c) Borrower will, and will cause each of its Subsidiaries, at
all times, to maintain, preserve and keep all operating equipment used
with respect to the Mineral Interests of Borrower and its Subsidiaries 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
<PAGE> 47
maintained; provided that no item of operating equipment need be so
repaired, renewed, replaced, added to or improved, if 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 Borrower
and its Subsidiaries.
SECTION 8.8. Environmental Law Compliance. Except to the extent a
failure to comply would not have a material adverse effect on the
business, financial condition, operations or prospects of Borrower and
its Subsidiaries considered as a whole, Borrower will, and will cause
each of its Subsidiaries to, comply with all Applicable Environmental
Laws, including, without limitation, (a) all licensing, permitting,
notification and similar requirements of Applicable Environmental Laws,
and (b) all provisions of all Applicable Environmental Laws regarding
storage, discharge, release, transportation, treatment and disposal of
hazardous substances, petroleum, solid waste or other contaminants.
Borrower will, and will cause each of its Subsidiaries to, promptly pay
and discharge when due all legal debts, claims, liabilities and
obligations with respect to any clean-up or remediation measures
necessary to comply with Applicable Environmental Laws.
SECTION 8.9. ERISA Reporting Requirements. Borrower shall furnish
or cause to be furnished to Agent:
(a) Promptly and in any event (i) within thirty (30) days
after Borrower or any ERISA Affiliate receives notice from any regulatory
agency of the commencement of an audit, investigation or similar
proceeding with respect to a Plan, and (ii) within ten (10) days after
Borrower or any ERISA Affiliate contacts the Internal Revenue Service for
the purpose of participation in a closing agreement or any voluntary
resolution program with respect to a Plan or knows or has reason to know
that any event with respect to any Plan of Borrower or any ERISA
Affiliate has occurred that could have a material adverse effect on
Borrower or any ERISA Affiliate;
(b) Promptly and in any event within thirty (30) days after
the receipt by Borrower of a request therefor by a Bank, copies of any
annual and other report (including Schedule B thereto) with respect to a
Plan filed by Borrower or any ERISA Affiliate with the United States
Department of Labor, the Internal Revenue Service or the PBGC;
(c) Notification within thirty (30) days of the effective date
thereof of any material increases in the benefits of any existing Plan
which is not a multiemployer plan (as defined in section 4001(a)(3) of
ERISA), or the establishment of any new Plans, or the commencement of
contributions to any Plan to which Borrower or any ERISA Affiliate was
not previously contributing;
(d) Promptly after receipt of written notice of commencement
thereof, notice of all (i) claims made by participants or beneficiaries
with respect to any Plan and (ii) actions, suits and proceedings before
any court or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, affecting Borrower or any ERISA
Affiliate with
<PAGE> 48
respect to any Plan, except those which, in the aggregate, if adversely
determined could not have a material adverse effect on Borrower or any
ERISA Affiliate.
SECTION 8.10. Additional Documents. Borrower shall cure promptly
any defects in the creation and issuance of each Note , and the execution
and delivery of this Agreement and the other Loan Papers and, at
Borrower's expense, Borrower shall promptly and duly 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 Borrower in this
Agreement and the other Loan Papers as may be reasonably necessary or
appropriate in connection therewith.
SECTION 8.11. Environmental Matters. Promptly upon Borrower or any
Subsidiary of Borrower receiving any notice or other information
indicating any potential, actual or alleged (i) non-compliance with or
violation of the requirements of any Applicable Environmental Law which
could result in liability to Borrower or any Subsidiary for fines, clean
up or any other remediation obligations or any other liability in excess
of $15,000,000 (without any reductions for insurance or offsets) 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 Borrower or any Subsidiary a duty to report
to a governmental authority or to pay cleanup costs or to take remedial
action under any Applicable Environmental Law which could result in
liability to Borrower or any Subsidiary for fines, clean up and other
remediation obligations or any other liability in excess of $15,000,000
(without any reductions for insurance or offsets) in the aggregate; or
(iii) the existence of any Lien arising under any Applicable
Environmental Law securing any obligation to pay fines, clean up or other
remediation costs or any other liability in excess of $15,000,000
(without any reductions for insurance or offsets) in the aggregate; then
Banks shall have the right to have environmental consultants and
engineers chosen by Banks prepare reports relating to the condition
described above which creates this right. Borrower shall reimburse Banks
for the fees and expenses of such consultants and engineers up to
$350,000 in the aggregate for each event described in the immediately
preceding sentence. Such consultants and engineers, in conducting any
testing, reviews and evaluations, shall operate at the direction of
Borrower. Banks will make their best efforts to protect any attorney-
client privilege which exists with respect to the reports prepared by
such engineers and consultants pursuant to this Section 8.11.
ARTICLE IX
NEGATIVE COVENANTS
Borrower agrees that, so long as any Bank has any commitment to lend
or participate in Letter of Credit Exposure hereunder or any amount
payable under any Note remains unpaid or any Letter of Credit remains
outstanding:
<PAGE> 49
SECTION 9.1. Incurrence of Debt. Borrower shall not, and shall not
permit any of its Subsidiaries to, incur any Debt other than (a) the
Obligations, and (b) other Debt in an aggregate amount outstanding at any
time not to exceed $10,000,000.
SECTION 9.2. Restrictions on Distributions. Borrower shall not,
directly or indirectly, declare or pay, or incur any liability to declare
or pay, Distributions in any Fiscal Year; provided, that (a) so long as
no Default or Event of Default exists on the date any such Distribution
is declared or paid and no Default or Event of Default would result
therefrom, Borrower shall be permitted to declare and pay Distributions
in any period of four (4) consecutive Fiscal Quarters in an amount not to
exceed the greater of (i) $12,000,000, or (ii) seventy five percent (75%)
of Borrower's Consolidated Net Income for such period of four (4)
consecutive Fiscal Quarters (as reflected in the financial statements for
Borrower for such Fiscal Quarters delivered pursuant to Section 8.1(a)
and (b), hereof), and (b) any Subsidiary of Borrower may make
Distributions to Borrower and to any wholly owned Subsidiary of Borrower.
Borrower shall not, and shall not permit any of its Subsidiaries to,
enter into any agreement or become subject to any order of any
Governmental Authority which prohibits or restricts in any way the right
of any of Borrower's Subsidiaries to pay Distributions.
SECTION 9.3. Negative Pledge. Borrower shall not, and shall not
permit any Subsidiary to create, assume or suffer to exist any Lien on
any asset of Borrower or any of its Subsidiaries other than Permitted
Encumbrances. Borrower shall not, and shall not permit any of its
Subsidiaries to, enter into or become bound by any agreement (other than
this Agreement) that prohibits or otherwise restricts the right of
Borrower or any of its Subsidiaries to create, assume or suffer to exist
any Lien on any of Borrower's or any of its Subsidiaries' assets in favor
of Agent.
SECTION 9.4. Consolidations and Mergers. Borrower shall not, and
shall not permit any Subsidiary to, consolidate or merge with or into any
other Person; provided, that so long as no Default or Event of Default
exists or will result (a) Borrower may merge or consolidate with another
Person so long as Borrower is the surviving corporation, (b) any wholly
owned Subsidiary of Borrower may merge or consolidate with any other
Person so long as a wholly owned Subsidiary of Borrower is the surviving
corporation, and (c) any Subsidiary of Borrower may merge with any other
Person so long as such Subsidiary is the surviving corporation.
SECTION 9.5. Asset Dispositions. Borrower shall not and shall not
permit any Subsidiary to sell, lease, transfer, abandon or otherwise
dispose of any asset other than (a) the sale in the ordinary course of
business of hydrocarbons produced from Borrower's and its Subsidiaries'
Mineral Interests, and (b) the sale, lease, transfer, abandonment or
other disposition of other assets, provided that the aggregate value of
all assets, sold, leased, transferred or disposed of pursuant to this
clause (b) in any period of twelve (12) consecutive months shall not
exceed Five Million Dollars ($5,000,000).
SECTION 9.6. Amendments to Organizational Documents. Borrower
shall not and shall not permit any of its Subsidiaries to enter into or
permit any modification or amendment of, or
<PAGE> 50
waive any material right or obligation of any Person under its certificate
or articles of incorporation, bylaws, partnership agreement, regulations or
other organizational documents other than amendments, modifications and
waivers which are not, individually or in the aggregate, material.
SECTION 9.7. Use of Proceeds. The proceeds of Borrowings will not
be used for any purpose other than (a) working capital, (b) to finance
the acquisition, exploration and development of Mineral Interests, and
(c) for general corporate purposes. None of such proceeds (including,
without limitation, proceeds of Letters of Credit issued hereunder) will
be used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any Margin Stock, and
none of such proceeds will be used in violation of applicable Law
(including, without limitation, the Margin Regulations). Letters of
Credit will be issued hereunder only for the purpose of securing bids,
tenders, bonds, contracts and other obligations entered into in the
ordinary course of Borrower's business. Without limiting the foregoing,
no Letters of Credit will be issued hereunder for the purpose of or
providing credit enhancement with respect to any debt or equity security
of Borrower or any of its Subsidiaries or to secure interest rate,
commodity, currency or other swaps, caps, collars, futures contracts or
similar hedging arrangements.
SECTION 9.8. Investments. Borrower shall not and shall not permit
any of its Subsidiaries to directly or indirectly, make any Investment
other than Permitted Investments.
SECTION 9.9. Transactions with Affiliates. Borrower shall not, and
shall not permit any of its Subsidiaries, to engage in any transaction
with an Affiliate unless such transaction is as favorable to Borrower or
such Subsidiary as could be obtained in an arm's length transaction with
an unaffiliated Person in accordance with prevailing industry customs and
practices.
