<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-7667
SANTA FE ENERGY RESOURCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
[S] [C]
DELAWARE 36-2722169
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION
NO.)
1616 SOUTH VOSS, SUITE 1000
HOUSTON, TEXAS 77057
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 783-2401
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH
TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED
Common Stock, $.01 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 1, 1994 was approximately $827 million.
Shares of Common Stock outstanding at March 1, 1994 --89,906,799.
DOCUMENTS INCORPORATED BY REFERENCE:
PROXY STATEMENT DATED MARCH 21, 1994 --------------------. PART III
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TABLE OF CONTENTS
PAGE
PART I
Items 1 and 2. Business and
Properties--------------------------- 1
General-------------------------- 1
Corporate Restructuring
Program-------------------------- 2
Reserves------------------------- 4
Domestic Development
Activities----------------------- 5
Domestic Exploration
Activities----------------------- 7
International Development
Activities----------------------- 8
International Exploration
Activities----------------------- 10
Drilling Activities-------------- 11
Producing Wells------------------ 11
Domestic Acreage----------------- 12
Foreign Acreage------------------ 12
Current Markets for Oil and
Gas------------------------------ 13
Santa Fe Energy Trust------------ 14
Other Business Matters----------- 15
Item 3. Legal Proceedings---------- 19
Item 4. Submission of Matters to a
Vote of Security Holders------------- 19
Executive Officers of the
Registrant--------------------------- 19
PART II
Item 5. Market for Registrant's
Common Equity and Related
Stockholder Matters---------------- 20
Item 6. Selected Financial Data---- 21
Item 7. Management's Discussion and
Analysis of Financial
Condition and Results Of
Operations----------------- 23
Item 8. Financial Statements and
Supplementary Data----------------- 29
Item 9. Changes in and
Disagreements with
Accountants on Accounting
and Financial
Disclosure----------------- 29
Part III
Item 10. Directors and Executive
Officers of the Registrant--------- 30
Item 11. Executive Compensation----- 30
Item 12. Security Ownership of
Certain Beneficial Owners and
Management------------------------- 30
Item 13. Certain Relationships and
Related Transactions--------------- 30
PART IV
Item 14. Exhibits, Financial
Statement Schedules and
Reports on Form 8-K-------- 30
Signatures--------------------------- 64
Schedule V -- Property, Plant and Equipment----- 65
Schedule VI -- Accumulated Depreciation,
Depletion and Amortization of
Property, Plant and Equipment-------- 66
Schedule VIII -- Valuation and Qualifying
Accounts----------------------------- 67
Schedule IX -- Short Term Borrowings------------- 68
Schedule X -- Supplementary Income Statement
Information-------------------------- 69
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PART I
CERTAIN DEFINITIONS
As used herein, the following terms have the specific meanings set out:
'Bbl' means barrel. 'MBbl' means thousand barrels. 'MMBbl' means million
barrels. 'Mcf' means thousand cubic feet. 'MMcf' means million cubic feet. 'Bcf'
means billion cubic feet. 'BOE' means barrel of oil equivalent. 'MBOE' means
thousand barrels of oil equivalent and 'MMBOE' means million barrels of oil
equivalent. Natural gas volumes are converted to barrels of oil equivalent using
the ratio of 6.0 Mcf of natural gas to 1.0 barrel of crude oil. Unless otherwise
indicated, natural gas volumes are stated at the official temperature and
pressure basis of the area in which the reserves are located. 'Finding cost'
refers to a fraction, of which the numerator is equal to the costs incurred by
the Company for property acquisition, exploration and development and of which
the denominator is equal to proved reserve additions from extensions,
discoveries, improved recovery, acquisitions and revisions of previous
estimates. 'Improved recovery,' 'enhanced oil recovery' and 'EOR' include all
methods of supplementing natural reservoir forces and energy, or otherwise
increasing ultimate recovery from a reservoir, such as waterfloods, cyclic
steam, steam drive and CO2 (carbon dioxide) injection and fireflood projects.
'Heavy oil' is low gravity, high viscosity crude oil.
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
GENERAL
Santa Fe Energy Resources, Inc. ('Santa Fe' or the 'Company') is engaged in
the exploration, development and production of oil and natural gas in the
continental United States and in certain foreign areas. At December 31, 1993,
the Company had worldwide proved reserves totaling 292.0 MMBOE (consisting of
approximately 248.2 MMBbls of oil and approximately 263.0 Bcf of natural gas),
of which approximately 93% were domestic reserves and approximately 7% were
foreign reserves. During 1993, the Company's worldwide production aggregated
approximately 94.3 MBOE per day, of which approximately 71% was crude oil and
approximately 29% was natural gas. A substantial portion of the Company's
domestic oil production is in long-lived fields with well-established production
histories. With recent sales of non-core properties pursuant to the Company's
corporate restructuring program (see '-- Corporate Restructuring Program'), the
Company has focused its activities on its three domestic core areas -- the
Permian Basin in Texas and New Mexico, the offshore Gulf of Mexico and the San
Joaquin Valley of California -- as well as in Argentina and Indonesia.
Santa Fe was incorporated in Delaware in 1971 as Santa Fe Natural Resources,
Inc., a wholly owned subsidiary of a predecessor of Santa Fe Pacific Corporation
('SFP'). SFP was formed as a result of a business combination on December 23,
1983, between Santa Fe Industries, Inc., the parent company of Santa Fe at that
time and Southern Pacific Company. On January 8, 1990, Santa Fe Energy Company,
which previously conducted a substantial portion of Santa Fe's domestic
exploration and development operations, merged into Santa Fe. Santa Fe
thereafter changed its name to Santa Fe Energy Resources, Inc. On March 8, 1990
Santa Fe sold 11,700,000 previously unissued shares of common stock in initial
public offerings. On December 4, 1990, SFP distributed all of the shares of
Santa Fe's common stock it held to its shareholders.
In May 1992 Adobe Resources Corporation ('Adobe') was merged with and into
the Company (the 'Adobe Merger'). The location of the properties acquired in the
Adobe Merger (the 'Adobe Properties') enhanced the Company's existing domestic
operations and added significant international operations to the Company's
international program. See Note 3 to the Consolidated Financial Statements for
a further discussion of the Adobe Merger.
For the five years ended December 31, 1993, the Company has replaced
approximately 172% of its production at an average finding cost of $4.80 per
BOE. Over the last four years, the Company has increased its overall production
by increasing production from its existing properties and through acquisitions
and has reduced its overall cost structure in order to enhance operating results
and to mitigate the Company's financial exposure in a low oil and natural gas
price environment. For example, over the four-year period ended December 31,
1993, Santa Fe has increased its average daily production from 69.1 MBOE to 94.3
MBOE (including 7.7 MBOE attributable to production from non-care assets sold
pursuant to the corporate restructuring program) and has reduced its average
production costs (including related production, severance and ad valorem taxes)
from $6.22 per BOE in 1990 to $5.39 per BOE in 1993.
Most of the Company's domestic crude oil production is located in California
and Texas, while its domestic natural gas production comes primarily from the
Gulf of Mexico, New Mexico and Texas. During 1993, the Company's domestic daily
production averaged approximately 60.2 MBbls of crude oil and 165.0 MMcf of
natural gas. Substantially all of the Company's oil and gas production is sold
at market responsive prices. Pursuant to the corporate restructuring program,
during 1993 the Company sold properties having 1993 combined production of 4.1
MBbls per day and 21.7 MMcf per day and estimated proved reserves of
approximately 16.7 MMBOE. The domestic crude oil marketing activities of the
Company are conducted through its Santa Fe Energy Products Division ('Energy
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Products'), which is also engaged in crude oil trading. Substantially all of the
Company's domestic natural gas production is currently marketed under the terms
of a sales contract with Hadson Corporation ('Hadson'). See '-- Current Markets
for Oil and Gas.'
A substantial portion of the Company's domestic oil production is in
long-lived fields with well-established production histories and where EOR
methods are employed. As of December 31, 1993, approximately 69% of the
Company's domestic proved crude oil and liquids reserves and 50% of its 1993
average daily domestic production of crude oil and liquids were attributable to
the Midway-Sunset field in the San Joaquin Valley of California, where the
Company first began production in 1905. Nearly all of the reserves in this field
are heavy oil, the production of which depends primarily on steam injection. As
of December 31, 1993, an additional 21% of the Company's domestic proved crude
oil and liquids reserves and approximately 25% of its 1993 average daily
domestic production of crude oil and liquids were attributable to five other oil
producing properties: the Wasson and Reeves fields in the Permian Basin of west
Texas and the South Belridge, Kern River and Coalinga fields in the San Joaquin
Valley.
The Company's foreign production is located in the El Tordillo field in
Argentina and in the Salawati Basin and Salawati Island area of Indonesia.
Production from the El Tordillo field averaged 2,400 barrels of oil per day in
1993 and production from the Indonesian operations averaged 4,100 barrels of oil
per day in 1993.
The Company maintains an active exploration and development program, a
significant portion of which consists of EOR projects on the producing fields
discussed above. During 1993, Santa Fe spent a total of $100.2 million on EOR
and development programs and $50.5 million on exploration programs (including
$38.5 million of exploration costs, of which $31.0 million was charged to
expense, and $12.0 million of unproved property acquisition costs), and $32.6
million on proved property acquisitions. The Company has budgeted $240 million
of expenditures for 1994. However, as a result of depressed oil prices that have
prevailed since November 1993, the Company, consistent with industry practice,
is considering deferring some of its capital projects in order to prudently
manage its available cash flow in the near term. Based upon current market
conditions, the Company estimates that 1994 capital expenditures will total
between $100 million and $160 million, with the actual amount to be determined
by the Company based upon numerous factors outside its control, including,
without limitation, prevailing oil and natural gas prices and the outlook
therefor and the availability of funds.
In the United States, at December 31, 1993, the Company held oil and gas
rights to approximately 0.8 million net undeveloped leasehold and fee acres in
14 states, excluding approximately 1.1 million net undeveloped acres sold to
Bridge under terms of a purchase agreement signed in December 1993 (expected to
close in April 1994) and 0.1 million net undeveloped fee acres sold to another
company in January 1994. See ' -- Corporate Restructuring Program.' Outside the
United States, at December 31, 1993, the Company held exploration rights with
respect to an aggregate of approximately 3.5 million net undeveloped acres in
Argentina, Bolivia, Canada, Gabon, Indonesia, Morocco, Myanmar and Papua New
Guinea.
CORPORATE RESTRUCTURING PROGRAM
In October 1993 the Company's Board of Directors adopted a broad corporate
restructuring program designed to improve earnings and cash flow while
increasing production and replacing reserves in the long-term. The restructuring
program is the result of an intensive review of the Company's operations and
cash flows and focuses on capital spending in the Company's core operating areas
and the disposition of non-core assets. To provide additional funding for the
capital program, the Company also announced the elimination of the payment of
its $0.04 per share quarterly dividend on its common stock, which will make
available approximately $14 million annually. The dividend on the Company's
convertible preferred stock will remain at its current level.
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As a part of the Company's restructuring program, the Company intends to
concentrate its capital spending on its three domestic core areas -- the
Permian Basin in Texas and New Mexico, the offshore Gulf Coast and the
San Joaquin Valley of California -- as well as its productive
areas in Indonesia and Argentina. The domestic program includes
development activities in the Delaware formation in southeast New Mexico, a
development drilling program for the offshore Gulf of Mexico natural gas
properties and infill drilling in the San Joaquin Valley of California.
Internationally, the program includes development of the Company's Sierra Chata
discovery in Argentina with gas sales expected to commence in early 1995.
The restructuring program includes an evaluation of the Company's capital
and cost structures to examine ways to increase flexibility and strengthen the
Company's financial performance. In this respect, in 1994 the Company intends to
refinance a portion of its existing long-term debt and is currently evaluating a
combination of debt and equity financing arrangements with which to effect the
refinancing.
As a result of the dispositions described below (one of which is expected to
close in April 1994), the Company has sold properties having combined production
during 1993 of 4.1 MBbls per day and 21.7 MMcf per day and estimated proved
reserves of approximately 16.7 MMBOE for total proceeds of approximately $91.4
million, has sold its natural gas gathering and processing assets for Hadson
securities and has realized approximately $11.3 million from the sale of its
remaining Depositary Units in the Trust and $8.3 million from the sale of its
interest in certain other oil and gas properties. As a result of these
transactions, the Company has disposed of substantially all of its inventory of
non-core properties.
SALE TO HADSON. In December 1993 the Company completed a transaction with
Hadson under the terms of which the Company sold the common stock of Adobe Gas
Pipeline Company ('AGPC'), a wholly owned subsidiary, to Hadson in exchange for
Hadson 11.25% preferred stock with a face value of $52.0 million and 40% of
Hadson's common stock. In addition, the Company signed a seven-year gas sales
contract under the terms of which Hadson will market substantially all of the
Company's domestic natural gas production from specified existing wells and
certain domestic development and exploration wells. Pursuant to such contract,
Hadson will be required to pay the Company for all production delivered at a
price for such gas equal to stipulated published monthly index prices. See
'-- Current Markets for Oil and Gas'. The Company also designated one-half of
the members of the Hadson Board of Directors.
AGPC's assets include approximately 630 miles of gathering and
transportation lines in Oklahoma, Texas and New Mexico with three processing
plants in west Texas and New Mexico and an intrastate pipeline system supplying
gas to commercial customers in Lubbock, Texas. Hadson's natural gas assets are
predominantly located in southeastern New Mexico and include two gas processing
facilities, a 12 Bcf natural gas storage facility and the 650-mile Llano
intrastate pipeline which has six connections to various interstate pipelines
serving strategic markets in the midwest, on the east coast and in southern
California.
SALE TO VINTAGE. In November 1993, the Company completed the sale of
certain southern California and Gulf Coast producing properties for net proceeds
totaling $41.3 million in cash. The transaction included most of the Company's
California interests outside its core area in the San Joaquin Valley as well as
certain onshore Gulf Coast properties in Texas, Louisiana and Mississippi.
Production from the properties sold to Vintage averaged approximately 2,800
barrels of oil per day and 6.5 MMcf of natural gas per day during 1993. During
1993 such properties contributed $2.7 million to the Company's income from
operations.
SALE TO BRIDGE. In December 1993, the Company signed a purchase agreement
with Bridge pursuant to which Bridge will purchase certain Mid-Continent and
Rocky Mountain producing and nonproducing oil and gas properties. The sales
price of $50.1 million, subject to certain adjustments, will be received by the
Company either in the form of cash plus 10% of the outstanding shares of
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Bridge, following the contemplated public offering of that stock in the first
quarter of 1994, or entirely in cash. The transaction is expected to close in
April 1994.
The transaction includes substantially all of the Company's assets in the
Anadarko Basin of Oklahoma and Texas as well as its interests in the Rocky
Mountain states, excluding its interests in the Canyon Creek natural gas field
in Wyoming. The undeveloped acreage includes approximately 1.7 million mineral
and leasehold acres and exploratory options on an additional 8.1 million acres.
Production from the properties to be sold to Bridge averaged approximately 1,300
barrels of oil per day and 15.2 MMcf of natural gas per day during 1993. During
1993 such properties contributed $5.8 million to the Company's income from
operations.
RESERVES
The following tables set forth information regarding changes in the
Company's estimates of proved net reserves from January 1, 1991 to December
31, 1993 and the balance of the Company's estimated proved developed reserves
at December 31 of each of the years 1990 through 1993.
<TABLE>
<CAPTION>
INCREASES (DECREASES)
BALANCE NET CHANGES
AT REVISION EXTENSIONS, PURCHASES IN
BEGINNING OF DISCOVERIES (SALES) OF OWNERSHIP-
OF PREVIOUS IMPROVED AND MINERALS PARTNER-
PERIOD ESTIMATES RECOVERY ADDITIONS IN PLACE PRODUCTION SHIP(A)
<S> <C> <C> <C> <C> <C> <C> <C>
PROVED RESERVES AT DECEMBER 31, 1991:
Oil and Condensate ((MMBbls)----- 222.3 (1.9) 15.9 1.8 10.9 (20.2) 0.4
Gas (Bcf)------------------------ 185.9 0.4 0.5 19.6 (3.0) (34.8) 2.2
Oil Equivalent (MMBOE)----------- 253.3 (1.8) 16.0 5.1 10.4 (26.0) 0.7
PROVED RESERVES AT DECEMBER 31, 1992:
Oil and Condensate (MMBbls)------ 229.2 14.1 17.0 2.6 15.0 (23.0) 0.2
Gas (Bcf)------------------------ 170.8 7.3 1.3 5.6 137.1 (46.2) 1.6
Oil Equivalent (MMBOE)----------- 257.7 15.3 17.2 3.6 37.9 (30.6) 0.4
PROVED RESERVES AT DECEMBER 31, 1993:
Oil and Condensate (MMBbls)------ 255.1 (10.8) 26.7 6.2 (4.8) (24.3) 0.1
Gas (Bcf)------------------------ 277.5 26.7 -- 55.9 (37.5) (60.4) 0.8
Oil Equivalent (MMBOE)----------- 301.5 (6.3) 26.7 15.4 (11.1) (34.4) 0.2
<CAPTION>
BALANCE
AT END
OF
PERIOD
<S> <C>
PROVED RESERVES AT DECEMBER 31, 1991:
Oil and Condensate ((MMBbls)----- 229.2
Gas (Bcf)------------------------ 170.8
Oil Equivalent (MMBOE)----------- 257.7
PROVED RESERVES AT DECEMBER 31, 1992:
Oil and Condensate (MMBbls)------ 255.1
Gas (Bcf)------------------------ 277.5
Oil Equivalent (MMBOE)----------- 301.5
PROVED RESERVES AT DECEMBER 31, 1993:
Oil and Condensate (MMBbls)------ 248.2
Gas (Bcf)------------------------ 263.0
Oil Equivalent (MMBOE)----------- 292.0(b)
<CAPTION>
DECEMBER 31,
1993 1992 1991 1990
<S> <C> <C> <C> <C>
PROVED DEVELOPED RESERVES (MMBOE)---- 225.5 248.4 210.3 205.0
(a) The information set forth under the column headed 'Changes in
Ownership -- Partnership' reflects reserve additions attributable to the
Company's increased ownership interest in Santa Fe Energy Partners, L.P.
(the 'Partnership') caused by the reinvestment of distributions received
by the Company in respect of its interest in the Partnership. At December
31, 1993, the Company (through its subsidiaries) owned an aggregate 100%
interest in the Partnership.
(b) At December 31, 1993, 5.2 MMBOE were subject to a 90% net profits interest
held by Santa Fe Energy Trust. See '-- Santa Fe Energy Trust.'
</TABLE>
Historically, the Company has utilized active development and exploration
programs as well as selected acquisitions to replace its reserves depleted by
production. The Company has increased its proved reserves (net of production) by
approximately 35% over the five years ended December 31, 1993. Most of such
increases are attributable to proved reserve additions from the Company's
producing oil properties in the San Joaquin Valley of California and the Permian
Basin in west Texas, proved reserves acquired in the Adobe Merger and other
purchases of oil and gas reserves. At December 31,
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1993, the Company's reserves were 9.5 MMBOE lower than at December 31, 1992,
primarily reflecting the sale during 1993 of properties with reserves totaling
16.7 MMBOE partially offset by additions.
The following table sets forth as of December 31, 1993 the Company's
estimated proved reserves and the discounted net present value thereof in each
of the Company's principal operating areas.
<TABLE>
<CAPTION>
NATURAL OIL PV1O(A)
OIL GAS EQUIVALENT (MILLIONS
OPERATING REGION (MMBBLS) (MMCF) (MMBOE) OF DOLLARS)
<S> <C> <C> <C> <C>
Permian Basin------------------------ 41.6 45.8 49.2 128.1
Offshore Gulf of Mexico-------------- 3.8 103.8 21.1 169.8
San Joaquin Valley------------------- 183.6 11.8 185.6 167.1
Other Domestic----------------------- 1.9 74.5 14.3 78.2
International------------------------ 17.3 27.1 21.8 24.6
Total---------------------------- 248.2 263.0 292.0 567.8
(a) Represents the net present value (discounted at 10%) of the pretax future
net cash flows estimated to result from production of the Company's
estimated proved reserves using estimated sales prices and estimates of
production costs, ad valorem and production taxes and future development
costs necessary to produce such reserves. The sales prices used in the
determination of proved reserves and of estimated future net cash flows
are based on the prices in effect at year end, and for 1993 averaged $9.27
per Bbl for oil and $2.17 per Mcf for natural gas. The average sales price
(unhedged) realized by the Company for its production during 1993 was
$12.93 per Bbl for oil and $2.03 per Mcf for natural gas.
</TABLE>
Ryder Scott Company ('Ryder Scott'), a firm of independent petroleum
engineers, prepared the above estimates of the Company's total proved reserves
as of December 31, 1990 through 1993.
During 1993 the Company filed Energy Information Administration Form 23
which reported natural gas and oil reserves for the year 1992. On an equivalent
barrel basis, the reserve estimates for the year 1992 contained in such report
and those reported herein for the year 1992 do not differ by more than five
percent.
DOMESTIC DEVELOPMENT ACTIVITIES
The Company is engaged in development activities primarily through the
application of thermal enhanced recovery techniques to its heavy oil properties
in the San Joaquin Valley, the use of secondary waterfloods and tertiary CO2
floods on its properties in other mature fields and the development of producing
properties acquired by the Company through its exploration successes and its
acquisition program. Thermal EOR operations involve the injection of steam into
a reservoir to raise the temperature and reduce the viscosity of the heavy oil,
facilitating the flow of the oil into producing wellbores. The Company has
operated thermal EOR projects in the San Joaquin Valley since the mid-1960s.
Similarly, the Company has extensive experience in the use of waterfloods, which
involve the injection of water into a reservoir to drive hydrocarbons into
producing wellbores. The Company has an interest in more than 50 waterflood
projects, and additional projects are planned for the future. Following the
waterflood phase, certain fields may continue to produce in response to tertiary
EOR projects, such as the injection of CO2 which mixes miscibly with the oil and
improves the displacement efficiency of the water injection. The Company's
principal CO2 floods are in the Wasson field and are operated by affiliates of
Shell Oil Company, ARCO and Amoco.
Set forth below is a discussion of some of the Company's principal
development projects. The Company has operated in the Midway-Sunset and Wasson
fields since 1905 and 1939, respectively. The Company acquired interests in the
South Belridge field from Petro-Lewis in 1987 and in January 1991 expanded its
holdings in the field with the purchase of certain properties from Mission
Operating Partnership, L.P. The Company's interests in the Kern River and
Coalinga fields were acquired in 1905 and 1977, respectively. The Gulf of Mexico
fields were discovered on leases held by
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the Company or acquired in the Adobe Merger, while the Delaware and Cisco
Canyon properties were acquired as undeveloped properties.
SAN JOAQUIN VALLEY
MIDWAY-SUNSET. The Company owns a 100% working interest (92% average net
revenue interest) in over 10,000 gross acres and 2,200 active wells in the
Midway-Sunset field. Substantially all the oil produced from the Midway-Sunset
field is heavy crude oil produced principally by cyclic steam and steamflood
operations from Pleistocene and Miocene reservoirs at depths less than 2,000
feet. These steam stimulation operations were initiated in the field in the
mid-1960s. During 1993 the Midway-Sunset field accounted for approximately 50%
of the Company's domestic crude oil and liquids production.
At December 31, 1993 the Midway-Sunset field accounted for approximately 69%
of the Company's domestic proved crude oil and liquid reserves. Reservoir
engineering studies prepared on behalf of the Company indicate significant
additions to its proved reserves in this field can continue to be made through
additional EOR and development projects. The Company has identified a
substantial number of locations that could be drilled in the field, depending in
part on future prices and economic conditions. The Company is pursuing
electrical cogeneration opportunities which could lower Midway-Sunset operating
costs.
SOUTH BELRIDGE. The South Belridge field is located approximately 15 miles
north of the Midway-Sunset field. The Company operates three leases in the field
which produce heavy oil from the shallow Tulare sands and lighter low viscosity
oil from the deeper Diatomite reservoirs. Steamflood operations in the lower
Tulare sands are in progress on one of these leases and plans call for flooding
the remaining Tulare sands on this lease and all Tulare sands on another lease
in the coming years. Waterflood operations in the Diatomite reservoir have been
initiated on two leases and the Company expects to expand these operations to
include the rest of the developed area.
COALINGA. The Coalinga field is located 55 miles southwest of Fresno,
California. Successful steamfloods and a pilot steamflood project have been
conducted in the Lower Temblor Sands on three of the six leases in which the
Company owns interests in the field. During the next several years, the Company
plans to expand the pilot steamflood project in the lower sands to cover the
remaining producing area and expand steam floods on the Upper Temblor Sands on
all leases after depletion of the lower zones. Most of the facilities required
for these projects are already in place as a result of the prior steamfloods.
KERN RIVER. The Kern River field is located near Bakersfield, California.
The Lower Kern River Series sands have been successfully steamflooded on three
of the leases in which the Company owns an interest. Over the next several years
steamflood operations will be sequentially redeployed in the upper sands of the
Kern River Series. Eventually the Company plans to flood all sands on its
remaining lease in several stages. The Company has installed and operates a
large steam generation plant on these properties.
PERMIAN BASIN
WASSON. The Company's interests in the field principally consist of royalty
and working interests in three units which are presently under CO2 flood. Most
of the expenditures for plant, facilities, wells and equipment necessary for
such tertiary recovery projects have been made. In addition, while expenditures
relating to the purchase of CO2 for the Wasson field are expected to continue,
CO2 can be recycled and, therefore, such expenditures should decline in the
future.
During 1993 the Wasson field accounted for approximately 9% of the Company's
domestic crude oil and liquids production and at December 31, 1993 the field
accounted for approximately 8% of the Company's domestic proved crude oil and
liquids reserves. Since initiation of CO2 flooding operations in 1984, the
field's previous production decline has been reversed. Reservoir engineering
studies
6
<PAGE>
prepared on behalf of the Company indicate significant additions to proved
reserves can be made through additional EOR and development projects.
REEVES. The Company owns a 72% net interest in the Reeves field, seven
miles east of the large Wasson field in west Texas. The field has been under
waterflood since 1965. During 1993 six wells were drilled and 16 wells were
worked over as part of a program to delineate the extended productive limits of
the field, to evaluate the potential for infill drilling and to enhance current
waterflood operations. Based on the successes of the prior year's program, the
Company plans to initiate an infill drilling and workover program in this field
in the near future.
NEW MEXICO. During 1993 the Company increased its activity in the light-oil
Delaware play in Lea and Eddy Counties of southeast New Mexico. A total of 51
gross (18.1 net) development wells were completed in 1993 with a 100% success
rate and in December 1993 such wells produced approximately 1,400 barrels of oil
and 3.1 MMcf of natural gas per day. Net production from this area in December
1993 totaled approximately 1,500 barrels of oil and 4.0 MMcf of natural gas per
day. The Company plans to drill additional development wells in 1994.
Also in southeastern New Mexico, the Company participated in five gross (2.8
net) wells in 1993 in the light oil and gas Cisco-Canyon project. Four wells
were completed as producers from the Cisco-Canyon zone by year end and a fifth
continued production testing. The Company plans to continue delineation of this
play which contains some 75 identified potential development locations.
OFFSHORE GULF OF MEXICO
At December 31, 1993, offshore Gulf of Mexico properties accounted for 39%
of the Company's proved natural gas reserves and during 1993 these properties
accounted for approximately 56% of the Company's natural gas production.
In the Gulf Division, several new fields or field additions were placed on
production during 1993. Net production from these fields at year end averaged
approximately 29.0 MMcf of gas per day. Further development in these fields are
either planned or under study for 1994 and 1995. The Company's activities in the
offshore Gulf of Mexico are conducted in the shallow water (less than 300 feet),
where the costs of drilling, completion and production are not as uncertain as
are the costs in the Flextrend and Deepwater areas of the Gulf of Mexico. During
1993, the Company participated in the drilling of four gross (1.3 net)
exploratory wells and one gross (0.3 net) well was drilling at year end (which
well resulted in a discovery and a multiwell development program is expected to
commence in 1994). For a description of the Company's leasehold position in the
offshore Gulf of Mexico, see '-- Domestic Exploration Activities.'
DOMESTIC EXPLORATION ACTIVITIES
The Company's domestic exploration focus continues to be in the Permian
Basin and the offshore Gulf of Mexico. Overall the Company participated in 22
gross (9.0 net) exploratory wells in 1993. A total of ten gross (3.6 net) were
completed as producers for a 40% net well success. At year end there were nine
gross (4.3 net) wells in some stage of drilling or completion.
As of December 31, 1993, the Company held approximately 0.3 million net
undeveloped leasehold acres in 14 states and offshore areas, excluding
approximately 0.5 million net undeveloped leasehold acres committed to Bridge
under the terms of a Purchase and Sales Agreement signed in December 1993. The
primary terms of lease expire with respect to 24% of such acreage in 1994, 25%
in 1995, 15% in 1996, 10% in 1997 and the remainder thereafter. In addition, the
Company owns approximately 0.5 million net acres of undeveloped fee minerals in
Louisiana, Texas and California.
The Company also controls the oil and gas rights on approximately 8.1
million net undeveloped acres in the western United States through direct
ownership and pursuant to lease option agreements from Santa Fe Pacific Railroad
Company and other former affiliates. These lands are located in high risk
exploration areas. Due to this risk, the Company has historically negotiated
with third parties to explore this acreage with the Company to receive a royalty
or carried interest in the exploration
7
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phase. An agreement relating to substantially all of these oil and gas rights
has been entered into with Bridge. This agreement is intended to provide
incentive to Bridge to accelerate exploration activities on lands subject to
these rights. The Company will receive a small revenue interest in the event
such activities are successful.
Set forth below is a brief discussion of some of the Company's principal
exploration programs.
PERMIAN BASIN. This area continues to be one of the Company's most active
and successful exploration areas. During 1993, the Company participated in 18
gross (7.7 net) exploratory wells. Eight gross (3.3 net) of these were completed
in 1993 as oil or gas discoveries. Additionally, eight gross (4.0 net) were in
some phase of drilling or completing at year end.
Drilling objectives for the Company's exploratory program target oil and gas
zones at depths of between 2,500 to 15,000 feet. The shallower targets such as
the Delaware, and Cisco-Canyon formations are providing successful results. The
Delaware program in southeast New Mexico was the subject of seven gross (3.7
net) exploratory and 51 gross (18.1 net) development wells completed in 1993. A
success rate of 58% of the net exploratory wells and 100% of the net development
wells was achieved in this increasingly active light oil play. Currently the
Company has identified in excess of 150 development well locations and has 20
exploratory prospects in inventory to be drilled over the next several years.
In the west Texas Permian Basin, the Company completed the shooting of 3-D
seismic over its 250 square mile block near Midland last fall. The joint venture
block contains over 100,000 net acres of lands owned or controlled by the
Company and its partners. Almost all of the Company's 25% interest in the 3-D
seismic was paid by a promoted partner. Drilling began in December 1993 on two
prospects identified in this program. Additional drilling is planned on a
variety of other prospects in 1994 at depths of 10,000 to 12,000 feet.
OFFSHORE GULF OF MEXICO. The Company participated in four gross (1.3 net)
exploratory wells in the offshore in 1993 and one gross (0.3 net) was drilling
at year end. One gross (0.3 net) well resulted in a discovery on which a
multiwell development program will commence in the second quarter of 1994.
The Company acquired 3-D seismic coverage over 12 blocks during 1993 adding
to its extensive Gulf of Mexico seismic database which includes 3-D coverage on
57 blocks. Currently the Company has 35 exploratory prospects in inventory and
some 30 development locations identified a portion of which are exploratory
planned to be drilled in 1994.
At year end the Company owned 179 blocks of acreage in the Gulf of Mexico
consisting of approximately 299,800 gross (147,400 net) undeveloped acres and
257,900 gross (79,000 net) developed acres.
INTERNATIONAL DEVELOPMENT ACTIVITIES
INDONESIA. The Company, through a wholly owned subsidiary, is engaged in
the production of crude oil in Indonesia through a joint venture (the 'Salawati
Basin Joint Venture') formed in 1970 to explore for and develop hydrocarbon
reserves in the Salawati Basin area of Irian Jaya. At December 31, 1993, the
Company held a 33 1/3% participation interest in, and acts as operator for, the
Salawati Basin Joint Venture. The Salawati Basin Joint Venture operates under a
production sharing contract (the 'PSC') with the Indonesia state oil agency
('Pertamina'), which had an initial term of 30 years and expires in the year
2000. The Company is currently negotiating with such state oil agency to extend
the contract for an additional 20 years. As of December 31, 1993, the contract
covered an area of approximately 235,000 acres. Production occurs from seven oil
and three gas condensate fields.
The PSC entitles the Salawati Basin Joint Venture to recover all of its
expenditures related to the operation (the 'cost recovery amount') before any
additional production is shared with the Indonesian state oil agency, which
recovery is effected by allocating to the Salawati Basin Joint Venture a portion
of the crude oil production sufficient, at the Indonesia government official
crude oil price ('ICP'), to offset the cost recovery amount. The balance of
production after the cost recovery
8
<PAGE>
amount is divided between the parties, with approximately 66% allocated to
Pertamina and 34% allocated to the Salawati Basin Joint Venture. However, 25% of
the 34% pre-tax portion (8.5% of total production) must be sold into the
Indonesian domestic market for $0.20 per barrel. The entire entitlement of the
Salawati Basin Joint Venture under the PSC, including the domestic market
obligation, averaged approximately 10.1 MBbls per day (approximately 3.4 MBbls
per day net to the Company) for the year ended December 31, 1993. The Salawati
Basin Joint Venture is required to pay Indonesian income taxes at the rate of
56%.
The Company, through another subsidiary, has also entered into a joint
venture with Pertamina to explore the Salawati Island Block of Irian Jaya. The
effective date of this joint venture is April 23, 1990 with a term of 30 years.
At December 31, 1993, the Company held a 16 2/3% participation interest in the
block which covers 1.09 million acres. The Company and Pertamina (with its 50%
interest) jointly operate the contract area. In 1991, a successful exploratory
well tested at a combined rate of 3,568 barrels of oil per day and was followed
by two successful delineation wells. Pertamina declared the field commercial in
January 1993 and designated it as the Matoa Field. Sales of production began in
January of 1993. Development activities through 1993 have the Matoa field
producing approximately 5,600 barrels of oil per day from eight wells as of
December 31, 1993.
Under the terms of the PSC, the joint venture participants are allowed to
recover the cost recovery amount, after an initial 20% portion (2.9% to the
joint venture participants and 17.1% to Pertamina) has been deducted, by
allocating to the joint venture participants a portion of the crude oil
production ('cost oil') sufficient to offset the cost recovery amount. All
unrecovered costs in any calendar year can be carried forward to future years.
The balance of production after allocation of cost oil is allocated
approximately 85.5% to Pertamina and 14.5% to the other Salawati Island Joint
Venture participants. However, 7.25% of the gross production allocated to the
joint venture participants must be sold into the Indonesian domestic market for
10% of ICP.
ARGENTINA. In 1991, the Company, through a wholly owned subsidiary,
acquired an 18% non-operated working interest (15.84% net interest) in the El
Tordillo field in Chubut Province, Argentina. At that time, the field was
producing approximately 10,500 barrels of oil per day. The Company has agreed to
spend approximately $16.7 million net during the period from July 1, 1992 to
July 1, 1996 on development and maintenance of the field which began with an
extensive workover and recompletion program. As of December 31, 1993 the El
Tordillo owners have completed 163 such workovers and drilled three new wells.
During that time production increased to approximately 16,000 barrels of oil per
day. The Company expects this program to continue through 1994 and anticipates
an expansion of the existing waterflood facilities.
Under the terms of the contract with the Argentine national oil company, the
joint venture group is allowed to sell crude oil produced from this field into
the open market. There is a 12% royalty on gross production and the joint
venture is taxed at a 30% rate after deductions for capitalized costs and
expenses.
In April 1993, the Company's subsidiary completed the Sierra Chata X-1 as a
successful exploratory test in Chihuidos Block, Neuquen Province, Argentina. The
well produced at a combined rate of 22.2 million cubic feet per day and 109
barrels of condensate per day. Carbon dioxide content of the natural gas was 6%.
Five successful delineation wells were drilled in 1993. Producing rates on these
wells varied from 3.2 to 27.6 million cubic feet per day. Engineering and
geological studies are presently being undertaken to develop the field through
additional drilling, with 4.0 gross (1.0 net) additional wells currently planned
for 1994. In addition, the Company and its partners intend to build a gas
processing facility and a 40-mile gathering pipeline during 1994 that will
transport production from the field and interconnect with a main transmission
line owned by a third party that transports gas to Buenos Aires and other major
markets. Construction of the gas processing facility and the pipeline and the
drilling of the development wells are estimated to cost an aggregate of $76.0
million gross ($17.2 million net to the Company's interest). The Company expects
that sales of production from the Sierra Chata discovery will commence in 1995.
9
<PAGE>
INTERNATIONAL EXPLORATION ACTIVITIES
In 1993, the Company had its most active year ever in the international
arena. The Company participated in six gross (1.8 net) exploratory wells of
which two gross (0.5 net) were completed as natural gas wells. Additionally,
four gross (1.2 net) wells were either drilling or completing at year end.
The Company made one exploration discovery in 1993. The Sierra Chata natural
gas discovery in the Neuquen Basin of Argentina is being developed from
sandstone reservoirs at 6,000 feet. The Company has a 22.5% working interest
(20% net revenue interest) and is operator of this field. To date a total of
six gross (1.3 net) wells have been drilled with no dry holes. Combined gross
flow rates from these six wells are in excess of 100 million cubic feet of
gas and 500 barrels of condensate per day. Additional development drilling
will continue during 1994 to increase production capacity and further define
the limits of the field. See '-- International Development Activities.'
The Company plans to drill eight gross (2.8 net) wells in 1994 in addition
to the four gross (1.2 net) wells which carried over from 1993 in either a
drilling or completing status. The 1994 drilling and exploratory activity will
be centered principally in Indonesia and South America. Of the total wells to be
completed in 1994, four gross (1.2 net) are in Indonesia, four gross (1.3 net)
are in Argentina and Bolivia, one gross (0.2 net) is in Papua New Guinea, two
gross (1.0 net) are in Canada and one gross (0.3 net) is in Gabon (West Africa).
The Company holds exploration contracts totaling 3.5 million net acres in
eight foreign countries. The majority of acreage is in Indonesia (1.1 million
net acres) and South America (1.2 net million acres) with the balance in Canada,
Morocco, Myanmar, Papua New Guinea and Gabon.
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DRILLING ACTIVITIES
The table below sets forth, for the periods indicated, the number of wells
drilled in which Santa Fe had an economic interest. As of December 31, 1993,
Santa Fe was in the process of drilling or completing 9 gross ( 4.3 net)
domestic exploratory wells, 13 gross (5.3 net) development wells, 4 gross (1.2
net) foreign exploratory wells and 3 gross (1.0 net) foreign development wells.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1993 1992 1991
GROSS NET GROSS NET GROSS NET
<S> <C> <C> <C> <C> <C> <C>
Development Wells
Domestic
Completed as natural gas
wells-------------------------- 21 6.0 6 1.5 25 7.5
Completed as oil wells----------- 237 180.0 62 39.0 220 167.3
Dry holes------------------------ 10 3.6 5 0.4 6 1.6
Foreign:
Completed as natural gas
wells---------------------------- 4 1.0 -- -- -- --
Completed as oil wells----------- 3 0.9 -- -- -- --
275 191.5 73 40.9 251 176.4
Exploratory Wells
Domestic
Completed as natural gas
wells-------------------------- 3 0.9 1 0.3 6 2.0
Completed as oil wells----------- 7 2.7 4 1.2 6 1.9
Dry holes------------------------ 12 5.4 2 0.6 19 7.2
Foreign
Completed as natural gas
wells---------------------------- 2 0.4 -- -- -- --
Completed as oil wells----------- -- -- 1 0.3 -- --
Dry holes------------------------ 4 1.3 4 1.3 3 0.4
28 10.7 12 3.7 34 11.5
303 202.2 85 44.6 285 187.9
</TABLE>
PRODUCING WELLS
The following table sets forth Santa Fe's ownership in producing wells at
December 31, 1993:
<TABLE>
<CAPTION>
U.S. ARGENTINA(1) INDONESIA(2) TOTAL
GROSS(3) NET GROSS NET GROSS(4) NET GROSS NET
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Oil---------------------------------- 10,081 4,780 381 69 401 131 10,863 4,980
Gas---------------------------------- 690 179 6 1 5 2 701 182
10,771 4,959 387 70 406 133 11,564 5,162
(1) At December 31, 1993 the 6 gross (1 net) gas wells were shut-in.
(2) Includes 98 gross (32 net) wells which were shut-in at December 31, 1993.
(3) Includes 33 wells with multiple completions.
(4) Includes 3 wells with multiple completions.
</TABLE>
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<PAGE>
DOMESTIC ACREAGE
The following table summarizes Santa Fe's developed and undeveloped fee and
leasehold acreage in the United States at December 31, 1993. Excluded from such
information is acreage in which Santa Fe's interest is limited to royalty,
overriding royalty and other similar interests.
<TABLE>
<CAPTION>
UNDEVELOPED DEVELOPED
STATE GROSS NET GROSS NET
<S> <C> <C> <C> <C>
Alabama -- Offshore------------------ -- -- 23,040 12,480
Alabama -- Onshore------------------- 3,089 108 6,063 382
Arkansas----------------------------- 633 493 4,177 3,173
California -- Offshore--------------- -- -- 17,280 2,074
California -- Onshore---------------- 249,207 248,990 7,391 7,011
Colorado----------------------------- -- -- 6,368 5,657
Illinois----------------------------- 202 50 43 13
Kansas------------------------------- 19,433 19,373 4,591 1,002
Louisiana -- Offshore---------------- 222,376 116,843 190,675 57,721
Louisiana -- Onshore----------------- 17,575 16,620 14,635 2,941
Michigan----------------------------- -- -- 71 11
Mississippi-------------------------- 114 30 3,724 810
Montana------------------------------ -- -- 3,196 142
Nevada------------------------------- 3,491 764 9,455 9,455
New Mexico--------------------------- 195,750 155,594 41,427 18,852
New York----------------------------- -- -- 189 47
North Dakota------------------------- 1,509 544 4,337 1,377
Oklahoma----------------------------- 1,917 1,917 29,589 9,940
Texas -- Offshore-------------------- 77,397 30,545 67,194 21,243
Texas -- Onshore--------------------- 180,828 174,912 246,287 168,421
Utah--------------------------------- 1,348 575 8,389 3,494
Wyoming------------------------------ 13,785 10,804 25,888 11,312
988,654 778,162 714,009 337,558
</TABLE>
The foregoing table excludes approximately 2,033,400 gross (1,682,000 net)
undeveloped leasehold and fee acres and 80,200 gross (45,900 net) developed
acres committed to Bridge under terms of a Purchase and Sales Agreement signed
in December 1993 and 123,000 gross (123,000 net) undeveloped acres sold in
January 1994.
FOREIGN ACREAGE
The following table summarizes Santa Fe's foreign acreage at December 31,
1993:
<TABLE>
<CAPTION>
UNDEVELOPED DEVELOPED
GROSS NET GROSS NET
<S> <C> <C> <C> <C>
Argentina---------------------------- 2,103,010 550,457 53,988 10,858
Bolivia------------------------------ 1,442,446 649,100 -- --
Canada (Alberta)--------------------- 150,703 68,071 -- --
Gabon-------------------------------- 701,000 175,250 -- --
Indonesia---------------------------- 4,439,569 1,059,193 9,360 2,870
Morocco------------------------------ 1,300,000 422,500 -- --
Myanmar------------------------------ 394,000 315,200 -- --
Papua New Guinea--------------------- 1,970,000 295,500 -- --
12,500,728 3,535,271 63,348 13,728
</TABLE>
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<PAGE>
CURRENT MARKETS FOR OIL AND GAS
The revenues generated by the Company's operations are highly dependent upon
the prices of, and demand for, oil and gas. For the last several years, prices
of these products have reflected a worldwide surplus of supply over demand. The
price received by the Company for its crude oil and natural gas depends upon
numerous factors beyond the Company's control, including economic conditions in
the United States and elsewhere and the world political situation as it affects
OPEC, the Middle East (including the current embargo of Iraqi crude oil from
worldwide markets) and other producing countries, the actions of OPEC and
governmental regulation. The fluctuation in world oil prices continues to
reflect market uncertainty regarding OPEC's ability to control member country
production and underlying concern about the balance of world demand for and
supply of oil and gas. Decreases in the prices of oil and gas have had, and
could have in the future, an adverse effect on the Company's development and
exploration programs, proved reserves, revenues, profitability, cash flow and
dividend levels. See Item 7. 'Management's Discussion and Analysis of Financial
Condition and Results of Operations -- General.'
The Company believes the market for heavy crude oil produced in California
differs substantially from the remainder of the domestic crude oil market. It is
necessary to heat or dilute heavy oil to make it flow, which increases
transportation and handling costs, and it is also more costly to refine. As a
result, the price paid for heavy crude oil is generally lower than the price
paid for light crudes. In addition, there is currently an oversupply of crude
oil in the California market that has had an adverse effect on the prices for
crude oil in that market. Although no assurance can be given, the Company
believes that such oversupply will not continue for the long term due to the
availability of crude oil pipelines to transport excess crude oils, including
blended oils, to markets in the midwest and west Texas, and due to the decline
of crude oil produced from the North Slope of Alaska.
From time to time the Company has hedged a portion of its oil and natural
gas production to manage its exposure to volatility in prices of oil and natural
gas. The Company used several instruments whereby monthly settlements were based
on the difference between the price, or a range of prices, specified in the
instruments and the monthly average of the daily settlement prices of certain
West Texas Intermediate ('WTI') crude oil futures contracts or of certain
natural gas futures contracts quoted on the New York Mercantile Exchange. In
instances where the actual average of the daily settlement price was less than
the price specified in the contract, the Company received a settlement based on
the difference; in instances where the actual average of the daily settlement
price was higher than the specified price, the Company paid an amount based on
the difference. The instruments utilized by the Company differed from futures
contracts in that there was no contractual obligation which required or allowed
for the future delivery of the product. Settlements were included in revenues in
the period in which the oil and natural gas were sold.
In 1990, oil hedges resulted in a $10.7 million reduction in oil revenues
and in 1991 and 1992 oil hedges resulted in an increase in oil revenues of $41.7
million and $9.7 million, respectively. The Company has had no oil hedging
contracts subsequent to 1992. In 1992 and 1993, natural gas hedges resulted in a
reduction in natural gas revenues of $0.5 million and $8.2 million,
respectively. The Company currently has six open natural gas hedging contracts
for approximately 24.6 MMcf per day during the seven month period beginning
March 1994. The 'approximate break-even price' (the average of the monthly
settlement prices of the applicable futures contracts which would result in no
settlement being due to or from the Company) with respect to such contracts is
approximately $1.88 per Mcf. In addition, a certain party holds an option on
a contract covering approximately 4.7 MMcf per day during the five month period
beginning May 1994 at an approximate break even price of $1.92 per Mcf. The
Company has no other outstanding natural gas hedging instruments.
During 1993, affiliates of Shell Oil Company and Celeron Corporation
accounted for approximately 23% and 15% respectively, of the Company's domestic
crude oil and liquids and natural gas revenues. No other individual customer
accounted for more than 10% of such revenues during 1993. Substantially all of
the Company's oil and natural gas production is currently sold at market-
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<PAGE>
responsive prices that approximate spot prices. Availability of a ready market
for the Company's oil and gas production depends on numerous factors, including
the level of consumer demand, the extent of worldwide oil production, the cost
and availability of alternative fuels, the cost of and proximity of pipelines
and other transportation facilities, regulation by state and federal authorities
and the cost of complying with applicable environmental regulations.
In December 1993, the Company signed a seven-year gas sales contract with
Hadson pursuant to the terms of which Hadson will market substantially all of
the Company's domestic natural gas production. Pursuant to such gas contract,
Santa Fe dedicated to Hadson all of its domestic natural gas production from
specified existing wells, which consist of essentially all of the Company's
domestic natural gas production, except to the extent such production was
dedicated under pre-existing contracts. Upon the expiration of any such
pre-existing contracts, that production shall also be dedicated to the Company.
In addition to production from existing wells, such gas contract provides
for the dedication by the Company of gas production from certain domestic
development wells and exploration wells to the extent that the Company accepts
proposals from Hadson to gather and market production from such exploration
wells. Production from gas wells acquired by the Company pursuant to an
acquisition of producing oil and gas properties will not be dedicated under the
gas contract but may be dedicated by the mutual agreement of the Company and
Hadson.
Pursuant to the gas contract, Hadson will be required to pay the Company for
all production delivered at a price for such gas equal to stipulated published
monthly index prices. Hadson is obligated to use its best efforts to receive gas
from the Company at delivery points so as to maximize the net price received by
the Company for such production. Payment for purchases by Hadson are to be made
in immediately available funds no later than the last working day of the month
following the month of production.
SANTA FE ENERGY TRUST
In November 1992, 5,725,000 Depositary Units ('Depositary Units'), each
consisting of beneficial ownership of one unit of undivided interest in Santa Fe
Energy Trust (the 'Trust') and a $20 face amount beneficial ownership interest
in a $1,000 face amount zero coupon United States Treasury obligation maturing
on February 15, 2008, were sold in a public offering. The assets of the Trust
consist of certain oil and gas properties conveyed by the Company. A total of
$114.5 million was received from public investors, of which $38.7 million was
used to purchase the Treasury obligations and $5.7 million was used to pay
underwriting commissions and discounts. The Company received the remaining $70.1
million and retained 575,000 Depositary Units. A portion of the proceeds
received by the Company was used to retire $30.0 million of the debt incurred in
connection with the Merger and the remainder was used for general corporate
purposes. In the first quarter of 1994, the Company sold the remaining 575,000
Depositary Units it held for $11.3 million.
The properties conveyed to the Trust consisted of two term royalty interests
in two production units in the Wasson field in west Texas and a net profits
royalty interest in certain royalty and working interests in a diversified
portfolio of properties located in twelve states. At December 31, 1993, 5.2
MMBOE of the Company's estimated proved reserves were subject to such net
profits interest. The reserve estimates included herein reflect the conveyance
of the Wasson term royalties to the Trust.
For any calendar quarter ending on or prior to December 31, 2002, the Trust
will receive additional royalty payments to the extent that such payments are
required to provide distributions of $0.40 per Depositary Unit per quarter. Such
additional royalty payments, if needed, will come from the Company's remaining
royalty interest in one of the production units in the Wasson field described
above, and are non-recourse to the Company. If such additional payments are
made, certain proceeds otherwise payable to the Trust in subsequent quarters may
be reduced to recoup the amount of such additional payments. The aggregate
amount of the additional royalty payments (net
14
<PAGE>
of any amounts recouped) will be limited to $20.0 million on a revolving basis.
The Company was required to make an additional royalty payment of $362,000 with
respect to the distribution made by the Trust for operations during the quarter
ended December 31, 1993. Based upon current prices, the Company believes that a
support payment will be required for the quarter ending March 31, 1994, the
amount of which has not been determined.
OTHER BUSINESS MATTERS
COMPETITION
The Company faces competition in all aspects of its business, including, but
not limited to, acquiring reserves, leases, licenses and concessions; obtaining
goods, services and labor needed to conduct its operations and manage the
Company; and marketing its oil and gas. The Company's competitors include
multinational energy companies, government-owned oil and gas companies,
other independent producers and individual producers and operators. The
Company believes that its competitive position is affected by price, its
geological and geophysical capabilities and ready access to markets
for production. Many competitors have greater financial and other
resources than the Company, more favorable exploration prospects and ready
access to move favorable markets for their production. The Company believes that
the well-defined nature of the reservoirs in its long-lived oil fields, its
expertise in EOR methods in these fields, its active development and
exploration position and its experienced management may give it a competitive
advantage over some other producers.
REGULATION OF CRUDE OIL AND NATURAL GAS
The petroleum industry is subject to various types of regulation throughout
the world, including regulation in the United States by state and federal
agencies. Domestic legislation affecting the oil and gas industry is under
constant review for amendment or expansion, frequently increasing the regulatory
burden. Also, numerous departments and agencies, both federal and state, are
authorized by statute to issue and have issued rules and regulations binding on
the oil and gas industry and its individual members, compliance with which is
often difficult and costly and which may carry substantial penalties for
non-compliance. Although the regulatory burden on the oil and gas industry
increases the cost of doing business and, consequently, affects profitability,
generally these burdens do not appear to affect the Company any differently or
to any greater or lesser extent than other companies in the industry with
similar types and quantities of production. While the Company is a party to
several regulatory proceedings before governmental agencies arising in the
ordinary course of business, management does not believe that the outcome of
such proceedings will have a material adverse affect on the operations or
financial condition of the Company. Set forth below is a general description of
certain state and federal regulations which have an effect on the Company's
operations.
STATE REGULATION. State statutes and regulations require permits for
drilling operations, drilling bonds and reports concerning operations. Most
states in which the Company operates also have statutes and regulations
governing the conservation of oil and gas and the prevention of waste, including
the unitization or pooling of oil and gas properties and rates of production
from oil and gas wells. Rates of production may be regulated through the
establishment of maximum daily production allowables on a market demand or
conservation basis or both.
FEDERAL REGULATION. A portion of the Company's oil and gas leases are
granted by the federal government and administered by the Bureau of Land
Management ('BLM') and the Minerals Management Service ('MMS'), both of which
are federal agencies. Such leases are issued through competitive bidding,
contain relatively standardized terms and require compliance with detailed BLM
and MMS regulations and orders (which are subject to change by the BLM and the
MMS). For offshore operations, lessees must obtain MMS approval for exploration
plans and development and production plans prior to the commencement of such
operations. In addition to permits required from other agencies (such as the
Coast Guard, Army Corps of Engineers and Environmental
15
<PAGE>
Protection Agency), lessees must obtain a permit from the BLM or the MMS prior
to the commencement of drilling.
The interstate transportation of natural gas is regulated by the Federal
Energy Regulatory Commission ('FERC') under the Natural Gas Act of 1938 and, to
a lesser extent, the Natural Gas Policy Act of 1978 (collectively, the 'Acts').
Numerous questions have been raised concerning the interpretation and
implementation of several significant provisions of the Acts, as well as the
regulations and policies promulgated by FERC thereunder. A number of lawsuits
and administrative proceedings have been instituted which challenge the validity
of regulations implementing the Acts. In addition, as described below, FERC
currently has under consideration various policies and proposals which will
affect the marketing of gas under new and existing contracts.
Since 1991, FERC's regulatory efforts have centered largely around its
generic rulemaking proceedings, Order No. 636. Through Order No. 636 and
successor orders, FERC has undertaken to restructure the interstate pipeline
industry with the goal of providing enhanced access to, and competition among,
alternative gas suppliers. By requiring interstate pipelines to 'unbundle' their
sales services and to provide its customers with direct access to any upstream
pipeline capacity held by pipelines, Order No. 636 has enabled pipeline
customers to choose the levels of transportation and storage service they
require, as well as to purchase gas directly from third-party merchants other
than the pipelines.
Although the implementation of Order No. 636 on individual interstate
pipelines is nearing completion, this process is not yet final. Moreover, nearly
all of these individual restructuring proceedings, as well as Order No. 636
itself and the regulations promulgated thereunder, are subject to pending
appellate review and could possibly be substantially modified by the courts.
Thus, while Order No. 636, if ultimately implemented without substantial change,
should generally facilitate the transportation of gas and the direct access to
end-user markets, the precise impact of these regulations on marketing
production cannot be predicted at this time.
Beyond Order No. 636, FERC is now considering a number of other important
policies, all of which could significantly affect the marketing of gas. Some of
the more notable of these regulatory initiatives include FERC's rulemakings on
gathering and production-area rate design, regulation of pipeline marketing
affiliates under Order No. 497, and standards for pipeline electronic bulletin
boards and electronic data exchange.
The U.S. Congress has historically been active in the area of oil and
natural gas regulation. Although no prediction can be made concerning future
regulation or legislation which may affect the competitive status of the
Company, or affect the prices at which it may sell its oil and gas, any
regulation or legislation that, directly or indirectly, lowers price levels for
oil and gas sold or increases the costs of production could have an adverse
effect on the Company's operations.
ENVIRONMENTAL REGULATION
Various federal, state and local laws and regulations covering the discharge
of materials into the environment, or otherwise relating to the protection of
the environment, may affect the Company's operations and costs. In particular,
the Company's oil and gas exploration, development, production and EOR
operations, its activities in connection with storage and transportation of
liquid hydrocarbons and its use of facilities for treating, processing,
recovering or otherwise handling hydrocarbons and wastes therefrom are subject
to stringent environmental regulation by governmental authorities. Such
regulation has increased the cost of planning, designing, drilling, installing,
operating and abandoning the Company's oil and gas wells and other facilities.
The Company has expended significant resources, both financial and managerial,
to comply with environmental regulations and permitting requirements and
anticipates that it will continue to do so in the future in order to comply with
stricter industry and regulatory safety standards such as those described below.
Although the Company believes that its operations and facilities are in general
compliance with applicable environmental regulations, risks of substantial costs
and liabilities are inherent in oil and gas
16
<PAGE>
operations and there can be no assurance that significant costs and liabilities
will not be incurred in the future. Moreover, it is possible that other
developments, such as increasingly strict environmental laws, regulations and
enforcement policies thereunder, and claims for damages to property, employees,
other persons and the environment resulting from the Company's operations, could
result in substantial costs and liabilities in the future. Although the
resulting costs cannot be accurately estimated at this time, these requirements
and risks typically apply to companies with types and quantities of production
similar to those of the Company and to the oil and gas industry in general.
OFFSHORE PRODUCTION. Offshore oil and gas operations are subject to
regulations of the United States Department of the Interior, the Department of
Transportation, the United States Environmental Protection Agency ('EPA') and
certain state agencies. In particular, the Federal Water Pollution Act of 1972,
as amended ('FWPCA'), imposes strict controls on the discharge of oil and its
derivatives into navigable waters. The FWPCA provides for civil and criminal
penalties for any discharges of petroleum in reportable quantities and, along
with the Oil Pollution Act of 1990 and similar state laws, imposes substantial
liability for the costs of oil removal, remediation and damages.
SOLID AND HAZARDOUS WASTE. The Company currently owns or leases, and has in
the past owned or leased, numerous properties that have been used for production
of oil and gas for many years. Although the Company has utilized operating and
disposal practices that were standard in the industry at the time, hydrocarbons
or other solid wastes may have been disposed or released on or under the
properties owned or leased by the Company. State and federal laws applicable to
oil and gas wastes and properties have gradually become more strict. Under these
new laws, the Company has been, and in the future could be, required to remove
or remediate previously disposed wastes or property contamination (including
groundwater contamination) or to perform remedial plugging operations to prevent
future contamination.
The Company generates hazardous and nonhazardous wastes that are subject to
the federal Resource Conservation and Recovery Act and comparable state
statutes. The EPA has limited the disposal options for certain hazardous wastes
and is considering the adoption of stricter disposal standards for nonhazardous
wastes. Furthermore, it is anticipated that additional wastes (which could
include certain wastes generated by the Company's oil and gas operations) will
in the future be designated as 'hazardous wastes,' which are subject to more
rigorous and costly disposal requirements. In response to the changing
regulatory environment, the Company has made certain changes in its operations
and disposal practices. For example, the Company has commenced remediation of
sites or replacement of facilities where its wastes have previously been
disposed.
SUPERFUND. The Comprehensive Environmental Response, Compensation and
Liability Act ('CERCLA'), also known as the 'superfund' law, imposes liability,
without regard to fault or the legality of the original conduct, on certain
classes of persons that contributed to the release of a 'hazardous substance'
into the environment. These persons include the owner or operator of a site and
companies that disposed or arranged for the disposal of the hazardous substance
found at a site. CERCLA also authorizes the EPA and, in some cases, third
parties to take actions in responses to threats to the public health or the
environment and to seek to recover from the responsible classes of persons the
costs they incur. In the course of its operations, the Company has generated and
will generate wastes that may fall within CERCLA's definition of 'hazardous
substances.' The Company may be responsible under CERCLA for all or part of the
costs to clean up sites at which such wastes have been disposed.
The Company has been identified as one of over 250 potentially responsible
parties ('PRPs') at a superfund site in Los Angeles County, California. The site
was operated by a third party as a waste disposal facility from 1948 until 1983.
The EPA is requiring the PRPs to undertake remediation of the site in several
phases, which include site monitoring and leachate control, gas control and
final remediation. In 1989 the EPA and a group of the PRPs entered into a
consent decree covering the site monitoring and leachate control phase of
remediation. The Company is a member of the group that is
17
<PAGE>
responsible for carrying out this first phase of work, which is expected to be
completed in five to eight years. The maximum liability of the group, which is
joint and several for each member of the group, for the first phase is $37.0
million, of which the Company's share is expected to be approximately $2.4
million ($1.3 million after recoveries from working interest participants in the
unit at which the wastes were generated) payable over the period that the phase
one work is performed. The EPA and a group of PRPs of which the Company is a
member have also entered into a subsequent consent decree (which has not yet
been finally entered by the court) with respect to the second phase of work (gas
control). The liability of this group has not been capped, but is estimated to
be $130 million. The Company's share of costs for this phase, however, is
expected to be approximately of the same magnitude as that of the first phase
because more parties are involved in the settlement. The Company has provided
for costs with respect to the first two phases, but it cannot currently estimate
the cost of any subsequent phases of work which may be required by the EPA.
In 1989, Adobe received requests from the EPA for information pursuant to
Section 104(e) of CERCLA with respect to the D. L. Mud and Gulf Coast Vacuum
Services superfund sites located in Abbeville, Louisiana. The EPA has issued its
record of decision at the Gulf Coast Site and on February 9, 1993 the EPA issued
to all PRPs at the site a settlement order pursuant to Section 122 of CERCLA.
Earlier, an emergency order pursuant to Section 106 of CERCLA was issued on
December 11, 1992, for purposes of containment due to the Louisiana rainy
season. On December 15, 1993 the Company entered into a cost-sharing agreement
with other PRPs to participate in the final remediation of the Gulf Coast site
which is presently estimated to cost $15.0 million. The Company's share of the
remediation is approximately $600,000 and reflects its proportionate share of
the orphans' shares of this site. With respect to the D.L. Mud site, a former
site owner has already conducted remedial activities at the site under a state
agency agreement. To date the Company has not been requested to share in the
remediation costs. The extent, if any, of any further necessary remedial
activity at and the prospective PRPs and the Company's financial obligations
for, the D. L. Mud Site has not been finally determined.
The Company has received a request for information from the EPA regarding
the Lee Acres Landfill CERCLA site in New Mexico. The Company advised the EPA
that it was not able to locate any information indicating that it had used that
facility. The Company is investigating its potential connection, if any, to this
facility and is not able to estimate its share of costs, if any, for the site at
this time.
AIR EMISSIONS. The operations of the Company, including most of its
operations in the San Joaquin Valley, are subject to local, state and federal
regulations for the control of emissions from sources of air pollution. Legal
and regulatory requirements in this area are increasing, and there can be no
assurance that significant costs and liabilities will not be incurred in the
future as a result of new regulatory developments. In particular, the 1990 Clean
Air Act amendments will impose additional requirements that may affect the
Company's operations, including permitting of existing sources and control of
hazardous air pollutants. However, it is impossible to predict accurately the
effects, if any, of the Clean Air Act Amendments on the Company at this time.
The Company has been and may in the future be subject to administrative
enforcement actions for failure to comply strictly with air regulations or
permits. These administrative actions are generally resolved by payment of a
monetary penalty and correction of any identified deficiencies. Alternatively,
regulatory agencies may require the Company to forego construction or operation
of certain air emission sources.
OTHER. The Company is subject to the requirements of the federal
Occupational Safety and Health Act ('OSHA') and comparable state statutes. The
OSHA hazard communication standard, the EPA community right-to-know regulations
under Title III of the federal Superfund Amendment and Reauthorization Act and
similar state statutes (such as California Proposition 65) require the Company
to organize information about hazardous materials used or produced in its
operations. Certain of this information must be provided to employees, state and
local governmental authorities
18
<PAGE>
and local citizens. The Company's facilities in California are also subject to
California Proposition 65, which was adopted in 1986 to address discharges and
releases of, or exposures to, toxic chemicals in the environment. Proposition 65
makes it illegal to knowingly discharge a listed chemical if the chemical will
pass (or probably will pass) into any source of drinking water. It also
prohibits companies from knowingly and intentionally exposing any individual to
such chemicals through ingestion, inhalation or other exposure pathways without
first giving a clear and reasonable warning.
Although generally less stringent, the Company's foreign operations are
subject to similar foreign laws respecting environmental and worker safety
matters.
INSURANCE COVERAGE MAINTAINED WITH RESPECT TO OPERATIONS
The Company maintains insurance policies covering its operations in amounts
and areas of coverage normal for a company of its size in the oil and gas
exploration and production industry. These coverages include, but are not
limited to, workers' compensation, employers' liability, automotive liability
and general liability. In addition, an umbrella liability and operator's extra
expense policies are maintained. All such insurance is subject to normal
deductible levels. The Company does not insure against all risks associated with
its business either because insurance is not available or because it has elected
not to insure due to prohibitive premium costs.
EMPLOYEES
As of December 31, 1993, the Company had approximately 777 employees, 210 of
whom were covered by a collective bargaining agreement which expires on January
31, 1996. The Company believes that its relations with its employees are
satisfactory.
ITEM 3. LEGAL PROCEEDINGS
The Company, its subsidiaries and other related companies are named
defendants in several lawsuits and named parties in certain governmental
proceedings arising in the ordinary course of business. For a description of
certain proceedings in which the Company is involved, see Items 1 and 2 '
Business and Properties -- Other Business Matters -- Environmental Regulation'
and Notes 12 and 13 to the Consolidated Financial Statements. While the outcome
of lawsuits or other proceedings against the Company cannot be predicted with
certainty, management does not expect these matters to have a material adverse
effect on the financial position or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF SANTA FE
Listed below are the names, ages (as of January 1, 1994) and positions of
all executive officers of Santa Fe (excluding executive officers who are also
directors of Santa Fe) and their business experience during the past five years.
Unless otherwise stated, all offices were held with Santa Fe Energy Company
prior to its merger with Santa Fe. Each executive officer holds office until his
successor is elected or appointed or until his earlier death, resignation or
removal.
HUGH L BOYT, 48 Senior Vice President -- Production since March 1, 1990.
From 1989 until March 1990, Mr. Boyt served as Corporate Production Manager.
From 1983, when Mr. Boyt joined Santa Fe, until 1989 he served as District
Production Manager -- Permian Basin.
JERRY L BRIDWELL, 50 Senior Vice President -- Exploration and Land since
1986. Mr. Bridwell served in various other capacities, including Vice
President -- Exploration, Central Division, since joining Santa Fe in 1974.
KEITH P. HENSLER, 62 Senior Vice President -- Marketing since January,
1990. From 1980 when Mr. Hensler joined Santa Fe, until January 1990, he served
as Vice President -- Marketing. Mr. Hensler is also Senior Vice President of
Energy Products.
19
<PAGE>
RICHARD B. BONNEVILLE, 51 Vice President -- Planning and Administration
since 1988. Prior to such time Mr. Bonneville served as Secretary of SFP.
E. EVERETT DESCHNER, 53 Vice President -- Reservoir Engineering and
Evaluation since April 1990. From 1982, when Mr. Deschner joined Santa Fe, until
1990, he served as Manager -- Engineering and Evaluation.
C. ED HALL, 51 Vice President -- Public Affairs since March 1991. Prior to
such time Mr. Hall served as Director -- Public Affairs since joining Santa Fe
in 1984.
CHARLES G. HAIN, JR., 47 Vice President -- Employee Relations since 1988.
From 1981, when Mr. Hain joined Santa Fe, until 1988, Mr. Hain served as
Director -- Employee Relations.
DAVID L HICKS, 44 Vice President -- Law and General Counsel since March
1991. From 1988 until March 1991 Mr. Hicks was General Counsel and prior to that
time was General Attorney for SFP.
MICHAEL J. ROSINSKI, 48 Vice President and Chief Financial Officer since
September 1992. Prior to joining Santa Fe, Mr. Rosinski was with Tenneco Inc.
and its subsidiaries for 24 years. From 1988 until 1990 he served as Deputy
Project Executive for the Colombian Crude Oil Pipeline Project and from 1990
until August 1992 he was Executive Director of Investor Relations. Mr. Rosinski
is also a director of Hadson Corporation.
JOHN R. WOMACK, 55 Vice President -- Business Development since 1987. From
1982, when Mr. Womack joined Santa Fe, until 1987, Mr. Womack served as Vice
President -- Land.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Santa Fe's common stock is listed on the New York Stock Exchange and trades
under the symbol SFR. The following table sets forth information as to the last
sales price per share of Santa Fe's common stock as quoted on the Consolidated
Tape System and cash dividends paid per share for each calendar quarter in 1992
and 1993.
[CAPTION]
CASH
LOW HIGH DIVIDENDS
[S] [C] [C] [C]
1992
1st Quarter---------------------- 7 9 3/8 0.04
2nd Quarter---------------------- 7 7/8 9 1/4 0.04
3rd Quarter---------------------- 7 7/8 9 7/8 0.04
4th Quarter---------------------- 7 3/4 9 7/8 0.04
1993
1st Quarter---------------------- 7 3/4 11 0.04
2nd Quarter---------------------- 9 5/8 11 7/8 0.04
3rd Quarter---------------------- 9 1/8 10 5/8 0.04
4th Quarter---------------------- 8 3/8 10 7/8 --
As discussed in Items 1 and 2, Business and Properties -- Corporate
Restructuring Program, the Company has eliminated the payment of its $0.04 per
share quarterly dividend on its common stock. The determination of the amount of
future cash dividends, if any, to be declared and paid is in the sole discretion
of Santa Fe's board of directors and will depend on dividend requirements with
respect to the Company's convertible preferred stock, the Company's financial
condition, earnings and funds from operations, the level of its capital and
exploration expenditures, dividend restrictions in its financing agreements, its
future business prospects and other matters as the Company's board of directors
deems relevant. For a discussion of certain restrictions on Santa Fe's ability
to pay dividends, see Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Financing Activities.
At December 31, 1993 the Company had approximately 59,100 shareholders of
record.
20
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<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<CAPTION>
YEAR ENDED DECEMBER 31,
1993 1992(B) 1991 1990 1989
(IN MILLIONS OF DOLLARS, EXCEPT AS NOTED)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL DATA
INCOME STATEMENT DATA:
Revenues------------------------- 436.9 427.5 379.8 382.9 322.9
Operating expenses
Production and operating----- 163.8 153.4 134.6 135.5 107.1
Oil and gas systems and
pipelines------------------ 4.2 3.2 -- -- --
Exploration, including dry
hole costs----------------- 31.0 25.5 18.7 21.0 19.4
Depletion, depreciation and
amortization--------------- 152.7 146.3 106.6 105.2 99.4
Impairment of oil and gas
properties----------------- 99.3 -- -- 1.4 1.1
General and
administrative------------- 32.3 30.9 27.8 25.6 28.6
Taxes (other than income)---- 27.3 24.3 27.2 22.0 22.3
Restructuring charges(a)----- 38.6 -- -- -- --
Loss (gain) on disposition of
oil and gas properties----- 0.7 (13.6) 0.5 2.8 (0.5)
Total operating
expenses--------------- 549.9 370.0 315.4 313.5 277.4
Income (loss) from Operations---- (113.0) 57.5 64.4 69.4 45.5
Other income (expense)------- (4.8) (10.0) 5.6 (0.3) 18.2
Interest income-------------- 9.1 2.3 2.3 5.2 4.3
Interest expense------------- (45.8) (55.6) (47.3) (57.1) (30.5)
Interest capitalized--------- 4.3 4.9 7.7 10.6 13.8
Income (loss) before income taxes
and cumulative effect of
accounting charge-------------- (150.2) (0.9) 32.7 27.8 51.3
Income taxes benefit
(expense)------------------ 73.1 (0.5) (14.2) (10.8) (26.0)
Income (loss) before cumulative
effect of accounting change---- (77.1) (1.4) 18.5 17.0 25.3
Cumulative effect of accounting
change------------------------- -- -- -- -- 24.5
Net income (loss)---------------- (77.1) (1.4) 18.5 17.0 49.8
Preferred dividend
requirement-------------------- (7.0) (4.3) -- -- --
Earnings (loss) attributable to
common stock------------------- (84.1) (5.7) 18.5 17.0 49.8
Per share data (in dollars):
Income (loss) before
cumulative effect of
accounting change---------- 0.48
Cumulative effect of change
in accounting for income
taxes---------------------- 0.47
Earnings (loss) to common
stock---------------------- (0.94) (0.07) 0.29 0.28 0.95
Weighted average number of
shares outstanding (in
millions)------------------ 89.7 79.0 63.8 61.7 52.1
STATEMENT OF CASH FLOWS DATA:
Net cash provided by operating
activities--------------------- 160.2 141.5 128.4 144.1 173.1
Net cash used in investing
activities--------------------- 121.4 15.9 117.2 108.2 86.8
BALANCE SHEET DATA (AT PERIOD END):
Properties and equipment, net---- 832.7 1,101.8 797.4 745.0 747.6
Total assets--------------------- 1,076.9 1,337.2 911.9 911.1 881.8
Long-term debt------------------- 405.4 492.8 440.8 417.2 124.7
Convertible preferred stock------ 80.0 80.0 -- -- --
Shareholders' equity------------- 323.6 416.6 225.1 215.8 228.1
21
<PAGE>
SELECTED OPERATING DATA:
DAILY AVERAGE PRODUCTION(C):
Crude oil and liquids (MBbls/day)
Domestic--------------------- 60.2 58.3 54.9 52.0 50.7
Argentina-------------------- 2.4 2.4 0.6 -- --
Indonesia-------------------- 4.1 1.8 -- -- --
66.7 62.5 55.5 52.0 50.7
Natural gas (MMcf/day)----------- 165.4 126.3 95.2 102.5 81.6
Total production (MMBOE)--------- 94.3 83.6 71.4 69.1 64.3
AVERAGE SALES PRICES:
Crude oil and liquids ($/Bbl)
Unhedged
Domestic----------------- 12.70 14.38 14.07 17.90 14.11
Argentina---------------- 14.07 15.99 16.24 -- --
Indonesia---------------- 15.50 17.51 -- -- --
Total-------------------- 12.93 14.54 14.09 17.90 14.11
Hedged----------------------- 12.93 14.96 16.16 17.34 14.11
Natural Gas ($/Mcf)
Unhedged--------------------- 2.03 1.71 1.49 1.57 1.72
Hedged----------------------- 1.89 1.70 1.49 1.57 1.72
PROVED RESERVES AT YEAR END(D):
Crude oil, condensate and natural
gas
liquids (MMBbls)--------------- 248.2 255.1 229.2 222.3 219.8
Natural gas (Bcf)---------------- 263.0 277.5 170.8 185.9 188.0
Proved reserves (MMBOE)---------- 292.0 301.5 257.7 253.3 251.1
Proved developed reserves
(MMBOE)------------------------ 225.5 248.4 210.3 205.0 204.0
Present value of proved reserves at
year-end
Before income taxes-------------- 567.8 915.2 602.6 1,231.4 1,090.1
After income taxes--------------- 502.4 733.5 463.6 839.4 772.8
Production costs (including related
production, severance and ad
valorem taxes) per BOE (in
dollars)--------------------------- 5.39 5.66 6.06 6.22 5.69
(a) Includes losses on property dispositions of $27.8 million, long-term debt
repayment penalties of $8.6 million and accruals of certain personnel
benefits and related costs of $2.2 million.
(b) On May 19, 1992 Adobe Resources Corporation was merged with and into the
Company.
(c) Includes production attributable to the properties sold to Vintage (closed
in November 1993) and Bridge (expected to close in April 1994). Production
attributable to such properties during 1993 totaled approximately 4.1 MBbls
of oil and 21.7 MMcf of natural gas per day (7.7 MBOE per day).
(d) The estimates set forth in this table for 1993 give effect to the sale by
the Company of approximately 8.0 MMBOE of proved reserves to Bridge, which
sale is expected to close in April 1994.
</TABLE>
22
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For the year ended December 31, 1993 the Company reported a loss to common
shares of $84.1 million, or $0.94 per share. The loss for the year includes a
$99.3 million charge for the impairment of oil and gas properties (see
' -- Results of Operations') and a $38.6 million restructuring charge (see Items
1 and 2. 'Business and Properties -- Corporate Restructuring Program'). The
restructuring charge is comprised of losses on property dispositions of $27.8
million, long-term debt repayment penalties of $8.6 million and accruals for
certain personnel benefits and related costs of $2.2 million. At December 31,
1993 the Company's long-term debt totalled $449.7 million, a portion of
which the Company intends to refinance to reduce required debt amortization in
the near-term and provide additional financial flexibility in the current low
oil price environment.
GENERAL
As an independent oil and gas producer, the Company's results of operations
are dependent upon the difference between the prices received for oil and gas
and the costs of finding and producing such resources. A substantial portion of
the Company's crude oil production is from long-lived fields where EOR methods
are being utilized. The market price of the heavy (i.e., low gravity, high
viscosity) and sour (i.e., high sulfur content) crude oils produced in these
fields is lower than sweeter, light (i.e., low sulfur and low viscosity) crude
oils, reflecting higher transportation and refining costs. The lower price
received for the Company's domestic heavy and sour crude oil is reflected in the
average sales price of the Company's domestic crude oil and liquids (excluding
the effect of hedging transactions) for 1993 of $12.70 per barrel, compared to
$16.94 per barrel for West Texas Intermediate crude oil (an industry posted
price generally indicative of spot prices for sweeter light crude oil). In
addition, the lifting costs of heavy crude oils are generally higher than the
lifting costs of light crude oils. As a result of these narrower margins, even
relatively modest changes in crude oil prices may significantly affect the
Company's revenues, results of operations, cash flows and proved reserves. In
addition, prolonged periods of high or low oil prices may have a material
effect on the Company's financial position.
Crude oil prices are subject to significant changes in response to
fluctuations in the domestic and world supply and demand and other
market conditions as well as the world political situation
as it affects OPEC, the Middle East and other producing countries.
(See Items 1 and 2, "Business and Properties -- Current Markets for Oil and
Gas"). The period since mid-1990 has included some of the largest fluctuations
in oil prices in recent times, primarily due to the political unrest
in the Middle East. The actual average sales price (unhedged) received by
the Company ranged from a high of $23.92 per barrel in the fourth quarter of
1990 to a low of $9.83 per barrel for the two months ended February 28, 1994.
The Company's average sales price for its 1993 oil production was $12.93 per
barrel. Based on operating results of 1993, the Company estimates that a $1.00
per barrel increase or decrease in average sales prices would have resulted in a
corresponding $21.6 million change in 1993 income from operations and a $16.2
million change in 1993 cash flow from operating activities. The Company also
estimates that a $0.10 per Mcf increase or decrease in average sales prices
would have resulted in a corresponding $5.8 million change in 1993 income from
operations and a $4.4 million change in 1993 cash flow from operating
activities. The foregoing estimates do not give effect to changes in any other
factors, such as the effect of the Company's hedging program or depreciation and
depletion, that would result from a change in oil and natural gas prices.
In the third quarter of 1990 the Company initiated a hedging program with
respect to its sales of crude oil and in the third quarter of 1992 a similar
program was initiated with respect to the Company's sales of natural gas. See
Items 1 and 2. 'Business and Properties -- Current Markets for Oil and Gas.'
During 1992 and 1993, certain significant events occurred which affect the
comparability of prior periods, including the merger of Adobe with and into the
Company in May 1992, the formation of the Santa Fe Energy Trust in November 1992
and implementation of the corporate restructuring
23
<PAGE>
program adopted in October 1993. The corporate restructuring program includes
(i) the concentration of capital spending in the Company's core operating areas,
(ii) the disposition of non-core assets, (iii) the elimination of the $0.04 per
share quarterly Common Stock dividend and (iv) the recognition of $38.6 million
of restructuring charges. See Note 2 to the Consolidated Financial Statements
and Items 1 and 2, 'Business and Properties -- Corporate Restructuring Program.'
In addition, the Company's results of operations for 1993 include a charge of
$99.3 million for the impairment of oil and gas properties.
The Company's capital program will be concentrated in three domestic core
areas -- the Permian Basin in Texas and New Mexico, the offshore Gulf of Mexico
and the San Joaquin Valley of California -- as well as its productive areas in
Argentina and Indonesia. The domestic program includes development activities in
the Delaware and Cisco-Canyon formations in west Texas and southeast New Mexico,
a development drilling program for the offshore Gulf of Mexico natural gas
properties and relatively low risk infill drilling in the San Joaquin Valley of
California. Internationally, the program includes development of the Company's
Sierra Chata discovery in Argentina with gas sales expected to commence in early
1995 and the Salawati Basin Joint Venture in Indonesia. See Items 1 and 2.
'Business and Properties -- Domestic Development Activities' and
'--International Development Activities.'
The Company's non-core asset disposition program includes the sale of its
natural gas gathering and processing assets to Hadson (completed in December
1993), the sale to Vintage of certain southern California and Gulf Coast oil and
gas producing properties (completed in November 1993) and the sale to Bridge of
certain Mid-Continent and Rocky Mountain oil and gas producing properties and
undeveloped acreage (expected to be completed during April 1994). See Items 1
and 2. 'Business and Properties -- Corporate Restructuring Program' for a
description of the transactions with Hadson, Vintage and Bridge. In the first
quarter of 1994, the Company sold the remaining 575,000 Depositary Units which
it held in Santa Fe Energy Trust (the 'Trust') for $11.3 million and its
interest in certain other oil and gas properties for $8.3 million. As a result
of the Vintage and Bridge dispositions, the Company has sold properties having
combined production during 1993 of 4.1 MBbls per day of oil and 21.7 MMcf per
day of natural gas and estimated proved reserves of approximately 16.7 MMBOE.
