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
November 27, 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, Texas 78232
(Address of principal executive offices)
Registrant's telephone number, including area code:
(210) 490-4788
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
(A) On November 14, 1996, Canadian Abraxas Petroleum Limited ("Canadian
Abraxas"), a wholly-owned subsidiary of Abraxas Petroleum Corporation,
("Abraxas"), acquired 100% of the capital stock of CGGS, Canadian Gas Gathering
Systems Inc. ("CGGS"). CGGS owns producing oil and gas properties in western
Canada (the "CGGS Properties") and interests ranging from 10% to 100% in 197
miles of natural gas gathering systems and 11 natural gas processing plants or
compression facilities, four of which are operated by CGGS (the "CGGS Plants").
The purchase price for the stock was $94.7 million which included approximately
$11.0 million for CGGS' working capital. Funding for the acquisition was
provided by proceeds from Abraxas' and Canadian Abraxas' recent senior note
offering. (See item 5). The CGGS Properties consist of 154,968 gross acres
(86,327 net acres) and 120 gross wells (68.8 net wells), 48 of which will be
operated by the Company. As of September 1, 1996, the CGGS Properties had total
proved reserves of 10,821 MBOE (91.8% natural gas) with aggregate PV-10 of $46.4
million, 86.3% of which is attributable to proved developed reserves. The CGGS
Plants had aggregate net natural gas processing capacity of 98.3 MMcf per day at
September 1, 1996.
(B) On November 14, 1996 Abraxas acquired a 75% partnership interest in
Portilla - 1996 L.P. (the "Partnership") for $27.5 million including the
repayment of certain indebtedness. The Company previously owned the other 25%
interest in the Partnership. The Partnership owned a 100% working interest in
the Portilla Field, a 100% interest in a natural gas processing plant located at
the Portilla Field, located in the Texas gulf coast region and a 12% working
interest in the Happy Field, located in the Permian Basin of west Texas. Funding
for the acquisition was provided by proceeds from Abraxas' and Canadian Abraxas'
recent senior note offering. (See item 5). Portilla and Happy consist of 1,405
gross acres (1,115 net acres) and 78 gross wells (52 net wells), 61 of which are
operated by the Company. As of June 30, 1996, Portilla and Happy had total
proved reserves of 4,314 MBOE (18.4% natural gas) with an aggregate PV-10 of
$30.2 million, 99.8% of which was attributable to proved developed reserves. The
Portilla Plant had natural gas processing capacity of approximately 20.0 MMcf
per day at June 30, 1996.
Item 5. OTHER EVENTS
A. SENIOR NOTE OFFERING
SALE OF NOTES. On November 14, 1996, Abraxas and Canadian Abraxas
consummated the offering of $215 million of 11.5% senior notes due 2004 (the
"Notes").
Interest on the Notes will accrue from their date of original issuance (the
"Issue Date") and will be payable semi-annually in arrears on May 1 and November
1 of each year, commencing on May 1, 1997, at the rate of 11.5% per annum. The
Notes will be redeemable, in whole or in part, at the option of Abraxas and
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Canadian Abraxas, on or after November 1, 2000, at the redemption prices set
forth below, plus accrued and unpaid interest to the date of redemption, if
redeemed during the 12-month period commencing on November 1 of the years set
forth below:
Year Percentage
2000 105.75%
2001 102.875
2002 and thereafter 100.00%
In addition, at any time on or prior to November 1, 1999, Abraxas and Canadian
Abraxas may, at their option, redeem up to 35% of the aggregate principal amount
of the Notes originally issued with the net cash proceeds of one or more equity
offerings, at a redemption price equal to 111.5% of the aggregate principal
amount of the Notes to be redeemed, plus accrued and unpaid interest to the date
of redemption; provided, however, that, after giving effect to any such
redemption, at least $139.75 million aggregate principal amount of Notes remains
outstanding.
The Notes are general unsecured obligations of Abraxas and Canadian
Abraxas and will rank pari passu in right of payment to all existing and future
unsubordinated indebtedness of Abraxas and Canadian Abraxas. The Notes rank
senior in right of payment to all future subordinated indebtedness of Abraxas
and Canadian Abraxas. The Notes are, however, effectively subordinated to
secured indebtedness of Abraxas and Canadian Abraxas to the extent of the value
of the assets securing such indebtedness.
The Notes are unconditionally guaranteed, jointly and severally, by
certain of Abraxas' and Canadian Abraxas' future subsidiaries (the "Subsidiary
Guarantors"). The guarantees are general unsecured obligations of the Subsidiary
Guarantors and rank pari passu in right of payment to all unsubordinated
indebtedness of the Subsidiary Guarantors and senior in right of payment to all
subordinated indebtedness of the Subsidiary Guarantors. The Guarantees are
effectively subordinated to secured indebtedness of the Subsidiary Guarantors to
the extent of the value of the assets securing such indebtedness. As of the date
of this Report, Abraxas, Canadian Abraxas and the Subsidiary Guarantors have no
secured indebtedness outstanding.
Upon a Change of Control (as defined in the Indenture governing the
Notes), each holder of the Notes will have the right to require Abraxas and
Canadian Abraxas to repurchase all or a portion of such holder's Notes at a
redemption price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest to the date of repurchase. In addition, Abraxas and Canadian
Abraxas will be obligated to offer to repurchase the Notes at 100% of the
principal amount thereof plus accrued and unpaid interest to the date of
repurchase in the event of certain asset sales.
USE OF PROCEEDS. The net proceeds to Abraxas and Canadian Abraxas from the
offering of the Notes were approximately $207.0 million after deducting
underwriting discounts and estimated offering expenses payable by Abraxas and
Canadian Abraxas.
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Abraxas and Canadian Abraxas used the net proceeds to (1) repay all amounts
outstanding under its credit agreement dated September 30, 1996 with Bankers
Trust Company ("BT") and other lenders in the amount of $85.0 million, (2)
acquire the outstanding capital stock of CGGS for $94.7 million, (3) acquire the
Partnership Interest in Portilla - 1996 L.P. and repay certain indebtedness for
$27.5 million and (4) provide working capital for general corporate purposes
including future acquisitions and development of producing properties.
New Credit Facility. In connection with the consummation of the offering
of the Notes, Abraxas entered into an Amended and Restated Credit Agreement with
Bankers Trust Company and ING (U.S.) Capital Corporation (the "New Credit
Facility". The New Credit Facility provides for a $40.0 million revolving
facility of which $20.0 million is initially available and is secured by
substantially all of the U.S. assets of Abraxas.
B. EQUITY ISSUES
In a November 1995 private equity placement, the Company sold 1,330,000 units,
each consisting of one share of common stock and one contingent value right
("CVR"). Under the terms of the placement, each CVR holder had the right to
acquire additional shares of common stock at November 17, 1996 under certain
circumstances related to the current trading value of the Company's stock. The
Company had the option to extend the issue date for any additional shares based
on the stock price until November 1997. On November 15, 1996 the Company
notified the CVR owners that it had exercised its option and extended any CVR
related share issue date until November 17, 1997 and correspondingly the target
value of share price had been increased from $10 to $12.50 per share.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(A) Financial Statements of Business Acquired.
It is impracticable to provide the required financial statements for the
acquisitions described above at the time this report is filed. The financial
statements will be filed as soon as practicable, but no later than 60 days after
this report must be filed.
(C) Exhibits.
The following exhibits are filed as part of this report:
NUMBER DOCUMENT
4.1 Indenture dated November 14, 1996 by
and among Abraxas Petroleum
Corporation ("Abraxas"), Canadian
Abraxas Petroleum Limited ("Canadian
Abraxas")and IBJ Schroeder Bank and
Trust Company.
10.1 Purchase Agreement dated November 14,
1996 by and among Abraxas, Canadian
Abraxas, BT Securities Corporation,
Jefferies & Company, Inc. and ING
Baring (U.S.) Securities Corporation
(collectively, the "Initial
Purchasers").
10.2 Registration Rights Agreement dated
November 14, 1996 by and among
Abraxas, Canadian Abraxas, and the
Initial Purchasers.
10.3 Share Sale Agreement dated October
29, 1996 by and among Abraxas,
Canadian Abraxas, CGGS Canadian Gas
Gathering Systems Inc. ("CGGS") and
the shareholders of CGGS.
10.4 Purchase and Sale Agreement dated
September 18, 1996 by and among
Abraxas, ACCO, LLC, Massachusetts Bay
Transportation Authority Retirement
Fund, Metropolitan Life Insurance
Company Separate Account No. 175, The
General Mills Inc. Master Trust:
Pooled Real Estate Fund and State
Street Research Energy, Inc.
10.5 Amended and Restated Credit Agreement
dated November 14, 1996 by and among
Abraxas, Bankers Trust Company, ING
(U.S.) Capital Corporation and the
lenders named therein.
<PAGE>
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 and Treasurer
Dated: November 27, 1996
ABRAXAS PETROLEUM CORPORATION
and
CANADIAN ABRAXAS PETROLEUM LIMITED,
as Issuers
and
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
INDENTURE
Dated as of November 14, 1996
$215,000,000
11 1/2% Senior Notes due 2004, Series A
11 1/2% Senior Notes due 2004, Series B
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CROSS-REFERENCE TABLE
TIA Indenture
Section Section
310(a)(1).............................................................7.10
(a)(2)............................................................7.10
(a)(3)..........................................................N.A.
(a)(4)..........................................................N.A.
(a)(5)......................................................7.08; 7.10
(b).........................................................7.08; 7.10,
.................................................................11.02
(c).............................................................N.A.
311(a)................................................................7.11
(b)...............................................................7.11
(c).............................................................N.A.
312(a)................................................................2.05
(b)..............................................................10.03
(c)..............................................................10.03
313(a)................................................................7.06
(b)(1)..........................................................N.A.
(b)(2)............................................................7.06
(c)........................................................7.06; 10.02
(d)...............................................................7.06
314(a)..........................................................4.07; 4.08;
.................................................................10.02
(b).............................................................N.A.
(c)(1)...........................................................10.04
(c)(2)...........................................................10.04
(c)(3)..........................................................N.A.
(d).............................................................N.A.
(e)..............................................................10.05
(f).............................................................N.A.
315(a)...........................................................7.01(b)
(b)........................................................7.05; 10.02
(c)..........................................................7.01(a)
(d)..........................................................7.01(c)
(e)...............................................................6.11
316(a)(last sentence).................................................2.09
(a)(1)(A).........................................................6.05
(a)(1)(B).........................................................6.04
(a)(2)..........................................................N.A.
(b)...............................................................6.07
(c)...............................................................9.04
317(a)(1).............................................................6.08
(a)(2)............................................................6.09
(b)...............................................................2.04
318(a)...............................................................10.01
(c)..............................................................10.01
- ----------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions............................................. 1
Section 1.02 Incorporation by Reference of TIA....................... 30
Section 1.03 Rules of Construction................................... 31
ARTICLE TWO
THE NOTES
Section 2.01 Form and Dating......................................... 31
Section 2.02 Execution and Authentication; Aggregate
Principal Amount..................................... 32
Section 2.03 Registrar and Paying Agent.............................. 34
Section 2.04 Paying Agent To Hold Assets in Trust.................... 34
Section 2.05 Holder Lists............................................ 35
Section 2.06 Transfer and Exchange................................... 35
Section 2.07 Replacement Notes....................................... 36
Section 2.08 Outstanding Notes....................................... 36
Section 2.09 Treasury Notes.......................................... 37
Section 2.10 Temporary Notes......................................... 37
Section 2.11 Cancellation............................................ 37
Section 2.12 Defaulted Interest...................................... 38
Section 2.13 CUSIP Number............................................ 39
Section 2.14 Deposit of Monies....................................... 39
Section 2.15 Restrictive Legends..................................... 39
Section 2.16 Book-Entry Provisions for Global Security............... 41
Section 2.17 Special Transfer Provisions............................. 43
Section 2.18 Liquidated Damages Under Registration
Rights Agreement..................................... 45
ARTICLE THREE
REDEMPTION
Section 3.01 Notices to Trustee...................................... 46
Section 3.02 Selection of Notes To Be Redeemed....................... 46
Section 3.03 Optional Redemption..................................... 47
Section 3.04 Notice of Redemption.................................... 47
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Section 3.05 Effect of Notice of Redemption.......................... 48
Section 3.06 Deposit of Redemption Price............................. 49
Section 3.07 Notes Redeemed in Part.................................. 49
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ARTICLE FOUR
COVENANTS
Section 4.01 Payment of Notes........................................ 49
Section 4.02 Maintenance of Office or Agency......................... 50
Section 4.03 Corporate Existence..................................... 50
Section 4.04 Payment of Taxes and Other Claims....................... 50
Section 4.05 Maintenance of Properties and
Insurance............................................ 51
Section 4.06 Compliance Certificate; Notice of
Default.............................................. 51
Section 4.07 Compliance with Laws.................................... 52
Section 4.08 Reports to Holders...................................... 53
Section 4.09 Waiver of Stay, Extension or Usury Laws................. 53
Section 4.10 Limitation on Restricted Payments....................... 53
Section 4.11 Limitation on Transactions with
Affiliates........................................... 56
Section 4.12 Limitation on Incurrence of Additional
Indebtedness......................................... 57
Section 4.13 Limitation on Dividend and Other Payment
Restrictions Affecting Restricted
Subsidiaries......................................... 59
Section 4.14 Limitation on Restricted and
Unrestricted Subsidiaries............................ 60
Section 4.15 Change of Control....................................... 61
Section 4.16 Limitation on Asset Sales............................... 64
Section 4.17 Limitation on Preferred Stock of
Restricted Subsidiaries.............................. 68
Section 4.18 Limitation on Liens..................................... 68
Section 4.19 Limitation on Conduct of Business....................... 68
Section 4.20 Additional Subsidiary Guarantees........................ 68
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01 Merger, Consolidation and Sale of Assets................ 69
Section 5.02 Successor Corporation Substituted....................... 71
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ARTICLE SIX
REMEDIES
Section 6.01 Events of Default....................................... 71
Section 6.02 Acceleration............................................ 73
Section 6.03 Other Remedies.......................................... 74
Section 6.04 Waiver of Past Defaults................................. 74
Section 6.05 Control by Majority..................................... 75
Section 6.06 Limitation on Suits..................................... 75
Section 6.07 Right of Holders To Receive Payment..................... 76
Section 6.08 Collection Suit by Trustee.............................. 76
Section 6.09 Trustee May File Proofs of Claim........................ 76
Section 6.10 Priorities.............................................. 77
Section 6.11 Undertaking for Costs................................... 77
Section 6.12 Restoration of Rights and Remedies...................... 78
ARTICLE SEVEN
TRUSTEE
Section 7.01 Duties of Trustee....................................... 78
Section 7.02 Rights of Trustee....................................... 79
Section 7.03 Individual Rights of Trustee............................ 81
Section 7.04 Trustee's Disclaimer.................................... 81
Section 7.05 Notice of Default....................................... 81
Section 7.06 Reports by Trustee to Holders........................... 81
Section 7.07 Compensation and Indemnity.............................. 82
Section 7.08 Replacement of Trustee.................................. 83
Section 7.09 Successor Trustee by Merger, Etc........................ 84
Section 7.10 Eligibility; Disqualification........................... 84
Section 7.11 Preferential Collection of Claims
Against Issuers...................................... 85
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.01 Termination of Issuers' Obligations..................... 85
Section 8.02 Application of Trust Money.............................. 88
Section 8.03 Repayment to the Issuers................................ 88
Section 8.04 Reinstatement........................................... 89
Section 8.05 Acknowledgment of Discharge by Trustee.................. 89
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ARTICLE NINE
MODIFICATION OF THE INDENTURE
Section 9.01 Without Consent of Holders.............................. 89
Section 9.02 With Consent of Holders................................. 90
Section 9.03 Compliance with TIA..................................... 90
Section 9.04 Revocation and Effect of Consents....................... 91
Section 9.05 Notation on or Exchange of Notes........................ 92
Section 9.06 Trustee To Sign Amendments, Etc......................... 92
ARTICLE TEN
MISCELLANEOUS
Section 10.01 TIA Controls............................................ 92
Section 10.02 Notices................................................. 93
Section 10.03 Communications by Holders with Other
Holders.............................................. 94
Section 10.04 Certificate and Opinion as to Conditions
Precedent............................................ 94
Section 10.05 Statements Required in Certificate or
Opinion.............................................. 94
Section 10.06 Rules by Trustee, Paying Agent, Registrar............... 95
Section 10.07 Legal Holidays.......................................... 95
Section 10.08 Governing Law........................................... 95
Section 10.09 No Adverse Interpretation of Other
Agreements........................................... 95
Section 10.10 No Personal Liability................................... 96
Section 10.11 Successors.............................................. 96
Section 10.12 Duplicate Originals..................................... 96
Section 10.13 Severability............................................ 96
Section 10.14 Independence of Covenants............................... 96
ARTICLE ELEVEN
GUARANTEE OF NOTES
Section 11.01 Unconditional Guarantee................................. 97
Section 11.02 Limitations on Guarantees............................... 98
Section 11.03 Execution and Delivery of Guarantee..................... 99
Section 11.04 Release of a Subsidiary Guarantor....................... 99
Section 11.05 Waiver of Subrogation................................... 100
Section 11.06 Immediate Payment....................................... 101
Section 11.07 No Set-Off.............................................. 101
Section 11.08 Obligations Absolute.................................... 101
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Section 11.09 Obligations Continuing.................................. 102
Section 11.10 Obligations Not Reduced................................. 102
Section 11.11 Obligations Reinstated.................................. 102
Section 11.12 Obligations Not Affected................................ 103
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Section 11.13 Waiver.................................................. 104
Section 11.14 No Obligation To Take Action Against
the Issuers.......................................... 104
Section 11.15 Dealing with the Issuers and Others..................... 105
Section 11.16 Default and Enforcement................................. 105
Section 11.17 Amendment, Etc.......................................... 105
Section 11.18 Acknowledgment.......................................... 106
Section 11.19 Costs and Expenses...................................... 106
Section 11.20 No Merger or Waiver; Cumulative Remedies................ 106
Section 11.21 Survival of Obligations................................. 106
Section 11.22 Guarantee in Addition to Other
Obligations.......................................... 107
Section 11.23 Severability............................................ 107
Section 11.24 Successors and Assigns.................................. 107
Signatures ..................................................... 108
Exhibit A - Form of Initial Note.......................................... A-1
Exhibit B - Form of Exchange Note......................................... B-1
Exhibit C - Form of Certificate To Be Delivered
in Connection with Transfers to
Non-QIB Accredited Investors............................ C-1
Exhibit D - Form of Certificate To Be Delivered in
Connection with Transfers Pursuant to
Regulation S............................................ D-1
Exhibit E - Guarantee..................................................... E-1
Note: This Table of Contents shall not, for any purpose, be deemed to be part of
the Indenture.
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<PAGE>
INDENTURE, dated as of November 14, 1996, among Abraxas Petroleum
Corporation, a Nevada corporation (the "Company"), Canadian Abraxas Petroleum
Limited, a Canadian corporation and wholly owned subsidiary of the Company
("Canadian Abraxas" and, together with the Company, the "Issuers") and IBJ
Schroder Bank & Trust Company, a New York corporation, as Trustee (the
"Trustee").
The Issuers have duly authorized the creation of an issue of 11 1/2%
Senior Notes due 2004, Series A (the "Initial Notes") and 11 1/2% Senior Notes
due 2004, Series B to be issued in exchange for the Initial Notes pursuant to
the Registration Rights Agreement (as defined herein) (the "Exchange Notes" and,
together with the Private Exchange Notes (as defined herein) and the Initial
Notes, the "Notes") and, to provide therefor, the Issuers have duly authorized
the execution and delivery of this Indenture. The Notes will be guaranteed on a
senior basis by each of the Company's future Restricted Subsidiaries (as defined
herein) (collectively, the "Subsidiary Guarantors"). All things necessary to
make the Notes, when duly issued and executed by the Issuers, and authenticated
and delivered hereunder, the valid obligations of the Issuers, and to make this
Indenture a valid and binding agreement of the Issuers, have been done.
Each party hereto agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Notes.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries (i) existing at the time such Person becomes a Restricted
Subsidiary or at the time it merges or consolidates with the Company or any of
its Restricted Subsidiaries or (ii) which becomes Indebtedness of the Company or
a Restricted Subsidiary in connection with the acquisition of assets from such
Person, in each case not incurred in connection with, or in anticipation or
contemplation of, such Person becoming a Restricted Subsidiary or such
acquisition, merger or consolidation.
"Additional Interest" shall have the meaning set forth in the
Registration Rights Agreement.
"Adjusted Consolidated Net Tangible Assets" means (without
duplication), as of the date of determination, (a) the sum of (i) discounted
future net revenues from proved oil and gas reserves of the Company and its
consolidated Subsidiaries, calculated in accordance with Commission guidelines
(before any state or federal income tax), as estimated by a nationally
recognized firm of independent petroleum engineers as of a date
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no earlier than the date of the Company's latest annual consolidated financial
statements, as increased by, as of the date of determination, the estimated
discounted future net revenues from (A) estimated proved oil and gas reserves
acquired since the date of such year-end reserve report, and (B) estimated oil
and gas reserves attributable to upward revisions of estimates of proved oil and
gas reserves since the date of such year-end reserve report due to exploration,
development or exploitation activities, in each case calculated in accordance
with Commission guidelines (utilizing the prices utilized in such year-end
reserve report), and decreased by, as of the date of determination, the
estimated discounted future net revenues from (C) estimated proved oil and gas
reserves produced or disposed of since the date of such year-end reserve report
and (D) estimated oil and gas reserves attributable to downward revisions of
estimates of proved oil and gas reserves since the date of such year-end reserve
report due to changes in geological conditions or other factors which would, in
accordance with standard industry practice, cause such revisions, in each case
calculated in accordance with Commission guidelines (utilizing the prices
utilized in such year-end reserve report); provided, however, that, in the case
of each of the determinations made pursuant to clauses (A) through (D), such
increases and decreases shall be as estimated by the Company's petroleum
engineers, unless in the event that there is a Material Change as a result of
such acquisitions, dispositions or revisions, then the discounted future net
revenues utilized for purposes of this clause (a)(i) shall be confirmed in
writing, by a nationally recognized firm of independent petroleum engineers
(which may be the Company's independent petroleum engineers who prepare the
Company's annual reserve report) plus (ii) the capitalized costs that are
attributable to oil and gas properties of the Company and its Subsidiaries to
which no proved oil and gas reserves are attributable, based on the Company's
books and records as of a date no earlier than the date of the Company's latest
annual or quarterly financial statements, plus (iii) the Net Working Capital on
a date no earlier than the date of the Company's latest consolidated annual or
quarterly financial statements plus (iv) with respect to each other tangible
asset of the Company or its consolidated Restricted Subsidiaries, specifically
including, but not to the exclusion of any other qualifying tangible assets, the
Company's or its consolidated Restricted Subsidiaries, gas producing facilities
and unproved oil and gas properties (less any remaining deferred income taxes
which have been allocated to such gas processing facilities in connection with
the acquisition thereof), land, equipment, leasehold improvements, investments
carried on the equity method, restricted cash and the carrying value of
marketable securities, the greater of (A) the net book value of such other
tangible asset on a date no earlier than the date of the Company's latest
consolidated annual or quarterly financial statements or (B) the appraised
value, as estimated by a qualified Independent Advisor, of such other tangible
assets of the Company and its Restricted Subsidiaries, as of a date no earlier
than the date of the Company's latest audited financial statements minus (b)
minority interests and, to the extent not otherwise taken into account in
determining Adjusted Consolidated Net Tangible Assets, any gas balancing
liabilities of the Company and its consolidated Restricted Subsidiaries
reflected in the Company's latest audited financial statements. In addition to,
but without duplication of, the foregoing, for purposes of this definition,
"Adjusted Consolidated Net Tangible Assets" shall be calculated after giving
effect, on a pro forma basis, to (1) any Investment not prohibited by the
Indenture, to and including the date of the transaction giving rise to the need
to calculate Adjusted Consolidated Net Tangible Assets (the "Assets Transaction
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Date"), in any other Person that, as a result of such Investment, becomes a
Restricted Subsidiary of the Company, (2) the acquisition, to and including the
Assets Transaction Date (by merger, consolidation or purchase of stock or
assets), of any business or assets, including, without limitation, Permitted
Industry Investments, and (3) any sales or other dispositions of assets
permitted by the Indenture (other than sales of Hydrocarbons or other mineral
products in the ordinary course of business) occurring on or prior to the Assets
Transaction Date.
"Affiliate" means, with respect to any specified Person, (a) any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or under common control with, such specified
Person and (b) any Related Person of such Person. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative of the foregoing.
"Affiliate Transaction" has the meaning provided in Section 4.11.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Agent Members" has the meaning provided in Section 2.16.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary, or shall be merged with or into the Company or
any Restricted Subsidiary, or (b) the acquisition by the Company or any
Restricted Subsidiary of the assets of any Person (other than a Restricted
Subsidiary) which constitute all or substantially all of the assets of such
Person or comprises any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, exchange, lease (other than operating leases entered into
in the ordinary course of business), assignment or other transfer for value by
the Company or any of its Restricted Subsidiaries (including any Sale and
Leaseback Transaction) to any Person other than the Company or a Restricted
Subsidiary of (a) any Capital Stock of any Restricted Subsidiary; or (b) any
other property or assets (including any interests therein) of the Company or any
Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction; provided, however, that Asset Sales shall
not include (i) the sale, lease, conveyance, disposition or other transfer of
all or substantially all of the assets of the Company in a transaction which is
made in compliance with the provisions of Section 5.01, (ii) any Investment in
an Unrestricted Subsidiary which is made in compliance with the provisions of
Section 4.10, (iii) disposals or replacements of obsolete equipment in the
ordinary course of business, (iv) the sale, lease, conveyance, disposition or
other transfer (each, a "Transfer") by the Company or any Restricted Subsidiary
of assets or property to the Company or one or more Restricted Subsidiaries, (v)
any disposition of Hydrocarbons
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or other mineral products for value in the ordinary course of business and (vi)
the Transfer by the Company or any Restricted Subsidiary of assets or property
in the ordinary course of business; provided, however, that the aggregate amount
(valued at the fair market value of such assets or property at the time of such
Transfer) of all such assets and property Transferred since the Issue Date
pursuant to this clause (vi) shall not exceed $1,000,000 in any one year.
"Authenticating Agent" has the meaning provided in Section 2.02.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"Board of Directors" means, as for any Person, the board of
directors of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to be in full force and effect on the date of such certification, and delivered
to the Trustee.
"Business Day" means any day other than a Saturday, Sunday or any
other day on which banking institutions in the City of New York are required or
authorized by law or other governmental action to be closed.
"Canadian Abraxas" means the party named as such in the first
paragraph of this Indenture until a successor replaces it pursuant to this
Indenture and thereafter means such successor.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether voting or non-voting) of capital stock,
including each class of Common Stock and Preferred Stock of such Person and any
and all rights, warrants or options exchangeable for or convertible into such
capital stock and (ii) with respect to any Person that is not a corporation, any
and all partnership or other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the
discounted present value of the rental obligations of such Person under a lease
of (or other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation at such date, determined in accordance with GAAP.
"Cascade" means Cascade Oil & Gas Ltd., an Alberta, Canada
corporation.
"Cash Equivalents" means (a) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof; (b)
marketable direct obligations issued
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by any state of the United States of America or any political subdivision of any
such state or any public instrumentality thereof maturing within one year from
the date of acquisition thereof and, at the time of acquisition, having one of
the two highest ratings obtainable from either Standard & Poor's Corporation
("S&P") or Moody's Investors Service, Inc. ("Moody's"); (c) commercial paper
maturing no more than one year from the date of creation thereof and, at the
time of acquisition, having a rating of at least A-1 from S&P or at least P-1
from Moody's; (d) certificates of deposit or bankers' acceptances maturing
within one year from the date of acquisition thereof issued by any bank
organized under the laws of the United States of America or any state thereof or
the District of Columbia or any United States branch of a foreign bank having at
the date of acquisition thereof combined capital and surplus of not less than
$250,000,000; (e) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (a) above; and (f)
money market mutual or similar funds having assets in excess of $100,000,000.
"Change of Control" means the occurrence of one or more of the
following events: (a) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for purposes
of Section 13(d) of the Exchange Act (a "Group") (whether or not otherwise in
compliance with the provisions of this Indenture); (b) the approval by the
holders of Capital Stock of the Company of any plan or proposal for the
liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of this Indenture); (c) any Person or Group shall
become the owner, directly or indirectly, beneficially or of record, of shares
representing more than 35% of the aggregate ordinary voting power represented by
the issued and outstanding Capital Stock of the Company; or (d) the replacement
of a majority of the Board of Directors of the Company over a two-year period
from the directors who constituted the Board of Directors of the Company at the
beginning of such period with directors whose replacement shall not have been
approved (by recommendation, nomination or election, as the case may be) by a
vote of at least a majority of the Board of Directors of the Company then still
in office who either were members of such Board of Directors at the beginning of
such period or whose election as a member of such Board of Directors was
previously so approved.
"Change of Control Offer" has the meaning provided in Section 4.15.
"Change of Control Payment Date" has the meaning provided in Section
4.15.
"Commission" means the SEC.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Company" means Abraxas Petroleum Corporation, a Nevada corporation.
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"Company Properties" means all Properties, and equity, partnership
or other ownership interests therein, that are related or incidental to, or used
or useful in connection with, the conduct or operation of any business
activities of the Company or the Subsidiaries, which business activities are not
prohibited by the terms of the Indenture.
"Consolidated EBITDA" means, for any period, the sum (without
duplication) of (a) Consolidated Net Income and (b) to the extent Consolidated
Net Income has been reduced thereby, (i) all income taxes of the Company and its
Restricted Subsidiaries paid or accrued in accordance with GAAP for such period
(other than income taxes attributable to extraordinary, unusual or nonrecurring
gains or losses or taxes attributable to sales or dispositions outside the
ordinary course of business), (ii) Consolidated Interest Expense, (iii) the
amount of any Preferred Stock dividends paid by the Company and its Restricted
Subsidiaries and (iv) Consolidated Non-cash Charges, less any non-cash items
increasing Consolidated Net Income for such period, all as determined on a
consolidated basis for the Company and its Restricted Subsidiaries in accordance
with GAAP.
"Consolidated EBITDA Coverage Ratio" means, with respect to the
Company, the ratio of (a) Consolidated EBITDA of the Company during the four
full fiscal quarters for which financial information in respect thereof is
available (the "Four Quarter Period") ending on or prior to the date of the
transaction giving rise to the need to calculate the Consolidated EBITDA
Coverage Ratio (the "Transaction Date") to (b) Consolidated Fixed Charges of the
Company for the Four Quarter Period. In addition to and without limitation of
the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect (without
duplication) on a pro forma basis for the period of such calculation to (a) the
incurrence or repayment of any Indebtedness of the Company or any of its
Restricted Subsidiaries (and the application of the proceeds thereof) giving
rise to the need to make such calculation and any incurrence or repayment of
other Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (b) any Asset
Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of the
Company or one of its Restricted Subsidiaries (including any Person who becomes
a Restricted Subsidiary as a result of the Asset Acquisition) incurring,
assuming or otherwise being liable for Acquired Indebtedness, and also
including, without limitation, any Consolidated EBITDA attributable to the
assets which are the subject of the Asset Acquisition or Asset Sale during the
Four Quarter Period) occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such Asset Sale or Asset Acquisition (including the
incurrence, assumption or liability for any such Acquired Indebtedness) occurred
on the first day of the Four Quarter Period. If the Company or any of its
Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the incurrence of such
guaranteed Indebtedness as if the Company or
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the Restricted Subsidiary, as the case may be, had directly incurred or
otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated EBITDA Coverage Ratio," (i) interest on
outstanding Indebtedness determined on a fluctuating basis as of the Transaction
Date and which will continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (ii) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; (iii) notwithstanding clauses (i) and (ii) above, interest
on Indebtedness determined on a fluctuating basis, to the extent such interest
is covered by agreements relating to Interest Swap Obligations, shall be deemed
to accrue at the rate per annum resulting after giving effect to the operation
of such agreements.
"Consolidated Fixed Charges" means, with respect to the Company for
any period, the sum, without duplication, of (a) Consolidated Interest Expense
(including any premium or penalty paid in connection with redeeming or retiring
Indebtedness of the Company and its Restricted Subsidiaries prior to the stated
maturity thereof pursuant to the agreements governing such Indebtedness), plus
(b) the product of (i) the amount of all dividend payments on any series of
Preferred Stock of the Company (other than dividends paid in Qualified Capital
Stock) paid, accrued or scheduled to be paid or accrued during such period times
(ii) a fraction, the numerator of which is one and the denominator of which is
one minus the then current effective consolidated federal, state and local
income tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to the Company
for any period, the sum of, without duplication: (a) the aggregate of the
interest expense of the Company and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (i) any amortization of original issue discount, (ii) the net costs
under Interest Swap Obligations, (iii) all capitalized interest and (iv) the
interest portion of any deferred payment obligation; and (b) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by the Company and its Restricted Subsidiaries during such
period, as determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to the Company for any
period, the aggregate net income (or loss) of the Company and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided, however, that there shall be excluded therefrom (a)
after-tax gains from Asset Sales or abandonments or reserves relating thereto,
(b) after-tax items classified as extraordinary or nonrecurring gains, (c) the
net income of any Person acquired in a "pooling of interests" transaction
accrued prior to the date it becomes a Restricted Subsidiary or is merged or
consolidated with the Company or any Restricted Subsidiary, (d) the net income
(but not loss) of any Restricted Subsidiary to the extent that the declaration
of dividends or similar
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distributions by that Restricted Subsidiary of that income is restricted by
charter, contract, operation of law or otherwise, (e) the net income of any
Person in which the Company has an interest, other than a Restricted Subsidiary,
except to the extent of cash dividends or distributions actually paid to the
Company or to a Restricted Subsidiary by such Person, (f) income or loss
attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued) and (g) in the case of a successor to the Company by
consolidation or merger or as a transferee of the Company's assets, any net
income (or loss) of the successor corporation prior to such consolidation,
merger or transfer of assets.
"Consolidated Net Worth" of any Person as of any date means the
consolidated stockholders' equity of such Person, determined on a consolidated
basis in accordance with GAAP, less (without duplication) amounts attributable
to Disqualified Capital Stock of such Person.
"Consolidated Non-Cash Charges" means, with respect to the Company,
for any period, the aggregate depreciation, depletion, amortization and other
non-cash expenses of the Company and its Restricted Subsidiaries reducing
Consolidated Net Income of the Company for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which requires an
accrual of or a reserve for cash charges for any future period).
"Consolidation" means, with respect to any Person, the consolidation
of the accounts of the Restricted Subsidiaries of such Person with those of such
Person, all in accordance with GAAP; provided, however, that "consolidation"
will not include consolidation of the accounts of any Unrestricted Subsidiary of
such Person with the accounts of such Person. The term "consolidated" has a
correlative meaning to the foregoing.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at One State Street, Eleventh Floor, New York, New York 10004.
"Covenant Defeasance" has the meaning set forth in Section 8.01.
"Crude Oil and Natural Gas Business" means (i) the acquisition,
exploration, development, operation and disposition of interests in oil, gas and
other hydrocarbon properties located in North America, and (ii) the gathering,
marketing, treating, processing, storage, selling and transporting of any
production from such interests or properties of the Company or of others.
"Crude Oil and Natural Gas Hedge Agreements" means, with respect to
any Person, any oil and gas agreements and other agreements or arrangements or
any combination thereof entered into by such Person in the ordinary course of
business and that is designed to provide protection against oil and natural gas
price fluctuations.
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"Crude Oil and Natural Gas Properties" means all Properties,
including equity or other ownership interests therein, owned by any Person which
have been assigned "proved oil and gas reserves" as defined in Rule 4-10 of
Regulation S-X of the Securities Act as in effect on the Issue Date.
"Crude Oil and Natural Gas Related Assets" means any Investment or
capital expenditure (but not including additions to working capital or
repayments of any revolving credit or working capital borrowings) by the Company
or any Subsidiary of the Company which is related to the business of the Company
and its Subsidiaries as it is conducted on the date of the Asset Sale giving
rise to the Net Cash Proceeds to be reinvested.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Depository" means The Depository Trust Company, its nominees and
successors.
"Disqualified Capital Stock" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is mandatorily redeemable at the sole option of the
holder thereof, in whole or in part, in either case, on or prior to the final
maturity of the Notes.
"Equity Offering" means an offering of Qualified Capital Stock of
the Company.
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"Exchange Notes" has the meaning provided in the preamble to this
Indenture.
"fair market value" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length, free market transaction,
for cash, between
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an informed and willing seller and an informed and willing buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. Fair
market value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a Board Resolution of the
Company delivered to the Trustee; provided, however, that (A) if the aggregate
non-cash consideration to be received by the Company or any Restricted
Subsidiary from any Asset Sale shall reasonably be expected to exceed $5,000,000
or (B) if the net worth of any Restricted Subsidiary to be designated as an
Unrestricted Subsidiary shall reasonably be expected to exceed $10,000,000, then
fair market value shall be determined by an Independent Advisor.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board as of any date of
determination.
"Global Note" has the meaning provided in Section 2.01.
"Grey Wolf" means, Grey Wolf Exploration Ltd., an Alberta
corporation.
"guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part) (but if in part, only to the extent thereof); provided,
however, that the term "guarantee" shall not include (A) endorsements for
collection or deposit in the ordinary course of business and (B) guar antees
(other than guarantees of Indebtedness) by the Company in respect of assisting
one or more Subsidiaries in the ordinary course of their respective businesses,
including without limitation guarantees of trade obligations and operating
leases, on ordinary business terms. The term "guarantee" used as a verb has a
corresponding meaning.
"Guarantees" means the guarantees of the obligations under this
Indenture and the Notes by the Subsidiary Guarantors as set forth in Article
Eleven hereof.
"Holder" means any Person holding a Note.
"Hydrocarbons" means oil, gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all constituents, elements or compounds thereof and products
processed therefrom.
"incur" has the meaning set forth in Section 4.12.
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"Indebtedness" means with respect to any Person, without
duplication, (a) all Obligations of such Person for borrowed money, (b) all
Obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (c) all Capitalized Lease Obligations of such Person, (d)
all Obligations of such Person issued or assumed as the deferred purchase price
of property, all conditional sale obligations and all Obligations under any
title retention agreement (but excluding trade accounts payable), (e) all
Obligations for the reimbursement of any obligor on a letter of credit, banker's
acceptance or similar credit transaction, (f) guarantees and other contingent
obligations in respect of Indebtedness referred to in clauses (a) through (e)
above and clause (h) below, (g) all Obligations of any other Person of the type
referred to in clauses (a) through (f) above which are secured by any Lien on
any property or asset of such Person, the amount of such Obligation being deemed
to be the lesser of the fair market value of such property or asset or the
amount of the Obligation so secured, (h) all Obligations under Currency
Agreements and Interest Swap Obligations and (i) all Disqualified Capital Stock
issued by such Person with the amount of Indebtedness represented by such
Disqualified Capital Stock being equal to the greater of its voluntary or
involuntary liquidation preference and its maximum fixed Redemption Price or
repurchase price. For purposes hereof, the "maximum fixed repurchase price" of
any Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Capital
Stock as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the Company. The
"amount" or "principal amount" of Indebtedness at any time of determination as
used herein represented by (a) any Indebtedness issued at a price that is less
than the principal amount at maturity thereof shall be the face amount of the
liability in respect thereof, (b) any Capitalized Lease Obligation shall be the
amount determined in accordance with the definition thereof, (c) any Interest
Swap Obligations included in the definition of Permitted Indebtedness shall be
zero, (d) all other unconditional obligations shall be the amount of the
liability thereof determined in accordance with GAAP and (e) all other
contingent obligations shall be the maximum liability at such date of such
Person.
"Indenture" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"Independent Advisor" means a reputable accounting, appraisal or
nationally recognized investment banking, engineering or consulting firm (a)
which does not, and whose directors, officers and employees or Affiliates do
not, have a direct or indirect material financial interest in the Company and
(b) which, in the judgment of the Board of Directors of the Company, is
otherwise disinterested, independent and qualified to perform the task for which
it is to be engaged.
"Initial Notes" has the meaning provided in the preamble to this
Indenture.
"Initial Purchasers" means, collectively, BT Securities Corporation,
Bankers
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Trust International plc, Jefferies & Company, Inc. and ING Baring
(U.S.) Securities Corporation.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"interest," when used with respect to any Note means the amount of
all interest accruing on such Note, including any applicable defaulted interest
pursuant to Section 2.12 and any Additional Interest pursuant to the
Registration Rights Agreement.
"Interest Payment Date" means the stated maturity of an installment
of interest on the Notes.
"Interest Swap Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"Investment" means, with respect to any Person, any direct or
indirect (i) loan, advance or other extension of credit (including, without
limitation, a guarantee) or capital contribution to (by means of any transfer of
cash or other property (valued at the fair market value thereof as of the date
of transfer) others or any payment for property or services for the account or
use of others), (ii) purchase or acquisition by such Person of any Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person (whether by merger, consolidation, amalgamation or
otherwise and whether or not purchased directly from the issuer of such
securities or evidences of Indebtedness), (iii) guarantee or assumption of the
Indebtedness of any other Person (other than the guarantee or assumption of
Indebtedness of such Person or a Restricted Subsidiary of such Person which
guarantee or assumption is made in compliance with the provisions of Section
4.12), and (iv) other items that would be classified as investments on a balance
sheet of such Person prepared in accordance with GAAP. Notwithstanding the
foregoing, "Investment" shall exclude extensions of trade credit by the Company
and its Restricted Subsidiaries on commercially reasonable terms in accordance
with normal trade practices of the Company or such Restricted Subsidiary, as the
case may be. The amount of any Investment shall not be adjusted for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment. If the Company or any Restricted Subsidiary sells or otherwise
disposes of any Capital Stock of any Restricted Subsidiary such that, after
giving effect to any such sale or disposition, it ceases to be a Subsidiary of
the Company, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Capital
Stock of such Restricted Subsidiary not sold or disposed of.
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"Issue Date" means the date of original issuance of the Notes.
"Issuers" means the Company and Canadian Abraxas.
"Legal Defeasance" has the meaning set forth in Section 8.01.
"Legal Holiday" has the meaning provided in Section 10.07.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Material Change" means an increase or decrease of more than 10%
during a fiscal quarter in the discounted future net cash flows (excluding
changes that result solely from changes in prices) from proved oil and gas
reserves of the Company and consolidated Subsidiaries (before any state or
federal income tax); provided, however, that the following will be excluded from
the Material Change calculation: (i) any acquisitions during the quarter of oil
and gas reserves that have been estimated by independent petroleum engineers and
on which a report or reports exist, (ii) any disposition of properties existing
at the beginning of such quarter that have been disposed of as provided in
Section 4.16 and (iii) any reserves added during the quarter attributable to the
drilling or recompletion of wells not included in previous reserve estimates,
but which will be included in future quarters.
"Maturity Date" means November 1, 2004.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable after
taking into account any reduction in consolidated tax liability due to available
tax credits or deductions and any tax sharing arrangements, (c) repayment of
Indebtedness that is required to be repaid in connection with such Asset Sale
and (d) appropriate amounts (determined by the Chief Financial Officer of the
Company) to be provided by the Company or any Restricted Subsidiary, as the case
may be, as a reserve, in accordance with GAAP, against any post-closing
adjustments or liabilities associated with such Asset Sale and retained by the
Company or any Restricted Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale (but excluding
any payments which, by the terms of the indemnities, will not, be made during
the term of the Notes).
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"Net Proceeds Offer" has the meaning set forth in Section 4.16.
"Net Proceeds Offer Amount" has the meaning set forth in Section
4.16.
"Net Proceeds Offer Payment Date" has the meaning set forth in
Section 4.16.
"Net Proceeds Offer Trigger Date" has the meaning set forth in
Section 4.16.
"Net Working Capital" means (i) all current assets of the Company
and its consolidated Subsidiaries, minus (ii) all current liabilities of the
Company and its consolidated Subsidiaries, except current liabilities included
in Indebtedness, in each case as set forth in financial statements of the
Company prepared in accordance with GAAP.
"New Credit Facility" means the Credit Agreement dated as of
September 30, 1996, by and among the Company, Bankers Trust Company, as Agent,
and each of the lenders named therein, or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders, together
with the related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreements extending the
maturity of, refinancing, replacing, increasing or otherwise restructuring all
or any portion of the Indebtedness under such agreements.
"Non-Recourse Indebtedness" with respect to any Person means
Indebtedness of such Person for which (i) the sole legal recourse for collection
of principal and interest on such Indebtedness is against the specific property
identified in the instruments evidencing or securing such Indebtedness and such
property was acquired with the proceeds of such Indebtedness or such
Indebtedness was Incurred within 90 days after the acquisition of such property
and (ii) no other assets of such Person may be realized upon in collection of
principal or interest on such Indebtedness; provided, however, that any such
Indebtedness shall not cease to be "Non-Recourse Indebtedness" solely as a
result of the instrument governing such Indebtedness containing terms pursuant
to which such Indebtedness becomes recourse upon (a) fraud or misrepresentation
by the Person in connection with such Indebtedness, (b) such Person failing to
pay taxes or other charges that result in the creation of liens on any portion
of the specific property securing such Indebtedness or failing to maintain any
insurance on such property required under the instruments securing such
Indebtedness, (c) the conversion of any of the collateral for such Indebtedness,
(d) such Person failing to maintain any of the collateral for such Indebtedness
in the condition required under the instruments securing the Indebtedness, (e)
any income generated by the specific property securing such Indebtedness being
applied in a manner not otherwise allowed in the instruments securing such
Indebtedness, (f) the violation of any applicable law or ordinance governing
hazardous materials or substances or otherwise affecting the environmental
condition of the specific property securing the Indebtedness or (g) the rights
of the holder of such Indebtedness to the specific property are impaired,
suspended or reduced by any act, omission or
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misrepresentation of such Person; provided, further, however, that upon the
occurrence of any of the foregoing clauses (a) through (g) above, any such
Indebtedness which shall have ceased to be "Non-Recourse Indebtedness" shall be
deemed to have been Indebtedness incurred by such Person at such time.
"Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.
"Notes" means the Initial Notes and the Exchange Notes treated as a
single class of securities, as amended or supplemented from time to time in
accordance with the terms hereof, that are issued pursuant to this Indenture.
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Offering Memorandum" means the confidential Offering Memorandum
dated November 5, 1996 of the Issuers relating to the offering of the Notes.
"Officer" means, with respect to any Person, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer, the Treasurer, the Controller, or the
Secretary of such Person, or any other officer designated by the Board of
Directors serving in a similar capacity.
"Officers' Certificate" means a certificate signed by two Officers
of each of the Issuers.
"Opinion of Counsel" means a written opinion from legal counsel who
is reasonably acceptable to the Trustee complying with the requirements of
Sections 10.04 and 10.05, as they relate to the giving of an Opinion of Counsel.
"Paying Agent" has the meaning provided in Section 2.03.
"Payment Restriction" shall have the meaning set forth in Section
4.13.
"Permitted Indebtedness" means, without duplication, each of the
following:
(a) Indebtedness under the Notes, the Exchange Notes, the Private
Exchange Notes, if any, this Indenture and the Guarantees;
(b) Indebtedness incurred pursuant to the New Credit Facility in an
aggregate principal amount at any time outstanding not to exceed
$50,000,000, reduced by any required permanent repayments (which are
accompanied by a corresponding permanent commitment reduction) thereunder;
(c) Interest Swap Obligations of the Company or a Restricted
Subsidiary covering Indebtedness of the Company or any of its Restricted
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Subsidiaries; provided, however, that such Interest Swap Obligations are
entered into to protect the Company and its Restricted Subsidiaries from
fluctuations in interest rates on Indebtedness incurred in accordance with
this Indenture to the extent the notional principal amount of such
Interest Swap Obligations does not exceed the principal amount of the
Indebtedness to which such Interest Swap Obligation relates;
(d) Indebtedness of a Restricted Subsidiary to the Company or to a
Wholly Owned Restricted Subsidiary for so long as such Indebtedness is
held by the Company or a Wholly Owned Restricted Subsidiary, in each case
subject to no Lien held by a Person other than the Company or a Wholly
Owned Restricted Subsidiary; provided, however, that if as of any date any
Person other than the Company or a Wholly Owned Restricted Subsidiary owns
or holds any such Indebtedness or holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of such Indebtedness;
(e) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary for so long as such Indebtedness is held by a Wholly Owned
Restricted Subsidiary, in each case subject to no Lien; provided, however,
that (i) any Indebtedness of the Company to any Wholly Owned Restricted
Subsidiary that is not a Subsidiary Guarantor is unsecured and
subordinated, pursuant to a written agreement, to the Company's
obligations under the Indenture and the Notes and (ii) if as of any date
any Person other than a Wholly Owned Restricted Subsidiary owns or holds
any such Indebtedness or holds a Lien in respect of such Indebtedness,
such date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the Company;
(f) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided, however,
that such Indebtedness is extinguished within two Business Days of
incurrence;
(g) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company or such Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations in
connection with self-insurance or similar requirements in the ordinary
course of business;
(h) Refinancing Indebtedness;
(i) Capitalized Lease Obligations of the Company outstanding on the
Issue Date;
(j) Capitalized Lease Obligations and Purchase Money Indebtedness of
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the Company or any of its Restricted Subsidiaries not to exceed $5,000,000
at any one time outstanding;
(k) Permitted Operating Obligations;
(l) Obligations arising in connection with Crude Oil and Natural Gas
Hedge Agreements of the Company or a Restricted Subsidiary;
(m) Non-Recourse Indebtedness;
(n) Indebtedness under Currency Agreements; provided, however, that
in the case of Currency Agreements which relate to Indebtedness, such
Currency Agreements do not increase the Indebtedness of the Company and
its Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(o) additional Indebtedness of the Company or any of its Restricted
Subsidiaries in an aggregate principal amount at any time outstanding not
to exceed the greater of (i) $10.0 million or (ii) 5.0% of Adjusted
Consolidated Net Tangible Assets of the Company; and
(p) Indebtedness outstanding on the Issue Date.
"Permitted Industry Investments" means (i) capital expenditures,
including, without limitation, acquisitions of Company Properties and interests
therein; (ii) (a) entry into operating agreements, joint ventures, working
interests, royalty interests, mineral leases, unitization agreements, pooling
arrangements or other similar or customary agreements, transactions, properties,
interests or arrangements, and Investments and expenditures in connection
therewith or pursuant thereto, in each case made or entered into in the ordinary
course of the oil and gas business, and (b) exchanges of Company Properties for
other Company Properties of at least equivalent value as determined in good
faith by the Board of Directors of the Company; and (iii) Investments of
operating funds on behalf of co-owners of Crude Oil and Natural Gas Properties
of the Company or the Subsidiaries pursuant to joint operating agreements.
"Permitted Investments" means (a) Investments by the Company or any
Restricted Subsidiary in any Person that is or will become immediately after
such Investment a Restricted Subsidiary or that will merge or consolidate into
the Company or a Restricted Subsidiary that is not subject to any Payment
Restriction, (b) Investments in the Company by any Restricted Subsidiary;
provided, however, that any Indebtedness evidencing any such Investment held by
a Restricted Subsidiary that is not a Subsidiary Guarantor is unsecured and
subordinated, pursuant to a written agreement, to the Company's obligations
under the Notes and this Indenture; (c) investments in cash and Cash
Equivalents; (d) Investments made by the Company or its Restricted Subsidiaries
as a result of consideration received in connection with an Asset Sale made in
compliance with Section 4.16; and (e) Permitted Industry Investments.
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"Permitted Liens" means each of the following types of Liens:
(a) Liens existing as of the Issue Date to the extent and in the
manner such Liens are in effect on the Issue Date (and any extensions,
replacements or renewals thereof covering property or assets secured by
such Liens on the Issue Date);
(b) Liens securing Indebtedness outstanding under the New Credit
Facility and Liens arising under the Indenture;
(c) Liens securing the Notes and the Guarantees;
(d) Liens of the Company or a Restricted Subsidiary on assets of any
Restricted Subsidiary;
(e) Liens securing Refinancing Indebtedness which is incurred to
Refinance any Indebtedness which has been secured by a Lien permitted
under this Indenture and which has been incurred in accordance with the
provisions of this Indenture; provided, however, that such Liens (x) are
no less favorable to the Holders and are not more favorable to the
lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being Refinanced and (y) do not extend to or cover any
property or assets of the Company or any of its Restricted Subsidiaries
not securing the Indebtedness so Refinanced;
(f) Liens for taxes, assessments or governmental charges or claims
either (i) not delinquent or (ii) contested in good faith by appropriate
proceedings and as to which the Company or a Restricted Subsidiary, as the
case may be, shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(g) statutory and contractual Liens of landlords to secure rent
arising in the ordinary course of business to the extent such Liens relate
only to the tangible property of the lessee which is located on such
property and Liens of carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen and other Liens imposed by law incurred in the
ordinary course of business for sums not yet delinquent or being contested
in good faith, if such reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made in respect thereof;
(h) Liens incurred or deposits made in the ordinary course of
business (i) in connection with workers' compensation, unemployment
insurance and other types of social security, including any Lien securing
letters of credit issued in the ordinary course of business consistent
with past practice in connection therewith, or (ii) to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, performance and return-of-money bonds
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and other similar obligations (exclusive of obligations for the payment of
borrowed money);
(i) judgment and attachment Liens not giving rise to an Event of
Default;
(j) easements, rights-of-way, zoning restrictions, restrictive
covenants, minor imperfections in title and other similar charges or
encumbrances in respect of real property not interfering in any material
respect with the ordinary conduct of the business of the Company or any of
its Restricted Subsidiaries;
(k) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(l) Liens securing Purchase Money Indebtedness of the Company or any
Restricted Subsidiary; provided, however, that (i) the Purchase Money
Indebtedness shall not be secured by any property or assets of the Company
or any Restricted Subsidiary other than the property and assets so
acquired or constructed and (ii) the Lien securing such Indebtedness shall
be created within 90 days of such acquisition or construction;
(m) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(n) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset
and set-off;
(o) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under this
Indenture and Liens securing Crude Oil and Natural Gas Hedge Agreements;
(p) Liens securing Acquired Indebtedness incurred in accordance with
Section 4.12; provided, however, that (i) such Liens secured such Acquired
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary and were not
granted in connection with, or in anticipation of, the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary and (ii)
such Liens do not extend to or cover any property or assets of the Company
or of any of its Restricted Subsidiaries other than the property or assets
that secured the Acquired Indebtedness prior to the time such Indebtedness
became Acquired Indebtedness of the Company or a Restricted Subsidiary and
are no more favorable to the lienholders than those securing the Acquired
Indebtedness prior to the incurrence of such Acquired Indebtedness by the
Company or a Restricted Subsidiary;
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(q) Liens on, or related to, properties and assets of the Company
and its Subsidiaries to secure all or a part of the costs incurred in the
ordinary course of business of exploration, drilling, development,
production, processing, transportation, marketing or storage, or operation
thereof;
(r) Liens on pipeline or pipeline facilities, Hydrocarbons or
properties and assets of the Company and its Subsidiaries which arise out
of operation of law;
(s) royalties, overriding royalties, revenue interests, net revenue
interests, net profit interests, revisionary interests, production
payments, production sales contracts, operating agreements and other
similar interests, properties, arrangements and agreements, all as
ordinarily exist with respect to Properties and assets of the Company and
its Subsidiaries or otherwise as are customary in the oil and gas
business;
(t) with respect to any Properties and assets of the Company and its
Subsidiaries, Liens arising under, or in connection with, or related to,
farm-out, farm-in, joint operation, area of mutual interest agreements
and/or other similar or customary arrangements, agreements or interests
that the Company or any Subsidiary determines in good faith to be
necessary for the economic development of such Property;
(u) any (a) interest or title of a lessor or sublessor under any
lease, (b) restriction or encumbrance that the interest or title of such
lessor or sublessor may be subject to (including, without limitation,
ground leases or other prior leases of the demised premises, mortgages,
mechanics' liens, tax liens, and easements), or (c) subordination of the
interest of the lessee or sublessee under such lease to any restrictions
or encumbrance referred to in the preceding clause (b);
(v) Liens in favor of collecting or payor banks having a right of
setoff, revocation, refund or chargeback with respect to money or
instruments of the Company or any Restricted Subsidiary on deposit with or
in possession of such bank; and
(w) Liens securing Non-recourse Indebtedness.
"Permitted Operating Obligations" means Indebtedness of the Company
or any Restricted Subsidiary in respect of one or more standby letters of
credit, bid, performance or surety bonds, or other reimbursement obligations,
issued for the account of, or entered into by, the Company or any Restricted
Subsidiary in the ordinary course of business (excluding obligations related to
the purchase by the Company or any Restricted Subsidiary of Hydrocarbons for
which the Company or such Restricted Subsidiary has contracts to sell), or in
lieu of any thereof or in addition to any thereto, guarantees and letters of
credit supporting any such obligations and Indebtedness (in each case, other
than for an obligation for borrowed money, other than borrowed money represented
by any such letter of credit, bid, performance or surety bond, or reimbursement
obligation itself, or any guarantee and letter of credit related thereto).
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"Person" means an individual, partnership, corporation,
unincorporated organization, limited liability company, trust, estate or joint
venture, or a governmental agency or political subdivision thereof.
"Physical Notes" has the meaning provided in Section 2.01.
"Plan of Liquidation" means, with respect to any Person, a plan
(including by operation of law) that provides for, contemplates or the
effectuation of which is preceded or accompanied by (whether or not
substantially contemporaneously) (i) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of such Person otherwise
than as an entirety or substantially as an entirety and (ii) the distribution of
all or substantially all of the proceeds of such sale, lease, conveyance or
other disposition and all or substantially all of the remaining assets of such
Person to holders of Capital Stock of such Person.
"Preferred Stock" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
"principal" of any Indebtedness (including the Notes) means the
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"Private Exchange Notes" has the meaning set forth in the
Registration Rights Agreement.
"Private Placement Legend" means the legend initially set forth on
the Notes in the form set forth in Section 2.15.
"pro forma" means, with respect to any calculation made or required
to be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act, as determined by the
Board of Directors of the Company in consultation with its independent public
accountants.
"Property" means, with respect to any Person, any interests of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including, without limitation, Capital Stock,
partnership interests and other equity or ownership interests in any other
Person.
"Purchase Money Indebtedness" means Indebtedness the net proceeds of
which are used to finance the cost (including the cost of construction) of
property or assets acquired in the normal course of business by the Person
incurring such Indebtedness.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
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"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Record Date" means the Record Dates specified in the Notes.
"Redemption Date," when used with respect to any Note to be
redeemed, means the date fixed for such redemption pursuant to this Indenture
and the Notes.
"Redemption Price," when used with respect to any Note to be
redeemed, means the price fixed for such redemption, including principal and
premium, if any, pursuant to this Indenture and the Notes.
"Reference Date" has the meaning set forth in Section 4.10.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part; "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or
any Restricted Subsidiary of the Company of Indebtedness incurred in accordance
with Section 4.12 (other than pursuant to clause (b), (c), (d), (e), (f), (g),
(j), (k), (l), (n) or (o) of the definition of Permitted Indebtedness), in each
case that does not (i) result in an increase in the aggregate principal amount
of Indebtedness of such Person as of the date of such proposed Refinancing (plus
the amount of any premium required to be paid under the terms of the instrument
governing such Indebtedness and plus the amount of reasonable expenses incurred
by the Company and its Restricted Subsidiaries in connection with such
Refinancing) or (ii) create Indebtedness with (x) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or (y) a final maturity earlier than the final
maturity of the Indebtedness being Refinanced; provided, however, that (1) if
such Indebtedness being Refinanced is Indebtedness of the Company or a
Subsidiary Guarantor, then such Refinancing Indebtedness shall be Indebtedness
solely of the Company and/or such Subsidiary Guarantor and (2) if such
Indebtedness being Refinanced is subordinate or junior to the Notes or a
Guarantee, then such Refinancing Indebtedness shall be subordinate to the Notes
or such Guarantee, as the case may be, at least to the same extent and in the
same manner as the Indebtedness being Refinanced.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration Rights
Agreement dated the Issue Date among the Issuers, the Subsidiary Guarantors and
the Initial Purchasers.
"Regulation S" means Regulation S under the Securities Act.
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"Related Person" of any Person means any other Person directly or
indirectly owning 10% or more of the outstanding voting Common Stock of such
Person (or, in the case of a Person that is not a corporation, 10% or more of
the equity interest in such Person).
"Replacement Assets" shall have the meaning set forth in Section
4.16.
"Restricted Payment" shall have the meaning set forth in Section
4.10.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
entitled to request and conclusively rely on an Opinion of Counsel with respect
to whether any Note constitutes a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company
(including, without limitation, Canadian Abraxas) that has not been designated
by the Board of Directors of the Company, by a Board Resolution delivered to the
Trustee, as an Unrestricted Subsidiary pursuant to and in compliance with
Section 4.14. Any such designation may be revoked by a Board Resolution of the
Company delivered to the Trustee, subject to the provisions of such covenant.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Rating Services, a division of The
McGraw Hill Companies, Inc., and its successors.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party providing for
the leasing to the Company or a Restricted Subsidiary of any property, whether
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such Person or to any other Person from whom funds have
been or are to be advanced by such Person on the security of such property.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Subsidiary," with respect to any Person, means (a) any corporation
of which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (b) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Subsidiary Guarantor" means each of the Company's Restricted
Subsidiaries that in the future executes a supplemental indenture in which such
Restricted Subsidiary
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agrees to be bound by the terms of this Indenture as a Subsidiary Guarantor;
provided, however, that any Person constituting a Subsidiary Guarantor as
described above shall cease to constitute a Subsidiary Guarantor when its
Guarantee is released in accordance with the terms of this Indenture.
"Surviving Entity" shall have the meaning set forth in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb), as amended, as in effect on the date of this Indenture, except as
otherwise provided in Section 9.03.
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer this Indenture, or in the case of
a successor trustee, an officer assigned to the department, division or group
performing the corporation trust work of such successor and assigned to
administer this Indenture.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"U.S. Government Obligations" mean direct obligations of, and
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged.
"U.S. Legal Tender" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Unrestricted Subsidiary" means any Subsidiary of the Company
designated as such pursuant to and in compliance with Section 4.14; provided,
however, that Unrestricted Subsidiaries shall initially include Cascade, Grey
Wolf and Western. Any such designation may be revoked by a Board Resolution of
the Company delivered to the Trustee, subject to the provisions of such Section
4.14.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Western" means Western Associated Energy Corporation, a Texas
Corporation.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary
of which all the outstanding voting securities normally entitled to vote in the
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election of directors are owned by the Company or another Wholly Owned
Restricted Subsidiary.
SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuers or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP of any date of determination;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision; and
(6) any reference to a statute, law or regulation means that
statute, law or regulation as amended and in effect from time to time and
includes any successor statute, law or regulation; provided, however, that
any reference to the Bankruptcy Law shall mean the Bankruptcy Law as
applicable to the relevant case.
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ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.
The Initial Notes and the Trustee's certificate of authentication
relating thereto shall be substantially in the form of Exhibit A hereto. The
Exchange Notes and the Trustee's certificate of authentication relating thereto
shall be substantially in the form of Exhibit B hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
depository rule or usage. The Issuers and the Trustee shall approve the form of
the Notes and any notation, legend or endorsement on them. Each Note shall be
dated the date of its issuance and shall show the date of its authentication.
Each Note shall have an executed Guarantee endorsed thereon substantially in the
form of Exhibit E hereto.
The terms and provisions contained in the Notes, annexed hereto as
Exhibits A and B, shall constitute, and are hereby expressly made, a part of
this Indenture and, to the extent applicable, the Issuers and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A, Notes offered and
sold to institutional "accredited investors" (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act) and Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of one or more permanent
global Notes in registered form, substantially in the form set forth in Exhibit
A (the "Global Note"), deposited with the Trustee, as custodian for the
Depository, duly executed by the Issuers (and having an executed Guarantee
endorsed thereon) and authenticated by the Trustee as hereinafter provided and
shall bear the legend set forth in Section 2.15. The aggregate principal amount
of the Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the Depository,
as hereinafter provided.
Notes issued in exchange for interests in a Global Note pursuant to
Section 2.16 may be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A (the "Physical
Notes").
SECTION 2.02. Execution and Authentication;
Aggregate Principal Amount.
Two Officers, or an Officer and an Assistant Secretary of each
Issuer and each Subsidiary Guarantor, shall sign, or one Officer shall sign and
one Officer or an Assistant Secretary (each of whom shall, in each case, have
been duly authorized by all requisite corporate actions) shall attest to, the
Notes for the Issuers and the Guarantees for the Subsidiary Guarantors by manual
or facsimile signature.
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If an Officer or Assistant Secretary whose signature is on a Note or
a Guarantee was an Officer or Assistant Secretary at the time of such execution
but no longer holds that office or position at the time the Trustee
authenticates the Note, the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue
in the aggregate principal amount not to exceed $200,000,000 and (ii) Exchange
Notes from time to time for issue only in exchange for a like principal amount
of Initial Notes or (iii) Private Exchange Notes, in each case upon a written
order of the Issuers in the form of an Officers' Certificate of each Issuer.
Each such written order shall specify the amount of Notes to be authenticated
and the date on which the Notes are to be authenticated, whether the Notes are
to be Initial Notes or Exchange Notes and whether the Notes are to be issued as
Physical Notes or Global Notes or such other information as the Trustee may
reasonably request. In addition, with respect to authentication pursuant to
clauses (ii) or (iii) of the first sentence of this paragraph, the first such
written order from the Issuers shall be accompanied by an Opinion of Counsel of
each Issuer in a form reasonably satisfactory to the Trustee stating that the
issuance of the Exchange Notes or Private Exchange Notes, as the case may be,
does not give rise to an event of default, complies with this Indenture and has
been duly authorized by such Issuer. The aggregate principal amount of Notes
outstanding at any time may not exceed $215,000,000, except as provided in
Sections 2.07 and 2.08.
The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to the Issuers to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with the
Issuers or with any Affiliate of the Issuers.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
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SECTION 2.03. Registrar and Paying Agent.
The Issuers shall maintain an office or agency (which shall be
located in the Borough of Manhattan in the City of New York, State of New York)
where (a) Notes may be presented or surrendered for registration of transfer or
for exchange ("Registrar"), (b) Notes may be presented or surrendered for
payment ("Paying Agent") and (c) notices and demands to or upon the Issuers in
respect of the Notes and this Indenture may be served. The Registrar shall keep
a register of the Notes and of their transfer and exchange. The Issuers, upon
prior written notice to the Trustee, may have one or more co-Registrars and one
or more additional paying agents reasonably acceptable to the Trustee. The term
"Paying Agent" includes any additional Paying Agent. The Issuers may act as
their own Paying Agent, except that for the purposes of payments on the Notes
pursuant to Sections 4.15 and 4.16, neither the Issuers nor any Affiliate of the
Issuers may act as Paying Agent.
