SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
October 15, 1996
Abraxas Petroleum Corporation
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation)
0-19118 74-2584033
(Commission File Number) (I.R.S. Employer Identification Number)
500 N. Loop 1604 East, Suite 100
San Antonio, Texas78232
(Address of principal executive offices)
Registrant's telephone number, including area code:
(210) 490-4788
<PAGE>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a)On September 30, 1996, Abraxas Petroleum Corporation, a Nevada
corporation (the "Company"), acquired oil and gas producing properties ("the
Properties") located in Sweetwater and Carbon Counties, Wyoming from Enserch
Exploration, Inc. The Properties include 27 gross (23.3 net) productive wells,
of which 22 gross wells will be operated by the Company. The Company also
acquired overriding royalty interests in four wells. The purchase price for the
Properties was $47,500,000 in cash, before adjustment for accrual of net revenue
and interest from April 1, 1996 to September 30, 1996. Funding for the purchase
price was provided by a loan from Bankers Trust Company and ING Capital.
The following exhibits are filed as part of this report:
NUMBER DOCUMENT
10.1 Credit Agreement dated September 30,
1996 between Abraxas Petroleum
Corporation and Bankers Trust
Company
10.2 Purchase and Sale Agreement dated
May 22, 1996 between Abraxas
Petroleum Corporation and Enserch
Exploration, Inc.
<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
Please see the Financial Statements attached hereto as Schedule A and the
notes thereto relating to the Properties included in this report together
with the Report of Deloitte & Touche LLP concerning the Financial
Statements and the notes thereto.
(b) PRO FORMA FINANCIAL INFORMATION
Abraxas Petroleum Corporation & Subsidiaries
Unaudited Pro Forma Balance Sheet
The following unaudited pro forma balance sheet has been prepared giving
effect to the purchase of the Properties as described elsewhere herein. The pro
forma balance sheet adds the properties as if the purchase occurred at the
beginning of the year. This statement should be read in conjunction with the pro
forma statement of operations and other financial information.
<TABLE>
<CAPTION>
ABRAXAS PURCHASE OF PRO FORMA
AT WAMSUTTER AT
ASSETS JUNE 30, 1996 PROPERTIES JUNE 30, 1996
- ------ ------------- --------------- -------------
In Thousands
-----------------------------------------------
<S> <C> <C> <C>
Current Assets ............ $ 5,648,529 $ - $ 5,648,529
Property & Equipment
Oil & Gas Properties..... 61,709,380 45,856,000 107,565,380
Other ................... 835,504 - 835,504
Other Assets ............... 9,329,177 (3,800,000) 5,529,177
------------ ------------- -------------
Total Assets ...............$ 77,522,590 $ 42,056,000 $ 119,578,590
============= ============= =============
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities ........$ 5,733,701 $ - $ 5,733,701
Long Term Debt:
Financing Agreement ..... 32,456,651 42,056,000 74,512,651
Other ................... 2,377,888 2,377,888
Shareholder Equity ......... 36,954,350 - 36,954,350
------------- ------------- -------------
Total Liabilities and
Shareholders' Equity ....$ 77,522,590 $ 42,056,000 $ 119,578,590
============= ============= =============
</TABLE>
See adjustments to unaudited pro forma financial statements
<PAGE>
The following unaudited pro forma statement of operations shows the
results of operations of Abraxas for the six months ended June 30, 1996 had the
financial results from the operations of the Wamsutter Properties been added to
the 1996 results. This pro forma statement of operations assumes the purchase of
the Properties described elsewhere herein was effective at the beginning of
1996. Pro forma earnings are not necessarily indicative of what actual earnings
will be in the future. This statement should be read in conjunction with the pro
forma balance sheet and other financial information included elsewhere herein.
<TABLE>
<CAPTION>
ABRAXAS PETROLEUM CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
RESULTS FROM ADJUSTMENTS
WAMSUTTER TO WAMSUTTER
ABRAXAS HISTORICAL PROPERTIES PROPERTIES PRO FORMA
SIX MONTHS ENDED INCREASE INCREASE SIX MONTHS ENDED
JUNE 30, 1996 (DECREASE) (DECREASE) JUNE 30, 1996
----------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Revenue:
Oil and gas Production sales........... $ 8,014,000 $ 4,883,000 $ $ 12,897,000
Rig revenues .......................... 78,000 78,000
Other ................................. 3,000 3,000
------------ ------------ ----------- ------------
8,095,000 4,883,000 12,978,000
Operating costs and expenses:
Lease operating & production taxes .... 2,181,000 1,268,000 3,449,000
Depreciation, depletion and
amortization ........................ 2,871,000 2,144,000 5,015,000
General and administrative ............ 810,000 810,000
Hedging Loss .......................... 312,000 312,000
Rig Operations ........................ 70,000 70,000
------------ ----------- ----------- ------------
6,244,000 1,268,000 2,144,000 9,656,000
------------ ----------- ----------- ------------
1,851,000 3,615,000 (2,144,000) 3,322,000
Other (income) expense:
Interest expense ..................... 1,444,000 1,829,215 3,273,215
Amortization of deferred
financing fees ...................... 128,000 128,000
Minority interest ..................... 35,000 35,000
Interest income ....................... (115,000) (115,000)
------------ ----------- ----------- ------------
1,492,000 1,829,215 3,321,215
------------ ----------- ----------- ------------
Income (loss) from continuing ............ 359,000 3,615,000 (3,973,215) 785
operations
Less dividend requirement on
cumulative preferred stock ............ (183,000) (183,000)
Net income (loss) applicable
to common stock ....................... $ 176,000 $ 3,615,000 $ (3,973,215) $ (182,215)
============ ============ ============ =============
Net income (loss) per common share ....... $ .03 $ (.03)
============ =============
Weighted average shares
outstanding ........................... $ 6,521,910 6,521,910
============ ============
</TABLE>
See adjustments to unaudited pro forma financial statements
<PAGE>
The following unaudited pro forma statement of operations shows the results
of operations of Abraxas for the year ended December 31, 1995 had the financial
results from the operations of the Wamsutter Properties been added to the 1995
results. This pro forma statement of operations assumes the sale of the
Properties described elsewhere herein was effective at the beginning of the
1995. Pro forma earnings are not necessarily indicative of what actual earnings
will be in the future. This statement should be read in conjunction with the pro
forma balance sheet and other financial information included elsewhere herein.
<TABLE>
<CAPTION>
ABRAXAS PETROLEUM CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
RESULTS FROM ADJUSTMENT TO
WAMSUTTER WAMSUTTER
ABRAXAS HISTORICAL PROPERTIES PROPERTIES PRO FORMA
YEAR ENDED INCREASE INCREASE YEAR ENDED
DEC. 31, 1995 (DECREASE) (DECREASE) DEC. 31, 1995
----------------- ------------ ---------- --------------
<S> <C> <C> <C> <C>
Revenue:
Oil and gas Production sales .......... $ 13,659,556 $ 7,542,000 $ 21,201,556
Rig revenues .......................... 108,400 108,400
Other ................................. 48,559 48,559
------------- ----------- ---------- -----------
13,816,515 7,542,000 21,358,515
Operating costs and expenses:
Lease operating & production taxes .... 4,333,240 2,142,000 6,475,240
Depreciation, depletion and
amortization ........................ 5,433,531 3,665,000 9,098,531
General and administrative ............ 1,041,740 1,041,740
Rig Operations ........................ 125,353 125,353
------------- ------------ ----------- -----------
10,933,864 2,142,000 3,665,000 16,740,864
------------- ------------ ----------- -----------
2,882,651 5,400,000 (3,665,000) 4,617,651
Other (income) expense:
Interest expense ..................... 3,910,669 3,666,480 7,577,149
Amortization of deferred
financing fees ...................... 214,231 214,231
Interest income ....................... (33,749) (33,749)
------------- ------------ ----------- -----------
4,091,151 3,666,480 7,757,631
------------- ------------ ----------- -----------
Income (loss) from continuing
operations ............................ (1,208,500) 5,400,000 (7,331,480) (3,139,980)
Less dividend requirement on
cumulative preferred stock ............ (365,928) (365,928)
Net income (loss) applicable
to common stock ....................... $ (1,574,428) $ 5,400,000 $(7,331,480) $(3,505,908)
============ ============ =========== ===========
Net income (loss) per common share ....... $ (.34) $ (.76)
============ ===========
Weighted average shares
outstanding ........................... 4,635,412 $ 4,635,412
============ ===========
</TABLE>
See adjustments to unaudited pro forma financial statements
<PAGE>
ABRAXAS PETROLEUM CORPORATION AND SUBSIDIARIES
AND CERTAIN COMBINED OIL AND GAS PRODUCING PROPERTIES
ACQUIRED - WYOMING PROPERTIES
ADJUSTMENTS TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND YEAR ENDED DECEMBER 31, 1995
A. On September 30, 1996, Abraxas Petroleum Corporation (Abraxas), completed
the acquisition of certain oil and gas producing properties located in
Wyoming from Enserch Exploration, Inc. (the Wyoming Properties). The
interests were purchased by Abraxas for net cash consideration of
approximately $45,856,000.
Funding for the purchase was provided by a credit facility negotiated between
Bankers Trust Company and ING Capital. The financing agreement is secured by
first priority liens in the properties acquired and second priority liens in
the producing properties acquired by the use of proceeds under the initial
financing agreement.
B. The pro forma combined balance sheet assumes that the purchase occurred as of
June 30, 1996 and the Wyoming Properties were recorded at Abraxas' net cost
of $45,856,000. Abraxas has allocated the purchase price between the
producing properties based on a preliminary estimate of the fair values of
the producing properties based on a preliminary adjustment for accrual of net
revenue and interest from April 1, 1996 to September 30, 1996. Abraxas
allocated approximately $8,028,000 of the purchase price to unproved
properties with the remainder to the depletable pool. The following is a
summary of the adjustments required to reflect the acquisition and related
financing:
1.To reflect the purchase of certain oil and gas properties acquired - the
Wyoming Properties for net cash consideration of $45,856,000 and the
related financing.
C. The pro forma combined statements of operations give effect to the
following adjustments:
1.To adjust the interest expense associated with the borrowings used to fund
the acquisition of the Wyoming Properties. Interest has been calculated at
8% in connection with the acquisition.
2.To adjust depreciation, depletion, and amortization for the six months
ended June 30, 1996, and the year ended December 31, 1995, to reflect the
related effects of the acquisition. Depreciation, depletion, and
amortization of oil and gas producing properties is computed based on the
units-of-production method over the estimated proved reserves.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
Enserch Exploration, Inc.:
We have audited the accompanying statements of revenues and direct operating
expenses of Enserch Exploration, Inc.'s Wamsutter Area Package (the "Package")
(see Note 1) to be sold to Abraxas Petroleum Corporation for the years ended
December 31, 1995, 1994, and 1993. These financial statements are the
responsibility of the management of Enserch Exploration, Inc., as operator of
the properties. Our responsibility of the management of Enserch Exploration,
Inc., as operator of the properties. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying statements of revenues and direct operating expenses reflect
the revenues and direct operating expenses attributable to the Package as
described in Note 1 to the financial statements and are not intended to be a
complete presentation of the revenues and expenses of the Package.
In our opinion, the accompanying financial statements present fairly, in all
material respects, the revenues and direct operating expenses of the Package as
described in Note 1 for the years ended December 31,1995, 1994, and 1993, in
accordance with generally accepted accounting principles.
Deloitte & Touche LLP
Dallas, Texas
June 26, 1996
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF REVENUES AND DIRECT
OPERATING EXPENSES OF ENSERCH
- ------------------------------------------------------------------------------------
EXPLORATION, INC'S WAMSUTTER AREA PACKAGE
For the six months
ended June 30,
(unaudited) For the years ended December 31,
1996 1995 1995 1994 1993
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues: (in Thousands)
Oil, gas and related product sales.... $ 4,883 $ 3,701 $ 7,542 $10,171 $10,655
Direct operating expenes:
Lease operating expense .............. 677 458 1,029 640 431
Severance and property taxes ......... 591 541 1,113 1,291 1,108
----- ----- ------ ------ ------
1,268 999 2,142 1,931 1,539
------ ------ ------ ------ ------
Excess of revenues over direct
operating expenses ................... $ 3,615 $2,702 $5,400 $8,240 $9,116
------- ------ ------ ------ ------
</TABLE>
<PAGE>
NOTES TO STATEMENTS OF REVENUES AND
DIRECT OPERATING EXPENSES OF ENSERCH
- --------------------------------------------------------------------------------
EXPLORATION INC'S WAMSUTTER AREA PACKAGE
1. THE PROPERTIES
The accompanying statements represent the revenues and direct operating
expenses attributable to the net interest in Enserch Exploration, Inc's
("EEX") Wamsutter Area Package producing wells and certain non-producing
leases to be sold to Abraxas Petroleum Corporation ("Abraxas"). The
properties are located in Sweetwater and Carbon County, Wyoming. EEX acquired
the properties on June 8, 1995 when it purchased all of the capital stock of
Dalon Corporation. Effective January 1, 1996, Dalon Corporation was merged
into EEX.
Historical financial statements reflecting financial position, results of
operations and cash flows required by generally accepted accounting
principles are not presented, as such information is neither readily
available on an individual property basis nor meaningful for the properties
acquired because the entire acquisition cost is being assigned to oil and gas
properties. Accordingly, these statements of revenues and direct operating
expenses are presented in lieu of the financial statements required under
Rule 3-05 of Securities and Exchange Commission Regulation S-X.
The accompanying statements of revenues and direct operating expenses
represent EEX's net working interest in the properties to be acquired by
Abraxas and are presented on the full cost accrual basis of accounting.
Depreciation, depletion and amortization, allocated general and
administrative expenses, interest expenses and income, and income taxes have
been excluded because the property interests acquired represent only a
portion of a business and the expenses incurred are not necessarily
indicative of the expenses to be incurred by Abraxas.
2. CONTINGENT LIABILITIES
Given the nature of the properties acquired and as stipulated in the
purchase agreement, Abraxas is subject to loss contingencies pursuant to
existing or expected environmental laws, regulations and losses covering the
acquired properties.
<PAGE>
NOTES TO STATEMENTS OF REVENUES AND
DIRECT OPERATING EXPENSES OF ENSERCH
- --------------------------------------------------------------------------------
EXPLORATION, INC'S WAMSUTTER AREA PACKAGE
3. OIL AND GAS RESERVES (UNAUDITED)
The following table of estimated proved and proved developed reserves of
oil and gas related to the Wamsutter Area Package properties has been
prepared utilizing estimates of period-end reserve quantities provided by
independent petroleum consultants.
Oil Gas
(Bbl) (a) (Mcf)
----------- ----------
At January 1, 1993 ............. 547,125 43,339,881
Production ................... (65,283)
Other charges, net ........... 28,903 553,355
---------- ----------
At January 1, 1994 ............. 510,745 39,395,043
Production ................... (288,763)
Other charges, net ........... 1,915,650 1,298,888
---------- ----------
At January 1, 1995 ............. 2,137,632 35,981,248
Production ................... (303,076)
Other charges, net ........... 1,390,493 8,838,026
At January 1, 1996 ............. 3,225,049 40,533,540
---------- ----------
PROVED DEVELOPED RESERVES:
At January 1, 1993 ............. 547,125 43,339,881
At January 1, 1994 ............. 510,745 39,395,043
At January 1, 1995 ............. 2,137,632 35,981,248
At January 1, 1996 ............. 2,942,115 36,559,004
(a) Includes condensate and natural gas liquids attributable to leasehold
interests of 2,655,476 Bbls for January 1, 1996 and 1,669,664 Bbls for
January 1, 1995. Prior to 1994, gas was not processed to extract natural gas
liquids.
<PAGE>
NOTES TO STATEMENTS OF REVENUES AND
DIRECT OPERATING EXPENSES OF ENSERCH
- --------------------------------------------------------------------------------
EXPLORATION, INC'S WAMSUTTER AREA PACKAGE
4. STANDARDIZED MEASURE (UNAUDITED)
Discounted future net cash flows relating to proved gas and oil reserve
quantities (unaudited) has been prepared using estimated future production
rates and associated production and development costs. Continuation of
economic conditions existing at the balance sheet date was assumed.
Accordingly, estimated future net cash flows were computed by applying
prices and contracts in effect at period and to estimated future production
of proved gas and oil reserves, estimating future expenditures to develop
proved reserves and estimating costs to produce the proved reserves based on
average costs for the period. Average prices used in the computation were:
Gas (per Mcf) $2.08 in 1995, $1.45 in 1994 and $2.40 in 1993; Oil (per
barrel) $11.17 in 1995, $7.22 in 1994 and $13.52 in 1993.
Because reserve estimates are imprecise and changes in the other variables
are unpredictable, the standarized measure should be interpreted as
indicative of the order of magnitude only and not as precise amounts.
1995 1994 1993
---- ---- ----
Standardized Measure (in thousands):
Future cash inflows .................... $120,278 $ 67,597 $101,445
Future production and development costs. (25,971) (17,121) (19,710)
Future income tax expense .............. (16,137) (14,873) (25,525)
------- ------- -------
Future net cash flows .................. 78,170 35,603 56,210
Less 10% annual discount ............... 35,565 14,095 23,727
------- ------- -------
Standardized measure of
discounted future net cash flows ...... $ 42,605 $ 21,508 $ 32,483
------- ------- -------
Change in Standardized Measure (in thousands):
Sales and transfers of gas and oil
produced net of production costs ..... $ (5,400) $ (8,240) $(9,116)
Changes in prices, net of production
and future development costs ........ 14,280 (21,828) 4,903
Accretion of discount ................. 2,151 3,248 3,326
Net change in income taxes ............ 190 5,765 240
Additions, revisions and other changes. 9,876 10,080 (125)
------- ------- -------
Total ................................. $ 21,097 $(10,975) $ (772)
------- ------- -------
<PAGE>
1
SIGNATURES
Pursuant to the requirement 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.
ABRAXAS PETROLEUM CORPORATION
By: /s/Chris Williford
-----------------------------
Chris Williford
Executive Vice President/
Chief Financial Officer
Dated: October 15, 1996
<PAGE>
PURCHASE AND SALE AGREEMENT
between
ENSERCH EXPLORATION, INC.,
as Seller,
and
ABRAXAS PETROLEUM CORPORATION,
as Buyer.
May 22, 1996
<PAGE>
TABLE OF CONTENTS
1. Property to be Sold and Purchased................................1
2. Purchase Price...................................................2
3. Deposit..........................................................2
4. Seller's Representations.........................................3
5. Buyer's Representations..........................................4
6. Certain Covenants of Seller and Buyer Pending Closing............5
7. Due Diligence Reviews............................................8
8. Certain Price Adjustments.......................................11
9. Conditions Precedent to Buyer's Obligations.....................12
10. Conditions Precedent to Seller's Obligations....................13
11. The Closing.....................................................13
12. Certain Accounting Adjustments..................................16
13. Assumption and Indemnification..................................18
14. Disclaimer of Warranties........................................19
15. Commissions.....................................................20
16. Casually Loss...................................................20
17. Notices.........................................................21
18. Survival of Provisions..........................................22
19. Miscellaneous Matters...........................................22
EXHIBIT A............................................................A-1
EXHIBIT B............................................................B-1
EXHIBIT C............................................................C-1
EXHIBIT D............................................................D-1
EXHIBIT E............................................................E-1
<PAGE>
PURCHASE AND SALE AGREEMENT
This Agreement, dated May 22, 1996, is made by and between ENSERCH
EXPLORATION, INC., (hereinafter called "Seller") and ABRAXAS PETROLEUM
CORPORATION (hereinafter called "Buyer");
WITNESSETH:
1. Property to be Sold and Purchased. Seller agrees to sell, and Buyer
agrees to purchase, for the consideration hereinafter set forth, pursuant to a
special warranty of title by, through and under Seller as limited in Section 14,
but not otherwise, and subject to the terms and provisions herein contained, the
following described properties, rights, and interests:
(a) All rights, titles and interests of Seller in and to the oil,
gas and mineral leases described in Exhibit A hereto (and any
ratifications and amendments to such leases, whether or not such
ratifications and amendments are described in Exhibit A) and all of
Seller's right, title, and interest in and to the fee mineral interests
described in Exhibit A, if any; and
(b) All rights, titles, and interests of Seller in and to, or
otherwise derived from, all presently existing and valid oil, gas and
mineral unitization, pooling, and communitization agreements,
declarations, and orders (including, without limitation, all units formed
under orders, rules, regulations, or other official acts of any federal,
state, or other authority having jurisdiction, and voluntary unitization
agreements, designations and declarations) relating to the properties
described in subsection 1(a) to the extent such rights, titles, and
interests are attributable to the properties described in subsection 1(a);
and
(c) All rights, titles, and interests of Seller in and to all
presently existing and valid production sales contracts, operating
agreements, and other agreements and contracts that relate to any of the
properties described in subsections 1(a) and 1(b), to the extent such
rights, titles, and interests are attributable to the properties described
in subsections 1(a) and 1(b); and
(d) All crude oil, natural gas, casinghead gas, drip gasoline,
natural gasoline, petroleum, natural gas liquids, condensate, products,
liquids and other hydrocarbons and other minerals or materials of every
kind and description, including without limitation, "line fill" and
inventory below the pipeline connection in tanks, insofar as such
hydrocarbons may be produced from or are attributable to the properties
described in Sections 1(a) and 1(b) after the Effective Date, as
hereinafter defined.
(e) All rights, titles, and interests of Seller in and to all
materials, supplies, machinery, equipment, improvements, and other
personal property and fixtures (including, but not limited to, all wells,
wellhead, equipment, pumping units, flowlines, tanks, buildings, injection
facilities, saltwater disposal facilities, compression facilities,
gathering systems, and other equipment) located on the properties
described in subsections 1(a) and 1(b) and used in connection with the
exploration, development, operation, or maintenance thereof.
The properties and interests specified in subsections 1(a), 1(b), 1(c), 1(d) and
1(e) are herein sometimes collectively called the "Properties." The defined term
"Properties" shall not include seismic data, geological or geophysical data, or
other similar data, or any interpretations thereof or other data or records
related thereto except that Seller shall provide Buyer with copies of such data
and records in its possession and a license to seismic data, if permitted to do
so by third party contracts. Such data and records shall not be subject to
Defects as defined in Section 7 herein.
2. Purchase Price. The unadjusted purchase price for the Properties shall
be FORTY SEVEN MILLION, FIVE HUNDRED THOUSAND Dollars ($47,500,000) (herein
called the "Base Purchase Price"). The Base Purchase Price may be adjusted, as
provided in Sections 6(c) and 8 hereof. The Base Purchase Price, as so adjusted
and as otherwise adjusted by mutual agreement of the parties herein, shall be
called the "Purchase Price." Buyer shall pay the Purchase Price in cash at the
Closing, as hereinafter provided. The Purchase Price shall be increased to
include interest at the rate of seven percent (7%) per annum on the Base
Purchase Price compounded on the first day of each month for the period
commencing on the Effective Date and ending on the Closing Date.
3. Deposit. Contemporaneous with its execution of this Agreement, Buyer
paid to Seller THREE MILLION, EIGHT HUNDRED THOUSAND Dollars ($3,800,000)
(hereinafter called the "Deposit"). If Buyer and Seller consummate the
transaction contemplated hereby in accordance with the terms hereof, the Deposit
shall be applied to the Purchase Price. If Buyer and Seller do not consummate
the transaction contemplated hereby because of a material default by Seller in
the absence of a material default by Buyer, Seller shall return the Deposit to
Buyer. If Buyer and Seller terminate this Agreement under Section 9 or 10 hereof
in a circumstance where such Section provides for return of the Deposit, then
Seller shall return the Deposit to Buyer. Except as provided in the preceding
two sentences, if Buyer fails or refuses to consummate the transaction
contemplated hereby, or if the transaction contemplated hereby otherwise fails
to close on the Closing Date, Seller shall retain the Deposit as liquidated
damages. The parties agree that damages in such event would be extremely
difficult to determine, that the Deposit represents a fair and reasonable
estimate of such damages under the circumstances, and that such a retention of
the Deposit does not constitute a penalty.
<PAGE>
4. Seller's Representations. Seller represents to Buyer that:
(a) Seller is a corporation duly organized and legally existing
under the laws of its state of incorporation. Seller is qualified to do
business and is in good standing, or will be at Closing, in each of the
states in which Properties are located, where the laws of such state
require a corporation owning the Properties located in such state to
qualify to do business.
(b) Seller has full power to enter this Agreement and perform its
obligations hereunder and has taken all proper action to enter this
Agreement and perform its obligations hereunder.
(c) Seller's execution and delivery of this Agreement, the
consummation of the transaction contemplated hereby, and Seller's
compliance with the terms hereof, will not result in any default under any
agreement or instrument to which Seller is a party or by which the
Properties are bound that would be material to this transaction. Seller's
execution and delivery of this Agreement will not violate any order, writ,
injunction, decree, statute, rule, or regulation applicable to Seller or
to the Properties that would be material to this transaction, except the
following:
(i) Any consents to assignment or waivers of preferential
rights to purchase that must be obtained from third parties;
(ii) Compliance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act");
(iii) Any approvals that must be obtained from governmental entities
that are lessors under leases included in the Properties (or
who administer such leases for such lessors) and that are
customarily obtained post-closing; and
(iv) Any maintenance of uniform interest provisions contained in
any operating or other agreements.
(d) This Agreement constitutes (and the Assignment and Bill of Sale
provided for in Section 1.1(a)(i) hereof and any other documentation
provided for herein to be executed by Seller, will, when executed and
delivered, constitute) the legal, valid, and binding obligations of
Seller, enforceable according to their terms, except as limited by
bankruptcy or other laws applicable generally to creditor's rights and as
limited by general equitable principles.
(e) Except as disclosed on Exhibit D, there are no pending suits,
actions, or other proceedings, not filed by Seller, in which Seller is a
party that materially affect the Properties (including, without
limitation, any actions challenging or pertaining to Seller's title to any
of the Properties) or affecting the execution and delivery of this
Agreement or the consummation of the transaction contemplated hereby.
(f) To the knowledge of Seller as of the date of execution of this
Agreement, all material ad valorem, production, severance, excise, and
similar taxes and assessments based upon or measured by the ownership of
or the production of hydrocarbons from the Properties which have become
due and payable have been properly paid or are being challenged in good
faith by Seller, all applicable tax returns relating to the same have been
filed, and Seller knows of no claim by any applicable taxing authority
against Seller in connection with the payment of such taxes.
5. Buyer's Representations. Buyer represents to Seller that:
(a) Buyer is a corporation duly organized and legally existing under
the laws of its state of organization. Buyer is qualified to do business
and is in good standing, or will be at Closing, in each of the states in
which Properties are located where the laws of such state require a
corporation owning the Properties located in such state to qualify to do
business.
(b) Buyer has full power to enter into and perform its obligations
under this Agreement and has taken all proper action to enter this
Agreement and perform its obligations hereunder.
(c) Buyer's execution and delivery of this Agreement, the
consummation of the transaction contemplated hereby, and Buyer's
compliance with the terms hereof, will not result in any default under any
Agreement or instrument to which Buyer is a party or by which the
Properties are bound that would be material to this transaction. Buyer's
execution and delivery of this Agreement will not violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Buyer or to
the Properties that would be material to this transaction, except the
following:
(i) Any consents to assignment or waivers of preferential
rights to purchase that must be obtained from third parties;
(ii) Compliance with the "HSR Act";
(iii) Any approvals that must be obtained from governmental entities
that are lessors under leases included in the Properties (or
who administer such leases for such lessors) and that are
customarily obtained post-closing; and
(iv) Any maintenance of uniform interest provisions contained in
any operating or other agreements.
(d) This Agreement constitutes, and the Assignment and Bill of Sale
provided for in Section 1.1(a)(i) hereof and any other documentation
provided for herein to be executed by Buyer, will, when executed and
delivered, constitute, the legal, valid, and binding obligations of Buyer,
enforceable according to their terms, except as limited by bankruptcy or
other laws applicable generally to creditor's rights and as limited by
general equitable principles.
(e) There are no pending suits, actions, or other proceedings, not
filed by Buyer, in which Buyer is a party that materially affect the
execution and delivery of this Agreement or the consummation of the
transaction contemplated hereby.
(f) Buyer is a knowledgeable purchaser, owner, and operator of oil
and gas properties, has the ability to evaluate (and has evaluated or will
evaluate prior to Closing) the Properties for purchase, and is acquiring
the Properties for its own account and not with the intent to make a
distribution within the meaning of the Securities Act of 1933, as amended
(and the rules and regulations pertaining thereto), or a distribution
thereof in violation of any other applicable securities laws, rules, or
regulations.
(g) With regard to those Properties which Buyer seeks to operate,
Buyer is, or will become, qualified to operate such Properties under the
applicable laws, rules and regulations of the jurisdiction in which such
Properties are located.