The restructuring program also includes an evaluation of the Company's
capital and cost structures to examine ways to increase flexibility and
strengthen the Company's financial performance. In this respect, in 1994 the
Company intends to refinance a portion of its existing long-term debt and
is currently evaluating a combination of debt and equity financing arrangements
with which to effect the refinancing.
In May, 1992, Adobe, an oil and gas exploration and production company, was
merged with and into the Company. The acquisition was accounted for as a
purchase and the results of operations of the properties acquired are included
in the Company's results of operations effective June 1, 1992. Pursuant to the
Adobe Merger, the Company issued 5,000,000 shares of its convertible preferred
stock and assumed approximately $175.0 million of long-term debt and other
liabilities. Pursuant to the Adobe Merger, the Company also acquired Adobe's
proved reserves and inventory of undeveloped acreage. As of December 31, 1991,
Adobe's estimated proved reserves totaled approximately 53.2 MMBOE (net of 6.9
MMBOE attributable to Adobe's ownership in certain gas plants), of which
approximately 58% was natural gas (approximately 66% of Adobe's estimated
domestic proved reserves were natural gas). Approximately 72% of the discounted
future net cash flow of Adobe's estimated domestic proved reserves was
concentrated in three areas of operation -- offshore Gulf of Mexico, onshore
Louisiana and in the Spraberry Trend in west Texas. In addition, Adobe's
international operations consisted of certain production sharing arrangements in
Indonesia, in respect of which approximately 6.0 MMBOE of estimated proved
reserves had been attributed to Adobe's interest as of December 31, 1991. The
location of the Adobe Properties enhanced the Company's
24
<PAGE>
existing domestic operations and added significant operations to the Company's
international program.
In November 1992, 5,725,000 Depositary Units consisting of interests in the
Trust were sold in a public offering. After payment of certain costs and
expenses, the Company received $70.1 million and 575,000 Depositary Units. For
any calendar quarter ending on or prior to December 21, 2002, the Trust will
receive additional royalty payments to the extent necessary to distribute $0.40
per Depositary Unit per quarter. The source of such payments, if needed, will be
limited to the Company's remaining royalty interest in certain of the properties
conveyed to the Trust. The aggregate amount of such payments will be limited to
$20.0 million on a revolving basis. The Company was required to make an
additional royalty payment of $362,000 with respect to the distribution made by
the Trust for operations during the quarter ended December 31, 1993. Based upon
current prices, the Company believes that a support payment will be required for
the quarter ending March 31, 1994, the amount of which has not been determined.
See Items 1 and 2. 'Business and Properties -- Santa Fe Energy Trust.'
RESULTS OF OPERATIONS
The following table sets forth, on the basis of the BOE produced by the
Company during the applicable annual period, certain of the Companys costs and
expenses for each of the three years ended December 31, 1993.
1993 1992 1991
Production and operating costs per
BOE (a)------------------------------ $ 4.76 $ 5.02 $ 5.17
Exploration, including dry hole costs
per BOE---------------------------- 0.90 0.84 0.72
Depletion, depreciation and
amortization per BOE--------------- 4.44 4.79 4.09
General and administrative costs per
BOE-------------------------------- 0.94 1.01 1.07
Taxes other than income per BOE
(b)-------------------------------- 0.79 0.80 1.05
Interest, net, per BOE (c)----------- 0.94 1.58 1.43
(a) Excluding related production, severance and ad valorem taxes.
(b) Includes production, severance and ad valorem taxes.
(c) Reflects interest expense less amounts capitalized and interest income.
1993 COMPARED WITH 1992
Total revenues increased approximately 2% from $427.5 million in 1992 to
$436.9 million in 1993 principally due to an increase in oil and natural gas
production offset by a decline in average oil prices. Average daily oil
production increased 7% from 62.5 MBbls in 1992 to 66.7 MBbls in 1993,
principally due to increased domestic and Indonesian production. The average
price realized per Bbl of oil during 1993 was $12.93, a decrease of 14% versus
the average price of $14.96 in 1992. Natural gas production increased 31% from
126.3 MMcf per day in 1992 to 165.4 MMcf per day in 1993, primarily reflecting
the effect of a full year's production from the Adobe Properties. Average
natural gas prices realized increased approximately 11% from $1.70 per Mcf in
1992 to $1.89 per Mcf in 1993.
Production and operating costs increased $10.4 million in 1993, primarily
reflecting the effect of a full year's costs for the Adobe Properties; however,
on a BOE basis such costs declined from $5.02 per barrel in 1992 to $4.76 per
barrel in 1993. Exploration costs were $5.5 million higher than in 1992
primarily reflecting higher geological and geophysical costs and higher dry hole
costs. Depletion, depreciation and amortization ('DD&A') increased $6.4 million
in 1993 primarily reflecting a full year's expense on Adobe Properties partially
offset by reduced amortization rates with respect to certain unproved
properties. DD&A for 1993 includes $12.1 million with respect to the properties
sold to Vintage and Bridge. On a BOE basis, DD&A decreased by $0.35 per Bbl,
from $4.79 to $4.44 per Bbl. General and administrative costs increased $1.4
million principally due to a $1.8 million charge related to the adoption of
Statement of Financial Standards No. 112 -- 'Employer's Accounting for
Postemployment Benefits'. Taxes (other than income) increased by $3.0 million in
1993 primarily reflecting the effect of the Adobe Properties.
25
<PAGE>
Costs and expenses for 1993 also include $99.3 million in impairments of oil
and gas properties and $38.6 million in restructuring charges. The Company
estimates the impairments taken in 1993 will result in a reduction of DD&A in
1994 of approximately $20.0 million. The restructuring charges include losses on
property dispositions of $27.8 million, long-term debt repayment penalties of
$8.6 million and accruals of certain personnel benefits and related costs of
$2.2 million. In connection with the property dispositions effected during 1993
(See '-- Liquidity and Capital Resources'), the Company sold properties having
combined production during 1993 of 4.1 MBbls per day of oil and 21.7 MMcf per
day of natural gas and combined estimated proved reserves of approximately 16.7
MMBOE. The Company's income from operations for 1993 includes $8.5 million with
respect to such operations.
Interest income in 1993 includes $6.8 million related to a $10 million
refund received as a result of the completion of the audit of the Company's
federal income tax returns for 1971 through 1980. The decrease in interest
expenses during 1993 reflects a decrease in the Company's debt outstanding and a
$5.7 million credit related to a revision to a tax sharing agreement with the
Company's former parent. Other income and expenses of 1993 includes a $4.0
million charge related to the accrual of a contingent loss with respect to the
operations of a former affiliate of Adobe.
1992 COMPARED WITH 1991
Total revenues increased approximately 13% from $379.8 million in 1991 to
$427.5 million in 1992 principally due to an increase of approximately $53.2
million attributable to production from properties acquired in the Adobe Merger
and an increase of approximately $10.7 million and $10.2 million in revenues
from the Company's domestic and Argentine properties, respectively, offset in
part by a decline of $32.0 million in crude oil hedging revenues. Oil production
increased 13% from 55.5 MBbls per day in 1991 to 62.5 MBbls per day in 1992,
reflecting a 3.4 MBbl per day increase in domestic oil production and a 3.6 MBbl
per day increase in production in Argentina and Indonesia. The average price
realized per barrel of oil during 1992 decreased to $14.96, a decrease of 7%
versus the average price of $16.16 in 1991, primarily reflecting a $32.0 million
decrease in hedging revenues. Natural gas production increased 33% from 95.2
MMcf per day in 1991 to 126.3 MMcf per day in 1992 as a result of properties
acquired in the Adobe Merger. Average natural gas prices realized increased
approximately 14% from $1.49 per Mcf in 1991 to $1.70 per Mcf in 1992.
Total operating expenses of the Company increased $54.6 million from $315.4
million in 1991 to $370.0 million in 1992 primarily reflecting costs associated
with the Adobe Merger. Production and operating costs in 1992 were $18.8 million
higher than in 1991, primarily reflecting costs related to the Adobe Properties
and increased fuel costs associated with the Company's EOR projects. On a BOE
basis, production and operating costs declined from $5.17 per barrel in 1991 to
$5.02 per barrel in 1992, primarily reflecting the lower cost structure of the
Adobe Properties. Exploration costs were $6.8 million higher than in 1991
primarily reflecting higher geological and geophysical costs with respect to
foreign projects. Depletion, depreciation and amortization costs were $39.7
million higher in 1992 due to the acquisition of the Adobe Properties and, to a
lesser extent, adjustments to oil and gas reserves with respect to certain
producing properties. General and administrative costs increased $3.1 million
principally due to a $1.2 million charge related to certain stock awards which
fully vested upon consummation of the Adobe Merger and certain other
merger-related costs. Taxes (other than income) decreased by $2.9 million in
1992, as a result of lower accruals with respect to property taxes. The $13.6
million gain on the disposition of properties in 1992 primarily relates to the
sale of certain royalty interest properties, in which the Company had no
remaining financial basis.
The increase in interest expense during 1992 reflects the increase in debt
as a result of the Adobe Merger. Other income and expenses for 1992 includes a
$10.9 million charge for costs incurred by Adobe in connection with the Adobe
Merger and paid by Santa Fe.
26
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has generally funded capital and exploration
expenditures and working capital requirements from cash provided by operating
activities. Depending upon the future levels of operating cash flows, which are
significantly affected by oil and gas prices, the restrictions on additional
borrowings included in certain of the Company's debt agreements, together with
debt service requirements and dividends, may limit the cash available for future
exploration, development and acquisition activities. Net cash provided by
operating activities totaled $160.2 million in 1993, $141.5 million in 1992 and
$128.4 million in 1991; net cash used in investing activities in such periods
totaled $121.4 million, $15.9 million and $117.2 million, respectively.
The Company's cash flow from operating activities is a function of the
volumes of oil and gas produced from the Company's properties and the sales
prices realized therefor. Crude oil and natural gas are depleting assets. Unless
the Company replaces over the long term the oil and natural gas produced from
the Company's properties, the Company's assets will be depleted over time
and its ability to service and incur debt at constant or declining prices
will be reduced. The Company's cash flow from operations for 1993 reflects an
average sales price (unhedged) for the Company's 1993 oil production of $12.93
per barrel. For the two months ended February 28, 1994, the average sales price
(unhedged) for the Company's 1994 oil production was $9.83 per barrel. If such
lower oil prices prevail throughout 1994, the Company's cash flow from operating
activities for 1994 will be significantly lower than that for 1993.
In October 1993, the Company's Board of Directors adopted a broad corporate
restructuring program that focuses on the concentration of capital spending in
core areas and the disposition of non-core assets. The Company's asset
disposition program adopted in connection with the 1993 restructuring program
has been substantially completed by the asset sales to Hadson, Vintage and
Bridge (expected to close in April 1994), the sale of the 575,000 Depositary
Units in the Trust and the sale of its interest in certain other oil and gas
properties. As a result of such sales, the Company sold a total of 16.7 MMBOE of
proved reserves and undeveloped acreage for a total of approximately $111.0
million, and sold certain gas gathering and processing facilities for Hadson
securities.
As a part of the 1993 restructuring program, the Company eliminated its
$0.04 per share quarterly dividend on its Common Stock and announced that it
might spend up to $240 million in 1994 on an accelerated capital program.
However, as a result of the depressed crude oil prices that have prevailed since
November 1993, the Company, consistent with industry practice, is considering
deferring some of its capital projects in order to prudently manage its cash
flow available in the near term. Based on current market conditions, the Company
estimates that 1994 capital expenditures may total between $100 million and $160
million, with the actual amount to be determined by the Company based upon
numerous factors outside its control, including, without limitation, prevailing
oil and natural gas prices and the outlook therefor.
The Company is a party to several long-term and short-term credit agreements
which restrict the Company's ability to take certain actions, including
covenants that restrict the Company's ability to incur additional indebtedness
and to pay dividends on its capital stock. For a description of such existing
credit agreements, see Note 7 to the Consolidated Financial Statements.
Effective March 16, 1994, the Company entered into an Amended and Restated
Revolving Credit Agreement (the "Bank Facility") which consists of a five year
secured revolving credit agreement maturing December 31, 1998 ("Facility A") and
and a three year unsecured revolving credit facility maturing December 31, 1996
("Facility B"). The aggregate borrowing limits under the terms of the Bank
Facility are $125.0 million (up to $90.0 million under Facility A and up to
$35.0 million under Facility B). Under certain circumstances, the aggregate
borrowing limits under the terms of the Bank Facility may be increased to $175.0
million (up to $90.0 million under Facility A and up to $85.0 million under
Facility B). Interest rates under the Bank Facility are tied to LIBOR or the
bank's prime rate with the actual interest rate reflecting certain ratios based
upon the Company's ability to repay its outstanding debt and the value and
projected timing of production of the Company's oil and gas reserves. These and
other similar ratios will also affect the Company's ability to borrow under the
Bank Facility and the timing and amount of any required repayments and
corresponding commitment reductions. The Bank Facility replaces the Revolving
and Term Credit Agreement discussed in Note 7 to the Consolidated Financial
Statements.
EFFECTS OF INFLATION
Inflation during the three years ended December 31, 1993 has had little
effect on the Company's capital costs and results of operations.
ENVIRONMENTAL MATTERS
Almost all phases of the Company's oil and gas operations are subject to
stringent environmental regulation by governmental authorities. Such regulation
has increased the costs of planning, designing, drilling, installing, operating
and abandoning oil and gas wells and other facilities. The Company has expended
significant financial and managerial resources to comply with such regulations.
Although the Company believes its operations and facilities are in general
compliance with applicable environmental regulations, risks of substantial costs
and liabilities are inherent in oil and gas operations. It is possible that
other developments, such as increasingly strict environmental laws, regulations
and enforcement policies or claims for damages to property, employees, other
persons and the environment resulting from the Company's operations, could
result in significant costs and liabilities in the future. As it has done in the
past, the Company intends to fund its cost of environmental compliance from
operating cash flows. See also, Items 1 and 2. 'Business and Properties -- Other
Business Matters -- Environmental Regulation' and Note 12 to the Consolidated
Financial Statements.
27
<PAGE>
DIVIDENDS
Dividends on the Company's convertible preferred stock are cumulative at an
annual rate of $1.40 per share. No dividends may be declared or paid with
respect to the Company's common stock if any dividends with respect to the
convertible preferred stock are in arrears. As described elsewhere herein, the
Company has eliminated the payment of its $0.04 per share quarterly dividend on
its common stock. The determination of the amount of future cash dividends, if
any, to be declared and paid on the Company's common stock is in the sole
discretion of the Company's Board of Directors and will depend on dividend
requirements with respect to the convertible preferred stock, the Company's
financial condition, earnings and funds from operations, the level of capital
and exploration expenditures, dividend restrictions in financing agreements,
future business prospects and other matters the Board of Directors deems
relevant.
28
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE
Audited Financial Statements
Report of Independent
Accountants------------------- 31
Consolidated Statement of
Operations for the years
ended December 31, 1993, 1992
and 1991--------------------- 32
Consolidated Balance Sheet --
December 31, 1993 and 1992---- 33
Consolidated Statement of
Cash Flows for the years
ended December 31, 1993, 1992
and 1991--------------------- 34
Consolidated Statement of
Shareholders' Equity for the
years ended December 31,
1993, 1992 and 1991---------- 35
Notes to Consolidated
Financial Statements---------- 36
Unaudited Financial Information
Supplemental Information to
the Consolidated Financial
Statements-------------------- 55
Financial Statement Schedules:
Schedule V --Property, Plant and Equipment------ 65
Schedule VI --Accumulated Depreciation, Depletion
and Amortization of Property Plant
and Equipment---------------------- 66
Schedule --Valuation and Qualifying
VIII Accounts--------------------------- 67
Schedule IX --Short Term Borrowings-------------- 68
--Supplementary Income Statement
Schedule X Information------------------------ 69
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
29
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except for the portion of Item 10 relating to Executive Officers of the
Registrant which is included in Part I of this Report, the information called
for by Items 10 through 13 is incorporated by reference from the Company's
Notice of Annual Meeting and Proxy Statement dated March 21, 1994, which meeting
involves the election of directors, in accordance with General Instruction G to
the Annual Report on Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
PAGE
1. Financial Statements: Report of Independent
Accountants--------------------------------------- 31
Consolidated Statement of Operations for the years
ended December 31, 1993, 1992 and 1991------------ 32
Consolidated Balance Sheet -- December 31, 1993
and 1992------------------------------------------ 33
Consolidated Statement of Cash Flows for the years
ended December 31, 1993, 1992 and 1991---------------- 34
Consolidated Statement of Shareholders' Equity for
the years ended December 31, 1993, 1992 and 1991------ 35
Notes to Consolidated Financial Statements------------ 36
2. Financial Statement
Schedules:
Schedule V -- Property, Plant and Equipment--------- 65
Schedule VI -- Accumulated Depreciation, Depletion
and Amortization of Property,
Plant and Equipment---------------- 66
Schedule VIII -- Valuation and Qualifying Accounts---- 67
Schedule IX -- Short Term Borrowings------------------ 68
Schedule X -- Supplementary Income Statement
Information------------------------ 69
All other schedules have been omitted because they
are not applicable or the required information is
presented in the financial statements or the notes to
financial statements.
3. Exhibits:
See Index to Exhibits on page 70 for a description of the exhibits
filed as a part of this report.
(b) Reports on Form 8-K
[CAPTION]
DATE ITEM
February 8, 1994 5
30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Santa Fe Energy Resources, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) on page 30 present fairly, in all material
respects, the financial position of Santa Fe Energy Resources, Inc. and its
subsidiaries at December 31, 1993 and 1992, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1993, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE
Houston, Texas
February 18, 1994
31
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
1993 1992 1991
Revenues
Crude oil and liquids------------ $ 307.3 $ 333.6 $ 320.3
Natural gas---------------------- 107.8 74.8 47.9
Natural gas systems-------------- 8.2 7.3 --
Crude oil marketing and
trading------------------------ 9.9 5.9 7.2
Other---------------------------- 3.7 5.9 4.4
436.9 427.5 379.8
Costs and Expenses
Production and operating--------- 163.8 153.4 134.6
Oil and gas systems and
pipelines---------------------- 4.2 3.2 --
Exploration, including dry hole
costs-------------------------- 31.0 25.5 18.7
Depletion, depreciation and
amortization------------------- 152.7 146.3 106.6
Impairment of oil and gas
properties--------------------- 99.3 -- --
General and administrative------- 32.3 30.9 27.8
Taxes (other than income)-------- 27.3 24.3 27.2
Restructuring charges------------ 38.6 -- --
Loss (gain) on disposition of oil
and gas properties------------- 0.7 (13.6) 0.5
549.9 370.0 315.4
Income (Loss) from Operations-------- (113.0) 57.5 64.4
Interest income------------------ 9.1 2.3 2.3
Interest expense----------------- (45.8) (55.6) (47.3)
Interest capitalized------------- 4.3 4.9 7.7
Other income (expense)----------- (4.8) (10.0) 5.6
Income (Loss) Before Income Taxes---- (150.2) (0.9) 32.7
Income taxes--------------------- 73.1 (0.5) (14.2)
Net Income (Loss)-------------------- (77.1) (1.4) 18.5
Preferred dividend requirement------- (7.0) (4.3) --
Earnings (Loss) Attributable to
Common Shares---------------------- $ (84.1) $ (5.7) $ 18.5
Earnings (Loss) Attributable to
Common Shares Per Share------------ $ (0.94) $ (0.07) $ 0.29
Weighted Average Number of Shares
Outstanding (in millions)---------- 89.7 79.0 63.8
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
(IN MILLIONS OF DOLLARS)
DECEMBER 31,
1993 1992
ASSETS
Current Assets
Cash and cash equivalents-------- $ 4.8 $ 83.8
Accounts receivable-------------- 87.4 90.0
Income tax refund receivable----- -- 16.2
Inventories---------------------- 8.7 4.8
Assets held for sale------------- 59.5 --
Other current assets------------- 12.2 10.6
172.6 205.4
Investment in Hadson Corporation----- 56.2 --
Properties and Equipment, at cost
Oil and gas (on the basis of
successful efforts
accounting)-------------------- 2,064.3 2,330.9
Other---------------------------- 27.3 26.8
2,091.6 2,357.7
Accumulated depletion,
depreciation, amortization and
impairment--------------------- (1,258.9) (1,255.9)
832.7 1,101.8
Other Assets
Receivable under gas balancing
arrangements------------------- 3.9 7.7
Other---------------------------- 11.5 22.3
15.4 30.0
$ 1,076.9 $ 1,337.2
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable----------------- $ 93.5 $ 90.9
Interest payable----------------- 10.2 11.0
Current portion of long-term
debt--------------------------- 44.3 53.4
Other current liabilities-------- 18.1 17.1
166.1 172.4
Long-Term Debt----------------------- 405.4 492.8
Deferred Revenues-------------------- 8.6 13.0
Other Long-Term Obligations---------- 48.8 43.4
Deferred Income Taxes---------------- 44.4 119.0
Commitments and Contingencies (Note
12)-------------------------------- -- --
Convertible Preferred Stock, $0.01
par value, 5.0 million shares
authorized, issued and
outstanding------------------------ 80.0 80.0
Shareholders' Equity
Preferred stock, $0.01 par value,
45.0 million shares authorized,
none issued-------------------- -- --
Common stock, $0.01 par value,
200.0 million shares
authorized--------------------- 0.9 0.9
Paid-in capital------------------ 496.9 494.3
Unamortized restricted stock
awards------------------------- (0.1) (0.4)
Accumulated deficit-------------- (173.8) (78.0)
Foreign currency translation
adjustment--------------------- (0.3) (0.2)
323.6 416.6
$ 1,076.9 $ 1,337.2
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS OF DOLLARS)
YEAR ENDED DECEMBER 31,
1993 1992 1991
Operating Activities:
Net income (loss)---------------- $ (77.1) $ (1.4) $ 18.5
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depletion, depreciation and
amortization--------------- 152.7 146.3 106.6
Impairment of oil and gas
properties----------------- 99.3 -- --
Restructuring charges-------- 27.8 -- --
Deferred income taxes-------- (71.9) (6.3) 1.5
Net loss (gain) on
disposition of
properties----------------- 0.7 (13.6) (5.5)
Exploratory dry hole
costs---------------------- 8.9 4.7 3.8
Expenses related to
acquisition of Adobe
Resources Corporation------ -- 10.9 --
Other------------------------ 4.2 2.0 0.3
Changes in operating assets and
liabilities:
Decrease (increase) in
accounts receivable-------- 12.4 (8.3) 23.6
Decrease (increase) in
inventories---------------- (3.8) 0.3 5.6
Increase (decrease) in
accounts payable----------- (2.6) 5.9 (24.9)
Increase (decrease) in
interest payable----------- (0.8) 0.4 0.2
Decrease in income taxes
payable-------------------- (0.6) (0.4) (3.6)
Net change in other assets
and liabilities------------ 11.0 1.0 2.3
Net Cash Provided by Operating
Activities------------------------- 160.2 141.5 128.4
Investing Activities:
Capital expenditures, including
exploratory dry hole costs----- (127.0) (76.8) (108.1)
Acquisitions of producing
properties, net of related
debt--------------------------- (4.4) (14.2) (28.5)
Acquisition of Adobe Resources
Corporation-------------------- -- (11.9) --
Acquisition of Santa Fe Energy
Partners, L.P.----------------- (28.3) -- --
Net proceeds from sales of
properties--------------------- 39.9 89.1 22.1
Increase in partnership interest
due to reinvestment------------ (1.6) (2.1) (2.7)
Net Cash Used in Investing
Activities------------------------- (121.4) (15.9) (117.2)
Financing Activities:
Net change in short-term debt---- -- (4.6) (4.2)
Proceeds from long-term
borrowings--------------------- -- 5.0 --
Principal payments on long-term
borrowings--------------------- (41.5) (55.5) (16.3)
Net change in revolving credit
agreement---------------------- (55.0) -- --
Cash dividends paid to others---- (21.3) (14.9) (10.2)
Net Cash Used in Financing
Activities------------------------- (117.8) (70.0) (30.7)
Net Increase (Decrease) in Cash and
Cash Equivalents------------------- (79.0) 55.6 (19.5)
Cash and Cash Equivalents at
Beginning of Year------------------ 83.8 28.2 47.7
Cash and Cash Equivalents at End of
Year------------------------------- $ 4.8 $ 83.8 $ 28.2
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
<TABLE>
SANTA FE ENERGY RESOURCES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(SHARES AND DOLLARS IN MILLIONS)
<CAPTION>
FOREIGN
UNAMORTIZED CURRENCY
RESTRICTED TRANSLA- TOTAL
COMMON STOCK PAID-IN STOCK ACCUMULATED TION SHAREHOLDERS'
SHARES AMOUNT CAPITAL AWARDS DEFICIT ADJUSTMENT EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1990--------- 63.8 $0.6 $ 282.4 $-- $ (67.2) $-- $ 215.8
Net income------------------------- -- -- -- -- 18.5 -- 18.5
Issuance of common stock----------- 0.3 -- 2.5 (1.4) -- -- 1.1
Dividends declared----------------- -- -- -- -- (10.3) -- (10.3)
Balance at December 31, 1991--------- 64.1 0.6 284.9 (1.4) (59.0) -- 225.1
Issuance of common stock
Acquisition of Adobe
Resources Corporation----------- 24.9 0.3 205.3 -- -- -- 205.6
Employee stock compensation and
savings plans------------------- 0.5 -- 4.1 (0.5) -- -- 3.6
Amortization of restricted stock
awards---------------------------- -- -- -- 1.5 -- -- 1.5
Foreign currency translation
adjustments----------------------- -- -- -- -- -- (0.2) (0.2)
Net loss--------------------------- -- -- -- -- (1.4) -- (1.4)
Dividends declared----------------- -- -- -- -- (17.6) -- (17.6)
Balance at December 31, 1992--------- 89.5 0.9 494.3 (0.4) (78.0) (0.2) 416.6
Issuance of common stock
Employee stock compensation and
savings plans------------------- 0.3 -- 2.6 (0.1)] -- -- 2.5
Amortization of restricted
stock awards---------------------- -- -- -- 0.4 -- -- 0.4
Pension liability adjustment------- -- -- -- -- (0.9) -- (0.9)
Foreign currency transaction
adjustments----------------------- -- -- -- -- -- (0.1) (0.1)
Net loss--------------------------- -- -- -- -- (77.1) -- (77.1)
Dividends declared----------------- -- -- -- -- (17.8) -- (17.8)
Balance December 31, 1993------------ 89.8 $0.9 $ 496.9 $ (0.1) $ (173.8) $ (0.3) $ 323.6
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Santa Fe Energy Resources, Inc.
('Santa Fe' or the 'Company') and its subsidiaries include the accounts of all
wholly owned subsidiaries. The accounts of Santa Fe Energy Partners, L.P., (the
'Partnership') are included on a proportional basis until September 1993 when
Santa Fe purchased all the Partnership's outstanding Depositary Units and
undeposited LP Units other than those units held by Santa Fe and its affiliates.
On September 27, 1993 the Company exercised its right under the Agreement of
Limited Partnership to purchase all of the Partnership's outstanding Depositary
Units and undeposited LP Units, other than those units held by the Company and
its affiliates, at a redemption price of $4.9225 per unit. Consideration for the
5,749,500 outstanding units totalled $28.3 million. The acquisition of the units
has been accounted for as a purchase and the results of operations of the
Partnership attributable to the units acquired is included in the Company's
results of operations with effect from October 1, 1993. The purchase price has
been allocated primarily to oil and gas properties.
References herein to the 'Company' or 'Santa Fe' relate to Santa Fe Energy
Resources, Inc., individually or together with its consolidated subsidiaries;
references to the 'Partnership' relate to Santa Fe Energy Partners, L.P.
All significant intercompany accounts and transactions have been eliminated.
Prior years' financial statements include certain reclassifications to conform
to current year's presentation.
OIL AND GAS OPERATIONS
The Company follows the successful efforts method of accounting for its oil
and gas exploration and production activities. Costs (both tangible and
intangible) of productive wells and development dry holes, as well as the cost
of prospective acreage, are capitalized. The costs of drilling and equipping
exploratory wells which do not find proved reserves are expensed upon
determination that the well does not justify commercial development. Other
exploratory costs, including geological and geophysical costs and delay rentals,
are charged to expense as incurred.
Depletion and depreciation of proved properties are computed on an
individual field basis using the unit-of-production method based upon proved oil
and gas reserves attributable to the field. Certain other oil and gas properties
are depreciated on a straight-line basis. Individual proved properties are
reviewed periodically to determine if the carrying value of the field exceeds
the estimated undiscounted future net revenues from proved oil and gas reserves
attributable to the field. Based on this review and the continuing evaluation of
development plans, economics and other factors, if appropriate, the Company
records impairments (additional depletion and depreciation) to the extent that
the carrying value exceeds the estimated undiscounted future net revenues. Such
impairments totaled $99.3 million in 1993 and there were none in 1992 and 1991.
The Company provides for future abandonment and site restoration costs with
respect to certain of its oil and gas properties. The Company estimates that
with respect to these properties such future costs total approximately $24.7
million and such amount is being accrued over the expected life of the
properties. At December 31, 1993 Accumulated Depletion, Depreciation,
Amortization and Impairment includes $14.6 million with respect to such costs.
The value of undeveloped acreage is aggregated and the portion of such costs
estimated to be nonproductive, based on historical experience, is amortized to
expense over the average holding period. Additional amortization may be
recognized based upon periodic assessment of prospect evaluation results. The
cost of properties determined to be productive is transferred to proved
36
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
properties; the cost of properties determined to be nonproductive is charged to
accumulated amortization.
Maintenance and repairs are expensed as incurred; major renewals and
improvements are capitalized. Gains and losses arising from sales of properties
are included in income currently.
REVENUE RECOGNITION
Revenues from the sale of petroleum produced are generally recognized upon
the passage of title, net of royalties and net profits interests. Crude oil
revenues include the effect of hedging transactions; see Note 12 -- Commitments
and Contingencies -- Crude Oil Hedging Program. Crude oil revenues also include
the value of crude oil consumed in operations with an equal amount charged to
operating expenses. Such amounts totalled $15.4 million in 1991, $4.8 million in
1992 and $1.2 million in 1993.
Revenues from natural gas production are generally recorded using the
entitlement method, net of royalties and net profits interests. Sales proceeds
in excess of the Company's entitlement are included in Deferred Revenues and the
Company's share of sales taken by others is included in Other Assets. At
December 31, 1993 the Company's deferred revenues for sales proceeds received in
excess of the Company's entitlement was $6.8 million with respect to 5.2 MMcf
and the asset related to the Company's share of sales taken by others was $3.9
million with respect to 2.7 MMcf. Natural gas revenues are net of the effect of
hedging transactions; see Note 12 -- Commitments and Contingencies -- Natural
Gas Hedging Program.
Revenues from crude oil marketing and trading represent the gross margin
resulting from such activities. Revenues from such activities are net of costs
of sales of $210.5 million in 1991, $247.3 million in 1992 and $225.9 million in
1993.
Revenues from natural gas systems are net of the cost of natural gas
purchased and resold. Such costs totalled $43.8 million in 1992 and $49.9
million in 1993.
EARNINGS PER SHARE
Earnings per share are based on the weighted average number of common shares
outstanding during the year.
ACCOUNTS RECEIVABLE
Accounts Receivable relates primarily to sales of oil and gas and amounts
due from joint interest partners for expenditures made by the Company on behalf
of such partners. The Company reviews the financial condition of potential
purchasers and partners prior to signing sales or joint interest agreements. At
December 31, 1993 and 1992 the Company's allowance for doubtful accounts
receivable, which is reflected in the consolidated balance sheet as a reduction
in accounts receivable, totaled $6.3 million and $5.0 million, respectively.
Accounts receivable totalling $0.2 million, $1.1 million and $0.1 million were
written off as uncollectible in 1991, 1992 and 1993, respectively.
INVENTORIES
Inventories are valued at the lower of cost (average price or first-in,
first-out) or market. Crude oil inventories at December 31, 1993 and 1992 were
$1.1 million and $1.5 million, respectively, and materials and supplies
inventories at such dates were $7.6 million and $3.3 million, respectively.
ENVIRONMENTAL EXPENDITURES
Environmental expenditures relating to current operations are expensed or
capitalized, as appropriate, depending on whether such expenditures provide
future economic benefits. Liabilities are
37
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recognized when the expenditures are considered probable and can be reasonably
estimated. Measurement of liabilities is based on currently enacted laws and
regulations, existing technology and undiscounted site-specific costs.
Generally, such recognition coincides with the Company's commitment to a formal
plan of action.
INCOME TAXES
The Company follows the asset and liability approach to accounting for
income taxes. Deferred tax assets and liabilities are determined using the tax
rate for the period in which those amounts are expected to be received or paid,
based on a scheduling of temporary differences between the tax bases of assets
and liabilities and their reported amounts. Under this method of accounting for
income taxes, any future changes in income tax rates will affect deferred income
tax balances and financial results.
(2) CORPORATE RESTRUCTURING PROGRAM
In October 1993 the Company's Board of Directors endorsed a broad corporate
restructuring program that focuses on the disposition of non-core assets, the
concentration of capital spending in core areas, the refinancing of certain
long-term debt and the elimination of the payment of its $0.04 per share
quarterly dividend on common stock.
In implementing the restructuring program the Company recorded a
nonrecurring charge of $38.6 million in 1993 comprised of (1) losses on property
dispositions of $27.8 million: (2) long-term debt repayment penalties of $8.6
million; and (3) accruals for certain personnel benefits and related costs of
$2.2 million.
The Company's non-core asset disposition program includes the sale of its
natural gas gathering and processing assets to Hadson Corporation ('Hadson'),
the sale to Vintage Petroleum, Inc. of certain southern California and Gulf
Coast oil and gas producing properties and the sale to Bridge Oil (U.S.A.) Inc.
('Bridge') of certain Mid-Continent and Rocky Mountain oil and gas producing
properties and undeveloped acreage. The Company also plans to dispose of other
non-core oil and gas properties during 1994.
In 1994 the Company intends to refinance a portion of its existing long-term
debt and is currently evaluating a combination of debt and equity financing
arrangements with which to effect the refinancing.
SALE TO HADSON. In December 1993 the Company completed a transaction with
Hadson under the terms of which the Company sold the common stock of Adobe Gas
Pipeline Company ('AGPC'), a wholly-owned subsidiary which held the Company's
natural gas gathering and processing assets, to Hadson in exchange for Hadson
11.25% preferred stock with a face value of $52.0 million and 40% of Hadson's
common stock. In addition, the Company signed a seven-year gas sales contract
under the terms of which Hadson will market substantially all of the Company's
domestic natural gas production at market prices as defined by published monthly
indices for relevant production locations.
The Company accounted for the sale as a non-monetary transaction and the
investment in Hadson has been valued at $56.2 million, the carrying value of the
Company's investment in AGPC. The Company's investment in Hadson is being
accounted for on the equity basis. At December 31, 1993 the Company's investment
in Hadson's common stock exceeded the net book value attributable to such common
shares by approximately $11.3 million. The Company's income from operations for
1993 includes $1.6 million attributable to the assets sold to Hadson.
SALE TO VINTAGE. In November 1993 the Company completed the sale of certain
southern California and Gulf Coast producing properties for net proceeds
totalling $41.3 million in cash, $31.5
38
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
million of which was collected in 1993. The Company's income from operations for
1993 includes $2.7 million attributable to the assets sold to Vintage.
SALE TO BRIDGE. In December 1993 the Company signed a Purchase and Sales
Agreement with Bridge under the terms of which Bridge will purchase certain
Mid-Continent and Rocky Mountain producing and nonproducing oil and gas
properties. The sale price of $51.0 million, subject to certain adjustments,
will be received by the Company either in the form of cash plus 10% of the
outstanding shares of Bridge, following the contemplated public offering of that
stock in the first quarter of 1994, or entirely in cash. The transaction is
expected to close in the second quarter of 1994.
The net book value of these assets is included in Assets Held for Sale at
December 31, 1993. The Company's income from operations for 1993 includes $5.8
million attributable to the assets to be sold to Bridge.
OTHER DISPOSITIONS. The Company has identified certain other oil and gas
properties which it plans to dispose of in 1994. The estimated realizable value
of these properties, $1.0 million, is included in Assets Held for Sale at
December 31, 1993. In the first quarter of 1994 the Company sold its interest in
certain other oil and gas properties for $8.3 million.
(3) MERGER WITH ADOBE RESOURCES CORPORATION
On May 19, 1992 Adobe Resources Corporation ('Adobe'), an oil and gas
exploration and production company, was merged with and into Santa Fe (the
'Merger'). The acquisition has been accounted for as a purchase and the results
of operations of the properties acquired (the 'Adobe Properties') are included
in Santa Fe's results of operations effective June 1, 1992.
To consummate the Merger, the Company issued 24.9 million shares of common
stock valued at $205.5 million, 5.0 million shares of convertible preferred
stock valued at $80.0 million, assumed long-term bank debt and other liabilities
of $140.0 million and $35.0 million, respectively, and incurred $13.8 million in
related costs. The Company also recorded a $19.7 million deferred tax liability
with respect to the difference between the book and tax basis in the assets
acquired. Certain merger-related costs incurred by Adobe and paid by Santa Fe
totaling $10.9 million were charged to income in the second quarter of 1992.
The Merger constituted a 'change of control' as defined in certain of the
Company's employee benefit plans and employment agreements (see Notes 10 and
12).
In a separate transaction in January 1992, the Company purchased three
producing properties from Adobe for $14.2 million.
(4) SANTA FE ENERGY TRUST
In November 1992 5,725,000 Depository Units ('Trust Units'), each consisting
of beneficial ownership of one unit of undivided beneficial interest in the
Santa Fe Energy Trust (the 'Trust') and a $20 face amount beneficial ownership
interest in a $1,000 face amount zero coupon United States Treasury obligation
maturing on or about February 15, 2008, were sold in a public offering. The
Trust consists of certain oil and gas properties conveyed by Santa Fe. A total
of $114.5 million was received from public investors, of which $38.7 million was
used to purchase the Treasury obligations and $5.7 million was used to pay
underwriting commissions and discounts. Santa Fe received the remaining $70.1
million and 575,000 Trust Units. A portion of the proceeds received by the
Company was used to retire $30.0 million of the debt incurred in connection with
the Merger and the remainder will be used for general corporate purposes
including possible acquisitions.
For any calendar quarter ending on or prior to December 31, 2002, the Trust
will receive additional royalty payments to the extent that it needs such
payments to distribute $0.40 per
39
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Depository Unit per quarter. The source of such additional royalty payments, if
needed, will be limited to the Company's remaining royalty interest in certain
of the properties conveyed to the Trust. If such additional payments are made,
certain proceeds otherwise payable to the Trust in subsequent quarters may be
reduced to recoup the amount of such additional payments. The aggregate amount
of the additional royalty payments (net of any amounts recouped) will be limited
to $20.0 million on a revolving basis.
At December 31, 1993 the Company held 575,000 Trust Units. At December 31,
1993 Accounts Receivable includes $0.2 million due from the Trust and Accounts
Payable includes $1.9 million due to the Trust. In the first quarter of 1994 the
Company sold the Trust Units for $11.3 million, the Company's investment in the
Trust Units, $10.4 million, is included in Assets Held for Sale at December 31,
1993.
(5) ACQUISITIONS OF OIL AND GAS PROPERTIES
In January 1991 the Company completed the purchase of Mission Operating
Partnership, L.P.'s ('Mission') interest in certain oil and gas properties,
effective from November 1, 1990, for approximately $55.0 million. The Company
formed a partnership, with an institutional investor as a limited partner, to
acquire and operate the properties. The investor contributed $27.5 million for a
50% interest in the partnership, which will be reduced to 15% upon the occurence
of payout. Payout will occur when the investor has received distributions from
the partnership totalling an amount equal to its original contribution plus a
12% rate of return on such contribution. Prior to payout, the Company will bear
100% of the capital expenditures of the partnership. Under the terms of the
partnership agreement a total of $36.8 million must be expended on development
of the property by the year 2000, $12.4 million of which had been expended
through the end of 1993.
The Company funded $16.8 million of its share of the purchase of the
properties with the assumption of a term loan and paid the remainder from
working capital. The Company has given the lender the equivalent of an
overriding royalty interest in certain production from the properties. The
royalty is payable only if such production occurs and is limited to a maximum of
$3.0 million.
In June 1991 the Company acquired a 10% interest in a producing field in
Argentina for approximately $18.3 million and in October 1991 purchased an
additional 8% interest in the field for approximately $15.7 million. The Company
financed $17.8 million of the total purchase price with loans from an Argentine
bank. The Company has agreed to spend approximately $16.7 million over a
five-year period on development and maintenance of the field.
(6) CASH FLOWS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
The Merger included certain non-cash investing and financing activities not
reflected in the Statement of Cash Flows as follows (in millions of dollars):
Common stock issued------------------ 205.5
Convertible preferred stock
issued------------------------------- 80.0
Deferred tax liability--------------- 19.7
Long-term debt----------------------- 140.0
Assets acquired, other than cash, net
of liabilities assumed------------- (457.1)
Cash paid---------------------------- (11.9)
In 1991, the Company sold a producing property for $0.9 million in cash and
a note receivable for $1.2 million. In 1991, the Partnership purchased certain
surface properties for $6.2 million,
40
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$5.5 million of which was funded by the issuance of promissory notes and the
Company also purchased producing properties for $63.1 million, $34.6 million of
which was funded with debt (see Notes 5 and 7).
The Company made interest payments of $45.5 million, $49.0 million and $48.0
million in 1991, 1992 and 1993, respectively. In 1991, 1992 and 1993, the
Company made tax payments of $18.4 million, $4.4 million and $5.0 million,
respectively, and in 1993 received refunds of $4.1 million, primarily related to
the audit of prior years' returns.
(7) FINANCING AND DEBT
Long-term debt at December 31, 1993 and 1992 consisted of (in millions of
dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
1993 1992
CURRENT LONG-TERM CURRENT LONG-TERM
<S> <C> <C> <C> <C>
SFER
Senior Notes--------------------- 30.0 310.0 25.0 340.0
Revolving and Term Credit
Agreement---------------------- 1.3 48.7 12.8 92.2
Notes Payable to Bank------------ 3.8 11.3 2.5 15.1
Term-Loan------------------------ 1.2 11.4 1.2 12.6
Partnership
Credit Agreement----------------- 8.0 24.0 11.1 29.5
Promissory Notes----------------- -- -- 0.8 3.4
44.3 405.4 53.4 492.8
Aggregate total maturities of long-term debt during the next five years are
as follows: 1994 -- $44.3 million; 1995 -- $78.9 million; 1996 -- $73.5 million;
1997 -- $43.0 million; and 1998 -- $35.0 million. These maturities will be
affected by the refinancing discussed in Note 2 -- Corporate Restructuring
Program.
On April 11, 1990 SFER issued $365.0 million of serial unsecured Senior
Notes with interest rates averaging 10.35%. The Note Agreement pursuant to which
the Senior Notes were issued includes certain covenants which, among other
things, restrict the Company's ability to incur additional indebtedness and to
pay dividends. Under the terms of the Note Agreement, at December 31, 1993 the
Company had the ability to incur at least $64.0 million in additional long-term
debt and pay $26.0 million in dividends and other restricted payments. At
December 31, 1993 $340.0 million in Senior Notes were outstanding and are to be
repaid, $30.0 million in 1994 and 1995, $35.0 million in 1996 through 1998 and
$25.0 million per year in 1999 through 2005.
In January 1991 the Company executed a $16.8 million term-loan agreement,
with interest at 9.0%, in connection with the purchase of certain producing
properties from Mission. At December 31, 1993 $12.6 million was outstanding
under the terms of the agreement and is to be repaid $1.2 million in 1994 and
$11.4 million in 1995. The Company made principal payments on the loan totalling
$1.8 million in 1991, $1.2 million in 1992 and $1.2 million in 1993.
In June 1991 the Company borrowed $10.4 million from an Argentine bank in
connection with the purchase of an interest in a producing oil field in
Argentina. The loan bore interest at the higher of 12% or the interbank offering
rate plus 2%. In October 1991 the Company borrowed an additional $7.8 million in
connection with the purchase of an additional interest in the field. The second
loan bore interest at the higher of rates ranging from 13.4% to 14.0% or the
London Interbank Offering Rate ('LIBOR') plus 2%. During 1993 the two loans were
combined in a new loan which bears interest at the higher of 13.06% or LIBOR
plus 2%.
41
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the Merger the Company entered into a $195.0 million
Revolving and Term Credit Agreement (the 'Credit Agreement') with a group of
banks. Upon consummation of the Merger the Company drew down the $145.0 million
available under the term loan feature of the Credit Agreement and repaid the
$140.0 million of long-term debt assumed in the Merger. The borrowings under the
term loan feature of the Credit Agreement are secured by properties acquired in
the Merger. Interest rates on borrowings are determined from time to time and at
December 31, 1993 amounts outstanding under the term loan feature bore interest
at an average of 5.5% per annum.
In April 1993 the term loan feature was amended to allow the Company to make
voluntary prepayments and reborrowings. At December 31, 1993 the balance
outstanding under the term loan feature was $50.0 million and the total amount
available under the term loan feature, including amounts then outstanding, was
$87.7 million. The amount available will be reduced, in semi-annual increments,
to $48.6 million in December 31, 1994 and $24.3 million at December 31, 1995.
The Credit Agreement expires December 31, 1996. In certain circumstances,
primarily related to the sale of properties securing the loans, the amount
available may be reduced or the Company may be required to make mandatory
repayments. The Company is currently negotiating an amendment to the Credit
Agreement which would extend the maturities and under certain circumstances
increase the amount available for borrowings.
Under the revolving credit feature of the Credit Agreement the Company may
borrow and issue letters of credit totalling up to $50.0 million. Borrowings
under the revolving credit feature are unsecured but are subject to compliance
with covenants identical to existing covenants under the Company's other
long-term debt agreeements including covenants related to debt incurrence,
dividends and other restricted payments, investments and limitations on liens,
mergers and sales of assets. In addition, the Company must comply annually with
certain borrowing base coverage ratios relating to projected cash flows from oil
and gas revenues. The amount available under the revolving credit feature will
be reduced to $10.0 million on February 28, 1994 and this feature expires on
February 28, 1995. At December 31, 1993, the Company had $8.7 million in letters
of credit outstanding under the revolving credit feature of the Credit
Agreement.
The Company has two uncommitted lines of credit totalling $35.0 million
which is used to meet short-term cash needs. Interest rates on borrowings under
this line of credit is typically lower than rates paid under the Credit
Agreement. At December 31, 1993 no amounts were outstanding under these lines of
credit.
In December 1991 the Partnership issued two promissory notes for a total of
$5.5 million in connection with the purchase of certain surface lands. The
notes, which bore interest at 10.0%, were retired in 1993. The Company's
proportionate share of such debt at December 31, 1992 was $4.2 million.
At December 31, 1993 and 1992 the Partnership had $32.0 million and $44.0
million, respectively, outstanding under the terms of long-term credit agreement
which expires in 1997. The Company's proportionate share of such debt totaled
$40.6 million at December 31, 1992. Interest on 65% of principal amount
outstanding is fixed at 10.13% with interest on the remaining amount outstanding
at floating rates which averaged 4.3% in 1993 and 5.46% in 1992. The credit
agreement imposes certain restrictions on future indebtedness and the transfer
or sale of principal properties and requires the maintenance of certain
financial ratios to avoid collateralization or default.
42
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) SEGMENT INFORMATION
The principal business of the Company is oil and gas, which consists of the
acquisition, exploration and development of oil and gas properties and the
production and sale of crude oil and liquids and natural gas. Pertinent
information with respect to the Company's oil and gas business is presented in
the following table (in millions of dollars):
</TABLE>
<TABLE>
<CAPTION>
OIL AND GAS OTHER GENERAL
U.S. ARGENTINA INDONESIA FOREIGN CORPORATE TOTAL
<S> <C> <C> <C> <C> <C> <C>
1993
Revenues--------------------------- 401.2 12.5 23.2 -- -- 436.9
Income (Loss) from Operations------ (33.6) 3.0 (13.4) (18.4) (50.6) (113.0)
Depletion, Depreciation, Amortiza-
tion and Impairment-------------- 218.8 3.6 21.2 6.7 1.7 252.0
Additions to Property and
Equipment------------------------ 116.1 7.3 16.8 6.1 4.4 150.7
Identifiable Assets at
December 31---------------------- 862.0 48.2 65.3 2.8 98.6 1,076.9
1992
Revenues--------------------------- 400.0 13.9 13.6 -- -- 427.5
Income (Loss) from Operations------ 100.6 2.5 2.3 (10.7) (37.2) 57.5
Depletion, Depreciation and
Amortization--------------------- 136.7 3.7 2.7 1.6 1.6 146.3
Additions to Property and
Equipment------------------------ 452.6 4.0 71.6 5.7 2.4 536.3
Identifiable Assets at December
31------------------------------- 1,076.5 39.2 73.9 5.8 141.8 1,337.2
1991
Revenues--------------------------- 376.1 3.7 -- -- -- 379.8
Income (Loss) from Operations------ 103.7 (2.2) .2 (2.5) (34.8) 64.4
Depletion. Depreciation and
Amortization--------------------- 101.3 1.8 -- .7 2.8 106.6
Additions to Property and
Equipment------------------------ 125.8 35.4 -- 3.7 8.8 173.7
Identifiable Assets at December
31------------------------------- 816.5 37.5 .2 3.9 53.8 911.9
</TABLE>
Crude oil and liquids and natural gas accounted for more than 95% of
revenues in 1991, 1992 and 1993. The following table reflects sales revenues
from crude oil purchasers who accounted for more than 10% of the Company's crude
oil and liquids revenues (in millions of dollars):
YEAR ENDED DECEMBER 31,
1993 1992 1991
Texaco Trading and Transportation,
Inc-------------------------------- -- 46.8 55.9
Celeron Corporation------------------ 56.8 56.3 45.6
Shell Oil Company-------------------- 86.3 -- --
None of the Company's purchasers of natural gas accounted for more than 10%
of revenues in 1991, 1992 or 1993. The Company does not believe the loss of any
purchaser would have a material adverse effect on its financial position since
the Company believes alternative sales arrangements could be made on relatively
comparable terms.
43
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) CONVERTIBLE PREFERRED STOCK
The convertible preferred stock issued in connection with the Merger is
non-voting and entitled to receive cumulative cash dividends at an annual rate
equivalent to $1.40 per share. The holders of the convertible preferred shares
may, at their option, convert any or all such shares into 1.3913 shares of the
Company's common stock. The Company may, at any time after the fifth anniversary
of the effective date of the Merger and upon the occurrence of a 'Special
Conversion Event', convert all outstanding shares of convertible preferred stock
into common stock at the initial conversion rate of 1.3913 shares of common
stock, subject to certain adjustments, plus additional shares in respect to
accrued and unpaid dividends. A Special Conversion Event is deemed to have
occurred when the average daily closing price for a share of the Company's
common stock for 20 of 30 consecutive trading days equals or exceeds 125% of the
quotient of $20.00 divided by the then applicable conversion rate (approximately
$18.00 per share at a conversion rate of 1.3913).
Upon the occurrence of the 'First Ownership Change' of Santa Fe, each holder
of shares of convertible preferred stock shall have the right, at the holder's
option, to elect to have all of such holder's shares redeemed for $20.00 per
share plus accrued and unpaid interest and dividends. The First Ownership Change
shall be deemed to have occurred when any person or group, together with any
affiliates or associates, becomes the beneficial owner of 50% or more of the
outstanding common stock of Santa Fe.
(10) SHAREHOLDERS' EQUITY
COMMON STOCK
In 1991, 1992 and 1993 the Company issued 1.1 million previously unissued
shares of common stock in connection with certain employee benefit and
compensation plans. Also in 1992, the Company issued 24.9 million previously
unissued shares of common stock in connection with the Merger.
The Company declared dividends to common shares of $0.16 per share in 1991
and 1992 and $0.12 per share in 1993.
PREFERRED STOCK
The Board of Directors of the Company is empowered, without approval of the
shareholders, to cause shares of preferred stock to be issued in one or more
series, and to determine the number of shares in each series and the rights,
preferences and limitations of each series. Among the specific matters which may
be determined by the Board of Directors are: the annual rate of dividends; the
redemption price, if any; the terms of a sinking or purchase fund, if any; the
amount payable in the event of any voluntary liquidation, dissolution or winding
up of the affairs of the Company; conversion rights, if any; and voting powers,
if any.
ACCUMULATED DEFICIT
At December 31, 1993 Accumulated Deficit included dividends in excess of
retained earnings of $89.8 million.
1990 INCENTIVE STOCK COMPENSATION PLAN
The Company has adopted the Santa Fe Energy Resources 1990 Incentive Stock
Compensation Plan (the 'Plan') under the terms of which the Company may grant
options and awards with respect to no more than 5,000,000 shares of common stock
to officers and key employees.
Options granted in 1991 and prior are fully vested and expire in 2000.
Options granted in 1992 have a ten year term and vest as to 33.33 percent one
year after grant, as to a cumulative 66.67
44
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
percent two years after grant and as to the entire amount three years after
grant. The options granted in 1993 have a ten year term and vest as to 50
percent 5 years after grant, as to a cumulative 75 percent 6 years after grant
and as to the entire amount 7 years after grant. The options are exercisable on
an accelerated basis beginning one year and ending three years after grant in
certain circumstances. If the market value per share of the Company's common
stock (sustained in all events for at least 60 days) exceeds $15, 25 percent of
the options shall become exercisable; in the event the market value per share
exceeds $20, 50 percent of the options shall become exercisable; and in the
event the market value exceeds $25, 100 percent shall become exercisable.
Unexercised options would be forfeited in the event of voluntary or involuntary
termination. Vested options are exercisable for a period of one year following
termination due to death, disability or retirement. In the event of termination
by the Company for any reason there is no prorata vesting of unvested options.
The following table reflects activity with respect to Non-Qualified Stock
Options during 1991 through 1993:
OPTION
OPTIONS PRICE
OUTSTANDING PER SHARE
Outstanding at December 31, 1990----- 1,803,923 $14.4375 to $24.24
Grants------------------------------- 4,500 $14.625
Cancellations------------------------ (45,332) $14.4375 to $24.24
Outstanding at December 31, 1991----- 1,763,091 $14.4375 to $24.24
Grants------------------------------- 1,099,000 $ 9.5625
Cancellations------------------------ (50,163) $14.4375 to $24.24
Outstanding at December 31, 1992----- 2,811,928 $ 9.5625 to $24.24
Grants------------------------------- 800,000 $ 9.5625
Cancellations------------------------ (95,398) $ 9.5625 to $24.24
Exercises---------------------------- (6,945) $ 9.5625
Outstanding at December 31, 1993----- 3,509,585 $ 9.5625 to $24.24
At December 31, 1993 options on 780,790 shares were available for future
grants.
A 'Phantom Unit' is the right to receive a cash payment in an amount equal
to the average trading price of the shares of common stock at the time the award
becomes payable. Awards are made for a specified period and are dependent upon
continued employment and the achievement of performance objectives established
by the Company. In December 1990 the Company awarded 211,362 Phantom Units and
in December 1991 313,262 shares of restricted stock were issued in exchange for
such units. Compensation expense is recognized over the period the awards are
earned based on the market price of the restricted stock on the date it was
issued ($8.00 per share). During 1990 and 1991 $0.2 million and $0.8 million,
respectively, were charged to expense with respect to such awards. The
unamortized portion of the award at December 31, 1991 ($1.4 million) was
reflected in Shareholders' Equity. The consummation of the Merger resulted in a
'change of control' as defined in the Plan and resulted in the vesting of the
awards and $1.4 million in compensation expense was recognized in 1992.
In 1993 the Company issued 6,432 shares of restricted stock to certain
employees and 118,039 common shares in accordance with the terms of certain
other employee compensation plans.
45
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) PENSION AND OTHER EMPLOYEE BENEFIT PLANS
PENSION PLANS
Prior to the Spin-Off the Company was included in certain non-contributory
pension plans of SFP. The Santa Fe Pacific Corporation Retirement Plan (the 'SFP
Plan') covered substantially all of the Company's officers and salaried
employees who were not covered by collective bargaining agreements. The Santa Fe
Pacific Corporation Supplemental Retirement Plan was an unfunded plan which
provided supplementary benefits, primarily to senior management personnel.
The Company adopted, effective as of the date of the Spin-Off, a defined
benefit retirement plan (the 'SFER Plan') covering substantially all salaried
employees not covered by collective bargaining agreements and a nonqualified
supplemental retirement plan (the 'Supplemental Plan'). The Supplemental Plan
will pay benefits to participants in the SFER Plan in those instances where the
SFER Plan formula produces a benefit in excess of limits established by ERISA
and the Tax Reform Act of 1986. Benefits payable under the SFER Plan are based
on years of service and compensation during the five highest paid years of
service during the ten years immediately preceding retirement. Benefits accruing
to the Company's employees under the SFP Plan have been assumed by the SFER
Plan. The Company's funding policy is to contribute annually not less than the
minimum required by ERISA and not more than the maximum amount deductible for
income tax purposes. In the fourth quarter of 1993 the Company established a new
pension plan with respect to certain persons employed in foreign locations.
The following table sets forth the funded status of the SFER Plan and the
Supplemental Plan at December 31, 1993 and 1992 (in millions of dollars):
SFER PLAN SUPPLEMENTAL PLAN
1993 1992 1993 1992
Plan assets at fair value, primarily
invested in common stocks and U.S.
and corporate bonds---------------- 30.2 28.9 -- --
Actuarial present value of projected
benefit obligations:
Accumulated benefit obligations
Vested----------------------- (30.9) (24.5) (0.6) (0.5)
Nonvested-------------------- (1.5) (1.4) -- --
Effect of projected future
salary increases----------- (8.3) (6.4) (0.3) (0.2)
Excess of projected benefit
obligation over plan assets-------- (10.5) (3.4) (0.9) (0.7)
Unrecognized net loss from past
experience different from that
assumed and effects of changes in
assumptions------------------------ 6.4 0.7 0.3 0.2
Unrecognized net (asset) obligation
being recognized over plan's
average remaining service life----- (1.0) (1.1) 0.2 0.3
Additional minimum liability--------- -- -- (0.3) (0.3)
Accrued pension liability------------ (5.1) (3.8) (0.7) (0.5)
Major assumptions at year-end
Discount rate-------------------- 7.0% 8.25% 7.0% 8.25%
Long-term asset yield------------ 9.5% 9.5% 9.5% 9.5%
Rate of increase in future
compensation------------------- 5.25% 5.25% 5.25% 5.25%
46
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the components of pension expense for the
SFER Plan and Supplemental Plan for 1993, 1992 and 1991 (in millions of
dollars):
<TABLE>
<CAPTION>
SFER PLAN SUPPLEMENTAL PLAN
1993 1992 1991 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Service cost------------------------- 1.4 1.2 1.1 -- -- --
Interest cost------------------------ 2.6 2.4 2.3 0.1 0.1 0.1
Return on plan assets---------------- (2.7) (2.5) (2.4) -- -- --
Net amortization and deferral-------- -- -- (0.1) -- -- --
1.3 1.1 0.9 0.1 0.1 0.1
</TABLE>
The Company also sponsors a pension plan covering certain hourly-rated
employees in California (the 'Hourly Plan'). The Hourly Plan provides benefits
that are based on a stated amount for each year of service. The Company annually
contributes amounts which are actuarially determined to provide the Hourly Plan
with sufficient assets to meet future benefit payment requirements.
The following table sets forth the components of pension expense for the
Hourly Plan for the years 1993, 1992 and 1991 (in millions of dollars):
YEAR ENDED DECEMBER 31,
1993 1992 1991
Service cost--------------------- 0.2 0.2 0.2
Interest cost-------------------- 0.7 0.7 0.7
Return on plan assets------------ (0.8) (0.1) (0.5)
Net amortization and deferral---- 0.4 (0.4) 0.1
0.5 0.4 0.5
The following table sets forth the funded status of the Hourly Plan at
December 31, 1993 and 1992 (in millions of dollars):
1993 1992
Plan assets at fair value, primarily
invested in fixed-rate securities---- 7.7 7.2
Actual present value of projected
benefit obligations
Accumulated benefit obligations
Vested----------------------- (11.2) (9.1)
Nonvested-------------------- (0.4) (0.3)
Excess of projected benefit
obligation over plan assets-------- (3.9) (2.2)
Unrecognized net (gain) loss from
past experience different from that
assumed and effects of changes in
assumptions------------------------ 1.5 (0.3)
Unrecognized prior service cost------ 0.5 0.6
Unrecognized net obligation---------- 1.5 1.6
Additional minimum liability--------- (3.5) (2.1)
Accrued pension liability-------- (3.9) (2.4)
Major assumptions at year-end
Discount rate-------------------- 7.0% 8.25%
Expected long-term rate of return
on plan assets----------------- 8.5% 8.5%
At December 31, 1993 the Company's additional minimum liability exceeded the
total of its unrecognized prior service cost and unrecognized net obligation by
$1.5 million. Accordingly, at December 31, 1993 the Company's retained earnings
have been reduced by such amount, net of related taxes of $0.6 million.
47
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides health care and life insurance benefits for
substantially all employees who retire under the provisions of a
Company-sponsored retirement plan and their dependents. Participation in the
plans is voluntary and requires a monthly contribution by the employee.
Effective January 1, 1993 the Company adopted the provisions of SFAS No.
106 -- 'Employers' Accounting for Postretirement Benefits Other Than Pensions'.
The Statement requires the accrual, during the years the employee renders
service, of the expected cost of providing postretirement benefits to the
employee and the employee's beneficiaries and covered dependents. The following
table sets forth the plan's funded status at December 31, 1993 and January 1,
1993 (in millions of dollars):
DECEMBER 31, JANUARY 1,
1993 1993
Plan assets, at fair value----------- -- --
Accumulated postretirement benefit
obligation
Retirees--------------------------- (3.6) (3.1)
Eligible active participants------- (1.2) (0.9)
Other active participants---------- (1.4) (1.2)
Accumulated postretirement benefit
obligation in excess of plan
assets----------------------------- (6.2) (5.2)
Unrecognized transition
obligation------------------------- 5.0 5.2
Unrecognized net loss from past
experience different from that
assumed and from changes in
assumptions------------------------ 0.5 --
Accrued postretirement benefit
cost------------------------------- (0.7) --
Assumed discount rate---------------- 7.5% 8.25%
Assumed rate of compensation
increase--------------------------- 5.25% 5.25%
The Company's net periodic postretirement benefit cost for 1993 includes the
following components (in millions of dollars):
Service costs---------------------------------------- 0.3
Interest costs--------------------------------------- 0.4
Amortization of unrecognized transition
obligation----------------------------------------- 0.3
1.0
In periods prior to 1993 the cost to the Company of providing health care
and life insurance benefits for qualified retired employees was recognized as
expenses when claims were paid. Such amounts totalled $0.4 million in 1991 and
$0.3 million in 1992.
Estimated costs and liabilities have been developed assuming trend rates for
growth in future health care costs beginning with 10% for 1993 graded to 6%
(5.5% for post age 65) by the year 2000 and remaining constant thereafter.
Increasing the assumed health care cost trend rate by one percent each year
would increase the accumulated postretirement benefit obligation as of December
31, 1993 by $0.9 million and the aggregate of the service cost and interest cost
components of the net periodic postretirement benefit cost for 1994 by $0.2
million.
SAVINGS PLAN
The Company has a savings plan, which became effective November 1, 1990,
available to substantially all salaried employees and intended to qualify as a
deferred compensation plan under Section 401(k) of the Internal Revenue Code
(the '401(k) Plan'). The Company will match employee contributions for an amount
up to 4% of each employee's base salary. In addition, if at the end of each
48
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
fiscal year the Company's performance for such year has exceeded certain
predetermined criteria, each participant will receive an additional matching
contribution equal to 50% of the regular matching contribution. The Company's
contributions to the 401(k) Plan, which are charged to expense, totaled $1.2
million in 1991, $1.3 million in 1992 and $1.5 million in 1993. In the fourth
quarter of 1993 the Company established a new savings plan with respect to
certain personnel employed in foreign locations.
OTHER POSTEMPLOYMENT BENEFITS
In the fourth quarter of 1993 the Company adopted SFAS No.
112 -- 'Employers' Accounting for Postemployment Benefits'. The Statement
requires the accrual of the estimated costs of benefits provided by an employer
to former or inactive employees after employment but before retirement. Such
benefits include salary continuation, supplemental unemployment benefits,
severance benefits, disability-related benefits, job training and counseling and
continuation of benefits such as health care and life insurance coverage. The
adoption of SFAS No. 112 resulted in a charge to earnings of $1.8 million in
1993.
(12) COMMITMENTS AND CONTINGENCIES
CRUDE OIL HEDGING PROGRAM
In the third quarter of 1990, the Company initiated a hedging program
designed to provide a certain minimum level of cash flow from its sales of crude
oil. Settlements were included in oil revenues in the period the oil is sold. In
the year ended December 31, 1990 hedges resulted in a reduction in oil revenues
of $10.7 million; in 1991 hedges resulted in an increase in oil revenues of
$41.7 million and in 1992 hedges resulted in an increase in oil revenues of $9.7
million. The Company had no open crude oil hedging contracts during 1993.
NATURAL GAS HEDGING PROGRAM
In the third quarter of 1992 the Company initiated a hedging program with
respect to its sales of natural gas. The Company has used various instruments
whereby monthly settlements are based on the differences between the price or
range of prices specified in the instruments and the settlement price of certain
natural gas futures contracts quoted on the New York Mercantile Exchange. In
instances where the applicable settlement price is less than the price specified
in the contract, the Company receives a settlement based on the difference; in
instances where the applicable settlement price is higher than the specified
prices the Company pays an amount based on the difference. The instruments
utilized by the Company differ from futures contracts in that there is no
contractual obligation which requires or allows for the future delivery of the
product. In 1992 and 1993 hedges resulted in a reduction in natural gas revenues
of $0.5 million and $8.2 million, respectively.
At December 31, 1993 the Company had two open natural gas hedging contracts
covering approximately 1.2 Bcf during the six month period beginning March 1994.
The 'approximate break-even price' (the average of the monthly settlement prices
of the applicable futures contracts which would result in no settlement being
due to or from the Company) with respect to such contracts is approximately
$1.82 per Mcf. In addition, certain parties hold options on contracts covering
approximately 4.8 Bcf during the seven month period beginning March 1994 at an
approximate break even price of $1.90 per Mcf. The Company has no other
outstanding natural gas hedging instruments.
INDEMNITY AGREEMENT WITH SFP
At the time of the Spin-Off, the Company and SFP entered into an agreement
to protect SFP from federal and state income taxes, penalties and interest that
would be incurred by SFP if the Spin-off were determined to be a taxable event
resulting primarily from actions taken by the Company during a one-year period
that ended December 4, 1991. If the Company were required to make
49
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
payments pursuant to the agreement, such payments could have a material adverse
effect on its financial condition; however, the Company does not believe that it
took any actions during such one-year period that would have such an effect on
the Spin-Off.
ENVIRONMENTAL REGULATION
Federal, state and local laws and regulations relating to environmental
quality control affect the Company in all of its oil and gas operations. The
Company has been identified as one of over 250 potentially responsible parties
('PRPs') at a superfund site in Los Angeles County, California. The site was
operated by a third party as a waste disposal facility from 1948 until 1983. The
Environmental Protection Agency ('EPA') is requiring the PRPs to undertake
remediation of the site in several phases, which include site monitoring and
leachate control, gas control and final remediation. In 1989, the EPA and a
group of the PRPs entered into a consent decree covering the site monitoring and
leachate control phases of remediation. The Company is a member of the group
that is responsible for carrying out this first phase of work, which is expected
to be completed in five to eight years. The maximum liability of the group,
which is joint and several for each member of the group, for the first phase is
$37.0 million, of which the Company's share is expected to be approximately $2.4
million ($1.3 million after recoveries from working interest participants in the
unit at which the wastes were generated) payable over the period that the phase
one work is performed. The EPA and a group of PRPs of which the Company is a
member have also entered into a subsequent consent decree (which has not been
finally entered by the court) with respect to the second phase of work (gas
control). The liability of this group has not been capped, but is estimated to
be $130.0 million. The Company's share of costs of this phase, however, is
expected to be approximately of the same magnitude as that of the first phase
because more parties are involved in the settlement. The Company has provided
for costs with respect to the first two phases, but it cannot currently estimate
the cost of any subsequent phases of work or final remediation which may be
required by the EPA.
In 1989, Adobe received requests from the EPA for information pursuant to
Section 104(e) of CERCLA with respect to the D. L. Mud and Gulf Coast Vacuum
Services superfund sites located in Abbeville, Louisiana. The EPA has issued its
record of decision at the Gulf Coast Site and on February 9, 1993 the EPA issued
to all PRP's at the site a settlement order pursuant to Section 122 of CERCLA.
Earlier, an emergency order pursuant to Section 106 of CERLA was issued on
December 11, 1992, for purposes of containment due to the Louisiana rainy
season. On December 15, 1993 the Company entered into a sharing agreement with
other PRP'S to participate in the final remediation of the Gulf Coast site. The
Company's share of the remediation is approximately $600,000 and includes its
proportionate share of those PRPs who do not have the financial resources to
provide their share of the work at the site. A former site owner has already
conducted remedial activities at the D. L. Mud Site under a state agency
agreement. The extent, if any, of any further necessary remedial activity at the
D. L. Mud Site has not been finally determined.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with certain key
employees. The initial term of each agreement expired on December 31, 1990 and,
on January 1, 1991 and beginning on each January 1 thereafter, is automatically
extended for one-year periods, unless by September 30 of any year the Company
gives notice that the agreement will not be extended. The term of the agreements
is automatically extended for 24 months following a change of control. The
consummation of the Merger constituted a change of control as defined in the
agreements.
In the event that following a change of control employment is terminated for
reasons specified in the agreements, the employee would receive: (i) a lump sum
payment equal to two years' base salary; (ii) the maximum possible bonus under
the terms of the Company's incentive compensation plan;
50
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(iii) a lapse of restrictions on any outstanding restricted stock grants and
full payout of any outstanding Phantom Units; (iv) cash payment for each
outstanding stock option equal to the amount by which the fair market value of
the common stock exceeds the exercise price of the option; and, (v) life,
disability and health benefits for a period of up to two years. In addition,
payments and benefits under certain employment agreements are subject to further
limitations based on certain provisions of the Internal Revenue Code.
INTEREST RATE SWAPS
Prior to the Merger, Adobe had entered into two interest rate swaps with a
bank with notional principal amounts of $15.0 mllion and $20.0 million. Under
the terms of the $20.0 million swap, which expires in April 1994, during any
quarterly period at the beginning of which a floating rate specified in the
agreement is less than 7.84%, the Company must pay the bank interest for such
period on the principal amount at the difference between the rates. Should the
floating rate be in excess of 7.84%, the bank must pay the Company interest for
such period on the principal amount at the difference between the rates. For the
period from the effective date of the Merger to December 31, 1992 the amount due
the bank in accordance with the terms of the $20.0 million swap totalled $0.6
million and the amount due the bank in 1993 totalled $0.9 million. For the
quarterly period which ends in April 1994, the amount due the bank is based on a
floating rate of 3.375%. The $15.0 million swap, which expired December 31,
1992, had terms similar to the $20.0 million swap and the amount due the bank
for the period subsequent to the Merger totaled $0.5 million.
OPERATING LEASES
The Company has noncancellable agreements with terms ranging from one to ten
years to lease office space and equipment. Minimum rental payments due under the
terms of these agreements are: 1994 -- $6.1 million, 1995 -- $6.0 million,
1996 -- $5.5 million, 1997 -- $5.2 million, 1998 -- $4.4 million and $4.7
million thereafter. Rental payments made under the terms of noncancellable
agreements totaled $4.0 million in 1991,$4.5 million in 1992 and $5.5 million in
1993.
OTHER MATTERS
The Company has several long-term contracts ranging up to fifteen years for
the supply and transportation of approximately 30 million cubic feet per day of
natural gas. In the aggregate, these contracts involve a minimum commitment on
the part of the Company of approximately $10 million per year.
There are other claims and actions, including certain other environmental
matters, pending against the Company. In the opinion of management, the amounts,
if any, which may be awarded in connection with any of these claims and actions
could be significant to the results of operations of any period but would not be
material to the Company's consolidated financial position.
(13) INCOME TAXES
Effective January 1, 1993 the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109 -- 'Accounting for Income Taxes'. The
adoption of SFAS No. 109 had no significant impact on the Company's provision
for income taxes.
Through the date of the Spin-Off the taxable income or loss of the Company
was included in the consolidated federal income tax return filed by SFP. The
Company has filed separate consolidated federal income tax returns for periods
subsequent to the Spin-Off. The consolidated federal income tax returns of SFP
have been examined through 1988 and all years prior to 1981 are closed. Issues
relating to the years 1981 through 1985 are being contested through various
stages of administrative appeal. The Company is evaluating its position with
respect to issues raised in a 1986 through 1988
51
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
audit. The Company believes adequate provision has been made for any adjustments
which might be assessed for all open years.
During 1989, the Company received a notice of deficiency for certain state
franchise tax returns filed for the years 1978 through 1983 as part of the
consolidated tax returns of SFP. The years subsequent to 1983 are still subject
to audit. At December 31, 1993 Other Long-Term Obligations includes $20.6
million with respect to this matter. The Company intends to contest this matter.
With the Merger of Adobe the Company succeeded to a net operating loss
carryforward that is subject to Internal Revenue Code Section 382 limitations
which annually limit taxable income that can be offset by such losses. Certain
changes in the Company's shareholders may impose additional limitations as well.
Losses carrying forward of $133.3 million expire beginning in 1998.
At date of the Merger, Adobe had ongoing tax litigation related to a refund
claim for carryback of certain net operating losses denied by the Internal
Revenue Service. During 1991 Adobe successfully defended its claim in Federal
District Court and prevailed again in 1992 in the United States Court of Appeals
for the Fifth Circuit. The Internal Revenue Service had no further recourse to
litigation and a $16.2 million refund was reflected as Income Tax Refund
Receivable at December 31, 1992 and collected in 1993.
Pretax income from continuing operations for the years ended December 31,
1993, 1992 and 1991 was taxed under the following jurisdictions:
1993 1992 1991
Domestic----------------------------- (120.9) 2.7 34.8
Foreign------------------------------ (29.3) (3.6) (2.1)
(150.2) (0.9) 32.7
The Company's income tax expense (benefit) for the years ended December 31,
1993, 1992 and 1991 consisted of (in millions of dollars):
1993 1992 1991
Current
U.S. federal--------------------- (1.3) 3.5 11.0
State---------------------------- (1.2) 1.4 1.7
Foreign-------------------------- 1.3 1.9 --
(1.2) 6.8 12.7
Deferred
U.S. federal--------------------- (65.6) (3.5) 0.2
U.S. federal tax rate change----- 2.6 -- --
State---------------------------- (8.0) (2.5) 1.3
Foreign-------------------------- (0.9) (0.3) --
(71.9) (6.3) 1.5
(73.1) 0.5 14.2
52
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's deferred income tax liabilities (assets) at December 31, 1993
and 1992 are composed of the following differences between financial and tax
reporting (in millions of dollars):
1993 1992
Capitalized costs and write-offs----- 83.0 150.8
Differences in Partnership basis----- 15.1 29.3
State deferred liability------------- 5.8 13.4
Foreign deferred liability----------- 13.7 15.5
Gross deferred liabilities----------- 117.6 209.0
Accruals not currently deductible for
tax purposes----------------------- (17.7) (28.3)
Alternative minimum tax
carryforwards---------------------- (8.3) (5.3)
Net operating loss carryforwards----- (46.7) (56.4)
Other-------------------------------- (0.5) --
Gross deferred assets---------------- (73.2) (90.0)
Deferred tax liability--------------- 44.4 119.0
The Company had no deferred tax asset valuation allowance at December 31,
1993 or 1992.
A reconciliation of the Company's U.S. income tax expense (benefit) computed
by applying the statutory U.S. federal income tax rate to the Company's income
(loss) before income taxes for the years ended December 31, 1993, 1992 and 1991
is presented in the following table (in millions of dollars):
1993 1992 1991
U.S. federal income taxes (benefit)
at statutory rate------------------ (52.6) (0.3) 11.1
Increase (reduction) resulting from:
State income taxes, net of federal
effect--------------------------- (1.0) 1.4 2.2
Foreign income taxes in excess of
U.S. rate------------------------ (0.8) 0.3 --
Nondeductible amounts-------------- (0.2) (2.4) --
Effect of increase in statutory
rate on deferred taxes----------- 2.6 -- --
Federal audit refund--------------- (3.2) -- --
Amendment to tax sharing agreement
with SFP------------------------- (1.2) -- --
Benefit of tax losses-------------- (11.2) -- --
Prior period adjustments----------- (5.5) -- --
Other------------------------------ -- 1.5 0.9
(73.1) 0.5 14.2
The Company increased its deferred tax liability in 1993 as a result of
legislation enacted during 1993 increasing the corporate tax rate from 34% to
35% commencing in 1993.
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 'Disclosure About Fair Value of Financial Instruments' requires
the disclosure, to the extent practicable, of the fair value of financial
instruments which are recognized or unrecognized in the balance sheet. The fair
value of the financial instruments disclosed herein is not representative of the
amount that could be realized or settled, nor does the fair value amount
consider the tax consequences, if any, of realization or settlement. The
following table reflects the financial
53
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
instruments for which the fair value differs from the carrying amount of such
financial instrument in the Company's December 31, 1993 and 1992 balance sheets
(in millions of dollars):
<TABLE>
<CAPTION> 1993 1992
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
<S> <C> <C> <C> <C>
Assets
Trust Units---------------------- 10.4 11.3 10.4 10.5
Liabilities
Long-Term Debt (including current
portion)----------------------- 449.7 482.2 546.2 572.2
Convertible Preferred Stock------ 80.0 103.8 80.0 93.8
Interest rate swap--------------- -- 0.4 -- 1.1
</TABLE>
The fair value of the Trust Units and convertible preferred stock is based
on market prices. The fair value of the Company's fixed-rate long-term debt is
based on current borrowing rates available for financings with similar terms and
maturities. With respect to the Company's floating-rate debt, the carrying
amount approximates fair value. The fair value of the interest rate swap
represents the estimated cost to the Company over the remaining life of the
contract.
At December 31, 1993 the Company had two open natural gas hedging contracts
and options outstanding on five additional contracts (see Note 12 -- Commitments
and Contingencies -- Natural Gas Hedging Contracts). Based on the settlement
prices of certain natural gas futures contracts as quoted on the New York
Mercantile Exchange on December 30, 1993, assuming all options are exercised,
the cost to the Company with respect to such contracts during 1994 would be
approximately $0.6 million.
54
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
SUPPLEMENTAL INFORMATION TO
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
OIL AND GAS RESERVES AND RELATED FINANCIAL DATA
Information with respect to the Company's oil and gas producing activities
is presented in the following tables. Reserve quantities as well as certain
information regarding future production and discounted cash flows were
determined by independent petroleum consultants, Ryder Scott Company.
OIL AND GAS RESERVES
The following table sets forth the Company's net proved oil and gas reserves
at December 31, 1990, 1991, 1992 and 1993 and the changes in net proved oil and
gas reserves for the years ended December 31, 1991, 1992 and 1993.
<TABLE>
<CAPTION>
CRUDE OIL AND LIQUIDS (MMBBLS) NATURAL GAS (BCF)
U.S. ARGENTINA INDONESIA TOTAL U.S. ARGENTINA INDONESIA TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Proved reserves at
December 31, 1990------------------- 222.3 -- -- 222.3 185.9 -- -- 185.9
Revisions of previous estimates---- (1.9) -- -- (1.9) 0.4 -- -- 0.4
Improved recovery techniques------- 15.9 -- -- 15.9 0.5 -- -- 0.5
Extensions, discoveries and other
additions------------------------- 1.8 -- -- 1.8 19.6 -- -- 19.6
Purchases of minerals-in-place----- 4.6 8.7 -- 13.3 2.5 -- -- 2.5
Sales of minerals-in-place--------- (2.4) -- -- (2.4) (5.5) -- -- (5.5)
Increase in ownership in
Partnership----------------------- 0.4 -- -- 0.4 2.2 -- -- 2.2
Production------------------------- (20.0) (0.2) -- (20.2) (34.8) -- -- (34.8)
Proved reserves at
December 31, 1991------------------- 220.7 8.5 -- 229.2 170.8 -- -- 170.8
Revisions of previous estimates---- 14.4 (0.3) -- 14.1 7.3 -- -- 7.3
Improved recovery techniques------- 17.0 -- -- 17.0 1.3 -- -- 1.3
Extensions, discoveries and other
additions------------------------- 1.3 1.3 -- 2.6 5.6 -- -- 5.6
Purchases of minerals-in-place----- 13.5 -- 7.2 20.7 141.5 -- 0.6 142.1
Sales of minerals-in-place--------- (5.7) -- -- (5.7) (5.0) -- -- (5.0)
Increase in ownership in
Partnership----------------------- 0.2 -- -- 0.2 1.6 -- -- 1.6
Production------------------------- (21.4) (0.8) (0.8) (23.0) (46.2) -- -- (46.2)
Proved reserves at
December 31, 1992------------------- 240.0 8.7 6.4 255.1 276.9 -- 0.6 277.5
Revisions to previous estimates---- (11.9) 0.5 0.6 (10.8) 26.6 -- 0.1 26.7
Improved recovery techniques------- 26.7 -- -- 26.7 -- -- -- --
Extensions, discoveries and other
additions------------------------- 3.4 0.5 2.3 6.2 29.5 26.4 -- 55.9
Purchases of minerals-in-place----- 3.2 -- 0.7 3.9 9.8 -- 0.1 9.9
Sales of minerals in place--------- (8.7) -- -- (8.7) (47.4) -- -- (47.4)
Increase in ownership in
Partnership----------------------- 0.1 -- -- 0.1 0.8 -- -- 0.8
Production------------------------- (21.9) (0.9) (1.5) (24.3) (60.3) -- (0.1) (60.4)
Proved reserves at
December 31, 1993------------------ 230.9 8.8 8.5 248.2 235.9 26.4 0.7 263.0
(TABLE CONTINUED ON FOLLOWING PAGE)
55
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
SUPPLEMENTAL INFORMATION TO
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
CRUDE OIL AND LIQUIDS (MMBBLS) NATURAL GAS (BCF)
U.S. ARGENTINA INDONESIA TOTAL U.S. ARGENTINA INDONESIA TOTAL
Proved developed reserves at
December 31
1990----------------------------- 176.8 -- -- 176.8 169.4 -- -- 169.4
1991----------------------------- 179.2 5.4 -- 184.6 154.2 -- -- 154.2
1992----------------------------- 194.6 5.6 6.4 206.6 250.2 -- 0.6 250.8
1993----------------------------- 178.8 5.5 6.7 191.0 206.0 -- 0.7 206.7
</TABLE>
Proved reserves are estimated quantities of crude oil and natural gas which
geological and engineering data indicate with reasonable certainty to be
recoverable in future years from known reservoirs under existing economic and
operating conditions. Proved developed reserves are proved reserves which can be
expected to be recovered through existing wells with existing equipment and
operating methods.