The Issuers shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that relate
to such Agent. The Issuers shall notify the Trustee, in advance, of the name and
address of any such Agent. If the Issuers fail to maintain a Registrar or Paying
Agent, or fail to give the foregoing notice, the Trustee shall act as such.
The Issuers initially appoint the Trustee as Registrar, Paying Agent
and agent for service of demands and notices in connection with the Notes, until
such time as the Trustee has resigned or a successor has been appointed. Any of
the Registrar, the Paying Agent or any other agent may resign upon 30 days'
notice to the Issuers.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Issuers shall require each Paying Agent other than the Trustee
to agree in writing that such Paying Agent shall hold in trust for the benefit
of the Holders or the Trustee all assets held by the Paying Agent for the
payment of principal of, premium, if any, or interest on, the Notes (whether
such assets have been distributed to it by the Issuers or any other obligor on
the Notes), and the Issuers and the Paying Agent shall notify the Trustee of any
Default by the Issuers (or any other obligor on the Notes) in making any such
payment. The Issuers at any time may require a Paying Agent to distribute all
assets held by it to the Trustee and account for any assets disbursed and the
Trustee may at any time during the continuance of any payment Default, upon
written request to a Paying Agent, require such Paying Agent to distribute all
assets held by it to the Trustee and to account for any assets distributed. Upon
distribution to the Trustee of all assets that shall have been delivered by the
Issuers to the Paying Agent, the Paying Agent shall have no further liability
for such assets.
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SECTION 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Trustee is not the Registrar, the Issuers shall furnish or
cause the Registrar to furnish to the Trustee before each Record Date and at
such other times as the Trustee may request in writing a list as of such date
and in such form as the Trustee may reasonably require of the names and
addresses of the Holders, which list may be conclusively relied upon by the
Trustee.
SECTION 2.06. Transfer and Exchange.
When Notes are presented to the Registrar or a co-Registrar with a
request to register the transfer of such Notes or to exchange such Notes for an
equal principal amount of Notes or other authorized denominations, the Registrar
or co-Registrar shall register the transfer or make the exchange as requested if
its requirements for such transaction are met; provided, however, that the Notes
presented or surrendered for registration of transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer in form satisfactory
to the Issuers, the Trustee and the Registrar or co-Registrar, duly executed by
the Holder thereof or his attorney duly authorized in writing. To permit
registration of transfers and exchanges, the Issuers shall execute and the
Trustee shall authenticate Notes and the Subsidiary Guarantors shall execute
Guarantees thereon at the Registrar's or co-Registrar's request. No service
charge shall be made for any registration of transfer or exchange, but the
Issuers may require payment of a sum sufficient to cover any transfer tax, fee
or similar governmental charge payable in connection therewith (other than any
such transfer taxes or similar governmental charge payable upon exchanges or
transfers pursuant to Sections 2.10, 3.04, 4.15, 4.16 or 9.05, in which event
the Issuers shall be responsible for the payment of such taxes).
The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period beginning at the opening
of business 15 days before the mailing of a notice of redemption of Notes and
ending at the close of business on the day of such mailing and (ii) selected for
redemption in whole or in part pursuant to Article Three, except the unredeemed
portion of any Note being redeemed in part.
Any Holder of a beneficial interest in a Global Note shall, by
acceptance of such Global Note, agree that transfers of beneficial interests in
such Global Notes may be effected only through a book entry system maintained by
the Holder of such Global Note (or its agent), and that ownership of a
beneficial interest in the Note shall be required to be reflected in a book
entry system.
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SECTION 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the Holder
of a Note claims that the Note has been lost, destroyed or wrongfully taken, the
Issuers shall issue and the Trustee shall authenticate a replacement Note and
the Subsidiary Guarantors shall execute a Guarantee thereon if the Trustee's
requirements are met. If required by the Trustee or the Issuers, such Holder
must provide an indemnity bond or other indemnity of reasonable tenor,
sufficient in the reasonable judgment of the Issuers, the Subsidiary Guarantors
and the Trustee, to protect the Issuers, the Subsidiary Guarantors, the Trustee
or any Agent from any loss which any of them may suffer if a Note is replaced.
Every replacement Note shall constitute an additional obligation of the Issuers
and the Subsidiary Guarantors.
SECTION 2.08. Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those canceled by it, those delivered to it
for cancellation and those described in this Section as not outstanding. Subject
to the provisions of Section 2.09, a Note does not cease to be outstanding
because an Issuer or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced Note is held by
a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal, premium, if any, and interest due on the Notes payable on that date
and is not prohibited from paying such money to the Holders thereof pursuant to
the terms of this Indenture, then on and after that date such Notes shall be
deemed not to be outstanding and interest on them shall cease to accrue.
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SECTION 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver, consent or notice, Notes owned
by the Issuers or an Affiliate of the Issuers shall be considered as though they
are not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes which a Trust Officer of the Trustee actually knows are so owned
shall be so considered. The Issuers shall notify the Trustee, in writing, when
either of them or, to their knowledge, any of their Affiliates repurchases or
otherwise acquires Notes, of the aggregate principal amount of such Notes so
repurchased or otherwise acquired and such other information as the Trustee may
reasonably request and the Trustee shall be entitled to rely thereon.
SECTION 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Issuers may
prepare and the Trustee shall authenticate temporary Notes upon receipt of a
written order of the Issuers in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Notes to be
authenticated and the date on which the temporary Notes are to be authenticated.
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Issuers consider appropriate for temporary Notes and so
indicate in the Officers' Certificate. Without unreasonable delay, the Issuers
shall prepare, the Trustee shall authenticate and the Subsidiary Guarantors
shall execute Guarantees on, upon receipt of a written order of the Issuers
pursuant to Section 2.02, definitive Notes in exchange for temporary Notes.
SECTION 2.11. Cancellation.
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee, or
at the direction of the Trustee, the Registrar or the Paying Agent, and no one
else, shall cancel and, at the written direction of the Issuers, shall dispose,
in its customary manner, of all Notes surrendered for transfer, exchange,
payment or cancellation. Subject to Section 2.07, the Issuers may not issue new
Notes to replace Notes that they have paid or delivered to the Trustee for
cancellation. If the Issuers shall acquire any of the Notes, such acquisition
shall not operate as a redemption or satisfaction of the Indebtedness
represented by such Notes unless and until the same are surrendered to the
Trustee for cancellation pursuant to this Section 2.11.
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SECTION 2.12. Defaulted Interest.
The Issuers will pay interest on overdue principal from time to time
on demand at the rate of interest then borne by the Notes. The Issuers shall, to
the extent lawful, pay interest on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the rate
of interest then borne by the Notes. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months, and, in the case of a partial
month, the actual number of days elapsed.
If the Issuers default in a payment of interest on the Notes, they
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, which special record date shall be the fifteenth
day next preceding the date fixed by the Issuers for the payment of defaulted
interest or the next succeeding Business Day if such date is not a Business Day.
The Issuers shall notify the Trustee in writing of the amount of defaulted
interest proposed to be paid on each Note and the date of the proposed payment
(a "Default Interest Payment Date"), and at the same time the Issuers shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such defaulted interest or shall make
arrangements satisfactory to the Trustee for such deposit on or prior to the
date of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such defaulted interest as provided in
this Section; provided, however, that in no event shall the Issuers deposit
monies proposed to be paid in respect of defaulted interest later than 11:00
a.m. New York City time of the proposed Default Interest Payment Date. At least
15 days before the subsequent special record date, the Issuers shall mail (or
cause to be mailed) to each Holder, as of a recent date selected by the Issuers,
with a copy to the Trustee, a notice that states the subsequent special record
date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid. Notwithstanding the
foregoing, any interest which is paid prior to the expiration of the 30-day
period set forth in Section 6.01(a) shall be paid to Holders as of the regular
record date for the Interest Payment Date for which interest has not been paid.
Notwithstanding the foregoing, the Issuers may make payment of any defaulted
interest in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange.
SECTION 2.13. CUSIP Number.
The Issuers in issuing the Notes may use a "CUSIP" number, and, if
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders; provided, however, that no representation is hereby
deemed to be made by the Trustee as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes, and that reliance may be placed
only on the other identification numbers printed on the Notes. The Issuers shall
promptly notify the Trustee of any change in the CUSIP number.
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SECTION 2.14. Deposit of Monies.
Prior to 11:00 a.m. New York City time on each Interest Payment
Date, Maturity Date, Redemption Date, Change of Control Payment Date and Net
Proceeds Offer Payment Date, the Issuers shall have deposited with the Paying
Agent in immediately available funds money sufficient to make cash payments, if
any, due on such Interest Payment Date, Maturity Date, Redemption Date, Change
of Control Payment Date and Net Proceeds Offer Payment Date, as the case may be,
in a timely manner which permits the Paying Agent to remit payment to the
Holders on such Interest Payment Date, Maturity Date, Redemption Date, Change of
Control Payment Date and Net Proceeds Offer Payment Date, as the case may be.
SECTION 2.15. Restrictive Legends.
Each Global Note and Physical Note that constitutes a Restricted
Security shall bear the following legend (the "Private Placement Legend") on the
face thereof until after the third anniversary of the later of the Issue Date
and the last date on which an Issuer or any Affiliate of either Issuer was the
owner of such Note (or any predecessor security) (or such shorter period of time
as permitted by Rule 144(k) under the Securities Act or any successor provision
thereunder) (or such longer period of time as may be required under the
Securities Act or applicable state securities laws in the opinion of counsel for
the Issuers, unless otherwise agreed by the Issuers and the Holder thereof):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR
(B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3), OR (7) UNDER THE SECURITIES ACT), (AN "ACCREDITED INVESTOR") OR (C)
IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
ISSUERS THEREOF OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY
A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
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THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE
FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT (PROVIDED
THAT ANY SUCH SALE OR TRANSFER IN CANADA OR TO OR FOR THE BENEFIT OF A
CANADIAN RESIDENT MUST BE EFFECTED PURSUANT TO AN EXEMPTION FROM THE
PROSPECTUS AND REGISTRATION REQUIREMENTS UNDER APPLICABLE CANADIAN
SECURITIES LAWS), (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED
BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES
THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE
OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR,
THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE
ISSUERS SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER
OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Each Global Note shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF
THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO AN ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
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ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTION 2.17 OF THE INDENTURE.
SECTION 2.16. Book-Entry Provisions
for Global Security.
(a) The Global Notes initially shall (i) be registered in the name
of the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Section 2.15.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depository, or the Trustee as its custodian, or under the
Global Notes, and the Depository may be treated by the Issuers, the Trustee and
any Agent of the Issuers or the Trustee as the absolute owner of such Global
Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Issuers, the Trustee or any Agent of the Issuers or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in a Global Note may be transferred or
exchanged for Physical Notes in accordance with the rules and procedures of the
Depository and the provisions of Section 2.17. In addition, Physical Notes shall
be transferred to all beneficial owners in exchange for their beneficial
interests in a Global Note if (i) the Depository notifies the Issuers that it is
unwilling or unable to continue as Depository for the Global Notes and a
successor depositary is not appointed by the Issuers within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depository to issue Physical
Notes.
(c) In connection with any transfer or exchange of a portion of the beneficial
interest in a Global Note to beneficial owners pursuant to paragraph (b), the
Registrar shall (if one or more Physical Notes are to be issued) reflect on its
books and records the date and a decrease in the principal amount of such Global
Note in an amount equal to the principal amount of the beneficial interest in
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the Global Note to be transferred, and the Issuers shall execute, the Subsidiary
Guarantors shall execute Guarantees on, and the Trustee shall authenticate and
deliver, one or more Physical Notes of like tenor and amount.
(d) In connection with the transfer of an entire Global Note to
beneficial owners pursuant to paragraph (b), such Global Note shall be deemed to
be surrendered to the Trustee for cancellation, and the Issuers shall execute,
the Subsidiary Guarantors shall execute Guarantees on and the Trustee shall
authenticate and deliver, to each beneficial owner identified by the Depository
in exchange for its beneficial interest in the Global Note, an equal aggregate
principal amount of Physical Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Security delivered
in exchange for an interest in a Global Note pursuant to paragraph (b) or (c)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.17, bear the legend regarding transfer restrictions applicable to the Physical
Notes set forth in Section 2.15.
(f) The Holder of a Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
SECTION 2.17. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors and
Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to
any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after the third
anniversary of the Issue Date (provided, however, that neither the Company
nor any Affiliate of the Company has held any beneficial interest in such
Note, or portion thereof, at any time on or prior to the third anniversary
of the Issue Date) or (y) (1) in the case of a transfer to an
Institutional Accredited Investor which is not a QIB (excluding Non-U.S.
Persons), the proposed transferee has delivered to the Registrar a
certificate substantially in the form of Exhibit C hereto or (2) in the
case of a transfer to a Non-U.S. Person, the proposed transferor has
delivered to the Registrar a certificate substantially in the form of
Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar of
(x) the certificate, if any, required by paragraph (i) above and (y)
written instructions given in accordance with the Depository's and the
Registrar's procedures, whereupon
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(a) the Registrar shall reflect on its books and records the date
and (if the transfer does not involve a transfer of outstanding Physical
Notes) a decrease in the principal amount of such Global Note in an amount
equal to the principal amount of the beneficial interest in the Global
Note to be transferred, and (b) the Issuers shall execute, the Subsidiary
Guarantors shall execute the Guarantees on and the Trustee shall
authenticate and deliver one or more Physical Notes of like tenor and
amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note
constituting a Restricted Security to a QIB (excluding transfers to
Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for
on the form of Note stating, or has otherwise advised the Issuers and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Note stating, or has otherwise advised the
Issuers and the Registrar in writing, that it is purchasing the Note for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Issuers as it has requested pursuant to Rule
144A or has determined not to request such information and that it is
aware that the transferor is relying upon its foregoing representations in
order to claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Notes to
be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in a Global Note, upon receipt by the Registrar
of written instructions given in accordance with the Depository's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of such Global
Note in an amount equal to the principal amount of the Physical Notes to
be transferred, and the Trustee shall cancel the Physical Notes so
transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) the requested transfer is after the third anniversary of the Issue
Date (provided, however, that neither Issuer nor any Affiliate of the Issuers
has held any beneficial interest in such Note, or portion thereof, at any time
prior to or on the third anniversary of the Issue Date), or (ii) there is
delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the
Issuers and the Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act.
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(d) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this Section 2.17.
The Issuers shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time during the
Registrar's normal business hours upon the giving of reasonable written notice
to the Registrar.
(e) Transfers of Notes Held by Affiliates. Any certificate (i)
evidencing a Note that has been transferred to an Affiliate of an Issuer within
three years after the Issue Date, as evidenced by a notation on the Assignment
Form for such transfer or in the representation letter delivered in respect
thereof or (ii) evidencing a Note that has been acquired from an Affiliate
(other than by an Affiliate) in a transaction or a chain of transactions not
involving any public offering, shall, until three years after the last date on
which either Issuer or any Affiliate of either Issuer was an owner of such Note,
in each case, bear a legend in substantially the form set forth in Section 2.15
hereof, unless otherwise agreed by the Issuers (with written notice thereof to
the Trustee).
SECTION 2.18. Liquidated Damages Under
Registration Rights Agreement.
Under certain circumstances, the Issuers shall be obligated to pay
certain liquidated damages to the Holders, all as set forth in Section 4 of the
Registration Rights Agreement. The terms thereof are hereby incorporated herein
by reference.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to Paragraph 6 of the
Notes, it shall notify the Trustee and the Paying Agent in writing of the
Redemption Date and the principal amount of the Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.01
60 days before the Redemption Date (unless a shorter notice period shall be
satisfactory to the Trustee, as evidenced in a writing signed on behalf of the
Trustee), together with an Officers' Certificate stating that such redemption
shall comply with the conditions contained herein and in the Notes.
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SECTION 3.02. Selection of Notes To Be Redeemed.
In the event that less than all of the Notes are to be redeemed at
any time, selection of such Notes, or portions thereof, for redemption will be
made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed or, if the
Notes are not then listed on a national securities exchange, on a pro rata
basis, by lot or by such other method as the Trustee shall deem fair and
appropriate; provided, however, that no Notes of a principal amount of $1,000 or
less shall be redeemed in part; and provided, further, that if a partial
redemption is made with the proceeds of an Equity Offering, selection of the
Notes or portions thereof for redemption shall be made by the Trustee only on a
pro rata basis or on as nearly a pro rata basis as is practicable (subject to
the procedures of DTC), unless such method is otherwise prohibited. Notice of
redemption shall be mailed by first-class mail at least 30 but not more than 60
days before the Redemption Date to each Holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the applicable Redemption Date,
interest will cease to accrue on Notes or portions thereof called for redemption
as long as the Issuers have deposited with the Paying Agent for the Notes funds
in satisfaction of the applicable Redemption Price.
SECTION 3.03. Optional Redemption.
The Notes will be redeemable, at the Issuers' option, in whole at
any time or in part from time to time, on and after November 1, 2000, upon not
less than 30 nor more than 60 days' notice, at the following Redemption Prices
(expressed as percentages of the principal amount thereof) if redeemed during
the twelve-month period commencing on November 1 of the years set forth below,
plus, in each case, accrued and unpaid interest, if any, thereon to the date of
redemption:
Year Percentage
2000............................ 105.750%
2001............................ 102.875%
2002 and thereafter.... 100.000%
At any time, or from time to time, on or prior to __________, 1999,
the Issuers may, at their option, use all or a portion of the net cash proceeds
of one or more Equity Offerings (as defined below) to redeem up to 35% of the
aggregate principal amount of the Notes originally issued at a Redemption Price
equal to 111.5% of the aggregate principal amount of the Notes to be redeemed,
plus accrued and unpaid interest, if any, thereon to the date of redemption;
provided, however, that at least $139.75 million aggregate principal amount of
Notes remains outstanding immediately after giving effect to any such redemption
(it being expressly agreed that for purposes of determining whether this
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condition is satisfied, Notes owned by either Issuer or any of their Affiliates
shall be deemed not to be outstanding). In order to effect the foregoing
redemption with the proceeds of any Equity Offering, the Issuers shall make such
redemption not more than 60 days after the consummation of any such Equity
Offering.
SECTION 3.04. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date,
the Issuers shall mail or cause to be mailed a notice of redemption by first
class mail to each Holder of Notes to be redeemed at its registered address,
with a copy to the Trustee and any Paying Agent. At the Issuers' request, the
Trustee shall give the notice of redemption in the Issuers' name and at the
Company's expense. The Issuers' shall provide such notices of redemption to the
Trustee at least five days before the intended mailing date.
Each notice of redemption shall identify (including the CUSIP
number) the Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such redemption
is being made;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest, if
any;
(6) that, unless the Issuers default in making the redemption
payment, interest on Notes or applicable portions thereof called for
redemption ceases to accrue on and after the Redemption Date, and the only
remaining right of the Holders of such Notes is to receive payment of the
Redemption Price plus accrued interest as of the Redemption Date, if any,
upon surrender to the Paying Agent of the Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date, and upon surrender of such Note, a new Note or Notes in
the aggregate principal amount equal to the unredeemed portion thereof
will be issued; and
(8) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Notes to be
redeemed and the aggregate principal amount of Notes to be outstanding
after such partial redemption.
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The Issuers will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Notes.
SECTION 3.05. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.04,
such notice of redemption shall be irrevocable and Notes called for redemption
become due and payable on the Redemption Date and at the Redemption Price plus
accrued interest as of such date, if any. Upon surrender to the Trustee or
Paying Agent, such Notes called for redemption shall be paid at the Redemption
Price plus accrued interest thereon to the Redemption Date, but installments of
interest, the maturity of which is on or prior to the Redemption Date, shall be
payable to Holders of record at the close of business on the relevant record
dates referred to in the Notes. Interest shall accrue on or after the Redemption
Date and shall be payable only if the Issuers default in payment of the
Redemption Price.
SECTION 3.06. Deposit of Redemption Price.
On or before the Redemption Date and in accordance with Section
2.14, the Issuers shall deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the Redemption Price plus accrued interest, if any, of all
Notes to be redeemed on that date. The Paying Agent shall promptly return to the
Company any U.S. Legal Tender so deposited which is not required for that
purpose, except with respect to monies owed as obligations to the Trustee
pursuant to Article Seven.
Unless the Issuers fail to comply with the preceding paragraph and
default in the payment of such Redemption Price plus accrued interest, if any,
interest on the Notes to be redeemed will cease to accrue on and after the
applicable Redemption Date, whether or not such Notes are presented for payment.
SECTION 3.07. Notes Redeemed in Part.
Upon surrender of a Note that is to be redeemed in part, the Trustee
shall authenticate for the Holder a new Note or Notes equal in principal amount
to the unredeemed portion of the Note surrendered.
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ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.
(a) The Issuers shall pay the principal of, premium, if any, and
interest on the Notes on the dates and in the manner provided in the Notes and
in this Indenture.
(b) An installment of principal of or interest on the Notes shall be
considered paid on the date it is due if the Trustee or Paying Agent (other than
an Issuer or any of its Affiliates) holds, prior to 11:00 a.m. New York City
time on that date, U.S. Legal Tender designated for and sufficient to pay the
installment in full and is not prohibited from paying such money to the Holders
pursuant to the terms of this Indenture or the Notes.
(c) Notwithstanding anything to the contrary contained in this
Indenture, the Issuers may, to the extent they are required to do so by law,
deduct or withhold income or other similar taxes imposed by the United States of
America from principal or interest payments hereunder.
SECTION 4.02. Maintenance of Office or Agency.
The Issuers shall maintain the office or agency required under
Section 2.03. The Issuers shall give prior written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Issuers shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 10.02.
SECTION 4.03. Corporate Existence.
Except as otherwise permitted by Article Five, the Issuers shall do
or cause to be done, at their own cost and expense, all things necessary to
preserve and keep in full force and effect their respective corporate existence
and the corporate existence of each of their Restricted Subsidiaries in
accordance with the respective organizational documents of each such Restricted
Subsidiary and the material rights (charter and statutory) and franchises of the
Issuers and each such Restricted Subsidiary; provided, however, that the Issuers
shall not be required to preserve, with respect to themselves, any material
right or franchise and, with respect to any of their Restricted Subsidiaries,
any such existence, material right or franchise, if the Board of Directors of
the Company shall determine in good faith that the preservation thereof is no
longer desirable in the conduct of the business of the Issuers and their
Subsidiaries, taken as a whole.
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SECTION 4.04. Payment of Taxes and Other Claims.
The Issuers shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all material taxes,
assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon either of
them or any of their Subsidiaries or properties of either of them or any of
their Subsidiaries and (ii) all material lawful claims for labor, materials and
supplies that, if unpaid, might by law become a Lien upon the property of the
Issuers or any of their Subsidiaries; provided, however, that the Issuers shall
not be required to pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate negotiations or proceedings
properly instituted and diligently conducted for which adequate reserves, to the
extent required under GAAP, have been taken.
SECTION 4.05. Maintenance of Properties
and Insurance.
(a) Each Issuer shall, and shall cause each of the Restricted
Subsidiaries to, maintain all properties used or useful in the conduct of its
business in good working order and condition (subject to ordinary wear and tear)
and make all necessary repairs, renewals, replacements, additions, betterments
and improvements thereto and actively conduct and carry on its business;
provided, however, that nothing in this Section 4.05 shall prevent an Issuer or
any of the Restricted Subsidiaries from discontinuing the operation and
maintenance of any of its properties, if such discontinuance is (i) in the
ordinary course of business pursuant to customary business terms or (ii) in the
good faith judgment of the respective Boards of Directors or other governing
body of such Issuer or Restricted Subsidiary, as the case may be, desirable in
the conduct of their respective businesses and is not disadvantageous in any
material respect to the Holders.
(b) The Issuers shall provide or cause to be provided, for
themselves and each of the Restricted Subsidiaries, insurance (including
appropriate self-insurance) against loss or damage of the kinds that, in the
good faith judgment of the Company, are adequate and appropriate for the conduct
of the business of the Company and its Restricted Subsidiaries in a prudent
manner, with reputable insurers or with the government of the United States of
America, Canada or an agency or instrumentality thereof, in such amounts, with
such deductibles, and by such methods as shall be customary, in the good faith
judgment of the Company, for companies similarly situated in the industry.
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SECTION 4.06. Compliance Certificate;
Notice of Default.
(a) The Issuers shall deliver to the Trustee, within 105 days after
the end of their respective fiscal quarters and fiscal years, an Officers'
Certificate of each of the Issuers (provided, however, that one of the
signatories to each such Officers' Certificate shall be the respective Issuer's
principal executive officer, principal financial officer or principal accounting
officer), as to such Officers' knowledge, without independent investigation, of
such Issuer's compliance with all conditions and covenants under this Indenture
(without regard to any period of grace or requirement of notice provided
hereunder) and in the event any Default of the Issuers exists, such Officers
shall specify the nature of such Default. Each such Officers' Certificate shall
also notify the Trustee should such Issuer elect to change the manner in which
it fixes its fiscal year end.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the annual financial
statements delivered pursuant to Section 4.08 shall be accompanied by a written
report of the Company's independent certified public accountants (who shall be a
firm of established national reputation) stating (A) that their audit
examination has included a review of the terms of this Indenture and the form of
the Notes as they relate to accounting matters, and (B) whether, in connection
with their audit examination, any Default or Event of Default has come to their
attention and if such a Default or Event of Default has come to their attention,
specifying the nature and period of existence thereof; provided, however, that,
without any restriction as to the scope of the audit examination, such
independent certified public accountants shall not be liable by reason of any
failure to obtain knowledge of any such Default or Event of Default that would
not be disclosed in the course of an audit examination conducted in accordance
with generally accepted auditing standards.
(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, the Company
shall deliver to the Trustee, at its address set forth in Section 10.02 hereof,
by registered or certified mail or by facsimile transmission followed by hard
copy by registered or certified mail an Officers' Certificate specifying such
event, notice or other action within 10 days of its becoming aware of such
occurrence.
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SECTION 4.07. Compliance with Laws.
The Issuers shall comply, and shall cause each of their Subsidiaries
to comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except for such noncompliances as could not singly or in the
aggregate reasonably be expected to have a material adverse effect on the
financial condition, business, prospects or results of operations of the Company
and its Subsidiaries taken as a whole.
SECTION 4.08. Reports to Holders.
The Company will deliver to the Trustee within 15 days after filing
the same with the Commission, copies of the quarterly and annual reports and of
the information, documents and other reports, if any, which the Company is
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the Trustee
and Holders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act. The Company will
also comply with the other provisions of Section 314(a) of the TIA.
SECTION 4.09. Waiver of Stay, Extension
or Usury Laws.
The Issuers covenant (to the extent that they may lawfully do so)
that they will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive the Issuers from paying
all or any portion of the principal of or interest on the Notes as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that they may lawfully do so) the Issuers hereby expressly waive all benefit or
advantage of any such law, and covenant that they will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
SECTION 4.10. Limitation on Restricted Payments.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly,
(i) declare or pay any dividend or make any distribution (other than
dividends or distributions payable solely in Qualified Capital Stock of
the Company) on or in respect of shares of the Company's Capital Stock to
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holders of such Capital Stock;
(ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any warrants, rights or options to
purchase or acquire shares of any class of such Capital Stock other than
through the exchange therefor solely of Qualified Capital Stock of the
Company or warrants, rights or options to purchase or acquire shares of
Qualified Capital Stock of the Company;
(iii) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund
payment, any Indebtedness of the Company or a Subsidiary Guarantor that is
subordinate or junior in right of payment to the Notes or such Subsidiary
Guarantor's Guarantee, as the case may be; or
(iv) make any Investment (other than a Permitted Investment)
(each of the foregoing actions set forth in clauses (i), (ii), (iii) and (iv)
being referred to as a "Restricted Payment"), if at the time of such Restricted
Payment or immediately after giving effect thereto, (a) a Default or an Event of
Default shall have occurred and be continuing, (b) the Company is not able to
incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with Section 4.12; provided, however, that
notwithstanding the provisions of clause (i) (a) of Section 4.12, for purposes
of determining whether the Company could incur such additional Indebtedness
pursuant to this clause (b), the Consolidated EBITDA Coverage Ratio which shall
be required shall be at least 2.5 to 1.0, or (c) the aggregate amount of
Restricted Payments (including such proposed Restricted Payment) made subsequent
to the Issue Date (the amount expended for such purposes, if other than in cash,
being the fair market value of such property as determined reasonably and in
good faith by the Board of Directors of the Company) shall exceed the sum of:
(A) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss) of the
Company earned subsequent to the Issue Date and on or prior to the last
date of the Company's fiscal quarter immediately preceding such Restricted
Payment (the "Reference Date") (treating such period as a single
accounting period); plus
(B) 100% of the aggregate net cash proceeds received by the Company
from any Person (other than a Restricted Subsidiary of the Company) from
the issuance and sale subsequent to the Issue Date and on or prior to the
Reference Date of Qualified Capital Stock of the Company, plus
(C) without duplication of any amounts included in the immediately
preceding subclause (B), 100% of the aggregate net cash proceeds of any
equity contribution received by the Company from a holder of the Company's
Capital Stock
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(excluding in the case of the immediately preceding clause (B) and this
clause (C), any net cash proceeds from an Equity Offering to the extent
used to redeem the Notes); plus
(D) an amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from dividends, interest payments,
repayments of loans or advances, or other transfers of cash, in each case
to the Company or to any Restricted Subsidiary of the Company from
Unrestricted Subsidiaries (but without duplication of any such amount
included in calculating cumulative Consolidated Net Income of the
Company), or from redesignations of Unrestricted Subsidiaries as
Restricted Subsidiaries (in each case valued as provided in Section 4.14),
not to exceed, in the case of any Unrestricted Subsidiary, the amount of
Investments previously made by the Company or any Restricted Subsidiary in
such Unrestricted Subsidiary and which was treated as a Restricted Payment
hereunder; plus
(E) without duplication of the immediately preceding subclause (D),
an amount equal to the lesser of the cost or net cash proceeds received
upon the sale or other disposition of any Investment made after the Issue
Date which had been treated as a Restricted Payment (but without
duplication of any such amount included in calculating cumulative
Consolidated Net Income of the Company); plus
(F) $5,000,000.
Notwithstanding the foregoing, the provisions set forth above will not prohibit:
(1) The payment of any dividend or redemption payment within 60 days
after the date of declaration of such dividend or applicable redemption if
the dividend or redemption payment, as the case may be, would have been
permitted on the date of declaration;
(2) If no Default or Event of Default shall have occurred and be
continuing, the acquisition of any shares of Capital Stock of the Company,
either (a) solely in exchange for shares of Qualified Capital Stock of the
Company or (b) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Restricted Subsidiary of the
Company) of shares of Qualified Capital Stock of the Company;
(3) If no Default or Event of Default shall have occurred and be
continuing, the acquisition of any Indebtedness of the Company or
Subsidiary Guarantor that is subordinate or junior in right of payment to
the Notes or such Subsidiary Guarantor's Guarantee, as the case may be,
either (a) solely in exchange for shares of Qualified Capital Stock of the
Company or (b) through the application of the net proceeds of a
substantially concurrent sale for cash (other than to a Restricted
Subsidiary of the Company) of (i) shares of Qualified Capital Stock of the
Company or (ii) Refinancing Indebtedness;
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(4) If no Default or Event of Default shall have occurred and be
continuing, the payment of dividends in respect of the Company's Series
1995-B Preferred Stock in an amount not to exceed $400,000 in any one
year;
(5) The initial designation of Cascade, Grey Wolf and Western as
Unrestricted Subsidiaries; and
(6) The payment of such portion of the CGGS purchase price, if any,
as shall have been placed in an escrow account to the former shareholders of
CGGS.
In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date in accordance with clause (c) of this Section 4.10,
amounts expended pursuant to clauses (1), (2)(b) and (5) shall be included in
such calculation.
SECTION 4.11. Limitation on Transactions
with Affiliates.
(i) The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into, amend or permit
or suffer to exist any transaction or series of related transactions (including,
without limitation, the purchase, sale, lease or exchange of any property, the
guaranteeing of any Indebtedness or the rendering of any service) with or for
the benefit of any of their respective Affiliates (an "Affiliate Transaction"),
other than (a) Affiliate Transactions permitted under paragraph (ii) of this
Section 4.11 and (b) Affiliate Transactions that are on terms that are fair and
reasonable to the Company or the applicable Restricted Subsidiary and are no
less favorable to the Company or the applicable Restricted Subsidiary than those
that might reasonably have been obtained in a comparable transaction at such
time on an arm's-length basis from a Person that is not an Affiliate of the
Company or such Restricted Subsidiary. All Affiliate Transactions (and each
series of related Affiliate Transactions which are similar or part of a common
plan) involving aggregate payments or other property with a fair market value in
excess of $1,000,000 shall be approved by the Board of Directors of the Company,
such approval to be evidenced by a Board Resolution stating that such Board of
Directors has determined that such transaction complies with the foregoing
provisions. If the Company or any Restricted Subsidiary enters into an Affiliate
Transaction (or a series of related Affiliate Transactions related to a common
plan) that involves an aggregate fair market value of more than $10,000,000, the
Company shall, prior to the consummation thereof, obtain a favorable opinion as
to the fairness of such transaction or series of related transactions to the
Company or the relevant Restricted Subsidiary, as the case may be, from a
financial point of view, from an Independent Advisor and file the same with the
Trustee.
(ii) The restrictions set forth in clause (i) shall not apply to (a)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary as determined in good faith by the Board of Directors or senior
management of the Company or such Restricted Subsidiary, as the case may be; (b)
transactions exclusively between or among
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the Company and any of its Restricted Subsidiaries or exclusively between or
among such Restricted Subsidiaries; provided, however, that such transactions
are not otherwise prohibited hereunder; (c) Restricted Payments permitted
hereunder; and (iv) the payment of such portion of the CGGS purchase price, if
any, as shall have been held in escrow to the former shareholders of CGGS.
SECTION 4.12. Limitation on Incurrence
of Additional Indebtedness.
Other than Permitted Indebtedness, the Company will not, and will
not cause or permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness; provided, however, that if
no Default or Event of Default shall have occurred and be continuing at the time
of or as a consequence of the incurrence of any such Indebtedness, the Company
and the Restricted Subsidiaries or any of them may incur Indebtedness
(including, without limitation, Acquired Indebtedness), in each case, if on the
date of the incurrence of such Indebtedness, after giving pro forma effect to
the incurrence thereof and the receipt and application of the proceeds
therefrom, (i) both (a) the Company's Consolidated EBITDA Coverage Ratio would
have been greater than 2.25 to 1.0 if such proposed incurrence is on or prior to
November 1, 1997 and at least equal to 2.5 to 1.0 if such proposed incurrence is
thereafter and (b) the Company's Adjusted Consolidated Net Tangible Assets are
equal to or greater than 150% of the aggregate consolidated Indebtedness of the
Company and its Restricted Subsidiaries or (ii) the Company's Adjusted
Consolidated Net Tangible Assets are equal to or greater than 200% of the
aggregate consolidated Indebtedness of the Company and its Restricted
Subsidiaries.
For purposes of determining any particular amount of Indebtedness under
this Section 4.12, guarantees of Indebtedness otherwise included in the
determination of such amount shall not also be included.
Indebtedness of a Person existing at the time such Person becomes a
Restricted Subsidiary (whether by merger, consolidation, acquisition of Capital
Stock or otherwise) or is merged with or into the Company or any Restricted
Subsidiary or which is secured by a Lien on an asset acquired by the Company or
a Restricted Subsidiary (whether or not such Indebtedness is assumed by the
acquiring Person) shall be deemed incurred at the time the Person becomes a
Restricted Subsidiary or at the time of the asset acquisition, as the case may
be.
The Company will not, and will not permit any Subsidiary Guarantor to
incur any Indebtedness which by its terms (or by the terms of any agreement
governing such Indebtedness) is subordinated in right of payment to any other
Indebtedness of the Company or such Subsidiary Guarantor unless such
Indebtedness is also by its terms (or by the terms of any agreement governing
such Indebtedness) made expressly subordinate in right of payment to the Notes
or the Guarantee of such Subsidiary Guarantor, as the case may be, pursuant to
subordination provisions that are substantively identical to the subordination
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provisions of such Indebtedness (or such agreement) that are most favorable to
the holders of any other Indebtedness of the Company or such Subsidiary
Guarantor, as the case may be.
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to: (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or advances,
or pay any Indebtedness or other obligation owed, to the Company or any other
Restricted Subsidiary; (c) guarantee any Indebtedness or any other obligation of
the Company or any Restricted Subsidiary; or (d) transfer any of its property or
assets to the Company or any other Restricted Subsidiary (each such encumbrance
or restriction, a "Payment Restriction"), except for such encumbrances or
restrictions existing under or by reason of: (1) applicable law; (2) this
Indenture; (3) the New Credit Facility; (4) customary non-assignment provisions
of any contract or any lease governing a leasehold interest of any Restricted
Subsidiary; (5) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to such Restricted Subsidiary, or
the properties or assets of such Restricted Subsidiary, other than the Person or
the property or assets of the Person so acquired; (6) agreements existing on the
Issue Date to the extent and in the manner such agreements are in effect on the
Issue Date; (7) customary restrictions with respect to a Restricted Subsidiary
of the Company pursuant to an agreement that has been entered into for the sale
or disposition of Capital Stock or assets of such Restricted Subsidiary to be
consummated in accordance with the terms of this Indenture solely in respect of
the assets or Capital Stock to be sold or disposed of; (8) any instrument
governing a Permitted Lien, to the extent and only to the extent such instrument
restricts the transfer or other disposition of assets subject to such Permitted
Lien; or (9) an agreement governing Refinancing Indebtedness incurred to
Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement
referred to in clause (2), (3), (5) or (6) above; provided, however, that the
provisions relating to such encumbrance or restriction contained in any such
Refinancing Indebtedness are no less favorable to the Holders in any material
respect as determined by the Board of Directors of the Company in their
reasonable and good faith judgment than the provisions relating to such
encumbrance or restriction contained in the applicable agreement referred to in
such clause (2), (3), (5), or (6).
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SECTION 4.14. Limitation on Restricted
and Unrestricted Subsidiaries.
The Board of Directors may, if no Default or Event of Default shall
have occurred and be continuing or would arise therefrom, designate an
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
(i) any such redesignation shall be deemed to be an incurrence as of the date of
such redesignation by the Company and its Restricted Subsidiaries of the
Indebtedness (if any) of such redesignated Subsidiary for purposes of Section
4.12, (ii) unless such redesignated Subsidiary shall not have any Indebtedness
outstanding, other than Indebtedness which would be Permitted Indebtedness, no
such designation shall be permitted if immediately after giving effect to such
redesignation and the incurrence of any such additional Indebtedness the Company
could not incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 4.12 and (iii) such Subsidiary assumes by
execution of a supplemental indenture all of the obligations of a Subsidiary
Guarantor under a Guarantee.
The Board of Directors of the Company also may, if no Default or
Event of Default shall have occurred and be continuing or would arise therefrom,
designate any Restricted Subsidiary to be an Unrestricted Subsidiary if (i) such
designation is at that time permitted under Section 4.10 and (ii) immediately
after giving effect to such designation, the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to Section
4.12. Any such designation by the Board of Directors shall be evidenced to the
Trustee by the filing with the Trustee of a certified copy of the resolution of
the Board of Directors giving effect to such designation or redesignation and an
Officers' Certificate certifying that such designation or redesignation complied
with the foregoing conditions and setting forth in reasonable detail the
underlying calculations. In the event that any Restricted Subsidiary is
designated an Unrestricted Subsidiary in accordance with this Section 4.14, such
Restricted Subsidiary's Guarantee will be released.
For purposes of Section 4.10, (i) an "Investment" shall be deemed to
have been made at the time any Restricted Subsidiary is designated as an
Unrestricted Subsidiary in an amount (proportionate to the Company's equity
interest in such Subsidiary) equal to the net worth of such Restricted
Subsidiary at the time that such Restricted Subsidiary is designated as an
Unrestricted Subsidiary; (ii) at any date the aggregate amount of all Restricted
Payments made as Investments since the Issue Date shall exclude and be reduced
by an amount (proportionate to the Company's equity interest in such Subsidiary)
equal to the net worth of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary, not to exceed, in
the case of any such redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary, the amount of Investments previously made by the Company and the
Restricted Subsidiaries in such Unrestricted Subsidiary (in each case (i) and
(ii) "net worth" to be calculated based upon the fair market value of the assets
of such Subsidiary as of any such date of designation); and (iii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer.
Notwithstanding the foregoing, the Board of Directors may not
designate any
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Subsidiary of the Company to be an Unrestricted Subsidiary if, after such
designation, (a) the Company or any Restricted Subsidiary (i) provides credit
support for, or a guarantee of, any Indebtedness of such Subsidiary (including
any undertaking, agreement or instrument evidencing such Indebtedness) or (ii)
is directly or indirectly liable for any Indebtedness of such Subsidiary or (b)
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, any Restricted Subsidiary which is not a Subsidiary of the
Subsidiary to be so designated.
Notwithstanding the foregoing, the provisions set forth above will
not prohibit the initial designation of each of Grey Wolf, Cascade and Western
as Unrestricted Subsidiaries.
Subsidiaries of the Company that are not designated by the Board of
Directors as Restricted or Unrestricted Subsidiaries will be deemed to be
Restricted Subsidiaries. Notwithstanding any provisions of this Section 4.14,
all Subsidiaries of an Unrestricted Subsidiary will be Unrestricted
Subsidiaries.
SECTION 4.15. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder will
have the right to require that the Issuers repurchase all or a portion of such
Holder's Notes pursuant to the offer described below (the "Change of Control
Offer"), at a purchase price equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, thereon to the date of purchase.
(b) Within 30 days following the date upon which the Change of
Control occurred, the Issuers must send, by first class mail, a notice to each
Holder at such Holder's last registered address, with a copy to the Trustee,
which notice shall govern the terms of the Change of Control Offer. The notice
to the Holders shall contain all instructions and materials necessary to enable
such Holders to tender Notes pursuant to the Change of Control Offer. Such
notice shall state:
(i) that the Change of Control Offer is being made pursuant to this
Section 4.15, that all Notes tendered and not withdrawn will be accepted
for payment and that the Change of Control Offer shall remain open for a
period of 20 Business Days or such longer period as may be required by
law;
(ii) the purchase price (including the amount of accrued interest)
and the purchase date (which shall be no earlier than 30 days nor later
than 45 days from the date such notice is mailed, other than as may be
required by law) (the "Change of Control Payment Date");
(iii) that any Note not tendered will continue to accrue interest;
(iv) that, unless the Issuers default in making payment therefor,
any Note accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Payment Date;
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(v) that Holders electing to have a Note purchased pursuant to a
Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day prior to the
Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Change of Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of
the Notes the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Notes purchased;
(vii) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; provided, however, that each Note purchased and
each new Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof; and
(viii) the circumstances and relevant facts regarding such Change of
Control.
On or before the Change of Control Payment Date, the Issuers shall
(i) accept for payment Notes or portions thereof tendered pursuant to the Change
of Control Offer, (ii) deposit with the Paying Agent in accordance with Section
2.14 U.S. Legal Tender sufficient to pay the purchase price plus accrued
interest, if any, of all Notes so tendered and (iii) deliver to the Trustee
Notes so accepted together with an Officers' Certificate stating the Notes or
portions thereof being purchased by the Issuers. Upon receipt by the Paying
Agent of the monies specified in clause (ii) above and a copy of the Officers'
Certificate specified in clause (iii) above, the Paying Agent shall promptly
mail to the Holders of Notes so accepted payment in an amount equal to the
purchase price plus accrued interest, if any, and the Trustee shall promptly
authenticate and mail to such Holders new Notes equal in principal amount to any
unpurchased portion of the Notes surrendered. Any Notes not so accepted shall be
promptly mailed by the Company to the Holder thereof. For purposes of this
Section 4.15, the Trustee shall act as the Paying Agent.
The Issuers shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer at
the Change of Control Purchase Price, at the same times and otherwise in
compliance with the requirements applicable to a Change of Control Offer made by
the Issuers and purchases all Notes validly tendered and not withdrawn under
such Change of Control Offer.
Neither the Board of Directors of the Company nor the Trustee may
waive the
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provisions of this Section 4.15 relating to the Issuers' obligation to make a
Change of Control Offer.
The Issuers will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.15, the Issuers shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached their
obligations under the provisions of this Section 4.15 by virtue thereof.
SECTION 4.16. Limitation on Asset Sales.
(a) The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless:
(i) the Company or the applicable Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at
least equal to the fair market value of the assets sold or otherwise
disposed of (as determined in good faith by the Company's Board of
Directors or senior management of the Company);
(ii) (a) at least 70% of the consideration received by the Company
or the Restricted Subsidiary, as the case may be, from such Asset Sale
shall be in the form of cash or Cash Equivalents and is received at the
time of such disposition and (b) at least 15% of such consideration
received if in a form other than cash or Cash Equivalents is converted
into or exchanged for cash or Cash Equivalents within 120 days of such
disposition; and
(iii) upon the consummation of an Asset Sale, the Company shall
apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 365 days of receipt thereof either (a)
to repay or prepay Indebtedness outstanding under the New Credit Facility,
including, without limitation, a permanent reduction in the related
commitment, (b) to repay or prepay any Indebtedness of the Company that is
secured by a Lien permitted to be incurred pursuant to Section 4.18, (c)
to make an investment in properties or assets that replace the properties
or assets that were the subject of such Asset Sale or in properties or
assets that will be used in the business of the Company and its Restricted
Subsidiaries as existing on the Issue Date or in businesses reasonably
related thereto ("Replacement Assets"), (d) to an investment in Crude Oil
and Natural Gas Related Assets or (e) a combination of prepayment and
investment permitted by the foregoing clauses (iii)(a) through (iii)(d).
On the 366th day after an Asset Sale or such earlier date, if any, as the
Board of Directors of the Company determines not to apply the Net Cash
Proceeds relating to such Asset Sale as set forth in clauses (iii)(a)
through (iii)(d) of the next preceding sentence (each a "Net Proceeds
Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which
have been received by the Company or such Restricted Subsidiary but which
have
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not been applied on or before such Net Proceeds Offer Trigger Date as
permitted in clauses (iii)(a) through (iii)(d) of the next preceding
sentence (each a "Net Proceeds Offer Amount") shall be applied by the
Company or such Restricted Subsidiary, as the case may be, to make an
offer to purchase (a "Net Proceeds Offer") on a date (the "Net Proceeds
Offer Payment Date") not less than 30 nor more than 45 days following the
applicable Net Proceeds Offer Trigger Date, from all Holders on a pro rata
basis, that principal amount of Notes purchasable with the Net Proceeds
Offer Amount at a price equal to 100% of the principal amount of the Notes
to be purchased, plus accrued and unpaid interest, if any, thereon to the
date of purchase; provided, however, that if at any time any non-cash
consideration received by the Company or any Restricted Subsidiary, as the
case may be, in connection with any Asset Sale is converted into or sold
or otherwise disposed of for cash (other than interest received with
respect to any such non-cash consideration), then such conversion or
disposition shall be deemed to constitute an Asset Sale hereunder and the
Net Cash Proceeds thereof shall be applied in accordance with this Section
4.16. The Company may defer the Net Proceeds Offer until there is an
aggregate unutilized Net Proceeds Offer Amount equal to or in excess of
$5,000,000 resulting from one or more Asset Sales (at which time, the
entire unutilized Net Proceeds Offer Amount, and not just the amount in
excess of $5,000,000, shall be applied as required pursuant to this
paragraph).
In the event of the transfer of substantially all (but not all) of
the property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under Section 5.01, the
successor corporation shall be deemed to have sold the properties and assets of
the Company and its Restricted Subsidiaries not so transferred for purposes of
this Section 4.16, and shall comply with the provisions of this Section 4.16
with respect to such deemed sale as if it were an Asset Sale. In addition, the
fair market value of such properties and assets of the Company or its Restricted
Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for
purposes of this Section 4.16.
Notwithstanding the two immediately preceding paragraphs, the
Company and its Restricted Subsidiaries will be permitted to consummate an Asset
Sale without complying with such paragraphs to the extent (a) the consideration
for such Asset Sale constitutes Replacement Assets and/or Crude Oil and Natural
Gas Related Assets and (b) such Asset Sale is for fair market value; provided,
however, that any consideration not constituting Replacement Assets and Crude
Oil and Natural Gas Related Assets received by the Company or any of its
Restricted Subsidiaries in connection with any Asset Sale permitted to be
consummated under this paragraph shall constitute Net Cash Proceeds subject to
the provisions of the two immediately preceding paragraphs.
(b) Subject to the deferral of the Net Proceeds Offer contained in
clause (a)(iii) above, each notice of a Net Proceeds Offer pursuant to this
Section 4.16 shall be mailed or caused to be mailed, by first class mail, by the
Issuers not more than 30 days after the Net Proceeds Offer Trigger Date to all
Holders at their last registered addresses, with a copy to the Trustee. The
notice shall contain all instructions and materials necessary to enable such
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Holders to tender Notes pursuant to the Net Proceeds Offer and shall
state the following terms:
(i) that the Net Proceeds Offer is being made pursuant to Section
4.16, that all Notes tendered will be accepted for payment; provided,
however, that if the aggregate principal amount of Notes tendered in a Net
Proceeds Offer plus accrued interest at the expiration of such offer
exceeds the aggregate amount of the Net Proceeds Offer, the Issuers shall
select the Notes to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Issuers so that only Notes
in denominations of $1,000 or multiples thereof shall be purchased) and
that the Net Proceeds Offer shall remain open for a period of 20 Business
Days or such longer period as may be required by law;
(ii) the purchase price (including the amount of accrued interest)
and the Net Proceeds Offer Payment Date (which shall be not less than 30
nor more than 45 days following the applicable Net Proceeds Offer Trigger
Date and which shall be at least five business days after the Trustee
receives notice thereof from the Issuers);
(iii) that any Note not tendered will continue to accrue interest;
(iv) that, unless the Issuers default in making payment therefor,
any Note accepted for payment pursuant to the Net Proceeds Offer shall
cease to accrue interest after the Net Proceeds Offer Payment Date;
(v) that Holders electing to have a Note purchased pursuant to a
Net Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day prior to the Net
Proceeds Offer Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Net Proceeds Offer Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of
the Notes the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased; and
(vii) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; provided, however, that each Note purchased and
each new Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof;
On or before the Net Proceeds Offer Payment Date, the Issuers shall
(i) accept for payment Notes or portions thereof tendered pursuant to the Net
Proceeds Offer which are to be purchased in accordance with item (b)(i) above,
(ii) deposit with the
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Paying Agent in accordance with Section 2.14 U.S. Legal Tender sufficient to pay
the purchase price plus accrued interest, if any, of all Notes to be purchased
and (iii) deliver to the Trustee Notes so accepted together with an Officers'
Certificate stating the Notes or portions thereof being purchased by the
Issuers. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price plus accrued interest,
if any. For purposes of this Section 4.16, the Trustee shall act as the Paying
Agent.
The Issuers will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
this Section 4.16, the Issuers shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached their obligations under
the provisions of this Section 4.16 by virtue thereof.
SECTION 4.17. Limitation on Preferred
Stock of Restricted Subsidiaries.
The Company will not cause or permit any of its Restricted
Subsidiaries to issue any Preferred Stock (other than to the Company or to a
Wholly Owned Restricted Subsidiary) or permit any Person (other than the Company
or a Wholly Owned Restricted Subsidiary) to own any Preferred Stock of any
Restricted Subsidiary.
SECTION 4.18. Limitation on Liens.
Other than Permitted Liens, the Company will not, and will not cause
or permit any of its Restricted Subsidiaries to, directly or indirectly, create,
incur, assume or permit or suffer to exist any Liens of any kind against or upon
any property or assets of the Company or any of its Restricted Subsidiaries
(whether owned on the Issue Date or acquired after the Issue Date) or any
proceeds therefrom, or assign or otherwise convey any right to receive income or
profits therefrom unless (a) in the case of Liens securing Indebtedness that is
expressly subordinate or junior in right of payment to the Notes or any
Guarantee, the Notes or such Guarantee, as the case may be, are secured by a
Lien on such property, assets or proceeds that is senior in priority to such
Liens at least to the same extent as the Notes are senior in priority to such
Indebtedness and (b) in all other cases, the Notes and the Guarantees are
equally and ratably secured.
SECTION 4.19. Limitation on Conduct of Business.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, engage in the conduct of any business other than the Crude Oil
and Natural Gas Business.
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SECTION 4.20. Additional Subsidiary Guarantees.
If the Company or any of its Restricted Subsidiaries transfers or
causes to be transferred, in one transaction or a series of related
transactions, any property to any Restricted Subsidiary that is not a Subsidiary
Guarantor, or if the Company or any of its Restricted Subsidiaries shall
organize, acquire or otherwise invest in or hold an Investment in another
Restricted Subsidiary having total consolidated assets with a book value in
excess of $500,000 that is not a Subsidiary Guarantor, then such transferee or
acquired or other Restricted Subsidiary shall (a) execute and deliver to the
Trustee a supplemental indenture in form reasonably satisfactory to the Trustee
pursuant to which such Restricted Subsidiary shall unconditionally guarantee all
of the Company's obligations under the Notes and this Indenture on the terms set
forth in this Indenture and (b) deliver to the Trustee an Opinion of Counsel and
an Officers' Certificate, stating that no event of default shall occur as a
result of such supplemental indenture, that it complies with the terms of this
Indenture and that such supplemental indenture has been duly authorized,
executed and delivered by such Restricted Subsidiary and constitutes a legal,
valid, binding and enforceable obligation of such Restricted Subsidiary.
Thereafter, such Restricted Subsidiary shall be a Subsidiary Guarantor for all
purposes of the Indenture.
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ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.1. Merger, Consolidation
and Sale of Assets.
The Company will not, in a single transaction or series of related
transactions, consolidate or merge with or into any Person, or sell, assign,
transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary to sell, assign, transfer, lease, convey or otherwise
dispose of) all or substantially all of the Company's assets (determined on a
consolidated basis for the Company and its Restricted Subsidiaries), whether as
an entirety or substantially as an entirety to any Person unless: (a) either (i)
the Company or such Restricted Subsidiary, as the case may be, shall be the
surviving or continuing corporation or (ii) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or the
Person which acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company and its Restricted
Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall be
a corporation organized and validly existing under the laws of the United States
or any state thereof or the District of Columbia and (y) shall expressly assume,
by supplemental indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, premium, if any, and interest on all of the Notes and the
performance of every covenant of the Notes, the Indenture and the Registration
Rights Agreement on the part of the Company to be performed or observed; (b)
immediately after giving effect to such transaction and the assumption
contemplated by clause (a)(ii)(y) above (including giving effect to any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction), the Company or such Surviving Entity, as the case
may be, (i) shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction and
(ii) shall be able to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to Section 4.12 hereof; (c) immediately
before and immediately after giving effect to such transaction and the
assumption contemplated by clause (a)(ii)(y) above (including, without
limitation, giving effect to any Indebtedness incurred or anticipated to be
incurred and any Lien granted in connection with or in respect of the
transaction), no Default or Event of Default shall have occurred or be
continuing; and (d) the Company or the Surviving Entity, as the case may be,
shall have delivered to the Trustee an officers' certificate and an opinion of
counsel, each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture comply with the applicable provisions hereof and that all conditions
precedent in this Indenture relating to such transaction have been satisfied;
provided, however, that such counsel may rely, as to matters of fact, on a
certificate or certificates of officers of the Company.
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For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
Notwithstanding the foregoing, nothing in this Section shall
prohibit the merger of CGGS with and into Canadian Abraxas.
Each Subsidiary Guarantor (other than any Subsidiary Guarantor whose
Guarantee is to be released in accordance with the terms of the Guarantee and
this Indenture in connection with any transaction complying with the provisions
of the Indenture described under Article Five) will not, and the Company will
not cause or permit any Subsidiary Guarantor to, consolidate with or merge with
or into any Person other than the Company or another Subsidiary Guarantor that
is a Wholly Owned Restricted Subsidiary unless: (a) the entity formed by or
surviving any such consolidation or merger (if other than the Subsidiary
Guarantor) or to which such sale, lease, conveyance or other disposition shall
have been made is a corporation organized and existing under the laws of the
United States or any state thereof or the District of Columbia; (b) such entity
assumes by execution of a supplemental indenture all of the obligations of the
Subsidiary Guarantor under its Guarantee; (c) immediately after giving effect to
such transaction, no Default or Event of Default shall have occurred and be
continuing; and (d) immediately after giving effect to such transaction and the
use of any net proceeds therefrom on a pro forma basis, the Company could
satisfy the provisions of clause (b) of the first paragraph of this covenant.
Any merger or consolidation of a Subsidiary Guarantor with and into the Company
(with the Company being the surviving entity) or another Subsidiary Guarantor
that is a Wholly Owned Restricted Subsidiary need only comply with clause (d) of
the first paragraph of this Section 5.01.
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation, merger, conveyance, lease or transfer in
accordance with Section 5.01, the successor Person formed by such consolidation
or into which the Company is merged or to which such conveyance, lease or
transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under this Indenture with the same effect
as if such successor had been named as the Company herein and thereafter (except
in the case of a lease) the predecessor corporation will be relieved of all
further obligations and covenants under this Indenture and the Notes.
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ARTICLE SIX
REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" means any of the following events:
(a) the failure to pay interest (including any Additional Interest)
on any Notes when the same becomes due and payable and such default
continues for a period of 30 days;
(b) the failure to pay the principal of any Notes when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer);
(c) a default in the observance or performance of any other covenant
or agreement contained in this Indenture which default continues for a
period of 30 days after either Issuer or Subsidiary Guarantor receives
written notice specifying the default (and demanding that such default be
remedied) from the Trustee or the Holders of at least 25% of the
outstanding principal amount of the Notes (except in the case of a default
with respect to observance or performance of any of the terms or
provisions of Section 4.15, 4.16 or 5.01 which will constitute an Event of
Default with such notice requirement but without such passage of time
requirement);
(d) a default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced
any Indebtedness of the Company or any Restricted Subsidiary (or the
payment of which is guaranteed by the Issuers or any Restricted
Subsidiary), whether such Indebtedness now exists, or is created after the
Issue Date, which default (i) is caused by a failure to pay principal of
or premium, if any, or interest on such Indebtedness after any applicable
grace period provided in such Indebtedness (a "Payment Default") or (ii)
results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5,000,000 or more;
(e) one or more judgments in an aggregate amount in excess of
$5,000,000 (unless covered by insurance by a reputable insurer as to which
the insurer has acknowledged coverage) shall have been rendered against
the Company or any of its Restricted Subsidiaries and such judgments
remain undischarged, unvacated, unpaid or unstayed for a period of 60 days
after such
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judgment or judgments become final and non-appealable;
(f) the Company or any of its Subsidiaries pursuant to or under or
within the meaning of any Bankruptcy Law:
(i) commences a voluntary case or proceeding;
(ii) consents to the entry of an order for relief against it
in an involuntary case or proceeding;
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property;
(iv) makes a general assignment for the benefit of its
creditors; or
(v) shall generally not pay its debts when such debts become
due or shall admit in writing its inability to pay its debts
generally;
(g) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company or any Subsidiary of the
Company in an involuntary case or proceeding,
(ii) appoints a Custodian of the Company or any Subsidiary of
the Company for all or substantially all of its Properties, or
(iii) orders the liquidation of the Company or any Subsidiary
of the Company, and in each case the order or decree remains
unstayed and in effect for 60 days; or
(h) any of the Guarantees cease to be in full force and effect or
any of the Guarantees are declared to be null and void or invalid and
unenforceable or any of the Subsidiary Guarantors denies or disaffirms its
liability under its Guarantees (other than by reason of release of a
Subsidiary Guarantor in accordance with the terms of this Indenture).
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SECTION 6.02. Acceleration.
Upon the happening of any Event of Default specified in Section 6.01
the Trustee may, or the holders of at least 25% in aggregate principal amount of
outstanding Notes may, declare the principal of, premium, if any, and accrued
and unpaid interest on all the Notes to be due and payable by notice in writing
to the Issuers and the Trustee specifying the respective Event of Default and
that it is a "notice of acceleration" and the same shall become immediately due
and payable. If an Event of Default of the type described in clause (f) or (g)
above occurs and is continuing, then such amount will ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.
At any time after a declaration of acceleration with respect to the
Notes as described in the preceding paragraph, the Holders of a majority in
aggregate principal amount of the Notes then outstanding by written notice to
the Company and the Trustee may rescind and cancel such declaration and its
consequences (a) if the rescission would not conflict with any judgment or
decree, (b) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of such
acceleration, (c) to the extent the payment of such interest is lawful, interest
on overdue installments of interest and overdue principal, which has become due
otherwise than by such declaration of acceleration, has been paid, (d) if the
Issuers have paid the Trustee its reasonable compensation and reimbursed the
Trustee for its expenses, disbursements and advances and (e) in the event of the
cure or waiver of an Event of Default of the type described in clause (f) or (g)
of the description of Events of Default above, the Trustee shall have received
an Officers' Certificate and an Opinion of Counsel that such Event of Default
has been cured or waived; provided, however, that such counsel may rely, as to
matters of fact, on a certificate or certificates of officers of the Company. No
such rescission shall affect any subsequent Default or impair any right
consequent thereto.
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SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of the principal of, premium, if any, or interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture.
All rights of action and claims under this Indenture or the Notes
may be enforced by the Trustee even if it does not possess any of the Notes or
does not produce any of them in the proceeding. A delay or omission by the
Trustee or any Holder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Prior to the declaration of acceleration of the Notes, the Holders
of not less than a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may, on behalf of the Holders of all the
Notes, waive any existing Default or Event of Default and its consequences under
this Indenture, except a Default or Event of Default specified in Section
6.01(a) or (b) or in respect of any provision hereof which cannot be modified or
amended without the consent of the Holder so affected pursuant to Section 9.02.
When a Default or Event of Default is so waived, it shall be deemed cured and
shall cease to exist. This Section 6.04 shall be in lieu of ss. 316(a)(1)(B) of
the TIA and such ss. 316(a)(1)(B) of the TIA is hereby expressly excluded from
this Indenture and the Notes, as permitted by the TIA.
SECTION 6.05. Control by Majority.
Holders of the Notes may not enforce this Indenture or the Notes
except as provided in this Article Six and under the TIA. The Holders of not
less than a majority in aggregate principal amount of the outstanding Notes
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee, provided, however, that the Trustee may refuse
to follow any direction (a) that conflicts with any rule of law or this
Indenture, (b) that the Trustee determines may be unduly prejudicial to the
rights of another Holder, or (c) that may expose the Trustee to personal
liability for which reasonable indemnity provided to the Trustee against such
liability shall be inadequate; provided, further, however, that the Trustee may
take any other action deemed proper by the Trustee that is not inconsistent with
such direction or this Indenture. This Section 6.05 shall be in lieu of ss.
316(a)(1)(A) of the TIA, and such ss. 316(a)(1)(A) of the TIA is hereby
expressly excluded from this Indenture and the Notes, as permitted by the TIA.
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SECTION 6.06. Limitation on Suits.
No Holder of any Notes shall have any right to institute any
proceeding with respect to this Indenture or the Notes or any remedy hereunder,
unless the Holders of at least 25% in aggregate principal amount of the
outstanding Notes have made written request, and offered reasonable indemnity,
to the Trustee to institute such proceeding as Trustee under the Notes and this
Indenture, the Trustee has failed to institute such proceeding within 30 days
after receipt of such notice, request and offer of indemnity and the Trustee,
within such 30-day period, has not received directions inconsistent with such
written request by Holders of not less than a majority in aggregate principal
amount of the outstanding Notes.
The foregoing limitations shall not apply to a suit instituted by a
Holder of a Note for the enforcement of the payment of the principal of,
premium, if any, or interest on, such Note on or after the respective due dates
expressed or provided for in such Note.
A Holder may not use this Indenture to prejudice the rights of any
other Holders or to obtain priority or preference over such other Holders.
SECTION 6.07. Right of Holders To Receive Payment.
Notwithstanding any other provision in this Indenture, the right of
any Holder of a Note to receive payment of the principal of, premium, if any,
and interest on such Note, on or after the respective due dates expressed or
provided for in such Note, or to bring suit for the enforcement of any such
payment on or after the respective due dates, is absolute and unconditional and
shall not be impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default specified in clause (a) or (b) of Section
6.01 occurs and is continuing, the Trustee may recover judgment in its own name
and as trustee of an express trust against the Company, or any other obligor on
the Notes for the whole amount of the principal of, premium, if any, and accrued
interest remaining unpaid, together with interest on overdue principal and, to
the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum provided for by the
Notes and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
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SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents, counsel, accountants and
experts) and the Holders allowed in any judicial proceedings relative to the
Issuers or Restricted Subsidiaries (or any other obligor upon the Notes), their
creditors or their property and shall be entitled and empowered to collect and
receive any monies or other property payable or deliverable on any such claims
and to distribute the same, and any Custodian in any such judicial proceedings
is hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, and any other amounts due the Trustee under Section 7.07. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
SECTION 6.10 Priorities.
If the Trustee collects any money pursuant to this Article Six it
shall pay out such money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for interest accrued on the Notes, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Notes for interest;
Third: to Holders for the principal amounts (including any premium)
owing under the Notes, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for the
principal (including any premium); and
Fourth: the balance, if any, to the Issuers.
The Trustee, upon prior written notice to the Issuers, may fix a
record date and payment date for any payment to Holders pursuant to this Section
6.10.
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SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court may in its discretion require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to any suit by the Trustee, any suit by a
Holder pursuant to Section 6.06, or a suit by a Holder or Holders of more than
10% in aggregate principal amount of the outstanding Notes.
SECTION 6.12. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture or any Note and such proceeding
has been discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every such case the
Issuers, the Trustee and the Holders shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise thereof as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are specifically
set forth in this Indenture and no covenants or obligations shall be
implied in this Indenture that are adverse to the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, in the case of any such certificates or
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opinions that by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01 and
Section 7.02.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with the
Issuers. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any document believed by it to be genuine and
to have been signed or presented by the proper Person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel of its selection and may require an Officers' Certificate or
an Opinion of Counsel, which shall conform to Sections 10.04 and 10.05.
The Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on such
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Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled, upon reasonable
notice to the Issuers, to examine the books, records, and premises of the
Issuers, personally or by agent or attorney and to consult with the
officers and representatives of the Issuers, including the Issuers'
accountants and attorneys.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee security
or indemnity reasonably satisfactory to the Trustee against the costs,
expenses and liabilities which may be incurred by it in compliance with
such request, order or direction.
(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(h) Delivery of reports, information and documents to the Trustee
under Section 4.08 is for informational purposes only and the Trustee's
receipt of the foregoing shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Issuers' compliance with any of their covenants
hereunder (as to which the Trustee is entitled to rely exclusively on
Officers' Certificates).
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Issuers, any of their
Subsidiaries, or their respective Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11.
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SECTION 7.04. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Notes, and it shall not be accountable for the Issuers'
use of the proceeds from the Notes, and it shall not be responsible for any
statement of the Issuers in this Indenture or the Notes other than the Trustee's
certificate of authentication.
SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if
it is known to a Trust Officer, the Trustee shall mail to each Holder notice of
the uncured Default or Event of Default within 90 days after obtaining knowledge
thereof. Except in the case of a Default or an Event of Default in payment of
principal of, or interest on, any Note, including an accelerated payment, a
Default in payment on the Change of Control Payment Date pursuant to a Change of
Control Offer or on the Net Proceeds Offer Payment Date pursuant to a Net
Proceeds Offer and a Default in compliance with Article Five hereof, the Trustee
may withhold the notice if and so long as its Board of Directors, the executive
committee of its Board of Directors or a committee of its directors and/or Trust
Officers in good faith determines that withholding the notice is in the interest
of the Holders. The foregoing sentence of this Section 7.05 shall be in lieu of
the proviso to ss. 315(b) of the TIA and such proviso to ss. 315(b) of the TIA
is hereby expressly excluded from this Indenture and the Notes, as permitted by
the TIA.
SECTION 7.06. Reports by Trustee to Holders.
Within 60 days after November 1 of each year beginning with 1997,
the Trustee shall, to the extent that any of the events described in TIA ss.
313(a) occurred within the previous twelve months, but not otherwise, mail to
each Holder a brief report dated as of such date that complies with TIA ss.
313(a). The Trustee also shall comply with TIA ss.ss. 313(b), (c) and (d).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Issuers and filed with the Commission and each stock exchange, if
any, on which the Notes are listed.
The Issuers shall promptly notify the Trustee if the Notes become
listed on any stock exchange and the Trustee shall comply with TIA ss. 313(d).
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SECTION 7.07. Compensation and Indemnity.
The Issuers shall pay to the Trustee from time to time such
compensation for its services as has been agreed to in writing signed by the
Issuers and the Trustee. The Trustee's compensation shall not be limited by any
law on compensation of a trustee of an express trust. The Issuers shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred or made by it in connection with the performance of its duties under
this Indenture. Such expenses shall include the reasonable fees and expenses of
the Trustee's agents, counsel, accountants and experts.
The Issuers shall indemnify each of the Trustee (or any predecessor
Trustee) and its agents, employees, stockholders, Affiliates and directors and
officers for, and hold them each harmless against, any and all loss, liability,
damage, claim or expense (including reasonable fees and expenses of counsel),
including taxes (other than taxes based on the income of the Trustee) incurred
by them except for such actions to the extent caused by any negligence, bad
faith or willful misconduct on their part, arising out of or in connection with
the acceptance or administration of this trust including the reasonable costs
and expenses of defending themselves against any claim or liability in
connection with the exercise or performance of any of their rights, powers or
duties hereunder. The Trustee shall notify the Issuers promptly of any claim
asserted against the Trustee for which it may seek indemnity. At the Trustee's
sole discretion, the Issuers shall defend the claim and the Trustee shall
cooperate and may participate in the defense; provided, however, that any
settlement of a claim shall be approved in writing by the Trustee if such
settlement would result in an admission of liability by the Trustee or if such
settlement would not be accompanied by a full release of the Trustee for all
liability arising out of the events giving rise to such claim. Alternatively,
the Trustee may at its option have separate counsel of its own choosing and the
Issuers shall pay the reasonable fees and expenses of such counsel.
To secure the Issuers' payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or premium, if any, or interest on particular
Notes.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(f) or (g) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
The provisions of this Section 7.07 shall survive the termination of
this Indenture.
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SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Issuers. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee and appoint a successor Trustee with the Issuers' consent, by so
notifying the Issuers and the Trustee. The Issuers may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuers shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in aggregate principal
amount of the outstanding Notes may appoint a successor Trustee to replace the
successor Trustee appointed by the Issuers.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The Issuers shall mail notice of such successor Trustee's appointment
to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers or the
Holders of at least 10% in aggregate principal amount of the outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding any resignation or replacement of the Trustee
pursuant to this Section 7.08, the Issuers' obligations under Section 7.07 shall
continue for the benefit of the retiring Trustee.
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SECTION 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; provided, however, that
such corporation shall be otherwise qualified and eligible under this Article
Seven.
SECTION 7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA ss.ss. 310(a)(1), (2) and (5). The Trustee (or, in the case
of a Trustee that is a corporation included in a bank holding company system,
the related bank holding company) shall have a combined capital and surplus of
at least $150 million as set forth in its most recent published annual report of
condition, and have a Corporate Trust Office in the City of New York. In
addition, if the Trustee is a corporation included in a bank holding company
system, the Trustee, independently of such bank holding company, shall meet the
capital requirements of TIA ss. 310(a)(2). The Trustee shall comply with TIA ss.
310(b); provided, however, that there shall be excluded from the operation of
TIA ss. 310(b)(1) any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of the Issuers
are outstanding, if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met. The provisions of TIA ss. 310 shall apply to the Company, as
obligors of the Notes.
SECTION 7.11 Preferential Collection of
Claims Against Issuers.
The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein. The
provisions of TIA ss. 311 shall apply to the Issuers, as obligors on the Notes.
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ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01 Termination of Issuers' Obligations.
This Indenture will be discharged and will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Notes, as expressly provided for in this Indenture) as to all outstanding
Notes when (a) either (i) all Notes, theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuers and thereafter repaid to the Issuers
or discharged from such trust) have been delivered to the Trustee for
cancellation or (ii) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Issuers have irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Issuers directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (b)
the Issuers have paid all other sums payable under this Indenture by the
Issuers; and (c) the Issuers have delivered to the Trustee an officers'
certificate and an opinion of counsel stating that all conditions precedent
under this Indenture relating to the satisfaction and discharge of this
Indenture have been complied with; provided, however, that such counsel may
rely, as to matters of fact, on a certificate or certificates of officers of the
Issuers.
The Issuers may, at their option and at any time, elect to have
their obligations and the corresponding obligations of the Subsidiary Guarantors
discharged with respect to the outstanding Notes ("Legal Defeasance"). Such
Legal Defeasance means that the Issuers shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding Notes, and
satisfied all of their obligations with respect to the Notes, except for (a) the
rights of Holders to receive payments in respect of the principal of, premium,
if any, and interest on the Notes when such payments are due, (b) the Issuers'
obligations with respect to the Notes concerning issuing temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payments, (c) the rights, powers, trust,
duties and immunities of the Trustee and the Issuers' obligations in connection
therewith and (d) the Legal Defeasance provisions of this Section 8.01. In
addition, the Issuers may, at their option and at any time, elect to have the
obligations of the Issuers and the Subsidiary Guarantors, if any, released with
respect to covenants contained in Sections 4.04, 4.08 and 4.10 through 4.20 and
Article Five ("Covenant Defeasance") and thereafter any omission to comply with
such obligations shall not constitute a Default or Event of Default with respect
to the Notes. In the event of Covenant Defeasance, those events described under
Section 6.01 (except those events described in Section 6.01(a),(b),(f) and (g))
will no longer constitute an Event of Default with respect to the Notes.
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In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Issuers must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders cash in United States dollars, non-callable
U.S. Government Obligations, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any,
and interest on the Notes on the stated date for payment thereof or on the
applicable Redemption Date, as the case may be;
(b) in the case of Legal Defeasance, the Issuers shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that (i) the Issuers have
received from, or there has been published by, the Internal Revenue
Service a ruling or (ii) since the date of this Indenture, there has been
a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion of counsel shall confirm that,
the Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not
occurred;
(c) in the case of Covenant Defeasance, the Issuers shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders will not
recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default
under Section 6.01(f) or (g) from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date
of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under this Indenture or
any other agreement or instrument to which the Company or any of its
Restricted Subsidiaries is a party or by which the Company or any of its
Restricted Subsidiaries is bound;
(f) the Issuers shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Issuers with the
intent of preferring the Holders over any other creditors of either Issuer
or with the intent of defeating, hindering, delaying or defrauding any
other creditors of the Issuers or others;
(g) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance, as the case may be, have been complied with; provided,
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however, that such counsel may rely, as to matters of fact, on a
certificate or certificates of officers of the Issuers;
(h) the Issuers shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and
(i) certain other customary conditions precedent are satisfied.
SECTION 8.02. Application of Trust Money.
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to Section 8.01, and
shall apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of the principal of
and interest on the Notes. The Trustee shall be under no obligation to invest
said U.S. Legal Tender or U.S. Government Obligations except as it may agree in
writing with the Issuers.
The Issuers shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.01 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of outstanding Notes.
SECTION 8.03. Repayment to the Issuers.
Subject to Section 8.01, the Trustee and the Paying Agent shall
promptly pay to the Issuers upon request any excess U.S. Legal Tender or U.S.
Government Obligations held by them at any time and thereupon shall be relieved
from all liability with respect to such money. The Trustee and the Paying Agent
shall pay to the Issuers upon request any money held by them for the payment of
principal or interest that remains unclaimed for one year; provided, however,
that the Trustee or such Paying Agent, before being required to make any
payment, may at the expense of the Issuers cause to be published once in a
newspaper of general circulation in the City of New York or mail to each Holder
entitled to such money notice that such money remains unclaimed and that after a
date specified therein which shall be at least 30 days from the date of such
publication or mailing any unclaimed balance of such money then remaining will
be repaid to the Issuers. After payment to the Issuers, Holders entitled to such
money must look to the Issuers for payment as general creditors unless an
applicable law designates another Person.
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SECTION 8.04. Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Section 8.01 by reason
of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Issuers' obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had occurred pursuant to Section
8.01 until such time as the Trustee or Paying Agent is permitted to apply all
such U.S. Legal Tender or U.S. Government Obligations in accordance with Section
8.01; provided, however, that if the Issuers have made any payment of interest
on or principal of any Notes because of the reinstatement of their obligations,
the Issuers shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the U.S. Legal Tender or U.S. Government Obligations
held by the Trustee or Paying Agent.
SECTION 8.05. Acknowledgment of Discharge by Trustee.
After (i) the conditions of Section 8.01 have been satisfied, (ii)
the Issuers have paid or caused to be paid all other sums payable hereunder by
the Issuers and (iii) each of the Issuers has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent referred to in clause (i) above relating to the
satisfaction and discharge of this Indenture have been complied with, the
Trustee upon request shall acknowledge in writing the discharge of the Issuers'
obligations under this Indenture except for those surviving obligations
specified in Section 8.01, provided the legal counsel delivering such Opinion of
Counsel may rely as to matters of fact on one or more Officers' Certificates of
the Issuers.
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ARTICLE NINE
MODIFICATION OF THE INDENTURE
SECTION 9.01. Without Consent of Holders.
Subject to the provisions of Section 9.02, the Issuers, the
Subsidiary Guarantors and the Trustee may amend, waive or supplement this
Indenture without notice to or consent of any Holder: (a) to cure any ambiguity,
defect or inconsistency; (b) to comply with Section 5.01 of this Indenture; (c)
to provide for uncertificated Notes in addition to certificated Notes; (d) to
comply with any requirements of the Commission in order to effect or maintain
the qualification of this Indenture under the TIA; or (e) to make any change
that would provide any additional benefit or rights to the Holders or that does
not adversely affect the rights of any Holder. Notwithstanding the foregoing,
the Trustee and the Issuers may not make any change that adversely affects the
rights of any Holder under this Indenture without the consent of such Holder. In
formulating its opinion on such matters, the Trustee will be entitled to rely on
such evidence as it deems appropriate, including, without limitation, solely on
an Opinion of Counsel; provided, however, that in delivering such Opinion of
Counsel, such counsel may rely as to matters of fact, on a certificate or
certificates of officers of the Company.
SECTION 9.02. With Consent of Holders.
All other modifications and amendments of this Indenture may be made
with the consent of the Holders of a majority in the then outstanding principal
amount of the then outstanding Notes, except that, without the consent of each
Holder of the Notes affected thereby, no amendment may, directly or indirectly:
(i) reduce the amount of Notes whose Holders must consent to any amendment; (ii)
reduce the rate of or change the time for payment of interest, including
defaulted interest, on any Notes; (iii) reduce the principal of or change the
fixed maturity of any Notes, or change the date on which any Notes may be
subject to redemption or repurchase, or reduce the redemption or repurchase
price therefor; (iv) make any Notes payable in money other than that stated in
the Notes; (v) make any change in provisions of this Indenture protecting the
right of each Holder of a Note to receive payment of principal of and interest
on such Note on or after the due date thereof or to bring suit to enforce such
payment or permitting Holders of a majority in aggregate principal amount of the
then outstanding Notes to waive Defaults or Events of Default; (vi) amend,
change or modify in any material respect the obligation of the Issuers to make
and consummate a Change of Control Offer in the event of a Change of Control or
make and consummate a Net Proceeds Offer with respect to any Asset Sale that has
been consummated or modify any of the provisions or definitions with respect
thereto; (vii) modify or change any provision of this Indenture or Section 1.01
affecting the ranking of the Notes or any Guarantee in a manner which adversely
affects the Holders; or (viii) release any Subsidiary Guarantor from any of its
obligations under its Guarantee or this Indenture otherwise than in accordance
with the terms of this Indenture.
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SECTION 9.03. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect; provided, however, that this
Section 9.03 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
notice to the Trustee or the Issuers received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented (and not theretofore revoked
such consent) to the amendment, supplement or waiver. An amendment, supplement
or waiver becomes effective upon receipt by the Trustee of such Officers'
Certificate and evidence of consent by the Holders of the requisite percentage
in principal amount of outstanding Notes.
The Issuers may, but shall not be obligated to, fix a Record Date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which Record Date shall be at least 30 days prior to the
first solicitation of such consent. If a Record Date is fixed, then
notwithstanding the second sentence of the immediately preceding paragraph,
those Persons who were Holders at such Record Date (or their duly designated
proxies), and only those Persons, shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
Record Date. No such consent shall be valid or effective for more than 90 days
after such Record Date unless consents from Holders of the requisite percentage
in principal amount of outstanding Notes required hereunder for the
effectiveness of such consents shall have also been given and not revoked within
such 90 day period.
SECTION 9.05. Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note,
the Trustee may require the Holder of such Note to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Note about the changed
terms and return it to the Holder. Alternatively, if the Issuers or the Trustee
so determine, the Issuers in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms.
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SECTION 9.06. Trustee To Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; provided, however, that the Trustee
may, but shall not be obligated to, execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or immunities under this
Indenture. In executing such supplement or waiver the Trustee shall be entitled
to receive indemnity reasonably satisfactory to it, and shall be fully protected
in relying upon an Opinion of Counsel and an Officers' Certificate of each
Issuer, each stating that no event of default shall occur as a result of such
amendment, supplement or waiver and that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Nine is authorized or
permitted by this Indenture, provided the legal counsel delivering such Opinion
of Counsel may rely as to matters of fact on one or more Officers' Certificates
of the Issuers. Such Opinion of Counsel shall not be an expense of the Trustee.
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control; provided, however, that this Section
10.01 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
SECTION 10.02. Notices.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
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if to the Issuers:
c/o Abraxas Petroleum Corporation
500 North Loop 1604 East
Suite 100
San Antonio, Texas 78232
Telecopier Number: (210) 490-8816
Attn: Chief Executive Officer
if to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
Eleventh Floor
New York, New York 10004
Telecopier Number: (212) 858-2952
Attention: Corporate Trust Trustee
Administration
Each of the Issuers and the Trustee by written notice to the other
may designate additional or different addresses for notices to such Person. Any
notice or communication to the Issuers or the Trustee shall be deemed to have
been given or made as of the date so delivered if hand delivered; when answered
back, if telexed; when receipt is acknowledged, if faxed; and five (5) calendar
days after mailing if sent by registered or certified mail, postage prepaid
(except that a notice of change of address shall not be deemed to have been
given until actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed to
him by first class mail or other equivalent means at his address as it appears
on the registration books of the Registrar ten (10) days prior to such mailing
and shall be sufficiently given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 10.03. Communications by Holders
with Other Holders.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Issuers, the Trustee, the Registrar and any other Person shall have the
protection of TIA ss. 312(c).
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SECTION 10.04. Certificate and Opinion as
to Conditions Precedent.
Upon any request or application by the Issuers to the Trustee to
take any action under this Indenture, the Issuers shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent to be performed by the Issuers, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Issuers, if
any, provided for in this Indenture relating to the proposed action have
been complied with (which counsel, as to factual matters, may rely on an
Officers' Certificate).
SECTION 10.05. Statements Required in
Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is reasonably necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with.
SECTION 10.06. Rules by Trustee, Paying
Agent, Registrar.
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
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SECTION 10.07. Legal Holidays.
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 10.08. Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS. Each of the
parties hereto agrees to submit to the jurisdiction of the courts of the State
of New York in any action or proceeding arising out of or relating to this
Indenture.
SECTION 10.09. No Adverse Interpretation
of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of either Issuer or any of their Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 10.10. No Personal Liability.
No director, officer, employee or stockholder, as such, of either
Issuer or any Subsidiary Guarantor, as such, shall have any liability for any
obligations of either Issuer or any Subsidiary Guarantor under the Notes, this
Indenture, the Guarantees or the Registration Rights Agreement or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for the issuance of the
Notes.
SECTION 10.11. Successors.
All agreements of the Issuers in this Indenture and the Notes shall
bind their successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 10.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
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SECTION 10.13. Severability.
In case any one or more of the provisions in this Indenture or in
the Notes shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
SECTION 10.14. Independence of Covenants.
All covenants and agreements in this Indenture and the Notes shall
be given independent effect so that if any particular action or condition is not
permitted by any of such covenants, the fact that it 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.
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ARTICLE ELEVEN
GUARANTEE OF NOTES
SECTION 11.01. Unconditional Guarantee.
Subject to the provisions of this Article Eleven, each Subsidiary
Guarantor, if any, hereby, jointly and severally, unconditionally and
irrevocably guarantees, on a senior basis (such guarantee to be referred to
herein as a "Guarantee") to each Holder of a Note authenticated and delivered by
the Trustee and to the Trustee and its successors and assigns, irrespective of
the validity and enforceability of this Indenture, the Notes or the obligations
of the Issuers or any other Subsidiary Guarantors to the Holders or the Trustee
hereunder or thereunder, that: (a) the principal of, premium, if any, and
interest on the Notes (and any Additional Interest payable thereon) shall be
duly and punctually paid in full when due, whether at maturity, upon redemption
at the option of Holders pursuant to the provisions of the Notes relating
thereto, by acceleration or otherwise, and interest on the overdue principal and
(to the extent permitted by law) interest, if any, on the Notes and all other
obligations of the Issuers or the Subsidiary Guarantors to the Holders or the
Trustee hereunder or thereunder (including amounts due the Trustee under Section
7.07 hereof) and all other obligations shall be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any Notes or any of such other
obligations, the same shall be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at maturity, by
acceleration or otherwise. Failing payment when due of any amount so guaranteed,
or failing performance of any other obligation of the Issuers to the Holders
under this Indenture or under the Notes, for whatever reason, each Subsidiary
Guarantor shall be obligated to pay, or to perform or cause the performance of,
the same immediately. An Event of Default under this Indenture or the Notes
shall constitute an event of default under this Guarantee, and shall entitle the
Holders of Notes to accelerate the obligations of the Guarantors hereunder in
the same manner and to the same extent as the obligations of the Issuers.
Each of the Subsidiary Guarantors hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, any release of any other Subsidiary
Guarantor, the recovery of any judgment against the Issuers, any action to
enforce the same, whether or not a Guarantee is affixed to any particular Note,
or any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor. Each of the Subsidiary Guarantors hereby
waives the benefit of diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Issuers, any
right to require a proceeding first against the Issuers, protest, notice and all
demands whatsoever and covenants that its Guarantee shall not be discharged
except by complete performance of
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the obligations contained in the Notes, this Indenture and this Guarantee. This
Guarantee is a guarantee of payment and not of collection. If any Holder or the
Trustee is required by any court or otherwise to return to the Issuers or to any
Subsidiary Guarantor, or any custodian, trustee, liquidator or other similar
official acting in relation to the Issuers or such Subsidiary Guarantor, any
amount paid by the Issuers or such Subsidiary Guarantor to the Trustee or such
Holder, this Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Subsidiary Guarantor further agrees
that, as between it, on the one hand, and the Holders of Notes and the Trustee,
on the other hand, (a) subject to this Article Eleven, the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article Six
hereof for the purposes of this Guarantee, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (b) in the event of any acceleration of such obligations
as provided in Article Six hereof, such obligations (whether or not due and
payable) shall forthwith become due and payable by the Subsidiary Guarantors for
the purpose of this Guarantee.
No stockholder, officer, director, employee or incorporator, past,
present or future, or any Subsidiary Guarantor, as such, shall have any personal
liability under this Guarantee by reason of his, her or its status as such
stockholder, officer, director, employee or incorporator.
Each Subsidiary Guarantor that makes a payment or distribution under
its Guarantee shall be entitled to a contribution from each other Subsidiary
Guarantor, determined in accordance with GAAP.
SECTION 11.02. Limitations on Guarantees.
The obligations of each Subsidiary Guarantor under its Guarantee
will be limited to the maximum amount which, after giving effect to all other
contingent and fixed liabilities of such Subsidiary Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Subsidiary Guarantor in respect of the obligations of such other Subsidiary
Guarantor under its Guarantee or pursuant to its contribution obligations under
the Indenture, will result in the obligations of such Subsidiary Guarantor under
the Guarantee not constituting a fraudulent conveyance or fraudulent transfer
under federal or state law.
SECTION 11.03. Execution and Delivery of Guarantee.
To further evidence the Guarantee set forth in Section 11.01, each
Subsidiary Guarantor hereby agrees that a notation of such Guarantee,
substantially in the form of Exhibit E herein, shall be endorsed on each Note
authenticated and delivered by the Trustee. Such Guarantee shall be executed on
behalf of each Subsidiary Guarantor by either manual or facsimile signature of
two Officers of each Subsidiary Guarantor, each of whom, in each case, shall
have been duly authorized to so execute by all requisite corporate action. The
validity and enforceability of any Guarantee shall not be affected by the fact
that it is not affixed to any particular Note.
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Each of the Subsidiary Guarantors hereby agrees that its Guarantee
set forth in Section 11.01 shall remain in full force and effect notwithstanding
any failure to endorse on each Note a notation of such Guarantee.
If an Officer of a Subsidiary Guarantor whose signature is on this
Indenture or a Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which such Guarantee is endorsed or at any time
thereafter, such Subsidiary Guarantor's Guarantee of such Note shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of each Subsidiary Guarantor.
SECTION 11.04. Release of a Subsidiary Guarantor.
(a) If no Default exists or would exist under this Indenture, upon
the sale or disposition of all of the Capital Stock of a Subsidiary Guarantor by
the Issuers or a Restricted Subsidiary of the Issuers in a transaction
constituting an Asset Sale the Net Cash Proceeds of which are applied in
accordance with Section 4.16, or upon the consolidation or merger of a
Subsidiary Guarantor with or into any Person in compliance with Article Five (in
each case, other than to an Issuer or an Affiliate of an Issuer or a Restricted
Subsidiary), such Subsidiary Guarantor and each Subsidiary of such Subsidiary
Guarantor that is also a Subsidiary Guarantor shall be deemed released from all
obligations under this Article Eleven without any further action required on the
part of the Trustee or any Holder; provided, however, that each such Subsidiary
Guarantor is sold or disposed of in accordance with this Indenture. Any
Subsidiary Guarantor not so released or the entity surviving such Subsidiary
Guarantor, as applicable, shall remain or be liable under its Guarantee as
provided in this Article Eleven.
(b) The Trustee shall deliver an appropriate instrument evidencing
the release of a Subsidiary Guarantor upon receipt of a request by the Issuers
or such Subsidiary Guarantor accompanied by an Officers' Certificate and an
Opinion of Counsel certifying as to the compliance with this Section 11.04,
provided the legal counsel delivering such Opinion of Counsel may rely as to
matters of fact on one or more Officers Certificates of the Issuers.
The Trustee shall execute any documents reasonably requested by the
Issuers or a Subsidiary Guarantor in order to evidence the release of such
Subsidiary Guarantor from its obligations under its Guarantee endorsed on the
Notes and under this Article Eleven.
Except as set forth in Articles Four and Five and this Section
11.04, nothing contained in this Indenture or in any of the Notes shall prevent
any consolidation or merger of a Subsidiary Guarantor with or into the Issuers
or another Subsidiary Guarantor or shall prevent any sale or conveyance of the
property of a Subsidiary Guarantor as an entirety or substantially as an
entirety to the Issuers or another Subsidiary Guarantor.
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SECTION 11.05. Waiver of Subrogation.
Until this Indenture is discharged and all of the Notes are
discharged and paid in full, each Subsidiary Guarantor hereby irrevocably waives
and agrees not to exercise any claim or other rights which it may now or
hereafter acquire against the Issuers that arise from the existence, payment,
performance or enforcement of the Issuers' obligations under the Notes or this
Indenture and such Subsidiary Guarantor's obligations under this Guarantee and
this Indenture, in any such instance including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution, indemnification, and any
right to participate in any claim or remedy of the Holders against the Issuers,
whether or not such claim, remedy or right arises in equity, or under contract,
statute or common law, including, without limitation, the right to take or
receive from the Issuers, directly or indirectly, in cash or other property or
by set-off or in any other manner, payment or security on account of such claim
or other rights. If any amount shall be paid to any Subsidiary Guarantor in
violation of the preceding sentence and any amounts owing to the Trustee or the
Holders of Notes under the Notes, this Indenture, or any other document or
instrument delivered under or in connection with such agreements or instruments,
shall not have been paid in full, such amount shall have been deemed to have
been paid to such Subsidiary Guarantor for the benefit of, and held in trust for
the benefit of, the Trustee or the Holders and shall forthwith be paid to the
Trustee for the benefit of itself or such Holders to be credited and applied to
the obligations in favor of the Trustee or the Holders, as the case may be,
whether matured or unmatured, in accordance with the terms of this Indenture.
Each Subsidiary Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by this Indenture and that
the waiver set forth in this Section 11.05 is knowingly made in contemplation of
such benefits.
SECTION 11.06. Immediate Payment.
Each Subsidiary Guarantor agrees to make immediate payment to the
Trustee on behalf of the Holders of all Obligations owing or payable to the
respective Holders upon receipt of a demand for payment therefor by the Trustee
to such Subsidiary Guarantor in writing.
SECTION 11.07. No Set-Off.
Each payment to be made by a Subsidiary Guarantor hereunder in
respect of the Obligations shall be payable in the currency or currencies in
which such Obligations are denominated, and shall be made without set-off,
counterclaim, reduction or diminution of any kind or nature.
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SECTION 11.08. Obligations Absolute.
The obligations of each Subsidiary Guarantor hereunder are and shall
be absolute and unconditional and any monies or amounts expressed to be owing or
payable by each Subsidiary Guarantor hereunder which may not be recoverable from
such Subsidiary Guarantor on the basis of a Guarantee shall be recoverable from
such Subsidiary Guarantor as a primary obligor and principal debtor in respect
thereof.
SECTION 11.09. Obligations Continuing.
The obligations of each Subsidiary Guarantor hereunder shall be
continuing and shall remain in full force and effect until all the obligations
have been paid and satisfied in full. Each Subsidiary Guarantor agrees with the
Trustee that it will from time to time deliver to the Trustee suitable
acknowledgments of this continued liability hereunder and under any other
instrument or instruments in such form as counsel to the Trustee may advise and
as will prevent any action brought against it in respect of any default
hereunder being barred by any statute of limitations now or hereafter in force
and, in the event of the failure of a Subsidiary Guarantor so to do, it hereby
irrevocably appoints the Trustee the attorney and agent of such Subsidiary
Guarantor to make, execute and deliver such written acknowledgment or
acknowledgments or other instruments as may from time to time become necessary
or advisable, in the judgment of the Trustee on the advice of counsel, to fully
maintain and keep in force the liability of such Subsidiary Guarantor hereunder.
SECTION 11.10. Obligations Not Reduced.
The obligations of each Subsidiary Guarantor hereunder shall not be
satisfied, reduced or discharged solely by the payment of such principal,
premium, if any, interest, fees and other monies or amounts as may at any time
prior to discharge of this Indenture pursuant to Article 8 be or become owing or
payable under or by virtue of or otherwise in connection with the Notes or this
Indenture.
SECTION 11.11. Obligations Reinstated.
The obligations of each Subsidiary Guarantor hereunder shall
continue to be effective or shall be reinstated, as the case may be, if at any
time any payment which would otherwise have reduced the obligations of any
Subsidiary Guarantor hereunder (whether such payment shall have been made by or
on behalf of the Issuers or by or on behalf of a Subsidiary Guarantor) is
rescinded or reclaimed from any of the Holders upon the insolvency, bankruptcy,
liquidation or reorganization of either Issuer or any Subsidiary Guarantor or
otherwise, all as though such payment had not been made. If demand for, or
acceleration of the time for, payment by the Issuers is stayed upon the
insolvency, bankruptcy, liquidation or reorganization of either Issuer, all such
Indebtedness otherwise subject to demand for payment or acceleration shall
nonetheless be payable by each Subsidiary Guarantor as provided herein.
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SECTION 11.12. Obligations Not Affected.
The obligations of each Subsidiary Guarantor hereunder shall not be
affected, impaired or diminished in any way by any act, omission, matter or
thing whatsoever, occurring before, upon or after any demand for payment
hereunder (and whether or not known or consented to by any Subsidiary Guarantor
or any of the Holders) which, but for this provision, might constitute a whole
or partial defense to a claim against any Subsidiary Guarantor hereunder or
might operate to release or otherwise exonerate any Subsidiary Guarantor from
any of its obligations hereunder or otherwise affect such obligations, whether
occasioned by default of any of the Holders or otherwise, including, without
limitation:
(a) any limitation of status or power, disability, incapacity or
other circumstance relating to either Issuer or any other person,
including any insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, winding-up or other proceeding
involving or affecting either Issuer or any other person;
(b) any irregularity, defect, unenforceability or invalidity in
respect of any indebtedness or other obligation of either Issuer or any
other person under this Indenture, the Notes or any other document or
instrument;
(c) any failure of the Issuers, whether or not without fault on
their part, to perform or comply with any of the provisions of this
Indenture or the Notes, or to give notice thereof to a Subsidiary
Guarantor;
(d) the taking or enforcing or exercising or the refusal or neglect
to take or enforce or exercise any right or remedy from or against the
Issuers or any other person or their respective assets or the release or
discharge of any such right or remedy;
(e) the granting of time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences to the
Issuers or any other Person;
(f) any change in the time, manner or place of payment of, or in any
other term of, any of the Notes, or any other amendment, variation,
supplement, replacement or waiver of, or any consent to departure from,
any of the Notes or this Indenture, including, without limitation, any
increase or decrease in the principal amount of or premium, if any, or
interest on any of the Notes;
(g) any change in the ownership, control, name, objects, businesses,
assets, capital structure or constitution of either Issuer or a Subsidiary
Guarantor;
(h) any merger or amalgamation of either Issuer or a Subsidiary
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Guarantor with any Person or Persons;
(i) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action of any
governmental authority or court amending, varying, reducing or otherwise
affecting, or purporting to amend, vary, reduce or otherwise affect, any
of the Obligations or the obligations of a Subsidiary Guarantor under its
Guarantee; and
(j) any other circumstance, including release of the Subsidiary
Guarantor pursuant to Section 11.04 (other than by complete, irrevocable
payment) that might otherwise constitute a legal or equitable discharge or
defense of the Issuers under this Indenture or the Notes or of a
Subsidiary Guarantor in respect of its Guarantee hereunder.
SECTION 11.13. Waiver.
Without in any way limiting the provisions of Section 11.01 hereof,
each Subsidiary Guarantor hereby waives notice of acceptance hereof, notice of
any liability of any Subsidiary Guarantor hereunder, notice or proof of reliance
by the Holders upon the obligations of any Subsidiary Guarantor hereunder, and
diligence, presentment, demand for payment on the Issuers, protest, notice of
dishonor or non-payment of any of the Obligations, or other notice or
formalities to the Issuers or any Subsidiary Guarantor of any kind whatsoever.
SECTION 11.14. No Obligation To Take Action Against
the Issuers.
Neither the Trustee nor any other Person shall have any obligation
to enforce or exhaust any rights or remedies or to take any other steps under
any security for the Obligations or against the Issuers or any other Person or
any Property of the Issuers or any other Person before the Trustee is entitled
to demand payment and performance by any or all Subsidiary Guarantors of their
liabilities and obligations under their Guarantees or under this Indenture.
SECTION 11.15. Dealing with the Issuers and Others.
The Holders, without releasing, discharging, limiting or otherwise
affecting in whole or in part the obligations and liabilities of any Subsidiary
Guarantor hereunder and without the consent of or notice to any Subsidiary
Guarantor, may
(a) grant time, renewals, extensions, compromises, concessions,
waivers, releases, discharges and other indulgences to the Issuers or any
other Person;
(b) take or abstain from taking security or collateral from the
Issuers or from perfecting security or collateral of the Issuers;
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(c) release, discharge, compromise, realize, enforce or otherwise
deal with or do any act or thing in respect of (with or without
consideration) any and all collateral, mortgages or other security given
by the Issuers or any third party with respect to the obligations or
matters contemplated by this Indenture or the Notes;
(d) accept compromises or arrangements from the Issuers;
(e) apply all monies at any time received from the Issuers or from
any security upon such part of the Obligations as the Holders may see fit
or change any such application in whole or in part from time to time as
the Holders may see fit; and
(f) otherwise deal with, or waive or modify their right to deal
with, the Issuers and all other Persons and any security as the Holders or
the Trustee may see fit.
SECTION 11.16. Default and Enforcement.
If any Subsidiary Guarantor fails to pay in accordance with Section
11.06 hereof, the Trustee may proceed in its name as trustee hereunder in the
enforcement of the Guarantee of any such Subsidiary Guarantor and such
Subsidiary Guarantor's obligations thereunder and hereunder by any remedy
provided by law, whether by legal proceedings or otherwise, and to recover from
such Subsidiary Guarantor the obligations.
SECTION 11.17. Amendment, Etc.
No amendment, modification or waiver of any provision of this
Indenture relating to any Subsidiary Guarantor or consent to any departure by
any Subsidiary Guarantor or any other Person from any such provision will in any
event be effective unless it is signed by such Subsidiary Guarantor and the
Trustee.
SECTION 11.18. Acknowledgment.
Each Subsidiary Guarantor hereby acknowledges communication of the
terms of this Indenture and the Notes and consents to and approves of the same.
SECTION 11.19. Costs and Expenses.
Each Subsidiary Guarantor shall pay on demand by the Trustee any and
all costs, fees and expenses (including, without limitation, legal fees on a
solicitor and client basis) incurred by the Trustee, its agents, advisors and
counsel or any of the Holders in enforcing any of their rights under any
Guarantee.
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SECTION 11.20. No Merger or Waiver; Cumulative
Remedies.
No Guarantee shall operate by way of merger of any of the
obligations of a Subsidiary Guarantor under any other agreement, including,
without limitation, this Indenture. No failure to exercise and no delay in
exercising, on the part of the Trustee or the Holders, any right, remedy, power
or privilege hereunder or under the Indenture or the Notes, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder or under this Indenture or the Notes preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges in the Guarantee
and under this Indenture, the Notes and any other document or instrument between
a Subsidiary Guarantor and/or either Issuer and the Trustee are cumulative and
not exclusive of any rights, remedies, powers and privilege provided by law.
SECTION 11.21. Survival of Obligations.
Without prejudice to the survival of any of the other obligations of
each Subsidiary Guarantor hereunder, the obligations of each Subsidiary
Guarantor under Section 11.01 shall survive the payment in full of the
Obligations and shall be enforceable against such Subsidiary Guarantor without
regard to and without giving effect to any defense, right of offset or
counterclaim available to or which may be asserted by the Company or any
Subsidiary Guarantor.
SECTION 11.22. Guarantee in Addition to Other
Obligations.
The obligations of each Subsidiary Guarantor under its Guarantee and
this Indenture are in addition to and not in substitution for any other
obligations to the Trustee or to any of the Holders in relation to this
Indenture or the Notes and any guarantees or security at any time held by or for
the benefit of any of them.
SECTION 11.23. Severability.
Any provision of this Article Eleven which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction
unless its removal would substantially defeat the basic intent, spirit and
purpose of this Indenture and this Article Eleven.
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SECTION 11.24. Successors and Assigns.
Each Guarantee shall be binding upon and inure to the benefit of
each Subsidiary Guarantor and the Trustee and the other Holders and their
respective successors and permitted assigns, except that no Subsidiary Guarantor
may assign any of its obligations hereunder or thereunder.
[Remainder of Page Intentionally Left Blank]
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
ABRAXAS PETROLEUM CORPORATION
By:
Name:
Title:
CANADIAN ABRAXAS PETROLEUM LIMITED
By:
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:
Name:
Title:
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EXHIBIT A
CUSIP No.: [ ]
ABRAXAS PETROLEUM CORPORATION
11 1/2% SENIOR NOTE DUE 2004, SERIES A
No. [ ] $[ ]
ABRAXAS PETROLEUM CORPORATION, a Nevada corporation, and CANADIAN
ABRAXAS PETROLEUM LIMITED, a Canadian corporation (the "Issuers", which term
includes any successor entities), for value received promise to pay to [ ] or
registered assigns the principal sum of [ ] Dollars on November 1, 2004.
Interest Payment Dates: May 1 and November 1, commencing May 1, 1997
Record Dates: April 15 and October 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Issuers have caused this Note to be signed
manually or by facsimile by their duly authorized officers and a facsimile of
their corporate seal to be affixed hereto or imprinted hereon.
ABRAXAS PETROLEUM CORPORATION
By:
Name:
Title:
CANADIAN ABRAXAS PETROLEUM LIMITED
By:
Name:
Title:
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Dated:
Certificate of Authentication
This is one of the 11 1/2% Senior Notes due 2004, Series A referred
to in the within-mentioned Indenture.
IBJ SCHRODER BANK & TRUST COMPANY
as Trustee
By:
Authorized Signatory
Date of Authentication:
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(REVERSE OF SECURITY)
11 1/2% Senior Note due 2004, Series A
(1) Interest. ABRAXAS PETROLEUM CORPORATION, a Nevada corporation,
and CANADIAN ABRAXAS PETROLEUM LIMITED, a Canadian corporation (the "Issuers"),
promise to pay interest on the principal amount of this Note at the rate per
annum shown above. Interest on the Notes will accrue from the most recent date
on which interest has been paid or, if no interest has been paid, from November
14, 1996. The Issuers will pay interest semi-annually in arrears on each
Interest Payment Date, commencing May 1, 1997. Interest will be computed on the
basis of a 360-day year of twelve 30-day months and, in the case of a partial
month, the actual number of days elapsed.
The Issuers shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
2. Method of Payment. The Issuers shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are cancelled on registration of transfer or registration
of exchange (including pursuant to an Exchange Offer (as defined in the
Registration Rights Agreement)) after such Record Date. Holders must surrender
Notes to a Paying Agent to collect principal payments. The Issuers shall pay
principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts ("U.S. Legal Tender").
However, the Issuers may pay principal and interest by their check payable in
such U.S. Legal Tender. The Issuers may deliver any such interest payment to the
Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, IBJ Schroder Bank & Trust
Company (the "Trustee") will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or co-Registrar without notice to the
Holders.
4. Indenture. The Issuers issued the Notes under an Indenture, dated
as of November 14, 1996 (the "Indenture"), among the Issuers, the Subsidiary
Guarantors and the Trustee. This Note is one of a duly authorized issue of
Initial Notes of the Issuers designated as their 11 1/2% Senior Notes due 2004,
Series A (the "Initial Notes"). The Notes are limited in aggregate principal
amount to $215,000,000. The Notes include the Initial Notes and the Exchange
Notes, as defined below, issued in exchange for the Initial Notes pursuant to
the Registration Rights Agreement. The Initial Notes and the Exchange Notes are
treated as a single class of securities under the Indenture. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect
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on the date of the Indenture. Notwithstanding anything to the contrary herein,
the Notes are subject to all such terms, and Holders of Notes are referred to
the Indenture and said Act for a statement of them. The Notes are general
unsecured obligations of the Issuers.
5. Indenture. Each Holder, by accepting a Note, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time in accordance with its terms.
6. Redemption. The Notes will be redeemable, at the Issuers' option,
in whole at any time or in part from time to time, on and after November 1,
2000, upon not less than 30 nor more than 60 days' notice, at the following
Redemption Prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on November 1 of the years
set forth below, plus, in each case, accrued and unpaid interest, if any,
thereon to the date of redemption:
Year Percentage
2000............................ 105.750%
2001............................ 102.875%
2002 and thereafter.... 100.000%
At any time, or from time to time, on or prior to __________, 1999,
the Issuers may, at their option, use all or a portion of the net cash proceeds
of one or more Equity Offerings (as defined in the Indenture) to redeem up to
35% of the aggregate principal amount of the Notes originally issued at a
Redemption Price equal to 111.5% of the aggregate principal amount of the Notes
to be redeemed, plus accrued and unpaid interest, if any, thereon to the date of
redemption; provided, however, that at least $139.75 million aggregate principal
amount of Notes remains outstanding immediately after giving effect to any such
redemption (it being expressly agreed that for purposes of determining whether
this condition is satisfied, Notes owned by either Issuer or any of their
Affiliates shall be deemed not to be outstanding). In order to effect the
foregoing redemption with the proceeds of any Equity Offering, the Issuers shall
make such redemption not more than 60 days after the consummation of any Equity
Offering.
7. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption
of the Notes called for redemption shall have been deposited with the Paying
Agent for redemption on such Redemption Date, then, unless the Issuers default
in the payment of such Redemption Price plus accrued interest, if any, the Notes
called for redemption will cease to bear interest from and after such Redemption
Date and the only right of the Holders of such Notes will be to receive payment
of the Redemption Price plus accrued interest, if any.
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8. Offers to Purchase. Sections 4.15 and 4.16 of the Indenture
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture), and subject
to further limitations contained therein, the Issuers will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
9. Registration Rights. Pursuant to the Registration Rights
Agreement among the Issuers, the Subsidiary Guarantors and the Initial
Purchasers, the Issuers and the Subsidiary Guarantors will be obligated to
consummate an exchange offer pursuant to which the Holder of this Note shall
have the right to exchange this Note for the Issuers' 11 1/2% Senior Notes due
2004, Series B (the "Exchange Notes"), which have been registered under the
Securities Act, in like principal amount and having terms identical in all
material respects as the Initial Notes. The Holders of the Initial Notes shall
be entitled to receive certain additional interest payments in the event such
exchange offer is not consummated and upon certain other conditions, all
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
10. Denominations; Transfer; Exchange. The Notes are in registered
form, without coupons, and (except Notes issued as payment of Interest) in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar
governmental charges payable in connection therewith as permitted by the
Indenture. The Registrar need not register the transfer of or exchange of any
Notes or portions thereof selected for redemption.
11. Persons Deemed Owners. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
12. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Issuers. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
13. Discharge Prior to Redemption or Maturity. If the Issuers at any
time deposit with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and comply with the other provisions of the Indenture relating thereto,
the Issuers will be discharged from certain provisions of the Indenture and the
Notes (including certain covenants, but including, under certain circumstances,
their obligation to pay the principal of and interest on the Notes but without
affecting the rights of the Holders to receive such amounts from such deposits).
14. Amendment; Supplement; Waiver. Subject to certain exceptions set
forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of not less than a majority
in aggregate principal amount of the Notes then outstanding, and any past
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Default or Event of Default or noncompliance with any provision may be waived
with the written consent of the Holders of not less than a majority in aggregate
principal amount of the Notes then outstanding. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the Indenture or the
Notes to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Notes in addition to or in place of certificated
Notes, comply with any requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the TIA or comply with Article
Five of the Indenture or make any other change that does not adversely affect
the rights of any Holder of a Note.
15. Restrictive Covenants. The Indenture imposes certain limitations
on the ability of the Issuers and the Restricted Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of their Capital
Stock or certain Indebtedness, make certain Investments, create or incur liens,
enter into transactions with Affiliates, create dividend or other payment
restrictions affecting Restricted Subsidiaries, issue Preferred Stock of their
Restricted Subsidiaries, and on the ability of the Issuers and their Restricted
Subsidiaries to merge or consolidate with any other Person or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of the
Issuers' and their Restricted Subsidiaries' assets or adopt a plan of
liquidation. Such limitations are subject to a number of important
qualifications and exceptions. Pursuant to Section 4.06 of the Indenture, the
Issuer must annually report to the Trustee on compliance with such limitations.
16. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
17. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of Notes then outstanding may declare all the Notes to be due
and payable in the manner, at the time and with the effect provided in the
Indenture. Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee is not obligated to enforce the Indenture
or the Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest when due, for any reason or a
Default in compliance with Article Five of the Indenture) if it determines that
withholding notice is in their interest.
18. Trustee Dealings with Issuers. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Issuers, their Subsidiaries or their
respective Affiliates as if it were not the Trustee.
19. No Recourse Against Others. No partner, director, officer,
employee or stockholder, as such, of either Issuer or any Subsidiary Guarantor,
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as such, shall have any liability for any obligations of either Issuer or any
Subsidiary Guarantor under the Notes, the Indenture, the Guarantees or the
Registration Rights Agreement or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Notes by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for the issuance of the Notes.
20. Guarantees. This Note will be entitled to the benefits of
certain Guarantees, if any, made for the benefit of the Holders. Reference is
hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations thereunder of the Subsidiary
Guarantors, the Trustee and the Holders.
21. Authentication. This Note shall not be valid until the Trustee
or Authenticating Agent manually signs the certificate of authentication on this
Note.
22. Governing Law. This Note and the Indenture shall be governed by
and construed in accordance with the laws of the State of New York, as applied
to contracts made and performed within the State of New York, without regard to
principles of conflict of laws. Each of the parties hereto agrees to submit to
the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Note.
23. Abbreviations and Defined Terms. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
24. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuers have caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
The Issuers will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note. Requests may be made to: Abraxas Petroleum Corporation, 500 North Loop
1604 East, Suite 100, San Antonio, Texas 78232.
145385.01
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Note to:
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint , agent to transfer this Note on the books
of the Issuers. The agent may substitute another to act for him.
Dated: Signed:
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the Commission
of the effectiveness of a registration statement under the Securities Act of
1933, as amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) [ ], the undersigned confirms that it has not utilized any
general solicitation or general advertising in connection with the transfer:
145385.01
<PAGE>
[Check One]
(1) __ to the Issuers or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the Securities
Act of 1933, as amended; or
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended) that has furnished to the Trustee a signed letter
containing certain representations and agreements (the form of which
letter can be obtained from the Trustee); or
(4) __ outside the United states to a "foreign person" in compliance
with Rule 904 of Regulation S under the Securities Act of 1933, as
amended; or
(5) __ pursuant to the exemption from registration provided by Rule 144
under the Securities Act of 1933, as amended; or
(6) __ pursuant to an effective registration statement under the
Securities Act of 1933, as amended; or
(7) __ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Issuers as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
o The transferee is an Affiliate of the Issuers.
Unless one of the items is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; provided, however, that if item (3), (4), (5) or (7)
is checked, the Issuers or the Trustee may require, prior to registering any
such transfer of the Notes, in their sole discretion, such written legal
opinions, certifications (including an investment letter in the case of box (3)
or (4)) and other information as the Trustee or the Issuers have reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act of 1933, as amended.
145385.01
<PAGE>
If none of the foregoing items are checked, the Trustee or Registrar shall not
be obligated to register this Note in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.17 of the Indenture shall have
been satisfied.
Dated: Signed:
(Sign exactly as name
appears on the other side
of this Note)
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Issuers as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
NOTICE: To be executed by
an executive officer
145385.01
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Issuers
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Issuers pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$-------------------
Dated: __________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the
face of the within Note in every particular
without alteration or enlargement or any change
whatsoever and be guaranteed.
Signature Guarantee:
145385.01
<PAGE>
EXHIBIT B
CUSIP No.: [ ]
ABRAXAS PETROLEUM CORPORATION
11 1/2% SENIOR NOTE DUE 2004, SERIES B
No. [ ] $[ ]
ABRAXAS PETROLEUM CORPORATION, a Nevada corporation, and CANADIAN
ABRAXAS PETROLEUM LIMITED, a Canadian corporation (the "Issuers", which term
includes any successor entities), for value received promise to pay to [ ] or
registered assigns the principal sum of [ ] Dollars on November 1, 2004.
Interest Payment Dates: May 1 and November 1, commencing May 1, 1997
Record Dates: April 15 and October 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Issuers have caused this Note to be signed
manually or by facsimile by their duly authorized officers and a facsimile of
their corporate seal to be affixed hereto or imprinted hereon.
ABRAXAS PETROLEUM CORPORATION
By:
Name:
Title:
CANADIAN ABRAXAS PETROLEUM LIMITED
By:
Name:
Title:
145385.01
<PAGE>
Dated:
Certificate of Authentication
This is one of the 11 1/2% Senior Notes due 2004, Series B referred
to in the within-mentioned Indenture.
IBT SCHRODER BANK AND TRUST COMPANY,
as Trustee
By:
Authorized Signatory
Date of Authentication:
(REVERSE OF SECURITY)
11 1/2% Senior Note due 2004, Series B
1. Interest. ABRAXAS PETROLEUM CORPORATION, a Nevada corporation,
and CANADIAN ABRAXAS PETROLEUM LIMITED, a Canadian corporation (the "Issuers"),
promise to pay interest on the principal amount of this Note at the rate per
annum shown above. Interest on the Notes will accrue from the most recent date
on which interest has been paid or, if no interest has been paid, from November
14, 1996. The Issuers will pay interest semi-annually in arrears on each
Interest Payment Date, commencing May 1, 1997. Interest will be computed on the
basis of a 360-day year of twelve 30-day months and, in the case of a partial
month, the actual number of days elapsed.
The Issuers shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
2. Method of Payment. The Issuers shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Issuers shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Issuers may pay principal and interest by their check payable in such U.S.
Legal Tender. The Issuers may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, IBJ Schroder Bank & Trust
Company (the "Trustee") will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or co-Registrar without notice to the
Holders.
145385.01
<PAGE>
4. Indenture. The Issuers issued the Notes under an Indenture, dated
as of November 14, 1996 (the "Indenture"), among the Issuers, the Subsidiary
Guarantors and the Trustee. This Note is one of a duly authorized issue of
Exchange Notes of the Issuers designated as their 11 1/2% Senior Notes due 2004,
Series B (the "Exchange Notes"). The Notes are limited in aggregate principal
amount to $215,000,000. The Notes include the 11 1/2% Notes due 2004 (the
"Initial Notes") and the Exchange Notes, issued in exchange for the Initial
Notes pursuant to the Registration Rights Agreement. The Initial Notes and the
Exchange Notes are treated as a single class of securities under the Indenture.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and said Act for a statement of them. The Notes are general unsecured
obligations of the Issuers.
5. Indenture. Each Holder, by accepting a Note, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time in accordance with its terms.
6. Redemption. The Notes will be redeemable, at the Issuers' option,
in whole at any time or in part from time to time, on and after November 1,
2000, upon not less than 30 nor more than 60 days' notice, at the following
Redemption Prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on November 1 of the years
set below, plus, in each case, accrued and unpaid interest, if any, thereon to
the date of redemption:
Year Percentage
2000............................ 105.750%
2001............................ 102.875%
2002 and thereafter.... 100.000%
At any time, or from time to time, on or prior to _________, 1999,
the Issuers may, at their option, use all or a portion of the net cash proceeds
of one or more Equity Offerings (as defined in the Indenture) to redeem up to
35% of the aggregate principal amount of the Notes originally issued at a
Redemption Price equal to 111.5% of the aggregate principal amount of the Notes
to be redeemed, plus accrued and unpaid interest, if any, thereon to the date of
redemption; provided, however, that at least $139.75 million aggregate principal
amount of Notes remains outstanding immediately after giving effect to any such
redemption (it being expressly agreed that for purposes of determining whether
this condition is satisfied, Notes owned by either Issuer or any of their
Affiliates shall be deemed not to be outstanding). In order to effect the
foregoing redemption with the proceeds of any Equity Offering, the Issuers shall
make such redemption not more than 60 days after the consummation of any Equity
Offering.
145385.01
<PAGE>
7. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption
of the Notes called for redemption shall have been deposited with the Paying
Agent for redemption on such Redemption Date, then, unless the Issuers default
in the payment of such Redemption Price plus accrued interest, if any, the Notes
called for redemption will cease to bear interest from and after such Redemption
Date and the only right of the Holders of such Notes will be to receive payment
of the Redemption Price plus accrued interest, if any.
8. Offers to Purchase. Sections 4.15 and 4.16 of the Indenture
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture), and subject
to further limitations contained therein, the Issuers will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
9. Denominations; Transfer; Exchange. The Notes are in registered
form, without coupons, and (except Notes issued as payment of Interest) in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar
governmental charges payable in connection therewith as permitted by the
Indenture. The Registrar need not register the transfer of or exchange of any
Notes or portions thereof selected for redemption.
10. Persons Deemed Owners. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Issuers. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Issuers at any
time deposit with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption and
comply with the other provisions of the Indenture relating thereto, the Issuers
will be discharged from certain provisions of the Indenture and the Notes
(including certain covenants, including, under certain circumstances, their
obligation to pay the principal of and interest on the Notes but without
affecting the rights of the Holders to receive such amounts from such deposit).
13. Amendment; Supplement; Waiver. Subject to certain exceptions set
forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of not less than a majority
in aggregate principal amount of the Notes then outstanding, and any past
145385.01
<PAGE>
Default or Event of Default or noncompliance with any provision may be waived
with the written consent of the Holders of not less than a majority in aggregate
principal amount of the Notes then outstanding. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the Indenture or the
Notes to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Notes in addition to or in place of certificated
Notes, comply with any requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the TIA or comply with Article
Five of the Indenture or make any other change that does not adversely affect
the rights of any Holder of a Note.
14. Restrictive Covenants. The Indenture imposes certain limitations
on the ability of the Issuers and the Restricted Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of their Capital
Stock or certain Indebtedness, make certain Investments, create or incur liens,
enter into transactions with Affiliates, create dividend or other payment
restrictions affecting Restricted Subsidiaries, issue Preferred Stock of their
Restricted Subsidiaries, and on the ability of the Issuers and their Restricted
Subsidiaries to merge or consolidate with any other Person or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of the
Issuers' and their Restricted Subsidiaries' assets or adopt a plan of
liquidation. Such limitations are subject to a number of important
qualifications and exceptions. Pursuant to Section 4.06 of the Indenture, the
Issuers must annually report to the Trustee on compliance with such limitations.
15. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
16. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of Notes then outstanding may declare all the Notes to be due
and payable in the manner, at the time and with the effect provided in the
Indenture. Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee is not obligated to enforce the Indenture
or the Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest when due, for any reason or a
Default in compliance with Article Five of the Indenture) if it determines that
withholding notice is in their interest.
17. Trustee Dealings with Issuers. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Issuers, their Subsidiaries or their
respective Affiliates as if it were not the Trustee.
18. No Recourse Against Others. No partner, director, officer,
employee or stockholder, as such, of either Issuer or any Subsidiary Guarantor,
145385.01
<PAGE>
as such, shall have any liability for any obligations of either Issuer or any
Subsidiary Guarantor under the Notes, the Indenture, the Guarantees or the
Registration Rights Agreement or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Notes by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for the issuance of the Notes.
19. Guarantees. This Note will be entitled to the benefits of
certain Guarantees, if any, made for the benefit of the Holders. Reference is
hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations thereunder of the Subsidiary
Guarantors, the Trustee and the Holders.
20. Authentication. This Note shall not be valid until the Trustee
or Authenticating Agent manually signs the certificate of authentication on this
Note.
21. Governing Law. This Note and the Indenture shall be governed by
and construed in accordance with the laws of the State of New York, as applied
to contracts made and performed within the State of New York, without regard to
principles of conflict of laws. Each of the parties hereto agrees to submit to
the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Note.
22. Abbreviations and Defined Terms. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
23. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuers have caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
The Issuers will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note. Requests may be made to: Abraxas Petroleum Corporation, 500 North Loop
1604 East, Suite 100, San Antonio, Texas 78232.
145385.01
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Note to:
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint , agent to transfer this Note on the books of the
Issuers. The agent may substitute another to act for him.
Dated: Signed:
(Sign exactly as name appears
on the other side of this Note)
Signature Guarantee:
145385.01
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Issuers
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Issuers pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$-------------------
Dated: _________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the
face of the within Note in every particular
without alteration or enlargement or any change
whatsoever and be guaranteed.
Signature Guarantee:
145385.01
<PAGE>
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
[ ], [ ]
[ ]
[ ]
[ ]
Ladies and Gentlemen:
In connection with our proposed purchase of 11 1/2% Senior Notes due
2004 (the "Notes") of Abraxas Petroleum Corporation ("Abraxas") and Canadian
Abraxas Petroleum Limited ("Canadian Abraxas"), we confirm that:
I. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated , 1996, relating to the Notes and such other
information as we deem necessary in order to make our investment decision.
We acknowledge that we have read and agreed to the matters stated in the
section entitled "Transfer Restrictions" of such Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the indenture
relating to the Notes (the "Indenture") as described in the Offering
Memorandum and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes except in compliance with, such
restrictions and conditions and the Securities Act of 1933, as amended
(the "Securities Act"), and all applicable State securities laws.
3. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered
or sold within the United States or to, or for the account or benefit of,
U.S. persons except as permitted in the following sentence. We agree, on
our own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell any Notes, we will do so only
(i) to Abraxas, Canadian Abraxas or any subsidiary thereof, (ii) inside
the United States in accordance with Rule 144A under the Securities Act to
a "qualified institutional buyer" (as defined in Rule 144A promulgated
under the Securities Act) that, prior to such transfer, furnishes (or has
furnished on its behalf by a U.S. broker-dealer) to the Trustee (as
defined in the Indenture) a signed letter containing certain
representations and agreements relating to the restrictions on transfer of
the Notes (the form of which letter can be
<PAGE>
obtained from the Trustee), (iii) outside the United States in accordance
with Rule 904 of Regulation S promulgated under the Securities Act
(provided that any such sale or transfer in Canada or to or for the
benefit of a Canadian resident must be effected pursuant to an exemption
from the prospectus and registration requirements under applicable
Canadian securities laws), (iv) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available),
or (v) pursuant to an effective registration statement under the
Securities Act, and we further agree to provide to any person purchasing
any of the Notes from us a notice advising such purchaser that resales of
the Notes are restricted as stated herein.
4. We understand that, on any proposed resale of any Notes, we will
be required to furnish to the Trustee, Abraxas and Canadian Abraxas such
certification, legal opinions and other information as the Trustee and
Abraxas may reasonably require to confirm that the proposed sale complies
with the foregoing restrictions. We further understand that the Notes
purchased by us will bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to
bear the economic risk of our or their investment, as the case may be.
6. We are acquiring the Notes purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You, Abraxas, Canadian Abraxas, the Trustee and others are entitled
to rely upon this letter and are irrevocably authorized to produce this letter
or a copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
Name:
Title:
<PAGE>
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
[ ], [ ]
[ ]
[ ]
[ ]
[ ]
Re: Abraxas Petroleum Corporation
Canadian Abraxas Petroleum Limited (the "Issuers")
11 1/2% Senior Notes due 2004 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $[ ] aggregate principal
amount of the Notes, we confirm that such sale has been effected pursuant to and
in accordance with Regulation S under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
<PAGE>
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
You, the Issuers and counsel for the Issuers are entitled to rely
upon this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
Authorized Signature
<PAGE>
EXHIBIT E
GUARANTEE
For value received, the undersigned hereby unconditionally
guarantees, as principal obligor and not only as a surety, to the Holder of this
Note the cash payments in United States dollars of principal of, premium, if
any, and interest on this Note (and including Additional Interest payable
thereon) in the amounts and at the times when due and interest on the overdue
principal, premium, if any, and interest, if any, of this Note, if lawful, and
the payment or performance of all other obligations of the Issuers under the
Indenture or the Notes, to the Holder of this Note and the Trustee, all in
accordance with and subject to the terms and limitations of this Note, Article
Eleven of the Indenture and this Guarantee. This Guarantee will become effective
in accordance with Article Eleven of the Indenture and its terms shall be
evidenced therein. The validity and enforceability of any Guarantee shall not be
affected by the fact that it is not affixed to any particular Note. Capitalized
terms used but not defined herein shall have the meanings ascribed to them in
the Indenture dated as of November 14, 1996, among Abraxas Petroleum
Corporation, a Nevada corporation, and Canadian Abraxas Petroleum Limited, a
Canadian corporation, as issuers (the "Issuers") and IBJ Schroder Bank & Trust
Company, as trustee (the "Trustee"), as amended or supplemented (the
"Indenture").
The obligations of the undersigned to the Holders of Notes and to
the Trustee pursuant to this Guarantee and the Indenture are expressly set forth
in Article Eleven of the Indenture and reference is hereby made to the Indenture
for the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. Each Subsidiary Guarantor hereby
agrees to submit to the jurisdiction of the courts of the State of New York in
any action or proceeding arising out of or relating to this Guarantee.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
<PAGE>
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused its
Guarantee to be duly executed.
Date: ____________________
[NAME OF SUBSIDIARY GUARANTOR], as
Guarantor
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
ABRAXAS PETROLEUM CORPORATION
CANADIAN ABRAXAS PETROLEUM LIMITED
$215,000,000
11 1/2% Senior Notes due 2004
PURCHASE AGREEMENT
November 5, 1996
BT SECURITIES CORPORATION
BANKERS TRUST INTERNATIONAL PLC
JEFFERIES & COMPANY INC.
ING BARING (U.S.) SECURITIES CORPORATION
c/o BT Securities Corporation
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
Abraxas Petroleum Corporation, a Nevada corporation (the "Company"),
and Canadian Abraxas Petroleum Limited, a Canada corporation and a wholly-owned
subsidiary of the Company ("Canadian Abraxas" and together with the Company, the
"Issuers"), hereby confirm their agreement with you (the "Initial Purchasers")
as set forth below.
1. The Securities. Subject to the terms and conditions herein
contained, the Issuers propose to issue and sell to the Initial Purchasers
$215,000,000 aggregate principal amount of their 11 1/2% Senior Notes due 2004
(the "Notes"). The Notes will be guaranteed (collectively, the "Guarantees") on
a senior basis by each of the Company's future Restricted Subsidiaries (as
defined in the Indenture) (collectively, the "Subsidiary Guarantors"). The Notes
and the Guarantees are collectively referred to herein as the "Securities". The
Notes are to be issued under an indenture (the "Indenture") to be dated as of
November 14, 1996 by and among the Issuers and IBJ Schroder Bank & Trust
Company, as Trustee (the "Trustee").
The Securities are being offered in connection with and conditioned
upon (i) the Issuers' acquisition of 100% of the capital stock of CGGS Canadian
Gas Gathering Systems Inc. ("CGGS"), (ii) the Company's acquisition of the oil
and gas producing properties located in the Portilla and Happy Fields ("Portilla
and Happy") (the acquisitions of CGGS and Portilla and Happy being collectively
referred to herein as the "Pending Acquisitions" and the agreements executed or
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to be executed by the Issuers in connection with the Pending Acquisitions are
collectively referred to herein as the "Acquisition Agreements"), and (iii) the
Issuers' entering into a new $40.0 million senior revolving credit facility (the
"New Credit Facility").
The Securities will be offered and sold to the Initial Purchasers
without being registered under the Securities Act of 1933, as amended (the
"Act"), in reliance on exemptions therefrom.
In connection with the sale of the Securities, the Issuers have
prepared a preliminary offering memorandum dated October 21, 1996 (the
"Preliminary Memorandum"), and a final offering memorandum dated November 6,
1996 (the "Final Memorandum"; the Preliminary Memorandum and the Final
Memorandum each herein being referred to as a "Memorandum") setting forth or
including a description of the terms of the Securities, the terms of the
offering of the Securities, a description of the Pending Acquisitions and the
New Credit Agreement, a description of the Issuers and the Subsidiary Guarantors
and any material developments relating to the Issuers and the Subsidiary
Guarantors occurring after the date of the most recent historical financial
statements included therein.
The Initial Purchasers and their direct and indirect transferees of
the Securities will be entitled to the benefits of the Registration Rights
Agreement to be dated as of the Closing Date (as defined) (the "Registration
Rights Agreement"), pursuant to which the Issuers will agree, among other
things, to file with the Securities and Exchange Commission (the "Commission"),
under the circumstances set forth therein, (i) a registration statement under
the Act (the "Exchange Offer Registration Statement"), relating to Senior Notes
due 2004 of the Issuers (the "Exchange Notes") to be offered in exchange (the
"Exchange Offer") for the Notes, and (ii) as and to the extent required by the
Registration Rights Agreement, a shelf registration statement pursuant to Rule
415 under the Act (the "Shelf Registration Statement" and, together with the
Exchange Offer Registration Statement, the "Registration Statements"), relating
to the resale by certain holders of the Notes, and to use their best efforts to
cause such Registration Statements to be declared effective. This Purchase
Agreement (this "Agreement"), the Notes, the Guarantees, the Indenture and the
Registration Rights Agreement are hereinafter referred to collectively as the
"Operative Documents."
2. Representations and Warranties. The Issuers, jointly and
severally, represent and warrant to and agree with each of the Initial
Purchasers that:
(a) Neither the Preliminary Memorandum as of its date nor the Final
Memorandum nor any amendment or supplement thereto as of the date thereof
and at all times subsequent thereto up to the Closing Date (as defined in
Section 3 below) contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and warranties
set forth in this Section 2(a) do not apply to statements or omissions
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made in reliance upon and in conformity with information relating to any
of the Initial Purchasers furnished to the Issuers in writing by the
Initial Purchasers expressly for use in the Preliminary Memorandum, the
Final Memorandum or any amendment or supplement thereto.
(b) As of June 30, 1996, the Company had the authorized, issued and
outstanding capitalization set forth in the Final Memorandum; all of the
subsidiaries of the Company are listed on Schedule I attached hereto
(each, a "Subsidiary" and collectively, the "Subsidiaries"); all of the
outstanding shares of capital stock of the Issuers and of each of the
Subsidiaries of the Company have been, and as of the Closing Date will be,
duly authorized and validly issued, are fully paid and nonassessable and
were not issued in violation of any preemptive or similar rights; all of
the outstanding shares of capital stock of Canadian Abraxas and of each of
the Subsidiaries (other than with respect to the shares of capital stock
of Grey Wolf Exploration Ltd., an Alberta corporation ("Grey Wolf"),
Cascade Oil & Gas Ltd., an Alberta corporation ("Cascade"), and Western
Associated Energy Corporation, a Texas corporation ("Western"), such
shares of capital stock owned by others as of the Closing Date and as set
forth in the Final Memorandum) will be owned by the Company free and clear
of all liens, encumbrances, equities and claims or restrictions on
transferability (other than those imposed by the Act and the securities or
"Blue Sky" laws of certain jurisdictions) or voting; except as set forth
in the Final Memorandum, as of June 30, 1996, there were no (i) options,
warrants or other rights to purchase, (ii) agreements or other obligations
of the Issuers to issue or (iii) other rights to convert any obligation
into, or exchange any securities for, shares of capital stock of or
ownership interests in either Issuer or any of the Subsidiaries
outstanding. Except for the Subsidiaries and as disclosed in the Final
Memorandum, none of the Issuers or any of the Subsidiaries owns, directly
or indirectly, any shares of capital stock or any other equity or
long-term debt securities or have any equity interest in any firm,
partnership, joint venture or other entity.