6. Certain Covenants of Seller and Buyer Pending Closing. Between
the date of this Agreement and the Closing Date:
(a) Seller shall permit Buyer access as follows:
(i) Seller shall give Buyer and its attorneys and other
representatives, who have a legitimate need to know, access
at all reasonable times during normal business hours to the
Properties and, at Seller's office, to Seller's records
(including, without limitation, title files, division order
files, well files, production records, equipment
inventories, and production, severance, and ad valorem tax
records) pertaining to the ownership and operation of the
Properties, to conduct due diligence reviews as
contemplated by Section 7 below. Buyer may make copies of
such records, at its expense, but shall, if Seller so
requests, return all copies so made if the Closing does not
occur. Seller shall not be obligated to provide Buyer with
access to any records or data that Seller considers to be
proprietary or confidential or that Seller cannot provide
to Buyer without, in its opinion, breaching, or risking a
breach of, confidentiality agreements with other parties.
Any records or data provided shall be subject to the
Confidentiality Agreement. Seller makes no representation
or warranty of any kind as to the accuracy or completeness
of any materials made available to Buyer in connection with
the transaction contemplated hereby.
(ii) Seller shall make a good faith effort to give Buyer, or
Buyer's authorized representatives, who have a legitimate
need to know, at reasonable times and upon adequate notice
to Seller, physical access to the Properties for the
purpose of inspecting same. Buyer recognizes that some or
all of the Properties may be operated by parties other than
Seller and that Seller's ability to obtain access to such
properties, and the manner and extent of such access, is
subject to the consent of such third parties. Buyer agrees
to comply fully with the rules, regulations, and
instructions issued by Seller (and, where Properties are
operated by other parties, such third parties) regarding
the actions of Buyer while upon, entering, or leaving the
Properties.
(iii) Exculpation and Indemnification. If Buyer exercises rights of
access under this Section or otherwise, or conducts
examinations or inspections under this Section or otherwise,
then (a) such access, examination, and inspection shall be at
Buyer's sole risk, cost, and expense, and Buyer waives and
releases all claims against Seller (its affiliates and their
respective directors, officers, employees, attorneys,
contractors, and agents) arising in any way therefrom or in
any way connected therewith or arising in connection with the
conduct of its directors, officers, employees, attorneys,
contractors, and agents in connection therewith; and (b) BUYER
SHALL RELEASE, INDEMNIFY, DEFEND, AND HOLD HARMLESS SELLER
(AND ITS PARENT, SUBSIDIARY COMPANIES AND OTHER AFFILIATES AND
THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS,
CONTRACTORS, AND AGENTS) (HEREINAFTER COLLECTIVELY REFERRED TO
AS "SELLER GROUP") FROM ANY AND ALL CLAIMS, ACTIONS, CAUSES OF
ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS, OR EXPENSES
(INCLUDING, WITHOUT LIMITATION, COURT COSTS AND REASONABLE
ATTORNEY'S FEES), OR LIENS OR ENCUMBRANCES FOR LABOR OR
MATERIALS, ARISING OUT OF OR IN ANY WAY CONNECTED WITH SUCH
MATTERS. THE FOREGOING RELEASE AND INDEMNIFICATION SHALL APPLY
WHETHER OR NOT SUCH CLAIMS, ACTIONS, CAUSES OF ACTION,
LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES ARISE OUT OF
(i) NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SINGLE NEGLIGENCE,
CONCURRENT NEGLIGENCE, ACTIVE OR PASSIVE NEGLIGENCE, BUT
EXPRESSLY NOT INCLUDING GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT) OF SELLER OR ANY OTHER INDEMNIFIED PARTY, OR (ii)
STRICT LIABILITY.
(b) Seller shall continue to operate in the ordinary course of its
business any portion of the Properties over which it serves as operator.
Except for the transaction contemplated by this Agreement, Seller shall
not sell or otherwise dispose of any material portion of the Properties.
Seller shall not, without the prior written consent of Buyer, (i) enter
into new gas sales contracts or new crude oil sales or supply contracts
with respect to the Properties except Seller may enter into such contracts
that are terminable at will (without penalty or detriment) on notice of 30
days or less; or (ii) incur or agree to incur any material contractual
obligation with respect to the Properties except as may be necessary to
protect health and safety or the environment. If Seller receives or
desires to make any proposal to drill an additional well on the Properties
or to conduct other operations that require the consent of non-operators
under any applicable operating agreement, it shall notify Buyer thereof
and shall consult with Buyer concerning such proposal. However, Seller
shall make its decision regarding such proposal in its own discretion and
in the ordinary course of its business.
(c) Seller shall use reasonable efforts, consistent with industry
practices in transactions of this type, to identify, with respect to each
material portion of the Properties, (i) all preferential rights to
purchase and all rights of third parties to withhold consent to an
assignment that would apply to the transaction contemplated hereby and
(ii) the parties holding such rights. In attempting to identify the same,
Seller shall not be obligated to go beyond its own records. Seller shall
request from the parties so identified (and in accordance with the
documents creating such rights) waivers of the preferential rights to
purchase and consents to assignment so identified. Seller shall have no
obligation hereunder other than to attempt to identify such preferential
rights and rights to withhold consent to assignment and to request such
waivers and consents. Seller shall not be obligated to assure that such
waivers and consents are obtained. Seller may tender to any party refusing
to waive such a preferential right the interest covered by such right at a
price equal to the amount specified in Exhibit B for such interest. To the
extent that such an interest is actually sold to a party exercising such a
preferential right, it shall be excluded from the transaction contemplated
hereby, and the Base Purchase Price shall be reduced by the amount such
party paid to Seller for such interest unless the parties hereto agree
otherwise.
(d) If applicable, as soon as practicable after the execution
hereof, Buyer and Seller shall prepare and submit any necessary filings in
connection with the transaction contemplated by this Agreement under the
HSR Act. Buyer shall pay all filing fees in connection with such filing.
Buyer and Seller shall request early termination of the waiting period by
the FTC, shall promptly make any appropriate or necessary subsequent or
supplemental filings, and shall furnish to each other copies of all
filings made under the HSR Act on the same day that they are filed with
the FTC. Seller shall cooperate with Buyer as to all filings required by
the HSR Act.
7. Due Diligence Reviews.
(a) The term "Defect" as used in this Section shall mean the
following:
(i) Seller's ownership of a well or unit listed on Exhibit B
hereto (A) entities Seller to receive a share of the oil,
gas, and other hydrocarbons produced from, or allocated to,
such well or unit that is less than the share set forth on
Exhibit B in connection with such well or unit in the
column headed "Net Revenue Interest" or (B) causes Seller
to bear a share of the cost of operating such well or unit
greater than the share set forth on Exhibit B for such well
or unit in the column headed "Operating Interest" (without
a proportionate increase in the share of production to
which Seller is entitled from such well or unit); or
(ii) Seller's ownership of a Property is subject to a lien other
than (A) a lien that will be released at or before Closing,
(B) a lien for taxes not yet delinquent, (C) a mechanic's or
materialmen's lien (or other similar lien), or (D) a lien
under an operating agreement or similar agreement, to the
extent the same relates to expenses incurred that are not yet
due; or
(iii) Seller's sale of a Property is subject to a preferential right
to purchase or may not be assigned without the consent of a
third party, unless a waiver of such right or such consent has
been obtained with respect to the transaction contemplated
hereby or an appropriate tender of the applicable interest has
been made to the party holding such right and the period of
time required for such party to exercise such right has
expired without such party exercising such right; or
(iv) Seller's ownership of a Property is subject to an imperfection
in title that, if asserted, would cause a Defect, as defined
in clause (i) above, to exist, and such imperfection in title
normally would not be waived by persons engaged in the oil and
gas business purchasing producing property; or
(v) Seller's rights and interests in the Properties are subject to
reduction by a third party reversionary, back-in or similar
right, except as shown on Exhibit A or Exhibit B; or
(vi) Seller is in default under a material provision of a lease,
farmout agreement, or other contract or agreement affecting
the Properties such that Seller is not entitled to receive the
production of hydrocarbons attributable to the interests shown
on Exhibit B; or
(vii) A Property has been cited for, or in its present condition is
in, violation of Applicable Environmental Laws (as hereinafter
defined) in any material respect unless such violation has
been cured (by remediation, agreement with appropriate
authorities, or otherwise, or by determination that a
violation does not exist) or is disclosed on Exhibit D.
"Applicable Environmental Laws" shall mean all federal, state,
or local laws, rules, orders, or regulations in effect as of
the Effective Date of this Agreement pertaining to health or
the environment, including those relating to waste materials
and hazardous substances.
(viii)Prior to the Effective Date, a well located on the Property
has been plugged and abandoned and the surface restored other
than in accordance with applicable regulatory laws in effect
at the time of the plugging operation and such failure will
cause the owner of the affected Property to incur additional
plugging and abandonment or surface restoration expense to
bring such Property into compliance with regulatory laws in
effect at the time of the original plugging operations. The
amount of the Defect shall be the minimum additional plugging
and abandonment or surface restoration expense necessary to
meet the regulatory requirements in effect at the time of the
original plugging operations. This Defect shall not apply to
wells located on the Property that have not been the subject
of plugging and abandonment operations. In lieu of reducing
the Purchase Price for the amount of such Defect, the Seller
may elect to conduct and pay for the additional plugging and
abandonment or surface restoration operations.
(b) A gas imbalance does not constitute a Defect, and shall be
handled under the provisions of Section 12. hereof.
(c) Buyer may conduct, to the extent it deems appropriate at its
sole cost, such examinations and investigations as it may choose with
respect to the Properties in order to determine whether "Defects" exist.
If Defects come to Buyer's attention, and if Buyer is unwilling to waive
one or more of such Defects, Buyer shall notify Seller in writing of such
Defects as soon as they are identified, but no later than five (5) days
prior to the date upon which Closing is scheduled to occur pursuant to
Section 11 [and not as extended pursuant to 11(i) or 11(ii)] (hereinafter
"Defect Notice Date"). Those Defects identified in such notice to Seller
are herein called "Asserted Defects." Such notification shall include, (i)
a description of the Asserted Defect, the lease or mineral interest on
Exhibit A affected by such Asserted Defect, the wells and units listed on
Exhibit B to which the Asserted Defect relates, and all supporting
documentation reasonably necessary fully to describe the basis for the
Asserted Defect; (ii) for each applicable well or unit, the size of any
variance from "Net Revenue Interest" or "Operating Interest" set forth in
Exhibit B that does or could result from such Asserted Defect; and (iii)
the amount by which Buyer proposes to adjust the Purchase Price because of
such Asserted Defect. Buyer hereby waives all Defects that it fails to
identify to Seller as Asserted Defects on or before the Defect Notice
Date. If Buyer notifies Seller of Asserted Defects, Seller (i) shall have
the right (but not the obligation) to attempt to cure such Asserted
Defects prior to Closing, and (ii) shall also have the right (which may be
exercised at any time before the Closing Date) to postpone the Closing by
designating a new Closing Date not later than thirty (30) days after the
Closing Date then existing, if Seller desires additional time to attempt
to cure (including determining if it will attempt to cure) one or more
Asserted Defects. In lieu of curing or attempting to cure an Asserted
Defect, Seller may elect, at any time prior to Closing with respect to any
Asserted Defect, to indemnify and hold Buyer harmless from and against any
actual damages or loss (including reasonable attorney's fees and court
costs, but specifically excluding consequential, special, or similar
damages) Buyer may suffer as a result of a third party claim based on such
Asserted Defect, If and when Seller makes such an election as to an
Asserted Defect, such Asserted Defect will be treated under this Agreement
as cured.
(d) Buyer shall have the right to make an environmental assessment
of the Properties during the period beginning on the date of execution of
this Agreement and ending on the Defect Notice Date. Buyer and its agents
shall have the right to enter upon the Properties and all buildings and
improvements thereon, inspect the same, conduct soil and water tests and
borings, and generally conduct such tests, examinations, investigations,
and studies as may be necessary or appropriate for the preparation of
appropriate engineering and other reports in relation to the Properties,
their condition, and the presence of Hazardous Substances (as the term
"Hazardous Substance" is defined in the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sec. 9601, et seq. ).
Buyer agrees promptly to provide to Seller a copy of the environmental
assessment, including any reports, data, and conclusions. Buyer shall keep
any data or information acquired by all such examinations and the results
of all analyses of such data and information strictly confidential and
shall not disclose same to any person or agency without the prior written
approval of Seller unless such disclosure is required by court order or,
in the written opinion of third party legal counsel acceptable to Seller
(Seller acknowledges Cox & Smith Incorporated, San Antonio, Texas, as
acceptable), required to be disclosed pursuant to any statute or any rule
or regulation of any environmental authority having jurisdiction over
Buyer, Seller or the Properties; and, in such event, Seller shall have a
reasonable period of time within which it may first disclose the data or
information to the applicable court or environmental authority. BUYER
SHALL RELEASE, INDEMNIFY, DEFEND, AND HOLD HARMLESS THE SELLER GROUP FROM
AND AGAINST ANY AND ALL LOSS, COST, DAMAGE, EXPENSE, OR LIABILITY
WHATSOEVER, INCLUDING REASONABLE ATTORNEY'S FEES, ARISING OUT OF ANY
INJURY TO OR DEATH OF PERSONS OR DAMAGE TO PROPERTY OCCURRING IN, ON, OR
ABOUT THE PROPERTIES AS A RESULT OF SUCH ACTIVITIES (EXCEPT ANY SUCH
INJURIES OR DAMAGES CAUSED SOLELY BY THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF ANY MEMBER OF THE SELLER GROUP). After the Defect Notice
Date, Buyer shall be deemed to have inspected the Properties or waived its
right to inspect the Properties for all purposes and satisfied itself as
to their physical and environmental condition, both surface and
subsurface, including, but not limited to conditions specifically related
to the presence, release, or disposal of Hazardous Substances.
8. Certain Price Adjustments.
(a) If Buyer presents Asserted Defects to Seller as a part of the
due diligence reviews provided for in Section 7 above, and if Seller is
unable or unwilling to cure such Asserted Defects prior to Closing, or if
Buyer has elected to treat a Property affected by a casualty loss pursuant
to Section 16 as if it were a Property affected by an Asserted Defect,
then:
(i) Buyer and Seller shall, with respect to each Property affected
by such matters, attempt to agree upon an appropriate
adjustment to the valuation placed upon such Property in
Exhibit B to account for such matters; and
(ii) With respect to each Property as to which Buyer and Seller
are unable to agree upon appropriate adjustment with
respect to all such matters affecting such Property, such
Property shall be excluded from the transaction
contemplated hereby, and the Purchase Price shall be
reduced by the amount attributed on Exhibit B to the wells
located on such Property and the units in which such
Property participates.
(b) The Properties with Asserted Defects for which Seller and Buyer
agree on a valuation adjustment pursuant to Section 8(a)(i) shall be
divided into two groups. The first group ("Major Defects") shall contain
the Properties with valuation adjustments which individually are in an
amount greater than or equal to $250,000. The second group ("Minor
Defects") shall contain the Properties with valuation adjustments which
individually are in an amount less than $250,000. The Base Purchase Price
shall be reduced by the total amount of the Major Defects. If the total of
all Minor Defects is greater than $2,375,000, the Base Purchase Price
shall be reduced by the total amount of the Minor Defects. If the total of
all Minor Defects is less than $2,375,000, the Base Purchase Price shall
not be reduced.
(c) If Seller is shown to be entitled to a share of the production
from a well or unit listed on Exhibit B greater than the share shown for
such well or unit under the column headed "Net Revenue Interest" on
Exhibit B, then Seller may propose an increase in the Purchase Price, in
which case such increase shall be handled in the same manner as provided
in Sections 8 (a) and (b) above with respect to adjustments for Asserted
Defects except that the Base Purchase Price shall be increased; and,
provided that the party making such determination shall notify the other
party of such adjustment no later than five (5) days prior to the Closing
Date.
9. Conditions Precedent to Buyer's Obligations. Buyer's obligations
under this Agreement are subject to each of the following conditions:
(a) Seller's representations under this Agreement shall be true and
accurate in all material respects as of the date when made and shall be
deemed to have been made again at Closing. At Closing, Seller's
representations under this Agreement shall be true and accurate in all
material respects except as to changes specifically contemplated by this
Agreement or consented to by Buyer.
(b) Seller shall have performed and complied in all material
respects with every covenant, agreement, and condition required by it
under this Agreement prior to or at the Closing unless performance or
compliance therewith shall have been waived by Buyer.
(c) If applicable, Buyer and Seller shall have received approval
from the FTC under the HSR Act of the transaction contemplated by this
Agreement, or shall have received notification that the waiting period
under such act has been terminated, or the waiting period under such act
shall have expired.
(d) The Purchase Price increase resulting from the procedure set
forth in Section 8 does not exceed five percent (5%) of the Base Purchase
Price.
(e) On the Closing Date, no material suit, action, or other
proceeding against Buyer shall be pending before any court or governmental
agency seeking to restrain, prohibit, or obtain damages or other relief in
connection with the consummation of the transaction contemplated by this
Agreement.
If any such condition precedent to the obligations of Buyer under this Agreement
is not met as of the Closing Date, and if Buyer is not in material breach of its
obligations hereunder, this Agreement may be terminated at the option of Buyer.
If Buyer thus terminates this Agreement, the Deposit will be returned to Buyer
and the parties shall have no further obligations to one another hereunder
(other than the obligations under Sections 6(a)(iii) and 15 hereof, which will
survive such termination). Notwithstanding the foregoing, if a condition set
forth above, other than condition 9(c) or 9(d), is not met (and is asserted by
Buyer as a failure of one of its conditions of Closing), and if the reasons such
condition is not met relate only to some, but not all, of the Properties,
failure of such condition to be met may, at the option of either Buyer or
Seller, be treated as an uncured Asserted Defect and handled in accordance with
the process set forth in Section 8 above.
10. Conditions Precedent to Seller's Obligations. Seller's
obligations under this Agreement are subject to the each of the following
conditions:
(a) Buyer's representations under this Agreement shall be true and
accurate in all material respects as of the date when made and shall be
deemed to have been made again at Closing. At Closing, Buyer's
representations under this Agreement shall be true and accurate in all
material respects except as to changes specifically contemplated by this
Agreement or consented to by Seller.
(b) Buyer shall have performed and complied in all material respects
with every covenant, agreement, and condition required by it under this
Agreement prior to or at the Closing unless compliance therewith shall
have been waived by Seller.
(c) If applicable, Buyer and Seller shall have received approval
from the FTC under the HSR Act of the transaction contemplated by this
Agreement, or shall have received notification that the waiting period
under such act has been terminated, or the waiting period under such act
shall have expired.
(d) The Purchase Price reduction resulting from the procedure set
forth in Section 8 above does not exceed five percent (5%) of the Base
Purchase Price.
(e) On the Closing Date, no material suit, action, or other
proceeding against Seller shall be pending before any court or
governmental agency seeking to restrain, prohibit, or obtain damages or
other relief in connection with the consummation of the transaction
contemplated by this Agreement.
If any such condition precedent to the obligations of Seller under this
Agreement is not met as of the Closing Date, this Agreement may be terminated at
the option of Seller. If Seller terminates this Agreement because of Buyer's
failure to fulfill condition (a) or (b), the Deposit will not be returned to
Buyer. If Seller terminates this Agreement because of conditions (c), (d) or
(e), and Buyer is not in material default under this Agreement, the deposit will
be returned to Buyer. Thereafter Seller and Buyer shall have no further
obligations to one another hereunder (other than the obligations under Section
6(a)(iii) and 15 hereof, which will survive such termination).
11. The Closing. The consummation of the transaction contemplated hereby
("Closing") shall take place in the offices of Seller, at 6688 North Central
Expressway, Dallas, Texas 75206, on July 15, 1996, at 10:00 a.m. Central
Daylight Time, or at such other date and time (i) as the Buyer and Seller may
agree or (ii) to which Seller may postpone the Closing pursuant to Section 7
hereof (such date and time, as changed pursuant to clauses (i) and (ii) being
herein called the "Closing Date"). At the Closing:
(a) Seller shall:
(i) execute, acknowledge, and deliver to Buyer a conveyance of the
Properties (the "Assignment and Bill of Sale"), in the form
attached hereto as Exhibit C (with Exhibit A hereto being
attached thereto), effective as to runs of oil and deliveries
of gas as of 7 o'clock a.m., local time at the locations of
the Properties, respectively, on April 1, 1996, (herein called
the "Effective Date"); and
(ii) execute (and, where required, acknowledge) and deliver to
Buyer forms of conveyance or assignment as required by the
applicable authorities for transfers of interests in state or
federal leases included in the Properties;
(iii) execute and deliver to Buyer letters in lieu of transfer
orders (or similar documentation), in form acceptable to both
parties; and
(iv) if Buyer requests, deliver to Buyer an affidavit or other
certification (as permitted by the Internal Revenue Code of
1986, as amended) that Seller is not a "foreign person"
within the meaning of Section 1445 (or similar provisions)
of such code (i.e., Seller is not a non-resident alien,
foreign corporation, foreign partnership, foreign trust, or
foreign estate, as those terms are defined in such code and
regulations promulgated thereunder); and
(v) to the extent Seller is able to do so, turn over possession
of the Properties to Buyer.
(b) Buyer shall:
(i) deliver to the Seller, by wire transfer to an account in a
bank located in the United States designated to Buyer by
Seller in writing no later than five (5) days prior to the
Closing, an amount equal to (A) the Purchase Price, less (B)
the Deposit, less (or plus, as the case may be) (C) any
adjustments made at Closing under Section 12 below; and
(ii) with respect to properties operated by Seller, and subject to
applicable Operating Agreement requirements, execute and
deliver to Seller appropriate evidence reflecting change of
operator as required by applicable authorities, and such
evidence as Seller may require that Buyer is qualified with
such authorities to succeed Seller as operator; and
(iii) execute such forms and take such other steps as Seller may
reasonably require to (i) succeed Seller with respect to the
Properties under the rules and regulations of applicable
authorities and (ii) assume any plugging liabilities of Seller
with respect to the wells located on the Properties or on
units in which the Properties participate (including, without
limitation compliance with state statutes).
Within fifteen (15) days after Closing, Seller shall deliver to Buyer all of
Seller's lease files, abstracts and title opinions, division order files,
production records, well files, copies of accounting records (but not including
general financial accounting or tax accounting records), and other similar files
and records that directly relate to the Properties. Notwithstanding the
foregoing, Seller shall not be required to deliver to Buyer materials that
Seller considers proprietary or confidential or that Seller legally cannot
provide to Buyer without, in its opinion, breaching, or risking a breach of,
confidentiality agreements with other parties. It is expressly understood that
Buyer is not acquiring, and Seller is not obligated to transfer to Buyer, any
seismic data, geological or geophysical data, or other similar data, or any
interpretations thereof or other data or records related thereto except as
provided in Section 1 herein. With respect to each portion of the Properties
from which Seller is disbursing proceeds of production attributable to other
parties:
(i) Seller shall continue to collect proceeds of production
through the production month of July 1996, and shall be
responsible for making disbursements, in accordance with
its normal procedures (and at normal times), of such
proceeds of production so collected to the parties entitled
to same, with any proceeds of production thereafter
collected by Seller to be forwarded promptly to Buyer (who
shall thereafter account for same to the parties entitled
thereto), and
(ii) After execution of this Agreement, but no later than five
(5) days before the Closing Date, Seller shall deliver to
Buyer (A) a copy of its "pay list" for each such property
(which pay list shall include the name, address, social
security number and applicable share of proceeds of
production, to the extent such information is contained in
Seller's records, for each party to whom Seller is
disbursing proceeds of production with respect to such
property), and (B) a list of all parties for whom it is
holding in suspense proceeds of production.
Following delivery of the materials referred to in clause (ii) above, Buyer
shall become responsible for all disbursements of proceeds of production
commencing with the production month of August 1996, and such disbursement
activities shall be included in the matters that Buyer assumes and with respect
to which Buyer indemnities Seller under Section 13 below. It is understood and
agreed that Seller does not represent or warrant to Buyer the accuracy of the
"pay lists" so delivered.
Buyer and Seller shall cooperate with respect to transition activities as to
Properties where Buyer succeeds Seller as operator. SELLER GIVES NO ASSURANCE
HEREUNDER THAT BUYER SHALL SUCCEED SELLER AS OPERATOR OF ANY PROPERTY WHERE
PARTIES OTHER THAN SELLER OWN INTERESTS IN SUCH PROPERTY. To the extent Seller
remains an operator after Closing (which it shall have no obligation to do), it
shall serve as operator under the applicable operating agreement in the manner
provided by such agreement and, to the extent Seller so operates any Property
after Closing, its obligations to Buyer with respect to such operations shall be
no greater than those that it would have to a non-operator under the applicable
operating agreement (and, in the absence of an operating agreement, under the
AAPL 610 (1989 Revision) form Operating Agreement). THE PARTIES RECOGNIZE THAT
UNDER SUCH AGREEMENTS AND SUCH FORM OF AGREEMENT THE OPERATOR IS NOT RESPONSIBLE
TO THE OTHER PARTIES THERETO FOR ITS OWN NEGLIGENCE AND HAS NO RESPONSIBILITY TO
SUCH OTHER PARTIES OTHER THAN FOR GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. SELLER
INDEMNIFIES AND AGREES TO DEFEND BUYER AGAINST CLAIMS THAT RESULT FROM SELLER'S
ACTS THAT ARE HELD IN A FINAL AND UNAPPEALABLE DECISION BY A COURT OF COMPETENT
JURISDICTION TO HAVE BEEN CONDUCTED IN A GROSSLY NEGLIGENT MANNER OR TO HAVE
RESULTED FROM THE WILLFUL MISCONDUCT OF SELLER. Seller agrees that, with regard
to the period between the Effective Date and the Closing Date, if Seller does
not properly distribute proceeds of production from the Properties in accordance
with its duties under the applicable contracts, and if this failure causes
penalties to be imposed on Seller or Buyer, Seller shall bear the cost of such
penalties.
12. Certain Accounting Adjustments.
(a) Appropriate adjustments shall be made between Buyer and
Seller so that:
(i) all expenses (including, without limitation, all drilling
costs, all capital expenditures, all overhead charges under
applicable operating agreements, regardless of whether such
operating agreements are with third parties or related
entities, and regardless of whether Seller is the operator
or a non-operator) and all other overhead charges actually
charged by third parties and incurred in the operation of
the Properties after the Effective Date shall be allocated
to Buyer, and all proceeds (net of applicable production,
severance, and similar taxes) from sale of oil, gas, and
other minerals produced from the Properties after the
Effective Date shall be allocated to Buyer; and
(ii) all expenses incurred in the operation of the Properties
before the Effective Date shall be allocated to Seller, and
all proceeds (net of applicable production, severance, and
similar taxes) from the sale of oil, gas, and other minerals
produced from the Properties before the Effective Date shall
be allocated to Seller.
In making such adjustments, the parties agree that:
(i) oil above pipeline connections that was produced from the
Properties and that was stored in tanks located on the
Properties on the Effective Date (or located elsewhere but
used by Seller to store oil produced from the Properties prior
to delivery to oil purchasers) and above pipeline connections
shall be deemed to have been produced before the Effective
Date; and
(ii) ad valorem and similar taxes assessed for periods prior to
the Effective Date shall be borne by Seller, and ad valorem
taxes assessed for periods on or after the Effective Date
shall be borne by Buyer (ad valorem and similar taxes shall
be considered assessed for the period for which they are
stated to be assessed, even if the same are based on
production or other activities occurring in prior periods);
and
(iii) ad valorem taxes with respect to the period containing the
Effective Date shall be prorated between Buyer and Seller
based on the number of days in such period that fall before
and after the Effective Date (with the Effective Date being
counted in the period after the Effective Date); and
(iv) no consideration shall be given to the local, state, or
federal income tax liabilities of any party.
(b) In addition, Buyer and Seller shall determine (i) the total
amount of overproduction of gas (measured in Mcf) with respect to the
Properties as of the Effective Date (e.g. volumes of gas taken from wells
on the Properties, or on lands unitized therewith, by the owners of the
Properties in excess of those volumes which the ownership of the
Properties would entitle such owners to receive) and (ii) total amount of
underproduction of gas (measured in Mcf) with respect to the Properties as
of the Effective Date (e.g. the amount by which the volume of gas from
wells on the Properties, or on lands unitized therewith, which the
ownership of the Properties would entitle the owners thereof to take
exceeds the volumes taken from such wells by owners). If the total amount
of overproduction exceeds the total amount of underproduction, Buyer shall
be credited with an amount equal to $1.00 times such excess. If the total
amount of underproduction exceeds the total amount of overproduction,
Seller shall be credited with an amount equal to $1.00 times such excess.
Buyer and Seller shall also determine the amount of all pipeline and
gathering system imbalances that existed as of the Effective Date with
respect to deliveries from the Properties. Seller shall receive credit for
all benefits arising out of such imbalances, and Buyer shall receive
credit for all obligations arising out of such imbalances.