Indonesian reserves represent an entitlement to gross reserves in accordance
with a production sharing contract. These reserves include estimated quantities
allocable to the Company for recovery of operating costs as well as quantities
related to the Company's net equity share after recovery of costs. Accordingly,
these quantities are subject to fluctuations with an inverse relationship to the
price of oil. If oil prices increase, the reserve quantities attributable to the
recovery of operating costs decline. Although this reduction would be offset
partially by an increase in the net equity share, the overall effect would be a
reduction of reserves attributable to the Company. At December 31, 1993, the
quantities include 0.6 million barrels which the Company is contractually
obligated to sell for $.20 per barrel.
At December 31, 1993 the Company's reserves were 6.9 million barrels of
crude oil and liquids and 14.5 Bcf of natural gas lower than at December 31,
1992, reflecting the sale in 1993 of properties with reserves totalling 8.7
million barrels of crude oil and liquids and 47.4 Bcf of natural gas.
At December 31, 1993, 1.9 million barrels of crude oil reserves and 19.7
billion cubic feet of natural gas reserves were subject to a 90% net profits
interest held by Santa Fe Energy Trust.
56
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
SUPPLEMENTAL INFORMATION TO
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
ESTIMATED PRESENT VALUE OF FUTURE NET CASH FLOWS
Estimated future net cash flows from the Company's proved oil and gas
reserves at December 31, 1991, 1992 and 1993 are presented in the following
table (in millions of dollars, except as noted):
<TABLE>
<CAPTION>
U.S. ARGENTINA INDONESIA TOTAL
<S> <C> <C> <C> <C>
1993
Future cash inflows-------------- 2,654.9 117.9 115.6 2,888.4
Future production costs---------- (1,547.2) (65.9) (78.7) (1,691.8)
Future development costs--------- (216.7) (32.4) (8.9) (258.0)
Future income tax expenses------- (100.5) -- (6.9) (107.4)
Net future cash flows-------- 790.5 19.6 21.1 831.2
Discount at 10% for timing of
cash flows--------------------- (308.5) (12.1) (8.2) (328.8)
Present value of future net cash
flows from
proved reserves---------------- 482.0 7.5 12.9 502.4
Average sales prices
Oil ($/Barrel)--------------- 9.10 9.74 13.50
Natural gas ($/Mcf)---------- 2.28 1.23 0.97
1992
Future cash inflows-------------- 3,709.8 132.9 105.8 3,948.5
Future production costs---------- (1,982.6) (82.1) (79.5) (2,144.2)
Future development costs--------- (292.2) (13.5) -- (305.7)
Future income tax expenses------- (286.9) (1.0) (9.5) (297.4)
Net future cash flows-------- 1,148.1 36.3 16.8 1,201.2
Discount at 10% for timing of
cash flows--------------------- (450.5) (14.0) (3.2) (467.7)
Present value of future net cash
flows from
proved reserves---------------- 697.6 22.3 13.6 733.5
Average sales prices
Oil ($/Barrel)--------------- 13.30 15.28 16.46
Natural gas ($/Mcf)---------- 2.01 -- 0.97
1991
Future cash inflows-------------- 2,899.9 117.2 -- 3,017.1
Future production costs---------- (1,655.3) (76.1) -- (1,731.4)
Future development costs--------- (242.2) (13.7) -- (255.9)
Future income tax expenses------- (236.6) -- -- (236.6)
Net future cash flows-------- 765.8 27.4 -- 793.2
Discount at 10% for timing of
cash flows--------------------- (320.0) (9.6) -- (329.6)
Present value of future net cash
flows from
proved reserves---------------- 445.8 17.8 -- 463.6
Average sales prices
Oil ($/Barrel)--------------- 11.80 13.72 --
Natural gas ($/Mcf)---------- 1.78 -- --
</TABLE>
57
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
SUPPLEMENTAL INFORMATION TO
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
The following tables sets forth the changes in the present value of
estimated future net cash flows from proved reserves during 1991, 1992 and 1993
(in millions of dollars):
<TABLE>
<CAPTION>
U.S. ARGENTINA INDONESIA TOTAL
<S> <C> <C> <C> <C>
1993
Balance at beginning of year------- 697.6 22.3 13.6 733.5
Increase (decrease) due to:
Sales of oil and gas, net of
production costs of $189.5
million------------------------ (230.1) (7.3) (10.0) (247.4)
Net changes in prices and
production costs--------------- (325.1) (7.7) 1.7 (331.1)
Extensions, discoveries and
improved recovery-------------- 94.8 14.8 7.0 116.6
Purchases of
minerals-in-place-------------- 20.4 -- 2.1 22.5
Sales of minerals-in-place------- (84.7) -- -- (84.7)
Development costs incurred------- 50.0 5.1 -- 55.1
Changes in estimated volumes----- 28.3 1.5 1.8 31.6
Changes in estimated development
costs-------------------------- 25.6 (24.1) (8.9) (7.4)
Interest factor -- accretion of
discount----------------------- 87.1 2.3 2.1 91.5
Income taxes--------------------- 112.0 0.6 3.5 116.1
Increase in ownership in
Partnership-------------------- 1.2 -- -- 1.2
Other---------------------------- 4.9 -- -- 4.9
(215.6) (14.8) (0.7) (231.1)
482.0 7.5 12.9 502.4
U.S. ARGENTINA INDONESIA TOTAL
1992
Balance at beginning of year------- 445.8 17.8 -- 463.6
Increase (decrease) due to:
Sales of oil and gas, net of
production costs of $176.2
million------------------------ (236.6) (8.4) (6.3) (251.3)
Net changes in prices and
production costs--------------- 191.7 7.8 3.5 203.0
Extensions, discoveries and
improved recovery-------------- 70.9 4.6 -- 75.5
Purchases of
minerals-in-place-------------- 230.6 -- 24.1 254.7
Sales of minerals-in-place------- (77.7) -- -- (77.7)
Development costs incurred------- 26.5 3.1 -- 29.6
Changes in estimated volumes----- 63.4 (1.0) -- 62.4
Changes in estimated development
costs-------------------------- (76.9) (2.8) -- (79.7)
Interest factor -- accretion of
discount----------------------- 58.7 1.8 -- 60.5
Income taxes--------------------- (14.8) (0.6) (7.7) (23.1)
Increase in ownership in
Partnership-------------------- 1.9 -- -- 1.9
Other---------------------------- 14.1 -- -- 14.1
251.8 4.5 13.6 269.9
697.6 22.3 13.6 733.5
58
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
SUPPLEMENTAL INFORMATION TO
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
U.S. ARGENTINA INDONESIA TOTAL
1991
Balance at beginning of year------- 839.4 -- -- 839.4
Increase (decrease) due to:
Sales of oil and gas, net of
production costs of $157.6
million------------------------ (221.0) (1.2) -- (222.2)
Net changes in prices and
production costs--------------- (617.6) 7.9 -- (609.7)
Extensions, discoveries and
improved recovery-------------- 71.6 -- -- 71.6
Purchases of
minerals-in-place-------------- 10.4 24.8 -- 35.2
Sales of minerals-in-place------- (30.7) -- -- (30.7)
Development costs incurred------- 54.0 0.7 -- 54.7
Changes in estimated volumes----- 2.3 -- -- 2.3
Changes in estimated development
costs-------------------------- (117.5) (14.4) -- (131.9)
Interest factor -- accretion of
discount----------------------- 123.5 -- -- 123.5
Income taxes--------------------- 233.5 -- -- 233.5
Increase in ownership in
Partnership-------------------- 4.6 -- -- 4.6
Other---------------------------- 93.3 -- -- 93.3
(393.6) 17.8 -- (375.8)
445.8 17.8 -- 463.6
</TABLE>
Estimated future cash flows represent an estimate of future net cash flows
from the production of proved reserves using estimated sales prices and
estimates of the production costs, ad valorem and production taxes, and future
development costs necessary to produce such reserves. No deduction has been made
for depletion, depreciation or any indirect costs such as general corporate
overhead or interest expense.
The sales prices used in the calculation of estimated future net cash flows
are based on the prices in effect at year end. Such prices have been held
constant except for known and determinable escalations.
Operating costs and ad valorem and production taxes are estimated based on
current costs with respect to producing oil and gas properties. Future
development costs are based on the best estimate of such costs assuming current
economic and operating conditions.
Income tax expense is computed based on applying the appropriate statutory
tax rate to the excess of future cash inflows less future production and
development costs over the current tax basis of the properties involved. While
applicable investment tax credits and other permanent differences are considered
in computing taxes, no recognition is given to tax benefits applicable to future
exploration costs or the activities of the Company that are unrelated to oil and
gas producing activities.
The information presented with respect to estimated future net revenues and
cash flows and the present value thereof is not intended to represent the fair
value of oil and gas reserves. Actual future sales prices and production and
development costs may vary significantly from those in effect at year-end and
actual future production may not occur in the periods or amounts projected. This
information is presented to allow a reasonable comparison of reserve values
prepared using standardized measurement criteria and should be used only for
that purpose.
59
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
SUPPLEMENTAL INFORMATION TO
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES
The following table includes all costs incurred, whether capitalized or
charged to expense at the time incurred (in millions of dollars):
<TABLE>
<CAPTION>
OTHER
U.S. ARGENTINA INDONESIA FOREIGN TOTAL
<S> <C> <C> <C> <C> <C>
1993
Property acquisition costs
Unproved------------------------- 6.4 -- 1.8 3.8 12.0
Proved--------------------------- 29.7 -- 2.9 -- 32.6
Other---------------------------- 0.8 -- -- -- 0.8
Exploration costs------------------ 20.9 0.7 5.2 11.7 38.5
Development costs------------------ 85.3 7.3 7.6 -- 100.2
143.1 8.0 17.5 15.5 184.1
1992
Property acquisition costs
Unproved------------------------- 29.3 0.2 8.8 3.5 41.8
Proved--------------------------- 294.1 -- 59.4 -- 353.5
Other---------------------------- 65.6 -- -- -- 65.6
Exploration costs------------------ 18.4 2.1 2.9 8.9 32.3
Development costs------------------ 56.8 3.0 1.8 -- 61.6
464.2 5.3 72.9 12.4 554.8
1991
Property acquisition costs
Unproved------------------------- 4.4 -- -- 3.2 7.6
Proved--------------------------- 29.0 -- -- 34.1 63.1
Other---------------------------- -- -- -- -- --
Exploration costs------------------ 20.7 -- -- 4.1 24.8
Development costs------------------ 85.8 -- -- 0.7 86.5
139.9 -- -- 42.1 182.0
</TABLE>
60
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
SUPPLEMENTAL INFORMATION TO
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
CAPITALIZED COSTS RELATED TO OIL AND GAS PRODUCING ACTIVITIES
The following table sets forth information concerning capitalized costs at
December 31, 1993 and 1992 related to the Company's oil and gas operations (in
millions of dollars):
<TABLE>
<CAPTION>
1993 OTHER 1992
U.S. ARGENTINA INDONESIA FOREIGN TOTAL U.S. ARGENTINA
<S> <C> <C> <C> <C> <C> <C> <C>
Oil and gas properties
Unproved------------------------- 40.3 1.3 12.0 10.7 64.3 80.1 1.3
Proved--------------------------- 1,869.9 48.9 68.0 -- 1,986.8 2,049.8 37.5
Other---------------------------- 13.2 -- -- -- 13.2 82.0 --
Accumulated amortization of unproved
properties------------------------- (14.6) (1.2) (2.8) (9.9) (28.5) (23.6) (1.0)
Accumulated depletion, depreciation
and impairment of proved
properties------------------------- (1,181.9) (7.9) (22.4) -- (1,212.2) (1,200.0) (4.6)
Accumulated depreciation of other oil
and gas properties (4.3) -- -- -- (4.3) (7.5) --
722.6 41.1 54.8 0.8 819.3 980.8 33.2
<CAPTION>
1992
OTHER
INDONESIA FOREIGN TOTAL
<S> <C> <C> <C>
Oil and gas properties
Unproved------------------------- 10.2 7.3 98.9
Proved--------------------------- 62.7 -- 2,150.0
Other---------------------------- -- 82.0
Accumulated amortization of unproved
properties------------------------- (1.7) (2.6) (28.9)
Accumulated depletion, depreciation
and impairment of proved
properties------------------------- (2.3) -- (1,206.9)
Accumulated depreciation of other oil
and gas properties -- -- (7.5)
68.9 4.7 1,087.6
</TABLE>
61
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
SUPPLEMENTAL INFORMATION TO
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
RESULTS OF OPERATIONS FROM OIL AND GAS PRODUCING ACTIVITIES
The following table sets forth the Company's results of operations from oil
and gas producing activities for the years ended December 31, 1993, 1992 and
1991 (in millions of dollars):
<TABLE>
<CAPTION>
OTHER
U.S. ARGENTINA INDONESIA FOREIGN TOTAL
<S> <C> <C> <C> <C> <C>
1993
Revenues--------------------------- 401.2 12.5 23.2 -- 436.9
Production costs------------------- (166.9) (5.2) (13.2) -- (185.3)
Oil and gas systems and
pipelines------------------------ (4.2) -- -- -- (4.2)
Exploration, including dry hole
costs---------------------------- (16.4) (0.7) (2.2) (11.7) (31.0)
Depletion, depreciation,
amortization and impairments----- (218.8) (3.6) (21.2) (6.7) (250.3)
Restructuring charges-------------- (27.8) -- -- -- (27.8)
Gain (loss) on disposition of
properties----------------------- (0.7) -- -- -- (0.7)
(33.6) 3.0 (13.4) (18.4) (62.4)
Income taxes----------------------- 24.1 (0.9) 1.9 -- 25.1
(9.5) 2.1 (11.5) (18.4) (37.3)
1992
Revenues--------------------------- 400.0 13.9 13.6 -- 427.5
Production costs------------------- (160.2) (5.5) (7.3) -- (173.0)
Oil and gas systems and
pipelines------------------------ (3.2) -- -- -- (3.2)
Exploration, including dry hole
costs---------------------------- (12.9) (2.2) (1.3) (9.1) (25.5)
Depletion, depreciation,
amortization and impairments----- (136.7) (3.7) (2.7) (1.6) (144.7)
Gain (loss) on disposition of
properties----------------------- 13.6 -- -- -- 13.6
100.6 2.5 2.3 (10.7) 94.7
Income taxes----------------------- (37.9) -- (1.6) -- (39.5)
62.7 2.5 0.7 (10.7) 55.2
1991
Revenues--------------------------- 376.1 3.7 -- -- 379.8
Production costs------------------- (155.1) (2.5) -- -- (157.6)
Exploration, including dry hole
costs---------------------------- (15.5) (1.5) -- (1.7) (18.7)
Depletion, depreciation,
amortization and impairments----- (101.3) (1.8) -- (0.7) (103.8)
Gain (loss) on disposition of
properties----------------------- (0.5) -- -- -- (0.5)
103.7 (2.1) -- (2.4) 99.2
Income Taxes----------------------- (42.3) -- -- -- (42.3)
61.4 (2.1) -- (2.4) 56.9
</TABLE>
Income taxes are computed by applying the appropriate statutory rate to the
results of operations before income taxes. Applicable tax credits and allowances
related to oil and gas producing activities have been taken into account in
computing income tax expenses. No deduction has been made for indirect cost such
as corporate overhead or interest expense.
62
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
SUPPLEMENTAL INFORMATION TO
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
<TABLE>
SUMMARIZED QUARTERLY FINANCIAL DATA
<CAPTION>
1 QTR 2 QTR 3 QTR 4 QTR YEAR
(IN MILLIONS OF DOLLARS EXCEPT PER SHARE DATE)
<S> <C> <C> <C> <C> <C>
1993
Revenues------------------------- 115.3 116.3 102.7 102.6 436.9
Gross profit (a)----------------- 19.0 22.5 8.5 (130.7) (80.7)
Income (loss) from operations---- 12.0 15.4 1.2 (141.6)(b) (113.0)
Net income (loss)---------------- (0.4) 4.0 2.4 (83.1) (77.1)
Earnings (loss) attributable to
common shares------------------ (2.2) 2.3 0.6 (84.8) (84.1)
Earnings (loss) attributable to
common shares per share-------- (0.02) 0.02 0.01 (0.95) (0.94)
Average shares outstanding
(millions)--------------------- 89.6 89.7 89.8 89.8 89.7
1992
Revenues------------------------- 78.5 97.7 127.9 123.4 427.5
Gross profit (a)----------------- 2.9 34.1 32.0 19.4 88.4
Income (loss) from operations---- (3.5) 25.1 24.4 11.5 57.5
Net income (loss)---------------- (8.8) 1.8 7.3 (1.7) (1.4)
Earnings (loss) attributable to
common shares------------------ (8.8) 1.0 5.5 (3.4) (5.7)
Earnings (loss) attributable to
common shares per share-------- (.14) .01 .06 (.04) (.07)
Average shares outstanding
(millions)--------------------- 64.3 72.7 89.4 89.5 79.0
(a) Revenues less operating expenses other than general and administrative.
(b) Includes charges of $99.3 million for impairment of oil and gas properties
and $38.6 million for restructuring charges.
</TABLE>
63
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
SANTA FE ENERGY RESOURCES, INC.
By /s/ MICHAEL J. ROSINSKI
MICHAEL J. ROSINSKI
VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
Dated: March 22, 1994
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND
IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE AND TITLE
JAMES L. PAYNE, Chairman
of the Board, President and
Chief Executive Officer and Director
(PRINCIPAL EXECUTIVE OFFICER)
MICHAEL J. ROSINSKI, Vice President
and Chief Financial Officer
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
DIRECTORS
Rod F. Dammeyer
William E. Greehey
Melvyn N. Klein
Robert D. Krebs
Allan V. Martini
Michael A. Morphy
Reuben F. Richards By: /s/ MICHAEL J. ROSINSKI
David M. Schulte MICHAEL J. ROSINSKI
Marc J. Shapiro VICE PRESIDENT AND
Robert F. Vagt CHIEF FINANCIAL OFFICER
Kathryn D. Wriston ATTORNEY IN FACT
Dated: March 22, 1994
64
<PAGE>
<TABLE>
SANTA FE ENERGY RESOURCES, INC.
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
THREE YEARS ENDED DECEMBER 31, 1993
(IN MILLIONS OF DOLLARS)
<CAPTION>
OTHER
PROPERTIES
OIL AND GAS AND
PROPERTIES EQUIPMENT TOTAL
<S> <C> <C> <C>
December 31, 1990-------------------- 1,811.5 13.4 1,824.9
Additions at cost---------------- 164.9 8.8 173.7
Retirements---------------------- (82.3) (.2) (82.5)
Other(a)------------------------- 12.1 2.4 14.5
December 31, 1991-------------------- 1,906.2 24.4 1,930.6
Additions at cost---------------- 533.9 2.4 536.3
Retirements---------------------- (117.1) (.1) (117.2)
Other(a)------------------------- 7.9 .1 8.0
December 31, 1992-------------------- 2,330.9 26.8 2,357.7
Additions, at cost--------------- 146.4 4.3 150.7
Retirements---------------------- (494.9) (1.3) (496.2)
Other(a)------------------------- 81.9 (2.5) 79.4
December 31, 1993-------------------- 2,064.3 27.3 2,091.6
(a) Principally represents an increase in proportionate ownership of property
of the Partnership due to reinvestment of the Partnership distributions
and in 1993 the purchase of the publicly held Depository Units and
undeposited LP Units of the Partnership (see Note 1 to the Consolidated
Financial Statements).
</TABLE>
65
<PAGE>
<TABLE>
SANTA FE ENERGY RESOURCES, INC.
SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
THREE YEARS ENDED DECEMBER 31, 1993
(IN MILLIONS OF DOLLARS)
<CAPTION>
OTHER
PROPERTIES
OIL AND GAS AND
PROPERTIES EQUIPMENT TOTAL
<S> <C> <C> <C>
December 31, 1990-------------------- 1,071.4 8.5 1,079.9
Additions------------------------ 103.8 2.8 106.6
Retirements---------------------- (61.6) (.1) (61.7)
Other(a)------------------------- 8.4 -- 8.4
December 31, 1991-------------------- 1,122.0 11.2 1,133.2
Additions------------------------ 144.8 1.5 146.3
Retirements---------------------- (29.5) (.1) (29.6)
Other(a)------------------------- 6.0 -- 6.0
December 31, 1992-------------------- 1,243.3 12.6 1,255.9
Additions(b)--------------------- 249.7 1.7 251.4
Retirements---------------------- (309.6) (0.4) (310.0)
Other(a)------------------------- 61.6 -- 61.6
December 31, 1993-------------------- 1,245.0 13.9 1,258.9
(a) Principally represents an increase in proportionate ownership of property
of the Partnership due to reinvestment of the Partnership distributions
and in 1993 the purchase of the publicly held Depository Units and
undeposited LP Units of the Partnership (see Note 1 to the Consolidated
Financial Statements).
(b) Depletion, depreciation, amortization and impairment expense per the
Statement of Operations totals $252.0 million. Such amount includes
amortization expense of $0.6 million with respect to certain assets
included in Other Assets.
</TABLE>
66
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1993
(IN MILLIONS OF DOLLARS)
1993 1992 1991
Accounts receivable
Balance at the beginning of
period------------------------- 5.0 2.6 2.8
Charge (credit) to income---- -- -- --
Net amounts written off------ (0.1 ) (1.1 ) (.2 )
Other(a)--------------------- 1.4 3.5 --
Balance at the end of period----- 6.3 5.0 2.6
(a) Represents valuation accounts related to accounts receivable acquired in
merger with Adobe Resources Corporation.
67
<PAGE>
<TABLE>
SANTA FE ENERGY RESOURCES, INC.
SCHEDULE IX -- SHORT-TERM BORROWINGS
THREE YEARS ENDED DECEMBER 31, 1993
(IN MILLIONS OF DOLLARS, EXCEPT AS NOTED)
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
INTEREST RATE MAXIMUM AVERAGE AVERAGE
OF AMOUNTS AMOUNT AMOUNT INTEREST
BALANCE OUTSTANDING OUTSTANDING OUTSTANDING RATE
AT END AT END AT ANY DURING THE DURING THE
OF PERIOD OF PERIOD MONTH END PERIOD(A) PERIOD(B)
<S> <C> <C> <C> <C> <C>
1992
Short-term bank loan------------- -- --% 3.7 0.6 5.89%
1991
Short-term bank loan------------- 4.6 6.04% 11.4 7.2 7.06%
(a) Total of daily outstanding principal divided by the actual number of days
in the period.
(b) Actual interest expense on short-term borrowings divided by the average
borrowings outstanding during the period, based upon a 365-day year.
</TABLE>
68
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
THREE YEARS ENDED DECEMBER 31, 1993
(IN MILLIONS OF DOLLARS)
YEAR ENDED DECEMBER 31,
1993 1992 1991
Maintenance and repairs-------------- 27.1 25.0 22.6
Taxes (other than income)
Ad valorem----------------------- 12.0 11.4 17.0
Production and severance--------- 9.5 8.2 6.8
Payroll and other---------------- 5.8 4.7 3.4
27.3 24.3 27.2
69
<PAGE>
INDEX OF EXHIBITS
A. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
3(a) -- Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the
Form S-2 Registration Statement of Santa Fe Energy Resources, Inc. ('SFER, Inc.')
Commission File No. 33-32831).
3(b) -- Bylaws, as amended (incorporated by reference to Exhibit 3(b) to SFER, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1992).
4(a) -- Form of Certificate of Designation, Rights and Preferences of the 7% Convertible Preferred
Stock of Santa Fe Energy Resources, Inc. (incorporated by reference to Exhibit 3(b) of the
Form S-4 Registration Statement of SFER, Inc., Commission File No. 33-45043).
4(b) -- Note Agreement dated as of March 31, 1990, by and among Santa Fe Energy Resources, Inc.
and various institutional investors relating to the issuance of $365,000,000 of Senior
Notes maturing 1993-2005, as amended (incorporated by reference to Exhibit 4(b) to SFER,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1990).
4(c) -- Amendment dated as of November 1, 1992, to Note Agreement dated as of March 30, 1990, by
and among Santa Fe Energy Resources, Inc. and various institutional investors, relating to
the issuance of $365,000,000 of Senior Notes maturing 1993 to 2005, as amended
(incorporated by reference to Exhibit 4(c) to SFER, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1992).
*4(d) -- Amendment dated as of December 31, 1993, to Note Agreement dated as of March 30, 1990, by
and among Santa Fe Energy Resources, Inc. and various institutional investors, relating to
the issuance of $365,000,000 of Senior Notes maturing 1993 to 2005, as amended.
10(a) -- Revolving and Term Credit Agreement, dated as of May 20, 1992, among Santa Fe Energy
Resources, Inc., the banks signatory thereto and Texas Commerce Bank National Association
as Co-Agent and Administrative Agent and NationsBank of Texas, N.A. as Co-Agent
(incorporated by reference to Exhibit 10(a) to SFER, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1992).
10(b) -- Amendment dated as of December 1, 1992, to Revolving Term and Credit Agreement dated as of
May 20, 1992, among Santa Fe Energy Resources, Inc., the banks signatory thereto and Texas
Commerce Bank National Association as Co-Agent and Administrative Agent and NationsBank of
Texas, N.A. as Co-Agent (incorporated by reference to Exhibit 10(b) to SFER, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1992).
*10(c) -- Amendment dated as of April 14, 1993, to Revolving Term and Credit Agreement dated as of
May 20, 1992, among Santa Fe Energy Resources, Inc., the banks signatory thereto and Texas
Commerce Bank National Association as Co-Agent and Administrative Agent and NationsBank of
Texas, N.A. as Co-Agent.
*10(d) -- Letter of Credit Agreement dated as of May 19, 1993, among Santa Fe Energy Resources,
Inc., the banks signatory thereto and Texas Commerce Bank National Association as Co-Agent
and Administrative Agent and NationsBank of Texas, N.A. as Co-Agent.
*10(e) -- Credit Agreement dated as of June 30, 1987 among Santa Fe Energy Operating Partners, L. P.
Morgan Guaranty Trust Company as Agent, and the Lenders thereunder.
70
<PAGE>
10(f) -- Agreement for the Allocation of the Consolidated Federal Income Tax Liability Among the
Members of the Santa Fe Pacific Corporation ('SFP') Affiliated Group, as amended, dated
December 23, 1983 (incorporated by reference to Exhibit 10.8 of the Form S-2 Registration
Statement of SFER, Inc. Commission File No. 33-32831).
10(g) -- Santa Fe Energy Resources, Inc. Incentive Compensation Plan (incorporated by reference to
Exhibit 10(d) to SFER, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1990).
10(h) -- Santa Fe Energy Resources, Inc. 1990 Incentive Stock Compensation Plan, as amended
(incorporated by reference to Exhibit 10(h) to SFER, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1992).
10(i) -- Example of employment agreements entered into with executive officers of SFER, Inc
(incorporated by reference to Exhibit 10(f) to SFER, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1990).
10(j) -- Example of Indemnification Agreement with SFER, Inc. directors and
officers (incorporated by reference to Exhibit 10(g) to SFER, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1990).
10(k) -- Spin Off Tax Indemnification Agreement between SFER, Inc. and SFP (incorporated by
reference to Exhibit 10(h) to SFER, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1990).
10(l) -- Agreement Concerning Taxes among the Company, certain subsidiaries of the Company
and SFP (incorporated by reference to Exhibit 10(i) to SFER, Inc.'s Annual Report
on Form 10-K for the year ended December 31, 1990).
10(m) -- Agreements for the Allocation of the Combined State Income Tax Liability Among the
Members of the Santa Fe Pacific Corporation Affiliated Group for the States of
Arizona, California, Illinois, Kansas, New Mexico, Oregon and Utah (incorporated
by reference to Exhibit 10(j) to SFER, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1990).
10(n) -- Agreement of Limited Partnership, South Belridge Limited Partnership, dated as of
October 31, 1990, by and between Santa Fe Energy Resources, Inc. and the Prudential
Insurance Company of America (incorporated by reference to Exhibit 10(k) to SFER,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1990).
10(o) -- Santa Fe Energy Resources Supplemental Retirement Plan, effective as of December 4, 1990
(incorporated by reference to Exhibit 10(l) to SFER, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1990).
*10(p) -- Santa Fe Energy Resources, Inc. Deferred Compensation Plan, effective as of January 1, 1991 as
amended and restated, effective February 1, 1994.
10(q) -- Stock Ownership and Registration Rights Agreement dated December 10, 1991, by, between
and among SFER, Inc., Minorco, and Minorco (U.S.A.) Inc. (incorporated by reference to
Exhibit 10(r) of the Form S-4 Registration Statement of SFER, Inc., Commission File
No. 33-45043).
10(r) -- Form of Net Profits Conveyance from Santa Fe Energy Resources, Inc. to Texas Commerce
Bank, Trustee of the Santa Fe Energy Royalty Trust (incorporated by reference to
Exhibit 10.1 of the Form S-1/S-3 Registration of Santa Fe Energy Resources, Inc. and
Santa Fe Energy Trust, Commission File No. 33-51760).
10(s) -- Form of Wasson Conveyance from Santa Fe Energy Resources, Inc. to Texas Commerce Bank,
Trustee of the Santa Fe Energy Royalty Trust (incorporated by reference to Exhibit 10.2
of the Form S-1/S-3 Registration of Santa Fe Energy Resources, Inc. and Santa Fe Energy
Trust, Commission File No. 33-51760).
71
<PAGE>
*10(t) -- Gas Marketing Agreement, dated as of December 14, 1993, between Santa Fe Energy
Resources, Inc., Santa Fe Energy Operating Partners, L.P. and Adobe Gas Pipeline Company.
*10(u) -- Agreement of Sale and Purchase by and among Santa Fe Energy Resources, Inc.,
Santa Fe Energy Operating Partners, L.P. and Bridge Oil (U.S.A.) Inc. dated
December 2, 1993.
*10(v) -- Amended and Restated Revolving Credit Agreement dated as of March 16, 1994 among Santa Fe
Energy Resources, Inc., the banks signatory thereto, and Texas Commerce Bank National Association
as Co-Agent and Administrative Agent and NationsBank of Texas, N.A. as Co-Agent.
*10(w) -- Letter of Credit Agreement dated as of March 16, 1994 among Santa Fe Energy Resources, Inc., the
banks signatory thereto, and Texas Commerce Bank National Association as Co-Agent and Administrative
Agent and NationsBank of Texas, N.A. as Co-Agent.
22(a) -- Subsidiaries of the registrant (incorporated by reference to Exhibit 22(a)
to SFER, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1992).
*23(a) -- Consent of Independent Accountants with respect to Registration Statements on Form S-8
(Nos. 33-37175, 33-44541 and 33-44542).
*23(b) -- Consent of Ryder Scott Company with respect to Registration Statements on Form S-8
(Nos. 33-37175, 33-44541 and 33-44542).
*24 -- Powers of Attorney
* Included in this report.
</TABLE>
B. REPORTS ON FORM 8-K.
DATE ITEM
February 8, 1994 5
72
<PAGE>
EXHIBIT 4(d)
FOURTH AMENDMENT
TO
NOTE AGREEMENT
This FOURTH AMENDMENT TO NOTE AGREEMENT (this "Amendment") dated
as of December 31, 1993 is among SANTA FE ENERGY RESOURCES, INC., a
Delaware corporation (the "Company"), and the entities identified on
the signature pages hereof as the holders (the "Required Holders") of
at least 51% of the aggregate principal amount of the Company's senior
promissory notes (the "Notes") outstanding, which were issued in seven
series in the aggregate principal amount of $365,000,000 pursuant to
the Note Agreement, dated as of March 31, 1990, among the Company and
the original Purchasers of the Notes, as amended by the First
Amendment to Note Agreement dated as of November 1, 1990, the Second
Amendment to Note Agreement dated as of September 1, 1991 and the
Third Amendment to Note Agreement dated as of November 1, 1992 (as so
amended, the "Agreement"). All capitalized terms defined in the
Agreement and not otherwise defined herein shall have the same
meanings herein as in the Agreement.
PRELIMINARY STATEMENT
The Company and the Required Holders have agreed, upon the terms
and conditions specified herein, to amend the Agreement as hereinafter
set forth.
NOW THEREFORE, in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the parties hereto, the Company and the
Required Holders hereby agree as follows:
-1-
<PAGE>
SECTION 1. AMENDMENT TO PARAGRAPH 5A OF THE AGREEMENT.
The final paragraph of Paragraph 5A is hereby amended by
inserting the following sentence immediately before the final sentence
of said paragraph:
"Together with each delivery of financial statements
required by clause (i) or (ii) above, the Company will
deliver to each holder a pro forma statement of operations
of the Company and its Restricted Subsidiaries for the same
fiscal period as such financial statements that assumes that
the impairments of oil and gas properties taken by the
Company and its Restricted Subsidiaries in the fourth
quarter of 1993 in the amount of up to $100 million as
reflected in the Company's consolidated financial statements
for the year ended December 31, 1993, shall not have
occurred and a calculation in reasonable detail showing the
determination of Consolidated Net Earnings and Unimpaired
Consolidated Net Earnings for such fiscal period."
SECTION 2. AMENDMENT TO PARAGRAPH 6A OF THE AGREEMENT.
Paragraph 6A is hereby amended by amending the definition of
Consolidated Net Earnings Available for Restricted Payments and
Restricted Investments contained in such Paragraph by replacing the
term "Consolidated Net Earnings" in each place where it appears in
such definition with the term "Unimpaired Consolidated Net Earnings".
SECTION 3. AMENDMENT TO PARAGRAPH 6B(1) OF THE AGREEMENT.
Paragraph 6B(1) is hereby amended by inserting the following phrase
before the comma at the end of clause (vi) of said Paragraph:
"and shall not secure any portion of the Company's or any
Restricted Subsidiary's Debt representing any advance (other
than advances with respect to the Adobe Debt) made to the
Company or any of its Restricted Subsidiaries, other than
advances the proceeds of which are paid solely to the Person
(or any successor or assignee of such Person) which is the
acquiree in such acquisition or that is providing such
construction, development or improvement".
-2-
<PAGE>
SECTION 4. AMENDMENTS TO PARAGRAPH 6B(2) OF THE AGREEMENT.
(a) Paragraph 6B(2) is hereby amended by inserting the
following phrase at the beginning of clause (iii)(c) of said
Paragraph:
"(1) for any such creation, incurrence or assumption
occurring prior to December 31, 1998, Priority Debt (other
than Existing Priority Debt) shall not exceed the lesser of
(A)(I) 40% of Consolidated Net Tangible Assets minus (II)
Existing Priority Debt and (B) 33% of Consolidated Net
Tangible Assets, and (2) for any such creation, incurrence
or assumption occurring on or after December 31, 1998,
Priority Debt shall not exceed 33% of Consolidated Net
Tangible Assets, and,".
(b) Paragraph 6B(2) is hereby further amended by inserting
the following phrase at the beginning of clause (iv)(c) of said
Paragraph:
"(1) for any such creation, incurrence or assumption
occurring prior to December 31, 1998, Priority Debt (other
than Existing Priority Debt) shall not exceed the lesser of
(A)(I) 40% of Consolidated Net Tangible Assets minus (II)
Existing Priority Debt and (B) 33% of Consolidated Net
Tangible Assets, and (2) for any such creation, incurrence
or assumption occurring on or after December 31, 1998,
Priority Debt shall not exceed 33% of Consolidated Net
Tangible Assets, and,".
SECTION 5. AMENDMENTS TO PARAGRAPH 10 OF THE AGREEMENT.
(a) Paragraph 10 is hereby amended by adding thereto in
alphabetical order the following definitions:
"ADOBE DEBT" at any time shall mean with respect to
the Debt of the Company incurred as of May 20, 1992, in
connection with the merger of Adobe Resources Corporation
into the Company, as such Debt may have been or hereafter
may be renewed, extended or otherwise modified, the maximum
principal amount of such Debt that can be outstanding at
such time, but only to the extent that such amount is equal
to or less than (i) $90,000,000, at any time during the
period from and including December 31, 1993, to and
including December 30, 1994, (ii) $72,000,000, at any time
during the period from and including December 31, 1994, to
and including December 30, 1995, (iii) $54,000,000, at any
time during the period from and including December 31, 1995,
to and including December 30, 1996, (iv) $36,000,000, at any
time during the period from and including December 31, 1996,
to and
-3-
<PAGE>
including December 30, 1997, (v) $18,000,000, at any time
during the period from and including December 31, 1997, to
and including December 30, 1998, and (vi) $0.00 at any time
thereafter.
"EXISTING PRIORITY DEBT" at any time shall mean, to
the extent that it is otherwise Priority Debt, an amount
equal to the sum of (i) the Adobe Debt at such time, (ii)
the outstanding principal amount of Debt under the Springing
Lien Agreement at such time, and (iii) the outstanding
principal amount of Debt under those certain Credit
Agreements of Petrolera Santa Fe S.A., dated as of June 25,
1991 and April 28, 1992, at such time.
"HADSON" shall mean Hadson Corporation, a Delaware
corporation, and any successor corporation thereto.
"HADSON STOCK" shall mean, to the extent held
continuously by the Company or any of its Restricted
Subsidiaries after the merger of SFER Pipeline, Inc. into
the Company, (i) any of the 2,080,000 shares of the Senior
Cumulative Preferred Stock, Series A, par value $.01 per
share, of Hadson and the 10,395,665 shares of the common
stock, par value $.01 per share of Hadson, acquired by the
Company or any of its Subsidiaries on or before January 31,
1994, (ii) any stock acquired by virtue of one or more stock
splits or recapitalizations involving such common stock or
Senior Cumulative Preferred Stock and not involving any
additional economic consideration on the part of the Company
or any of its Subsidiaries, and (iii) any dividend paid on
such common stock or Senior Cumulative Preferred Stock
solely in the capital stock of Hadson.
"PRIORITY DEBT" at any time shall mean an amount
equal to the sum of (without duplication) the amount of all
Special Debt outstanding at such time and the amount of all
Debt of the Company and its Restricted Subsidiaries
outstanding at such time that is secured by one or more
Liens permitted under clause 6B(1)(iv), (v), (vi), (vii),
(viii), (ix), (x), (xi) or (xii).
"UNIMPAIRED CONSOLIDATED NET EARNINGS" for any
period shall mean the amount of Consolidated Net Earnings
for such period except that with respect to the oil and gas
properties impairments taken by the Company and its
Restricted Subsidiaries in the fourth quarter of 1993 in the
amount of up to $100 million as reflected in the Company's
consolidated financial statements for the year ended
December 31, 1993:
(i) for any calculation of "Unimpaired Consolidated
Net Earnings" for any fiscal period of the Company and
its Restricted Subsidiaries ending on or after December
31, 1993,
-4-
<PAGE>
the net earnings of the Company and its Restricted
Subsidiaries shall not be reduced by the amount of such
oil and gas properties impairments; and
(ii) for any such calculation for any fiscal period
of the Company and its Restricted Subsidiaries ending on
or after December 31, 1993, the depreciation, depletion
and amortization expenses of the Company and its
Restricted Subsidiaries shall be calculated on a pro
forma basis as if such oil and gas properties
impairments had never occurred.
(b) Paragraph 10 is hereby further amended by deleting the
phrase "but not including in gross revenues any dividends,
distributions or other payments received by the Company and its
Restricted Subsidiaries from the Special Subsidiary" in its
entirety from the definition of "Consolidated Net Earnings" in
such Paragraph and replacing said phrase with the following
phrase:
"but not including in gross revenues any dividends,
distributions or other payments received by the Company
or any of its Restricted Subsidiaries in connection with
the Hadson Stock, unless received in the form of cash,
or any dividends, distributions or other payments
received by the Company or any of its Restricted
Subsidiaries from the Special Subsidiary".
(c) Paragraph 10 is hereby further amended by inserting the
following phrase at the end of clause (A)(5) of the definition of
"Consolidated Net Tangible Assets" in such paragraph immediately
prior to the period in such clause:
"(other than Restricted Investments in the capital stock
of Hadson)".
(d) Paragraph 10 is hereby further amended by deleting
clause (x) of the definition of "Restricted Investment" in such
Paragraph and replacing said clause with the following two
clauses:
"(x) Investments in the Hadson Stock, or
-5-
<PAGE>
(xi) Investments not otherwise permitted hereunder in an
aggregate principal amount not to exceed $10,000,000."
SECTION 6. CONDITIONS OF EFFECTIVENESS. This Amendment
shall become effective when, and only when the Company and the
Required Holders shall have executed a counterpart hereof and
delivered the same to the Company.
SECTION 7. REFERENCE TO THE AGREEMENT AND EFFECT ON THE
NOTES AND OTHER DOCUMENTS EXECUTED PURSUANT TO THE AGREEMENT.
(a) Upon the effectiveness of this Amendment, each reference
in the Agreement to "this Agreement," "hereunder," "herein,"
"hereof" or words of like import shall mean and be a reference to
the Agreement, as affected and amended hereby.
(b) Upon the effectiveness of this Amendment, each reference
in the Notes and the other documents and agreements delivered or
to be delivered pursuant to the Agreement shall mean and be a
reference to the Agreement, as affected and amended hereby.
(c) The Agreement, as amended and modified by the amendment
referred to above, shall remain in full force and effect and is
hereby ratified and confirmed.
SECTION 8. EXECUTION IN COUNTERPARTS. This Amendment may
be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which taken
together shall constitute but one and the same instrument.
-6-
<PAGE>
SECTION 9. GOVERNING LAW. THIS AMENDMENT SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE
PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF TEXAS AND THE
UNITED STATES OF AMERICA.
SECTION 10. HEADINGS. Section headings in this Amendment
are included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed effective as of the date first stated herein, by their
respective officers thereunto duly authorized.
SANTA FE ENERGY RESOURCES, INC.
By: MICHAEL J. ROSINSKI
Name: Michael J. Rosinski
Title: Vice President and
Chief Financial Officer
REQUIRED HOLDERS:
ALLSTATE INSURANCE COMPANY
By:
Name:
Title:
AMERICAN ENTERPRISE LIFE
INSURANCE COMPANY
By:
Name:
Title:
-8-
<PAGE>
AMERICAN GENERAL LIFE
INSURANCE COMPANY
By:
Name:
Title:
AMERICAN GENERAL LIFE
INSURANCE COMPANY OF
DELAWARE
By:
Name:
Title:
CENTRAL LIFE ASSURANCE
COMPANY
By:
Name:
Title:
COVENANT LIFE ASSURANCE
COMPANY
By: William Blair & Company,
Agent
By:
Name:
Title:
-9-
<PAGE>
EQUITABLE VARIABLE LIFE
INSURANCE COMPANY
By:
Name:
Title:
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By:
Name:
Title:
THE EQUITABLE OF COLORADO, INC.
By:
Name:
Title:
FARM BUREAU LIFE INSURANCE
COMPANY
By: RICHARD D. WARMING
Name: Richard D. Warming
Title: VP-Chief Investment
Officer
-10-
<PAGE>
FARM FAMILY LIFE INSURANCE
COMPANY
By:
Name:
Title:
FARM FAMILY MUTUAL INSURANCE
COMPANY
By:
Name:
Title:
FBL INSURANCE COMPANY
By: RICHARD D. WARMING
Name: Richard D. Warming
Title: VP-Chief Investment
Officer
GENERAL AMERICAN LIFE
INSURANCE COMPANY
By:
Name:
Title:
-11-
<PAGE>
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
By: DAVID SULLIVAN
Name: David Sullivan
Title: Vice President
Private Placement
Investments
By: WAYNE T. HOFFMANN
Name: Wayne T. Hoffmann
Title: Vice President
Private Placement
Investments
IDS LIFE INSURANCE COMPANY
By:
Name:
Title:
KANSAS PUBLIC EMPLOYEES
RETIREMENT SYSTEM
By: The Boston Safe Deposit
and Trust Company, Agent
By:
Name:
Title:
-12-
<PAGE>
KEYPORT LIFE INSURANCE CO.
By: Stein Roe & Farnham
Incorporated, as Agent
By: RICHARD A. HEGWOOD
Name: Richard A. Hegwood
Title: Vice President
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: RICHARD C. MORRISON
Name: Richard C. Morrison
Title: Vice President
MELLON SECURITY TRUST
By:
Name:
Title:
MERRIL LYNCH LIFE INSURANCE
COMPANY
By: DAVID M. DUNFORD
Name: David M. Dunford
Title: Senior Vice President
-13-
<PAGE>
MODERN WOODMEN OF AMERICAN
By:
Name:
Title:
THE MUTUAL BENEFIT LIFE
INSURANCE COMPANY
By:
Name:
Title:
OHIO CASUALTY INSURANCE
COMPANY
By:
Name:
Title:
OHIO LIFE INSURANCE COMPANY
By:
Name:
Title:
-14-
<PAGE>
PAN-AMERICAN LIFE INSURANCE
COMPANY
By:
Name:
Title:
PRINCIPAL MUTUAL LIFE
INSURANCE COMPANY
By: STEPHEN G. SKRIVANEK
Name: Stephen G. Skrivanek
Title: Counsel
By: CLINT WOODS
Name: Clint Woods
Title: Counsel
PROVIDENT LIFE AND ACCIDENT
INSURANCE COMPANY
By:
Name:
Title:
PROVIDENT NATIONAL ASSURANCE
COMPANY
By:
Name:
Title:
-15-
<PAGE>
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: PruCapital Management,
Inc., Agent
By: STEVEN ARNOLD
Name: Steven Arnold
Title: Vice President
SECURITY MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By:
Name:
Title:
SMA LIFE ASSURANCE COMPANY
By: SCOTT C. HYNEY
Name: Scott C. Hyney
Title: Assistant Treasurer
STATE MUTUAL LIFE ASSURANCE
COMPANY OF AMERICA
By: SCOTT C. HYNEY
Name: Scott C. Hyney
Title: Assistant Treasurer
-16-
<PAGE>
SUN LIFE ASSURANCE COMPANY OF
CANADA (U.S.)
By: L. BROCK THOMSON
Name: L. Brock Thomson
Title: Treasurer
SUN LIFE INSURANCE AND ANNUITY
COMPANY OF NEW YORK
By: L. BROCK THOMSON
Name: L. Brock Thomson
Title: Treasurer
THE TRAVELERS INDEMNITY
COMPANY
By: JOHN GILSENAN
Name: John Gilsenan
Title: 2nd Vice President
THE TRAVELERS INSURANCE
COMPANY
By: JOHN GILSENAN
Name: John Gilsenan
Title: 2nd Vice President
-17-
UNITED OF OMAHA LIFE INSURANCE
COMPANY
By:
Name:
Title:
USG ANNUITY & LIFE COMPANY
By:
Name:
Title:
WEST AMERICAN INSURANCE
COMPANY
By:
Name:
Title:
-18-
<PAGE>
EXHIBIT 10(c)
AGREEMENT AND SECOND AMENDMENT
TO REVOLVING AND TERM CREDIT AGREEMENT
THIS AGREEMENT AND SECOND AMENDMENT TO REVOLVING AND TERM CREDIT
AGREEMENT, hereinafter referred to as this "AMENDMENT", dated as of
April 14, 1993, is made and entered into by and among SANTA FE ENERGY
RESOURCES, INC. (the "COMPANY"), a Delaware corporation; each of the
lenders which is a signatory hereto (individually a "BANK" and
collectively the "BANKS"); TEXAS COMMERCE BANK NATIONAL ASSOCIATION
("TCB"), a national banking association, as Administrative Agent for
the Banks (in such capacity, together with its successors in such
capacity, the "AGENT"); and TCB and NATIONSBANK OF TEXAS, N.A.
("NATIONSBANK"), a national banking association, as Co-Agents (in such
capacity, the "CO-AGENTS").
RECITALS:
1. The Company, the Agent, the Co-Agents and the Banks have
entered into a Revolving and Term Credit Agreement dated as of May 20,
1992 (which Revolving and Term Credit Agreement, as amended to the
date hereof, is herein called the "CREDIT AGREEMENT").
2. The parties hereto desire to amend the Credit Agreement in
certain respects to provide, among other things, that the Company,
subject to certain terms and conditions, may reborrow any amounts
prepaid on the unpaid principal balance of the Term Loans at the
option of the Company, all as is more fully provided hereinbelow.
AGREEMENTS:
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and warranties herein set forth, and for
other good and valuable consideration, the receipt and sufficiency of
which are acknowledged, the parties hereto do hereby agree as follows:
SECTION 1. DEFINITIONS DELETED. The Credit Agreement is hereby
amended by deleting in its entirety the definition of "Term Loan
Principal Installment" contained in Section 1.1 of the Credit
Agreement.
SECTION 2. DEFINITIONS AMENDED.
(a) The definition of "Applicable Margin" contained in
Section 1.1 of the Credit Agreement is hereby amended by deleting the
following parenthetical phrase each place that it appears therein:
(assuming the Available Amount is fully drawn for determinations
related to the Independent Engineering Report and on the basis of
the actual aggregate amount of
<PAGE>
outstanding Revolving Loans and Letter of Credit Liabilities for
all other determinations)
and substituting therefor the following in each such place:
(assuming the Available Amount is fully drawn and that the
aggregate unpaid principal balance of the Term Notes is equal to
the Term Loan Maximum Amount for determinations related to the
Independent Engineering Report and on the basis of the actual
aggregate amount of outstanding Revolving Loans, Term Loans and
Letter of Credit Liabilities for all other determinations)
(b) The definition of "Interest Period" contained in Section
1.1 of the Credit Agreement is hereby amended by deleting the phrase
"due date of the final Term Loan Principal Installment" where it
appears in clause (z) thereof and substituting therefor the phrase
"December 31, 1996."
(c) The following definitions contained in Section 1.1 of the
Credit Agreement are hereby each amended in their entireties to be and
read, respectively, as follows:
"TERM LOAN" shall mean a Loan (including a Term Loan
Readvance) made pursuant to SECTION 2.1(a).
"TERM LOAN COMMITMENT" shall mean, as to any Bank, the
obligation, if any, of such Bank to make Term Loans to the
Company in an initial aggregate principal amount up to but not
exceeding the amount, if any, set forth opposite such Bank's name
on the signature pages hereof under the caption "Term Loan
Commitment," and such Bank's obligation, if any, to make Term
Loan Readvances to the Company in an aggregate principal amount
at any one time outstanding equal to such Bank's Commitment
Percentage times the Term Loan Unused Readvance Commitment then
in effect.
SECTION 3. DEFINITIONS ADDED. Section 1.1 of the Credit
Agreement is hereby amended by adding thereto the following
definitions:
"APPLICABLE PERIODS" shall have the meaning ascribed to it in
the definition of Term Loan Maximum Amount.
"MARGINAL REDUCTION AMOUNT" shall mean, on any date and for
any Applicable Period, the difference of the Term Loan Maximum
Amount for such Applicable Period from the Term Loan Maximum
Amount for the immediately preceding Applicable Period, all as of
such date.
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<PAGE>
"TERM LOAN MATURITY DATE" shall mean the earlier of (a) the
date the Agent declares the principal amount then outstanding of
and the accrued interest on the Loans and all fees and all other
amounts payable hereunder and under the Notes to be due and
payable pursuant to SECTION 10.1 or (b) December 31, 1996.
"TERM LOAN MAXIMUM AMOUNT" shall mean, on any day occurring
during the periods (the "APPLICABLE PERIODS") indicated below, an
amount equal to the amount indicated below (as each of said
amounts may be decreased from time to time pursuant to the terms
of SECTION 2.2):
TERM LOAN MARGINAL
PERIOD MAXIMUM AMOUNT REDUCTION AMOUNT
March 31, 1993 through
June 29, 1993 $ 103,000,000 $ -0-
June 30, 1993 through
December 30, 1993 $ 99,417,000 $ 3,583,000
December 31, 1993
through June 29, 1994 $ 90,460,000 $ 8,957,000
June 30, 1994 through
December 30, 1994 $ 70,308,000 $ 20,152,000
December 31, 1994
through June 29, 1995 $ 50,156,000 $ 20,152,000
June 30, 1995 through
December 30, 1995 $ 39,408,000 $ 10,748,000
December 31, 1995
through June 29, 1996 $ 25,078,000 $ 14,330,000
June 30, 1996 through
December 30, 1996 $ 12,539,000 $ 12,539,000
On the Term Loan
Termination Date $ -0- $ 12,539,000
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<PAGE>
"TERM LOAN OPTIONAL PREPAYMENT" shall mean any prepayment of
the Term Notes made pursuant to SECTION 3.2(a).
"TERM LOAN READVANCE" shall mean a readvance made pursuant to
SECTION 2.1(a)(ii) of any Term Loan Optional Prepayment.
"TERM LOAN TERMINATION DATE" shall mean the earliest of (a)
the date the Term Loan Commitment is permanently terminated in
its entirety by the Company pursuant to SECTION 2.2(b), (b) the
Term Loan Maturity Date or (c) the date the Agent declares the
Term Loan Commitment terminated pursuant to SECTION 10.1.
"TERM LOAN UNUSED READVANCE COMMITMENT" shall mean, on any
date, the difference of (a) the Term Loan Maximum Amount MINUS
(b) the aggregate outstanding principal balance of the Term
Notes, all determined on such date.
SECTION 4. TERM LOANS; TERM LOAN READVANCES. Section 2.1(a) of
the Credit Agreement is hereby amended in its entirety to be and read
as follows:
(a) TERM LOANS; TERM LOAN READVANCES.
(i) On the date hereof, each Bank shall make to the
Company (and the Company shall borrow from each Bank) a Loan
under this SECTION 2.1(a) in an amount equal to such Bank's Term
Loan Commitment. The aggregate of the Term Loan Commitments on
the date hereof is $145,000,000.
(ii) From time to time after the date hereof and prior to
the Term Loan Termination Date, each Bank shall readvance Term
Loan Optional Prepayments under this SECTION 2.1(a) to the
Company in an aggregate principal amount at any one time
outstanding up to but not exceeding such Bank's Commitment
Percentage of the Term Loan Unused Readvance Commitment. Each
Term Loan Readvance shall be in an amount that is an integral
multiple of $1,000,000. Subject to the conditions herein, any
such Term Loan Optional Prepayment made prior to the Term Loan
Termination Date may be reborrowed pursuant to the terms of this
Agreement; PROVIDED, that any and all Term Loans shall be due and
payable in full at the Term Loan Maturity Date.
(iii) Notwithstanding anything herein to the contrary, (1) no
Bank shall be required to make Term Loan Readvances at any one
time outstanding in excess of such Bank's Commitment Percentage
of the Term Loan Unused
-4-
<PAGE>
Readvance Commitment, and (2) if a Bank fails to make a Term Loan
Readvance as and when required hereunder and the Company
subsequently makes a repayment on the Term Notes, such repayment
shall be split among the non-defaulting Banks ratably in
accordance with their respective Commitment Percentages until
each Bank has its Commitment Percentage of all of the outstanding
Term Loans, and the balance of such repayment shall be divided
among all of the Banks in accordance with their respective
Commitment Percentages.
(iv) Notwithstanding anything in this Agreement to the
contrary, no Bank shall be required to make a Term Loan Readvance
(but each Bank shall permit Rollovers) during the existence of an
Engineering Shortfa1l.
SECTION 5. REVOLVING LOANS. Section 2.1(b) of the Credit
Agreement is hereby amended by adding at the end thereof a new
Subsection (vi), which shall be and read as follows:
(vi) Notwithstanding anything contained in the foregoing
provisions of this Section which may appear to be to the contrary
and except in the case of a Rollover or a Revolving Loan to
satisfy a Reimbursement Obligation pursuant to SECTION 4.1, the
Company may not obtain Revolving Loans at any time unless the
Term Loan Unused Readvance Commitment is equal to zero at such
time.
SECTION 6. TERMINATIONS, REDUCTIONS AND CHANGES OF COMMITMENTS
AND TERM LOAN MAXIMUM AMOUNTS. Section 2.2 of the Credit Agreement is
hereby amended in its entirety to be and read as follows:
2.2. TERMINATIONS, REDUCTIONS AND CHANGES OF COMMITMENTS AND TERM
LOAN MAXIMUM AMOUNTS.
(a) MANDATORY. (1) On the Term Loan Termination Date, all
Term Loan Commitments shall be terminated in their entirety. On
the Termination Date, all Revolving Commitments shall be
terminated in their entirety.
(2) In the event that the Company is required to make a
prepayment of the Term Loans pursuant to SECTION 3.2(b)(2)(A) or
3.2(b)(2)(B), the Term Loan Maximum Amount for the then current
Applicable Period shall be reduced by the amount of such
prepayment and an amount equal to such prepayment shall be
applied to reduce the Term Loan Maximum Amounts for each
subsequent Applicable Period PRO RATA based on the respective
Marginal Reduction Amounts as in effect immediately prior to such
reduction; PROVIDED, that if such pro rata
-5-
<PAGE>
application does not result in compliance by the Company with all
Required Ratios, then such amount shall be reallocated among such
subsequent Applicable Periods as the Company shall direct to the
extent necessary to bring the Company into compliance with the
Required Ratios.
(3) Except only in the case of any noncompliance
resulting solely from an Engineering Shortfall, and then only
during the cure period permitted by SECTION 10.l(e), the Company
shall from time to time on demand by the Agent reduce the Term
Loan Maximum Amount for any particular Applicable Period by the
amount necessary so that the Company is in compliance with the
Required Ratios at each delivery of a Coverage Report and prepay
the Term Loans so that the aggregate unpaid principal balance of
the Term Notes does not exceed the Term Loan Maximum Amount then
in effect, as so reduced pursuant to SECTION 2.2(a)(5).
(4) In addition, in the event the Company is required
to make a prepayment of the Term Loans pursuant to
SECTION 3.2(b)(3), an amount equal to such prepayment shall be
applied to reduce the Term Loan Maximum Amount for any particular
Applicable Period in the manner necessary to bring the Company
into compliance with the Required Ratios.
(5) Except where reductions in the Term Loan Maximum
Amounts for the Applicable Periods are made PRO RATA pursuant to
SECTION 2.2(a)(2), if the Term Loan Maximum Amount is reduced for
a particular Applicable Period pursuant to SECTION 2.2(a)(2),
2.2(a)(3) or 2.2(a)(4) to bring the Company in compliance with
the Required Ratios, the Term Loan Maximum Amount for the then
current Applicable Period and each subsequent Applicable Period
to occur prior to such particular Applicable Period shall be
reduced by a like amount.
(b) THE COMPANY'S OPTION. The Company shall have the right to
terminate or reduce the unused portion of the Revolving
Commitments at any time or from time to time; PROVIDED that
(1) the Company shall give notice of each such termination or
reduction to the Agent as provided in SECTION 5.5; (2) each such
partial reduction shall be in an integral multiple of $5,000,000,
and (3) the Company may not cause the Available Amount to be less
than the aggregate principal amount of the Revolving Loans then
outstanding plus the Letter of Credit Liabilities then
outstanding. No voluntary reduction in the Available Amount prior
to any scheduled reduction in the Available Amount shall affect
the Available Amount after such scheduled reduction date unless
such
-6-
<PAGE>
voluntarily reduced Available Amount is less than the amount
scheduled to be the Available Amount after such scheduled
reduction date, in which case the Available Amount after such
scheduled reduction date shall be no greater than such
voluntarily reduced Available Amount. The Company shall have the
right to (y) terminate or reduce the Term Loan Unused Readvance
Commitment at any time or from time to time or (z) reduce the
Term Loan Maximum Amount for any particular Applicable Period at
any time or from time to time; PROVIDED that (1) the Company
shall give notice of each such termination or reduction to the
Agent as provided in SECTION 5.5, and (2) the Company may not
cause the Term Loan Maximum Amount to be less than the aggregate
principal amount of the Term Loans then outstanding. If the
Company voluntarily reduces the Term Loan Maximum Amount for a
particular Applicable Period, the Term Loan Maximum Amount for
the then current Applicable Period and each subsegment Applicable
Period to occur prior to such particular Applicable Period shall
be reduced by a like amount.
(c) NO REINSTATEMENT. Any reduction in or termination of the
Commitments pursuant to SECTION 2.2 or any reduction in any Term
Loan Maximum Amount may not be reinstated without the written
approval of the Agent and the Banks.
SECTION 7. TERM LOAN COMMITMENT FEES. Section 2.3 of the Credit
Agreement is hereby amended by adding at the end thereof the
following:
In consideration of the Term Loan Commitments, the Company shall
pay to the Agent for the account of each Bank in accordance with
its Commitment Percentage commitment fees (the "TERM LOAN
COMMITMENT FEES") for the period from the date of the execution
of this Agreement to and including the Term Loan Termination Date
at a rate per annum equal to 1/2% of the Term Loan Unused
Readvance Commitment. The Term Loan Commitment Fees shall be
computed for each day and shall be based on the Term Loan Unused
Readvance Commitment for such day. Accrued Term Loan Commitment
Fees shall be payable in arrears, within three days after demand
therefor on or about the Quarterly Dates, and within three days
after demand therefor on or about the Term Loan Termination Date.
All past due Term Loan Commitment Fees shall bear interest at the
Post-Default Rate. Upon receipt, the Agent shall disburse the
Term Loan Commitment Fees to the Banks in accordance with their
Commitment Percentages.
-7-
<PAGE>
SECTION 8. RELEASE OF MORTGAGES. Section 2.8 of the Credit
Agreement is hereby amended by deleting the following parenthetical
phrase where it appears therein:
(each calculated assuming that the Available Amount then in
effect is fully drawn)
and substituting therefor the following in each such place:
(each calculated assuming the Available Amount is fully drawn and
that the aggregate unpaid principal balance of the Term Notes is
equal to the Term Loan Maximum Amount)
SECTION 9. USE OF PROCEEDS. Section 2.9 of the Credit
Agreement is hereby amended by adding at the end thereof the
following:
The proceeds of the Term Loan Readvances shall be used by the
Company for working capital and for general corporate purposes.
SECTION 10. OPTIONAL PREPAYMENTS. The last sentence of Section
3.2(a) of the Credit Agreement is hereby amended in its entirety to be
and read as follows:
Optional prepayments of Term Loans shall be applied to the
aggregate unpaid principal balance then owing on the Term Notes.
SECTION 11. MANDATORY PREPAYMENTS.
(a) Section 3.2(b)(1) of the Credit Agreement is hereby
amended by adding at the end thereof the following:
In addition, the Company shall from time to time on demand by the
Agent prepay the Term Loans in such amounts as shall be necessary
so that at all times the aggregate outstanding principal amount
of the Term Loans (including Term Loan Readvances) shall not be
in excess of the Term Loan Maximum Amount.
(b) Sections 3.2(b)(2)(A) and (B) of the Credit Agreement are
hereby amended by deleting the term "to the Term Loan Principal
Installments as herein provided" where it appears in those sections
and substituting therefor in each such place the phrase "to the unpaid
principal balance of the Term Notes."
(c) Section 3.2(b)(2)(C) of the Credit Agreement is hereby
amended in its entirety to be and read as follows:
(C) All amounts prepaid pursuant to Section 3.2(b)(2)(A) or
(B) shall be applied to the unpaid
-8-
<PAGE>
principal balance of the Term Notes. The Company may in its
discretion defer making the prepayment required by Section
3.2(b)(2) (A) or (B) until the earlier of (i) the time the
aggregate amount of such prepayments so deferred equals or
exceeds $1,000,000 or (ii) one month after the date the first
such prepayment would otherwise be due.
(d) The second to the last sentence of Section 3.2(b)(3) of
the Agreement is hereby amended in its entirety to be and read as
follows:
If the Company upon any such redetermination shall not be in
compliance with all Required Ratios, the Company shall prepay on
the Business Day following the date of such sale an amount of the
proceeds of all sales of any Adobe Properties not previously
prepaid for application to the unpaid principal balance on the
Term Notes.
SECTION 12. SECTIONS DELETED. (a) The Credit Agreement is hereby
amended by deleting therefrom Section 3.2(b)(4) of the Credit
Agreement in its entirety and renumbering Section 3.2(b)(5) of the
Credit Agreement to now be Section 3.2(b)(4).
(b) The Credit Agreement is hereby amended by deleting
therefrom Section 4.1(b) in its entirety and renumbering Section
4.1(c) of the credit Agreement to now be Section 4.1(b).
SECTION 13. ASSIGNMENTS. (a) Clause (2) of Section 12.6(c) of the
Credit Agreement is hereby amended in its entirety to be and read as
follows:
(2) the aggregate amount of the Commitments and/or Loans of the
assigning Bank subject to each such assignment (determined as of
the date the Assignment Agreement with respect to such assignment
is delivered to the Agent) shall in no event be less $10,000,000
(or $1,000,00O in the case of an assignment between Banks)
(except for certain exceptions approved by the Company and the
Agent or where all of a Bank's Commitments and Loans are being
assigned) and shall be in an amount that is an integral multiple
of $1,000,000 (except for certain exceptions approved by the
Company and the Agent or where all of a Bank's Commitments and
loans are being assigned);
(b) The Agent, the Co-Agents, the Banks and the Company
hereby ratify and consent to the sale of all of WestPac Banking
Corporation's Commitment Percentage of all of the Commitments, Loans
and Letter of Credit Liabilities to one or more of the Banks,
notwithstanding the fact that such sales were not in multiples of
$1,000,000 as required under the Credit Agreement or $75,000, as
required under the Letter of Credit Agreement.
-9-
<PAGE>
SECTION 14. EXHIBITS. Exhibit C to the Credit Agreement is hereby
deleted, and there is hereby substituted therefor a new Exhibit C,
which shall be identical to EXHIBIT A, hereto attached and hereby made
a part hereof by reference for all purposes.
SECTION 15. CONDITIONS. This Amendment shall not become effective
until the Company shall have delivered to the Agent each of the
following:
(a) a certificate of the Secretary or any Assistant Secretary
of the Company, in form and substance satisfactory to the Agent,
the Co-Agents and the Banks, dated as of the date hereof, as to
(i) the resolutions of the Board of Directors of the Company
authorizing the execution, delivery and performance of this
Amendment and of all instruments contemplated herein to be
executed and delivered by the Company in connection herewith (a
copy of such resolutions to be attached to such certificate),
such certificate to state that said copy is a true and correct
copy of such resolutions and that such resolutions were duly
adopted and have not been amended, superseded, revoked or
modified in any respect and remain in full force and effect as of
the date of such certificate; (ii) the election, incumbency and
signatures of the officer or officers of the Company executing
and delivering this Amendment and each other instrument or
document furnished in connection herewith; (iii) the Certificate
of Incorporation of the Company in effect as of the date hereof
(a copy of such Certificate of Incorporation to be attached to
the certificate or such certificate to contain a representation
that there have been no changes to such Certificate of
Incorporation since May 20, 1992, when a true, correct and
complete copy of such Certificate of Incorporation was delivered
to the Agent); (iv) the Bylaws of the Company in effect as of the
date hereof (a copy of such By-Laws to be attached to the
certificate or such certificate to contain a representation that
there have been no changes to such Bylaws since May 20, 1992,
when true, correct and complete copies of such Bylaws were
delivered to the Agent); and (v) such other documents and
information as the Agent, the Co-Agents or any of the Banks shall
reasonably request; and
(b) the opinion of Andrews & Kurth, L.L.P., counsel to the
Company, substantially in the form of ANNEX I attached hereto.
SECTION 16. REPRESENTATIONS TRUE; NO DEFAULT. The Company
represents and warrants that the representations and warranties
contained in Section 8 of the Credit Agreement and in the other Credit
Documents are true and correct in all material respects on and as of
the date hereof as though made on and as of such date. The Company
hereby certifies that no event has occurred and is continuing which
constitutes an Event of Default under the Credit
-10-
<PAGE>
Agreement or any of the other Credit Documents or which upon the
giving of notice or the lapse of time or both would constitute such an
Event of Default.
SECTION 17. RATIFICATION; LIENS NOT AFFECTED. Except as expressly
amended hereby, the Credit Agreement and the other Credit Documents
shall remain in full force and effect and the Security Documents
secure and shall continue to secure the Term Loans (including the Term
Loan Readvances, as that term is defined in the Credit Agreement as
amended hereby) and the Term Notes. The Credit Agreement, as hereby
amended, and all rights and powers created thereby or thereunder and
under the other Credit Documents are in all respects ratified and
confirmed and remain in full force and effect. The Company hereby
warrants and represents to the Agent, the Co-Agents and the Banks that
the execution and delivery of this Amendment does not and will not
result in any termination, invalidity, unperfection, diminution, lapse
or loss of any rights or remedies under any of the Liens of the
Security Documents or of any of the Security Documents themselves.
SECTION 18. DEFINITIONS AND REFERENCES. Terms used herein which
are defined in the Credit Agreement or in the other Credit Documents
shall have the meanings therein ascribed to them. The term "Agreement"
as used in the Credit Agreement and the term "Credit Agreement," as
used in the other Credit Documents or any other instrument, document
or writing furnished to any or all of the Agent, the Co-Agents and the
Banks by the Company shall mean the Credit Agreement as hereby
amended.
SECTION 19. EXPENSES; ADDITIONAL INFORMATION. The Company shall
pay to the Agent all reasonable expenses incurred in connection with
the execution of this Amendment. The Company shall furnish to the
Agent, the Co-Agents and the Banks all such other documents, consents
and information relating to the Company or otherwise, as the Agent,
the Co-Agents and the Banks may reasonably require.
SECTION 20. MISCELLANEOUS. This Amendment (a) shall be binding
upon and inure to the benefit of the Company and the Agent, the
Co-Agents and the Banks and their respective successors, assigns,
receivers and trustees (provided, however, that the Company shall not
assign its rights hereunder without the prior written consent of all
of the Banks); (b) may be modified or amended only in accordance with
Section 12.5 of the Credit Agreement; (c) shall be governed by and
construed in accordance with the laws of the State of Texas and the
United States of America; (d) may be executed in several counterparts,
and by the parties hereto on separate counterparts, and each
counterpart, when so executed and delivered, shall constitute an
original agreement, and all such separate counterparts shall
constitute but one and the same agreement; and (e) together with the
other Credit Documents, embodies the entire agreement and
understanding between the parties
-11-
<PAGE>
with respect to the subject matter hereof and of the other Credit
Documents and supersedes all prior agreements, consents and
understandings relating to such subject matter. The headings herein
shall be accorded no significance in interpreting this Amendment.
Wherever the term "including" or a similar term is used in this
Amendment, it shall be read as if it were "including by way of example
only and without in any way limiting the generality of the clause or
concept referred to." Any exhibits, appendices and annexes described
in this Amendment as being attached to it are hereby incorporated into
it.
SECTION 21. DTPA WAIVER. The Company waives all rights, remedies,
claims, demands and causes of action based upon or related to the
Texas Deceptive Trade Practices-Consumer Protection Act as described
in Sections 17.41 et seq. of the Texas Business & Commerce Code, as
the same pertains or may pertain to this Amendment or any of the
transactions contemplated therein, to the maximum extent that such
rights, etc. may lawfully and effectively be waived. In furtherance of
this waiver, the Company hereby represents and warrants to the Agent,
the Co-Agents and the Banks that (a) the Company is represented by
legal counsel in connection with the negotiation, execution and
delivery of this Amendment, (b) the Company has a choice other than to
enter into this waiver in that it can obtain the Loans from another
institution and (c) the Company does not consider itself to be in a
significantly disparate bargaining position relative to Agent, the
Co-Agents or any of the Banks with respect to this Amendment.
SECTION 22. RELEASE. The Company hereby releases, discharges and
acquits forever the Agent, the Co-Agents, the Banks and their
respective officers, directors, trustees, agents, employees and
counsel (in each case, past, present or future) from any and all
Claims existing as of the date hereof (or the date of actual execution
hereof by the applicable person or entity, if later). As used herein,
the term "CLAIM" shall mean any and all liabilities, claims, defenses,
demands, actions, causes of action, judgments, deficiencies, interest,
liens, costs and expenses (including court costs, penalties,
attorneys' fees and disbursements, and amounts paid in settlement) of
any kind and character whatsoever, including claims for usury, breach
of contract, breach of commitment, negligent misrepresentation or
failure to act in good faith, in each case whether now known or
unknown, suspected or unsuspected, asserted or unasserted or primary
or contingent, and whether arising out of written documents, unwritten
undertakings, course of conduct, tort, violations of laws or
regulations or otherwise; in each case to the extent, but only to the
extent, such matters relate to this Amendment, the Credit Agreement
and the other Credit Documents and the transactions evidenced and
contemplated hereby and thereby. To the maximum extent permitted by
applicable law, the Company hereby waives all rights, remedies, claims
and defenses based upon or related to SECTIONS 51.003, 51.004 and
51.005 of the Texas Property
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<PAGE>
Code, to the extent the same pertain or may pertain to any enforcement
of this Amendment.
NOTICE PURSUANT TO TEX. BUS. AND COMM. CODE SECTION 26.02
THIS AMENDMENT AND ALL OTHER CREDIT DOCUMENTS EXECUTED BY ANY OF
THE PARTIES BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE
EXECUTION HEREOF, TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT
WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
signed by their respective duly authorized officers, effective as of
the date which first appears hereinabove.
SANTA FE ENERGY RESOURCES, INC.,
a Delaware corporation
By: M. J. ROSINSKI
M. J. Rosinski, Vice President
and Chief Financial Officer
<PAGE>
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, individually,
as Administrative Agent and as
Co-Agent
By: JAMES R. MCBRIDE
James R. McBride
Senior Vice President
<PAGE>
NATIONSBANK OF TEXAS, N.A.,
individually and as Co-Agent
By: H. GENE SHIGLS
Name: H. Gene Shigls
Title: Vice President
<PAGE>
THE BANK OF NEW YORK
By: M. B. DAVIS
Name: M. B. Davis
Title: Vice President
<PAGE>
THE BANK OF NOVA SCOTIA
By: F. C. H. ASHBY
Name: F. C. H. Ashby
Title: Senior Assistant Agent
<PAGE>
BANK OF MONTREAL
By: MARK GREEN
Name: Mark Green
Title: Director
<PAGE>
CIBC, INC.
By: BRIAN R. SWINFORD
Name: Brian R. Swinford
Title: Vice President
<PAGE>
BANQUE PARIBAS HOUSTON AGENCY
By: BARTON D. SCHOUEST
Name: Barton D. Schouest
Title: Group Vice President
By: MEI WAN TONG
Name: Mei Wan Tong
Title: Group Vice President
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
By: GEORGE W. PASSELA
Name: George W. Passela
Title: Managing Director
<PAGE>
ABN AMRO Bank, N.V.--HOUSTON AGENCY
By: RONALD A. MAHLE
Name: Ronald A. Mahle
Title: Vice President
By: CHERYL I. LIPSHUTZ
Name: Cheryl I. Lipshutz
Title: Vice President
<PAGE>
The undersigned legal counsel for Borrower signs this Agreement not as
a party to it but solely for the purpose of complying with the
provisions of Section 17.42(a)(3) of the Texas Deceptive Trade
Practices-Consumer Protection Act described in Section 21 hereof.
DAVID L. HICKS
David L. Hicks
Illinois Bar No. 06186418
<PAGE>
EXHIBIT 10(d)
LETTER OF CREDIT AGREEMENT
dated as of May 19, 1993
among
SANTA FE ENERGY RESOURCES, INC.;
the Banks signatory hereto,
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
as Co-Agent and Administrative Agent
and
NATIONSBANK OF TEXAS, N.A.
as Co-Agent
<PAGE>
TABLE OF CONTENTS
Section 1. Definitions and Accounting Matters,. . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . 1
1.2 Accounting Terms and Determinations . . . . . . . 26
Section 2. Commitments. . . . . . . . . . . . . . . . . . . 27
2.1 Letters of Credit . . . . . . . . . . . . . . . . 27
2.3 Reductions and Changes of Commitments . . . . . . 33
2.4 Several Obligations . . . . . . . . . . . . . . . 33
2.5 Fees . . . . . . . . . . . . . . . . . . . . . . 33
Section 3. Prepayments . . . . . . . . . . . . . . . . . . 34
3.1 (a)Commitment Amount . . . . . . . . . . . . . . 34
Section 4. Payments of Principal and Interest . . . . . . . 34
4.1 Repayment of Reimbursement Obligations . . . . . 34
4.2 Interest . . . . . . . . . . . . . . . . . . . . 34
Section 5. Payments: Pro Rata Treatment: Computations, Etc. 35
5.1 Payments . . . . . . . . . . . . . . . . . . . . 35
5.2 Pro Rata Treatment. . . . . . . . . . . . . . . . 35
5.3 Computations. . . . . . . . . . . . . . . . . . . 35
5.4 Minimum And Maximum Amounts . . . . . . . . . . . 36
5.5 Certain Actions, Notices. Etc . . . . . . . . . . 36
5.6 Non-Receipt of Funds by the Agent . . . . . . . . 36
5.7 Sharing of Payments, Etc. . . . . . . . . . . . . 37
5.8 Other Expenses . . . . . . . . . . . . . . . . . 38
Section 6. Yield Protection and Illegality. . . . . . . . . 38
6.1 Additional Costs in Respect of Letters of
Credit. . . . . . . . . . . . . . . . . . . . . . 38
6.2 Capital Adequacy. . . . . . . . . . . . . . . . . 39
Section 7. Conditions Precedent . . . . . . . . . . . . . . 40
7.1 Closing Conditions . . . . . . . . . . . . . . . 40
7.2 All Letters of Credit . . . . . . . . . . . . . . 41
Section 8. Representations and Warranties . . . . . . . . . 42
8.1 Corporate Existence . . . . . . . . . . . . . . . 42
8.2 Information . . . . . . . . . . . . . . . . . . . 42
8.3 Litigation; Compliance. . . . . . . . . . . . . . 43
8.4 No Breach . . . . . . . . . . . . . . . . . . . . 43
8.5 Corporate Action . . . . . . . . . . . . . . . . 43
8.6 Approvals . . . . . . . . . . . . . . . . . . . . 43
8.7 Regulations G, U and X . . . . . . . . . . . . . 44
8.8 ERISA . . . . . . . . . . . . . . . . . . . . . . 44
8.9 Taxes . . . . . . . . . . . . . . . . . . . . . . 44
8.10 Subsidiaries . . . . . . . . . . . . . . . . . . 44
8.11 Investment Company Act . . . . . . . . . . . . . 44
8.12 Public Utility Holding Company Act . . . . . . . 45
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<PAGE>
8.13 Environmental Matters . . . . . . . . . . . . . . 45
Section 9. Covenants. . . . . . . . . . . . . . . . . . . . 45
9.1 Financial Statements and Certificates . . . . . . 45
9.2 Inspection of Property. . . . . . . . . . . . . . 49
9.3 Compliance with Environmental Laws . . . . . . . 49
9.4 Payment of Taxes . . . . . . . . . . . . . . . . 50
9.5 Maintenance of Insurance . . . . . . . . . . . . 50
9.6 Restricted Payments And Restricted Investments. . 50
9.7 Lien, Debt and Other Restrictions . . . . . . . . 52
9.8 Issuance of Stock by Restricted Subsidiaries. . . 62
Section 10. Defaults . . . . . . . . . . . . . . . . . . . 63
10.1 Events of Default. . . . . . . . . . . . . . . . 63
Section 11. The Agent . . . . . . . . . . . . . . . . . . . 67
11.1 Appointment, Powers and Immunities . . . . . . . 67
11.2 Reliance By Agent. . . . . . . . . . . . . . . . 67
11.3 Defaults . . . . . . . . . . . . . . . . . . . . 68
11.4 Rights as a Bank . . . . . . . . . . . . . . . . 68
11.5 Indemnification. . . . . . . . . . . . . . . . . 68
11.6 Non-Reliance on the Agent and Other Banks. . . . 69
11.7 Failure to Act . . . . . . . . . . . . . . . . . 69
11.8 Resignation or Removal of the Agent. . . . . . . 69
Section 12. Miscellaneous . . . . . . . . . . . . . . . . . 70
12.1 Waiver . . . . . . . . . . . . . . . . . . . . . 70
12.2 Notices. . . . . . . . . . . . . . . . . . . . . 70
12.3 Expenses, Etc. . . . . . . . . . . . . . . . . . 70
12.4 Indemnification. . . . . . . . . . . . . . . . . 71
12.5 Amendments, Etc. . . . . . . . . . . . . . . . . 72
12.6 Successors and Assigns . . . . . . . . . . . . . 72
12.7 Survival; Term; Reinstatement. . . . . . . . . . 75
12.8 Limitation of Interest . . . . . . . . . . . . . 76
12.9 Captions . . . . . . . . . . . . . . . . . . . . 77
12.10 Counterparts . . . . . . . . . . . . . . . . . . 77
12.11 Governing Law. . . . . . . . . . . . . . . . . . 77
12.12 Severability . . . . . . . . . . . . . . . . . . 77
12.13 Chapter 15 Not Applicable. . . . . . . . . . . . 77
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<PAGE>
LETTER OF CREDIT AGREEMENT
This Letter of Credit Agreement (as amended, modified,
supplemented and restated from time to time, this "AGREEMENT") dated
as of May 19, 1993, is by and among SANTA FE ENERGY RESOURCES, INC.