(c) Each of the Issuers and the Subsidiaries is duly incorporated,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation and has all requisite corporate power and
authority to own its properties and conduct its business as now conducted
and as described in the Final Memorandum; each of the Issuers and the
Subsidiaries is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions where the ownership or leasing of
its properties or the conduct of its business requires such qualification,
except where the failure to be so qualified would not, individually or in
the aggregate, have a material adverse effect on the general affairs,
management, business, condition (financial or otherwise), prospects or
results of operations of the Issuers and the Subsidiaries taken as a whole
(any such event, a "Material Adverse Effect").
(d) Each of the Issuers and the Subsidiaries has all requisite
corporate power and authority to execute, deliver and perform its
respective obligations under this Agreement and the other Operative
Documents to which it is a party and to consummate the transactions
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<PAGE>
contemplated hereby and thereby, including, without limitation, the power
and authority to issue, sell and deliver the Securities as contemplated by
this Agreement.
(e) This Agreement has been duly and validly authorized, executed
and delivered by each of the Issuers.
(f) The Indenture has been duly and validly authorized by the
Issuers and, when duly executed and delivered in accordance with its terms
(assuming the due execution and delivery thereof by the Trustee), will be
the valid and legally binding agreement of the Issuers, enforceable
against each of them in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws now or hereinafter in effect relating to
or affecting creditors' rights generally, by general equitable principles
(regardless of whether such enforceability is considered in a proceeding
in equity or at law); and the Indenture meets the requirements for
qualification under the Trust Indenture Act of 1939, as amended (the
"TIA").
(g) The Notes have been duly and validly authorized for issuance and
sale to the Initial Purchasers by the Issuers pursuant to this Agreement
and, when issued and authenticated in accordance with the terms of the
Indenture and delivered against payment therefor in accordance with the
terms hereof, will be the legally valid and binding obligations of the
Issuers, enforceable against each of them in accordance with their terms
and entitled to the benefits of the Indenture, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws now or hereinafter in effect relating to
or affecting creditors' rights generally, by general equitable principles
(regardless of whether such enforceability is considered in a proceeding
in equity or at law) or the discretion of the court before which any
proceeding therefor may be brought.
(h) The Exchange Notes have been duly and validly authorized for
issuance by the Issuers and, when issued and authenticated in accordance
with the terms of the Indenture, the Registration Rights Agreement and the
Exchange Offer, will be the legally valid and binding obligations of the
Issuers, enforceable against each of them in accordance with their terms
and entitled to the benefits of the Indenture, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws now or hereinafter in effect relating to
or affecting creditors' rights generally, by general equitable principles
(regardless of whether such enforceability is considered in a proceeding
in equity or at law) or the discretion of the court before which any
proceeding therefor may be brought.
(i) The Registration Rights Agreement has been duly authorized by
the Issuers and, when duly executed and delivered by the Issuers (assuming
the due execution and delivery thereof by you), will be the legally valid
and binding obligation of the Issuers, enforceable against each of them in
accordance with its terms, except as such enforceability may be limited by
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<PAGE>
bankruptcy, insolvency, reorganization, moratorium and other similar laws
now or hereinafter in effect relating to or affecting creditors' rights
generally, by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or the
discretion of the court before which any proceeding therefor may be
brought and, as to rights of indemnification and contribution, by
principles of public policy or U.S. or Canadian federal, state or
provincial securities laws relating thereto.
(j) No consent, waiver, approval, authorization or order of or
filing, registration, qualification, license or permit of or with any
court or governmental agency or body, or third party is required for (i)
the issuance and sale by the Issuers of the Notes to the Initial
Purchasers or the consummation by the Issuers of each of the other
transactions contemplated hereby or by any of the other Operative
Documents, (ii) the issuance and sale by the Subsidiary Guarantors of the
Guarantees or the consummation by the Subsidiary Guarantors of the other
transactions contemplated hereby or by any of the Operative Documents,
(iii) the consummation by the Issuers of the transactions contemplated by
the Acquisition Agreements, to the extent each is a party thereto, and
(iv) the execution by the Company of the New Credit Facility and the
consummation by the Issuers of each of the transactions contemplated by
the New Credit Facility, except, in each case, such as have been or, prior
to the Closing Date, will be obtained and such as may be required under
state securities or "Blue Sky" laws in connection with the purchase and
resale of the Securities by the Initial Purchasers. None of the Issuers or
any of the Subsidiaries is (A) in violation of its charter or bylaws (or
similar organizational document), (B) in breach or violation of any
statute, judgment, decree, order, rule or regulation applicable to any of
them or any of their respective properties or assets, except for any such
breach or violation which would not, individually or in the aggregate,
have a Material Adverse Effect, or (C) in breach of or default under (nor
has any event occurred which, with notice or passage of time or both,
would constitute a default under) or in violation of any of the terms or
provisions of any indenture, mortgage, deed of trust, loan agreement,
note, lease, license, permit, certificate, contract or other agreement or
instrument to which any of them is a party or to which any of them or
their respective properties or assets is subject (collectively,
"Contracts"), except for any such breach, default, violation or event
which would not, individually or in the aggregate, have a Material Adverse
Effect.
(k) The execution, delivery and performance by the Issuers of this
Agreement and each of the other Operative Documents (to the extent a party
thereto) and the consummation of the transactions contemplated hereby and
thereby (including, without limitation, the issuance and sale of the
Securities to the Initial Purchasers and the issuance of the Exchange
Notes in the Exchange Offer), the consummation by the Issuers of the
Pending Acquisitions, to the extent each is a party thereto, and the
execution, delivery and performance by the Company of the New Credit
Facility do not and will not violate, conflict with or constitute or
result in a breach of or a default under (or constitute an event which
5
<PAGE>
with notice or passage of time or both would constitute a default under)
or cause an acceleration of any obligation under, or result in the
imposition or creation of (or the obligation to create or impose) a Lien
(as defined) on any properties or assets of either Issuer or any
Subsidiary with respect to (A) the terms or provisions of any Contract,
except for any such conflict, breach, violation, default or event which
would not, individually or in the aggregate, have a Material Adverse
Effect, (B) the charter or bylaws (or similar organizational document) of
the Issuers or any of the Subsidiaries, or (C) (assuming compliance with
all applicable state securities or "Blue Sky" laws and assuming the
accuracy of the representations and warranties of the Initial Purchasers
in Section 8 hereof) any statute, judgment, decree, order, rule or
regulation applicable to the Issuers or any of the Subsidiaries or any of
their respective properties or assets, except for any such conflict,
breach or violation which would not, individually or in the aggregate,
have a Material Adverse Effect.
(l) Ernst & Young LLP, Deloitte & Touche LLP and KPMG Chartered
Accountants who are reporting on the audited financial statements of the
Issuers, Enserch Exploration, Inc.'s Wamsutter Area package and CGGS,
respectively, included in the Final Memorandum, are independent public
accountants within the meaning of the Act. The audited financial
statements of the Issuers, CGGS and Enserch Exploration, Inc.'s Wamsutter
Area package and related notes thereto included in the Final Memorandum
present fairly in all material respects the financial position of the
Issuers, CGGS and Enserch Exploration, Inc.'s Wamsutter Area package as of
the dates indicated and the results of their respective operations and the
changes in the cash flow for the periods specified, in accordance with
generally accepted accounting principles ("GAAP") consistently applied
throughout such periods, except as otherwise stated therein. The summary
and selected financial and statistical data included in the Final
Memorandum present fairly in all material respects the information shown
therein and have been prepared and compiled on a basis consistent with the
audited financial statements included therein, except as stated therein.
(m) The pro forma financial statements (including the notes thereto)
and the other pro forma financial information included in the Final
Memorandum (i) comply as to form in all material respects with the
applicable requirements of Regulation S-X promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (ii) have been
prepared in all material respects in accordance with the Commission's
rules and guidelines with respect to pro forma financial statements, and
(iii) have been properly computed on the bases described therein; the
assumptions used in the preparation of the pro forma financial data and
other pro forma financial information included in the Final Memorandum are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions or circumstances referred to therein.
(n) There is not pending or, to the knowledge of the Issuers,
threatened any action, suit, proceeding, inquiry or investigation to which
either of the Issuers or any of the Subsidiaries is a party, or to which
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the property or assets of either of the Issuers or any of the Subsidiaries
is subject, before or brought by any court, arbitrator or governmental
agency or body which, if determined adversely to either of the Issuers or
any of the Subsidiaries, would, individually or in the aggregate, have a
Material Adverse Effect or which seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the
Securities to be sold hereunder or the consummation of the other
transactions described in the Final Memorandum.
(o) Each of the Issuers and the Subsidiaries possesses all licenses,
permits, certificates, consents, orders, approvals and other
authorizations from, and has made all declarations and filings with, all
federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals,
presently required or necessary to own or lease, as the case may be, and
to operate its respective properties and to carry on its respective
businesses as now or proposed to be conducted as set forth in the Final
Memorandum ("Permits"), except where the failure to obtain such Permits
would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect; each of the Issuers and the Subsidiaries
has fulfilled and performed all of its obligations with respect to such
Permits and no event has occurred which allows, or after notice or lapse
of time would allow, revocation or termination thereof or results in any
other material impairment of the rights of the holder of any such Permit,
except where the failure to perform such obligations or the occurrence of
such event would not have a Material Adverse Effect; and none of the
Issuers or any of the Subsidiaries has received any notice of any
proceeding relating to revocation or modification of any such Permit,
except as described in the Final Memorandum and except where such
revocation or modification would not, individually or in the aggregate,
have a Material Adverse Effect.
(p) Since the respective dates as to which information is given in
the Final Memorandum, except as described therein, (i) none of the Issuers
or any of the Subsidiaries has incurred any liabilities or obligations,
direct or contingent, or entered into or agreed to enter into any
transactions or contracts (written or oral) not in the ordinary course of
business, or which liabilities, obligations, transactions or contracts
would, individually or in the aggregate, be material to the business,
condition (financial or otherwise), prospects or results of operations of
the Issuers and the Subsidiaries, taken as a whole, (ii) none of the
Issuers or any of the Subsidiaries has purchased any of its outstanding
capital stock (other than repurchases by the Company of its capital stock
in the open market not exceeding $1 million in the aggregate), nor
declared, paid or otherwise made any dividend or distribution of any kind
on its capital stock (other than with respect to the Company's Series
1995-B Preferred Stock and other than with respect to any of such
Subsidiary, the purchase of, or dividend or distribution on, capital stock
owned by the Company) and (iii) there shall not have been any change in
the capital stock or long-term indebtedness of any of the Issuers or
Subsidiaries.
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(q) Each of the Issuers and the Subsidiaries has filed all necessary
federal, state and foreign income and franchise tax returns, except where
the failure to so file such returns would not, individually or in the
aggregate, have a Material Adverse Effect, and has paid all taxes shown as
due thereon except as to taxes any of the Issuers or Subsidiaries is
contesting in good faith; and other than tax deficiencies which any of the
Issuers or Subsidiaries is contesting in good faith and for which such
Issuer or such Subsidiaries has provided adequate reserves in accordance
with generally accepted accounting principles, there is no tax deficiency
that has been asserted against any of the Issuers or the Subsidiaries that
would have, individually or in the aggregate, a Material Adverse Effect.
(r) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which the Issuers believe
to be reliable and accurate.
(s) None of the Issuers or any of the Subsidiaries or any agent
acting on their behalf has taken or will take any action that might cause
this Agreement or the sale of the Securities to violate Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System, in each case
as in effect, or as the same may hereafter be in effect, on the Closing
Date.
(t) Each of the Issuers and the Subsidiaries has good and defensible
title to all real property and good title to all personal property
described in the Final Memorandum as being owned by it and good and
defensible title to a leasehold estate in the real and personal property
described in the Final Memorandum as being leased by it free and clear of
all liens, charges, encumbrances or restrictions, except as described in
the Final Memorandum, liens arising under the New Credit Facility or to
the extent the failure to have such title or the existence of such liens,
charges, encumbrances or restrictions would not, individually or in the
aggregate, have a Material Adverse Effect. All leases, contracts and
agreements to which any of the Issuers or Subsidiaries is a party or by
which any of them is bound are valid and enforceable against such Issuer
or such Subsidiary, as the case may be, and to the knowledge of the
Issuers and the Subsidiaries are valid and enforceable against the other
party or parties thereto and are in full force and effect with only such
exceptions as would not, individually or in the aggregate, have a Material
Adverse Effect, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
now or hereinafter in effect relating to or affecting creditors' rights
generally, by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or the
discretion of the court before which any proceeding therefor may be
brought. The Issuers and the Subsidiaries own or possess adequate licenses
or other rights to use all patents, trademarks, service marks, trade
names, copyrights and know-how necessary to conduct the businesses now or
proposed to be operated by them as described in the Final Memorandum, and
none of the Issuers or any of the Subsidiaries has received any notice of
infringement of or conflict with (or knows of any such infringement of or
conflict with) asserted rights of others with respect to any patents,
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trademarks, service marks, trade names, copyrights or know-how which, if
such assertion of infringement or conflict were sustained, would have a
Material Adverse Effect.
(u) There are no legal or governmental proceedings involving or
affecting any of the Issuers or Subsidiaries or any of their respective
properties or assets which would be required to be described in a
prospectus pursuant to the Act that are not so described in the Final
Memorandum, nor are there any material contracts or other documents which
would be required to be described in a prospectus pursuant to the Act that
are not so described in the Final Memorandum.
(v) Except as described in the Final Memorandum or as would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect (A) each of the Issuers and the Subsidiaries is in
compliance with and not subject to any known liability under applicable
Environmental Laws (as defined below), (B) each of the Issuers and the
Subsidiaries has made all filings and provided all notices required under
any applicable Environmental Law, and has, and is in compliance with, all
Permits required under any applicable Environmental Laws and each of them
is in full force and effect, (C) there is no civil, criminal or
administrative action, suit, demand, claim, hearing, notice of violation
or, to the knowledge of the Issuers and the Subsidiaries, investigation,
proceeding, notice or demand letter or request for information pending or
threatened against any of the Issuers or the Subsidiaries under any
Environmental Law, (D) no lien, charge, encumbrance or restriction has
been recorded under any Environmental Law with respect to any assets,
facility or property owned, operated, leased or controlled by any of the
Issuers or the Subsidiaries, (E) none of the Issuers or any of the
Subsidiaries has received notice that it has been identified as a
potentially responsible party under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"),
or any comparable state law, (F) no property or facility of any of the
Issuers or the Subsidiaries is (i) listed or, to the knowledge of the
Issuers and the Subsidiaries proposed for listing on the National
Priorities List under CERCLA or is (ii) listed in the Comprehensive
Environmental Response, Compensation, Liability Information System List
promulgated pursuant to CERCLA, or on any comparable list maintained by
any state or local governmental authority.
For purposes of this Agreement, "Environmental Laws" means the
common law and all applicable federal, state and local laws or
regulations, codes, orders, decrees, judgments or injunctions issued,
promulgated, approved or entered thereunder, relating to pollution or
protection of public or employee health and safety or the environment,
including, without limitation, laws relating to (i) emissions, discharges,
releases or threatened releases of hazardous materials into the
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), (ii) the manufacture,
processing, distribution, use, generation, treatment, storage, disposal,
transport or handling of hazardous materials, and (iii) underground and
above ground storage tanks and related piping, and emissions, discharges,
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releases or threatened releases therefrom.
(w) There is no strike, labor dispute, slowdown or work stoppage
with the employees of any of the Issuers or the Subsidiaries which is
pending or, to the knowledge of the Issuers, threatened.
(x) Each of the Issuers and the Subsidiaries carries insurance
including self-insurance in such amounts and covering such risks as in its
reasonable determination is adequate for the conduct of its business and
the value of its properties.
(y) None of the Issuers or any of the Subsidiaries has incurred any
liability for any prohibited transaction or funding deficiency or any
complete or partial withdrawal liability with respect to any pension,
profit sharing or other plan which is subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), to which any of the
Issuers or the Subsidiaries makes or ever has made a contribution and in
which any employee of any of the Issuers or the Subsidiaries is or has
ever been a participant, which in the aggregate could have a Material
Adverse Effect. With respect to such plans, each of the Issuers and the
Subsidiaries is in compliance in all respects with all applicable
provisions of ERISA, except where the failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect.
(z) Each of the Issuers and the Subsidiaries (i) makes and keeps
accurate books and records and (ii) maintains internal accounting controls
which provide reasonable assurance that (A) transactions are executed in
accordance with management's authorization, (B) transactions are recorded
as necessary to permit preparation of its financial statements and to
maintain accountability for its assets, (C) access to its assets is
permitted only in accordance with management's authorization and (D) the
reported accountability for its assets is compared with existing assets at
reasonable intervals.
(aa) None of the Issuers or any of the Subsidiaries will be an
"investment company" or "promoter" or "principal underwriter" for an
"investment company," as such terms are defined in the Investment Company
Act of 1940, as amended, and the rules and regulations thereunder.
(bb) The Notes, the Guarantees, the Indenture, the Registration
Rights Agreement and the New Credit Facility conform in all material
respects to the descriptions thereof contained in the Final Memorandum.
(cc) No holder of securities of any of the Issuers or any Subsidiary
will be entitled to have such securities registered under the registration
statements required to be filed by the Issuers pursuant to the
Registration Rights Agreement, other than as expressly permitted thereby.
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(dd) Immediately after the consummation of the transactions
contemplated by the Acquisition Agreements, this Agreement and the
Indenture, the fair value and present fair saleable value of the assets of
each of the Issuers and the Subsidiaries will exceed the sum of its stated
liabilities and identified contingent liabilities; none of the Issuers or
any of the Subsidiaries (each on a consolidated basis) is, nor will any of
the Issuers or the Subsidiaries (each on a consolidated basis) be, after
giving effect to the execution, delivery and performance of the
Acquisition Agreements, this Agreement and the Indenture, and the
consummation of the transactions contemplated hereby and thereby, (a) left
with unreasonably small capital with which to carry on its business as it
is proposed to be conducted, (b) unable to pay its debts (contingent or
otherwise) as they mature or (c) otherwise insolvent.
(ee) None of the Issuers or any of the Subsidiaries or any of their
respective Affiliates (as defined in Rule 501(b) of Regulation D under the
Act) has directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any
"security" (as defined in the Act) which is or could be integrated with
the sale of the Securities in a manner that would require the registration
under the Act of the Securities or (ii) engaged in any form of general
solicitation or general advertising (as those terms are used in Regulation
D under the Act) in connection with the offering of the Securities or in
any manner involving a public offering within the meaning of Section 4(2)
of the Act.
(ff) When the Securities are delivered pursuant to this Agreement,
none of the Securities will be of the same class (within the meaning of
Rule 144A under the Act) as securities of either Issuer or any Subsidiary
that are listed on a national securities exchange registered under Section
6 of the Exchange Act or that are quoted in a United States automated
inter-dealer quotation system.
(gg) All legal or governmental proceedings, contracts or documents
of a character required to be described in a registration statement on
Form S-1 or to be filed as an exhibit to a registration statement on Form
S-1 have been so described; and any such descriptions are complete and
accurate in all material respects.
(hh) None of the Issuers, the Subsidiaries, any of their respective
Affiliates (as defined in Rule 501(b) of Regulation D under the Act) or
any person acting on any of their behalf (other than the Initial
Purchasers) has engaged in any directed selling efforts (as that term is
defined in Regulation S under the Act ("Regulation S")) with respect to
the Securities; the Issuers and their respective Affiliates and any person
acting on any of their behalf (other than the Initial Purchasers) have
complied with the offering restrictions requirement of Regulation S.
(ii) Subsequent to the respective dates as of which information is
given in the Final Memorandum and up to the Closing Date, except as set
forth in the Final Memorandum, neither of the Issuers has incurred any
liabilities or obligations, direct or contingent, which are material to
the Issuers taken as a whole, nor entered into any transaction not in the
ordinary course of business and there has not been, individually or in the
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aggregate, any material adverse change, or any development which may
reasonably be expected to involve a material adverse change, in the
properties, business, results of operations, condition (financial or
otherwise), affairs or prospects of the Issuers taken as a whole other
than any such effect caused solely by decreases in crude oil, natural gas
liquids and natural gas prices (any such event, a "Material Adverse
Change").
(jj) Assuming that the representations and warranties of the Initial
Purchasers contained in Section 8 are true and correct, it is not
necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchasers or the reoffer and resale by the
Initial Purchasers in the manner contemplated by this Agreement to
register the Securities under the Act or to qualify the Indenture in
respect of the Notes under the TIA.
(kk) Western is a subsidiary of the Company with no operations,
assets or liabilities other than $2,000,000 par value preferred stock
issued to a bank. Portilla Happy Corporation, a Texas corporation, will be
dissolved prior to the Closing Date and will not be a Subsidiary of the
Company on the Closing Date.
Any certificate signed by any officer of either Issuer and delivered
to any Initial Purchaser or to counsel for the Initial Purchasers or either of
the Issuers shall be deemed a joint and several representation and warranty by
the Issuers to each Initial Purchaser as to the matters covered thereby.
3. Purchase, Sale and Delivery of the Securities. On the basis of
the representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Issuers agree to issue
and sell to the Initial Purchasers, and the Initial Purchasers, acting severally
and not jointly, agree to purchase the Notes (and the related Guarantees) in the
respective amounts set forth opposite their respective names on Schedule II
attached hereto at [ ]% of their principal amount. One or more certificates in
definitive form for the Notes and Guarantees that the Initial Purchasers have
agreed to purchase hereunder, and in such denomination or denominations and
registered in such name or names as the Initial Purchasers request upon notice
to the Issuers at least 36 hours prior to the Closing Date, shall be delivered
by or on behalf of the Issuers to the Initial Purchasers, against payment by or
on behalf of the Initial Purchasers of the purchase price therefor by wire
transfer (same day funds) to such account or accounts as the Issuers shall
specify prior to the Closing Date, or by such means as the parties hereto shall
agree prior to the Closing Date. Such delivery of and payment for the Securities
shall be made at the offices of Cahill Gordon & Reindel, 80 Pine Street, New
York, New York at 10:00 A.M., New York time, on November 14, 1996, or at such
other place, time or date as the Initial Purchasers, on the one hand, and the
Issuers, on the other hand, may agree upon, such time and date of delivery
against payment being herein referred to as the "Closing Date." The Issuers will
make such certificate or certificates for the Securities available for checking
and packaging by the Initial Purchasers at the offices of BT Securities
Corporation in New York, New York, or at such other place as BT Securities
Corporation may designate, at least 24 hours prior to the Closing Date.
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4. Offering by the Initial Purchasers. The Initial Purchasers
propose to make an offering of the Securities at the price and upon the terms
set forth in the Final Memorandum, as soon as practicable after this Agreement
is entered into and as in the judgment of the Initial Purchasers is advisable.
5. Covenants of the Issuers. The Issuers, jointly and severally,
covenant and agree with each of the Initial Purchasers that:
(a) The Issuers will not amend or supplement the Final Memorandum or
any amendment or supplement thereto of which the Initial Purchasers shall
not previously have been advised and furnished a copy for a reasonable
period of time prior to the proposed amendment or supplement and as to
which the Initial Purchasers shall not have given their consent, which
consent shall not unreasonably be withheld. The Issuers will promptly,
upon the reasonable request of the Initial Purchasers or counsel for the
Initial Purchasers, make any amendments or supplements to the Preliminary
Memorandum or the Final Memorandum that may be necessary or advisable in
connection with the resale of the Securities by the Initial Purchasers.
(b) The Issuers will cooperate with the Initial Purchasers in
arranging for the qualification of the Securities for offering and sale
under the securities or "Blue Sky" laws of such jurisdictions as the
Initial Purchasers may designate and will continue such qualifications in
effect for as long as may be necessary to complete the resale of the
Securities; provided, however, that in connection therewith, neither of
the Issuers shall be required to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction or
subject itself to taxation in excess of a nominal dollar amount in any
such jurisdiction where it is not then so subject.
(c) If, at any time prior to the initial resale by the Initial
Purchasers of the Securities or the Exchange Notes, any event occurs or
information becomes known as a result of which the Final Memorandum as
then amended or supplemented would include any untrue statement of a
material fact, or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, or if for any other reason it is necessary at
any time to amend or supplement the Final Memorandum to comply with
applicable law, the Issuers will promptly notify the Initial Purchasers
thereof and will prepare, at the expense of the Issuers, an amendment or
supplement to the Final Memorandum that corrects such statement or
omission or effects such compliance.
(d) The Issuers will, without charge, provide to the Initial
Purchasers and to counsel for the Initial Purchasers as many copies of the
Preliminary Memorandum and the Final Memorandum or any amendment or
supplement thereto as the Initial Purchasers may reasonably request.
(e) The Issuers will apply the net proceeds from the sale of the
Securities as set forth under "Use of Proceeds" in the Final Memorandum.
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(f) For so long as any of the Securities remain outstanding, the
Issuers will furnish to the Initial Purchasers copies of all reports and
other communications (financial or otherwise) furnished by the Issuers to
the Trustee or to the holders of the Notes and, as soon as available,
copies of any reports or financial statements furnished to or filed by the
Issuers with the Commission or any national securities exchange on which
any class of securities of the Company may be listed.
(g) Prior to the Closing Date, the Company will furnish to the
Initial Purchasers, as soon as they have been prepared, if at all, a copy
of any available unaudited consolidated interim financial statements of
the Company and any available unaudited interim consolidated financial
statements of CGGS for any period subsequent to the period covered by the
most recent financial statements of the Company and CGGS respectively,
appearing in the Final Memorandum.
(h) None of the Issuers or any of their Affiliates will sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) which could be integrated with the sale
of the Securities in a manner which would require the registration under
the Act of the Securities.
(i) The Issuers will not, and will not permit any of the
Subsidiaries to, engage in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) in
connection with the offering of the Securities or in any manner involving
a public offering within the meaning of Section 4(2) of the Act.
(j) For so long as any of the Securities remain outstanding, the
Company will make available at its expense, upon request, to any holder of
such Securities and any prospective purchasers thereof, the information
specified in Rule 144A(d)(4) under the Act, unless the Company is then
subject to Section 13 or 15(d) of the Exchange Act.
(k) The Issuers will use their best efforts to (i) permit the
Securities to be designated for trading in the Private Offerings, Resales
and Trading through Automated Linkages market (the "PORTAL Market") of the
NASD and (ii) permit the Securities to be eligible for clearance and
settlement through The Depository Trust Company.
(l) In connection with Securities offered and sold in an off-shore
transaction (as defined in Regulation S) the Issuers will not register any
transfer of such Notes not made in accordance with the provisions of
Regulation S and will not, except in accordance with the provisions of
Regulation S, if applicable, issue any such Notes in the form of
definitive securities.
6. Expenses. The Issuers agree, jointly and severally, to pay all
costs and expenses incident to the performance of their respective
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obligations under this Agreement, whether or not the transactions
contemplated herein are consummated or this Agreement is terminated
pursuant to Section 10 hereof, including all costs and expenses incident
to (i) the printing, word processing or other production of documents with
respect to the transactions contemplated hereby, including any costs of
printing the Preliminary Memorandum and the Final Memorandum and any
amendment or supplement thereto, and any "Blue Sky" memoranda, (ii) all
arrangements relating to the delivery to the Initial Purchasers of copies
of the foregoing documents, (iii) the fees and disbursements of the
counsel, the accountants and any other experts or advisors retained by the
Issuers, (iv) preparation (including printing), issuance and delivery to
the Initial Purchasers of the Securities, (v) the qualification of the
Securities under state securities and "Blue Sky" laws, including filing
fees and reasonable fees and disbursements of counsel for the Initial
Purchasers relating thereto, (vi) expenses in connection with any meetings
with prospective investors in the Securities, (vii) fees and expenses of
the Trustee including reasonable fees and expenses of its counsel, (viii)
all expenses and listing fees incurred in connection with the application
for quotation of the Securities on the PORTAL Market, (ix) any fees
charged by investment rating agencies for the rating of the Securities and
(x) all reasonable out-of-pocket expenses of the Initial Purchasers
(including fees and expenses of Cahill Gordon & Reindel, as counsel to the
Initial Purchasers). If the sale of the Securities provided for herein is
not consummated because any condition to the obligations of the Initial
Purchasers set forth in Section 7 hereof is not satisfied, because this
Agreement is terminated or because of any failure, refusal or inability on
the part of the Issuers to perform all obligations and satisfy all
conditions on their part to be performed or satisfied hereunder (other
than solely by reason of a default by the Initial Purchasers of their
obligations hereunder after all conditions hereunder have been satisfied
in accordance herewith), the Issuers agree, jointly and severally, to
promptly reimburse the Initial Purchasers upon demand for all
out-of-pocket expenses (including reasonable fees, disbursements and
charges of Cahill Gordon & Reindel, counsel for the Initial Purchasers)
that shall have been incurred by the Initial Purchasers in connection with
the proposed purchase and sale of the Securities.
7. Conditions of the Initial Purchasers' Obligations. The obligation
of the Initial Purchasers to purchase and pay for the Securities shall, in
their sole discretion, be subject to the satisfaction or waiver of the
following conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchasers shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchasers, of Cox & Smith Incorporated, United States counsel for the
Issuers, in form and substance satisfactory to counsel for the Initial
Purchasers, to the effect that:
(i) The Company is duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation
and has all requisite corporate power and authority to own its
properties and to conduct its business as described in the Final
Memorandum. The Company is duly qualified to do business as a
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foreign corporation in good standing in each jurisdiction where the
ownership or leasing of its properties or the conduct of its
business requires such qualification, except where the failure to be
so qualified would not, individually or in the aggregate, have a
Material Adverse Effect.
(ii) As of June 30, 1996, the Company had the authorized,
issued and outstanding capitalization set forth in the Final
Memorandum; all of the outstanding shares of capital stock of the
Issuers and each of the Subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable and, with respect
to the Company and Western, were not issued in violation of any
preemptive or similar rights; all of the outstanding shares of
capital stock of Canadian Abraxas and Western will be owned,
directly or indirectly, by the Company, free and clear of all
perfected security interests and, to the knowledge of such counsel,
free and clear of all other liens, encumbrances, equities and claims
or restrictions on transferability (other than those imposed by the
Act and the securities or "Blue Sky" laws of certain jurisdictions)
or voting.
(iii) To the knowledge of such counsel, except as set forth in
the Final Memorandum (A) no options, warrants or other rights to
purchase from either Issuer or any of the Subsidiaries shares of
capital stock or ownership interests in either Issuer or any of the
Subsidiaries were outstanding as of June 30, 1996 other than stock
options granted to employees, officers and directors, (B) no
agreements or other obligations to issue, or other rights to
convert, any obligation into, or exchange any securities for, shares
of capital stock or ownership interests in either Issuer or any of
the Subsidiaries were outstanding as of June 30, 1996 other than
stock options granted to employees, officers and directors and (C)
no holder of securities of either Issuer or any of the Subsidiaries
is entitled to have such securities registered under a registration
statement filed pursuant to the Registration Rights Agreement.
(iv) The Company has the requisite corporate power and
authority to execute, deliver and perform its obligations under this
Agreement and each of the other Operative Documents and to
consummate the transactions contemplated hereby and thereby,
including, without limitation, the corporate power and authority to
issue, sell and deliver the Securities as contemplated by this
Agreement. The Company has the requisite corporate power and
authority to execute, deliver and perform its obligations under each
Operative Document and to consummate the transactions contemplated
hereby and thereby.
(v) This Agreement has been duly and validly authorized,
executed and delivered by the Company and the Company has the
requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby.
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(vi) The Indenture has been duly and validly authorized by the
Company and, when duly executed and delivered in accordance with its
terms (assuming the due execution and delivery thereof by each of
the parties thereto other than the Company), will be the valid and
legally binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium
and other similar laws now or hereinafter in effect relating to or
affecting creditors' rights generally, by general equitable
principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law) or the discretion of the court
before which any proceeding therefor may be brought; and the
Indenture meets the requirements for qualification under the TIA.
(vii) The Notes have been duly and validly authorized for
issuance and sale to the Initial Purchasers by the Company pursuant
to this Agreement and, when issued and authenticated in accordance
with the terms of the Indenture and delivered against payment
therefor in accordance with the terms hereof, will be the legally
valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms and entitled to the
benefits of the Indenture, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws now or hereinafter in effect relating to or
affecting creditors' rights generally, by general equitable
principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law) or the discretion of the court
before which any proceeding therefor may be brought.
(viii) The Exchange Notes have been duly and validly authorized
for issuance by the Company and, when issued and authenticated in
accordance with the terms of the Indenture, the Registration Rights
Agreement and the Exchange Offer, will be the legally valid and
binding obligations of the Company, enforceable against the Company
in accordance with their terms and entitled to the benefits of the
Indenture, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar
laws now or hereinafter in effect relating to or affecting
creditors' rights generally, by general equitable principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) or the discretion of the court
before which any proceeding therefor may be brought.
(ix) The Registration Rights Agreement has been duly
authorized by the Company and, when duly executed and delivered by
the Company (assuming the due execution and delivery thereof by each
of the parties thereto other than the Company), will be the legally
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium
and other similar laws now or hereinafter in effect relating to or
affecting creditors' rights generally, by general equitable
17
<PAGE>
principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law) or the discretion of the court
before which any proceeding therefor may be brought and, as to
rights of indemnification and contribution, by principles of public
policy or federal or state securities laws relating thereto.
(x) The statements set forth in the Final Memorandum under
the captions "Business-Regulatory Matters," "Certain United States
and Canadian Income Tax Considerations" and "Certain Anti-takeover
Defenses," insofar as they address matters of United States, Texas
or Nevada law or legal conclusions based on United States, Texas or
Nevada law and subject to the limitations set forth therein, insofar
as such statements constitute a summary of the matters referred to
therein, fairly and accurately present the information disclosed
therein in all material respects.
(xi) The Indenture, the Notes, the Guarantees, the
Registration Rights Agreement and the New Credit Facility conform in
all material respects to the descriptions thereof contained in the
Final Memorandum.
(xii) To such counsel's knowledge, no legal or governmental
proceedings are pending or threatened to which either of the Issuers
or any Subsidiary is a party or to which the property or assets of
either of the Issuers or any Subsidiary is subject, before or
brought by any court, arbitrator or government agency or body which,
if determined adversely to either of the Issuers or any Subsidiary,
would result, individually or in the aggregate, in a Material
Adverse Effect, or which seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the
Securities to be sold hereunder or the consummation of the other
transactions described in the Final Memorandum.
(xiii) To such counsel's knowledge, none of the Issuers or any
of the Subsidiaries is (A) in violation of its charter or bylaws (or
similar organizational document), (B) in breach or violation of any
statute, judgment, decree, order, rule or regulation applicable to
any of them or any of their respective properties or assets, except
for any such breach or violation which would not, individually or in
the aggregate, have a Material Adverse Effect, or (C) in breach of
or default under (nor has any event occurred which, with notice or
passage of time or both, would constitute a default under) or in
violation of any of the terms or provisions of any Contract, except
for any such breach, default, violation or event which would not,
individually or in the aggregate, have a Material Adverse Effect.
(xiv) The execution, delivery and performance by the Issuers
of the Purchase Agreement and each of the other Operative Documents
(to the extent a party thereto) and the consummation of the
transactions contemplated hereby and thereby (including, without
limitation, the issuance and sale of the Securities to the Initial
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<PAGE>
Purchasers and the issuance of the Exchange Notes in the Exchange
Offer), the consummation by the Issuers of the Pending Acquisitions
and the execution, delivery and performance by the Company of the
New Credit Facility do not conflict with or constitute or result in
a breach or a default under (or an event which with notice or
passage of time or both would constitute a default under) or
violation of or cause an acceleration of any obligation under, or
result in the imposition or creation of (or the obligation to create
or impose) a Lien on any properties or assets of the Company or any
Subsidiary with respect to (i) the terms or provisions of any
Contract known to such counsel to which the Company is a party,
except for any such conflict, breach, violation, default or event
which would not, individually or in the aggregate, have a Material
Adverse Effect, (ii) the certificate of incorporation or bylaws (or
similar organizational document) of the Company, or (iii) (assuming
compliance with all applicable state securities or "Blue Sky" laws
and assuming the accuracy of the representations and warranties of
the Initial Purchasers in Section 8 hereof) any statute, judgment,
decree, order, rule or regulation known to such counsel to be
applicable to the Company or any of its properties or assets, except
for any such conflict, breach or violation which would not,
individually or in the aggregate, have a Material Adverse Effect.
(xv) To the knowledge of such counsel, no consent, waiver,
approval, authorization or order of or filing, registration,
qualification, license or permit of or with any court or
governmental agency or body, or third party is required for (i) the
issuance and sale by the Issuers of the Notes to the Initial
Purchasers or the consummation by the Issuers of the other
transactions contemplated hereby and (ii) the consummation by the
Issuers of the transactions contemplated by the Acquisition
Agreements, to the extent each is a party thereto and (iii) the
execution by the Company of the New Credit Facility and the
consummation by the Issuers of each of the transactions contemplated
by the New Credit Facility, except such as may be required under
Blue Sky laws, as to which such counsel need express no opinion, and
those which have previously been obtained.
(xvi) To the knowledge of such counsel, there are no legal or
governmental proceedings involving or affecting either Issuer or the
Subsidiaries or any of their respective properties or assets which
would be required to be described in a prospectus pursuant to the
Act that are not so described in the Final Memorandum, nor are there
any material contracts or other documents which would be required to
be described in a prospectus pursuant to the Act that are not so
described in the Final Memorandum.
(xvii) None of the Issuers or any of the Subsidiaries is, or
immediately after the sale of the Securities to be sold hereunder
and the application of the proceeds from such sale (as described in
the Final Memorandum under the caption "Use of Proceeds") will be,
an "investment company" as such term is defined in the Investment
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Company Act of 1940, as amended.
(xviii) No registration under the Act of the Securities is
required in connection with the sale of the Securities to the
Initial Purchasers as contemplated by this Agreement and the Final
Memorandum or in connection with the initial resale of the
Securities by the Initial Purchasers in accordance with Section 8 of
this Agreement, and prior to the commencement of the Exchange Offer
or the effectiveness of the Shelf Registration Statement, the
Indenture is not required to be qualified under the TIA, in each
case assuming (i) that the purchasers who buy such Securities in the
initial resale thereof are qualified institutional buyers as defined
in Rule 144A promulgated under the Act ("QIBs") or accredited
investors as defined in Rule 501(a) (1), (2), (3) or (7) promulgated
under the Act ("Accredited Investors"), (ii) the accuracy of the
Initial Purchasers' representations in Section 8 and those of the
Issuers contained in this Agreement regarding the absence of a
general solicitation in connection with the sale of such Securities
to the Initial Purchasers and the initial resale thereof and (iii)
the due performance by the Initial Purchasers of the agreements set
forth in Section 8 hereof.
(xix) Neither the consummation of the transactions contemplated
by this Agreement nor the sale, issuance, execution or delivery of
the Securities will violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
At the time the foregoing opinion is delivered, Cox & Smith,
Incorporated shall additionally state that it has participated in conferences
with officers and other representatives of the Issuers, representatives of the
independent public accountants for the Issuers, representatives of Canadian
counsel for the Issuers, representatives of the Initial Purchasers and counsel
for the Initial Purchasers, at which conferences the contents of the Final
Memorandum and related matters were discussed, and, although it has not
independently verified and is not passing upon and assumes no responsibility for
the accuracy, completeness or fairness of the statements contained in the Final
Memorandum (except to the extent specified in subsections (x) and (xi) of this
Section 7(a)), no facts have come to its attention which lead it to believe that
the Final Memorandum, on the date thereof or at the Closing Date, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading (it being
understood that such firm need express no opinion with respect to the financial
statements and related notes thereto and the other financial, engineering,
statistical and accounting data included in the Final Memorandum).
In rendering the foregoing opinions, Cox & Smith Incorporated may
(i) rely, to the extent such counsel deems proper, upon the representations and
certifications of officers of the Issuers or of public officials and (ii) rely
as to matters involving the application of laws of any jurisdiction other than
the federal laws of the United States of America and the laws of the State of
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Texas and the corporation law of the State of Nevada, to the extent such counsel
deems proper and specifies in such opinion, upon the opinion of other counsel
who are reasonably satisfactory to counsel for the Initial Purchasers; provided,
however, that Cox & Smith Incorporated shall state that it believes that it, the
Initial Purchasers and counsel for the Initial Purchasers are justified in
relying on such opinion.
References to the Final Memorandum in this subsection (a) shall
include any amendment or supplement thereto prepared in accordance with
the provisions of this Agreement at the Closing Date.
(b) On the Closing Date, the Initial Purchasers shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchasers, of Burnet, Duckworth & Palmer, Barristers and Solicitors,
Canadian Counsel for the Issuers, in form and substance satisfactory to
counsel for the Initial Purchasers, to the effect that:
(i) Each of Canadian Abraxas, Cascade and Grey Wolf is duly
incorporated, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation and has all
requisite corporate power and authority to own its properties and to
conduct its business as described in the Final Memorandum. Each of
Canadian Abraxas, Cascade and Grey Wolf is duly qualified to carry
on business in the Province of Alberta, Canada, being the only
jurisdiction in which such entities do business.
(ii) All of the outstanding shares of capital stock of Canadian
Abraxas, Grey Wolf and Cascade have been duly and validly issued,
are fully paid and non-assessable and in respect of Canadian
Abraxas, to the knowledge of counsel, were not issued in violation
of any preemptive or similar rights. The Company is the registered
owner of all of the outstanding shares of capital stock of Canadian
Abraxas and the Company is the registered owner of that percentage
of outstanding shares of the capital stock of Grey Wolf as is set
forth in the Final Memorandum and Grey Wolf is the registered owner
of the capital stock of Cascade as is reflected in the Final
Memorandum in the indirect ownership of the Company in Cascade; in
each such case, free and clear of all perfected security interests
registered in the Province of Alberta against the Company, Grey Wolf
and Cascade. To the knowledge of such counsel, except as set forth
in the Final Memorandum (A) no options, warrants or other rights to
purchase from Canadian Abraxas, Grey Wolf or Cascade shares of
capital stock or ownership interests in Canadian Abraxas, Grey Wolf
or Cascade are outstanding, other than as are disclosed in the Final
Memorandum and other than stock options issued to employees,
officers and directors, (B) no agreements or other obligations to
issue, or other rights to convert, any obligation into, or exchange
any securities for, shares of capital stock or ownership interests
in Canadian Abraxas Grey Wolf or Cascade are outstanding other than
stock options issued to employees, officers and directors and (C) no
holder of securities of Canadian Abraxas, Grey Wolf or Cascade is
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entitled to have such securities registered under a registration
statement filed pursuant to the Registration Rights Agreement.
(iii) Each of Canadian Abraxas, Grey Wolf and Cascade has all
requisite corporate power and authority to execute, deliver and
perform its respective obligations under this Agreement and the
other Operative Documents to which it is a party and to consummate
the transactions contemplated hereby and thereby, including, without
limitation, in respect of Canadian Abraxas the corporate power and
authority to issue, sell and deliver the Securities as contemplated
by this Agreement.
(iv) This Agreement has been duly and validly authorized,
executed and delivered by Canadian Abraxas.
(v) The Indenture has been duly and validly authorized by
Canadian Abraxas and, when duly executed and delivered in accordance
with its terms (assuming the due execution and delivery thereof by
the other parties thereto), will be the valid and legally binding
agreement of Canadian Abraxas, enforceable against it in accordance
with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar
laws now or hereinafter in effect relating to or affecting
creditors' rights generally, by general equitable principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(vi) The Notes have been duly and validly authorized for
issuance and sale to the Initial Purchasers by Canadian Abraxas
pursuant to this Agreement and, when issued and authenticated in
accordance with the terms of the Indenture and delivered against
payment therefor in accordance with the terms hereof, will be the
legally valid and binding obligations of Canadian Abraxas,
enforceable against Canadian Abraxas in accordance with their terms
and entitled to the benefits of the Indenture, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws now or hereinafter
in effect relating to or affecting creditors' rights generally, by
general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(vii) The Exchange Notes have been duly and validly authorized
for issuance by Canadian Abraxas and, when issued and authenticated
in accordance with the terms of the Indenture, the Registration
Rights Agreement and the Exchange Offer, will be the legally valid
and binding obligations of Canadian Abraxas, enforceable against
Canadian Abraxas in accordance with their terms and entitled to the
benefits of the Indenture, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and
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other similar laws now or hereinafter in effect relating to or
affecting creditors' rights generally, by general equitable
principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
(viii) The Registration Rights Agreement has been duly
authorized by Canadian Abraxas and, when duly executed and delivered
by Canadian Abraxas (assuming the due execution and delivery thereof
by the other parties thereto), will be the legally valid and binding
obligation of Canadian Abraxas, enforceable against it in accordance
with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar
laws now or hereinafter in effect relating to or affecting
creditors' rights generally, by general equitable principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) and, as to rights of
indemnification, contribution and waiver, by principles of public
policy or federal or provincial securities laws relating thereto.
(ix) To such counsel's knowledge, no legal or governmental
proceedings are pending or threatened to which Canadian Abraxas or
Grey Wolf or Cascade is a party or to which the property or assets
of Canadian Abraxas or Grey Wolf or Cascade is subject, before or
brought by any court, arbitrator or government agency or body which,
if determined adversely to Canadian Abraxas, Grey Wolf or Cascade,
would result, individually or in the aggregate, in a Material
Adverse Effect, or which seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the
Securities to be sold hereunder or the consummation of the other
transactions described in the Final Memorandum.
(x) To such counsel's knowledge, none of Canadian Abraxas or
Grey Wolf or Cascade is (A) in violation of its charter or bylaws
(or similar organizational document), (B) in breach or violation of
any statute, judgment, decree, order, rule or regulation applicable
to any of them or any of their respective properties or assets,
except for any such breach or violation which would not,
individually or in the aggregate, have a Material Adverse Effect, or
(C) in breach of or default under (nor has any event occurred which,
with notice or passage of time or both, would constitute a default
under) or in violation of any of the terms or provisions of any
Contract known to such counsel, except for any such breach, default,
violation or event which would not, individually or in the
aggregate, have a Material Adverse Effect.
(xi) The execution, delivery and performance by Canadian
Abraxas of the Purchase Agreement and each of the other Operative
Documents (to the extent a party thereto) and the consummation of
the transactions contemplated hereby and thereby (including, without
limitation, the issuance and sale of the Securities to the Initial
Purchasers and the issuance of the Exchange Notes in the Exchange
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Offer), the consummation by Canadian Abraxas of the Pending
Acquisitions to which it is a party do not and will not conflict
with or constitute or result in a breach or a default under (or an
event which with notice or passage of time or both would constitute
a default under) or violation of or cause an acceleration of any
obligation under, or result in the imposition or creation of (or the
obligation to create or impose) a Lien on any properties or assets
of Canadian Abraxas, Grey Wolf or Cascade with respect to (i) the
terms or provisions of any Contract known to such counsel, except
for any such conflict, breach, violation, default or event which
would not, individually or in the aggregate, have a Material Adverse
Effect, (ii) the certificate of incorporation or bylaws (or similar
organizational document) of Canadian Abraxas, Grey Wolf or Cascade,
or (iii) (assuming the accuracy of the representations and
warranties of the Initial Purchasers in Section 8 hereof) any
statute, judgment, decree, order, rule or regulation known to such
counsel to be applicable to Canadian Abraxas or Grey Wolf or Cascade
or any of their respective properties or assets, except for any such
conflict, breach or violation which would not, individually or in
the aggregate, have a Material Adverse Effect.
(xii) To the knowledge of such counsel no consent, waiver,
approval, authorization or order of or filing, registration,
qualification, license or permit of or with any court or
governmental agency or body, or third party is required for (i) the
issuance and sale by Canadian Abraxas of the Notes to the Initial
Purchasers or the consummation by Canadian Abraxas of the other
transactions contemplated hereby and (ii) the consummation by
Canadian Abraxas of the transactions contemplated by the Acquisition
Agreements under the laws of Alberta except those which have
previously been obtained or made.
(xiii) The statements set forth in the final Memorandum under
the captions "Business-Regulatory Matters" and "Certain United
States and Canadian Income Tax Considerations," insofar as they
address matters of Alberta law or the laws of Canada applicable
therein and subject to the limitations set forth therein, insofar as
such statements constitute a summary of the matters referred to
therein, fairly and accurately present the information disclosed
therein in all material respects.
(xiv) The laws of the Province of Alberta, Canada, permit an
action to be brought in a court of competent jurisdiction on any
final and conclusive judgment in persona for a sum certain in money
of a court of the State of New York in favor of persons of a foreign
jurisdiction, which is not impeachable as void or voidable under the
internal laws of such foreign jurisdiction, for a sum certain,
without reexamination or relitigation of the matters adjudicated
upon if:
a) the Court rendering such judgment had jurisdiction,
in accordance with Alberta conflict of law rules, over the
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judgment debtor (and submission by Canadian Abraxas to the
jurisdiction of the New York Court pursuant to the Operative
Documents will suffice for this purpose).
b) such judgment was not obtained by fraud or in a
manner contrary to natural justice and the enforcement thereof
would not be contrary to public policy, as such term is
understood under the laws of Alberta and the federal laws of
Canada applicable therein;
c) the enforcement of such judgment does not constitute,
directly or indirectly, the enforcement of foreign revenues,
expropriation, penal or public laws;
d) no new admissible evidence relevant to the action is
discovered prior to the rendering of judgment by the Alberta
Court; and
e) the action to enforce such judgment is commenced
within 10 years after the date of such judgment.
(xv) In the event that any of the Operative Documents are
sought to be enforced in any action or proceeding in the Province of
Alberta, Canada, in accordance with the laws of the State of New
York, the courts of the Province of Alberta, Canada, would recognize
the choice of laws and would apply the laws of the State of New York
in any such action or proceeding, upon appropriate evidence as to
such laws being adduced, provided that none of the provisions of
such agreements or instruments, as the case may be, or of the laws
of the State of New York are contrary to public policy, as such term
is understood under the law of the Province of Alberta, Canada and,
an Alberta court will not apply those laws of New York which it
characterizes as being of a revenue, expropriatory, penal or public
law nature and in matters of procedure, the laws of Alberta will be
applied.
At the time the foregoing opinion is delivered, Burnet, Duckworth &
Palmer, Barristers and Solicitors shall additionally state that although
it has not independently verified and is not passing upon and assumes no
responsibility for the accuracy, completeness or fairness of the
statements contained in the Final Memorandum (except to the extent
specified in subsection (xiv), no facts have come to its attention which
lead it to believe that the Final Memorandum, on the date thereof or at
the Closing Date, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading (it being
understood that such firm need express no opinion with respect to the
financial statements and related notes thereto and the other financial,
statistical and accounting data included in the Final Memorandum).
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In rendering the foregoing opinions, Burnet, Duckworth & Palmer,
Barristers and Solicitors may rely, to the extent such counsel deems
proper, upon the representations and certifications of officers of the
Issuers or of public officials and shall not be required to opine on the
effect of any statutes or laws of the United States and may restrict its
opinion to the laws of the Province of Alberta and the laws of Canada
applicable therein.
References to the Final Memorandum in this subsection (a) shall
include any amendment or supplement thereto prepared in accordance with
the provisions of this Agreement at the Closing Date.
(c) On the Closing Date, the Initial Purchasers shall have received
the opinion, in form and substance satisfactory to the Initial Purchasers,
dated as of the Closing Date and addressed to the Initial Purchasers, of
Cahill Gordon & Reindel, counsel for the Initial Purchasers, with respect
to certain legal matters relating to this Agreement and such other related
matters as the Initial Purchasers may reasonably require. In rendering
such opinion, Cahill Gordon & Reindel shall have received and may rely
upon such certificates and other documents and information as it may
reasonably request to pass upon such matters.
(d) The Initial Purchasers shall have received from each of Ernst &
Young LLP, Deloitte & Touche LLP and KPMG Chartered Accountants a comfort
letter or letters dated the date hereof and the Closing Date, in form and
substance satisfactory to counsel for the Initial Purchasers.
(e) The representations and warranties of the Issuers contained in
this Agreement shall be true and correct in all material respects on and
as of the date hereof and on and as of the Closing Date as if made on and
as of the Closing Date; the statements of the Issuers' officers made
pursuant to any certificate delivered in accordance with the provisions
hereof shall be true and correct in all material respects on and as of the
date made and on and as of the Closing Date; the Issuers shall have
performed all covenants and agreements and satisfied all conditions on
their part to be performed or satisfied hereunder at or prior to the
Closing Date; and, except as described in the Final Memorandum (exclusive
of any amendment or supplement thereto after the date hereof), subsequent
to the date of the most recent financial statements in such Final
Memorandum, there shall have been no event or development, and no
information shall have become known, that, individually or in the
aggregate, has or would be reasonably likely to have a Material Adverse
Effect.
(f) The sale of the Securities hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(g) Subsequent to the date of the most recent financial statements
in the Final Memorandum (exclusive of any amendment or supplement thereto
after the date hereof), none of the Issuers or any of the Subsidiaries
shall have sustained any loss or interference with respect to its business
or properties from fire, flood, hurricane, accident or other calamity,
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whether or not covered by insurance, or from any strike, labor dispute,
slow down or work stoppage or from any legal or governmental proceeding,
order or decree, which loss or interference, individually or in the
aggregate, has or would be reasonably likely to have a Material Adverse
Effect.
(h) The Initial Purchasers shall have received a certificate of the
Company, dated the Closing Date, signed on behalf of the Company by its
Chairman of the Board, President or any Senior Vice President and the
Chief Financial Officer, to the effect that:
(i) The representations and warranties of the Issuers
contained in this Agreement are true and correct on and as of the
date hereof and on and as of the Closing Date, and the Issuers have
performed all covenants and agreements and satisfied all conditions
on their part to be performed or satisfied hereunder at or prior to
the Closing Date;
(ii) At the Closing Date, since the date hereof or since the
date of the most recent financial statements in the Final Memorandum
(exclusive of any amendment or supplement thereto after the date
hereof), no event or development has occurred, and no information
has become known, that, individually or in the aggregate, has or
would be reasonably likely to have a Material Adverse Effect; and
(iii) The sale of the Securities hereunder has not been
enjoined (temporarily or permanently).
(i) On the Closing Date, the Initial Purchasers shall have received
the Registration Rights Agreement executed by each of the Issuers and such
agreement shall be in full force and effect at all times from and after
the Closing Date.
(j) The Company shall have delivered to the Initial Purchasers a
true, correct and complete copy of the New Credit Facility; the Company
and the other parties thereto shall have executed and delivered the New
Credit Facility and satisfied all conditions precedent to any borrowing
thereunder; and the New Credit Facility shall be in full force and effect.
(k) The Issuers shall have delivered to the Initial Purchasers a
true, correct and complete copy of each of the Acquisition Agreements; the
Issuers (to the extent each is a party thereto) and the other parties
thereto shall have executed and delivered the Acquisition Agreements; all
conditions precedent to the Pending Acquisitions shall have been satisfied
or waived; and each of the Acquisition Agreements shall be in full force
and effect.
(l) On or prior to the Closing Date, the sale by CGGS of the Nevis
Plant (as defined in the Memorandum) shall have been consummated.
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(m) The closing in respect of the New Credit Facility and the
Pending Acquisitions, including the merger of CGGS with and into Canadian
Abraxas, shall occur simultaneously with the closing in respect of the
purchase and sale of the Securities hereunder.
(n) On or before the Closing Date, the Initial Purchasers and
counsel for the Initial Purchasers shall have received such further
documents, opinions, certificates, letters and schedules or instruments
relating to the business, corporate, legal and financial affairs of the
Issuers as they shall have heretofore reasonably requested.
(o) On the Closing Date, the Initial Purchasers shall have received
letters, dated as of the Closing Date and addressed to the Initial
Purchasers of, DeGolyer & MacNaughton and Sproule Associates Limited,
independent petroleum engineers for the Company and CGGS, respectively, in
form and substance satisfactory to counsel for the Initial Purchasers.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Initial Purchasers and counsel for the Initial Purchasers. The Issuers shall
furnish to the Initial Purchasers such conformed copies of such documents,
opinions, certificates, letters, schedules and instruments in such quantities as
the Initial Purchasers shall reasonably request.
8. Offering of Securities; Restrictions on Transfer. (a)Each of the
Initial Purchasers represents and warrants (as to itself only) that it is a QIB.
Each of the Initial Purchasers agrees with the Issuers (as to itself only) that
(i) it has not and will not solicit offers for, or offer or sell, the Securities
by any form of general solicitation or general advertising (as those terms are
used in Regulation D under the Act) or in any manner involving a public offering
within the meaning of Section 4(2) of the Act; and (ii) it has and will solicit
offers for the Securities only from, and will offer the Securities only to (A)
in the case of offers inside the United States, (x) persons whom the Initial
Purchasers reasonably believe to be QIBs or, if any such person is buying for
one or more institutional accounts for which such person is acting as fiduciary
or agent, only when such person has represented to the Initial Purchasers that
each such account is a QIB, to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A, and, in each case, in
transactions under Rule 144A or (y) a limited number of other institutional
investors reasonably believed by the Initial Purchasers to be Accredited
Investors that, prior to their purchase of the Securities, deliver to the
Initial Purchasers a letter containing the representations and agreements set
forth in Annex A to the Final Memorandum and (B) in the case of offers outside
the United States, to persons other than U.S. persons ("foreign purchasers,"
which term shall include dealers or other professional fiduciaries in the United
States acting on a discretionary basis for foreign beneficial owners (other than
an estate or trust)); provided, however, that, in the case of this clause (B),
in purchasing such Securities such persons are deemed to have represented and
agreed as provided under the caption "Transfer Restrictions" contained in the
Final Memorandum (or, if the Final Memorandum is not in existence, in the most
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recent Memorandum).
(b) Each of the Initial Purchasers represents and warrants (as to
itself only) with respect to offers and sales outside the United States that (i)
it has and will comply with all applicable laws and regulations in each
jurisdiction in which it acquires, offers, sells or delivers Securities or has
in its possession or distributes any Memorandum or any such other material, in
all cases at its own expense including, without limitation, that the Securities
have not been and will not be offered or sold to residents of the Province of
Alberta, Canada; (ii) the Securities have not been and will not be offered or
sold within the United States or to, or for the account or benefit of, U.S.
persons except in accordance with Regulation S under the Act or pursuant to an
exemption from the registration requirements of the Act; (iii) it has offered
the Securities and will offer and sell the Securities (A) as part of its
distribution at any time and (B) otherwise until 40 days after the later of the
commencement of the offering and the Closing Date, only in accordance with Rule
903 of Regulation S and, accordingly, neither it nor any persons acting on its
behalf have engaged or will engage in any directed selling efforts (within the
meaning of Regulation S) with respect to the Securities, and any such persons
have complied and will comply with the offering restrictions requirement of
Regulation S; and (iv) it agrees that, at or prior to confirmation of sales of
the Securities, it will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases
Securities from it during the restricted period a confirmation or notice to
substantially the following effect:
"The Securities covered hereby have not been registered under the United
States Securities Act of 1933 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of the distribution of the Securities
at any time or (ii) otherwise until 40 days after the later of the
commencement of the offering and the closing date of the offering, except
in either case in accordance with Regulation S (or Rule 144A if available)
under the Securities Act. Terms used above have the meaning given to them
in Regulation S."
Terms used in this Section 8(b) and not defined in this Agreement have the
meanings given to them in Regulation S.
(c) Each of the Initial Purchasers represents and warrants (as to
itself only) that the source of funds being used by it to acquire the Securities
does not include the assets of any "employee benefit plan" (within the meaning
of Section 3 of ERISA) or any "plan" (within the meaning of Section 4975 of the
Code).
9. Indemnification and Contribution. (a)The Issuers and any
Subsidiary Guarantors agree, jointly and severally, to indemnify and hold
harmless the Initial Purchasers, their affiliates and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities to which any Initial Purchaser or such controlling person may become
subject under the Act, the Exchange Act or otherwise, insofar as any such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon:
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(i) any untrue statement or alleged untrue statement of any
material fact contained in any Memorandum or any amendment or supplement
thereto or any application or other document, or any amendment or
supplement thereto, executed by an Issuer or based upon written
information furnished by or on behalf of an Issuer filed in any
jurisdiction in order to qualify the Securities under the securities or
"Blue Sky" laws thereof or filed with any securities association or
securities exchange (each an "Application"); or
(ii) the omission or alleged omission to state, in any Memorandum or
any amendment or supplement thereto or any Application, a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading,
and will reimburse, as incurred, the Initial Purchasers, each such affiliate and
each such controlling person for any reasonable legal or other reasonable
expenses incurred by the Initial Purchasers, such affiliate or such controlling
person in connection with investigating, defending against or appearing as a
third-party witness in connection with any such loss, claim, damage, liability
or action; provided, however, that the Issuers and the Subsidiary Guarantors
will not be liable (i) in any such case to the extent that any such loss, claim,
damage, or liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in any Memorandum
or any amendment or supplement thereto or any Application in reliance upon and
in conformity with written information concerning the Initial Purchasers
furnished to an Issuer by the Initial Purchasers specifically for use therein or
(ii) with respect to the Preliminary Memorandum, to the extent that any such
loss, claim, damage or liability arises solely from the fact that the Initial
Purchasers sold Securities to a person to whom there was not sent or given, on
or prior to the written confirmation of such sale, a copy of the Final
Memorandum, as amended and supplemented, if the Issuers shall have previously
furnished copies thereof to the Initial Purchasers in accordance with this
Agreement and the Final Memorandum, as amended and supplemented, would have
corrected any such untrue statement or omission. This indemnity agreement will
be in addition to any liability that the Issuers and the Subsidiary Guarantors
may otherwise have to the indemnified parties. The Issuers and the Subsidiary
Guarantors shall not be liable under this Section 9 for any settlement of any
claim or action effected without their prior written consent, which shall not be
unreasonably withheld.
The Initial Purchasers shall not, without the prior written consent
of the Issuers, effect any settlement or compromise of any pending or threatened
proceeding in respect of which any Issuer is or could have been a party, or
indemnity could have been sought hereunder by any Issuer, unless such settlement
(A) included an unconditional written release of the Issuers, in form and
substance reasonably satisfactory to the Issuers, from all liability on claims
that are the subject matter of such proceeding and (B) does not include any
statement as to an admission of fault, culpability or failure to act by or on
behalf of any Issuer.
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(b) The Initial Purchasers agree, severally and not jointly, to
indemnify and hold harmless the Issuers and the Subsidiary Guarantors, their
respective directors and their respective officers and each person, if any, who
controls an Issuer within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act against any losses, claims, damages or liabilities to which an
Issuer or any of the Subsidiary Guarantors or any such director, officer or
controlling person may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any Memorandum or any
amendment or supplement thereto or any Application, or (ii) the omission or the
alleged omission to state therein a material fact required to be stated in any
Memorandum or any amendment or supplement thereto or any Application, or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information concerning such Initial Purchaser, furnished to an Issuer by
such Initial Purchaser specifically for use therein; and subject to the
limitation set forth immediately preceding this clause, will reimburse, as
incurred, any reasonable legal or other expenses incurred by an Issuer or any of
the Subsidiary Guarantors or any such director, officer or controlling person in
connection with investigating or defending against or appearing as a third party
witness in connection with any such loss, claim, damage, liability or action in
respect thereof. This indemnity agreement will be in addition to any liability
that the Initial Purchasers may otherwise have to the indemnified parties. The
Initial Purchasers shall not be liable under this Section 9 for any settlement
of any claim or action effected without their consent, which shall not be
unreasonably withheld.
The Issuers shall not, without the prior written consent of the
Initial Purchasers, effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Initial Purchaser is or could have
been a party, or indemnity could have been sought hereunder by any Initial
Purchaser, unless such settlement (A) includes an unconditional written release
of the Initial Purchasers, in form and substance reasonably satisfactory to the
Initial Purchasers, from all liability on claims that are the subject matter of
such proceeding and (B) does not include any statement as to an admission of
fault, culpability or failure to act by or on behalf of any Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action for which such indemnified
party is entitled to indemnification under this Section 9, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 9, notify the indemnifying party of the commencement
thereof in writing; but the omission to so notify the indemnifying party (i)
will not relieve the indemnifying party from any liability under paragraph (a)
or (b) above unless and to the extent such failure results in the forfeiture by
the indemnifying party of substantial rights and defenses and (ii) will not, in
any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraphs (a) and (b) above. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
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thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party; provided, however, that if (i) the use of counsel chosen
by the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have been advised by counsel that there may be one or
more legal defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying party, or
(iii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after receipt by the indemnifying party of notice of the
institution of such action, then, in each such case, the indemnifying party
shall not have the right to direct the defense of such action on behalf of such
indemnified party or parties and such indemnified party or parties shall have
the right to select separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by such indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 9 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the immediately preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by the Initial Purchasers
in the case of paragraph (a) of this Section 9 or the Issuers in the case of
paragraph (b) of this Section 9, representing the indemnified parties under such
paragraph (a) or paragraph (b), as the case may be, who are parties to such
action or actions) or (ii) the indemnifying party has authorized in writing the
employment of counsel for the indemnified party at the expense of the
indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs and
expenses of any settlement of such action effected by such indemnified party
without the prior written consent of the indemnifying party (which consent shall
not be unreasonably withheld), unless such indemnified party waived in writing
its rights under this Section 9, in which case the indemnified party may effect
such a settlement without such consent.
(d) In circumstances in which the indemnity agreement provided for
in the preceding paragraphs of this Section 9 is unavailable to, or insufficient
to hold harmless, an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof), each indemnifying party, in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect (i) the relative benefits received by
the indemnifying party or parties on the one hand and the indemnified party on
the other from the offering of the Securities or (ii) if the allocation provided
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by the foregoing clause (i) is not permitted by applicable law, not only such
relative benefits but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof). The relative benefits received by the Issuers on the one hand and any
Initial Purchaser on the other shall be deemed to be in the same proportion as
the total proceeds from the offering (before deducting expenses) received by the
Issuers bear to the total discounts and commissions received by such Initial
Purchaser. The relative fault of the parties shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Issuers on the one hand, or such Initial
Purchaser on the other, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission or
alleged statement or omission, and any other equitable considerations
appropriate in the circumstances. The Issuers and the Initial Purchasers agree
that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to in the first sentence of this paragraph (d). Notwithstanding any other
provision of this paragraph (d), no Initial Purchaser shall be obligated to make
contributions hereunder that in the aggregate exceed the total discounts,
commissions and other compensation received by such Initial Purchaser under this
Agreement, less the aggregate amount of any damages that such Initial Purchaser
has otherwise been required to pay by reason of the untrue or alleged untrue
statements or the omissions or alleged omissions to state a material fact, and
no person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this paragraph (d),
each affiliate of an Initial Purchaser, each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act shall have the same rights to contribution as the Initial
Purchasers, and each director of an Issuer, each officer of an Issuer and each
person, if any, who controls an Issuer within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, shall have the same rights to
contribution as the Issuers.