(c) At or before Closing, the parties shall determine, based upon
the best information reasonably available to them (and as to adjustments
under subsection (a), based on amounts actually received or paid by Seller
prior to such time) the amount of the adjustments provided for in
subsections (a) and (b) above. If the amount of adjustments so determined
that would result in a credit to Buyer exceeds the amount of adjustments
so determined that would result in a credit to Seller, Buyer shall receive
a credit for the amount of such excess. If the amount of adjustments so
determined that would result in a credit to Seller exceed the amount of
adjustments so determined that would result in a credit to Buyer, Buyer
shall pay to Seller the amount of such excess. On or before one hundred
twenty (120) days after Closing, Buyer and Seller shall review any
additional information pertaining to the adjustments provided for in
subsections (a) and (b) above, shall determine if any additional
adjustments (whether the same be made to account for expenses or revenues,
or overproduction or underproduction volumes, not considered in making the
adjustments made at Closing, or to correct errors made in such
adjustments) should be made beyond those made at Closing, and shall make
any such adjustments by appropriate payments from Seller to Buyer or from
Buyer to Seller. Following such additional adjustments, no further
adjustments shall be made under this Section 12.
13. Assumption and Indemnification. Buyer shall, on the date of Closing,
agree (and, upon the delivery to Buyer of the Assignment and Bill of Sale shall
be deemed to have agreed) (a) to assume, and timely to pay and perform, all
duties, obligations and liabilities relating to the ownership or operation of
the Properties after the Effective Date (including, without limitation, those
arising under the contracts and agreements described in Section 1(c) above), and
(b) to release, indemnify, defend, and hold harmless the Seller Group from and
against any and all claims, actions, liabilities, losses, damages, costs or
expenses (including court costs and attorneys' fees) of any kind or character
arising out of or otherwise relating to the ownership or operation of the
Properties after the Effective Date. In connection with (but not in limitation
of) the foregoing, it is specifically understood and agreed that matters arising
out of or otherwise relating to the ownership or operation of the Properties
after the Effective Date shall be deemed to include all matters arising out of
the condition of the Properties on the Effective Date including, without
limitation, within such matters all obligations to properly plug and abandon
wells located on the Properties, to restore the surface of the Properties and to
comply with, or bring the Properties into compliance with, applicable
environmental laws, including all liability and expense for any restoration,
clean-up, disposal, or removal that may be incurred as a result of the existence
or discovery of Hazardous Substances or other deleterious substances in, on, or
under the Properties, regardless of when the events occurred that give rise to
such condition, and the above provided for assumptions and indemnifications by
Buyer shall expressly cover and include such matters. THE FOREGOING ASSUMPTIONS
AND INDEMNIFICATIONS SHALL APPLY WHETHER OR NOT SUCH DUTIES, OBLIGATIONS, OR
LIABILITIES, OR SUCH CLAIMS, ACTIONS, CAUSES OF ACTION, LIABILITIES, DAMAGES,
LOSSES, COSTS, OR EXPENSES ARISE OUT OF (i) NEGLIGENCE (INCLUDING SOLE
NEGLIGENCE, SINGLE NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE OR PASSIVE
NEGLIGENCE, BUT EXPRESSLY NOT INCLUDING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT)
OF SELLER OR ANY OTHER INDEMNIFIED PARTY, OR (ii) STRICT LIABILITY. Seller shall
give notice to Buyer of an event giving rise to the obligation to indemnify, and
Seller shall, at its sole cost and expense, have the right, if it so elects, to
participate in the defense of any such suit or suits in which it may be a party,
without relieving Buyer of its obligation.
14. Disclaimer of Warranties. THE EXPRESS REPRESENTATIONS AND WARRANTIES
OF SELLER CONTAINED IN SECTION 4 (OR IN THE ASSIGNMENT AND BILL OF SALE EXECUTED
PURSUANT TO THIS AGREEMENT) ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER
REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE,
EXCEPT FOR A SPECIAL WARRANTY OF TITLE AS HEREINAFTER DESCRIBED, AND SELLER
EXPRESSLY DISCLAIMS ANY AND ALL SUCH OTHER REPRESENTATIONS AND WARRANTIES.
WITHOUT LIMITATION OF THE FOREGOING, THE PROPERTIES SHALL BE CONVEYED PURSUANT
HERETO WITHOUT ANY WARRANTY OR REPRESENTATION, WHETHER EXPRESS, IMPLIED,
STATUTORY, OR OTHERWISE RELATING TO THE CONDITION, QUANTITY, QUALITY, FITNESS
FOR A PARTICULAR PURPOSE, CONFORMITY TO THE MODELS OR SAMPLES OF MATERILALS, OR
MERCHANTABILITY OF ANY EQUIPMENT OR ITS FITNESS FOR ANY PURPOSE, AND, EXCEPT AS
PROVIDED OTHERWISE IN THE FIRST SENTENCE OF THIS PARAGRAPH, WITHOUT ANY OTHER
EXPRESS, IMPLIED, STATUTORY, OR OTHER WARRANTY OR REPRESENTATION WHATSOEVER.
BUYER SHALL HAVE INSPECTED, OR WAIVED (AND UPON CLOSING SHALL BE DEEMED TO HAVE
WAIVED) ITS RIGHT TO INSPECT, THE PROPERTIES FOR ALL PURPOSES AND SATISFIED
ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH SURFACE AND
SUBSURFACE, INCLUDING, BUT NOT LIMITED TO, CONDITIONS SPECIFICALLY RELATED TO
THE PRESENCE, RELEASE, OR DISPOSAL OF HAZARDOUS SUBSTANCES, SOLID WASTES,
ASBESTOS OR OTHER MANMADE FIBERS OR NATURALLY OCCURRING RADIOACTIVE MATERIALS
("NORM") IN, ON, OR UNDER THE PROPERTIES. BUYER IS RELYING SOLELY UPON ITS OWN
INSPECTION OF THE PROPERTIES, AND BUYER SHALL, EXCEPT AS PROVIDED OTHERWISE
HEREIN, ACCEPT ALL OF THE SAME "AS IS, WHERE IS" WITHOUT LIMITATION OF THE
FOREGOING, SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS, IMPLIED,
STATUTORY, OR OTHERWISE, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA,
REPORTS, RECORDS, PROJECTIONS, INFORMATION, OR MATERIALS NOW, HERETOFORE, OR
HEREAFTER FURNISHED OR MADE AVAILABLE TO BUYER IN CONNECTION WITH THIS AGREEMENT
INCLUDING, WITHOUT LIMITATION, PRICING ASSUMPTIONS OR QUALITY OR QUANTITY OF
HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE PROPERTIES OR THE ABILITY OR
POTENTIAL OF THE PROPERTIES TO PRODUCE HYDROCARBONS OR THE ENVIRONMENTAL
CONDITION OF THE PROPERTIES OR ANY OTHER MATTERS CONTAINED IN THE PROPRIETARY
DATA OR ANY OTHER MATERIALS FURNISHED OR MADE AVAILABLE TO BUYER BY SELLER OR BY
SELLER'S AGENTS OR REPRESENTATIVES. ANY AND ALL SUCH DATA, RECORDS, REPORTS,
PROJECTIONS, INFORMATION, AND OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED BY
SELLER OR OTHERWISE MADE AVAILABLE OR DISCLOSED TO BUYER ARE PROVIDED TO BUYER
AS A CONVENIENCE AND SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF OR
AGAINST SELLER, AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT BUYER'S SOLE
RISK TO THE MAXIMUM EXTENT PERMITTED BY LAW.
TO THE EXTENT OF SELLER'S INTEREST IN THE PROPERTIES AS SHOWN ON EXHIBIT
B, SELLER WARRANTS TITLE BY, THROUGH AND UNDER SELLER, BUT NOT OTHERWISE, IT
BEING EXPRESSLY UNDERSTOOD THAT THE TERM "SELLER" AS USED IN THIS SPECIAL
WARRANTY PROVISION REFERS TO ENSERCH EXPLORATION, INC. AND NOT TO ITS
PREDECESSORS IN TITLE INCLUDING, BUT NOT LIMITED TO, DALEN CORPORATION, DALEN
RESOURCES OIL & GAS CO., PG&E RESOURCES COMPANY, PG&E ENTERPRISES AND EACH OF
THEIR PREDECESSORS. THIS SPECIAL WARRANTY SHALL NOT COVER OR PERTAIN TO TITLE AS
IT MAY BE AFFECTED BY THAT CERTAIN ASSIGNMENT OF OIL AND GAS LEASES WITH
RESERVATION OF PRODUCTION PAYMENT, DATED EFFECTIVE AUGUST 1, 1995, BETWEEN
SELLER AND TGAS INVESTMENTS L.L.C.
15. Commissions. Seller agrees to indemnify and hold harmless Buyer, its
parent and subsidiary companies and other affiliates, and their directors,
officers, employees and agents from and against any and all claims, obligations,
actions, liabilities, losses, damages, costs, or expenses (including court costs
and attorneys fees) of any kind or character arising out of or resulting from
any agreement, arrangement, or understanding by, or on behalf of, Seller with
any broker or finder in connection with this Agreement or the transaction
contemplated hereby. Buyer agrees to indemnify and hold harmless Seller Group
from and against any and all claims, obligations, actions, liabilities, losses,
damages, costs, or expenses (including court costs and reasonable attorney's
fees) of any kind or character arising out of or resulting from any agreement,
arrangement, or understanding by, or on behalf of, Buyer with any broker or
finder in connection with this Agreement or the transaction contemplated hereby.
16. Casualty Loss. If the Properties are damaged by fire or other casualty
prior to the Closing, this Agreement shall remain in full force and effect, and
(unless Buyer and Seller shall otherwise agree) in such event as to each such
damaged Property that Seller, in its sole discretion, elects not to repair,
Buyer either may treat such Property as if it had an Asserted Defect or elect
not to adjust the Purchase Price therefor. If Buyer elects hereunder to treat
the damaged Property as if it had an Asserted Defect, the procedure provided for
in Section 8 shall apply to such Property, and all rights to insurance proceeds
and claims against third parties related thereto shall belong to Seller. If
Buyer elects hereunder not to adjust the Purchase Price for such damaged
Property, and if Seller is entitled to any claims under an insurance policy with
respect to such damage, Seller shall either collect and pay over, or assign,
such insurance claims to Buyer. Buyer shall then take title to such Property
without reduction of the Purchase Price. If Seller elects to repair a damaged
Property, all rights to insurance proceeds and claims against third parties
related thereto shall belong to Seller.
17. Notices. All notices and other communications required or permitted
under this Agreement shall be in writing, unless otherwise specifically provided
herein, and shall be delivered personally, by recognized commercial courier or
delivery service (which provides a receipt), by telex or telecopier (with
receipt acknowledged), or by registered or certified mail (postage prepaid), at
the following addresses:
If to Buyer:
Abraxas Petroleum Corporation
500 North Loop 1604 East
Suite 100
San Antonio, Texas 78232
Attention: Mr. Robert L. G. Watson
<PAGE>
With a copy to:
Cox & Smith Incorporated
112 East Pecan Street
Suite 1800
San Antonio, Texas 78205
Attention: Mr. Steven R. Jacobs
If to Seller:
Enserch Exploration, Inc.
4849 Greenville Avenue
Suite 1200
Dallas, Texas 75206
Attention: Mr. James Hyink
With a copy to:
Mr. Randall B. Wilson
Vice President and General Counsel Enserch Exploration, Inc.
6688 North Central Expressway Suite 1000
Dallas, Texas 75206
All such notices and communications shall be considered delivered on the date of
receipt. Buyer or Seller may specify as its proper address any other post office
address within the continental limits of the United States by giving notice to
the other party, in the manner provided in this Section.
18. Survival of Provisions. All representations and warranties made in
Section 4 by Seller and in Section 5 by Buyer shall be continuing and shall be
true and correct on the Closing Date with the same force and effect as if made
at that time (and shall inure to the benefit of the respective successors and
assigns of Buyer and Seller). All such representations and warranties shall
survive the Closing and the delivery of the Assignment and Bill of Sale. The
obligations of the parties under Section 11 (to the extent the same are, by
mutual agreement, not performed at Closing), and Sections 12, 13, 14, 15, 17,
18, and 19 shall (subject to any limitations set forth therein) also survive the
Closing and the delivery of the Assignment and Bill of Sale.
19. Miscellaneous Matters.
(a) After the Closing, Seller and Buyer shall execute and deliver,
and shall otherwise cause to be executed and delivered, from time to time,
such further instruments, notices, division orders, transfer orders, and
other documents, and do such other and further acts and things as may be
reasonably necessary more fully and effectively to grant, convey, and
assign the Property to Buyer. Seller shall prepare and Buyer shall file
appropriate assignments and other documents required for the transfer of
any federal leases comprising a portion of the Properties. Seller agrees
that until governmental approval of each such assignment is obtained,
Seller shall forward to Buyer notices that Seller receives regarding such
leases and Seller agrees to cooperate with Buyer in maintaining such
leases in effect. At the request of Buyer, Seller agrees to name Buyer as
its designated operator for any federal leases which comprise a portion of
the Properties.
(b) Except as provided below, neither party shall have the right to
assign its rights under this Agreement without the prior written consent
of the other party, and any such assignment in violation of this provision
shall be void. Seller may, without consent, assign its rights to a direct
or indirect parent of Seller, to a direct or indirect subsidiary of
Seller, or to an entity that is a direct or indirect subsidiary of a
direct or indirect parent of Seller.
(c) On the Closing Date (and upon the delivery to Buyer of the
Assignment and Bill of Sale), Buyer shall succeed to the position of
Seller with respect to all gas imbalances (whether wellhead imbalances or
pipeline or gathering imbalances) and to the position of Seller with
respect to all make-up obligations. As a result of such succession, Buyer
(i) shall be entitled to receive any and all benefits, including payments
of proceeds of production in excess of amounts that it would otherwise be
entitled to produce and receive by virtue of ownership of the Properties
that Seller would have been entitled to receive by virtue of such position
and (ii) shall be obligated to suffer any detriments (whether the same be
in the form of obligations to deliver production that would have otherwise
been attributable to its ownership of the Properties without receiving
full payment therefor, or be in the form of the obligation to make payment
in cash) that Seller would have been obligated to suffer by virtue of such
positions.
(d) To the extent applicable to the transaction contemplated hereby,
or any portion thereof, Buyer waives the provisions of the Texas Deceptive
Trade Practices Act, Chapter 17, Subchapter E, Sections 17.41 through
17.63, inclusive (other than Section 17.555 which is not waived), Texas
Business and Commerce Code. In connection with such waiver, Buyer hereby
represents and warrants to Seller that Buyer (a) is in the business of
seeking or acquiring, by purchase or lease, goods or services for
commercial or business use, (b) has assets of Five Million and No/100
Dollars ($5,000,000.00) or more according to its most recent financial
statement, (c) has knowledge and experience in financial and business
matters that enable it to evaluate the merits and risks of the transaction
contemplated hereby, and (d) is not in a significantly disparate
bargaining position.
(e) Any Confidentiality Agreement executed by Buyer and Seller in
connection with the transaction contemplated hereby remains in full force
and effect and is not superseded or modified by this Agreement.
(f) This Agreement contains the entire understanding of the parties
hereto with respect to subject matter hereof and supersedes all prior
agreements, understandings, negotiations, and discussions among the
parties with respect to such subject matter, except as provided above with
respect to any Confidentiality Agreement. The headings contained in this
Agreement are for convenience only and shall not control or affect the
meaning or construction of any provision of this Agreement. Within this
Agreement, words of any gender shall be held and construed to cover any
other gender, and words in the singular shall be held and construed to
cover the plural, unless the context otherwise requires. Time is of the
essence in this Agreement.
(g) This Agreement may be amended, modified, supplemented, restated,
or discharged (and provisions hereof may be waived) only by an instrument
in writing signed by the party against whom enforcement of the amendment,
modification, supplement, restatement, or discharge (or waiver) is sought.
(h) Each party shall bear and pay all expenses it incurred in
connection with the transaction contemplated by this Agreement.
(i) This Agreement shall be binding on the parties hereto and their
respective successors and assigns.
(j) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which shall constitute
one and the same instrument. It shall not be necessary for both parties to
sign the same counterpart.
(k) WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, THIS AGREEMENT
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE AND BY THE LAWS OF THE UNITED STATES
OF AMERICA, EXCEPT THAT, TO THE EXTENT THE LAW OF A STATE IN WHICH THE
PROPERTIES ARE LOCATED NECESSARILY GOVERNS, THE LAW OF SUCH STATE SHALL,
TO SUCH EXTENT, APPLY TO THE PROPERTIES.
(1) Prior to Closing, Buyer shall not issue public announcements of
this Agreement or the transaction described herein without the prior
written consent of Seller, provided however, the foregoing shall not
restrict disclosures by Buyer which, in the written opinion of third party
legal counsel acceptable to Seller (Cox & Smith Incorporated, San Antonio,
Texas, is acknowledged to be acceptable) are required to comply with
applicable securities or other laws or are required to maintain compliance
with existing loan or other agreements binding such party (or its
affiliated companies). Such required public announcements shall be limited
to the minimum information and circulation necessary to comply with the
disclosure obligation. Buyer and Seller agree that a Press Release in the
form of Exhibit E, attached hereto, may be issued by Buyer after execution
of this Agreement by Buyer and Seller.
IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on
the date set forth above.
ENSERCH EXPLORATION, INC.
By: ________________________
Barry K. Irani
Senior Vice President
ABRAXAS PETROLEUM CORPORATION
By: ________________________
Chris E. Williford
Executive Vice President & Chief Financial Officer
<PAGE>
ACKNOWLEDGEMENTS
STATE OF TEXAS
COUNTY OF DALLAS
This instrument was acknowledged before me, Notary Public, this _____ day
of ______________, 1996, by Barry K. Irani, Senior Vice President of ENSERCH
EXPLORATION, INC., a Texas corporation, on behalf of the corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public
My commission expires:
STATE OF TEXAS
COUNTY OF DALLAS
This instrument was acknowledged before me, Notary Public, this _____ day
of__________ , 1996, by Chris E. Williford, Executive Vice President & Chief
Financial Officer of ABRAXAS PETROLEUM CORPORATION, a Nevada corporation, on
behalf of the corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
_______________________________
Notary Public
My commission expires:
__________________________
<PAGE>
<TABLE>
0135685.01
EXHIBIT "A"
LEASE EXHIBIT
<CAPTION>
LEASE
PROSPECT....... ST.. COUNTY........ NUMBER...... LEASE NAME............ LESSEE................. REC BOOK.. PAGE.....
<S> <C> <C> <C> <C> <C> <C> <C>
CRESTON........ WY CARBON 493107 USA W 38437 GORDON TANNER
CRESTON ....... WY CARBON 493108 USA W 57177 ROBERT J CONNAGHAN 724 335
WAMSUTTER NE .. WY SWEETWATER 493006 USA W 10054 ORVILLE HAER 743 604
WAMSUTTER NE .. WY SWEETWATER 493007 USA W 12480 JOYCE A. EVANS 689 299
WAMSUTTER NE .. WY SWEETWATER 493008 USA W 16350 J L FUSSELMAN 696 237
WAMSUTTER NE .. WY CARBON 493011 USA W 32958 WILLIAM C ARMOR JR 688 889
WAMSUTTER NE .. WY CARBON 493012 USA W 37181 BASIL P ANDRIKPOULOS 766 332
WAMSUTTER NE .. WY SWEETWATER 493013 USA W 37184 CHARLES E STRANGE JR 737 1825
WAMSUTTER NE .. WY CARBON 493014 USA W 38447 ROSE ROUX 688 896
WAMSUTTER NE .. WY SWEETWATER 493015 USA W 54410 CARL M BOMHOLT 742 1290
WAMSUTTER NE .. WY CARBON 493016 ST WY 727052 GRETCHEN S CATRON 766 739
WAMSUTTER NE .. WY SWEETWATER 493017 ST WY 73 13620 VIRGINIA G STOUFFER 689 287
WAMSUTTER NE .. WY SWEETWATER 493018 CHAMPLIN PETROLEUM AMOCO PRODUCTION 657 110
COMPANY COMPANY
WAMSUTTER NE .. WY SWEETWATER 493019 CHAMPLIN PETROLEUM AMOCO PRODUCTION 615 116
COMPANY COMPANY
WAMSUTTER NE .. WY SWEETWATER 493240 USA WYW 115283 NGC ENERGY COMPANY 831 279
WAMSUTTER NE .. WY SWEETWATER 493690 USA WYW 124394 PG&E RESOURCES COMPANY 870 908
WAMSUTTER NE .. WY SWEETWATER 493699 USA WYW 124928 PG&E RESOURCES COMPANY
WAMSUTTER NE .. WY SWEETWATER WY3758 UNION PACIFIC PG&E RESOURCES COMPANY 846 127
RESOURCES CO
</TABLE>
PAGE 1 of 2
<PAGE>
<TABLE>
ROW EXHIBIT
<CAPTION>
LEASE
PROSPECT....... ST.. COUNTY........ NUMBER ..... LEASE NAME............ LESSEE.................. REC BOOK.. PAGE.....
<S> <C> <C> <C> <C> <C> <C> <C>
WAMSUTTER NE .. WY SWEETWATER 493610 UNION PACIFIC LAND PACIFIC TRANSMISSION
WAMSUTTER NE .. WY SWEETWATER 493613 UNION PACIFIC NGC ENERGY COMPANY
RESOURCES CO
WAMSUTTER NE .. WY CARBON 493614 DOM ECHEVERRIA ESTATE PTS
WAMSUTTER NE .. WY CARBON 493615 DOM ECHEVERRIA ESTATE PACIFIC TRANSMISSION
SUPPLY CO
WAMSUTTER NE .. WY SWEETWATER 493616 DOM ECHEVERRIA ESTATE PACIFIC TRANSMISSION
WAMSUTTER NE .. WY SWEETWATER 493617 USA W 80301 NGC ENERGY COMPANY
WAMSUTTER NE .. WY CARBON 493618 DOM ECHEVERRIA TRUST NGC ENERGY COMPANY
WAMSUTTER NE .. WY CARBON 493619 DOM ECHEVERRIA TRUST NGC ENERGY COMPANY
WAMSUTTER NE .. WY CARBON 493620 DOM ECHEVERRIA TRUST PACIFIC TRANSMISSION
SUPPLY
WAMSUTTER NE .. WY SWEETWATER 493621 P&H LIVESTOCK COMPANY PACIFIC TRANSMISSION
SUPPLY
WAMSUTTER NE .. WY SWEETWATER 493622 P H LIVESTOCK COMPANY NGC ENERGY COMPANY
WAMSUTTER NE .. WY SWEETWATER 493623 USA W 93669 NGC ENERGY COMPANY
WAMSUTTER NE .. WY SWEETWATER 493625 USA W 88986 NGC
WAMSUTTER NE .. WY CARBON 493644 USA WYW 117008 PG&E RESOURCES COMPANY
WAMSUTTER NE .. WY SWEETWATER 493646 USA WYW 117001 PG&E RESOURCES COMPANY
WAMSUTTER NE .. WY CARBON 493681 USA WYW 119066 PG&E RESOURCES COMPANY
WAMSUTTER NE .. WY SWEETWATER 7-491-1008 UNION PACIFIC LAND PG&E RESOURCES COMPANY
RESOURCES
WAMSUTTER NE .. WY CARBON 7-491-1019 NORWEST BANK GREELEY PG&E RESOURCES COMPANY
NATL ASSO
WAMSUTTER NE .. WY CARBON 7-491-1020 NORWEST BANK GREELEY PG&E RESOURCES COMPANY
NATL ASSO
WAMSUTTER NE .. WY SWEETWATER 7-491-1023 USA WYW 128278 PG&E RESOURCES COMPANY
WAMSUTTER NE .. WY SWEETWATER 7-491-1024 USA WYW 127932 PG&E RESOURCES COMPANY
WAMSUTTER NE .. WY SWEETWATER 7-491-1026 UNION PACIFIC LAND PG&E RESOURCES COMPANY 838 614
RESOURCES
WAMSUTTER NE .. WY SWEETWATER 7-491-1027 UNION PACIFIC LAND PG&E RESOURCES COMPANY 838 609
RESOURCES CO
WAMSUTTER NE .. WY CARBON 7-491-1028 USA WYW 128279 PG&E RESOURCES COMPANY
WAMSUTTER NE .. WY SWEETWATER 7-491-1036 UNION PACIFIC LAND PG&E RESOURCES COMPANY 846 859
RESOURCES
</TABLE>
PAGE 2 of 2
<PAGE>
<TABLE>
EXHIBIT B
- ------------------------------------------------------------------------------------------------------------------------
B.P.O. A.P.O. ALLOCATED
<CAPTION>
--------------------- -----------------
API WELL WELL NAME COUNTY ST FIELD NAME G.W.I. N.R.I. G.W.I. N.R.I. VALUE
NUMBER ID
- ------------------------------------------------------------------------------------------------------------ ----------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4900721150 4833 ECHO SPRINGS #3X-36A CARBON WY WAMSUTTER NE 1.0000000 .8450000 1.00000000 .8450000 $2,473,574
4903721427 4835 FIVE MILE GULCH #9 SWEETWATER WY WAMSUTTER NE 0.1575000 .1295990 .14062500 .1160157 $13,992
4903720828 4836 MONUMENT LAKE #1 SWEETWATER WY WAMSUTTER NE 0.5000000 .4093750 .50000000 .4093750 $9,240
4900721155 4837 ECHO SPRINGS #23-10 FED CARBON WY WAMSUTTER NE 1.0000000 .8250001 .00000000 .8250000 $257,806
4903722126 4839 SOURDOUGH GULCH #3-5A* SWEETWATER WY WAMSUTTER NE 1.0000000 .8000000 .75000000 .6375000 $0
4900720491 4841 ECHO SPRINGS #3-10 FED CARBON WY WAMSUTTER NE 1.0000000 .8250000 1.00000000 .8250000 $0
4900720492 4842 ECHO SPRINGS #3-14 CARBON WY WAMSUTTER NE 1.0000000 .8250000 1.00000000 .8250000 $6,297,141
4900720461 4843 ECHO SPRINGS #3-18A FED CARBON WY WAMSUTTER NE 1.0000000 .8400000 1.00000000 .8400000 $5,799,338
4900720493 4844 ECHO SPRINGS #3-22A FED CARBON WY WAMSUTTER NE 1.0000000 .8350000 1.00000000 .8350000 $4,447,607
4903721233 4845 SIBERIA RIDGE #3-22 FED SWEETWATER WY WAMSUTTER NE 0.6000000 .4950000 .75000000 .6187500 $193,241
4903721358 4846 SIBERIA RIDGE #3-24A FED* SWEETWATER WY WAMSUTTER NE 0.6743540 .5320905 .67435420 .5320905 $35,966
4900720462 4848 ECHO SPRINGS #3-24 FED CARBON WY WAMSUTTER NE 1.0000000 .8250000 1.00000000 .8250000 $6,795,550
4903721326 4851 ECHO SPRINGS #3-36X SWEETWATER WY WAMSUTTER NE 1.0000000 .8450000 1.00000000 .8450000 $2,254,866
4903722060 4852 ECHO SPRINGS #3-28 FED SWEETWATER WY WAMSUTTER NE 1.0000000 .8450000 1.00000000 .8450000 $850,150
4900721523 4856 ECHO SPRINGS #2-22A FED* CARBON WY WAMSUTTER NE 1.0000000 .8350000 1.00000000 .8350000 $3,745,328
4903722998 4857 ECHO SPRINGS #2-36 STATE* SWEETWATER WY WAMSUTTER NE 1.0000000 .8450000 1.00000000 .8450000 $1,520,294
4900721255 4858 ECHO SPRINGS #2-14 FED* CARBON WY WAMSUTTER NE 1.0000000 .8250000 1.00000000 .8250000 $2,704,304
4900721256 4859 ECHO SPRINGS #2-10 FED* CARBON WY WAMSUTTER NE 1.0000000 .8250000 1.00000000 .8250000 $733,662
4903723067 5090 SIBERIA RIDGE #2-34 FED* SWEETWATER WY WAMSUTTER NE 1.0000000 .8750000 1.00000000 .8750000 $1,559,330
4903722935 5152 ECHO SPRINGS #6-2 FED* SWEETWATER WY WAMSUTTER NE 0.0000000 .0337500 0.07500000 .0633750 $36,182
4903723127 5172 UPRC #3-27* SWEETWATER WY WAMSUTTER NE 1.0000000 .7750000 0.60000000 .4800000 $1,121,942
4903723251 5752 SIBERIA RIDGE 4-34 FED SWEETWATER WY WAMSUTTER NE 1.0000000 .8750000 1.00000000 .8750000 $1,414,029
4903722559 5759 UPRC #2-27 SWEETWATER WY WAMSUTTER NE 1.0000000 .8000000 0.60000000 .4800000 $396,556
4900721352 5812 ECHO SPRINGS #2-24 FED CARBON WY WAMSUTTER NE 1.0000000 .8250000 1.00000000 .8250000 $2,165,159
4900721375 5850 ECHO SPRINGS #2-18A FED CARBON WY
4903723652 8617 SIERRA RIDGE #5-26 FED* SWEETWATER WY WAMSUTTER NE 0.2500000 .1875000 0.25000000 .1875000 $235,483
4900720845 4735 OVERLAND #43-6 FED* CARBON WY CRESTON 0.0000000 .6250000 0.00000000 .6250000 $0
4900720768 4736 CRESTON #1-18 FED* CARBON WY CRESTON 0.0000000 .0318750 0.37500000 .3131250 $13,787
4900720769 4737 CRESTON #1-8 FED* CARBON WY CRESTON 0.0000000 .0318750 0.37500000 .3093750 $15,123
SIBERIA RIDGE,SECTION 14 SWEETWATER WY SIBERIA RIDGE 0.37500000 .3093750 $224,892
SIBERIA RIDGE,SECTION 22,NE/4 SWEETWATER WY SIBERIA RIDGE 0.75000000 .6187500 $146,341
SIBERIA RIDGE,SECTION 22,NW/4 SWEETWATER WY SIBERIA RIDGE 0.75000000 .6187500 $145,996
SIBERIA RIDGE,SECTION 22,SE/4 SWEETWATER WY SIBERIA RIDGE 0.75000000 .6187500 $153,429
SIBERIA RIDGE,SECTION 24,NE/4 SWEETWATER WY SIBERIA RIDGE 0.67435420 .5320905 $120,607
SIBERIA RIDGE,SECTION 24,SE/4 SWEETWATER WY SIBERIA RIDGE 0.67435420 .5320905 $140,010
SIBERIA RIDGE,SECTION 24,NW/4 SWEETWATER WY SIBERIA RIDGE 0.67435420 .5320905 $120,607
SIBERIA RIDGE,SECTION 26,NE/4 SWEETWATER WY SIBERIA RIDGE 0.25000000 .2187500 $55,045
SIBERIA RIDGE,SECTION 26,SE/4 SWEETWATER WY SIBERIA RIDGE 0.25000000 .2187500 $50,799
SIBERIA RIDGE,SECTION 26,SW/4 SWEETWATER WY SIBERIA RIDGE 0.25000000 .2187500 $50,799
ECHO SPRINGS 3-2A CARBON WY ECHO SPRINGS 0.07500000 .0633750 $0
STANDARD DRAW 3-36A CARBON WY STANDARD DRAW 1.00000000 .8450000 $0
===========
TOTAL ALLOCATED VALUE $47,500,000
<FN>
*DALEN Resources Oil & Gas Co. (now Enserch Exploration, Inc.) assigned to Tgas
Investments LL C. its right, title and interest in and to the oil and gas leases
described in Exhibit 'A', insofar, and only insofar, as such leases cover the
right to produce from t he Mesaverde formation the wells identified above b y an
asterisk. Enserch's lack of record title in such leases, insofar only as they
cover the right to produce such wells from the Mesaverde formation, shall not
constitute a Defect under Section 7 of the Purchase and Sale Agreement to which
this Exhibit is attached.