(the "COMPANY"), a Delaware corporation; each of the lenders which is
or which may from time to time become a Signatory hereto (individually
a "BANK" and collectively the "BANKS"); TEXAS COMMERCE BANK NATIONAL
ASSOCIATION ("TCB"), a national banking association, as Administrative
Agent for the Banks (in such capacity, together with its successors
in such capacity, the "Agent"); and TCB and NATIONSBANK OF TEXAS,
N.A., a national banking association, as Co-Agents (in such capacity,
the "CO- AGENTS").
The parties agree as follows:
Section 1. DEFINITIONS AND ACCOUNTING MATTERS.
1.1 CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings:
"ADDITIONAL COSTS" shall have the meaning ascribed to such term
in SECTION 6.1.
"ADOBE" shall mean Adobe Resources Corporation, a Delaware
corporation.
"ADOBE PROPERTIES" shall mean oil, gas and mineral properties and
other assets owned by Adobe at the time of the Merger.
"AFFILIATE" shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or
is controlled by, such Person; and with respect to an individual,
"AFFILIATE" shall also mean any individual related to such individual
by blood or marriage. As used in this definition, "CONTROLS",
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH" shall mean possession,
directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
"ALTERNATE ANNUAL DEBT SERVICE COVERAGE RATIO" shall mean, as of
any date of determination and for the Calculation Period in which such
date occurs and for each Calculation Period thereafter to and
including the Calculation Period including the Termination Date, the
lowest of the ratios obtained by dividing (a) Combined CFADS
(calculated on the basis of the Most Recent Engineering Report) for
such Calculation Period by (b) Alternate Debt Service of the Company
and the Restricted Subsidiaries for such Calculation
<PAGE>
Period PLUS, at all times and to the extent the Special Subsidiary
Qualifying conditions are met, the Special Subsidiary Percentage times
the Alternate Debt Service of the Special Subsidiary for such
Calculation Period (in each case calculated on the basis set forth in
the most recent Coverage Report delivered to the Agent pursuant to
SECTION 9.1 and taking into account any incurrence or prepayment of
Covered Debt by the Company or any of the Restricted Subsidiaries or
the Special Subsidiary since the date of such Coverage Report).
"ALTERNATE BASE RATE" shall mean, for any date, a rate per annum
(rounded upwards, if necessary, to the next higher 1/100%) equal to
the greater of (a) the Prime Rate in effect on such day or (b) the Fed
Funds Rate in effect for such day plus 1/2%. Any change in the
Alternate Base Rate due to a change in the Fed Funds Rate shall be
effective on the effective date of such change in the Fed Funds Rate.
If for any reason the Agent shall have determined (which determination
shall be conclusive absent manifest error) that it is unable to
ascertain the Fed Funds Rate for any reason, including the inability
or failure of the Agent to obtain sufficient bids or publications in
accordance with the terms hereof, the Alternate Base Rate shall be the
Prime Rate until the circumstances giving rise to such inability no
longer exist.
"ALTERNATE DEBT SERVICE" shall mean, for any Calculation Period
and with respect to any Person, the total of principal payments in
respect of Covered Debt of such Person and the total of interest
payments (using, with respect to interest to accrue, the interest
rates set forth in the most recent Approved Assumptions for such
Covered Debt not bearing interest at a fixed rate; if some or all of
such Covered Debt bears interest at one or more fixed rates as of the
date of determination of Alternate Debt Service but such Covered Debt
will not bear interest at such fixed rate or rates to the end of such
Calculation Period, then interest payments in respect of Alternate
Debt Service with respect to such Covered Debt shall be calculated on
the basis of such fixed rate or rates for such time as the same shall
be applicable to such Covered Debt, and then at the interest rates set
forth in the most recent Approved Assumptions) in respect of Covered
Debt of such Person, in each case paid and scheduled to be paid during
such Calculation Period; PROVIDED that the principal amount of any
Covered Debt of such Person which by its terms matures on a date
within such Calculation Period but which may reasonably be expected to
be reborrowed in a Rollover on such date shall not be deemed, for
purposes of this definition, to be scheduled to be paid on such date;
and PROVIDED FURTHER that for purposes of this definition it shall be
assumed that (a) surety bonds for environmental purposes and letters
of credit issued for the account of a Person will be fully drawn upon
their respective expiry dates, (b) the reimbursement obligations of a
Person with respect to all surety bonds for environmental purposes and
letters of credit issued for
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<PAGE>
its account shall be satisfied immediately and considered as a
"principal payment" for purposes of this definition.
"ANNUAL DEBT SERVICE COVERAGE RATIO" shall mean, as of any date
of determination and for the Calculation Period in which such date
occurs and for each Calculation Period thereafter to and including the
Calculation Period including the Termination Date, the lowest of the
ratios obtained by dividing (a) Combined CFADS (calculated on the
basis of the Most Recent Engineering Report) for such Calculation
Period by (b) Debt Service of the Company and the Restricted
Subsidiaries for such Calculation Period PLUS, at all times and to the
extent the Special Subsidiary Qualifying Conditions are met, the
Special Subsidiary Percentage times the Debt Service of the Special
Subsidiary for such Calculation Period (in each case calculated on the
basis set forth in the most recent Coverage Report delivered to the
Agent pursuant to SECTION 9.1 and taking into account any incurrence
or prepayment of Covered Debt by the Company and the Restricted
Subsidiaries and the Special Subsidiary since the date of such
Coverage Report).
"APPLICABLE ENVIRONMENTAL LAWS" shall mean all applicable
environmental or pollution-control Legal Requirements governing,
without limitation, wastewater effluent, solid and hazardous waste or
substances and air emissions, together with any other applicable
requirements for conducting, on a timely basis, reporting, record
keeping, periodic tests and monitoring for contamination of ground
water, surface water, air and land and for biological toxicity of the
aforesaid, including, without limitation, the Resource Conservation
and Recovery Act of 1976, the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (as amended by the Superfund
Amendments and Reauthorization Act), the Toxic Substances Control Act,
the Safe Drinking Water Act, the Hazardous Materials Transportation
Act, the Clean Air Act, the Clean Water Act, the Oil Pollution Act,
the Texas Water Code, the Texas Health and Safety Code, the Texas
Natural Resources Code, the Louisiana Environmental Quality Act, the
Louisiana Air Control Law, the Louisiana Water Control Law, the
Louisiana Solid Waste Management and Resource Recovery Law, the
Louisiana Hazardous Waste Control Law, the Louisiana Oil Spill
Prevention and Response Act, the Louisiana Resource Recovery and
Development Act, the Louisiana Waste Reduction Law, the Louisiana
Hazardous Material Information Development, Preparedness, and Response
Act, the Louisiana State and Local Coastal Resources Management Act of
1978, the Louisiana Coastal Wetlands Conservation and Restoration Act,
the Louisiana Abandoned Oilfield Waste Site Law, and the Louisiana
Mineral Code, in each case as amended from time to time.
"APPLICABLE LENDING OFFICE" shall mean, for each Bank the office
of such Bank (or of an Affiliate of such Bank) designated below its
name on the signature pages hereof or such other office of such Bank
(or of an Affiliate of such Bank) as such Bank may from time to time
specify to the Agent and the Company as the
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<PAGE>
office by which its Letters of Credit are to be issued and maintained.
"APPLICABLE MARGIN" for Letters of Credit shall mean 1.00% per
annum.
"APPLICATION" shall mean each application and agreement for a
Letter of Credit, or similar instrument or agreement, substantially in
the form of EXHIBIT A, now or hereafter executed by the Company in
connection with any Letter of Credit at any time issued or to be
issued hereunder; to the extent that an Application is inconsistent
with this Agreement, this Agreement shall control.
"APPROVED ASSUMPTIONS" shall mean (a) until the first delivery of
an Independent Engineering Report hereunder, those assumptions set
forth on SCHEDULE III and (b) thereafter, for each Independent
Engineering Report hereunder, assumptions as to product prices,
interest rates, escalation rates, discount rates and future levels of
production curtailment, which assumptions shall be determined by the
Co-Agents after consultation with the Company and set forth (x) in the
case of each Required Reserve Report, in a notice sent to the Banks on
or before January 21 of each such year and in a notice from the Agent
to the Company on or prior to the next succeeding February 1 or (y) in
the case of each Optional Reserve Report, in a notice sent to the
Banks within 30 days of the delivery of the notice to the Co-Agents
required by SECTION 2.2(d) and in a notice from the Agent to the
Company on or prior to a date 10 days after the date of such notice to
the Banks; PROVIDED that such assumptions are, within ten days after
any such notice is sent to the Banks, approved (as indicated in one or
more notices received by the Agent within such ten-day period) by
Banks with aggregate Commitment Percentages of 75% or more. If the
assumptions proposed by the Co-Agents are not approved, the Banks will
work to determine and approve alternative assumptions in good faith in
accordance with their customary oil and gas lending practices.
Approved Assumptions set forth in a notice to the Company shall govern
until new Approved Assumptions are set forth in a notice to the
Company as provided herein, and shall be used, without limitation, in
preparation of the next Independent Engineering Report required to be
delivered pursuant to SECTION 9.1 or permitted to be delivered
pursuant to SECTION 2.2(d).
"ASSIGNMENT AGREEMENT" shall mean an Assumption and Assignment
Agreement substantially in the form of EXHIBIT B.
"ATTRIBUTABLE DEBT" shall mean the lesser of (a) the fair market
value of the assets sold pursuant to any Sale and Leaseback
Transaction (which determination shall be based upon a written opinion
(the cost of which shall be borne exclusively by the Company) as to
valuation from an independent valuation expert selected by the
Company) or (b) the present value (discounted
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<PAGE>
according to GAAP at the interest rate implicit in the lease) of the
obligations of the lessee for rental payments during the term of any
lease constituting a part of such Sale and Leaseback Transaction.
"AVAILABLE AMOUNT" shall mean subject always to the limitation
set forth in SECTION 2.2(e), the Preliminary Available Amount from
time to time in effect, as the same may be adjusted upward and
downward in accordance with SECTION 2.2 or permanently decreased in
accordance with SECTION 2.3.
"BOARD" shall mean the Board of Governors of the Federal Reserve
System of the United States.
"BUSINESS DAY" shall mean any day other than a day on which
commercial banks are authorized or required to close in Houston, Texas
or New York, New York.
"CALCULATION PERIOD" shall mean the year ending on the last day
of a February; with respect to calculations for a Calculation Period
determined with reference to amounts for two calendar years, it shall
be assumed (unless such amounts are due on scheduled dates, in which
case such calculations shall be made with reference to such dates)
that each such calendar year amount is spread evenly over the
appropriate calendar year, with the result that each such amount for a
Calculation Period beginning on a March 1 shall be composed of (a)
10/12 of the calendar year amount for the calendar year containing
such March 1 plus (b) 2/12 of the calendar year amount for the next
calendar year.
"CAPITAL GAINS" shall mean gains (net of expenses and income
taxes applicable thereto) in excess of losses resulting from the sale,
conversion or other disposition of capital assets (I.E., assets other
than current assets).
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation
which, under GAAP, is or will be required to be capitalized on the
books of the Company or any Restricted Subsidiary, taken at the amount
thereof accounted for as indebtedness (net of interest expense) in
accordance with such principles.
"CFADS" shall mean, for any Calculation Period and with respect
to any Person, (a) Net Oil and Gas Income (PROVIDED that in
calculating Combined CFADS, no more than 25% of Net Oil and Gas Income
may be attributable to proved nonproducing and proved undeveloped
Recognized Proved Reserves) LESS (b) Projected G & A Expense LESS (c)
Projected Income Tax Expense PLUS (d) anticipated net income (or minus
anticipated net losses) from the Price Protection Agreements
(determined on the basis of the Approved Assumptions), (e) PLUS any
anticipated gain, and MINUS any anticipated loss, on Interest Rate
Protection Agreements (determined on the basis of the Approved
Assumptions), PLUS (f)
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<PAGE>
other income from operations as reasonably projected under the
Approved Assumptions, not to exceed 5% of Combined CFADS, and PLUS (g)
proceeds of sales of assets permitted by the Credit Documents, to the
extent (but only to the extent) such proceeds are applied as
prepayments pursuant to SECTION 3.1, in each case for such Calculation
Period and such Person.
"CHANGE OF CONTROL" shall mean any change so that any Person (or
any Persons acting together which would constitute a Group), together
with any Affiliates or Related Persons thereof, shall at any time
either (1) Beneficially Own more than 50% of the aggregate Voting
power of all classes of Voting Stock of the Company or (2) succeed in
having sufficient of its or their nominees elected to the Board of
Directors of the Company such that such nominees, when added to any
existing director remaining on the Board of Directors of the Company
after such election who is an Affiliate or Related Person of such
Person or Group, shall constitute a majority of the Board of
Directors of the Company. As used herein (a) "BENEFICIALLY OWN" shall
mean beneficially own as defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or any
successor provision thereto; (b) "GROUP" shall mean a "group" for
purposes of Section 13(d) of the Exchange Act; (c) "RELATED PERSON" of
any Person shall mean any other Person owning (1) 5% or more of the
outstanding common stock of such Person or (2) 5% or more of the
Voting Stock of such Person, and (d) "VOTING STOCK" of any Person
shall mean capital stock of such Person which ordinarily has voting
power for the election of directors (or persons performing similar
functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any
contingency.
"CHAPTER ONE" shall mean Chapter One of the Texas Credit Code, as
in effect on the date the document using such term was executed.
"CODE" shall mean the Internal Revenue Code of 1986, as amended,
or any successor statute, together with all publicly available written
regulations, rulings and interpretations thereof or thereunder by the
Internal Revenue Service.
"COLLATERAL" shall mean all property at any time subject to the
Security Documents under the Revolving and Term Credit Agreement.
"COMBINED CFADS" shall mean, for any Calculation Period, the sum
of (a) CFADS of the Company and the Restricted Subsidiaries PLUS, at
all times and to the extent all Special Subsidiary Qualifying
Conditions are met, but not at any other time, (b) the product of (1)
the Special Subsidiary Percentage times (2) the CFADS of the Special
Subsidiary, in each case for such Calculation Period.
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<PAGE>
"COMBINED COVERED DEBT" shall mean, as of any date, the sum of
(a) the Covered Debt of the Company and the Restricted Subsidiaries,
PLUS, at all times and to the extent all Special Subsidiary Qualifying
Conditions are met, (b) the product of (1) the Special Subsidiary
Percentage times (2) the Covered Debt of the Special Subsidiary, all
as of such date.
"COMBINED GROUP" shall mean the Company, the Restricted
Subsidiaries and the Special Subsidiary.
"COMBINED RESERVE VALUE" shall mean, as of any date, the sum of
(a) the Reserve Value of the Company and the Restricted Subsidiaries
PLUS, at all times and to the extent all Special Subsidiary Qualifying
Conditions are met, (b) the product of (1) the Special Subsidiary
Percentage times (2) the Reserve Value of the Special Subsidiary, all
as of such date. In calculating the Combined Reserve Value, no more
than 25% of such Combined Reserve Value may be attributable to the
combination of proved nonproducing and proved undeveloped Recognized
Proved Reserves.
"COMMITMENT" shall mean, as to any Bank, the obligation, if any,
of such Bank to incur Letter of Credit Liabilities in an aggregate
principal amount at any one time outstanding up to but not exceeding
such Bank's Commitment Percentage times the difference between (a) the
Available Amount then in effect, and (b) the aggregate unpaid balance
of the Revolving Notes, which amount shall be up to but not exceeding
the amount set forth opposite such Bank's name on the signature pages
hereof under the caption "COMMITMENT" (as the same may be reduced from
time to time pursuant to SECTION 2.3).
"COMMITMENT FEE" shall mean the fee payable by the Company to the
Agent for the account of the Banks in their Commitment Percentages as
provided in SECTION 2.5.
"COMMITMENT PERCENTAGE" shall mean, as to any Bank, the
percentage equivalent of a fraction, the numerator of which is the
amount of such Bank's Commitment as shown opposite such Bank's name on
the signature pages hereof under the caption "Commitment", subject to
reduction and the identification of new Banks pursuant to SECTION
12.6, and the denominator of which is the aggregate amount of the
Commitments of all the Banks.
"CONSOLIDATED NET EARNINGS" shall mean consolidated gross
revenues (including Capital Gains) of the Company and the Restricted
Subsidiaries less all operating and non-operating expenses of the
Company and the Restricted Subsidiaries including all charges of a
proper character (including current and deferred taxes on income,
provision for taxes on unremitted foreign earnings which are included
in gross revenues, and current additions to reserves), but not
including in gross revenues any dividends, distributions or other
payments received by the Company and the Restricted Subsidiaries
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<PAGE>
from the Special Subsidiary or gains resulting from write-up of
assets, any equity of the Company or any Restricted Subsidiary in the
unremitted earnings of any Person which is not a Restricted
Subsidiary, any earnings of any Person acquired by the Company or any
Restricted Subsidiary through purchase, merger or consolidation or
otherwise for any year prior to the year of acquisition, or any
deferred credit representing the excess of equity in any Restricted
Subsidiary at the date of acquisition over the cost of the investment
in such Restricted Subsidiary; all determined in accordance with GAAP.
"CONSOLIDATED NET EARNINGS AVAILABLE FOR FIXED CHARGES" shall
mean for any period the sum of (a) Consolidated Net Earnings for such
period (PROVIDED that the maximum amount of Capital Gains included
therein shall be $3,000,000 through December 31, 1990 and such maximum
amount shall increase by $150,000 on the first day of each year
thereafter); without duplication, (b) cash distributions received
during such period by the Company and the Restricted Subsidiaries on
their Investment in the Special Subsidiary to the extent not
reinvested in the Special Subsidiary; to the extent deducted from
gross revenues in determining Consolidated Net Earnings, (c) all
provisions for any federal, state or other income taxes made by the
Company and the Restricted Subsidiaries during such period; (d) Fixed
Charges of the Company and the Restricted Subsidiaries during such
period; (e) depreciation, depletion and amortization charges of the
Company and the Restricted Subsidiaries for such period, and (f) all
other non-cash charges of the Company and the Restricted Subsidiaries
for such period, all determined in accordance with GAAP.
"CONSOLIDATED NET TANGIBLE ASSETS" shall mean the aggregate net
tangible assets of the Company and the Restricted Subsidiaries,
determined as follows:
(a) The MLP Investment (at such times as SFEP is treated as the
Special Subsidiary) plus the aggregate gross book value of all the
assets of the Company and the Restricted Subsidiaries, both real and
personal, shall be computed, EXCLUDING, however, the following items:
(i) all franchises, licenses, permits, patents, patent
applications, copyrights, trademarks, trade names, goodwill,
experimental or organizational expense, unamortized debt discount and
expense, and all other assets which under GAAP are deemed intangible;
(ii) any reacquired shares or reacquired Debt of the
Company or the Restricted Subsidiaries;
(iii) any write-up of assets made after December 31, 1989;
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<PAGE>
(iv) 50% of the value of all assets of the Company and the
Restricted Subsidiaries acquired after April 1, 1990 which are located
outside the United States of America and Canada and not freely
returnable to the United States of America or Canada, including any
notes or accounts receivable from any debtor having any substantial
part of its business, operations or properties located outside the
United States of America and Canada, except notes or accounts
receivable from such a debtor which arose in the ordinary course of
business of the Company or any Restricted Subsidiary, as the case may
be, to which such notes or accounts receivable are payable and which
otherwise constitute current assets, but only to the extent of an
amount of dollars readily realizable from such notes or accounts
receivable by liquidation either directly or through a currency freely
convertible into dollars; and
(v) all Restricted Investments of the Company and the
Restricted Subsidiaries.
(b) From the gross book value of the tangible assets of the
Company and the Restricted Subsidiaries, determined as provided in the
preceding CLAUSE (a), there shall be deducted the following items:
(i) all reserves for depreciation, depletion, obsolescence
and amortization of the assets of the Company and the Restricted
Subsidiaries (other than assets excluded as provided in the preceding
CLAUSE (a), all proper reserves (other than reserves for deferred
taxes and general contingency reserves and other reserves representing
mere appropriations of surplus) which in accordance with GAAP should
be set aside in connection with the business conducted by them;
(ii) all Current Debt of the Company and the Restricted
Subsidiaries; and
(iii) all other liabilities of the Company and the
Restricted Subsidiaries, including the reduction in equity
attributable to minority interests but excluding deferred taxes,
Funded Debt of the Company and the Restricted Subsidiaries, capital
shares, surplus and general contingency reserves and other reserves
representing mere appropriations of surplus.
(c) In the determination of Consolidated Net Tangible Assets, no
amount shall be included therein on account of any excess cost of
acquisition of shares of any Restricted Subsidiary over the net book
value of the assets of such Restricted Subsidiary attributable to such
shares at the date of such acquisition or on account of any excess of
the net book value of the assets of any Restricted Subsidiary
attributable to any shares of such Restricted Subsidiary at the date
of acquisition of such shares over the cost of acquisition of such
shares.
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<PAGE>
"COVERAGE REPORT" shall mean a report substantially in the form
of SCHEDULE IV setting forth the calculation of the Life-of-Reserves
Coverage Ratio, the Annual Debt Service Coverage Ratio and the
Alternate Annual Debt Service Coverage Ratio.
"COVERED DEBT" shall mean, without duplication, (a) all
obligations for borrowed money; (b) all obligations evidenced by
bonds, debentures, notes or other similar instruments; (c) all
obligations to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course
of business; (d) all Capitalized Lease Obligations; (e) all
obligations in respect of production payments, proceeds production
payments and similar financing arrangements; (f) all reimbursement
obligations and all letter of credit advances with respect to letters
of credit issued for the account of such Person, including the Letter
of Credit Liabilities; (g) surety bonds for environmental purposes;
(h) all obligations of the types described in CLAUSES (a) through (g)
of this definition (collectively, "ORDINARY DEBT") of another Person
secured by a Lien on any property of the Person as to which Covered
Debt is being determined, regardless of whether such Ordinary Debt is
assumed by such Person, and (i) all Ordinary Debt of another Person
guaranteed (but excluding the obligations of the Company and the
Restricted Subsidiaries arising solely by virtue of their serving as
general partner of SFEP) by such Person; PROVIDED that Covered Debt
shall not include Ordinary Debt or any obligation of the types
described in CLAUSES (h) or (i) of this definition which is (1)
non-recourse (either directly or contingently) as to all members of
the Combined Group and (2) secured only by assets which are not
Recognized Proved Reserves.
"CREDIT DOCUMENTS" shall mean this Agreement, all Applications,
all Letters of Credit, the Notice of Entire Agreement, the Revolving
and Term Credit Agreement and all instruments, certificates and
agreements now or hereafter executed or delivered to the Agent or any
Bank pursuant to any of the foregoing.
"CURRENT DEBT" shall mean any obligation for borrowed money (and
any notes payable and drafts accepted representing obligations for
borrowed money) payable on demand or within a period of one year from
the date of the creation thereof and any Guaranty with respect to
Current Debt (of the kind otherwise described in this definition) of
another Person; PROVIDED that any obligation shall be treated as
Funded Debt, regardless of this term, if such obligation is renewable
pursuant to the terms thereof or of a revolving credit or similar
agreement effective for more than one year after the date of the
creation of such obligation, or may be payable out of the proceeds of
a similar obligation pursuant to the terms of such obligation or of
any such agreement.
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<PAGE>
"DEBT" shall mean Funded Debt and/or Current Debt, as the case may be.
"DEBT SERVICE" shall mean, for any Calculation Period, the total
of principal payments in respect of Covered Debt of the Person as to
which Debt Service is to be determined and the total of interest
payments (using, with respect to interest to accrue, the interest
rates set forth in the most recent Approved Assumptions for such
Covered Debt not bearing interest at a fixed rate; if some or all of
such Covered Debt bears interest at one or more fixed rates as of the
date of determination of Debt Service but such Covered Debt will not
bear interest at such fixed rate or rates to the end of such
Calculation Period, then interest payments in respect of Debt Service
with respect to such Covered Debt shall be calculated on the basis of
such fixed rate or rates for such time as the same shall be applicable
to such Covered Debt, and then at the interest rates set forth in the
most recent Approved Assumptions) in respect of Covered Debt of such
Person, in each case paid and scheduled to be paid during such
Calculation Period; PROVIDED that the principal amount of any Covered
Debt of such Person which by its terms matures on a date within such
Calculation Period but which may reasonably be expected to be
reborrowed in a Rollover on such date shall not be deemed, for
purposes of this definition, to be scheduled to be paid on such date;
and PROVIDED FURTHER that for purposes of this definition it shall be
assumed (to the extent relevant with respect to such Person) that (a)
Letters of Credit will be fully drawn upon their respective expiry
dates; (b) other letters of credit issued for the account of such
Person will not be drawn; (c) surety bonds for environmental purposes
issued on behalf of such Person will not be drawn, and (d) the
reimbursement obligations of the Company under the Letter of Credit
Agreement shall be satisfied immediately and considered as a
"principal payment" for purposes of this definition.
"DEFAULT" shall mean an Event of Default or an event which with
notice or lapse of time or both would, unless cured or waived, become
an Event of Default.
"EBITD" shall mean for any period Consolidated Net Earnings for
such period, plus the aggregate amounts deducted in determining
Consolidated Net Earnings in respect of (a) all provisions for any
federal, state or other income taxes made by the Company and the
Restricted Subsidiaries during such period; (b) Fixed Charges of the
Company and the Restricted Subsidiaries during such period; (c)
depreciation, depletion and amortization charges of the Company and
the Restricted Subsidiaries for such period, and (d) all other
non-cash charges of the Company and the Restricted Subsidiaries for
such period, all determined in accordance with GAAP.
"ELIGIBLE ASSIGNEE" means (a) a commercial bank having total
assets in excess of $1,000,000,000 or (b) a finance company, insurance
company, other financial institution or fund, acceptable
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<PAGE>
to the Agent and the Company, which is regularly engaged in making,
purchasing or investing in loans and having total assets in excess of
$1,000,000,000.
"ENGINEERING SHORTFALL" shall mean, during the pendency of a
Default described in SECTION 10.1(e), the amount, if any, by which the
sum of (a) the aggregate outstanding principal balance of the
Revolving Notes PLUS (b) the aggregate Letter of Credit Liabilities
shall exceed the Available Amount at the time of any delivery of (and
as determined in accordance with) an Independent Engineering Report
and its related Coverage Report.
"ENVIRONMENTAL CLAIM" means any claim, demand, action, cause of
action, suit, judgment, governmental or private investigation relating
to remediation or compliance with Applicable Environmental Laws,
proceeding or lien, whether threatened, sought, brought or imposed,
that seeks to recover costs, damages, punitive damages, expenses,
fines, criminal liability, judgments, response costs, investigative
and monitoring costs, abatement costs, attorney's fees, expert's fees
or consultant's fees, or seeks to impose liability regarding the
Company or any of its Subsidiaries, or any of their sites or
properties for violations of Applicable Environmental Laws or for
pollution, contamination, preservation, protection, remediation or
clean up of the air, surface water, ground water, soil or wetlands, or
otherwise in relation to the use, storage, generation, release,
handling or disposal of materials and substances that is regulated by
or subject to Applicable Environmental Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and all rules, regulations and
interpretations by the Internal Revenue Service or the Department of
Labor thereunder.
"ERISA AFFILIATE" shall mean any trade or business (whether or
not incorporated) which on and after December 5, 1990 is under common
control with the Company within the meaning of the regulations under
Section 414 of the Code.
"EVENT OF DEFAULT" shall have the meaning assigned to such term
in SECTION 10.
"EXISTING LETTERS OF CREDIT" shall mean the letters of credit
listed on SCHEDULE IX.
"FDIC" means the Federal Deposit Insurance Corporation or any
entity succeeding to any or all of its functions.
"FED FUNDS RATE" shall mean, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by
-12-
federal funds brokers, as published on the succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Agent from
three federal funds brokers of recognized standing selected by it.
"FIXED CHARGES" shall mean (without duplication) for any period
the sum of interest expense in respect of all Debt of the Person for
which the determination is made (calculated, in the case of Debt which
bears interest at a floating rate, at the rate in effect at the time
of calculation), including imputed interest expense in respect of
Capitalized Lease Obligations.
"FUNDED DEBT" shall mean and include, without duplication, any
obligation (including the current maturities thereof)
(a) payable more than one year from the date of creation thereof
(1) for borrowed money; (2) evidenced by bonds, debentures, notes or
reimbursement obligations in respect of letters of credit or other
similar instruments (other than letters of credit and surety bonds
relating to trade obligations incurred in the ordinary course of
business and includable, under GAAP, in current liabilities on a
balance sheet or in the notes relating thereto); (3) for the payment
of the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business; (4)
constituting Capitalized Lease Obligations; (5) in respect of
production payments, proceeds production payments or similar financing
arrangements; (6) which is, under GAAP, shown on a balance sheet
(after giving effect, in the case of the balance sheet of the Company
or a Restricted Subsidiary, to the eliminating entries, if any, for
the Unrestricted Subsidiaries as a group and the Special Subsidiary)
as long-term debt (excluding provisions for deferred income taxes,
unfunded pension obligations, unfunded liabilities for other
post-employment benefits and other reserves or provisions to the
extent that such reserves or provisions do not constitute an
obligation), or (7) for any item described in any of the foregoing
CLAUSES (1) through (6) which is secured by any Lien on property owned
by the Company or any Restricted Subsidiary, whether or not the
obligations secured thereby shall have been assumed by the Company or
such Restricted Subsidiary; or
(b) payable more than one year from the date of creation
thereof, which under GAAP is shown on the balance sheet as a long-term
liability (EXCLUDING provisions for deferred income taxes, unfunded
pension obligations, unfunded liabilities for other post-employment
benefits and other reserves or provisions to the extent that such
reserves or provisions do not constitute an obligation); or
(c) constituting a Guaranty with respect to Funded Debt (of the
kind otherwise described in CLAUSES (A) and (b) of this
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<PAGE>
definition) of another Person, including any obligation by the Company
or a Restricted Subsidiary for Funded Debt of SFEP or any other
Person, regardless of the percentage of equity interest owned therein
by the Company or a Restricted Subsidiary, by virtue of its capacity
as a general partner of SFEP or such other Person.
"GAAP" shall mean, as to a particular Person, such accounting
practice as, in the opinion of the independent accountants of
recognized national standing regularly retained by such Person and
acceptable to the Agent, conforms at the time to generally accepted
accounting principles, consistently applied. Generally accepted
accounting principles means those principles and practices which are
(a) recognized as such by the Financial Accounting Standards Board;
(b) applied for all periods after the date hereof in a manner
consistent with the manner in which such principles and practices were
applied to the financial statements of the relevant Person dated
December 31, 1991 and for the period then ended, and (c) consistently
applied for all periods after the date hereof so as to reflect
properly the financial condition and results of operations of such
Person.
"GOVERNMENTAL AUTHORITY" shall mean any sovereign governmental
authority, the United States of America, any State of the United
States and any political subdivision of any of the foregoing, and any
agency, instrumentality, department, commission, board, bureau,
central bank, authority, court or other tribunal, in each case whether
executive, legislative, judicial, regulatory or administrative,
having jurisdiction over the Company, any of the Company's
Subsidiaries, any of their respective property, the Agent, the
Co-Agent or any Bank.
"GUARANTY" shall mean and include, without limitation, any
obligation of the Company or a Restricted Subsidiary
(a) constituting a guaranty, endorsement (other than an
endorsement of a negotiable instrument for collection in the ordinary
course of business) or other contingent liability (whether direct or
indirect) in connection with the obligations, stock or dividends of
any Person (other than the Company or a Restricted Subsidiary);
(b) payable under any contract (other than the Tax
Indemnification Agreement and any other tax indemnification or sharing
agreement) providing for the making of loans, advances or capital
contributions to any Person (other than the Company or a Restricted
Subsidiary), or for the purchase of any property from any Person, in
each case in order primarily to enable such Person to maintain working
capital, net worth or any other balance sheet condition or to pay
debts, dividends or expenses;
(c) payable under any contract for the purchase of materials,
supplies or other property or services (other than any natural gas
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<PAGE>
transportation contract or any electrical, water supply, steam
purchase or other utility supply contract) if such contract (or any
related document) requires that payment for such materials, supplies
or other property or services shall be made regardless of whether or
not delivery of such materials, supplies or other property or services
is ever made or tendered; PROVIDED that the exceptions contained in
this CLAUSE (c) shall not apply to any contract for the purchase or
transportation of natural gas where payment is required regardless of
whether the delivery of such natural gas is ever made or tendered,
unless at the time such contract is entered into the aggregate of
payments under such contract and all such existing contracts would not
exceed $20,000,000 in any calendar year based on existing rates and
automatic escalations in such rates under such contracts;
(d) payable under any contract to rent or lease (as lessee) any
real or personal property (other than any oil and gas leases) if such
contract (or any related document) provides that the obligation to
make payments thereunder is absolute and unconditional under
conditions not customarily found in commercial leases then in general
use or requires that the lessee purchase or otherwise acquire
securities or obligations of the lessor; or
(e) payable under any other contract which, in economic effect,
is substantially equivalent to a guarantee for any payment or
performance of an obligation of a Person other than the Company or a
Restricted Subsidiary.
"HIGHEST LAWFUL RATE" shall mean, on any day, the maximum
nonusurious rate of interest permitted for that day by whichever of
applicable federal or Texas law permits the higher interest rate,
stated as a rate per annum. On each day, if any, that Chapter One
establishes the Highest Lawful Rate, the Highest Lawful Rate shall be
the "indicated rate ceiling" (as defined in Chapter One) for that day.
"HYDROCARBONS" shall mean crude oil, condensate, natural gas,
natural gas liquids and associated substances.
"INDEPENDENT ENGINEERING REPORT" shall mean a report prepared by
an Independent Petroleum Engineer which sets forth the gross and net
volume of Hydrocarbons projected to be produced from the Petroleum
Properties, by calendar years, for the remaining economic life of the
Petroleum Properties. The Petroleum Properties of the Special
Subsidiary shall be segregated from the Petroleum Properties of the
other members of the Combined Group, and the Adobe Properties shall be
separately identified. Each Independent Engineering Report shall also
contain a list of Petroleum Properties of the members of the Combined
Group and indicate the Net Oil and Gas Income for each calendar year
attributable thereto, all in reasonable detail. Each such report
shall identify which of the Petroleum Properties covered thereby are
"proved developed
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<PAGE>
producing," "proved developed non-producing" and "proved undeveloped"
(as defined in the "Definitions for Oil and Gas Reserves" as published
by the Society of Petroleum Engineers). Each such report shall be
prepared in accordance with established criteria generally accepted in
the oil and gas industry and standards customarily used by independent
petroleum engineers well regarded in the industry in making reserve
determinations or appraisals, and shall be based on Approved
Assumptions and such other assumptions, estimates and projections as
are fully disclosed in such Independent Engineering Report.
"INDEPENDENT PETROLEUM ENGINEER" shall mean Ryder Scott Company
Petroleum Engineers or another independent petroleum engineer retained
by the Company acceptable to the Required Banks.
"INTEREST RATE PROTECTION AGREEMENTS" shall mean an interest rate
swap agreement, interest rate cap agreement or other similar
arrangement which satisfies all of the following requirements: (a) a
member of the Combined Group is a party to such agreement; (b) the
Company has given evidence (satisfactory to the Agent) of such
agreement to the Agent; (c) the terms and parties to such agreement,
taking into account all similar agreements to which members of the
Combined Group are parties, are satisfactory to the Required Banks;
and (d) such agreement is in full force and effect and has not been
unwound.
"INVESTMENT" shall mean any purchase or other acquisition of the
stock, obligations or securities of, or any interest in, or any
capital contribution, loan or advance to, or any Guaranty in respect
of the obligations of (but excluding the obligations of the Company
and the Restricted Subsidiaries arising solely by virtue of their
serving as general partner of SFEP) any Person, but in any event shall
include as an investment in any Person the amount of all Debt owed by
such Person, and all accounts receivable from such Person which are
not current assets or did not arise from sales to such Person in the
ordinary course of business. As used herein, any capital contribution
of assets by the Company or any Restricted Subsidiary shall be valued
at the book value of such assets as reflected in the consolidated
financial statements of the Company and the Restricted Subsidiaries as
at the end of the quarter ending immediately prior to each
contribution.
"LEGAL REQUIREMENT" shall mean any applicable law, statute,
ordinance, decree, requirement, order, judgment, rule, regulation (or
official interpretation by any Governmental Authority of any of the
foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority, in each case as now or hereafter in effect.
"LETTER OF CREDIT" shall have the meaning ascribed to each term
in SECTION 2.1(a).
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<PAGE>
"LETTER OF CREDIT FEE" shall mean with respect to any Letter of
Credit issued pursuant hereto a fee equal to 1% per annum of the face
amount of each such Letter of Credit issued; PROVIDED, that each
Letter of Credit Fee shall in no event be less than $600.
"LETTER OF CREDIT LIABILITIES" shall mean, at any time and in
respect of Letters of Credit under this Agreement, the sum of (i) the
aggregate amounts then or thereafter available for drawings under such
outstanding Letters of Credit PLUS (without duplication) (ii) the
aggregate unpaid amount of all Reimbursement Obligations at the time
due and payable in respect of previous drawings made under such
Letters of Credit.
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing), any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing
of, or agreement to give, any financing statement under the Uniform
Commercial Code of any jurisdiction or any other type of preferential
arrangement.
"LIFE-OF-RESERVES COVERAGE RATIO" shall mean, as of any date of
determination, the ratio of (a) the Combined Reserve Value to (b) the
Combined Covered Debt, in each case as of such date.
"LOANS" shall mean the loans and Rollover of loans provided for
by the Revolving and Term Credit Agreement.
"MATERIAL ADVERSE CHANGE" shall mean an occurrence of whatever
nature (including any adverse determination in any litigation,
arbitration or governmental investigation or proceeding), which after
taking into account actual insurance coverage and effective
indemnification with respect to such occurrence, (a) has a material
adverse effect on the financial condition, business, operations or
properties of the Company and its Subsidiaries taken as a whole and
(b) impairs in any material respect either (1) the ability of the
Company to perform any of its obligations under the Credit Documents
or (2) the ability of the Banks to enforce any of such obligations or
any of their remedies under the Credit Documents.
"MERGER" shall mean the merger of Adobe into the Company
described in the Registration Statement.
"MLP INVESTMENT" shall mean, at any time, the lesser of (a) the
book value of the Investment of the Company and the Restricted
Subsidiaries in the Special Subsidiary, as determined from the most
recent consolidated balance sheet of the Company or (b) the product of
(1) the average closing price of the publicly traded limited partner
interests of the Special Subsidiary for the 30 days immediately
preceding the date upon which such determination is made multiplied by
(2) the total limited partner interests in the
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<PAGE>
Special Subsidiary owned by the Company and the Restricted
Subsidiaries on the date such determination was made.
"MOST RECENT ENGINEERING REPORT" shall mean, as of any date of
determination, (a) until the first Independent Engineering Report is
delivered pursuant to SECTION 9.1 or SECTION 2.2(d), the Independent
Engineering Report of Ryder Scott Company Petroleum Engineers dated
February 10, 1992; (b) thereafter, the most recent Independent
Engineering Report delivered pursuant to either Section 9.1 or
SECTION 2.2(d) on or prior to such date of determination.
"NET OIL AND GAS INCOME" shall mean, for any calendar year (or
portion thereof) and for any Person, (a) an amount (or, with respect
to any portion of a calendar year, PRO RATA in accordance with the
number of days in such portion of such calendar year) of projected
gross revenues (based on the prices set forth in the Approved
Assumptions) from the sale of Hydrocarbons produced from the
Recognized Proved Reserves to be received, subject to no entitlement
of any other Person but including appropriate adjustments for
over- and under-produced statue, by such Person during such calendar year as
set forth in the Most Recent Engineering Report LESS (b) an amount
(or, with respect to any portion of a calendar year, PRO RATA in
accordance with the number of days in such portion of such calendar
year) of projected royalties and windfall profit, production, ad
valorem, severance and all other similar taxes and operating and
capital expenditures required to be incurred during each calendar year
in order to generate such gross revenues (but not including general
and administrative expenses or principal and interest payable with
respect to Debt), as set forth in the Most Recent Engineering Report.
"NOTICE OF ENTIRE AGREEMENT" shall mean that certain Notice of
Entire Agreement, DTPA Waiver and Release of Claims of even date
herewith between the Company and the Agent.
"OBLIGATIONS" shall mean, as at any date of determination
thereof, the sum of (a) the aggregate principal amount of Loans
outstanding under the Revolving and Term Credit Agreement PLUS (b) the
aggregate amount of the Reimbursement Obligations.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the
name of the Company by its President, one of its Vice Presidents or
its Treasurer.
"OPTIONAL RESERVE REPORT" shall mean the Independent Engineering
Report permitted by Section 2.2(d).
"ORGANIZATIONAL DOCUMENT" shall mean, with respect to a
corporation, the certificate of incorporation, articles of
incorporation and bylaws of such corporation; with respect to a
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<PAGE>
partnership or a limited partnership, the partnership agreement
establishing such partnership; with respect to a joint venture, the
joint venture agreement establishing such joint venture; and with
respect to a trust, the instrument establishing such trust; in each
case including any and all modifications thereof as of the date of the
Credit Document referring to such Organizational Document.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERSON" shall mean and include an individual or legal entity in
the form of a partnership, a joint venture, a corporation, a trust, an
unincorporated organization or a government or any department or
agency thereof. The term "Person" shall not, however, mean and include
an arrangement that is not a separate legal entity such as the legal
arrangement between two or more parties owning interests in the same
property or unit.
"PETROLEUM PROPERTIES" shall mean, at any time and with respect
to any Person, all Recognized Proved Reserves which are (a) owned by
such Person at such time free and clear of any Lien (other than Liens
permitted by SECTION 9.7) and (b) covered in the Most Recent
Engineering Report.
"PLAN" shall mean an employee benefit plan which is covered by
ERISA which is either (a) maintained by the Company or any ERISA
Affiliate for employees of the Company or such ERISA Affiliate or (b)
a multiemployer plan as defined in Section 4001(a)(3) of ERISA to
which (i) the Company, (ii) any ERISA Affiliate or (iii) any trade or
business which was previously under common control with the Company
within the meaning of Section 414 of the Code (but only with respect
to such period of common control with the Company), has an obligation
to make contributions (or with respect to (iii) above, had an
obligation to make contributions during any portion of time that the
limitations period under Section 4301(f) of ERISA with respect to such
obligation has not expired).
"POST-DEFAULT RATE" shall mean, in respect of any principal of
any Reimbursement Obligation or any other amount payable by the
Company under any Credit Document which is not paid when due (whether
at stated maturity, by acceleration, or otherwise), a rate per annum
on each day during the period commencing on the due date until such
amount is paid in full equal to the lesser of (a) the Alternate Base
Rate as in effect for that day PLUS the Applicable Margin in effect
for that day plus 2% or (b) the Highest Lawful Rate for that day.
"PRELIMINARY AVAILABLE AMOUNT" shall mean (a) $20,000,000 on and
after the date hereof and prior to February 28, 1994, (b) $5,000,000
on and after February 28, 1994 and prior to December 31, 1994, and (c)
notwithstanding the foregoing, $0 on and after the
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Termination Date (as defined in the Revolving and Term Credit
Agreement).
"PRICE PROTECTION AGREEMENT" shall mean a product price
protection agreement which satisfies all of the following
requirements: (a) a member of the Combined Group is a party to such
agreement; (b) the Company has given evidence (satisfactory to the
Agent) of such agreement to the Agent; (c) the terms and parties to
such agreement, taking into account all similar agreements to which
members of the Combined Group are parties, are satisfactory to the
Required Banks; and (d) such agreement is in full force and effect and
has not been unwound. The agreements described on SCHEDULE III hereto
are Price Protection Agreements for purposes of this Agreement as of
the date hereof.<PAGE>
"PRIME RATE" shall mean, as of a particular date, the prime rate
most recently announced by TCB and thereafter entered in the minutes
of TCB's Loan and Discount Committee, automatically fluctuating upward
and downward with and at the time specified in each such announcement
without special notice to the Company or any other Person, which prime
rate may not necessarily represent the lowest or best rate actually
charged to a customer.
"PRINCIPAL OFFICE" shall mean the principal banking building of
the Agent, presently located at 712 Main Street, Houston, Harris
County, Texas 77002.
"PROJECTED G & A EXPENSE" shall mean, for any Person, the
appropriate projected annual levels of general and administrative
expense and district overhead to be used in the calculation of CFADS
of such Person, as mutually agreed among the Agent, the Co-Agent and
the Company as soon as practical after the delivery of the Most Recent
Engineering Report.
"PROJECTED INCOME TAX EXPENSE" shall mean, for any Person, the
appropriate projected annual levels of income tax expense to be used
in the calculation of CFADS of such Person, as determined by the Agent
after consultation with the Company and based on such Person's current
tax position projected into the future and the Most Recent Engineering
Report; the Agent will give written notice of the Projected Income Tax
Expense of each such Person to the Company as soon as practical after
the delivery of the Most Recent Engineering Report.
"PROVED RESERVES" shall mean reserves of Hydrocarbons in place
which are estimated to be recoverable with reasonable certainty and
are consistent with the "Definitions for Oil and Gas Reserves" as
published by the Society of Petroleum Engineers.
"QUARTERLY DATES" shall mean the last day of each March, June,
September and December; PROVIDED that if any such date is not a
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<PAGE>
Business Day, the relevant Quarterly Date shall be the next succeeding
Business Day.
"RECOGNIZED PROVED RESERVES" shall mean Proved Reserves if (a)
the designation of such Proved Reserves was by an Independent
Petroleum Engineer; (b) a member of the Combined Group owns such
Proved Reserves; (c) the estimates with respect to such Proved
Reserves were made on the basis of the most recent Approved
Assumptions, and (d) either (1) such Proved Reserves are located
onshore or offshore the United States or Canada or (2) the Required
Banks have consented to the inclusion of such Proved Reserves in the
Recognized Proved Reserves.
"REGISTRATION STATEMENT" shall mean the Registration Statement on
Form S-4 filed by the Company with the Securities and Exchange
Commission and declared effective by the Commission on February 27,
1992, true and correct copies of which have been delivered to the
Banks.
"REGULATION D" shall mean Regulation D of the Board as the same
may be amended or supplemented from time to time and any successor or
other regulation relating to reserve requirements.
"REGULATORY CHANGE" shall mean, with respect to any Bank, any
change on or after the date of this Agreement in any Legal Requirement
(including Regulation D) or the adoption or making on or after such
date of any official interpretation, directive or request applying to
a class of banks including such Bank under any Legal Requirement
(whether or not having the force of law) by any Governmental Authority
charged with the interpretation or administration thereof.
"REIMBURSEMENT OBLIGATIONS" shall mean, at any date, the
obligations of the Company then outstanding in respect of Letters of
Credit under this Agreement to reimburse the Banks for the amount paid
by such Banks in respect of any drawing under such Letters of Credit
or otherwise owing under this Agreement.
"REQUIRED BANKS" shall mean Banks having equal to or greater than
66-2/3% of the Commitments.
"REQUIRED RATIOS" shall mean (a) an Annual Debt Service Coverage
Ratio of at least 1.15 to 1; (b) an Alternate Annual Debt Service
Coverage Ratio of at least 1.0 to 1, and (c) a Life-of-Reserves
Coverage Ratio of at least 1.75 to 1.
"REQUIRED RESERVE REPORT" shall mean each Independent Engineering
Report required to be provided pursuant to SECTION 9.1(a).
"RESERVE VALUE" shall mean, as of any date and with respect to a
Person, the net present value (discounted at the discount rate
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set forth in the most recent Approved Assumptions) of projected Net
Oil and Gas Income (calculated on the basis of the Most Recent
Engineering Report) attributable to the Petroleum Properties of such
Person for the period commencing on such date and ending at the end of
the economic life of such Petroleum Properties.
"RESTRICTED INVESTMENT" shall mean any Investment other than:
(a) Investments in the Company or a Restricted Subsidiary or in
an entity which immediately after or concurrently with such Investment
will be a Restricted Subsidiary;
(b) Investments in the Special Subsidiary;
(c) readily marketable direct full faith and credit obligations
of the United States of America or any agency thereof or obligations
unconditionally guaranteed by the full faith and credit of the United
States of America or any agency thereof, due within three years of the
making of the Investment;
(d) readily marketable direct obligations of any State of the
United States of America or any political subdivision of any such
State having a credit rating of at least "Aa" by Moody's Investors
Service, Inc ("MOODY'S") or "AA" by Standard & Poor's Corporation
("S&P"), in each case due within three years from the making of the
Investment;
(e) domestic and Eurodollar certificates of deposit maturing
within one year from the making of the Investment issued by, deposits
in, Eurodollar deposits through, and banker's acceptances of,
commercial banks incorporated under the laws of the United States or
any State thereof, Canada, Japan or any Western European country, and
having combined capital, surplus and undivided profits of at least
$100,000,000;
(f) readily marketable commercial paper of any commercial bank or
corporation doing business and incorporated under the laws of the
United States of America or any State thereof having a credit rating
of at least "A-l" from S&P or at least "P-1" by Moody's, in each case
due within 270 days after the making of the Investment;
(g) money market investment programs which primarily invest in
the types of Investments described in CLAUSES (C) through (F) above
and which are classified as a current asset in accordance with GAAP
and which are administered by broker-dealers acceptable to the Agent;
(h) repurchase agreements with major dealers or banks, pursuant
to which physical delivery of the respective securities is required,
except for obligations of the U.S. Treasury to be delivered through
the Federal Reserve book entry system;
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<PAGE>
(i) travel and other like advances to officers and employees of
the Company or a Restricted Subsidiary in the ordinary course of
business; or
(j) Investments not described in CLAUSES (A) through (I) of this
definition in an aggregate principal amount not to exceed $10,000,000.
"RESTRICTED SUBSIDIARY" shall mean each Subsidiary of the Company
designated as a Restricted Subsidiary on SCHEDULE I, together with any
Subsidiary hereafter created or acquired and, at the time of creation
or acquisition, not designated by the Board of Directors of the
Company as an Unrestricted Subsidiary. Any Subsidiary of the Company
designated as an Unrestricted Subsidiary for purposes of this
Agreement may thereafter be designated a Restricted Subsidiary upon 30
days' prior written notice to the Banks if, at the time of such
designation and after giving effect thereto and to the concurrent
retirement of any Debt, (a) no Default shall have occurred and be
continuing; (b) such Subsidiary is organized under the laws of the
United States or any state thereof; (c) 80% or more of each class of
voting stock outstanding of such Subsidiary is owned by the Company or
a wholly owned Restricted Subsidiary, and (d) such Subsidiary could
incur at least $1.00 of additional Funded Debt without violation of
SECTION 9.7(b)(4).
"REVOLVING AND TERM CREDIT AGREEMENT" shall mean that certain
Revolving and Term Credit Agreement dated as of May 20, 1992, among
the Company, the Agent, the Co-Agent, and the Banks.
"REVOLVING COMMITMENTS" shall have the meaning ascribed to such
term in the Revolving and Term Credit Agreement.
"REVOLVING LOAN" shall mean a Loan made pursuant to SECTION
2.1(b) of the Revolving and Term Credit Agreement.
"REVOLVING NOTES" shall mean the Revolving Notes of the Company
under (and as defined in) the Revolving and Term Credit Agreement.
"ROLLOVER" shall mean any reborrowing from a lender of a loan
which is prepaid, or by its terms is due, to such lender on the date
of such reborrowing if the instrument or agreement governing such Debt
specifically contemplates the periodic prepayment or repayment and
simultaneous reborrowing of such loan, PROVIDED that such reborrowing
results in no net increase in the aggregate outstanding principal
balance of such loan; without limiting the generality of the
foregoing, "Rollover" shall include specifically the repayment of a
Loan at the end of the Interest Period applicable thereto and the
simultaneous reborrowing by the Company of a new Loan in the same
principal amount.
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<PAGE> "SALE AND LEASEBACK TRANSACTION" shall mean any arrangement in
which the Company or a Restricted Subsidiary shall sell its buildings,
equipment or surface real properties, which was acquired or occupied
by the Company or a Restricted Subsidiary for more than 180 days, and
within 180 days from the date of such sale, enter into a lease as
lessee of such buildings, equipment or surface real properties having
a term (including terms of renewal or extension at the option of the
lessor or the lessee, whether or not such option has been exercised)
expiring three or more years after the commencement of the initial
term.
"SECURED DEBT" shall mean all Funded Debt that is secured by a
Lien permitted by SECTION 9.7(a)(13) on any property or assets of the
Company or any Restricted Subsidiary.
"SERIAL NOTE AGREEMENT" shall mean that certain Note Agreement
dated as of March 31, 1990, evidencing the issuance of Series A, B, C,
D, E, F and G Notes by the Company in the aggregate amount of
$365,000,000, as amended from time to time.
"SFEP" shall mean, collectively, Santa Fe Energy Partners, L.P.
and Santa Fe Energy Operating Partners, L.P., each a Delaware limited
partnership.
"SFP GROUP" shall mean Santa Fe Pacific Corporation and its
affiliated group of corporations which together constitute an
affiliated group of corporations within the meaning of Section 1504(a)
of the Code.
"SPECIAL DEBT" shall mean the sum of (a) Attributable Debt;
(b) Secured Debt, and (c) Funded Debt of the Restricted Subsidiaries.
"SPECIAL SUBSIDIARY" shall mean SFEP until (a) the Company
designates SFEP a Restricted Subsidiary pursuant to the terms of the
Serial Note Agreement or (b) the Company designates or continues to
designate SFEP as an Unrestricted Subsidiary subsequent to the
acquisition by the Company and the Restricted Subsidiaries of all of
the outstanding limited partnership interests in SFEP.
"SPECIAL SUBSIDIARY PERCENTAGE" shall mean, as of any date, the
percentage ownership interest of the Company and the Restricted
Subsidiaries in the Special Subsidiary on such date.
"SPECIAL SUBSIDIARY QUALIFYING CONDITIONS" shall mean all of the
following conditions: (a) the Company or a Restricted Subsidiary
owns more than 50% of the outstanding indicia of equity rights issued
by Santa Fe Energy Partners, L.P. and serves as the sole managing
general partner of Santa Fe Energy Partners, L.P.; (b) Santa Fe
Energy Partners, L.P. owns more than 50% of the outstanding indicia of
equity rights issued by Santa Fe Energy
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<PAGE>
Operating Partners, L.P.; (c) the Company or a Restricted Subsidiary
serves as the sole managing general partner of Santa Fe Energy
Operating Partners, L.P., and (d) both Santa Fe Energy Partners, L.P.
and Santa Fe Energy Operating Partners, L.P. are permitted (by
applicable law and applicable contract) to make distributions to their
partners.
"SPIN-OFF" shall mean (a) the distribution, by dividend to the
stockholders of Santa Fe Pacific Corporation of the shares of capital
stock of the Company owned by Santa Fe Pacific Corporation, which
distribution was commenced on December 4, 1990, and (b) the
distribution by SFP Properties, Inc. to Santa Fe Pacific Corporation
of the capital stock of the Company that was made on December 27,
1989.
"SPRINGING LIEN" shall mean the Liens on real property of SFEP
that come into existence at any time SFEP is a Restricted Subsidiary
pursuant to section 5.08(b) or 5.11 of the Credit Agreement (the
"SPRINGING LIEN AGREEMENT") dated as of June 30, 1987 among Santa Fe
Energy Operating Partners, L.P., the lenders listed on the signature
pages thereof and Morgan Guaranty Trust Company of New York, as the
Agent, as the same may be amended, PROVIDED that (a) the Debt under
the Springing Lien Agreement is not increased, extended or renewed and
(b) the Springing Lien Agreement is not amended in any way which would
increase the likelihood or potential circumstances under which such
Liens may arise; if either clause of the foregoing proviso is
violated, then such Liens shall not be "Springing Liens" for purposes
of this Agreement.
"SUBSIDIARY" shall mean, with respect to any Person (the
"PARENT"), any corporation or entity, a majority of the shares of
voting stock (or in the case of an entity which is not a corporation,
of the equity interests that provide the power to manage or direct the
management of such entity) of which is at the time any determination
is being made, owned, directly or indirectly, by the parent.
"TAX ALLOCATION AGREEMENTS" shall mean those nine certain
agreements among the SFP Group, dated as of January 1, 1990 unless
otherwise specified in this definition and styled as follows:
(a) Agreement for the Allocation of the Combined Utah Franchise Tax
Liability; (b) Agreement for the Allocation of the Combined Oregon
Excise Tax Liability; (c) Agreement for the Allocation of the
Consolidated New Mexico Income Tax Liability; (d) Agreement for the
Allocation of the Combined Kansas Income Tax Liability; (e) Agreement
for the Allocation of the Combined Illinois Income Tax Liability; (f)
Agreement for the Allocation of the Combined California Franchise Tax
Liability; (g) Agreement for the Allocation of the Combined Arizona
Income Tax Liability; (h) Agreement Concerning Taxes, and (i)
Agreement for the Allocation of the Consolidated Federal Income Tax
Liability Among the Members of
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<PAGE>
the Santa Fe Southern Pacific Corporation Affiliated Group, dated as
of January 1, 1987.
"TAX INDEMNIFICATION AGREEMENT" shall mean any agreement pursuant
to which the Company agrees to indemnify Santa Fe Pacific Corporation
or any member of the SFP Group from and against any and all federal,
state or local taxes, interest, penalties or additions to tax imposed
upon or incurred by the SFP Group or any member thereof as a result of
the Spin-Off to the extent specified in any such agreement.
"TERMINATION DATE" shall mean the earliest of (a) the date
determined by the Agent pursuant to SECTION 10.1, (b) the date the
Commitments are terminated by the Company pursuant to SECTION 2.3, or
(c) May 18, 1994.
"TEXAS CREDIT CODE" shall mean Title 79, Revised Civil Statutes
of Texas, 1925, as amended.
"UNFUNDED LIABILITIES" shall mean, with respect to any Plan, at
any time, the amount (if any) by which (a) the present value of all
benefits under such Plan exceeds (b) the fair market value of all Plan
assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan (in accordance with GAAP), but
only to the extent that such excess represents a potential liability
of the Company or any ERISA Affiliate to the PBGC or a Plan under
Title IV of ERISA.
"UNRESTRICTED SUBSIDIARY" shall mean each Subsidiary of the
Company designated as an Unrestricted Subsidiary on SCHEDULE I,
together with any Subsidiary of the Company which is hereafter
designated by the Board of Directors of the Company as an Unrestricted
Subsidiary. Unless designated as a Restricted Subsidiary after the
date hereof, SFEP shall be treated hereunder as an Unrestricted
Subsidiary except as SFEP is otherwise treated hereunder as a Special
Subsidiary. Any Subsidiary may be designated an Unrestricted
Subsidiary upon 30 days' prior written notice to the Banks if, at the
time of such designation and after giving effect thereto and to the
concurrent retirement of any Debt, (a) no Default shall have occurred
and be continuing; (b) such Subsidiary does not own, directly or
indirectly, any Funded Debt or capital stock of the Company or a
Restricted Subsidiary, and (c) the Company could incur at least $l.00
of additional Funded Debt without violation of SECTION 9.7(b)(3).
"UNUSED COMMITMENT" shall mean, on any date, the difference of
(a) the Available Amount minus (b) the sum of (1) the aggregate
outstanding principal balance of the Revolving Notes plus (2) the
Letter of Credit Liabilities, all determined on such date.
1.2 ACCOUNTING TERMS AND DETERMINATIONS. Except where
specifically otherwise provided:
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(a) The symbol "$" and the word "dollars" shall mean lawful
money of the United States of America.
(b) Any accounting term not otherwise defined shall have the
meaning ascribed to it under GAAP.
(c) Unless otherwise expressly provided, any accounting concept
and all financial covenants shall be determined on a consolidated
basis, and financial measurements shall be computed without
duplication.
(d) Wherever the term "including" or any of its correlatives
appears in the Credit Documents, it shall be read as if it were
written "including (by way of example and without limiting the
generality of the subject or concept referred to)".
(e) Wherever the word "herein" or "hereof" is used in any Credit
Document, it is a reference to that entire Credit Document and not
just to the subdivision of it in which the word is used.
(f) References in any Credit Document to Section numbers are
references to the Sections of such Credit Document.
(g) References in any Credit Document to Exhibits, Schedules,
Annexes and Appendices are to the Exhibits, Schedules, Annexes and
Appendices to such Credit Document, and they shall be deemed
incorporated into such Credit Document by reference.
(h) Any term defined in the Credit Documents which refers to a
particular agreement, instrument or document shall also mean, refer to
and include all modifications, amendments, supplements, restatements,
renewals, extensions and substitutions of the same; PROVIDED that
nothing in this subsection shall be construed to authorize any such
modification, amendment, supplement, restatement, renewal, extension
or substitution except as may be permitted by other provisions of the
Credit Documents.
(i) All times of day used in the Credit Documents mean local
time in Houston, Texas.
(j) Defined terms may be used in the singular or plural, as the
context requires.
Section 2. COMMITMENTS.
2.1 LETTERS OF CREDIT. (a) COMMITMENTS. Subject to the terms
and conditions of this Agreement, the Agent agrees, upon receipt by
Agent of an Application therefor, to issue, and each Bank severally
agrees to purchase from the Agent a participation in (according to
such Bank's Commitment Percentage), letters of credit containing such
provisions not inconsistent with the terms of this Agreement as the
Company may reasonably request and such provisions
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<PAGE>
not inconsistent with the terms of this Agreement as the Banks may
reasonably require (together with the Existing Letters of Credit, the
"LETTERS OF CREDIT") for the account of the Company and on behalf of
the Company, or for the joint and several account of and on behalf of
the Company and one or more of its Subsidiaries, as follows. From time
to time on or after the conditions herein set forth to issue such
Letters of Credit have been satisfied, and prior to the Termination
Date, the Agent shall issue and/or may have outstanding Letters of
Credit under this SECTION 2.1 in an aggregate principal amount at any
one time outstanding (including all Letter of Credit Liabilities at
such time) up to but not exceeding the lesser of (1) $15,000,000 (as
adjusted downward from time to time in accordance herewith) or (2) the
Available Amount less the aggregate unpaid principal balance of the
Revolving Notes; PROVIDED, that the aggregate Letter of Credit
Liabilities at any one time outstanding together with the aggregate
principal amount of Revolving Loans at any time outstanding shall
never exceed the Available Amount and PROVIDED, that anything to the
contrary in this Agreement notwithstanding, the Agent shall have no
obligation to issue any Letter of Credit on or after the Termination
Date. Upon the date of the issuance of a Letter of Credit on or after
the date hereof, the Agent 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 Agent, a participation, to the extent of such Bank's
Commitment Percentage, in such Letter of Credit and the related Letter
of Credit Liabilities. No Letter of Credit issued pursuant to this
Agreement shall have an expiry date later than one year from date of
issuance. Each Bank has heretofore purchased participations in each of
the Existing Letters of Credit and the related Letter of Credit
Liabilities, to the extent of such Bank's Commitment Percentage. Such
participations are hereby ratified and confirmed and made subject
hereto. All provisions of this Agreement applicable to participations
in Letters of Credit hereunder shall be deemed to apply to
participations in the Existing Letters of Credit.
(b) ADDITIONAL PROVISIONS. The following additional provisions
shall apply to each Letter of Credit:
(i) The Company shall give the Agent and each other Bank at
least five Business Days' irrevocable prior notice (effective upon
receipt) specifying the date such Letter of Credit is to be issued and
describing the proposed terms of such Letter of Credit and the nature
of the transaction proposed to be supported thereby. The Company shall
furnish such additional information regarding such transaction as the
Agent may reasonably request. Upon receipt of such notice, the Agent
shall promptly notify each Bank of such Bank's Commitment Percentage
of the amount of the proposed Letter of Credit and not later than two
Business Days prior to the requested issuance date for such Letter of
Credit shall furnish to each Bank and the Company a proposed form of
an Application for
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<PAGE>
such Letter of Credit. The issuance by the Agent of each Letter of
Credit shall, in addition to the conditions precedent set forth in
SECTION 7, be subject to the conditions precedent that such Letter of
Credit shall be in such form and contain such terms as shall be
reasonably satisfactory to the Agent and that the Company shall have
executed and delivered to the Agent an Application and such other
instruments and agreements relating to such Letter of Credit not
inconsistent with terms of this Agreement as the Agent shall have
reasonably requested and are not inconsistent with the terms of this
Agreement.
(ii) No Letter of Credit may be issued if after giving effect
thereto the sum of (a) the aggregate outstanding principal amount of
the Revolving Loans plus (b) the aggregate Letter of Credit
Liabilities would exceed the Available Amount. On each day during the
period commencing with the issuance of any Letter of Credit and until
such Letter of Credit shall have expired or been terminated, the
Revolving 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 amount then or thereafter available for drawings
under such Letter of Credit.
(iii) In consideration of the issuance of each Letter of Credit
the Company agrees to pay to the Agent, for the ratable benefit of the
Banks, the Letter of Credit Fee. The Letter of Credit Fee shall be
payable concurrently with the issuance of each such Letter of Credit
and shall be separate from and in addition to interest on any
Reimbursement Obligation. The Agent will pay to each Bank, promptly
after receiving any payment in respect of Letter of Credit Fees, an
amount equal to such Bank's Commitment Percentage of such Letter of
Credit Fees.
(iv) Upon receipt from the beneficiary of any Letter of Credit
of any demand for payment thereunder, the Agent shall promptly notify
the Company and each Bank as to the amount to be paid as a result of
such demand and the payment date. If at any time the Agent shall have
made a payment to a beneficiary of a Letter of Credit in respect of a
drawing or in respect of an acceptance created in connection with a
drawing under such Letter of Credit, each Bank will pay to the Agent
immediately upon demand (or, if such demand is made after 1:00 p.m.,
on the next succeeding Business Day) by the Agent at any time during
the period commencing after such payment until reimbursement thereof
in full by the Company, an amount equal to such Bank's Commitment
Percentage of such payment, together with interest on such amount for
each day from the later of (x) the date such payment is due as
provided in the preceding sentence or (y) the date such payment is
made under such Letter of Credit to the date of payment by such Bank
of such amount at a rate of interest per annum equal to the Fed Funds
Rate for such period. No interest shall be due from any Bank that
makes full payment to the Agent on the date such payment is due.
Nothing herein shall be deemed to require any Bank to pay to the Agent
any
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<PAGE>
amount as reimbursement for any payment made by the Agent to acquire
(discount) for its own account prior to maturity thereof any
acceptance created under a Letter of Credit.
(v) The Company shall be irrevocably and unconditionally
obligated forthwith to reimburse the Agent for the account of each
Bank for any amount paid by the Agent or such Bank upon any drawing
under any Letter of Credit, without presentment, demand, protest or
other formalities of any kind all of which are hereby expressly waived
by the Company. Each drawing under any Letter of Credit shall bear
interest at the Post-Default Rate until the Company shall have made
reimbursement for such drawing. If the Company shall fail to make
reimbursement for any such drawing prior to noon on the second
Business Day after such notice is given, the Agent may in its
discretion and without the consent of (but with concurrent notice to)
the Company effect such reimbursement of any Letter of Credit, subject
to the satisfaction of the conditions in SECTION 7 of the Revolving
and Term Credit Agreement and to the existence of Revolving
Commitments, by borrowing of Revolving Loans and the application of
the proceeds thereof to the related Reimbursement Obligations. The
Reimbursement Obligations shall survive the Termination Date and the
termination of this Agreement. The Agent will pay to each Bank such
Bank's Commitment Percentage of all amounts received from the Company
for application in payment, in whole or in part, of the Reimbursement
Obligation in respect of any Letter of Credit, but only to the extent
such Bank has made payment to the Agent in respect of such Letter of
Credit pursuant to CLAUSE (iv) above. Nothing herein shall be deemed to
require the Agent to pay to any Bank any part of the proceeds of
disposition (rediscount) by the Agent for its own account to any other
Person of any acceptance created under a Letter of Credit which is
acquired (discounted) by the Agent prior to the maturity thereof or to
require any Bank to reimburse the Agent for the consequences of the
Agent's own gross negligence or willful misconduct.
(vi) The obligations of the Company to pay Reimbursement
Obligations under this Agreement shall be absolute, unconditional and
irrevocable and shall be paid or performed strictly in accordance with
the terms of this Agreement under all circumstances whatsoever,
including, without limitation, the following circumstances:
(a) any lack of legality, validity, regularity or
enforceability of this Agreement, any Letter of Credit, any
Application or any agreement or document related to any of the
foregoing;
(b) any amendment or waiver of (including any default), or
any consent to departure from, any Letter of Credit, this Agreement,
any Application or any agreement or document related to any of the
foregoing;
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<PAGE>
(c) the existence of any claim, set-off, defense or other
rights which the Company may have at any time against any beneficiary
or any transferee of any Letter of Credit (or any Persons or entities
for which such beneficiary or any such transferee may be acting), the
Agent, any Bank or any other Person, whether in connection with this
Agreement, any Letter of Credit, any Application or any agreement or
document related to any of the foregoing, the transactions
contemplated hereby or any unrelated transaction;
(d) any statement, certificate, draft or any other document
presented under any Letter of Credit proves to have been forged,
fraudulent, invalid or insufficient in any respect or any statement
therein proves to have been untrue or inaccurate in any respect
whatsoever;
(e) payment by the Agent under any Letter of Credit against
presentation of a draft or certificate which appears on its face to
comply but does not in fact comply with the terms of such Letter of
Credit;
(f) any defense based upon the failure of any beneficiary
or any transferee to receive all or any part of the proceeds of a draw
under any Letter of Credit transmitted by the Agent, or any
non-application or misapplication by any beneficiary or other
transferee of the proceeds of demand for payment under any Letter of
Credit; and
(g) any bankruptcy, insolvency, reorganization,
arrangement, assignment for the benefit of creditors, readjustment of
debt, dissolution, liquidation or other similar event with respect to
the Company.
PROVIDED, that no such payment shall impair any claim the Company may
have against the Agent or any Bank.
(c) ILLEGALITY. In the event that any restriction or limitation
is imposed upon or determined or held to be applicable to the Agent,
any Bank or the Company by, under or pursuant to any Legal
Requirement, which in the reasonable judgment of the Agent or any Bank
would prevent the Agent or such Bank from legally incurring liability
under or in respect of a Letter of Credit issued or proposed to be
issued hereunder, then the Agent shall give prompt written notice
thereof to the Company, whereupon the Agent and the Bank or Banks
affected shall have no obligation to issue or purchase participations
in any such Letter of Credit.
2.2 AVAILABLE AMOUNT
(a) Concurrently with the delivery of each Independent
Engineering Report and related Coverage Report required or permitted
hereby, there shall be determined, based on the Most
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<PAGE>
Recent Engineering Report and Approved Assumptions, the total maximum
amount of Revolving Loans and Letters of Credit to be available to the
Company hereunder without violation of the Required Ratios. Upon each
such delivery, the Company may by notice to the Co-Agents designate as
the Available Amount any amount (not to exceed $50,000,000) equal to
or less than such total maximum amount. The Available Amount so
designated shall remain in effect as the Available Amount until the
next determination under this SECTION 2.2. If no different amount is
designated in accordance with this SECTION 2.2, the Available Amount
shall be the lesser of (a) the Preliminary Available Amount then in
effect or (b) such total maximum amount.
(b) Notwithstanding anything herein to the contrary, (1) no
Bank shall be required to have aggregate Letters of Credit Liabilities
at any one time outstanding in excess of such Bank's Commitment
Percentage of the lesser of (x) $15,000,000 and (y) the difference
between (i) the Available Amount and (ii) the aggregate Revolving
Loans, and (2) if a Bank fails to participate in a Letter of Credit as
and when required hereunder and the Company subsequently makes a
repayment on the Reimbursement Obligations with respect to such Letter
of Credit, such repayment shall be split among the non-defaulting
Banks ratably in accordance with their respective Commitment
Percentages until each Bank has its Commitment Percentage of all of
the outstanding Reimbursement Obligations, and the balance of such
repayment shall be divided among all of the Banks in accordance with
their respective Commitment Percentages.
(c) Notwithstanding anything in this Agreement to the
contrary, the Agent shall not be required to issue any Letter of
Credit during the existence of an Engineering Shortfall.
(d) The Company may from time to time at its option,
exercisable by giving written notice to the Co-Agents not more often
than once in any Calculation Period, provide to the Co-Agents an
Independent Engineering Report. Upon the receipt of such notice, the
Co-Agents shall consult with the Company to determine new Approved
Assumptions, which shall be furnished to the Banks by a notice as
provided in the definition of "Approved Assumptions" and shall be
subject to the proviso therein. The Optional Reserve Report shall be
based on the new Approved Assumptions and shall be accompanied by a
Coverage Report as of the date such Report is furnished. The Annual
Debt Service Coverage Ratio, the Alternate Annual Debt Service
Coverage Ratio and the Life-of-Reserves Coverage Ratio shall each be
redetermined in accordance with this Agreement on the basis of each
such Optional Reserve Report and Coverage Report, and the Available
Amount recalculated as provided in this SECTION 2.2.
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(e) Notwithstanding any other provision of this Agreement
to the contrary, should both (x) the Company at any time designate as
the Available Amount an amount less than the maximum amount then
offered to it as the Available Amount by the Co-Agents and (y) as a
result the Company shall obtain the release of any Mortgaged
Properties under the Revolving and Term Credit Agreement, the
Available Amount may never thereafter exceed the amount so designated
by the Company.
2.3 REDUCTIONS AND CHANGES OF COMMITMENTS.
(a) MANDATORY. On the Termination Date the aggregate Commitments
shall be terminated in their entirety.
(b) THE COMPANY'S OPTION. The Company shall have the right to
terminate or reduce the unused portion of the Commitments at any time
or from time to time; PROVIDED that: (i) the Company shall give notice
of each such termination or reduction to the Agent as provided in
SECTION 5.5; (ii) each such partial reduction shall be in minimum
increments equal to $5,000,000; and (iii) the Company may not cause
the Available Amount to be less than the aggregate principal amount of
the Revolving Loans then outstanding plus the Letter of Credit
Liabilities then outstanding. Any voluntary reduction in the Available
Amount prior to any scheduled reduction in the Available Amount shall
not affect the Available Amount after such scheduled reduction date
unless such voluntarily reduced Available Amount is less than the
amount scheduled to be the Available Amount after such scheduled
reduction date, in which case the Available Amount after such
scheduled reduction date shall be no greater than such voluntarily
reduced Available Amount.
2.4 SEVERAL OBLIGATIONS. The failure of any Bank to participate
in any Letter of Credit shall not relieve any other Bank of its
obligation to participate in any Letter of Credit (the face amount of
which shall be reduced dollar for dollar by the amount of the share of
the Bank that failed to participate in such Letter of Credit) on such
date, but neither the Agent nor any Bank shall be responsible for the
failure of any other Bank to participate in any Letter of Credit.
2.5 FEES. In consideration of the Commitments, the Company shall
pay to the Agent for the account of each Bank in accordance with its
Commitment Percentage commitment fees (the "COMMITMENT FEES") for the
period from the date of the execution of this Agreement to and
including the earlier of the date the Commitments are terminated or
the Termination Date at a rate per annum equal to 1/2% of the Unused
Commitment. The Company shall be entitled to credit on the Commitment
Fees any amount paid pursuant to SECTION 2.3 of the Revolving and Term
Credit Agreement. The Commitment Fees shall be computed for each day
and shall be based on the Unused Commitment for such day. Accrued
Commitment Fees shall be payable in arrears on the date of the initial
Letter of
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Credit, within three days after demand therefor on or about the
Quarterly Dates, and within three days after demand therefor on or
about the Termination Date. All past due Commitment Fees shall bear
interest at the Post-Default Rate. Upon receipt, the Agent shall
disburse the Commitment Fees to the Banks in accordance with their
Commitment Percentages.
Section 3. PREPAYMENTS.
3.1 (a) COMMITMENT AMOUNT. The Company shall from time to time
on demand by the Agent prepay the Revolving Loans or reduce Letter of
Credit Liabilities in such amounts as shall be necessary so that at
all times the aggregate outstanding principal amount of all Revolving
Loans and all Letter of Credit Liabilities hereunder shall not be in
excess of the aggregate of the Revolving Commitments and the
Commitments. Any such payment shall be allocated between Revolving
Loans, Letter of Credit Liabilities (and if to Letter of Credit
Liabilities, first, to Reimbursement Obligations) and other
obligations as the Company may elect.
(b) AVAILABLE AMOUNT. The Company shall from time to time on
demand by the Agent and on the Termination Date prepay the Revolving
Loans or reduce Letter of Credit Liabilities in such amounts as shall
be necessary so that at all times the aggregate outstanding principal
amount of all Revolving Loans and all Letter of Credit Liabilities of
the Company hereunder shall be less than or equal to the Available
Amount. Any such payment shall be allocated between Revolving Loans,
Letter of Credit Liabilities (and if to Letter of Credit Liabilities,
first, to Reimbursement Obligations) and other obligations as the
Company may elect.
Section 4. PAYMENTS OF PRINCIPAL AND INTEREST.
4.1 REPAYMENT OF REIMBURSEMENT OBLIGATIONS. The Company will pay
to the Agent for the account of each Bank the amount of each
Reimbursement Obligation forthwith upon its incurrence. The amount of
any Reimbursement Obligation may, if the applicable conditions
precedent specified in SECTION 7 of the Revolving and Term Credit
Agreement have been satisfied, be paid with the proceeds of Revolving
Loans.
4.2 INTEREST. Subject to SECTION 12.8, the Company will pay to
the Agent for the account of each Bank interest on the unpaid
principal amount of each Reimbursement Obligation owed to such Bank
for the period commencing on the date such Reimbursement Obligation
arises to but excluding the date such Reimbursement Obligation shall
be paid in full, at the Post-Default Rate.
Accrued interest shall be due and payable from time to time on
demand of the Agent or the Required Banks (through the Agent).
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Section 5. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS, ETC.
5.1 PAYMENTS. (a) Except to the extent otherwise provided
herein, all payments of principal of or interest on the Reimbursement
Obligations and other amounts to be made by the Company hereunder
shall be made in dollars, in immediately available funds, to the Agent
at its Principal Office (or in the case of a Successor Agent, at the
principal office of such successor Agent in the United States), not
later than 11:00 a.m. on the date on which such payment Shall become
due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day).
(b) The Company shall, at the time of making each payment
hereunder, specify to the Agent the Reimbursement Obligations or other
amounts payable by the Company hereunder to which such payment is to
be applied (and in the event that it fails so to specify, such payment
shall be applied as the Agent may designate to the amounts then due
and payable); PROVIDED that if no Reimbursement Obligations are then
due and payable or an Event of Default has occurred and is continuing,
the Agent may apply such payment to the Obligations in such order as
it may elect in its sole discretion, but subject to the other terms
and conditions of this Agreement, including SECTION 5.2). Each payment
received by the Agent hereunder for the account of a Bank shall be
paid promptly to such Bank, in immediately available funds for the
account of such Bank's Applicable Lending Office.
(c) If the due date of any payment hereunder falls on a day which
is not a Business Day, the due date for such payment shall be extended
to the next succeeding Business Day and interest shall be payable for
any principal so extended for the period of such extension.
5.2 PRO RATA TREATMENT. Except to the extent otherwise provided
herein, (a) each issuance of a Letter of Credit and each termination
or reduction of the Commitments of the Banks under SECTION 2.3 shall
be made PRO RATA according to the Banks' respective Commitments;
(b) each payment by the Company of principal of or interest on any
Reimbursement Obligation shall be made to the Agent for the account of
the Banks PRO RATA in accordance with the respective unpaid principal
amounts of such Reimbursement Obligation held by the Banks; and (c)
the Banks (other than the Agent) shall purchase from the Agent
participations in the Letters of Credit in accordance with their
respective Commitment Percentages.
5.3 COMPUTATIONS. Interest based on the Alternate Base Rate (to
the extent determined by reference to the Prime Rate), and fees
hereunder, will be computed on the basis of 365 (or 366) days and
actual days elapsed (including the first day but excluding the last
day) occurring in the period for which payable. All other interest
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shall be computed on the basis of a year of 360 days and actual days
elapsed (including the first day but excluding the last day) occurring
in the period for which payable, unless the effect of so computing
shall be to cause the rate of interest to exceed the Highest Lawful
Rate (in which event interest shall be calculated on the basis of the
actual number of days elapsed in a year composed of 365 or 366 days,
as the case may be).
5.4 MINIMUM AND MAXIMUM AMOUNTS. Each Letter of Credit shall be
in a face amount at least equal to $100,000.
5.5 CERTAIN ACTIONS, NOTICES, ETC. Notices to the Agent of any
termination or reduction of Commitments, prepayments under SECTION 3.1
and requests for the issuance of Letters of Credit shall be
irrevocable and shall be effective only if received by the Agent not
later than 11:00 a.m. on the number of Business Days prior to the date
of the relevant issuance, termination, reduction, and/or prepayment
specified below:
Number of Business
Days Prior
Notice
Termination or reduction
of Commitments 10
Issuance of Letters of Credit 5
Prepayments 1
Each such notice of termination or reduction shall specify the amount
of the Commitments to be terminated or reduced. Each such notice of
prepayment shall specify the amount to be prepaid (subject to SECTION
3.1) and the date of prepayment (which shall be a Business Day). The
Agent shall promptly notify the Banks of the contents of each such
notice or Application. Notice of any prepayment having been given,
the principal amount specified in such notice, together with interest
thereon to the date of prepayment, shall be due and payable on such
prepayment date.