10. Survival Clause. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Issuers, their
respective officers and the Initial Purchasers set forth in this Agreement or
made by or on behalf of them pursuant to this Agreement shall remain in full
force and effect, regardless of (i) any investigation made by or on behalf of
the Issuers, any of their respective officers or directors, the Initial
Purchasers or any controlling person referred to in Section 9 hereof and (ii)
delivery of and payment for the Securities. The respective agreements,
covenants, indemnities and other statements set forth in Sections 6, 9 and 15
hereof shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement.
11. Termination. (a)This Agreement may be terminated in the sole
discretion of the Initial Purchasers by notice to the Issuers given prior to the
Closing Date in the event that either of the Issuers shall have failed, refused
or been unable to perform all obligations and satisfy all conditions on its part
33
<PAGE>
to be performed or satisfied hereunder at or prior thereto or, if at or prior to
the Closing Date:
(i) either of the Issuers shall have sustained any loss or
interference with respect to its businesses or properties from fire,
flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any strike, labor dispute, slow down or work stoppage
or any legal or governmental proceeding, which loss or interference, in
the sole judgment of the Initial Purchasers, has had or has a Material
Adverse Effect, or there shall have been, in the sole judgment of the
Initial Purchasers, any event or development that, individually or in the
aggregate, has or could be reasonably likely to have a Material Adverse
Effect (including without limitation a change in control of any of the
Issuers or the Subsidiaries), except in each case as described in the
Final Memorandum (exclusive of any amendment or supplement thereto);
(ii) trading in securities generally on the New York Stock Exchange,
American Stock Exchange or the NASDAQ National Market shall have been
suspended or minimum or maximum prices shall have been established on any
such exchange or market;
(iii) a banking moratorium shall have been declared by New York or
United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international
calamity or emergency, or (C) any material change in the financial markets
of the United States which, in the case of (A), (B) or (C) above and in
the sole judgment of the Initial Purchasers, makes it impracticable or
inadvisable to proceed with the offering or the delivery of the Securities
as contemplated by the Final Memorandum; or
(v) any securities of the Issuers shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11 shall
be without liability of any party to any other party except as provided in
Section 10 hereof.
12. Information Supplied by the Initial Purchasers. The statements
set forth in the last paragraph on the front cover page and in the third
paragraph and the first, third and seventh sentences of the fifth paragraph
under the heading "Private Placement" in the Final Memorandum (to the extent
such statements relate to the Initial Purchasers) constitute the only
information furnished by the Initial Purchasers to the Issuers for the purposes
of Sections 2(a) and 9 hereof and the Initial Purchasers confirm that such
statements are correct as of the date hereof and as of the Closing Date.
34
<PAGE>
13. Notices. All communications hereunder shall be in writing and,
if sent to the Initial Purchasers, shall be mailed or delivered to BT Securities
Corporation, 130 Liberty Street, New York, New York 10006, Attention: Corporate
Finance Department, with a copy to Cahill Gordon & Reindel, 80 Pine Street, New
York, New York 10005, Attention: Daniel J. Zubkoff; if sent to the Issuers or
the Subsidiary Guarantors, if any, shall be mailed or delivered to the Issuers
at 500 North Loop 1604 East, Suite 100, San Antonio, Texas 78232, Attention:
Robert L.G. Watson, with a copy to Cox & Smith Incorporated, 112 East Pecan,
Suite 1800, San Antonio, Texas 78205, Attention: Steven Jacobs.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; and one business
day after being timely delivered to a next-day air courier.
14. Successors. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchasers, the Issuers and the Subsidiary Guarantors,
if any, and their respective successors and legal representatives, and nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any other person any legal or equitable right, remedy or claim under or in
respect of this Agreement, or any provisions herein contained; this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of such persons and for the benefit of no other
person except that (i) the indemnities of the Issuers and the Subsidiary
Guarantors, if any, contained in Section 9 of this Agreement shall also be for
the benefit of any person or persons who control an Initial Purchaser within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the
indemnities of the Initial Purchasers contained in Section 9 of this Agreement
shall also be for the benefit of the directors of the Issuers and the Subsidiary
Guarantors, if any, their respective officers and any person or persons who
control an Issuer within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act. No purchaser of Securities from the Initial Purchasers will be
deemed a successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17. Miscellaneous. If, on the Closing Date, any of the Initial
Purchasers shall fail or refuse to purchase Securities that it has agreed to
purchase hereunder on such date, and the aggregate amount of Securities which
such defaulting Initial Purchaser agreed but failed and refused to purchase is
not more than ten percent of the aggregate amount of Securities to be purchased
35
<PAGE>
on such date, the other Initial Purchasers shall be obligated to purchase the
Securities which such defaulting Initial Purchaser agreed but failed or refused
to purchase on such date. If, on the Closing Date, any Initial Purchaser shall
fail or refuse to purchase Securities which it agreed to purchase hereunder on
such date and the aggregate amount of Securities with respect to which such
default occurs is more than ten percent of the aggregate amount of Securities to
be purchased on such date and arrangements satisfactory to the nondefaulting
Initial Purchasers and the Company for the purchase of such Securities are not
made within 36 hours after such default, this Agreement shall terminate without
liability on the part of any nondefaulting Initial Purchasers or of the Company,
except as provided in Section 10. In any such case either the nondefaulting
Initial Purchaser or the Company shall have the right to postpone the Closing
Date, but in no event for longer than seven days, in order that the required
changes, if any, in the Final Memorandum or in any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Initial Purchaser from liability in respect to any
default of such Initial Purchaser under this Agreement.
18. Agent for Service; Submission to Jurisdiction; Waiver of
Immunities. By the execution and delivery of this Agreement, Canadian Abraxas
(i) acknowledges that it has, by separate written instrument, designated and
appointed CT Corporation System, 1633 Broadway, New York, New York 10019 (and
any successor entity), as its authorized agent upon which process may be served
in any suit or proceeding arising out of or relating to this Agreement, the
Registration Rights Agreement, the Securities, the Exchange Notes, the Private
Exchange Notes, if any, or the Indenture that may be instituted in any Federal
or state court in the State of New York, The City of New York, the Borough of
Manhattan, or brought under Federal or state securities laws, and acknowledges
that CT Corporation System has accepted such designation, (ii) submits to the
non-exclusive jurisdiction of any such court in any such suit or proceeding and
(iii) agrees that service of process upon CT Corporation System and written
notice of said service to Canadian Abraxas in accordance with Section 13 shall
be deemed in every respect effective service of process upon Canadian Abraxas in
any such suit or proceeding. Canadian Abraxas further agrees to take any and all
action, including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and appointment of
CT Corporation System in full force and effect so long as any of the Securities,
the Exchange Notes, the Private Exchange Notes, if any, shall be outstanding;
provided that Canadian Abraxas may, by written notice to the Initial Purchasers,
designate such additional or alternative agent for service of process under this
Section 18 that (i) maintains an office located in the Borough of Manhattan, The
City of New York in the State of New York; (ii) is either (x) counsel for
Canadian Abraxas or (y) a corporate service company which acts as agent for
service of process for other persons in the ordinary course of its business and
(iii) agrees to act as agent for service of process in accordance with this
Section 18. Such written notice shall identify the name of such agent for
service of process and the address of the office of such agent for service of
process in the Borough of Manhattan, The City of New York, State of New York.
19. Subsidiary Guarantor a Party. Immediately upon the designation
36
<PAGE>
of any Subsidiary of either Issuer as a Restricted Subsidiary (as defined in the
Indenture), the Issuers shall cause such Subsidiary to become a party hereto as
a Subsidiary Guarantor by executing and delivering to the Initial Purchasers a
counterpart hereof.
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Issuers
and the Initial Purchasers.
Very truly yours,
ABRAXAS PETROLEUM CORPORATION
By:
Name:
Title:
CANADIAN ABRAXAS PETROLEUM LIMITED
By:
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
BT SECURITIES CORPORATION
By: __________________________
Name:
Title:
JEFFERIES & COMPANY INC.
By: __________________________
Name:
Title:
37
<PAGE>
ING BARINGS (U.S.) SECURITIES CORPORATION
By: __________________________
Name:
Title:
BANKERS TRUST INTERNATIONAL PLC
By: __________________________
Name:
Title:
Each of the undersigned by its execution hereof agrees to become a
party to this Agreement as a Subsidiary Guarantor as of the date first above
written:
By:
Name:
Title:
38
<PAGE>
SCHEDULE I
Subsidiaries of Abraxas Petroleum Corporation
Grey Wolf Exploration Ltd.
Cascade Oil & Gas Ltd.
Western Associated Energy Corporation
<PAGE>
SCHEDULE II
Principal
Amount of
Initial Purchaser Notes
BT Securities Corporation................................... $ 85,250,000
Bankers Trust International PLC............................. $ 11,500,000
Jefferies & Company Inc..................................... $ 96,750,000
ING Barings (U.S.) Securities
Corporation .............................................. $ 21,500,000
------------
Total.................................................. $215,000,000
<PAGE>
REGISTRATION RIGHTS AGREEMENT
Dated as of November 14, 1996
By and Among
ABRAXAS PETROLEUM CORPORATION
and
CANADIAN ABRAXAS PETROLEUM LIMITED,
as Issuers
and
BT SECURITIES CORPORATION,
JEFFERIES & COMPANY, INC.,
BANKERS TRUST INTERNATIONAL PLC
ING BARING (U.S.) SECURITIES CORPORATION,
as Initial Purchasers
11 1/2% Senior Notes due 2004
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions....................................................... 1
2. Exchange Offer.................................................... 5
3. Shelf Registration................................................ 9
4. Additional Interest............................................... 11
5. Registration Procedures........................................... 13
6. Registration Expenses............................................. 25
7. Indemnification................................................... 26
8. Rules 144 and 144A................................................ 31
9. Underwritten Registrations........................................ 31
10. Miscellaneous..................................................... 32
(a) No Inconsistent Agreements.................................. 32
(b) Adjustments Affecting Registrable Notes..................... 32
(c) Amendments and Waivers...................................... 32
(d) Notices..................................................... 33
(e) Successors and Assigns...................................... 33
(f) Release of Subsidiary Guarantors............................ 34
(g) Counterparts................................................ 34
(h) Headings.................................................... 34
(i) Governing Law............................................... 34
(j) Severability................................................ 34
(k) Securities Held by the Issuers or Their
Affiliates............................................... 34
(l) Third Party Beneficiaries................................... 34
(m) Entire Agreement............................................ 35
(n) Information Supplied by the Participants.................... 35
(o) Subsidiary Guarantor a Party................................ 35
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
November 14, 1996, by and among ABRAXAS PETROLEUM CORPORATION, a Nevada
corporation (the "Company"), and CANADIAN ABRAXAS PETROLEUM LIMITED, Canada
corporation and a wholly owned subsidiary of the Company ("Canadian Abraxas"
and, together with the Company, the "Issuers"), as issuers, and BT SECURITIES
CORPORATION, BANKERS TRUST INTERNATIONAL PLC, JEFFERIES & COMPANY, INC. and ING
BARING (U.S.) SECURITIES CORPORATION, as initial purchasers (the "Initial
Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of November 14, 1996, by and among the Issuers and the
Initial Purchasers (the "Purchase Agreement"), which provides for the sale by
the Issuers to the Initial Purchasers of $215,000,000 aggregate principal amount
of the Issuer's 11 1/2% Senior Notes due 2004 (the "Notes"), unconditionally
guaranteed on a senior basis by each of the Company's future Restricted
Subsidiaries (as defined in the Indenture) (collectively, the "Subsidiary
Guarantors"). In order to induce the Initial Purchasers to enter into the
Purchase Agreement, the Issuers have agreed to provide the registration rights
set forth in this Agreement for the benefit of the Initial Purchasers and any
subsequent holder or holders of the Notes. The execution and delivery of this
Agreement is a condition to the Initial Purchasers' obligation to purchase the
Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4 hereof.
Advice: See Section 5 hereof.
Agreement: See the introductory paragraphs hereto.
Applicable Period: See Section 2 hereof.
Canadian Abraxas: See the introductory paragraphs hereto.
Company: See the introductory paragraphs hereto.
Effectiveness Date: With respect to any Registration Statement, the
75th day after the Filing Date with respect thereto.
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145391.01
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Effectiveness Period: See Section 3 hereof.
Event Date: See Section 4 hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2 hereof.
Exchange Offer: See Section 2 hereof.
Exchange Offer Registration Statement: See Section 2 hereof.
Filing Date: (A) If no Registration Statement has been filed by the
Company pursuant to this Agreement, the 45th day after the Issue Date; provided,
however, that if a Shelf Notice is given within 10 days of the Filing Date, then
the Filing Date with respect to the Initial Shelf Registration shall be the 15th
calendar day after the date of the giving of such Shelf Notice; and (B) in each
other case (which may be applicable notwithstanding the consummation of the
Exchange Offer), the 30th day after the delivery of a Shelf Notice.
Holder: Any holder of a Registrable Note or Registrable Notes.
Indemnified Person: See Section 7(c) hereof.
Indemnifying Person: See Section 7(c) hereof.
Indenture: The Indenture, dated as of November 14, 1996, by and
among the Issuers and IBJ SCHRODER BANK & TRUST COMPANY, as trustee, pursuant to
which the Notes are being issued, as the same may be amended or supplemented
from time to time in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraphs hereto.
Initial Shelf Registration: See Section 3(a) hereof.
Inspectors: See Section 5(o) hereof.
Issue Date: November 6, 1996, the date of original issuance of the
Notes.
Issuers: See the introductory paragraphs hereto.
NASD: See Section 5(t) hereof.
Participant: See Section 7(a) hereof.
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145391.01
<PAGE>
Participating Broker-Dealer: See Section 2 hereof.
Person: An individual, trustee, corporation, partnership, joint
stock company, trust, unincorporated association, union, business association,
firm or other legal entity.
Private Exchange: See Section 2 hereof.
Private Exchange Notes: See Section 2 hereof.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act and any term sheet filed pursuant to Rule
434 under the Securities Act), as amended or supplemented by any prospectus
supplement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs hereof.
Records: See Section 5(o) hereof.
Registrable Notes: Each Note upon its original issuance and at all
times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof
is applicable upon original issuance and at all times subsequent thereto and
each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until (i) a Registration Statement (other than, with respect
to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the
Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or such Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective Registration Statement, (ii) such
Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or
Exchange Notes that may be resold without restriction under state and federal
securities laws, (iii) such Note, Exchange Note or Private Exchange Note, as the
case may be, ceases to be outstanding for purposes of the Indenture or (iv) such
Note, Exchange Note or Private Exchange Note, as the case may be, may be resold
without restriction pursuant to Rule 144 under the Securities Act.
Registration Statement: Any registration statement of the Issuers
and the Subsidiary Guarantors (if any) that covers any of the Notes, the
Exchange Notes or the Private Exchange Notes filed with the SEC under the
Securities Act, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
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145391.01
<PAGE>
Rule 144: Rule 144 promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2 hereof.
Shelf Registration: See Section 3(b) hereof.
Subsequent Shelf Registration: See Section 3(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and the trustee (if any)
under any indenture governing the Exchange Notes and Private Exchange Notes.
Underwritten registration or underwritten offering: A registration
in which securities of the Issuers are sold to an underwriter for reoffering to
the public.
2. Exchange Offer
(a) To the extent permitted by applicable law or applicable
interpretation of the staff of the Division of Corporation Finance of the SEC,
the Issuers shall file with the SEC, no later than the Filing Date, a
Registration Statement (the "Exchange Offer Registration Statement") on an
appropriate registration form with respect to a registered offer (the "Exchange
Offer") to exchange any and all of the Registrable Notes for a like aggregate
principal amount of notes (the "Exchange Notes") of the Issuers (the guarantees,
if any, of the Subsidiary Guarantors) that are identical in all material
respects to the Notes except that the Exchange Notes (and the guarantees, if
any, of the Subsidiary Guarantors) shall contain no restrictive legend thereon.
The Exchange Offer shall comply with all
4
145391.01
<PAGE>
applicable tender offer rules and regulations under the Exchange Act and other
applicable law. The Issuers shall use their respective best efforts to (x) cause
the Exchange Offer Registration Statement to be declared effective under the
Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer
open for at least 30 days (or longer if required by applicable law) after the
date that notice of the Exchange Offer is mailed to Holders; and (z) consummate
the Exchange Offer on or prior to the 135th day following the date on which the
Exchange Offer Registration Statement is declared effective by the SEC. If,
after the Exchange Offer Registration Statement is initially declared effective
by the SEC, the Exchange Offer or the issuance of the Exchange Notes thereunder
is interfered with by any stop order, injunction or other order or requirement
of the SEC or any other governmental agency or court, the Exchange Offer
Registration Statement shall be deemed not to have become effective for purposes
of this Agreement.
Each Holder that participates in the Exchange Offer will be required
to represent that any Exchange Notes to be received by it will be acquired in
the ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement or understanding with any
Person to participate in the distribution of the Exchange Notes in violation of
the provisions of the Securities Act, and that such Holder is not an affiliate
of any of the Issuers within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, mutatis
mutandis, solely with respect to Registrable Notes that are Private Exchange
Notes, Exchange Notes as to which Section 2(c)(iv) is applicable and Exchange
Notes held by Participating Broker-Dealers (as defined), and the Issuers shall
have no further obligation to register Registrable Notes (other than Private
Exchange Notes and other than in respect of any Exchange Notes as to which
clause 2(c)(iv) hereof applies) pursuant to Section 3 hereof.
No securities other than the Exchange Notes shall be included in the
Exchange Offer Registration Statement.
(b) The Issuers shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Holders, which shall contain a summary statement of
the positions taken or policies made by the staff of the SEC with respect to the
potential "underwriter" status of any broker-dealer that is the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by
such broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"),
whether such positions or policies have been publicly disseminated by the staff
of the SEC or such positions or policies represent the prevailing views of the
staff of the SEC. Such "Plan of Distribution" section shall also expressly
permit, to the extent permitted by applicable policies and regulations of the
SEC, the use of the Prospectus by all Persons subject to the prospectus delivery
requirements of the Securities Act, including, to the extent permitted by
applicable policies and regulations of the SEC, all Participating
Broker-Dealers, and include a statement describing the means by which
5
145391.01
<PAGE>
Participating Broker-Dealers may resell the Exchange Notes in compliance with
the Securities Act.
The Issuers shall use their respective best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be lawfully
delivered by all Persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as is necessary to comply with applicable
law in connection with any resale of the Exchange Notes covered thereby;
provided, however, that such period shall not exceed 180 days after such
Exchange Offer Registration Statement is declared effective (or such longer
period if extended pursuant to the last paragraph of Section 5 hereof) (the
"Applicable Period").
If, prior to consummation of the Exchange Offer, any Holder holds
any Notes acquired by it that have, or that are reasonably likely to be
determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Exchange
Offer, the Issuers upon the request of any such Holder shall simultaneously with
the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to
any such Holder, in exchange (the "Private Exchange") for such Notes held by any
such Holder, a like principal amount of notes (the "Private Exchange Notes") of
the Issuers that are identical in all material respects to the Exchange Notes
and the Subsidiary Guarantors if any shall guarantee such Private Exchange
Notes. The Private Exchange Notes shall be issued pursuant to the same indenture
as the Exchange Notes and bear the same CUSIP number as the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from (A) the later of (i) the last interest payment date on which
interest was paid on the Notes surrendered in exchange therefor or (ii) if the
Notes are surrendered for exchange on a date in a period which includes the
record date for an interest payment date to occur on or after the date of such
exchange and as to which interest will be paid, the date of such interest
payment date or (B) if no interest has been paid on the Notes, from the date of
the original issuance of the Notes.
In connection with the Exchange Offer, the Issuers shall:
(1) mail, or cause to be mailed, to each Holder entitled to
participate in the Exchange Offer a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(2) keep the Exchange Offer open for not less than 30 days after the
date that notice of the Exchange Offer is mailed to Holders (or longer if
required by applicable law);
(3) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
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145391.01
<PAGE>
(4) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which
the Exchange Offer shall remain open; and
(5) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer and the
Private Exchange, if any, the Issuers shall:
(1) accept for exchange all Registrable Notes validly tendered and
not validly withdrawn pursuant to the Exchange Offer and the Private
Exchange, if any;
(2) deliver to the Trustee for cancellation all Registrable Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in principal amount to the Notes of such Holder so accepted for
exchange.
The Exchange Offer and the Private Exchange shall not be subject to
any conditions, other than that (i) the Exchange Offer or Private Exchange, as
the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) no action or proceeding shall have
been instituted or threatened in any court or by any governmental agency which
might materially impair the ability of the Issuers to proceed with the Exchange
Offer or the Private Exchange, and no material adverse development shall have
occurred in any existing action or proceeding with respect to the Issuers and
(iii) all governmental approvals shall have been obtained, which approvals the
Issuers deem necessary for the consummation of the Exchange Offer or Private
Exchange.
The Exchange Notes and the Private Exchange Notes shall be issued
under (i) the Indenture or (ii) an indenture identical in all material respects
to the Indenture and which, in either case, has been qualified under the TIA or
is exempt from such qualification and shall provide that the Exchange Notes
shall not be subject to the transfer restrictions set forth in the Indenture.
The Indenture or such indenture shall provide that the Exchange Notes, the
Private Exchange Notes and the Notes shall vote and consent together on all
matters as one class and that none of the Exchange Notes, the Private Exchange
Notes or the Notes will have the right to vote or consent as a separate class on
any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Issuers are not permitted to effect
the Exchange Offer, (ii) the Exchange Offer is not consummated within 150 days
of the Issue Date, (iii) any holder of Private Exchange Notes so requests in
writing to the Issuers within 60 days after the consummation of the Exchange
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Offer, or (iv) in the case of any Holder that participates in the Exchange
Offer, such Holder does not receive Exchange Notes on the date of the exchange
that may be sold without restriction under state and federal securities laws
(other than due solely to the status of such Holder as an affiliate of any of
the Issuers within the meaning of the Securities Act) and so notifies the
Issuers within 30 days after such Holder first becomes aware of such
restrictions, in the case of each of clauses (i) to and including (iv) of this
sentence, then the Issuers shall promptly deliver to the Holders and the Trustee
written notice thereof (the "Shelf Notice") and shall file a Shelf Registration
pursuant to Section 3 hereof.
3. Shelf Registration
If at any time a Shelf Notice is delivered as contemplated by
Section 2(c) hereof, then:
(a) Shelf Registration. The Issuers shall file with the SEC a
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange
Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is
applicable (the "Initial Shelf Registration"). The Issuers shall use their
respective diligent best efforts to file with the SEC the Initial Shelf
Registration on or before the applicable Filing Date. The Initial Shelf
Registration shall be on Form S-1 or another appropriate form permitting
registration of such Registrable Notes for resale by Holders in the manner or
manners designated by them (including, without limitation, one or more
underwritten offerings). The Issuers shall not permit any securities other than
the Registrable Notes to be included in the Initial Shelf Registration or any
Subsequent Shelf Registration (as defined below).
The Issuers shall use their respective best efforts to cause the
Initial Shelf Registration to be declared effective under the Securities Act on
or prior to the Effectiveness Date and to keep the Initial Shelf Registration
continuously effective under the Securities Act until the date which is three
years from the Effectiveness Date, subject to extension pursuant to the last
paragraph of Section 5 hereof (the "Effectiveness Period"), or such shorter
period ending when (i) all Registrable Notes covered by the Initial Shelf
Registration have been sold in the manner set forth and as contemplated in the
Initial Shelf Registration or (ii) a Subsequent Shelf Registration covering all
of the Registrable Notes covered by and not sold under the Initial Shelf
Registration or an earlier Subsequent Shelf Registration has been declared
effective under the Securities Act; provided, however, that the Effectiveness
Period in respect of the Initial Shelf Registration shall be extended to the
extent required to permit dealers to comply with the applicable prospectus
delivery requirements of Rule 174 under the Securities Act and as otherwise
provided herein and shall be subject to reduction to the extent that the
applicable provisions of Rule 144 are amended or revised.
No holder of Registrable Notes may include any of its Registrable
Notes in any Shelf Registration Statement pursuant to this Agreement unless and
until such holder furnishes to the Issuers in writing, within 30 days after
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receipt of a request therefor, such information as the Issuers may reasonably
request for use in connection with any Shelf Registration Statement or
Prospectus or preliminary prospectus included therein. No holder of Registrable
Notes shall be entitled to Additional Interest pursuant to Section 4 hereof
unless and until such holder shall have provided all such reasonably requested
information. Each holder of Registrable Notes as to which any Shelf Registration
Statement is being effected agrees to furnish promptly to the Issuers all
information required to be disclosed in order to make information previously
furnished to the Issuers by such Holder not materially misleading.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (other than because of the
sale of all of the securities registered thereunder), the Issuers shall use
their respective best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 30 days of
such cessation of effectiveness amend the Initial Shelf Registration in a manner
to obtain the withdrawal of the order suspending the effectiveness thereof, or
file an additional "shelf" Registration Statement pursuant to Rule 415 covering
all of the Registrable Notes covered by and not sold under the Initial Shelf
Registration or an earlier Subsequent Shelf Registration (each, a "Subsequent
Shelf Registration"). If a Subsequent Shelf Registration is filed, the Issuers
shall use their respective best efforts to cause the Subsequent Shelf
Registration to be declared effective under the Securities Act as soon as
practicable after such filing and to keep such subsequent Shelf Registration
continuously effective for a period equal to the number of days in the
Effectiveness Period less the aggregate number of days during which the Initial
Shelf Registration or any Subsequent Shelf Registration was previously
continuously effective. As used herein the term "Shelf Registration" means the
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuers shall promptly
supplement and amend any Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any underwriter
of such Registrable Notes.
4. Additional Interest
(a) The Issuers and the Initial Purchasers agree that the Holders
will suffer damages if the Issuers fail to fulfill their obligations under
Section 2 or Section 3 hereof and that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, the Issuers agree, jointly
and severally, to pay, as liquidated damages, additional interest on the Notes
("Additional Interest") under the circumstances and to the extent set forth
below (each of which shall be given independent effect):
(i) if (A) neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration has been filed on or prior to the applicable
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Filing Date or (B) notwithstanding that the Issuers have consummated or
will consummate the Exchange Offer, the Issuers are required to file a
Shelf Registration and such Shelf Registration is not filed on or prior to
the Filing Date applicable thereto, then, commencing on the day after any
such Filing Date, Additional Interest shall accrue on the principal amount
of the Notes at a rate of 0.50% per annum for the first 90 days
immediately following each such Filing Date, and such Additional Interest
rate shall increase by an additional 0.50% per annum at the beginning of
each subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement nor
the Initial Shelf Registration is declared effective by the SEC on or
prior to the relevant Effectiveness Date or (B) notwithstanding that the
Issuers have consummated or will consummate the Exchange Offer, the
Issuers are required to file a Shelf Registration and such Shelf
Registration is not declared effective by the SEC on or prior to the
Effectiveness Date in respect of such Shelf Registration, then, commencing
on the day after such Effectiveness Date, Additional Interest shall accrue
on the principal amount of the Notes at a rate of 0.50% per annum for the
first 90 days immediately following the day after such Effectiveness Date,
and such Additional Interest rate shall increase by an additional 0.50%
per annum at the beginning of each subsequent 90-day period; or
(iii) if (A) the Issuers have not exchanged Exchange Notes for all
Notes validly tendered in accordance with the terms of the Exchange Offer
on or prior to the 135th day after the date on which the Exchange Offer
Registration Statement relating thereto was declared effective or (B) if
applicable, a Shelf Registration has been declared effective and such
Shelf Registration ceases to be effective at any time during the
Effectiveness Period, then Additional Interest shall accrue on the
principal amount of the Notes at a rate of 0.50% per annum for the first
90 days commencing on the (x) 151st day after such effective date, in the
case of (A) above, or (y) the day such Shelf Registration ceases to be
effective in the case of (B) above, and such Additional Interest rate
shall increase by an additional 0.50% per annum at the beginning of each
such subsequent 90-day period;
provided, however, that the Additional Interest rate on the Notes may not exceed
at any one time in the aggregate 1.50% per annum; provided, further, however,
that (1) upon the filing of the applicable Exchange Offer Registration Statement
or the applicable Shelf Registration as required hereunder (in the case of
clause (i) above of this Section 4), (2) upon the effectiveness of the Exchange
Offer Registration Statement or the applicable Shelf Registration Statement as
required hereunder (in the case of clause (ii) of this Section 4), or (3) upon
the exchange of the applicable Exchange Notes for all Notes tendered (in the
case of clause (iii)(A) of this Section 4), or upon the effectiveness of the
applicable Shelf Registration Statement which had ceased to remain effective (in
the case of (iii)(B) of this Section 4), Additional Interest on the Notes in
respect of which such events relate as a result of such clause (or the relevant
subclause thereof), as the case may be, shall cease to accrue.
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(b) The Issuers shall notify the Trustee within one business day
after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). Any amounts of
Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section
4 will be payable in cash semi-annually on each May 1 and November 1 (to the
holders of record on the April 15 and October 15 immediately preceding such
dates), commencing with the first such date occurring after any such Additional
Interest commences to accrue. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate by the
principal amount of the Registrable Notes, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed), and the denominator of which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Issuers shall effect such registrations to permit
the sale of the securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in connection
with any Registration Statement filed by the Issuers hereunder the Issuers
shall:
(a) Prepare and file with the SEC prior to the applicable Filing
Date, a Registration Statement or Registration Statements as prescribed by
Sections 2 or 3 hereof, and use their respective best efforts to cause
each such Registration Statement to become effective and remain effective
as provided herein; provided, however, that, if (1) such filing is
pursuant to Section 3 hereof, or (2) a Prospectus contained in the
Exchange Offer Registration Statement filed pursuant to Section 2 hereof
is required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period relating thereto, before filing any Registration Statement or
Prospectus or any amendments or supplements thereto, the Issuers shall
furnish to and afford the Holders of the Registrable Notes covered by such
Registration Statement or each such Participating Broker-Dealer, as the
case may be, their counsel and the managing underwriters, if any, a
reasonable opportunity to review copies of all such documents (including
copies of any documents to be incorporated by reference therein and all
exhibits thereto) proposed to be filed (in each case at least five days
prior to such filing, or such later date as is reasonable under the
circumstances). The Issuers shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto if the Holders of a
majority in aggregate principal amount of the Registrable Notes covered by
such Registration Statement, or any such Participating Broker-Dealer, as
the case may be, their counsel, or the managing underwriters, if any,
shall reasonably object.
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(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer
Registration Statement, as the case may be, as may be necessary to keep
such Registration Statement continuously effective for the Effectiveness
Period or the Applicable Period, as the case may be; cause the related
Prospectus to be supplemented by any Prospectus supplement required by
applicable law, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities
Act; and comply with the provisions of the Securities Act and the Exchange
Act applicable to each of them with respect to the disposition of all
securities covered by such Registration Statement as so amended or in such
Prospectus as so supplemented and with respect to the subsequent resale of
any securities being sold by a Participating Broker-Dealer covered by any
such Prospectus. The Issuers shall be deemed not to have used their
respective diligent best efforts to keep a Registration Statement
effective during the Effective Period or the Applicable Period, as the
case may be, relating thereto if any of the Issuers voluntarily takes any
action that would result in selling Holders of the Registrable Notes
covered thereby or Participating Broker-Dealers seeking to sell Exchange
Notes not being able to sell such Registrable Notes or such Exchange Notes
during that period unless (i) such action is required by applicable law or
(ii) such Issuers comply with the provisions of the last sentence of
Section 5(k) or the last paragraph of this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period relating thereto from
whom the Company has received written notice that it will be a
Participating Broker-Dealer in the Exchange Offer, notify the selling
Holders of Registrable Notes, or each such Participating Broker-Dealer, as
the case may be, their counsel and the managing underwriters, if any,
promptly (but in any event within one day), and confirm such notice in
writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has
become effective under the Securities Act (including in such notice a
written statement that any Holder may, upon request, obtain, at the sole
expense of the Issuers, one conformed copy of such Registration Statement
or post-effective amendment including financial statements and schedules,
documents incorporated or deemed to be incorporated by reference and
exhibits), (ii) of the issuance by the SEC of any stop order suspending
the effectiveness of a Registration Statement or of any order preventing
or suspending the use of any preliminary prospectus or the initiation of
any proceedings for that purpose, (iii) if at any time when a prospectus
is required by the Securities Act to be delivered in connection with sales
of the Registrable Notes or resales of Exchange Notes by Participating
Broker-Dealers the representations and warranties of any of the Issuers
contained in any agreement (including any underwriting agreement)
contemplated by Section 5(m) hereof cease to be true and correct in all
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<PAGE>
material respects, (iv) of the receipt by any of the Issuers of any
notification with respect to the suspension of the qualification or
exemption from qualification of a Registration Statement or any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, (v) of the happening of
any event, the existence of any condition or any information becoming
known that makes any statement made in such Registration Statement or
related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that, in the case of
the Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, and (vi)
of any of the Issuers' determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, use their respective
best efforts to prevent the issuance of any order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of a Prospectus or suspending the qualification (or
exemption from qualification) of any of the Registrable Notes or the
Exchange Notes to be sold by any Participating Broker-Dealer, for sale in
any jurisdiction, and, if any such order is issued, to use their
respective best efforts to obtain the withdrawal of any such order at the
earliest possible date.
(e) Subject to the provisions of the last sentence of Section 5(k),
if a Shelf Registration is filed pursuant to Section 3 and if requested by
the managing underwriter or underwriters (if any), the Holders of a
majority in aggregate principal amount of the Registrable Notes being sold
in connection with an underwritten offering or any Participating
Broker-Dealer, (i) promptly as practicable incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriter or underwriters (if any), such Holders, any Participating
Broker-Dealer or counsel for any of them reasonably request to be included
therein, (ii) make all required filings of such prospectus supplement or
such post-effective amendment as soon as practicable after either Issuer
has received notification of the matters to be incorporated in such
prospectus supplement or post-effective amendment, and (iii) supplement or
make amendments to such Registration Statement; provided, however, that
the Issuers shall not be required to take any action pursuant to this
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Section 5(e) that would violate applicable law.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, furnish to each selling
Holder of Registrable Notes and to each such Participating Broker-Dealer
who so requests and to counsel and each managing underwriter, if any, at
the sole expense of the Issuers, one conformed copy of the Registration
Statement or Registration Statements and each post-effective amendment
thereto, including financial statements and schedules, and, if requested,
all documents incorporated or deemed to be incorporated therein by
reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, deliver to each selling
Holder of Registrable Notes, or each such Participating Broker-Dealer, as
the case may be, their respective counsel, and the underwriters, if any,
at the sole expense of the Issuers, as many copies of the Prospectus or
Prospectuses (including each form of preliminary prospectus) and each
amendment or supplement thereto and any documents incorporated by
reference therein as such Persons may reasonably request; and, subject to
the last paragraph of this Section 5, each of the Issuers hereby consents
to the use of such Prospectus and each amendment or supplement thereto by
each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the underwriters or
agents, if any, and dealers (if any), in connection with the offering and
sale of the Registrable Notes covered by, or the sale by Participating
Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any
amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, to use their respective best efforts
to register or qualify, and to cooperate with the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the case
may be, the managing underwriter or underwriters, if any, and their
respective counsel in connection with the registration or qualification
(or exemption from such registration or qualification) of such Registrable
Notes for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any selling Holder,
Participating Broker-Dealer, or the managing underwriter or underwriters
reasonably request in writing; provided, however, that where Exchange
Notes held by Participating Broker-Dealers or Registrable Notes are
offered other than through an underwritten offering, the Issuers agree to
cause their counsel to perform Blue Sky investigations and file
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registrations and qualifications required to be filed pursuant to this
Section 5(h); keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is
required to be kept effective and do any and all other acts or things
reasonably necessary or advisable to enable the disposition in such
jurisdictions of the Exchange Notes held by Participating Broker-Dealers
or the Registrable Notes covered by the applicable Registration Statement;
provided, however, that none of the Issuers shall be required to (A)
qualify generally to do business in any jurisdiction where it is not then
so qualified, (B) take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject or (C)
subject itself to taxation in excess of a nominal dollar amount in any
such jurisdiction where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Notes to be sold,
which certificates shall not bear any restrictive legends and shall be in
a form eligible for deposit with The Depository Trust Company; and enable
such Registrable Notes to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or Holders may
request.
(j) Use their respective best efforts to cause the Registrable Notes
covered by the Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be reasonably
necessary to enable the seller or sellers thereof or the underwriter or
underwriters, if any, to consummate the disposition of such Registrable
Notes, except as may be required solely as a consequence of the nature of
such selling Holder's business, in which case the Issuers will cooperate
in all reasonable respects with the filing of such Registration Statement
and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, upon the occurrence of
any event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as
promptly as practicable prepare and (subject to Section 5(a) hereof) file
with the SEC, at the sole expense of the Issuers, a supplement or
post-effective amendment to the Registration Statement or a supplement to
the related Prospectus or any document incorporated or deemed to be
incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Notes
being sold thereunder or to the purchasers of the Exchange Notes to whom
such Prospectus will be delivered by a Participating Broker-Dealer, any
such Prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
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to make the statements therein, in light of the circumstances under which
they were made, not misleading. Notwithstanding the foregoing, the Issuers
shall not be required to amend or supplement a Registration Statement, any
related prospectus or any document incorporated therein by reference in
the event that, and for a period (a "Black Out Period") not to exceed, for
so long as this Agreement is in effect, an aggregate of 45 days if (x) an
event occurs and is continuing as a result of which a Registration
Statement, any related prospectus or any document incorporated therein by
reference as then amended or supplemented would, in the Issuers' good
faith judgment, contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, and (y) (1) the Issuers determine in good faith that the
disclosure of such event at such time would have a material adverse effect
on the business, operations or prospects of the Issuers or (2) the
disclosure otherwise relates to a material business transaction which has
not yet been publicly disclosed in any relevant jurisdiction.
(l) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with
certificates for the Registrable Notes in a form eligible for deposit with
The Depository Trust Company and (ii) provide a CUSIP number for the
Registrable Notes.
(m) In connection with any underwritten offering of Registrable
Notes pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in underwritten offerings of debt securities
similar to the Notes in form and substance reasonably satisfactory to the
Issuers and take all such other actions as are reasonably requested by the
managing underwriter or underwriters in order to expedite or facilitate
the registration or the disposition of such Registrable Notes and, in such
connection, (i) make such representations and warranties to, and covenants
with, the underwriters with respect to the business of the Issuers and
their respective subsidiaries (including any acquired business, properties
or entity, if applicable) and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, as are customarily made by issuers to underwriters
in underwritten offerings of debt securities similar to the Notes, and
confirm the same in writing if and when requested in form and substance
reasonably satisfactory to the Issuers; (ii) obtain the written opinions
of counsel to the Issuers and written updates thereof in form, scope and
substance reasonably satisfactory to the managing underwriter or
underwriters, addressed to the underwriters covering the matters
customarily covered in opinions reasonably requested in underwritten
offerings and such other matters as may be reasonably requested by the
managing underwriter or underwriters; (iii) use their best efforts to
obtain "cold comfort" letters and updates thereof in form, scope and
substance reasonably satisfactory to the managing underwriter or
underwriters from the independent certified public accountants of the
Issuers (and, if necessary, any other independent certified public
accountants of any subsidiary of any of the Issuers or of any business
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acquired by any of the Issuers for which financial statements and
financial data are, or are required to be, included or incorporated by
reference in the Registration Statement), addressed to each of the
underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt securities similar to the Notes and such
other matters as reasonably requested by the managing underwriter or
underwriters as permitted by the Statement on Auditing Standards No. 72;
and (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable to the
sellers and underwriters, if any, than those set forth in Section 7 hereof
(or such other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of Registrable Notes covered by
such Registration Statement and the managing underwriter or underwriters
or agents, if any). The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder.
(n) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Notes being sold, or
each such Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Notes, if any, and
any attorney, accountant or other agent retained by any such selling
Holder or each such Participating Broker-Dealer, as the case may be, or
underwriter (collectively, the "Inspectors"), at the offices where
normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and instruments of the Issuers and
their respective subsidiaries (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and
employees of the Issuers and their respective subsidiaries to supply all
information reasonably requested by any such Inspector in connection with
such Registration Statement and Prospectus. Each Inspector shall agree in
writing that it will keep the Records confidential and that it will not
disclose any of the Records unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such
Registration Statement or Prospectus, (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction, (iii) disclosure of such information is necessary or
advisable, in the opinion of counsel for any Inspector, in connection with
any action, claim, suit or proceeding, directly or indirectly, involving
or potentially involving such Inspector and arising out of, based upon,
relating to, or involving this Agreement or the Purchase Agreement, or any
transactions contemplated hereby or thereby or arising hereunder or
thereunder, or (iv) the information in such Records has been made
generally available to the public; provided, however, that prior notice
shall be provided as soon as practicable to the Issuers of the potential
disclosure of any information by such Inspector pursuant to clauses (ii)
or (iii) of this sentence to permit the Issuers to obtain a protective
order (or waive the provisions of this paragraph (n)) and that such
Inspector shall take such actions as are reasonably necessary to protect
the confidentiality of such information (if practicable) to the extent
such action is otherwise not inconsistent with, an impairment of or in
derogation of the rights and interests of the Holder or any Inspector.
Each selling Holder of such Registrable Notes and each such Participating
Broker-Dealer will be required to agree that information obtained by it as
a result of such inspections shall be deemed confidential and shall not be
used by it as the basis for any market transactions in the securities of
the Issuers unless and until such is made generally available to the
public. Each selling Holder of such Registrable Notes and each such
Participating Broker-Dealer will be required to further agree that it
will, upon learning that disclosure of such Records is sought in a court
of competent jurisdiction, give notice to the Issuers and allow the
Issuers to undertake appropriate action to prevent disclosure of the
Records deemed confidential at the Issuers' expense.
(o) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the first
Registration Statement relating to the Registrable Notes; and in
connection therewith, cooperate with the trustee under any such indenture
and the Holders of the Registrable Notes, to effect such changes to such
indenture as may be required for such indenture to be so qualified in
accordance with the terms of the TIA; and execute, and use their
respective best efforts to cause such trustee to execute, all documents as
may be required to effect such changes, and all other forms and documents
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required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(p) Comply with all applicable rules and regulations of the SEC and
make generally available to their respective securityholders earnings
statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month period
(or 90 days after the end of any 12-month period if such period is a
fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Notes are sold to underwriters in a firm commitment or best
efforts underwritten offering and (ii) if not sold to underwriters in such
an offering, commencing on the first day of the first fiscal quarter of
the Issuers after the effective date of a Registration Statement, which
statements shall cover said 12- month periods.
(q) Upon consummation of the Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Issuers, in a form customary for
underwritten transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the
Private Exchange, as the case may be, that the Exchange Notes or Private
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Exchange Notes, as the case may be, and the related indenture constitute
legal, valid and binding obligations of the Issuers, enforceable against
the Issuers in accordance with its respective terms, subject to customary
exceptions and qualifications.
(r) If the Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the
Issuers (or to such other Person as directed by the Issuers) in exchange
for the Exchange Notes or the Private Exchange Notes, as the case may be,
the Issuers shall mark, or cause to be marked, on such Registrable Notes
that such Registrable Notes are being cancelled in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be; in no
event shall such Registrable Notes be marked as paid or otherwise
satisfied.
(s) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in
connection with any filings required to be made with the National
Association of Securities Dealers, Inc. (the "NASD").
(t) Use their respective best efforts to take all other steps
reasonably necessary to effect the registration of the Exchange Notes
and/or Registrable Notes covered by a Registration Statement contemplated
hereby.
The Issuers may require each seller of Registrable Notes as to which
any registration is being effected to furnish to the Issuers such information
regarding such seller and the distribution of such Registrable Notes as the
Issuers may, from time to time, reasonably request. The Issuers may exclude from
such registration the Registrable Notes of any seller so long as such seller
fails to furnish such information within a reasonable time after receiving such
request. Each seller as to which any Shelf Registration is being effected agrees
to furnish promptly to the Issuers all information required to be disclosed in
order to make the information previously furnished to the Issuers by such seller
not materially misleading.
If any such Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Issuers, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
by such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the securities covered thereby and that
such holding does not imply that such Holder will assist in meeting any future
financial requirements of any of the Issuers, or (ii) in the event that such
reference to such Holder by name or otherwise is not required by the Securities
Act or any similar federal statute then in force, the deletion of the reference
to such Holder in any amendment or supplement to the Registration Statement
filed or prepared subsequent to the time that such reference ceases to be
required.
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Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by its acquisition of such Registrable Notes or Exchange
Notes to be sold by such Participating Broker-Dealer, as the case may be, that,
upon actual receipt of any notice from the Issuers of the happening of any event
of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi)
hereof, such Holder will forthwith discontinue disposition of such Registrable
Notes covered by such Registration Statement or Prospectus or Exchange Notes to
be sold by such Holder or Participating Broker-Dealer, as the case may be, until
such Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing (the "Advice") by any of the Issuers that the use of
the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto. In the event that the Issuers shall give any
such notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and including the date
of the giving of such notice to and including the date when each seller of
Registrable Notes covered by such Registration Statement or Exchange Notes to be
sold by such Participating Broker-Dealer, as the case may be, shall have
received (x) the copies of the supplemented or amended Prospectus contemplated
by Section 5(k) hereof or (y) the Advice.
6. Registration Expenses
All fees and expenses incident to the performance of or compliance
with this Agreement by the Issuers shall be borne by the Issuers, jointly and
severally, whether or not the Exchange Offer Registration Statement or any Shelf
Registration is filed or becomes effective or the Exchange Offer is consummated,
including, without limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the NASD in connection with an underwritten offering and (B) fees and expenses
of compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of counsel in connection with Blue
Sky qualifications of the Registrable Notes or Exchange Notes and determination
of the eligibility of the Registrable Notes or Exchange Notes for investment
under the laws of such jurisdictions (x) where the holders of Registrable Notes
are located, in the case of the Exchange Notes, or (y) as provided in Section
5(h) hereof, in the case of Registrable Notes or Exchange Notes to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses, including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriter or underwriters, if any,
by the Holders of a majority in aggregate principal amount of the Registrable
Notes included in any Registration Statement or in respect of Registrable Notes
or Exchange Notes to be sold by any Participating Broker-Dealer during the
Applicable Period, as the case may be, (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Issuers and reasonable
fees and disbursements of one special counsel for all of the sellers of
Registrable Notes (exclusive of any counsel retained pursuant to Section 7
hereof), (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(m)(iii) hereof (including, without
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limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (vi) Securities Act liability
insurance, if the Issuers desire such insurance, (vi) fees and expenses of all
other Persons retained by any of the Issuers, (viii) internal expenses of the
Issuers (including, without limitation, all salaries and expenses of officers
and employees of all of the Issuers performing legal or accounting duties), (ix)
the expense of any annual audit, (x) the fees and expenses incurred in
connection with the listing of the securities to be registered on any securities
exchange, and the obtaining of a rating of the securities, in each case, if
applicable, and (xi) the expenses relating to printing, word processing and
distributing all Registration Statements, underwriting agreements, indentures
and any other documents necessary in order to comply with this Agreement.
7. Indemnification
(a) The Issuers and any Subsidiary Guarantors agree, jointly and
severally, to indemnify and hold harmless each Holder of Registrable Notes and
each Participating Broker-Dealer selling Exchange Notes during the Applicable
Period, the officers, directors, employees and agents of each such Person, and
each Person, if any, who controls any such Person within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a
"Participant"), from and against any and all losses, claims, damages, judgments,
liabilities and expenses (including, without limitation, the reasonable legal
fees and other expenses actually incurred in connection with any suit, action or
proceeding or any claim asserted) caused by, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) or Prospectus (as amended or
supplemented if any of the Issuers shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by, arising out of
or based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the case of the Prospectus in light of the circumstances under which they were
made, not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
relating to any Participant furnished to the Issuers in writing by such
Participant expressly for use therein; provided, however, that the Company will
not be liable if such untrue statement or omission or alleged untrue statement
or omission was contained or made in any preliminary prospectus and corrected in
the final Prospectus or any amendment or supplement thereto and any such loss,
liability, claim, or damage or expense suffered or incurred by the Participants
resulted from any action, claim or suit by any Person who purchased Registrable
Notes or Exchange Notes which are the subject thereof from such Participant and
it is established in the related proceeding that such Participant failed to
deliver or provide a copy of the final Prospectus (as amended or supplemented)
to such Person with or prior to the confirmation of the sale of such Registrable
Notes or Exchange Notes sold to such Person if required by applicable law.
(b) Each Participant agrees, severally and not jointly, to indemnify
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and hold harmless each of the Issuers, their respective directors, their
respective officers who sign the Registration Statement and each Person who
controls each Issuer within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent (but on a several, and not
joint, basis) as the foregoing indemnity from the Issuers to each Participant,
but only with reference to information relating to such Participant furnished to
the Issuers in writing by such Participant expressly for use in any Registration
Statement or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus. The liability of any Participant under this paragraph shall in no
event exceed the proceeds received by such Participant from sales of Registrable
Notes or Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
notify the Persons against whom such indemnity may be sought (the "Indemnifying
Persons") in writing, and the Indemnifying Persons, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Persons may reasonably designate in such proceeding and shall pay
the fees and expenses actually incurred by such counsel related to such
proceeding; provided, however, that the failure to so notify the Indemnifying
Persons shall not relieve any of them of any obligation or liability which any
of them may have hereunder or otherwise. In any such proceeding, any Indemnified
Person shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Person unless (i)
the Indemnifying Persons and the Indemnified Person shall have mutually agreed
to the contrary, (ii) the Indemnifying Persons shall have failed within a
reasonable period of time to retain counsel reasonably satisfactory to the
Indemnified Person or (iii) the named parties in any such proceeding (including
any impleaded parties) include both any Indemnifying Person and the Indemnified
Person or any affiliate thereof and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is understood that, unless there exists a conflict among
Indemnified Persons, the Indemnifying Persons shall not, in connection with such
proceeding or separate but substantially similar related proceeding in the same
jurisdiction arising out of the same general allegations, be liable for the fees
and expenses of more than one separate firm (in addition to any local counsel)
for all Indemnified Persons, and that all such fees and expenses shall be
reimbursed promptly as they are incurred. Any such separate firm for the
Participants and such control Persons of Participants shall be designated in
writing by Participants who sold a majority in interest of Registrable Notes and
Exchange Notes sold by all such Participants and shall be reasonably acceptable
to the Issuers and any such separate firm for the Issuers, their respective
directors, their respective officers and such control Persons of the Issuers
shall be designated in writing by the Issuers and shall be reasonably acceptable
to the Holders.
The Indemnifying Persons shall not be liable for any settlement of
any proceeding effected without its prior written consent (which consent shall
not be unreasonably withheld or delayed), but if settled with such consent or if
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there be a final non-appealable judgment for the plaintiff for which the
Indemnified Person is entitled to indemnification pursuant to this Agreement,
each of the Indemnifying Persons agrees to indemnify and hold harmless each
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. No Indemnifying Person shall, without the prior written
consent of the Indemnified Persons (which consent shall not be unreasonably
withheld or delayed), effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party, or indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement (A) includes an unconditional written
release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of such
Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to, or insufficient
to hold harmless, an Indemnified Person in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Person under
such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and
in order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
(i) the relative benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other from the offering of
the Notes or (ii) if the allocation provided by the foregoing clause (i) is not
permitted by applicable law, not only such relative benefits but also the
relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative benefits received by the
Issuers on the one hand and the Participants on the other shall be deemed to be
in the same proportion as the total proceeds from the offering (net of discounts
and commissions but before deducting expenses) of the Notes received by the
Issuers bears to the total proceeds received by such Participant from the sale
of Registrable Notes or Exchange Notes, as the case may be, in each case as set
forth in the table on the cover page of the Offering Memorandum in respect of
the sale of the Notes. The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Issuers on the one hand or such
Participant or such other Indemnified Person, as the case may be, on the other,
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission, and any other equitable
considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
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other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages, judgments, liabilities and expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which
an indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the Indemnifying Party to the Indemnified Party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Issuers set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Holder or any person who controls a
Holder, any Issuer, their respective directors, officers, employees or agents or
any person controlling any Issuer, and (ii) any termination of this Agreement.
(g) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
The Issuers covenant and agree that each of them will file the
reports required to be filed by each of them under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder in a
timely manner in accordance with the requirements of the Securities Act and the
Exchange Act and, if at any time any of the Issuers is not required to file such
reports, such Issuer will, upon the request of any Holder or beneficial owner of
Registrable Notes, make available such information necessary to permit sales
pursuant to Rule 144A under the Securities Act. The Issuers further covenant and
agree, for so long as any Registrable Notes remain outstanding that each of them
will take such further action as any Holder of Registrable Notes may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Notes without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144(k) and Rule 144A under the
Securities Act, as such Rules may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the SEC.
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9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf Registration
are to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Notes included in such offering and shall be reasonably acceptable to the
Issuers.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Miscellaneous
(a) No Inconsistent Agreements. None of the Issuers has, as of the
date hereof, and none of the Issuers shall, after the date of this Agreement,
enter into any agreement with respect to any of its securities that is
inconsistent with the rights granted to the Holders of Registrable Notes in this
Agreement or otherwise conflicts with the provisions hereof. The rights granted
to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of any of the Issuers' other
issued and outstanding securities under any such agreements. Except as otherwise
disclosed to the Initial Purchasers, none of the Issuers has entered and none
will enter into any agreement with respect to any of its securities which will
grant to any Person piggy-back registration rights with respect to any
Registration Statement.
(b) Adjustments Affecting Registrable Notes. None of the Issuers
shall, directly or indirectly, take any action with respect to the Registrable
Notes as a class that would adversely affect the ability of the Holders of
Registrable Notes to include such Registrable Notes in a registration undertaken
pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (I) the Issuers and the Subsidiary Guarantors, if any, and (II)(A)
the Holders of not less than a majority in aggregate principal amount of the
then outstanding Registrable Notes and (B) in circumstances that would adversely
affect the Participating Broker-Dealers, the Participating Broker-Dealers
holding not less than a majority in aggregate principal amount of the Exchange
Notes held by all Participating Broker-Dealers; provided, however, that Section
7 and this Section 10(c) may not be amended, modified or supplemented without
the prior written consent of each Holder and each Participating Broker-Dealer
(including any person who was a Holder or Participating Broker-Dealer of
Registrable Notes or Exchange Notes, as the case may be, disposed of pursuant to
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any Registration Statement) affected by any such amendment, modification or
supplement. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Registrable Notes whose securities are being sold pursuant
to a Registration Statement and that does not directly or indirectly affect,
impair, limit or compromise the rights of other Holders of Registrable Notes may
be given by Holders of at least a majority in aggregate principal amount of the
Registrable Notes being sold pursuant to such Registration Statement.
(d) Notices. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
(i) if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture.
(ii) if to either of the Issuers or any of the Subsidiary
Guarantors, at the address as follows:
c/o Abraxas Petroleum Corporation
500 N. Loop 1604 East
Suite 100
San Antonio, Texas
Facsimile No.: (210) 490-8816
Attention: Chief Executive Officer
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto, the Holders and the Participating Broker-Dealers.
(f) Release of Subsidiary Guarantors. If any Subsidiary Guarantor
becomes a party to this Agreement and is subsequently released from its
obligations under the Indenture in accordance with the terms thereof then such
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Subsidiary Guarantor shall be released from its obligations hereunder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the 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.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(j) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(k) Securities Held by the Issuers or Their Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by any of the Issuers or any of their
their respective affiliates (as such term is defined in Rule 405 under the
Securities Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
(l) Third Party Beneficiaries. Holders of Registrable Notes and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement, and this Agreement may be enforced by such Persons.
(m) Entire Agreement. This Agreement, together with the Purchase
Agreement and the Indenture, is intended by the parties as a final and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein and any and all prior oral or
written agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Holders on the one hand
and the Issuers on the other, or between or among any agents, representatives,
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parents, subsidiaries, affiliates, predecessors in interest or successors in
interest with respect to the subject matter hereof and thereof are merged herein
and replaced hereby.
(n) Information Supplied by the Participants. The statements set
forth in the last paragraph on the front cover page and under the heading "Plan
of Distribution" in the preliminary offering memorandum and the final offering
memorandum in respect of the sale of the Notes (to the extent such statements
relate to a Participant) constitute the only information furnished by the
Participants to the Issuers for the purposes of Section 7 hereof.
29
145391.01
<PAGE>
(o) Subsidiary Guarantor a Party. Immediately upon the designation
of any Subsidiary of either Issuer as a Restricted Subsidiary (as defined in the
Indenture), the Issuers shall cause such Subsidiary to become a party hereto as
a Subsidiary Guarantor by executing and delivering to the Initial Purchasers a
counterpart hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
ABRAXAS PETROLEUM CORPORATION BT SECURITIES CORPORATION,
as Initial Purchaser
By: By:
Name: Name:
Title: Title:
CANADIAN ABRAXAS PETROLEUM BANKERS TRUST INTERNATIONAL
LIMITED PLC,
as Initial Purchaser
By: By:
Name: Name:
Title: Title:
JEFFERIES & COMPANY, INC.,
as Initial Purchaser
By:
Name:
Title:
30
145391.01
<PAGE>
ING BARING (U.S.) SECURITIES
CORPORATION,
as Initial Purchaser
By:
Name:
Title:
31
145391.01
<PAGE>
Each of the undersigned by its execution hereof agrees to become a
party to this Agreement as a Subsidiary Guarantor as of the date first above
written:
By:
Name:
Title:
32
145391.01
<PAGE>
SHARE SALE AGREEMENT
IN RESPECT OF
CGGS CANADIAN GAS GATHERING SYSTEMS INC.
BETWEEN:
THE SHAREHOLDERS OF
CGGS CANADIAN GAS GATHERING SYSTEMS INC.
- and -
CGGS CANADIAN GAS GATHERING SYSTEMS INC.
- and -
ABRAXAS PETROLEUM CORPORATION
- and -
CANADIAN ABRAXAS PETROLEUM LIMITED
DATED AS OF THE 29TH DAY OF OCTOBER, 1996
BENNETT JONES VERCHERE
4500 Bankers Hall East
855 - 2nd Street S.W.
Calgary, Alberta
T2P 4K7
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 Definitions 1
1.2 Certain Rules of Interpretation 13
1.3 Entire Agreement 14
1.4 Applicable Law and Jurisdiction 14
1.5 Accounting Terms 14
1.6 Knowledge 15
1.7 Liabilities 15
1.8 Joint Rights 15
1.9 Schedules 16
ARTICLE 2 PURCHASE AND SALE
2.1 Action by Vendors and Purchaser 17
2.2 Adjustments to Purchase Price 18
2.3 Closing and Post-Closing Adjustments 19
2.4 Place and Time of Closing 20
2.5 Tender 20
2.6 Section 116 Certificate 20
2.7 Deposit 20
2.8 Limitation 21
2.9 Representations and Warranties;
Material Adverse Damage 21
2.10 [Intentionally Deleted] 22
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE VENDORS AND THE
COMPANY
3.1 Incorporation and Registration 22
3.2 Subsidiaries 22
3.3 Capital 22
3.4 Absence of Conflicting Agreements 23
3.5 Financial Statements 23
3.6 Absence of Unusual Transactions 24
3.7 Absence of Guarantees 25
3.8 Restrictive Covenants 25
3.9 Tax Matters 25
3.10 Equipment Contracts 27
3.11 Real Property and Real Property Leases 27
3.12 Title to Assets 27
3.13 Quiet Enjoyment 27
3.14 Material Contracts 28
3.15 Litigation 28
3.16 Compliance with Terms 28
3.17 Title Documents and Production Sales Contracts 28
3.18 Production and Accounts Receivable 29
3.19 Employment Matters 29
3.20 Employees 29
<PAGE>
3.21 Insurance 29
3.22 Copies of Agreements etc. 30
3.23 Bank Accounts, etc. 30
3.24 Corporate Records and Minute Books 30
3.25 Environmental Matters 30
3.26 No Production Penalties 31
3.27 No Excess Gas Deliveries 32
3.28 Prepaid Gas Obligations 32
3.29 Royalty Payments 32
3.30 Gas Balancing Agreements 32
3.31 Production Sale Contracts 32
3.32 Partnerships 32
3.33 Capacity 32
3.34 Capital Expenditures 33
3.35 Engineering Report 33
3.36 [Intentionally Omitted] 33
3.37 No Business in the United States 33
3.38 Due Authorization 33
3.39 Enforceability of Obligations 33
3.40 Consents, Approvals or Authorizations 34
3.41 Finders' Fees 34
3.42 Formation of the Vendors;
Title to the Purchased Shares 34
3.43 Due Authorization 35
3.44 Enforceability of Obligations 35
3.45 Consents, Approvals or Authorizations 35
3.46 Finders' Fees 35
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF ABRAXAS AND THE
PURCHASER
4.1 Incorporation 37
4.2 Due Authorization 37
4.3 Enforceability of Obligations 37
4.4 Absence of Conflicting Agreements 37
4.5 Consents, Approvals or Authorizations 38
4.6 Finders' Fees 38
4.7 Independent Evaluation 38
4.8 Eligibility 38
4.9 Securities Laws 38
ARTICLE 5 SURVIVAL
5.1 Nature and Survival 39
5.2 Reliance 39
ARTICLE 6 PURCHASER'S CONDITIONS PRECEDENT
6.1 Truth and Accuracy of Representations
of Company at the Closing Time 40
6.2 Performance of Obligations 40
6.3 Receipt of Closing Documentation 40
6.4 Consents, Authorizations and Registrations 40
6.5 [Intentionally Omitted] 41
<PAGE>
6.6 Agreements Terminated 41
6.7 Closing Opinion 41
6.8 Title Opinion Update 41
6.9 Financing 41
6.10 Officers and Directors 41
6.11 Escrow Agreement 41
6.12 Sale of Excluded Assets 41
6.13 Termination Agreements and Transition Agreement 42
6.14 Material Adverse Damage 42
6.15 No Litigation 42
6.16 Bank Accounts 42
6.17 Debentures 42
ARTICLE 7 VENDORS' CONDITIONS PRECEDENT
7.1 Truth and Accuracy of Representations
of Purchaser at Closing Time 43
7.2 Performance of Obligations 43
7.3 Receipt of Closing Documentation 43
7.4 Consents, Authorizations and Registrations 43
7.5 Closing Opinion 44
7.6 Release of Directors and Officers 44
7.7 Escrow Agreement 44
7.8 Representations and Warranties 44
7.9 No Litigation 44
7.10 Termination Agreements and Transition Agreement 44
7.11 Material Adverse Damage 44
ARTICLE 8 INTERIM PERIOD
8.1 Conduct of Business Prior to Closing 45
8.2 Access for Investigation 48
8.3 Actions to Satisfy Closing Conditions 49
8.4 Waiver of Conditions in Nevis Agreement 49
8.5 Delivery of Debentures to the Representative 49
ARTICLE 9 POST-CLOSING MATTERS
9.1 Claims 49
9.2 Escrow Account 51
9.3 Joint Venture Audits 52
9.4 Stub Period Returns 53
9.5 Change of Name 53
9.6 Tax and Royalty Matters 53
9.7 Repayment of Debentures 55
ARTICLE 10 CONFIDENTIALITY
10.1 Confidential Information 55
10.2 Obligation 56
10.3 Disclosure 56
10.4 Remedies 56
ARTICLE 11 GENERAL
<PAGE>
11.1 Covenant of the Vendors 56
11.2 Public Notices 57
11.3 Expenses 57
11.4 Notices 57
11.5 Parties in Interest 60
11.6 Time 60
11.7 Assignment, Successors and Assigns 60
11.8 Further Assurances 60
11.9 Counterparts 60
ARTICLE 12 TERMINATION
12.1 Termination 60
12.2 Effect of Termination 61
ARTICLE 13 ARBITRATION
13.1 Arbitration 61
SHARE SALE AGREEMENT
THIS AGREEMENT is made as of the 29th day of October, 1996
BETWEEN:
THE SHAREHOLDERS OF CGGS CANADIAN GAS GATHERING SYSTEMS INC.
(hereinafter called the "Vendors")
- - and -
CGGS CANADIAN GAS GATHERING SYSTEMS INC., a corporation incorporated under the
laws of Canada (hereinafter called the "Company")
- - and -
ABRAXAS PETROLEUM CORPORATION, a corporation incorporated under the laws of the
State of Nevada (hereinafter called "Abraxas") and CANADIAN ABRAXAS PETROLEUM
LIMITED, a corporation incorporated under the laws of Canada (hereinafter called
the "Purchaser")
RECITALS:
A. The Vendors beneficially own and control all of the
Purchased Shares and the Option.
B. The Vendors desire to sell, and the Purchaser desires to purchase, all of the
Purchased Shares and the Parties desire to terminate the Option, all upon and
subject to the terms and conditions set forth in this Agreement.