</FN>
</TABLE>
B-1
<PAGE>
EXHIBIT C
ASSIGNMENT AND BILL OF SALE
ENSERCH EXPLORATION, INC. ("Grantor"), for Ten Dollars and other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), hereby GRANTS, BARGAINS, SELLS, CONVEYS, ASSIGNS, TRANSFERS, SETS
OVER, and DELIVERS unto ABRAXAS PETROLEUM CORPORATION whose address is 500 North
Loop 1604 East, Suite 100, San Antonio, Texas 78232, (herein called "Grantee")
the following described properties, rights and interests.
(a) All of Grantor's right, title, and interest in and to the oil,
gas and mineral leases described in Exhibit A hereto (and any
ratifications and amendments to such leases, whether or not such
ratifications and amendments are described in Exhibit A) and all of
Grantor's right, title and interest in and to the fee mineral interests
described in Exhibit A, if any; and
(b) All rights, titles, and interests of Grantor in and to, or
otherwise derived from, all presently existing and valid oil, gas and
mineral unitization, pooling, and communitization agreements,
declarations, and orders (including, without limitation, all units formed
under orders, rules, regulations, or other official acts of any federal,
state, or other authority having jurisdiction, and voluntary unitization
agreements, designations and declarations) relating to the properties
described in subsection (a) to the extent such rights, titles, and
interests are attributable to the properties described in subsection (a);
and
(c) All rights, titles, and interests of Grantor in and to all
presently existing and valid production sales contracts, operating
agreements, and other agreements and contracts that relate to any of the
properties described in subsections (a) and (b) , to the extent such
rights, titles, and interests are attributable to the properties described
in subsections (a) and (b); and
(d) All crude oil, natural gas, casinghead gas, drip gasoline,
natural gasoline, petroleum, natural gas liquids, condensate, products,
liquids and other hydrocarbons and other minerals or materials of every
kind and description, including without limitation, "line fill" and
inventory below the pipeline connection in tanks, insofar as such
hydrocarbons may be produced from or are attributable to the properties
described in subsections (a) and (b) after the effective date hereof; and.
(e) All rights, titles, and interests of Setter in and to all
materials, supplies, machinery, equipment, improvements, and other
personal property and fixtures (including, but not limited to, all wells
listed on Exhibit B hereto, all wells, wellhead equipment, pumping units,
flowlines, tanks, buildings, injection facilities, saltwater disposal
facilities, compression facilities, gathering systems, and other
equipment) located on the properties described in subsections (a) and (b)
and used in connection with the exploration, development, operation, or
maintenance thereof.
The properties and interests specified in subsections (a), (b), (c), (d) and (e)
are herein sometimes collectively called the "Properties."
TO HAVE AND TO HOLD the Properties unto Grantee, its successors and
assigns, forever.
EXCEPT FOR A SPECIAL WARRANTY OF TITLE AS HEREINAFTER DESCRIBED, THIS
ASSIGNMENT AND BILL OF SALE IS MADE WITHOUT WARRANTIES OR REPRESENTATIONS OF ANY
KIND, ALL REPRESENTATIONS AND WARRANTIES BEING EXPRESSLY DISCLAIMED SPECIFICALLY
IN THIS CONNECTION, BUT WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ALL
EQUIPMENT, OTHER PERSONAL PROPERTY, AND FIXTURES SOLD AND CONVEYED TO GRANTEE
ARE SOLD AND CONVEYED ON AN "AS IS" AND "WHERE IS" BASIS, AND GRANTOR EXPRESSLY
DISCLAIMS ANY AND ALL SUCH OTHER REPRESENTATIONS AND WARRANTIES. WITHOUT
LIMITATION OF THE FOREGOING, THE PROPERTIES SHALL BE CONVEYED PURSUANT HERETO
WITHOUT ANY WARRANTY OR REPRESENTATION, WHETHER EXPRESS, IMPLIED, STATUTORY OR
OTHERWISE, RELATING TO THE CONDITION, QUANTITY, QUALITY, FITNESS FOR A
PARTICULAR PURPOSE, CONFORMITY TO THE MODELS OR SAMPLES OF MATERIALS OR
MERCHANTABILITY OF ANY EQUIPMENT OR ITS FITNESS FOR ANY PURPOSE WITHOUT ANY
OTHER EXPRESS, IMPLIED, STATUTORY OR OTHER WARRANTY OR REPRESENTATION
WHATSOEVER. GRANTEE SHALL HAVE INSPECTED, OR WAIVED (AND UPON CLOSING SHALL BE
DEEMED TO HAVE WAIVED) ITS RIGHT TO INSPECT, THE PROPERTIES FOR ALL PURPOSES AND
SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH SURFACE
AND SUBSURFACE, INCLUDING BUT NOT LIMITED TO CONDITIONS SPECIFICALLY RELATED TO
THE PRESENCE, RELEASE OR DISPOSAL OF HAZARDOUS SUBSTANCES, SOLID WASTES,
ASBESTOS OR OTHER MANMADE FIBERS OR NATURALLY OCCURRING RADIOACTIVE MATERIALS
("NORM") IN, ON OR UNDER THE PROPERTIES. GRANTEE IS RELYING SOLELY UPON ITS OWN
INSPECTION OF THE PROPERTIES, AND GRANTEE SHALL, EXCEPT AS PROVIDED OTHERWISE
HEREIN, ACCEPT ALL OF THE SAME IN THEIR "AS IS, WHERE IS" CONDITION. ALSO
WITHOUT LIMITATION OF THE FOREGOING, GRANTOR MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AS TO THE ACCURACY OR
COMPLETENESS OF ANY DATA, REPORTS, RECORDS, PROJECTIONS, INFORMATION OR
MATERIALS NOW, HERETOFORE OR HEREAFTER FURNISHED OR MADE AVAILABLE TO BUYER IN
CONNECTION WITH THIS AGREEMENT INCLUDING, WITHOUT LIMITATION, RELATIVE TO
PRICING ASSUMPTIONS, OR QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY)
ATTRIBUTABLE TO THE PROPERTIES OR THE ABILITY OR POTENTIAL OF THE PROPERTIES TO
PRODUCE HYDROCARBONS OR THE ENVIRONMENTAL CONDITION OF THE PROPERTIES OR ANY
OTHER MATTERS CONTAINED IN THE PROPRIETARY DATA OR ANY OTHER MATERIALS FURNISHED
OR MADE AVAILABLE TO BUYER BY GRANTOR OR BY GRANTOR'S AGENTS OR REPRESENTATIVES.
ANY AND ALL SUCH DATA, RECORDS, REPORTS, PROJECTIONS, INFORMATION AND OTHER
MATERIALS (WRITTEN OR ORAL) FURNISHED BY GRANTOR OR OTHERWISE MADE AVAILABLE OR
DISCLOSED TO GRANTEE SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF OR
AGAINST GRANTOR AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT GRANTEE'S
SOLE RISK TO THE MAXIMUM EXTENT PERMITTED BY LAW.
TO THE EXTENT OF GRANTOR'S INTEREST IN THE PROPERTIES AS SHOWN ON EXHIBIT B,
GRANTOR WARRANTS TITLE BY, THROUGH AND UNDER GRANTOR, BUT NOT OTHERWISE, IT
BEING EXPRESSLY UNDERSTOOD THAT THE TERM "GRANTOR" AS USED IN THIS SPECIAL
WARRANTY PROVISION REFERS TO ENSERCH EXPLORATION, INC. AND NOT TO ITS
PREDECESSORS IN TITLE INCLUDING, BUT NOT LIMITED TO, DALEN CORPORATION, DALEN
RESOURCES OM & GAS CO., PG&E RESOURCES COMPANY, PG&E ENTERPRISES AND THEIR
PREDECESSORS. THIS SPECIAL WARRANTY SHALL NOT COVER OR PERTAIN TO TITLE AS IT
MAY BE AFFECTED BY THAT CERTAIN ASSIGNMENT OF OIL AND GAS LEASES WITH
RESERVATION OF PRODUCTION PAYMENT, DATED EFFECTIVE AUGUST 1, 1995, BETWEEN
GRANTOR AND TGAS INVESTMENTS L.L.C.
This Assignment and Bill of Sale is subject to the terms and provisions of
that certain Purchase and Sale Agreement, dated May 22, 1996, between Grantor
and Grantee.
This Assignment and Bill of Sale may be executed in several counterparts
all of which are identical, except that, to facilitate recordation, in certain
counterparts hereof only that portion of Exhibit A that contains specific
descriptions of properties located in the recording jurisdiction in which the
particular counterpart is to be recorded are included, and other portions of
Exhibit A are included by reference only. All such counterparts together shall
constitute one and the same instrument. Complete copies of this Assignment and
Bill of Sale containing the entire Exhibit A have been retained by Grantor and
Grantee.
<PAGE>
IN WITNESS W]HEREOF this Assignment and Bill of Sale has been executed and
delivered on , effective as to runs of oil and deliveries of gas, and for all
other purposes, as of 7:00 o'clock a.m. local time at the locations of the
Properties, respectively, on April 1, 1996.
ENSERCH EXPLORATION, INC.
By:________________________
Name:______________________
Title:_____________________
ABRAXAS PETROLEUM CORPORATION
By:_________________________
Name:_______________________
Title:______________________
<PAGE>
STATE OF TEXAS ss.
ss.
COUNTY OF DALLAS ss.
On this _____ day of ________, before me, a Notary Public of said state,
duly commissioned and sworn, appeared , known to me to be the person whose name
is subscribed to the within instrument as of ENSERCH EXPLORATION, INC., a Texas
corporation, and acknowledged to me that such corporation executed the same.
Witness my hand and official seal.
_________________________________
Notary Public, State of Texas
My Commission Expires:
______________________
STATE OF TEXAS ss.
ss.
COUNTY OF DALLAS ss.
On this _____ day of_______ , before me, a Notary Public of said state,
duly commissioned and sworn, appeared , known to me to be the person whose name
is subscribed to the within instrument as of ABRAXAS PETROLEUM CORPORATION, a
Texas corporation, and acknowledged to me that such corporation executed the
same.
Witness my hand and official seal.
___________________________________
Notary Public, State of Texas
My Commission Expires:
__________________________
<PAGE>
<PAGE>
EXHIBIT D
Disclosure Schedule
1. Certain litigation: None
2. Certain environmental matters: None
D-1
CREDIT AGREEMENT
ABRAXAS PETROLEUM CORPORATION,
as the Borrower,
the Banks named herein,
and
BANKERS TRUST COMPANY,
as Agent
Dated as of September 30, 1996
<PAGE>
TABLE OF CONTENTS
PRELIMINARY STATEMENT ................................................ 1
ARTICLE I DEFINITIONS, ETC.......................................... 1
Section 1.01. Certain Defined Terms ........................... 1
Section 1.02. Accounting Terms ................................ 1
Section 1.03. Computation of Time Periods ..................... 1
Section 1.04. References, Etc. ................................ 1
ARTICLE II COMMITMENTS AND TERMS OF CREDIT .......................... 2
Section 2.01. Commitments ..................................... 2
Section 2.02. Borrowing Procedures; Conversions ............... 3
Section 2.03. Warrants ........................................ 5
Section 2.04. Borrowing Base .................................. 5
Section 2.05. The Notes ....................................... 6
Section 2.06. Reduction of the Commitments .................... 6
Section 2.07. Mandatory Repayment of Loans .................... 6
Section 2.08. Interest Accrual, Payments ...................... 7
Section 2.09. Optional Prepayments ............................ 9
Section 2.10. Payments, Notice of Certain Repayments and
Computations ............................................. 9
Section 2.11. Fees ............................................ 10
Section 2.12. Setoff, Counterclaims and Taxes ................. 11
Section 2.13. Funding Losses .................................. 13
Section 2.14. Change of Law ................................... 13
Section 2.15. Increased Costs ................................. 14
ARTICLE III CONDITIONS OF CREDIT .................................. 15
Section 3.01. Conditions Precedent to the Initial Borrowing.... 15
Section 3.02. Conditions Precedent to All Loans ............... 18
ARTICLE IV REPRESENTATIONS AND WARRANTIES ......................... 18
Section 4.01. Corporate Existence ............................. 18
Section 4.02. Corporate Authority; Binding Obligations ........ 18
Section 4.03. No Conflict ..................................... 19
Section 4.04. No Consent ...................................... 19
Section 4.05. No Defaults or Violations of Law ................ 19
Section 4.06. Financial Position .............................. 19
Section 4.07. Litigation ...................................... 20
Section 4.08. Use of Proceeds ................................. 20
Section 4.09. Governmental Regulation ......................... 20
Section 4.10. Disclosure ...................................... 20
Section 4.11. ERISA ........................................... 20
Section 4.12. Payment of Taxes ................................ 21
Section 4.13. Title and Liens ................................. 21
Section 4.14. Gas Imbalances................................... 22
Section 4.15. Consummation of Acquisition...................... 22
Section 4.16. Environmental Matters............................ 22
ARTICLE V AFFIRMATIVE COVENANTS...................................... 23
Section 5.01. Reporting Requirements........................... 23
Section 5.02. Taxes; Claims.................................... 26
Section 5.03. Compliance with Laws............................. 26
Section 5.04. Insurance ....................................... 26
Section 5.05. Corporate Existence.............................. 27
Section 5.06. Inspections ..................................... 27
Section 5.07. Maintenance of Properties........................ 27
Section 5.08. Accounting Systems............................... 27
Section 5.09. Use of Loans..................................... 28
Section 5.10. Reserve Reports.................................. 28
Section 5.11. Title............................................ 29
Section 5.12. Additional Collateral............................ 29
Section 5.13. Further Assurances in General.................... 29
Section 5.14. Enforcement of Acquisition Documents............. 30
ARTICLE VI NEGATIVE COVENANTS........................................ 30
Section 6.01. Indebtedness Restriction......................... 30
Section 6.02. Lien Restriction................................. 30
Section 6.03. Derivatives...................................... 32
Section 6.04. Interest Coverage Ratio.......................... 32
Section 6.05. Current Ratio.................................... 32
Section 6.06. Tangible Net Worth............................... 32
Section 6.07. Sales of Assets.................................. 32
Section 6.08. Consolidation and Mergers........................ 32
Section 6.09. Restricted Disbursements......................... 33
Section 6.10. Lines of Business................................ 33
Section 6.11. Transactions with Affiliates..................... 33
ARTICLE VII DEFAULT AND REMEDIES..................................... 33
Section 7.01. Events of Default................................ 33
Section 7.02. Setoff in Event of Default....................... 36
Section 7.03. No Waiver; Remedies.............................. 37
Section 7.04. Hydrocarbon Proceeds............................. 37
ARTICLE VIII THE AGENT............................................... 37
Section 8.01. Authorization and Action......................... 37
Section 8.02. Reliance, Etc.................................... 38
Section 8.03. BTCo and Affiliates.............................. 38
Section 8.04. Bank Credit Decision............................. 39
Section 8.05. Indemnification.................................. 39
Section 8.06. Employees of the Agent........................... 40
Section 8.07. Successor Agent.................................. 40
Section 8.08. Notice of Default................................ 41
Section 8.09. Execution of Loan Documents...................... 41
ARTICLE IX MISCELLANEOUS............................................. 41
Section 9.01. Amendments, Etc.................................. 41
Section 9.02. Participation Agreements and Assignments......... 42
Section 9.03. Notices.......................................... 45
Section 9.04. Costs and Expenses............................... 46
Section 9.05. Successors and Assigns........................... 46
Section 9.06. Independence of Covenants........................ 46
Section 9.07. Survival of Representations and Warranties ...... 46
Section 9.08. Separability..................................... 46
Section 9.09. Captions......................................... 47
Section 9.10. Counterparts..................................... 47
Section 9.11. Governing Law.................................... 47
Section 9.12. Submission to Jurisdiction....................... 47
Section 9.13. Limitation on Interest........................... 48
Section 9.14. Indemnification.................................. 48
Section 9.15. Confidentiality.................................. 49
Section 9.16. Final Agreement of the Parties................... 49
EXHIBITS
Exhibit 2.02(a)-1 Form of Borrowing Request (Revolving Borrowing)
Exhibit 2.02(a)-2 Form of Borrowing Request (Tranche A Borrowing and
Tranche B Borrowing)
Exhibit 2.02(c) Form of Conversion Notice
Exhibit 2.03 Form of Warrant Agreement
Exhibit 2.05(a) Form of Revolving Note
Exhibit 2.05(b) Form of Tranche A Note
Exhibit 2.05(c) Form of Tranche B Note
Exhibit 9.02 Form of Assignment and Acceptance Agreement
SCHEDULES
Schedule 4.01 List of Borrower's Subsidiaries
Schedule 4.04 Consents
Schedule 4.07 Litigation
Schedule 4.13 Titles and Liens
Schedule 4.14 Gas Imbalances
Schedule 6.01 Indebtedness
HOU04:37909.7
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of September 30, 1996 is among
ABRAXAS PETROLEUM CORPORATION, a Nevada corporation (the "Borrower"), the banks
named on the signature pages hereto (together with their respective successors
and assigns in such capacity, the "Banks"), and BANKERS TRUST COMPANY, as agent
for the Banks (together with its successors and assigns in such capacity, the
"Agent"). Unless otherwise defined herein, all capitalized terms used herein and
defined in Article I are used herein as so defined.
PRELIMINARY STATEMENT
The Borrower has requested that the Banks provide the Borrower with
(a) a $30,000,000 revolving credit facility, (b) a $35,000,000 term loan
facility and (c) a $25,000,000 term loan facility, each of which will be used as
specified herein. The Banks have agreed to provide the Borrower with such credit
facilities upon the terms and conditions set forth in this Agreement.
Accordingly, in consideration of the foregoing and the mutual
covenants set forth herein, the parties agree as follows:
ARTICLE I
DEFINITIONS, ETC.
Section 1.01. Certain Defined Terms. Capitalized terms used in this
Agreement and not otherwise defined herein, shall have the respective meanings
set forth in Annex A hereto (such meanings to be equally applicable to both
singular and plural forms of the terms defined).
Section 1.02. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the consolidated financial statements referred to in Section 4.06.
Section 1.03. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding."
Section 1.04. References, Etc. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All references herein to Sections, Annexes, Exhibits and Schedules
<PAGE>
shall, unless the context requires a different construction, be deemed to be
references to the Sections of this Agreement and the Annexes, Exhibits and
Schedules attached hereto and made a part hereof. In this Agreement, unless a
clear contrary intention appears the word "including" (and with correlative
meaning "include") means including, without limiting the generality of any
description preceding such term. No provision of this Agreement shall be
interpreted or construed against any Person solely because that Person or its
legal representative drafted such provision.
ARTICLE II
COMMITMENTS AND TERMS OF CREDIT
Section 2.01. Commitments. (a) Each Bank severally agrees, on the
terms and conditions hereinafter set forth, to make one or more revolving loans
(the "Revolving Loans") to the Borrower from time to time on any Business Day
during the period from the Effective Date up to, but excluding, the Maturity
Date in an aggregate amount outstanding for such Bank not to exceed at any time
an amount equal to such Bank's Revolving Commitment. Each Revolving Loan shall
be made as either a Base Rate Loan or a Eurodollar Rate Loan and as part of a
single Revolving Borrowing made on the same day by the Banks ratably according
to their respective Commitment Percentages. Each Base Rate Revolving Borrowing
shall be in an aggregate amount not less than $2,000,000, or, if less, the
entire unfunded portion of the Total Revolving Commitment. Each Eurodollar Rate
Revolving Borrowing shall be in an aggregate amount not less than $2,000,000 or
an integral multiple of $1,000,000 in excess thereof. Within the limits set
forth above and subject to the terms and conditions of this Agreement, the
Borrower may borrow, repay pursuant to Section 2.07 or prepay pursuant to
Section 2.09 and reborrow under this Section 2.01(a)(i).
Notwithstanding any other term or provision hereof no Revolving Loan
shall be made if after giving effect thereto (A) the aggregate amount of Loans
outstanding would exceed the Borrowing Base or (B) the aggregate amount of
outstanding Revolving Loans would exceed the Total Revolving Commitment.
(b) Each Bank severally agrees, on the terms and conditions
hereinafter set forth, to make term loans to the Borrower (the "Tranche A
Loans") on the Effective Date in an aggregate amount equal to such Bank's
Tranche A Commitment. If the Tranche A Loan made by a Bank on the Effective Date
is less than such Bank's Tranche A Commitment, such Tranche A Commitment shall
automatically be reduced to the amount of such Tranche A Loan, as contemplated
by the definition of Tranche A Commitment. Each Tranche A Loan shall be made as
a Base Rate Loan or a Eurodollar Rate Loan and as part of a single Tranche A
Borrowing made on the Effective Date by the Banks ratably
HOU04:37909.7
<PAGE>
according to their respective Commitment Percentages. Each Eurodollar Rate
Tranche A Borrowing shall be in an aggregate amount not less than $2,000,000 or
an integral multiple of $1,000,000 in excess thereof. Any Tranche A Borrowing in
an aggregate amount less than $2,000,000 shall be a Base Rate Borrowing. Tranche
A Loans, once repaid, may not be reborrowed.
(c) Each Bank severally agrees, on the terms and conditions
hereinafter set forth, to make a term loan to the Borrower (the "Tranche B
Loans") on the Effective Date in an aggregate amount equal to such Bank's
Tranche B Commitment. If the Tranche B Loan made by a Bank on the Effective Date
is less than such Bank's Tranche B Commitment, such Tranche B Commitment shall
automatically be reduced to the amount of such Tranche B Loan, as contemplated
by the definition of Tranche B Commitment. Each Tranche B Loan shall be made and
maintained as a Base Rate Loan and as part of a single Tranche B Borrowing made
on the Effective Date by the Banks ratably according to their respective
Commitment Percentages. Tranche B Loans, once repaid, may not be reborrowed.
(d) Loans of more than one Type may be outstanding at the same time,
but the Borrower shall not be entitled to request any Borrowing or to Convert
Loans comprising any Borrowing into Loans of another Type, if after giving
effect to such Borrowing or Conversion, as the case may be, any Bank would have
outstanding (i) at any one time more than four (4) different Types of Revolving
Loans or more than four (4) different Types of Tranche A Loans or (ii) a Tranche
B Loan other than as a Base Rate Loan. Loans having different Interest Periods,
regardless of whether they commence on the same date or have the same type of
interest rate, shall be considered different Types of Loans; provided, however,
that all Base Rate Loans are the same type of Loan so long as they remain Base
Rate Loans.
Section 2.02. Borrowing Procedures; Conversions. (a) (i) Each
Revolving Borrowing shall be made upon the written, telecopied or facsimile
transmitted request of the Borrower, given to the Agent not later than 11:00
a.m. (New York time) on (A) the third Business Day prior to the proposed
Borrowing Date in the case of a Eurodollar Rate Revolving Borrowing, or (B) the
Business Day immediately preceding the proposed Borrowing Date in the case of a
Base Rate Revolving Borrowing, and the Agent shall give each other member of the
Bank Group prompt notice of such request by telecopier, telex or cable.
(ii) The Tranche A Borrowings to be funded on the Effective Date
shall be made upon the written, telecopied or facsimile transmitted
request of the Borrower, given to the Agent not later than 11:00 a.m. (New
York time) on (A) the third Business Day prior to the Effective Date in
the case of a Eurodollar Rate Tranche A Borrowing or (B) on the Business
Day prior to the Effective Date in the case of a Base Rate Tranche A
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Borrowing, and the Agent shall give each other member of the Bank Group
prompt notice of such request by telecopier, telex or cable. The Tranche B
Borrowing to be funded on the Effective Date shall be made upon the
written, telecopied or facsimile transmitted request of the Borrower,
given to the Agent not later than 11:00 a.m. (New York time) on the
Business Day prior to the Effective Date, and the Agent shall give each
other member of the Bank Group prompt notice of such request by
telecopier, telex or cable.
(iii) Each request for a Borrowing (a "Borrowing Request") made by
the Borrower shall be in substantially the form of Exhibit 2.02(a)-1 in
the case of a Revolving Borrowing, or Exhibit 2.02(a)-2 in the case of the
Tranche A Borrowing and Tranche B Borrowing to be made on the Effective
Date, specifying therein (A) the Borrowing Date for such Borrowing, (B)
the Type of Loans comprising such Borrowing, (C) the aggregate amount of
such Borrowing and (D) in the case of a Eurodollar Rate Borrowing, the
Interest Period for the Loans comprising such Borrowing. Each Bank shall,
before 12:00 Noon (New York time) on the date of such Borrowing, make
available for the account of its Applicable Lending Office to the Agent at
its address referred to in Section 9.03, in same day funds, such Bank's
ratable portion of such Borrowing. After the Agent's receipt of such funds
and upon fulfillment of the applicable conditions set forth in Article
III, the Agent will make such funds available to the Borrower at the
Agent's aforesaid address. Each Borrowing Request shall be irrevocable and
binding on the Borrower.
(b) Unless the Agent shall have received notice from a Bank prior to
the date of any Borrowing that such Bank will not make available to the Agent
such Bank's ratable portion of such Borrowing, the Agent may assume that such
Bank has made such portion available to the Agent on the date of such Borrowing
in accordance with subsection (a) of this Section 2.02 and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so made
such ratable portion available to the Agent, such Bank and the Borrower
severally agree to repay to the Agent forthwith on demand such corresponding
amount, together with interest thereon for each day from the date such amount is
made available to the Borrower until the date such amount is repaid to the Agent
at (i) in the case of the Borrower, the interest rate applicable at the time to
the Loans comprising such Borrowing and (ii) in the case of such Bank, the
Federal Funds Rate. If such Bank shall repay to the Agent such corresponding
amount, such amount so repaid shall constitute such Bank's Loan as part of such
Borrowing for purposes of this Agreement, and Borrower shall be relieved of
Borrower's obligation to repay such amount under this Section 2.02(b). The
failure of any Bank to make the Loan to be made by it as part of any Borrowing
shall not relieve any other Bank of its obligation, if any,
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hereunder to make its Loan on the date of such Borrowing or any subsequent
Borrowing Date, but no Bank shall be responsible for the failure of any other
Bank to make the Loan to be made by such other Bank on the date of any
Borrowing.