SECTION 9.10. ERISA. Borrower agrees that it will not knowingly
take action or fail to take action which would result in a violation of
ERISA, the Code or other laws applicable to the Plans maintained or
contributed to by it or any ERISA Affiliate. Neither Borrower nor any
ERISA Affiliate shall, without the prior written consent of the Required
Banks, materially modify the term of, or the funding obligations or
contribution requirements under any existing Plan, establish a new Plan,
or become obligated or incur any liability under a Plan that is not
maintained or contributed to by Borrower or any ERISA Affiliate as of the
Closing Date.
SECTION 9.11. Hedge Transactions. Borrower shall not, and shall
not permit any of its 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 seventy five
percent (75%) of Borrower's anticipated production from Proved, Producing
Mineral Interests during the term of such existing Hedge Transactions.
SECTION 9.12. Fiscal Year. Borrower shall not change its fiscal
year.
<PAGE> 51
SECTION 9.13. Change in Business. Borrower shall not, and shall
not permit any of its Subsidiaries to, engage in any business other than
the acquisition, exploration, production and development of Mineral
Interests; provided, that, this Section 9.13 shall not prevent Borrower
or any of its Subsidiaries from (a) making Permitted Investments
described in clause (e) of the definition of Permitted Investments, or
(b) making capital expenditures to purchase assets used in the
transportation, processing, refining or marketing of petroleum products;
provided, that the sum of (i) the aggregate amount of capital
expenditures made by Borrower and its Subsidiaries in such "downstream"
assets, plus (ii) the aggregate amount of the outstanding Investments
made pursuant to clause (e) of the definition of Permitted Investments
(in each case measured on a cost basis), shall not exceed $15,000,000 at
any time.
ARTICLE X
FINANCIAL COVENANTS
Borrower agrees that, so long as any Bank has any commitment to lend
or participate in Letter of Credit Exposure hereunder or any amount
payable under any Note remains unpaid or any Letter of Credit remains
outstanding:
SECTION 10.1. Minimum Consolidated Tangible Net Worth of Borrower.
Borrower will not permit its Consolidated Tangible Net Worth at any time
to be less than the Minimum Consolidated Tangible Net Worth at such time.
ARTICLE XI
DEFAULTS
SECTION 11.1. Events of Default. If one or more of the following
events (collectively "Events of Default" and individually an "Event of
Default") shall have occurred and be continuing:
(a) Borrower shall fail to pay when due any principal on any
Note;
(b) Borrower shall fail to pay when due accrued interest on
any Note or any fees or any other amount payable hereunder and such
failure shall continue for a period of three (3) days following the due
date;
(c) Borrower shall fail to observe or perform any covenant or
agreement contained in Sections 8.1(a), (b), (c), (e) or (g), 8.10,
Article IX or Article X of this Agreement;
(d) Borrower or any Subsidiary of Borrower shall fail to
observe or perform any covenant or agreement contained in this Agreement
or the other Loan Papers (other than
<PAGE> 52
those referenced in Sections 11.1(a), (b) and (c)) and such failure
continues for a period of twenty (20) days after the earlier of (i) the
date any Authorized Officer of Borrower acquires knowledge of such
failure, or (ii) written notice of such failure has been given to
Borrower by Agent or any Bank;
(e) any representation, warranty, certification or statement
made or deemed to have been made by Borrower in this Agreement or by
Borrower, any Subsidiary of Borrower or any other Person on behalf of
Borrower or on behalf of any Subsidiary of Borrower in any certificate,
financial statement or other document delivered pursuant to this
Agreement shall prove to have been incorrect in any material respect when
made;
(f) Borrower or any of its Subsidiaries shall fail to make any
payment when due on any Debt of such Person in a principal amount equal
to or greater than $2,500,000 or any other event or condition shall occur
which (i) results in the acceleration of the maturity of any such Debt,
or (ii) entitles the holder of such Debt to accelerate the maturity
thereof;
(g) Borrower or any of its Subsidiaries shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or shall
consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced
against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due,
or shall take any corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against Borrower or any of its Subsidiaries seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of sixty (60) days; or an order for relief shall be
entered against Borrower or any of its Subsidiaries of any of them under
the federal bankruptcy Laws as now or hereafter in effect;
(i) one (1) or more judgments or orders for the payment of
money aggregating in excess of $2,500,000 shall be rendered against
Borrower or any of its Subsidiaries and such judgment or order shall
continue unsatisfied and unstayed for thirty (30) days;
(j) (i) any event occurs with respect to any Plan or Plans
pursuant to which Borrower and/or any ERISA Affiliate incur a liability
due and owing at the time of such event, without existing funding
therefor, for benefit payments under such Plan or Plans in excess of
$1,500,000; or (ii) Borrower, any ERISA Affiliate, or any other "party-
in-interest" or "disqualified person", as such terms are defined in
section 3(14) of ERISA and section 4975(e)(2)
<PAGE> 53
of the Code, shall engage in transactions which in the aggregate would
reasonably result in a direct or indirect liability to Borrower or any
ERISA Affiliate in excess of $500,000 under section 409 or 502 of ERISA or
section 4975 of the Code; or
(k) as of any date either (i) thirty percent (30%)
of the Persons who are members of Borrower's board of directors are
Persons who were not members of Borrower's board of directors on the date
which was twelve (12) months prior to such date, or (ii) any single
Person or group of Affiliated Persons (excluding Persons who are
directors or executive officers of Borrower on the Closing Date or are
listed on Schedule 5, attached hereto) shall acquire thirty percent (30%)
or more of the outstanding voting stock of Borrower (whether in a single
transaction or series of related or unrelated transactions);
then, and in every such event, Agent shall without presentment, notice
or demand (unless expressly provided for herein) of any kind (including,
without limitation, notice of intention to accelerate and acceleration),
all of which are hereby waived, (a) if requested by the Required Banks,
terminate the Commitments and they shall thereupon terminate, and (b) if
requested by the Required Banks, take such other actions as may be
permitted by the Loan Papers including, declaring the Notes (together
with accrued interest thereon) to be, and the Notes shall thereupon
become, immediately due and payable; provided that (c) in the case of any
of the Events of Default specified in Sections 11.1(f) or (g), without
any notice to Borrower or any other act by Agent or Banks, the
Commitments shall thereupon terminate and the Notes (together with
accrued interest thereon) shall become immediately due and payable.
ARTICLE XII
AGENT
SECTION 12.1. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes Agent to take such action as Agent on its behalf
and to exercise such powers under this Agreement, the Notes and the other
Loan Papers as are delegated to Agent by the terms hereof or thereof,
together with all such powers as are reasonably incidental thereto,
provided that, as between and among Banks, Agent will not prosecute,
settle or compromise any claim against Borrower or release or institute
enforcement proceedings, except with the consent of the Required Banks.
Each Bank and Borrower agree that Agent is not a fiduciary for Banks or
for Borrower but simply is acting in the capacity described herein to
alleviate administrative burdens for both Borrower and Banks and that
Agent has no duties or responsibilities to Banks or Borrower except those
expressly set forth herein.
SECTION 12.2. Agent and Affiliates. NationsBank of Texas, N.A.
shall have the same rights and powers under this Agreement as any other
Bank and may exercise or refrain from exercising the same as though it
were not Agent, and NationsBank of Texas, N.A. and its affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with Borrower and its Subsidiaries or any affiliate of Borrower
as if it were not Agent hereunder.
<PAGE> 54
SECTION 12.3. Action by Agent. The obligations of Agent hereunder
are only those expressly set forth herein. Without limiting the
generality of the foregoing, Agent shall not be required to take any
action with respect to any Default, except as expressly provided in
Article XI. Notwithstanding the administrative authority delegated to
Agent, Agent shall not without the prior written approval of all Banks
cause or permit any modification of the Loan Papers pertaining to (a) the
scheduled payment of principal, interest or fees in respect of the Loans
including the Termination Date, (b) the rate of interest applicable to
the Loans or the amount of fees payable hereunder, (c) increasing the
Commitment of any Bank, or (d) Article III or the definitions contained
in Section 1.1 applicable thereto. Agent shall make such requests or
take such actions in respect of Borrower as the Required Banks shall
direct. Further, Agent shall grant such waivers, consents or approvals
in favor of Borrower as the Required Banks shall direct.
SECTION 12.4. Consultation with Experts. Agent may consult with
legal counsel (who may be counsel for Borrower), independent public
accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance
with the advice of such counsel, accountants or experts.
SECTION 12.5. LIABILITY OF AGENT. NEITHER AGENT NOR ANY OF ITS
DIRECTORS, OFFICERS, AGENTS, OR EMPLOYEES SHALL BE LIABLE FOR ANY ACTION
TAKEN OR NOT TAKEN BY IT IN CONNECTION HEREWITH (A) WITH THE CONSENT OR
AT THE REQUEST OF THE REQUIRED BANKS OR (B) IN THE ABSENCE OF ITS OWN
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, IT BEING THE INTENTION OF BANKS
THAT SUCH PARTIES SHALL NOT BE LIABLE FOR THE CONSEQUENCES OF THEIR OWN
NEGLIGENCE. Neither Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire
into or verify (a) any statement, warranty or representation made in
connection with this Agreement or any Borrowing hereunder, (b) the
performance or observance of any of the covenants or agreements of
Borrower, (c) the satisfaction of any condition specified in Article VI,
except receipt of items required to be delivered to Agent, or (d) the
validity, effectiveness or genuineness of this Agreement, the Notes or
any other instrument or writing furnished in connection herewith. Agent
shall not incur any liability by acting in reliance upon any notice,
consent, certificate, statement, or other writing (which may be a bank
wire, telex or similar writing) believed by it to be genuine or to be
signed by the proper party or parties or upon any oral notice which Agent
believes will be confirmed in writing by the proper party or parties. If
Agent fails to take any action required to be taken by it under the Loan
Papers after a default and within a reasonable time after being requested
to do so by any Bank (after such requesting Bank has obtained the
approval of such other Banks as required), Agent shall not suffer or
incur any liability as a result thereof, but such requesting Bank may
request Agent to resign, whereupon Agent shall so resign pursuant to
Section 12.9.