5.6 NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Agent shall
have been notified by a Bank prior to noon on the date on which such
Bank is to make payment to the Agent of any amount to be paid by such
Bank to reimburse the Agent for a drawing under any Letter of Credit
or by the Company prior to the date on which the Company is to make a
payment to the Agent for the account of one or more of the Banks, as
the case may be (such Bank or the Company being herein called the
"PAYOR" and such payment being herein called the "REQUIRED PAYMENT"),
which notice shall be effective upon receipt, that the Payor does not
intend to make the Required Payment to the Agent, the Agent may assume
that the Required Payment has been made and may, in reliance upon such
assumption
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(but shall not be required to), make the amount thereof available to
the intended recipient on the date that such Required Payment is to be
made. If the Payor is the Company and the Company has not in fact made
the Required Payment to the Agent on or before such date, the
recipient of such payment (or, if the recipient is the beneficiary of
a Letter of Credit, the Company, and, if the Company fails to pay the
amount thereof to the Agent on demand, then the Banks, to the extent
not already paid, ratably in proportion to their respective Commitment
Percentages) shall, on demand, pay to the Agent the amount made
available by the Agent, together with interest thereon from the date
such amount was so made available by the Agent until the date the
Agent recovers such amount at a rate per annum equal to the Fed Funds
Rate for the first three days and thereafter at the Fed Funds Rate
plus 2%. If the Payor is a Bank and such Bank has not in fact made the
Required Payment to the Agent on or before such date, then such Bank
shall pay to the Agent the amount made available by the Agent on
behalf of such Bank, together with interest thereon from the date such
amount was so made available by the Agent until the Agent recovers
such amount at a rate per annum equal to the Fed Funds Rate for the
first three days and thereafter at the Fed Funds Rate plus 2%.
5.7 SHARING OF PAYMENTS, ETC. If a Bank or any participant of a
Bank shall obtain payment of any obligation to it under this
Agreement, through the exercise of any right of set-off, banker's
lien, counterclaim or similar right, or otherwise, then such Bank or
participant shall promptly purchase from the other Banks
participations in the Reimbursement Obligations or other obligations
held by the other Banks in such amounts, and make such other
adjustments from time to time as shall be equitable to the end that
all the Banks and participants shall share the benefit of such payment
(net of any expenses which may be incurred by such Bank or its
participant in obtaining or preserving such benefit) PRO RATA in
accordance with the unpaid principal and interest on such obligations
then due to each of them. To such end all the Banks and their
participants shall make appropriate adjustments among themselves (by
the resale of participations sold or otherwise) if such payment is
rescinded or must otherwise be restored. The Company agrees, to the
fullest extent it may effectively do so under applicable law, that any
Bank so purchasing a participation in the Reimbursement Obligations or
other obligations held by other Banks may exercise all rights of
set-off, bankers' lien, counterclaims or similar rights with respect
to such participation as fully as if such Bank were a direct holder of
Reimbursement Obligations or other obligations in the amount of such
participation. Nothing contained herein shall require any Bank to
exercise any such right or shall affect the right of any Bank to
exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of the Company.
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5.8 OTHER EXPENSES. The Company agrees to pay the Agent, for the
account of the Agent, the usual and customary charges of TCB for each
extension, amendment and wire advice of and drawing under the Letters
of Credit.
Section 6. YIELD PROTECTION AND ILLEGALITY.
6.1 ADDITIONAL COSTS IN RESPECT OF LETTERS OF CREDIT. If as a
result of any Regulatory Change there shall be imposed, modified or
deemed applicable any tax, reserve, special deposit or similar
requirement against or with respect to or measured by reference to
Letters of Credit issued or to be issued hereunder and the result
shall be to increase the cost to the Agent or any Bank of issuing or
maintaining or participating in any Letter Of Credit or reduce any
amount receivable by the Agent or any Bank hereunder in respect of any
Letter of Credit or participation therein, then such Bank shall notify
the Company through the Agent, and upon demand therefor by such Bank
through the Agent, the Company (subject to SECTION 12.8) shall pay to
the Agent or such Bank, from time to time as specified by the Agent or
such Bank, such additional amounts as shall be sufficient to
compensate the Agent or such Bank for such increased costs or
reductions in amount. Before making such demand pursuant to this
SECTION 6.1, the Agent or such Bank will designate a different
available Applicable Lending Office for the Letter of Credit or
participation or take such other action as the Company may request, if
such designation or action will avoid the need for, or reduce the
amount of, such compensation and will not, in the sole opinion of the
Agent or such Bank, be disadvantageous to the Agent or such Bank. A
statement as to such increased costs or reductions in amount incurred
by the Agent or such Bank, submitted by the Agent or such Bank to the
Company, shall cover amounts accruing under this section with respect
to a period beginning not earlier than 120 days from the date thereof
and be conclusive as to the amount thereof, absent manifest error.
In the event any Bank shall seek compensation pursuant to this
SECTION 6.1, the Company may give notice to such Bank (with copies to
the Agent) that it wishes to seek one or more Eligible Assignees
(which may be one or more of the Banks) to assume the Commitment of
such Bank and to purchase and assume its outstanding Letter of Credit
Liabilities. Each Bank requesting compensation pursuant to this
SECTION 6.1 agrees to sell its Commitment and interest in this
Agreement and in the Obligations and in the Revolving and Term Credit
Agreement pursuant to SECTION 12.6 (without recourse, representation
or warranty except as provided in SECTION 12.6) to any such Eligible
Assignee for an amount equal to the sum of the outstanding unpaid
principal of and accrued interest on such Obligations plus all other
fees and amounts (including any compensation claimed by such Bank
under this SECTION 6.1) owing to such Bank hereunder and under the
Revolving and Term Credit Agreement calculated, in each case, to the
date such Commitment, Obligations and interests are purchased,
whereupon such Bank shall
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have no further Commitment or other obligation to the Company
hereunder or under the Revolving and Term Credit Agreement.
6.2 CAPITAL ADEQUACY. If any Bank shall have determined that the
adoption after the date hereof or effectiveness after the date hereof
(regardless of whether previously announced) of any applicable Legal
Requirement or treaty regarding capital adequacy, or any change after
the date hereof in any existing or future Legal Requirement or treaty
regarding capital adequacy, or any change in the interpretation or
administration thereof after the date hereof by any Governmental
Authority or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable
Lending Office) with any request or directive after the date hereof
regarding capital adequacy (whether or not having the force of law) of
any such Governmental Authority or comparable agency has or would have
the effect of reducing the rate of return on the capital of such Bank
(or any holding company of which such Bank is a part) as a consequence
of its obligations hereunder and under or in respect of the Letters of
Credit to a level below that which such Bank or holding company could
have achieved but for such adoption, change or compliance by an amount
deemed by such Bank to be material, then from time to time, upon
demand by such Bank (with a copy to the Agent), the Company (subject
to SECTION 12.8) shall pay to such Bank such additional amount or
amounts as will compensate such Bank or holding company for such
reduction. The certificate of any Bank setting forth such amount or
amounts as shall be necessary to compensate it and the basis therefor
shall cover amounts accruing under this SECTION 6.2 with respect to a
period beginning not earlier than 120 days from the date thereof and
shall be conclusive and binding, absent manifest error. The Company
shall pay the amount shown as due on any such certificate upon
delivery of such certificate. In preparing such certificate, a Bank
may employ such assumptions and allocations of costs and expenses as
it shall in good faith deem reasonable and may use any reasonable
averaging and attribution method. In the event any Bank shall seek
compensation pursuant to this SECTION 6.2, the Company may give notice
to such Bank (with copies to the Agent) that it wishes to seek one or
more Eligible Assignees (which may be one or more of the Banks) to
assume the Commitment of such Bank and to purchase and assume its
outstanding Letter of Credit Liabilities. Each Bank requesting
compensation pursuant to this SECTION 6.2 agrees to sell its
Commitment and interest in this Agreement and in the Obligations and
in the Revolving and Term Credit Agreement pursuant to SECTION 12.6
(without recourse, representation or warranty except as provided in
SECTION 12.6) to any such Eligible Assignee for an amount equal to the
sum of the outstanding unpaid principal of and accrued interest on
such Obligations plus all other fees and amounts (including any
compensation claimed by such Bank under this SECTION 6.2) owing to
such Bank hereunder and under the Revolving and Term Credit Agreement
calculated, in each case, to the date such Commitment, Obligations,
and interests are purchased, whereupon such Bank shall
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have no further Commitment or other obligation to the Company
hereunder or under the Revolving and Term Credit Agreement.
Section 7. CONDITIONS PRECEDENT.
7.1 CLOSING CONDITIONS. The effectiveness of this Agreement is
subject to the following conditions precedent, each of which shall
have been fulfilled or waived to the satisfaction of the Agent:
(a) CORPORATE ACTION AND STATUS. The Agent shall have received
copies of the Organizational Documents of the Company certified by the
Secretary of the Company, and resolutions of the Board of Directors of
the Company, certified by the Secretary of the Company, for all
corporate action taken by the Company authorizing the execution,
delivery and performance of the Credit Documents and all other
documents related to this Agreement, together with such certificates
as may be appropriate to demonstrate the qualification and good
standing of and payment of taxes by each member of the Combined Group
in each jurisdiction set forth on SCHEDULE VIII.
(b) INCUMBENCY. The Company shall have delivered to the Agent a
certificate in respect of the name and signature of each officer who
(1) is authorized to sign on its behalf the applicable Credit
Documents related to any Letter of Credit and (2) will, until replaced
by another officer or officers duly authorized for that purpose, act
as its representative for the purposes of signing documents and giving
notices and other communications in connection with any Letter of
Credit hereunder. The Agent and each Bank may conclusively rely on
such certificates until they receive notice in writing from the
Company to the contrary.
(c) FEES AND EXPENSES. The Company shall have paid to the Agent
all fees in the amounts previously agreed upon in writing among the
Company and the Agent.
(d) OPINION OF COUNSEL TO THE COMPANY. The Agent shall have
received the opinion of Andrews & Kurth, L.L.P. and David L. Hicks,
counsel to the Company, substantially in the forms of SCHEDULES VI and
VII hereto, respectively.
(e) COUNTERPARTS. The Agent shall have received counterparts of
each of the Credit Documents duly executed and delivered by or on
behalf of each of the parties thereto (or, in the case of any Bank as
to which the Agent shall not have received such a counterpart, the
Agent shall have received evidence satisfactory to it of the execution
and delivery by such Bank of a counterpart hereof).
(f) CONSENTS. The Agent shall have received evidence satisfactory
to it that all consents of each Governmental Authority and of each
other Person, if any, required in connection with (1)
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the Letters of Credit and (2) the execution, delivery and performance
of the Credit Documents have been received and remain in full force
and effect.
(g) REVOLVING AND TERM CREDIT AGREEMENT. The Revolving and Term
Credit Agreement shall be executed and delivered by the parties
thereto and shall be in full force and effect.
(h) OTHER DOCUMENTS. The Agent shall have received such other
documents consistent with the terms of this Agreement and relating to
the transactions contemplated hereby as the Agent may reasonably
request.
All provisions and payments required by this SECTION 7.1 are
subject to the provisions of SECTION 12.8.
7.2 ALL LETTERS OF CREDIT. In addition to the conditions precedent
described in SECTION 2, the obligation of the Agent to issue
and each Bank to participate in any Letter of Credit is subject to the
additional conditions precedent that, as of the date of such issuance
and after giving effect thereto:
(a) no Default shall have occurred and be continuing, and no
"Default" shall have occurred and be continuing under the Revolving
and Term Credit Agreement;
(b) there has been no Material Adverse Change since December 31,
1991;
(c) the representations and warranties made in each Credit
Document shall be true and correct in all material respects on and as
of the date of the issuance of such Letter of Credit, with the same
force and effect as if made on and as of such date;
(d) the Company shall have delivered to the Agent an Application
within the time specified in SECTION 5.5;
(e) the issuance of such Letter of Credit shall not be prohibited
by, or subject any Bank to any penalty under, any Legal Requirement
applicable to any Bank; and
(f) after giving effect to such Letter of Credit the Company
shall be in compliance with all Required Ratios and no Engineering
Shortfall shall exist.
Each request for issuance of a Letter of Credit by the Company
hereunder shall include a representation and warranty by the Company
to the effect set forth in SUBSECTIONS (a) through (d) and SUBSECTION
(f) (if applicable) of this SECTION 7.2 (both as of the date of such
notice and, unless the Company otherwise notifies the Agent prior to
the date of such issuance, as of the date of such issuance).
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Section 8. REPRESENTATIONS AND WARRANTIES. To induce the
Agent and the Banks to enter into this Agreement and to issue and
participate in Letters of Credit, the Company represents and warrants
(such representations and warranties to survive any investigation and
the issuance of Letters of Credit) to the Banks and the Agent as
follows:
8.1 CORPORATE EXISTENCE. Each member of the Combined Group (a)
is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization; (b) has all requisite
power, and has all licenses, permits, authorizations, consents and
approvals necessary, to own its property and carry on its business as
now being conducted, and (c) is qualified to do business, and is in
good standing, in (1) all jurisdictions in which any of the Recognized
Proved Reserves which it owns are located and (2) any other
jurisdiction in which the nature of the business conducted by it makes
such qualification necessary or advisable, unless (for purposes only
of this CLAUSE (2)) the failure to be so qualified or in good standing
would not individually or in the aggregate have a material adverse
effect on the business, financial condition or results of operations
of the Combined Group taken as a whole.
8.2 INFORMATION.
(a) (i) The most recent consolidated balance sheet of the Company
and its Subsidiaries and the related consolidated statements of
operations, changes in financial position and cash flows for the
period then ended, together with the respective notes thereto,
delivered to each of the Banks prior to the execution of this
Agreement (which financial statements are dated December 31, 1991) or
in accordance with the provisions of SECTION 9.1(a) or (b), as the
case may be (the latest of such financial statements and the notes
thereto being referred to herein as the "MOST RECENT FINANCIAL
STATEMENTS"), fairly present in all material respects the consolidated
financial position of the Company and its Subsidiaries as of such date
and their consolidated results of operations for the period then ended
in conformity with GAAP.
(ii) The Company and its Subsidiaries did not on the date of the
Most Recent Financial Statements, and do not on the date as of which
this representation is made in accordance with the terms of this
Agreement, have any material contingent liabilities, material
liabilities for taxes, unusual and material forward or long-term
commitments or material unrealized or anticipated losses from any
commitments, except (A) as referred to or reflected or provided for in
the Most Recent Financial Statements; (B) as otherwise hereafter
disclosed to the Banks in writing in accordance with the terms of this
Agreement, or (C) in connection with the obligations of the Company
under this Agreement and the Revolving and Term Credit Agreement.
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(b) Since December 31, 1991, there has been no Material Adverse
Change.
8.3 LITIGATION; COMPLIANCE. Except as disclosed in the
Registration Statement, or as hereafter disclosed to the Banks in
accordance with the provisions of SECTION 9.1(e), there are no legal
or arbitral proceedings or any proceedings by or before any
Governmental Authority now pending, or, to the knowledge of the
Company, threatened, against or affecting the Company or any of its
Subsidiaries which, if adversely determined, would cause a Material
Adverse Change. The Company and its Subsidiaries comply in all
material respects with all applicable material (based on the Company
and its Subsidiaries taken as a whole) Legal Requirements other than
the Applicable Environmental Laws. Neither the Company nor any of its
Subsidiaries is in default in any material respect under or violation
of any material (based on the Company and its Subsidiaries taken as a
whole) judgment, order or decree of any Governmental Authority.
8.4 NO BREACH. None of the execution and delivery of the
Credit Documents, the consummation of the transactions therein
contemplated or compliance with the terms and provisions thereof will
conflict with or result in a breach of, or require any consent that
has not been obtained under, the Serial Note Agreement, the
Organizational Documents of the Company or any of its Subsidiaries or
any material Legal Requirement (including any securities law, rule or
regulation) applicable to the Company or any of its Subsidiaries or
(except for the Liens required or permitted by this Agreement) result
in the creation or imposition of any Lien upon any of the revenues or
property of the Company or any of its Subsidiaries. Such execution,
delivery, consummation and compliance do not and will not conflict
with or result in a breach of any material agreement or instrument to
which the Company is a party or by which the Company is bound or to
which it is subject, or constitute a default under any such agreement
or instrument.
8.5 CORPORATE ACTION. The Company has all necessary corporate
power and authority to execute, deliver and perform its obligations
under the Credit Documents. The execution, delivery and performance of
the Credit Documents by the Company have been duly authorized by all
necessary corporate action. The Credit Documents have been duly and
validly executed and delivered by the Company and constitute the
legal, valid and binding obligations of the Company, enforceable in
accordance with their respective terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating
to the enforcement of creditors' rights generally and by general
equitable principles.
8.6 APPROVALS. All authorizations, approvals and consents of,
and all filings and registrations with, all Governmental Authorities
and each other Person necessary for the execution,
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delivery or performance of any Credit Document or for the validity or
enforceability thereof, except for the filings and recordings of the
Liens created pursuant to the Security Documents under the Revolving
and Term Credit Agreement, have been obtained by the Company.
8.7 REGULATIONS G, U AND X. Neither the Company nor any of its
Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation
G, U or X of the Board) and no Letter of Credit hereunder will be used
to acquire or carry, directly or indirectly, any such margin stock.
8.8 ERISA. (a) The Company and each ERISA Affiliate have
fulfilled their contribution obligations under each Plan subject to
Title IV of ERISA and have fulfilled their obligations under the
minimum funding standards of ERISA and the Code with respect to each
Plan subject to Title IV of ERISA, and in all other regard with
respect to each Plan are in material compliance with the applicable
provisions of ERISA, the Code, and all other applicable laws,
regulations and rules, to the extent that noncompliance with such
provisions would result in a Material Adverse Change. (b) The Company
has no knowledge of any event with respect to each Plan which could
result in a Material Adverse Change.
8.9 TAXES. Each of the Company and its Subsidiaries has filed
all United States federal income tax returns and all other material
tax returns which are required to be filed by it and has paid all
taxes due pursuant to such returns or pursuant to any assessment
received by it, except to the extent the same may be contested in good
faith by appropriate proceedings diligently conducted for which
adequate reserves have been established in accordance with GAAP. The
charges, accruals and reserves on the books of the Company and its
Subsidiaries in respect of taxes and other governmental charges, as
made on a periodic basis, are adequate.
8.10 SUBSIDIARIES. SCHEDULE I is a complete and correct list, as
of the date of this Agreement, of all Subsidiaries of the Company. All
shares or other indicia of equity interest of the Restricted
Subsidiaries and the Special Subsidiary directly or indirectly owned
by the Company are free and clear of Liens, and all such shares are
validly issued, fully paid and non-assessable.
8.11 INVESTMENT COMPANY ACT. No member of the Combined Group is
an investment company within the meaning of the Investment Company Act
of 1940, as amended, or, to the best knowledge of the Company,
directly or indirectly controlled by or acting on behalf of any Person
which is an investment company, within the meaning of said Act.
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8.12 PUBLIC UTILITY HOLDING COMPANY ACT. No member of the
Combined Group is a "public utility company", or, to the knowledge of
the Company, an "affiliate" or a "subsidiary company" of a "public
utility company", or a "holding company", or an "affiliate" or a
"subsidiary company" of a "holding company" or of a "subsidiary
company" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended.
8.13 ENVIRONMENTAL MATTERS. Except as disclosed in the
Registration Statement, the Company and its Subsidiaries, and the
plants and sites of each, have complied with all Applicable
Environmental Laws, except, in any such case, where such failure to so
comply would not result in a Material Adverse Change. Without limiting
the generality of the preceding sentence, neither the Company nor any
of its Subsidiaries has received notice of or has actual knowledge of
any actual or claimed or asserted failure so to comply with Applicable
Environmental Laws or of any other Environmental Claim which alone or
together with all other such failures or Environmental Claims is
material and would result in a Material Adverse Change. Except as
disclosed in the Registration Statement, neither the Company nor any
of its Subsidiaries nor their plants or other sites manage, generate
or dispose of, or during their respective period of use, ownership,
occupancy or operation by the Company or its Subsidiaries have
managed, generated, released or disposed of, any hazardous wastes,
hazardous substances, hazardous materials, toxic substances or toxic
pollutants, as those terms are used or defined in the Applicable
Environmental Laws, in material violation of or in a manner which
would result in liability under the Applicable Environmental Laws or
any other applicable Legal Requirement, or in a manner which would
result in an Environmental Claim except where such noncompliance or
liability or Environmental Claim would not result in a Material
Adverse Change. The representation and warranty contained in this
SECTION 8.13 is based in its entirety upon (a) current interpretations
and enforcement policies that have been publicly disseminated and are
used by Governmental Authorities charged with the enforcement of the
Applicable Environmental Laws or which apply to the Company or any of
its Subsidiaries with respect to any property or sites in a particular
jurisdiction and (b) current levels of publicly disseminated
scientific knowledge concerning the detection of, and the health and
environmental risks associated with the discharge of, substances and
pollutants regulated pursuant to the Applicable Environmental Laws.
Section 9. COVENANTS. The Company agrees with the Banks and the
Agent that until the termination of this Agreement:
9.1 FINANCIAL STATEMENTS AND CERTIFICATES. The Company will
deliver in duplicate:
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(a) to each Bank, as soon as practicable and in any event within
45 days after the end of each quarterly period (other than the last
quarterly period) in each fiscal year, consolidated and consolidating
statements of operations, stockholders' equity and cash flows of the
Company and its Subsidiaries for the period from the beginning of the
current fiscal year to the end of such quarterly period, and a
consolidated and consolidating balance sheet of the Company and its
Subsidiaries as of the end of such quarterly period, setting forth
(1) as to each account affected thereby, all eliminating entries for the
Unrestricted Subsidiaries as a group and for the Special Subsidiary,
respectively, and (2) the resulting consolidated and consolidating
figures for the Company and the Restricted Subsidiaries, and setting
forth in each case in comparative form figures for the corresponding
period in the preceding fiscal year, all in reasonable detail and
unaudited but certified by an authorized financial officer of the
Company as fairly presenting the financial position and results of
operations of the Company and its Subsidiaries as of the date thereof
and the period then ended, subject to changes resulting from year-end
adjustments;
(b) to each Bank, as soon as practicable and in any event within
90 days after the end of each fiscal year, consolidated and
consolidating statements of operations, stockholders' equity and cash
flows of the Company and its Subsidiaries for such year, and a
consolidated and consolidating balance sheet of the Company and its
Subsidiaries as of the end of such fiscal year, setting forth (1) as
to each account affected thereby, all eliminating entries for the
Unrestricted Subsidiaries as a group and for the Special Subsidiary,
respectively, and (2) the resulting consolidating figures for the
Company and the Restricted Subsidiaries, and setting forth in each
case in comparative form corresponding consolidating figures from the
preceding annual audit, all in reasonable detail and which shall be
reported on by Price Waterhouse & Co. or other independent public
accountants of recognized national standing selected by the Company
whose report shall (A) contain an opinion that shall be unqualified as
to the scope or limitations imposed by the Company and shall not be
subject to any other material qualification and (B) state that such
financial statements present fairly, in all material respects, the
financial position of the Company and its Subsidiaries at the dates
indicated and their cash flows and the results of their operations and
the changes in their financial position for the periods indicated in
conformity with GAAP, and shall be accompanied by a report of such
independent public accountants stating that (W) such audit was made
for the purpose of forming an opinion on the consolidated financial
statements taken as a whole; (X) the consolidating information set
forth therein is presented for purposes of additional analysis rather
than to present the financial position, results of operations and cash
flows of the individual companies; (Y) such consolidating information
has been subjected to the auditing procedures applied in the audit of the
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basic financial statements, and (Z) in such independent public
accountants' opinion, such consolidating information is fairly stated
in all material respects in relation to the consolidated financial
statements taken as a whole, with such changes thereto as such
accountants reasonably determine to be appropriate under the
circumstances;
(c) to each Bank, promptly upon transmission thereof, copies of
all financial statements, proxy statements, notices and reports as it
shall send to its public stockholders and copies of all registration
statements (without exhibits, and other than registration statements
and reports relating to employee benefit or compensation plans) and
all reports which it files with the Securities and Exchange Commission
(or any governmental body or agency succeeding to the functions of the
Securities and Exchange Commission);
(d) to each Bank, promptly upon receipt thereof, a copy of each
other report submitted to the Company or any of its Subsidiaries by
independent accountants in connection with any annual, interim or
special audit made by them of the books of the Company or any such
Subsidiary;
(e) to each Bank, as soon as practicable and in any event within
15 days after any executive officer of the Company obtains knowledge
(1) of any Default or any condition or event which, in the opinion of
management of the Company, would have a Material Adverse Change (to
the extent affecting the Company and its Subsidiaries in a materially
different manner or extent than the oil and gas industry generally);
(2) that any Person has given any notice to the Company or any of its
Subsidiaries or taken any other action with respect to a claimed
default or event or condition of the type referred to in SECTION 10.(b)
or (m); (3) of the institution of any litigation involving
claims against the Company or any of its Subsidiaries equal to or
greater than $5,000,000 with respect to any single cause of action or
of any adverse determination in any court proceeding in any litigation
involving a potential liability to the Company or any of its
Subsidiaries equal to or greater than $5,000,000 with respect to any
single cause of action which makes the likelihood of an adverse
determination in such litigation against the Company or such
Subsidiary substantially more probable, or (4) of any regulatory
proceeding which, if determined adversely to the Company, would have a
Material Adverse Change (to the extent affecting the Company and its
Subsidiaries in a materially different manner or extent than the oil
and gas industry generally), an Officer's Certificate specifying the
nature and period of existence of any such Default, condition or
event, or specifying the notice given or action taken by such Person
and the nature of any such claimed Default, event or condition, or
specifying the details of such proceeding, litigation or dispute and,
in each case, what action the Company or any of its
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Subsidiaries has taken, is taking or proposes to take with respect
thereto;
(f) to each Bank, (1) promptly after the filing or receiving
thereof, copies of all annual reports and such other material reports
and notices which the Company or any ERISA Affiliate files under ERISA
with the Internal Revenue Service, the PBGC or the U.S. Department of
Labor with respect to a Plan that is subject to Title IV of ERISA; (2)
promptly upon acquiring knowledge of any "reportable events" (as
defined in Section 4043 of ERISA) or of any "prohibited transaction,"
as such term is defined in the Code or ERISA, in connection with any
Plan which may result in a Material Adverse Change, a statement
executed by the president or chief financial officer of the Company or
the applicable ERISA Affiliate, setting forth the details thereof and
the action which the Company or the ERISA Affiliate proposes to take
with respect thereto and, when known, any action taken by the PBGC,
the Internal Revenue Service or the U.S. Department of Labor with
respect thereto; (3) promptly after the filing or receiving thereof by
the Company or any ERISA Affiliate, any notice of the institution of
any proceedings or other actions which may result in the termination
of any Plan or notice of complete or partial withdrawal liability
under Title IV of ERISA, and (4) each request for waiver of the
funding standards or extension of the amortization periods required by
Sections 303 and 304 of ERISA or Section 412 of the Code promptly
after the request is submitted by the Company or any ERISA Affiliate,
to the Secretary of the Treasury, the U.S. Department of Labor or the
Internal Revenue Service, as the case may be;
(g) to each Bank, as soon as available but in no event later than
February 28 of each year, an Independent Engineering Report reflecting
data as of January 1 of such year; and
(h) to each Bank, with reasonable promptness, such other
information respecting the business, financial condition or results of
operations of the Company or any of its Subsidiaries as such Bank may
reasonably request.
Together with each delivery of financial statements required by
SUBSECTION (a) above, each Required Reserve Report and each Optional
Reserve Report, the Company will deliver to each Bank an Officer's
Certificate and a Coverage Report demonstrating (with computations in
reasonable detail) compliance by the Company and the Restricted
Subsidiaries with the provisions of SECTIONS 9.6, 9.7(b)(3), (4) and
(6), 9.7(c)(2) and (3), 9.7(d), 9.7(e), 9.7(f), 9.7(g) and 9.9,
demonstrating that no Default exists under SECTION 10.1(i) and stating
that there then exists no Default, or, if any Default exists,
specifying the nature and period of existence thereof and what action
the Company proposes to take with respect thereto.
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Together with each delivery of financial statements required by
SUBSECTION (b) above, the Company will deliver to each Bank a
certificate of such accountants stating that, in conducting the audit
of the Company's consolidated financial statements in accordance with
generally accepted auditing standards they have obtained no knowledge
of any Default arising under SECTION 10.1(a), (b) or (i) or any
Default arising under SECTION 10.1(d) that occurs as result of the
breach or violation by the Company or the Restricted Subsidiaries of
SECTIONS 9.6, 9.7(b), (c), (d), (e), (f), (g), (h), (i) or 9.8, or, if
they have obtained knowledge of any such Default, specifying the
nature and period of existence thereof. Such accountants, however,
shall not be liable to the Agent or any Bank by reason of their
failure to obtain knowledge of any such Default which would not be
disclosed in the course of an audit conducted in accordance with
generally accepted auditing standards. The Company also covenants
that forthwith upon the chief executive officer, principal financial
officer or principal accounting officer of the Company obtaining
knowledge of a Default, it will deliver to each Bank an Officer's
Certificate specifying the nature and period of existence thereof and
what action the Company proposes to take with respect thereto.
9.2 INSPECTION OF PROPERTY. The Company covenants that it will
permit any Person designated in writing by any Bank, at such Bank's
expense and risk, to visit and inspect any of the properties of the
Company and its Subsidiaries; and also to examine the corporate books
and financial records of the Company and its Subsidiaries and to make
copies thereof or extracts therefrom and to discuss the affairs,
finances and accounts of such Persons with the executive officers of
the Company, the petroleum reserve engineers employed by the Company
and its Subsidiaries and the Company's independent public accountants,
all at such reasonable times, with a representative of the Company
present and as often as such Bank may reasonably request, and will
assist such Person or Persons in all such activities.
9.3 COMPLIANCE WITH ENVIRONMENTAL LAWS. The Company will, and will
cause each of its Subsidiaries and each of its Affiliates that are
controlled by the Company or its Subsidiaries to, comply in a timely
fashion with, or operate pursuant to valid waivers of the provisions
of, all Applicable Environmental Laws, except where non-compliance
would not (a) result in a Material Adverse Change or (b) subject the
Agent or any Bank to any liability for such non compliance (PROVIDED
that the Company shall not be in default of this SUBSECTION (b) if the
Company indemnifies each of the Agent, Banks or any of them subjected
to such liability and provides collateral to secure such
indemnification, all to the extent required by the Person subjected to
such liability in its sole and unfettered discretion). The Company
agrees to indemnify and hold the Agent and each Bank, and their
respective officers, agents and employees harmless from any loss,
liability, claim or expense which any such Person may incur or suffer
as a result of a breach by the
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Company or its Subsidiaries or Affiliates, as the case may be, of this
covenant. The Company shall not be deemed to have breached or violated
this SECTION 9.3 if the Company or its Subsidiary or Affiliate, as the
case may be, are challenging in good faith by appropriate proceedings
diligently pursued the application or enforcement of any such
Applicable Environmental Laws for which adequate reserves have been
established in accordance with GAAP.
9.4 PAYMENT OF TAXES. The Company will, and will cause each of its
Subsidiaries to, pay, or have paid on its behalf, before the same become
delinquent all taxes, assessments and governmental charges imposed upon
it or upon its property, except to the extent contested in good faith by
appropriate proceedings diligently conducted for which adequate reserves
have been established in accordance with GAAP.
9.5 MAINTENANCE OF INSURANCE. The Company covenants that it and
each of its Subsidiaries will carry and maintain insurance (subject to
self-insurance in the maximum amount of $10,000,000, customary
deductibles and retentions) in at least such amounts and against such
liabilities and hazards and by such methods as customarily maintained
by other companies operating similar businesses and, together with
each delivery of financial statements required by SECTION 9.1(b), will
deliver to the Agent for each Bank an Officer's Certificate specifying
the details of such insurance in effect. Upon the request of the Agent
or any Bank, the Company shall promptly deliver to the Agent one or
more current certificates of the insurer or insurers providing the
insurance required by this SECTION 9.5 to the effect that such
insurance may not be canceled, reduced or affected in any manner
without 30 days' prior written notice to the Agent.
9.6 RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS. The Company
will not and will not permit any Restricted Subsidiary to (a) make any
Restricted Investment; (b) pay or declare any dividend on any class of
its stock or make any other distribution on account of any class of
its stock, or redeem, purchase or otherwise acquire, directly or
indirectly, any shares of its stock, or (c) make any additional
Investment in the Special Subsidiary (all of the foregoing described
in SUBSECTIONS (b) and (c) above being herein called "RESTRICTED
PAYMENTS") (1) except out of Consolidated Net Earnings Available for
Restricted Payments and Restricted Investments; PROVIDED that the
Company or any wholly owned Restricted Subsidiary may, without
violation of this clause, in a single transaction or a series of
publicly announced related transactions to be completed within six
months, make an Investment in the Special Subsidiary which results in
the ownership by the Company and the wholly owned Restricted
Subsidiaries of 100% of the outstanding general and limited partner
interests in the Special Subsidiary; PROVIDED FURTHER that the amount
of such Investment shall be included in any subsequent computations of
Restricted Payments and of Consolidated Net Earnings Available for
Restricted
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Payments and Restricted Investments under this Section unless
immediately after giving effect to such Investment in the Special
Subsidiary, the Special Subsidiary is designated as a Restricted
Subsidiary; (2) unless, after giving effect to any such Restricted
Investment or Restricted Payment, as the case may be, (A) no Default
shall have occurred and be continuing and (B) the Company could incur
at least $1.00 of additional Funded Debt without violation of SECTION
9.7(b)(3), and (3) unless, in the case of Investments in the Special
Subsidiary, such Investment shall otherwise be permitted by SECTION
9.7(g).
"CONSOLIDATED NET EARNINGS AVAILABLE FOR RESTRICTED PAYMENTS AND
RESTRICTED INVESTMENTS" shall mean an amount equal to
(a) the sum of (1) $45,000,000; (2) 100% (or minus 100% in case of
a deficit) of Consolidated Net Earnings for the period (taken as one
accounting period) commencing on April 1, 1990 (the "COMMENCEMENT
DATE") and terminating at the end of the last fiscal quarter preceding
the date of any proposed Restricted Investment or Restricted Payment,
as the case may be; (3) the net cash proceeds received by the Company
or any Restricted Subsidiary from the sale of any shares of its stock
on or after the Commencement Date, except (A) any such proceeds used
as a basis, for a prepayment in respect of the then-outstanding notes
issued under the Serial Note Agreement pursuant to Paragraphs 4A, 4B
or 4C thereof and (B) any proceeds from the sale of stock to the
Company or any of its Subsidiaries on or after the Commencement Date;
(4) the net cash proceeds received by the Company or any Restricted
Subsidiary from the sale, on or after the Commencement Date, of any
convertible debt security which has been converted into stock of the
Company or a Restricted Subsidiary, except (A) any such proceeds used
as a basis for a prepayment in respect of the then-outstanding notes
issued under the Serial Note Agreement pursuant to Paragraphs 4A, 4B
or 4C thereof and (B) any proceeds from the sale of such convertible
debt security to the Company or any of its Subsidiaries; (5) any cash
distributions from the Special Subsidiary received by the Company or
any Restricted Subsidiary on or after the Commencement Date, and (6)
any return of capital from Unrestricted Subsidiaries or Restricted
Investments received by the Company or any Restricted Subsidiary on or
after the Commencement Date, less
(b) the sum of all Restricted Investments and all Restricted
Payments made on or after the Commencement Date.
There shall not be included in Restricted Payments or in any
computation of Consolidated Net Earnings Available for Restricted
Payments and Restricted Investments (w) dividends paid or declared in
respect of stock held by any Person, or distributions made to any
Person, in stock of the Company or any Restricted Subsidiary; (x)
exchanges of stock of one or more classes of the Company or any
Restricted Subsidiary for common stock of the Company or such
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Restricted Subsidiary, as the case may be, or for stock of the Company
or such Restricted Subsidiary, as the case may be, of the same class,
except to the extent that cash or other value is involved in such
exchange; (y) dividends paid or declared in respect of stock held by,
or distributions made to, or redemptions, purchases or other
acquisitions of stock made from, the Company or a wholly owned
Restricted Subsidiary, or (z) any advances to the Special Subsidiary
not in excess of $20,000,000 in the aggregate at any one time
outstanding that are repaid in full within 60 days pursuant to
customary cash management services provided to the Special Subsidiary.
The term "stock" as used in this Section shall include warrants,
options to purchase stock and redeemable rights.
9.7 LIEN, DEBT AND OTHER RESTRICTIONS. The Company will not and
will not permit any Restricted Subsidiary to:
(a) LIENS. Create, assume or suffer to exist any Lien upon any of
its properties or assets, whether now owned or hereafter acquired
except
(1) Liens for taxes or assessments or other governmental charges
or levies not yet due or which are being actively contested in good
faith by appropriate proceedings;
(2) Liens (including mechanics' and materialmen's liens,
landlord liens, easements, rights-of-way or the like) incidental to
the conduct of its business or the ownership of its property and
assets which are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than advances or
credit on open account, includable in current liabilities, for goods
and services in the ordinary course of business and on terms and
conditions which are customary in the oil, gas and mineral exploration
and development business) or the guaranteeing of the obligations of
another Person, and which do not in the aggregate materially detract
from the value of its property or assets or materially impair the use
thereof in the operation of its business;
(3) Liens for lessor's royalties, overriding royalties, net
profits interests, carried interests, reversionary interests and other
similar burdens, production sales contracts, division orders,
contracts for the sale, purchase, exchange, or processing of
hydrocarbons, unitization and pooling designations, declarations,
orders and agreements, operating agreements, agreements of
development, area of mutual interest agreements, gas balancing or
deferred production agreements, processing agreements, plant
agreements, pipeline gathering and transportation agreements,
injection, repressuring and recycling agreements, salt water or other
disposal agreements, seismic or geophysical permits or agreements, and
other agreements which are customary in the oil, gas and mineral
exploration and development business or in the business of processing
gas and gas condensate production for the extraction of products
therefrom, if the net cumulative effect of
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such burdens does not operate to reduce the net revenue interest of
any oil and gas properties to less than (A) the "Net Revenue Interest"
set forth in the Most Recent Engineering Report for those oil and gas
properties included in the Most Recent Engineering Report or (B) the
net revenue interest so acquired for those oil and gas properties
acquired after the date of the Most Recent Engineering Report;
PROVIDED that such Liens are not incurred in connection with the
borrowing of money or the obtaining of advances or credit (other than
advances or credit on open account, includable in current liabilities,
for goods and services in the ordinary course of business and on terms
and conditions which are customary in the oil, gas and mineral
exploration and development business) or the guaranteeing of the
obligations of another Person;
(4) Liens described in SCHEDULE II securing Debt of the Company
or a Restricted Subsidiary set forth in SCHEDULE II;
(5) the Springing Lien, Liens existing on any real property of
any Person at the time such Person becomes a Restricted Subsidiary, or
any Liens existing prior to the time of acquisition upon any real
property acquired by the Company or any Restricted Subsidiary through
purchase, merger or consolidation or otherwise, whether or not the
obligation secured by such Lien is assumed by the Company or such
Restricted Subsidiary; PROVIDED that except as otherwise permitted by
SECTION 9.7(a), any such Springing Lien or Lien (A) shall not encumber
any other property of the Company or any Restricted Subsidiary and (B)
shall not have been created in anticipation of such Person becoming a
Restricted Subsidiary or in anticipation of the acquisition by the
Company or any Restricted Subsidiary of the real property secured
thereby;
(6) Liens placed on property at the time of acquisition,
construction, development or improvement thereof, or created in
respect of such property within six months after the time of
acquisition thereof or the commencement of construction, development
or improvement thereof, as the case may be, to secure all or a portion
of (or to secure Debt incurred to pay all or a portion of) the
purchase price of such acquisition, or the cost of such construction,
development or improvement, as the case may be; PROVIDED that (A) such
property is not and shall not thereby become encumbered in an amount
in excess of the lesser of the cost or fair market value thereof; (B)
except as otherwise permitted in SECTION 9.(a), any such Lien shall
not encumber any other property of the Company or a Restricted
Subsidiary, and (C) any such Lien shall not encumber property of the
Company or a Restricted Subsidiary for the purpose of securing an
obligation of the Company or a Restricted Subsidiary or securing a
Guaranty by the Company or any Restricted Subsidiary in connection
with the sale, exchange, transfer or other disposition by the Company
or a Restricted Subsidiary of net profits interests; PROVIDED that the
Company or a Restricted Subsidiary may assign all or part of the
proceeds of production of property in which a net profits interest has
been
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granted to secure its obligation to make net profits interests
payments therefrom; and PROVIDED FURTHER that any such Lien shall not
encumber any other property of the Company or any Restricted
Subsidiary;
(7) Liens on the capital stock of a Restricted Subsidiary
acquired after April 11, 1990 by the Company or a Restricted
Subsidiary and created or assumed contemporaneously with such
acquisition, to secure Debt assumed or incurred to finance all or a
part of the purchase price of such acquisition;
(8) Liens on the capital stock of an Unrestricted Subsidiary
other than the Special Subsidiary;
(9) from and after the time that the Company and the wholly
owned Restricted Subsidiaries shall have become the owners of all of
the outstanding general and limited partner interests in the Special
Subsidiary, (A) Liens on all or any portion of the limited partner
interests in SFEP, at such times as SFEP shall be an Unrestricted
Subsidiary or (B) at such times as SFEP shall be a Restricted
Subsidiary, Liens securing Debt incurred to finance all or a part of
the purchase price of limited partner interests in the Special
Subsidiary acquired by the Company and the wholly owned Restricted
Subsidiaries from Persons other than the Special Subsidiary in a
single transaction or a series of publicly announced related
transactions that were completed within six months and that result in
the ownership by the Company and the wholly owned Restricted
Subsidiaries of 100% of the general and limited partner interests
therein; PROVIDED that the Liens described in this CLAUSE (B) shall
extend only to the limited partner interests so acquired;
(10) Liens on property of the Company or a Restricted Subsidiary
to secure Debt assumed or incurred in the form of Capitalized Lease
Obligations or industrial revenue bonds, pollution control bonds or
similar tax-exempt financings; PROVIDED that any such Lien shall not
encumber any property of the Company or a Restricted Subsidiary other
than the property the acquisition or construction of which is financed
or refinanced, in whole or in part, with proceeds from such Debt;
(11) Liens created pursuant to the Security Documents under the
Revolving and Term Credit Agreement;
(12) any Lien renewing or extending any Lien permitted by
CLAUSES (4), (5), (6), (7), (8), (9), (10) or (11) above; PROVIDED
that the principal amount of the Debt secured thereby is not increased
and such Lien is not extended to other property; and
(13) other Liens on any property of the Company or a Restricted
Subsidiary securing any Funded Debt of the Company or a Restricted
Subsidiary permitted by SECTION 9.7(b)(3)(C) or (4)(C).
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(b) DEBT. Create, incur, assume or suffer to exist any Debt,
except
(1) Funded Debt of the Company under the Revolving and Term
Credit Agreement and Funded Debt of the Company hereunder or
represented by the notes issued pursuant to the Serial Note Agreement;
(2) Funded Debt of the Company or any Restricted Subsidiary set
forth in SCHEDULE II, which may not be renewed, extended, refunded or
permitted to remain outstanding after the stated maturities thereof
except by the Person primarily liable thereon and unless, after giving
effect to such renewal, extension or refunding, neither the principal
amount thereof nor the aggregate Funded Debt of the Company and the
Restricted Subsidiaries is increased thereby;
(3) Funded Debt of the Company if at the time it is created,
incurred or assumed and after giving effect thereto, to the receipt of
the proceeds thereof, and to the concurrent retirement of any Debt,
(A) the aggregate amount of all Funded Debt of the Company and the
Restricted Subsidiaries shall not exceed 65% of Consolidated Net
Tangible Assets; (B) Consolidated Net Earnings Available for Fixed
Charges for the four fiscal quarters of the Company (taken as a single
period) most recently ended shall equal at least 225% of Fixed Charges
for the four fiscal quarters of the Company (taken as a single period)
commencing with and including the fiscal quarter during which such
Funded Debt is created, incurred or assumed, and (C) if such Funded
Debt is Secured Debt, Special Debt shall not exceed 10% of
Consolidated Net Tangible Assets;
(4) Funded Debt of a Restricted Subsidiary if at the time it is
created, incurred or assumed and after giving effect thereto, to the
receipt of the proceeds thereof, and to the concurrent retirement of
any Debt, (A) the aggregate amount of all Funded Debt of the Company
and the Restricted Subsidiaries shall not exceed 65% of Consolidated
Net Tangible Assets; (B) Consolidated Net Earnings Available for
Fixed Charges for the four fiscal quarters of the Company (taken as a
single period) most recently ended shall equal at least 225% of Fixed
Charges for the four fiscal quarters of the Company (taken as a single
period) commencing with and including the fiscal quarter during which
such Funded Debt is created, incurred or assumed, and (C) Special Debt
shall not exceed 10% of Consolidated Net Tangible Assets;
(5) Debt of the Company owing to a wholly owned Restricted
Subsidiary which is subordinated to the Obligations upon terms set
forth on SCHEDULE V, and Debt of a Restricted Subsidiary owing to the
Company or any other wholly owned Restricted Subsidiary; and
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(6) Current Debt of the Company not secured by any Lien on any
property owned by the Company or the Restricted Subsidiaries; PROVIDED
that for a period of at least 45 consecutive days in each period of 18
consecutive months commencing April 1, 1990, the amount of Current
Debt (other than Current Debt existing pursuant to customary cash
management services provided to the Special Subsidiary which is repaid
in full within 60 days) permitted by this clause shall at no time
exceed the maximum amount of Funded Debt that the Company could then
incur under SECTION 9.7(b)(3) without violation thereof.
For purposes of this SECTION 9.7(b), any Debt (i) which is
extended, renewed or refunded shall be deemed to have been incurred
when extended, renewed or refunded (except as provided pursuant to
CLAUSE (2) above); (ii) of a Person when it becomes, or is merged
into, or is consolidated with a Restricted Subsidiary or the Company
shall be deemed to have been incurred at that time; (iii) which is
permitted by CLAUSE (5) above and which is owing to a wholly owned
Restricted Subsidiary when it ceases to be a wholly owned Restricted
Subsidiary shall be deemed to have been incurred at that time; (iv) of
a Restricted Subsidiary which is owing to the company or any other
Restricted Subsidiary shall be deemed to have been incurred at the
time the Company or such other Restricted Subsidiary disposes of such
Debt to any Person other than the Company or a wholly owned Restricted
Subsidiary; (v) which is Funded Debt of the Company or a Restricted
Subsidiary consisting of a reimbursement obligation in respect of a
letter of credit or similar instrument shall be deemed to be incurred
when such letter of credit or similar instrument is issued, or (vi)
which is Funded Debt of the type described in CLAUSE (b) of the
definition of Funded Debt, or any Guaranty of such Funded Debt, shall
not be deemed to have been created, incurred or assumed, as the case
may be, at the time it becomes Funded Debt, but shall be included in
all subsequent calculations of Funded Debt for all purposes of this
Agreement.
(c) SALE OF LESS THAN SUBSTANTIALLY ALL ASSETS. Sell, exchange,
transfer or otherwise dispose of part, but less than all or
substantially all, of their respective assets, unless
(1) such sale, exchange, transfer or other disposition is made
in the ordinary course of business (including abandonments, farm-ins,
farm-outs, leases and subleases of developed or undeveloped properties
owned or held by the Company or any Restricted Subsidiary that are
made or entered into in the ordinary course of business, but
EXCLUDING, however, any sale of net profits interests in developed oil
and gas properties); or
(2) after giving effect to such sale, exchange, transfer or
other disposition, (A) the aggregate net book value of (i) all assets
of the Company and the Restricted Subsidiaries (including the sale of
net profits interests in developed oil and gas
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properties) sold, exchanged, transferred or otherwise disposed of (on
a consolidated basis) (but excluding assets sold, exchanged,
transferred or otherwise disposed of in the ordinary course of
business pursuant to SECTION 9.7(c)(1) during the period of 12
consecutive months immediately preceding such sale, exchange, transfer
or other disposition and (ii) the assets of all Restricted
Subsidiaries, the stock of which have been sold or otherwise disposed
of pursuant to SECTION 9.7(d)(2)(A) during such 12-month period shall
not exceed 10% of Consolidated Net Tangible Assets of the Company and
the Restricted Subsidiaries as of the end of the fiscal quarter
immediately preceding or coinciding with such sale, exchange, transfer
or other disposition, and (B) the assets described in the foregoing
CLAUSE (A) shall not have contributed more than 10% of EBITD of the
Company and the Restricted Subsidiaries for the four most recently
completed fiscal quarters taken as a single accounting period; or
(3) after giving effect to such sale, exchange, transfer or
other disposition, (A) the aggregate net book value of (i) all assets
of the Company and the Restricted Subsidiaries (including the sale of
net profits interests in developed oil and gas properties) sold,
exchanged, transferred or otherwise disposed of (on a consolidated
basis) (but excluding assets sold, exchanged, transferred or otherwise
disposed of pursuant to SECTION 9.7(c)(1) and (2)) during the period
of 12 consecutive months immediately preceding such sale, exchange,
transfer or other disposition and (ii) the assets of all Restricted
Subsidiaries, the stock of which has been sold or otherwise disposed
of pursuant to SECTION 9.7(d)(2)(B) during such 12-month period, shall
not exceed 10% of Consolidated Net Tangible Assets of the Company and
the Restricted Subsidiaries as of the end of the fiscal quarter
immediately preceding or coinciding with such sale, exchange, transfer
or other disposition; (B) the assets described in the foregoing CLAUSE
(A) shall not have contributed more than 10% of EBITD for the four
most recently completed fiscal quarters taken as a single accounting
period, and (C) within six months after such sale, exchange, transfer
or other disposition, the net proceeds thereof are applied toward, or
the exchange results in, (1) the acquisition by the Company or a
Restricted Subsidiary of (i) assets which have an aggregate fair
market value at least equal to the net proceeds received by the
Company and its Restricted Subsidiaries from such sale, exchange,
transfer or other disposition; (ii) if the assets so sold, exchanged,
transferred or otherwise disposed of were located in the United States
of America or Canada, the assets acquired are located in the United
States of America or Canada, and (iii) the assets so acquired are of a
type usual and customary in the oil and gas business; PROVIDED that no
Liens shall at any time exist on the assets so acquired which secure
any Debt except as permitted by SECTION 9.7(a)(13) or (2) the
prepayment of an aggregate principal amount of all Obligations plus
accrued interest and premium, if any, thereon in accordance with this
Agreement and the Revolving and Term Credit Agreement, or the payment
of an
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aggregate principal amount of other Funded Debt (other than Funded
Debt subordinate in right of payment to the Obligations) plus accrued
interest and premium, if any, in either case in an amount at least
equal to the aggregate net proceeds that the Company or a Restricted
Subsidiary receives from the sale, exchange, transfer or other
disposition of such assets.
(d) SALE OF STOCK OF RESTRICTED SUBSIDIARIES. Sell or otherwise
dispose of, or part with control of, any shares of stock of any
Restricted Subsidiary, except (1) to the Company or another wholly
owned Restricted Subsidiary and (2) that all shares of stock of any
Restricted Subsidiary at the time owned by the Company and all
Restricted Subsidiaries may be sold as an entirety for a cash
consideration which represents the fair market value (as determined in
good faith by the Board of Directors of the Company) at the time of
sale of the shares of stock so sold; PROVIDED that for purposes of
this exception:
(A) (i) the net book value of the assets of such Restricted
Subsidiary together with (x) the net book value of the assets of any
other Restricted Subsidiary the stock of which was sold during the
preceding 12-month period and (y) the net book value of the assets of
the Company and all Restricted Subsidiaries sold, exchanged,
transferred or otherwise disposed of pursuant to SECTION 9.7(c)(2)
during the preceding 12-month period, does not represent more than 10%
of Consolidated Net Tangible Assets as of the end of the fiscal
quarter immediately preceding or coinciding with such sale, exchange,
transfer or other disposition and (ii) the earnings of such Restricted
Subsidiary together with (x) the earnings of any other Restricted
Subsidiary the stock of which was sold or otherwise disposed of
pursuant to the exception described in this CLAUSE (A) during the
preceding 12-month period and (y) the earnings attributable to the
assets sold, exchanged, transferred or otherwise disposed of pursuant
to SECTION 9.7(c)(2) during such 12-month period, do not represent
more than 10 of EBITD for the four most recently completed fiscal
quarters taken as a single accounting period; and PROVIDED FURTHER
that, at the time of such sale, such Restricted Subsidiary shall not
own, directly or indirectly, any shares of stock of the Company or any
other Restricted subsidiary unless all of the shares of stock of such
other Restricted Subsidiary owned, directly or indirectly, by the
Company and all Restricted Subsidiaries are simultaneously being sold
as permitted by the exception described in this CLAUSE (A); or
(B) (i) the net book value of the assets of such Restricted
Subsidiary together with (x) the net book value of the assets of any
other Restricted Subsidiary the stock of which was sold during the
preceding 12-month period and (y) the net book value of the assets of
the Company and any Restricted Subsidiary sold, exchanged, transferred
or otherwise disposed of pursuant to SECTION 9.7(c)(3) during the
preceding 12-month period, does not represent more than 10% of the
Consolidated Net Tangible Assets as
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of the end of the fiscal quarter immediately preceding or coinciding
with such sale, exchange, transfer or other disposition; (ii) the
earnings of such Restricted Subsidiary together with (x) the earnings
of any other Restricted Subsidiary the stock of which was sold or
otherwise disposed of pursuant to the exception described in this
CLAUSE (B) during the preceding 12-month period and (y) the earnings
attributable to the assets sold, exchanged, transferred or otherwise
disposed of pursuant to SECTION 9.7(c)(3) during such 12-month period,
do not represent sore than 10% of EBITD for the four most recently
completed fiscal quarters taken as a single accounting period, and
(iii) within six months after such sale or other disposition, the
proceeds thereof are applied toward (i) the acquisition by the Company
or a Restricted Subsidiary of (1) assets which have an aggregate fair
market value at least equal to the net proceeds received by the
Company and the Restricted Subsidiaries from such sale or other
disposition and (2) the assets so acquired are of a type usual and
customary in the oil and gas business; PROVIDED that no Liens shall at
any time exist on the assets so acquired which secure Any Debt except
as permitted by SECTION 9.7(a)(13), or (ii) the prepayment of an
aggregate principal amount of all Obligations in accordance with this
Agreement and the Revolving and Term Credit Agreement, or the payment
of an aggregate principal amount of other Funded Debt (other than
Funded Debt subordinate in right of payment to the Obligations) plus
accrued interest and premium, if any, in either case in an amount at
least equal to the aggregate net proceeds that the Company or a
Restricted Subsidiary receives from the sale or other disposition; and
PROVIDED FURTHER that, at the time of such sale or other disposition,
such Restricted Subsidiary shall not own, directly or indirectly, (y)
any shares of stock of the Company or any other Restricted Subsidiary
unless all of the shares of stock of such other Restricted Subsidiary
owned, directly or indirectly, by the Company and all Restricted
Subsidiaries are simultaneously being sold as permitted by the
exception described in this CLAUSE (B).
(e) MERGER AND SALE OF ALL OR SUBSTANTIALLY ALL ASSETS. Merge or
consolidate with or into any other Person or convey, exchange,
transfer or otherwise dispose of all or a substantial part of its
assets (i.e., assets which could not otherwise be disposed of pursuant
to SECTION 9.7(c)(2) or (3)) to any Person except that
(1) any wholly owned Restricted Subsidiary may merge with the
Company (PROVIDED that the Company shall be the continuing or
surviving corporation) or with any one or more other wholly owned
Restricted Subsidiaries;
(2) any Restricted Subsidiary may sell, exchange, transfer or
otherwise dispose of any of its assets to the Company or to a wholly
owned Restricted Subsidiary;
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(3) any Restricted Subsidiary may sell, exchange, transfer or
otherwise dispose of all or substantially all of its assets subject to
the conditions and provisions specified in SECTIONS 9.7(c)(2) and (3);
(4) any Restricted Subsidiary may merge into or consolidate with
any Person which does not thereupon become a Restricted Subsidiary,
subject to the conditions and provisions specified in SECTION 9.7(d)
with respect to a sale or other disposition of the stock of such
Restricted Subsidiary;
(5) any Restricted Subsidiary may permit any Person to be merged
into such Restricted Subsidiary or may consolidate with or merge into
a Person which thereupon becomes a Restricted Subsidiary; PROVIDED
that immediately after any such merger or consolidation, no Default
shall have occurred and be continuing;
(6) the Company may permit any Person to be merged into the
Company (such that the Company shall be the continuing or surviving
corporation); and
(7) the Company may permit any corporation to consolidate with
the Company and the Company may merge into or otherwise dispose of its
assets as an entirety or substantially as an entirety to any solvent
corporation organized under the laws of the United States of America
or any state thereof and having at least 80% of its consolidated
assets located in the United States of America and Canada which
expressly assumes in writing the due and punctual performance of the
obligations of the Company under the Credit Documents, to the same
extent as if such successor or transferee corporation had originally
executed the Credit Documents in the place of the Company (it being
agreed that such assumption shall, upon the request of any Bank and at
the expense of such successor or transferee corporation, be evidenced
by the exchange of each outstanding Application for another
Application executed by such successor or transferee corporation, with
such changes in phraseology and form as may be appropriate but in
substance of like terms as the Application surrendered for such
exchange and of like unpaid principal amount, and that each
Application executed pursuant to this Agreement after such assumption
shall be executed by and in the name of such successor or transferee
corporation);
PROVIDED that for purposes of SECTIONS 9.7(e)(6) and (7) immediately
after such merger, consolidation, sale or other disposition, and after
giving effect thereto, (x) such successor or transferee Person could
incur at least $1.00 of additional Funded Debt without violation of
SECTION 9.7(b)(3) and (y) no Default shall have occurred and be
continuing. As soon as practicable, and in any event at least 75 days
prior to the proposed consummation date of any merger, consolidation,
sale or other disposition described in SECTION 9.7(e)(7), the Company
shall give written notice thereof to each Bank describing in
reasonable detail the
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proposed transaction, the date on which it is proposed to be
consummated and the identity, jurisdiction of organization, and
geographic composition of assets of the proposed successor or
transferee corporation. No disposition by the Company of its assets
as an entirety or substantially as an entirety under SECTION 9.7(e)(7)
shall release the Company as the applicant under any Application from
its liability as obligor thereon.
(f) SALE AND LEASEBACK. Enter into any Sale and Leaseback
Transaction unless:
(1) immediately after giving effect thereto and to the
application of any sales proceeds received in connection therewith,
Special Debt shall not exceed 10% of the Consolidated Net Tangible
Assets; or
(2) the net sales proceeds received by the Company or a
Restricted Subsidiary in respect of the assets sold pursuant to such
Sale and Leaseback Transaction are greater than or equal to the fair
market value of the assets sold (which determination shall be based
upon a written opinion (the cost of which shall be borne exclusively
by the Company) as to valuation from an independent valuation expert
selected by the Company) and such proceeds are concurrently applied to
(A) the purchase, acquisition, development or construction of assets
having a value at least equal to such net proceeds, and to be used in
the Company's or such Restricted Subsidiary's business; PROVIDED that
no Liens shall at any time exist on such assets which secure any Debt
except as permitted by SECTION 9.7(a)(13); (B) the prepayment in
accordance with this Agreement of any aggregate principal amount of
all the Obligations (plus accrued interest and premium, if any) at
least equal to the amount of such net proceeds; or (C) the payment of
other Funded Debt (other than Funded Debt subordinate in right of
payment to the Obligations) in an aggregate principal amount at least
equal to the amount of such net sales proceeds; or
(3) the Sale and Leaseback Transaction involves the sale of
assets by the Company to a wholly owned Restricted Subsidiary or by a
Restricted Subsidiary to the Company or to another wholly owned
Restricted Subsidiary; PROVIDED that if the Company is the seller
under any such Sale and Leaseback Transaction, its lease obligations
thereunder shall be subordinated to the Obligations represented by the
Applications upon terms set forth on SCHEDULE V.
(g) INVESTMENTS IN THE SPECIAL SUBSIDIARY. Directly or indirectly
make an Investment in the Special Subsidiary after March 31, 1990,
unless (1) the aggregate amount of all other Investments in the
Special Subsidiary made, directly or indirectly, by the Company and
the Restricted Subsidiaries after March 31, 1990 shall not exceed the
aggregate amount of cash distributions received by the Company and the
Restricted Subsidiaries from the Special Subsidiary after March 31,
1990 or (2) in the opinion of
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the Board of Directors of the Company, the Investment would not impair
the ability of the Company to make when due any payment (including any
prepayment required by SECTION 3 of principal of or interest on the
Reimbursement Obligations.
(h) TRANSACTIONS WITH AFFILIATES. Directly or indirectly
purchase, acquire or lease any property from, or sell, transfer or
lease any property to, or otherwise deal with, in the ordinary course
of business or otherwise, (1) any Affiliate (except any employee
compensation benefit plan or any Restricted Subsidiary) or (2) any
Person (other than a Restricted Subsidiary) in which an Affiliate or
the Company (directly or indirectly) owns, beneficially or of record,
5% or more of the outstanding voting stock or similar equity interest,
except that (A) any Affiliate may be a director, officer or employee
of the Company or any Restricted Subsidiary and may be paid reasonable
compensation in connection therewith and (B) subject to applicable
fiduciary standards with respect to the Special Subsidiary, acts and
transactions that would otherwise be prohibited by this Subsection may
be performed or engaged in if upon terms not less favorable to the
Company or any Restricted Subsidiary than if no relationship described
in CLAUSES (1) and (2) above existed.
(i) TAX CONSOLIDATION. Except for the Tax Allocation Agreements,
the Company will not, and will not permit any of its Subsidiaries to,
file or consent to the filing of any consolidated income tax return
with any Person unless such other Person shall have agreed in writing
with the Company that the Company's or such Subsidiary's liability
with respect to taxes as a result of the filing of any such
consolidated income tax return with such Person shall not be
materially greater, nor the receipt of any tax benefits materially
less, than they would have been had the Company and its Subsidiaries
continued to file a consolidated income tax return with the Company as
the parent corporation.
9.8 ISSUANCE OF STOCK BY RESTRICTED SUBSIDIARIES. The Company
covenants that it will not permit any Restricted Subsidiary (either
directly or indirectly, by the issuance of rights or options for, or
securities convertible into, such shares) to issue, sell or otherwise
dispose of any shares of any authorized but unissued or treasury class
of such Restricted Subsidiary's stock (other than directors'
qualifying shares) except to the Company or another Restricted
Subsidiary.
9.9 COVERAGE RATIOS. As of the end of each fiscal quarter of the
Company, and each delivery of a Required Reserve Report or Optional
Reserve Report, the Company shall be in compliance with all Required
Ratios (except for any noncompliance resulting solely from an
Engineering Shortfall, and then only during the cure period permitted
by Section 10.1(e)).
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Section 10. DEFAULTS.
10.1 EVENTS OF DEFAULT. If one or more of the following events
(herein called "EVENTS OF DEFAULT") shall occur and be continuing:
(a) the Company shall fail to pay any principal of any
Reimbursement Obligation or any fee or other principal amount payable
hereunder or under any other Credit Document when due, or shall fail
to pay any interest on any amount hereunder or under any other Credit
Document for more than three days after the date due; or
(b) any member of the Combined Group shall default in any payment
of principal of or interest on any other obligation for money borrowed
(or any Capitalized Lease Obligation, any obligation under a
conditional sale or other title retention agreement, any obligation
issued or assumed as full or partial payment for property whether or
not secured by a purchase money mortgage or any obligation under notes
payable or drafted accepted representing extensions of credit) beyond
any period of grace provided with respect thereto, or any member of
the Combined Group shall fail to perform or observe any other
agreement, term or condition contained in any agreement under which
any such obligation is created (or if any other event thereunder or
under any such agreement shall occur and be continuing) and the effect
of such failure or other event is to cause, or to permit the holder or
holders of such obligation (or a trustee on behalf of such holder or
holders) to cause, such obligation to become due prior to any stated
maturity, or any member of the Combined Group shall fail to pay any
Guaranty relating to Debt for borrowed money in accordance with its
terms, PROVIDED that the aggregate amount of all obligations as to
which such a payment default shall occur and be continuing or such a
failure or other event causing or permitting acceleration shall occur
and be continuing shall exceed $10,000,000; or
(c) any representation or warranty by the Company or any of its
officers in any Credit Document or in any writing furnished to the
Agent or the Banks in connection herewith shall prove to have been
false or misleading in any material respect as of the date as of which
it was made; or
(d) the Company shall default in the performance of any of its
obligations under SECTIONS 9.6 through 9.8 or under SECTION 9.9 (other
than a Default resulting solely from an Engineering Shortfall); or
(e) the Company hall deliver any Independent Engineering Report
and related Coverage Report to the Banks in accordance with SECTION
9.1 or SECTION 2.2(d) reflecting noncompliance with any Required Ratio
and such noncompliance shall result solely from an Engineering
Shortfall and shall not be cured (such cure to be
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evidenced by a new Coverage Report demonstrating compliance with all
Required Ratios) on or before the date 180 days after the Company
delivers such Independent Engineering Report and related Coverage
Report; or
(f) the Company shall default in the performance of any of its
obligations in any Credit Document other than those specified
elsewhere in this SECTION 10.1 and such default shall not be remedied
within 30 days after any executive officer of the Company obtains
actual knowledge thereof; or
(g) any member of the Combined Group shall (1) make An assignment
for the benefit of creditors; (2) generally fail to pay its debts as
such debts become due, or (3) admit in writing its inability to
generally pay its debts as such debts become due; or
(h) a Governmental Authority shall enter any decree or order for
relief in respect of any member of the Combined Group under any
bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law,
whether now or hereafter in effect (herein called the "BANKRUPTCY
LAW"), of any jurisdiction; or
(i) any member of the Combined Group shall petition or apply to
any Governmental Authority for, or consent to, the appointment of, or
taking possession by, a trustee, receiver, custodian, liquidator or
similar official of such member of the Combined Group, or of any
substantial part of the assets of such member of the Combined Group,
or shall commence a voluntary case under the Bankruptcy Law of the
United States or any proceedings (other than proceedings for the
voluntary liquidation and dissolution of a Restricted Subsidiary)
relating to any member of the Combined Group under the Bankruptcy Law
of any other jurisdiction; or
(j) any such petition or application referred to in SECTION
10.1(i) shall be filed, or any such proceedings referred to in SECTION
10.1(i) shall be commenced, against any member of the Combined Group
and such member of the Combined Group by any act shall indicate its
approval thereof, consent thereto or acquiescence therein, or an
order, judgment or decree shall be entered appointing any such
trustee, receiver, custodian, liquidator or similar official, or
approving the petition in any such proceedings, and such order,
judgment or decree shall remain unstayed and in effect for more than
60 consecutive days; or
(k) any order, judgment or decree shall be entered in any
proceedings against any member of the Combined Group decreeing the
dissolution of any member of the Combined Group and such order,
judgment or decree shall remain unstayed and in effect for more than
the appeal time provided by law; or
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(l) any order, judgment or decree shall be entered in any
proceedings against any member of the Combined Group decreeing a
split-up of such member of the Combined Group which requires (1) the
divestiture of assets which exceed, or the divestiture of partnership
interest in the Special Subsidiary or of the stock of a Restricted
Subsidiary whose assets exceed, 10% of Consolidated Net Tangible
Assets as of the end of the fiscal quarter immediately preceding or
coinciding with such divestiture or (2) the divestiture of assets or
stock of a Restricted Subsidiary or assets of or partnership interest
in the Special Subsidiary, which shall have contributed more than 10%
of EBITD for the four most recently completed fiscal quarters, and
such order, judgment or decree shall remain unstayed and in effect for
more than 60 consecutive days; or
(m) any judgment or order, or series of judgments or orders, for
the payment of money in an amount in excess of $5,000,000 shall be
rendered against any member of the Combined Group and the same shall
not be discharged (or provision shall not be made for such discharge),
or a stay of execution thereof shall not be procured, within the
appeal time provided by law from the date of entry thereof, or such
member of the Combined Group shall not, within said Appeal time, or
such longer period during which execution of the same shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal; or
(n) the Company or any ERISA Affiliate shall fail to pay when due
an amount or amounts aggregating in excess of $5,000,000 which it
shall have become liable to pay with respect to any Plan; or notice of
intent to terminate a Plan or Plans (other than a multiemployer plan
under Section 4001(a)(3) of ERISA) having aggregate Unfunded
Liabilities in excess of $5,000,000 shall be filed under Title IV of
ERISA by the Company or any ERISA Affiliate, any plan administrator or
any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a trustee
to be appointed to administer any Plan or Plans (other than a
multiemployer plan under Section 4001(a)(3) of ERISA) having aggregate
Unfunded Liabilities in excess of $5,000,000 or a proceeding shall be
instituted by a fiduciary of any such Plan or Plans against the
Company or any ERISA Affiliate to enforce Section 515 or 4219(c)(5) of
ERISA; or the Company or any ERISA Affiliate shall incur a complete or
partial withdrawal liability under Title IV of ERISA in an annual
amount in excess of $2,000,000 (and in the aggregate $5,000,000) in
connection with any Plan; or a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that
any Plan or Plans having aggregate Unfunded Liabilities in excess of
$5,000,000 must be terminated; or there shall occur any event or
condition that might reasonably constitute grounds for the termination
of any Plan or Plans having aggregate Unfunded Liabilities in excess
of $5,000,000 or with respect to such Plan or Plans either the
imposition of any liability in excess of $5,000,000 (other than
contributions in the ordinary course) or any
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Lien provided under Section 4068 of ERISA securing an amount in excess
of $5,000,000 on any property of the Company or any ERISA Affiliate;
provided, however, any amounts owing by Santa Fe Pacific Corporation
pursuant to the ERISA Indemnification Agreement between Santa Fe
Pacific Corporation and the Company shall first be offset against the
dollar threshold amounts set forth above before any such condition or
event constitutes an event of default under this paragraph; or
(o) one or more demands for payment is made upon the Company by
Santa Fe Pacific Corporation or any other Person pursuant to the Tax
Indemnification Agreement and such demands would exceed $5,000,000 in
the aggregate; or
(p) any Change of Control shall occur; or
(q) any Event of Default shall occur and be continuing under the
Revolving and Term Credit Agreement,
THEREUPON: (I) the Agent may (and, if directed by the Required Banks,
shall) do any or all of the following: (a) terminate any Letter of
Credit providing for such termination by sending a notice of
termination as provided therein; (b) declare the Commitments
terminated (whereupon the Commitments shall be terminated); and (c)
declare the principal amount then outstanding of and the accrued
interest on all Reimbursement Obligations and all fees and all other
amounts payable hereunder and under the Applications to be forthwith
due and payable, whereupon such amounts shall be and become
immediately due and payable, without notice (including notice of
acceleration and notice of intent to accelerate), presentment, demand,
protest or other formalities of any kind, all of which are hereby
expressly WAIVED by the Company; PROVIDED that in the case of the
occurrence of an Event of Default with respect to the Company referred
to in SECTION 10.1(g) through (l), the Commitments shall be
automatically terminated and the principal amount then outstanding of
and the accrued interest on the Reimbursement Obligations and fees and
all other amounts payable hereunder and under the Applications shall
be and become automatically and immediately due and payable, without
notice (including notice of intent to accelerate and notice of
acceleration) and without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly WAIVED by
the Company; (II) each Bank may exercise its rights of offset against
each account and all other property of the Company in the possession
of such Bank, which right is hereby granted by the Company to the
Banks; and (III) the Agent and each Bank may exercise any and all
other rights pursuant to the Credit Documents, at law and in equity.
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Section 11. THE AGENT.
11.1 APPOINTMENT, POWERS AND IMMUNITIES. Each Bank hereby
irrevocably appoints and authorizes the Agent to act as its Agent
under the Credit Documents and under the Letters of Credit with such
powers as are specifically delegated to the Agent by the terms
thereof, together with such other powers as are reasonably incidental
thereto. The Agent (which term as used in this SECTION 11 shall
include reference to its Affiliates and its own and its Affiliates'
officers, directors, employees and agents) shall (a) have no duties or
responsibilities except those expressly set forth in the Letters of
Credit and the Credit Documents, and shall not by reason of any Credit
Document be a trustee or fiduciary for any Bank; (b) not be
responsible to any Bank for any recitals, statements, representations
or warranties contained in any Credit Document, or in any certificate
or other document referred to or provided for in, or received by any
of them under, any Credit Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of any
Credit Document or any other document referred to or provided for
therein or any property covered thereby or for any failure by the
Company or any other Person to perform any of its obligations
thereunder; (c) not be required to initiate or conduct any litigation
or collection proceedings hereunder or under any Credit Document
except to the extent requested by the Required Banks (and SECTION 11.7
shall apply), and (d) not be responsible for any action taken or
omitted to be taken by it under any Credit Document or any other
document or instrument referred to or provided for therein or in
connection therewith, including pursuant to its own negligence, except
for its own gross negligence or willful misconduct. The Agent may
employ agents and attorneys-in-fact and shall not be responsible for
the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. Without in any way limiting any
of the foregoing, each Bank acknowledges that the Agent shall have no
greater responsibility in the operation of the Letters of Credit than
is specified in the Uniform Customs and Practice of Documentary
Credits (1983 Revision, International Chamber of Commerce Publication
No. 400).
11.2 RELIANCE BY AGENT. The Agent shall be entitled to rely upon
any certification, notice or other communication (including any
thereof by telephone, telex, telegram or cable) believed by it to be
genuine and correct and to have been signed or sent by or on behalf of
the proper Person or Persons, and upon advice and statements of legal
counsel (which may be counsel for the Company), independent
accountants and other experts selected by the Agent. As to any matters
not expressly provided for by any Credit Document, the Agent shall in
all cases be fully protected in acting, or in refraining from acting,
hereunder and thereunder in accordance with instructions of the
Required Banks, and any action taken or failure to act pursuant
thereto shall be binding on all of the Banks.
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11.3 DEFAULTS. The Agent shall not be deemed to have knowledge
of the occurrence of a Default (other than the non-payment of
principal of or interest on Reimbursement Obligations) unless it has
received notice from a Bank or the Company specifying such Default and
stating that such notice is a "Notice of Default". In the event that
the Agent receives such a notice of the occurrence of a Default, the
Agent shall give prompt notice thereof to the Banks (and shall give
each Bank prompt notice of each such non-payment). The Agent shall
(subject to SECTIONS 11.7 and 12.5) take such action with respect to
such Default as shall be directed by all Banks or the Required Banks,
as appropriate, and within its rights under the Credit Documents and
at law or in equity; PROVIDED that, unless and until the Agent shall
have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action,
permitted hereby with respect to such Default as it shall deem
advisable in the best interests of the Banks and within its rights
under the Credit Documents, at law or in equity.
11.4 RIGHTS AS A BANK. With respect to their Commitments, the
Letters of Credit and the Reimbursement Obligations, TCB and
NationsBank in their capacities as Banks hereunder shall have the same
rights and powers hereunder as any other Bank and may exercise the
same as though they were not acting as the Agent or the Co-Agents, and
the term "Bank" or "Banks" shall, unless the context otherwise
indicates, include the Agent and the Co-Agents in their individual
capacity. The Agent and the Co-Agents may (without having to account
therefor to any Bank) accept deposits from, lend money to and
generally engage in any kind of banking, trust, letter of credit,
agency or other business with the Company (and any of its Affiliates)
as if they were not acting as the Agent and the Co-Agents, and the
Agent and the Co-Agents may accept fees and other consideration from
the Company and its Affiliates (in addition to the fees heretofore
agreed to between the Company and the Agent or the Co-Agents) for
services in connection with this Agreement or otherwise without having
to account for the same to the Banks.
11.5 INDEMNIFICATION. The Banks agree to indemnify the Agent (to
the extent not reimbursed under SECTION 12.3 or 12.4, but without
limiting the obligations of the Company under said SECTIONS 12.3 and
12.4), ratably in accordance with their respective Commitments, for
any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever (including the consequences of the
negligence of the Agent) which may be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of
any Credit Document or any other documents contemplated by or referred
to therein or the transactions contemplated thereby (including the
costs and expenses which the Company is obligated to pay under
SECTIONS 12.3 and 12.4 but excluding, unless a Default has occurred
and is continuing, normal administrative costs and expenses incident
to the performance of
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its agency duties hereunder) or the enforcement of any of the terms
hereof or thereof or of any such other documents, including the
negligence of the Agent; PROVIDED that no Bank shall be liable for any
of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the party to be indemnified. The obligations of
the Banks under this SECTION 11.5 shall survive the termination of
this Agreement.
11.6 NON-RELIANCE ON THE AGENT AND OTHER BANKS. Each Bank agrees
that it has received current financial information with respect to the
Company and that it has, independently and without reliance on the
Co-Agents or any other Bank and based on such documents and
information as it has deemed appropriate, made its own credit analysis
of the Company and decision to enter into this Agreement and that it
will, independently and without reliance upon the Co-Agents or any
other Bank, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under the Credit Documents.
The Co-Agents shall not be required to keep themselves informed as to
the performance or observance by the Company of any Credit Document or
any other document referred to or provided for therein or to inspect
the property or books of the Company or any other Person. Except for
notices, reports and other documents and information expressly
required to be furnished to the Banks by the Co-Agents under the
Credit Documents, the Co-Agents shall not have any duty or
responsibility to provide any Bank with any credit or other
information concerning the affairs, financial condition or business of
the Company (or any of its Affiliates) which may come into the
possession of the Co-Agents.
11.7 FAILURE TO ACT. Except for action expressly required of the
Agent under the Credit Documents, the Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder
unless it shall receive further assurances to its satisfaction by the
Banks of their indemnification obligations under SECTION 11.5 against
any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action.
11.8 RESIGNATION OR REMOVAL OF THE AGENT. Subject to the
appointment and acceptance of a successor Agent as provided below, the
Agent may resign at any time by giving notice thereof to the Banks and
the Company, and the Agent may be removed at any time with or without
cause by the Required Banks. Upon any such resignation or removal,
the Required Banks shall have the right to appoint a successor Agent.
If no successor Agent shall have been so appointed by the Required
Banks and shall have accepted such appointment within 30 days after
the retiring Agent's giving of notice of resignation or the Required
Banks' removal of the retiring Agent, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent. Any successor Agent
shall be a bank which has an office in the United States and a
combined
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capital and surplus of at least $250,000,000 and with its deposits
insured by the FDIC. Upon the acceptance of any appointment as the
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 hereunder. Such
successor Agent shall promptly specify its Principal Office referred
to in SECTIONS 3.1 and 5.1 by notice to the Company. After any
retiring Agent's resignation or removal hereunder as the Agent, the
provisions of this SECTION 11 shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it
was acting as the Agent.
Section 12. MISCELLANEOUS.
2.1 WAIVER. No waiver of any Default shall be a waiver of any
other Default. No failure on the part of the Agent or any Bank to
exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under any Credit Document
shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege thereunder preclude any
other or further exercise thereof or the exercise of any other right,
power or privilege. The remedies provided in the Credit Documents are
cumulative and not exclusive of any remedies provided by law or in
equity.
12.2 NOTICES. All notices and other communications provided for
herein (including any modifications of, or waivers or consents under,
this Agreement) shall be given or made by telex, telegraph, telecopy
(confirmed by mail), cable or other writing and telexed, telecopied,
telegraphed, cabled, mailed or delivered to the intended recipient at
the "Address for Notices" specified below its name on the signature
pages hereof; or, as to any party, at such other address as shall be
designated by such party in a notice to the Company and the Agent
given in accordance with this Section. Except as otherwise provided in
this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telex or telecopier, delivered to the
telegraph or cable office or personally delivered or, in the case of a
mailed notice, upon receipt, in each case given or addressed as
aforesaid.
12.3 EXPENSES, ETC. Whether or not any Letter of Credit is ever
issued, the Company shall pay or reimburse on demand each of the Banks
and the Co-Agents for paying: (a) the reasonable fees and expenses of
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., special counsel to the
Agent, in connection with (1) the preparation, execution and delivery
of the Credit Documents (including the exhibits and schedules hereto),
the issuance of the Letters of Credit hereunder and (2) any
modification, supplement or waiver of any of the terms of any Credit
Document; (b) all reasonable out-of-pocket costs and expenses of the
Banks and the Co-Agents (including reasonable counsels' fees) in
connection with
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any Event of Default under or the enforcement of any Credit Document;
(c) all transfer, stamp, documentary or other similar taxes,
assessments or charges levied by any governmental or revenue authority
in respect of any Credit Document or any other document referred to
therein; and (d) reasonable expenses of due diligence and syndication,
and mutually agreed advertising and marketing costs.
12.4 INDEMNIFICATION. The Company shall indemnify the Agent
(including the Agent when acting as issuer of the Letters of Credit),
the Co-Agents, the Banks, and each Affiliate thereof and their
respective directors, officers, employees, agents and counsel from,
and hold each of them harmless against, any and all losses,
liabilities, costs, expenses, claims or damages to which any of them
may become subject, regardless of and including losses arising from
the negligence of the Agent or the Co-Agents or the Banks or any other
indemnitee, (A) in connection with the execution and delivery or
transfer of or payment or failure to pay under any Letter of Credit,
including, without limitation, any claims, damages, losses,
liabilities, costs or expenses which the Agent, such Co-Agent or such
Bank, as the case may be, may incur (whether incurred as a result of
its own negligence or otherwise) by reason of or in connection with
the failure of any other Bank (whether as a result of its own
negligence or otherwise) to fulfill or comply with its obligations to
the Agent or such Bank, as the case may be, hereunder (but nothing
herein contained shall affect the rights the Company may have against
such defaulting Bank); and (B) insofar as such losses, liabilities,
costs, expenses, claims or damages arise out of or result from any (a)
actual or proposed use by the Company of the proceeds of any extension
of credit by the Agent or any Bank hereunder; (b) breach by the
Company of any Credit Document; (c) violation by the Company or any of
its Subsidiaries of any Legal Requirement including Applicable
Environmental Laws; (d) any Bank's or the Agent's or any Co-Agent's
being deemed an owner or operator of any assets of the Company or its
Subsidiaries by a court or other regulatory or administrative agency
or tribunal in circumstances in which neither the Agent, either
Co-Agent nor any of the Banks is generally operating or generally
exercising control over such assets, to the extent such losses,
liabilities, claims or damages arise out of or result from any Legal
Requirement including Applicable Environmental Laws pertaining to the
condition of such assets, (e) Environmental Claim or (f)
investigation, litigation or other proceeding (including any
threatened investigation or proceeding) relating to any of the
foregoing, and the Company shall reimburse the Agent, Co-Agent, each
Bank, and each Affiliate thereof and their respective directors,
officers, employees, agents and counsel, upon demand, for any expenses
(including reasonable legal fees) incurred in connection with any such
investigation or proceeding; but excluding any such losses,
liabilities, claims, damages, costs or expenses incurred by a Person
or any Affiliate thereof or their respective directors, officers,
employees, agents or counsel by reason of the gross negligence or
willful misconduct
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of such Person, Affiliate director, officer, employee, agent or
counsel. The obligation of the Company to provide indemnification
under this SECTION 12.4 for fees and expenses of counsel shall be
limited to the fees and expenses of one counsel in each jurisdiction
representing all of the Persons entitled to such indemnification,
except to the extent that, in the reasonable judgment of any such
indemnified Person, the existence of actual or potential conflicts of
interest make representation of all of such indemnified Persons by the
same counsel inappropriate; in such a case, the Person exercising such
judgment shall be indemnified for the reasonable fees and expenses of
its separate counsel to the extent provided in this SECTION 12.4
without giving effect to the first clause of this sentence. Nothing
in this SECTION 12.4 is intended to limit the obligations of the
Company under any other provision of this Agreement.