(c) The Borrower may, subject to the terms of this Agreement, on any
Business Day, upon written, telecopied or facsimile transmitted notice to the
Agent, given not later than 11:00 a.m. (New York time) on (i) the third Business
Day prior to the proposed Conversion Date in the case of a Conversion of Loans
into Eurodollar Rate Loans, or (ii) the Business Day immediately preceding the
proposed Conversion Date in the case of a Conversion of Loans into Base Rate
Loans, Convert Revolving Loans into Revolving Borrowings comprised of Revolving
Loans of another Type or Convert Tranche A Loans into Tranche A Borrowings
comprised of Tranche A Loans of another Type, and the Agent shall promptly
transmit the contents of such notice to each other member of the Bank Group by
telecopier, telex or cable. Notwithstanding any other term or provision hereof,
after giving effect to any such Conversion, the size of all Borrowings
outstanding hereunder, and the number of different Types of Loans outstanding
hereunder, shall conform to the requirements of Section 2.01. In the event of
any Conversion of Eurodollar Rate Loans on any day other than the last day of
the Interest Period applicable thereto, the Borrower shall be obligated to
reimburse the Banks in respect thereof pursuant to Section 2.13. Each notice of
a Conversion (a "Conversion Notice") given by the Borrower shall be in
substantially the form of Exhibit 2.02(c) hereto, specifying therein (A) the
Conversion Date for such Conversion, (B) the Loans to be Converted, (C) the Type
of Loans to which such Loans are to be Converted and (D) in the case of a
Conversion into Eurodollar Rate Loans, the Interest Period for such Converted
Loans. If the Borrower shall fail to give a timely Conversion Notice conforming
to the requirements of this Agreement with respect to any Eurodollar Rate Loans
prior to the expiration of the Interest Period applicable thereto, such
Eurodollar Rate Loans shall, automatically on the last day of such Interest
Period, be Converted, in the case of Eurodollar Rate Revolving Loans, into Base
Rate Revolving Loans, or, in the case of Eurodollar Rate Tranche A Loans, into
Base Rate Tranche A Loans.
Section 2.03. Warrants. If the Loans and other Obligations have not
been paid in full, and the Commitments terminated, by January 1, 1997, then, no
later than January 15, 1997, the Borrower shall execute and deliver the Warrant
Agreement to a "Warrant Agent" approved by the Agent and issue the Banks
Warrants sufficient to purchase five percent (5%) of the Borrower's issued and
outstanding common stock, on a fully diluted basis, as of January 1, 1997, with
each Bank receiving a number of Warrants equal to its Commitment Percentage of
the total number of Warrants so issued. The Warrants shall be issued pursuant
to, and shall be governed by and subject to the terms of, the Warrant Agreement.
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Concurrently with delivery of the Warrants to the Banks, the
Borrower shall cause to be delivered to the Banks an opinion of counsel, in form
and substance satisfactory to the Banks, covering such matters as the Banks may
request, including that (i) the Borrower is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Nevada,
(ii) the execution, delivery and performance of the Warrant Agreement, and the
issuance of the Warrants, have been duly authorized by all necessary corporate
action, (iii) the Warrants and the Warrant Agreement have been duly executed and
delivered by the Borrower, and constitute the legal, valid and binding
obligations of the Borrower, enforceable against it in accordance with their
respective terms, (iv) the execution, delivery and performance by the Borrower
of the Warrants and the Warrant Agreement will not violate any Requirement of
Law or breach any provision contained in the articles or certificate of
incorporation or bylaws of the Borrower or any material agreement, instrument or
document to which it is now a party or by which it or its properties is bound,
and (v) the shares of common stock to be issued upon exercise of the Warrants
are validly authorized and, when the Warrants are exercised, such shares will be
validly issued, fully paid and nonassessable.
Section 2.04. Borrowing Base. (a) The Borrowing Base in effect from
time to time shall represent the maximum amount (subject to the Total
Commitment) of Loans that the Banks will make to the Borrower. During the period
from and after the Effective Date until the Borrowing Base is redetermined in
accordance with this Section, the amount of the Borrowing Base shall be
$85,000,000. The Borrowing Base shall be determined in accordance with Section
2.04(b) by the Agent and approved by all of the Banks or the Majority Banks, as
applicable. The Borrowing Base is subject to redetermination in accordance with
Section 2.04(d). Upon any redetermination of the Borrowing Base, such
redetermination shall remain in effect until the next successive date that the
redetermined Borrowing Base becomes effective subject to the notice requirements
specified in Section 2.04(e) for both the scheduled redetermination and
unscheduled redeterminations. So long as any part of the Commitments are in
effect and until all of the Loans outstanding hereunder are paid in full, this
Agreement shall be governed by the then effective Borrowing Base.
(b) The Agent will after receipt of the most recent Reserve Report
delivered to the Banks under Section 5.10, and such other data and supplemental
information as may from time to time be reasonably requested by the Agent, but
in no event later than May 1, 1997, redetermine the Borrowing Base based on such
Reserve Report. The Agent and each Bank will redetermine the Borrowing Base in
accordance with their respective normal and customary oil and gas lending
criteria as such exist at that particular time. The Agent and each Bank, in
their sole discretion, may make reasonable adjustments to the rates, volumes and
prices and other assumptions set forth in the Reserve Reports and such other
data and supplemental information. Each
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redetermination of the Borrowing Base which would increase the Borrowing Base
must be approved by all the Banks, and each other redetermination of the
Borrowing Base must be approved by the Majority Banks. Failure of a Bank to
object to a redetermination within 14 days after notice of such redetermination
is given to such Bank by the Agent shall be deemed an approval of such
redetermination by such Bank.
(c) The Agent may exclude any Oil and Gas Property or portion of
production therefrom from the Borrowing Base, at any time, because the status of
title to such Oil or Gas Property is not reasonably satisfactory to Agent or
because such Oil and Gas Property is not subject to a first priority lien in
favor of the Agent as security for the Obligations.
(d) So long as any of the Commitments are in effect and until
payment in full of all Loans hereunder, effective on May 1, 1997 ("Scheduled
Redetermination Date"), the Agent with the approval of all of the Banks or the
Majority Banks, as applicable, shall redetermine the amount of the Borrowing
Base in accordance with Section 2.04(b). In addition, the Agent, the Majority
Banks and the Borrower may initiate a redetermination of the Borrowing Base at
any other time after the Scheduled Redetermination Date as they so elect;
provided that the Agent, the Majority Banks and the Borrower may each initiate
only one such unscheduled redetermination during any consecutive twelve (12)
month period (an "Unscheduled Redetermination Date"). Any redetermination of the
Borrowing Base or an Unscheduled Redetermination Date shall be in accordance
with Section 2.04(b).
(e) The Agent shall promptly notify in writing the Borrower and the
Banks of the new Borrowing Base. Such redetermination of the Borrowing Base
shall not be in effect until notice is given to the Borrower.
Section 2.05. The Notes. (a) The Revolving Loans made by each Bank
shall be evidenced by a single Revolving Note issued to such Bank by the
Borrower, (i) dated the date of this Agreement (or such other date as may be
specified in Section 9.02), (ii) payable to the order of such Bank in a
principal amount equal to such Bank's Revolving Commitment and (iii) otherwise
duly completed. Each Revolving Loan made by a Bank to the Borrower and all
payments made on account of the principal amount thereof shall be entered by
such Bank in its records or on the schedule (or a continuation thereof) attached
to the Revolving Note of such Bank, provided, that prior to any transfer of any
such Revolving Note, such Bank shall endorse the amount and maturity of any
outstanding Revolving Loans on the schedule (or a continuation thereof) attached
to such Revolving Note.
(b) The Tranche A Loans made by each Bank shall be evidenced by a
single Tranche A Note issued to such Bank by the Borrower, (i) dated the date of
this Agreement (or such other date as may be specified in
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Section 9.02), (ii) payable to the order of such Bank in a principal amount
equal to such Bank's Tranche A Commitment and (iii) otherwise duly completed.
(c) The Tranche B Loans made by each Bank shall be evidenced by a
single Tranche B Note issued to such Bank by the Borrower, (i) dated the date of
this Agreement (or such other date as may be specified in Section 9.02), (ii)
payable to the order of such Bank in a principal amount equal to such Bank's
Tranche B Commitment and (iii) otherwise duly completed.
Section 2.06. Reduction of the Commitments. (a) The Borrower shall
have the right, upon at least three Business Days' notice to the Agent to
terminate in whole or reduce ratably in part the unused portions of the
respective Revolving Commitments of the Banks; provided, that (i) the respective
Revolving Commitments of the Banks may not be so partially reduced until such
time as the Tranche A Loans and the Tranche B Loans have been paid in full and
(ii) each partial reduction in the Total Revolving Commitment shall be in the
aggregate amount of $1,000,000 or an integral multiple of $1,000,000 in excess
thereof.
(b) Upon any prepayment of the Revolving Loans pursuant to Section
2.07(c) or Section 2.07(e), the Revolving Commitment of each Bank shall
automatically be reduced by its ratable share of such prepayment. On the
Maturity Date the Revolving Commitment of each Bank shall automatically be
reduced to zero.
Section 2.07. Mandatory Repayment of Loans. (a) The Borrower shall
from time to time repay the Revolving Loans comprising part of the same
Borrowing in such amounts as shall be necessary so that at all times the
Revolving Loans outstanding shall not be in excess of the Total Revolving
Commitment.
(b) The Borrower shall from time to time repay the Loans comprising
part of the same Borrowing in whole or ratably in part in an amount equal to the
excess of (i) the Loans outstanding as of any redetermination of the Borrowing
Base pursuant to Section 2.04 over (ii) the Borrowing Base as of such date. Any
repayment required by this Section 2.07(b) shall be due and payable in three
equal monthly installments, each in an amount equal to one third (1/3rd) of the
original amount of such excess, commencing on the last day of the calendar month
immediately following such redetermination of the Borrowing Base and continuing
on the same day of each subsequent calendar month, and applied (x) first, to
repay the Tranche A Loans, (y) second, to repay the Tranche B Loans, and (z) the
remainder, to repay the Revolving Loans.
(c) Immediately upon receipt of any Net Proceeds, the Borrower shall
repay the Loans comprising part of the same Borrowing in whole or ratably
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<PAGE>
in part in an amount equal to such Net Proceeds. Any repayment required by this
Section 2.07(c) shall be applied (i) first, to repay the Tranche A Loans, (ii)
second, to repay the Tranche B Loans, and (iii) the remainder, to repay the
Revolving Loans.
(d) All outstanding Loans shall be fully due and payable on the
Maturity Date, together with any unpaid interest accrued thereon.
(e) All outstanding Loans shall be fully due and payable upon the
occurrence of a Change of Control, together with any unpaid interest accrued
thereon.
(f) Each repayment of Loans required by this Section 2.07 shall be
accompanied by payment of accrued interest to the date of such payment on the
principal amount paid. In the event of any payment of a Eurodollar Rate Loan,
the Borrower shall be obligated to reimburse the Banks in respect thereof
pursuant to Section 2.13. All principal payments required by this Section 2.07
shall (i) in the case of Tranche A Loans, first be applied to Base Rate Tranche
A Borrowings, and second to Eurodollar Rate Tranche A Borrowings, and (ii) in
the case of Revolving Loans, first be applied to Base Rate Revolving Borrowings,
and second to Eurodollar Rate Revolving Borrowings.
Section 2.08. Interest Accrual, Payments. (a) Accrual and
Payment. Subject to the provisions of Section 9.13, the Borrower shall pay
interest on the unpaid principal amount of each Loan made by each Bank from the
date of such Loan until such principal amount shall be paid in full, on the
dates and at the rates per annum specified as follows:
(i) Base Rate Loans. If such Loan is a Base Rate Loan, a rate per
annum equal at all times to the lesser of (A) the Highest Lawful Rate and
(B) the Base Rate in effect from time to time plus the Applicable Margin
in effect from time to time, and unpaid accrued interest on such Loans
shall be due and payable on each Quarterly Payment Date and on the date
such Base Rate Loan shall be paid in full; provided, however, that if the
Borrower has not been notified by the Agent of the amount of such accrued
interest at least one Business Day prior to such date, such accrued
interest shall be due and payable one Business Day after the Borrower is
notified of such amount.
(ii) Eurodollar Rate Loans. If such Loan is a Eurodollar Rate Loan,
a rate per annum equal at all times during the Interest Period for such
Loan to the lesser of (A) the Highest Lawful Rate and (B) the sum of the
Eurodollar Rate for such Interest Period plus the Applicable Margin in
effect as of the first day of such Interest Period, and unpaid accrued
interest on such Loans shall be due and payable on the last day of such
Interest Period; provided, however, that if the Borrower has not been
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<PAGE>
notified by the Agent of the amount of such accrued interest at least one
Business Day prior to such date, such accrued interest shall be due and
payable one Business Day after the Borrower is notified of such amount.
Any amount of principal or, to the extent permitted by applicable law, interest
which is not paid when due (whether at stated maturity, by acceleration or
otherwise) shall bear interest from the date on which such amount is due until
such amount is paid in full, at a rate per annum equal at all times to the
lesser of (A) the Highest Lawful Rate and (B) the Base Rate in effect from time
to time during the applicable period plus the Applicable Margin in effect from
time to time during such period plus two percent (2%) (the "Default Rate"),
payable on demand.
(b) Determination of Interest Rates. (i) The Agent shall give prompt
notice to the Borrower and each other member of the Bank Group of the applicable
interest rate determined by the Agent hereunder for each Borrowing. Each
determination by the Agent of an interest rate hereunder shall be conclusive and
binding for all purposes, absent manifest error.
(ii) If the Majority Banks shall, at least one Business Day before
the date of any requested Eurodollar Rate Borrowing, notify the Agent that the
Eurodollar Rate applicable to such Borrowing will not adequately reflect the
cost to such Banks of making, funding or maintaining their respective Eurodollar
Rate Loans for such Borrowing, the right of the Borrower to select Eurodollar
Rate Loans for such Borrowing or any subsequent Borrowing shall be suspended
until the Agent shall notify the Borrower and each other member of the Bank
Group that the circumstances causing such suspension no longer exist, and each
Loan comprising such Borrowing shall be made as, or Converted into, as
applicable, a Base Rate Loan.
(c) Applicable Margin. As used in this Agreement and the other Loan
Documents, "Applicable Margin" means, as to Loans consisting of a single
Borrowing, a rate per annum determined by reference to the Type of Loans
comprising such Borrowing as follows:
(i) in the case of Revolving Loans, such rate per annum shall be one
percent (1%) for Base Rate Revolving Loans, and two and one-quarter
percent (2.25%) for Eurodollar Rate Revolving Loans;
(ii) in the case of Tranche A Loans, such rate per annum
shall be one percent (1%) for Base Rate Tranche A Loans, and two and
one-quarter (2.25%) for Eurodollar Rate Tranche A Loans; and
(iii) in the case of Tranche B Loans, (A) from the date hereof
through December 31, 1996, three percent (3%) , (B) from January 1,
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<PAGE>
1997 through March 31, 1997, three and one-half percent (3.50%), (C) from
April 1, 1997 through June 30, 1997, four percent (4%), (D) from July 1,
1997 through September 30, 1997, four and one-half percent (4.50%), and
(E) thereafter, five percent (5%).
Section 2.09. Optional Prepayments. (a) The Borrower may, from time
to time on any Business Day, upon notice to the Agent stating the proposed date
and aggregate principal amount thereof, and if such notice is given the Borrower
shall, prepay the outstanding principal amount of the Base Rate Loans (without
premium or penalty) comprising part of the same Borrowing in whole or ratably in
part; provided, that any partial prepayment of such Base Rate Loans shall be in
an aggregate principal amount of not less than $500,000. The Borrower may from
time to time upon at least three Business Days' notice to the Agent stating the
proposed date and the aggregate principal amount thereof, and if such notice is
given the Borrower shall, prepay the outstanding principal amount of the
Eurodollar Rate Loans comprising part of the same Borrowing in whole or ratably
in part; provided, that any partial prepayment of such Eurodollar Rate Loans
shall be in an aggregate principal amount of not less than $500,000 or an
integral multiple of $100,000 in excess thereof.
(b) Each prepayment of Loans made pursuant to this Section 2.09
shall be accompanied by a payment of accrued interest to the date of such
prepayment on the principal amount prepaid. In the event of any prepayment of a
Eurodollar Rate Loan, the Borrower shall be obligated to reimburse the Banks in
respect thereof pursuant to Section 2.13.
Section 2.10. Payments, Notice of Certain Repayments and Computations. (a)
All payments of principal, interest, commitment fees and other amounts
hereunder, under the Notes and the other Loan Documents shall be made in Dollars
to the Agent at its address specified in Section 9.03 for the account of each of
the Banks, in immediately available funds not later than 11:00 a.m. (New York
time) on the date when due. Upon receipt of such payments, the Agent will
promptly cause to be distributed like funds relating to the payment of principal
or interest or commitment fees ratably (other than amounts payable pursuant to
Section 2.12, Section 2.13, Section 2.14 or Section 2.15) to the Banks, for the
account of their respective Applicable Lending Offices, and like funds relating
to the payment of any other amount payable to any Bank, to such Bank for the
account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement.
(b) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Banks under the Loan
Documents that the Borrower will not make such payment in full, the Agent may
assume that the Borrower has made such payment in full to the Agent on
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<PAGE>
such date and the Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to the amount then due
such Bank. If and to the extent the Borrower shall not have made such payment in
full to the Agent each Bank shall repay to the Agent forthwith on demand such
amount distributed to such Bank, together with interest thereon for each day
from the date such amount is distributed to such Bank until the date such Bank
repays such amount to the Agent at the Federal Funds Rate.
(c) All payments by the Borrower of the fees payable to the Agent shall be
made in Dollars directly to such Person at its address specified in Section 9.03
in immediately available funds not later than 11:00 a.m. (New York time) on the
date when due.
(d) All computations of interest based on the Base Rate shall be made on
the basis of a year of 365 or 366 days, as the case may be, and all computations
of interest based on the Eurodollar Rate or the Federal Funds Rate, as well as
commitment fees, shall be made on the basis of a year of 360 days (unless use of
a 360 day year would cause the interest contracted for, charged or received
hereunder to exceed the Highest Lawful Rate, in which case such computations
shall be made on the basis of a year of 365 or 366 days, as the case may be), in
each case for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest or commitment fees
are payable.
(e) Whenever any payment under the Loan Documents shall be stated to be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or commitment fee, as the
case may be; provided, if such extension would cause payment of interest on or
principal of Eurodollar Rate Loans to be made in the next following calendar
month, such payment shall be made on the immediately preceding Business Day.
(f) If any Bank shall obtain any payment (whether voluntary, involuntary,
through the exercise of any right of setoff, or otherwise) on account of the
Loans made by it (other than pursuant to Section 2.08(b), Section 2.12, Section
2.13, Section 2.14 or Section 2.15), in excess of its ratable share of payments
on account of the Loans obtained by all the Banks, such Bank shall forthwith
purchase from the other Banks such participations in the Loans made by such
other Banks as shall be necessary to cause such purchasing Bank to share the
excess payment ratably with each of them. The Borrower agrees that any Bank so
purchasing a participation from another Bank pursuant to this Section 2.10(f)
may, to the fullest extent permitted by law and this Agreement, exercise all its
rights of payment (including the right of setoff) with respect to
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such participation as fully as if such Bank were the direct creditor of the
Borrower in the amount of such participation.
Section 2.11. Fees. Subject to the provisions of Section 9.13, the Borrower
agrees to pay to each Bank a commitment fee equal to one-half of one percent
(.50%) per annum on the average unused portion of the Revolving Commitment of
such Bank in effect from time to time for the period from the Execution Date to,
but excluding, the Maturity Date (or if earlier, the termination in full of the
Revolving Commitment). Accrued commitment fees shall be due and payable in
arrears on each Quarterly Payment Date in each year, on the date of any
reduction or termination of the Revolving Commitment of such Bank and on the
Maturity Date (or if earlier, the termination in full of the Revolving
Commitment); provided that if the Borrower has not been notified by Agent of the
amount of such fee at least one (1) Business Day prior to any such date, such
fee shall be due and payable one (1) Business Day after the Borrower is notified
by Agent of such amount, and shall be computed for the period commencing with
the day to which such fee was last paid (or, in the case of the first commitment
fee payment date, for the period commencing with and including the Execution
Date) to the date such fee is due and payable.
Section 2.12. Setoff, Counterclaims and Taxes. (a) All payments of
principal, interest, expenses, reimbursements, compensation, fees and any other
amount from time to time due under the Notes, this Agreement or any other Loan
Document shall be made by the Borrower without setoff or counterclaim and shall
be made free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each member of the
Bank Group, taxes imposed on its income, and franchise taxes imposed on it, by
the jurisdiction under the laws of which such member of the Bank Group is
organized or any political subdivision thereof and, in the case of each Bank,
taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction of such Bank's Applicable Lending Office or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If the Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under any Loan Document to any member of the
Bank Group, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.12) such member of the Bank Group
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.
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(b) In addition, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under the Notes or the
other Loan Documents or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement, the Notes or the other Loan Documents
(hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each member of the Bank Group for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.12) paid, by such member of the Bank Group (whether paid on its own behalf or
on behalf of any other member of the Bank Group) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
This indemnification shall be made within 10 days from the date such member of
the Bank Group makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
will furnish to the Agent, at its address referred to in Section 9.03, the
original or a certified copy of a receipt evidencing payment thereof. If no
Taxes are payable in respect of any payment hereunder or under the Notes or the
other Loan Documents, upon the reasonable request of the Agent, the Borrower
will furnish to the Agent at its address referred to in Section 9.03, a
certificate from each appropriate taxing authority, or an opinion of counsel
acceptable to the Agent stating that such payment is exempt from or not subject
to Taxes.
(e) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.12 shall survive the payment in full of the Credit Outstanding
and all other amounts owing under the other Loan Documents. The provisions of
this Section 2.12 are in all respects subject to Section 9.13 hereof.
(f) Each Bank represents and warrants to the Agent and the Borrower that
such Bank is either (i) a corporation organized under the laws of the United
States or a state thereof or (ii) entitled to complete exemption from United
States withholding tax imposed on or with respect to any payments, including
fees, to be made to it pursuant to this Agreement and the other Loan Documents
(x) under an applicable provision of a tax convention to which the United States
is a party or (y) because it is acting through a branch, agency or office in the
United States and any payment to be received by it hereunder is effectively
connected with a trade or business in the United States. Upon becoming a party
to this Agreement (whether by assignment or as an original signatory hereto),
and in any event, from time to time upon the request of the Agent or the
Borrower, each Bank which is not a corporation organized under the laws of the
United States or any state thereof shall deliver to the Agent and the Borrower
such forms, certificates or other instruments as may be required by
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the Agent in order to establish that such Bank is entitled to complete
exemption from United States withholding taxes imposed on or with respect to any
payments, including fees, to be made to such Bank under this Agreement and the
other Loan Documents. Each Bank also agrees to deliver to the Borrower and the
Agent and such other supplemental forms as may at any time be required as a
result of the passage of time or changes in applicable law or regulation in
order to confirm or maintain in effect its entitlement to exemption from U.S.
withholding tax on any payments hereunder; provided, that the circumstances of
the Bank at the relevant time and applicable laws permit it to do so. If a Bank
determines, as a result of any change in either (1) applicable law, regulation
or treaty, or in any official application thereof or (2) its circumstances, that
it is unable to submit any form or certificate that it is obligated to submit
pursuant to this Section 2.12(f), or that it is required to withdraw or cancel
any such form or certificate previously submitted, it shall promptly notify the
Borrower and the Agent of such fact. If a Bank is organized under the laws of a
jurisdiction outside the United States, and the Borrower and the Agent have not
received forms, certificates or other instruments indicating to their
satisfaction that all payments to be made to such Bank hereunder are not subject
to United States withholding tax or the Agent otherwise has reason to believe
that such Bank is subject to U.S. withholding tax, the Borrower shall withhold
taxes from such payments at the applicable statutory rate. Each Bank shall
indemnify and hold the Borrower and the Agent harmless from any United States
taxes, penalties, interest and other expenses, costs and losses incurred or
payable by them as a result of either (A) such Bank's failure to submit any form
or certificate that it is required to provide pursuant to this Section 2.12(f)
or (B) reliance by the Borrower or the Agent on any such form or certificate
which such Bank has provided to them pursuant to this Section 2.12(f).
Section 2.13. Funding Losses. The Borrower shall indemnify each Bank
against any loss or reasonable expense (including, but not limited to, any loss
or reasonable expense sustained or incurred or to be sustained or incurred in
liquidating or reemploying deposits from third parties acquired to effect or
maintain such Loan or any part thereof as a Eurodollar Rate Loan) which such
Bank may sustain or incur as a consequence of (a)any failure by the Borrower to
fulfill on the date of any Borrowing hereunder the applicable conditions set
forth in Article III, (b) any failure by the Borrower to borrow hereunder, or to
Convert Loans hereunder after a Borrowing Request or Conversion Notice,
respectively, has been given, (c) any payment, prepayment or Conversion of a
Eurodollar Rate Loan required or permitted by any other provisions of this
Agreement, including, without limitation, payments made due to the acceleration
of the maturity of the Notes pursuant to Section 7.01, or otherwise made on a
date other than the last day of the applicable Interest Period, (d) any default
in the payment or prepayment of the principal amount of any Loan or any part
thereof or interest accrued thereon, as and when due and payable (at the due
date thereof, by notice of prepayment or otherwise) or (e) the occurrence of an
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Event of Default. Such loss or reasonable expense shall include, without
limitation, an amount equal to the excess, if any, as determined by each Bank of
(i) its cost of obtaining the funds for the Loan being paid, prepaid or
Converted or not borrowed or Converted (based on the Eurodollar Rate applicable
thereto) for the period from the date of such payment, prepayment or Conversion
or failure to borrow or Convert to the last day of the Interest Period for such
Loan (or, in the case of a failure to borrow or Convert, the Interest Period for
the Loan which would have commenced on the date of such failure to borrow or
Convert) over (ii) the amount of interest (as estimated by such Bank) that would
be realized by such Bank in reemploying the funds so paid, prepaid or Converted
or not borrowed or Converted for such period or Interest Period, as the case may
be. A certificate of each Bank setting forth any amount or amounts which such
Bank is entitled to receive pursuant to this Section 2.13 shall be delivered to
the Borrower (with a copy to the Agent) and shall be conclusive, if made in good
faith, absent manifest error. The Borrower shall pay to the Agent for the
account of each Bank the amount shown as due on any certificate within 10 days
after its receipt of the same. Notwithstanding the foregoing, in no event shall
any Bank be permitted to receive any compensation hereunder constituting
interest in excess of the Highest Lawful Rate. Without prejudice to the survival
of any other obligations of the Borrower hereunder, the obligations of the
Borrower under this Section 2.13 shall survive the termination of this Agreement
and/or the payment or assignment of any of the Notes.
Section 2.14. Change of Law. (a) If at any time any Bank determines in good
faith (which determination shall be conclusive) that any change in any
applicable law, rule or regulation or in the interpretation, application or
administration thereof makes it unlawful, or any central bank or other
Governmental Authority asserts that it is unlawful, for such Bank or its foreign
branch or branches to fund or maintain any Eurodollar Rate Loan (any of the
foregoing determinations being a "Eurodollar Event"), then, such Bank, at its
option, may: (i) declare that Eurodollar Rate Loans will no longer be made or
maintained by such Bank, whereupon the right of the Borrower to select
Eurodollar Rate Loans for any Borrowing shall be suspended until such Bank shall
notify the Agent that the circumstances causing such Eurodollar Event no longer
exist; (ii) with respect to any Eurodollar Rate Loans of such Bank then
outstanding, require that all such Eurodollar Rate Loans be Converted to Base
Rate Loans, in which event all such Eurodollar Rate Loans shall automatically be
Converted into Base Rate Loans on the effective date of such notice and all
payments or prepayments of principal that would have otherwise been applied to
repay such Converted Eurodollar Rate Loans shall instead be applied to repay the
Base Rate Loans resulting from such Conversion; and/or (iii) with respect to any
Eurodollar Rate Loans requested of such Bank but not yet made as or Converted
into such, require that such Eurodollar Rate Loans be made as or Converted into,
as applicable, Base Rate Loans.
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(b) Upon the occurrence of any Eurodollar Event, and at any time thereafter
so long as such Eurodollar Event shall continue, such Bank may exercise its
aforesaid option by giving written notice thereof to the Agent and the Borrower,
such notice to be effective upon receipt thereof by the Borrower. Any Conversion
of any Eurodollar Rate Loan which is required under this Section 2.14 shall be
made, together with accrued and unpaid interest and all other amounts payable to
such Bank under this Agreement with respect to such Converted Loan (including,
without limitation, amounts payable pursuant to Section 2.13 hereof), on the
date stated in the notice to the Borrower referred to above.
Section 2.15. Increased Costs. (a) If, due to either (i) the introduction
of or any change in or in the interpretation of any law or regulation or (ii)
the compliance with any guideline issued or request made by any central bank or
other Governmental Authority (whether or not having the force of law) after the
date hereof, there shall be any increase in the cost to any Bank of agreeing to
make or making, funding or maintaining Eurodollar Rate Loans, then the Borrower
shall from time to time, subject to the provisions of Section 9.13, pay to the
Agent for the account of such Bank additional amounts sufficient to compensate
such Bank for such increased cost upon demand by such Bank.