SECTION 12.6. Delegation of Duties. Agent may execute any of its
duties hereunder by or through officers, directors, employees, attorneys,
or agents.
<PAGE> 55
SECTION 12.7. Indemnification. Each Bank shall, ratably in
accordance with its commitment, indemnify Agent (to the extent not
reimbursed by Borrower) against any cost, expense (including counsel fees
and disbursements), claim, demand, action, loss or liability (except such
as result from Agent's gross negligence or willful misconduct) that Agent
may suffer or incur in connection with this Agreement or any action taken
or omitted by Agent hereunder, including, without limitation, matters
arising out of Agent's own ordinary negligence. IT IS THE EXPRESS
INTENTION OF EACH BANK THAT AGENT SHALL BE INDEMNIFIED HEREUNDER FOR THE
CONSEQUENCES OF ITS OWN ORDINARY NEGLIGENCE.
SECTION 12.8. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon Agent or any other Bank, and
based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement.
Each Bank also acknowledges that it will, independently and without
reliance upon Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking any action under this
Agreement.
SECTION 12.9. Successor Agent. Agent may resign at any time that
an Event of Default is continuing by giving written notice thereof to
Banks and Borrower. In addition, Borrower may, prior to a Default,
request the designation by Banks of a successor Agent. Upon any such
request by Borrower or resignation by Agent (which, in the absence of an
Event of Default, shall be made only with the consent of Borrower), the
Required Banks shall have the right to appoint a successor Agent, which
shall be one of Banks and, except during the continuance of an Event of
Default, shall be approved by Borrower, such approval to not be
unreasonably withheld. If no successor Agent shall have been so
appointed by the Required Banks, so approved by Borrower (if necessary),
and accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation or Borrower's request for a
successor Agent, then the retiring Agent may, on behalf of Banks, appoint
a successor Agent, which shall (i) be a commercial bank organized under
the laws of the United States of America or of any State thereof and
having a combined capital and surplus of at least $500,000,000 and (ii)
unless an Event of Default is continuing, be approved by Borrower (such
approval to not be unreasonably withheld). Upon the acceptance of its
appointment as a successor Agent hereunder, such successor Agent shall
thereupon succeed to and become vested with all the rights and duties of
the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations hereunder. After any Agent's resignation
hereunder as Agent, the provisions of this Article XII shall continue to
inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent. Borrower shall be entitled to recommend a successor
Agent at the time of designation of any successor Agent pursuant to this
Section 12.9. Banks shall give due consideration to the successor
nominated by Borrower, but shall have no obligation to approve such
nominee.
<PAGE> 56
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including
bank wire, telecopy or similar writing) and shall be given, if to Agent
or any Bank, at its address or telecopier number set forth on Schedule 1
hereto, and if given to Borrower, at its address or telecopy number set
forth on the signature pages hereof (or in either case, at such other
address or telecopy number as such party may hereafter specify for the
purpose by notice to Agent, Borrower and each Bank). Each such notice,
request or other communication shall be effective (a) if given by
telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section 13.1 and the appropriate answerback is received
or receipt is otherwise confirmed, (b) if given by mail, three (3)
Domestic Business Days after deposit in the mails with first class
postage prepaid, addressed as aforesaid or (c) if given by any other
means, when delivered at the address specified in this Section 13.1;
provided that notices to Agent under Article II or VI shall not be
effective until received.
SECTION 13.2. No Waivers. No failure or delay by Agent or any Bank
in exercising any right, power or privilege hereunder or under any Note
or other Loan Paper shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive
of any rights or remedies provided by law or in any of the other Loan
Papers.
SECTION 13.3. Expenses; Documentary Taxes; Indemnification. (a)
Borrower shall pay (i) all reasonable out-of-pocket expenses of Agent,
including reasonable fees and disbursements of special counsel for Agent,
in connection with the preparation of this Agreement and the other Loan
Papers and, if appropriate, the recordation of the Loan Papers, any
waiver or consent hereunder or any amendment hereof or supplement hereto
or any Default or alleged Default hereunder; provided, that the fees and
expenses of counsel to Agent incurred in connection with the preparation
of this Agreement and the other Loan Papers to be executed on or before
the Closing Date and closing the transactions contemplated hereby shall
not exceed the sum of (A) $20,000, (B) reasonable fees of counsel to
Agent in connection with the title review contemplated by Section 6.1(g),
and (c) travel expenses related to out of town travel to the extent
required, and (ii) if an Event of Default occurs, all reasonable out-of-
pocket expenses incurred by Agent or any Bank, including fees and
disbursements of counsel in connection with such Event of Default and
collection and other enforcement proceedings resulting therefrom, fees of
auditors and consultants incurred in connection therewith and
investigation expenses incurred by Agent or any Bank in connection
therewith. Borrower shall indemnify each Bank against any Taxes imposed
by reason of the execution and delivery of this Agreement or the Notes
(other than Taxes imposed on the overall net income of such Bank or its
Lending Office, unless and to the extent that such income Taxes are
assessed in a jurisdiction in which such Bank was not previously subject
to income Taxes and are assessed solely as a result of such Bank's rights
and obligations under this Agreement and the other Loan Papers). Without
limiting Borrower's rights under Section 2.9,
<PAGE> 57
Banks agree that if Taxes of the type described in this Section 13.3 are
imposed on any Bank and such Bank requests indemnification therefor in an
amount greater than $100,000, Borrower shall have the right to either
(i) reduce the Total Commitment to zero pursuant to and in accordance with
Section 2.9, or (ii) replace such Bank with an Assignee reasonably acceptable
to Agent pursuant to an Assignment and Assumption Agreement in accordance
with Section 13.10 hereof.
(b) Borrower agrees to indemnify Agent and each Bank and hold
Agent and each Bank harmless from and against any and all liabilities,
losses, damages, costs and expenses of any kind (including, without
limitation, the reasonable fees and disbursements of counsel for Agent
and each Bank in connection with any investigative, administrative or
judicial proceeding, whether or not such Bank shall be designated a party
thereto) which may be incurred by any Bank or by Agent relating to or
arising out of (i) the existence of this Agreement or any of the Loan
Papers, including the performance by Borrower, Agent or any Bank of its
obligations hereunder, (ii) any transactions contemplated hereby or by
any of the other Loan Papers, (iii) the exercise of any rights or
remedies by Agent or any Bank under this Agreement or applicable Law
following any Default or Event of Default hereunder or (iv) any actual or
proposed use of proceeds of Loans or Letters of Credit hereunder;
provided that neither Agent nor any Bank shall have the right to be
indemnified hereunder for its own gross negligence or willful misconduct,
IT BEING THE EXPRESS INTENTION OF BORROWER THAT EACH BANK AND AGENT SHALL
BE INDEMNIFIED FOR THE CONSEQUENCES OF ITS OWN ORDINARY NEGLIGENCE. The
obligation of Borrower to provide indemnification under this Section 13.3
for fees and expenses of counsel shall be limited to the fees and
expenses of one counsel in each jurisdiction representing all of the
Persons entitled to such indemnification, except to the extent that, in
the reasonable judgment of any such indemnified Person, the existence of
actual or potential conflicts of interest make representation of all of
such indemnified Persons by the same counsel inappropriate; in such a
case, the Person exercising such judgment shall be indemnified for the
reasonable fees and expenses of the separate counsel to the extent
provided in this Section 13.3 without giving effect to the first clause
of this sentence. Nothing in this Section 13.3 is intended to limit the
obligations of Borrower under any other provision of this Agreement.
SECTION 13.4. Right and Sharing of Set-Offs. (a) Upon the
occurrence and during the continuance of an Event of Default, each Bank
is hereby authorized at any time and from time to time, to the fullest
extent permitted by Law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Bank to or for the
credit or the account of Borrower against any and all of the Obligations
of Borrower now or hereafter existing under this Agreement and any Note
held by such Bank, irrespective of whether or not such Bank shall have
made any demand under this Agreement or such Note and although such
Obligations may be unmatured. Each Bank agrees promptly to notify
Borrower after any such setoff and application made by such Bank,
provided that the failure to give such notice shall not affect the
validity of such setoff and application. The rights of each Bank under
this Section 13.4(a) are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which such Bank
may have.
<PAGE> 58
(b) Each Bank agrees that if it shall, by exercising any right
of setoff or counterclaim or otherwise, receive payment of a proportion
of the aggregate amount of principal and interest due with respect to any
Note held by it which is greater than the proportion received by any
other Bank in respect of the aggregate amount of principal and interest
due with respect to any Note held by such other Bank, Bank receiving such
proportionately greater payment shall purchase such participations in the
Notes held by the other Banks, and such other adjustments shall be made,
as may be required so that all such payments of principal and interest
with respect to the Notes held by Banks shall be shared by Banks ratably;
provided that nothing in this Section 13.4 shall impair the right of any
Bank to exercise any right of setoff or counterclaim it may have and to
apply the amount subject to such exercise to the payment of indebtedness
of Borrower other than its indebtedness under the Notes. Borrower
agrees, to the fullest extent it may effectively do so under applicable
Law, that any holder of a participation in a Note may exercise rights of
setoff or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of Borrower in the amount of such participation.