NOW THEREFORE, in consideration of premises and covenants
<PAGE>
herein set forth, the receipt and sufficiency of which is hereby acknowledged by
the Parties, the Parties agree as follows:
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 Definitions
Whenever used in this Agreement, unless there is something inconsistent in the
subject matter or context, the following words and terms shall have the meanings
set out below:
"Abraxas" means Abraxas Petroleum Corporation, a corporation
incorporated under the laws of the State of Nevada;
"Accounting Firm" shall have the meaning ascribed thereto in
Section 2.3(c);
"Act" means the Income Tax Act (Canada) as amended;
"Adjustments" has the meaning ascribed thereto in Section 2.3(a);
"AEUB Approval" means an order of the Alberta Energy and Utilities Board that
section 99 of the Public Utilities Board Act (Alberta) does not apply to the
transactions contemplated herein;
"Affiliate" has the meaning given in the Business Corporations
Act (Alberta), as amended from time to time;
"Agreement" means this Share Sale Agreement, including all schedules, and all
instruments supplementing or amending or confirming this Agreement, and
references to "Article" or "Section" are to the specified Article or Section of
this Agreement;
"Alberta Crown Royalties" has the meaning ascribed thereto in
Section 5.1(b);
"Assets" means all of the assets of the Company including the Petroleum and
Natural Gas Rights, the Miscellaneous Interests and the Tangibles and all other
assets described, referred to, or included expressly or by implication in the
July 31 Balance
Sheet, other than the Excluded Assets;
"Assessment" has the meaning ascribed thereto in Section 9.6(a);
"Audit Notice" has the meaning ascribed thereto in Section
9.3(a);
"Audited Balance Sheet" has the meaning ascribed thereto in
Section 2.3(b);
"Auditors" has the meaning ascribed thereto in Section
<PAGE>
2.3(b);
"BDP" means Burnet, Duckworth & Palmer, Barristers and
Solicitors, Calgary, Alberta, solicitors for the Purchaser;
"BJV" means Bennett Jones Verchere, Barristers and Solicitors,
Calgary, Alberta, the solicitors for the Vendors and the Company;
"Business Day" means a day, other than a Saturday, Sunday or statutory holiday,
on which the principal commercial banks located in Calgary, Alberta are open for
business during normal banking hours;
"Claim Notice" has the meaning ascribed thereto in Section
9.1(a);
"Claims" means any claim, demand, action, cause of action, damage, loss, cost,
liability or expense, including reasonable legal fees and all costs incurred in
investigating, defending or pursuing any of the foregoing or any proceeding
relating to any of the foregoing;
"Class A Shares" means Class A shares (without nominal or par
value) in the capital of the Company;
"Class B Shares" means Class B shares (without nominal or par
value) in the capital of the Company;
"Closing" means the completion of the sale and purchase of the
Purchased Shares under and as contemplated in this Agreement;
"Closing Date" means the date on which Closing is to occur (as provided in
Section 2.4) which shall be the Business Day on which all of the conditions
precedent set forth in Articles 6 and 7 have been satisfied or waived in
writing, provided however that in no event will Closing occur earlier than the
second Business Day after the Business Day on which the Section 116 Certificates
are received, or such other date as the Parties may agree as the date upon which
the Closing shall take place;
"Closing Purchase Price" has the meaning ascribed thereto in
Section 2.1;
"Closing Statement" has the meaning ascribed thereto in Section
2.3(a);
"Closing Time" means 10:00 o'clock a.m., local time at the Place of Closing, on
the Closing Date or at such other time as the Parties may agree;
"Company" means CGGS Canadian Gas Gathering Systems Inc., a
corporation incorporated under the laws of Canada;
"Contractual Claim" has the meaning ascribed thereto in
<PAGE>
Section 9.1(a);
"Corporate Tax Act" has the meaning ascribed thereto in Section
3.9(h);
"Curtis Mallet" means Curtis, Mallet-Provost, Colt & Mosle,
Attorneys and Counsellors at Law, New York, New York, attorneys
for the Vendors;
"Damages" has the meaning ascribed thereto in Section 9.1(a);
"Debenture Prepayment Agreement" means an agreement between the
Company and the holders of the Old Debentures in the form of
Schedule 6.17;
"Debentures" means all of the debentures to be issued on the Business Day
immediately prior to Closing in payment for the Old Debentures, for an aggregate
principal amount in Canadian dollars equal to the Canadian dollar equivalent of
the aggregate principal amount of the Old Debentures set forth in Schedule
1.1(c) plus interest accrued but unpaid thereon, which Canadian dollar
equivalent shall be calculated based upon the noon rate of exchange for Canadian
interbank transactions established by the Bank of Canada for the Business Day
immediately prior to the Closing Date (or if such rate is for any reason
unavailable, at the spot rate quoted for wholesale transactions by the Company's
bank at approximately noon (Toronto time) on that date in accordance with its
normal practice), and which debentures shall otherwise be in substantially the
form attached as Exhibit "A" to the Debenture Prepayment Agreement;
"Deposit" has the meaning ascribed thereto in Section 2.7(a);
"Encumbrance" means a Royalty, pledge, lien, restriction, charge, security
agreement, lease, title retention agreement, mortgage, encumbrance, charge,
option, imperfection of title or other adverse claim, of any kind or character
whatsoever;
"Engineering Report" means the "Evaluation of the P. & N.G.
Reserves of CGGS Canadian Gas Gathering Systems Inc. (as of
September 1, 1996)" prepared by Sproule Associates Limited;
"Environment" means the components of the earth and includes:
(a) air, land, water, groundwater, soil and subsurface soil;
(b) all layers of the atmosphere;
(c) all organic and inorganic matter and living organisms;
(d) the environment in the workplace; and
(e) the interacting natural systems that include components referred to in
subparagraphsa(a), (b), (c) and (d) above.
<PAGE>
"Environmental Approvals" means applicable permits, licences and approvals
required by Governmental Authorities pursuant to the Environmental Laws with
respect to the use of a property or operation of a business;
"Environmental Laws" means all applicable Canadian, Alberta and local laws,
by-laws, rules, regulations, orders, information letters, interim directives,
general bulletins and guidelines (collectively, in this definition, "laws")
relating to the protection of the environment and employee and public health and
safety, including those laws relating to the discovery, development, production,
gathering, use, storage, transmission, transportation, treatment and disposal of
Substances, employee and product safety, the emission, discharge, release or
threatened release of Substances into the air, water or land and clean-up,
remediation and contaminated sites;
"Equipment Contracts" means the motor vehicle leases, equipment leases,
conditional sales contracts, title retention agreements and other similar
agreements relating to equipment between the Company and third Persons;
"Escrow Account" means the account established with the Escrow
Agent in which the Escrow Amount is deposited;
"Escrow Agent" has the meaning ascribed thereto in Section
2.1(f)(i);
"Escrow Agreement" means the Escrow Agreement between Abraxas,
the Purchaser, the Vendors, Feshbach and the Escrow Agent in
substantially the form of Schedule 7.7;
"Escrow Amount" has the meaning ascribed thereto in Section
2.1(f)(i);
"Established Contractual Claim" has the meaning ascribed thereto
in Section 9.2(a);
"Excluded Assets" means the "Assets" as defined in the Nevis
Agreement which are to be purchased by Morrison pursuant to the
Nevis Agreement;
"Excluded Liabilities" means the "Assumed Liabilities" as defined in the Nevis
Agreement which are to be assumed by Morrison pursuant to the Nevis Agreement;
"Facilities Interests" means the undivided participating
interests of the Company in and to each of the Major Facilities
as set forth in Schedule 1.1(a);
"Feshbach" means Bernard Feshbach, an individual residing in Palo
Alto, California;
"Feshbach Consulting Agreement" means the Consulting Agreement made as of the
<PAGE>
9th day of March, 1990 between the Company and Feshbach and any amendments
thereto;
"Financial Statements" means the balance sheet, income statement and statement
of changes in financial position of the Company for and in respect of its fiscal
year ending on October 31, 1995 which form part of Schedule 3.5;
"GE Consulting Agreement" means the Consulting Agreement made as of the 9th day
of March, 1990 between the Company and Gas Systems III Corporation and any
amendments thereto;
"GEPT" means Gas Systems I Corporation, a corporation;
"GEPT II" means Gas Systems II Corporation, a corporation;
"Governmental Authority" means each federal, provincial and municipal agency,
board, tribunal, ministry and department having jurisdiction over the Company,
the Assets or any of them;
"Interim Period" means the period from the date of this Agreement
until the Closing Date;
"Investors' Agreements" means collectively:
(a) the Unit Subscription Agreement and all amendments
thereto;
(b) the Shareholders Agreement dated March 9, 1990 between all
of the parties to the Unit Subscription Agreement and all
amendments thereto;
(c) three Class B Stock Subscription Agreements each dated March 9, 1990 between
the Company and GEPT, Morrison and Feshbach, respectively and all amendments
thereto;
"Jefferies" means Jefferies & Company Inc., a company organized
and existing under the laws of the State of Delaware;
"Jefferies Indemnification Letter" has the meaning ascribed
thereto in Section 3.7;
"Joint Venture Audit" has the meaning ascribed thereto in Section
9.3(a);
"July 31 Balance Sheet" means the unaudited balance sheet for the Company as at
the close of business on July 31, 1996 restated to exclude the Excluded Assets
(determined without regard to whether any of the Company's accounts receivable
were or were not collected after July 31, 1996) and the Excluded Liabilities
(determined without regard to whether any of the Company's liabilities were or
were not settled or paid after July 31, 1996), which forms part of Schedule 3.5;
<PAGE>
"Lands" means collectively all of the lands owned by the Company other than
lands included in the Excluded Assets, and includes the lands referred to in the
Property Schedule and the Petroleum Substances within, upon or under such lands,
together with the right to explore for and produce such Petroleum Substances;
"Leases" means collectively all of the leases (including gas storage leases),
options for leases, subleases, licences (including exploratory licences of
occupation) and documents of title (or any replacements, renewals or extensions
thereof or leases derived therefrom) covering the Lands and owned by the
Company, including those described in the Property Schedule, by virtue of which
the holder thereof is granted certain rights with respect to Petroleum
Substances within, upon or under the Lands or by virtue of which the holder
thereof is deemed to be entitled to a share of Petroleum Substances removed from
the Lands or any lands with which the Lands are pooled or unitized but excluding
any included in the Excluded Assets;
"Major Facilities" means the gathering, compression and
transportation facilities described in Schedule 1.1(a);
"Management Agreements" means collectively:
(a) the Administration Agreement dated March 9, 1990 between the Company and
Morrison and the Management Agreement dated March 9, 1990 between the Company
and Morrison and all amendments to either of such agreements (herein
collectively the "Morrison Agreements"); and
(b) the GE Consulting Agreement; and
(c) the Feshbach Consulting Agreement.
"Material" means, when used with reference to any contract, transaction,
agreement, change, commitment or effect, that the economic or monetary value
thereof to the Company is $500,000 or more;
"Material Adverse Effect" means any adverse change in the financial condition,
results of operations, assets, liabilities, or business of the Company that is
or may reasonably be expected to be Material to the Company;
"Material Contract" means the Management Agreements, the Investors' Agreements
and any other contract or commitment whether oral or written, involving payment,
whether absolute, contingent or otherwise, to or by the Company in excess of
$500,000 over the term of the contract or commitment or any commitment;
"Miscellaneous Interests" means the entire right, title and interest of the
Company in and to all property, assets and rights (other than the Petroleum and
Natural Gas Rights or the Tangibles) pertaining to the Petroleum and Natural Gas
<PAGE>
Rights or the Tangibles or any rights relating thereto and to which the Company
is entitled, including such interests in:
(a) all contracts, agreements, books, records, title opinions and reports, lease
and land files, compilations, surveys, regulatory filings and other documents
(including agreements for the construction, ownership and operation of the Major
Facilities) relating directly to the Petroleum and Natural Gas Rights and the
Tangibles and any rights in relation thereto;
(b) all subsisting rights to enter upon, use and occupy the surface of the
Lands, any lands with which the Lands have been pooled or unitized, any lands
upon which the Tangibles are located or any lands which are used to gain access
to any of the foregoing;
(c) all subsisting rights to carry out any operations relating to the Lands or
any lands with which the Lands have been pooled or unitized or lands upon which
the Tangibles are located including all well licences, rights of way, crossing
agreements and easements;
(d) all Wells, including the well bores of the Wells;
(e) all subsisting disposal and injection leases;
(f) all geological, engineering, geophysical, seismic and other
reports and data;
(g) all Petroleum Substances produced from the Lands (or any lands with which
the Lands have been pooled or unitized) which are placed into tanks or storage
after August 1, 1996;
(h) all intangible assets of any kind associated with any of the
foregoing;
but excluding any such interests relating to the Excluded Assets;
"Morrison" means Morrison Petroleums Ltd., a corporation
continued under the laws of Alberta;
"Nevis Agreement" means the agreement attached as Schedule 6.12;
"Nevis Proceeds" means the net cash proceeds received by the Company from the
sale of the Excluded Assets:
(a) plus the aggregate amount of cash receipts by the Company (other than the
said net cash proceeds from the sale of the Excluded Assets) during the period
from August 1, 1996 until the closing of the transactions contemplated by the
Nevis Agreement insofar as the said receipts relate to the "Business" as defined
in the Nevis Agreement, and minus the aggregate amount of cash payments by the
Company during the period from August 1, 1996 until the closing of the
<PAGE>
transactions contemplated by the Nevis Agreement insofar as the said payments
relate to the "Business" as defined in the Nevis Agreement;
(b) minus the aggregate of:
(i) all legal, accounting, finders' and other fees and expenses
incurred or paid by the Company in connection with the sale of the Excluded
Assets and the within sale of the Purchased Shares; and
(ii) the amount by which the aggregate fees payable under the
Management Agreements in respect of the period commencing on August 1, 1996 and
ending on the day immediately before the Closing exceed $200,000 for each
complete calendar month (or a pro rata amount for a partial month);
"Notice" has the meaning ascribed thereto in Section 11.4;
"Notifying Party" has the meaning ascribed thereto in
Section 9.1(a);
"Offering Memorandum" means the Offering Memorandum of Abraxas
and the Purchaser related to the issuance and sale of
approximately U.S. $200 Million of senior notes;
"Old Debentures" means all of the debentures which are as of the date of this
Agreement uncancelled and which were issued pursuant to the Unit Subscription
Agreement or the Option Agreement, in the principal amounts set forth in
Schedule 1.1(c);
"Option" means the rights of GEPT II, Morrison and Feshbach pursuant to Section
1.1 of the Option Agreement and "Option Agreement" means that certain Option
Agreement dated March 9, 1990 between all of the parties to the Unit
Subscription Agreement (other than the Company) and GEPT II and all amendments
thereto;
"Parties" means the Company, the Vendors, Abraxas and the
Purchaser collectively;
"Party" means either the Company, the Vendors collectively or
Abraxas and the Purchaser collectively;
"Permitted Encumbrances" means:
(a) easements, rights of way, servitudes, restrictions or other similar rights
in land, including rights of way and servitudes for highways and other roads,
railways, sewers, drains, gas and oil pipelines, gas and water mains, electric
light, power, telephone, telegraph or cable television conduits, poles, towers,
wires and cables;
(b) the rights reserved to or vested in any grantor, government or other public
authority by the terms of any Lease or by any statutory provision, including any
<PAGE>
rights to terminate any Lease or to require annual or other periodic payments as
a condition of the continuance thereof;
(c) liens imposed by statute securing the payment of Taxes other than in respect
of Taxes which are now due or hereafter become due in respect of a period ending
at or prior to the Closing Date;
(d) the Regulations and any rights reserved to or vested in any Governmental
Authority to control or regulate any of the Assets in any manner, including
legally binding requirements imposed by statutes or Governmental Authorities
concerning rates of production from operations on any of the Lands or otherwise
affecting recoverability of Petroleum Substances from the Lands;
(e) the rights of third parties to purchase Petroleum Substances produced from
the Lands or any lands with which the Lands have been pooled or unitized,
pursuant to production sales contracts or other contracts for the sale of
Petroleum Substances which are described in Schedule 3.31 or which are
terminable on not more than 60 days' notice;
(f) rights reserved to or vested in any Governmental Authority to levy taxes on
minerals or the income therefrom or to limit, control or regulate any of the
Assets in any manner and all applicable laws, rules and orders of any
Governmental Authority;
(g) undetermined or inchoate liens (including, processors', operators',
mechanics', builders', materialmens' and similar liens) incurred or created as
security in favour of the Person conducting the operation of any of the Assets
arising in the ordinary course of business for the Company's proportionate share
of the costs and expenses of such operations except in respect of costs now due
or delinquent or which become due or delinquent and relate to a period ending at
or prior to the Closing Date;
(h) penalties which have arisen under operating procedures and similar
agreements as a consequence of elections by the Company prior to the Closing
Date not to participate in operations on the Lands to which the penalty applies,
and which are described in the Property Schedule;
(i) liens and security interests granted in the ordinary course of business to a
public utility, municipality or Governmental Authority in connection with
operations pertaining to the Assets;
(j) all Encumbrances (including lessor's royalties) described in
the Property Schedule;
(k) all Encumbrances, exceptions, deficiencies and
qualifications set forth in the Title Opinions; and
<PAGE>
(l) other Encumbrances which are not, in the aggregate,
Material;
"Person" means any individual, sole proprietorship, partnership, unincorporated
association, unincorporated syndicate, unincorporated organization, trust, body
corporate, natural person in his capacity as director, trustee, executor,
administrator or other legal representative, including any shareholder of the
Company or any affiliate or employee of an officer or manager of the Company;
"Petroleum and Natural Gas Rights" means all of the Company's working interests,
royalty interests, production payments, profit and net profit interests,
reversionary interest and other in rem and contractual interests of the Company,
whether absolute or contingent, legal or beneficial, in the Leases and Lands,
including those described in the Property Schedule but excluding the Excluded
Assets;
"Petroleum Substances" means petroleum, natural gas and all related hydrocarbons
(including, without limitation, all liquid hydrocarbons) and all other
substances, whether liquids, gaseous or solids and whether hydrocarbons or not
(except coal but including sulphur) produced in association with such petroleum,
natural gas or related hydrocarbons;
"Place of Closing" means the offices of Cahill Gordon & Reindel at 80 Pine
Street, New York, New York, or such other place as may be mutually agreed to by
the Parties;
"Preferential Right" means an option or preferential right of purchase, right of
first refusal or similar pre-emptive rights to purchase the Assets or any of
them;
"Prime Rate" means the rate of interest established from time to time by the
Canadian Imperial Bank of Commerce at its main branch in Calgary, Alberta, as
its prime or reference lending rate for Canadian dollar commercial loans in
Canada;
"Property Schedule" means the schedule attached as Schedule
1.1(b);
"Purchase Price" means the cash consideration which will be paid by the
Purchaser to the Vendors, which shall be equal to the Unadjusted Purchase Price
net of the Adjustments as finally settled as contemplated in Section 2.3 and
minus the adjustments if any made as contemplated in Section 2.9;
"Purchased Shares" means 2,813,738 Class A Shares and
937,910.6663 Class B Shares;
"Purchaser" means Canadian Abraxas Petroleum Limited, a
corporation incorporated under the laws of Canada;
<PAGE>
"Real Property" means the real property listed in Schedule
1.1(b);
"Real Property Leases" means the real property leases listed in
Schedule 1.1(b);
"Receiving Party" has the meaning ascribed thereto in
Section 9.1(a);
"Refund" has the meaning ascribed thereto in Section 9.6(e);
"Regulations" means all statutes, laws, rules, orders and regulations in effect
from time to time and made by Governmental Authorities having jurisdiction over
the Company or the Assets;
"Representative" has the meaning ascribed thereto in Section 1.8;
"Royalties" means all royalties, burdens, profits interests, production payments
and similar interests payable to the Crown, lessors and other Persons in respect
of or relating to the production or sale of Petroleum Substances;
"Schedule" has the meaning ascribed thereto in Section 1.9;
"Section 116 Certificate" means a certificate as contemplated in
Section 116 of the Act;
"Securities" means collectively the Purchased Shares, the Option,
the Old Debentures and the Debentures;
"Substance" means petroleum, natural gas, or other hydrocarbons, any
contaminant, pollutant, waste, hazardous waste, toxic substance, dangerous good
or hazardous substance that is likely to cause harm or degradation to the
environment or risk to human health or safety;
"Substantial" and "Substantially", when used in Sectionsa6.1 and 7.1 with
reference to the truth and correctness of a Party's representations and
warranties, mean that the aggregate adverse effect of the untruth or
incorrectness of all of the Party's representations and warranties does not
exceed $3 Million, measured by reference to the cost of making such
representations and warranties true and correct;
"Tangibles" means:
(a) the interests of the Company in and to all tangible depreciable property and
assets which are situate in, on or about the Lands or lands with which the Lands
have been pooled or unitized or used or intended for use in connection with
production of Petroleum Substances from the Lands or lands with which the Lands
have been pooled or unitized or for the gathering, processing, transmission, or
treatment of such Petroleum Substances including production tubing, wellheads,
<PAGE>
pipelines, flowlines, gathering systems, batteries, plants, and
other equipment, but excluding the Major Facilities and the
Excluded Assets; and
(b) the Facilities Interests;
"Tax Returns" means all returns, reports, declarations, elections, filings,
information returns and statements required to be filed in respect of Taxes;
"Taxes" includes all income, capital, goods and services, excise, property and
other taxes, duties, fees, premiums, assessments, imposts, levies and other
charges of any kind whatsoever imposed or exigible by or payable to any taxing
or other governmental authority or agency within or outside of Canada, together
with all interest, penalties or additional amounts imposed in respect thereof;
"Termination Agreements" means collectively:
(a) an agreement between the Company and Morrison to
terminate the Morrison Agreements, in the form of Schedule
6.13(a);
(b) an agreement between the Company and Feshbach to
terminate the Feshbach Consulting Agreement, in the form of
Schedule 6.13(b);
(c) an agreement between the Company and Gas Systems III Corporation to
terminate the GE Consulting Agreement, in the form of Schedule 6.13(c); and
(d) an agreement between the Company and the Vendors to
terminate the Investors' Agreements and the Option Agreement, in
the form of Schedule 6.13(d);
"Title Opinions" means collectively:
(i) the title opinion of BJV dated September 10, 1996 and entitled "Title
Opinion" in respect of certain Petroleum and Natural Gas Rights owned by CGGS
Canadian Gas Gathering Systems Inc. (herein the "BJV Title Opinion");
(ii) the title opinions of Code Hunter, Barristers and Solicitors, dated
July 25, December 16 and December 18, 1991 addressed to the Company, with
respect to certain of the Petroleum and Natural Gas Rights; and
(iii) the title opinion of Howard Mackie, Barristers and Solicitors, dated July
25, 1991 addressed to the Company and Novalta Resources Inc., with respect to
Petroleum and Natural Gas Rights in the Sundre area;
"Transition Agreement" means the Transitional Services Agreement to be entered
<PAGE>
between Morrison and the Purchaser in the form of Schedule 6.13(e);
"Unadjusted Purchase Price" has the meaning ascribed thereto in
Section 2.1;
"Unit Subscription Agreement" means that certain Unit Subscription Agreement
dated March 9, 1990 between the Company and the Vendors (other than GEPT II) and
all amendments thereto;
"Vendors" means collectively the persons listed in Schedule
1.1(c);
"Wells" means all abandoned, producing, shut-in, suspended, injection, water
source and disposal wells located on the Lands or any lands with which the Lands
have been pooled or unitized, including the wells described in the Property
Schedule; and
"Working Capital" means the aggregate of:
(a) the difference between:
(i) the amount of the Company's current assets as set forth
on the July 31 Balance Sheet;
and
(ii) the aggregate of:
(A) the amount of the Company's current
liabilities as set forth in the July 31 Balance Sheet; and
(B) the sum of $200,000; and
(b) the interest income of the Company actually earned on an accrual basis
during the period from and including August 1, 1996 until but excluding the
Closing Date.
1.2 Certain Rules of Interpretation
(a) Unless otherwise specified, all references to money amounts
are to Canadian currency.
(b) The descriptive headings of Articles and Sections are inserted solely for
convenience of reference and are not intended as complete or accurate
descriptions of content and shall not be used to interpret the provisions of
this Agreement.
(c) The use of words in the singular or plural, or with a particular gender,
shall not limit the scope or exclude the application of any provision of this
Agreement or a Schedule to such Person or Persons or circumstances as the
context otherwise permits.
<PAGE>
(d) Whenever a provision of this Agreement or a Schedule requires an approval or
consent by a party and notification of such approval or consent is not delivered
within the applicable time limit, then, unless otherwise specified, the party
whose consent or approval is required shall be conclusively deemed to have
withheld its consent or approval.
(e) Unless otherwise specified, time periods within or following which any
payment is to be made or act is to be done shall be calculated by excluding the
day on which the period commences and including the day on which the period ends
and by extending the period to the next Business Day following if the last day
of the period is not a Business Day.
(f) Whenever any payment to be made or action to be taken under this Agreement
is required to be made or taken on a day other than a Business Day, such payment
shall be made or action taken on the next Business Day following.
(g) The words "including" and "includes" shall be deemed to mean "including
without limitation" and "includes without limitation" respectively.
1.3 Entire Agreement
This Agreement, including the Schedules to this Agreement, together with the
agreements and other documents to be delivered pursuant to this Agreement,
constitute the entire agreement between the Parties pertaining to the subject
matter hereof and supersede all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the Parties other than, subject to
Section 10.1, the Confidentiality Agreement dated May 28, 1996 between the
Purchaser and the Company (the "Confidentiality Agreement"). The Confidentiality
Agreement shall terminate if and when Closing occurs. There are no warranties,
representations or other agreements between the Parties in connection with the
subject matter hereof except as specifically set forth in this Agreement and in
any agreement or document delivered pursuant to this Agreement. No supplement,
modification, waiver, amendment or termination of this Agreement shall be
binding unless executed in writing by the Parties.
1.4 Applicable Law and Jurisdiction
This Agreement shall be construed in accordance with the laws of the Province of
Alberta and the laws of Canada applicable in the Province of Alberta (without
giving effect to its conflicts of law rules) and shall be treated, in all
respects, as an Alberta contract. Subject to Article 13, each of the Parties
irrevocably attorns and submits to the non-exclusive jurisdiction of any Alberta
court sitting in Calgary in any action or proceeding arising out of or related
to this Agreement and irrevocably agrees that all claims in respect of any such
action or proceeding shall be heard and determined in such Alberta court. Each
of the Parties irrevocably waives any "inconvenient forum" or similar defence to
<PAGE>
the maintenance of such action or proceeding.
1.5 Accounting Terms
All accounting terms not otherwise defined in this Agreement have the meanings
assigned to them in accordance with Canadian generally accepted accounting
principles.
1.6 Knowledge
Where a representation or warranty is made in this Agreement on the basis of the
knowledge or awareness of the Company, such knowledge or awareness consists of
the knowledge that each and every current officer, manager and supervisor of the
Company (or of Morrison to the extent he or she has knowledge of the affairs of
the Company) has or ought to have after diligent inquiry (which shall not
include a physical inspection of the Assets specifically for the purpose of the
transaction), but does not include the knowledge of any other Person or Persons.
1.7 Liabilities
(a) The obligations and liabilities of each Vendor hereunder shall be separate,
and not joint, several or joint and several. Except where an obligation or
liability hereunder is the obligation or liability of a particular Vendor
because it arises out of, results from or is in any manner connected with (i) a
breach or incorrectness of a particular Vendor's representations and warranties
set forth in Sections 3.42 to 3.46 inclusive, (ii) the breach by a particular
Vendor of any of its covenants or agreements hereunder or (iii) a claim based on
the fraud of a particular Vendor, each Vendor shall be separately liable for a
percentage of the obligation or liability equal to the particular Vendor's share
of the Purchase Price set forth in Schedule 1.1(c).
(b) The obligations and liabilities of Abraxas and the Purchaser hereunder are
joint and several. Any of the Vendors, the Representative and the Company may
bring separate actions against either Abraxas or the Purchaser without first
having proceeded against the other, in respect of any such obligations or
liabilities, and shall not be required to exhaust their recourse against either
Abraxas or the Purchaser before being entitled to performance from the other.
1.8 Joint Rights
(a) The Vendors hereby, and pursuant to that certain Representation Agreement
dated as of the Closing Date between the Vendors and Feshbach, appoint Feshbach
as their representative (herein the "Representative") who shall have full power
and authority to make all decisions relating to adjustments provided in Article
2, to exercise elections and options and take all actions necessary or permitted
<PAGE>
to be taken pursuant to Article 9, to undertake the defence or settlement of any
claims for which the Vendors may be required to indemnify the Purchaser, to
receive the payments and prepayments contemplated to be made to the Vendors
pursuant to the provisions of this Agreement, including Sections 2.1, 2.3, 2.7
and 9.7, to waive any or all of the conditions precedent set forth in Article 7
on behalf of the Vendors other than Morrison and to take all such other actions
provided herein or in the Escrow Agreement to be taken by the Representative
(and any other actions reasonably related or ancillary thereto), including the
power to execute and deliver the Escrow Agreement and such other documents as
may be necessary for the foregoing purposes, provided however that the
Representative shall not in any event have any authority to waive, on behalf of
Morrison, any or all of the conditions precedent set forth in Article 7. The
Vendors hereby authorize the Representative to deliver the Debentures to the
Company marked paid-in-full upon payment of the principal and all interest
accrued but unpaid thereon as contemplated in Section 9.7.
(b) All actions to be taken by the Vendors herein except as may be limited
by Section 1.8(a) may be taken by the Representative. The Vendors also
irrevocably authorize the Representative to be the recipient of any Notice
required to be given or made by the Purchaser to any of the Vendors hereunder,
and any Notice received by the Representative shall be deemed for all purposes
to be received by all of the Vendors.
(c) If the Representative resigns from such position, the Vendors shall
promptly select another person from among the Vendors (or their heirs,
executors, administrators, personal representatives, successors or assigns) to
fill such vacancy. All decisions and actions by the Representative, including
any agreement between the Representative and the Purchaser relating to any
negotiated adjustment of the Purchase Price, any defence or settlement of any
claims for which a Vendor or the Vendors may be required to indemnify the
Purchaser, any decision, action or agreement to be made or taken under the
Escrow Agreement, the Escrow Agreement or any other action provided herein to be
taken by Representative, shall be binding upon all of the Vendors, and no Vendor
shall have the right as between such Vendor and Purchaser to object, dissent,
protest or otherwise contest the same.
(d) The provisions of this Section 1.8 are independent and severable, are
irrevocable and are coupled with an interest running in favour of the Purchaser
and shall be enforceable notwithstanding any rights or remedies that any Vendor
may have in connection with the transactions contemplated by this Agreement.
Damages as the remedy for any breach of the provisions of this Section 1.8 would
be inadequate, with the result that the Purchaser shall be entitled to temporary
and permanent injunctive relief without the necessity of proving damages if the
<PAGE>
Purchaser brings an action to enforce the provisions of this Section 1.8.
(e) The provisions of this Section 1.8 shall be binding upon the heirs,
executors, administrators, personal representatives, successors and assigns of
each Vendor. All fees and expenses of or incurred by the Representative shall be
paid by the Vendors from sources other than the Escrow Amount.
<PAGE>
1.9 Schedules
The following schedules to this Agreement (herein collectively
the "Schedules"), as listed below, are incorporated in this Agreement:
Schedule Description
Schedule 1.1(a) Major Facilities
Schedule 1.1(b) Property Schedule and List of Wells
Schedule 1.1(c) Vendors and Securities
Schedule 3.5 Financial Statements
Schedule 3.6 Financial Commitments and AFEs
Schedule 3.9 Non-Restricted Resource Properties
Schedule 3.10 Equipment Contracts
Schedule 3.14 Material Contracts
Schedule 3.15 Litigation
Schedule 3.20 Employees
Schedule 3.21 Insurance
Schedule 3.23 Bank Accounts
Schedule 3.25 Environmental Matters
Schedule 3.31 Production Sale, Processing,
Transportation and Other Contracts
Schedule 6.7(a) BJV Opinion
Schedule 6.7(b) Vendors' Counsel's Opinion
Schedule 6.8 Title Opinion Update
Schedule 6.10 Release
Schedule 6.12 Nevis Sale Agreement
Schedule 6.13 Termination Agreements and Transition
Agreement
Schedule 6.17 Debenture Prepayment Agreement
Schedule 7.5(a) BDP Opinion
Schedule 7.5(b) Cox & Smith Opinion
Schedule 7.6 Release
Schedule 7.7 Escrow Agreement
ARTICLE 2
PURCHASE AND SALE
2.1 Action by Vendors and Purchaser
In accordance with this Agreement, the Vendors shall sell, transfer, assign,
convey and deliver to the Purchaser, and the Purchaser shall purchase from the
Vendors, the Purchased Shares, and the Vendors shall cause the Option to be
terminated, for an aggregate purchase price of $115 Million (the "Unadjusted
Purchase Price"), subject to:
(a) increases in respect of Working Capital, the Nevis Proceeds
and interest as provided in Section 2.2;
(b) decreases in respect of the principal amount of the Debentures plus interest
accrued but unpaid thereon as at the Closing Date as provided in Section 2.2;
(c) decreases, if any, as provided in Section 2.9; and
<PAGE>
(d) a decrease equal to $4,047,088, being the aggregate amount of interest,
expressed in Canadian dollars, paid by the Company, on the Old Debentures on or
about October 1, 1996 in respect of the period commencing on August 1, 1996 and
ending on September 30, 1996;
(as so adjusted for Closing, the "Closing Purchase Price"). Each Vendor shall be
entitled to the percentage of the Purchase Price set forth opposite its name in
Schedule 1.1(c). At the Closing Time, upon and subject to the terms and
conditions of this Agreement:
(e) the Vendors shall transfer and deliver to the Purchaser the share
certificates representing all of the Purchased Shares duly endorsed in blank for
transfer, or accompanied by an irrevocable security transfer power of attorney
duly executed in blank, in either case by the holder of record thereof, and the
parties to the Option Agreement shall execute and deliver an agreement
terminating the Option, and shall take such steps as shall be necessary to cause
the Company to enter the Purchaser or its nominee(s) upon the books of the
Company as the holder of the Purchased Shares and to issue one or more share
certificates to the Purchaser or its nominee(s) representing the Purchased
Shares; and
(f) the Purchaser shall pay the Closing Purchase Price as
follows:
(i) $5.75 Million (herein the "Escrow Amount") shall be paid to Montreal
Trust Company of Canada, as the escrow agent (herein the "Escrow Agent"), to be
held and distributed pursuant to the Escrow Agreement; and
(ii) the remainder of the Closing Purchase Price shall be paid to the
order of the Representative by wire transfer in immediately available funds (to
an account at a financial institution to be designated by the Representative not
later than 2 Business Days prior to Closing) and forthwith thereafter paid by
the Representative to the order of each Vendor in the respective amounts set
forth in Schedule 1.1(c) by wire transfer in immediately available funds to the
account designated by each Vendor at least 2 Business Days prior to Closing.
2.2 Adjustments to Purchase Price
(a) The Unadjusted Purchase Price shall be increased by an
amount equal to the aggregate of:
(i) the Working Capital; and
(ii) the Nevis Proceeds.
(b) The Unadjusted Purchase Price shall be increased by an amount equal to
interest on the Unadjusted Purchase Price at the Prime Rate from and including
<PAGE>
August 1, 1996 to but excluding the Closing Date, calculated monthly and not
compounded.
(c) The Unadjusted Purchase Price shall be reduced by an amount equal to the
principal amount of the Debentures plus interest accrued but unpaid thereon as
at the Closing Date.
(d) The unadjusted Purchase Price shall be decreased as set
forth in Section 2.1(d).
2.3 Closing and Post-Closing Adjustments
(a) The Company shall initially prepare and, not later than 5 Business Days
prior to the Closing Date, deliver a draft statement of Closing adjustments
(herein the "Closing Statement") as contemplated in Sections 2.1(a) and (b), to
the Purchaser for review. The Representative and the Purchaser shall cooperate
in settling and agreeing to the amounts to be set forth on the Closing Statement
to be used pursuant to the provisions of this Section 2.3. The Closing Statement
shall be utilized for the purpose of settling for Closing the adjustments to be
made pursuant to Sectiona2.2 (herein the "Adjustments") and shall also set forth
the adjustments, if any, to be made pursuant to Section 2.9.
(b) Forthwith after Closing, in order to settle the Adjustments finally and
thereby to settle the Purchase Price, the Purchaser and the Representative shall
cause the Adjustments, including the July 31 Balance Sheet insofar as it relates
to the Adjustments, to be audited jointly by their respective auditors (herein
the "Auditors"), in accordance with generally accepted Canadian auditing
standards. The Representative and the Purchaser shall cooperate fully with such
audit so as to cause the Auditors to complete such audit within 90 days after
the Closing Date. The Representative and the Purchaser shall have the
opportunity, at their own expense, to review the work papers of the Company and
the Auditors relating to such audit. If the Purchaser and the Representative
agree with all changes resulting from the said audit, the July 31 Balance Sheet
insofar as it relates to the Adjustments as so audited and changed (herein the
"Audited Balance Sheet") shall for the purposes of this Article 2 be deemed to
be the July 31 Balance Sheet as revised by virtue of such audit and the
Adjustments shall be recalculated to take all revisions resulting from the Audit
into account. If either or both of the Purchaser and the Representative do not
agree with any of the said changes resulting from the said audit, or their
respective Auditors do not agree as to any matter, either the Purchaser or the
Representative may, within 15 Business Days after receipt by it or them of the
Audited Balance Sheet and the statement of the recalculated Adjustments or
notice from one of the Auditors of any such disagreement, give written notice
(an "Audit Notice") of any such disagreement, with reasons, to the other Party.
If neither the Purchaser nor the Vendor notifies the other of any disagreement
within 15 Business Days after its receipt of the Audited Balance Sheet and the
<PAGE>
recalculated Adjustments they shall be deemed to have accepted the Audited
Balance Sheet and the recalculated Adjustments as so changed. The Purchaser and
the Representative shall have reasonable access to the other's records and the
records of the Company in order to resolve any disagreements.
(c) If a disagreement is made the subject of an Audit Notice and the Purchaser
and the Representative fail to resolve such dispute within 10 Business Days
after the date on which the Purchaser or the Representative gave an Audit Notice
with respect to the proposed change, then the Calgary office of Price
Waterhouse, Chartered Accountants (herein the "Accounting Firm"), shall be
engaged forthwith to resolve any remaining disputes. The Accounting Firm shall
be required to render its decision within 25 Business Days after the dispute is
referred to it. The decision of the Accounting Firm shall be final and binding.
The fees and expenses of the Accounting Firm shall be shared equally by the
Vendor and the Purchaser.
(d) Payment of any amount arising by virtue of changes in the July 31 Balance
Sheet or the Adjustments pursuant to this Section 2.3 shall be subject to
Sectiona116 of the Act, shall be made within 10 Business Days after the disputed
portion has been agreed upon by the Parties or determined by the Accounting Firm
pursuant to this Section 2.3, and shall include in addition an amount equal to
interest at the Prime Rate calculated from the Closing Date to the date of
payment.
2.4 Place and Time of Closing
The Closing shall take place at the Place of Closing on the Closing Date.
2.5 Tender
Any tender of documents or money pursuant to this Agreement may be made upon the
Parties or their respective counsel and, subject to Section 2.1(e), money shall
be tendered by official bank draft drawn upon a Schedule 1 Canadian chartered
bank.
2.6 Section 116 Certificate
The Vendors shall, prior to Closing, make reasonable efforts to obtain Section
116 Certificates in respect of the Purchase Price.
2.7 Deposit
(a) The Parties acknowledge that the Purchaser has paid a deposit of $2 million
(herein the "Deposit"), which shall be held in an interest-bearing account by
the Representative and disposed of in accordance with this Section 2.7. The
Deposit shall be invested in an instrument selected by the Representative, of
which it gives timely written notice to the Purchaser and which shall be
<PAGE>
available for investment or purchase at the branch of a Schedule 1 Canadian
chartered bank in Calgary.
(b) If Closing occurs, the Deposit, together with interest earned thereon by the
Purchaser while it is held in trust, shall be paid to the Representative at
Closing and applied against the Closing Purchase Price.
(c) If Closing does not occur, notwithstanding that the Vendors are ready,
willing and able to complete the sale of the Purchased Shares and to terminate
the Option as contemplated herein, the Section 116 Certificates have been
received and all of the conditions precedent set forth in Article 6 (other than
in Section 6.9, if it has not then been satisfied, complied with or waived in
writing by the Purchaser) have been satisfied, complied with or waived in
writing by the Purchaser or Abraxas, the Deposit together with interest earned
thereon shall be forfeited to the Vendors (in the proportions set forth in
Schedule 1.1(c)), in full and complete satisfaction of all claims which the
Vendors may have in connection with Purchaser's failure or refusal to perform
its obligations hereunder.
(d) If Closing does not occur for any reason other than as set forth in Section
2.7(c) or this Agreement terminates pursuant to Section 12.1(a)(ii), the Deposit
together with interest earned thereon shall be paid to the Purchaser.
2.8 Limitation
Notwithstanding any other provision of this Agreement or any rule of law or
equity, the maximum amount of damages and other compensation to which the
Purchaser shall be entitled if Closing does not occur solely or partially
because of the failure or refusal of the Company and the Vendors or either of
them to perform their obligations hereunder is $2 million, which shall be in
addition to the return of the Deposit plus interest thereon as contemplated in
Section 2.7(d).
2.9 Representations and Warranties; Material Adverse Damage
If any of the representations and warranties set forth in Article 3 are not true
and correct on the Closing Date, or physical damage occurs to any of the
Petroleum and Natural Gas Rights, Tangibles or Miscellaneous Interests and the
uninsured portions of the cost of repair is less than $3 Million, (or more than
$3 Million and the Parties agree to reduce the Purchase Price by such amount) as
the case may be, then, subject to Articles 6 and 7, the Unadjusted Purchase
Price shall be decreased at Closing by an amount equal to the cost, if any, of
making the representations and warranties true and correct on the Closing Date
and of the uninsured costs of repair, as the case may be, and the Parties shall
in good faith attempt to agree on the said amounts. If the Parties are unable to
agree on either or both of the said amount or amounts, the said amount or
amounts shall be settled by arbitration in accordance with Article 13 and the
<PAGE>
Closing Date shall be extended in order for the arbitration proceedings to be
conducted and the arbitrator's decision to be rendered. The Parties shall use
their best efforts to cause the arbitration proceedings to be conducted and the
arbitrator's decision to be rendered within 20 Business Days. For the purposes
of a dispute as to the said amount under this Section 2.9, the notice period
contemplated in Section 13.1(b) shall be 1 Business Day.
2.10 [Intentionally Deleted]
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE VENDORS AND THE COMPANY
The Company hereby makes the representations and warranties set forth in
Sections 3.1 to 3.41, inclusive, to the Purchaser.
3.1 Incorporation and Registration
The Company is a corporation duly incorporated, organized, validly existing and
in good standing under the laws of Canada and has all necessary corporate power,
authority and capacity to own its properties and assets and to carry on its
business as presently conducted. Neither the nature of its business nor the
location or character of the properties owned or leased by the Company requires
the Company to be registered, licensed or otherwise qualified as an extra
provincial or foreign corporation or to be in good standing in any jurisdiction
other than in the Province of Alberta. The Company is duly registered, licensed
and otherwise qualified and in good standing for such purpose in such province.
The Company has all governmental licences and permits (other than Environmental
Approvals, which are referred to in Section 3.25) necessary or appropriate to
own and operate (to the extent it is the operator thereof) the Assets and the
Excluded Assets and the Company is in Material compliance with all such licences
and permits.
3.2 Subsidiaries
The Company has no subsidiaries.
3.3 Capital
(a) The authorized share capital of the Company consists of an unlimited number
of Class A Shares and Class B Shares. The Purchased Shares constitute all of the
issued and outstanding shares in the Company and all of such shares have been
duly and validly issued and are outstanding as fully paid and non assessable
shares of the Company. There are no options, warrants, calls, rights, or
agreements to which the Company or any Vendor is a party or by which it is bound
obligating the Company or any Vendor to issue, deliver or sell, or cause to be
<PAGE>
issued, delivered or sold, shares of capital stock or other securities of the
Company or obligating the Company or any Vendor to grant, extend or enter into
any such option, warrant, call, right or agreement, and no securities or
obligations convertible into or exchangeable for shares or other securities of
the Company have been authorized or agreed to be issued or are outstanding,
otherwise than pursuant to the Option Agreement.
(b) The Old Debentures constitute all of the issued and outstanding debentures
which were issued pursuant to the Unit Subscription Agreement and the Option
Agreement. Upon the issuance of the Debentures the Old Debentures will be
canceled and the Company will have no further obligation or duty with respect
thereto.
(c) The share and debenture registers will immediately prior to Closing reflect
the ownership of Purchased Shares and Debentures as set forth in Schedule
1.1(c).
3.4 Absence of Conflicting Agreements
The execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated hereby and compliance with the provisions hereof
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit, or result in the creation of any lien, pledge, security
interest, adverse claim, charge, or other encumbrance upon any of the Assets or
the Excluded Assets (any such conflict, violation, default, right of
termination, cancellation or acceleration, loss or creation, a "Violation")
pursuant to, any provision of:
(a) the Articles of Incorporation, as amended, or By-laws, as amended, of
the Company (a true and complete copy of each of which as of the date hereof has
been delivered to the Purchaser);
(b) any contract, agreement, loan or credit agreement, note, bond,
debenture, mortgage, indenture, lease, employee benefit plan or other agreement,
obligation, instrument, permit, concession, franchise, or license applicable to
the Company, the Assets or the Excluded Assets (a true and complete copy of each
of which as of the date hereof has been delivered to Purchaser); or
(c) any judgment, injunction, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or the Assets or the Excluded Assets.
3.5 Financial Statements
Except insofar as the July 31 Balance Sheet excludes the Excluded Assets
(determined without regard to whether any of the Company's accounts receivable
<PAGE>
were or were not collected after July 31, 1996) and the Excluded Liabilities
(determined without regard to whether any of the Company's liabilities were or
were not settled or paid after July 31, 1996):
(a) the Financial Statements and the July 31 Balance Sheet and the books and
accounts of the Company have been prepared in accordance with Canadian generally
accepted accounting principles applied on a basis consistent with that of
preceding periods;
(b) the Financial Statements and the July 31 Balance Sheet present fairly all of
the assets and liabilities and the financial position of the Company as at the
respective dates thereof;
(c) the Financial Statements present fairly the results of
operations and statement of changes in financial position for the
periods then ended;
(d) except to the extent reflected or reserved against in the July 31 Balance
Sheet or as otherwise disclosed in Schedule 3.5, the Company has no outstanding
indebtedness, liabilities or obligations, whether contingent or absolute;
(e) the Financial Statements and the July 31 Balance Sheet have been prepared in
accordance with the books and accounts of the Company; and
(f) the statement of income included in the Financial Statements does not
include any items of special nonrecurring income or any other income not earned
in the ordinary course of business except as expressly specified therein.
3.6 Absence of Unusual Transactions
Except for the sale of the Excluded Assets and the assumption of the Excluded
Liabilities as contemplated by the Nevis Agreement, or as otherwise disclosed in
Schedule 3.6 or as permitted in Section 8.1, since July 31, 1996 the Company has
not:
(a) transferred, assigned, sold or otherwise disposed of any of
the Assets or canceled, waived or released any debts or claims;
(b) mortgaged, pledged, subjected to lien, granted a security interest or
otherwise encumbered any of its assets or property, whether tangible or
intangible, other than Permitted Encumbrances;
(c) authorized, incurred or assumed any capital expenditure or financial
commitment or other obligation or liability (fixed or contingent) except those
listed in the July 31 Balance Sheet and except unsecured obligations and
liabilities incurred in the ordinary and usual course of business and not
exceeding $500,000 in the aggregate;
<PAGE>
(d) suffered an extraordinary loss, waived or omitted to take any action in
respect of any rights of substantial value, or entered into any commitment or
transaction not in the ordinary and usual course of business;
(e) issued or sold any shares in its capital or any warrants, bonds, debentures
or other corporate securities of the Company or issued, granted or delivered any
right, option or other commitment for the issuance of any such securities or any
other securities;
(f) amended or changed or taken any action to amend or change
its Articles of Incorporation or By-laws;
(g) authorized, agreed or otherwise become committed to do any
of the foregoing; or
(h) from August 1, 1996 to the date of this Agreement, breached any of the
provisions of Section 8.1 (which shall be read for the purposes of this Section
3.6(h) as if the Interim Period commenced on August 1, 1996 and ended on the
date of this Agreement).
3.7 Absence of Guarantees
Except for indemnities set forth in the By-Laws of the Company, in the
Management Agreements and in the indemnification letter agreement (herein the
"Jefferies Indemnification Letter") dated February 26, 1996 between the Company
and Jefferies described in Schedule 3.14, the Company has not given or agreed to
give, and is not a party to or bound by any guarantee or indemnity in respect of
indebtedness or other obligations, of any Person or any other commitment by
which the Company is or may be responsible or liable for such indebtedness or
other obligations, provided that if any claim is made by Jefferies against the
Company for indemnification pursuant to the said letter agreement, the amount
claimed by Jefferies shall be treated as Damages as defined in Section 9.1(a)
and all of the provisions of Article 9 with respect to Damages shall be
applicable.
3.8 Restrictive Covenants
Except for the Management Agreements, the Company is not a party to or bound or
affected by any commitment, agreement or document containing any covenant which
limits the freedom of the Company to compete in any line of business, or to
transfer or move any of its Assets or operations or which affects or may affect
the business practices, operations or conditions or the continued operation of
the business of the Company after the Closing on substantially the same basis as
such businesses are carried on at the date of this Agreement.
<PAGE>
3.9 Tax Matters
(a) The Company has duly and timely filed its Tax Returns with the appropriate
taxing or other governmental authority or agency and its Tax Returns were
prepared in accordance with the books and accounts of the Company and the
information contained in such Tax Returns is true, complete and accurate in all
Material respects.
(b) The Company has duly and timely paid all Taxes, including all installments
on account of Taxes for the current year, that it reasonably believed were due
and payable by it and the July 31 Balance Sheet sets forth, as an amount
payable, an amount not less than the amount of all Taxes that are or will become
due and payable in respect of periods ending on or prior to August 1, 1996,
except amounts which may become payable after completion of the current Revenue
Canada income tax audit for the Company's 1993, 1994 and 1995 taxation years
which are not individually or in the aggregate Material.
(c) The Company has not entered into any agreement or other arrangement or
executed any waiver except with respect to its 1991 tax year providing for, any
extension of time within which (i) to file any Tax Return covering any Taxes for
which the Company is or may be liable, (ii) the Company is required to pay or
remit any Taxes or amounts on account of Taxes or (iii) any taxing authority may
assess or collect Taxes for which the Company is or may be liable.
(d) The Canadian federal and provincial income and capital tax liabilities of
the Company have been assessed by the relevant taxing authority and notices of
assessment have been issued to the Company by the relevant taxing authority for
all taxation years ending on or prior to October 31, 1995, provided however that
amended returns have been filed in respect of the Company's 1991, 1992, 1993 and
1994 tax years and no reassessments or confirmations of increases or losses has
been received in respect thereof.
(e) There are no actions, suits, proceedings, investigations, audits or claims
now pending or, to the knowledge of the Company, threatened, against the Company
in respect of any Taxes and there are no matters under discussion with any
taxing authority relating to Taxes, except as described in Section 3.9(b).
(f) The Company has duly and timely withheld from any amount paid or credited by
it to or for the account or benefit of any Person, including, without
limitation, any of its employees, officers and directors and any non-resident
Person, the amount of all Taxes and other deductions required by any applicable
law, rules or regulations to be withheld from any such amount and has duly and
timely remitted the same to the appropriate taxing or other governmental
authority or agency.
(g) The Company is not a section 1504(d) corporation for United
States tax purposes and has not filed consolidated United States tax returns.
<PAGE>
(h) The Company is not an "above-limit corporation", "restricted corporation",
member of an "above-limit partnership" or "restricted partnership" or associated
with a "restricted corporation" as those phrases are defined and used in the
Alberta Corporate Tax Act, as amended (herein the "Corporate Tax Act"), and the
Company is not the subject of a direction by the Provincial Treasurer (Alberta)
pursuant to subsection 26.1(9) or (10) of the Corporate Tax Act, nor does the
Company nor the Vendors have any reason to believe that the provincial treasurer
is contemplating or likely to make any such direction. Each of the Assets is a
"restricted resource property" as defined in the Corporate Tax Act, except as
described in Schedule 3.9.
(i) Immediately before Closing, the following tax pools of the Company, will be
at least:
(i) Undepreciated capital cost $0
(as defined for the purposes of the Act)
(ii) Cumulative Canadian development expense $1.3
million
(as defined in Section 66.2(5) of the Act)
(iii) Cumulative Canadian oil and gas property
expense $25.5 million
(as defined in Section 66.4(5) of the Act)
(iv) Cumulative Canadian exploration expense $0
(as defined in Section 66.1(6) of the Act)
(v) Undeducted non-capital losses $4.2 million
(as defined in Section 111(8) of the Act)
3.10 Equipment Contracts
Schedule 3.10 sets forth a true and complete list of the Equipment Contracts and
the equipment and vehicles which are subject to Equipment Contracts. All of the
Equipment Contracts are in full force and effect and no default exists on the
part of the Company or, to the knowledge of the Company, on the part of any
other party thereto and the Company has not received notice of an intent to
terminate or amend such contracts by the other party thereto. Except for the
Excluded Assets, equipment and vehicles subject to the Equipment Contracts, and
the vehicles and other equipment described in Schedule 3.10, no Person other
than the Company owns any equipment, vehicles or other tangible assets or
property used in or necessary for the operation of the business of the Company.
3.11 Real Property and Real Property Leases
The Company owns no real property or interests therein, and is not a party to,
<PAGE>
or bound by, any leases or subleases of any real property, other than its
interests in the Lands, the Leases and the Major Facilities.
3.12 Title to Assets
(a) The Assets are and will be at the Closing Time free and clear of all
Encumbrances created by, through or under the Company, except for Permitted
Encumbrances.
(b) The Company has not done or failed to do any act or thing whereby any of the
Petroleum and Natural Gas Rights or Tangibles may become liable or subject to
termination, surrender, forfeiture, cancellation or alienation.
3.13 Quiet Enjoyment
Except for interruptions which in the aggregate would not have a Material
Adverse Effect, subject to the rents, covenants, conditions and stipulations in
the Leases and on the lessee's or holder's part thereunder to be paid, performed
and observed and to the Permitted Encumbrances, the Company, after Closing, will
continue to hold and enjoy the Petroleum and Natural Gas Rights, the
Miscellaneous Interests and the Tangibles for the remainder of their respective
terms and all renewals or extensions thereof after Closing, without any
interruption of or by the Vendors or any other person (other than the Purchaser)
whomsoever claiming or to claim the same or any part thereof or any interest
therein by, through or under the Company or the Vendors.
3.14 Material Contracts
(a) Schedule 3.14 is an accurate and complete list of all Material Contracts,
other than those described in any other Schedule. All of the Material Contracts
are in full force and effect, unamended, and the Company is not in and has not
received notice of any Material default in respect of any such Material Contract
or commitment by it or any of the parties to any such Material Contract, which
default has not been rectified as of the date of this Agreement. None of the
other parties to any of the Material Contracts have given notice to the Company
of their intention to terminate or amend any of the Material Contracts, except
as specifically contemplated herein.
(b) Except as disclosed in Schedule 3.14, the Company is not a party to any oral
or written (i) confidentiality or standstill agreement, non-competition
agreement or other Material agreement or contract which, after giving effect to
the transactions contemplated by this Agreement, purports to restrict or bind
the Company or any of its affiliates or (ii) collective bargaining agreement.
Except as disclosed in the Property Schedule, the Company is not a party to any
contract or agreement granting a preferential right of purchase or similar right
to any Person with respect to any of the Assets.
<PAGE>
3.15 Litigation
Except as disclosed in Schedule 3.15, there is no suit, action, litigation,
investigation, claim, complaint, grievance or proceeding, including appeals and
applications for review, in progress or pending or, to the knowledge of the
Company, threatened, by or against or relating to the Company or any of its
assets or businesses which, if determined adversely to the Company, would have a
Material Adverse Effect. Except as disclosed in Schedule 3.15, there is not
presently outstanding against the Company any judgment, decree, injunction, rule
or order of any court, governmental department, commission, board, bureau,
agency or arbitrator which could reasonably be expected to have a Material
Adverse Effect.
3.16 Compliance with Terms
The Company has complied with, performed, observed and satisfied all terms,
conditions, obligations and liabilities which have arisen prior to the Closing
Date and were the obligations of the Company under any of the provisions of any
law, statute, order, writ, injunction or decree of any Governmental Authority or
court and in respect of which there could occur a Material Adverse Effect if not
complied with, performed, observed or satisfied.
3.17 Title Documents and Production Sales Contracts
The Company has made available for inspection by the Purchaser or its
representatives:
(a) all documents, instruments, records and books relevant to
title to the Assets and the operation thereof; and
(b) all production sales contracts and other contracts within the possession or
control of the Company for the sale of Petroleum Substances produced from the
Lands or lands with which the Lands have been pooled or unitized.
3.18 Production and Accounts Receivable
Except for those non-payments which in the aggregate will not exceed $150,000:
(a) payments of production revenue and deliveries in kind in respect of
Petroleum Substances produced from the Lands are being paid or made, as the case
may be, to the Company consistent with the ordinary practice in the oil and gas
industry; and
(b) the amount of all accounts receivable, unbilled invoices and other debts due
or recorded in the records and books of account of the Company as reflected on
the July 31 Balance Sheet are valid, enforceable and collectible and none of the
accounts receivable reflected in the July 31 Balance Sheet are subject to any
counterclaim or set-off except to the extent reflected in the July 31 Balance
Sheet.
<PAGE>
3.19 Employment Matters
The Company does not have any employees. The Company has not established any
severance, pension, retirement or other individual or group employment benefit
plans.
3.20 Employees
Schedule 3.20 is a true and complete list of all individuals who are currently
employees of Morrison and who are employed full-time by Morrison so that
Morrison can perform its services under the Morrison Agreements.
3.21 Insurance
Schedule 3.21 sets forth a true and complete list and brief summary of the terms
of all of the Company's insurance policies (in this Section 3.21, the "said
documents"). The Company maintains or causes to be maintained such policies of
insurance, issued by responsible insurers, as are appropriate to its operations,
property and assets, in such amounts and against such risks as are customarily
carried and insured against by owners of comparable operations, properties and
assets. All of the said policies are in full force and effect and the Company is
not in default, as to the payment of premium or otherwise, under the terms of
any such policy. None of the said policies contains a provision whereby the
insurer is entitled to terminate the said policy because of the sale of control
of the Company pursuant to this Agreement.
3.22 Copies of Agreements etc.
A current and complete copy of each of the contracts, commitments, mortgages,
leases, instruments and other documents identified in the Schedules (in this
Section 3.22, the "said documents"), including the Material Contracts and all
amendments thereto, has been made available for inspection by the Purchaser.
There are no negotiations presently occurring with respect to the renewal,
repudiation or amendment of any of the said documents or any of the Material
Contracts.
3.23 Bank Accounts, etc.
Schedule 3.23 sets forth:
(a) the name of each bank and other depository with which the Company
maintains any bank account, trust account or safety deposit box, the number of
each such account and the names of all Persons authorized to draw thereon or who
have access thereto; and
(b) the names of all Persons, if any, holding powers of
<PAGE>
attorney from the Company and a summary statement of the terms
thereof.
3.24 Corporate Records and Minute Books
The corporate records and minute books of the Company have been made available
to the Purchaser at the offices of BJV or the Company and include complete and
accurate minutes of all meetings of the directors and shareholders of the
Company held to date and all consent resolutions passed by the directors and
shareholders, since the date of its incorporation. The share certificate book,
register of shareholders, register of transfers and register of directors
included therein of the Company, are complete and accurate. All of the corporate
records and minute books of the Company which have been furnished to the
Purchaser for it to review accurately record all Material transactions of the
Company in all respects and have been maintained consistently in accordance with
good business practices.
3.25 Environmental Matters
Except as disclosed in Schedule 3.25 or in any of the reports and other
documents described in Schedule 3.25:
(a) all Environmental Approvals in the possession of the
Company:
(i) which are material to the continued operation of Major
Facilities operated by the Company;
(ii) which relate to any abandonment, reclamation, work or
remediation obligation of the Company; or
(iii) which relate to any Major Facilities not operated
by the Company and which are in the possession of the Company
have been made available to the Purchaser at the Company's
Calgary office for inspection and review by the Purchaser;
(b) the Company and its operations and its Assets are (1) in substantial
compliance with all Environmental Laws, (2) are not the subject of any remedial,
preventative or control action, direction or order by any Governmental
Authorities, or any investigation or evaluation by any Governmental Authorities,
as to whether any remedial or preventative action is needed to respond to an
existing or potential Environmental concern and (3) there is no reasonable basis
for any Person to assert that the Company is liable to any Person as a result of
the release of any Substance into the Environment or into any facility or
structure;
(c) the Company has made available, for inspection and review by the Purchaser,
all audits, reports and assessments in respect of Environmental matters relating
to the Assets operated by the Company, and all audits, reports and assessments
relating to other Assets, to the extent that the audits, reports and assessments
<PAGE>
are within the possession or control of the Vendors or the Company; and
(d) all Environmental Approvals, if any, required to be obtained, held, or filed
by the Company in connection with any aspect of the business of the Company
including those related to the treatment, storage, disposal or release of a
hazardous substance, which relate to any abandonment, reclamation, work or
remediation obligation of the Company, and which are material to the continued
operation of the Assets, have been duly obtained, held or filed and remain valid
and in effect and the Company is in substantial compliance with all terms and
conditions of all such Environmental Approvals;
Notwithstanding any other provision of this Agreement, this Section 3.25 is the
sole representation and warranty of the Company with respect to Environmental
matters and no other representations or warranties shall be interpreted so as to
apply to, contemplate or deal with any matter relating to the Environment. For
the purposes of this Section 3.25, "substantial compliance" means that the
aggregate direct cost of compliance with Environmental Laws and the
Environmental Approvals referred to in Section 3.25(d), other than those
disclosed in Schedule 3.25, would not exceed in the aggregate $1 million.
3.26 No Production Penalties
None of the Wells has been overproduced such that it is subject to a production
penalty or limitation which will result in it being shut in or have its
production curtailed, except for any such penalties which would not in the
aggregate have a Material Adverse Effect on the Company or which are of general
application to producing wells in Alberta and any such penalties and limitations
which have resulted from circumstances where good oil and gas field practices
have been followed (and penalties and limitations which result from prior
production in excess of allowables shall be deemed not to have arisen in such
circumstances).
3.27 No Excess Gas Deliveries
The Company has not received notice from a purchaser of natural gas produced
from the Petroleum and Natural Gas Rights asserting that the Company has
delivered to such purchaser an annual amount of natural gas in excess of the
amount which the Company was entitled to deliver to the particular purchaser
under the applicable gas purchase contract.
3.28 Prepaid Gas Obligations
The Company is not obligated by virtue of a prepayment or similar arrangement to
deliver Petroleum Substances without then or thereafter receiving full payment
therefor.
<PAGE>
3.29 Royalty Payments
All Royalties have been properly and timely paid to the Crown, lessors and other
holders of the Royalties with respect to all production or sales of Petroleum
Substances from the Petroleum and Natural Gas Rights and all filings in respect
of such Royalties have been properly made in accordance with the applicable
legislation or agreements.
3.30 Gas Balancing Agreements
The Company is not party to any gas balancing agreements.
3.31 Production Sale Contracts
Except for those contracts described in Schedule 3.31 and contracts which are
terminable on not more than 60 days' notice, none of the Petroleum and Natural
Gas Rights are dedicated or otherwise subject to any contractual or other
arrangement for the sale, processing or transportation of Petroleum Substances
produced therefrom (or otherwise related to the marketing of such Petroleum
Substances) which would bind the Company or would otherwise restrict the rights
of the Company to take possession of and market such Petroleum Substances.
3.32 Partnerships
None of the Petroleum and Natural Gas Rights is subject to any tax or common law
partnership (other than any Permitted Encumbrances) except for any such
partnership created under a joint operating or similar agreement to which the
Company is party.
3.33 Capacity
Subject to contractual and regulatory restrictions, all Wells which are
currently producing natural gas in paying quantities (which for clarity is
agreed to exclude Wells which are abandoned, capped or shut in or which are
being produced for test purposes only) are connected to a gathering system of
sufficient capacity to permit the continuing delivery of Petroleum Substances in
accordance with the Company's contractual obligations to buyers of its
production for the reasonably foreseeable future.
3.34 Capital Expenditures
Except as disclosed in or permitted by Schedule 3.6 and subject to Section 8.1,
the Company has not made any oral or written commitments or agreement to acquire
any assets (including under circumstances where such acquisition would be
classified as a capital expenditure under Canadian generally accepted accounting
principles consistently applied) or make any capital expenditure or contribution
in any individual transaction or project
<PAGE>
including the drilling, recompletion, reworking, plugging back or abandonment of
any Wells where the purchase price, capital expenditure or contribution required
of the Company, directly or indirectly, exceeds $250,000 or in transactions or
projects where the aggregate purchase price, capital expenditure or contribution
exceeds $2 million.
3.35 Engineering Report
In connection with the preparation of the Engineering Report, the Company has
provided to Sproule Associates Limited ("Sproule") all information requested by
Sproule which was in the possession of the Company and would be of Material
relevance to the preparation of the Engineering Report. All such information was
Materially true and complete and did not omit any information required to make
it Materially true and complete (except for information already in Sproule's
possession or publicly available to Sproule).
3.36 [Intentionally Omitted]
3.37 No Business in the United States
All of the Assets and the Excluded Assets are located outside the United States
and the Company has not made aggregate sales in or into the United States of
U.S. $25 million or more in the fiscal year ending October 31, 1995.
3.38 Due Authorization
The Company has all necessary power (corporate or otherwise), authority and
capacity to enter into this Agreement and to carry out its respective
obligations under this Agreement. The execution and delivery of this Agreement
and the consummation of the transactions contemplated in this Agreement have
been duly authorized by all necessary action (corporate or otherwise) on its
part.
3.39 Enforceability of Obligations
This Agreement constitutes the Company's valid and binding obligation
enforceable against the Company in accordance with the terms of this
Agreement,asubject, however, to limitations with respect to enforcement imposed
by law in connection with bankruptcy or similar proceedings and to the extent
that equitable remedies such as specific performance and injunction are in the
discretion of the court from which they are sought.
3.40 Consents, Approvals or Authorizations
Except for the AEUB Approval or as otherwise obtained, no consent, approval,
order or authorization of, filing or registration with, or notification to, any
Governmental Authority or regulatory authority, or consent, approval, order or
<PAGE>
authorization of any Person (except those that may not be unnecessarily
withheld), is required on its behalf in connection with the execution and
delivery of this Agreement by the Company or the completion of the transactions
contemplated by this Agreement.
3.41 Finders' Fees
Except for finders' fees which are to be deducted in calculating the Nevis
Proceeds, the Company has not incurred any liability, contingent or otherwise,
for brokers' or finders' fees in respect of the transactions contemplated herein
for which the Company or the Purchaser shall have any responsibility.
Each of the Vendors, separately as to itself, makes the representations and
warranties set forth in section 3.42 to 3.46 inclusive to the Purchaser.
3.42 Formation of the Vendors; Title to the Purchased Shares
Other than Feshbach and Lynch, each of whom is an individual, it is a
corporation, partnership or trust duly incorporated or otherwise formed, validly
existing and in good standing under the laws of the jurisdiction of its
formation. It or he is the beneficial owner, and will at Closing be the
beneficial and registered owner, of the number of Purchased Shares set forth
opposite its name in Schedule 1.1(c) free and clear of all Encumbrances (other
than the rights of the Purchaser under this Agreement). As at the date of this
Agreement, it or he is the beneficial owner of the principal amount of the Old
Debentures set forth opposite its name in Schedule 1.1(c). It or he will at
Closing be the beneficial and registered owner of the principal amount of the
Debentures in Canadian dollars equivalent to the amount set forth opposite its
or his name in Schedule 1.1(c) plus interest accrued but unpaid thereon as
contemplated in the definition of "Debentures", free and clear of all
Encumbrances (other than the rights of the Purchaser under this Agreement) and
the Old Debentures held by it or him will have been canceled and the Company
will have no liability, obligation or duty with respect thereto. It or he will
deliver to the Purchaser on Closing good, valid and marketable title to all of
such Purchased Shares free and clear of all Encumbrances and has the exclusive
right to dispose of such Purchased Shares provided in this Agreement. Such
disposition will not violate, contravene, breach or offend against or result in
any default under any indenture, mortgage, lease, agreement, obligation,
instrument, charter or by-law provision, statute, regulation, order, judgment,
decree, licence, permit or law to which it or he is party or subject or by which
it is bound or affected (other than any such violation, contravention, breach,
offence or default which will not have a Material Adverse Effect).