(b) If any Bank shall have determined in good faith that any law, rule,
regulation or guideline adopted after the date hereof pursuant to or arising out
of the July 1988 report of the Basle Committee on Banking Regulations and
Supervisory Practices entitled "International Convergence of Capital Measurement
and Capital Standards" or that the adoption after the date hereof of any
applicable law, rule, regulation or guideline regarding capital adequacy, or any
change after the date hereof in any of the foregoing or in the interpretation or
administration thereof by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or compliance by such
Bank (or any lending office of such Bank) with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
Governmental Authority or comparable agency, affects or would affect the amount
of capital required or expected to be maintained by such Bank or any corporation
controlling such Bank, then the Borrower shall from time to time, subject to the
provisions of Section 9.13, pay to such Bank upon demand additional amounts
sufficient to compensate such Bank or such corporation in the light of such
circumstances, to the extent that such Bank reasonably determines such increase
in capital to be allocable to the existence of such Bank's Commitment hereunder.
(c) Each Bank will notify the Borrower of any event occurring after the
date of this Agreement which will entitle such Bank to compensation pursuant to
this Section 2.15 as promptly as practicable after such Bank obtains knowledge
of the occurrence of such event. A certificate of such Bank setting
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forth in reasonable detail (i) such amount or amounts as shall be necessary
to compensate such Bank (or participating banks or other entities pursuant to
Section 9.02) as specified above and (ii) the calculation of such amount or
amounts shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay to such Bank the amount shown as due on
any such certificate within ten (10) days after its receipt of the same. The
failure of any Bank to demand compensation for any increased costs or reduction
in amounts received or receivable or reduction in return on capital shall not
constitute a waiver of the right of such Bank or any other Bank to demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital as such rights are set forth
herein. The protection of this Section 2.15 shall be available to the Banks
regardless of any possible contention of invalidity or inapplicability of law,
regulation or condition which shall have been imposed.
ARTICLE III
CONDITIONS OF CREDIT
Section 3.01. Conditions Precedent to the Initial Borrowing. The obligation
of each Bank to make its initial Loan on the occasion of the initial Borrowing
hereunder is subject to the conditions precedent that the Agent shall have
received on or before the date of such initial Borrowing all of the following,
each in form and substance reasonably satisfactory to the Bank Group and in such
number of counterparts as may be reasonably requested by the Agent:
(a) The following Loan Documents duly executed by the
Persons indicated below:
(i) this Agreement executed by the Borrower and each member
of the Bank Group,
(ii) the Notes executed by the Borrower,
(iii) the Mortgage executed by the Borrower, and
(iv) the Security Agreement executed by the Borrower.
(b) Evidence that the Liens created by the Security Documents have
been duly perfected and constitute valid first priority Liens, which shall
include, without limiting the generality of the foregoing:
(i) the filing of such financing statements under the Uniform
Commercial Code in such jurisdictions as the Agent may require, and
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(ii) the filing of the Mortgage in such jurisdictions as the Agent
may require.
(c) A certificate of the secretary or an assistant secretary of the
Borrower certifying, inter alia, (i) true and correct copies of resolutions
adopted by the Board of Directors of the Borrower (A) authorizing the execution,
delivery and performance by the Borrower of the Loan Documents to which it is or
will be a party and the Borrowings to be made thereunder and the consummation of
the transactions contemplated thereby, (B) authorizing officers of the Borrower
to negotiate the Loan Documents to which it is a party and which will be
delivered at or prior to the date of the initial Borrowing and (C) authorizing
officers of the Borrower to execute and deliver the Loan Documents to which it
is or will be a party and any related documents, including, without limitation,
any agreement or security document contemplated by this Agreement, (ii) true and
correct copies of the articles of incorporation and bylaws (or other similar
charter documents) of the Borrower and (iii) the incumbency and specimen
signatures of the officers of the Borrower executing any documents on behalf of
it.
(d) Certificates of appropriate public officials as to the existence and
good standing of the Borrower in the States of Texas, Nevada and Wyoming.
(e) An engineering report covering the Acquisition Properties and the other
Oil and Gas Properties of the Borrower prepared by DeGolyer and MacNaughton
dated as of June 30, 1996 (the "Initial Reserve Report").
(f) Copies of all environmental reports in the Borrower's possession
covering its existing Oil and Gas Properties and an environmental report
prepared by Borrower with respect to the Acquisition Properties, in form, scope
and substance satisfactory to the Agent.
(g) A true and correct copy of the Acquisition Documents and evidence
satisfactory to the Agent that the Acquisition has been consummated in
accordance with the terms thereof and all Requirements of Law.
(h) Fully executed and acknowledged releases of all Liens existing as
security for the First Union Debt, in form, scope and substance satisfactory to
the Agent.
(i) Title opinions covering at least 80% of the value of the Borrower's Oil
and Gas Properties included in the Initial Reserve Report in form, scope and
substance satisfactory to the Agent.
(j) Copies of all authorizations, consents, approvals, licenses, filings or
registrations obtained from or made with any Governmental Authority or
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any other Person in connection with the Acquisition or the execution, delivery
and performance of the Loan Documents, together with a certificate from a
Responsible Officer of the Borrower to the effect that all such authorizations,
consents, approvals, licenses, filings or registrations have been obtained or
made, as applicable, and are in full force and effect.
(k) A list of all insurance policies and programs in effect with respect to
the properties and businesses of the Borrower and its Subsidiaries, specifying
for each such policy or program the amount thereof, the risks insured against
thereby, the name of the insurer and each insured party thereunder and the
policy or other identification number thereof, together with a certificate from
a Responsible Officer of the Borrower to the effect that all such policies and
programs are in full force and effect.
(l) A satisfactory review of Borrower, including a review of its marketing,
transportation and hedging arrangements for Hydrocarbons.
(m) A certificate signed by a Responsible Officer of the Borrower
certifying as to the satisfaction of the conditions specified in Section
3.02(a).
(n) The favorable, signed opinions of Cox & Smith Incorporated, special
counsel to the Borrower and its Subsidiaries and Brown & Drew, special Wyoming
counsel to the Agent and the Bank Group, each addressed to the Agent and the
Bank Group, in form and substance reasonably satisfactory to the Agent and its
counsel.
(o) A written confirmation from the Process Agent of its appointment and
acceptance as process agent for the Borrower as provided for in Section 9.12.
(p) The payment to the Bank Group of the fees due to them as of such date
under the Loan Documents, and the payment of all legal fees and expenses of
counsel to the Agent, including those of Andrews & Kurth L.L.P. and Cahill
Gordon & Reindel.
(q) Such other documents, certificates and opinions as the Agent may
reasonably request relating to this Agreement and the other Loan Documents.
Section 3.02. Conditions Precedent to All Loans. The obligation of each
Bank to make any Loan, shall be subject to the further conditions precedent that
(a) on the Borrowing Date of such Loan the following statements shall be true,
and the Borrower, by virtue of its delivery of a Borrowing Request shall be
deemed to have certified to the Bank Group as of such date that (i) the
representations and warranties contained in Article IV are true and correct on
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and as of such date, before and after giving effect to such Loan and as
though made on and as of such date, (ii) no Default or Event of Default has
occurred and is continuing, or would result from such Loan and (iii) no event
has occurred since the Execution Date that could reasonably be expected to have
a Material Adverse Effect on the Borrower or any of its Subsidiaries and (b)
that the Agent shall have received on or before such date such other documents,
certificates, information and opinions as the Agent may reasonably request
relating to this Agreement and the other Loan Documents, each in form and
substance reasonably satisfactory to the Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Bank Group to enter into this Agreement, the
Borrower hereby represents and warrants to the Bank Group as follows:
Section 4.01. Corporate Existence. Each of the Borrower and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and is duly
qualified or licensed to transact business as a foreign corporation and is in
good standing under the laws of each jurisdiction in which the conduct of its
operations or the ownership or leasing of its properties requires such
qualification or licensing, except where the failure to be so qualified or
licensed will not have a Material Adverse Effect on such Person. Schedule 4.01
is a complete list of the Borrower's Subsidiaries.
Section 4.02. Corporate Authority; Binding Obligations. Each of the
Borrower and its Subsidiaries has all requisite corporate power and authority to
conduct its business, to own, operate and encumber its Property, and to execute,
deliver and perform all of its obligations under the Loan Documents executed by,
or to be executed by, such Person. The execution, delivery and performance of
each of the Loan Documents to which the Borrower or any of its Subsidiaries is a
party and the consummation of the transactions contemplated thereby have been
duly authorized by all necessary corporate action. Each of the Loan Documents to
which the Borrower or any of its Subsidiaries is a party has been duly executed
and delivered by such Person, is in full force and effect and constitutes the
legal, valid and binding obligation of such Person, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditor's rights generally and general principles
of equity. The Security Documents create valid Liens in the collateral described
therein, securing the secured obligations described therein.
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Section 4.03. No Conflict. The execution, delivery and performance by the
Borrower or any of its Subsidiaries of each Loan Document to which such Person
is a party and the consummation of each of the transactions contemplated thereby
do not and shall not, by the lapse of time, the giving of notice or otherwise:
(a) constitute a violation of any Requirement of Law or a breach of any
provision contained in the articles or certificate of incorporation or bylaws of
such Person, or any shareholder agreement pertaining to such Person, or
contained in any material agreement, instrument or document to which it is now a
party or by which it or its properties is bound, except for such violations or
breaches that will not have a Material Adverse Effect on any such Person; or (b)
result in or require the creation or imposition of any Lien whatsoever upon any
of the properties or assets of the Borrower or any of its Subsidiaries (other
than Excepted Liens and Liens in favor of the Agent arising pursuant to the Loan
Documents).
Section 4.04. No Consent. No authorization, consent, approval, license, or
exemption of or filing or registration with, any Governmental Authority or any
other Person, which has not been obtained, was, is or will be necessary for the
valid execution, delivery or performance by the Borrower or any of its
Subsidiaries of any of the Loan Documents to which it is a party and the
consummation of each of the transactions contemplated thereby (including,
without limitation, the consummation of the Acquisition) or the Borrower's or
any of its Subsidiaries' ownership, use or operation of any of their Properties
other than (a) those listed on Schedule 4.04 and (b) those that the failure to
obtain, file or make will not have a Material Adverse Effect on any such Person.
Section 4.05. No Defaults or Violations of Law. No Default or Event of
Default has occurred and is continuing. No default (or event or circumstance
occurred which, but for the passage of time or the giving of notice, or both,
would constitute a default) has occurred and is continuing with respect to any
note, indenture, loan agreement, mortgage, lease, deed or other agreement to
which the Borrower or any of its Subsidiaries is a party or by which any of them
or their Properties is bound, except for such defaults that will not have a
Material Adverse Effect on the Borrower or any of its Subsidiaries. Neither the
Borrower nor any of its Subsidiaries is in violation of any applicable
Requirement of Law except for such violations that will not have a Material
Adverse Effect on any such Person.
Section 4.06. Financial Position. (a) Prior to the Execution Date, the
Borrower has furnished to the Agent and the Bank Group audited financials of the
Borrower and its Subsidiaries as of December 31, 1995 and unaudited financials
of the Borrower as of June 30, 1996. The audited financials referred to in the
previous sentence have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved and
present fairly the financial condition of the Borrower and its
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Subsidiaries as of the dates thereof and the results of their operations
for the periods then ended. As of the Execution Date, no event has occurred
since June 30, 1996 that could reasonably be expected to have a Material Adverse
Effect on the Borrower or any of its Subsidiaries.
(b) Except as fully reflected in the audited financials referred to in
paragraph (a) of this Section 4.06, as of the date hereof, there are no
liabilities or obligations of the Borrower or any of its Subsidiaries of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, would have a
Material Adverse Effect on the Borrower or any of its Subsidiaries.
Section 4.07. Litigation. Except as set out in Schedule 4.07, there are no
actions, suits or proceedings pending or, to the knowledge of the Borrower
threatened against or affecting the Borrower or any of its Subsidiaries, or the
Properties of any such Person, before or by any Governmental Authority or other
Person, which, if determined adversely to such Person could have a Material
Adverse Effect on any such Person.
Section 4.08. Use of Proceeds. (a) The Borrower's uses of the proceeds of
the Loans are, and will continue to be, legal and proper corporate uses (duly
authorized by Borrower's board of directors), and such uses are consistent with
the terms of the Loan Documents, including, without limitation, Section 5.09,
and all Requirements of Law.
(b) Neither the Borrower nor any of its Subsidiaries is engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U), and no part of the proceeds of any
Loan will be used, directly or indirectly, (i) to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock or (ii) for the purpose of purchasing, carrying or trading in
any securities under such circumstances as to involve the Borrower or any of its
Subsidiaries in a violation of Regulation X.
Section 4.09. Governmental Regulation. Neither the Borrower nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act, as amended, the Investment Company Act of 1940, as amended, or any other
Requirement of Law such that the ability of any such Person to incur
indebtedness is limited or its ability to consummate the transactions
contemplated by this Agreement, the other Loan Documents or any document
executed in connection therewith is impaired.
Section 4.10. Disclosure. The schedules, documents, exhibits, reports,
certificates and other written statements and information furnished by or on
behalf of the Borrower or any of its Subsidiaries to the Bank Group do not
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contain any Material misstatement of fact, or omit to state a Material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. Neither the Borrower
nor any of its Subsidiaries has intentionally withheld any fact known to it
which has or is reasonably likely to have a Material Adverse Effect on the
Borrower or any of its Subsidiaries.
Section 4.11. ERISA. (a) The Borrower, and each ERISA Affiliate and
Subsidiary have operated and administered each Pension Plan and Other Benefit
Plan in compliance with all applicable laws, except for such instances of
noncompliance as have not resulted in and could not reasonably be expected to
result in a Material Adverse Effect. Neither the Borrower nor any ERISA
Affiliate or Subsidiary has incurred any liability pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Internal Revenue Code
relating to employee benefit plans (as defined in Section 3 of ERISA), and no
event, transaction or condition has occurred or exists or is threatened that
could reasonably be expected to result in the incurrence of any such liability
by the Borrower or any ERISA Affiliate or Subsidiary, or in the imposition of
any Lien on any of the rights, properties or assets of the Borrower or any ERISA
Affiliate or Subsidiary, in either case pursuant to Title I or IV of ERISA or to
such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the
Internal Revenue Code, other than such liabilities or Liens as would not be,
individually or in the aggregate, Material.
(b) The present value of the aggregate benefit liabilities under each
Pension Plan subject to Title IV of ERISA, determined as of the end of such
Pension Plan's most recently ended plan year on the basis of the actuarial
assumptions specified for funding purposes in such Pension Plan's most recent
actuarial valuation report, did not exceed the aggregate current value of the
assets of such Pension Plan allocable to such benefit liabilities. The term
"benefit liabilities" has the meaning specified in section 4001 of ERISA and the
terms "current value" and "present value" have the meaning specified in Section
3 of ERISA.
(c) The Borrower and its ERISA Affiliates and Subsidiaries do not currently
and have never had any liability or obligation with respect to any liabilities
(and are not subject to contingent withdrawal liabilities) under section 4201 or
4204 of any Multiemployer Plan.
(d) The expected post-retirement benefit obligation (determined as of the
last day of the Borrower's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Internal Revenue Code ("COBRA")) of the Borrower and its ERISA Affiliates
and Subsidiaries is not Material and, except as modified by
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COBRA, such obligations can be unilaterally terminated at any time by the
Borrower, or its ERISA Affiliates and Subsidiaries without any Material
liability.
Section 4.12. Payment of Taxes. The Borrower has filed, and has caused each
of its Subsidiaries to file, all federal, state and local tax returns and other
reports that the Borrower and each such Subsidiary are required by law to file
and have paid all taxes and other similar charges that are due and payable
pursuant to such returns and reports, except to the extent any of the same may
be contested in good faith by appropriate proceedings promptly initiated and
diligently conducted, and with respect to which adequate reserves have been set
aside on the books of such Person in accordance with generally accepted
accounting principles.
Section 4.13. Title and Liens. (a) Except as set out in Schedule 4.13 the
Borrower and its Subsidiaries have good and defensible title to its Properties,
free and clear of all Liens except Liens permitted by Section 6.02. Except as
set forth in Schedule 4.13, after giving full effect to the Excepted Liens, the
Borrower owns the net interests in production attributable to Oil and Gas
Properties reflected in the Initial Reserve Report and the ownership of such Oil
and Gas Properties shall not in any material respect obligate the Borrower to
bear the costs and expenses relating to the maintenance, development and
operations of each such Oil and Gas Property in an amount in excess of the
working interest of each Oil and Gas Property set forth in the Initial Reserve
Report. Further, upon delivery of each Reserve Report, the statements made in
the preceding sentence shall be true with respect to such furnished Reserve
Reports including the ownership of the Oil and Gas Properties set forth therein.
To the best of the Borrower's knowledge, all information contained in the
Initial Reserve Report is true and correct in all material respects as of the
date thereof.
(b) All material leases and agreements necessary for the conduct of the
business of the Borrower and its Subsidiaries are valid and subsisting, in full
force and effect and, to the knowledge of the Borrower, there exists no default
or event or circumstance which with the giving of notice or the passage of time
or both would give rise to a default under any such lease or leases, which would
affect in any material respect the conduct of the business of the Borrower and
its Subsidiaries.
(c) The rights, properties and other assets presently owned, leased or
licensed by the Borrower and its Subsidiaries including, without limitation, all
easements and rights of way, include all rights, properties and other assets
necessary to permit the Borrower and its Subsidiaries to conduct their business
in all material respects in the same manner as their business has been conducted
prior to the date hereof.
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(d) All of the assets and properties of the Borrower and its
Subsidiaries which are reasonably necessary for the operation of its business
are in good working condition and are maintained in accordance with prudent
business standards.
Section 4.14. Gas Imbalances. As of the date of this Agreement,
except as set forth in Schedule 4.14 or on the most recent certificate delivered
pursuant to Section 5.10(c), on a net basis there are no gas imbalances, take or
pay or other prepayments with respect to the Borrower's Oil and Gas Properties
which would require the Borrower to deliver Hydrocarbons produced from the Oil
and Gas Properties at some future time without then or thereafter receiving full
payment therefor exceeding a market value of $100,000 in the aggregate.
Section 4.15. Consummation of Acquisition. The transactions
described in the Acquisition Documents, including, without limitation, the
Acquisition, have been completed in accordance with terms of the Acquisition
Documents, and with all Requirements of Law.
Section 4.16. Environmental Matters. Except as set forth in the
report delivered to the Banks on the Effective Date pursuant to Section 3.01,
(a) (i) the Borrower and each of its Subsidiaries possess all environmental,
health and safety licenses, permits, authorizations, registrations, approvals
and similar rights necessary under law or otherwise for such Person to conduct
its operations as now being conducted, (ii) each of such licenses, permits,
authorizations, registrations, approvals and similar rights is valid and
subsisting, in full force and effect and enforceable by such Person, and (iii)
such Person is in compliance with all terms, conditions or other provisions of
such permits, authorizations, registrations, approvals and similar rights,
except to the extent that the failure to do so will not have a Material Adverse
Effect on such Person; (b) except as disclosed in the environmental reports
delivered to the Bank Group on the Effective Date pursuant to Section 3.01,
neither the Borrower nor any of its Subsidiaries has received any notices of any
violation of, noncompliance with, or remedial obligation under, Requirements of
Environmental Laws, and there are no writs, injunctions, decrees, orders or
judgments outstanding, or lawsuits, claims, proceedings, investigations or
inquiries pending or, to the knowledge of the Borrower, threatened, relating to
the ownership, use, condition, maintenance, or operation of, or conduct of
business related to, any Property owned, leased or operated by the Borrower or
any of its Subsidiaries, other than those violations, instances of
noncompliance, obligations, writs, injunctions, decrees, orders, judgments,
lawsuits, claims, proceedings, investigations or inquiries that will not have a
Material Adverse Effect on such Person; (c) except as disclosed in the
environmental reports delivered to the Agent pursuant to Section 3.01, there are
no material obligations, undertakings or liabilities arising out of or relating
to Environmental Laws to which the Borrower or any of its Subsidiaries has
agreed to, assumed or retained, or by which the Borrower or
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any of its Subsidiaries is adversely affected, by contract or otherwise; and (d)
except as disclosed in the environmental reports delivered to the Banks on the
Effective Date pursuant to Section 3.01, neither the Borrower nor any of its
Subsidiaries has received a written notice or claim to the effect that such
Person is or may be liable to any Person as the result of a release or
threatened release of a hazardous material or solid waste.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any principal amount of any Loan, any amount of interest
accrued under the Notes or any commitment or other fee, expense, compensation or
any other amount payable to any member of the Bank Group under the Loan
Documents shall remain unpaid or outstanding or any Bank shall have any
Commitment hereunder, unless the Majority Banks shall otherwise consent in
writing:
Section 5.01. Reporting Requirements. The Borrower shall deliver or
cause to be delivered to the Agent (with sufficient copies for the Agent to
distribute the same to the other members of the Bank Group):
(a) As soon as available and in any event within forty-five (45)
days after the end of each of the first three calendar quarters:
(i) copies of the unaudited consolidated balance sheets of the
Borrower and its Subsidiaries as of the end of such period, and unaudited
consolidated statements of income, retained earnings and cash flows of the
Borrower and its Subsidiaries for that fiscal period and for the portion
of the fiscal year ending with such period, in each case setting forth in
comparative form (on a consolidated basis) the figures for the
corresponding period of the preceding fiscal year, all in reasonable
detail; and
(ii) a certificate of a Responsible Officer of the Borrower (1)
stating that (A) such financial statements fairly present in all material
respects the consolidated financial position and results of operations of
the Borrower and its Subsidiaries in accordance with generally accepted
accounting principles consistently applied, subject to year-end
adjustments and the absence of notes and (B) no Default or Event of
Default has occurred and is continuing or, if any such event has occurred
and is continuing, the action the Borrower is taking or proposes to take
with respect thereto, and (2) setting forth calculations demonstrating
compliance by the Borrower with Sections 6.04, 6.05 and 6.06.
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(b) As soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Borrower (i) copies of the audited
consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as of the close of such fiscal year and audited consolidated and
consolidating statements of income and retained earnings and a statement of cash
flows of the Borrower and its Subsidiaries for such fiscal year, in each case
setting forth in comparative form (on a consolidated basis) the figures for the
preceding fiscal year, all in reasonable detail and accompanied by an opinion
thereon (which shall not be qualified by reason of any limitation imposed by the
Borrower) of independent accountants of recognized national standing selected by
the Borrower and reasonably satisfactory to the Majority Banks, to the effect
that such consolidated financial statements have been prepared in accordance
with generally accepted accounting principles consistently applied (except for
changes in which such accountants concur) and that such audit has been made in
accordance with generally accepted auditing standards and (ii) a certificate of
a Responsible Officer of the Borrower (A) setting forth calculations
demonstrating compliance by the Borrower with Sections 6.04, 6.05 and 6.06 and
(B) stating that no Default or Event of Default has occurred and is continuing
or, if any such event has occurred and is continuing, the action the Borrower is
taking or proposes to take with respect thereto.
(c) Promptly after the sending or filing thereof, copies of all
reports and shareholder information which the Borrower or any of its
Subsidiaries sends to any holders of its respective securities in their
capacities as holders of such securities and not in their capacities as
directors, officers or employees of the Borrower or any of the Borrower's
Subsidiaries, or to the SEC.
(d) As soon as reasonably possible and in any event within ten (10)
days after the Borrower or any of its Subsidiaries becomes aware of the
occurrence of a Default or Event of Default, a certificate of a Responsible
Officer of the Borrower setting forth details of such Default or Event of
Default and the action which has been taken or is to be taken with respect
thereto.
(e) As soon as reasonably possible and in any event within ten (10)
days after the Borrower or any of its Subsidiaries becomes aware thereof,
written notice from a Responsible Officer of the Borrower of (i) the institution
of or overt threat of, any action, suit, proceeding, governmental investigation
or arbitration by any Governmental Authority or other Person against or
affecting the Borrower or any of its Subsidiaries that could have a Material
Adverse Effect on any such Person and that has not previously disclosed in
writing to the Bank Group pursuant to this Section 5.01 or (ii) any material
development in any action, suit, proceeding, governmental investigation or
arbitration already disclosed to the Bank Group pursuant to this Section 5.01 or
Section 3.01.
(f) As soon as reasonably possible and in any event within ten (10)
days after the Borrower or any of its Subsidiaries becomes aware thereof,
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written notice from a Responsible Officer of the Borrower of (i) any violation
of, noncompliance with, or remedial obligations under, Requirements of
Environmental Laws, (ii) any release or threatened release affecting any
property owned, leased or operated by the Borrower or any of its Subsidiaries
that could have a Material Adverse Effect on the Borrower or any of its
Subsidiaries, (iii) the amendment or revocation of any permit, authorization,
registration, approval or similar right that could have a Material Adverse
Effect on the Borrower or any of its Subsidiaries or (iv) changes to
Requirements of Environmental Laws that could have a Material Adverse Effect on
the Borrower or any of its Subsidiaries.
(g) Promptly, and in any event within five days after becoming aware
of any of the following, a written notice setting forth the nature thereof and
the action, if any, that the Borrower or an ERISA Affiliate or Subsidiary
proposes to take with respect thereto: (i) with respect to any Pension Plan, any
Reportable Event, for which notice thereof has not been waived pursuant to such
regulations as in effect on the date hereof; or (ii) the taking by the PBGC of
steps to institute, or the threatening by the PBGC of the institution of,
proceedings under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan, or the receipt by the
Borrower or any ERISA Affiliate or Subsidiary of a notice from a Multiemployer
Plan that such action has been taken by the PBGC with respect to such
Multiemployer Plan; or (iii) any event, transaction or condition that could
result in the incurrence of any liability by the Borrower or any ERISA Affiliate
or Subsidiary pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Internal Revenue Code relating to employee benefit plans, or
in the imposition of any Lien on any of the rights, properties or assets of the
Borrower or any ERISA Affiliate or Subsidiary pursuant to Title I or IV of ERISA
or such penalty or excise tax provisions; or (iv) the inability or failure of
the Borrower or any ERISA Affiliate or Subsidiary to make timely any payment or
contribution to or with respect to any Pension Plan, Multiemployer Plan or Other
Benefit Plan, if such failure, either separately or together with all other such
failures could reasonably be expected to be Material; or (v) any event with
respect to any Pension Plan, Multiemployer Plan and/or Other Benefit Plan,
individually or in the aggregate, that could reasonably be expected to be a
Material liability.
(h) As soon as available and in any event simultaneously with the
delivery of the financial statements delivered pursuant to Section 5.01(b),
copies of the budget of the Borrower and its Subsidiaries containing a
consolidated and consolidating balance sheet, and detailed statements of income,
cash flow and projected capital expenditures for the then current fiscal year.
(i) As soon as possible and in any event within ten (10) days after
the Borrower becomes aware thereof, any claim by or against the Borrower
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<PAGE>
under the Acquisition Documents, including claims for breach of warranty and
claims for indemnity.
(j) As soon as possible and in any event within ninety (90) days
after the end of each calendar year commencing March 31, 1997, an environmental
report prepared by Pilko & Associates or any other independent environmental
firm qualified to prepare such reports and approved by the Agent covering the
real property owned by the Borrower and its Subsidiaries in form and substance
satisfactory to the Agent.
(k) Such other information as any member of the Bank Group may from
time to time reasonably request respecting the business, properties, operations
or condition, financial or otherwise, of the Borrower or any of its
Subsidiaries.
Section 5.02. Taxes; Claims. The Borrower will pay and discharge,
and will cause each of its Subsidiaries to pay and discharge, all taxes,
assessments and governmental charges or levies imposed upon such Person or upon
its income or profits, or upon any properties belonging to such Person, prior to
the date on which penalties attach thereto, and all lawful claims which, if
unpaid, might become a Lien upon any properties of such Person, other than any
such tax, assessment, charge, levy or claim which is being contested in good
faith by appropriate proceedings promptly initiated and diligently conducted,
and with respect to which adequate reserves are set aside on the books of such
Person in accordance with generally accepted accounting principles.
Section 5.03. Compliance with Laws. The Borrower will comply, and
will cause each of its Subsidiaries to comply, with all applicable Requirements
of Law imposed by, any Governmental Authority, non-compliance with which might
have a Material Adverse Effect on any such Person. Without limitation of the
foregoing, the Borrower shall, and shall cause each of its Subsidiaries to,
comply with all Requirements of Environmental Laws, operate properties and
conduct its business in accordance with good environmental practices, and
handle, treat, store and dispose of hazardous materials or solid waste in
accordance with such practices, except where the failure to do so will not have
a Material Adverse Effect on any such Person.
Section 5.04. Insurance. The Borrower will maintain, and will cause
each of its Subsidiaries to maintain, with financially sound and reputable
insurance companies or associations, or self-insure against such risks, and in
such amounts (and with co-insurance and deductibles), as are usually insured
against by Persons of similar size and established reputation engaged in the
same or similar businesses and similarly situated, including insurance against
fire, casualty, business interruption, injury to Persons or property and other
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<PAGE>
normal hazards normally insured against, but, in any event, such insurance shall
not be substantially dissimilar from that described in the insurance schedule
delivered on the Effective Date pursuant to Section 3.01. In addition, on or
before January 31 of each year commencing January 31, 1997, the Borrower will
deliver to the Agent a report prepared by Borrower's insurance broker listing
all insurance policies and programs then in effect with respect to the
properties and businesses of the Borrower and each of its Subsidiaries,
specifying for each such policy and program, (a) the amount thereof, (b) the
risks insured against thereby, (c) the name of the insurer and each insured
party thereunder and (d) the policy or other identification number thereof.