SECTION 13.5. Amendments and Waivers. Any provision of this
Agreement, the Notes or the other Loan Papers may be amended or waived
if, but only if such amendment or waiver is in writing and is signed by
Borrower and the Required Banks (and, if the rights or duties of Agent
are affected thereby, by Agent); provided that no such amendment or
waiver shall, unless signed by all Banks, (a) increase the Commitments of
Banks or subject any Bank to any additional obligation, (b) forgive any
of the principal of or reduce the rate of interest on any Loan or any
fees hereunder, (c) postpone the date fixed for any payment of principal
of or interest on any Loan or any fees hereunder including the
Termination Date, (d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the number of Banks,
which shall be required for Banks or any of them to take any action under
this Section 13.5 or any other provision of this Agreement, (e) Article
III or the definitions contained in Section 1.1 applicable thereto.
SECTION 13.6. Survival. All representations, warranties and
covenants made by Borrower herein or in any certificate or other
instrument delivered by it or in its behalf under the Loan Papers shall
be considered to have been relied upon by Banks and shall survive the
delivery to Banks of such Loan Papers or the extension of the Loans (or
any part thereof), regardless of any investigation made by or on behalf
of Banks.
SECTION 13.7. Limitation on Interest. Regardless of any provision
contained in the Loan Papers, Banks shall never be entitled to receive,
collect, or apply, as interest on the Loans, any amount in excess of the
Maximum Lawful Rate, and in the event any Bank ever receives, collects or
applies as interest any such excess, such amount which would be deemed
excessive interest shall be deemed a partial prepayment of principal and
treated hereunder as such; and if the Loans are paid in full, any
remaining excess shall promptly be paid to Borrower. In determining
whether or not the interest paid or payable under any specific
contingency exceeds the Maximum Lawful Rate, Borrower and Banks shall, to
the extent permitted under applicable Law, (a) characterize any
nonprincipal payment as an expense, fee or premium rather than as
<PAGE> 59
interest, (b) exclude voluntary prepayments and the effects thereof and
(c) amortize, prorate, allocate and spread, in equal parts, the total
amount of the interest throughout the entire contemplated term of the
Notes, so that the interest rate is the Maximum Lawful Rate throughout
the entire term of the Notes; provided, however, that if the unpaid
principal balance thereof is paid and performed in full prior to the end
of the full contemplated term thereof, and if the interest received for
the actual period of existence thereof exceeds the Maximum Lawful Rate,
Banks shall refund to Borrower the amount of such excess and, in such
event, Banks shall not be subject to any penalties provided by any laws
for contracting for, charging, taking, reserving or receiving interest in
excess of the Maximum Lawful Rate.
SECTION 13.8. Invalid Provisions. If any provision of the Loan
Papers is held to be illegal, invalid, or unenforceable under present or
future Laws effective during the term thereof, such provision shall be
fully severable, the Loan Papers shall be construed and enforced as if
such illegal, invalid, or unenforceable provision had never comprised a
part thereof, and the remaining provisions thereof shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance therefrom. Furthermore, in
lieu of such illegal, invalid, or unenforceable provision there shall be
added automatically as a part of the Loan Papers a provision as similar
in terms to such illegal, invalid, or unenforceable provision as may be
possible and be legal, valid and enforceable.
SECTION 13.9. Waiver of Consumer Credit Laws. Pursuant to Article
15.10(b) of Chapter 15, Subtitle 79, Revised Civil Statutes of Texas,
1925, as amended, Borrower agrees that such Chapter 15 shall not govern
or in any manner apply to the Loans.
SECTION 13.10. Successors and Assigns. (a) Each Loan Paper binds
and inures to the parties to it, any intended beneficiary of it, and each
of their respective successors and permitted assigns. Borrower shall not
assign or transfer any rights or obligations under any Loan Paper without
first obtaining all Banks' consent, and any purported assignment or
transfer without all Banks' consent is void. No Bank may transfer,
pledge, assign, sell any participation in, or otherwise encumber its
portion of the Obligations except as permitted by clauses (b) or (c)
below.
(b) Any Bank may (subject to the provisions of this section,
in accordance with applicable law, in the ordinary course of its
business, and at any time) sell to one or more Persons (each a
"Participant") participating interests in its portion of the Obligations.
The selling Bank remains a "Bank" under the Loan Papers, the Participant
does not become a "Bank" under the Loan Papers, and the selling Bank's
obligations under the Loan Papers remain unchanged. The selling Bank
remains solely responsible for the performance of its obligations and
remains the holder of its share of the outstanding Loans for all purposes
under the Loan Papers. Borrower and each Agent shall continue to deal
solely and directly with the selling Bank in connection with that Bank's
Rights and obligations under the Loan Papers, and each Bank must retain
the sole right and responsibility to enforce due obligations of Borrower.
Participants have no rights under the Loan Papers except certain voting
rights as provided below. Subject to the following, each Bank may obtain
(on behalf of its Participants) the benefits of Article XII with respect
to all participations in its part of the Obligations outstanding from
time to time so long
<PAGE> 60
as Borrower is not obligated to pay any amount in excess of the amount that
would be due to that Bank under Article XII calculated as though no
participations have been made. No Bank may sell any participating interest
under which the Participant has any Rights to approve any amendment,
modification, or waiver of any Loan Paper except as to matters in Section 13.5.
(c) Each Bank may make assignments to the Federal Reserve
Bank. Each Bank may also assign to one or more assignees (each an
"Assignee") all or any part of its rights and obligations under the Loan
Papers so long as (i) the assignor Bank and Assignee execute and deliver
to Agent and Borrower for their consent and acceptance (that may not be
unreasonably withheld) an assignment and assumption agreement in
substantially the form of Exhibit J (an "Assignment and Assumption
Agreement") and, in the case of any assignment occurring on or after the
ninetieth (90th) day after the Closing Date, pay to Agent a processing
fee of $2,500, and (ii) the conditions (including, without limitation,
minimum amounts of the Total Commitment that may be assigned or that must
be retained) for that assignment set forth in the applicable Assignment
and Assumption Agreement are satisfied. The "Effective Date" in each
Assignment and Assumption Agreement must (unless a shorter period is
agreeable to Borrower and Agent) be at least five Domestic Business Days
after it is executed and delivered by the assignor Bank and the Assignee
to each Agent and Borrower for acceptance. Once that Assignment and
Assumption Agreement is accepted by Agent and Borrower, then, from and
after the Effective Date stated in it (i) the Assignee automatically
becomes a party to this agreement and, to the extent provided in that
Assignment and Assumption Agreement, has the Rights and obligations of a
Bank under the Loan Papers, (ii) the assignor Bank, to the extent
provided in that Assignment and Assumption Agreement, is released from
its obligations to fund Borrowings under this Agreement and its
reimbursement obligations under this Agreement and, in the case of an
Assignment and Assumption Agreement covering all of the remaining portion
of the assignor Bank's rights and obligations under the Loan Papers, that
Bank ceases to be a party to the Loan Papers, (iii) Borrower shall
execute and deliver to the assignor Bank and the Assignee the appropriate
Notes in accordance with this Agreement following the transfer, (iv) upon
delivery of the Notes under clause (iii) preceding, the assignor Bank
shall return to Borrower all Notes previously delivered to that Bank
under this agreement, and (v) Schedule 1 is automatically deemed to be
amended to reflect the name, address, telecopy number, and Commitment of
the Assignee and the remaining Commitment (if any) of the assignor Bank,
and Agent shall prepare and circulate to Borrower and Banks an amended
Schedule 1 reflecting those changes.
SECTION 13.11. TEXAS LAW. THIS AGREEMENT AND EACH NOTE AND THE
OTHER LOAN PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS.
SECTION 13.12. [Intentionally Deleted].
SECTION 13.13. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement shall become effective when Agent
shall have received counterparts hereof signed by all of the parties
hereto
<PAGE> 61
or, in the case of any Bank as to which an executed counterpart shall
not have been received, Agent shall have received telegraphic or
other written confirmation from such Bank of execution of a counterpart
hereof by such Bank.
SECTION 13.14. No Third Party Beneficiaries. It is expressly
intended that there shall be no third party beneficiaries of the
covenants, agreements, representations or warranties herein contained
other than third party beneficiaries permitted pursuant to Section
13.10(b).
SECTION 13.15. COMPLETE AGREEMENT. THIS AGREEMENT AND THE OTHER
LOAN PAPERS COLLECTIVELY REPRESENT THE FINAL AGREEMENT BY AND AMONG
BANKS, AGENT AND BORROWER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF BANKS, AGENT AND
BORROWER. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN BANKS, AGENT
AND BORROWER.
SECTION 13.16. WAIVER OF JURY TRIAL. BORROWER AND BANKS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN PAPERS
AND FOR ANY COUNTERCLAIM THEREIN.
<PAGE> 62
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers effective as of
the day and year first above written.
BORROWER:
BERRY PETROLEUM COMPANY
a Delaware corporation
By: /s/ Jerry V. Hoffman
Jerry V. Hoffman,
President and Chief Executive Officer
By: /s/ Ralph J. Goehring
Ralph J. Goehring,
Chief Financial Officer
[Two signatures required]
Berry Petroleum Company
28700 Hovey Hills Road
P.O. Bin X
Taft, California 93268
Attn: Chief Financial Officer
Telecopy No.: (805) 769-8960
BANKS:
NATIONSBANK OF TEXAS, N.A.
By: /s/ Richard P. Stults
Richard P. Stults, Vice President
<PAGE> 63
AGENT:
NATIONSBANK OF TEXAS, N.A.