<PAGE>
3.43 Due Authorization
It or he has all necessary power (corporate or otherwise), authority and
capacity to enter into this Agreement and to carry out its obligations under
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated in this Agreement have been duly
authorized by all necessary action (corporate or otherwise) on its or his part.
3.44 Enforceability of Obligations
This Agreement constitutes its or his valid and binding obligation enforceable
against it in accordance with the terms of this Agreement,asubject, however, to
limitations with respect to enforcement imposed by law in connection with
bankruptcy or similar proceedings and to the extent that equitable remedies such
as specific performance and injunction are in the discretion of the court from
which they are sought.
3.45 Consents, Approvals or Authorizations
Except for the AEUB Approval or as otherwise obtained, no consent, approval,
order or authorization of, filing or registration with, or notification to, any
Governmental Authority or regulatory authority, or consent, approval, order or
authorization of any Person (except those that may not be unnecessarily
withheld), is required on its or his behalf in connection with the execution and
delivery of this Agreement by it or the completion of the transactions
contemplated by this Agreement.
3.46 Finders' Fees
Except for finder's fees which are to be deducted in calculating the Nevis
Proceeds, it has not incurred any liability, contingent or otherwise, for
brokers' or finders' fees in respect of the transactions contemplated herein for
which the Company or the Purchaser shall have any responsibility.
Without limiting Section 1.3:
(a) except only to the extent of the representations and
warranties set forth in this Agreement:
(i) the Company and the Vendors negate and disclaim representations and
warranties at any time or times made orally or in writing and directly or
indirectly concerning the transactions provided for in this Agreement, including
those in any information or advice provided to the Purchaser by any officer,
shareholder, director, employee, agent, consultant or representative of the
Company or the Vendors (including Jefferies); and
(ii) the Company and the Vendors make no representation or warranty, and shall
have no liability, directly or indirectly in respect of the Company's title in
<PAGE>
or to or Encumbrances against any Petroleum and Natural Gas Rights or as to the
Environmental condition of the Assets, the Environment, Environmental matters,
the effect of any of the Assets on the Environment, Environmental Approvals or
Environmental Laws; and
(b) notwithstanding anything to the contrary in Article 3 or elsewhere in this
Agreement, the Vendors make no representations or warranties whatsoever other
than those expressly set forth in Sections 3.42 to 3.46 inclusive, and the
Vendors and the Company make no representations or warranties and shall have no
liability directly or indirectly in respect of or which contemplate or relate
to:
(i) the quantity, quality, recoverability or deliverability
of reserves of Petroleum Substances attributable to the Petroleum
and Natural Gas Rights;
(ii) any geological or other interpretations or economic
evaluations of any Petroleum and Natural Gas Rights;
(iii) the condition, fitness or merchantability of any
of the Assets;
(iv) the value of any Petroleum and Natural Gas Rights, estimates of
prices or future cash flows arising from the sale of Petroleum Substances
attributable to any Petroleum and Natural Gas Rights, estimates of other
revenues attributable to the Petroleum and Natural Gas Rights or the
availability or continued availability of transportation to sell such Petroleum
Substances.
The Purchaser acknowledges and confirms, without diminishing the force and
effect of the express representations and warranties herein and in the
Schedules, that:
(c) it has inspected, or has been given a reasonable and adequate opportunity to
inspect, the Assets and their physical and Environmental condition and performed
its own due diligence and has not relied directly or indirectly on any data,
information or advice from or on behalf of the Company or the Vendors in that
regard in connection with the transactions provided for in this Agreement; and
(d) in agreeing to enter into and complete the transactions provided for in this
Agreement, and in completing such transactions, it has relied solely upon its
own engineering and other evaluations, assessments, inspections and projections,
without any direct or indirect involvement of or on behalf of the Company or the
Vendors.
UCC DISCLAIMER: EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES PROVIDED IN
ARTICLE 3, THE COMPANY AND THE VENDORS MAKE NO WARRANTY OR REPRESENTATION,
EXPRESS, STATUTORY OR IMPLIED, AS TO (I) THE ACCURACY, COMPLETENESS, OR
MATERIALITY OF ANY DATA, INFORMATION OR RECORDS FURNISHED TO THE PURCHASER IN
<PAGE>
CONNECTION WITH THE ASSETS; (II) THE QUANTITY, QUALITY, RECOVERABILITY OR
DELIVERABILITY OF RESERVES OF PETROLEUM SUBSTANCES ATTRIBUTABLE TO THE PETROLEUM
AND NATURAL GAS RIGHTS; (III) THE ABILITY OF THE ASSETS TO PRODUCE HYDROCARBONS,
INCLUDING WITHOUT LIMITATION PRODUCTION RATES, DECLINE RATES AND RECOMPLETION
OPPORTUNITIES; (IV) GAS BALANCING INFORMATION, ALLOWABLES OR OTHER REGULATORY
MATTERS, (V) THE PRESENT OR FUTURE VALUE OF THE ANTICIPATED INCOME, COSTS OF
PROFITS, IF ANY, TO BE DERIVED FROM THE ASSETS, OR (VI) THE ENVIRONMENTAL
CONDITION OF THE ASSETS. ANY AND ALL DATA, INFORMATION OR OTHER RECORDS
FURNISHED BY THE COMPANY OR THE VENDORS ARE PROVIDED TO THE PURCHASER AS A
CONVENIENCE AND THE PURCHASER'S RELIANCE ON OR USE OF THE SAME IS AT THE
PURCHASER'S SOLE RISK.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ABRAXAS AND THE PURCHASER
Abraxas and the Purchaser hereby make the following representations and
warranties to the Company and the Vendors.
4.1 Incorporation
Abraxas and the Purchaser are corporations duly incorporated, organized, validly
existing and in good standing under the laws of the State of Nevada and Canada,
respectively.
4.2 Due Authorization
Abraxas and the Purchaser have all necessary corporate power, authority and
capacity to enter into this Agreement and to carry out their obligations under
this respective Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated in this Agreement have been duly
authorized by all necessary corporate action on the part of Abraxas and the
Purchaser.
4.3 Enforceability of Obligations
This Agreement constitutes a valid and binding obligation of Abraxas and the
Purchaser enforceable against Abraxas and the Purchaser in accordance with the
terms of this Agreement, subject, however, to limitations with respect to
enforcement imposed by law in connection with bankruptcy or similar proceedings
and to the extent that equitable remedies such as specific performance and
injunction are in the discretion of the court from which they are sought.
4.4 Absence of Conflicting Agreements
The execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated hereby and compliance with the provisions hereof
will not constitute a Violation by Abraxas or the Purchaser under or pursuant to
any provision of:
<PAGE>
(a) the Articles of Incorporation, as amended, or By-laws, as amended, of
Abraxas or the Purchaser (a true and complete copy of each of which as of the
date hereof has been delivered to the Representative);
(b) any contract, agreement, loan or credit agreement, note, bond, debenture,
mortgage, indenture, lease, employee benefit plan or other agreement,
obligation, instrument, permit, concession, franchise, or license applicable to
Abraxas or the Purchaser (a true and complete copy of each of which as of the
date hereof has been delivered to the Representative); or
(c) any judgment, injunction, order, decree, statute, law, ordinance, rule or
regulation applicable to Abraxas or the Purchaser or their respective property
or assets.
4.5 Consents, Approvals or Authorizations
Except in connection with the AEUB Approval, no consent, approval or
authorization of, filing or registration with, or notification to, any
governmental or regulatory authority or consent, approval or authorization of
any Person, is required on behalf of Abraxas or the Purchaser in connection with
the execution and delivery of this Agreement by it or the consummation of the
transactions contemplated by this Agreement.
4.6 Finders' Fees
Neither Abraxas nor the Purchaser has incurred any liability, contingent or
otherwise, for brokers' or finders' fees in respect of the transactions
contemplated herein for which the Company or the Vendors shall have any
responsibility.
4.7 Independent Evaluation
Abraxas and the Purchaser are experienced and knowledgeable investors in the oil
and gas business. Abraxas and the Purchaser have been advised by and have relied
solely on their own expertise and legal, tax, reservoir engineering and other
professional counsel concerning this transaction, the Securities and the Assets
and the value thereof, as determined by their examination of the Company's
records and inspection of the Company, the Securities and the Assets, and the
representations, warranties and covenants made by the Company and the Vendors in
this Agreement.
4.8 Eligibility
The Purchaser is eligible under the Regulations to own the Purchased Shares.
<PAGE>
4.9 Securities Laws
The Purchaser is acquiring the Purchased Shares as principal for its own account
for the purpose of investment and not with a view to or for sale in connection
with any distribution thereof
ARTICLE 5
SURVIVAL
5.1 Nature and Survival
(a) Subject to the limitations set forth in Section 5.1(b), the representations,
warranties, indemnities and covenants contained in Sections 2.3, 8.1 and 8.4 and
Articles 1, 3, 4, 9, 10, 11 and 13 of this Agreement shall survive the Closing,
the execution and delivery of any transfer instruments and other documents of
title to the Purchased Shares and any other agreements, certificates and
indemnities under this Agreement and the payment of the Purchase Price.
(b) The representations and warranties concerning tax matters set out in Section
3.9, the representation and warranty set forth in Section 3.29, insofar as it
concerns Royalties (herein "Alberta Crown Royalties") payable to Her Majesty the
Queen in right of the Province of Alberta, and the provisions of Section 9.6,
the covenants, agreements and indemnities related thereto and the covenants set
forth in Article 10 shall survive for a period of 1 year from the Closing Date.
All other representations, warranties, indemnities and covenants shall survive
for a period of 6 months from the Closing Date. If no Contractual Claim has been
made under this Agreement in accordance with the applicable provision in Section
9.1, prior to the expiry of the applicable survival period provided for, against
a Party for any incorrectness or breach of any representation or warranty made
in, or breach of any covenant, agreement or indemnity in, this Agreement by such
Party, such Party shall have no further liability under this Agreement or
otherwise with respect to such representation or warranty. If Closing occurs,
none of the Parties shall have any claim or remedy in respect of any of the
representations, warranties, covenants and indemnities set forth herein or any
agreement, certificate or document delivered pursuant hereto except as provided
in Article 9.
(c) The provisions of Sections 9.1, 9.2, 9.3 and 9.6 shall survive Closing for
so long as any Contractual Claims made prior to the expiry of the applicable
survival period remain unresolved.
5.2 Reliance
No Party shall be entitled to maintain an action after Closing against another
Party in respect of any incorrectness or breach by the other Party of a
<PAGE>
representation or warranty in Articlea3 or 4, as the case may be, if the Party
asserting the claim was actually aware of the incorrectness or breach at or
prior to Closing or if a Purchase Price adjustment was made pursuant to Section
2.9 in respect of the particular incorrectness or breach of a representation or
warranty.
ARTICLE 6
PURCHASER'S CONDITIONS PRECEDENT
The obligation of the Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction of, or compliance with, or
waiver in writing by the Purchaser of, on or prior to the Closing Time, each of
the following conditions precedent (each of which is acknowledged to be inserted
for the exclusive benefit of the Purchaser and may be waived by it in whole or
in part in writing).
6.1 Truth and Accuracy of Representations of Company at the
Closing Time
The representations and warranties of the Vendors and the Company made in or
pursuant to this Agreement shall be Substantially true and correct as of the
Closing Time and with the same force and effect as if made at and as of the
Closing Time (except as such representations and warranties may be affected by
the occurrence of events or transactions expressly contemplated and permitted by
this Agreement or as consented to in writing by the Purchaser) and the Purchaser
shall have received a certificate of the Company to the effect that its
representations and warranties are true and correct as of the Closing Time
except as aforesaid in this Section 6.1 and except to the extent that a Purchase
Price adjustment has been made as contemplated in Section 2.9.
6.2 Performance of Obligations
The Vendors and the Company shall have performed or complied with all of their
obligations, covenants and agreements under this Agreement. The Purchaser shall
have received a certificate of the Company to the effect that it has performed
or complied with all of its obligations, covenants and agreements under this
Agreement.
6.3 Receipt of Closing Documentation
All documentation relating to the due authorization and completion of the sale
and purchase of the Purchased Shares and the termination of the Option under
this Agreement and all actions and proceedings taken on or prior to the Closing
in connection with the performance by the Company and the Vendors of their
respective obligations under this Agreement shall be satisfactory to the
Purchaser (acting reasonably) and the Purchaser shall have received copies of
all such documentation or other evidence as it may reasonably request in order
<PAGE>
to establish the consummation of the transactions contemplated by this Agreement
and the taking of all corporate proceedings in connection therewith in
compliance with these conditions, in form (as to certification and otherwise)
and substance satisfactory to the Purchaser acting reasonably.
6.4 Consents, Authorizations and Registrations
All material consents, approvals, orders, authorizations and confirmations of
any Persons and Governmental Authorities including without limitation the AEUB
Approval (or registrations, declarations, filings or recordings with any such
authorities) which are reasonably required in connection with the completion of
the transactions contemplated by this Agreement or the execution of this
Agreement shall have been obtained on or before the Closing Time.
6.5 [Intentionally Omitted]
6.6 Agreements Terminated
The Option Agreement, the Investors' Agreements and the Management Agreements
shall have been terminated and all sums due and owing under the Investors'
Agreements and the Management Agreements shall have been paid in full.
6.7 Closing Opinion
The Purchaser shall have received an opinion from BJV and an opinion from legal
counsel for each of the Vendors who is not an individual, each dated the Closing
Date, substantially in the forms attached as Schedule 6.7 (a) and (b)
respectively.
6.8 Title Opinion Update
The Purchaser shall have received from BJV an opinion updating the BJV Title
Opinion in the form of Schedule 6.8.
6.9 Financing
The Purchaser shall have obtained financing on terms and conditions satisfactory
to the Purchaser, in the Purchaser's sole discretion, to consummate the purchase
and sale of the Purchased Shares and termination of the Option as contemplated
hereby.
6.10 Officers and Directors
All of the officers and directors of the Company shall have resigned effective
as of the Closing Date and shall have delivered releases to the Company in the
form of Schedule 6.10.
<PAGE>
6.11 Escrow Agreement
The Vendors, the Representative and the Escrow Agent shall have executed and
delivered the Escrow Agreement.
6.12 Sale of Excluded Assets
The sale of the Excluded Assets to Morrison and the assumption of the Excluded
Liabilities by Morrison shall have been completed pursuant to the Nevis
Agreement.
6.13 Termination Agreements and Transition Agreement
The Termination Agreements and all of the releases provided for therein and the
Transition Agreement shall have been executed and delivered.
6.14 Material Adverse Damage
From August 1, 1996 until the Closing Date, there shall not have been any
physical damage to any of the Petroleum and Natural Gas Rights or the Tangibles:
(a) the uninsured portions of the costs of repair of which will
exceed $3 Million; or
(b) which is insured and not substantially repaired prior to the Closing Date
but the cost of repair of which will exceed $3 Million.
6.15 No Litigation
No action or proceeding shall have been instituted or, to the best knowledge of
the Company, threatened before a court or other government body or by any public
authority to restrain or prohibit, or otherwise affect, any of the transactions
contemplated hereby, and the Company shall have delivered to the Purchaser a
certificate dated as of the Closing Date to that effect.
6.16 Bank Accounts
The Company shall have executed and delivered to the Purchaser documents
evidencing the change of signing authorities, in respect of the bank accounts
listed in Schedule 3.23 to individuals identified by the Purchaser to the
Representative not later than three Business Days prior to Closing.
6.17
Debentures
The Debentures will have been validly issued in full and complete satisfaction
of all of the issued and outstanding Old Debentures pursuant to the Debenture
Prepayment Agreement and the Debentures shall have been delivered to the
Representative in accordance with Section 8.5. If any of the foregoing
<PAGE>
conditions in this Article, which are for the sole benefit of the Purchaser,
have not been fulfilled and performed by Closing, the Purchaser may terminate
this Agreement by notice in writing to the Company and the Vendors. However, the
Purchaser may in writing waive compliance with any condition, in whole or in
part, if it sees fit to do so, without prejudice to its rights of termination in
the event of nonfulfillment of any other condition, in whole or in part, or to
its rights to recover damages for the breach of any representation, warranty,
covenant or condition contained in this Agreement, whether or not it terminates
this Agreement.
ARTICLE 7
VENDORS' CONDITIONS PRECEDENT
The obligation of the Vendors to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction of or compliance with, or
waiver in writing by all of the Vendors of, on or prior to the Closing Time,
each of the following conditions precedent (each of which is acknowledged to be
inserted for the exclusive benefit of the Vendors and may be waived by them in
whole or in part).
7.1 Truth and Accuracy of Representations of Purchaser at
Closing Time
The representations and warranties of Abraxas and the Purchaser made in or
pursuant to this Agreement shall be Substantially true and correct as of the
Closing Time and with the same force and effect is if made at and as of the
Closing Time (except as such representations and warranties may be affected by
the occurrence of events or transactions expressly contemplated and permitted by
this Agreement or as consented to in writing by the Vendors) and the Vendors
shall have received a certificate of Abraxas and the Purchaser to that effect.
7.2 Performance of Obligations
Abraxas and the Purchaser shall have performed or complied with all of their
obligations, covenants and agreements under this Agreement. The Vendors and the
Company shall have received a certificate of Abraxas and the Purchaser to that
effect.
7.3 Receipt of Closing Documentation
All documentation relating to the due authorization and completion of the sale
and purchase of the Purchased Shares and the termination of the Option under
this Agreement and all actions and proceedings taken on or prior to the Closing
in connection with the performance by the Purchaser of its obligations under
this Agreement shall be satisfactory to the Vendor (acting reasonably) and the
Vendor shall have received copies of all such documentation or other evidence as
<PAGE>
it may reasonably request in order to establish the consummation of the
transactions contemplated by this Agreement and the taking of all corporate
proceedings in connection therewith in compliance with these conditions, in form
(as to certification and otherwise) and substance satisfactory to the Vendors,
acting reasonably.
7.4 Consents, Authorizations and Registrations
All material consents, approvals, orders, authorizations and confirmations of
any Persons and Governmental Authorities including the AEUB Approval (or
registrations, declarations, filing or recordings with any such authorities)
which are reasonably required in connection with the completion of the
transactions contemplated by this Agreement or the execution of this Agreement,
shall have been obtained on or before the Closing Time.
7.5 Closing Opinion
The Vendors shall have received an opinion from BDP and an opinion from Cox &
Smith, Incorporated, each dated the Closing Date, substantially in the forms
attached as Schedule 7.5(a) and (b) respectively.
7.6 Release of Directors and Officers
The Purchaser and the Company shall have delivered releases in the form of
Schedule 7.6 to and in respect of each of the Company's current officers and
directors.
7.7 Escrow Agreement
The Escrow Agent and the Purchaser shall have executed and delivered the Escrow
Agreement.
7.8 Representations and Warranties
The representations and warranties of the Vendors and the Company made in or
pursuant to this Agreement shall be Substantially true and correct as of the
Closing Time and with the same force and effect as if made as of the Closing
Time (except as such representations and warranties may be affected by the
occurrence of events or transactions expressly contemplated and permitted by
this Agreement or as consented to in writing by the Purchaser).
7.9 No Litigation
No action or proceeding shall have been instituted or, to the best knowledge of
the Company, threatened before a court or other government body or by any public
authority to restrain or prohibit any of the transactions contemplated hereby.
<PAGE>
7.10 Termination Agreements and Transition Agreement
The Termination Agreements and the releases provided for therein and the
Transition Agreement shall have been executed and delivered.
7.11 Material Adverse Damage
From August 1, 1996 until the Closing Date, there shall not have been any
physical damage to any of the Petroleum and Natural Gas Rights or the Tangibles,
the uninsured portions of the cost of repair of which will exceed $3 Million.
If any of the foregoing conditions in this Article, which are for the sole
benefit of the Vendors, have not been fulfilled or performed by Closing, the
Vendors may terminate this Agreement by notice in writing to the Purchaser.
However, the Vendors may in writing waive compliance with any condition, in
whole or in part, if they see fit to do so, without prejudice to its rights of
termination in the event of nonfulfillment of any other condition in whole or in
part or to its rights to recover damages for the breach of any representation,
warranty, covenant or condition contained in this Agreement, whether or not it
terminates this Agreement.
ARTICLE 8
INTERIM PERIOD
8.1 Conduct of Business Prior to Closing
(a) During the Interim Period, the Company shall:
(i) except as otherwise expressly permitted by this Agreement, conduct the
Company's businesses in the ordinary and usual course and in accordance with
good industry practice, and shall not:
(A) without the prior written consent of the Purchaser, make
or commit to any single expenditure in excess of $250,000 (except in the event
of a catastrophe or other event endangering life or property); or
(B) enter into any transaction which if effected before the
date of this Agreement would constitute or result in a breach of the
representations, warranties or agreements contained in this Agreement;
(ii) continue in full force and effect all existing policies
or insurance presently maintained or caused to be maintained by
the Company; and
(iii) comply with all laws affecting the operation of
its business and pay all required Taxes and installments of
Taxes;
<PAGE>
(iv) to the extent that the nature of its interests in the Assets permits,
maintain and keep the Assets in good condition and working order, preserving the
Assets in full force and effect and performing all covenants and conditions
imposed upon the Company including, but not limited to, payment of royalties,
delay rentals, shut-in gas royalties and any and all other required payments
(except those held in suspense in good faith by the Company for a justifiable
purpose);
(v) to the extent that the nature of its interests in the Assets permits,
operate or cause to be operated the Wells or any unit of which any of the Assets
are a part in a good and workmanlike manner in accordance with the terms of the
respective applicable operating agreements and good industry practices;
(vi) timely perform all of its obligations under the
Material Contracts;
(vii) exercise due diligence in safeguarding and maintaining secure and
confidential all geological and geophysical maps, confidential reports and all
other confidential data in its possession relating in any way to the Assets;
(viii) maintain the Company's Articles of Incorporation
and By-Laws in their form on the date of this Agreement,
(ix) maintain the compensation payable or to become payable by the Company
to any officer, employee or agent at their levels on the date of this Agreement,
(x) except for the sale of the Excluded Assets, preserve the business
organization of the Company, keep available to Purchaser the Company's officers
and agents and preserve its present business relations with suppliers, customers
and others and shall not commit any act or any way assist others to commit any
act which will injure the Company or the business of the Company.
and except as otherwise provided or disclosed in this Agreement the Company will
not, without the Purchaser's prior written consent, which shall not be
unreasonably withheld or delayed:
(xi) surrender or abandon any of the Assets or amend any
agreement or contract relating to the Assets; or
(xii) sell, transfer or dispose of, or grant a security interest in or in
respect of, all or any part of or any interest in the Assets, except for the
sale (in the ordinary course of business pursuant to contract, terminable on
notice of not more than (60 days) of Petroleum Substances produced from the
Lands.
(xiii) make any bonus, pension, retirement or insurance payment or arrangement
to or with any such persons except those that may have already been accrued, and
bonus and insurance payments in the ordinary course of business and consistent
<PAGE>
with the past practice of the Company;
(xiv) issue, sell or otherwise dispose of its capital
stock or any right or option to acquire any shares of its capital
stock;
(xv) declare or pay any dividend or make any other distribution or payment
in respect of its capital stock or redeeming, purchasing or otherwise acquiring
or agreeing to redeem, purchase or acquire any of its capital stock;
(xvi) create, incur, or assume any long-term or
short-term debt whether for money borrowed or otherwise;
(xvii) assume, guarantee, endorse or otherwise become
liable or responsible for the obligation of any other Person;
(xviii) make any loans, advances or capital contributions to, or
investments in, any other Person, prepay any interest payable under the Old
Debentures or the Debentures (other than to the extent that the issuance of the
Debentures constitutes a prepayment of interest under the Old Debentures) or
distribute any insurance proceeds or the Nevis Proceeds to any shareholders;
(xix) make any change affecting any bank, safe deposit
or power of attorney arrangements of the Company;
(xx) waive, compromise or settle any material right or claim
of the Company;
(xxi) enter into any forward, future, swap or hedging
contract that burdens the Assets or production therefrom; or
(xxii) amend or modify any of the Material Contracts, the
Option Agreement, the Nevis Agreement, the Old Debentures, the
Debentures or the Termination Agreements;
The Purchaser will respond to all written requests for consent under this
Section 8.1(a) with reasonable promptness, and within such reasonable time
period as the Company or the Vendors may specify to enable a timely reply to be
given to any third party. If the Purchaser does not respond within any such time
period specified by the Company or Vendors, the Company and the Vendors shall be
entitled to carry out the action described in the request, so long as the action
is consistent with proper business practices.
(b) The Purchaser acknowledges that an operation may be proposed pursuant to a
facilities, unit, unit operating or other agreement and may proceed if a
majority, but not all, of the owners of the particular facility, unit or
property vote in favour thereof, and that the owners voting against the
operation will nevertheless be obliged to pay for their respective proportionate
shares of the costs of the operation. When the Company is required by this
<PAGE>
Section to obtain the written consent of the Purchaser in respect of any capital
expenditure which is subject to such a vote, the Company will vote in favour of
the particular expenditure unless the Purchaser instructs the Company to vote
against it. If the particular expenditure is approved of and proceeded with in
accordance with the applicable agreement notwithstanding that the Company may
have voted against the particular expenditure, the Purchaser shall,
notwithstanding its refusal to consent to the expenditure, be deemed to have
consented to it.
(c) If, having been given a written request for consent as contemplated in the
last paragraph of Section 8.1(a) and a reasonable time period to respond to the
said request having regard to the time period within which a reply is to be
given to the relevant third party, the Purchaser fails or refuses to consent
pursuant to this Section 8.1 to an expenditure necessary to preserve the
existence of any of the Leases and, as a consequence, any of the Leases or the
interest of the Company therein is terminated or surrendered or deemed to have
been terminated or surrendered, the Purchase Price shall not be reduced on
account of the termination or surrender nor shall the termination or surrender,
without more, constitute a breach or failure of the representations and
warranties of the Company relating thereto or of the Company's title thereto.
(d) The Company shall give prompt written notice to the Purchaser of any notice
or claim, written or oral, of default or breach by the Company, or of any
termination or cancellation (or threat of any of the same, whether disputed or
denied by the Company) received or given by the Vendors or the Company prior to
Closing under any instrument or agreement affecting the Assets to which the
Company is a party or by which it or any of the Assets is bound.
(e) Except with respect to the transactions contemplated by this Agreement,
during the period from the date of this Agreement to the Closing Date, the
Vendors shall not take, and shall cause the Company to refrain from taking, any
action to, directly or indirectly, encourage, initiate or engage in discussions
or negotiations with, or provide any information to, any Person, other than
Purchaser, concerning any purchase of the Securities, or any part thereof, or
any merger, sale of all or substantially all of the assets of the Company or
similar transaction involving the Company.
(f) Except with respect to the transaction contemplated by this Agreement,
during the period from the date of this Agreement to the Closing Date, the
Vendors shall not sell, transfer, dispose of, or grant a security interest in or
in respect of, all or any part of the Purchased Shares, the Option, the Old
Debentures or the Debentures.
<PAGE>
8.2 Access for Investigation
(a) For the purpose of permitting the Purchaser to investigate the business,
properties and assets of the Company, but subject to confidentiality obligations
of the Company or the Vendors to other Persons, the Company shall permit the
Purchaser and its representatives, during the Interim Period, without
interference to the ordinary conduct of the business of the Company, to have
reasonable access during normal business hours and on reasonable notice to the
premises and to all the books, accounts, records and other data of the Company
within the possession or control of the Company. The Company shall furnish to
the Purchaser such financial and operating data and other information with
respect to the business, properties and assets of the Company as the Purchaser
shall from time to time reasonably request. The right of the Purchaser to have
access to the Assets shall be subject to any contractual restrictions thereon.
The Company shall cooperate with the Purchaser in attempting to secure such
access from other Persons. The Purchaser shall repair any damage to the Assets
resulting from its inspection thereof and shall indemnify and save harmless the
Company and the Vendors from and against any Claims arising as the result of the
Purchaser conducting such inspection.
(b) In particular, without limiting the generality of Section 8.2(a), the
Company shall make the Material Contracts, the Leases and all agreements and
other documents and correspondence, including title opinions previously
prepared, relating to title to the Assets, and all financial, tax, accounting,
well, production and operating data and records of the Company, available to the
Purchaser and its representatives at the offices of the Company for such
inspection and review as the Purchaser reasonably requires.
8.3 Actions to Satisfy Closing Conditions
Each of the Parties agrees to take all such actions as are within its power or
control, and to use its best efforts, to cause other actions to be taken which
are not within its power or control, so as to ensure compliance with each of the
conditions and covenants set forth in Articles 6, 7 and 8 which are for the
benefit of any other Party.
8.4 Waiver of Conditions in Nevis Agreement
The Company shall not waive any of the conditions precedent of the Company to
closing set forth in Article 7 of the Nevis Agreement.
8.5 Delivery of Debentures to the Representative
Prior to the Closing, the Vendors shall deliver the Debentures to the
Representative, to be held in trust until payment of the principal and accrued
but unpaid interest has been made in accordance with section 9.7. The Vendors
and the Representative shall not demand payment of the Debentures earlier than
the Business Day immediately following the Closing Date.
<PAGE>
ARTICLE 9
POST-CLOSING MATTERS
9.1 Claims
(a) If, at any time, a Party or Parties (herein, whether one or more, a
"Notifying Party") believes that it has incurred or suffered or that it will
incur or suffer liabilities, losses or costs (herein collectively "Damages")
because of the incorrectness or breach of a representation or warranty in
Article 3 or 4 (whether as of the date hereof or at the Closing Time) or the
certificates delivered by the Company pursuant to Section 6.1 and 6.2 hereof, or
the breach of any covenant set forth in Section 2.3(d), 8.1, 8.4, 8.5, 9.3 or
9.6 or this Section 9.1 or Articles 10, 11 or 13, or any amount of Taxes or
Alberta Crown Royalties finally established by a Court of competent
jurisdiction, or agreed by the Representative to be payable by the Company as
the result of an Assessment as contemplated in Section 9.6, or any such amount
paid in good faith by the Company or the Purchaser (without the consent of the
Representative) with respect to an Assessment as contemplated in Sections 9.6(b)
and (d), or any claim by Jefferies for indemnification pursuant to the Jefferies
Indemnification Letter as the case may be, or the fraud of the Company or any of
the Vendors, as the result of which it has an actual or potential claim for
Damages or amounts or that for any other reason it has any claim hereunder (each
such claim being referred to as a "Contractual Claim"), the Notifying Party
shall forthwith give written notice (herein the "Claim Notice") to the other
Parties (herein, whether one or more, the "Receiving Party") and to the Escrow
Agent of the matter giving rise to the Contractual Claim. The notification shall
specify in reasonable detail the subject matter of the Contractual Claim, to the
extent then known to the Notifying Party. The Parties agree to deal in good
faith in the settlement or resolution of any Contractual Claim.
(b) Upon notice to the Notifying Party within 10 Business Days after receipt of
a Claim Notice, the Receiving Party shall have the right, in good faith, at its
own expense (not to be paid from the Escrow Account) and employing counsel of
its own choice, to contest and assume the defence of any Contractual Claim which
may result from a Claim made by a third party. In such event, the Notifying
Party shall have the right to retain its own counsel but the fees and expenses
of such counsel shall be at the expense of the Notifying Party. The failure to
give such notice of intent to defend a Contractual Claim shall constitute a
waiver of the Receiving Party's right to defend such Contractual Claim under
this Section 9.1(b) and shall preclude the Receiving Party from disputing the
manner in which the Notifying Party may in good faith conduct the defence of
such Contractual Claim or the reasonableness of any amount paid in good faith by
the Notifying Party in satisfaction of such Contractual Claim. The Receiving
<PAGE>
Party shall not compromise or settle any Contractual Claim without the consent
of the Notifying Party, not to be unreasonably withheld.
(c) The failure by a Party to give a Claim Notice to the other Parties with
respect to any Contractual Claim shall relieve the other Parties of their
obligations with respect to the particular Contractual Claim, but only if and to
the extent that the other Parties are prejudiced by such failure. The failure by
a Party to give the other Parties a Claim Notice with respect to any actual or
potential Contractual Claim within the period applicable by virtue of Section
5.1(b) shall relieve the Parties against whom the particular Contractual Claim
is or may be made of any liability with respect to such Contractual Claim.
(d) The Parties will cooperate with each other in providing access to their
respective records in connection with Contractual Claims. The Purchaser shall
preserve such data and other information as may reasonably be required in
connection with a Contractual Claim until the end of the limitation period
applicable by virtue of Section 5.1(b). The Notifying Party will use reasonable
efforts to make available to the Receiving Party:
(i) those Persons who are then employees of the Notifying Party or the
Vendors whose assistance, testimony or presence is necessary or advisable to
assist the Receiving Party to evaluate and defend the subject matter of a
Contractual Claim; and
(ii) all documents, records and other materials in the possession or
control of the Notifying Party and reasonably required by the Receiving Party to
evaluate and defend the subject matter of a Contractual Claim,
and, subject to the other provisions of this Agreement, shall otherwise
cooperate in all reasonable respects with the Receiving Party in evaluating and
defending the subject matter of Contractual Claims. The Purchaser shall preserve
all documents, records and other material as may reasonably be required in
connection with the subject matter of a Contractual Claim, for so long as the
obligation to indemnify continues in effect.
(e) Notwithstanding any other provision of this Agreement to the contrary, the
representation and warranty set forth in Section 3.9(i) shall be breached,
untrue or incorrect only if and to the extent that the aggregate of the tax pool
amounts referred to by category in Section 3.9(i)(i) to (vi) inclusive as
finally determined is less than $31 million, and the Damages incurred or
suffered by the Purchaser shall be deemed to be equal to $0.30 for each $1.00 by
which the aggregate of the said tax pool amounts is less than $31 million.
<PAGE>
9.2 Escrow Account
(a) Subject to Article 5, the Purchaser shall be entitled to recover from the
Escrow Account the Damages to which it establishes itself entitled pursuant to
the terms of the Escrow Agreement, in respect of a Contractual Claim for the
incorrectness or breach of a representation or warranty set forth in Article 3
(whether as of the date hereof or as of the Closing Date), or the certificates
of the Company delivered pursuant to Sections 6.1 and 6.2 hereof or any other
covenant or agreement set forth herein or any amount of Taxes or Alberta Crown
Royalties finally established by a Court of competent jurisdiction, or agreed by
the Representative to be payable by the Company as the result of an Assessment
as contemplated in Section 9.6, or any such amount paid in good faith by the
Company or the Purchaser (without the consent of the Representative) with
respect to an Assessment as contemplated in Sections 9.6(b) and (d), or any
claim by Jefferies for indemnification pursuant to the Jefferies Indemnification
Letter, the fraud of the Company or any of the Vendors, or any other amount to
which it, Abraxas or the Company establishes itself to be entitled pursuant to
the Escrow Agreement (herein an "Established Contractual Claim") as if all such
representations, warranties, covenants and agreements were made jointly and
severally by the Vendors. If the Closing occurs, the Vendors shall have no
claims or rights of indemnification or contribution against the Company with
respect to any Established Contractual Claim whatsoever hereunder including
amounts recovered by the Purchaser from the Escrow Account.
(b) Subject to the last sentence of this Section 9.2(b), the Purchaser shall be
limited to recovery from the Escrow Account for recovery in respect of any and
all Established Contractual Claims whatsoever hereunder, other than pursuant to
Section 2.3(d) or Article 10. Subject to the last sentence of this Section
9.2(b), in no event will the Purchaser have any claim whatsoever under this
Agreement against the Representative, the Vendors or the current or former
employees, officers or directors of the Company or any of them personally, nor
will the Purchaser be entitled to recover separately or in the aggregate, in
respect of all Established Contractual Claims and each of them, an amount in
excess of the Escrow Amount. In no event will the limitations in this Section
9.2(b) apply to:
(i) any Established Contractual Claim based upon:
(A) the fraud of the Company or any of the
Vendors; or
(B) the incorrectness or breach of any of the representations
and warranties set forth in Sections 3.42 to 3.46 inclusive or the breach of any
covenants or agreements set forth in Section 2.3(d), 8.1(f), 8.5 or Article 10;
or
(ii) any claim, right, demand or cause of action relating to or arising
out of the incorrectness or breach of any covenant, representation or warranty
<PAGE>
in any agreement or document entered into or executed by any of the Parties
pursuant to the terms hereof or as contemplated hereby;
with respect to which the Purchaser or the Vendors, as the case may
be, shall be entitled to indemnification as provided herein directly from the
other and to such other remedies as may be available at law or in equity.
9.3 Joint Venture Audits
(a) Each notice or enquiry received or sent by the Company, or hereafter
received or sent by the Company as a result of any joint venture or similar
audit (herein a "Joint Venture Audit") conducted before or after August 1, 1996
as to expenses incurred or revenues received in respect of any of the Assets
prior to August 1, 1996 pursuant to an operating agreement is referred to herein
as an "Audit Notice". If an Audit Notice is received or given after Closing, the
Purchaser shall within 30 days of the receipt or giving of the Audit Notice
forward a copy of the Audit Notice to the Representative.
(b) If any Audit Notice is to the effect that a payment in excess of $100,000
should be made by or to the Company to or by another Person, the Vendors shall
be entitled to have reasonable access during normal business hours to review the
records of the Company pertaining to the matter, in order to evaluate the
matters disclosed in the Audit Notice. Neither the Purchaser nor the Company
shall make a payment by way of an adjustment resulting from any such Joint
Venture Audit, of expenses or revenues pertaining to any period ending on or
prior to August 1, 1996, without the consent of the Representative acting
reasonably, except pursuant to the award of a Court or arbitrator. Subject to
Sections 5.1, 9.1 and 9.2, if the amount of the payment to be made or received
by the Company, as the case may be, exceeds $100,000, the Vendors shall
forthwith reimburse the Company for, or the Purchaser shall cause the Company to
pay to the Representative (for immediate disbursement to the Vendors as their
interests appear), as the case may be, the amount by which the said payment
exceeds $100,000.
(c) The Vendors shall have the right at their own expense (not to be paid out of
the Escrow Account) and employing counsel of their own choice to contest any
Audit Notice to the effect that a payment in excess of $100,000 should be made
by the Company to another Person. In that event, the Purchaser shall have the
right to retain its own counsel but the fees and expenses of such counsel shall
be at the expense of the Purchaser.
9.4 Stub Period Returns
(a) The Company shall cause to be prepared and filed on a timely basis all Tax
Returns for the Company for the fiscal period which ends immediately prior to
Closing. The Representative will have a reasonable opportunity to review such
<PAGE>
Tax Return prior to the filing thereof.
(b) The Parties shall cooperate fully with each other and make available to each
other in a timely fashion such data and other information as may reasonably be
required for the preparation of the Tax Return referred to in Section 9.4(a) and
shall preserve such data and other information until the expiration of any
applicable limitation period under any applicable law with respect to Taxes.
9.5 Change of Name
The Purchaser will not use, in the name of the Company or its successors, the
term "CGGS" or "CGGS Canadian Gas Gathering Systems Inc." or any other term
which is confusingly similar to such term.
9.6 Tax and Royalty Mattersa
(a) Notwithstanding any other provision set forth in this Agreement to the
contrary, if, at any time, the Purchaser or the Company receives an assessment,
a reassessment, an indication in writing that an assessment is being considered
or proposed, or any other notice in writing relating to an amount (the
"Assessment") of Taxes or Alberta Crown Royalties paid or payable in respect of
any period ending on or prior to July 31, 1996, the Purchaser or the Company
shall deliver to the Representative within 30 days of receiving the Assessment,
a copy of the Assessment, together with a statement setting out the obligations
of the Vendors pursuant to this Section 9.6 and the Escrow Agreement, on the
assumption that the Assessment is valid and binding.
(b) Upon notice given by the Representative to the Purchaser within 15 Business
Days after receipt by the Representative from the Purchaser or the Company of a
notice of an Assessment, the Representative on behalf of the Vendors shall have
the right at its own expense (not to be paid out of the Escrow Account) and
employing counsel of its own choice to contest, in good faith, any Assessment.
In such event, the Purchaser shall have the right to retain its own counsel but
the fees and expenses of such counsel shall be at the expense of the Purchaser.
The failure to give such notice of intent to contest an Assessment shall
constitute a waiver of the Vendors' right to contest such Assessment under this
Section 9.6(b) and shall preclude the Vendors from disputing the manner in which
the Purchaser or the Company may in good faith contest such Assessment or the
reasonableness of any amount paid in good faith by the Company in satisfaction
of such Assessment. The Representative shall not compromise or settle any
Assessment without the consent of the Purchaser, which shall not be unreasonably
withheld.
<PAGE>
(c) The Purchaser will cooperate with the Representative, including providing
access to its employees and to financial and other records of the Company and
the Purchaser, in order to facilitate the filing of Tax Returns or returns
relating to Alberta Crown Royalties, as the case may be, in respect of periods
of time prior to the Closing and the conduct of any disputes relating thereto.
The Purchaser shall cause the Company to preserve such data and other
information as may reasonably be required in connection with a Tax Return or
returns relating to Alberta Crown Royalties, as the case may be, of the Company
for any taxation year or fiscal period ending on or prior to Closing, until the
end of any applicable limitation period under any applicable law with respect to
Taxes or Alberta Crown Royalties, as the case may be.
(d) Except with the consent of the Representative, which consent shall not be
unreasonably withheld, the Purchaser shall not, and shall not permit the
Company, to agree to any compromise or settlement with respect to any
Assessment; provided, however, that notwithstanding the foregoing, if the
Purchaser or the Company determines in good faith that the failure to pay,
compromise or settle an Assessment could adversely affect the Company or its
business, the Purchaser or Company may pay, compromise or settle such Assessment
and such action shall not impair or adversely affect the Purchaser's or
Company's right to make such payment the subject of a claim in accordance with
Sections 9.1, 9.2 and 9.6 hereof.
(e) If a refund of Taxes or Alberta Crown Royalties, as the case may be (to the
extent not reflected in the July 31 Balance Sheet) (the "Refund") is received
by, or credited to, the account of the Company, in respect of any fiscal period
ending on or prior to July 31, 1996, such recipient shall pay the amount of the
Refund to the Representative, after deduction of an amount equal to the amount
of Taxes, if any, to which the recipient would be subject as a result of the
receipt or crediting of such Refund. The Representative shall forthwith upon
receipt of any such Refund distribute same to the Vendors as their respective
interests appear.
(f) The Purchaser undertakes to inform and to cause the Company to inform the
Representative of all written audit inquiries received with respect to the
representations and warranties in Section 3.9 within 30 days of receipt thereof
and to provide the Representative with the right to make any representations
prior to an Assessment.
(g) References to the "Company" in this Section 9.6 shall include and be deemed
to include successors to such corporations by way of amalgamation, winding-up or
other reorganization of any nature whatsoever.
(h) The failure by the Purchaser to give to the Representative the notice
required by Section 9.6(a) with, respect to any Claim relating to Tax or Alberta
Crown Royalty matters shall relieve the Vendors of their obligations with
<PAGE>
respect to such Claim only in the event the Vendors are prejudiced by such
failure.
(i) Notwithstanding any of the provisions of this Agreement, the Purchaser shall
not be entitled to recover twice for the same Damages or Claim under Section 9.2
in respect of the breach or incorrectness of any of the representations and
warranties set forth in Article 3 or in respect of any amount of Taxes or
Alberta Crown Royalties.
9.7 Repayment of Debentures
On the same Business Day as the Representative makes written demand of the
Company, which shall not be made earlier than the Business Day immediately after
Closing, the Purchaser shall cause the Company to repay in full the principal
amount of the Debentures, plus the interest accrued but unpaid thereon, to the
Vendors, as their respective interests appear. The principal amount of
Debentures to be held by each of the Vendors shall be the Canadian dollar
equivalent of the U.S. dollar amounts set forth in the column "Old Debenture
Principal (US$)" in Schedule 1.1(c), plus certain accrued but unpaid interest
thereon, all as contemplated in Section 2.1 of the Debenture Prepayment
Agreement. At the time of such repayment, the Representative shall deliver all
of the Debentures to the Company, free and clear of all Encumbrances, for
cancellation. The repayment required under this Section 9.7 shall be made to the
Representative for immediate disbursement to the Vendors in the proportions
appearing in column "Percentage of Old Debenture Principal" in Schedule 1.1(c).
ARTICLE 10
CONFIDENTIALITY
10.1 Confidential Information
As used herein, "Confidential Material" means, with respect to the Company, all
information, whether oral, written or otherwise, and all reports or analyses,
compilations, studies and other materials prepared, either prior to the Closing
Date or after the Closing Date in respect of any matter arising hereunder, by
the Company or any officer, director, employee, agent or representative of the
Company, (in whatever form maintained, whether documentary, computer storage or
otherwise) containing, reflecting or based upon, in whole or in part, any
information of the Company. The term "Confidential Material" does not include
information which (i) is or becomes generally available to the public other than
as a result of a disclosure by any of the Vendors or any officers, directors,
employees, agents or representatives of the Vendors (collectively, in this
Article 10, "Representatives") or anyone to whom the Vendors or any of their
Representatives transmit any Confidential Material in violation of this
Agreement, (ii) is or becomes known or available to the Vendors or their
<PAGE>
Representatives on a non-confidential basis from a source (other than the
Company) who is not, to the knowledge of the Vendors or their Representatives
after reasonable inquiry, prohibited from transmitting the information to the
Vendors or their Representatives by a contractual, legal, fiduciary or other
obligation or (iii) is contained in the Offering Memorandum.
10.2 Obligation
Subject to Section 10.3 or except as required by law, the Confidential Material
will be kept confidential by the Vendors and the Representatives and will not,
without the prior written consent of the Company, the Purchaser and Abraxas, be
disclosed by the Vendors or their Representatives, in whole or in part, and will
not be used by the Vendors or their Representatives, directly or indirectly, for
any purpose other than in connection with this Agreement.
10.3 Disclosure
In the event that any of the Vendors or their Representatives or anyone to whom
any of the Vendors or their Representatives supply the Confidential Material,
are requested or required (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand, any government
or governmental agency or authority or otherwise in connection with legal
processes) to disclose any Confidential Material, such Vendor agrees (i) to
immediately notify the Company, the Purchaser and Abraxas of the existence,
terms and circumstances surrounding such a request (ii) to consult with the
Company, the Purchaser and Abraxas on the advisability of taking legally
available steps to resist or narrow such request and (iii) if disclosure of such
information is required, to furnish only that portion of the Confidential
Material which, in the opinion of such Vendor's counsel, such Vendor is legally
compelled to disclose and to cooperate with any action by the Company, the
Purchaser and Abraxas to obtain an appropriate protective order or other
reliable assurance that confidential treatment will be accorded the Confidential
Material (it being agreed that the Company, the Purchaser and Abraxas shall
reimburse the Vendor for all reasonable out-of-pocket expenses incurred by the
Vendor in connection with such cooperation).
10.4 Remedies
The Vendors acknowledge and agree that any breach or threatened breach of this
Article 10 may cause irreparable injury to the Company, the Purchaser and
Abraxas and that money damages would in that event not provide an adequate
remedy to the Company, Purchaser and Abraxas and that the Company, the Purchaser
and Abraxas shall have the right, without limiting any other remedies available
to them hereunder, to have the provisions of this Section 10 specifically
enforced by any court having equity jurisdiction.
<PAGE>
ARTICLE 11
GENERAL
11.1 Covenant of the Vendors
The Vendors hereby engage Feshbach & Sons (the "Adviser") to act as adviser to
the Vendors with respect to the transactions contemplated by the Nevis Agreement
and this Agreement. As payment for such advisory services, the Vendors shall pay
pro rata to the Adviser a success fee (the "Success Fee") equal to 1.75% of the
aggregate amount of consideration received by the Vendors from the proceeds of
sale in respect of the Nevis Agreement and this Agreement, including any
escrowed or contingent amounts of such consideration, and any additional
consideration payable pursuant to any post-closing adjustment under the Nevis
Agreement and this Agreement. The Adviser will reallow 3/7ths of the Success Fee
to certain officers or directors of the Company or Morrison. The foregoing
arrangement has been approved by representatives of the largest shareholder, Gas
Systems I Corporation (on behalf of the trustees of General Electric Pension
Trust).
11.2 Public Notices
Each of the Parties shall be entitled to communicate the details of the within
transaction to its shareholders and employees and to investment analysts and to
issue press releases, notwithstanding the Confidentiality Agreement. A Party
making any such communication shall advise the other Party of the occurrence and
nature of each such disclosure and shall deliver a copy of each press release to
the other Party so that the other Party will have the opportunity to review the
press release in advance of its dissemination. All other public notices to third
parties and all other publicity concerning the transactions contemplated by this
Agreement shall be jointly planned and coordinated by the Parties and no Party
shall act unilaterally in this regard without the prior approval of the other
Party, such approval not to be unreasonably withheld, except:
(a) in the case of the Vendors for communications made in
confidence to the Company's employees affected by such
transactions; or
(b) where required to do so by law or by the applicable regulations or policies
of any provincial or Canadian or other regulatory agency of competent
jurisdiction or any stock exchange in circumstances where prior consultation
with the other Party is not practicable.
<PAGE>
11.3 Expenses
All costs and expenses (including the fees and disbursements of legal counsel)
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the Party incurring such expenses; provided, however,
the Company shall not bear any of the costs and expenses incurred in whole or in
part by the Vendors in connection with this Agreement and the Nevis Agreement
and the transactions contemplated hereby and thereby.
11.4 Notices
Any notice or other writing required or permitted to be given under this
Agreement or for the purposes of this Agreement (referred to in this Section as
a "Notice") shall be sufficiently given if delivered or if transmitted by
facsimile or other form of recorded communication to such Party:
(a) to the Representative, for and on behalf of all of the
Vendors in the case of a Notice to the Vendors at:
Bernard Feshbach
#404, 1510 Oak Creek Drive
Palo Alto, California
94304-2032
Fax: (415) 321-5627
with a copy to:
Bennett Jones Verchere
4500 Bankers Hall East
855 - 2nd Street S.W.
Calgary, AB T2P 4K7
Attention: Donald E. Greenfield
Fax: (403) 265-7219
and to:
Curtis, Mallet-Provost, Colt & Mosle
101 Park Avenue
New York, New York
10178-0061
Attention: Albert Francke
Carl Ruggiero
Fax: (212) 697-1559
(b) prior to the Closing, in the case of a Notice to the Company
at:
CGGS CANADIAN GAS GATHERING SYSTEMS INC.
#3000, 400 - 3rd Avenue S.W.
Calgary, Alberta
T2P 4H2
<PAGE>
Attention: Ken Woolner
Fax: (415) 750-3186
with a copy to:
Bennett Jones Verchere
4500 Bankers Hall East
855 - 2nd Street S.W.
Calgary, AB T2P 4K7
Attention: Donald E. Greenfield
Fax: (403) 265-7219
and to:
Curtis, Mallet-Provost, Colt & Mosle
101 Park Avenue
New York, New York
10178-0061
Attention: Albert Francke
Carl Ruggiero
Fax: (212) 697-1559
(c) in the case of a notice to the Purchaser or to the Company
subsequent to Closing:
Abraxas Petroleum Corporation
500 North Loop 1604 East, Suite 100
San Antonio, Texas
U.S.A. 78232
Attention: Robert L. G. Watson
Fax: (210) 490-8816
with a copy to:
Cox & Smith Incorporated
112 E. Pecan Street, Suite 1800
San Antonio, Texas
U.S.A. 78205
Attention: Steven R. Jacobs
Fax: (210) 226-8395
or at such other address as the Party to whom such Notice is to be given shall
have last notified the Party giving the same, in the manner provided in this
Section. Any Notice delivered to the Party to whom it is addressed as provided
in this Section shall be deemed to have been given and received on the day it is
so delivered at such address, provided that if such day is not a Business Day
then the Notice shall be deemed to have been given and received on the Business
Day next following such day. Any Notice sent by prepaid registered mailed shall
be deemed to have been given and received on the fifth Business Day next
<PAGE>
following the date of its mailing. Any notice transmitted by facsimile or other
form of recorded communication shall be deemed given and received on the first
Business Day after its transmission.
11.5 Parties in Interest
This Agreement is binding upon and is for the benefit of the Parties and their
respective successors and permitted assigns. This Agreement is not made for the
benefit of any person not a party to this Agreement, and no Person other than
the Parties or their respective successors and permitted assigns shall acquire
or have any right, remedy or claim under or by virtue of this Agreement.
11.6 Time
Time shall be of the essence of this Agreement.
11.7 Assignment, Successors and Assigns
Neither any Vendor nor the Purchaser shall assign all or any part of this
Agreement nor any of its rights or obligations under this Agreement to any
Person, without the prior written consent of the other. Subject to the
foregoing, this Agreement shall enure to the benefit of and be binding upon the
Parties and their respective successors (including any successor by reason of
amalgamation of any Party) and permitted assigns.
11.8 Further Assurances
The Parties shall with reasonable diligence do all such things and provide all
such reasonable assurances as may be required to consummate the transactions
contemplated by this Agreement, and each Party shall provide such further
documents or instruments required by the other Party as may be reasonably
necessary or desirable to effect the purpose of this Agreement and carry out its
provisions, whether before or after the Closing.
11.9 Counterparts
This Agreement may be executed by the Parties in separate counterparts each of
which when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument.
ARTICLE 12
TERMINATION
12.1 Termination
In addition to termination as provided elsewhere herein, this
<PAGE>
Agreement may be terminated and the transactions contemplated hereby abandoned
at any time prior to the Closing:
(a) automatically if:
(i) Closing has not occurred on or before December 31,
1996;
(ii) there shall be any statute, rule, or regulation that makes
consummation of the transactions contemplated hereby illegal or otherwise
prohibited or a Governmental Authority shall have issued an order, decree, or
ruling or taken any other action permanently restraining, enjoining, or
otherwise prohibiting the consummation of the transactions contemplated hereby,
and such order, decree, ruling, or other action shall have become final and
nonappealable;
(b) by mutual written agreement of the Parties;
(c) by the Vendors with notice to the Purchaser if one or more
of the conditions set forth in Article 7 are not satisfied as of
the Closing Date;
(d) by the Purchaser with notice to the Vendors if one or more
of the conditions set forth in Article 6 are not satisfied as of
the Closing Date;
(e) by the Vendors pursuant to Section 2.6.
12.2 Effect of Termination
In the event of the termination of this Agreement by a Party pursuant to Section
12.1 or otherwise, written notice thereof shall forthwith be given to the other
Parties specifying the provision hereof pursuant to which such termination is
made, and this Agreement shall become void and have no effect, and there shall
be no liability hereunder on the part of any of the Parties (or any of their
respective directors, officers, employees, shareholders, or representatives),
except such liabilities or damages as are provided for in Section 2.7(c) in
respect of the Purchaser and in Section 2.8 in respect of the Vendors. The
provisions contained in this Section and in Section 3.41, 3.46, 4.6, 11.1, 11.2
and 11.3 and Article 13 shall survive the termination hereof.
ARTICLE 13
ARBITRATION
13.1 Arbitration
(a) Any dispute arising in connection with the Agreement shall be finally
settled under the Rules of Conciliation and Arbitration of the International
Chamber of Commerce:
<PAGE>
(i) by one arbitrator nominated by the Parties;
(ii) in Calgary, Alberta;
(iii) in the English language; and
(iv) the laws of Alberta shall govern.
(b) Subject to Section 2.9, a Party wishing to have recourse to arbitration by
the International Chamber of Commerce shall, in addition to the requirements of
the Rules of Conciliation and Arbitration of the International Chamber of
Commerce, advise the other Party of its intention to do so by giving at least 10
days notice as herein provided specifying the subject of dispute, the contract
number and date and that Party's choice of arbitrator.
(c) For purposes of this Agreement, a dispute shall include a difference between
the Parties as to the interpretation, application or administration of this
Agreement, any failure to agree where agreement between the Parties is called
for and any dispute which this Agreement specifically provides shall be
arbitrated where the Parties are unable to resolve a dispute.
IN WITNESS WHEREOF the Parties have hereunto duly executed this Agreement.
<PAGE>
CANADIAN ABRAXAS PETROLEUM LIMITED
By:
Name:
Title:
By:
Name:
Title:
CGGS CANADIAN GAS GATHERING SYSTEMS INC.
By:
Name:
Title:
By:
Name:
Title:
GAS SYSTEMS I CORPORATION
By:
Name:
Title:
By:
Name:
Title:
WITNESS
WITNESS
FLEET NATIONAL BANK, as Trustee of Echlin Pension Master Trust
By:
Name:
Title:
By:
Name:
<PAGE>
Title:
MELLON BANK, N.A., as Trustee for the Alcoa Master Trust
By:
Name:
Title:
By:
Name:
Title:
STATE STREET BANK AND TRUST COMPANY, as Trustee of the GMI/DRI
Investment Trust
By:
Name:
Title:
By:
Name:
Title:
ROYAL TRUST CORPORATION OF CANADA, in trust for the Kodak Canada
Inc. Retirement Income Plan
By:
Name:
Title:
By:
Name:
Title:
GENERAL REINSURANCE CORPORATION
By:
Name:
Title:
By:
Name:
Title:
ABRAXAS PETROLEUM CORPORATION
By:
Name:
<PAGE>
Title:
By:
Name:
Title:
MORRISON PETROLEUMS LTD.
By:
Name:
Title:
By:
Name:
Title:
GAS SYSTEMS II CORPORATION
By:
Name:
Title
By:
Name:
Title:
BERNARD FESHBACH
DENNIS P. LYNCH
MARCUS SCHLOSS & CO., INC.
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
MORGAN GUARANTY TRUST CO. OF N.Y. as Trustee
By:
Name:
Title:
By:
Name:
Title:
BOSTON SAFE DEPOSIT AND TRUST COMPANY, as Trustee of Kodak
Retirement Income Plan
By:
Name:
Title:
By:
Name:
Title:
HOWARD HUGHES MEDICAL INSTITUTE
By:
Name:
Title:
By:
Name:
Title:
BEINECKE INVESTMENT FUND, L.P., by Ashford Capital Management,
Inc. as general partner
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT ("Agreement") dated as of September ___,
1996 by and among Abraxas Petroleum Corporation, a Nevada corporation
("Abraxas"), Acco, LLC, a Massachusetts limited liability company ("Acco"),
Massachusetts Bay Transportation Authority Retirement Fund ("MBTA"),
Metropolitan Life Insurance Company Separate Account No. 175 ("MetLife"), The
General Mills, Inc. Master Trust: Pooled Real Estate Fund ("General Mills" and,
together with MBTA and MetLife, the "SSR Investors") and State Street Research
Energy, Inc., a Massachusetts corporation ("State Street").
W I T N E S S E T H:
WHEREAS, Acco owns a 75% limited partnership interest (the "Interest") in
Portilla - 1996, L.P., a Texas limited partnership (the "Partnership");
WHEREAS, the SSR Investors are the holders of (i) promissory notes of the
Partnership dated March 20, 1996 and the date hereof in the aggregate principal
amount of $6,451,151.33 (the "Notes") and (ii) options to purchase overriding
royalty interests (the "ORI Options") in the Portilla Field, San Patricio
County, Texas ("Portilla"), and the Happy Field, Garza County, Texas ("Happy");
WHEREAS, Acco desires to sell the Interest, the SSR Investors desire to
sell the Notes and the ORI Options and Abraxas desires to purchase the
Interests, the Notes and the ORI Options;
NOW, THEREFORE, IT IS AGREED:
ARTICLE I
SALE OF INTEREST
1.01 Sale of Interest. Subject to the terms and conditions of this
Agreement, Acco and the SSR Investors (collectively, "Sellers") agree to sell,
assign, transfer and deliver to Abraxas on the Closing Date (as hereinafter
defined), and Abraxas agrees to purchase from Sellers on the Closing Date, the
Interest, the Notes and the ORI Options.
1.02 Consideration. In consideration for the purchase of the Interest, the
Notes and the ORI Options by Abraxas, at the Closing, the following payments
shall be made:
(a) Abraxas shall purchase the Interest from Acco in consideration
of the payment of $87,177.67 in cash by certified or bank cashier's check at the
Closing and the assumption by Abraxas of all of Acco's liabilities and
obligations pursuant to the loan made to Acco (the "Christiania Loan") pursuant
to that certain Credit Agreement dated as of March 20, 1996 (the "Credit
Agreement") by and between Acco and Christiania Bank og
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Kreditkasse ("Christiania") including, but not limited to, all of Acco's
obligations under the Loan Papers (as defined in the Credit Agreement) and under
Sections 7.15 and 8.13 of the Credit Agreement except as set forth in Section
9.01 hereof;
(b) Abraxas shall purchase that certain Promissory Note dated March
20, 1996 in the aggregate principal amount of $1,000,000 and payable to MBTA as
supplemented by that certain Promissory Note dated as of the date hereof in the
aggregate principal amount of $89,721.51 and payable to MBTA (together, the
"MBTA Note") in consideration of the payment of $1,089.721.51 to MBTA by
certified or bank cashier's check at the Closing;
(c) Abraxas shall purchase that certain Promissory Note dated March
20, 1996 in the aggregate principal amount of $3,920,000 and payable to MetLife
as supplemented by that certain Promissory Note dated as of the date hereof in
the aggregate principal amount of $351,708.31 and payable to MetLife (together,
the "MetLife Note") in consideration of the payment of $4,271,708.31 to MetLife
by certified or bank cashier's check at the Closing;
(d) Abraxas shall purchase that certain Promissory Note dated March
20, 1996 in the aggregate principal amount of $1,000,000 and payable to General
Mills as supplemented by that certain Promissory Note dated as of the date
hereof in the aggregate principal amount of $89,721.51 and payable to General
Mills (together, the "General Mills Note") in consideration of the payment of
$1,089,721.51 to General Mills by certified or bank cashier's check at the
Closing;
(e) Abraxas shall purchase all right, title and interest in and to
that certain Royalty Option dated March 20, 1996 in favor of MBTA (the "MBTA
Option") in consideration of the payment of $64,189.19 to MBTA in cash by
certified or bank cashier's check;
(f) Abraxas shall purchase all right, title and interest in and to
that certain Royalty Option dated March 20, 1996 in favor of MetLife (the
"MetLife Option") in consideration of the payment of $251,621.62 to MetLife in
cash by certified or bank cashier's check;
(g) Abraxas shall purchase all right, title and interest in and to
that certain Royalty Option dated March 20, 1996 in favor of General Mills (the
"General Mills Option") in consideration of the payment of $64,189.19 to General
Mills in cash by certified or bank cashier's check.
The amounts payable pursuant to paragraphs (e), (f) and (g) above shall be
reduced pro rata by the amount payable to State Street pursuant to Section 1.05
hereof.
In the event that the transactions contemplated by this Agreement have not
been consummated on or prior to October 20, 1996, in addition to the payments to
be made to the Sellers pursuant to this Section 1.02, Abraxas shall also pay
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interest to the Sellers at a rate of 10% per annum on the principal amount of
the Notes for the period from October 21, 1996 to the earlier of (i) the Closing
Date or (ii) December 31, 1996. Such interest shall be payable on the earlier of
(i) the Closing Date or (ii) January 15, 1997.
1.03 Further Assurances. Sellers agree that, from time to time, at
Abraxas' request and without further consideration, Sellers will execute and
deliver such additional instruments of transfer and take such other actions as
Abraxas may require to more effectively transfer ownership of the Interest, the
Notes and the ORI Options to Abraxas, as applicable.
1.04 Closing. The closing ("Closing") of the transactions contemplated
hereby shall take place at the offices of Cahill, Gordon & Reindel, 80 Pine
Street, New York, New York 10005 on the date that all of the conditions to
Closing set forth in Articles IV and V hereof have been satisfied or waived or
such other time and place as the parties hereto may agree. The date, as thus
determined, on which the Closing will be held is herein referred to as the
"Closing Date".
1.05 Termination of Advisory Agreement. At the Closing, the Advisory
Agreement between the Partnership and State Street shall be terminated, and
Abraxas shall pay State Street an amount equal to the expenses incurred by State
Street pursuant to Section 9.01.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of Acco, MBTA, MetLife, General Mills and State Street, severally for
itself, and not jointly and severally, represents, warrants and agrees, as
follows:
2.01 Ownership of Interest. (a) Acco is the lawful owner of the Interest,
free and clear of all liens, encumbrances, restrictions and claims of every kind
other than liens, encumbrances, restrictions and claims related to the
Christiania Loan. Acco has full legal right, power and authority to enter into
this Agreement and to sell, assign, transfer and convey the Interest pursuant to
this Agreement. The sale by Acco to Abraxas of the Interest pursuant to the
provisions of this Agreement will transfer to Abraxas good, valid and marketable
title thereto, free and clear of all liens, encumbrances, restrictions,
mortgages, pledges, charges or claims of every kind (collectively, "Liens").
(b) MBTA is the lawful owner of the MBTA Note and the MBTA Option, free
and clear of all liens, encumbrances, restrictions and claims of every kind.
MBTA has full legal right, power and authority to enter into this Agreement and
to sell, assign, transfer and convey the MBTA Note and the MBTA Option pursuant
to this Agreement. The sale by MBTA to Abraxas of the MBTA Note and the MBTA
Option pursuant to the provisions of this Agreement will transfer to Abraxas
good, valid and marketable title thereto, free and clear of all Liens.
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(c) MetLife is the lawful owner of the MetLife Note and the MetLife
Option, free and clear of all liens, encumbrances, restrictions and claims of
every kind. MetLife has full legal right, power and authority to enter into this
Agreement and to sell, assign, transfer and convey the MetLife Note and the
MetLife Option pursuant to this Agreement. The sale by MetLife to Abraxas of the
MetLife Note and the MetLife Option pursuant to the provisions of this Agreement
will transfer to Abraxas good, valid and marketable title thereto, free and
clear of all Liens.
(d) General Mills is the lawful owner of the General Mills Note and the
General Mills Option, free and clear of all liens, encumbrances, restrictions
and claims of every kind. General Mills has full legal right, power and
authority to enter into this Agreement and to sell, assign, transfer and convey
the General Mills Note and the General Mills Option pursuant to this Agreement.
The sale by General Mills to Abraxas of the General Mills Note and the General
Mills Option pursuant to the provisions of this Agreement will transfer to
Abraxas good, valid and marketable title thereto, free and clear of all Liens.
2.02 Power and Authority. Acco has the power and authority to make,
execute, deliver and perform this Agreement, and this Agreement has been duly
authorized and approved by all required action. State Street has the power and
authority to make, execute, deliver and perform this Agreement on behalf of each
of MBTA, MetLife and General Mills, and this Agreement has been duly authorized
and approved by all required action of each of MBTA, MetLife and General Mills.
2.03 Broker's or Finder's Fees. No agent, broker, person or firm acting on
behalf of the Sellers are, or will be, entitled to any commission or broker's or
finder's fees from any of the Sellers.