12.5 AMENDMENTS, ETC. No amendment or waiver of any provision of
any Credit Document, nor any consent to any departure by the Company
therefrom, shall in any event be effective unless the same shall be
agreed or consented to by the Required Banks and the Company, and each
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
each Bank affected thereby, (a) increase the Commitment of any of the
Banks or subject the Banks to any additional obligations; (b) reduce
the principal of, or interest on, any Reimbursement Obligation, fee or
other sum to be paid under any Credit Document; (c) postpone any
scheduled date fixed for any payment of principal of, or interest on,
any Reimbursement Obligation, fee or other sum to be paid under any
Credit Document; (d) change the percentage of any of the Commitments,
or of the aggregate unpaid principal amount of the Reimbursement
Obligations, or the number of Banks which shall be required for the
Banks or any of them to take any action under this Agreement; (e)
change any provision contained in SECTIONS 2.3, 5.2, 5.7, 6, 12.3 or
12.4 or this SECTION 12.5, or in the definition of "Required Ratios".
Anything in this SECTION 12.5 to the contrary, no amendment, waiver or
consent shall be made with respect to SECTION 11 without the consent
of the Agent and the Co-Agents.
12.6 SUCCESSORS AND ASSIGNS. (a) This Agreement shall be binding
upon and inure to the benefit of the Company, the Agent, the Co-Agents
and the Banks and their respective successors and assigns. The
Company may not assign or transfer any of its rights or obligations
hereunder without the prior written consent of all of the Banks.
(b) Each Bank may sell participations to any Person in all or part
of its Reimbursement Obligation, or all or part of its Commitment, in
which event, without limiting the foregoing, the provisions of SECTION
6 shall inure to the benefit of each purchaser of a participation and
the PRO RATA treatment of
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payments, as described in SECTION 5 2, shall be determined as if such
Bank had not sold such participation. In the event any Bank shall
sell any participation, (1) the Company, the Agent, the Co-Agent and
the other Banks shall continue to deal solely and directly with such
selling Bank in connection with such selling Bank's rights and
obligations under the Credit Documents (including the Applications
held by such selling Bank); (2) such Bank shall retain the sole right
and responsibility to enforce the Reimbursement Obligations, including
the right to approve any amendment, modification or waiver of any
provision of this Agreement other than amendments, modifications or
waivers with respect to (A) any fees payable hereunder to the Banks,
and (B) the amount of principal or the rate of interest payable on, or
the dates fixed for the scheduled repayment of principal of, the
Reimbursement Obligations and other sums to be paid to the Banks
hereunder, and (3) the Company agrees, to the fullest extent it may
effectively do so under applicable law, that any participant of a Bank
may exercise all rights of set-off, bankers' lien, counterclaim or
similar rights with respect to such participation as fully as if such
participant were a direct holder of Reimbursement Obligations if such
Bank has previously given notice of such participation to the Company.
(c) Each Bank may assign to one or more Banks or Eligible
Assignees all or a portion of its interests, rights and obligations
under this Agreement (including all or a portion of its Commitment and
the same portion of the related Reimbursement Obligations at the time
owing to it); PROVIDED (1) other than in the case of an assignment to
a Person at least 50% owned by the assignor Bank, or by a common
parent of both, or to another Bank, the Agent and the Company must
give their respective prior written consent, which consent will not be
unreasonably withheld; (2) the aggregate amount of the Commitment
and/or Reimbursement Obligations of the assigning Bank subject to each
such assignment (determined as of the date the Assignment Agreement
with respect to such assignment is delivered to the Agent) shall in no
event be less than $750,000 (or $75,000 in the case of an assignment
between Banks) (except for certain exceptions approved by the Company
and the Agent) and shall be in an amount that is an integral multiple
of $75,000; (3) the assigning Bank shall contemporaneously assign to
such assignee Bank or Eligible Assignee an equal percentage of the
assigning Bank's Revolving Commitment and Term Loan Commitment and all
assigning Bank's other rights and obligations under the Revolving and
Term Credit Agreement; and (4) the parties to each such assignment
shall execute and deliver to the Agent, for its acceptance and
recording in its records, an Assignment Agreement with blanks
appropriately completed, together with the Applications subject to
such assignment and a processing and recordation fee of $2,000 (for
which the Company shall have no liability except in the case of
assignments required by the Company pursuant to SECTION 6.1 or 6.2, in
which case such fee shall be paid by the Company). Upon such
execution, delivery, acceptance and recording, from and after the
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effective date specified in each Assignment Agreement, (A) the
assignee thereunder shall be a party hereto and, to the extent
provided in such Assignment Agreement, have the rights and obligations
of a Bank hereunder and (B) the Bank thereunder shall, to the extent
provided in such assignment, be released from its obligations under
this Agreement (and, in the case of an Assignment Agreement 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).
(d) By executing and delivering an Assignment Agreement, the Bank
assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows (1) other
than the representation and warranty that it is the legal and
beneficial owner of the interest being assigned thereby, such assignor
Bank makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made in
or in connection with any Credit Document or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of any
Credit Document; (2) such assignor Bank makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Company or the performance or observance by the
Company of any of its obligations under any Credit Document; (3) such
assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements of the Company
previously delivered in accordance herewith and such other documents
and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment Agreement; (4)
such assignee will, independently and without reliance upon the Agent,
such assignor Bank or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking action under the
Credit Documents; (5) such assignee appoints and authorizes the Agent
to take such action as agent on its behalf and to exercise such powers
under the Credit Documents as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental
thereto, and (6) such assignee agrees that it will perform in
accordance with their terms all obligations that by the terms of the
Credit Documents are required to be performed by it as a Bank.
(e) The Agent shall maintain at its office a copy of each
Assignment Agreement delivered to it and a record of the names and
addresses of the Banks and the Commitment of, and principal amount of
the Reimbursement Obligations owing to, each Bank from time to time.
The entries in such record shall be conclusive, in the absence of
manifest error, and the Company, the Agent and the Banks say treat
each Person the name of which is recorded therein as a Bank hereunder
for all purposes of the Credit Documents. Such records shall be
available for inspection by the Company or any
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Bank at any reasonable time and from time to time upon reasonable
prior notice.
(f) Upon its receipt of an Assignment Agreement executed by an
assigning Bank and the assignee thereunder together with the
Application subject to such assignment, the written consent to such
assignment and the fee payable in respect thereto, the Agent shall, if
such Assignment Agreement has been completed with blanks appropriately
filled, (1) accept such Assignment Agreement; (2) record the
information contained therein in its records, and (3) give prompt
notice thereof to the Company.
(g) Any Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section, disclose to the assignee or participant or proposed assignee
or participant, any information relating to the Company furnished to
such Bank by or on behalf of the Company.
(h) Any assignment by a Bank pursuant to this SECTION 12.6 shall
not result in any single Bank holding in excess of 25% of the
aggregate of the Commitments at any one time.
(i) Notwithstanding any other provision of this SECTION 12.6, TCB
and its Affiliates may not assign their rights hereunder unless, after
giving effect to such assignment, TCB and its Affiliates would have an
aggregate Commitment Percentage of at least 10%.
(j) Notwithstanding anything herein to the contrary, each Bank may
pledge and assign all or any portion of its rights and interests under
the Credit Documents to any Federal Reserve Bank.
12.7 SURVIVAL; TERM; REINSTATEMENT. In addition to the other
provisions of this Agreement expressly stated to survive the
termination of this Agreement, the obligations of the Company under
SECTIONS 6, 12.3 and 12.4 and the last sentence of this SECTION 12.7
and the obligations of the Banks under SECTION 12.8 shall survive the
termination of this Agreement. The term of this Agreement shall be
until (a) the full and final payment of all Reimbursement Obligations,
(b) the expiry of all Letters of Credit, (c) the termination of all
Commitments and (d) the payment of all amounts due under the Credit
Documents. The Company agrees that if at any time all or any part of
any payment previously applied by any Bank to any Reimbursement
Obligation or other sum hereunder is or must be returned by or
recovered from such Bank for any reason (including the order of any
bankruptcy court), the Credit Documents shall automatically be
reinstated to the same effect as if the prior application had not been
made, and the Company hereby agrees to indemnify such Bank against,
and to save and hold such Bank harmless from, any required return by
or recovery from such Bank of any such payment because of its being
deemed preferential under applicable Legal Requirements, or for any
other reason.
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12.8 LIMITATION OF INTEREST. The parties to this Agreement
intend to strictly comply with all applicable laws, including
applicable usury laws. Accordingly, the provisions of this Section
shall govern and control over every other provision of any Credit
Document which conflicts or is inconsistent with this Section, even if
such provision declares that it controls. As used in this SECTION
12.8, the term "interest" includes the aggregate of all charges, fees,
benefits or other compensation which constitute interest under
applicable law; PROVIDED that, to the maximum extent permitted by
applicable law, (a) any non-principal payment shall be characterized
as an expense or as compensation for something other than the use,
forbearance or detention of money, and not as interest and (b) all
interest at any time contracted for, reserved, charged or received
shall be amortized, prorated, allocated and spread, in equal parts
during the full term of this Agreement and the Commitments. In no
event shall the Company or any other Person be obligated to pay, or
the Agent or any Bank have any right or privilege to reserve, receive
or retain, (x) any interest in excess of the maximum amount of
nonusurious interest permitted under the laws of the State of Texas or
the applicable laws (if any) of the United States or of any other
state or (y) total interest in excess of the amount which the Agent or
such Bank could lawfully have contracted for, reserved, received,
retained or charged had the interest been calculated for the full term
of this Agreement at the Highest Lawful Rate. On each day, if any,
that the interest rate (the "Stated Rate") called for under any Credit
Document exceeds the Highest Lawful Rate, the rate at which interest
shall accrue shall automatically be fixed by operation of this
sentence at the Highest Lawful Rate for that day, and shall remain
fixed at the Highest Lawful Rate for each day thereafter until the
total amount of interest accrued equals the total amount of interest
which would have accrued if there were no such ceiling rate as is
imposed by this sentence. Thereafter, interest shall accrue at the
Stated Rate unless and until the Stated Rate again exceeds the Highest
Lawful Rate when the provisions of the immediately preceding sentence
shall again automatically operate to limit the interest accrual rate.
The daily interest rates to be used in calculating interest at the
Highest Lawful Rate shall be determined by dividing the applicable
Highest Lawful Rate per annum by the number of days in the calendar
year for which such calculation is being made. None of the terms and
provisions contained in any Credit Document which directly or
indirectly relate to interest shall ever be construed without
reference to this Section, or be construed to create a contract to pay
for the use, forbearance or detention of money at an interest rate in
excess of the Highest Lawful Rate. If the term of this Agreement is
shortened by reason of acceleration of maturity as a result of any
Default or by any other cause, or by reason of any required or
permitted prepayment, and if for that (or any other) reason the Agent
or any Bank at any time, including the stated maturity, is owed or
receives (and/or has received) interest in excess of interest
calculated at the Highest Lawful Rate, then and in any such event all
of any such excess interest shall be
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canceled automatically as of the date of such acceleration, prepayment
or other event which produces the excess, and, if such excess interest
has been paid to the Agent or such Bank, it shall be credited PRO
TANTO against the then-outstanding principal balance of the Company's
obligations to the Agent or such Bank, effective as of the date or
dates when the event occurs which causes it to be excess interest,
until such excess is exhausted or all of such principal has been fully
paid and satisfied, whichever occurs first, and any remaining balance
of such excess shall be promptly refunded to its payor.
12.9 CAPTIONS. Captions and section headings appearing herein are
included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
12.10 COUNTERPARTS. Each Credit Document may be executed in any
number of counterparts, all of which taken together shall constitute
one and the same agreement and any of the parties hereto may execute
such Credit Document by signing any such counterpart.
12.11 GOVERNING LAW. Except to the extent otherwise specified
therein, each Credit Document shall be governed by and construed in
accordance with the law of the State of Texas and the United States of
America. The Company hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Southern District of Texas
and of any Texas state court sitting in Harris County, Texas for
purposes of all legal proceedings arising out of or relating to the
Credit Documents or the transactions contemplated thereby The Company
irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in
an inconvenient forum.
12.12 SEVERABILITY. Whenever possible, each provision of the
Credit Documents shall be interpreted in such manner as to be
effective and valid under applicable law. If any provision of any
Credit Document shall be invalid, illegal or unenforceable in any
respect under any applicable law, the validity, legality and
enforceability of the remaining provisions of such Credit Document
shall not be affected or impaired thereby.
12.13 CHAPTER 15 NOT APPLICABLE. Chapter 15 of the Texas Credit
Code shall not apply to any Credit Document or to any Commitment or
Letter of Credit or Application or Reimbursement Obligation, nor shall
any Credit Document be governed by or be subject to the provisions of
such Chapter 15 in any manner whatsoever.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered on May 20, 1992 but effective as of
the day and year first above written.
SANTA FE ENERGY RESOURCES, INC.
a Delaware corporation
By: M. J. ROSINSKI
Name: M. J. Rosinski
Title: Vice President & Chief
Financial Officer
Address for Notices:
Santa Fe Energy Resources, Inc.
1616 South Voss, Suite 100
Houston, Texas 77097
Telecopy: (713) 268-5341
Attention: Vice President-Finance
Telex: 794-567
(Answerback: SFEPROD HOU)
<PAGE>
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, individually,
as Administrative Agent and as
Co-Agent
By: JAMES R. MCBRIDE
James R. McBride
Senior Vice President
Address for Notices:
Texas Commerce Bank National
Lending Offices: Association
712 Main Street
Texas Commerce Bank National Houston, Texas 77002
Association Attention: Manager, Energy Group
ABA #113000609 Telecopy: (713) 236-4117
For Credit To: Acct. #10967 Telex: 166-053 (Answerback:
Attention: Investment TCB HOU)
Operations/Norma Benzon with copies to:
Reference: Santa Fe Energy
Resources, Inc. Texas Commerce Bank National
Association
P.O. Box 2558
COMMITMENT: $1,817,496.23 Houston, Texas 77252
Attention: Manager, Capital
Markets Division
and
Texas Commerce Bank National
Association
P.O. Box 2558
Houston, Texas 77252
Attention: Manager, Loan
Agreements Division
<PAGE>
NATIONSBANK OF TEXAS, N.A.,
individually and as Co-Agent
By: H. GENE SHIELS
Name: H. Gene Shiels
Title: Vice President
Address for Notices:
Lending Offices:
NationsBank of Texas, N.A. NationsBank of Texas, N.A.
ABA #111000025 700 Louisiana
For Credit to: Acct. P.O. Box 2518
#0180019828 Houston, Texas 77252-2518
Attention: Loan Funds Attention: H. Gene Shiels
Transfer Telecopy: (713) 247-6432
Reference: Santa Fe Energy
Resources, Inc.
COMMITMENT: $1,817,496.23
<PAGE>
THE BANK OF NEW YORK
By: M. B. DAVIS
Name: M. B. Davis
Title: Vice President
Lending Office: Address for Notices:
The Bank of New York
ABA #021000018 The Bank of New York
For Credit To: Special One Wall Street, 19th Floor
Financial Products Dept. New York, New York 10286
Account No. 803-329-7689 Attention: Administration
Reference: Santa Fe Energy Telecopy: (212) 635-7923
Resources, Inc. Telex: 420-268 (Answerback:IRV UI)
Specify fees, period.
COMMITMENT: $1,538,461.54
<PAGE>
THE BANK OF NOVA SCOTIA
By: A. S. NORSWORTHY
Name: A. S. Norsworthy
Title: Assistant Agent
Address for Notices:
Lending Office:
Bank of Nova Scotia, New The Bank of Nova Scotia
York Agency 55 Park Plaza, Suite 650
ABA #026002532 Atlanta, Georgia 30303
For Credit To: Atlanta Attention: Claude Ashby
Agency Telecopy: (404) 525-3833
Reference: Santa Fe Energy Telex: 00542319
Resources, Inc. (Answerback: SCOTIABANK ATL)
COMMITMENT: $1,538,461.54
with a copy to:
The Bank of Nova Scotia
1100 Louisiana, Suite 3000
Houston, Texas 77002
Attention: Mark Ammerman
Telecopy: (713) 752-2425
<PAGE>
BANK OF MONTREAL
By: MARK GREEN
Name: Mark Green
Title: Director
Address for Notices:
Lending Offices:
Harris Bank Bank of Montreal
ABA #071000288 700 Louisiana, Suite 4400
For Credit To: Bank of Houston, Texas 77002
Montreal, Chicago Branch Attention: Dennis Spencer
Attention: E. Rios Telecopy: (713) 223-4007
Reference: Santa Fe Energy Telex: 77-5640
Resources, Inc. (Answerback: BKMONTREAL HOU)
COMMITMENT: $1,538,461.54
<PAGE>
CIBC, INC.
By: BRIAN R. SWINFORD
Name: Brian R. Swinford
Title: Vice President
Address for Notices:
Lending Offices:
Morgan Guaranty Trust CIBC, Inc.
Company of New York 200 Galleria Parkway, NW
ABA #021-000-238 Suite 650
For Credit To: CIBC, Atlanta, Georgia 30339
Atlanta Acct. #630-00-480 Attention: Alex Dymanus
For Further Credit To: Telecopy: (404) 955-1185
Acct. #0701610 Telex: 790-745
Attention: Loan Operations (Answerback: CANBANK ATL)
Reference: Santa Fe Energy
Resources, Inc.
COMMITMENT: $1,538,461.54
with a copy to:
Canadian Imperial Bank of
Commerce
2 Houston Center, Suite 1200
Houston, Texas 77010
Attention: Brian R. Swinford
Telecopy: (713) 658-9922
<PAGE>
BANQUE PARIBAS HOUSTON AGENCY
By: BARTON D. SCHOUEST
Name: Barton D. Schouest
Title: Group Vice President
By: MEI WAN TONG
Name: Mei Wan Tong
Title: Group Vice President
Lending Offices: Address for Notices:
Bankers Trust Co.
ABA #02-100-1033 Banque Paribas Houston Agency
1200 Smith Street, Suite 3100
Houston, Texas 77002
For Credit To: Banque Attention: Brian Malone
Paribas New York Telecopy: (713) 659-3832
#04202195
Final Credit 2144-001545
Banque Paribas Houston Agency
Reference: Santa Fe Energy
Resources, Inc.
COMMITMENT: $1,153,846.16
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
By: JOHN R. VAUGHAN, JR.
Name: John R. Vaughan, Jr.
Title: Director
Address for Notices:
Lending Offices:
Bank of Boston The First National Bank of Boston
ABA #011000390 100 Federal Street
Boston, Massachusetts 02110
For Credit To: Attention: George W. Passela
not applicable Telecopy: (617) 434-3652
Reference: Santa Fe Energy
Resources, Inc.
COMMITMENT: $1,538,461.54
<PAGE>
ABN AMRO Bank, N.V.--HOUSTON AGENCY
By: CHARLES W. RANDALL
Name: Charles W. Randall
Title: Assistant Vice President
Address for Notices:
Lending Offices:
ABN AMRO New York ABN AMRO Bank, N.V.--Houston
ABA #026009580 Agency
Three Riverway, Suite 1600
Houston, Texas 77056
Attention: Mr. Collis Sanders
For Credit To: ABN AMRO Telecopy: (713) 629-7533
Houston Agency
Acct. #651001071541
Reference: Santa Fe Energy
Resources, Inc.
COMMITMENT: $2,134,238.30
<PAGE>
EXHIBITS:
A - Form of Application
B - Assignment Agreement
SCHEDULES:
I - Restricted and Unrestricted Subsidiaries
II - Liens and Funded Debt
III - Initial Approved Assumptions and Price Protection Agreements
IV - Coverage Report
V - Subordination Provisions
VI - Opinion of Andrews & Kurth, L.L.P.
VII - Opinion of David L. Hicks
VIII - Jurisdictions for Which Certificates Are to Be Provided
IX - Existing Letters of Credit
<PAGE>
EXHIBIT 10(e)
EXECUTION COPY
CREDIT AGREEMENT
dated as of
June 30, 1987
among
Santa Fe Energy Operating Partners, L.P.
The Lenders Listed Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
<PAGE>
TABLE OF CONTENTS*
PAGE
SECTION 1.01 Definitions................................ 1
1.02 Accounting Terms and Determinations........ 18
ARTICLE II
THE CREDITS
SECTION 2.01 Commitments to Lend........................ 19
2.02 Method of Borrowing........................ 20
2.03 Notes...................................... 21
2.04 Maturity of Loans.......................... 22
2.05 Interest Rates............................. 23
2.06 Mandatory Termination or Reduction
of Tranche A Commitments................ 26
2.07 Prepayments................................ 28
2.08 General Provisions as to Payments.......... 32
2.09 Funding Losses............................. 32
2.10 Computation of Interest and Fees........... 33
2.11 Regulation D Compensation.................. 33
2.12 Increase of Aggregate Loans................ 33
ARTICLE III
CONDITIONS TO BORROWINGS
SECTION 3.01 First Borrowing............................ 36
3.02 Subsequent Borrowings...................... 37
* The Table of Contents is not a part of this Agreement.
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<PAGE>
PAGE
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Existence and Power....................... 38
4.02 Partnership and Governmental
Authorization; Contravention............ 38
4.03 Binding Effect............................ 38
4.04 Full Disclosure;
Financial Information................... 38
4.05 Litigation................................ 39
4.06 Compliance with ERISA..................... 39
4.07 Taxes..................................... 40
4.08 Title to Assets........................... 40
4.09 Not an Investment Company................. 41
ARTICLE V
COVENANTS
SECTION 5.01 Information............................... 41
5.02 Payment of Obligations.................... 44
5.03 Maintenance of Property; Insurance........ 44
5.04 Conduct of Business and
Maintenance of Existence;
Change of Name Fiscal Year.............. 44
5.05 Compliance with Laws...................... 45
5.06 Inspection of Property,
Books and Records....................... 45
5.07 Debt...................................... 45
5.08 Coverage Ratios; Security................. 46
5.09 Restricted Payments....................... 48
5.10 Negative Pledge........................... 48
5.11 Provision of Security Upon Triggering
Event................................... 49
5.12 Merger; Sale or Abandonment of
Assets; Release of Collateral............ 50
5.13 Use of Proceeds........................... 51
ARTICLE VI
DEFAULTS
SECTION 6.01 Events of Default......................... 52
6.02 Notice of Default......................... 55
6.03 Tranche B Loans Due Upon Failure
to Reborrow Tranche A Loans............. 55
6.04 Additional Amount Payable With
Respect to Tranche B Loans............... 55
-ii-
<PAGE>
PAGE
ARTICLE VII
THE AGENT
SECTION 7.01 Appointment and Authorization............. 56
7.02 Agent and Affiliates...................... 56
7.03 Action by Agent........................... 56
7.04 Consultation with Experts................. 56
7.05 Liability of Agent........................ 56
7.06 Indemnification........................... 57
7.07 Credit Decision........................... 57
7.08 Fees...................................... 57
ARTICLE VIII
CHANGE IN CIRCUMSTANCES AFFECTING
TRANCHE A LENDERS
SECTION 8.01 Basis for Determining Interest
Rate Inadequate or Unfair............... 58
8.02 Illegality................................ 58
8.03 Increased Cost and Reduced Return......... 59
8.04 Prime Loans Substituted for Affected
Fixed Rate Loans........................ 61
8.05 Substitution of Lender.................... 62
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Notices................................... 62
9.02 No Waivers................................ 63
9.03 Expenses; Documentary Taxes............... 63
9.04 Sharing of Set-Offs....................... 63
9.05 Amendments and Waivers.................... 64
9.06 Successors and Assigns.................... 64
9.07 Collateral................................ 65
9.08 Representation of Lenders................. 66
9.09 Confidentiality........................... 66
9.10 New York Law.............................. 66
9.11 Counterparts; Effectiveness............... 66
9.12 Non-Recourse to Partners.................. 66
Exhibit A - Form of Domestic Note
Exhibit B - Form of Euro-Dollar Note
Exhibit C - Form of Tranche B Note
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<PAGE>
Exhibit D - Form of Opinion of Counsel for
the Borrower and its Affiliates
Exhibit E - Form of Opinion of Special Counsel
for the Lenders and the Agent
Exhibit F - Form of SFNR Undertaking
Exhibit G - Form of Mortgage
Exhibit X - Terms of Subordination
-iv-
<PAGE>
CREDIT AGREEMENT
AGREEMENT dated as of June 30, 1987 among SANTA FE ENERGY
OPERATING PARTNERS, L.P., the LENDERS listed on the signature pages
hereof and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. The following terms, as used
herein, have the following meanings:
"Adjusted CD Rate" has the meaning set forth in Section
2.05(b).
"Affiliate" means (except as provided in the definition of
"Triggering Event") the Managing General Partner, the Special General
Partner, or any Person directly or indirectly controlling, controlled
by or under common control with the Borrower or the Managing General
Partner or the Special General Partner. As used in this definition of
"Affiliate", 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 ownership of
voting securities, by contract or otherwise.
"Agent" means Morgan Guaranty Trust Company of New York in
its capacity as agent for the Lenders hereunder, and its successors in
such capacity.
"Annual Coverage Ratio" means, as of any date of
determination, the lowest of the ratios obtained by, for the remaining
portion of the fiscal year in which such date occurs and for each
fiscal year thereafter to and including fiscal 1997, dividing (i) the
sum of, for all Petroleum Properties owned by the Borrower on such
date, Cash Flow Available for Debt Service (calculated on the basis of
the Most Recent Engineering Report) for such period, by (ii) Debt
Service for such period (calculated on the basis set forth in the most
recent Coverage Report delivered to the Lenders pursuant to
<PAGE>
Section 5.01(i), taking into account any incurrence or prepayment of
Debt since the date of such Coverage Report).
"Approved Assumptions" means (i) until February 20, 1988,
such assumptions regarding interest rates as have been heretofore
provided to the Borrower by the Agent, and (ii) thereafter,
assumptions as to prices, costs, interest rates and other matters
relevant to any Engineering Report or to the calculation of Coverage
Ratios, which assumptions shall be determined by the Agent, after
consultation with the Managing General Partner, on a semi-annual basis
starting in 1988 and set forth in a notice sent to the Lenders on or
before January 20 and July 20 of each such year and, if the PROVISO
hereto does not apply, in a notice to the Borrower from the Agent on
or prior to the next succeeding February 20 or August 20, as the case
may be; PROVIDED that if such assumptions are, within 10 days of any
such notice to the Lenders, disapproved by the Required Lenders (as
indicated in a notice to the Agent within such 10-day period) and
alternative assumptions are determined by the Required Lenders and set
forth in a notice delivered to the Agent on or prior to the next
succeeding February 15 or August 15, as the case may be (such
alternative assumptions to be determined by the Required Lenders in
good faith in accordance with their customary oil and gas lending
practices), such alternative assumptions shall be the Approved
Assumptions, and notice thereof shall be sent to the Borrower by the
Agent on or prior to the next succeeding February 20 or August 20, as
the case may be. Approved Assumptions set forth in a notice to the
Borrower shall govern until new Approved Assumptions are set forth in
a notice to the Borrower, and shall be used, without limitation, in
preparation of the next Engineering Report or supplement thereto
required to be delivered pursuant to Section 5.01(i).
"Assessment Rate" has the meaning set forth in Section
2.05(b).
"Borrower" means Santa Fe Energy Operating Partners, L.P., a
Delaware limited partnership.
"Borrowing" means the first borrowing hereunder consisting
of Loans made to the Borrower at the same time by the Lenders pursuant
to Article II and each subsequent borrowing hereunder consisting of
Tranche A Loans made to the Borrower at the same time by the Tranche A
Lenders pursuant to Article II. A Borrowing is, with respect to the
Tranche A Loans, a "Domestic Borrowing" if such Tranche A Loans are
Domestic Loans or a "Euro-Dollar Borrowing" if such Tranche A Loans
are Euro-Dollar Loans. A Domestic Borrowing is a "CD
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<PAGE>
Borrowing" if such Domestic Loans are CD Loans or a "Prime Borrowing"
if such Domestic Loans are Prime Loans.
"Cash Flow Available for Debt Service" means, for any fiscal
year (or portion thereof), (a) Pre-G&A Cash Flow for such period, LESS
(b) an amount (or, with respect to any portion of a fiscal year, a
proportional amount corresponding to such portion of such fiscal year)
of general and administrative expenses equal to, for any fiscal year,
the higher of (i) for each fiscal year ending on or before December
31, 1997, $7,000,000 and for each fiscal year thereafter, $5,000,000,
and (ii) the amount equal to (x) Pre-G&A Cash Flow for such fiscal
year TIMES (y) the quotient derived by dividing (1) the sum of the
prior fiscal year's actual production-related general and
administrative expenses plus one-half of the prior fiscal year's
actual exploration-related general and administrative expenses, by (2)
Pre-G&A Cash Flow for the prior fiscal year.
"CD Base Rate" has the meaning set forth in Section 2.05(b).
"CD Loan" means a Tranche A Loan to be made as a CD Loan
pursuant to the applicable Notice of Borrowing.
"CD Reference Banks" means Bank of Montreal and Morgan
Guaranty Trust Company of New York and each such other bank as may be
appointed pursuant to Section 9.06(d).
"Code" means the Internal Revenue Code of 1986, as amended,
or any successor statute.
"Collateral Threshold" has the meaning set forth in Section
5.08(d).
"Commitment" means, with respect to each Lender, the amount
set forth opposite the name of such Lender on the signature pages
hereof, as such amount may, in the case of Tranche A Lenders, be
reduced from time to time pursuant to Section 2.06.
"Controlled Groups means all members of a controlled group
of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower,
are treated as a single employer under Section 414(b) or 414(c) of the
Code.
"Coverage Ratio" means either the Life-of-Reserves Coverage
Ratio or the Annual Coverage Ratio.
-3-
<PAGE>
"Coverage Report" means a report prepared by the Borrower
and satisfactory in form and scope to the Required Lenders setting
forth the Coverage Ratios as of the date of such report and the
calculations necessary to determine such Coverage Ratios.
"Debt" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments, (iii) all obligations of such Person to pay
the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business, (iv) all
obligations of such Person as lessee under capital leases, (v) all
obligations of such Person in respect of production payments, proceeds
production payments and similar financing arrangements, (vi) all Debt
of others secured by a Lien on any asset of such Person, whether or
not such Debt is assumed by such Person, and (vii) all Debt of others
Guaranteed by such Person.
"Debt Service" means, for any period, the total of principal
payments in respect of Debt of the Borrower (other than Subordinated
Debt of the Borrower owed to Affiliates) and the total of interest
payments (using, with respect to interest to accrue, the interest
rates set forth in the most recent Approved Assumptions for Debt not
bearing interest at a fixed rate) in respect of Debt of the Borrower,
in each case scheduled to be paid during such period; PROVIDED that
the principal amount of any loan which by its terms matures on a date
within such period but which may reasonably be expected to be
reborrowed in a Rollover on such date shall not be deemed, for
purposes of this definition, to be scheduled to be paid on such date.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time
or both would, unless cured or waived, become an Event of Default.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in New York City are
authorized by law to close.
"Domestic Lending Office" means, as to each Tranche A
Lender, its office located at its address set forth on the signature
pages hereof (or identified on the signature pages hereof as its
Domestic Lending Office) or such other office as
-4-
<PAGE>
such Tranche A Lender may hereafter designate as its Domestic Lending
Office by notice to the Borrower and the Agent; PROVIDED that any
Tranche A Lender may from time to time by notice to the Borrower and
the Agent designate separate Domestic Lending Offices for its Prime
Loans, on the one hand, and its CD Loans, on the other hand, in which
case all references herein to the Domestic Lending Office of such
Tranche A Lender shall be deemed to refer to either or both of such
offices, as the context may require.
"Domestic Loans" means CD Loans or Prime Loans or both.
"Domestic Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit A hereto, evidencing the
obligation of the Borrower to repay the Domestic Loans.
"Domestic Reserve Percentage" has the meaning set forth in
Section 2.05(b).
"Energy Partners" means Santa Fe Energy Partners,
L.P., a Delaware limited partnership.
"Engineering Report" means a report prepared and certified
by an Independent Petroleum Engineer which sets forth, with respect to
all oil and gas properties of the Borrower, the Recognized Proved
Reserves and the gross and net volume of Hydrocarbons projected to be
produced from such Recognized Proved Reserves, by fiscal years, for
the remaining economic life of such Recognized Proved Reserves. Each
Engineering Report shall also contain a list of Petroleum Properties,
shall set forth, for each fiscal year, Pre-G&A Cash Flow and shall
indicate Pre-G&A Cash Flow for each fiscal year for the various
Petroleum Properties. Each such report shall identify which Petroleum
Properties are "developed" and which are not "developed" (as defined
in the definition of "Recognized Proved Reserves") and shall set forth
the Relative Values thereof, on an aggregate basis. Each such report
shall be prepared in accordance with established criteria generally
accepted in the oil and gas industry and standards customarily used by
independent petroleum engineers well regarded in the industry in
making reserve determinations or appraisals, and shall be based on
Approved Assumptions and such other assumptions, estimates and
projections as are fully disclosed in such Engineering Report.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
-5-
<PAGE>
"ERISA Obligor" means (i) for so long as the Controlled
Group includes Santa Fe Southern Pacific and Santa Fe Natural
Resources, Santa Fe Southern Pacific and each of its Material
Subsidiaries, and (ii) at all other times, each member of the
Controlled Group.
"Euro-Dollar Business Day" means any Domestic Business Day
on which commercial banks are open for international business
(including dealings in dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Tranche A
Lender, its office, branch or affiliate located at its address set
forth on the signature pages hereof (or identified on the signature
pages hereof) as its Euro-Dollar Lending Office) or such other office,
branch or affiliate of such Tranche A Lender as it may hereafter
designate as its Euro-Dollar Lending Office by notice to the Borrower
and the Agent.
"Euro-Dollar Loan" means a Tranche A Loan to be made as a
Euro-Dollar Loan pursuant to the applicable Notice of Borrowing.
"Euro-Dollar Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit B hereto, evidencing the
obligation of the Borrower to repay the Euro-Dollar Loans.
"Euro-Dollar Reference Banks" means the principal offices of
Bank of Montreal and Morgan Guaranty Trust Company of New York and
each such other bank as may be appointed pursuant to Section 9.06(d).
"Eurodollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or
any successor) for determining the maximum reserve requirement for a
member bank of the Federal Reserve System in New York City with
deposits exceeding five billion dollars in respect of "Eurocurrency
liabilities" (or in respect of any other category of liabilities which
includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of
credit or other assets which includes loans by a non-United States
office of any Tranche A Lender to United States residents).
-6-
<PAGE>
"Event of Default" has the meaning set forth in Section 6.01.
"Excluded Plan" means each employee pension benefit plan.
other than a "Plan" as defined in clause (i) of the definition of
"Plan", which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code which is
either (i) maintained by a member of the Controlled Group for
employees of a member of the Controlled Group or (ii) maintained
pursuant to a collective bargaining agreement or any other arrangement
to which more than one employer makes contributions and to which a
member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five plan
years made contributions.
"Fixed CD Rate" has the meaning set forth in Section
2.05(b).
"Fixed Rate Borrowing" means a CD Borrowing or a Euro-Dollar
Borrowing.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or
both.
"General Partners" means the Managing General Partner and
the Special General Partner of the Borrower or, if so specified, of
Energy Partners.
"Guarantee" by any Person means any obligation, contingent
or otherwise, of such Person directly or indirectly guaranteeing any
Debt of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt (whether arising by
virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement conditions or otherwise) or (ii) entered
into for the purpose of assuring in any other manner the holder of
such Debt of the payment thereof or to protect such holder against
loss in respect thereof (in whole or in part), PROVIDED that the term
Guarantee shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb
has a corresponding meaning.
"Hydrocarbons" means oil, gas and other liquid and gaseous
hydrocarbons.
-7-
<PAGE>
"Independent Petroleum Engineer" means Riggs & Associates
Inc., or another independent petroleum engineering consulting firm
selected by the Borrower and acceptable to the Required Lenders.
"Interest Period" means: (1) with respect to each Euro-
Dollar Borrowing, the period commencing on the date of a Borrowing and
ending one, two, three or six months thereafter, as the Borrower may
elect in the applicable Notice of Borrowing; PROVIDED that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar
Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case such
Interest Period shall end on the next preceding Euro-
Dollar business Day;
(b) any Interest Period which begins on the last Euro-
Dollar Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) if any Interest Period includes a date on which a
payment of principal of the Tranche A Loans is required
to be made under Section 2.06 but does not end on such
date, then (i) the principal amount of each Euro-Dollar
Loan required to be repaid on such date shall have an
Interest Period ending on such date and (ii) the
remainder (if any) of each such Euro-Dollar Loan shall
have an Interest Period determined as set forth above.
(2) with respect to each CD Borrowing, the period commencing on the
date of such Borrowing and ending 30, 60, 90 or 180 days thereafter,
as the Borrower may elect in the applicable Notice of Borrowing;
PROVIDED that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b)(i) below) which would
otherwise end on a day which is not a Euro-Dollar
Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
-8-
<PAGE>
(b) if any Interest Period includes a date on which a
payment of principal of the Tranche A Loans is required
to be made under Section 2.06 but does not end on
such date, then (i) the principal amount (if any) of
each CD Loan required to be repaid on such date shall
have an Interest Period ending on such date and (ii)
the remainder (if any) of each such CD Loan shall have
an Interest Period determined as set forth above.
(3) with respect to each Prime Borrowing, the period commencing on the
date of such Borrowing and ending 30 days thereafter; PROVIDED that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b)(i) below) which would
otherwise end on a day which is not a Euro-Dollar
Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) if any Interest Period includes a date on which a
payment of principal of the Tranche A Loans is required
to be made under Section 2.06 but does not end on such
date, then (i) the principal amount (if any) of each
Prime Loan required to be repaid on such date shall
have an Interest Period ending on such date and (ii)
the remainder (if any) of each such Prime Loan shall
have an Interest Period determined as set forth above.
"Lender" means each lender listed on the signature pages
hereof as having a Commitment, and its successors and assigns.
"Lending Office" means, as to any Tranche A Lender, its
Domestic Lending Office or its Euro-Dollar Lending Office, as the
context may require.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in
respect of such asset (including without limitation any production
payment, advance payment or similar arrangement with respect to
minerals in place), whether or not filed, recorded or otherwise
perfected under applicable law. For the purposes of this Agreement,
the Borrower shall be deemed to own subject to a Lien any asset which
it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
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"Life-of-Reserves Coverage Ratio" means, as of any date of
determination, the ratio obtained by dividing (i) the sum of, for all
Petroleum Properties owned by the Borrower on such date, Cash Flow
Available for Debt Service (calculated on the basis of the Most Recent
Engineering Report) for the period of twenty years commencing on such
date, by (ii) Debt Service for such period (calculated on the basis
set forth in the most recent Coverage Report delivered to the Lenders
pursuant to Section 5.01(i), taking into account any incurrence or
prepayment of Debt since the date of such Coverage Report).
"Loan" means a loan made by a Lender to the Borrowerhereunder.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.05(c).
"Managing General Partner" means the managing general
partner of the Borrower or, if so specified, of Energy Partners.
"Material Subsidiary" means any Subsidiary of Santa Fe
Southern Pacific (other than Bankers Leasing and Financial
Corporation, a Delaware corporation, and its subsidiaries and
Constellation Reinsurance Company) the consolidated assets of which,
as shown by its most recent year-end consolidated balance sheet, are
in excess of $75,000,000.
"Mortgage" means a mortgage or deed of trust, substantially
in the form of Exhibit G hereto or in such other form as has been
approved by the Required Lenders, if and as required to be executed
and recorded by the Borrower pursuant to Section 5.08 or 5.11.
"Most Recent Engineering Report" means as of any date of
determination, until the first Engineering Report is delivered
pursuant to Section 5.01(i), the Engineering Report dated December 31,
1986, as supplemented by a report heretofore delivered to the Lenders
under a cover letter dated June 12, 1987 prepared by the Managing
General Partner to take account of the Petro-Lewis Acquisition, and,
thereafter, the most recent Engineering Report delivered pursuant to
Section 5.01(i), in each case as subsequently updated pursuant to
Section 5.01(i) or supplemented pursuant to Section 5.08 on or prior
to such date of determination; PROVIDED that if the Borrower at any
time acquires any additional Recognized Proved Reserves, it may cause
a further supplement, prepared by an
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Independent Petroleum Engineer, to the most recent Engineering Report
delivered pursuant to Section 5.01(i) to be delivered to the Lenders,
whereupon the "Most Recent Engineering Report" shall incorporate such
supplement.
"Note" means a Domestic Note or a Euro-Dollar Note or a
Tranche B Note, and "Notes" means the Domestic Notes or the Euro-
Dollar Notes or the Tranche B Notes or all of them.
"Notice of Borrowing" has the meaning set forth in Section
2.02.
"Notice of Prepayment" and "Notice of Prospective
Prepayment" have the meanings set forth in Section 2.07(c).
"Partnership Agreements" means the Agreement of Limited
Partnership of Energy Partners dated as of January 14, 1986 among
Santa Fe Pacific Exploration, as Managing General Partner, Santa Fe
Energy, as Special General Partner, and Santa Fe Energy, as the
organizational limited partner, and the Agreement of Limited
Partnership of the Borrower dated as of January 14, 1986 among Santa
Fe Pacific Exploration, as Managing General Partner, Santa Fe Energy,
as Special General Partner and Energy Partners, as the Limited
Partner, as such agreements may be amended from time to time in
accordance with the provisions hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Liens" means, with respect to any assets, Liens
thereon consisting of:
(i) lessor's royalties, overriding royalties, and division
orders and sales contracts covering Hydrocarbons,
reversionary interests and similar burdens, if the net
cumulative effect of such burdens does not operate to
reduce the net revenue interest of the Borrower in any
Petroleum Property to less than such net revenue
interest set forth in the Most Recent Engineering
Report;
(ii) any operator's liens or similar Liens arising in the
ordinary course of the Borrower's oil and gas
operations and securing obligations of the Borrower
that are not past due;
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(iii) inchoate liens arising by operation of statutory law
and liens for taxes or assessments not yet due or not
yet delinquent, or, if delinquent, that are being
contested in good faith in the normal course of
business;
(iv) easements, rights of way, servitudes, permits, surface
leases and other rights in respect of surface
operations, pipelines, grazing, logging, canals,
ditches, reservoirs or the like; conditions, covenants
or other restrictions; and easements for streets,
alleys, highways, pipelines, telephone lines, power
lines, railways and other easements and rights-of-way,
on, over or in respect of such Petroleum Properties;
(v) rights reserved to or vested in any municipality or
governmental, tribal, statutory or public authority to
control or regulate any of the Petroleum Properties in
any manner, and all applicable laws, rules, and orders
of governmental or tribal authority; and
(vi) all other Liens arising in the ordinary course of the
Borrower's business or incidental to the ownership of
its properties;
PROVIDED that such Liens (x) do not secure Debt, (y) do not in the
aggregate materially detract from the value of the properties of the
Borrower or materially impair the use thereof in the operation of the
business of the Borrower and (z) in the aggregate are not
disadvantageous in any material respect to the Lenders.
"Person" means an individual, a corporation, a partnership,
an association, a trust or any other entity or organization, including
a government or political subdivision or an agency or instrumentality
thereof.
"Petroleum Properties" means, at any time, all Recognized
Proved Reserves which are (i) owned by the Borrower at such time free
and clear of any Lien (other than Liens permitted by Section 5.10) and
(ii) covered in the Most Recent Engineering Report.
"Petro-Lewis Acquisition" means the acquisition of Petroleum
Properties by the Borrower from Petro-Lewis Corporation and its
affiliates in April 1987.
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"Plan" means (i) for so long as the Controlled Group
includes Santa Fe Southern Pacific and Santa Fe Natural Resources, an
employee pension benefit plan which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Code
and is maintained by Santa Fe Southern Pacific or any of its Material
Subsidiaries for salaried employees of Santa Fe Southern Pacific or
any of its Material Subsidiaries, and (ii) at any other time, an
employee pension benefit plan which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Code
and is either (X) maintained by a member of the Controlled Group for
employees of a member of the Controlled Group or (y) maintained
pursuant to a collective bargaining agreement or any other arrangement
under which more than one employer makes contributions and to which a
member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five plan
years made contributions.
"Pre-G&A Cash Flow" means, for any fiscal year (or portion
thereof), (a) an amount (or, with respect to any portion of a fiscal
year, a proportional amount corresponding to such portion of such
fiscal year) of projected gross revenues from the sale of Hydrocarbons
produced from Recognized Proved Reserves to be received, subject to no
entitlement of any other Person but including appropriate adjustments
for over- and under-produced status, by the Borrower during such
fiscal year as set forth in the Most Recent Engineering Report, LESS
(b) an amount (or, with respect to any portion of a fiscal year, a
proportional amount corresponding to such portion of such fiscal year)
of projected royalties and wind-fall profit, production, ad valorem,
severance, income and all other taxes, operating and capital
expenditures required to be incurred during such fiscal year in order
to generate such gross revenues (but not including general and
administrative expenses or principal and interest payable with respect
to Debt) as set forth in the Most Recent Engineering Report.
"Prepayment" has the meaning set forth in Section 2.07(c).
"Prime Loan" means a Tranche A Loan to be made as a Prime
Loan pursuant to the applicable Notice of Borrowing or Article VIII.
"Prime Rate" means the rate of interest publicly announced
by Morgan Guaranty Trust Company of New York in New York City from
time to time as its Prime Rate.
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"Pro Rata Share" has the meaning set forth in Section
5.08(d).
"Prospective Prepayment" has the meaning set forth in
Section 2.07(c).
"Recognized Proved Reserves" means reserves of Hydrocarbons
which are estimated to be recoverable with reasonable certainty and
are consistent with the "Definitions for Oil and Gas Reserves" as
published by the Society of Petroleum Engineers of AIME, PROVIDED that
(i) the estimates are made by an Independent Petroleum Engineer, (ii)
the estimates are made on the basis of (a) the Approved Assumptions
and (b) actual production or an actual flow test, (iii) the reserves
are located onshore or offshore the United States or Canada and shall
otherwise be acceptable to the Required Lenders, and (iv) no more than
10% (in Relative Value) of Recognized Proved Reserves included at any
time in the Most Recent Engineering Report shall consist of proved
reserves which are not developed. Reserves in reservoirs penetrated
by wells but currently not being produced are classified as
"developed" only if (X) the Independent Petroleum Engineer has
determined that such reserves can be recovered through the existing
wells requiring no more than simple workover operation and (y) an
actual flow test of the formation in an offset well or a conclusive
flow test of the same well shall have been conducted and, using the
Approved Assumptions, shall support the economic producibility of such
reserves.
"Reduction Date" means each March 31, June 30, September 30
and December 31, from and including March 31, 1990 to and including
December 31, 1997.
"Reference Banks" means the CD Reference Banks or the Euro-
Dollar Reference Banks, as the context may require, and "Reference
Bank" means any one of such Reference Banks.
"Refunding Borrowing" means a Borrowing which, after
application of the proceeds thereof, results in no net increase in the
outstanding principal amount of Loans made by any Lender.
"Regulation G" means Regulation G of the Board of Governors
of the Federal Reserve System, as in effect from time to time.
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"Regulation U" means Regulation U of the Board of Governors
of the Federal Reserve System, as in effect from time to time.
"Relative Value" of any selected Petroleum Properties (or
Recognized Proved Reserves) in relation to a group of Petroleum
Properties (or Recognized Proved Reserves) means as of any date of
determination the number, stated as a percentage, obtained by dividing
(i) the net present value (using the discount rate used in valuing
reserves for purposes of Energy Partners' most recent annual report on
Form 10-K filed with the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of Pre-G&A Cash Flow attributable to
such selected Petroleum Properties (or Recognized Proved Reserves) by
(ii) the net present value (using the same discount rate) of Pre-G&A
Cash Flow attributable to such group of Petroleum Properties (or
Recognized Proved Reserves), in each case based on the Most Recent
Engineering Report for the period of twenty fiscal years commencing
with the fiscal year in which the date of determination occurs.
"Required Lenders" means at any time prior to the first
Borrowing, Lenders having at least 66 2/3% of the aggregate amount of
the Commitments and thereafter, Lenders holding Notes evidencing at
least 66 2/3% of the aggregate unpaid principal amount of the Loans.
"Restricted Payment" means (i) any distribution on account
of any partnership interest in the Borrower (whether in the form of
cash, securities or other property and whether on account of income,
capital or otherwise), (ii) any payment by the Borrower on account of
the purchase, redemption, retirement or acquisition of any partnership
interest (or any right to acquire any partnership interest) in the
Borrower or (iii) any payment which represents an Investment in any
Affiliate; PROVIDED that any payments by the Borrower, in accordance
with its normal practice as of the date of this Agreement, of windfall
profit taxes on behalf of Persons holding partnership interests in the
Borrower or Energy Partners shall not be considered Restricted
Payments; and PROVIDED FURTHER that balances that may be outstanding
and payable by Energy Partners or by either of the General Partners to
the Borrower arising in the course of the Borrower's normal cash
management operations which provide for settlement on a monthly basis
shall not constitute Restricted Payments. For purposes hereof
"Investment" means any investment in any Person, whether by means of
share purchase, capital contribution, loan or otherwise.
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"Rollover" means (i) any Refunding Borrowing and (ii) any
similar reborrowing from a lender of a loan which is prepaid, or by
its terms is due, to such lender on the date of such reborrowing if
the instrument or agreement governing such Debt specifically
contemplates the periodic prepayment or repayment and simultaneous
reborrowing of such loan.
"Santa Fe Energy" means Santa Fe Energy Company, a Texas
corporation.
"Santa Fe Pacific Exploration" means Santa Fe Pacific
Exploration Company, a Delaware corporation.
"Santa Fe Natural Resources" means Santa Fe Natural
Resources, Inc., a Delaware corporation, and its successors.
"Santa Fe Southern Pacific" means Santa Fe Southern Pacific
Corporation, a Delaware corporation, and its successors.
"SFNR Undertaking" means a letter of Santa Fe Natural
Resources to the Lenders substantially in the form of Exhibit F
hereto.
"Special General Partner" means the special general partner
of the Borrower or, if so specified, of Energy Partners.
"Subordinated Debt" means Debt of the Borrower no principal
of which is payable on a mandatory or optional basis so long as any of
the Loans remain outstanding and which is evidenced by an instrument
containing subordination provisions substantially in the form of
Exhibit H hereto.
"Subsidiary" of any Person means any corporation or other
entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person; PROVIDED that "Subsidiary", with
respect to the Borrower, shall not refer to any joint venture to which
the Borrower is a party entered into in the ordinary course of the
Borrower's investment in oil and gas interests, properties or
prospects, even if such joint venture constitutes a partnership for
tax purposes.
"Tranche A" means, (i) with respect to a Lender, a Lender
whose Commitment is indicated on the signature pages hereof to be a
Tranche A Commitment, (ii) with respect to a
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Commitment, means the Commitment of a Tranche A Lender, and (iii) with
respect to a Loan, a Loan made by a Tranche A Lender.
"Tranche B" means, (i) with respect to a Lender, a Lender
whose Commitment is indicated on the signature pages hereof to be a
Tranche B Commitment, (ii) with respect to a Commitment, means the
Commitment of a Tranche B Lender, (iii) with respect to a Loan, a Loan
made by a Tranche B Lender and (iv) with respect to a Note, a
promissory note of the Borrower, substantially in the form of Exhibit
C hereto, evidencing the obligation of the Borrower to repay a Tranche B Loan.
"Triggering Event" means the first to occur of:
(i) that point in time when Santa Fe Energy and its
Affiliates first beneficially own, directly or
indirectly, less than an aggregate of 50% of all
limited partnership units of Energy Partners (the
"Units") then outstanding, excluding any outstanding
Units which Energy Partners may have issued (other than
to Santa Fe Energy or any of its Affiliates) to acquire
oil and gas properties, oil or gas exploration,
development, production, treatment, processing,
transportation or marketing assets, or corporations,
partnerships or other business entities engaged
predominantly in the oil and gas business; or
(ii) the execution and delivery by Santa Fe Energy or an
Affiliate of Santa Fe Energy of a definitive agreement
to sell, or a determination by Santa Fe Energy or an
Affiliate of Santa Fe Energy to distribute, Units
which, if sold or distributed, would result in, or the
occurrence of any other event that within 90 days after
the occurrence thereof would result in, Santa Fe Energy
and its Affiliates beneficially owning, directly or
indirectly, less than an aggregate of 50% of all
units then outstanding, excluding any outstanding
Units which Energy Partners may have issued (other
than to Santa Fe Energy or any of its Affiliates) to
acquire oil and gas properties, oil or gas
exploration, development, production, treatment,
processing, transportation or marketing assets, or
corporations, partnerships or other business engaged
predominantly in the oil and gas business; or
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(iii) the distribution by Santa Fe Energy or an Affiliate of
Santa Fe Energy of securities convertible into, or
rights or warrants to acquire Units which, if fully
converted or exercised, would reduce the interest of
Santa Fe Energy and its Affiliates to less than an
aggregate of 50% of all Units then outstanding,
excluding any outstanding units which Energy Partners
may have issued (other than to Santa Fe Energy or any
of its Affiliates) to acquire oil and gas properties,
oil or gas exploration, development, production,
treatment, processing, transportation or marketing
assets, or corporations, partnerships or other business
entities engaged predominantly in the oil and gas
business; PROVIDED that if such securities, rights or
warrants are redeemable by Santa Fe Energy or an
Affiliate of Santa Fe Energy immediately following
their distribution, a "Triggering Event" shall not be
deemed to have occurred unless and until such
securities, rights or warrants are no longer so
redeemable.
For purposes of this definition, "Affiliate" of Santa Fe Energy means
any person, entity or group (x) owning 10% or more of the securities
of Santa Fe Energy entitled to vote for the election of directors, or
(y) controlling, controlled by or under common control with Santa Fe
Energy.
"Unfunded Vested Liabilities" means, with respect to any
Plan at any time, the amount (if any) by which (i) the present value
of all vested nonforfeitable benefits under such Plan exceeds (ii) the
fair market value of all Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plan,
but only to the extent that such excess represents a potential
liability of a member of the Controlled Group to the PBGC or the Plan
under Title IV of ERISA.
"Wholly-Owned Subsidiary" of any Person means any Subsidiary
of such Person all of the shares of capital stock or other ownership
interests of which (except directors' qualifying shares) are at the
time directly or indirectly owned by such Person.
SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made,
and all financial statements required to be delivered hereunder shall
be prepared in accordance with generally accepted accounting
principles as in effect from
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time to time, applied on a basis consistent (except for changes
concurred in by the independent public accountants for Energy
Partners) with the most recent audited financial statements of Energy
Partners delivered to the Lenders.
ARTICLE II
CREDITS
SECTION 2.01. COMMITMENTS TO LEND.
(a) THE FIRST BORROWING. Each Lender severally agrees to
lend to the Borrower at one time on or prior to August 31, 1987, on
the terms and conditions set forth in this Agreement, an amount equal
to such Lender's Commitment. Such Loan by each Lender shall be made
as part of the first Borrowing hereunder, which shall be made from the
several Lenders ratably in proportion to their respective Commitments.
(b) SUBSEQUENT BORROWINGS. Each Tranche A Lender severally
agrees on the terms and conditions set forth in this Agreement, to
make one or more new Tranche A Loans to the Borrower upon any
repayment of outstanding Tranche A Loans pursuant to Section 2.04;
PROVIDED that the principal amount of such Lender's new Loans shall
not exceed the principal amount of its outstanding Loans being repaid;
and PROVIDED FURTHER that the principal amount of such Lender's
outstanding Loans shall at no time exceed its Commitment. The
Borrower agrees that it shall, unless it has theretofore given a
Notice of Prepayment in accordance with Section 2.07(c), give a Notice
of Borrowing providing for a Borrowing of Tranche A Loans to occur on
the last day of each Interest Period so that, after giving effect
thereto, the aggregate amount of Tranche A Loans outstanding on such
day equals the aggregate Tranche A Commitments on such day, after
giving effect to any reduction of Tranche A Commitments on such day
pursuant to Section 2.06(c). Each Borrowing under this subsection (b)
shall be in an amount equal to $5,000,000 or any larger multiple of
$1,000,000 (or if less, the aggregate amount of the Tranche A
Commitments) and shall be made from the several Tranche A Lenders
ratably in proportion to their respective Tranche A Commitments.
There shall not at any time be more than four Tranche A Loans
outstanding from each Tranche A Lender, in addition to any Loan made
by such Lender under Section 2.12. Amounts required to be repaid
pursuant to Section 2.06(d) shall not be reborrowed, and amounts
repaid pursuant to Section 8.02 shall be reborrowed only as provided
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therein; the making by any Lender of a Loan pursuant to Section 2.12
and the making by any such Lender of subsequent Tranche A Loans
pursuant to its new or increased Commitment shall not be deemed a
reborrowing of amounts repaid hereunder.
SECTION 2.02. METHOD OF BORROWING. (a) The Borrower shall
give the Agent notice (a "Notice of Borrowing") at least three
Euro-Dollar Business Days before the first Borrowing and, thereafter,
not later than 10:00 A.M. (New York City time) on the date of each
Prime Borrowing, at least two Domestic Business Days before each CD
Borrowing and at least three Euro-Dollar Business Days before each
Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a
Euro-Dollar Business Day in the case of the first
Borrowing, and, thereafter, shall be a Domestic
Business Day in the case of a Domestic Borrowing or a
Euro-Dollar Business Day in the case of a Euro-Dollar
Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Tranche A Loans included in such
Borrowing are to be CD Loans, Prime Loans or Euro-
Dollar Loans, and
(iv) in the case of a Fixed Rate Borrowing, the duration
of the Interest Period applicable thereto, subject to
the provisions of the definition of Interest Period.
(b) Upon receipt of a Notice of Borrowing, the Agent shall
promptly notify each Tranche A Lender (and, in the case of the first
Borrowing only, each Tranche B Lender) of the contents thereof and of
such Lender's ratable share of such Borrowing and such Notice of
Borrowing shall not thereafter be revocable by the Borrower.
(c) Not later than 11:00 A.M. (New York City time) on the
date of each Borrowing, each Tranche A Lender (and, in the case of the
first Borrowing only, each Tranche B Lender) shall (except as provided
in subsection (d) of this Section) make available its ratable share of
such Borrowing, in Federal or other funds immediately available in New
York City, to the Agent at its address specified in or pursuant to
Section 9.01. Unless the Agent determines that any applicable
condition specified in Article III has not been satisfied, the Agent
will make the funds so received from the Lenders available to the
Borrower at the Agent's aforesaid address.
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(d) If any Tranche A Lender makes one or more new Loans
hereunder on a day on which the Borrower is to repay all or any part
of any outstanding Loans from such Tranche A Lender, such Tranche A
Lender shall apply the proceeds of its new Loans to make such
repayment and only an amount equal to the difference (if any) between
the amount being borrowed and the amount being repaid shall be made
available by such Bank to the Agent as provided in subsection (c) of
this Section, or remitted by the Borrower to the Agent as provided in
Section 2.08, as the case may be.
SECTION 2.03. NOTES. (a) The Domestic Loans of each
Tranche A Lender shall be evidenced by a single Domestic Note payable
to the order of such Lender for the account of its Domestic Lending
Office in an amount equal to the aggregate unpaid principal amount of
such Lender's Domestic Loans.
(b) The Euro-Dollar Loans of each Tranche A Lender shall be
evidenced by a single Euro-Dollar Note payable to the order of such
Lender for the account of its Euro-Dollar Lending Office in an amount
equal to the aggregate unpaid principal amount of such Lender's
Euro-Dollar Loans.
(c) Each Tranche A Lender may, by notice to the Borrower
and the Agent (to be given not later than two Domestic Business Days
prior to the first Borrowing) request that its Prime Loans and CD
Loans be evidenced by separate Domestic Notes payable to the order of
such Lender for the account of its Domestic Lending Office in an
amount equal to the aggregate unpaid principal amount of such Lender's
Prime Loans and CD Loans, respectively. Each such Note shall be in
substantially the form of Exhibit A hereto with appropriate
modifications to reflect the fact that it evidences solely. Prime
Loans or CD Loans, as the case may be. Each reference in this
Agreement to the "Notes" or "Domestic Note" of such Lender shall be
deemed to refer to and include either or both of such Notes, as the
context may require.
(d) The Loan of each Tranche B Lender shall be evidenced by
a single Tranche B Note payable to such Tranche B Lender in an amount
equal to the aggregate unpaid principal amount of such Lender's Loan.
(e) Upon receipt of each Lender's Notes pursuant to Section
3.01(d) or 2.12, the Agent shall mail such Notes to such Lender. Each
Tranche A Lender shall record, and prior to any transfer of its Notes
shall endorse on the schedules
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forming a part thereof appropriate notations to evidence, the date,
amount and maturity of each Loan made by it and the date and amount of
each payment of principal made by the Borrower with respect thereto;
PROVIDED that the failure of any Tranche A Lender to make any such
recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Notes. Each Tranche A Lender is
hereby irrevocably authorized by the Borrower so to endorse its Notes
and to attach to and make a part of any Note a continuation of any
such schedule as and when required.
SECTION 2.04. MATURITY OF LOANS. (a) Each Tranche A Loan
included in any Borrowing shall mature, and the principal amount
thereof shall be due and payable, on the last day of the Interest
Period applicable to such Tranche A Loan.
(b) The principal amount of each Tranche B Loan shall be
due in installments on the Reduction Dates to and including December
31, 1997 in the following amounts: (i) on each Reduction Date from
and including March 31, 1990 to and including December 31, 1991, an
amount equal to 4.44% of the original amount of such Tranche B Loan
shall be due, (ii) on each Reduction Date from and including March 31,
1992 to and including December 31, 1992, an amount equal to 3.89% of
the original amount of such Tranche B Loan shall be due, (iii) on each
Reduction Date from and including March 31, 1993 to and including
December 31, 1993, an amount equal to 3.33% of the original amount of
such Tranche B Loan shall be due, (iv) on each Reduction Date from and
including March 31, 1994 to and including September 30, 1997, an
amount equal to 2.22% of the original amount of such Tranche B Loan
shall be due and (v) on December 31, 1997, an amount equal to 2.3% of
the original amount of such Tranche B Loan shall be due; PROVIDED that
(x) the principal amount of any Tranche B Loan made pursuant to
Section 2.12 shall be due in installments on the remaining Reduction
Dates and the amount of such installments with respect to such Loan
shall be the same, as a percentage of the then outstanding amount of
such Loan, as the amount of the installments due on such Reduction
Dates with respect to the original Tranche B Loans, as a percentage of
the then outstanding amount of such original Loans, (y) in the case of
any prepayment of a Tranche B Loan pursuant to Section 2.07(c)(ii)(x)
or (c)(iii)(x), the remaining installments payable with respect to
such Tranche B Loan shall be reduced as the Borrower shall direct by
notice in writing to the Agent (which notice shall be irrevocable once
given) on or prior to the date of such prepayment and (z) the amounts
of the remaining installments may be adjusted from time to time as
contemplated by Section 5.08(a).
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SECTION 2.05. INTEREST RATES. (a) Each Prime Loan shall, subject to
the provisions of subsection (h) below, bear interest on the
outstanding principal amount thereof, for each day from the date such
Loan is made until it becomes due, at a rate per annum equal to the
Prime Rate for such day. Any overdue principal of and, to the extent
permitted by law, overdue interest on any Prime Loan shall, subject to
the provisions of subsection (h) below, bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum
of 1% plus the Prime Rate for such day.
(b) Each CD Loan shall, subject to the provisions of
subsection (h) below, bear interest on the outstanding principal
amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the applicable Fixed CD Rate; PROVIDED that if any
CD Loan or any portion thereof shall, as a result of clause (2)(b)(i)
of the definition of Interest Period, have an Interest Period of less
than 30 days, such portion shall bear interest during such Interest
Period at the rate applicable to Prime Loans during such period. Such
interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than 90 days, at
intervals of 90 days after the first day thereof. Any overdue
principal of and, to the extent permitted by law, overdue interest on
any CD Loan shall, subject to the provisions of subsection (h) below,
bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 1% plus the higher of (i) the Fixed CD
Rate applicable to such Loan and (ii) the Prime Rate for such day.
The "Fixed CD Rate" applicable to any CD Loan for any
Interest Period means a rate per annum equal to the sum of 5/8 of 1%
plus the applicable Adjusted CD Rate.
The "Adjusted CD Rate" applicable to any Interest Period
means a rate per annum determined pursuant to the following formula:
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{ CDBR } *
ACDR = { ---------- } + AR
{ 1.00 - DRP }
ACDR = Adjusted CD Rate
CDBR = CD Base Rate 1931
DRP = Domestic Reserve Percentage
AR = Assessment Rate
______________
* The amount in brackets being rounded upwards, if
necessary, to the next higher of 1/100 of 1%.
The "CD Base Rate" applicable to any Interest Period is the
rate of interest determined by the Agent to be the arithmetic average
(rounded upward, if necessary, to the next higher 1/100 of 1%) of the
prevailing rates per annum bid at 10:00 A.M. (New York City time) (or
as soon thereafter as practicable) on the first day of such Interest
Period by two or more New York certificate of deposit dealers of
recognized standing for the purchase at face value from each CD
Reference Bank of its certificates of deposit in an amount comparable
to the unpaid principal amount of the CD Loan of such CD Reference
Bank to which such Interest Period applies and having a maturity
comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or
any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency
reserves) for a member bank of the Federal Reserve System in New York
City with deposits exceeding five billion dollars in respect of new
non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of
$100,000 or more. The Fixed CD Rate shall be adjusted automatically
on and as of the effective date of any change in the Domestic Reserve
Percentage.
"Assessment Rate" means for any Interest Period the net
annual assessment rate (rounded upwards, if necessary, to the next
higher 1/100 of 1%) actually incurred by Morgan Guaranty Trust Company
of New York to the Federal Deposit Insurance Corporation (or any
successor) for such Corporation's (or such successor's) insuring time
deposits at offices of Morgan Guaranty Trust Company of New York in
the United States during the most recent period for which such
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rate has been determined prior to the commencement of such Interest
Period.
(c) Each Euro-Dollar Loan shall, subject to the provisions
of subsection (h) below, bear interest on the outstanding principal
amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the sum of 1/2 of 1% plus the applicable London
Interbank Offered Rate. Such interest shall be payable for each
Interest Period on the last day thereof and, if such Interest Period
is longer than three months, at intervals of three months after the
first day thereof.
The "London Interbank Offered Rate" applicable to any
Interest Period means the average (rounded upward, if necessary, to
the next higher 1/16 of 1%) of the respective rates per annum at which
deposits in dollars are offered to each of the Euro-Dollar Reference
Banks in the London inter-bank market at approximately 11:00 A.M.
(London time) two Euro-Dollar Business Days before the first day of
such Interest Period in an amount approximately equal to the principal
amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply (or, if applicable, the
principal amount of the Loan to be made pursuant to Section 2.12) and
for a period of time comparable to such Interest Period.
(d) Any overdue principal of and, to the extent permitted
by law, overdue interest on any Euro-Dollar Loan shall, subject to the
provisions of subsection (h) below, bear interest, payable on demand,
for each day from and including the date payment thereof was due to
but excluding the date of actual payment, at a rate per annum equal to
the sum of 1 1/2% plus the average (rounded upward, if necessary, to
the next higher 1/16 of 1%) of the respective rates per annum at which
one day (or, if such amount due remains unpaid more than three Euro-
Dollar Business Days, then for such other period of time not longer
than six months as the Agent may elect) deposits in dollars in an
amount approximately equal to such overdue payment due to each of the
Euro-Dollar Reference Banks are offered to such Euro-Dollar Reference
Bank in the London interbank market for the applicable period
determined as provided above (or, if the circumstances described in
clause (a) or (b) of Section 8.01 shall exist, at a rate per annum
equal to the sum of 1% plus the rate applicable to Prime Loans for
such day).
(e) Each Tranche B Loan shall, subject to the provisions of
subsection (h) below, bear interest on the
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outstanding principal amount thereof, for each day from the date such
Loan is made until it becomes due, at 9.63% per annum, except that any
Tranche B Loan made pursuant to Section 2.12 shall bear interest on
the outstanding principal amount thereof at the rate set forth on the
addendum hereto and in the Note relating to such Loan. Any overdue
principal of, premium (if any) under Section 2.07 or 6.04, and, to the
extent permitted by law, overdue interest on any Tranche B Loan shall,
subject to the provisions of subsection (h) below, bear interest,
payable on demand, for each day until paid at a rate per annum equal
to the sum of 1% plus the rate specified in the previous sentence.
Such interest shall be payable in arrears on each March 31, June 30,
September 30 and December 31, commencing September 30, 1987.
(f) The Agent shall determine each interest rate applicable
to the Tranche A Loans hereunder. The Agent shall give prompt notice
to the Borrower and the Tranche A Lenders by telex or telecopy of each
rate of interest so determined, and its determination thereof shall be
conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to
furnish quotations to the Agent as contemplated hereby. If any
Reference Bank does not furnish a timely quotation, the Agent shall
determine the relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank or Banks or, if
none of such quotations is available on a timely basis, the provisions
of Section 8.01 shall apply.
(h) Notwithstanding the foregoing provisions, the
APPLICABLE RATE OF INTEREST per annum on each Loan outstanding shall
be, for each day, if the aggregate ownership by Santa Fe Southern
Pacific AND its WHOLLY-OWNED Subsidiaries of limited partnership
interests in Energy Partners, as a percentage of the total outstanding
limited partnership interests in Energy Partners, on such day is (i)
less than 50% but greater than or equal to 25%, increased by 1/8 of 1%
per annum, (ii) less than 25% but greater than or equal to 10%,
increased by 1/4 of 1% per annum, or (iii) LESS THAN 10%, INCREASED BY
1/2 OF 1% PER ANNUM.
SECTION 2.06. MANDATORY TERMINATION OR REDUCTION OF TRANCHE
A COMMITMENTS. (a) The Tranche A Commitments shall terminate on
December 31, 1997, and any Tranche A Loans then outstanding (together
with accrued interest thereon) shall be due and payable on such date.
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(b) On any date after the date of the first Borrowing on
which the Commitment of any Tranche A Lender shall be greater than the
principal amount of the Loan of such Tranche A Lender outstanding on
such date (after giving effect to any repayment, prepayment and
borrowing on such date), the Commitment of such Lender shall be
automatically reduced to an amount equal to such outstanding principal
amount.
(c) The aggregate Tranche A Commitments shall be further
reduced (and the Commitment of each Tranche A Lender shall be
correspondingly reduced on a pro rata basis), on each Reduction Date
in each year as follows:
REDUCTION ON EACH
YEAR REDUCTION DATE
1990 $1,377,777.78
1991 $1,377,777.78
1992 $1,205,555.56
1993 $1,033,333.33
1994 $ 688,888.89
1995 $ 688,888.89
1996 $ 688,888.89
1997 $ 688,888.88
PROVIDED that (i) any reduction of the Commitments pursuant to
subsection (b) shall reduce the amount of subsequent mandatory
reductions of Commitments pursuant to this subsection (c) as directed
by the Borrower in a notice (which shall be irrevocable once given) to
the Agent on or prior to the date of such reduction of the Commitments
pursuant to subsection (b); (ii) if any Tranche A Loan is made
pursuant to Section 2.12, the amount of each of the remaining
reductions of Commitments pursuant to this subsection (c) shall be
ratably increased in proportion to the increase in the aggregate
Tranche A Commitments hereunder; and (iii) the schedule of mandatory
reductions of Commitments pursuant to this subsection (c) may be
adjusted from time to time as contemplated by Section 5.08(a)
(d) On each Reduction Date, the Borrower shall repay such
principal amount (together with accrued interest thereon) of each
Tranche A Lender's outstanding Loan, if any, as may be necessary so
that after such repayment, the unpaid principal amount of such
Lender's Loan does not exceed the amount of such Lender's Commitment
as then reduced.
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SECTION 2.07. PREPAYMENTS. (a) The Borrower may, subject
to the provisions of subsection (c) below, prepay any Prime Borrowing
in whole at any time, or from time to time in part.
(b) Except as provided in Section 8.02 the Borrower may not
prepay all or any portion of the principal amount of any Fixed Rate
Loan prior to the maturity thereof.
(c) (i) If (x) the Borrower determines to reduce the
aggregate principal amount of Loans outstanding hereunder and such
reduction is not called for by the provisions of Section 2.04(b) and
Section 2.06(c) and (d) (any such reduction herein referred to as a
"Prepayment"), or (y) the Borrower determines to increase, on a
prospective basis pursuant to Section 5.08(a), the amount of scheduled
reductions on a Reduction Date of the aggregate principal amount of
Loans outstanding hereunder called for by the provisions of Section
2.04(b) and Section 2.06(c) and (d) (any such increase in such
scheduled reduction for such Reduction Date herein referred to as a
"Prospective Prepayment"), then, it shall give the Agent notice (a
"Notice of Prepayment" or "Notice of Prospective Prepayment") of such
determination not less than 15 days prior to the date on which it
wishes to (i) make such Prepayment or (ii) adjust the amounts of the
installments to be due under Section 2.04(b) and the amounts of the
reductions in Commitments under Section 2.06(c) to give effect to such
Prospective Prepayment. Such date shall, in the case of a Prepayment,
be a Domestic Business Day, and, if the Tranche A Loans then
outstanding are Fixed Rate Loans, the last day of the then current
Interest Period (other than an Interest Period provided for in clause
(l)(c)(i) or (2)(b)(i) of the definition of "Interest Period"). Each
Prepayment shall be of an amount equal to (x) $5,000,000 or a larger
multiple of $1,000,000, (y) such amount as will effect the restoration
of the Coverage Ratios to their required levels under Section 5.08, or
(z) the aggregate principal amount of Loans outstanding. Each
Prospective Prepayment under this Section shall be in such amount as
will, when taken together with other related adjustments being made to
the scheduled reductions of Loans outstanding hereunder, restore the
Annual Coverage Ratio to its required level under Section 5.08(a).
Each Notice of Prepayment and Notice of Prospective Prepayment shall
specify how the amount of such Prepayment or Prospective Prepayment is
to be allocated, on an aggregate basis for both Tranche A and Tranche
B Loans, to the remaining scheduled reductions in the Loans under
Section 2.04(b) and Section 2.06(c) and (d).
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(ii) Unless the aggregate amount of all prior Prepayments
and Prospective Prepayments as to which notice has been given under
this Section exceeds $20,000,000, each Tranche B Lender shall, not
less than 7 days after the date of a Notice of Prepayment or Notice of
Prospective Prepayment, as relevant, advise the Agent whether it
wishes to be included in the portion of such Prepayment or Prospective
Prepayment which, together with all such prior Prepayments and
Prospective Prepayments, does not exceed $20,000,000. Based on such
notices given to the Agent, which the Agent shall forward to the
Borrower, the Borrower shall:
(x) in the case of a Prepayment, prepay on the date
specified in the Notice of Prepayment the Tranche B Loans of the
Tranche B Lenders, if any, participating in such Prepayment and
prepay the Prime Loans on such date or give a Notice of Borrowing
with respect to a reborrowing of the Tranche A Loans due on such
date such that the portion of such Prepayment which, together
with all such prior Prepayments and Prospective Prepayments, does
not exceed $20,000,000 shall, after giving effect to any
repayment, prepayment and reborrowing of Loans on such day,
assuming the conditions precedent set forth in Section 3.02 are
met on such day, have been applied pro rata (based on the then
outstanding amounts of the Loans) to the Loans of the Tranche B
Lenders, if any, participating in such Prepayment and the Tranche
A Lenders; or
(y) in the case of a Prospective Prepayment, the Agent
shall make such changes in the amounts of the scheduled
installments due on the Tranche B Loans under Section 2.04(b) and
the reductions of the Commitments under Section 2.06(c) scheduled
to occur on the relevant Reduction Date, such that, after giving
effect to any repayment, prepayment and reborrowing of Loans on
such day, assuming the conditions precedent set forth in Section
3.02 are met on such day, the portion of such Prospective
Prepayment which, together with all such prior Prepayments and
Prospective Prepayments, does not exceed $20,000,000, shall have
been applied pro rata (based on the then outstanding amounts of
the Loans) to the Loans of the Tranche B Lenders, if any,
participating in such Prospective Prepayment and the Tranche A
Lenders.
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(iii) In the case of any Prepayment or Prospective
Prepayment, or a portion thereof, which, together with all prior
Prepayments and Prospective Prepayments as to which notice has been
given under this Section, exceeds $20,000,000, the Borrower shall:
(x) in the case of a Prepayment, prepay on the date
specified in the Notice of Prepayment the Tranche B Loans of the
Tranche B Lenders and prepay the Prime Loans on such date or give
a Notice of Borrowing with respect to a reborrowing of the
Tranche A Loans due on such date such that the portion of such
Prepayment which, together with all such prior Prepayments and
Prospective Prepayments, exceeds $20,000,000 shall, after giving
effect to any repayment, prepayment and reborrowing of Loans on
such day, assuming the conditions precedent set forth in Section
3.02 are met on such day, have been applied pro rata (based on
the then outstanding amounts of the Loans) to all of the Loans of
the Lenders; or
(y) in the case of a Prospective Prepayment, the Agent shall
make such changes in the amounts of the scheduled installments
due on the Tranche B Loans under Section 2.04(b) and the
reductions of the Commitments under Section 2.06(c) scheduled to
occur on the relevant Reduction Date, such that, after giving
effect to any repayment, prepayment and reborrowing of Loans on
such day, assuming the conditions precedent set forth in Section
3.02 are met on such day, the portion of such Prospective
Prepayment which, together with all such prior Prepayments and
Prospective Prepayments, exceeds $20,000,000, shall have been
applied pro rata (based on the then outstanding amounts of the
Loans) to all of the Loans of the Lenders.
(d) Upon receipt of a Notice of Prepayment or Notice of
Prospective Prepayment pursuant to this Section, the Agent shall
promptly notify each Lender of the contents thereof, and such notice
shall not thereafter be revocable by the Borrower. The Agent shall
promptly advise each Lender of the portion of any Prepayment or
Prospective Prepayment which is applicable to its Loan determined in
accordance with subsection (c) above and shall also advise such Lender
of the corresponding adjustments in the remaining scheduled reductions
of such Loan under Section 2.04(b) or Section 2.06(c) and (d) as
relevant. With respect to any prepayment of a
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Tranche B Loan made as part of a Prepayment or as to the portion of
any installment of a Tranche B Loan which is attributable to a
Prospective Prepayment, the amount of each scheduled installment of
such Loan which would have been required to be paid on a subsequent
Reduction Date but for such Prepayment or Prospective Prepayment shall
be for purposes of this Section 2.07 referred to as an "Eliminated
Payment"; PROVIDED that the "Eliminated Payments" associated with any
prepayment of a Tranche B Loan shall also include the reductions (if
any) in Eliminated Payments occurring under subsection (e)(iii) below
as a consequence of such prepayment.
(e) (i) Any prepayment of Prime Loans or Tranche B Loans
under subsection (c)(ii)(x) or subsection (c)(iii)(x) above shall be
effected by payment by the Borrower to the Agent for the accounts of
the relevant Lenders of the principal amount to be prepaid together
with accrued interest thereon to the date of prepayment and, in the
case of the portion of any Tranche B Loans prepaid pursuant to
subsection (c)(iii)(x) above, an amount equal to the excess, if any,
of (x) the net present value, at the time of such prepayment, of all
future scheduled payments of principal and interest with respect to
the corresponding Eliminated Payments, calculated as if such
prepayment were not being made and using a discount rate equal to the
yield, which shall be imputed by linear interpolation from the yields
(as most recently published in Federal Reserve Statistical Release
H.15 (519) or any successor publication thereto) of those United
States Treasury notes which have maturities as close as practicable to
the remaining weighted average life of such Eliminated Payments; OVER
(y) the amount of such prepayment.
(ii) If any portion of an installment of any Tranche B Loan
due on a Reduction Date pursuant to Section 2.04(b) is payable due to
a Prospective Prepayment (or portion thereof) described in subsection
(c)(iii)(y) above, the Borrower shall also pay to the Agent for the
account of the relevant Tranche B Lender an amount equal to the
excess, if any, of (x) the net present value, at the time of such
payment, of all future scheduled payments of principal and interest
with respect to the corresponding Eliminated Payments, calculated as
if such Prospective Prepayment (or portion thereof) had not occurred
and using a discount rate equal to the yield, which shall be imputed
by linear interpolation from the yields (as most recently published in
Federal Reserve Statistical Release H.15 (519) or any successor
publication thereto) of those United States Treasury notes which have
maturities as close as practicable to the remaining weighted average
life of such
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Eliminated Payments; OVER (y) such portion of such installment.
(iii) For purposes hereof, any reduction of a scheduled
installment of a Tranche B Loan under Section 2.04 attributable to a
prepayment of such Tranche B Loan under subsection (c)(iii)(x) shall
be applied at the time of such prepayment first to reduce the portion,
if any, of such installment which is then attributable to Prospective
Prepayments described in subsection (c)(iii)(y) above and shall also
reduce (on a pro rata basis, if there is more than one such Eliminated
Payment) the corresponding Eliminated Payments associated with such
portion of such installment.