By: /s/ Richard P. Stults
Richard P. Stults, Vice President
<PAGE> 1
EXHIBIT A
FORM OF COMMITTED NOTE
$_______________ Dallas, Texas _______________, 1996
FOR VALUED RECEIVED, the undersigned, Berry Petroleum
Company, a Delaware corporation ("Maker"), hereby promises to pay
to the order of [Name of Bank or Lending Office] ("Payee"), at
the offices of NationsBank of Texas, N.A., as Agent (herein so
called) for Payee and the other Banks hereinafter described at
the offices of Agent, 901 Main St., 64th Floor, Dallas, Texas
75202, Dallas County, Texas, the principal sum of [Amount of such
Bank's Commitment] ($___________), or so much thereof as may be
advanced and outstanding, together with interest, as hereinafter
described.
This Committed Note has been executed and delivered pursuant
to, and is subject to and governed by, the terms of that certain
Credit Agreement dated as of December 1, 1996 (as hereafter
renewed, extended, amended, or supplemented, the "Agreement")
among Maker, Payee, Agent and the other Banks named therein and
is one of the "Committed Notes" referred to therein. Unless
otherwise defined herein or unless the context hereof otherwise
requires, each term used herein with its initial letter
capitalized has the meaning given to such term in the Agreement.
Maker also promises to pay interest on the unpaid principal
amount hereof in like money at the offices of Agent above
referenced from the date hereof at the rates applicable to
Committed Loans provided in the Agreement.
Accrued interest shall be due and payable (a) in the case of
Committed Loans which are Eurodollar Loans, at the expiration of
the Interest Period applicable thereto, and in the event such
Interest Period is for a term longer than three (3) months, on
each Quarterly Date during such Interest Period, (b) in the case
of Base Rate Loans, on each Quarterly Date, and (c) at the times
required by Section 2.11 of the Agreement. The principal balance
of the Committed Loans evidenced by this Committed Note shall be
paid at the times and in the amounts required by Sections 2.6,
2.7, 2.9, 2.10, 3.4, 5.3 and 5.5 of the Agreement. The entire
outstanding principal balance hereof and all accrued but unpaid
interest thereon shall be due and payable in full on the
Termination Date.
Upon and subject to the terms and conditions of the
Agreement, Maker shall be entitled to prepay the principal of or
interest on this Committed Note from time to time and at any
time, in whole or in part.
Upon the occurrence and continuance of an Event of Default,
and upon the conditions stated in the Agreement, the holder
hereof may, at its option, declare the entire unpaid principal of
and accrued interest on this Committed Note immediately due and
payable (provided that, upon the occurrence of certain Events of
Default, and upon the conditions stated in the Agreement, such
acceleration shall be automatic), without notice (except as
otherwise required by the Agreement), demand, or presentment, all
of which are hereby waived, and the holder hereof shall have the
right to offset against this Note any sum or sums owed by the
holder hereof to Maker. All past-due principal of and, to the
extent permitted by law, accrued interest on this Committed Note
shall, at the option of the holder hereof, bear interest at the
lesser of (a) the Maximum Lawful Rate or (b) the Base Rate plus
3% until paid.
<PAGE 2>
Notwithstanding the foregoing, if at any time, any rate of
interest calculated under Section 2.5(a) and (b) of the Agreement
(the "Contract Rate") exceeds the Maximum Lawful Rate, the rate
of interest hereunder shall be limited to the Maximum Lawful
Rate, but any subsequent reductions in the Contract Rate shall
not reduce the rate of interest on this Committed Note below the
Maximum Lawful Rate until the total amount of interest accrued
equals the amount of interest which would have accrued (including
the amount of interest which would have accrued prior to the
payment or prepayment of any portion of this Committed Note) if
the Contract Rate had at all times been in effect. In the event
that at maturity (stated or by acceleration), or at final payment
of this Committed Note, the total amount of interest paid or
accrued on this Committed Note is less than the amount of
interest which would have accrued if the Contract Rate had at all
times been in effect with respect thereto, then at such time the
Maker shall pay to the holder of this Committed Note an amount
equal to the difference between (a) the lesser of the amount of
interest which would have accrued if the Contract Rate had at all
times been in effect and the amount of interest which would have
accrued if the Maximum Lawful Rate had at all times been in
effect, and (b) the amount of interest actually paid or accrued
on this Committed Note.
BERRY PETROLEUM COMPANY,
a Delaware corporation
By:
Name:
Title:
By:
Name:
Title:
[Two signatures required]
<PAGE 3>
COMMITTED LOANS, MATURITIES, AND
PAYMENTS OF PRINCIPAL AND INTEREST
Rate of Interest
Amount of Maturity of Applicable to
Borrowing Committed Committed Committed Amount of
Date Loan Loan Loan Principal Paid
Unpaid
Amount of Principal Notation Made
Interest Paid Balance By
<PAGE 1>
EXHIBIT B
FORM OF COMPETITIVE BID NOTE
$_______________ Dallas, Texas ___________, 1996
FOR VALUED RECEIVED, the undersigned, Berry Petroleum
Company, a Delaware corporation ("Maker"), hereby promises to pay
to the order of [Name of Bank or Lending Office] ("Payee"), at
the offices of NationsBank of Texas, N.A., as Agent (herein so
called) for Payee and the other Banks hereinafter described at
the offices of Agent, 901 Main St., 64th Floor, Dallas, Texas
75202, Dallas County, Texas, the principal sum of [Amount of such
Bank's Commitment] ($___________), or so much thereof as may be
advanced and outstanding, together with interest, as hereinafter
described.
This Competitive Bid Note has been executed and delivered
pursuant to, and is subject to and governed by, the terms of that
certain Credit Agreement dated as of December 1, 1996 (as
hereafter renewed, extended, amended or supplemented, the
"Agreement") among Maker, Payee, Agent and the other Banks named
therein and is one of the "Competitive Bid Notes" referred to
therein. Unless otherwise defined herein or unless the context
hereof otherwise requires, each term used herein with its initial
letter capitalized has the meaning given to such term in the
Agreement.
Maker also promises to pay interest on the unpaid principal
amount hereof in like money at the offices of Agent above
referenced from the date hereof at the rates provided in the
Agreement applicable to Competitive Bid Loans and in the
applicable Competitive Bids under which Competitive Bid Loans
outstanding hereunder are made.
Accrued interest shall be due and payable on the expiration
of each Interest Period with respect to those Competitive Bid
Loans which are subject to the Interest Period then expiring and
at the times required by Section 2.11 of the Agreement. The
principal balance of the Competitive Bid Loans evidenced by this
Competitive Bid Note shall be paid at the times and in the
amounts required by Sections 2.6, 2.7, 2.9, 2.10, 3.4, 5.3 and
5.5 of the Agreement. The entire outstanding principal balance
hereof and all accrued but unpaid interest thereon shall be due
and payable in full on the Conversion Date. The amount and type
of each Competitive Bid Loan made by the Bank to the Maker and
the maturity thereof, the rate of interest applicable thereto and
all payments made on account of principal and interest hereof,
shall be recorded by the Bank and, prior to any transfer hereof,
endorsed on the grid attached hereto which is part of this
Competitive Bid Note.
Upon and subject to the terms and conditions of the
Agreement, Maker shall be entitled to prepay the principal of or
interest on this Competitive Bid Note from time to time and at
any time, in whole or in part.
<PAGE 2>
Upon the occurrence and continuance of an Event of Default,
and upon the conditions stated in the Agreement, the holder
hereof may, at its option, declare the entire unpaid principal of
and accrued interest on this Competitive Bid Note immediately due
and payable (provided that, upon the occurrence of certain Events
of Default, and upon the conditions stated in the Agreement, such
acceleration shall be automatic), without notice (except as
otherwise required by the Agreement), demand, or presentment, all
of which are hereby waived, and the holder hereof shall have the
right to offset against this Competitive Bid Note any sum or sums
owed by the holder hereof to Maker. All past-due principal of
and, to the extent permitted by law, accrued interest on this
Competitive Bid Note shall, at the option of the holder hereof,
bear interest at the lesser of (a) the Maximum Lawful Rate or (b)
the Base Rate plus 3% until paid.
Notwithstanding the foregoing, if at any time, any rate of
interest calculated under Section 2.5(b), (c) or (d) of the
Agreement (the "Contract Rate") exceeds the Maximum Lawful Rate,
the rate of interest hereunder shall be limited to the Maximum
Lawful Rate, but any subsequent reductions in the Contract Rate
shall not reduce the rate of interest on this Competitive Bid
Note below the Maximum Lawful Rate until the total amount of
interest accrued equals the amount of interest which would have
accrued (including the amount of interest which would have
accrued prior to the payment or prepayment of any portion of this
Competitive Bid Note) if the Contract Rate had at all times been
in effect. In the event that at maturity (stated or by
acceleration), or at final payment of this Competitive Bid Note,
the total amount of interest paid or accrued on this Competitive
Bid Note is less than the amount of interest which would have
accrued if the Contract Rate had at all times been in effect with
respect thereto, then at such time the Maker shall pay to the
holder of this Competitive Bid Note an amount equal to the
difference between (a) the lesser of the amount of interest which
would have accrued if the Contract Rate had at all times been in
effect and the amount of interest which would have accrued if the
Maximum Lawful Rate had at all times been in effect, and (b) the
amount of interest actually paid or accrued on this Competitive
Bid Note.