Other than with respect to worker's compensation policies, each policy listed on
the schedule delivered pursuant to Section 3.02 and each additional policy
maintained in compliance with this Agreement shall be endorsed showing the Agent
as an additional insured, or a loss payee, as applicable. All policies of
insurance required by the terms of this Agreement or any Security Document shall
provide that at least 30 days' prior written notice be given to the Agent of any
termination, cancellation, reduction or other modification of such insurance.
Section 5.05. Corporate Existence. The Borrower will preserve and
maintain, and will cause each of its Subsidiaries to preserve and maintain, its
existence, rights, franchises and privileges in the jurisdiction of its
incorporation, and qualify and remain qualified, and cause each of its
Subsidiaries to qualify and remain qualified, as a foreign corporation in each
jurisdiction in which such qualification is material to the business and
operations of such Person or the ownership or leasing of the properties of such
Person except to the extent that a Subsidiary merges or consolidates in
compliance with Section 6.08 or ceases to be a Subsidiary of Borrower if such
cessation is permitted under this Agreement.
Section 5.06. Inspections. From time to time during regular business
hours upon reasonable prior notice, the Borrower will permit, and will cause
each of its Subsidiaries to permit, any agents or representatives of any member
of the Bank Group to examine and make copies of and abstracts from the records
and books of account of, and visit the properties of the Borrower and its
Subsidiaries and to discuss the affairs, finances and accounts of any such
Person with any of its independent public accountants, officers or directors,
all at the expense of the Borrower.
Section 5.07. Maintenance of Properties. The Borrower will maintain
and preserve, and will cause each Subsidiary of the Borrower to maintain and
preserve, all of its personal property and fixtures (or replacement therefor)
necessary for the proper conduct of its business in good working order and
condition as would a reasonably prudent operator, ordinary wear and tear
excepted. The Borrower shall cause, or in the event the Borrower is not the
operator of its Oil and Gas Properties, use reasonable best efforts consistent
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<PAGE>
with its rights under applicable operating agreements to cause, its Oil and Gas
Properties to be maintained, developed, protected against drainage and operated
in a good and workmanlike manner as would a reasonably prudent operator and in
material compliance with all operating agreements, other applicable agreements
and all applicable Requirements of Law.
Section 5.08. Accounting Systems. The Borrower will keep, and will
cause each of its Subsidiaries to keep, adequate records and books of account in
which complete entries will be made in accordance with generally accepted
accounting principles consistently applied (subject to year end adjustments),
reflecting all financial transactions of such Person. The Borrower shall
maintain or cause to be maintained a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in conformity with generally accepted accounting
principles, and each of the financial statements described herein shall be
prepared from such system and records.
Section 5.09. Use of Loans. Except as specified in the following
sentence, the Borrower will use the proceeds of all Revolving Loans hereunder
for general corporate purposes (including working capital purposes) consistent
with the terms of this Agreement and all Requirements of Law. The proceeds of
the Loans funded on the Effective Date will be used to (a) fund the purchase
price payable by the Borrower under the Acquisition Documents, and (b) pay in
full the First Union Debt.
Section 5.10. Reserve Reports. (a) By March 15 and September 15 of
each year commencing March 15, 1997, the Borrower shall furnish to the Agent and
the Banks a Reserve Report dated as of the immediately preceding December 31 or
June 30, as the case may be. Each Reserve Report shall be prepared by certified
independent petroleum engineers acceptable to the Agent. Each such Reserve
Report shall be in form and substance satisfactory to the Agent and shall set
forth, as of the immediately preceding December 31 or June 30, as the case may
be: (i) the Proved Reserves attributable to the Borrower's Oil and Gas
Properties together with a projection of the rate of production and future net
income, taxes, operating expenses and capital expenditures with respect thereto
as of such dates, based upon pricing and escalation assumptions consistent with
SEC reporting requirements at the time and (ii) such other information as the
Agent may reasonably request.
(b) In the event of an unscheduled redetermination of the Borrowing
Base, the Borrower shall furnish to the Agent and the Banks a Reserve Report
prepared by or under the supervision of the chief engineer of the Borrower who
shall certify, to the best of his knowledge and in all material respects, such
Reserve Report to be true and accurate and to have been
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prepared in accordance with the procedures used in the immediately preceding
Reserve Report delivered to the Banks under Section 5.10(a) with an "as of date"
as requested by the Majority Banks. For any unscheduled redetermination of the
Borrowing Base initiated by the Majority Banks, the Borrower shall provide such
Reserve Report as soon as possible, but in any event no later than 30 days
following the Borrower's receipt of notice of such unscheduled redetermination
from the Agent.
(c) With the delivery of each Reserve Report, the Borrower shall
provide to the Bank Group, a certificate from the Responsible Officer that, to
the best of his knowledge and in all material respects, (i) the information
contained in the Reserve Report and any other information delivered therewith is
true and correct, (ii) the Borrower owns good and defensible title to its Oil
and Gas Properties evaluated in such Reserve Report free of all Liens except for
Excepted Liens and that the Borrower has created or allowed to be created no new
Liens on its Oil and Gas Properties except for Excepted Liens, (iii) except as
set forth on an exhibit to the certificate, on a net basis there are no gas
imbalances, take or pay or other prepayments with respect to its Oil and Gas
Properties evaluated in such Reserve Report which would require the Borrower to
delivery Hydrocarbons produced from such Oil and Gas Properties at some future
time without then or thereafter receiving full payment therefor exceeding a
market value of $100,000 in the aggregate, (iv) none of its Oil and Gas
Properties have been sold (other than Hydrocarbons produced and sold in the
ordinary course of business) since the date of the last Borrowing Base
determination except as set forth on an exhibit to the certificate, which
certificate shall list all of its Oil and Gas Properties sold (other than
Hydrocarbons produced and sold in the ordinary course of business) and in such
detail as reasonably required by the Agent, (v) attached to the certificate is a
list of its Oil and Gas Properties added to and deleted from the immediately
prior Reserve Report and an updated list of all Persons (with their addresses)
disbursing proceeds to the Borrower from its Oil and Gas Properties, (vi) except
as set forth on a schedule attached to the certificate, all of the Oil and Gas
Properties evaluated by such Reserve Report are Mortgaged Property, and (vii)
any change in working interest or net revenue interest in its Oil and Gas
Properties occurring since the last Reserve Report and the reason for such
change.
(d) As soon as available and in any event within 30 days after the
end of each month commencing with October 31, 1996, the Borrower shall provide
the Bank Group production reports certified by an officer of the Borrower for
its Oil and Gas Properties, which reports shall include quantities or volume of
production which have accrued to the Borrower's accounts in such period, and
such other information with respect thereto as the Agent may reasonably request.
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Section 5.11. Title. Promptly and in any event within 30 days after
written request therefor by the Agent, the Borrower will provide the Agent with
title opinions reasonably satisfactory to the Agent with respect to the
Borrower's Oil and Gas Properties which are included in the most recent Reserve
Report delivered to the Bank Group and for which title opinions have not been
previously delivered so that the Agent will have acceptable title opinions on at
least eighty percent (80%) of the value of the Borrower's Oil and Gas Properties
included in such Reserve Report.
Section 5.12. Additional Collateral. Should the Borrower own
additional Oil and Gas Properties that are not subject to a first priority Lien
under the Security Documents or acquire any additional Oil and Gas Properties,
the Borrower will grant to the Agent as security for the Obligations a first
priority Lien (subject only to Excepted Liens) on the Borrower's interest in
such Oil and Gas Properties which Lien will be created and perfected by and in
accordance with the provisions of mortgages, deeds of trust, security agreements
and financing statements, or other Security Documents, all in form and substance
satisfactory to the Agent in its sole discretion and in sufficient executed (and
acknowledged where necessary or appropriate) counterparts for recording
purposes.
Section 5.13. Further Assurances in General. The Borrower shall, and
shall cause each of its Subsidiaries to, protect and perfect the Liens
contemplated by the Security Documents. The Borrower at its expense shall, and
shall cause each of its Subsidiaries to, promptly execute and deliver all such
other and further documents, agreements and instruments in compliance with or
accomplishment of the covenants and agreements of the Borrower or any of its
Subsidiaries in the Loan Documents, including, without limitation, the
accomplishment of any condition precedent that may have been waived by the Banks
prior to the initial Borrowing or any subsequent Borrowings.
Section 5.14. Enforcement of Acquisition Documents. The Borrower
will enforce in all material respects all of the terms, covenants, warranties
and representations in favor of the Borrower under the Acquisition Documents.
ARTICLE VI
NEGATIVE COVENANTS
So long as any principal amount of any Loan, any amount of interest
accrued under the Notes or any commitment, facility or other fee, expense,
compensation or any other amount payable to any member of the Bank Group under
the Loan Documents shall remain unpaid or outstanding or any Bank shall have any
Commitment hereunder, unless the Majority Banks shall otherwise consent in
writing:
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Section 6.01. Indebtedness Restriction. The Borrower will not, and
will not permit any of its Subsidiaries to, create, incur, assume or suffer to
exist, any Indebtedness other than:
(a) Indebtedness of the Borrower and its Subsidiaries under the
Loan Documents,
(b) Indebtedness of the Borrower in respect of any Derivatives
permitted by Section 6.03,
(c) purchase money Indebtedness for equipment or similar items
purchased or leased in the ordinary course of business not to exceed in the
aggregate $2,000,000 outstanding at any time,
(d) Indebtedness owing to Christiania Bank og Kreditkasse that the
Borrower is obligated to make contributions to Portilla-1996, L.P. to allow such
partnership to pay under Section 6.03 of that certain Purchase and Sale
Agreement, dated September 18, 1996, among the Borrower and Acco, LLC, et al.
and under paragraph 4 of the August 22, 1996 letter agreement between the
Borrower and Christiania Bank og Kreditkasse; provided, that if the Borrower is
required to contribute any amount in excess of $2,000,000 in the aggregate under
such purchase and sale agreement and letter agreement, such event shall
constitute an Event of Default under this Agreement;
(e) Indebtedness set out on Schedule 6.01; and
(f) Indebtedness of Borrower and its Subsidiaries in the aggregate
amount not to exceed $500,000 in addition to all other Indebtedness permitted by
this Section 6.01.
Section 6.02. Lien Restriction. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume or suffer to be
created, assumed or incurred or to exist, any Lien upon any of such Person's
property or assets, whether now owned or hereafter acquired other than the
following Liens ("Excepted Liens"):
(a) Liens created pursuant to this Agreement or any other Loan
Document,
(b) royalties, overriding royalties, reversionary interests,
production payments and similar burdens with respect to the Borrower's or its
Subsidiaries Oil and Gas Properties to the extent such burdens do not reduce the
Borrower's net interests in production in its Oil and Gas Properties below the
interests reflected in each Reserve Report or the interests warranted under this
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Agreement or the Mortgage and do not operate to deprive the Borrower or its
Subsidiaries of any material rights in respect of its assets or properties
(except for rights customarily granted with respect to such interests);
(c) statutory liens, including liens for taxes or other assessments
that are not yet delinquent (or that, if delinquent, are being contested in good
faith by appropriate proceedings and for which the Borrower or its Subsidiaries
have set aside on their books adequate reserves in accordance with generally
accepted accounting principles consistently applied);
(d) easements, rights of way, servitudes, permits, surface leases
and other rights in respect to surface operations, pipelines, grazing, logging,
canals, ditches, reservoirs or the like, conditions, covenants and other
restrictions, and easements of streets, alleys, highways, pipelines, telephone
lines, power lines, railways and other easements and rights of way on, over or
in respect of the Borrower's or its Subsidiaries' assets or properties;
(e) materialmen's, mechanic's, repairman's, contractor's,
sub-contractor's, operator's and other Liens incidental to the construction,
maintenance, development or operation of the Borrower's or its Subsidiaries'
assets or properties to the extent not delinquent (or which, if delinquent, are
being contested in good faith by appropriate proceedings and for which the
Borrower or its Subsidiaries have set aside on their books adequate reserves in
accordance with generally accepted accounting principles consistently applied);
and
(f) all contracts, agreements and instruments, and all defects and
irregularities and other matters affecting the Borrower's or its Subsidiaries'
assets and properties which were in existence at the time such assets and
properties were originally acquired by such Person and all routine operational
agreements entered into in the ordinary course of business, which contracts,
agreements, instruments, defects, irregularities and other matters and routine
operational agreements do not reduce the Borrower's net interest in production
in its Oil and Gas Properties below the interests reflected in each Reserve
Report or the interests warranted under this Agreement or the Mortgage and do
not interfere materially with the operation, value or use of the Borrower's or
its Subsidiaries' assets and properties;
(g) landlord's lien securing obligations that are not yet delinquent
(or that, if delinquent, are being contested in good faith by appropriate
proceedings and for which the Borrower or its Subsidiaries have set aside on
their books adequate reserves in accordance with generally accepted accounting
principles consistently applied);
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(h) Liens in connection with workmen's compensation, unemployment
insurance or other social security, old age pension or public liability
obligations that are not yet delinquent (or that, if delinquent, are being
contested in good faith by appropriate proceedings and for which the Borrower or
its Subsidiaries have set aside on their books adequate reserves in accordance
with generally accepted accounting principles consistently applied);
(i) Liens securing purchase money Indebtedness permitted under
Section 6.01(c) but only to the extent such Liens cover the equipment or other
similar items purchased or leased;
(j) Undertaking by Grey Wolf Exploration Ltd. to The Alberta
Stock Exchange dated January 4, 1996, concerning the common shares of Cascade
Oil & Gas Ltd.; and
(k) Lien in favor of Compass Bank-San Antonio covering certain real
property in Comal County, Texas described in that certain Real Estate Lien Note,
dated December 28, 1995, issued by the Borrower, in the principal amount of
$238,500, to the extent the Lien secures such Real Estate Lien Note.
Section 6.03. Derivatives. The Borrower shall not, and shall not
permit any of its Subsidiaries to, enter into any Derivatives other than (a)
Derivatives presently existing with First Union National Bank of North Carolina,
which are being assumed by the Agent, (b) commodity price Derivatives related to
bona fide hedging activities so long as (i) the aggregate notional amounts of
such Derivatives during any calculation period do not exceed fifty percent (50%)
of the Borrower's projected actual production of Hydrocarbons (based on the
projected production of Proved Producing Reserves reflected in the Reserve
Report delivered pursuant hereto immediately prior to the execution of such
Derivative) for such period, and (ii) such commodity price Derivative has been
entered into with the Agent or such other Person agreed to by the Majority Banks
and (c) interest rate and foreign exchange Derivatives entered into with the
Agent or otherwise approved by the Majority Banks.
Section 6.04. Interest Coverage Ratio. The Borrower will not permit
the ratio of (a) EBITDA to (b) Interest Expense, measured as of the last day of
any calendar quarter for the twelve month period then ended, to be less than
1.75 to 1.00.
Section 6.05 Current Ratio. The Borrower will not permit the ratio
of (i) its consolidated current assets, including amounts available under the
Revolving Commitments based on the Revolving Loans outstanding and the most
recent determination of the Borrowing Base, to (ii) its consolidated current
liabilities, excluding the aggregate amount of Loans outstanding, at the end of
any fiscal quarter to be less than 1.00 to 1.00.
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Section 6.06. Tangible Net Worth. The Borrower will not permit its
Consolidated Tangible Net Worth to be less than $30,000,000 at any time.
Section 6.07. Sales of Assets. The Borrower will not, and will not
permit any of its Subsidiaries to, sell, transfer, assign, farm-out, lease or
otherwise transfer or dispose of any assets other than (a) sales of Hydrocarbon
production in the ordinary course of business and sales of obsolete or worn-out
equipment in the ordinary course of business, (b) sales or transfers of assets
by any of the Borrower's wholly-owned Subsidiaries to the Borrower or any such
other wholly-owned Subsidiary, (c) sale of the Gaelic Resources Stock, and (d)
any other sale of assets sold at fair market value, so long as the aggregate Net
Proceeds for all such sales made under this subclause (d) during any calendar
year does not exceed $500,000 and the Net Proceeds of all such sales are applied
as a mandatory prepayment of the Loans in accordance with Section 2.07.
Section 6.08. Consolidation and Mergers. The Borrower will not, and
will not permit any of its Subsidiaries to, directly or indirectly, consolidate
with or merge into any Person or permit any Person to consolidate with or merge
into it, except that any Subsidiary of the Borrower may merge into or
consolidate with any other Subsidiary of the Borrower and any Subsidiary of the
Borrower may merge into or consolidate with the Borrower, provided in each case
that, immediately after giving effect and pro forma effect thereto, no event
shall occur and be continuing which constitutes either a Default or an Event of
Default, and if the Borrower is a party to such merger, the Borrower is the
surviving entity.
Section 6.09. Restricted Disbursements. The Borrower will not, and
will not permit any of its Subsidiaries to approve, make, incur or commit to
incur any Restricted Disbursements other than:
(a) advances or extensions of credit on terms customary in the
industry involved in the form of accounts receivable incurred, and investments,
loans, and advances made in settlement of such accounts receivable, all in the
ordinary course of business;
(b) Permitted Investments;
(c) Capital Expenditures to develop Proved Reserves as detailed in
the most recent Reserve Report delivered by the Borrower, plus Capital
Expenditures in an amount not to exceed $2,000,000 during any six-month period
commencing on any October 1 or April 1, as the case may be;
(d) preferred stock dividends not to exceed $365,928 per annum so
long as no Event of Default has occurred and is continuing or would be caused by
payment of such preferred stock dividend; and
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(e) dividends paid by any Subsidiary of the Borrower to the Borrower
or any of its Subsidiaries and any minority shareholders of such Subsidiary, so
long as such dividend is paid at a uniform rate to all shareholders of such
Subsidiary and no Event of Default would exist after giving effect to such
payment.
Section 6.10. Lines of Business. The Borrower will not, and will not
permit any of its Subsidiaries to, directly or indirectly engage in any business
other than the acquisition, disposition, exploration, ownership development and
operation of Oil and Gas Properties and the gathering, marketing, treating,
processing, storage and transporting of production from Oil and Gas Properties.
Section 6.11. Transactions with Affiliates. Neither the Borrower nor
any of its Subsidiaries, will enter into any transaction with an Affiliate other
than (a) transactions entered into in the ordinary course of business and upon
terms no less favorable than those that the Borrower or its Subsidiary, as
applicable, could obtain in an arms length transaction with a Person that is not
an Affiliate and (b) transactions between the Borrower and any of its
Subsidiaries, or between such Subsidiaries, that do not and will not, either
directly or indirectly, cause an Event of Default.
ARTICLE VII
DEFAULT AND REMEDIES
Section 7.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) the Borrower shall fail to pay when due any installment of
principal of the Notes; or
(b) the Borrower shall fail to pay any interest on any Loan or any
arrangement fee, commitment fee, administration fee, funding fee, commission,
expense, compensation, reimbursement or other amount when due; or
(c) the Borrower shall fail to perform any term, covenant or
agreement contained in Article VI, or Section 5.01(e) of this Agreement; or
(d) the Borrower shall fail to perform any term, covenant or
agreement contained in this Agreement (other than those referenced in
subsections (a), (b) and (c) of this Section 7.01) and such failure shall not
have been remedied within ten (10) days after notice thereof from the Agent to
the Borrower; or
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(e) the Borrower shall fail to perform any term, covenant or
agreement contained in any Loan Document (other than those referenced in
subsections (a), (b), (c) and (d) of this Section 7.01) and such failure shall
not have been remedied within thirty (30) days after notice thereof from the
Agent to the Borrower; or
(f) any representation or warranty made by the Borrower, or any of
its officers, in any Loan Document or in any certificate, agreement, instrument
or statement contemplated by or delivered pursuant to, or in connection with,
any Loan Document shall prove to have been incorrect in any material respect
when made; or
(g) the Borrower or any of its Subsidiaries shall (i) fail to pay
Indebtedness having a principal amount in excess of $250,000 in the aggregate
(other than the amounts referred to in subsections (a) and (b) of this Section
7.01) owing by such Person, or any interest or premium thereon, when due (or, if
permitted by the terms of the relevant document, within any applicable grace
period), whether such Indebtedness shall become due by scheduled maturity, by
required prepayment, by acceleration, by demand or otherwise; or (ii) fail to
perform any term, covenant or condition on its part to be performed under any
agreement or instrument evidencing, securing or relating to any such
Indebtedness, when required to be performed, and such failure shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such failure is to accelerate, or to permit the
holder or holders of such Indebtedness to accelerate, the maturity of such
Indebtedness; or
(h) any Loan Document shall (other than with the consent of the
Majority Banks), at any time after its execution and delivery and for any
reason, cease to be in full force and effect or to provide the Liens
contemplated thereby, or shall be declared to be null and void, or the validity
or enforceability thereof or of the Liens contemplated thereby shall be
contested by any Person party to the Loan Documents or any such Person shall
deny that it has any or further liability or obligation under any Loan Document;
or
(i) the Borrower or any of its Subsidiaries shall be adjudicated
insolvent, or shall generally not pay, or admit in writing its inability to pay,
its debts as they mature, or make a general assignment for the benefit of
creditors, or any proceeding shall be instituted by any such Person seeking to
adjudicate it insolvent, seeking liquidation, winding-up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, or other similar official for it or for any substantial part
of its property, or the
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Borrower or any of its Subsidiaries shall take any action in furtherance of
any of the actions set forth above in this Section 7.01(i); or
(j) any proceeding of the type referred to in Section 7.01(i) is
filed, or any such proceeding is commenced against the Borrower or any of its
Subsidiaries or any such Person by any act indicates its approval thereof,
consent thereto or acquiescence therein, or an order for relief is entered in an
involuntary case under the bankruptcy law of the United States, or an order,
judgment or decree is entered appointing a trustee, receiver, custodian,
liquidator or similar official or adjudicating any such Person insolvent, or
approving the petition in any such proceedings, and such order, judgment or
decree remains in effect for sixty (60) days; or
(k) a final judgment or order for the payment of money in excess of
$500,000 (net of acknowledged, uncontested insurance coverage) shall be rendered
against the Borrower or any of its Subsidiaries which has not been discharged,
vacated or reversed and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) a stay of
enforcement of such judgment or order by reason of a pending appeal or
otherwise, shall not be in effect for any period of thirty (30) consecutive
days; or
(l) if (i) any Pension Plan shall fail to satisfy the minimum
funding standards of ERISA or the Internal Revenue Code for any plan year or
part thereof or a waiver of such standards or extension of any amortization
period is sought or granted under section 412 of the Internal Revenue Code, (ii)
a notice of intent to terminate any Pension Plan shall have been or is
reasonably expected to be filed with the PBGC or the PBGC shall have instituted
proceedings under Section 4042 of ERISA to terminate or appoint a trustee to
administer any Pension Plan or the PBGC shall have notified the Borrower or any
ERISA Affiliate or Subsidiary that a Pension Plan may become a subject to any
such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities"
(within the meaning of Section 4001(a)(18) of ERISA) under all Pension Plans,
determined in accordance with Title IV of ERISA, shall exceed $100,000, (iv) the
Borrower or any ERISA Affiliate or Subsidiary shall have incurred or is
reasonably expected to incur any liability pursuant to Title I or IV of ERISA,
the penalty or excise tax provisions of the Internal Revenue Code relating to
employee benefit plans and/or other liability with respect to one or more Other
Benefit Plans, (v) the Borrower or any ERISA Affiliate or Subsidiary withdraws
from any Multiemployer Plan, (vi) the Borrower or any ERISA Affiliate or
Subsidiary fails to make any contribution due, or payment to, any Pension Plan,
Multiemployer Plan and/or Other Benefit Plan, or (vii) the Borrower or any ERISA
Affiliate or Subsidiary establishes or amends any employee welfare benefit plan
that provides post-employment welfare benefits in a manner that would increase
the liability of the Borrower or any ERISA Affiliate or Subsidiary thereunder,
and any such event or events described in clauses (i) through (vii) above,
either
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individually or together with any other such event or events, could reasonably
be expected to have a Material Adverse Effect; or
(m) any event which has a Material Adverse Effect shall occur.
then, (i) upon the occurrence of any Event of Default described in Section
7.01(i) or Section 7.01(j), (A) the Commitments shall automatically terminate
and (B) the entire unpaid principal amount of all Loans, all interest accrued
and unpaid thereon, and all other amounts payable by the Borrower under this
Agreement, the Notes, the other Loan Documents and any other agreement or
security document contemplated by or delivered in connection with this Agreement
shall automatically become immediately due and payable, without presentment for
payment, demand, protest, notice of intent to accelerate, notice of acceleration
or further notice of any kind, all of which are hereby expressly waived by the
Borrower, and (ii) upon the occurrence of any Event of Default, the Agent may,
and upon the direction of the Majority Banks shall, by notice to the Borrower
(A) declare the Commitments to be terminated, whereupon the same shall forthwith
terminate and (B) declare the entire unpaid principal amount of all Loans, all
interest accrued and unpaid thereon, and all other amounts payable by the
Borrower under this Agreement, the Notes, the other Loan Documents and any other
agreement or security document contemplated by or delivered in connection with
this Agreement, to be forthwith due and payable, whereupon all such amounts
shall become and be forthwith due and payable, without presentment for payment,
demand, protest, notice of intent to accelerate, notice of acceleration or
further notice of any kind, all of which are hereby expressly waived by the
Borrower.
Section 7.02. Setoff in Event of Default. Upon the occurrence and
during the continuance of any Event of Default, each member of the Bank Group is
hereby authorized, at any time and from time to time, without notice to the
Borrower (any such notice being expressly waived by the Borrower) and to the
fullest extent permitted by applicable law, to setoff and apply any and all
deposits at any time held and other indebtedness at any time owing by such
member of the Bank Group (or any branch, subsidiary or affiliate of such member
of the Bank Group) to or for the credit or the account of the Borrower against
any and all of the obligations of the Borrower or any other Person, now or
hereafter existing under this Agreement, the Notes or the other Loan Documents,
irrespective of whether or not such member of the Bank Group shall have made any
demand for satisfaction of such obligations and although such obligations may be
unmatured. Any member of the Bank Group exercising such right agrees to notify
the Borrower promptly after any such setoff and application made by such Person;
provided, that the failure to give such notice shall not affect the validity of
such setoff and application. The rights of the Bank Group under this Section
7.02 are in addition to other rights and remedies (including,
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without limitation, other rights of setoff) which the Bank Group may have
hereunder or under any applicable law.
Section 7.03. No Waiver; Remedies. No failure on the part of any
member of the Bank Group to exercise, or any delay in exercising, any right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies provided in this Agreement are
cumulative and not exclusive of any remedies provided in any of the other Loan
Documents or by law.
Section 7.04. Hydrocarbon Proceeds. Notwithstanding that, by the terms of
the various Security Documents, Borrower is and will be absolutely and
unconditionally assigning to the Agent for the ratable benefit of the Banks all
Hydrocarbons and all proceeds therefrom accruing to the interest of the Borrower
in the Mortgaged Property, so long as no Event of Default has occurred the
Borrower shall have the right (revocable at any time by the Agent upon the
occurrence of an Event of Default) to receive from the purchasers of production
all such Hydrocarbon proceeds, subject, however, to the Liens created under the
Security Documents, which Liens are hereby affirmed and ratified. Upon the
occurrence of an Event of Default, the Agent may exercise all rights and
remedies granted under the Security Documents, including the right to obtain
possession of all such Hydrocarbon proceeds then held by the Borrower or to
receive directly from the purchasers of production all other such Hydrocarbon
proceeds. In no case shall any failure, whether purposed or inadvertent, by the
Agent to collect directly any such Hydrocarbon proceeds constitute in any way a
waiver, remission or release of any of its rights under the Security Documents,
nor shall any release of any such Hydrocarbon proceeds by the Agent to the
Borrower constitute a waiver, remission or release of any other such Hydrocarbon
proceeds or of any rights of the Agent to collect other such proceeds
thereafter.
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ARTICLE VIII
THE AGENT
Section 8.01. Authorization and Action. Each Bank hereby appoints
and authorizes the Agent to take such action in such capacity on such Bank's
behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to the Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto. As to any
matters not expressly provided for by this Agreement (including, without
limitation, enforcement or collection of the Notes or of amounts owing under the
other Loan Documents), the Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Majority Banks, and such instructions shall be
binding upon all Banks and any other holders of Notes; provided, however, that
the Agent shall not be required to take any action which exposes it to personal
liability or which is contrary to the Loan Documents or applicable law. The
Agent is hereby expressly authorized on behalf of the other members of the Bank
Group, without hereby limiting any implied authority, (a) to receive on behalf
of each of the other members of the Bank Group any payment of principal of or
interest on the Loans outstanding hereunder and all other amounts accrued
hereunder paid to such Persons, and promptly to distribute to each other member
of the Bank Group its proper share of all payments so received; (b) to give
notice within a reasonable time on behalf of each other member of the Bank Group
to the Borrower of any Default or Event of Default specified in this Agreement
of which the Agent has actual knowledge as provided in Section 8.09; (c) to
distribute to the other members of the Bank Group copies of all notices,
agreements and other material as provided for in this Agreement as received by
such Person; and (d) to distribute to the Borrower any and all requests, demands
and approvals received by such Person from any other member of the Bank Group.