SECTION 2.08. GENERAL PROVISIONS AS TO PAYMENTS. The
Borrower shall make each payment of principal of, and interest on, the
Loans hereunder not later than 11:00 A.M. (New York City time) on the
date when due, in Federal or other funds immediately available in New
York City, to the Agent at its address referred to in Section 9.01.
The Agent will wire transfer to each Lender, in accordance with the
most recent wire transfer instructions previously delivered by such
Lender to the Agent, the amount of each such payment received by the
Agent for the account of such Lender. If such payment is received by
the Agent at or before 11:00 A.M. (New York City time) on any date,
such wire transfer shall be made by the Agent on such date. If such
payment is received after 11:00 A.M. (New York City time), such wire
transfer shall be made by the Agent on the next succeeding Domestic
Business Day. Whenever any payment of principal of, or interest on,
the Domestic Loans or the Tranche B Loans shall be due on a day which
is not a Domestic Business Day, the date for payment thereof shall be
extended to the next succeeding Domestic Business Day. Whenever any
payment of principal of, or interest on, the Euro-Dollar Loans shall
be due on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-Dollar
Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case the date for payment thereof shall be
the next preceding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise,
interest thereon shall be payable for such extended time.
SECTION 2.09. FUNDING LOSSES. If the Borrower makes any
payment of principal with respect to any Fixed Rate Loan (pursuant to
Article VI or VIII or otherwise) on any day other than the last day of
the Interest Period applicable thereto, or the end of an applicable
period fixed pursuant to
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Section 2.05(d), or if the Borrower fails to borrow any Fixed Rate
Loans after notice has been given to any Lender in accordance with
Section 2.02(b) or fails to borrow Loans to be advanced under Section
2.12, the Borrower shall reimburse each Lender on demand for any
resulting loss or expense incurred by it (or by any existing or
prospective participant in the related Loan), including (without
limitation) any loss incurred in liquidating or employing deposits
from third parties, but excluding loss of margin for the period after
any such payment or failure to borrow, PROVIDED that such Lender shall
have delivered to the Borrower a certificate as to the amount of such
loss or expense, which certificate shall be conclusive in the absence
of manifest error.
SECTION 2.10. COMPUTATION OF INTEREST AND FEES. Interest on
Domestic Loans based on the Prime Rate shall be computed on the basis
of a year of 365 days (or 366 days in a leap year) and paid for the
actual number of days elapsed (including the first day but excluding
the last day). Interest on Domestic Loans based on the Adjusted CD
Rate and interest on Euro-Dollar Loans shall be computed on the basis
of a year of 360 days and paid for the actual number of days elapsed,
calculated as to each Interest Period or period fixed pursuant to
Section 2.05(d) from and including the first day thereof to but
excluding the last day thereof. Interest on Tranche B Loans shall be
computed on the basis of a year of 360 days, consisting of 12 months
of 30 days each.
SECTION 2.11. REGULATION D COMPENSATION. Each Tranche A
Lender may require the Borrower to pay, contemporaneously with each
payment of interest on the Tranche A Loans, additional interest on the
Euro-Dollar Loans of such Tranche A Lender at a rate per annum equal
to the excess of (i)(A) the applicable London Interbank Offered Rate
divided by (B) one MINUS the Euro-Dollar Reserve Percentage over (ii)
the rate specified in clause (i)(A). Any Tranche A Lender wishing to
require payment of such additional interest (x) shall so notify the
Borrower and the Agent, in which case such additional interest on the
Euro-Dollar Loans of such Tranche A Lender shall be payable to such
Tranche A Lender at the place indicated in such notice with respect to
each Interest Period commencing at least five Domestic Business Days
after the giving of such notice and (y) shall notify the Borrower at
least five Domestic Business Days prior to each date on which interest
is payable on the Tranche A Loans of the amount then due it under this
Section.
SECTION 2.12. INCREASE OF AGGREGATE LOANS. (a) The
aggregate Commitments and Loans hereunder may from time to
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time after the first Borrowing be increased by the addition of a new
Lender and its commitment to this facility or by increasing the
Commitment of any existing Lender under this facility, in the manner
described in this Section.
(b) At any time that the Borrower desires to increase the
aggregate Commitments and Loans hereunder, it shall give notice
thereof to the Agent, and shall specify whether it wishes such
Commitments and Loans to be Tranche A Commitments and Loans or
Tranche B Commitments and Loans or some combination thereof. In the
case of any proposed increase in Tranche B Commitments and Loans
hereunder, the Borrower shall, in such notice, state the interest rate
per annum at which such Loans shall be made. The Agent shall promptly
advise the Lenders of any such notice it receives from the Borrower.
With respect to any proposed increase in Tranche A Commitments and
Loans hereunder, each existing Tranche A Lender shall, within ten
Domestic Business Days, advise the Agent as to whether it is willing
to provide its share of such increase pro rata in proportion to the
existing Commitments of the Tranche A Lenders. With respect to any
proposed increase in Tranche B Commitments and Loans hereunder, each
existing Tranche B Lender shall, within ten Domestic Business Days,
advise the Agent as to whether it is willing to provide its share of
such increase pro rata in proportion to the existing Commitments of
the Tranche B Lenders. If any existing Tranche A or Tranche B Lenders
hereunder are not willing to provide the full amounts of their shares
of any such increase in the Commitments and Loans hereunder, the
resulting shortfall shall be allocated among the remaining Tranche A
or Tranche B Lenders, as relevant, as determined by the Borrower and
the Agent, or the Borrower may designate one or more new Lenders,
satisfactory to the Agent, to provide one or more new Commitments and
Loans hereunder in the amount of such shortfall, and, in the case of
Tranche B Loans, at the rate of interest per annum specified in the
notice of the Borrower to the Agent described above.
(e) The increase in existing Commitments or the addition of
Commitments of new Lenders hereunder shall be effected by execution of
an addendum to this Agreement as provided in Section 9.05.
Simultaneously with the execution of such an addendum, the Borrower
shall execute and deliver to the Agent a Euro-Dollar Note and a
Domestic Note for each Lender that is a new Tranche A Lender, or a
Tranche B Note for each Lender that is a Tranche B Lender making a new
Loan under this Section, in each case dated the date of such addendum,
and shall, in any case, execute and deliver such documents as the
Agent may reasonably request relating to the authorization
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for and validity of such addendum and, if relevant, such new Note or
Notes. If the Borrower shall have provided security under Section
5.08 or 5.11, the documents relating to such security shall be amended
as necessary or advisable to take account of the increased Commitments
and Loans hereunder.
(d) The Lender executing such addendum shall, not later
than 11:00 A.M. (New York City time) on the date specified in such
addendum, advance a Loan to the Borrower in an amount equal to, in the
case of a new Lender, its Commitment, or, in the case of an existing
Lender, the increase in its Commitment by making such amount
available, in Federal or other funds immediately available in New York
City, to the Agent at its address specified in or pursuant to Section
9.01. If such Loan is a Tranche A Loan, it shall be of the same type
(Prime, CD or Euro-Dollar) as the then-outstanding Tranche A Loans and
the Interest Period for such Tranche A Loan shall commence on such
date and end on the last day of the then current Interest Period for
the then-outstanding Tranche A Loans. Such Tranche A Loan shall
mature, and the principal amount thereof be due and payable, on the
last day of the Interest Period applicable thereto. If such Loan is a
Tranche B Loan, the principal thereof shall be payable and interest
thereon shall accrue and be payable as provided in Sections 2.04(b)
and 2.05(e).
(e) The borrowing of any Loan by the Borrower under this
Section shall constitute a representation and warranty by the Borrower
to all of the Lenders that:
(i) immediately after such borrowing, no Default shall have
occurred and be continuing; and
(ii) the fact that the representations and warranties of the
Borrower contained in this Agreement (except the representation
and warranty set forth in Section 4.04(d) as to any material
adverse change which has theretofore been disclosed in writing by
the Borrower to the Lenders) are true on and as of the date of
such borrowing.
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ARTICLE III
CONDITIONS TO BORROWINGS
SECTION 3.01. FIRST BORROWING. The obligation of each
Lender to make a Loan on the occasion of the first Borrowing is
subject to the satisfaction of the following conditions:
(a) receipt by the Agent of notice of such Borrowing as
required by Section 2.02;
(b) the fact that, immediately after such Borrowing, no
Default shall have occurred and be continuing;
(c) the fact that the representations and warranties of the
Borrower contained in this Agreement shall be true on and as of
the date of such Borrowing;
(d) receipt by the Agent for the account of each Lender of
a duly executed Note or Notes, each dated on or before the date
of such Borrowing, complying with the provisions of Section 2.03;
(e) receipt by the Agent of opinions of counsel acceptable
to it or policies of title insurance acceptable to it covering
not less than 85% (in Relative Value) of the Petroleum Properties
acquired by the Borrower pursuant to the Petro-Lewis Acquisition;
(f) receipt by the Agent of the duly executed SFNR
Undertaking dated the date of the first Borrowing;
(g) receipt by the Agent of an opinion of Jeffrey R.
Moreland, associate general counsel of Santa Fe Southern Pacific
and counsel for the Borrower and its affiliates in connection
herewith, substantially in the form of Exhibit D hereto and
covering such additional matters relating to the transactions
contemplated hereby as the Required Lenders may reasonably
request;
(h) receipt by the Agent of an opinion of Davis Polk &
Wardwell, special counsel for the
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Lenders and the Agent, substantially in the form of Exhibit E
hereto and covering such additional matters relating to the
transactions contemplated hereby as the Required Lenders may
reasonably request;
(i) receipt by the Agent of a certificate signed by the
president or chief financial officer of the Managing General
Partner of the Borrower, to the effect set forth in clauses (b)
and (c) above and certifying as to the correctness of the
Coverage Report delivered in connection with the first Borrowing
pursuant to Section 5.01(i); and
(j) receipt by the Agent of all documents it may reasonably
request relating to the existence of the Borrower and the
Managing General Partner, the authority for and the validity of
this Agreement, the Notes, the Mortgages and the SFNR Undertaking
and any other matters relevant hereto, all in form and substance
satisfactory to the Agent.
The certificate and opinions referred to in clauses (g), (h) and (i)
above shall be dated the date of the first Borrowing.
SECTION 3.02. SUBSEQUENT BORROWINGS. The obligation of
each Tranche A Lender to make a Loan on the occasion of each Borrowing
subsequent to the first Borrowing is subject to the satisfaction of
the following conditions:
(a) receipt by the Agent of notice of such Borrowing as
required by Section 2.02;
(b) the fact that, immediately after such Borrowing, no
Default shall have occurred and be continuing; and
(c) the fact that the representations and warranties of the
Borrower contained in this Agreement (except the representation
and warranty set forth in Section 4.04(d) as to any material
adverse change which has theretofore been disclosed in writing by
the Borrower to the Lenders) shall be true on and as of the date
of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and
warranty by the Borrower on the date of such Borrowing as to the facts
specified in clauses (b) and (c) of this Section.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. EXISTENCE AND POWER. The Borrower is a limited
partnership duly organized, validly existing and in good standing
under the laws of the State of Delaware, including the Delaware
Revised Uniform Limited Partnership Act, and in each other
jurisdiction where the ownership of its properties or the conduct of
its business requires it so to be, and has authority under said laws
and its Partnership Agreement and all powers and all material
governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted.
SECTION 4.02. PARTNERSHIP AND GOVERNMENTAL AUTHORIZATION;
CONTRAVENTION. The execution, delivery and performance by the
Borrower of this Agreement, the Notes and the Mortgages are within the
Borrower's legal powers, have been duly authorized by all necessary
legal action, require no action by or in respect of, or filing with,
any governmental body, agency or official (except for the recordation
of the Mortgages and the filing of the related financing statements)
and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of either Partnership Agreement or of
any other agreement, judgment, injunction, order, decree or other
instrument binding upon the Borrower or Energy Partners or result in
the creation or imposition of any Lien on any asset of the Borrower or
Energy Partners (except as contemplated by Sections 5.08 and 5.11).
SECTION 4.03. BINDING EFFECT. This Agreement constitutes a
valid and binding agreement of the Borrower; the Notes, when executed
and delivered in accordance with this Agreement, will constitute valid
and binding obligations of the Borrower; and the Mortgages, when
executed in accordance with this Agreement, will constitute valid and
binding agreements of the Borrower.
SECTION 4.04. FULL DISCLOSURE; FINANCIAL INFORMATION. (a) The
information and other documents furnished by or on behalf of the
Borrower or any of its Affiliates to the Lenders in connection with
the transactions contemplated hereby do not and will not, as of the
date thereof, contain
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any untrue statement of material fact or omit to state a material
fact necessary in order to make the statements contained therein not
misleading.
(b) The balance sheet of Energy Partners as of December 31, 1986
and the related statements of income, changes in financial position
and changes in partners' capital for the fiscal year then ended,
reported on by Price Waterhouse and set forth in the 1986 annual
report on Form 10-K for Energy Partners, as filed with the Securities
and Exchange Commission, a copy of which has been delivered to each of
the Lenders, fairly present, in conformity with generally accepted
accounting principles, the financial position of Energy Partners as of
such date and its results of operations and changes in financial
position for such fiscal year.
(c) The unaudited balance sheet of Energy Partners as of March
31, 1987 and the related unaudited statements of income, changes in
financial position and changes in partners' capital for the three
months then ended, set forth in the quarterly report of Energy
Partners for the fiscal quarter ended March 31, 1987 as filed with the
Securities and Exchange Commission on Form 10-Q, a copy of which has
been delivered to each of the Lenders, fairly present, in conformity
with generally accepted accounting principles applied on a basis
consistent with the financial statements referred to in paragraph (b)
of this Section, the financial position of Energy Partners as of such
date and its results of operations and changes in financial position
for such three month period (subject to normal year-end adjustments).
(d) Since December 31, 1986 there has been no material adverse
change in the business, properties, financial position, results of
operations or current operating environment of Energy Partners or of
the Borrower.
SECTION 4.05. LITIGATION. There is no action, suit or
proceeding pending against, or to the knowledge of the Borrower
threatened against or affecting, the Borrower or any of its Affiliates
before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse
decision which could materially adversely affect the Borrower's
ability to perform its obligations under this Agreement or which in
any manner draws into question the validity of this Agreement, the
Notes or the Mortgages.
SECTION 4.06. COMPLIANCE WITH ERISA. (a) Each ERISA
Obligor has fulfilled in all material respects its
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obligations under the minimum funding standards of ERISA and the Code
with respect to each Plan and is in compliance in all material
respects with the presently applicable provisions of ERISA and the
Code, and with respect to each Plan there is not outstanding any
material liability currently payable (other than premium payments
outstanding for 60 days or less) to the PBGC or a Plan under Title IV
of ERISA.
(b) As of the date of this Agreement, the sum, for all Excluded
Plans, of (i) the present value of all benefits accrued under each
Excluded Plan determined on a termination basis using the assumptions
established by the PBGC as in effect on such date minus (ii) the
assets of such Excluded Plan (excluding for these purposes any accrued
but unpaid contributions) does not exceed $22,000,000.
SECTION 4.07. TAXES.
(a) From and including the date of this Agreement to and
including the date of the first Borrowing, the Borrower represents
that neither the Borrower nor Energy Partners is an association
taxable as a corporation within the meaning of the Code, and neither
the income of the Borrower nor the income of Energy Partners is
subject to Federal income tax at the partnership level under the Code.
(b) The Borrower and Energy Partners have filed all United
States Federal income tax information returns and all other material
tax returns which are required to be filed by them and have paid all
taxes due pursuant to such returns or pursuant to any assessment
received by either of them (other than such taxes as are being
contested in good faith in appropriate proceedings). The charges,
accruals and reserves on the books of the Borrower and on the books of
Energy Partners in respect of taxes or other governmental charges are,
in the opinion of the Borrower, adequate.
SECTION 4.08. TITLE TO ASSETS. The Borrower has, to the best of
its knowledge, valid and defensible title to the Petroleum Properties,
subject to no Liens other than Liens permitted under Section 5.10, and
the Borrower's net revenue interests in the various Petroleum
Properties are as shown in the Most Recent Engineering Report. Except
for instances which do not in the aggregate materially detract from
the value of such leases or materially impair the use thereof in the
operation of its business, the Borrower enjoys peaceful, lawful and
undisturbed possession under all leases included in the Petroleum
Properties and such leases are valid, subsisting, in full force and
effect, and are not subject to any
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terms which are not usual and customary in similar transactions
negotiated on an arms-length basis.
SECTION 4.09. NOT AN INVESTMENT COMPANY. The Borrower is not an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Lender has any
Commitment hereunder or any amount payable under any Note remains
unpaid:
SECTION 5.01. INFORMATION. The Borrower will deliver to each of
the Lenders:
(a) as soon as available and in any event within 120 days after
the end of each fiscal year of Energy Partners, a balance sheet of
Energy Partners as of the end of such fiscal year and the related
statements of income, changes in financial position and changes in
partners' capital for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, all
reported on in a manner acceptable to the Securities and Exchange
Commission by Price Waterhouse or other independent public accountants
of nationally recognized standing;
(b) as soon as available and in any event within 60 days after
the end of each of the first three quarters of each fiscal year of the
Borrower, a balance sheet of Energy Partners as of the end of such
quarter and the related statements of income, changes in financial
position and changes in partners' capital for such quarter and for the
portion of the fiscal year of Energy Partners ended at the end of such
quarter, setting forth in each case in comparative form the figures
for the corresponding quarter and the corresponding portion of the
previous fiscal year of Energy Partners, all certified (subject to
normal year-end adjustments) as to fairness of presentation, generally
accepted accounting principles and consistency by the chief
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financial officer or chief accounting officer of the Managing General
Partner;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of
the chief financial officer or chief accounting officer of the
Managing General Partner (i) setting forth (x) the Coverage Ratios as
of the date of such financial statements, and (y) if the
Life-of-Reserves Coverage Ratio does not exceed 2.05, in reasonable
detail the calculations required to establish the Coverage Ratios and
(ii) stating whether any Default exists on the date of such
certificate and, if any Default then exists, setting forth the details
thereof and the action which the Managing General Partner and the
Borrower are taking or propose to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements
whether anything has come to their attention to cause them to believe
that any Default existed on the date of such statements;
(e) forthwith upon the occurrence of any Default, a certificate
of the chief financial officer or chief accounting officer of the
Managing General Partner setting forth the details thereof and the
action which the Managing General Partner and the Borrower are taking
or propose to take with respect thereto;
(f) promptly upon the mailing thereof to the limited partners of
Energy Partners generally, copies of all financial statements, reports
(other than reports on Form K-1 under the Code and related schedules
thereto) and proxy statements so mailed other than those provided or
to be provided under subsection (a) or (b) above;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K,
10-Q and 8-K (or their equivalents) which the Energy Partners shall
have filed with the Securities
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and Exchange Commission other than those provided or to be provided
under Subsection (a) or (b) above;
(h) if and when any ERISA Obligor (i) gives or is required to
give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV of ERISA, or
knows that the plan administrator of any Plan has given or is required
to give notice of any such reportable event, a copy of the notice of
such reportable event given or required to be given to the PBGC; (ii)
receives notice of complete or partial withdrawal liability under
Title IV of ERISA, a copy of such notice; or (iii) receives notice
from the PBGC under Title IV of ERISA of an intent to terminate or
appoint a trustee to administer any Plan, a copy of such notice;
(i)(x) on or prior to April 1 of each year, an Engineering
Report as of January 1 of such year; (y) unless the Required Lenders
waive such requirement (consent to any request for such waiver not to
be unreasonably denied), on or prior to September 15 of each year, an
update of such Engineering Report as of July 1 of such year, prepared
by the Borrower or an Independent Petroleum Engineer, which shall
reflect (1) the acquisition of Recognized Proved Reserves covered in
supplements, prepared by an Independent Petroleum Engineer, delivered
to the Lenders since delivery of such Engineering Report, (2) six
months' reduction in Recognized Proved Reserves (equal to one-half of
such year's production as shown in the Engineering Report as of
January 1 of such year), (3) any significant adverse developments in
production or reserves since January 1 of such year, (4) changes in
Approved Assumptions and (5) any disposition of Recognized Proved
Reserves; but shall not otherwise, unless prepared by an Independent
Petroleum Engineer, reflect any acquisition of Recognized Proved
Reserves or any reassessment of the matters covered in such
Engineering Report; and (z) on the date of, and giving effect to, the
first Borrowing, and on or prior to May 1 and October 15 of each year,
a Coverage Report as of the date of such Coverage Report;
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(j) forthwith upon the occurrence of any Triggering Event or of
an event described in clause II of Section 5.11(a), or any change in
the ownership of Energy Partners which results in a change in the
applicable interest rates hereunder, a certificate of the Managing
General Partner setting forth the details thereof; and
(k) from time to time such additional information regarding the
financial position or business of the Borrower or Energy Partners or
the General Partners of the Borrower as the Agent, at the request of
any Lender, may reasonably request.
SECTION 5.02. PAYMENT OF OBLIGATIONS. The Borrower will pay and
discharge at or before maturity, all its material obligations and
liabilities, including, without limitation, tax liabilities, except
where the same may be contested in good faith by appropriate
proceedings, and will maintain, in accordance with generally accepted
accounting principles, appropriate reserves for the accrual of any of
the same.
SECTION 5.03. MAINTENANCE OF PROPERTY; INSURANCE. (a) The
Borrower will keep all property useful and necessary in its business
in good working order and condition.
(b) The Borrower will maintain or cause to be maintained for its
benefit, with financially sound and reputable insurance companies,
property, casualty and liability insurance with respect to all its
properties and operations whether owned or leased in at least such
amounts and against at least such risks as is customary for Persons
engaged in the same or a similar business in similar locations. The
Borrower will furnish to the Agent from time to time, if so requested,
full information as to the insurance carried.
SECTION 5.04. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE:
CHANGE OF NAME; FISCAL YEAR. The Borrower will preserve, renew and
keep in full force and effect its existence and its rights, privileges
and franchises necessary or desirable in the normal conduct of
business. Without limiting the generality of the foregoing, it shall
be the case that Energy Partners will have no assets, operations or
business activities except for its ownership of 99% of the partnership
interests in the Borrower (and except for such ownership of assets,
operations and business activities as are incidental thereto) and will
continue to operate, and to own its oil and gas properties, through
the Borrower and that the Borrower
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shall continue to be engaged primarily in the exploration for, and
acquisition, production and marketing of, Hydrocarbons on behalf of
Energy Partners. The Borrower will cause any Petroleum Properties
operated by it or by an Affiliate, and will use its best efforts to
cause any Petroleum Properties operated by any other Person, to be
operated prudently in accordance with good oil field practice. The
Borrower will cause Hydrocarbons produced from the Petroleum
Properties to be marketed in a commercially reasonable manner at
commercially reasonable prices. The Borrower will have no
Subsidiaries (i) except with the prior written consent of the Required
Lenders, such consent not to be unreasonably withheld provided that
the provisions of this Agreement are amended to take account thereof
as deemed appropriate by the Required Lenders and (ii) except for
Subsidiaries which may exist on a transitory basis not to exceed 90
days in the course of an acquisition by the Borrower of oil and gas
properties by way of a purchase of stock or partnership interests.
The Borrower shall not change its name without 30 days' prior written
notice to the Agent, and the Agent shall promptly notify each Lender
thereof. The fiscal year of the Borrower and Energy Partners shall at
all times be the calendar year.
SECTION 5.05. COMPLIANCE WITH LAWS. The Borrower will comply in
all material respects with all applicable laws, ordinances, rules,
regulations, and requirements of governmental authorities except where
the necessity of compliance therewith is contested in good faith by
appropriate proceedings.
SECTION 5.06. INSPECTION OF PROPERTY, BOOKS AND RECORDS. The
Borrower will keep proper books of record and account of all dealings
and transactions in relation to its business and activities; and will
permit representatives of any Lender to visit and inspect any of its
properties, to examine and make abstracts from any of its books and
records and to discuss its affairs, finances and accounts with its
officers and independent public accountants, all at such reasonable
times and as often as may reasonably be desired, it being understood
that the foregoing shall be at the expense of such Lender and, in the
case of visits and inspections of oil and gas properties, at such
Lender's risk.
SECTION 5.07. DEBT. The Borrower shall not incur any Debt on or
after the date of this Agreement unless, immediately after such
incurrence of Debt, (i) no Default shall have occurred and be
continuing and (ii) the Life-of Reserves Coverage Ratio is equal to or
greater than 1.75 and the Annual Coverage Ratio is equal to or greater
than 1.20.
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Furthermore, the Borrower shall not incur any Debt after a Triggering
Event, or an event described in clause (II) or (III) of Section
5.11(a), has occurred until it has complied with Section 5.11(a) or
such compliance is, pursuant to a waiver granted under Section 5.11(b)
or pursuant to the provisions of Section 5.11(c), no longer required.
For purposes of this Section, a Rollover shall not be deemed an
incurrence of Debt.
SECTION 5.08. COVERAGE RATIOS; SECURITY (a) If the
Life-of-Reserves Coverage Ratio set forth in any certificate delivered
pursuant to Section 5.01(c) or Coverage Report delivered pursuant to
Section 5.01(i)(z) is less than 1.75, or if the Annual Coverage Ratio
set forth in such certificate or Coverage Report is less than 1.20,
then, within 60 days of the date of such report, the Borrower shall
(i) reduce Debt, (ii) in accordance with Section 2.07(c), adjust the
amounts of installments of Tranche B Loans under Section 2.04(b) and
the amounts of mandatory reductions of Commitments under Section
2.06(c) so that amounts scheduled to be paid under such Sections are
reduced for later Reduction Dates and increased (by an equal amount in
aggregate) for earlier Reduction Dates or (iii) acquire additional
Recognized Proved Reserves (acceptable to the Required Lenders and
included in a supplement, prepared by an Independent Petroleum
Engineer and delivered to the Lenders within such 60-day period, to
the Most Recent Engineering Report) such that, based on a new Coverage
Report delivered to the Lenders within such 60-day period, the
Life-of-Reserves Coverage Ratio is equal to or greater than 1.75 and
the Annual Coverage Ratio is equal to or greater than 1.20; PROVIDED
that, if a Triggering Event, or an event described in clause (II) or
(III) of Section 5.11(a), has occurred, the Life-of-Reserves Coverage
Ratio shall not on any day be less than 1.90 unless the Borrower has
complied with Section 5.11(a) or such compliance is, pursuant to a
waiver granted under Section 5.11(b) or pursuant to the provisions of
Section 5.11(c), no longer required.
(b) If, on any day, the Life-of-Reserves Coverage Ratio is less
than the Collateral Threshold on such day, the Borrower shall, not
later than 60 days thereafter, either (i) have delivered to the Agent
evidence satisfactory to the Agent (which shall include opinions of
counsel) that Mortgages have been executed and recorded as necessary
to perfect for the benefit of the Lenders liens having first priority
(except for Permitted Liens), securing payment of principal of and
interest on the Notes and all other amounts payable by the Borrower
under this Agreement and covering the lesser of (x) the Lenders' Pro
Rata Share of 80% (in Relative Value) of
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the Petroleum Properties not subject to Liens described in Section
5.10(a) and (y) such Petroleum Properties (l) the Cash Flow Available
for Debt Service from which for the period of twenty fiscal years
commencing with the fiscal year in which the date of determination
occurs equals or exceeds (2) 190% of the sum of the aggregate
outstanding principal amount of the Loans and interest scheduled to
accrue on the Loans (using the interest rates for the Loans as set
forth in the most recent Approved Assumptions) or (ii) reduce Debt or
acquire additional Recognized Proved Reserves (acceptable to the
Required Lenders and included in a supplement, prepared by an
Independent Petroleum Engineer and delivered to the Lenders within
such 60-day period, to the then Most Recent Engineering Report) such
that, based on a new Coverage Report delivered to the Lenders within
such 60-day period, the Life-of-Reserves Coverage Ratio is equal to or
greater than the Collateral Threshold; PROVIDED that if the
Life-of-Reserves Coverage Ratio, after giving effect to any incurrence
of Debt, Restricted Payment or sale or other disposition of assets
(including any exchange of Petroleum Properties for other oil and gas
properties) by the Borrower, would be less than the Collateral
Threshold, the Borrower shall, as a precondition to such incurrence of
Debt, Restricted Payment or sale (or exchange) or other disposition of
assets, comply with clause (b)(i) above.
(c) If the Borrower provides security pursuant to clause (b)(i)
above, it shall at all times thereafter maintain a perfected first
priority (except as aforesaid) lien for the benefit of the Lenders
covering the lesser of (l) the Lenders' Pro Rata Share (as calculated
from time to time) of 80% (in Relative Value) of the Petroleum
Properties not subject to Liens described in Section 5.10(a) and (2)
such Petroleum Properties (x) the Cash Flow Available for Debt Service
from which for the period of twenty fiscal years commencing with the
fiscal year in which the date of determination occurs equals or
exceeds (y) 190% of the sum of the aggregate outstanding principal
amount of the Loans and interest scheduled to accrue on the Loans
(using the interest rates for the Loans as set forth in the most
recent Approved Assumptions).
(d) The "Pro Rata Share" of any holder of any Debt of the
Borrower (other than Debt of the Borrower Guaranteed by another
Person, Subordinated Debt, Debt secured by any Lien on any asset of
the Borrower pursuant to Section 5.10(a) or (e), or Debt incurred in
violation of this Agreement) at any time is the then outstanding
principal amount of such Debt as a percentage of the then outstanding
total principal amount of the Borrower's Debt other than (w) Debt of
the Borrower
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Guaranteed by another Person, (x) Subordinated Debt, (y) Debt secured
by a Lien on any asset of the Borrower pursuant to Section 5.10(a) or
(e) and (z) Debt incurred in violation of this Agreement; and the
"Collateral Threshold" is, if Santa Fe Southern Pacific and its
Wholly-Owned Subsidiaries' aggregate ownership of limited partnership
units of Energy Partners is, as a percentage of total outstanding
limited partnership units of Energy Partners, (i) greater than or
equal to 50%, 1.90, (ii) less than 50% but greater than or equal to
25%, 2.15, or (iii) less than 25%, 2.65.
SECTION 5.09. RESTRICTED PAYMENTS. The Borrower will not
declare or make any Restricted Payments if (a) after giving effect to
such Restricted Payment, a Default shall have occurred and be
continuing, or (b) Santa Fe Southern Pacific and its Wholly-Owned
Subsidiaries own in aggregate, less than 50% of the outstanding
limited partnership units of Energy Partners and the Life-of-Reserves
Ratio is, after giving effect to such Restricted Payment, less than
2.05. Furthermore, the Borrower shall not, after a Triggering Event,
or an event described in clause (II) or (III) of Section 5.11(a), has
occurred, make any Restricted Payment until it has complied with
Section 5.11(a) or such compliance is, pursuant to a waiver granted
under Section 5.11(b) or pursuant to Section 5.11(c), no longer
required.
SECTION 5.10. NEGATIVE PLEDGE. The Borrower will not create,
assume or suffer to exist any Lien on any asset now owned or hereafter
acquired by it, except:
(a) any Lien existing on any oil and gas interest, property
or prospect acquired by the Borrower which Lien was in existence
prior to such acquisition and was not created in contemplation of
such acquisition; PROVIDED that no more than one-third (in
Relative Value) of the Petroleum Properties shall at any time be
subject to such Liens;
(b) Permitted Liens;
(c) (i) Liens securing the Loans and any other obligations
of the Borrower under this Agreement and (ii) so long as such
Liens described in clause (i) exist, Liens on Petroleum
Properties securing other Debt of the Borrower (other than Debt
of the Borrower Guaranteed by another Person, Subordinated Debt,
Debt secured by any Lien on any asset of the Borrower pursuant to
Section 5.10(a) or (e), or Debt incurred in violation of this
Agreement); PROVIDED
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that the Relative Value of such Petroleum Properties, in relation
to all Petroleum Properties subject to Liens described in this
clause (c), does not exceed the Pro Rata Share of the holders of
such other Debt;
(d) any Lien arising pursuant to any order of attachment,
distraint or similar legal process arising in connection with
court proceedings so long as the execution or other enforcement
thereof is effectively stayed and the claims secured thereby are
being contested in good faith by appropriate proceedings; and
(e) Liens on assets which do not (directly or indirectly)
constitute oil and gas interests, properties or prospects,
PROVIDED that aggregate principal amount of Debt secured thereby
does not at any time exceed $10,000,000.
SECTION 5.11. PROVISION OF SECURITY UPON TRIGGERING EVENT.
(a) Subject to the provisions of subsection (c) below, if (I) a
Triggering Event shall have occurred or (II) there shall be any change
in the identity of the Managing General Partner or of the Special
General Partner of either of the Borrower or Energy Partners or (III)
an event described in the definition of "Triggering Event" (for these
purposes replacing "Santa Fe Energy" whenever it occurs with "Santa Fe
Natural Resources") shall have occurred, the Borrower shall, not later
than 60 days after such event, (if it has not theretofore provided
security pursuant to Section 5.08(a) or is not at such time
maintaining such security in accordance with Section 5.08(c)) have
delivered to the Agent evidence satisfactory to the Agent (which shall
include opinions of counsel) that Mortgages have been executed and
recorded as necessary to perfect for the benefit of the Lenders liens
having first priority (except for Permitted Liens), securing payment
of principal of and interest on the Notes and all other amounts
payable by the Borrower under this Agreement and covering the lesser
of (l) the Lenders' Pro Rata Share of 80% (in Relative Value) of the
Petroleum Properties not subject to Liens described in Section 5.lO(a)
and (2) such Petroleum Properties (x) the Cash Flow Available for Debt
Service from which for the period of twenty fiscal years commencing
with the fiscal year in which the date of determination occurs equals
or exceeds (y) 190% of the aggregate outstanding principal amount of
the Loans.
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(b) The Borrower shall, if required to provide security pursuant
to subsection (a) above, at all times there after (unless the Required
Lenders waive such requirement, the consent of the Lenders to a
request for such waiver not to be unreasonably withheld in light of,
among other things, the considerations identified in clause (ii) of
subsection (c) below) maintain a perfected first priority (except as
aforesaid) lien for the benefit of the Lenders covering the lesser of
(1) the Lenders' Pro Rata Share (as calculated from time to time) of
80% (in Relative Value) of the Petroleum Properties not subject to
Liens described in Section 5.10(a) and (2) such Petroleum Properties
(x) the Cash Flow Available for Debt Service from which for the period
of twenty fiscal years commencing with the fiscal year in which the
date of determination occurs equals or exceeds (y) 190% of the
aggregate outstanding principal amount of the Loans.
(c) The Borrower need not comply with the provisions of
subsection (a) above, if, within the 60-day period referred to
therein, (i) in the case of a Triggering Event occurring while Santa
Fe Pacific Exploration is the Managing General Partner, a new board of
directors of Santa Fe Pacific Exploration is elected which is
comprised entirely of persons who are not employees, officers,
directors or affiliates of Santa Fe Natural Resources or of any
affiliate of Santa Fe Natural Resources (other than Santa Fe Pacific
Exploration) and (ii) in any case, the Required Lenders have not
determined, taking into account the composition of the board of
directors of the Managing General Partner, that such event may result
in a change of management policy that may adversely affect the
interests of the Lenders. Each Lender agrees to respond to the Agent
with respect to any request for a determination under clause (ii)
above within five Domestic Business Days of such Lender's receipt of
such request.
SECTION 5.12. MERGER; SALE OR ABANDONMENT OF ASSETS: RELEASE OF
COLLATERAL. (a) The Borrower will not merge or consolidate with any
other Person unless the surviving Person is the Borrower or is a
Person directly or indirectly controlling, controlled by or under
common control with Santa Fe Southern Pacific (the word "control"
having for purposes hereof the meaning assigned thereto in the
definition of Affiliate) and unless, after giving effect thereto, no
Default shall have occurred and be continuing. The Borrower will not
sell, assign, lease or otherwise transfer or abandon any Petroleum
Properties or any proceeds thereof or rights with respect thereto
without the prior written consent of the Required Lenders except that
(i) the Borrower may sell Hydrocarbons after severance in the ordinary
course of its
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business; (ii) the Borrower may sell, in any period of twelve months,
Petroleum Properties having an aggregate fair market value not in
excess of $25,000,000, PROVIDED that (A) the aggregate fair market
value of all Petroleum Properties sold pursuant to this clause (ii)
during the term of this Agreement shall not exceed $50,000,000 and (B)
no sale of Petroleum Properties may be made under this clause (ii) if,
after giving effect to such sale and the use of proceeds thereof,
(1) a Default would exist, or (2) the Life-of-Reserves Coverage Ratio
would be less than 1.75 or the Annual Coverage Ratio would be less
than 1.20; (iii) the Borrower may exchange any Petroleum Properties
for any other oil and gas properties having an equivalent fair market
value provided such exchange is otherwise permitted by this Agreement
and PROVIDED that, after giving effect thereto, (x) no Default would
exist, and (y) the Life-of-Reserves Coverage Ratio would equal or
exceed 1.75 and the Annual Coverage Ratio would equal or exceed 1.20;
(iv) the Borrower may sell, lease or otherwise transfer (through
farm-out or otherwise) any oil and gas property (or any indirect
investment in oil and gas property) if such property contains no
Recognized Proved Reserves; and (v) the Borrower may abandon any oil
and gas property which the Managing General Partner has determined in
good faith (and, if such property consists of one or more line items
in the Most Recent Engineering Report, so certified to the Agent) is
incapable of producing Hydrocarbons at a level sufficient to produce
gross revenues in excess of the sum of associated royalties, operating
costs and windfall profits, production, ad valorem, severance and
income taxes.
(b) If, at any time, the Borrower is required at such time
pursuant to Sections 5.08(c) and/or 5.11(b) to maintain security
theretofore provided under Sections 5.08(b) and/or 5.11(a), the Agent
shall, nevertheless, upon the request of the Borrower, release any
Mortgage as to any Petroleum Properties, if after giving effect to
such release, (x) no Default shall have occurred and be continuing,
(y) the Life-of-Reserves Coverage Ratio equals or exceeds 1.75 and the
Annual Coverage Ratio equals or exceeds 1.20, and (z) the Borrower
continues to be in compliance with Sections 5.08(c) and/or 5.11(b), as
relevant.
SECTION 5.13. USE OF PROCEEDS. The proceeds of the Loans made
under this Agreement will be used by the Borrower to refinance
short-term debt and for general corporate purposes. None of such
proceeds will be used, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying
any "margin stock" within the meaning of Regulation G or Regulation U.
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ARTICLE VI
DEFAULTS
SECTION 6.01. EVENTS OF DEFAULT. If one or more of the
following events ("Events of Default") shall have occurred and be
continuing:
(a) the Borrower shall fail to pay when due any principal
of any Loan or shall fail to pay within 10 Domestic Business Days
of the due date thereof any interest on any Loan, any fees or any
other amount payable hereunder;
(b) the Borrower shall fail to observe or perform any
covenant contained in Sections 5.07 through 5.13 inclusive (other
than Section 5.08(c) or Section 5.11(b));
(c) the Borrower shall fail to observe or perform any
covenant or agreement contained in this Agreement (other than
those covered by clause (a) or (b) above) or in any Mortgage for
30 days after written notice thereof has been given to the
Borrower by the Agent at the request of any Lender;
(d) any representation, warranty, certification or
statement made by the Borrower or the Managing General Partner in
this Agreement or in any certificate, financial statement or
other document delivered pursuant to this Agreement shall prove
to have been incorrect in any material respect when made (or
deemed made);
(e) the Borrower shall fail to make any payment in respect
of any Debt (other than the Notes) when due or within any
applicable grace period if the aggregate principal amount of such
Debt exceeds $5,000,000;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Debt of the Borrower (other
than the Notes) or enables (or, with the giving of notice or
lapse of time or both, would enable) the holder of such Debt or
any Person acting on such holder's behalf to
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accelerate the maturity thereof if the aggregate principal amount of
such Debt exceeds $5,000,000;
(g) the Borrower shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part
of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due, or
shall take any corporate action to authorize any of the
foregoing;
(h) an involuntary case or other proceeding shall be
commenced against the Borrower seeking liquidation,
reorganization or other relief with respect to it or its debt
under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it
or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and unstated
for a period of 60 days; or an order for relief shall be entered
against the Borrower under the federal bankruptcy laws as now or
hereafter in effect;
(i) any ERISA Obligor shall fail to pay when due an amount
or amounts aggregating in excess of $5,000,000 which it shall
have become liable to pay to the PBGC or to a Plan under Title IV
of ERISA; or notice of intent to terminate a Plan or Plans having
aggregate Unfunded Vested Liabilities in excess of $10,000,000
(collectively, a "Material Plan") shall be filed under Title IV
of ERISA by any ERISA Obligor, any plan administrator or any
combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a
trustee to be appointed to administer any Material Plan or a
proceeding shall be instituted by a fiduciary of any Material
Plan against any ERISA Obligor to enforce Section 515 of ERISA
and such proceeding shall not have been dismissed within 30
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days thereafter; or a condition shall exist by reason of which
the PBGC would be entitled to obtain a decree adjudicating that
any Material Plan must be terminated;
(j) judgments or orders for the payment of money in excess
of $10,000,000 in the aggregate shall be rendered against the
Borrower and such judgments or orders shall continue unsatisfied
and unstayed for a period of 30 days;
(k) Energy Partners shall fail to directly own at least 99%
of the partnership interests in the Borrower or shall cease to be
the sole limited partner of the Borrower; or the Borrower or
Energy Partners shall be dissolved; or either Partnership
Agreement shall be amended in any material respect without the
prior written consent of the Required Lenders or shall be
breached in any material respect; or any other agreement to which
the Borrower or Energy Partners is a party is breached and such
breach may reasonably be expected to have a material adverse
effect on the ability of the Borrower to perform its obligations
under this Agreement; or
(1) (i) any lien granted pursuant to Section 5.08 or 5.11
shall thereafter be determined to be invalid or unenforceable, or
not to constitute a first priority lien (subject only to
Permitted Liens) on the properties purported to be covered
thereby, and such event or condition shall continue, not cured or
waived, for seven days; provided that any such event or condition
affecting any lien shall not be an Event of Default if the
Borrower is in compliance with Section 5.08(c) and Section
5.11(b) without giving effect to such lien; or (ii) the Borrower
contests in writing the validity, enforceability or priority of
any lien granted and required to be maintained pursuant to
Section 5.08 or Section 5.11;
then, and in every such event, the Agent shall, if requested by the
Required Lenders, by notice to the Borrower terminate the Tranche A
Commitments and they shall thereupon terminate, and by notice to the
Borrower declare the Notes (together with accrued interest thereon) to
be, and the Notes shall thereupon become, immediately due and payable
without presentment, demand, protest or other notice of any kind, all
of which are
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hereby waived by the Borrower; PROVIDED that in the case of any of the
Events or Default specified in clause (g) or (h) above, without any
notice to the Borrower or any other act by the Agent or the Lenders,
the Commitments shall thereupon terminate and the Notes (together with
accrued interest thereon) shall become immediately due and payable
without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower.
SECTION 6.02. NOTICE OF DEFAULT. The Agent shall give notice to
the Borrower under Section 6.01(c) promptly upon being requested to do
so by any Lender and shall thereupon notify all the Lenders thereof.
SECTION 6.03. TRANCHE B LOANS DUE UPON FAILURE TO REBORROW
TRANCHE A LOANS. If, on the last day of any Interest Period, the
Borrower fails to borrow Tranche A Loans in accordance with the Notice
of Borrowing required to be given with respect to a Borrowing on such
day (due to a failure by the Borrower to deliver a Notice of
Borrowing, a failure to meet conditions precedent or otherwise), the
Tranche B Loans shall be due and payable on such day, without
presentment, demand, protest or notice of any kind, all of which are
hereby waived by the Borrower.
SECTION 6.04. ADDITIONAL AMOUNT PAYABLE WITH RESPECT TO TRANCHE
B LOANS. Together with any payment of any Tranche B Loan pursuant to
Section 6.01 or 6.03 above, the Borrower shall pay to the relevant
Tranche B Lender an amount equal to the excess, if any, of (x) all
future scheduled payments of principal and interest with respect to
the corresponding Eliminated Payments, calculated as if such payment
were not being made and using a discount rate equal to the yield,
which shall be imputed by linear interpolation from the yields (as
most recently published in Federal Reserve Statistical Release H.15
(519) or any successor publication thereto) of those United States
Treasury notes which have maturities as close as practicable to the
remaining weighted average life of such Eliminated Payments; over (y)
the amount of such payment. With respect to any such payment pursuant
to Section 6.01 or 6.03 above of a Tranche B Loan, the corresponding
"Eliminated Payments" shall mean all scheduled installments of such
Loan which would have been required to be paid on subsequent Reduction
Dates but for such payment pursuant to Section 6.01 or 6.03 above;
PROVIDED that the "Eliminated Payments" associated with any such
payments shall also include the Eliminated Payments (as defined in
Section 2.07(d) associated with any portion of any such scheduled
installment which is then
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attributable to Prospective Prepayments described in Section
2.07(c)(iii)(y).
ARTICLE VII
THE AGENT
SECTION 7.01. APPOINTMENT AND AUTHORIZATION. Each Lender
irrevocably appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement
and the Notes and the Mortgages as are delegated to the Agent by the
terms hereof or thereof, together with all such powers as are
reasonably incidental thereto. Each Lender, in particular, authorizes
the Agent to act as mortgagee or beneficiary and security agent under
each Mortgage for the benefit of the Lenders, subject to the
provisions of this Article VII.
SECTION 7.02. AGENT AND AFFILIATES. Morgan Guaranty Trust
Company of New York shall have the same rights and powers under this
Agreement as any other Lender and may exercise or refrain from
exercising the same as though it were not the Agent, and Morgan
Guaranty Trust Company of New York and its affiliates may accept
deposits from, lend money to, and generally engage in any kind of
business with the Borrower or any Affiliate of the Borrower as if it
were not the Agent hereunder.
SECTION 7.03. ACTION BY AGENT. The obligations of the Agent
hereunder are only those expressly set forth herein. Without limiting
the generality of the foregoing, the Agent shall not be required to
take any action with respect to any Default, except as expressly
provided in Article VI.
SECTION 7.04. CONSULTATION WITH EXPERTS. The Agent may consult
with legal counsel (who may, with the consent of the Required Lenders,
be 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 by it in good faith in accordance with the advice
of such counsel, accountants or experts.
SECTION 7.05. LIABILITY OF AGENT. Neither the Agent nor any of
its directors, officers, agents, or employees shall be liable for any
action taken or not taken by it in connection herewith or under any
Mortgage (i) with the consent or at the request of the Required
Lenders or (ii) in the
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absence of its own gross negligence or willful misconduct. Neither the
Agent nor any of its directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify
(i) any statement, warranty or representation made in connection with
this Agreement or any Mortgage or any borrowing hereunder; (ii) the
performance or observance of any of the covenants or agreements of the
Borrower; (iii) the satisfaction of any condition specified in Article
III or Section 2.12, except receipt of items required to be delivered
to the Agent; or (iv) the validity, effectiveness or genuineness of
this Agreement, the Notes, any Mortgage or any other instrument or
writing furnished in connection herewith or therewith. The Agent shall
not incur any liability by acting in reliance upon any notice,
consent, certificate, statement, or other writing (which may be a bank
wire, telex or similar writing) believed by it to be genuine or to be
signed by the proper party or parties.
SECTION 7.06. INDEMNIFICATION. Each Lender shall, ratably in
accordance with its outstanding Loans, indemnify the Agent (to the
extent not reimbursed by the Borrower) against any cost, expense
(including counsel fees and disbursements), claim, demand, action,
loss or liability (except such as result from the Agent's gross
negligence or willful misconduct) that the Agent may suffer or incur
in connection with this Agreement or any action taken or omitted by
the Agent hereunder.
SECTION 7.07. CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into
this Agreement. Each Lender also acknowledges that it will,
independently and without reliance upon the Agent or any other sender,
and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking any action under this Agreement.
SECTION 7.08. FEES. The Borrower shall pay to the Agent the
arrangement and commitment fee set forth in the letter from the Agent
to the Borrower dated June 8, 1987, and shall pay to the Agent on the
date of the first Borrowing and on each anniversary thereof, so long
as any Loan remains outstanding, an agency and engineering fee of
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ARTICLE VIII
CHANGE IN CIRCUMSTANCES AFFECTING TRANCHE A LENDERS
SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR
UNFAIR. If on or prior to the first day of any Interest Period:
(a) the Agent is advised by the Reference Banks that
deposits in dollars (in the applicable amounts) are not being
offered to the Reference Banks in the relevant market for such
Interest Period, or
(b) Tranche A Lenders having 66 2/3% or more of the
aggregate amount of the Tranche A Commitments advise the Agent
that the Adjusted CD Rate or the London Interbank Offered Rate,
as the case may be, as determined by the Agent will not
adequately and fairly reflect the cost to such Tranche A Lenders
of funding their Fixed Rate Loans for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the
Tranche A Lenders, whereupon until the Agent notifies the Borrower
that the circumstances giving rise to such suspension no longer exist,
the obligations of the Tranche A Lenders to make CD Loans or
Euro-Dollar Loans, as the case may be, shall be suspended. Unless the
Borrower notifies the Agent at least two Domestic Business Days before
the date of any Fixed Rate Borrowing for which a Notice of Borrowing
has previously been given that it elects not to borrow on such date,
such Borrowing shall instead be made as a Prime Borrowing.
SECTION 8.02. ILLEGALITY. If, after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by any Tranche A Lender (or its Euro-Dollar Lending Office)
with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall make it
unlawful or impossible for any Tranche A Lender (or its Euro-Dollar
Lending Office) to make, maintain or fund its Euro-Dollar Loans and
such Tranche A Lender shall so notify the Agent, the Agent shall
forthwith give notice thereof to
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the other Tranche A Lenders and the Borrower, whereupon until such
Tranche A Lender notifies the Borrower and the Agent that the
circumstances giving rise to such suspension no longer exist, the
obligation of such Tranche A Lender to make Euro-Dollar Loans shall be
suspended. Before giving any notice to the Agent pursuant to this
Section, such Tranche A Lender shall designate a different Euro-Dollar
Lending Office if such designation will avoid the need for giving such
notice and will not, in the judgment of such Tranche A Lender, be
otherwise materially disadvantageous to such Tranche A Lender. If such
Tranche A Lender shall determine that it may not lawfully continue to
maintain and fund any of its outstanding Euro-Dollar Loans to maturity
and shall so specify in such notice, the Borrower shall immediately
prepay in full the then outstanding principal amount of each such
Euro-Dollar Loan, together with accrued interest thereon. Concurrently
with prepaying each such Euro-Dollar Loan, the Borrower shall borrow a
Prime Loan in an equal principal amount from such Tranche A Lender (on
which interest and principal shall be payable contemporaneously with
the related Euro-Dollar Loans of the other Tranche A Lenders), and
such Tranche A Lender shall make such a Prime Loan.
SECTION 8.03. INCREASED COST AND REDUCED RETURN. (a) If after
the date hereof, the adoption of any applicable law, rule or
regulation, or any change therein, or any change in the interpretation
or administration thereof by any governmental authority, central bank
or comparable agency charged with the interpretation or administration
thereof, or compliance by any Tranche A Lender (or its Lending Office)
with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency:
(i) shall subject any Tranche A Lender (or its Lending
Office) to any tax, duty or other charge with respect to its
Fixed Rate Loans, its Notes or its obligation to make Fixed Rate
Loans, or shall change the basis of taxation of payments to any
Tranche A Lender (or its Lending Office) of the principal of or
interest on its Fixed Rate Loans or any other amounts due under
this Agreement in respect of its Fixed Rate Loans or its
obligation to make Fixed Rate Loans (except for changes with
respect to tax on net income or any tax computed by reference to
net income of such Tranche A Lender or its applicable Lending
Office imposed by the jurisdiction in which such Tranche A
Lender's principal executive office or applicable Lending Office
is located); or
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(ii) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without
limitation, any such requirement imposed by the Board of
Governors of the Federal Reserve System, but excluding (A) with
respect to any CD Loan any such requirement included in an
applicable Domestic Reserve Percentage and (B) with respect to
any Euro-Dollar Loan any such requirement for which such Tranche
A Lender is entitled to compensation during the relevant Interest
Period pursuant to Section 2.11) against assets of, deposits with
or for the account of, or credit extended by, any Tranche A
Lender (or its Lending Office) or shall impose on any Tranche A
Lender (or its Lending Office) or on the United States market for
certificates of deposit or the London interbank market any other
condition affecting its Fixed Rate Loans, its Notes or its
obligation to make Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost to such
Tranche A Lender (or its Lending Office) of making or maintaining any
Fixed Rate Loan, or to reduce the amount of any sum received or
receivable by such Tranche A Lender (or its Lending Office) under this
Agreement or under its Notes with respect thereto, by an amount deemed
by such Tranche A Lender to be material, such Tranche A Lender shall
promptly after its determination of such occurrence give notice
thereof to the Agent (which shall promptly give notice to the
Borrower), and the Borrower shall pay to such Tranche A Lender from
time to time, within 30 days of demand, such amount as such Tranche A
Lender certifies to be the amount that will compensate it for such
increased costs, provided that the Borrower's obligation to pay such
Tranche A Lender shall be limited to the increased costs that are
attributable to the period of time commencing with the date 30 days
prior to the date on which such Tranche A Lender's notice is received
by the Borrower.
(b) If after the date hereof, any Tranche A Lender shall
have determined that the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or
any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance
by any Tranche A Lender (or its Lending Office) with any request
or directive regarding capital adequacy (whether or not having
the force of law)
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of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on such
Tranche A Lender's capital as a consequence of its obligations
hereunder to a level below that which such Tranche A Lender could
have achieved but for such adoption, change or compliance (taking
into consideration such Tranche A Lender's policies with respect
to capital adequacy) by an amount deemed by such Tranche A Lender
to be material, such Tranche A Lender shall promptly after its
determination of such occurrence give notice thereof to the Agent
(which will promptly give notice to the Borrower), and the
Borrower shall pay to such Tranche A Lender from time to time,
within 30 days of demand, such amount as such Tranche A Lender
certifies to be the amount that will compensate it for such
reduction provided that the Borrower's obligation to pay such
Tranche A Lender shall be limited to the reduction that is
attributable to the period of time commencing with the date 30
days prior to the date on which such Tranche A Lender's notice is
received by the Borrower.
(c) Each Tranche A Lender will promptly notify the Borrower
and the Agent of any event of which it has knowledge, occurring
after the date hereof, which will entitle such Tranche A Lender
to compensation pursuant to this Section and will designate a
different Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in
the judgment of such Tranche A Lender, be otherwise materially
disadvantageous to such Tranche A Lender. A certificate of any
Tranche A Lender claiming compensation under this Section and
setting forth the additional amount or amounts to be paid to it
hereunder shall be conclusive in the absence of manifest error.
In determining such amount, such Tranche A Lender may use any
reasonable averaging and attribution methods.
SECTION 8.04. PRIME LOANS SUBSTITUTED FOR AFFECTED FIXED RATE
LOANS. If (i) the obligation of any Tranche A Lender to make
Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii)
any Tranche A Lender has demanded compensation under Section 8.03(a)
and the Borrower shall, by at least five Euro-Dollar Business Days'
prior notice to such Tranche A Lender through the Agent, have elected
that the provisions of this Section shall apply to such Tranche A
Lender, then, unless and until such Tranche A Lender notifies the
Borrower that the circumstances giving rise to such suspension or
demand for compensation no longer apply:
(a) all Loans which would otherwise be made by such Tranche
A Lender as CD Loans or Euro-Dollar
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Loans, as the case may be, shall be made instead as Prime Loans
(on which interest and principal shall be payable
contemporaneously with the related Fixed Rate Loans of the other
Tranche A Lenders), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the
case may be, has been repaid, all payments of principal which
would otherwise be applied to repay such Fixed Rate Loans shall
be applied to repay its Prime Loans instead.
SECTION 8.05. SUBSTITUTION OF LENDER. If (i) the obligation of
any Tranche A Lender to make Euro-Dollar Loans has been suspended
pursuant to Section 8.02 or (ii) any Tranche A Lender has demanded
compensation under Section 8.03, the Borrower shall have the right,
with the assistance of the Agent, to seek a mutually satisfactory (to
the Borrower and the Agent) substitute lender or lenders (which may be
one or more of the Lenders) to purchase the Notes and assume the
Tranche A Commitment of such Tranche A Lender.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing (including
bank wire, telex, telecopy or similar writing) and shall be given to
such party at its address or telex or telecopy number set forth on the
signature pages hereof or such other address or telex or telecopy
number as such party may hereafter specify for the purpose by notice
to the Agent and the Borrower. Each such notice, request or other
communication shall be effective (i) if given by telex or telecopy,
when such telex or telecopy is transmitted to the telex or telecopy
number specified in this Section and, in the case of a telex, the
appropriate answerback is received, (ii) if given by mail, 72 hours
after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other
means, when delivered at the address specified in this Section;
PROVIDED that notices to the Agent under Article II and requests to
the Lenders under Section 5.11(c)(ii) shall not be effective until
received.
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SECTION 9.02. NO WAIVERS. No failure or delay by the Agent or
any Lender in exercising any right, power or privilege hereunder or
under any Note or any Mortgage shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative
and not exclusive of any rights or remedies provided by law.
SECTION 9.03. EXPENSES; DOCUMENTARY TAXES. The Borrower shall
pay (i) all reasonable out-of-pocket expenses of the Agent, including
reasonable fees and disbursements of special counsel for the Lenders
and the Agent, in connection with the preparation of this Agreement,
any waiver or consent hereunder or any amendment hereof or any Default
or alleged Default hereunder, (ii) all out-of-pocket expenses of the
Agent, including fees and disbursements of counsel for the Lenders and
the Agent, in connection with the preparation, execution, recordation,
or administration of any Mortgage and (iii) if an Event of Default
occurs, all out-of-pocket expenses incurred by the Agent or any
Lender, including fees and disbursements of counsel, in connection
with such Event of Default and collection and other enforcement
proceedings resulting therefrom. The Borrower shall indemnify each
Lender against any transfer taxes, recording taxes, documentary taxes,
assessments or charges made by any governmental authority by reason of
the execution and delivery of this Agreement or the Notes or of the
execution and recordation of any Mortgage.
SECTION 9.04. SHARING OF SET-OFFS. Each Lender agrees that if
it shall, by exercising any right of set-off or counterclaim or
otherwise, receive payment of a proportion of the aggregate amount of
principal and interest due with respect to any Note held by it which
is greater than the proportion received by any other Lender in respect
of the aggregate amount of principal and interest due with respect to
any Note held by such other Lender, the Lender receiving such
proportionately greater payment shall purchase such participations in
the Notes held by the other Lenders, and such other adjustments shall
be made, as may be required so that all such payments of principal and
interest with respect to the Notes held by the Lenders shall be shared
by the Lenders pro rata; PROVIDED that nothing in this Section shall
impair the right of any Lender to exercise any right of set-off or
counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of the Borrower other than its
indebtedness under the Notes. The Borrower
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<PAGE>
agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in a Note, whether
or not acquired pursuant to the foregoing arrangements, may exercise
rights of set-off or counterclaim and other rights with respect to
such participation as fully as if such holder of a participation were
a direct creditor of the Borrower in the amount of such participation.
SECTION 9.05. AMENDMENTS AND WAIVERS. Any provision of this
Agreement or the Notes or the Mortgage may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by
the Borrower and the Required Lenders (and, if the rights or duties of
the Agent are affected thereby, by the Agent); PROVIDED that no such
amendment or waiver shall, unless signed by all the Lenders, (i)
increase the Commitment of any Lender or subject any Lender to any
additional obligation, except as contemplated by Section 2.12 and the
further PROVISO below, (ii) reduce the principal of or rate of
interest on any Loan or any fees hereunder, (iii) effect any amendment
in the provisions of Section 2.07, 6.03, 6.04 or 9.04, (iv) effect any
amendment in Section 5.08 or 5.11 or permit the release of any
Mortgage except pursuant to a waiver granted under Section 5.11(b) or
pursuant to the provisions of Section 5.12(b), (v) postpone the date
fixed for any payment of principal of or interest on any Loan or any
fees hereunder or (vi) change the percentage of the Commitments or of
the aggregate unpaid principal amount of the Notes which shall be
required for the Lenders or any of them to take any action under this
Section or any other provision of this Agreement; PROVIDED FURTHER
that the signature pages hereof may be amended to include a new Lender
and to set forth its Commitment or to increase the Commitment of an
existing Lender (as contemplated by Section 2.12) and to reflect the
resulting increase in the aggregate Commitments by execution of an
addendum hereto by the Borrower, the Agent and such Lender, and all
references herein, or in any other document, to this Agreement shall
thereafter be deemed to refer to this Agreement as amended by such
addendum. The Agent shall promptly give notice to the Borrower and all
Lenders of any amendment or waiver of this Agreement or the Notes or
any Mortgage.
SECTION 9.06. SUCCESSORS AND ASSIGNS. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except
that (i) the Borrower may not assign or otherwise transfer any of its
rights under this Agreement and (ii) no Tranche A Lender may, without
the prior written consent of the Borrower, assign any Tranche A Loan
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<PAGE>
hereunder; PROVIDED that nothing herein shall be deemed to prohibit
the granting by any Tranche A Lender of participation in any Tranche A
Loan hereunder or the sale, assignment, pledge or other transfer by
any Tranche A Lender of its Notes and its rights thereunder to any
Federal Reserve Bank.
(b) The Agent and the Borrower may, for all purposes of this
Agreement, treat any Lender as the holder of any Note drawn to it or
its order (and owner of the Loans evidenced thereby) until written
notice of assignment, participation or other transfer shall have been
received by them and reflected on the Borrower's books; PROVIDED that
no Tranche A Lender or participant shall give any such written notice
with respect to any participation referred to in the PROVISO contained
in subsection (a) prior to the occurrence of an Event of Default. The
Borrower shall promptly record on its books all notices it receives
under this subsection (b). In the case of any transfer of a Tranche B
Note, the Borrower shall execute and deliver a new Tranche B Note
payable to the transferee upon surrender of the old Tranche B Note
duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of the old Tranche B Note. Such new
Tranche B Note shall be dated and bear interest from the date to which
interest has been paid on the surrendered Tranche B Note or from the
date of the surrendered Note if no interest has been paid thereon.
(c) No assignee, participant or other transferee of any Tranche
A Lender's rights shall be entitled to receive any greater payment
under Section 8.03 than such Lender would have been entitled to
receive with respect to the rights transferred, except in the case of
an assignment made with the Borrower's prior written consent or by
reason of the provisions of Section 8.02 or 8.03 requiring such Lender
to designate a different Lending Office under certain circumstances or
at a time when the circumstances giving rise to such greater payment
did not exist.
(d) If any Reference Bank assigns its Notes to an unaffiliated
institution, the Agent shall, in consultation with the Borrower and
with the consent of the Tranche A Lenders, appoint another bank to act
as a Reference Bank hereunder.
SECTION 9.07. COLLATERAL. Each of the Lenders represents to the
Agent and each of the other Lenders that it in good faith is not
relying upon any "margin stock" (as defined in Regulation G and
Regulation U) as collateral in the
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<PAGE>
extension or maintenance of the credit provided for in this Agreement.
SECTION 9.08. REPRESENTATIONS OF LENDERS. Each Tranche A Lender
represents that it is making its Loan in the ordinary course of its
commercial banking business and not with a view toward distribution
thereof, and each Tranche B Lender represents that it is acquiring its
Tranche B Note for investment for its own account and not with a view
toward distribution thereof, subject, nevertheless, to any requirement
of law that the disposition of its property shall at all times be
within its control.
SECTION 9.09. CONFIDENTIALITY. Any information which any of the
Lenders receives from the Borrower which is designated proprietary or
confidential at the time of receipt thereof by such Lender shall not
be disclosed by such Lender to any other Person, if such information
is not otherwise in the public domain, other than (i) to its
independent accountants and legal counsel, (ii) pursuant to statutory
and regulatory requirements, (iii) pursuant to any mandatory court
order, or (iv) to any other Lender or, subject to an agreement
containing provisions substantially the same as those of this Section,
to any participant in or assignee of, or prospective participant in or
assignee of, any Loan.
SECTION 9.10. NEW YORK LAW. This Agreement and each Note shall
be construed in accordance with and governed by the law of the State
of New York.
SECTION 9.11. COUNTERPARTS; EFFECTIVENESS. This Agreement may
be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. This Agreement shall become effective
when the Agent shall have received counterparts hereof signed by all
of the parties hereto.
SECTION 9.12. NON-RECOURSE TO PARTNERS. No recourse shall be had
for the payment of the principal of or interest on any Loan, or for
any claim based thereon, or otherwise in respect thereof, or with
respect to any other obligation hereunder, against any past, present
or future partner of the Borrower or any partner thereof (including,
without limitation, Santa Fe Pacific Exploration and Santa Fe Energy),
and in no event shall any such Person be held liable, personally or
otherwise with respect to the indebtedness evidenced by the Notes or
for any obligations under this Agreement, whether by virtue of any
statute or rule of law, or
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<PAGE>
by the enforcement of any assessment or penalty or otherwise, all such
liability being expressly waived and released by the Agent and each
Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the
day and year first above written.
<PAGE>
SANTA FE ENERGY OPERATING
PARTNERS, L.P.
By: SANTA FE PACIFIC EXPLORATION
COMPANY, as Managing
General Partner
By:
Title:
1616 South Voss Road,
Suite 1000
Houston, Texas 77057
Telecopy number: (713) 975-4871
COMMITMENTS
$13,000,000 MORGAN GUARANTY TRUST COMPANY
(Tranche A) OF NEW YORK
By:
Title:
DOMESTIC LENDING OFFICE
Morgan Guaranty Trust Company
of New York
23 Wall Street
New York, New York 10015
Telex number: 420230
-67-
<PAGE>
COMMITMENTS
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, CHANNEL ISLAND
BRANCH
By:
Title:
LENDING OFFICE
Morgan Guaranty Trust Company
of New York, Channel Islands
Branch
c/o MORGAN CHRISTIANA CORP.
Servicing Unit
902 Market Street
Wilmington, Delaware 19801
Telex number: 835383
$10,000,000 EQUITABLE VARIABLE LIFE INSURANCE
(Tranche B) COMPANY
By:
Title:
c/o Equitable Capital Management
Corporation
1285 Avenue of the Americas
New York, New York 10019
Attention: Corporate Finance
Department
Telex number: (212) 554-1032
$11,000,000 THE NORTHWESTERN MUTUAL LIFE
(Tranche B) INSURANCE COMPANY
By:
Title:
720 East Wisconsin Avenue
Milwaukee, WI 53202
Telecopy number: (414) 226-7001
-68-
<PAGE>
COMMITMENTS
$9,000,000 BANK OF MONTREAL
(Tranche A)
By:
Title:
115 South La Salle Street
Chicago, IL 60603
Telex number: 190289 TRT
Telecopy number: (312) 750-4368
$9,000,000 TEXAS COMMERCE BANK,
(Tranche A) NATIONAL ASSOCIATION
By:
Title:
Texas Commerce Plaza
712 Main Street
Houston, TX 77002
Telex number: 775418 TEXCOMBK
$7,000,000 AMERICAN GENERAL LIFE INSURANCE
(Tranche B) COMPANY OF NEW YORK
By:
Title:
2929 Allen Parkway
A37-01
Houston, TX 77019
Attention: Private Placement
Department
Telecopy number: (713) 831-1979
$6,500,000 MUTUAL BENEFIT LIFE INSURANCE
(Tranche B) COMPANY
By:
Title:
520 Broad Street
Newark, NJ 07101
Telecopy number: (201) 482-5865
-69-
<PAGE>
COMMITMENTS
$6,500,000 NEW ENGLAND MUTUAL LIFE
(Tranche B) INSURANCE COMPANY
By:
Title:
501 Boylston Street
Boston, MA 04126
Telecopy number: (617) 578-4827
$6,500,000 PRINCIPAL MUTUAL LIFE INSURANCE
(Tranche B) COMPANY
By:
Title:
By:
Title:
711 High Street
Des Moines, Iowa 50309
Attention: Investment Department-
Securities
Telecopy number: (515) 247-5930
$6,500,000 UNUM LIFE INSURANCE COMPANY
(Tranche B) OF AMERICA
By:
Title:
2211 Congress Street
Portland, ME 04122
Attention: Bond Investment
Division
Telecopy number: (207) 780-6937
-70-
<PAGE>
COMMITMENTS
$5,000,000 THE EQUITABLE LIFE ASSURANCE
(Tranche B) SOCIETY OF THE UNITED STATES
By:
Title:
c/o Equitable Management
Corporation
1285 Avenue of the Americas
New York, New York 10019
Attention: Corporate Finance
Department
Telecopy number: (212) 554-1032
Total Commitments
$90,000,000
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By:
Title:
23 Wall Street
New York, New York 10015
Attention: Kevin McCann
Telex number; 420230
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<PAGE>
EXHIBIT 10(p)
SANTA FE ENERGY RESOURCES, INC.
DEFERRED COMPENSATION PLAN
(As Amended)
I. NAME AND PURPOSE
The name of this plan is the Santa Fe Energy Resources, Inc.
Deferred Compensation Plan (the "Plan"). The purpose of the
Plan is to provide certain highly compensated employees of
Santa Fe Energy Resources, Inc. (the "Company") and its
Subsidiaries and the members of the Board of Directors of the
Company with the opportunity to defer compensation earned as an
Eligible Employee or as a Director on an elective basis and, to
also provide Highly Paid Employees the opportunity to receive a
Company matching contribution with respect to their base
compensation in excess of that which is covered under the
Company's Savings Plan.
II. EFFECTIVE DATE
Except as provided in Section XIV, the Plan became effective as
of January 1, 1991. This First Amendment and restatement of the
Plan shall be effective as of February 1, 1994.
III. DEFINITIONS
When used in this Plan, the following terms shall have the
meanings set forth below unless a different meaning is plainly
required by the context:
A. "Account" shall mean a Deferral Account, Excess Account
and/or Company Account, as the context requires.
B. "Board of Directors" shall mean the Board of Directors of
the Company.
C. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
<PAGE>
D. "Committee" shall mean the Employee Benefits Committee of
the Company.
E. "Company Account" shall mean a bookkeeping account
established by the Company to credit Company Matching
Contributions on behalf of a Highly Paid Employee pursuant
to Section VI(C).
F. "Company Matching Contribution" shall mean an amount equal
to the product of (i) a Highly Paid Employee's Excess
Contributions for the first year and (ii) the Company's
actual regular matching contribution rate for such year
under the Savings Plan plus, if the Participant is entitled
to receive an Employer Bonus Contribution under the Savings
Plan, the Bonus Percentage thereunder.
G. "Compensation" shall mean (1) all directors' retainers and
fees paid by the Company to a member of the Board of
Directors and (2) the rate of annual base salary payable to
an Eligible Employee by the Company or a Subsidiary.
H. "Deferral Account" shall mean a bookkeeping account
established by the Company to credit elective deferrals on
behalf of a Participant pursuant to Section VI(A).
I. "Eligible Employee" shall mean an employee of the Company
or a Subsidiary whose Compensation on a specified Entry
Date exceeds ten times the amount specified in Section
402(g)(1) of the Code as in effect on such Entry Date; such
term shall also include an employee who is a Highly Paid
Employee.
J. "Entry Date" shall mean the first day of each calendar
year; however, with respect to a Director, the first day of
the month following his initial election as a member of the
Board of Directors and the first day of the month in which
the Annual Meeting of Shareholders is conducted shall also
be an Entry Date and, with respect to a Highly Paid
Employee for purposes of making Excess Contributions,
February 1, 1994 shall also be an Entry Date.
<PAGE>
K. "Excess Account" shall mean a bookkeeping account
established by the Company to credit Excess Contributions
on behalf of a Highly Paid Employee pursuant to Section
VI(B).
L. "Excess Compensation" shall mean Compensation, after
reduction for any elective deferrals under this Plan that
are credited to a Participant's Deferral Account, in excess
of the amount specified in Section 401(a)(17) of the Code
as in effect on such Entry Date. In no event shall
compensation that is covered by the Savings Plan be Excess
Compensation under this Plan.
M. "Excess Contributions" shall mean the amount of Excess
Compensation deferred by a Highly Paid Employee for a year
pursuant to Section V.
N. "Highly Paid Employee" shall mean an Eligible Employee who
has Excess Compensation.
O. "Participant" shall mean a member of the Board of
Directors, an Eligible Employee or Highly Paid Employee who
makes an election to participate in the Plan.
P. "Payment Date" shall mean the date elected by a Participant
on which to receive distribution of his Account(s)
established with respect to a specified year.
Q. "Savings Plan" shall mean the Santa Fe Energy Resources,
Inc. Savings Investment Plan.
R. "Subsidiary" shall mean any corporation in which the
Company owns directly or indirectly at least 50% of the
voting stock.
Throughout this Plan, words in the masculine gender shall include the
feminine and neuter genders, the plural shall include the singular and
the singular shall include the plural.
IV. PARTICIPANTS
Each member of the Board of Directors and each Eligible
Employee,
<PAGE>
including each Highly Paid Employee, shall be eligible to
participate in the Plan. A Highly Paid Employee shall be
eligible to make an election with respect to his Compensation
or his Excess Compensation or both. In the event that an
employee makes an election to participate in the Plan for a
particular year believing such employee is an Eligible Employee
(or Highly Paid Employee, as the case may be), and it is
subsequently determined that such employee's Compensation at
the Entry Date does not exceed ten times the amount specified
in Section 402(g)(1) (or, with respect to a Highly Paid
Employee, Section 401(a)(17)) of the Code as adjusted for that
year, any amounts deferred by such employee under the Plan (or,
if applicable, Excess Contributions made) for such year shall
be returned to the employee as soon as practicable and no
further deferrals (or Excess Contributions, as the case may be)
shall be made for such employee with respect to such year.
V. MANNER OF ELECTING DEFERRALS
An Eligible Employee may elect to defer all or a part of his or
her Compensation for a specified year by giving written notice
to the Company setting forth the Participant's election as to:
(a) the percentage (in multiples of 5% of Compensation, up
to 100% thereof) of the Participant's Compensation to
be deferred for such year; and
(b) the Payment Date, as described in Section VII(A), for
distribution of that year's Deferral Account.
In addition, a Highly Paid Employee, who has made an election
under the Savings Plan to contribute the maximum amount
permitted under Section 402(g)(1) of the Code for that year,
may elect, either in lieu of or in addition to an election made
with respect to his Compensation, to defer part of his Excess
Compensation for such year (an "Excess Contribution") by giving
written notice to the Company setting forth the Participant's
election as to:
(x) the percentage (either 1%, 2%, 3% or 4%) of the
<PAGE>
Participant's Excess Compensation to be deferred for
such year; and
(y) the Payment Date, as described in Section VII(A), for
distribution of that year's Matching Account and Excess
Account.
If, however, during a year a Highly Paid Employee reduces his
election under the Savings Plan to less than the maximum amount
permitted by Section 402(g)(1) of the Code, the Participant
shall automatically cease making Excess Contributions
thereunder.
In order to participate in the Plan for a specified year, a
Participant must deliver an executed deferred compensation
election to the Company, on the form prescribed by the Company
for that purpose, prior to the Entry Date for such year.
The elections described in this Section shall pertain only to
the year for which they are made and shall apply to all
Compensation and/or Excess Compensation, if applicable, payable
for such year. If no election is made for a year, no elective
deferral of Compensation or Excess Compensation will be made
for such year. All elections shall be irrevocable except to the
extent the Committee, in its sole discretion, permits a
Participant to terminate or change a deferral election. Such
termination or change shall be effective only with respect to
Compensation or Excess Compensation earned after the date such
termination or change of election is approved by the Committee.
VI. ACCOUNTS
A. DEFERRAL ACCOUNTS. A separate Deferral Account shall be
established and maintained for each Eligible Employee who
elects to be a Participant for a year reflecting the amount
of Compensation electively deferred for that year by the
Participant and the interest credited thereon as provided
in D. below. In the event two or more Deferral Accounts of
a Participant are to be paid on the same Payment Date, all
such Deferral Accounts shall be aggregated into a single
Deferral Account for such Participant. At the end of each
month, an
<PAGE>
amount shall be credited to the appropriate Deferral
Account of each Participant to reflect the Compensation
otherwise payable during said month but deferred pursuant
to the Plan by the Participant.
B. EXCESS ACCOUNTS. A separate Excess Account shall be
established and maintained for each Highly Paid Employee
who elects to be a Participant for a year reflecting the
amount of Excess Compensation electively deferred for that
year by the Participant and the interest credited thereon
as provided in D. below. In the event two or more Excess
Accounts of a Participant are to be paid on the same
Payment Date, all such Excess Accounts shall be aggregated
into a single Excess Account for such Participant. At the
end of each month, an amount shall be credited to the
appropriate Excess Account of each Participant to reflect
the Excess Compensation otherwise payable during said month
but deferred pursuant to the Plan by the Participant.
C. COMPANY ACCOUNTS. A separate Company Account shall be
established and maintained each year for each Highly Paid
Employee who makes an Excess Contribution such year
reflecting the amount of Company Matching Contributions
credited on his behalf that year, if any, and the interest
credited thereon as provided in D. below. In the event two
or more Company Accounts of a Participant are to be paid on
the same Payment Date, all such Company Accounts shall be
aggregated into a single Company Account for such
Participant. At the end of each month, an amount shall be
credited to the appropriate Company Account of each
Participant who is a Highly Paid Employee to reflect the
Company Matching Contribution, if any, credited for said
month on behalf of the Participant.
D. INTEREST. Each Account shall be credited with interest as
of the last day of each month based upon the balance in
such Account on such date after first reducing the Account
balance to reflect any distributions made during such month
from such Account and before crediting to the Account any
new deferrals made or Company Matching Contributions
credited, as the case may be,
<PAGE>
for such month. Interest for each month shall be computed
by using the interest rate earned for such month by the
Fixed Interest Fund of the Savings Plan.
E. VESTING. A Participant shall at all times be 100% vested
(possess a nonforfeitable interest) in his Participant and
Excess Accounts and shall be vested in his Company
Accounts, if any, on any date to the same extent that he is
vested in his Employers Contributions Account under the
Savings Plan on such date.
VII. DISTRIBUTION OF ACCOUNTS
A. ELECTED DISTRIBUTION DATE. Except as provided below, a
Participant's Accounts shall be valued as of the end of the
month coinciding with or immediately preceding the Payment
Date elected by the Participant with respect to such
Account and shall be paid in a single, lump-sum
distribution (by Company check) to the Participant as soon
as is reasonably practicable after such Payment Date.
Each year a Participant elects to defer Compensation and/or
Excess Compensation, the Participant shall elect (at the
time of the deferral and prior to the Entry Date) from
among the following alternatives (to the extent applicable)
the Payment Date applicable with respect to his deferrals
for such year:
OPTION 1: January 1 of any specified year, but not
later than the January 1 on or next following
(i) with respect to an Eligible Employee, the
later of the Participant's (a) 70th birthday
or (b) termination of his employment with the
Company and its Subsidiaries or (ii) the
Participant's ceasing to be a director, as
the case may be;
OPTION 2: If an Eligible Employee, as soon as
practicable after the Participant's
"Retirement Date" under the Santa Fe Energy
Resources Retirement Income Plan
<PAGE>
(the "Pension Plan");
OPTION 3: If an Eligible Employee, January 1 after the
year in which the Participant's "Retirement
Date" under the Pension Plan occurs; or
OPTION 4: If an Eligible Employee, one month prior to
the Participant's "Retirement Date" under the
Pension Plan.
B. DISTRIBUTION UPON DEATH OR DISABILITY OF PARTICIPANT. If a
Participant dies or becomes disabled (I.E., is receiving
benefits under the Company's long-term disability plan or
Social Security), the Participant's Accounts shall be
valued as of the end of the month in which the Participant
dies or becomes disabled, as the case may be, and shall be
paid to the Participant's estate, in the event of death, or
to the Participant, in the event of his disability, as the
case may be, in a single lump-sum (by Company check) as
soon as is reasonably practicable after such date of death
or disability.
C. EARLY TERMINATION OF EMPLOYMENT. If a Participant
terminates employment (for reasons other than death or
Disability) with the Company and its Subsidiaries prior to
attaining his early retirement date under the Pension Plan,
then notwithstanding his election of a later Payment Date
to the contrary, his Accounts shall be valued as of the end
of the month coinciding with or immediately preceding the
date of such termination of employment and, to the extent
vested, shall be paid to the Participant in a single
lump-sum (by Company check) as soon as is reasonably
practicable thereafter. Any nonvested Company Account
balances shall be immediately forfeited on his termination
of employment.
D. HARDSHIP DISTRIBUTIONS. In the event of an unforeseen and
immediate financial emergency of a Participant which is
beyond his control, the Committee may, in its sole
discretion, upon a written request of a participant, direct
the acceleration of such vested portion of the
Participant's Accounts as may be
<PAGE>
necessary to meet such emergency. The Committee shall
require the Participant to furnish the Committee with proof
of such emergency and the Participant's other financial
resources as the Committee may deem necessary to evaluate a
Participant's written request for accelerated payment.
VIII. PARTICIPANTS' RIGHT
Establishment of the Plan shall not be construed to give any
Eligible Employee the right to be retained in the service of
the Company or a Subsidiary. A Participant shall not have any
interest in the amounts credited to his Accounts until such
Accounts are distributed in accordance with the Plan. With
respect to amounts deferred or otherwise held in an Account for
a Participant, the Participant shall be an unsecured general
creditor of the Company.
IX. NON-ALIENABILITY AND NON-TRANSFERABILITY
No Participant may borrow against his Accounts; no Account
shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, charge,
garnishment, execution or levy of any kind, whether voluntary
or involuntary. However, if a former spouse of a Participant is
awarded an interest in a Participant's Accounts through a
judgment or order of a court, the Committee may, in its sole
discretion, direct that the payment of such interest awarded to
the former spouse be paid (valued as of the end of the month
that the Company received written notice of such award) to the
former spouse in a lump sum; thereafter, the Participant's
Accounts shall be reduced for all Plan purposes by the amount
of any such payment.