BERRY PETROLEUM COMPANY,
a Delaware corporation
By:
Name:
Title:
By:
Name:
Title:
[Two signatures required]
<PAGE 3>
COMPETITIVE BID LOANS, MATURITIES,
AND PAYMENTS OF PRINCIPAL AND INTEREST
Amount of Maturity of Rate of Interest
Competitive Bid Competitive Applicable to
Borrowing Loan Bid Loan Competitive Bid
Date Loan
Amount of Amount of Unpaid
Principal Paid Interest Paid Principal Notation Made
Balance By
<PAGE 1>
EXHIBIT C
FORM OF COMPETITIVE BID REQUEST
NationsBank of Texas, N.A.,
as Agent for the Banks
parties to the Credit
Agreement referred to below
901 Main Street
Dallas, Texas 75202 [Date]
Attention:
Dear Sirs:
The undersigned hereby gives notice pursuant to
Section 2.2.1 of the Credit Agreement dated December 1, 1996 (the
"Agreement")(capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in
the Agreement) among the undersigned, the Banks named therein and
NationsBank of Texas, N.A., as Agent, that it requests a
Competitive Bid Borrowing under the Credit Agreement, and set
forth below are the terms on which such Competitive Bid Borrowing
is requested to be made:
(1) Borrowing Date of Competitive Bid Borrowing 1
(which is a Domestic Business Day)
(2) Principal Amount of Competitive Bid Borrowing 2
(3) Interest Period and the last day thereof 3
Borrower and the officer of Borrower signing this instrument
hereby certify that:
(a) Such officer is the duly elected, qualified and
acting officer of Borrower as indicated below such officer's
signature hereto;
1 At least three (3) Domestic Business Days after receipt of this
Request by Agent.
2 Not less than $5,000,000 or greater than the Competitive Bid
Availability, and in integral multiples of $100,000.
3 Which shall have a duration of 7, 30, 60 or 90 days, and which,
in either case, shall end by the thirtieth day prior to the
Conversion Date.
<PAGE 2>
(b) The representations and warranties of Borrower set
forth in the Agreement and the Loan Papers delivered to
Banks are true and correct on and as of the date hereof,
with the same effect as though such representations and
warranties had been made on and as of the date hereof or, if
such representations and warranties are expressly limited to
particular dates, as of such particular dates. No material
changes have occurred in the business, financial condition,
operations or prospects of Borrower or any of its
Subsidiaries since the date of the last financial reports
delivered to Banks pursuant to Section 8.1 of the Agreement.
(c) There does not exist on the date hereof, any
condition or event which constitutes a Default, nor will any
such Default exist upon Borrower's receipt and application
of the proceeds requested hereby. Borrower will use the
proceeds hereby requested in compliance with the applicable
provisions of the Agreement.
(d) Borrower has performed and complied with all
agreements and conditions in the Agreement required to be
performed or complied with by Borrower on or prior to the
date hereof, and each of the conditions precedent contained
in the Agreement to making the Loans requested herein have
been and remain satisfied in all respects.
Sincerely,
BERRY PETROLEUM COMPANY
By:
Name:
Title:
By:
Name:
Title:
[TWO (2) SIGNATURES REQUIRED]
<PAGE 1>
EXHIBIT D
FORM OF NOTICE OF COMPETITIVE BID REQUEST
[Name of Bank] [Date]
[Address of Bank]
Attention:
Dear Sirs:
Reference is made to the Credit Agreement dated as of
December 1, 1996 (the "Credit Agreement"), among Berry Petroleum
Company (the "Company"), the Banks named therein, and NationsBank
of Texas, N.A., as Agent. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such
terms in the Credit Agreement. The Company delivered a Request
for Competitive Bids requesting a Competitive Bid on
_______________, 19____ pursuant to Section 2.2.1(a) of the
Credit Agreement, and in that connection you are invited to
submit a Competitive Bid by [Date] , [Time] 1.
Your Competitive Bid must comply with Section 2.2.1(b) of the
Credit Agreement and the terms set forth below on which the
Notice of Competitive Borrowing was made:
(1) Date of Competitive Bid Borrowing
(2) Principal amount of Competitive Bid Borrowing
(3) Interest Period and the last day thereof
Very truly yours,
NATIONSBANK OF TEXAS, N.A.,
as Agent
By:
Name:
Title:
1 The Competitive Bid must be received by Agent not later than 10:00 a.m.
Dallas, Texas time, two Domestic Business Days before the proposed
Competitive Bid Borrowing.
<PAGE 1>
EXHIBIT E
FORM OF COMPETITIVE BID
NationsBank of Texas, N.A.,
as Agent for the Banks
parties to the Credit
Agreement referred to below
901 Main Street
Dallas, Texas 75202 [Date]
Attention:
Dear Sirs:
The undersigned, [Name of Bank] , refers to the
Credit Agreement dated as of December 1, 1996 (the "Credit
Agreement"), among Berry Petroleum Company (the "Company"), the
Banks named therein, and NationsBank of Texas, N.A., as Agent.
Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Credit
Agreement. The undersigned hereby makes a Competitive Bid
pursuant to Section 2.2.1(b) of the Credit Agreement, in response
to the Request for Competitive Bids (the "Competitive Bid
Request") made by the Company on _______________, 19____, and in
that connection sets forth below the terms on which such
Competitive Bid is made:
(1) Principal Amount 1 ______________________
(2) Competitive Bid Rate 2 ____________________
(3) Interest Period and
the last day thereof 3 ____________________
The undersigned hereby confirms that it is prepared to
extend credit to the Company upon acceptance by the Company of
this bid in accordance with Section 2.2.1(d) of the Credit
Agreement. The undersigned hereby represents that the sum of
(i) the aggregate principal amount of all Committed Loans made by
it, plus (ii) the aggregate principal amount of all Competitive
1 Not less than $1,000,000 or greater than the Competitive Bid
Borrowing requested by Borrower and in integral multiples of
$100,000.
2 Expressed in the form of a decimal to no more than four decimal
places.
3 The Interest Period must be the Interest Period specified in the
Competitive Bid Request.
<PAGE 2>
Bid Loans made by it (after giving effect to this Competitive
Bid), plus (iii) the amount of the undersigned's Letter of Credit
Exposure, does not exceed the undersigned's Commitment Percentage
of the Borrowing Base now in effect.
Very truly yours,
[Name of Bank]
By:
Name:
Title:
<PAGE 1>
EXHIBIT F
FORM OF REQUEST FOR COMMITTED LOANS
Reference is made to that certain Credit Agreement dated as
of December 1, 1996, (as from time to time amended, the
"Agreement") by and among Berry Petroleum Company ("Borrower"),
NationsBank of Texas, N.A., as Agent ("Agent"), and certain other
Banks named therein. Terms which are defined in the Agreement
and which are used but not defined herein are used herein with
the meanings given them in the Agreement. Pursuant to the terms
of the Agreement, Borrower hereby requests each Bank to make a
Committed Loan to Borrower in the amount allocated to such Bank
pursuant to Section 2.1(a) of the Agreement (as applicable) of
the full amount of the Borrowing requested hereby, said amount
being $ ________________________ to be advanced on
______________, 19__ .1
Borrower requests that the Committed Loans to be made
hereunder shall be Base Rate Loans and/or Eurodollar Loans and
shall have the Interest Periods all as set forth below:
Type of Loan Aggregate Amount Interest Period 2
Borrower and the officer of Borrower signing this instrument
hereby certify that:
(a) Such officer is the duly elected, qualified and
acting officer of Borrower as indicated below such officer's
signature hereto;
(b) The representations and warranties of Borrower set
forth in the Agreement and the Loan Papers delivered to Banks
are true and correct on and as of the date hereof, with the same
effect as though such representations and warranties had been
made on and as of the date hereof or, if such representations and
warranties are expressly limited to particular dates, as of such
particular dates. No material changes have occurred in the business,
financial condition, operations or prospects of Borrower or any of its
1 For a Base Rate Borrowing, at least one (1) Domestic Business Day
after receipt of this Request by Agent, and for a Eurodollar Borrowing,
at least three (3) Eurodollar Business Days after receipt of this
Request by Agent.
2 For Eurodollar Loans only, a duration of one, two, three or six, and,
if available to Banks, twelve months.
<PAGE 2>
Subsidiaries since the date of the last financial reports
delivered to Banks pursuant to Section 8.1 of the Agreement.
(c) There does not exist on the date hereof, any
condition or event which constitutes a Default, nor will any
such Default exist upon Borrower's receipt and application
of the proceeds requested hereby. Borrower will use the
proceeds hereby requested in compliance with the applicable
provisions of the Agreement.
(d) Borrower has performed and complied with all
agreements and conditions in the Agreement required to be
performed or complied with by Borrower on or prior to the
date hereof, and each of the conditions precedent contained
in the Agreement to making the Loans requested herein have
been and remain satisfied in all respects.
IN WITNESS WHEREOF, this instrument is executed as of
_______________, 19____.
BERRY PETROLEUM COMPANY
a Delaware corporation
By:
Name:
Title:
By:
Name:
Title:
[TWO (2) SIGNATURES REQUIRED]
<PAGE 1>
EXHIBIT G
FORM OF REQUEST FOR LETTER OF CREDIT
Reference is made to that certain Credit Agreement dated as
of December 1, 1996 (as from time to time amended, the
"Agreement"), by and among Berry Petroleum Company ("Borrower"),
NationsBank of Texas, N.A., as Agent ("Agent"), and certain other
Banks named therein. Terms which are defined in the Agreement
and which are used but not defined herein are used herein with
the meanings given them in the Agreement. Pursuant to the terms
of the Agreement, Borrower hereby requests ___________________
("Issuer") to issue a Letter of Credit for the
account of Borrower as follows:
Requested Amount 1
$ ___________________
Requested Date of Issuance 2 ___________________
Requested Expiration Date 3
___________________
Beneficiary ___________________
Borrower and the officer of Borrower signing this instrument
hereby certify that:
(a) Such officer is the duly elected, qualified and
acting officer of Borrower as indicated below such officer's
signature hereto;
(b) The representations and warranties of Borrower set
forth in the Agreement and the other Loan Papers delivered
to Banks are true and correct on and as of the date hereof,
with the same effect as though such representations and
warranties had been made on and as of the date hereof or, if
such representations and warranties are expressly limited to
particular dates, as of such particular dates. No material
changes have occurred in the business, financial condition,
operations or prospects of Borrower or any of its
Subsidiaries since the date of the last financial reports
delivered to Banks pursuant to Section 8.1 of the Agreement.