Nothing herein contained shall be construed to constitute the Agent as a trustee
for any holder of the Notes or of a participation therein, nor to impose on the
Agent any duties or obligations other than those expressly provided for in the
Loan Documents.
Section 8.02. Reliance, Etc. None of the Agent, its Affiliates and
their directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent: (a) may treat
the payee of any Note as the holder thereof until the Agent receives and accepts
an Assignment and Acceptance entered into by the Bank which is the payee of such
Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section
9.02; (b) may consult with legal counsel (including counsel for the Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (c) makes
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no warranty or representation to any Bank and shall not be responsible to any
Bank for any statements, warranties or representations (whether written or oral)
made in or in connection with this Agreement or the other Loan Documents; (d)
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or the
other Loan Documents on the part of the Borrower or any other Person or to
inspect the property (including the books and records) of the Borrower or any
other Person; (e) shall not be responsible to any Bank for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of any
Loan Document, any collateral provided for therein, or any other instrument or
document furnished pursuant thereto; and (f) shall incur no liability under or
in respect of this Agreement by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telecopier, telegram, cable or
telex) believed by it to be genuine and signed or sent by the proper party or
parties. None of the Agent, its Affiliates and their directors, officers,
employees or agents shall have any responsibility to the Borrower on account of
the failure or delay in performance or breach by any Bank of any of its
obligations hereunder or to any Bank on account of the failure of or delay in
performance or breach by any other Bank or the Borrower of any of its
obligations hereunder or in connection herewith; provided, however, that the
foregoing shall not relieve BTCo of its obligations as a Bank hereunder.
Section 8.03. BTCo and Affiliates. Without limiting the right of any
other Bank to engage in any business transactions with the Borrower or any of
its Affiliates, with respect to its Commitment, the Loans made by it and the
Notes issued to it. Bankers Trust Company ("BTCo") shall have the same rights
and powers under this Agreement as any other Bank and may exercise the same as
though it were not the Agent; and the term "Bank" or "Banks" shall, unless
otherwise expressly indicated, include BTCo in its individual capacity. BTCo, or
any of its Affiliates, may be engaged in, or may hereafter engage in, one or
more loan, letter of credit, leasing, derivative or other financing activities
not the subject of the Loan Documents (collectively, the "Other Financings")
with the Borrower or any of its Affiliates, or may act as trustee on behalf of,
or depositary for, or otherwise engage in other business transactions with the
Borrower or any of its Affiliates (all Other Financings and other such business
transactions being collectively, the "Other Activities") with no responsibility
to account therefor to the Banks. Without limiting the rights and remedies of
the Banks specifically set forth in the Loan Documents, no other Bank shall have
any interest in (a) any Other Activities, (b) any present or future guarantee by
or for the account of the Borrower not contemplated or included in the Loan
Documents, (c) any present or future offset exercised by BTCo in respect of any
such Other Activities, (d) any present or future property taken as security for
any such Other Activities or (e) any property now or hereafter in the possession
or control of BTCo which may be or become security for the obligations of the
Borrower under the Loan Documents by reason of the general description of
indebtedness secured, or of
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property, contained in any other agreements, documents or instruments related to
such Other Activities; provided, that if any payment in respect of such
guarantees or such property or the proceeds thereof shall be applied to
reduction of the obligations evidenced hereunder and by the Notes, then each
Bank shall be entitled to share in such application according to its pro rata
portion of such obligations.
Section 8.04. Bank Credit Decision. Each Bank acknowledges that
it has, independently and without reliance upon any other member of the Bank
Group and based on the financial statements referred to in Section 4.06 and such
other 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 any other
member of the Bank Group and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement.
Section 8.05. Indemnification. The Banks agree to indemnify each of
the Agent, its Affiliates or any of their respective directors, officers, agents
or employees (to the extent not reimbursed by the Borrower), ratably according
to its Commitment Percentages, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against any such Person in any way relating to or
arising out of this Agreement or the other Loan Documents or any action taken or
omitted by any such Person under this Agreement or the other Loan Documents,
provided, that no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from such Person's gross negligence or
willful misconduct. IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT THE
AGENT, AND ITS AFFILIATES AND THEIR DIRECTORS, OFFICERS, AGENTS OR EMPLOYERS
SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES OR DISBURSEMENTS OF ANY KIND ARISING OUT OF OR RESULTING FROM THE
ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OF SUCH PERSON. The Agent
shall not be required to do any act hereunder or under any other document or
instrument delivered hereunder or in connection herewith or take any action
toward the execution or enforcement of the agencies hereby created, or to
prosecute or defend any suit in respect of this Agreement or the Loan Documents
or any collateral security, unless indemnified to its satisfaction by the
holders of the Notes against loss, cost, liability, and expense. If any
indemnity furnished to the Agent for any purpose is, in the opinion of such
Person insufficient or becomes impaired, such Person may call for additional
indemnity and not commence or
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cease to do the acts indemnified against until such additional indemnity is
furnished. Without limitation of the foregoing, each Bank agrees to reimburse
the Agent promptly upon demand for its ratable share of any out-of-pocket
expenses (including counsel fees) incurred by such Person in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
and the other Loan Documents, to the extent that the Agent is not reimbursed for
such expenses by the Borrower.
Section 8.06. Employees of the Agent. The Agent may execute any of
its duties under this Agreement, the other Loan Documents and any instrument,
agreement or document executed, issued or delivered pursuant hereto or thereto
or in connection herewith or therewith, by or through employees, agents and
attorneys-in-fact, and shall not be answerable for the default or misconduct of
any such employee, agent or attorney-in-fact selected by it with reasonable
care. The Agent may, and upon the written instruction of the Majority Banks
shall, enforce on behalf of the Banks any claims which the Agent and/or the
Banks may have against any such employee, agent or attorney-in-fact, and any
recovery therefrom shall be applied for the pro rata benefit of the Banks.
Section 8.07. Successor Agent. The Agent may resign at any time by
giving written notice thereof to the other members of the Bank Group and the
Borrower and may be removed at any time with or without cause by the Majority
Banks. Upon any such resignation or removal, the Majority Banks shall have the
right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Majority Banks, and shall have accepted such appointment,
within thirty (30) days after the retiring Agent's giving of notice of
resignation or the Majority Banks' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Banks, appoint a successor Agent, which
shall 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. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement, subject to the requirement that such retiring Agent will execute
such documents and take such actions as may be necessary or desirable to cause
the successor Agent to be vested with all such rights, powers, privileges and
duties. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Article VIII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement. All
reasonable costs and expenses incurred by the Bank Group in connection with
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any amendments or other documentation required by this Section 8.07 shall be
paid by the Borrower pursuant to Section 9.04 hereof.
Section 8.08. Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless it shall have received notice from a Bank or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default" or "notice of event of
default," as applicable. If the Agent receives such a notice from the Borrower,
the Agent shall give notice thereof to the other members of the Bank Group and,
if such notice is received from a Bank, the Agent shall give notice thereof to
the other members of the Bank Group and the Borrower. The Agent shall be
entitled to take action or refrain from taking action with respect to such
Default or Event of Default as provided in this Article VIII.
Section 8.09. Execution of Loan Documents. Each member of the Bank
Group hereby authorizes and directs the Agent to execute and deliver on its
behalf each Loan Document to be executed by the Agent pursuant to the terms of
this Agreement.
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ARTICLE IX
MISCELLANEOUS
Section 9.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement, any Note or any other Loan Document, or consent to
any departure by any Person herefrom or therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Borrower and the
Majority Banks, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided, that
no amendment, waiver or consent shall, unless in writing and signed by all the
Banks, do any of the following: (a) waive any of the conditions specified in
Article III, (b) increase the Commitments of the Banks or subject the Banks to
any additional obligations, (c) reduce the principal of, or interest on, the
Notes or any fees or other amounts payable hereunder, (d) postpone any date
fixed for any payment of principal of, or interest on, the Notes or any fees or
other amounts payable hereunder, (e) release the Borrower or any other Person
from its payment obligations to the Bank Group, regardless of whether such
obligations are those of a primary obligor, a guarantor or surety, or otherwise,
(f) authorize the Agent to release Liens against a substantial portion of any
collateral covered by the Security Documents, (g) take action which expressly
requires the signing of all the Banks pursuant to the terms of this Agreement,
(h) reduce the Commitment Percentages or the aggregate unpaid principal amount
of the Notes, or the number of Banks, as the case may be, required for the Agent
or the Banks or any of them to take any action under this Agreement or reduce
the percentage of Majority Banks or (i) amend this Section 9.01; provided,
further, that no amendment, waiver or consent shall, unless in writing and
signed by the Agent in addition to the Banks required above to take such action,
affect the rights or duties of the Agent under this Agreement or any other Loan
Document. Notwithstanding the foregoing, the Agent may (without the consent of
the Banks) release the Lien created under the Security Documents on any assets
of the Borrower or any of its Subsidiaries if the sale of such assets is
permitted under Section 6.07.
Section 9.02. Participation Agreements and Assignments. (a) Each
Bank may assign to one or more Eligible Assignees all or a portion of its rights
and obligations under this Agreement (including, without limitation, all or a
portion of its Commitment and the Loans owing to it and the other Loan
Documents); provided, that (i) each such assignment shall be of a constant, and
not a varying, percentage of all rights and obligations of the assignor under
this Agreement and the other Loan Documents, and no assignment shall be made
unless it covers a pro rata share of all rights and obligations of such assignor
under this Agreement and the other Loan Documents, (ii) the amount of the
Commitment of the assigning Bank being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to such
assignment) shall, unless otherwise agreed to by the Agent or
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unless such assignment is to a member of the Bank Group, in no event be less
than $5,000,000, (iii) each such assignment to an Eligible Assignee who is not a
member of the Bank Group must be approved by the Agent and (iv) the parties to
each such assignment shall execute and deliver to the Agent, for its acceptance
and recording in the Register (defined below), an Assignment and Acceptance,
together with any Note subject to such assignment and a recordation fee in the
amount of $3,500 for processing such assignment. Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto
and, to the extent that rights and obligations under the Loan Documents have
been assigned to it pursuant to such Assignment and Acceptance, have the rights
and obligations of a Bank under the Loan Documents, (y) the assigning Bank
thereunder shall, to the extent that rights and obligations under the Loan
Documents have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from further obligations under the Loan
Documents (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Bank's rights and obligations under this
Agreement, such Bank shall cease to be a party hereto) and (z) be deemed to have
made, as of such effective date, to the Agent and the Borrower the
representations and warranties set forth in Section 2.12(f) hereof.
(b) By executing and delivering an Assignment and Acceptance, the
assigning Bank thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Bank makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or any other instrument or document furnished
pursuant hereto; (ii) such assigning Bank makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrower or any other Person or the performance or observance by the Borrower or
any other Person of any of its obligations under this Agreement or any other
instrument or document furnished pursuant hereto; (iii) such assignee confirms
that it has received a copy of this Agreement and the other Loan Documents,
together with copies of the financial statements referred to in Section 4.06 and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance upon any member of
the Bank Group (including such assigning Bank) and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints
and authorizes the Agent, to take such action on its
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behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to such Person by the terms thereof, together with
such powers as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement and the other Loan Documents are required to be
performed by it as a Bank.
(c) The Agent shall maintain at its address referred to in Section
9.03 a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the Banks and
the Commitment of, and principal amount of the Loans owing to, each Bank from
time to time (the "Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrower and each
member of the Bank Group may treat each Person whose name is recorded in the
Register as a Bank hereunder for all purposes of this Agreement. The Register
shall be available for inspection by the Borrower or any member of the Bank
Group at any reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee representing that it is an Eligible Assignee,
together with any Notes subject to such assignment and the administrative fee
payable to the Agent for such assignment, the Agent shall, if such Assignment
and Acceptance has been completed and is in substantially the form of Exhibit
9.02 hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Borrower. Within five (5) Business Days after its receipt of such
notice, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for the surrendered Notes, new Notes to the order of such
Eligible Assignee in an amount corresponding to the Revolving Commitment assumed
by such Eligible Assignee pursuant to such Assignment and Acceptance and, if the
assigning Bank has retained a Revolving Commitment hereunder, new Notes to the
order of the assigning Bank in an amount corresponding to the Commitment
retained by it hereunder. Such new Notes shall be in an aggregate principal
amount equal to the aggregate principal amount of such surrendered Notes, shall
be dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form prescribed by Section 2.04 hereto.
(e) Each Bank may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment and
the Loans owing to it); provided, that (i) such Bank's obligations under this
Agreement (including, without limitation, its Commitment to the Borrower
hereunder) and the other Loan Documents shall remain unchanged, (ii) such
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Bank shall remain solely responsible to the other parties hereto for the
performance of such obligations, and the participating banks or other entities
shall not be considered a "Bank" for purposes of the Loan Documents, (iii) the
participating banks or other entities shall be entitled to the cost protection
provisions contained in Sections 2.11 through 2.14 to the same extent that the
Bank from which such participating bank or other entity acquired its
participation would be entitled to the benefit of such cost protection
provisions, so long as Borrower is not obligated to pay any amount under such
Sections in excess of the amount that would have been due to such Bank under
such Sections if no participations had been made by such Bank, and (iv) the
Borrower and the other members of the Bank Group shall continue to deal solely
and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement and the other Loan Documents, and such Bank
shall retain the sole right to enforce the obligations of the Borrower relating
to the Loans and to approve any amendment, modification or waiver of any
provision of this Agreement (other than amendments, modifications or waivers
with respect to the amounts of any fees payable hereunder or the amount of
principal of or the rate at which interest is payable on the Loans or the dates
fixed for payments of principal or interest on the Loans).
(f) Any Bank may at any time pledge or assign all or any portion of
its rights under this Agreement and the other Loan Documents to any Federal
Reserve Bank without notice to or consent of the Borrower. No such pledge or
assignment shall release the assigning Bank from its obligations hereunder.
(g) The Agent and each Bank may furnish any information concerning
the Borrower or its Subsidiaries in the possession of the Agent or such Bank
from time to time to Affiliates of the Agent or such Bank (including without
limitation, in the case of Bankers Trust Company, BT Securities Corporation and
its employees, to the extent necessary for the purposes contemplated by this
Agreement, including, without limitation, the syndication of the credit
facilities contemplated hereby) and, in the case of each Bank, to assignees and
participants (including prospective assignees and participants) of such Bank.
Each Bank will take reasonable steps to protect the confidentiality of any
information concerning the Borrower or its Subsidiaries provided to a respective
participant or assignee and known by such Bank to be confidential, and, if
requested by the Borrower, such Bank will identify the prospective assignees and
participants that have received such information.
Section 9.03. Notices. All correspondence, statements, notices,
requests and demands (collectively "Communications") shall be in writing
(including telegraphic Communications) and mailed, telegraphed, telecopied,
facsimile transmitted or delivered as follows:
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if to the Borrower --
Abraxas Petroleum Corporation
500 North Loop 1604 East, Suite 100
San Antonio, Texas 78232
Attention: Robert L.G. Watson
Telecopier: (210) 490-8816
if to the Agent--
Bankers Trust Company
130 Liberty Street, 14th Floor
New York, New York 10006
Attention: James T. Cullen
Telecopier: (212) 250-6029 or (212) 250-7351
with a copy to --
BT Southwest, Inc.
909 Fannin Street, Suite 3000
Houston, Texas 77010
Attention: Roberta Bohn
Telecopier: (713) 759-6708
if to any Bank, at its Domestic Lending Office, or as to each such party, at
such other address as such party shall designate in a written Communication to
each of the other parties hereto. All such Communications shall be effective, in
the case of written or telegraphed Communications, when deposited in the mails
or delivered to the telegraph company, respectively, and, in the case of a
Communication by telecopy or facsimile transmission, when telecopied or
transmitted against receipt of a confirmation, in each case addressed as
aforesaid, except that Communications to any member of the Bank Group pursuant
to Article II and Article VIII shall not be effective until received by such
Persons.
Section 9.04. Costs and Expenses. The Borrower agrees to pay
promptly (a) all reasonable costs and expenses (including fees and expenses of
legal counsel) of the Agent incurred in connection with the preparation,
execution, delivery, filing, administration and recording of the Loan Documents
and any other agreements or security documents delivered in connection with or
pursuant to any of the Loan Documents and the syndication of this Agreement both
before and after the date hereof, and (b) all reasonable costs and expenses of
any member of the Bank Group incurred in connection with the enforcement of the
Loan Documents and any other agreements or security documents executed
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in connection with or pursuant to any of the Loan Documents, including, but not
limited to, the reasonable fees and out-of-pocket expenses of counsel for any
member of the Bank Group, and local counsel who may be retained by such counsel,
with respect thereto, and the costs and expenses in connection with the custody,
preservation, use or operation of, or the sale of, or collection from, or other
realization upon the sale of, or collection from, or other realization upon any
collateral covered by any of the other documents executed in connection with or
pursuant to any of the Loan Documents. The agreements of Borrower contained in
this Section 9.04 shall survive the termination of the Commitments and the
payment of all other amounts owing hereunder or under any of the other Loan
Documents.
Section 9.05. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Borrower, the Agent, the Banks and
its successors and assigns, except that the Borrower may not assign or transfer
its rights hereunder without the prior written consent of the Banks.
Section 9.06. Independence of Covenants. All covenants contained in
the Loan Documents shall be given independent effect so that if a particular
action or condition is not permitted by any of such covenants, the fact that
such action or condition would be permitted by an exception to, or otherwise be
within the limitations of, another covenant shall not avoid the occurrence of a
Default or an Event of Default if such action is taken or condition exists.
Section 9.07. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement and the other Loan
Documents or made in writing by the Borrower in connection herewith or
therewith, shall survive the execution and delivery of this Agreement, the Notes
and the other Loan Documents, and the repayment of the Loans. Any investigation
by any member of the Bank Group shall not diminish in any respect whatsoever its
right to rely on such representations and warranties.
Section 9.08. Separability. Should any clause, sentence, paragraph,
subsection, Section or Article of this Agreement be judicially declared to be
invalid, unenforceable or void, such decision will not have the effect of
invalidating or voiding the remainder of this Agreement, and the parties hereto
agree that the part or parts of this Agreement so held to be invalid,
unenforceable or void will be deemed to have been stricken herefrom by the
parties hereto, and the remainder will have the same force and effectiveness as
if such stricken part or parts had never been included herein.
Section 9.09. Captions. The captions in this Agreement have been
inserted for convenience only and shall be given no substantive meaning or
significance whatsoever in construing the terms and provisions of this
Agreement.
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<PAGE>
Section 9.10. Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original, and all of
which taken together shall constitute one and the same agreement.
Section 9.11. Governing Law. THIS AGREEMENT (INCLUDING THE VALIDITY
AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK. Chapter 15, Subtitle 3, Title 79, of
the Revised Civil Statutes of Texas, 1925, as amended (relating to revolving
loan and revolving triparty accounts), shall not apply to this Agreement or the
Notes or the transactions contemplated hereby.
Section 9.12. Submission to Jurisdiction. (a) The Borrower hereby
irrevocably submits to the non-exclusive jurisdiction of any New York state
court located in the Borough of Manhattan, City and State of New York, or any
federal court located in the Southern District of New York over any action or
proceeding arising out of or relating to this Agreement or any of the other Loan
Documents, and each of the Borrower irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in such New
York state or federal court; provided, nothing in this Section 9.12 is intended
to waive the right of any member of the Bank Group to remove any such action or
proceeding commenced in any such New York state court to an appropriate New York
federal court to the extent the basis for such removal exists under applicable
law. The Borrower hereby irrevocably appoints CT Corporation (the "Process
Agent"), with an office on the date hereof at 1633 Broadway, New York, New York
10019, as its agent to receive on behalf of it and its properties service of
copies of the summons and complaint and any other process which may be served in
any such action or proceeding. Such service may be made by mailing by certified
mail a copy of such process to the Borrower in care of the Process Agent at the
Process Agent's above address, with a copy to such Person at its address
specified herein and each of the Borrower hereby irrevocably authorizes and
directs the Process Agent to accept such service on its behalf. As an
alternative method of service, each of the Borrower also irrevocably consents to
the service of any and all process in any such action or proceeding by the
mailing by certified mail of copies of such process to it at its address
specified herein. The Borrower agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(b) Nothing in this Section 9.12 shall affect the right of any
member of the Bank Group to serve legal process in any other manner permitted by
law or affect the right of any member of the Bank Group to bring any action or
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<PAGE>
proceeding against any of the Borrower, or such Person's properties, in the
courts of any other jurisdiction.
Section 9.13. Limitation on Interest. Each provision in this
Agreement and each other Loan Document is expressly limited so that in no
event whatsoever shall the amount paid, or otherwise agreed to be paid, by the
Borrower for the use, forbearance or detention of the money to be loaned under
this Agreement or any other Loan Document or otherwise (including any sums paid
as required by any covenant or obligation contained herein or in any other Loan
Document which is for the use, forbearance or detention of such money), exceed
that amount of money which would cause the effective rate of interest to exceed
the Highest Lawful Rate, and all amounts owed under this Agreement and each
other Loan Document shall be held to be subject to reduction to the effect that
such amounts so paid or agreed to be paid which are for the use, forbearance or
detention of money under this Agreement or such Loan Document shall in no event
exceed that amount of money which would cause the effective rate of interest to
exceed the Highest Lawful Rate. To the extent that the Highest Lawful Rate
applicable to a Bank is at any time determined by Texas law, such rate shall be
the "indicated rate ceiling" described in Section (a)(1) of Article 1.04 of
Chapter 1, Subtitle 1, Title 79, of the Revised Civil Statutes of Texas, 1925,
as amended; provided, to the extent permitted by such Article, the Banks from
time to time by notice from the Agent to Borrower may revise the aforesaid
election of such interest rate ceiling as such ceiling affects the then-current
or future balances of the Loans outstanding under the Notes. Notwithstanding any
provision in this Agreement or any other Loan Document to the contrary, if the
maturity of the Notes or the obligations in respect of the other Loan Documents
are accelerated for any reason, or in the event of prepayment of all or any
portion of the Notes or the obligations in respect of the other Loan Documents
by the Borrower or in any other event, earned interest on the Loans and such
other obligations of the Borrower may never exceed the maximum amount permitted
by applicable law, and any unearned interest otherwise payable under the Notes
or the obligations in respect of the other Loan Documents that is in excess of
the maximum amount permitted by applicable law shall be cancelled automatically
as of the date of such acceleration or prepayment or other such event and, if
theretofore paid, shall be credited on the principal of the Notes or, if the
principal of the Notes has been paid in full, held as collateral for any
contingent or unmatured obligation of the Borrower, or, if there are no
contingent or unmatured obligations of the Borrower then outstanding, refunded
to the Borrower. In determining whether or not the interest paid or payable,
under any specific contingency, exceeds the Highest Lawful Rate, the Borrower
and the Banks shall, to the maximum extent permitted by applicable law,
amortize, prorate, allocate and spread, in equal parts during the period of the
actual term of this Agreement, all interest at any time contracted for, charged,
received or reserved in connection with this Agreement.
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<PAGE>
Section 9.14. Indemnification. The Borrower agrees to indemnify,
defend and hold the Agent and each member of the Bank Group, their Affiliates
and their officers, employees, agents, directors, shareholders and Affiliates
(collectively, "Indemnified Persons") harmless from and against any and all
loss, liability, damage, judgment, claim, deficiency or reasonable expense
(including interest, penalties, reasonable attorneys' fees and amounts paid in
settlement) incurred by or asserted against any Indemnified Person arising out
of, in any way connected with, or as a result of (i) the execution and delivery
of this Agreement and the other documents contemplated hereby, the performance
by the parties hereto and thereto of its obligations hereunder and thereunder
(including but not limited to the making of the Commitments of each Bank) and
consummation of the transactions contemplated hereby and thereby, (ii) the
actual or proposed use of the proceeds of the Loans, (iii) any violation by the
Borrower or any of its Subsidiaries of any Requirement of Law, including but not
limited to Environmental Laws, (iv) ownership by the Bank Group of any real or
personal property following foreclosure under the Security Documents, to the
extent such losses, liabilities, damages, judgments, claims, deficiencies or
expenses arise out of or result from the presence, disposal or release of any
hazardous materials or solid waste in, on or under such property during the
period owned, leased or operated by the Borrower or any of its Subsidiaries,
including, without limitation, losses, liabilities, damages, judgments, claims,
deficiencies or expenses which are imposed under Environmental Laws upon Persons
by virtue of their ownership, (v) any member of the Bank Group being deemed an
operator of any such real or personal property in circumstances in which no
member of the Bank Group is generally operating or generally exercising control
over such property, to the extent such losses, liabilities, damages, judgments,
claims, deficiencies or expenses arise out of or result from any hazardous
materials or solid waste located in, on or under such property or (vi) any
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnified Person is a party thereto; provided that such
indemnity shall not apply to any such losses, claims, damages, liabilities or
related expenses that are determined by a court of competent jurisdiction by
final and nonappealable judgment to have resulted from the gross negligence or
willful misconduct of such Indemnified Person. WITHOUT LIMITING ANY PROVISION OF
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, IT IS THE EXPRESS INTENTION
OF THE BORROWER THAT EACH INDEMNIFIED PERSON SHALL BE INDEMNIFIED AND HELD
HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DEFICIENCIES,
JUDGMENTS OR REASONABLE EXPENSES ARISING OUT OF OR RESULTING FROM THE ORDINARY
NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OF SUCH INDEMNIFIED PERSON. THE
OBLIGATIONS OF THE BORROWER UNDER THIS SECTION 9.14 SHALL SURVIVE THE
TERMINATION OF THIS AGREEMENT.
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Section 9.15. Confidentiality. In the event that the Borrower
provides to the Agent or the Banks written confidential information belonging to
the Borrower, if the Borrower shall denominate such information in writing as
"confidential", the Agent and the Banks shall thereafter maintain such
information in confidence in accordance with the standards of care and diligence
that each utilizes in maintaining its own confidential information. This
obligation of confidence shall not apply to such portions of the information
which (i) are in the public domain, (ii) hereafter become part of the public
domain without the Agent or the Banks breaching their obligation of confidence
to the Borrower, (iii) are previously known by the Agent or the Banks from some
source other than the Borrower, (iv) are hereafter obtained by or available to
the Agent or the Banks from a third party who owes no obligation of confidence
to the Borrower with respect to such information or through any other means
other than through disclosure by the Borrower, (vi) are disclosed with the
Borrower's consent, (vii) must be disclosed either pursuant to any Requirements
of Law or to Persons regulating the activities of the Agent or the Banks, or
(viii) as may be required by law or regulation or order of any Governmental
Authority in any judicial, arbitration or governmental proceeding. Further, the
Agent or a Bank may disclose any such information to any other Bank, any
independent petroleum engineers or consultants, any independent certified public
accountants, any legal counsel employed by such Person in connection with this
Agreement or any Security Document, including without limitation, the
enforcement or exercise of all rights and remedies thereunder, or any assignee
or participant (including prospective assignees and participants) in the Loans;
provided, however, that the Agent or Bank imposes on the Person to whom such
information is disclosed the same obligation to maintain the confidentiality of
such information as is imposed upon it hereunder. Notwithstanding anything to
the contrary provided herein, this obligation of confidence shall cease three
(3) years from the date the information was furnished, unless the Borrower
requests in writing at least thirty (30) days prior to the expiration of such
three year period, to maintain the confidentiality of such information for an
additional three year period. The Borrower waives any and all other rights it
may have to confidentiality as against the Agent and the Banks arising by
contract, agreement, statute or law except as expressly stated in this Section
9.15.
Section 9.16. Final Agreement of the Parties. THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by its officers thereunto duly authorized as of the date first above
written.
ABRAXAS PETROLEUM
CORPORATION
By:_____________________________
Chris E. Williford
Executive Vice President
BANKERS TRUST COMPANY,
as
Agent
By:__________________________
Mary Zadroga
Vice President
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Bank:
Revolving Commitment: $25,000,000.00 BANKERS TRUST COMPANY
Tranche A Commitment: $29,166,666.67
Tranche B Commitment: $20,833,333.33
By:_________________________
Mary Zadroga
Vice President
Address:
130 Liberty Street, 14th Floor
New York, New York 10006
Telecopy No.: (212) 250-6029
Domestic Lending Office
Bankers Trust Company
130 Liberty Street, 14th Floor
New York, New York 10006
Eurodollar Lending Office
Bankers Trust Company
130 Liberty Street, 14th Floor
New York, New York 10006
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Bank:
Revolving Commitment: $5,000,000.00 INTERNATIONALE
NEDERLANDEN
Tranche A Commitment: $5,833,333.33 (U.S.) CAPITAL
CORPORATION
Tranche B Commitment: $4,166,666.67
By:__________________________
Christopher R. Wagner
Vice President
Address:
135 East 57th Street
8th Floor
New York, New York 10022
Telecopy No.: (212) 832-3616
Domestic Lending Office
135 East 57th Street
8th Floor
New York, New York 10022
Telecopy No.: (212) 832-3616
Eurodollar Lending Office
135 East 57th Street
8th Floor
New York, New York 10022
Telecopy No.: (212) 832-3616
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