2.04 Receipt of Information. Acco and State Street (acting on its own
behalf and on behalf of the SSR Investors) acknowledge the receipt of a letter
dated July 15, 1996 from Abraxas relating to Portilla and copies of the reserve
report prepared by DeGoyler and MacNaughton relating to Portilla and Happy dated
June 30, 1996. Each of Acco and State Street (acting on its own behalf and on
behalf of the SSR Investors) has had the opportunity to review such information
and has had the opportunity to ask questions of and receive answers from Abraxas
concerning the Partnership, Portilla and Happy and the future plans and
prospects thereof. Each of Acco, MBTA, MetLife, General Mills and State Street
is an Accredited Investor (as defined in Rule 501 promulgated under the
Securities Act of 1933, as amended). Each of Acco and State Street (acting on
its own behalf and on behalf of the SSR Investors) has engaged such professional
advisers including, without limitation, legal, tax and petroleum engineering
advisers, as it deemed necessary in connection with the transactions
contemplated hereby.
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ARTICLE III
REPRESENTATIONS OF ABRAXAS
Abraxas represents, warrants and agrees as follows:
3.01 Existence and Good Standing of Abraxas. Abraxas is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada.
3.02 Power and Authority. Abraxas has the corporate power and authority to
make, execute, deliver and perform this Agreement, and this Agreement has been
duly authorized and approved by all required corporate action of Abraxas.
3.03 Broker's or Finder's Fees. No agent, broker, person or firm acting on
behalf of Abraxas is, or will be, entitled to any commission or broker's or
finder's fees from Abraxas.
3.04 No Net Income. The Partnership has not had any net taxable income
since its inception.
ARTICLE IV
CONDITIONS TO ABRAXAS' OBLIGATIONS
All obligations of Abraxas to be discharged under this Agreement at the
Closing are subject to the fulfillment, prior to or at the Closing, of each of
the following conditions, unless waived in writing by Abraxas prior to or at the
Closing:
4.01 Truth of Representations and Warranties. The representations and
warranties of Acco, the SSR Investors and State Street contained in this
Agreement shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date and Acco, the SSR Investors and State Street shall have each delivered
to Abraxas a certificate, dated the Closing Date, to such effect.
4.02 No Litigation Threatened. No action or proceedings shall have been
instituted or, to the best knowledge of Sellers, threatened before a court or
other government body or by any public authority to restrain or prohibit any of
the transactions contemplated hereby.
4.03 Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to Abraxas, and Abraxas
shall have received copies of all such documents and other evidences as it or
its counsel may reasonably request in order to establish the consummation of
such transactions and the taking of all proceedings in connection therewith.
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4.04 Mutual Release. Sellers and Abraxas shall have executed and delivered
a Mutual Release in substantially the form of Exhibit "A" hereto (the
"Release").
4.05 Documents and Instruments. Sellers shall have executed such documents
and instruments as may be reasonably requested by Abraxas to effectively sell,
transfer, assign and convey the Interest, the Notes and the ORI Options to
Abraxas.
4.06 Financing. Abraxas shall have received financing on such terms and
conditions as may be reasonably satisfactory to Abraxas.
ARTICLE V
CONDITIONS TO SELLERS'S OBLIGATIONS
All obligations of Sellers to be discharged under this Agreement at the
Closing are subject to the fulfillment, prior to or at the Closing, of each of
the following conditions, unless waived in writing by Sellers prior to or at the
Closing:
5.01 Truth of Representations and Warranties. The representations and
warranties of Abraxas contained in this Agreement shall be true and correct on
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of such date, and Abraxas shall have
delivered to Sellers a certificate, dated the Closing Date, to such effect.
5.02 No Litigation Threatened. No action or proceeding shall have been
instituted or, to the best knowledge of Abraxas, threatened before a court or
other government body or by any public authority to restrain or prohibit any of
the transactions contemplated hereby.
5.03 Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto,
shall be reasonably satisfactory in form and substance to Sellers and its
counsel, and Sellers shall have received copies of all such documents and other
evidences as it or its counsel may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
5.04 Mutual Release. Sellers and Abraxas shall have executed and delivered
the Release.
5.05 Documents and Instruments. Abraxas shall have executed and delivered
such documents and instruments as may be reasonably requested by Acco to
effectuate the assumption of the Christiania Loan by Abraxas and, in the event
that Abraxas does not repay the Christiania Loan and assume all of Acco's
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obligations under the Loan Papers except as set forth in Section 9.01 hereof
substantially simultaneously with the consummation of the transactions
contemplated hereby, Abraxas shall have obtained the release of Acco by
Christiania.
ARTICLE VI
COVENANTS
6.01 Reasonable Efforts. Abraxas will use its reasonable efforts to obtain
the necessary financing through a private placement of debt securities to be
closed on or before September 30, 1996. If Abraxas is unable to complete the
offering by September 30, 1996, Abraxas agrees to continue to use its reasonable
efforts to pursue alternative financing arrangements and, in all events, will
attempt to complete the purchase of the Interest, the Notes and the ORI Options
no later than December 31, 1996.
6.02 Public Announcements. Upon execution and delivery of this Agreement,
Abraxas will issue a press release reasonably satisfactory to Abraxas and
Sellers. Otherwise, none of the parties hereto shall, prior to the Closing, make
any public announcement or disclosure relating to the transactions contemplated
hereby without the prior consent of each other party hereto; provided, however,
that each party shall consult with the other in advance of making any disclosure
required by law, but the agreement of the other parties hereto shall not be
required.
6.03 Pre-Closing Operations. Prior to the Closing, Abraxas will contribute
to the Partnership all monies necessary for the Partnership (a) to pay its
operating expenses and (b) to make the minimum distributions necessary for Acco
to make required payments on the Christiania Loan; provided, however, that
Abraxas shall not be obligated to make contributions pursuant to this Section
6.03 after December 31, 1996.
ARTICLE VII
TAX MATTERS, DISTRIBUTIONS AND ALLOCATIONS
7.01 Liquidation and/or Sale of Interest. For federal income tax purposes,
it is the intention of the parties that the purchase and sale of the Interest be
treated as a sale of Acco's interest in the Partnership pursuant to Sections 741
of Subchapter K of the Internal Revenue Code of 1986, as amended.
7.02 Allocations of Profits and Losses. Abraxas and Acco agree that Acco
shall be allocated its pro-rata share (in accordance with Acco's Capital
Percentage and Capital Ratio, as such terms are defined in the limited
partnership agreement of the Partnership) of the Partnership's cumulative
profits and/or losses for the portion of the 1996 taxable year that were
generated from March 20, 1996 to and including the Closing Date.
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7.03 Tax Returns and Information Statements. Abraxas shall be responsible
for the preparation and timely filing of the Partnerships income tax returns for
the 1996 calendar year including, but not limited to, any information statements
related to the sale and/or liquidation of the Interest. Abraxas agrees to
provide to Acco, in a timely fashion, any information reasonably requested by
Acco in order for Acco to accurately report and reflect the sale of the Interest
on Acco's 1996 income tax return including, but not limited to, the reporting of
Acco's proportionate share of profits and/or losses from the Partnership.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS; INDEMNITY;
LIMITATION OF LIABILITY
8.01 Survival of Representations. The representations and warranties of
each of the parties hereto contained in this Agreement shall survive the
purchase and sale of the Interest, the Notes and the ORI Options contemplated
hereby.
8.02 Indemnification by the Sellers and Management. Sellers agree
severally, and not jointly and severally, to indemnify and hold Abraxas, its
directors, officers, employees and agents harmless from damages, losses or
expenses (net of any insurance proceeds) (collectively, "Damages") suffered or
paid, directly or indirectly, by Abraxas as a result of any and all claims,
demands, suits, causes of action, proceedings, judgments and liabilities
(whether asserted directly or as a common law or statutory claim for
contribution or indemnity), including, without limitation, reasonable counsel
fees and costs incurred in litigation or otherwise, assessed, incurred or
sustained by or against any of them with respect to or arising out of the
failure of any representation or warranty made by Sellers in this Agreement to
be true and correct in all respects as of the date of this Agreement and as of
the Closing Date or the breach of any covenant made by the Sellers hereunder.
8.03 Indemnification by Abraxas. Abraxas agrees to indemnify and hold
Sellers harmless from Damages suffered or paid, directly or indirectly, as a
result of any and all claims, demands, suits, causes of action, proceedings,
judgments and liabilities, including reasonable counsel fees incurred in
litigation or otherwise, assessed, incurred or sustained by or against any of
them with respect to or arising out of the failure of any representation or
warranty made by Abraxas in this Agreement to be true and correct in all
respects as of the date of this Agreement and as of the Closing Date or the
breach of any covenant made by Abraxas hereunder.
8.04 Notice of Claim. If indemnification pursuant to Sections 8.02 or 8.03
is sought, the indemnified party shall give notice to the indemnifying party of
an event giving rise to the obligation to indemnify, allow the indemnifying
party to assume and conduct the defense of the claim or action with counsel
reasonably satisfactory to the indemnified party, and cooperate with the
indemnifying party in the defense thereof; provided, however, that the omission
to give such notice to the indemnifying party shall not relieve the indemnifying
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party from any liability which it may have to the indemnified party, except to
the extent that the indemnifying party is prejudiced by the failure to give such
notice. The indemnified party shall have the right to employ separate counsel to
represent the indemnified party if the indemnified party is advised by counsel
that a conflict of interest makes it advisable for the indemnified party to be
represented by separate counsel and the reasonable expenses and fees of such
separate counsel shall be paid by the indemnifying party. If the party obligated
to indemnify and hold the other harmless wrongfully refuses to assume the
defense of the party seeking indemnification, the party refusing to indemnify
shall be responsible, for all legal and other expenses incurred by the other
party in connection with the investigation or defense of such claim or action
including, without limitation, expenses incurred in enforcing such obligation to
indemnify.
ARTICLE IX
MISCELLANEOUS
9.01 Expenses. The parties hereto shall pay all of their own expenses
relating to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel and financial
advisers; provided, however, Abraxas shall pay all filing and recording fees and
expenses in connection with the purchase and sale of the Interest, the Notes and
the ORI Options. Notwithstanding anything to the contrary set forth in this
Agreement, Acco shall be responsible for the fees and expenses, including fees
and expenses of counsel, of Christiania incurred in connection with the Credit
Agreement and the transactions contemplated hereby up to a maximum of $25,000;
provided, however, that if Christiania's fees and expenses exceed $25,000, the
parties hereto agree to negotiate in good faith regarding the payment of the
fees and expenses in excess of $25,000.
9.02 Governing Law. The interpretation and construction of this Agreement,
and all matters relating hereto, shall be governed by the laws of the State of
Texas.
9.03 Captions. The Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
9.04 Notices. Any notice or other communications required or permitted
hereunder shall be sufficiently given if delivered in person or sent by
registered or certified mail, postage prepaid, if to:
If to Abraxas:
Abraxas Petroleum Corporation
500 North Loop 1604 East, Suite 100
San Antonio, Texas 78232
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Attention: Robert L. G. Watson
With a copy to:
Cox & Smith Incorporated
112 E. Pecan Street, Suite 1800
San Antonio, Texas 78205
Attention: Steven R. Jacobs
If to Sellers:
State Street Research Energy, Inc.
One Financial Center
31st Floor
Boston, MA 02109
Attention: Tom Moore
With a copy to:
Mintz, Levin, Cohen, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Attention: Thomas J. Kelly
and
Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Attention: Frank W. R. Hubert, Jr.
or such other address as shall be furnished in writing by any such party, and
such notice or communication shall be deemed to have been given as of the date
so delivered or mailed.
9.05 Parties in Interest. This Agreement may not be transferred, assigned,
pledged or hypothecated by any party hereto other than by operation of law. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, successors and
assigns.
9.06 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
9.07 Entire Agreement. This Agreement, including the other documents
referred to herein which form a part hereof or any other written agreements that
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the parties enter into pursuant to or relating to the transactions contemplated
by this Agreement, contains the entire understanding of the parties hereto with
respect to the subject matter contained herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter. All exhibits and schedules referred to herein
and attached hereto are incorporated herein by reference.
9.08 Amendments. This Agreement may not be changed orally, but only by an
agreement in writing signed by all of the parties hereto.
9.09 Severability. In case any provision in this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof will not in any way be affected or impaired
thereby.
9.10 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto.
9.11 Arbitration. The parties hereto agree that all disputes,
controversies or claims that may arise among them (including their agents and
employees) including, without limitation, any dispute, controversy or claim
arising out of or relating to this Agreement or any other agreement, or the
breach, termination or invalidity thereof, whether entered into or arising
prior, on or subsequent to the date hereof, shall be submitted to, and
determined by, binding arbitration. Such arbitration shall be conducted in
accordance with the terms of Section 12.9 of the Partnership Agreement of the
Partnership.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the day and year first above written.
ABRAXAS PETROLEUM CORPORATION
By:
Robert L. G. Watson,
Chairman of the Board, President
and Chief Executive Officer
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ACCO, LLC
By:
Title:
STATE STREET RESEARCH ENERGY, INC.,
Creditors Representative of Massachusetts
Bay Transportation Authority Retirement
Fund, Metropolitan Life Insurance Company
Separate Account No. 175 and The General
Mills, Inc. Master Trust: Pooled Real Estate
Fund
By:
Title:
STATE STREET RESEARCH ENERGY, INC.
By:
Title:
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0135432.01
AMENDED AND RESTATED CREDIT AGREEMENT
ABRAXAS PETROLEUM CORPORATION,
as the Borrower,
the Banks named herein,
and
BANKERS TRUST COMPANY,
as Agent
and
ING (U.S.) CAPITAL CORPORATION,
as Co-Agent
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of November 14, 1996
HOU04:43581.4
<PAGE>
TABLE OF CONTENTS
PRELIMINARY STATEMENT 1
ARTICLE I DEFINITIONS, ETC. 2
Section 1.01. Certain Defined Terms 2
Section 1.02. Accounting Terms 2
Section 1.03. Computation of Time Periods 2
Section 1.04. References, Etc. 2
ARTICLE II COMMITMENTS AND TERMS OF CREDIT 2
Section 2.01. Commitments 2
Section 2.02. Borrowing Procedures; Conversions 3
Section 2.03. Issuing and Reimbursing the Letters
of Credit 5
Section 2.04. Borrowing Base 7
Section 2.05. The Notes 9
Section 2.06. Reduction of the Commitments 9
Section 2.07. Mandatory Repayment of Loans 9
Section 2.08. Interest Accrual, Payments 10
Section 2.09. Optional Prepayments 12
Section 2.10. Payments, Notice of Certain Repayments
and Computations 12
Section 2.11. Fees 13
Section 2.12. Setoff, Counterclaims and Taxes 14
Section 2.13. Funding Losses 16
Section 2.14. Change of Law 17
Section 2.15. Increased Costs 18
ARTICLE III CONDITIONS OF CREDIT 19
Section 3.01. Conditions Precedent to Effectiveness,
the Initial Borrowing 19
Section 3.02. Conditions Precedent to All Letters of
Credit and Loans 22
ARTICLE IV REPRESENTATIONS AND WARRANTIES 22
Section 4.01. Corporate Existence 23
Section 4.02. Corporate Authority; Binding Obligations 23
Section 4.03. No Conflict 23
Section 4.04. No Consent 23
Section 4.05. No Defaults or Violations of Law 24
Section 4.06. Financial Position 24
Section 4.07. Litigation 24
Section 4.08. Use of Proceeds 24
Section 4.09. Governmental Regulation 25
Section 4.10. Disclosure 25
HOU04:43581.4
<PAGE>
Section 4.11. ERISA 25
Section 4.12. Payment of Taxes 26
Section 4.13. Title and Liens 26
Section 4.14. Gas Imbalances 27
Section 4.15. Environmental Matters 27
ARTICLE V AFFIRMATIVE COVENANTS 27
Section 5.01. Reporting Requirements 28
Section 5.02. Taxes; Claims 30
Section 5.03. Compliance with Laws 30
Section 5.04. Insurance 30
Section 5.05. Corporate Existence 31
Section 5.06. Inspections 31
Section 5.07. Maintenance of Properties 31
Section 5.08. Accounting Systems 32
Section 5.09. Use of Loans 32
Section 5.10. Reserve Reports 32
Section 5.11. Title 34
Section 5.12. Additional Collateral 34
Section 5.13. Further Assurances in General 34
Section 5.14. Enforcement of Acquisition Documents 34
ARTICLE VI NEGATIVE COVENANTS 35
Section 6.01. Indebtedness Restriction 35
Section 6.02. Lien Restriction 36
Section 6.03. Derivatives 38
Section 6.04. Interest Coverage Ratio 38
Section 6.05. Current Ratio 38
Section 6.06. Tangible Net Worth 38
Section 6.07. Sales of Assets 38
Section 6.08. Consolidation and Mergers 38
Section 6.09. Restricted Disbursements 39
Section 6.10. Lines of Business 39
Section 6.11. Transactions with Affiliates 40
ARTICLE VII DEFAULT AND REMEDIES 40
Section 7.01. Events of Default 40
Section 7.02. Setoff in Event of Default 43
Section 7.03. No Waiver; Remedies 43
Section 7.04. Hydrocarbon Proceeds 43
Section 7.05. Application of Proceeds After Acceleration 44
ARTICLE VIII THE AGENT 45
Section 8.01. Authorization and Action 45
Section 8.02. Reliance, Etc. 46
Section 8.03. BTCo and Affiliates 46
Section 8.04. Bank Credit Decision 47
HOU04:43581.4
<PAGE>
Section 8.05. Indemnification 47
Section 8.06. Employees of the Agent and the Issuing Bank 48
Section 8.07. Successor Agent 48
Section 8.08. Successor Co-Agent and Successor
Issuing Bank 49
Section 8.09. Notice of Default 50
Section 8.10. Execution of Loan Documents 50
ARTICLE IX MISCELLANEOUS 50
Section 9.01. Amendments, Etc. 50
Section 9.02. Participation Agreements and Assignments 51
Section 9.03. Notices 53
Section 9.04. Costs and Expenses 54
Section 9.05. Successors and Assigns 55
Section 9.06. Independence of Covenants 55
Section 9.07. Survival of Representations and Warranties 55
Section 9.08. Separability 55
Section 9.09. Captions 55
Section 9.10. Counterparts 55
Section 9.11. Governing Law 56
Section 9.12. Submission to Jurisdiction 56
Section 9.13. Limitation on Interest 56
Section 9.14. Indemnification 57
Section 9.15. Ratification of Security Documents 58
Section 9.16. Confidentiality 58
Section 9.17. Final Agreement of the Parties 59
Exhibits and Schedules
Exhibit 2.02(a) Form of Borrowing Request
Exhibit 2.02(c) Form of Conversion Notice
Exhibit 2.03 Form of Letter of Credit Request
Exhibit 2.05 Form of Revolving Note
Exhibit 9.02 Form of Assignment and Acceptance Agreement
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
HOU04:43581.4
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THIS AMENDED AND RESTATED CREDIT
AGREEMENT dated as of November 14, 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"), and as the issuing
bank with respect to the Letters of Credit issued hereunder (together with its
successors and assigns in such capacity, the "Issuing Bank"), and ING (U.S.)
CAPITAL CORPORATION (formerly known as Internationale Nederlanden (U.S.) Capital
Corporation), as co-agent for the Banks (together with its successors and
assigns in such capacity, the "Co-Agent"). Unless otherwise defined herein, all
capitalized terms used herein and defined in Article I are used herein as so
defined.
PRELIMINARY STATEMENT
A. The Borrower, the Agent and the Banks entered into
that certain Credit Agreement dated as of September 30, 1996 (the "Original
Credit Agreement") whereby the Banks agreed to make certain loans to the
Borrower.
B. Bankers Trust Company has assigned a portion of its
rights and obligations under the Original Credit Agreement to Union Bank of
California, N.A., pursuant to that certain Assignment and Acceptance dated
November 13, 1996.
C. In connection with the consummation of the Bond
Offering (as defined herein) the Borrower has paid contemporaneously with the
effectiveness of this Agreement all amounts outstanding under the Original
Credit Agreement.
D. The Borrower, the Agent and the Banks desire to amend
and restate the Original Credit Agreement in its entirety, to provide for among
other things, the modification, extension and renewal of the "Revolving
Commitments" under the Original Credit Agreement, which are the Commitments
referred to herein.
Accordingly, in consideration of the foregoing and the
mutual covenants set forth herein, the parties agree that the Original Credit
Agreement is hereby amended and restated in its entirety to read as follows:
HOU04:43581.4
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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 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.
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ARTICLE II
COMMITMENTS AND TERMS OF CREDIT
Section 2.01. Commitments. (a) (i) Each Bank severally
agrees, on the terms and conditions hereinafter set forth, to make one or more
loans (the "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 Commitment. Each Loan shall be made as either a Base Rate
Loan or a Eurodollar Rate Loan and as part of a single Borrowing made on the
same day by the Banks ratably according to their respective Commitment
Percentages. Each Base Rate Borrowing shall be in an aggregate amount not less
than $2,000,000, or, if less, the entire unfunded portion of the Total
Commitment. Each Eurodollar Rate 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).
(ii) The Issuing Bank agrees, on the terms and conditions
hereinafter set forth, to issue standby or commercial letters of credit for the
account of the Borrower (the "Letters of Credit") from time to time on any one
or more Business Days during the period from the Effective Date up to, but
excluding, the ninetieth (90th) day preceding the Maturity Date in an aggregate
amount for all Outstanding Letters of Credit not exceeding at any time the
Letter of Credit Limit. Each Letter of Credit shall be denominated in Dollars,
shall expire no later than the date set forth in Section 2.03(a), and shall be
in such form as approved from time to time by the Issuing Bank and the Borrower.
Each Bank severally agrees, on the terms and conditions hereinafter set forth,
to purchase participations in the Letters of Credit issued by the Issuing Bank
pursuant to this Agreement in an amount equal to such Bank's Commitment
Percentage of the face amount of such Letter of Credit. Upon the issuance of
each Letter of Credit, the Issuing Bank shall be deemed, without further action
by any party hereto, to have sold to each Bank, and each Bank shall be deemed,
without further action by any party hereto, to have purchased from the Issuing
Bank, a participation, to the extent of such Bank's Commitment Percentage, in
such Letter of Credit, the obligations of the Issuing Bank thereunder and in the
reimbursement obligations of the Borrower due in respect of drawings made under
such Letter of Credit. Subject to the terms of the Loan Documents, the Banks
will execute any other documents the Issuing Bank may reasonably request to
evidence the purchase of such participation. On each day during the period
commencing with the issuance by the Issuing Bank of any Letter of Credit and
ending on the date when such Letter of Credit shall have expired or been
terminated, and, irrespective of whether such Letter of Credit has expired or
terminated if such Letter of Credit has been drawn upon and the amount so drawn
has not been reimbursed to the Issuing Bank, the Commitment of each Bank shall
be deemed to be utilized for all purposes hereof in an amount equal to such
Bank's Commitment Percentage of the Outstanding Letters of Credit.
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(iii) Notwithstanding any other term or provision hereof
(A) no Loan shall be made and no Letter of Credit shall be issued if after
giving effect to the making of such Loan or issuance of such Letter of Credit
the aggregate amount of Credit Outstanding would exceed the Total Commitment and
(B) no Letter of Credit shall be issued if after giving effect to the issuance
of such Letter of Credit the aggregate amount of Outstanding Letters of Credit
would exceed the Letter of Credit Limit.
(b) 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
Loans. 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 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 Borrowing, or (B) the Business
Day immediately preceding the proposed Borrowing Date in the case of a Base Rate
Borrowing, and the Agent shall give each other member of the Bank Group prompt
notice of such request by telecopier, telex or cable.
(ii) Each request for a Borrowing (a "Borrowing Request")
made by the Borrower shall be in substantially the form of Exhibit
2.02(a), 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
HOU04:43581.4
<PAGE>
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, 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 Loans into Borrowings comprised of 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 into Base Rate Loans.
Section 2.03. Issuing and Reimbursing the Letters of
Credit. (a) Each Letter of Credit shall, subject to the terms of this Agreement,
be issued upon the written or facsimile transmitted request (an original of
which shall be immediately forwarded by overnight courier to the Issuing Bank)
of the Borrower given to the Agent not later than 11:00 a.m. (New York time) on
the third Business Day prior to the proposed date of issuance of such Letter of
HOU04:43581.4
<PAGE>
Credit. Each such request for a Letter of Credit (a "Letter of Credit Request")
made by the Borrower shall be in substantially the form of Exhibit 2.03 hereto
and shall specify the Business Day on which such Letter of Credit is to be
issued, the beneficiary of such Letter of Credit, the amount of such Letter of
Credit, the draw conditions applicable thereto and shall provide for an expiry
date which is not later than thirty days prior to the Maturity Date.
(b) Upon satisfaction of the applicable terms and
conditions set forth in Article III, the Issuing Bank shall issue such Letter of
Credit to the specified beneficiary not later than the close of business (New
York time) on the date so specified. The Issuing Bank shall provide each other
member of the Bank Group with a copy of each Letter of Credit so issued, but any
failure of the Issuing Bank to provide such Persons with a copy of such Letter
of Credit shall not in any way affect the Borrower's obligation to reimburse the
Issuing Bank for any amount paid by the Issuing Bank under any Letter of Credit
or the Banks' obligation to reimburse the Issuing Bank for such amount, to the
extent provided herein, in the event the Borrower fails to do so. Each such
Letter of Credit shall (i) provide for the payment of drafts or other forms of
payment to be presented for honor thereunder by the beneficiary in accordance
with the terms thereon, at sight when accompanied by the documents described
therein and (ii) be subject to the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
(and any subsequent revisions thereof approved by a Congress of the
International Chamber of Commerce and adhered to by the Issuing Bank) (the
"UCP") and shall, as to matters not governed by the UCP, be governed by, and
construed and interpreted in accordance with, the governing law specified in
this Agreement.
(c) Upon presentment to the Issuing Bank of any draft for
honor under any Letter of Credit by the beneficiary thereof and the
determination by the Issuing Bank that such draft is in order, the Issuing Bank
shall give prompt notice (a "Reimbursement Notice") to the Borrower of (i) the
Letter of Credit to which such Reimbursement Notice relates, (ii) the amounts to
be paid on account of such draft (the "Reimbursement Amount") and (iii) the date
on which such amounts are to be paid (the "Reimbursement Date"), but any failure
to so notify the Borrower shall not in any way affect the Borrower's obligations
to reimburse the Issuing Bank for any amount paid by the Issuing Bank under any
Letter of Credit.
(d) Upon receipt of any Reimbursement Notice, the
Borrower shall reimburse the Issuing Bank by forthwith paying to the Agent for
the benefit of the Issuing Bank (who shall promptly notify the Issuing Bank of
such payment) no later than 10:00 a.m. (New York time) on the Reimbursement Date
specified in such Reimbursement Notice an amount equal to the Reimbursement
Amount specified in such Reimbursement Notice, and, if the Issuing Bank is not
fully reimbursed by the Borrower on such Reimbursement Date, together with
interest from such Reimbursement Date until such reimbursement is made by the
Borrower at a fluctuating rate per annum equal to the lesser of (i) the Highest
Lawful Rate and (ii) the Base Rate in effect during the time such reimbursement
HOU04:43581.4
<PAGE>
obligation remains unpaid plus the Applicable Margin for Base Rate Loans from
such Reimbursement Date until the third day immediately following the delivery
of such Reimbursement Notice by the Issuing Bank to Borrower and (B) thereafter,
the Default Rate. To the extent availability may then exist, and upon compliance
with the relevant terms and conditions of this Agreement, the Borrower may repay
any or all of the obligations described in this paragraph by requesting a
Borrowing and applying the proceeds thereof accordingly.
(e) If the Borrower shall fail to reimburse the Issuing
Bank for any payment by the Issuing Bank under a Letter of Credit by 12:00 noon.
(New York time) on the Reimbursement Date specified in the Reimbursement Notice
related thereto, the Agent shall give prompt notice thereof to each other member
of the Bank Group. Upon receipt of such notice, each Bank shall, notwithstanding
any other provision of this Agreement (including the occurrence and continuance
of a Default or an Event of Default), make available to the Agent for the
benefit of the Issuing Bank an amount equal to its Commitment Percentage of the
Reimbursement Amount specified in the related Reimbursement Notice no later than
the close of business on such Reimbursement Date. If such amount is not in fact
made available to the Agent by such Bank on such Reimbursement Date, such Bank
shall pay to the Agent for the account of the Issuing Bank, on demand made by
the Issuing Bank, in addition to such amount, interest on such amount for the
number of days that elapse from such Reimbursement Date to the date on which the
amount equal to such Bank's Commitment Percentage of such Reimbursement Amount
becomes immediately available to the Issuing Bank at a rate per annum equal to
the average daily Federal Funds Rate for such days. Any amount received by the
Agent or the Issuing Bank from the Borrower in respect of a draft honored under
a Letter of Credit after one or more of the Banks have made funds available for
the payment of such draft pursuant to this paragraph shall be paid over by the
Agent or the Issuing Bank, as the case may be, to the Banks, pro rata according
to the amounts so made available by the Banks, promptly upon receipt by the
Agent or the Issuing Bank of such amount. Nothing in this Agreement shall
diminish the Borrower's obligation under this Agreement to provide the funds for
the payment of, or on demand to reimburse the Issuing Bank for payment of, any
draft presented to, and duly honored by, the Issuing Bank under any Letter of
Credit.
(f) In order to induce the issuance of Letters of Credit
by the Issuing Bank and the purchase of participations therein by the Banks, the
Borrower irrevocably agrees (i) that the obligation of the Borrower to reimburse
the Issuing Bank for amounts paid by the Issuing Bank under any Letter of
Credit, including accrued interest thereon, as set forth herein is absolute and
unconditional, (ii) that no member of the Bank Group shall be responsible or
liable for, and the Borrower's unconditional obligation to reimburse the Issuing
Bank through the Agent for amounts paid by the Issuing Bank on account of drafts
honored under the Letters of Credit shall not be affected by, any circumstance,
act or omission whatsoever relating to any Letter of Credit, whether or not
known to any member of the Bank Group, unless such circumstance, act or omission
results in the wrongful payment or the wrongful dishonor of any Letter of Credit
HOU04:43581.4
<PAGE>
or is otherwise the result of the gross negligence or willful misconduct of such
member of the Bank Group, (iii) that any action taken or omitted to be taken by
any member of the Bank Group under or in connection with any Letter of Credit or
any related draft, document or property shall be binding on the Borrower and
shall not put any member of the Bank Group under any resulting liability to the
Borrower, unless such action or omission results in the wrongful payment or the
wrongful dishonor of any Letter of Credit or otherwise is the result of the
gross negligence or willful misconduct of such member of the Bank Group and (iv)
to indemnify, defend and hold each member of the Bank Group harmless from and
against any and all liabilities, damages, claims or reasonable expenses
(including reasonable attorneys' fees and amounts paid in settlement) arising
out of or based on any Letter of Credit, except to the extent the same is the
result of the wrongful payment or the wrongful dishonor of any Letter of Credit
or is otherwise the result of the gross negligence or willful misconduct of the
Person seeking indemnity hereunder, IT BEING THE EXPRESS INTENTION OF THE
BORROWER THAT EACH MEMBER OF THE BANK GROUP SHALL BE INDEMNIFIED AND HELD
HARMLESS AGAINST ANY AND ALL LIABILITIES, CLAIMS, OR REASONABLE EXPENSES ARISING
OUT OF OR RESULTING FROM THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY)
OF SUCH MEMBER OF THE BANK GROUP. The Borrower hereby waives presentment for
payment and notice of dishonor, protest and notice of protest with respect to
drafts honored under the Letters of Credit.
(g) The provisions of this Agreement and the other Loan
Documents concerning collateral, standard of care of the Issuing Bank, timing of
payments, interest rates applicable to any reimbursement obligation relating to
any Letter of Credit, any representations, warranties, covenants, events of
default, remedies and governing law shall supersede in their entirety the
provisions of any Letter of Credit application relating to such matters. In the
event any other provision of any Letter of Credit application is inconsistent
with, or in conflict of any provision of this Agreement or any Loan Documents,
the provisions of this Agreement or the Loan Documents shall govern.
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 $20,000,000. 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.
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(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 and November 1 of each year
commencing 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 taking into account all of the
assets and liabilities of the Borrower and its Subsidiaries. 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 redetermination of the
Borrowing Base which would increase the Borrowing Base must be approved by all
of 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 or about May 1 and
November 1 of each year commencing May 1, 1997 (each being a "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, at any time after the
first scheduled Redetermination Date, (i) the Borrower may request a
redetermination of the Borrowing Base on its own initiation at any time in
connection with a proposed acquisition of Oil and Gas Properties with a fair
market value in excess of $10,000,000 and at one additional time during any
consecutive twelve (12) month period, and (ii) the Agent and Majority Banks may
each initiate a redetermination of the Borrowing Base at any time as they so
elect; provided, however, that the Agent and Majority Banks may each initiate
only one such unscheduled redetermination during any consecutive twelve (12)
month period (each being an "Unscheduled Redetermination Date"). Any
redetermination of the Borrowing Base on 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.
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Section 2.05. The Notes. The Loans made by each Bank
shall be evidenced by a single 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 Commitment Percentage of the Aggregate Maximum Commitment
and (iii) otherwise duly completed. Each 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 Note of such Bank, provided, that prior to any transfer of any such Note,
such Bank shall endorse the amount and maturity of any outstanding Loans on the
schedule (or a continuation thereof) attached to such Note.
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
Aggregate Maximum Commitment; provided, that each partial reduction in the
Aggregate Maximum Commitment shall be in the aggregate amount of $1,000,000 or
an integral multiple of $1,000,000 in excess thereof. Any such reduction or
termination shall be irrevocable by the Borrower.
(b) On each Commitment Reduction Date, the Reducing
Commitment Amount shall automatically be reduced by an amount equal to 8.2% of
the Reducing Commitment Amount as of the first Commitment Reduction Date. On the
Maturity Date the 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 Loans comprising part of the same
Borrowing or provide cover for Outstanding Letters of Credit in such amounts as
shall be necessary so that at all times the Credit Outstanding shall not be in
excess of the Total Commitment. Except to the extent that repayment or cover is
required to be made in three equal monthly installments under Section 2.07(b),
any repayment or cover required by this Section 2.07(a) shall be due and payable
on the date such repayment or cover obligation accrues pursuant to the preceding
sentence.
(b) The Borrower shall from time to time repay the Loans
comprising part of the same Borrowing or provide cover for Outstanding Letters
of Credit (as provided below) in whole or ratably in part in an amount equal to
the excess of (i) the Credit 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 or cover 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.
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(c) In the event that the Borrower shall be required
pursuant to this Section 2.07 to repay Loans or provide cover for Outstanding
Letters of Credit, the Borrower shall make such repayment and provide such cover
in the following order: (i) first, pay the amount of all unreimbursed drawings
under the Letters of Credit, (ii) second, repay the principal of the Loans and
(iii) third, provide cover for Letters of Credit. Cover for Letters of Credit
shall be effected by paying to the Agent immediately available funds, to be held
by the Agent in an account under the sole dominion and control of the Agent, for
the benefit of the Bank Group, as security for the obligations of the Borrower
under the Loan Documents until the earlier of (A) the occurrence in this Section
2.07 which necessitated such cover no longer exists or (B) such time as the
Letters of Credit have been terminated and all obligations of the Borrower to
the Bank Group (including the Issuing Bank) in respect thereof have been paid in
full, at which time the Agent shall remit the amount of such cover, in
immediately available funds, at the direction or instruction of the Borrower.
Any funds delivered pursuant to the preceding sentence shall be placed in an
interest bearing account selected by the Agent and so long as no Default has
occurred and is continuing, any accrued interest on such funds shall be
distributed monthly to the Borrower.
(d) All outstanding Loans shall be fully due and payable
on the Maturity Date, together with any unpaid interest accrued thereon.
(e) 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 first be applied to Base Rate Borrowings, and second to Eurodollar Rate
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
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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 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) if the aggregate amount of Loans outstanding as of
the date of determination is equal to or greater than 66.7% of the Total
Commitment as of such date, then such rate per annum shall be one-half of
one percent (1/2%) for Base Rate Loans, and two percent (2%) for
Eurodollar Rate Loans;
(ii) if the aggregate amount of Loans outstanding as
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of the date of determination is equal to or greater than 33.3% but less
than 66.7% of the Total Commitment as of such date, such rate per annum
shall be one-half of one percent (1/2%) for Base Rate Loans and one and
three-quarters (1 3/4%) for Eurodollar Rate Loans; and
(iii) if the aggregate amount of Loans outstanding as of
the date of determination is less than 33.3% of the Total Commitment as of
such date, such rate per annum shall be one-half of one percent (1/2%) for
Base Rate Loans, and one and one-quarter percent (1 1/4%) for Eurodollar
Rate Loans.
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 (other than Bank
Group Derivatives) 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
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<PAGE>
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 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 or the Issuing Bank 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), or payments
by the Issuing Bank made pursuant to Section 2.03, in excess of its ratable
share of payments on account of the Loans or payments by the Issuing Bank made
pursuant to Section 2.03, obtained by all the Banks, such Bank shall forthwith
purchase from the other Banks such participations in the Loans made by such
other Banks, or the reimbursement obligations in respect of the payments by the
Issuing Bank made pursuant to Section 2.03, as the case may be, 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
HOU04:43581.4
<PAGE>
permitted by law and this Agreement, exercise all its rights of payment
(including the right of setoff) with respect to 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. (a) 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 (1/2%) per annum on the average unused portion of the
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 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 Commitment of such Bank and on the Maturity
Date (or if earlier, the termination in full of the Commitment); provided that
if the Borrower has not been notified by Agent of the amount of such fee at
least one Business Day prior to any such date, such fee shall be due and payable
one 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. Subject to the provisions of Section 9.13, so long as any
Obligation shall remain outstanding or any Banks shall have any Commitment
hereunder the Borrower shall pay the Agent an annual agency fee of $25,000 on
the Execution Date and on each anniversary date thereof.
(b) (i) The Borrower agrees to pay the Issuing Bank a fee
in respect of each Letter of Credit issued for the account of the Borrower (the
"L/C Fees"). With respect to each Letter of Credit, Borrower agrees to pay an
L/C Fee, for the period from the date of issuance of such Letter of Credit in an
amount equal to 1 1/4 % per annum on the outstanding face amount of such Letter
of Credit. All L/C Fees shall be paid in immediately available funds and shall
based on a 360 day year and actual days elapsed. Accrued L/C Fees for each
Letter of Credit shall be due and payable in arrears on each Quarterly Payment
Date and on the termination or expiration date of such Letter of Credit (or if
earlier, the termination in full of the Commitments). The Issuing Bank shall be
entitled to retain, solely for the Issuing Bank's account, .15% per annum as an
issuing fee on all Letters of Credit (the "Retained L/C Fees") and pay to the
Agent for the pro rata benefit of the Banks all remaining L/C Fees. In addition
to the L/C Fees, the Borrower shall pay the Issuing Bank, solely for the Issuing
Bank's account, its customary administrative service charges relating to the
issuance of, amendment to, payment under and transfer of any Letters of Credit.
Such amounts to be due and payable when such services are rendered by the
Issuing Bank.
(ii) On each Quarterly Payment Date, the Issuing Bank
shall pay the aggregate amount of all L/C Fees collected by the Issuing Bank
during the quarterly period then ended, net of the amount of any Retained L/C
Fees retained by the Issuing Bank for such period, to the Agent. Upon receipt by
the Agent, the Agent shall distribute such net amount of L/C Fees to the Banks
ratably according to their respective Commitment Percentages. Within ten (10)
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<PAGE>
Business Days after each Quarterly Payment Date, the Issuing Bank shall give a
written report to the other members of the Bank Group specifying the gross
amount of all L/C Fees collected by the Issuing Bank during the quarterly period
then ended, the amount of all Retained L/C Fees, and the net amount of such L/C
Fees delivered to the Agent for distribution to the Banks.
Section 2.12. Setoff, Counterclaims and Taxes. (a) All
payments of principal, interest, expenses, reimbursements, compensation,
commitment fees, L/C Fees, arrangement fees or administration 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.
(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.
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<PAGE>
(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, the
Issuing Bank, the Borrower and the Guarantor 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 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 or under the Guaranty are not subject
to United States withholding tax or the Agent otherwise has reason to believe
HOU04:43581.4
<PAGE>
that such Bank is subject to U.S. withholding tax, the Borrower and the
Guarantor shall withhold taxes from such payments at the applicable statutory
rate. Each Bank shall indemnify and hold the Borrower, the Guarantor, the
Issuing Bank 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, the Guarantor, the Issuing Bank or the Agent on any such form or
certificate which such Bank has provided to them pursuant to this Section
2.12(f).
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<PAGE>
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 or to cause a Letter of
Credit to be issued after a Borrowing Request, Letter of Credit 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 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
the Co-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
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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.
(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
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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) If any law, executive order or regulation is adopted
or interpreted by any central bank or other Governmental Authority so as to
affect any of the Borrower's obligations or the compensation to any Bank or the
Issuing Bank in respect of the Letters of Credit or the cost to such Bank or the
Issuing Bank of establishing and/or maintaining the Letters of Credit (or any
participation therein), then the Borrower shall from time to time upon demand,
subject to the provisions of Section 9.13, reimburse or indemnify such Bank or
the Issuing Bank, as the case may be, with respect thereto so that such Bank or
the Issuing Bank, as the case may be, shall be in the same position as if there
had been no such adoption or interpretation.
(d) Each Bank or the Issuing Bank, as the case may be,
will notify the Borrower of any event occurring after the date of this Agreement
which will entitle such Bank or the Issuing Bank, as the case may be, 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 or the Issuing Bank, as the case may be, setting 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) or the Issuing
Bank, as the case may be, 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 or to the Issuing
Bank, as the case may be, the amount shown as due on any such certificate within
ten (10) days after its receipt of the same. The failure of any Bank or the
Issuing 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, any other Bank or the Issuing
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
Issuing Bank and the Banks regardless of any possible contention of invalidity
or inapplicability of law, regulation or condition which shall have been
imposed.
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ARTICLE III
CONDITIONS OF CREDIT
Section 3.01. Conditions Precedent to Effectiveness, the
Initial Borrowing or Letter of Credit. The effectiveness of this Agreement and
the obligation of each Bank to make its initial Loan on the occasion of the
initial Borrowing hereunder or the obligation of the Issuing Bank to issue the
initial Letter of Credit hereunder, as the case may be, is subject to the
conditions precedent that the Agent shall have received on or before the date of
such initial Borrowing or initial Letter of Credit, 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 New Mortgage executed by the Borrower,
(iv) the Mortgage Amendment amending the Existing
Mortgage executed by the Borrower, and
(v) the Guaranty executed by the Guarantor.
(b) Evidence that the Liens created by the Security
Documents have been duly perfected, or will be duly perfected upon the filing of
the instruments referred to in subsections (i) and (ii) below, and constitute
valid first priority Liens, which shall include, without limiting the generality
of the foregoing:
(i) the delivery to the Agent of such financing
statements under the Uniform Commercial Code for filing in such
jurisdictions as the Agent may require, and
(ii) the delivery to the Agent of the New Mortgage and
the Mortgage Amendment for filing 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 or Letters of
Credit to be issued thereunder and the consummation of the transactions
contemplated thereby, (B) authorizing officers of the Borrower to negotiate the
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Loan Documents to which it is a party and which will be delivered at or prior to
the date of the initial Borrowing or Letter of Credit 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) A certificate of the secretary or an assistant
secretary of the Guarantor certifying, inter alia, (i) true and correct copies
of resolutions adopted by the Board of Directors of the Guarantor (A)
authorizing the execution, delivery and performance by the Guarantor of the Loan
Documents to which it is or will be a party and the consummation of the
transactions contemplated thereby, (B) authorizing officers of the Guarantor 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 or Letter of Credit and (C)
authorizing officers of the Guarantor 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 Guarantor and (iii) the incumbency and
specimen signatures of the officers of the Guarantor executing any documents on
behalf of it.
(e) Certificates of appropriate public officials as to
the existence and good standing of the Borrower in the States of Texas, Nevada
and Wyoming.
(f) Certificates of appropriate public officials as the
existence and good standing of the Guarantor in Alberta, Canada.
(g) 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").
(h) Evidence satisfactory to the Agent that all of the
conditions to the Initial Purchaser's obligation under the Bond Purchase
Agreement have been satisfied and that the Bond Offering has been consummated in
accordance with the Bond Purchase Agreement and all Requirements of Law.
(i) Evidence satisfactory to the Agent that the Guarantor
has acquired all of the outstanding capital stock of CGGS and that CGGS has
merged with and into the Guarantor.
(j) Evidence satisfactory to the Agent that the Portilla-
Happy Acquisition has been consummated in accordance with the Portilla-Happy
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Acquisition Documents and all Requirements of Law and
original counterparts of the assignment of the Portilla-Happy Acquisition
Properties to the Borrower.
(k) A portion of the proceeds of the Bond Offering shall
have been used to repay in full all Obligations accrued or otherwise outstanding
under the Original Credit Agreement.
(l) Evidence of payment in full of the Portilla-Happy
Debt and fully executed and acknowledged releases of all Liens existing as
security for the Portilla-Happy Debt, in form, scope and substance satisfactory
to the Agent.
(m) 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.
(n) Copies of all authorizations, consents, approvals,
licenses, filings or registrations obtained from or made with any Governmental
Authority or any other Person in connection with the Bond Offering, 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.
(o) 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.
(p) A satisfactory review of Borrower, including a review
of its marketing, transportation and hedging arrangements for Hydrocarbons.
(q) A certificate signed by a Responsible Officer of the
Borrower certifying as to the satisfaction of the conditions specified in
Section 3.02(a).
(r) The favorable, signed opinions of Cox & Smith
Incorporated, special counsel to the Borrower and its Subsidiaries, Burnet,
Duckworth & Palmer, special Canadian counsel to the Guarantor, and Stikeman,
Elliott, special Canadian 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.
(s) A written confirmation from the Process Agent of its
appointment and acceptance as process agent for the Guarantor as provided for
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in the Guaranty.
(t) The payment to the Bank Group of the fees due to them
as of such date under the Loan Documents.
(u) 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 Letters of
Credit and Loans. The obligation of the Issuing Bank to issue any Letter of
Credit, and of each Bank to make any Loan, shall be subject to the further
conditions precedent that (a) on the Borrowing Date of such Loan or the issuance
date of such Letter of Credit, as the case may be, the following statements
shall be true, and the Borrower, by virtue of its delivery of a Borrowing
Request or a Letter of Credit Request, as applicable, 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 and as of such date,
before and after giving effect to such Loan or Letter of Credit, as the case may
be, 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 or Letter
of Credit, as the case may be, 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
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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.
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 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
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<PAGE>
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 Subsidiaries as of the dates thereof and the results of their operations
for the periods then ended. 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 and of the Letters of Credit 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 or Letter of Credit 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
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<PAGE>
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 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
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<PAGE>
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 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 the 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. Environmental Matters. Except as disclosed
in the environmental reports delivered to the Bank Group pursuant to the
Original Credit Agreement or Section 3.01 hereof, (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)
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) 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 any of its Subsidiaries is adversely
affected, by contract or otherwise; and (d) 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.
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ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Letter of Credit remains outstanding, any
principal amount of any Loan, any principal amount of any reimbursement
obligation in respect of any Letter of Credit, any amount of interest accrued
under the Notes or in respect of any Letter of Credit, 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 fiscal quarters of the
Borrower:
(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.
(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
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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 been 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, 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.
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(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) On or before April 30, 1997, an environmental report
prepared by an independent environmental firm approved by the Agent covering the
real property owned by the Borrower and its Subsidiaries in form, scope and
substance reasonably satisfactory to the Agent.
(j) 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
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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 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 3.01 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
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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
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 and Letters of Credit. All
Letters of Credit shall be issued for general corporate purposes consistent with
the terms of this Agreement and all Requirements of Law. The Borrower will use
the proceeds of all Loans hereunder for general corporate purposes (including
working capital purposes) consistent with the terms of this Agreement and all
Requirements of Law.
Section 5.10. Reserve Reports. (a) By March 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. 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
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<PAGE>
satisfactory to the Agent and shall set forth, as of the immediately preceding
December 31: (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. By August 15 of each year commencing August 15,
1997, the Borrower shall furnish to the Agent and the Banks a Reserve Report
dated as of the immediately preceding June 30. Each such Reserve Report shall be
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 prepared in accordance
with the procedures used in the immediately preceding Reserve Report delivered
to the Banks under this Section 5.10(a).
(b) With respect to any unscheduled redetermination of
the Borrowing Base requested by the Borrower in connection with a proposed
acquisition of Oil and Gas Properties with a fair market value in excess of
$10,000,000, the Borrower shall furnish to the Bank Group a Reserve Report
prepared by certified independent petroleum engineers acceptable to the Agent
covering the Oil and Gas Properties to be acquired. Such Reserve Report shall be
prepared in accordance with the procedures set forth in Section 5.10(a) and
contain such other information as the Agent may reasonably request. In the event
of any other 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 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 or the Agent, 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
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<PAGE>
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 November 30, 1996, the Borrower
shall provide the Bank Group production reports for the Borrower's Oil and Gas
Properties and gas throughput reports for the Guarantor's gas plants, in each
case, certified by an officer of the Borrower, which reports shall include
quantities or volume of production or gas throughput which have accrued to the
Borrower's or the Guarantors accounts (as applicable) in such period, and such
other information with respect thereto as the Agent may reasonably request.
(e) By March 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. Each such 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: (i) the
Proved Reserves attributable to the Guarantor'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.
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
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<PAGE>
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. Upon written request by the Agent, the Borrower will
immediately execute and deliver to the Agent Security Documents in form and
substance satisfactory to the Agent granting to the Agent as security for the
Obligations a first priority Lien (subject only to Excepted Liens) on (a) all
notes or other instruments or documents evidencing Indebtedness of each
Subsidiary of the Borrower owing to the Borrower that is permitted under Section
6.01(f) and (b) all Liens in favor of the Borrower securing such Indebtedness.
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 Letter of Credit or any subsequent Borrowings
or Letters of Credit.
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 Letter of Credit remains outstanding, any
principal amount of any reimbursement obligation in respect of any Letter of
Credit, any principal amount of any Loan, any amount of interest accrued under
the Notes or in respect of any Letter of Credit, 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:
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:
HOU04:43581.4
<PAGE>
(a) Indebtedness of the Borrower and the Guarantor under
the Loan Documents;
(b) Indebtedness of the Borrower or its Subsidiaries 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) the Bond Indebtedness;
(e) Indebtedness set out on Schedule 6.01;
(f) Indebtedness of Subsidiaries of the Borrower to the
Borrower or to a Wholly Owned Subsidiary not to exceed $5,000,000 in the
aggregate so long as such Indebtedness (i) is held only by the Borrower or a
Wholly Owned Subsidiary, and (ii) is secured by Liens in favor of the Borrower
or a Wholly Owned Subsidiary, as appropriate, covering Property of such
Subsidiary with a fair market value equal to or in excess of the amount of such
Indebtedness.
(g) Indebtedness of the Borrower to a Wholly Owned
Subsidiary so long as such Indebtedness (i) is held only by a Wholly Owned
Subsidiary and (ii) is unsecured and subordinated to the Obligations pursuant to
a written subordination agreement satisfactory to the Agent;
(h) Indebtedness under the CGGS Debentures, provided that
such Indebtedness is repaid not later than five (5) days after the date of this
Agreement; and
(i) Indebtedness of Borrower and its Subsidiaries in the
aggregate amount not to exceed $1,000,000 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
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<PAGE>
warranted under this Agreement, the Existing Mortgage or the New 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);
(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, the Existing
Mortgage or the New 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 liens 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);
(h) Liens in connection with workmen's compensation,
unemployment insurance or other social security, old age pension or public
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<PAGE>
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) Liens in favor of the trustee under Section 7.07 of
the Bond Indenture;
(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;
(l) Liens on any assets of any Subsidiary in favor of the
Borrower or the Guarantor;
(m) Liens in favor of the Frost National Bank ("Frost")
on various certificates of deposits issued by Frost to the Borrower in an
original principal amount of $60,000, which Liens secure Indebtedness of the
Borrower to Frost pursuant to the letters of credit issued by Frost for the
benefit of the Borrower that are described on Schedule 6.01;
(n) Any Lien reserved in a lease or farmout agreement to
secure the payment of rents or royalties or other obligations under such farmout
agreement or lease, but only to the extent that any such Lien referred to in
this clause secures obligations 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)
and encumbers the Property covered by such lease or farmout agreement and does
not materially impair (i) the use of the Property covered by such Lien for the
purposes for which such Property is held by the Borrower or any Subsidiary, or
(ii) the value of the Property subject thereto; and
(o) Liens in favor of collecting or payor banks having a
right of setoff, revocation, refund or chargeback with respect to money or
instruments of the Borrower or any Subsidiary on deposit with or in possession
of such bank.
Section 6.03. Derivatives. The Borrower shall not, and
shall not permit any of its Subsidiaries to, enter into any Derivatives other
than (a) commodity price Derivatives presently existing with Christiania (b)
commodity price Derivatives related to bona fide hedging activities so long as
(i) the aggregate notional amounts of such Derivatives during any calculation
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<PAGE>
period do not exceed fifty percent (50%) of the Borrower's and such
Subsidiaries' projected actual production of Hydrocarbons (based on the
projected production of Proved Producing Reserves reflected in the most recent
Reserve Report or reserve report delivered under Section 5.10(e), as applicable,
delivered pursuant hereto) for such period, and (ii) such commodity price
Derivative has been entered into with the Agent, the Co-Agent or such other
Person agreed to by the Majority Banks and (c) interest rate and foreign
exchange Derivatives entered into with the Agent, the Co-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 1.50 to 1.00 as of the last day of any calendar quarter through June
30, 1997 or to be less than 1.75 to 1.00 as of the last day of any calendar
quarter after June 30, 1997.
Section 6.05. Current Ratio. The Borrower will not permit
the ratio of (i) its consolidated current assets, including amounts available
under the Commitments based on the Credit Outstanding and the most recent
determination of the Borrowing Base, to (ii) its consolidated current
liabilities, excluding the aggregate amount of Credit Outstanding, at the end of
any fiscal quarter to be less than 1.00 to 1.00.
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 $2,000,000. Upon written request of the
Borrower and provided no Event of Default shall exist, the Agent shall release
the Lien in favor of the Agent covering assets sold by the Borrower, to the
extent (and only to the extent) the sale of such assets was permitted under
subclause (d) of the preceding sentence.
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
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<PAGE>
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 by the Borrower to develop its
Proved Reserves, Capital Expenditures by any Subsidiary to develop its Proved
Reserves, and additional Capital Expenditures by the Borrower and its
Subsidiaries in an amount not to exceed $5,000,000 in the aggregate 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;
(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;
(f) the repayment of the CGGS Debentures Indebtedness;
(g) payments by the Borrower or any Subsidiary on account
of Indebtedness permitted under Section 6.01;
(h) investments or capital contributions not to exceed
$2,000,000 in the aggregate made by the Borrower in or to any Wholly Owned
Subsidiary; and
(i) investments or capital contributions made by any
Subsidiary of the Borrower in or to the Borrower or any Wholly Owned Subsidiary.
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,
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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 any reimbursement obligation in respect
of any Letter of Credit; or
(b) the Borrower shall fail to pay any interest on any
Loan or any arrangement fee, commitment fee, administration fee, funding fee,
L/C 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 thirty (30) days after notice thereof from the Agent
to the Borrower; or
(e) the Borrower or the Guarantor 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
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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 $500,000 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 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
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(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
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; or
(n) a Change of Control shall occur; or
(o) an event of default shall occur under the Bond
Indenture;
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
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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 the Agent may direct the beneficiary of any outstanding Letter of
Credit to make a drawing under such Letter of Credit in an amount equal to the
full amount available thereunder and require from the Borrower immediate
reimbursement for payments made pursuant to such drawing, or the Agent may
direct the Borrower to deposit with the Issuing Bank cash equal to the aggregate
amount of all Outstanding Letters of Credit as security for the Borrower's
obligations in respect of such Letters of Credit, 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, and the Agent may direct the
beneficiary of any outstanding Letter of Credit to make a drawing under such
Letter of Credit in an amount equal to the full amount available thereunder and
require from the Borrower immediate reimbursement for payments made pursuant to
such drawing, or the Agent may direct the Borrower to deposit with the Issuing
Bank cash equal to the aggregate amount of all Outstanding Letters of Credit as
security for the Borrower's obligations in respect of such Letters of Credit.
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,
without limitation, other rights of setoff) which the Bank Group may have
hereunder or under any applicable law.
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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.
Section 7.05. Application of Proceeds After Acceleration.
If any Event of Default shall have occurred and be continuing, and if the
Obligations have become due and payable, all cash collateral held by the Agent
under this Agreement and the proceeds of any sale, disposition or other
realization by the Agent upon the Mortgaged Property (or any portion thereof)
pursuant to the Security Documents, shall be distributed in whole or in part by
the Agent in the following order of priority, unless otherwise directed by all
of the Banks:
First, to the Agent and the Co-Agent, ratably, in an
amount equal to all costs and expenses of the Agent and the Co-Agent due
and payable as of the date of such distribution;
Second, to the Banks, ratably, in an amount equal to all
accrued interest and fees owing to the Banks under the Credit Agreement
due and payable as of the date of such distribution; provided, however,
that in case such proceeds shall be insufficient to pay in full all such
Obligations, then to the payment thereof to the Banks, ratably, in
proportion to its percentage of the sum of the aggregate amounts of all
such Obligations;
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Third, to the Banks, ratably, in an amount equal to all
unreimbursed drawings under the Letters of Credit owing to the Banks due
and payable as of the date of such distribution; provided, however, that
in case such proceeds shall be insufficient to pay in full all such
Obligations, then to the payment thereof to the Banks, ratably, in
proportion to its percentage of the sum of the aggregate amounts of all
such Obligations;
Fourth, to the Banks, ratably, in an amount equal to the
principal of all Loans owing to the Banks under the Credit Agreement due
and payable as of the date of such distribution; provided, however, that
in case such proceeds shall be insufficient to pay in full all such
Obligations, then to the payment thereof to the Banks, ratably, in
proportion to its percentage of the sum of the aggregate amounts of all
such Obligations;
Fifth, to the Agent as cash collateral in an amount equal
to all Outstanding Letters of Credit;
Sixth, to the Banks, ratably, in an amount equal to all
amounts owing to the Banks under all Bank Group Derivatives due and
payable as of the date of such distribution; provided, however, that in
case such proceeds shall be insufficient to pay in full all such
Obligations, then to the payment thereof to the Banks, ratably, in
proportion to its percentage of the sum of the aggregate amounts of all
such Obligations;
Seventh, to the Banks in an amount equal to all other
Obligations due and payable as of the date of such distribution; provided,
however, that in case such proceeds shall be insufficient to pay in full
all such Obligations, then to the payment thereof to the Banks, ratably,
in proportion to its percentage of the sum of the aggregate amounts of all
such Obligations; and
Eighth, to the extent of any surplus, to the Borrower, as
its interests may appear, except as may be provided otherwise by law;
it being understood that the Borrower shall remain liable to the extent of any
deficiency between the amount of the proceeds of the Mortgaged Property and the
aggregate of the sums referred to in clauses First through Seventh above.
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ARTICLE VIII
THE AGENT, THE CO-AGENT AND THE ISSUING BANK
Section 8.01. Authorization and Action. Each Bank hereby
appoints and authorizes the Agent and the Issuing Bank 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 or the
Issuing Bank 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), neither the Agent nor
the Issuing Bank shall 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 neither the Agent nor the
Issuing Bank shall be required to take any action which exposes it to personal
liability or which is contrary to the Loan Documents or applicable law. Each of
the Agent and the Issuing Bank 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, any
Letters of Credit 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 or the Issuing Bank 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, the
Issuing Bank, their Affiliates and their respective 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 and the Issuing Bank: (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 no
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<PAGE>
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, the Issuing Bank, their Affiliates and their
respective 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,
the Notes issued to it and its interest in the Outstanding Letters of Credit,
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
Issuing Bank or 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 property, contained in any other agreements,
documents or instruments related to such Other Activities; provided, that if any
HOU04:43581.4
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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 and the Issuing Bank, the Co-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, THE CO-AGENT, THE
ISSUING BANK AND THEIR 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. Neither
the Agent, the Issuing Bank nor the Co-Agent shall 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, the Issuing
Bank and the Co-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 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, the Issuing Bank or the Co-Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including
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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, the Issuing Bank or the
Co-Agent is not reimbursed for such expenses by the Borrower.
Section 8.06. Employees of the Agent and the Issuing
Bank. Each of the Agent and the Issuing Bank may execute any of their respective
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. Each of the Agent and the Issuing Bank 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 or corporation 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 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. Successor Co-Agent and Successor Issuing
Bank. (a) The Co-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
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or removal, the Majority Banks shall have the right to appoint a successor
Co-Agent. If no successor Co-Agent shall have been so appointed by the Majority
Banks, and shall have accepted such appointment, within thirty (30) days after
the retiring Co-Agent's giving of notice of resignation or the Majority Banks'
removal of the retiring Co-Agent, then the retiring Co-Agent may, on behalf of
the Banks, appoint a successor Co-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 Co-Agent hereunder by a successor Co-Agent,
such successor Co-Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Co-Agent, and the
retiring Co-Agent shall be discharged from its duties and obligations under this
Agreement, subject to the requirement that such retiring Co-Agent will execute
such documents and take such actions as may be necessary or desirable to cause
the successor Co-Agent to be vested with all such rights, powers, privileges and
duties. After any retiring Co-Agent's resignation or removal hereunder as
Co-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 Co-Agent under this
Agreement. All reasonable costs and expenses incurred by the Bank Group in
connection with any amendments or other documentation required by this Section
8.08 shall be paid by the Borrower pursuant to Section 9.04 hereof.
(b) The Issuing Bank 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 Issuing Bank. If no successor Issuing Bank shall have been
so appointed by the Majority Banks, and shall have accepted such appointment,
within thirty (30) days after the retiring Issuing Bank's giving of notice of
resignation or the Majority Banks' removal of the retiring Issuing Bank, then
the retiring Issuing Bank may, on behalf of the Banks, appoint a successor
Issuing Bank, which shall be a commercial bank or corporation 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 Issuing Bank hereunder by a successor Issuing Bank, such
successor Issuing Bank shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Issuing Bank, and the
retiring Issuing Bank shall be discharged from its duties and obligations under
this Agreement, subject to the requirement that such retiring Issuing Bank will
execute such documents and take such actions as may be necessary or desirable to
cause the successor Issuing Bank to be vested with all such rights, powers,
privileges and duties. Without limiting the generality of the foregoing, the
Borrower, the retiring Issuing Bank and the successor Issuing Bank will cause
each Letter of Credit issued by the retiring Issuing Bank to be terminated and
replaced by a Letter of Credit issued by the successor Issuing Bank. After any
retiring Issuing Bank's resignation or removal hereunder as Issuing Bank, 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 Issuing Bank under this
Agreement. All costs and expenses incurred by the Bank Group in connection with
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any amendments or other documentation required by this Section 8.08(b) shall be
paid by the Borrower pursuant to Section 9.04 hereof.
Section 8.09. 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 8.10. Execution of Loan Documents. Each member of
the Bank Group hereby authorizes and directs the Agent and the Issuing Bank 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, the reimbursement obligations in respect of the Letters of Credit or any
fees or other amounts payable hereunder, (d) postpone any date fixed for any
payment of principal of, or interest on, the Notes, the reimbursement
obligations in respect of the Letters of Credit 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, the Issuing
Bank 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 (1) unless in
writing and signed by the Co-Agent in addition to the Banks required above to
take such action, affect the rights or duties of the Co-Agent under this
Agreement or any other Loan Document and (2) unless in writing and signed by the
Issuing Bank in addition to the Banks required above to take such action, affect
the rights or duties of the Issuing Bank under this Agreement, the Letters of
Credit, Letter of Credit Applications, 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, the Note or the
Notes held by it, its interest in the Outstanding Letters of Credit 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
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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
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 and the Issuing
Bank, to take such action on its behalf and to exercise such powers under this
Agreement and the other Loan Documents as are delegated to such Person by the
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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 Commitment assumed by such
Eligible Assignee pursuant to such Assignment and Acceptance and, if the
assigning Bank has retained a 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 2.05 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 and its interest in the Outstanding Letters
of Credit); 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 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
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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 the Letters of
Credit 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 amount of any
reimbursement obligations payable with respect to any Letter of Credit or the
dates fixed for payments of principal or interest on the Loans or reimbursement
obligations in respect of any Letters of Credit).
(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, the Issuing Bank 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:
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
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if to the Issuing Bank or 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 any of the Agent, the Co-Agent and the Issuing Bank
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 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.
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Section 9.05. Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of the Borrower, the Agent, the
Issuing Bank, the Banks and their respective 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 or the Guarantor in connection
herewith or therewith, shall survive the execution and delivery of this
Agreement, the Notes and the other Loan Documents, the expiration of the Letters
of Credit 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.
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
loans and revolving triparty accounts), shall not apply to this Agreement or the
Notes or the transactions contemplated hereby.
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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
proceeding against 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
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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.
Section 9.14. Indemnification. The Borrower agrees to
indemnify, defend and hold the Agent, the Co-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 Letters of Credit or
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
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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.
Section 9.15. Ratification of Security Documents. The Borrower
hereby ratifies, adopts and confirms the Liens granted by and under the Security
Documents as security for all of the Obligations. The Borrower further
acknowledges and agrees that the term "Secured Obligations" as defined in the
Security Agreement shall include, without limitation, the payment and
performance of the Obligations as defined in this Agreement.
Section 9.16. 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
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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
9.16.
Section 9.17. 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.
HOU04:43581.4
<PAGE>
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:
Robert L. G. Watson
Chief Executive Officer
BANKERS TRUST COMPANY, as
Agent and as Issuing Bank
By:
Mary Jo Jolly
Assistant Vice President
ING (U.S.) CAPITAL
CORPORATION, as
Co-Agent
By:
Christopher R. Wagner
Vice President
HOU04:43581.4
<PAGE>
Bank:
Commitment: $15,000,000.00 BANKERS TRUST COMPANY
By:
Mary Jo Jolly
Assistant 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
HOU04:43581.4
<PAGE>
Bank:
Commitment: $15,000,000.00 ING (U.S.) CAPITAL
CORPORATION
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
HOU04:43581.4
<PAGE>
Bank:
Commitment: $10,000,000.00 UNION BANK OF CALIFORNIA,
N.A.
By:
Name:
Title:
By:
Name:
Title:
Address:
Union Bank of California, N.A.
500 North Akard, Suite 4200
Dallas, Texas 75201
Telecopy No.: (214) 922-4209
Domestic Lending Office
Union Bank of California, N.A.
445 South Figueroa Street
Los Angeles, California 90071
Eurodollar Lending Office
Union Bank of California, N.A.
445 South Figueroa Street
Los Angeles, California 90071
HOU04:43581.4
<PAGE>