(c) There does not exist on the date hereof any
condition or event which constitutes a Default, nor will any
such Default exist upon the issuance of the Letter of
1 Minimum amount of $5,000.00.
2 At least three (3) Domestic Business Days after this Request
for Letter of Credit, and at least ninety (90) days prior
to the Conversion Date.
3 Not later than the earlier of (i) thirty (30) days prior to
the Conversion Date, or (ii) one (1) year from the date of
issuance.
<PAGE 2>
Credit requested hereby. Borrower will use the Letter of Credit
solely for purposes permitted by the Agreement.
(d) Borrower has performed and complied with all
agreements and conditions in the Agreement required to be
performed or complied with by Borrower on or prior to the
date hereof, and each of the conditions precedent contained
in the Agreement to the issuance of Letters of Credit have
been and remain satisfied.
(e) After the issuance of the Letter of Credit
requested hereby, Borrower will have Availability on the
date requested for the issuance of such Letter of Credit.
IN WITNESS WHEREOF, this instrument is executed as of
, 19 .
BERRY PETROLEUM COMPANY,
a Delaware corporation
By:
Name:
Title:
By:
Name:
Title:
[TWO (2) SIGNATURES REQUIRED]
<PAGE 1>
EXHIBIT H
FORM OF CERTIFICATE OF OWNERSHIP INTEREST
This Certificate of Ownership Interest (this "Certificate")
is executed and delivered pursuant to that certain Credit
Agreement dated December 1, 1996, but effective for all purposes
as of ____________, 1996 (the "Agreement"), by and among Berry
Petroleum Company, as Borrower, NationsBank of Texas, N.A., as
Agent and certain other Banks named therein. Unless otherwise
defined herein, all capitalized terms shall have the meanings
given such terms in the Agreement.
In order to induce each Bank to enter into the Agreement and
to make Loans thereunder, Borrower hereby represents and warrants
to each Bank that Borrower has good and indefeasible title,
beneficially and of record, subject only to Permitted
Encumbrances, to all Mineral Interests described in the most
recent Reserve Report delivered to Banks pursuant to the Credit
Agreement. All such Mineral 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.
Without regard to any consent or non-consent provisions of any
joint operating agreement covering any of Borrower's Proved
Mineral Interests, Borrower's share of (a) the costs for each
Proved Mineral Interest described in the Reserve Report is not
greater than the decimal fraction set forth in the Reserve
Report, 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 Mineral Interest is not less than the decimal
fraction set forth in the Reserve Report, before and after
payout, as the case may be, and described therein by the
designations net revenue interest, NRI, or similar terms.
Borrower acknowledges and agrees that the Banks are relying
on this Certificate, and the representations and warranties
herein contained, in entering into the Agreement and committing
to make Loans and issue Letters of Credit thereunder, and but for
Borrower's execution and delivery of this Certificate, Banks
would not enter into the Agreement and commit to make Loans and
issue Letters of Credit to Borrower thereunder.
Executed the ____ day of _______, 1996.
BERRY PETROLEUM COMPANY
a Delaware corporation
By:
Name:
Title:
<PAGE 1>
EXHIBIT I
FORM OF CERTIFICATE OF FINANCIAL OFFICER
The undersigned, the __________________________ of Berry
Petroleum Company, a Delaware corporation ("Borrower"), hereby
(a) delivers this Certificate pursuant to Section 8.1(c) of that
certain Credit Agreement ("Credit Agreement") dated as of
December 1, 1996, by and among Borrower, NationsBank of Texas,
N.A., as Agent ("Agent"), and the financial institutions listed
on the signature pages thereto, as Banks ("Banks"), and
(b) certifies to Banks, with the knowledge and intent that Banks
may, without any independent investigation, rely fully on the
matters herein in connection with the Credit Agreement, as
follows:
1. Attached hereto as Schedule I are the consolidated
financial statements of Borrower [and its Subsidiaries] as of and
for the Fiscal Year Quarter (check one) ended
________________, 19____.
2. Such consolidated financial statements are true and
correct in all material respects, have been prepared on a
consistent basis in accordance with GAAP (except as otherwise
noted therein) and fairly present the financial condition of
Borrower [and its Subsidiaries] as of the date indicated therein
and the results of operations for the respective period indicated
therein.
3. Unless otherwise disclosed on Schedule II attached
hereto and incorporated herein by reference for all purposes,
neither a Default nor an Event of Default has occurred which is
in existence on the date hereof; provided, that for any Default
or Event of Default disclosed on Schedule II attached hereto,
Borrower is taking or proposes to take the action to cure such
Default or Event of Default set forth on Schedule II.
4. The representations and warranties of Borrower set
forth in the Credit Agreement and the Loan Papers delivered to
Banks are true and correct on and as of the date hereof, with the
same effect as though such representations and warranties had
been made on and as of the date hereof or, if such
representations and warranties are expressly limited to
particular dates, as of such particular dates. No material
changes have occurred in the business, financial condition,
operations or prospects of Borrower or any of its Subsidiaries
since the date of the last financial reports delivered to Banks
pursuant to Section 8.1 of the Credit Agreement.
5. Attached hereto as Schedule III is a list and
description of all Hedge Transactions to which Borrower or any of
its Subsidiaries is then a party, including a calculation of
Borrower's and its Subsidiaries' termination liability assuming
each of such Hedge Transactions was terminated as of such date
(whether or not such Hedge Transactions are then terminable, but
without giving effect to penalties for early termination if any).
<PAGE 2>
6. The aggregate amount of all Investments of Borrower, of
the type described in clause (d) of the definition of "Permitted
Investments", which are outstanding as of the date this
Certificate, is $____________________.
7. The Consolidated Tangible Net Worth of Borrower, as of
the date of this Certificate, is $_______________. The Minimum
Consolidated Tangible Net Worth of Borrower is $_______________
(sum of $74,000,000 plus 75% of any increase in the shareholders
equity of Borrower resulting from the issuance of any equity
securities of Borrower after the Closing Date).
IN WITNESS WHEREOF, the undersigned has duly executed this
Certificate as of _______________, 19__.
BERRY PETROLEUM COMPANY
By:
Name:
Title:
<PAGE 3>
Schedule I to Exhibit I
Financial Statements
(to be attached)
<PAGE 4>
Schedule II to Exhibit I
Defaults or Events of Default/Remedial Action
(to be attached)
<PAGE 5>
Schedule III to Exhibit I
Hedge Transactions
(to be attached)
<PAGE 1>
EXHIBIT J
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT ("Assignment and
Assumption") is dated ____________________, 199__, among
__________________________ ("Assignor") and
______________________________ ("Assignee") and NationsBank of
Texas, N.A., as Agent ("Agent").
BACKGROUND.
A. Reference is made to the Credit Agreement dated as of
December 1, 1996 (as it may hereafter be amended or otherwise
modified from time to time, being referred to as the "Credit
Agreement") among Berry Petroleum Company (the "Borrower"), the
financial institutions parties thereto as Banks thereunder, and
Agent. Unless otherwise defined, terms are used herein as
defined in the Credit Agreement.
B. This Assignment and Assumption Agreement is made with
reference to the following facts:
(i) Assignor is a Bank under and as defined in the
Credit Agreement and, as such, presently holds a percentage
of the rights and obligations of Banks under the Credit
Agreement.
(ii) As of the date hereof, the Total Commitment is
$__________, Assignor's Commitment is $______________ and
Assignor's Commitment Percentage is ______%.
(iii) As of the date hereof, the outstanding
balance of Assignor's Competitive Bid Loans is
$_______________ and the outstanding balance of its
Committed Loans is $_______________.
(iv) On the terms and conditions set forth below,
Assignor desires to sell and assign to Assignee, and
Assignee desires to purchase and assume from Assignor, as of
the Effective Date (as defined below), ___________ percent
(_______%) of the Total Commitment (the "Assigned
Percentage").
AGREEMENT.
NOW, THEREFORE, Assignor and Assignee hereby agree as
follows:
1. By this agreement, and effective as of _____________,
19__ (which must be at least five (5) Domestic Business Days
after the execution and delivery of this Assignment and
<PAGE 2>
Assumption to both Borrower and Agent for acceptance), Assignor
hereby sells and assigns to Assignee, without recourse and,
except as provided in paragraph 2 of this Assignment and
Assumption, without representation and warranty, and Assignee
hereby purchases and assumes from Assignor, Assignor's rights and
obligations under the Credit Agreement, to the (a) extent of the
Assigned Percentage of the Committed Loans, the Letter of Credit
Exposure, and the Commitment as in effect on the Effective Date,
and (b) ______% of each of the Competitive Bid Loans owing to
Assignor on the Effective Date).
2. Assignor (a) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any adverse
claim; (b) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit
Agreement, any other Loan Paper or any other instrument or
document furnished pursuant thereto, or with respect to the
execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement or any other Loan
Paper or any other instrument or document furnished pursuant
thereto; and (c) makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the
Borrower or any Person or the performance or observance by the
Borrower or any Person of any of its obligations under the Loan
Papers or any other instrument or document furnished pursuant
thereto.
3. Assignee (a) confirms that it has received a copy of
the Credit Agreement, together with copies of the most recent
financial statements delivered to Assignor pursuant to
Section 8.1 of the Credit Agreement, and such other documents and
information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and
Assumption; (b) agrees that it will, independently and without
reliance upon the Agent, Assignor or any other Bank and based on
such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement and the other Loan
Papers; (c) appoints and authorizes Agent to take such action as
agent on its behalf and to exercise such powers under the Credit
Agreement and the other Loan Papers as are delegated to Agent by
the terms thereof, together with such powers as are reasonably
incidental thereto; (d) agrees that it will perform in accordance
with their terms all of the obligations which, by the terms of
the Credit Agreement and the other Loan Papers, are required to
be performed by it as a Bank; (e) specifies, as its address for
notice and Lending Office, the office set forth beneath its name
on the signature pages hereof, and (f) if Assignee is not
organized under the Laws of the United States of America or one
of its states, it (a) represents and warrants to Assignor, Agent
and Borrower that (i) no Taxes are required to be withheld by
Agent or Borrower with respect to any payments to be made to it
in respect of the Obligations and (ii) it has furnished to Agent
and Borrower two duly completed copies of either U.S. Internal
Revenue Service Form 4224, Form 1001, Form W-8, or other form
acceptable to Agent that entitles it to exemption from U.S.
federal withholding Tax on all interest payments under the Loan
Papers, (b) covenants to (i) provide Agent and Borrower a new
form 4224, Form 1001, Form W-8, or other form acceptable to Agent
upon the expiration or obsolescence of any previously delivered
form according to applicable laws and regulations, duly executed
and completed by it, and (ii) comply from time to time with all
applicable laws and regulations with
<PAGE 3>
regard to the withholding Tax exemption, and (c) agrees that if
any of the foregoing is not true or the applicable forms are not
provided, then Borrower and Agent (without duplication) may deduct
and withhold from interest payments under the Loan Papers any United
States federal income Tax at the maximum rate under the Code.
4. Borrower acknowledges its obligations under the Credit
Agreement, and agrees, within five Domestic Business Days after
receiving an executed copy of this Assignment and Assumption to
execute and deliver to Agent, in exchange for the Notes
originally delivered to Assignor, new Notes to the order of
Assignor and Assignee in amounts equal to their respective
Commitment Percentages of the Commitment.
5. As of the Effective Date, (a) Assignee shall be a party
to the Credit Agreement and, to the extent provided in this
Assignment and Assumption, have the rights and obligations of a
Bank thereunder, (b) Assignor shall, to the extent provided in
this Assignment and Assumption, relinquish its rights and be
released from its obligations under the Credit Agreement and
other Loan Papers, and (c) Assignor's Commitment Percentage shall
be ______%, and Assignee's Commitment Percentage shall be
______%.
6. From and after the Effective Date, Agent shall make all
payments under the Credit Agreement in respect of the interest
assigned hereby (including, without limitation, all payments of
principal, interest, fees and other amounts with respect thereto)
to Assignee. Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement for periods
prior to the Effective Date directly between themselves.
7. This Assignment and Assumption shall not become
effective until (a) counterparts of this Assignment and
Assumption are executed and delivered by Assignor and Assignee to
Borrower, Agent and each Bank, (b) Borrower, Agent and each Bank
execute such counterparts, and (c) if the Effective Date is
ninety (90) days or more after the Closing Date of the Credit
Agreement, Agent receives a processing fee of $2,500 from
Assignor or Assignee.
8. This Assignment and Assumption shall be governed by,
and construed in accordance with, the laws of the State of Texas,
without reference to principles of conflict of laws.
ASSIGNOR:
By:
Name:
Title:
<PAGE 4>
ASSIGNEE:
Address:
Attn: By:
Tel: Name:
Fax: Title:
LIBOR Lending Office:
Attn:
Tel:
Fax:
AGENT:
NATIONSBANK OF TEXAS, N.A.
as Agent
By:
Name:
Title:
Accepted and approved this ____ day
of ________________________, 199__:
BERRY PETROLEUM COMPANY, Borrower
By:
Name:
Title:
<PAGE 5>
Accepted and approved this ____ day
of ________________________, 199__:
[BANK]
By:
Name:
Title:
Accepted and approved this ____ day
of ________________________, 199__:
[BANK]
By:
Name:
Title:
<PAGE> 1
SCHEDULE 1
FINANCIAL INSTITUTIONS
Banks Commitment Amount Commitment Percentage
NationsBank of Texas, N.A. $150,000,000 100%
Banks Domestic Lending Office
901 Main Street, 64th Floor
Dallas, Texas 75202
NationsBank of Texas, N.A. Fax No. (214) 508-1285
Eurodollar Lending Office Address for Notice
901 Main Street, 64th Floor 901 Main Street, 64th Floor
Dallas, Texas 75202 Dallas, Texas 75202
Fax No. (214) 508-1285 Fax No. (214) 508-1285
Agent - Address:
901 Main Street, 64th Floor
Dallas, Texas 75202
Attn: Richard P. Stults
Fax: (214) 508-1285
<PAGE> 1
SCHEDULE 2
INVESTMENT GUIDELINES
1 Commercial Paper A maximum of 70% of the portfolio is to be invested
in commercial paper with a rating of A1/P1 or better.
Maximum 10% in any one issuer.
2 Short-term bonds 60% maximum. RAN's, TAN's, BAN's or equivalents are
including RAN's, to be direct state obligations or insured instruments
TAN's, BAN's or only. AAA or AA state-rated GO's with no more than
equivalent 10% in any one state.
3 US treasury bills 15% minimum, 100% maximum with no more than 10%
notes or bonds maturing beyond 2 years.
4 Repurchase 5% maximum secured by US treasuries with overnight
Agreements liquidity.
5 Certificate of 10% maximum in banks with O'Keefe rating of B or
Deposit better, or Standard & Poor's/Moody's long-term debt
rating of AA/aa or better. Domestic banks only.
6 Auction/Money 25% only in issuers with CP rating of A1/P1 or better
Market Preferreds Auction market preferreds should have AAA/aaa rating.
7 Short-term bonds 10% maximum in well known liquid agency bonds or notes
or notes issued out to 2 years.
By agencies of the
US
8 Corporate debt A maximum of 15% of the portfolio may be invested in
corporate debt rated A1/a or better out to 2 years.
9 Collateralize No collateralized mortgage obligations, bankers
Obligations/ acceptances, zero coupon bonds or warrants.
Bankers Acceptances
10 A maximum of 50% of portfolio can be in the 1 to 2 year period.
<PAGE> 1
SCHEDULE 3
LITIGATION
1 On December 25, 1993, the Company experienced a crude oil spill on its
PRC735 State lease located in the West Montalvo field in Ventura County,
California. The clean-up of the spill was substantially completed in January
1994. The Company negotiated a resolution of the state criminal investigation
for a total of $.6 million in August 1994. Governmental investigations
continue regarding potential civil and federal criminal penalties, if any.
Management believes the Company has an adequate amount of insurance
coverage for the majority of the costs associated with the spill and has
received preliminary coverage letters from its insurance carriers tendering
coverage, subject to certain reservations. The Company estimates the total
cost of the spill, net of insurance reimbursement, to be a minimum of $3.3
million and a maximum of $5.1 million. The minimum amount was expensed by
the Company ($1.3 million in 1994 and $2 million in 1993). The costs
incurred and estimated to be incurred in connection with the spill not yet
paid by the Company are included in current liabilities at September 30,
1996, and the probable remaining minimum insurance reimbursement is included
in accounts receivable. As of September 30, 1996, the Company had received
approximately $8.1 million under its insurance coverage as reimbursement for
costs incurred and paid by the Company associated with the spill.
2 On May 6, 1996, Berry Petroleum filed a complaint against Rincon Island
Limited Partnership and Windsor Energy Corporation ("Rincon") for breach of
an obligation under the Purchase and Sale Agreement by which Berry sold its
Rincon, et al., to reimburse Berry for certain expenses related to a pipeline
connection. The prayer in the complaint is $472,893.90. On or about June 13,
1996, Rincon cross-complained against Berry denying the obligation to pay as
described in the complaint and asserting causes of action for breach of
contract, negligence, negligent misrepresentation and fraud. The prayer in
the cross-complaint filed for fraud is for compensatory and punitive damages.
Answers have been filed to the complaint and the cross-complaint and the
matter is proceeding to discovery.
<PAGE> 1
SCHEDULE 4
ENVIRONMENTAL DISCLOSURE
Investments in real property generally, and especially investments in oil
and gas producing properties, create a potential for environmental liability
on the part of the owner of such real property. No formal Phase I or Phase II
environmental studies have been done on the properties of the Company. The
Company does maintain policies and practices with regard to compliance with
environmental statutory and regulatory requirements. While the Company
strives to maintain its compliance, there can be no assurance that there may
not be environmental issues related to such properties; however, the Company
has no specific knowledge of any material outstanding environmental claims
except as follows:
Montalvo Oil Spill - On December 25, 1993, the Company experienced crude oil
spill on its PRC735 State lease located in the West Montalvo field in Ventura
County, California. The clean-up of the spill was substantially completed in
January 1994. The Company negotiated a resolution of the state criminal
investigation for a total of $.6 million in August 1994. Governmental
investigations continue regarding potential civil and federal criminal
penalties, if any. Management believes the Company has an adequate amount of
insurance coverage for the majority of the costs associated with the spill
and has received preliminary coverage letters from its insurance carriers
tendering coverage, subject to certain reservations. The Company estimates
the total cost of the spill, net of insurance reimbursement, to be a minimum
of $3.3 million and a maximum of $5.1 million. The minimum amount was
expensed by the Company ($1.3 million in 1994 and $2 million in 1993). The
costs incurred and estimated to be incurred in connection with the spill not
yet paid by the Company are included in current liabilities at September 30,
1j996, and the probable remaining minimum insurance reimbursement is included
in accounts receivable. As of September 30, 1996, the Company had received
approximately $8.1 million under its insurance coverage as reimbursement for
costs incurred and paid by the Company associated with the spill.
<PAGE> 1
SCHEDULE 5
PRINCIPAL SHAREHOLDERS
C.J. Bennett
William F. Berry
Winifred Lowell