X. STATEMENT OF ACCOUNT
Statements will be sent to Participants as soon as practicable
after the end of each year as to the balance in their Accounts
as of the end of such year.
XI. ADMINISTRATION
<PAGE>
The Committee shall have the authority to adopt rules and
regulations for carrying out the Plan and to interpret,
construe and implement the provisions thereof. Any decision or
interpretation of any provision of the Plan adopted by the
Committee shall be final and conclusive. The individuals
serving as the Committee shall be fully indemnified (to the
extent permitted by law) by the Company for all claims, losses,
damages or expenses incurred by them for any act, omission or
construction made in connection with the Plan. The Committee is
expressly authorized to direct at any time that the Accounts of
a Participant that are fully vested and payable at the same
Payment Date be aggregated for recordkeeping purposes.
XII. AMENDMENT AND TERMINATION
The Plan may, at any time, be amended, modified or terminated
by the Board of Directors. In addition, the Committee may amend
or modify the Plan provided that no such amendment or
modification made by the Committee can materially increase the
obligations of the Company under the Plan. Any such amendment,
modification or termination requires the affirmative approval
of a majority of the members constituting a quorum and shall be
evidenced by a written resolution or other document signed by
the Board of Directors or the Committee, as the case may be. No
amendment, modification or termination of the Plan shall,
without the consent of a Participant, adversely affect such
Participant's rights with respect to amounts accrued in his
Accounts. Notwithstanding anything in the Plan to the contrary,
all Accounts shall become immediately payable in full upon the
termination of the Plan.
XIII. UNFUNDED STATUS OF THE PLAN
Except as provided below, any and all payments made to the
Participant pursuant to the Plan shall be made only from the
general assets of the Company. All Accounts under the Plan
shall be for bookkeeping purposes only and shall not represent
a claim against specific assets of the Company. Nothing
contained in this Plan shall be deemed to create a trust of any
kind or create any fiduciary relationship between the Company
and the Participant. The Company, in its sole discretion, may
establish a grantor trust to provide for all or part of such
Accounts, provided that the assets
<PAGE>
of such grantor trust at all times remain subject to the claims
of the general creditors of the Company.
XIV. SFP PLAN TRANSFERRED ACCOUNTS
Effective with the corporate spinoff of the Company by Santa Fe
Pacific Corporation ("SFP") the deferred accounts of any
Eligible Employee under a similar SFP deferred compensation
plan were transferred from such SFP plan to this Plan and such
transferred accounts shall continue to be held hereunder
pursuant to the elections made by the Participants under the
SFP plan and shall be invested as provided in this Plan and
paid pursuant to the Participant's distribution election(s)
made under the SFP plan. Further, any deferral election made
under such SFP plan with respect to compensation otherwise to
be earned by the Eligible Employee after the date of the
corporate spinoff shall be deemed to be a continuing election,
without interruption or change, under this Plan for the
remainder of the year in which such corporate spinoff occurs.
XV. GENERAL PROVISIONS
A. NOTICES. All notices to the Company hereunder shall be
delivered to the attention of the Secretary of the Company.
Any notice or filing required or permitted to be given to
the Committee or the Company under this Plan shall be
sufficient if in writing and hand delivered, or sent by
registered or certified mail, to the Company or the
Committee, as appropriate, at the principal office of the
Company. Such notice shall be deemed given as of the date
of delivery or, if delivery is made by mail, as of the date
shown on the postmark or the receipt for registration or
certification.
B. CONTROLLING LAW. Except to the extent superseded by
applicable federal law, the laws of the State of Texas
shall be controlling in all matters relating to the Plan.
C. CAPTIONS. The captions of Sections and paragraphs of this
Plan are for convenience only and shall not control or
affect the
<PAGE>
meaning or construction of any of its provisions.
D. ACTION BY THE COMPANY. Any action required or permitted by
the Company under the Plan shall be by resolution of its
Board of Directors or any person or persons authorized by
its Board of Directors with respect to such matters.
E. FACILITY OF PAYMENT. Any amounts payable hereunder to any
person under legal disability or who, in the judgment of
the Committee, is unable to properly manage his financial
affairs may be paid to the legal representative of such
person or may be applied for the benefit of such person in
any manner which the Committee may select.
F. WITHHOLDING OF TAXES. The Company shall withhold from such
Compensation and Excess Compensation when deferred, or from
deferred compensation payments when made hereunder, as the
case may be, any taxes required to be withheld therefrom
for federal, state or local government purposes.
G. SEVERABILITY. Whenever possible, each provision of the Plan
shall be interpreted in such manner as to be effective and
valid under applicable law (including the Code), but if any
provision of the Plan shall be held to be prohibited by or
invalid under applicable law, then (i) such provision shall
be deemed amended to, and to have contained from the outset
such language as shall be necessary to, accomplish the
objectives of the provision and (ii) all other provisions
of the Plan shall remain in full force and effect.
H. NO STRICT CONSTRUCTION. No rule of strict construction
shall be applied against the Company, the Committee, the
Board of Directors, or any other person in the
interpretation of any of the terms of the Plan or any rule
or procedure established by the Committee.
I. SUCCESSORS. The provisions of the Plan shall bind and inure
to the benefit of the Company and its successors and
assigns. The
<PAGE>
term "successors" as used herein shall include any
corporation or other business entity which shall by merger,
consolidation, purchase or otherwise, acquire all or
substantially all of the business and assets of the Company
and successors of any such corporation or other business
entity.
IN WITNESS WHEREOF, Santa Fe Energy Resources, Inc. has caused
this amendment to be executed by its duly authorized officer
this _____ , 1994, effective for all purpose as of February 1,
1994.
SANTA FE ENERGY RESOURCES, INC.
By: __________________________
<PAGE>
EXHIBIT 10(t)
MASTER GAS PURCHASE AGREEMENT
THIS MASTER GAS PURCHASE AGREEMENT (this "Agreement"), dated this
14th day of December, 1993, is by and among SANTA FE ENERGY RESOURCES,
INC., a Delaware corporation, and SANTA FE ENERGY OPERATING PARTNERS,
L.P., a Delaware limited partnership (hereinafter jointly referred to
as "Seller"), and ADOBE GAS PIPELINE COMPANY, a Delaware corporation
(hereinafter referred to as "Buyer"). Seller and Buyer may
hereinafter be referred to collectively as "Parties" or singularly as
a "Party."
W I T N E S S E T H:
WHEREAS, Seller has available for sale certain quantities of gas
not committed to any other purchaser; and
WHEREAS, Buyer desires to purchase and receive, and Seller
desires to sell and deliver, such gas upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, Seller and Buyer agree as follows:
ARTICLE 1
DEFINITIONS
The following definitions when used in this Agreement shall have
the following meanings (other terms are defined elsewhere in this
Agreement):
1.1 "Btu" shall mean British Thermal Unit.
1.2 "Buyer's Transporter" means, for each Delivery Point, the
pipeline company or companies with whom Buyer contracts to transport
Seller's Gas from each such Delivery Point to the corresponding
Pricing Point for such Delivery Point.
1.3 "Cashout Costs" means, for Seller's Gas delivered to each
Delivery Point, (i) the difference between the Index Price for such
Delivery Point and the price paid to
<PAGE>
or received from a transporter to purchase or sell gas to eliminate any
imbalance on such transporter's pipeline attributable to Seller's Gas from
such Delivery Point, in accordance with such transporter's Tariff, and
(ii) all costs assumed or incurred by Seller or its operator to buy gas
under any operational balancing agreement with a transporter to eliminate
any imbalance on such transporter's pipeline.
1.4 "Contract Year" shall mean a period of twelve (12) consecutive
Months beginning on April 1 and ending on March 31 of the following
calender year, except the first Contract Year which shall begin on the
Effective Date and end on March 31, 1994.
1.5 "Day" or "day" shall mean a period of twenty-four (24)
consecutive hours concurrent with the respective operating day of
Buyer's Transporter as set forth in Buyer's Transporter's Tariff.
1.6 "Delivery Points" means, for each Seller's Well, the
measuring station or other measurement facilities at the point of
interconnection between Seller's delivery facilities for each such
Seller's Well and the facilities of Buyer's Transporter accepting and
transporting Seller's Gas from each such Seller's Well, which as of
the Effective Date are the points of interconnection described in
Exhibit A.
1.7 "Development Lands" means the lands covered by the oil, gas,
and mineral leases described in Exhibit B and any lands pooled or
unitized therewith, limited, in each case, as to depth, from the
surface of the earth to one hundred feet (100') below the depth of the
deepest interval first completed and producing gas in the first well
drilled on such lands.
1.8 "Development Well" means the wellbore of any well drilled
and completed after the Effective Date (i) on the Development Lands or
(ii) from an existing production platform in the Gulf of Mexico from
which one or more Existing Wells are producing as of the Effective
Date, limited, as to depth, from the surface of the earth
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to one hundred feet (100') below the depth of the deepest interval
completed and producing gas in commercial quantities in such Existing
Wells.
1.9 "Effective Date" shall mean the date first written above.
1.10 "Existing Wells" means the wellbores of the wells described
in Exhibit A, limited, in each case, as to depth, from the surface of
the earth to one hundred feet (100') below the depth of the bottom of
the deepest interval producing or completed to produce gas on the
Effective Date.
1.11 "Exploration Lands" means all lands in the continental
United States or the Gulf of Mexico in which Seller owns or hereafter
acquires a working interest or other rights to produce and sell gas,
other than (i) Development Lands and (ii) lands covered by oil, gas
and/or mineral leases or similar rights and interests acquired by
Seller after the Effective Date in connection with or as part of the
acquisition or purchase of producing oil and gas properties.
1.12 "Exploration Well" means the wellbore of any well drilled
and completed after the Effective Date on the Exploration Lands and
for which Seller has elected to accept Buyer's Gathering Proposal
under Section 5.1 which requires Seller to sell and deliver gas
produced from such well to Buyer under this Agreement.
1.13 "FERC" means the Federal Energy Regulatory Commission or any
successor thereto having jurisdiction.
1.14 "Gas" or "gas" shall mean natural gas produced from gas
wells, casinghead gas produced from oil wells, and residue gas
resulting from the processing of such gas well gas or casinghead gas.
1.15 "Imbalance Penalties" means, for Seller's Gas delivered to
each Delivery Point, any imbalance penalty charges and Cashout Costs
assessed by a transporter pursuant to such transporter's Tariff for
Buyer's failure to take or Seller's failure to deliver Seller's
Estimate for such Delivery Point or Buyer's failure to submit a timely
and accurate nomination based on any timely given Seller's Estimate to
such
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transporter, including, without limitation, penalty charges and
Cashout Costs incurred by Seller or its operator under operational
balancing agreements with a transporter.
1.16 "Index Price" means, for Seller's Gas delivered to each
Delivery Point, the price that best represents the fair market price
for similar quantities and quality of gas delivered at or near the
Pricing Point for each such Delivery Point, which as of the Effective
Date the Parties have agreed is the price reported in the table "Price
of Spot Gas Delivered to Pipeline," for the Pricing Point for such
Delivery Point, under the heading "Index," in the first issue of
INSIDE FERC published in each Month in which Seller's Gas is delivered
to each such Delivery Point.
1.17 "INSIDE FERC" means the publication INSIDE F.E.R.C.'S GAS
MARKET REPORT, as published by McGraw Hill, Inc.
1.18 "MMBtu" shall mean one million (1,000,000) British Thermal
Units.
1.19 "Month" shall mean the period beginning on the first Day of
each calendar month and ending at the beginning of the first Day of
the next succeeding calendar month.
1.20 "Llano System" means the Llano gas pipeline system located
in Eddy and Lea Counties, New Mexico.
1.21 "Preexisting Contracts" means the gas sales and purchase
contracts, processing agreements, and other contracts described in
Exhibit C.
1.22 "Pricing Point" means, for Seller's Gas delivered to each
Delivery Point, the point downstream of each such Delivery Point at
which the Index Price for each such Delivery Point is determined by
Buyer each Month, consistent with Section 8.2.
1.23 "Seller's Estimate" means, with respect to each Delivery
Point, Seller's estimate under Section 4.1 of the quantity of
Seller's Gas that Seller expects to deliver in each Month to each such
Delivery Point.
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<PAGE>
1.24 "Seller's Gas" means, for each Seller's Well, (i) Seller's
net revenue interest share of gas produced and delivered from each
such Seller's Well and (ii) any Third Party Gas produced and delivered
by Seller hereunder from each such Seller's Well.
1.25 "Seller's Wells" means the Existing Wells, the Development
Wells, and the Exploration Wells.
1.26 "Tariff" means the currently effective tariff of a
transporter filed with FERC, or if a transporter does not have a
tariff on file with FERC, such transporter's current operating
policies and procedures.
1.27 "Third Party Gas" means all gas produced and delivered from
each Seller's Well (i) that is attributable to the interests of
parties other than Seller (including royalty owners and overriding
royalty owners) in such Seller's Well and (ii) that Seller has the
right and authority to deliver and sell to Buyer under this Agreement.
1.28 "Transportation Expenses" means, for Seller's Gas delivered
to each Delivery Point, the actual and reasonable transportation rates
paid by Buyer to gather and transport Seller's Gas from each such
Delivery Point to the corresponding Pricing Point for each such
Delivery Point.
1.29 "Working Day" means a calendar day Monday through Friday and
excludes Saturday, Sunday, and nationally recognized holidays.
ARTICLE 2
DEDICATION OF GAS
2.1 SELLER'S COMMITMENT. Except as otherwise provided in this
Agreement, Seller commits and dedicates all of Seller's Gas to the
performance of this Agreement that is not dedicated or committed to a
Preexisting Contract.
2.2 ADDITIONAL GAS FROM NONOPERATED WELLS. Buyer may, by giving
Seller sixty (60) days' prior written notice, elect to purchase under
this Agreement any gas
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<PAGE>
that is produced from the nonoperated wells described in Exhibit D if
(i) in Seller's reasonable business judgment the sale of such gas to
Buyer under this Agreement would not result in a lower gas price or
higher transportation or other costs and expenses than Seller would
receive or pay if such gas is sold through the operator of such wells
and (ii) Seller has the right to sell such gas to Buyer under this
Agreement. Exhibit A shall be amended from time to time to incorporate
any such wells which become subject to this Agreement pursuant to the
foregoing sentence. Buyer shall be fully responsible for all
Imbalance Penalties paid by or assessed against Buyer or Seller for
wells added to Exhibit A under this Section 2.2.
2.3 RELEASE OF THIRD PARTY GAS. Upon written request by Seller,
Buyer shall release from this Agreement any Third Party Gas that
Seller reasonably believes should be released from this Agreement and
sold to third parties under other agreements to avoid incurring
penalties or other costs and expenses if Seller continues to deliver
and sell such Third Party Gas to Buyer under this Agreement.
2.4 RIGHT TO CONTROL AND CURTAIL PRODUCTION. Seller reserves
the right, in its sole discretion, to limit, curtail, or shut-in any
or all of the production of Seller's Gas from any Seller's Well or
Wells for any reason, including, without limitation, inadequate price,
unacceptable market conditions, or any mechanical, engineering, legal,
title, or other field or well condition. Seller shall use all
reasonable efforts to give notice to Buyer at least thirty (30) Days'
prior to the first Day of any Month in which Seller intends to curtail
or shut-in any quantities of Seller's Gas solely as a result of
Seller's belief that the price received hereunder for such Seller's
Gas is inadequate. For any other curtailment or shut-in of any
quantities of Seller's Gas, Seller shall give Buyer notice as soon as
reasonably practicable under the circumstances. Each curtailment
notice shall be in writing and shall identify the quantities of
Seller's Gas that Seller intends to curtail or shut-in and the
expected duration of such curtailment or shut-in period. Seller shall
not, however, shut in or
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<PAGE>
curtail any quantities of Seller's Gas solely for inadequate price
during any Month in which such quantities of Seller's Gas have been
represented as being available for sale to Buyer in Seller's Estimate
given three (3) Days prior to Buyer's Transporter's nomination
deadline for such Month. If Seller returns to production during the
middle of any Month any quantities of Seller's Gas shut-in or
curtailed due to inadequate price, Seller shall give prior written
notice to Buyer and Buyer shall have the right, but not the
obligation, to purchase such Seller's Gas for the balance of such
Month at the gas price determined under Section 8.4. If Buyer elects
to not purchase such Seller's Gas for the balance of such Month,
Seller may sell such Seller's Gas not purchased by Buyer to any third
party. At the end of such Month, Buyer shall resume purchasing under
the terms of this Agreement all such Seller's Gas nominated under
Section 4.1.
2.5 PROCESSING OF GAS. Seller reserves the right to process
Seller's Gas either prior to the Delivery Points or after delivery to
Buyer at the Delivery Points. Seller's Gas may be processed to
extract liquid and liquefiable hydrocarbons, together with any methane
unavoidably contained in the ethane or heavier hydrocarbons. Such
processing will not render the total heating value to be less than the
requirements of the transporter or otherwise cause Seller's Gas to not
meet the quality specifications of the transporter. All liquid and
liquefiable hydrocarbons so recovered shall belong to Seller. If
Seller's Gas is processed by Seller after delivery to the Delivery
Points, Seller shall be paid by Buyer for the volumes of residue gas
remaining after processing and Seller shall be responsible for charges
of Buyer's Transporter for the transportation to the processing plant
of fuel and plant volume reduction resulting from such processing. If
Seller's Gas is processed under percentage of proceeds-type contracts
or other agreements that do not provide for the residue gas
attributable to Seller's Gas to be returned in kind at the tailgate of
the processing plant, Buyer shall
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<PAGE>
release such Seller's Gas from this Agreement in writing upon written
request by Seller.
2.6 RELEASE OF CERTAIN PROPERTIES. Buyer shall, if requested by
Seller, promptly release from commitment and dedication hereunder all
Seller's Gas produced from any Seller's Wells if (i) Seller commits to
sell or exchange such Seller's Wells under a written agreement with a
third party which is not an affiliate of Seller and (ii) under such
agreement the average amount of the consideration to be received by
Seller for the gas reserves attributable to Seller's interests in each
such Seller's Well is less than $250,000 per Seller's Well. If Seller
desires to sell to a third party and have released from this Agreement
any Seller's Wells that do not meet the requirements of the preceding
sentence, Seller may substitute for such Seller's Wells like
quantities of gas delivered to delivery points reasonably acceptable
to Buyer and with daily deliverabilities during the term of this
Agreement similar to the Seller's Wells which Seller proposes to sell.
Buyer shall release from commitment under this Agreement such Seller's
Wells effective as of the date such substitute wells become subject to
this Agreement.
2.7 RELEASE OF CERTAIN NONOPERATED WELLS. If the Imbalance
Penalties paid or incurred by Seller under this Agreement for any
Seller's Gas produced from any nonoperated Seller's Well become
excessive in Seller's reasonable opinion, Buyer shall, upon written
request by Seller, release such Seller's Gas from commitment under
this Agreement unless Buyer agrees to be responsible for and bear such
Imbalance Penalties for such Seller's Well.
2.8 OPERATIONAL RESERVATIONS. Seller hereby reserves and
excepts the following rights and quantities of Seller's Gas from the
provisions of this Agreement:
(i) The right to use Seller's Gas produced from any lease or
field for Seller's requirements in the development and operation
of such leases and fields including, but not limited to, use of
Seller's Gas for drilling, enhanced recovery
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<PAGE>
operations, workover operations, treating, gas lifting oil wells
for repressuring, recycling, or pressure maintenance purposes,
and compressor fuel, and to otherwise operate such leases and
fields free from any control by Buyer. Subject to Section 2.9,
Seller will not, however, use any Seller's Gas for enhanced oil
recovery operations in California other than Seller's Gas that is
produced in California.
(ii) Seller's Gas which is delivered to others under Seller's
leases, Seller's agreements for easements, unit agreements, unit
operating agreements, operating agreements, or other similar
agreements affecting Seller's Wells.
(iii) All liquids, liquid hydrocarbons, oil, and condensate
removed from Seller's Gas prior to the Delivery Points.
(iv) The right to pool or unitize Seller's leases with other
leases of Seller or others located in the field in which Seller's
Wells are located.
(v) The right to operate Seller's leases and Seller's Wells in
such manner as Seller, in Seller's discretion, deems advisable,
including the right to drill new wells, to rework Seller's Wells,
to renew in whole or in part any leases, and to abandon any
Seller's Well or surrender, release, or terminate any lease, in
Seller's discretion.
(vi) Seller's Gas delivered to others under gas balancing
agreements or similar arrangements affecting any of Seller's
Wells.
2.9 EOR OPERATIONS. At any time after twenty-four (24) Months
after the Effective Date and upon forty-five (45) Days' prior written
notice from Seller, Buyer shall release from commitment under this
Agreement up to 30,000 MMBtu's per Day of Seller's Gas for use by
Seller in Seller's enhanced oil recovery operations in California or
in exchange for other gas to be used in such operations ("EOR Gas").
Buyer shall, at the request of Seller, arrange for the transportation
of EOR Gas from the Delivery Points to Seller's enhanced oil recovery
operations in California using
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either Seller's transportation rights or Buyer's transportation
rights, as directed by Seller. Seller shall be responsible for
transportation charges to transport EOR Gas to its enhanced oil
recovery operations in California. In consideration of Buyer
releasing and arranging such transportation for EOR Gas, Seller shall
pay Buyer each Month a handling fee of five cents (5 cents) for each MMBtu
released under this Section 2.9. EOR Gas shall become recommitted to
this Agreement on the first day of the Month following the date Seller
permanently ceases to use EOR Gas in its California enhanced oil
recovery operations. Seller shall give Buyer at least fifteen (15)
Days' notice prior to the first day of the Month in which EOR Gas will
become recommitted to this Agreement.
2.10 ACQUISITION PROPERTIES. Buyer recognizes that all gas
produced from wells or properties acquired by Seller after the
Effective Date in connection with or as part of the acquisition or
purchase of producing oil and gas properties shall not be subject to
or committed to this Agreement.
2.11 PREEXISTING CONTRACTS. Upon the expiration of or
termination of any Preexisting Contract, any Seller's Gas subject to
or covered by such Preexisting Contract shall become committed to this
Agreement without further action of the Parties. Buyer shall notify
Seller in writing no less than thirty (30) Days before the date each
Preexisting Contract expires or terminates based on the information in
Exhibit C. If Buyer timely gives Seller such notice, Seller will
exercise its rights to terminate each Preexisting Contract at the end
of its primary term unless the failure to extend the term of any such
Preexisting Contract would cause Seller to pay penalties or to
otherwise incur any costs or expenses for failing to extend the term
of such Preexisting Contract. Seller shall not, however, have any
obligation to Buyer, and this provision does not create any obligation
upon Seller, to cause the early termination or expiration of any
Preexisting Contract.
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<PAGE>
2.12 POWER TEX CONTRACT. Buyer shall, for a period ending not
later than twenty-four (24) Months after the Effective Date and upon
not less than ten (10) days' prior written notice by Seller, release
from commitment under this Agreement up to 4,500 MMBtu's per Day of
Seller's Gas to allow Seller to supply gas under that certain Gas
Sales Agreement between Adobe Gas Marketing Co. and the City of
Lubbock, dated May 9, 1991 (the "Power Tex Contract"). Any such
released Seller's Gas shall become recommitted to this Agreement at
the beginning of the first Month following the end such twenty-four
(24) Month period.
ARTICLE 3
QUANTITY
3.1 PURCHASE AND SALE OBLIGATION. Commencing on the Effective
Date and continuing through the term hereof, Seller agrees, subject to
the other provisions hereof, to sell and deliver, or cause to be
delivered and sold, to Buyer at the Delivery Points the quantity of
Seller's Gas nominated each Month by Seller under Article 4. Seller
shall use its reasonable efforts to deliver the gas at uniform hourly
and daily rates of flow. Buyer agrees to take and purchase all of
Seller's Gas delivered each Month at the Delivery Points.
3.2 FAILURE TO DELIVER OR TAKE. If for any reason other than
Force Majeure either Party fails in any Month to perform its
obligation to deliver or take Seller's Gas under this Agreement, the
other Party shall use its reasonable efforts to mitigate the effect of
such failure to perform, which includes attempting to secure an
alternate interruptible supply or interruptible market, as the case
may be, at reasonable prices.
3.3 PARTIAL MONTHLY PRODUCTION. If Seller delivers to any
Delivery Point after the first day of any Month any quantity of
Seller's Gas that was not previously delivered at any time in such
Month due to Force Majeure affecting Seller or that is
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attributable to the recompletion of an Existing Well or the completion
or recompletion of any Development Well or Exploration Well, Buyer
shall have the obligation to take and purchase such Seller's Gas
during such Month, but only to the extent Buyer is able to arrange
transportation for such Seller's Gas in such Month. If Buyer is
unable to arrange transportation for such Seller's Gas in such Month,
Seller may sell such Seller's Gas to any third parties during such
Month.
ARTICLE 4
SCHEDULING AND TRANSPORTATION OF DAILY VOLUMES
4.1 GAS SCHEDULING. At least three (3) Days prior to Buyer's
Transporter's nomination deadline for the first Day of the following
Month, Seller shall provide Buyer a written report by telecopy showing
Seller's Estimate for each Delivery Point for the following Month.
Seller shall use its reasonable efforts to provide along with Seller's
Estimate for each Month a description of any planned or foreseeable
events which will materially affect deliveries during the following
Month, including workovers and new Seller's Wells beginning
production. If the quantity of Seller's Gas delivered to one or more
Delivery Points differs from Seller's Estimate by more than the
transporter's tolerance level for such Delivery Points for any Day or
Days, Seller shall so notify Buyer immediately after becoming aware of
such change by telephone, and shall provide Buyer with a revised
written Seller's Estimate for such Delivery Points for the remainder
of the Month by telecopy as soon as reasonably practicable. As of the
Effective Date, Buyer shall notify Seller in writing of the Daily and
Monthly tolerance levels for Imbalance Penalties for each transporter
for each Delivery Point. Such tolerance levels shall remain in effect
until Seller is otherwise notified by Buyer.
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4.2 TRANSPORTATION CAPACITY. Buyer shall arrange for and
maintain all necessary transportation downstream of the Delivery
Points to ensure that Seller's Gas flows without interruption, except
in the case of Force Majeure.
4.3 TRANSPORTATION IMBALANCES.
(a) AVOIDANCE. Buyer and Seller shall use all reasonable
efforts to avoid the imposition of Daily or Monthly Imbalance
Penalties by any transporter and each Party agrees to cooperate
with the other Party to resolve and eliminate, to the extent
reasonably practicable, any Imbalance Penalties.
(b) RESPONSIBILITY. If any Imbalance Penalties are incurred
or payable to a transporter with respect to Seller's Gas
delivered to any Delivery Point as a result of Seller's actions,
including Seller's failure to give Buyer timely notice of any
increase or decrease in Daily quantities to be delivered at such
Delivery Point from Seller's Estimate for such Delivery Point,
Seller shall be responsible for such Imbalance Penalties. If any
Imbalance Penalties are incurred or payable to a transporter with
respect to Seller's Gas delivered to any Delivery Point as a
result of Buyer's actions, including Buyer's failure to give
timely notice to such transporter of any change in Seller's
Estimate for such Delivery Point after receiving timely notice
from Seller of such change, Buyer shall be responsible for such
Imbalance Penalties.
(c) TIMELY NOTICE. For the purpose of this Section 4.3,
Seller's notice will be deemed timely if, under the
circumstances, it gives Buyer reasonably sufficient time to
notify the transporter of such changes to Seller's Estimate by
the time required under the terms of such transporter's Tariff to
avoid the imposition of such Imbalance Penalties.
(d) SELLER'S CREDIT. In determining the amount of any
Imbalance Penalties due by Seller hereunder in any Month, Buyer
shall aggregate the Cashout Costs for which Seller is responsible
and which were incurred by Buyer
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for all transporters for such Month. Buyer shall, for each such
Month, credit all such Cashout Costs that resulted in Buyer
selling gas at a price higher than the applicable Index Price or
that resulted in Buyer buying gas at a price lower than the
applicable Index Price ("Buyer's Monthly Gain") against all such
Cashout Costs that resulted in Buyer buying gas at a price higher
than the applicable Index Price or that resulted in Buyer selling
gas at a price lower than the applicable Index Price ("Buyer's
Monthly Loss") to arrive at an aggregate net Imbalance Penalty
for such Month. If, for any Month, Buyer's Monthly Gain for such
Month exceeds Buyer's Monthly Loss for such Month, Buyer shall
have no obligation to refund the difference to Seller.
(e) BUYER'S CREDIT. In determining the amount of any
Imbalance Penalties due by Buyer hereunder, Seller shall
aggregate all Cashout Costs for which Buyer is responsible and
which were incurred by Seller in any Month under operational
balancing agreements, operating agreements, or other agreements
covering any Seller's Well. Seller shall, for each such Month,
credit all such Cashout Costs that resulted in Seller selling gas
at a price higher than the applicable Index Price ("Seller's
Monthly Gain") against all such Cashout Costs that resulted in
Seller selling gas at a price lower than the applicable Index Price
or that resulted from Seller buying gas ("Seller's Monthly Loss")
to arrive at an aggregate net Imbalance Penalty for such Month.
If, for any Month, Seller's Monthly Gain exceeds Seller's Monthly
Loss, Seller shall have no obligation to refund the difference to
Buyer.
(f) LLANO SYSTEM. Seller shall not be responsible for any
Imbalance Penalties for Seller's Gas gathered on the Llano
System.
(g) NO LIMIT. The provisions of this Section 4.3 do not in
any way waive, limit, or alter either Party's obligation under
Section 3.1.
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4.4 ASSIGNMENT OF GATHERING CONTRACTS. As of the Effective Date,
Seller shall assign to Buyer, to the extent Seller has the contractual
right to do so, any agreements entered into prior to the Effective
Date with third parties for the gathering of Seller's Gas. If Seller
is required to obtain the consent or approval of any third party to
assign any or all of such agreements to Buyer, Seller shall use its
reasonable efforts to obtain any and all third-party consents and
approvals as quickly as reasonably practicable. If Seller does not
have the legal right to assign any such agreement, then Seller shall
authorize Buyer to act as Seller's agent under such agreements. Buyer
shall administer all such agreements so that they remain valid and
enforceable in accordance with their terms. Buyer shall obtain the
consent of Seller prior to releasing, amending, or otherwise modifying
such agreements. Upon termination or expiration of this Agreement,
Buyer shall reassign to Seller or its designee all such agreements
that remain in effect.
4.5 DELIVERY POINTS. As of the Effective Date, Buyer and Seller
have agreed that Seller's Gas will be delivered and accepted at the
Delivery Points described in Exhibit A. The parties shall mutually
agree to the Delivery Point for each Development Well or Exploration
Well which subsequently produces Seller's Gas subject to this
Agreement and the Parties may at any time otherwise agree to change,
add to, or delete from the Delivery Points shown in Exhibit A. Any
supplement or amendment to Exhibit A shall be in writing and executed
by both Parties.
4.6 DELIVERY DIFFERENCES. If at the end of the first six (6)
Months of this Agreement, the aggregate quantity of Seller's Gas
delivered by Buyer for each Month to any interstate pipeline has been
materially different from Seller's Estimate for such Seller's Gas made
by Seller three (3) Days prior to the nomination deadline of the
applicable Buyer's Transporter for each such Month, except as allowed
under the provisions of this Agreement, Seller shall, upon Buyer's
written request, use all reasonable efforts to promptly correct such
differences in the following two (2)
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Months. If Seller fails to correct such differences in the following
two (2) Months, Buyer may request the renegotiation of Buyer's payment
hereunder of the Index Price for such differences and allocation among
the Parties of any benefits or costs to Buyer arising out of such
differences for the remaining term of this Agreement. If Buyer and
Seller are unable to mutually agree on the price to be paid for such
differences and such allocation, such matter may be submitted by
either Party to Arbitration as a Dispute under Article 9.
ARTICLE 5
BUYER'S SERVICES
5.1 CONNECTION OF GATHERING SYSTEMS - EXPLORATION WELLS. Within
thirty (30) Days of the drilling and completion of any well producing
commercial quantities of gas on the Exploration Lands, Seller shall
notify Buyer of the completion of such well and provide Buyer with all
available well test data including, without limitation, all well logs,
drill stem tests, well potential tests, and Seller's estimate of well
deliverability and ultimate recoverable reserves. Within twenty (20)
Days after receipt of Seller's notice, Buyer shall submit to Seller,
in writing, for Seller's review, Buyer's recommendation of the most
economical and efficient method of gathering and transporting the gas
produced from such well, whether by Buyer, Seller, or third parties
("Buyer's Gathering Proposal"). Seller may, in its discretion, either
accept or reject Buyer's Gathering Proposal by giving written notice
to Buyer. If Seller accepts Buyer's Gathering Proposal, Buyer shall
promptly commence and diligently complete the work necessary to
implement Buyer's Gathering Proposal, and, upon completion of such
gathering system, Seller will sell the gas produced from such well to
either Buyer or a third party, as provided in Buyer's Gathering
Proposal. If the gas produced from such well is sold to Buyer under
this Agreement, such well shall become committed to this Agreement as
an Exploration Well. If Seller rejects
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Buyer's Gathering Proposal, Seller may contract with any third parties
to gather and purchase the gas produced from such well without any
obligation to Buyer under this Agreement.
5.2 DEVELOPMENT WELLS. Upon completion of each Development Well,
Buyer shall, if requested by Seller, recommend the most economical
method of gathering the gas produced from such Development Well.
5.3 MARKETING UPDATES. Buyer shall, upon request, provide Seller
written updates and verbal briefings on gas market trends including,
but not limited to, the development of new natural gas markets or
expansion of existing markets, changes in the relative wellhead values
of gas in different regions of the country due to the construction of
new pipelines or other developments, and supply and demand forecasts.
In addition, Buyer shall periodically provide written updates on
regulatory trends and developments in both the domestic and
international gas market that could impact Seller.
5.4 SUPPLY OF GAS UNDER POWER TEX CONTRACT. Upon request by
Seller, during the first twenty-four (24) Months of this Agreement,
Buyer will, as agent for Seller, purchase and deliver the gas required
to be delivered under the Power Tex Contract upon terms mutually
acceptable to Buyer and Seller.
ARTICLE 6
QUALITY AND MEASUREMENT
6.1 BUYER'S TRANSPORTER. The rules, guidelines, and policies of
Buyer's Transporter, as may be changed from time to time, shall govern
the units of measurement, measurement specifications, quality, heating
value, and testing specifications of Seller's Gas delivered to each
Delivery Point.
6.2 QUALITY. Seller's Gas shall meet the quality specifications
of Buyer's Transporter at each Delivery Point. If all or any portion
of the Seller's Gas does not
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meet the quality specifications of Buyer's Transporter, Buyer at its
option may at any time refuse to accept any or all such Seller's Gas
("Subquality Gas"). Acceptance of any or all Subquality Gas that
fails to conform to the quality specifications of this Agreement shall
not be deemed a waiver of Seller's obligations hereunder with respect
to such Subquality Gas or with respect to any future deliveries of
Subquality Gas. All Subquality Gas which Buyer fails to take under
this Section 6.2 may be sold to any third parties free from any
obligation under this Agreement during the period Buyer refuses to
accept such Subquality Gas. SELLER MAKES NO OTHER WARRANTIES,
EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, INCLUDING WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ABOUT SELLER'S
GAS.
ARTICLE 7
OWNERSHIP AND CONTROL
7.1 DELIVERY. Gas sold and delivered hereunder shall be
delivered by Seller to Buyer at the Delivery Points. Title and risk
of loss to all Seller's Gas shall pass from Seller to Buyer at the
Delivery Points. If Seller elects under Section 2.5 to process any
quantities of Seller's Gas after the Delivery Points, the risk of loss
for such Seller's Gas shall pass from Buyer to Seller where such
Seller's Gas enters the facilities of the party processing such
Seller's Gas. The risk of loss to the residue gas resulting from
processing such Seller's Gas shall pass to Buyer where it enters the
facilities of Buyer's transporter at or near the tailgate of such
processing facilities.
7.2 CONTROL. As between the Parties hereto, Seller shall be
deemed to be in control and possession of Seller's Gas and shall be
fully responsible for and shall defend and indemnify Buyer, its
successors and assigns, against any damages or injury resulting from
the operation of facilities used to deliver gas at the Delivery
Points, or the possession and handling of such Seller's Gas, until
delivered to Buyer or
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Buyer's Transporter at the Delivery Points and during the period such
Seller's Gas, if processed, is in the facilities of the processor.
Except as provided in the preceding sentence, Buyer shall be deemed to
be in control of Seller's Gas and shall be responsible for and shall
defend and indemnify Seller, its successors and assigns, against any
and all damages or injury resulting from the transportation, handling,
or use of Seller's Gas after it is delivered to Buyer, or Buyer's
Transporter, at the Delivery Points.
ARTICLE 8
PRICE
8.1 MONTHLY GAS PRICES. Except as otherwise provided in this
Article 8, for all Seller's Gas delivered to each Delivery Point each
Month, Buyer shall pay Seller a gas price per MMBtu equal to the Index
Price for each such Delivery Point for such Month less Transportation
Expenses, if any, for such Seller's Gas for such Month.
8.2 PRICING COMBINATION. Buyer shall, for each Month, use its
best efforts to obtain for Seller at each Delivery Point the Index
Price, Pricing Point, and Transportation Expenses for Seller's Gas
delivered to each such Delivery Point in such Month that result in the
highest net back price to Seller under Section 8.1 for such Delivery
Point, giving consideration to and consistent with Buyer's obligation
under Section 3.1 to purchase and take all of Seller's Gas delivered
to each such Delivery Point in such Month.
8.3 DELIVERY. Subject to the other provisions of this Agreement,
Seller shall be responsible for, and shall pay all costs and expenses
of, all arrangements necessary to deliver Seller's Gas to the Delivery
Points and Buyer shall be responsible for, and shall pay all costs and
expenses of, all arrangements necessary to receive Seller's Gas
delivered hereunder at the Delivery Points.
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8.4 PARTIAL MONTHLY PRODUCTION. For all Seller's Gas taken by
Buyer at any Delivery Point under Section 3.3 and for all Seller's Gas
returned to production in the middle of a Month under Section 2.4
after being shut-in or curtailed due to inadequate price, the average
of the high and low prices per MMBtu published in the table "Daily
Price Survey" in GAS DAILY for the first Day of deliveries for the
region of production for such Delivery Point shall be substituted for
the Index Price in determining the price to be paid by Buyer to Seller
for such Seller's Gas under Section 8.1.
8.5 LLANO SYSTEM TRANSPORTATION RATE. The Transportation
Expenses for Seller's Gas gathered on the Llano System shall never
exceed in any Month the lowest transportation rate charged by Buyer to
other shippers on the Llano System in the prior six (6)-Month period,
except for any such rate which may be agreed to by Llano Inc., in its
discretion, as part of the settlement of any claim made against Llano
Inc. or its affiliates.
8.6 TRANSPORTATION EXPENSES. Buyer shall, for each Delivery
Point, use its best efforts each Month to obtain for Seller the lowest
reasonably available transportation rates on Buyer's Transporter for
Seller's Gas, consistent with reliability and giving consideration to
Buyer's obligation to purchase and take all of Seller's Gas at such
Delivery Point and to Seller's right to shut-in or curtail production
of Seller's Gas hereunder.
8.7 PUBLICATION OF INDEX PRICE. If INSIDE FERC or any
replacement publication or other information source then in effect to
determine the Index Price ceases to be available, substantially alters
the method by which the referenced prices are calculated, or otherwise
substantially alters the referenced prices, the Parties shall mutually
agree in writing on a replacement publication or information source.
If the Parties are unable to mutually agree on a replacement
publication or information source, the matter may be submitted by
either Party to Arbitration under Article 9.
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ARTICLE 9
ARBITRATION
9.1 RESOLUTION OF DISPUTES. Except as provided in the following
sentence, any action, dispute, claim, or controversy arising between
the Parties under this Agreement (each a "Dispute") shall be resolved
by arbitration ("Arbitration") in accordance with the procedures set
forth below. Any dispute, claim, or controversy arising under Article
12 shall not be a subject to arbitration under this Article 9. If a
Dispute is not resolved by the Parties after negotiation among
themselves, either Party may invoke Arbitration by providing written
notice to the other Party of its intent to submit the Dispute to
Arbitration hereunder. Either Party may bring an action to compel the
Arbitration of any Dispute.
9.2 SELECTION OF THE ARBITRATOR. Not later than ten (10) Working
Days following the receipt of notice from either Party notifying the
other Party of its intent to submit a Dispute to Arbitration, Buyer
and Seller shall mutually select and appoint an arbitrator (the
"Arbitrator") to resolve the Dispute. If at the end of such ten (10)
Working-Day period the Arbitrator has not been selected and appointed,
then each Party shall, within five (5) Working Days, thereafter,
select an arbitrator. The two arbitrators shall then jointly select a
third arbitrator (each an "Arbitrator") within ten (10) Working Days
after the appointment of the second Arbitrator. Any Arbitrator acting
hereunder shall be a qualified neutral third party not having any
prior, current, or known or anticipated future affiliation or
association with Seller or Buyer. If the Dispute involves a pricing
matter hereunder, each Arbitrator shall have a minimum of ten (10)
years' (immediately prior to the appointment) general experience in
the purchase and sale of natural gas.
9.3 ARBITRATION. Upon selection and appointment of the
Arbitrators, each Party shall deliver to the other Party and to the
Arbitrators, within ten (10) Working
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Days of the appointment of the Arbitrators, a written proposal stating
its proposed outcome together with supporting materials and
documentation. Each Party may submit its written counterproposal
together with supporting materials and documentation, within ten (10)
Working Days of receipt of the written proposal from the other Party,
to both that Party and the Arbitrators. The Arbitrators may request
additional information or documentation from either Party, which
information or documentation shall be timely provided. No later than
twenty (20) Working Days after the counterproposals are submitted, the
Arbitrators shall select and adopt either the outcome desired by
Seller or the outcome desired by Buyer, without modification or
compromise. All Arbitrations shall take place in Houston, Harris
County, Texas.
9.4 PRICING INSTRUCTIONS. If the Dispute involves the
determination of the Index Price, the Arbitrators shall be given the
following instructions, unless the Parties agree in writing upon other
instructions:
(i) In determining the Index Price, the Arbitrators will
recognize that the Parties selected INSIDE FERC as representative
of the fair market value of Seller's Gas at each Pricing Point on
the Effective Date;
(ii) The Index Price shall be reported on a Monthly basis
from a publication or other information source publicly
available; and
(iii) The Arbitrators shall determine the Index Price by
selecting either the Index Price proposed by Seller or the Index
Price proposed by Buyer, without modification or compromise.
9.5 PRICE PAYABLE DURING ARBITRATION. If the Dispute relates to
the publication or other information source then being used to
determine the Index Price, the price paid during the Arbitration shall
be determined from such publication or information source or, if such
publication or information source is no longer available, the price
shall be determined from the last such publication or information
source that was
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available. Upon the conclusion of the Arbitration, the price paid by
Buyer to Seller for such Seller's Gas shall be adjusted retroactively
to the date the Arbitration was invoked. The Party owing the other
Party as a result of such retroactive adjustment shall pay to such
other Party the amounts due under the redetermined Index Price within
ten (10) Working Days following the Arbitrator's decision.
9.6 FINALITY OF AWARD AND COSTS OF ARBITRATION. The
determination of the Arbitrators shall be final and binding on the
Parties, except in the event of manifest material error or misconduct
by the Arbitrators. Each Party shall bear its own costs and expenses
and share equally the costs and expenses of the Arbitrators and the
arbitration.
9.7 SUPPLEMENTAL ARBITRATION RULES. Each Arbitration shall be
administered in accordance with the terms of this Article 9 and the
Commercial Arbitration Rules of the American Arbitration Association.
Judgment on any award rendered by the Arbitrators may be entered in
any court having jurisdiction.
ARTICLE 10
TAXES
The price to be paid by Buyer to Seller for Seller's Gas
purchased and sold hereunder is inclusive of all production,
severance, ad valorem, and/or similar taxes levied on the production
of Seller's Gas prior to the Delivery Points, and all such taxes shall
be borne and paid by Seller. If state law requires Buyer to remit
such taxes to the collecting authority, then Buyer shall do so and
deduct the taxes so paid on Seller's behalf from payments otherwise
due to Seller hereunder. Buyer shall pay and be responsible for all
federal, Indian, state or local sales, use, consumption, and/or
similar taxes which may now or hereafter be imposed on the transfer of
title or possession of Seller's Gas.
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ARTICLE 11
PAYMENT
11.1 MONTHLY PAYMENT. Not later than the fifteenth (15th) day
of each Month, Seller shall provide Buyer with a statement setting
forth the volumes of gas delivered at the Delivery Points in the prior
Month along with an invoice for payment based thereon. If actual
volumes at the Delivery Points are not available by the fifteenth
(15th) day of the Month, Seller may furnish statements and invoices
based on Seller's Estimate. By no later than the last Working Day of
the Month following the production Month, Buyer shall make payment of
the amount set forth in Seller's statement by wire transfer into
Seller's account in accordance with Seller's instructions. Buyer
shall submit to Seller with each Monthly payment a schedule showing,
for each Delivery Point for such Month, the quantity of Seller's Gas
delivered to such Delivery Point, the Pricing Point, the Index Price,
and any Transportation Expenses and Imbalance Penalties attributable
to Seller's Gas from such Delivery Point. If requested by Seller,
payment to Seller hereunder shall be made through a bank or escrow
account established, funded, and maintained in a manner acceptable to
Seller in all respects.
11.2 PAYMENT DEFAULT. If Buyer fails to pay Seller for
Seller's Gas for any Month within three (3) Working Days of the date
required under Section 11.1, Seller may, at its option, either,
singularly or in combination, (i) immediately terminate this
Agreement, or (ii) suspend performance under this Agreement until all
indebtedness under this Agreement is paid in full.
11.3 ERRORS. If an error is discovered in any invoice
rendered hereunder (including reconciliations for actual deliveries of
any payments made by Buyer based on Seller's Estimate), such error
shall be adjusted within thirty (30) Days after notice of the
discovery of the error. If a dispute arises as to the amount payable
pursuant to any invoice rendered hereunder, Buyer shall nevertheless
pay when due the amount
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not in dispute under such invoice. Such payment shall not be deemed
to be a waiver of the right by Buyer to recoup any overpayment, nor
shall acceptance of any payment be deemed to be a waiver by Seller of
any underpayment.
11.4 OVERDUE PAYMENTS. If Buyer fails to pay the entire
amount due to Seller when same is due, interest on any unpaid portion
shall accrue at a rate equal to the lesser of (i) three percent (3%)
above the rate of interest then most recently announced by Texas
Commerce Bank, National Association as its "prime rate" and (ii) the
maximum non-usurious rate of interest allowed by applicable law.
11.5 AUDITING. Each Party shall keep and maintain true and
correct books, records, files, and accounts of all information
reasonably related to the transactions contemplated by this Agreement
(the "Records"), including all measurement records, all information
used to determine prices and calculate invoices, and all invoices,
statements, and payment records. All such Records shall be maintained
for at least forty-eight (48) Months after the Month to which they
pertain. Either Party may, at its own expense, audit, and copy the
other Party's Records at any time during normal business hours upon at
least fifteen (15) Days' written notice. No adjustment to any payment
made by Buyer to Seller for Seller's Gas sold hereunder shall be made
after the lapse of eighteen (18) Months from the date of any such
payment, except for any adjustments to such payments due to volume
adjustments of Seller's Gas delivered at the Delivery Points.
ARTICLE 12
TERM
12.1 TERM. Unless sooner terminated as provided herein, this
Agreement shall be effective on the Effective Date and shall continue
in full force and effect thereafter until March 31, 2001.
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12.2. EARLY TERMINATION. Seller may terminate this Agreement,
and immediately cease delivering and selling all Seller's Gas to Buyer
under this Agreement, upon the occurrence of any of the following
events:
(i) the occurrence of an event which allows Seller to
terminate this Agreement under Section 11.2;
(ii) the occurrence of an event of default under any debt
or credit agreement of Buyer for borrowed money (each a "Credit
Agreement") that results in an obligation in excess of
$10,000,000.00 becoming due before its stated maturity;
(iii) Buyer makes an assignment or any general arrangement
for the benefit of creditors, files a petition or otherwise
commences, authorizes, or acquiesces in the commencement of a
proceeding under any bankruptcy or similar law for the protection
of creditors, or otherwise becomes insolvent or bankrupt; or
(iv) Buyer fails to purchase at least (a) eighty percent
(80%) of Seller's Gas made available at all Delivery Points in
two (2) or more Months during any Contract Year or (b) ninety
percent (90%) of Seller's Gas made available at all Delivery
Points in any consecutive six (6)-Month period, other than as a
result of Force Majeure.
12.3 RIGHTS OF EITHER PARTY TO TERMINATE. Either Party may
terminate this Agreement by giving written notice (for the notice
period specified) to the other Party upon the occurrence of any of the
following events:
(i) the taking by any governmental authority of the
action described in Article 15, but only after giving the notice
required by Article 15; or
(ii) a material breach of this Agreement by the other
Party which such defaulting Party fails to cure within thirty
(30) days after receiving written notice of the breach from the
nondefaulting Party.
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12.4 FINANCIAL REVIEW. Buyer shall provide to Seller (i) by
the thirtieth (30th) day of each Month, internally prepared monthly
unaudited financial statements of Buyer for the prior Month, (ii) by
the forty-fifth (45th) day following the end of each calendar quarter,
unaudited quarterly financial statements of Buyer, and (iii) by March
31 of each year, annually audited financial statements of Buyer
accompanied by an opinion of independent auditors for the prior year.
12.5 BUYER'S FINANCIAL ASSURANCES.
(a) REQUEST OF FINANCIAL ASSURANCES. Anything to the
contrary herein notwithstanding, if at any time the financial
condition of Buyer materially and adversely changes from its
financial condition on the Effective Date, Seller may request in
writing that Buyer deliver and maintain for Seller's benefit
financial assurances acceptable to Seller in amount, form,
issuer, term, and all other respects, in Seller's sole discretion
(the "Financial Assurances").
(b) TEMPORARY RELEASE. Buyer shall provide the Financial
Assurances to Seller within five (5) Working Days after the date
of Seller's notice. If Buyer fails to provide Financial
Assurances covering the value of all of Seller's Gas within such
five (5) Working-Day period, Seller shall not be obligated to
sell to Buyer under this Agreement any Seller's Gas that is not
covered by such Financial Assurances, as determined by Seller,
and Seller may sell such Seller's Gas to third parties.
(c) PERMANENT RELEASE. Buyer shall have thirty (30) Working
Days to obtain Financial Assurances covering the value of
Seller's Gas released under Section 12.5(b) above. To the extent
Buyer fails to provide Financial Assurances covering such
released Seller's Gas within thirty (30) Working Days after the
date of Seller's notice under Section 12.5(a), such Seller's Gas
shall be permanently released from this Agreement.
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(d) SUBSEQUENT RELEASE. If any Seller's Gas for which Buyer
has provided Financial Assurances as set forth above is at any
time thereafter not covered by Financial Assurances, such
Seller's Gas shall be permanently released from this Agreement on
the date Buyer ceases to provide such Financial Assurances. If
all of Seller's Gas is permanently released from this Agreement,
this Agreement shall terminate.
(e) RELEASE OF FINANCIAL ASSURANCES. Buyer's obligation to
provide and maintain Financial Assurances covering Seller's Gas
under all provisions of this Section 12.5 shall cease at the time
when the financial condition of Buyer is no longer materially and
adversely different than its financial condition on the Effective
Date.
12.6 NOTICE. Buyer shall notify Seller immediately upon
receipt by Buyer of any notice of default under any Credit Agreement.
ARTICLE 13
SELLER'S WARRANTY
Seller warrants title to, or the right to sell, all Seller's
Gas delivered under this Agreement. Seller also warrants that all
Seller's Gas shall be free and clear from liens, encumbrances, and
adverse claims including, but not limited to, liens to secure payment
of production taxes, severance taxes, and ad valorem taxes. If
Seller's title is questioned or becomes the subject of litigation,
Seller shall indemnify and save Buyer harmless from and against all
suits, actions, damages, costs and expenses relating thereto.
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ARTICLE 14
FORCE MAJEURE
14.1 NONPERFORMANCE. Except with regard to a Party's
obligation to make payments due under this Agreement, if either Party
fails to observe or perform any of the covenants or obligations herein
imposed upon it and such failure shall have been occasioned by, in
connection with, or in consequence of Force Majeure, as hereinafter
defined, such failure shall not be deemed to be a breach of such
covenants or obligations of such Party.
14.2 DEFINITION. The term "Force Majeure" shall mean acts of
God, strikes, lockouts, industrial disputes or disturbances, civil
disturbances, interruptions by government or court orders, present or
future orders of any regulatory body having jurisdiction, acts of the
public enemy, wars, riots, inability to secure materials or labor,
inability to secure rights-of-way, epidemics, landslides, lightning,
earthquakes, fires, hurricanes, tropical storms, storms, floods,
explosions, breakage or accident to machinery, pipelines or equipment,
freezing of Seller's Wells or pipelines, well blowouts, craterings,
partial or entire failure of gas wells, or any other situation,
occurrence, or condition not reasonably within the control of the
Party claiming suspension and which, by the exercise of due diligence,
such Party is unable to overcome.
14.3 EXCLUSIONS. The term "Force Majeure" does not include
(i) loss of Buyer's markets, or (ii) the loss, interruption, or
curtailment of gathering or transportation capacity on any gathering
or pipeline system for purposes of gathering or transporting all or
any part of Seller's Gas from and after the Delivery Points, unless
such loss, interruption, or curtailment is due to Force Majeure
invoked by the operator of such gathering or pipeline system.
14.4 STRIKES. The settlement of strikes or lockouts shall be
entirely within the discretion of the Party having the difficulty and
the above requirement of the use of
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diligence in restoring normal operating conditions shall not require
the settlement of strikes or lockouts by acceding to the terms of the
opposing party when such course is inadvisable in the discretion of
the Party having the difficulty.
14.5 FORCE MAJEURE NOTICE. The Party affected by Force
Majeure shall give written notice to the other Party of the Force
Majeure and the expected duration as soon as reasonably practicable
after the occurrence of the Force Majeure.
14.6 MARKETING OF FORCE MAJEURE GAS. If Buyer is unable to
take Seller's Gas from any Delivery Points due to the occurrence of
Force Majeure, Seller may market and sell such Seller's Gas from the
affected Delivery Point to any third parties free from this Agreement
and without any obligation to Buyer during the continuance of the
Force Majeure.
ARTICLE 15
CHOICE OF LAW AND GOVERNMENT REGULATIONS
15.1 CHOICE OF LAW. The transactions contemplated hereunder
bear a reasonable relationship to, and shall be governed by and
construed in accordance with, the laws of the State of Texas,
excluding any law thereof which would direct the application of the
law of any other jurisdiction.
15.2 REGULATIONS. This Agreement is subject to all present
and future valid orders, rules, and regulations of any regulatory body
or other authority of a state or the federal government having
jurisdiction. Either Party shall have the right to contest before
such regulatory body or authority, or in court, the validity of any
such law, order, rule, or regulation. If any governmental authority
reimposes price controls on Seller's Gas, or adopts any action, rule,
or order which materially and adversely affects the rights or ability
to perform of either Party, then the affected Party may terminate this
Agreement by giving sixty (60) Days' written notice to the other
Party.
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ARTICLE 16
ASSIGNMENT
16.1 NO ASSIGNMENT. Except as permitted below, this Agreement
may not be assigned in whole or in part by either Party without the
prior written consent of the other Party.
16.2 MERGER. The Parties recognize that Adobe Gas Pipeline
Company will be merged into Hadson Corporation on the Effective Date,
and, upon consummation of such merger, Hadson Corporation will be the
"Buyer" under this Agreement.
16.3 SALE OF SELLER'S GAS. Except as provided in Section 2.6,
all of Seller's Gas shall remain dedicated to this Agreement
notwithstanding any assignment or sale of any Seller's Wells producing
Seller's Gas by Seller. Seller may, however, assign this Agreement to
the extent this Agreement covers such Seller's Wells to any party
purchasing such Seller's Wells without the consent of Buyer. Upon
such assignment by Seller, Seller shall be fully released from any
obligation to Buyer hereunder for the performance by Seller's assignee
of this Agreement for such Seller's Wells.
ARTICLE 17
MISCELLANEOUS
17.1 NOTICES. Any formal notice or other communication
required or permitted to be given pursuant to this Agreement shall be
in writing and shall be deemed properly given when hand delivered,
telegraphed by prepaid telegram, transmitted by telecopy or mailed
from within the United States by certified mail, return receipt
requested, postage pre-paid, to the following addresses or such other
address as a Party may designate in writing from time to time:
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Buyer: Notices and Correspondence
Hadson Gas Systems, Inc.
600 East John W. Carpenter Freeway
Suite 201
Irving, Texas 75062-3977
Attention: Contract Administration
Telephone: (214) 717-1499
Telecopy: (214) 717-0171
Seller: Notices and Correspondence:
Santa Fe Energy Resources, Inc.
1616 South Voss Road, Suite 1000
Houston, Texas 77057-2696
Attention: Vice President, Marketing
Telephone: (713) 783-2401
Telecopy: (713) 268-5716
Payments shall be made to:
Santa Fe Energy Resources, Inc.
1616 South Voss Road, Suite 1000
Houston, Texas 77057-2696
Attention: Treasurer
17.2 INTEGRATED AGREEMENT. This Agreement, together with the
exhibits and other material incorporated herein by reference,
constitute the entire agreement of the Parties.
17.3 NO WAIVER. Waiver by either Party hereto of any one or
more defaults by the other in the performance of any provisions of
this Agreement shall not operate nor be construed as a waiver of any
other default or defaults, or the same default on a subsequent
occasion.
17.4 HEADINGS. The numbering and titling of particular
provisions of this Agreement are for the purpose of facilitating
administration and are not to be taken
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into account or considered in construing the terms and provisions
hereof, or to be deemed to qualify, modify, explain, or have any
substantive effect on such provisions.
17.5 ACCESS. To the extent Seller has the legal right to do
so, Seller grants to Buyer the right of ingress and egress to
Development Wells and Exploration Wells to the extent Buyer needs such
rights to implement any Buyer's Gathering Proposal, and the right to
use all existing lease roads of Seller for such Development Wells and
Exploration Wells.
17.6 LIMIT OF LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE
OTHER PARTY FOR ANY INCIDENTAL, SPECIAL, CONSEQUENTIAL, PUNITIVE,
EXEMPLARY, OR SIMILAR DAMAGES ARISING OUT OF OR RELATED TO THE
PERFORMANCE OR NONPERFORMANCE OF THIS AGREEMENT.
17.7 AMENDMENT. This Agreement may not be amended, altered,
revised, renewed, extended, or otherwise changed, except by a writing
that refers to this Agreement and is executed by the Parties.
17.8 CONSTRUCTION OF AGREEMENT. In construing this Agreement,
the following principles shall be followed:
(i) no consideration shall be given to the captions of
the articles, sections, subsections, or clauses, which are
inserted for convenience in locating the provisions of this
Agreement and not as an aid in its construction;
(ii) no consideration shall be given to the fact or
presumption that one Party had a greater or lesser hand in
drafting this Agreement;
(iii) examples shall not be construed to limit, expressly
or by implication, the matter they illustrate;
(iv) the word "includes" and its syntactical variants mean
"includes, but is not limited to" and corresponding syntactical
variant expressions;
(v) a defined term has its defined meaning throughout this
Agreement, regardless of whether it appears before or after the
place in this Agreement where it is defined;
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(vi) the plural shall be deemed to include the singular,
and vice versa; and
(vii) each exhibit, attachment, and schedule to this
Agreement is a part of this Agreement, but if there is any
conflict or inconsistency between the main body of this Agreement
and any exhibit, attachment, or schedule, the provisions of the
main body of this Agreement shall prevail.
17.9 RELATIONSHIP OF PARTIES. This Agreement does not create a
partnership, joint venture, or relationship of trust or agency between
the Parties.
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IN WITNESS WHEREOF, the Parties have, by their duly
authorized officers or agents, executed this Agreement as of the
Effective Date.
"SELLER"
ATTEST: SANTA FE ENERGY RESOURCES, INC.
/s/ MARK A. OLDER By:/s/
Title: VICE PRESIDENT
"SELLER"
ATTEST: SANTA FE ENERGY OPERATING
PARTNERS, L.P.
/s/ MARK A. OLDER By:/s/
Title: VICE PRESIDENT
"BUYER"
ATTEST: ADOBE GAS PIPELINE COMPANY
/s/ MARK A. OLDER By:/s/
Title: SENIOR VICE PRESIDENT
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EXHIBIT 10(u)
AGREEMENT OF SALE AND PURCHASE
by and among
SANTA FE ENERGY RESOURCES, INC.
SANTA FE ENERGY OPERATING PARTNERS, L.P.
and
BRIDGE OIL (U.S.A.) INC.
December 2, 1993
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TABLE OF CONTENTS
Page
I. DEFINED TERMS AND REFERENCES ......................... 1
1.1. Defined Terms ................................. 1
1.2. References .................................... 1
II. AGREEMENT TO SELL AND PURCHASE ....................... 8
III. PURCHASE PRICE ....................................... 9
IV. THE CLOSING .......................................... 9
4.1. Closing ...................................... 10
4.2. Seller's Closing Obligations.................. 10
4.3. Buyer's Closing Obligations................... 10
V. REPRESENTATIONS AND WARRANTIES OF SELLER.............. 10
5.1. Organization.................................. 11
5.2. Qualification ................................ 11
5.3. Authority Relative to This Agreement ......... 11
5.4. Noncontravention.............................. 11
5.5. Governmental Consents ........................ 11
5.6. Legal Proceedings ............................ 12
5.7. Compliance With Laws ......................... 12
5.8. Commitments .................................. 12
5.9. Title to Oil and Gas Properties .............. 12
5.10. Compliance with Agreements ................... 13
5.11. Take or Pay Arrangements ..................... 13
5.12. Receipts and Payments ........................ 13
5.13. Payment of Expenses .......................... 14
5.14. Sales of Production .......................... 14
5.15. Area of Mutual Interest and Other Agreements.. 14
5.16. Certain Filings .............................. 14
5.17. ERISA ........................................ 15
5.18. Taxes ........................................ 15
5.19. Undeveloped Acreage........................... 15
5.20. FIRPTA Disclaimer ............................ 15
5.21. Imbalances ................................... 15
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Page
5.22. Environmental Matters......................... 15
5.23. Registration Statement........................ 15
5.24. Taylorco Transaction ......................... 16
5.25. No Representation or Warranty ................ 16
VI. REPRESENTATION AND WARRANTIES OF BUYER................ 16
6.1. Organization ................................. 16
6.2. Qualification ................................ 16
6.3. Authority Relative to This Agreement ......... 17
6.4. Noncontravention.............................. 17
6.5. Governmental Approvals ....................... 17
6.6. Capitalization ............................... 17
6.7. Consideration Shares ......................... 18
6.8. Registration Statement ....................... 18
6.9. Charter and Bylaws ........................... 18
VII. COVENANTS AND AGREEMENTS OF THE PARTIES PRIOR TO,
AT AND AFTER THE CLOSING.............................. 18
7.1. Operation of Properties Prior to Closing...... 19
7.2. Conduct of Buyer's Business Prior to Closing.. 19
7.3. Access to Information ........................ 23
7.4. Confidentiality .............................. 24
7.5. HSR Act Notification ......................... 24
7.6. Public Offering .............................. 24
7.7. Registration Rights Agreement ................ 25
7.8. Investment Agreement ......................... 25
7.9. Exploration Agreement......................... 25
7.10. Notice of Litigation ......................... 26
7.11. Notification of Certain Matters .............. 26
7.12. Preferential Right to Purchase ............... 26
7.13. Public Announcements ......................... 27
7.14. Filing and Recording of Assignments, Etc ..... 27
7.15. Access to Records After Closing .............. 27
7.16. Transfer of Geoscience Data .................. 28
7.17. Santa Fe Separate Disclosure Schedule ........ 28
7.18. Sales and Other Taxes ........................ 28
7.19. Fees and Expenses ............................ 28
7.20. Brokers. ..................................... 28
7.21. Over-allotment Option After Closing .......... 29
7.22. Agreement to Convey .......................... 29
7.23. Britt Ranch Imbalance ........................ 29
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Page
7.24. Wyoming Ad Valorem Tax ....................... 30
7.25. Purchase of Taylorco NPI ..................... 30
7.26. Further Assurances ........................... 30
VIII. TITLE DEFECTS AND RELATED PURCHASE PRICE ADJUSTMENTS.. 31
8.1. Notice of Title Defects ...................... 31
8.2. Purchase Price Reductions for Title Defects .. 31
8.3. Purchase Price Increases...................... 32
8.4. Adjustment to Purchase Price ................. 34
8.5. Right to Terminate ........................... 34
8.6. Certain Agreements Regarding Disputes ........ 34
8.7. Allocations .................................. 36
IX. CONDITIONS TO OBLIGATIONS OF SELLER .................. 36
9.1. Representations and Warranties True .......... 36
9.2. Covenants and Agreements Performed............ 36
9.3. Certificate................................... 36
9.4. Opinion of Counsel ........................... 36
9.5. HSR Act ...................................... 36
9.6. Legal Proceedings ............................ 37
X. CONDITIONS TO OBLIGATION OF BUYER .................... 37
10.1. Representations and Warranties True .......... 37
10.2. Covenants and Agreements Performed ........... 37
10.3. Certificate .................................. 37
10.4. Opinion of Counsel ........................... 37
10.5. HSR Act ...................................... 37
10.6. Legal Proceedings ............................ 37
XI. TERMINATION, AMENDMENT AND WAIVER .................... 38
11.1. Termination .................................. 38
11.2. Amendment .................................... 38
11.3. Waiver........................................ 38
XII. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.......... 39
12.1. Survival ..................................... 39
12.2. Indemnification by Seller .................... 40
12.3. Indemnification by Buyer ..................... 40
12.4. Certain Limitations on Seller's Liability .... 41
12.5. Procedure for Indemnification ................ 41
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Page
XIII. CASUALTY LOSS AND CONDEMNATION ....................... 42
XIV. CERTAIN ACCOUNTING ADJUSTMENTS........................ 43
14.1. Adjustments................................... 43
14.2. Accounting.................................... 44
XV. MISCELLANEOUS .......................................... 44
15.1. Notices ...................................... 44
15.2. Entire Agreement.............................. 45
15.3. Binding Effect: Successors and Assigns........ 45
15.4. Severability ................................. 46
15.5. No Third-Party Beneficiaries ................. 46
15.6. DTPA Waiver .................................. 46
15.7. Governing Law ................................ 46
15.8. Counterparts ................................. 47
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AGREEMENT OF SALE AND PURCHASE
THIS AGREEMENT OF SALE AND PURCHASE dated December 2, 1993, is
made and entered into by and among Santa Fe Energy Resources, Inc., a
Delaware corporation ("SFER"), Santa Fe Energy Operating Partners,
L.P., a Delaware limited partnership ("SFEOP"), and Bridge Oil
(U.S.A.) Inc., a Delaware corporation ("BRIDGE").
RECITALS:
A. SFER and SFEOP desire to sell to Bridge certain oil, gas and
mineral properties and other assets on the terms and conditions set
forth herein and are herein sometimes collectively called the
"SELLER."
B. Bridge desires to purchase from Seller certain oil, gas and
mineral properties and other assets on the terms and conditions
contained herein and is herein sometimes called the "BUYER."
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals and
the mutual covenants and agreements contained herein, Seller and Buyer
do hereby agree as follows:
I. DEFINED TERMS AND REFERENCES
1.1. DEFINED TERMS. When used in this Agreement, the following
terms shall have the respective meanings assigned to them in this
SECTION 1.1 or in the articles, sections, subsections or other
subdivisions referred to below:
"ADDITIONAL SHARES" shall have the meaning assigned to it in
SECTION 7.21.
"AGREED DEFECT'' shall mean a Title Defect arising pursuant
to SECTION 8.2 that is uncured, has not been waived prior to
Closing by Buyer and for which there is no disagreement between
Buyer and Seller as to whether it exists or has been cured or the
amount of the related Purchase Price reduction.
"AGREED INCREASE" shall mean an increase in the Purchase
Price arising pursuant to SECTION 8.3 for which there is no
disagreement between Buyer and Seller as to its existence or the
amount thereof.
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"AGREEMENT" shall mean this Agreement of Sale and Purchase,
as hereafter amended or modified in accordance with the terms
hereof.
"APPLICABLE LAW" shall mean any statute, law, rule, or
regulation or any judgment, order, writ, injunction, or decree of
any Governmental Entity to which a specified person or property
is subject.
"APPLICABLE CONTRACT" shall mean any joint operating
agreement or any purchase, sale, transportation, balancing,
processing, or treating agreement or any unitization,
communitization, pooling, lease, farm-out, farm-in, royalty,
overriding royalty, development, easement, right-of-way, or other
agreement with respect to any of the rights, titles, interests
and estates agreed to be sold to Buyer hereunder, or production
or the proceeds of production from any of such rights, titles,
interests and estates.
"BRIDGE COMMON STOCK" shall mean the shares of common stock
of Buyer, $.01 par value per share.
"BRIDGE LP" shall have the meaning assigned to it in
SECTION 15.3.
"BUYER" shall have the meaning assigned to it in PARAGRAPH B
of the Recitals.
"BUYER GROUP" shall have the meaning assigned to it in
SECTION 12.2.
"CASH PORTION OF PURCHASE PRICE" shall mean that portion of
the Purchase Price payable to Seller in cash as determined in
accordance with ARTICLES III, VIII and XIV and SECTIONS 7.1
and 7.12.
"CLAIMED DEFECT" shall mean a claimed Title Defect arising
pursuant to SECTION 8.2 for which there is a disagreement between
Buyer and Seller as to whether it exists or has been cured or the
amount of the related Purchase Price reduction and which has not
been waived by Buyer prior to Closing.
"CLAIMED INCREASE" shall mean a claimed increase in the
Purchase Price arising pursuant to SECTION 8.3 for which there is
a disagreement between Buyer and Seller as to whether it exists
or the amount thereof.
"CLOSING" shall have the meaning assigned to it in
SECTION 4.1.
"CLOSING DATE" shall have the meaning assigned to it in
SECTION 4.1.
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"CODE" shall mean the Internal Revenue Code of 1986 or any
successor statute or statutes, as amended from time to time.
"CONSIDERATION SHARES" shall mean the shares of Bridge
Common Stock to be issued to Seller as determined in accordance
with ARTICLE III and SECTION 7.21.
"DAMAGES" shall have the meaning assigned to it in
SECTION 12.2.
"EFFECTIVE DATE" shall mean 7:00 a.m., local time, at the
location of the Properties on December 1, 1993.
"ENVIRONMENTAL CLAIM" shall have the meaning assigned to it
in SECTION 12.1.
"ENVIRONMENTAL LAWS" shall mean all Applicable Laws relating
to health, safety or the environment.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"EXCLUDED ASSETS" shall refer to any of the Properties that
are excluded from the transactions contemplated hereby pursuant
to SECTION 7.1, 7.12 or 8.2.
"EXPLORATION AGREEMENT" shall have the meaning assigned to
it in SECTION 7.9.
"GEOSCIENCE DATA" shall mean Seller's geological and
geophysical data related to the Oil and Gas Properties, including
(without limitation), prospect and other maps, the seismic
records listed in SCHEDULE C, well logs, scout tickets, and
completion cards related to the Oil and Gas Properties.
"GOVERNMENTAL ENTITY" shall mean any court or tribunal in
any jurisdiction (domestic or foreign) or any public,
governmental, or regulatory body, agency, department, commission,
board, bureau, or other authority or instrumentality (domestic or
foreign).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"HYDROCARBONS" shall mean crude oil, natural gas, casinghead
gas, condensate, sulphur, natural gas liquids and other liquid or
gaseous hydrocarbons (including C02), and shall also refer to any
other minerals of every kind and character which may be covered
by or included in the Oil and Gas Properties.
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"IMBALANCE" shall mean any gas production imbalance existing
with respect to any of the Oil and Gas Properties, together with
any related rights or obligations as to future cash and/or gas
balancing (subject, however, to SECTION 7.23).
"INITIAL REGISTRATION STATEMENT" shall have the meaning
assigned to it in SECTION 6.8.
"INITIAL SHARES" shall have the meaning assigned to it in
ARTICLE III.
"INITIAL STOCK VALUE" shall have the meaning assigned to it
in ARTICLE III.
"INVESTMENT AGREEMENT" shall have the meaning assigned to it
in SECTION 7.8.
"NGPA" shall have the meaning assigned to it in
SECTION 5.16.
"NGPA REGULATIONS" shall have the meaning assigned to it in
SECTION 5.16.
"NON-OPERATED PROPERTIES" shall mean those Properties with
respect to which Seller is not serving as operator.
"OFFERING" shall mean the public offering of Bridge Common
Stock referenced in SECTION 7.6.
"OFFERING CLOSING DATE" shall mean the date on which Buyer
consummates the sale of the Bridge Common Stock pursuant to the
Offering.
"OFFERING PRICE" shall mean the public offering price set
forth on the cover page of the final prospectus relating to the
registration statement filed with the SEC with respect to the
Offering.
"OFFERING TERMINATION NOTICE" shall have the meaning
assigned to it in SECTION 7.6.
"OIL AND GAS PROPERTIES" shall mean the properties described
in PARAGRAPHS (a), (b), and (c) of the definition of
"Properties."
"PARENT" shall mean Bridge Oil Limited, an Australian
company.
"PERMITTED ENCUMBRANCES" shall mean any of the following
matters:
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(a) the terms, conditions, restrictions, exceptions,
reservation, limitations and other matters contained in the
agreements, instruments and documents which create or
reserve to Seller its interests in any of the Oil and Gas Properties,
provided they do not operate (i) to reduce the net revenue interest,
nor increase the working interest (without a corresponding increase in
the net revenue interest), of Seller in the Oil and Gas Properties as
reflected in SCHEDULE A hereto or (ii) to reduce the net acres of
Seller in the Oil and Gas Properties as reflected in SCHEDULE B
hereto;
(b) any tax, regulatory, mechanic's, materialman's,
contractor's, operator's, lessor's, or other liens or encumbrances
created by contract or law which are undetermined or inchoate;
(c) all Applicable Contracts listed in the Santa Fe Separate
Disclosure Schedule to the extent that any Applicable Contract does
not result in any mortgage, lien or security interest on any of the
Properties;
(d) easements for streets, alleys, highways, pipelines,
telephone lines, power lines, railways and other similar rights-of-
way, on, over, or in respect of property owned or leased by Seller or
over which Seller owns rights-of-way, easements, permits, or licenses
to the extent such matters, individually or in the aggregate, do not
interfere materially with oil and gas operations on the Oil and Gas
Properties;
(e) rights reserved to or vested in any Governmental Entity to
control or regulate any of the Properties in any manner;
(f) conventional rights of reassignment arising immediately
prior to the termination or expiration of an oil and gas lease or upon
a decision or election by the owner of an oil and gas lease to
surrender or abandon all or any portion of same;
(g) rights to consent by, required notices to, filings with, or
actions by Governmental Entities in connection with the sale, transfer
or conveyance of federal, state, Indian or other governmental agency
oil and gas leases or interests therein, where the same are
customarily obtained or made subsequent to the assignment of such oil
and gas leases or interests therein; and
(h) any agreement, contract, lease, instrument, permit,
amendment, or extension entered into by Seller following the date of
this Agreement in accordance with SECTION 7.1.
"PROCEEDINGS" shall mean all proceedings, actions, claims,
suits, investigations, and inquiries by or before any arbitrator or
Governmental Entity.
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"PROPERTIES" shall mean:
(a) All of Seller's right, title and interest in and to the lands
underlying the leases and other documents described in Schedules A and
B (and in and to any ratifications and/or amendments to such leases
and other documents, whether or not such ratifications or amendments
are described in such Schedules A and B) and all wells (including
wells which may be currently producing, not producing, in the process
of or awaiting completion, or drilling) located upon such lands or
upon any lands with which any portion of such leases or lands may be
pooled, communitized, or unitized (either voluntary or by compulsory
order);
(b) Without limitation of the foregoing, all other right, title
and interest (of whatever kind or character, whether legal or
equitable, and whether vested or contingent) of Seller in and to the
oil, gas and other minerals in and under and that may be produced from
the lands underlying the leases or other documents described in
Schedules A and B (including, without limitation, interests in oil,
gas and/or mineral leases covering such lands, overriding royalty
interests, production payments and net profits interests in such
lands, and fee royalty interests, fee mineral interests and other
interests in such oil, gas and other minerals);
(c) All rights, titles and interests of Seller in and to, or
otherwise derived from all presently existing and valid oil, gas
and/or mineral unitization, pooling, and/or communitization
agreements, declarations and/or orders in and to the properties
covered and the units created thereby (including, without limitation,
units formed under orders, rules, regulations or other official acts
of any Governmental Entity having jurisdiction, voluntary unitization
agreements, designations and/or declarations, and so called "working
interest units" created under operating agreements or otherwise) which
relate to any of the properties described in paragraphs (a) and (b)above;
(d) All production from the properties described in paragraphs
(a), (b), and (c) above after the Effective Date and all merchantable
allowable oil or liquids owned by Seller and stored in tanks on the
lands covered by the leases and other documents described on Schedules
A and B on the Effective Date;
(e) All rights and obligations of Seller with respect to
Imbalances in existence as of the Effective Date (subject to Section 7.23).
(f) All rights, titles and interests of Seller in and to all
presently existing and valid production sales contracts, operating
agreements, and other agreements and contracts which relate to any of
the properties described in PARAGRAPHS (a), (b) and (c) above, or
which relate to the exploration, development, operation or maintenance
thereof or the
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treatment, storage, transportation or marketing of production
therefrom (or allocated thereto), including accounts receivable and
payable arising from any of the foregoing and attributable to any
period after the Effective Date;
(g) All rights, titles and interests of Seller in and to all
materials, supplies, machinery, equipment, improvements, and other
personal property and fixtures (including, but not by way of
limitation, the items listed in Schedule D) appurtenant to the
properties described in PARAGRAPHS (a), (b) and (c) above; and
(h) All of Seller's lease files, abstracts and title opinions,
production records, well files, accounting records (but not including
general financial accounting or tax accounting records), Geoscience
Data, and all other files, documents and records which directly relate
to the properties described above (unless, subject to SECTION 7.16,
Seller is prohibited from transferring any such items pursuant to the
terms of a third-party agreement).
The Properties shall not include any properties or other assets
of Seller classified hereunder as Excluded Assets.
"PURCHASE PRICE" shall have the meaning assigned to it in
ARTICLE III.
"PURCHASE PRICE INCREASES" shall have the meaning assigned
to it in SECTION 8.3.
"PURCHASE PRICE REDUCTIONS" shall have the meaning assigned
to it in SECTION 8.2.
"REGISTRATION RIGHTS AGREEMENT" shall have the meaning
assigned to it in SECTION 7.7.
"REGISTRATION STATEMENT'' shall have the meaning assigned to
it in SECTION 7.6.
"RESERVE REPORT" shall mean that certain reserve report
attached as SCHEDULE E.
"ROYALTY TRUST" shall mean that certain Trust Agreement of
the Santa Fe Energy Trust dated November 19, 1992, between SFER
and Texas Commerce Bank, National Association, as Trustee.
"SANTA FE SEPARATE DISCLOSURE SCHEDULE" shall have the
meaning assigned to it in SECTION 7.17.
"SCHEDULE A" shall mean SCHEDULES A-1 and A-2.
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"SCHEDULE B" shall mean SCHEDULES B-1, B-2 and B-3.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"SELLER" shall have the meaning assigned to it in PARAGRAPH
A of the Recitals.
"SELLER GROUP" shall have the meaning assigned to it in
SECTION 12.3.
"SFER SUB" shall have the meaning assigned to it in
SECTION 15.3.
"SPLIT POINT" shall have the meaning assigned to it in
SECTION 12.4(b).
"SURVIVAL DATE" shall have the meaning assigned to it in
SECTION 12.1.
"TAYLORCO" shall mean Taylorco, Inc.
"TAYLORCO PURCHASE AGREEMENT" shall mean that certain
Purchase Agreement dated as of August 22, 1988, by and between
SFEOP and Taylorco, as amended.
"THRESHOLD AMOUNT" shall have the meaning assigned to it in
SECTION 12.4 (b).
"TITLE DEFECT" shall refer to any matter which would cause
the representations of Seller in Section 5.9 not to be true.
"UNDERWRITERS" shall mean the underwriters named in the
Registration Statement.
"UNDERWRITING AGREEMENT" shall mean the underwriting agreement
to be entered into by Morgan Stanley & Co. Incorporated, Donaldson
Lufkin & Jenrette Securities Corporation, UBS Securities Inc. and S.G.
Warburg and Co. Inc., as representatives of the Underwriters, and
Buyer relating to the Offering.
1.2. REFERENCES. All references in this Agreement to articles,
sections, subsections and other subdivisions refer to corresponding
sections, subsections and other subdivisions of this Agreement unless
expressly provided otherwise. Titles appearing at the beginning of any
of such subdivisions are for convenience only and shall not constitute
part of such subdivisions and shall be disregarded in construing the
language contained in such subdivisions. The words "this
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Agreement", "herein", "hereby", "hereof", "hereunder" and words of
similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. Words in the
singular form shall be construed to include the plural and vice versa,
unless the context otherwise requires.
II. AGREEMENT TO SELL AND PURCHASE
At the Closing and subject to the terms and conditions hereof,
Seller shall sell, transfer, assign, convey and deliver to Buyer, and
Buyer shall purchase, acquire, accept and pay for, the Properties.
III. PURCHASE PRICE
The total consideration for the Properties (the "PURCHASE
PRICE") shall be payable in cash and Bridge Common Stock as follows.
The portion of the Purchase Price to be paid by Buyer in cash shall be
$15,000,000 (unless otherwise adjusted as provided below). The portion
of the Purchase Price to be paid by Buyer in Bridge Common Stock
(unless otherwise adjusted as provided below) shall be that number of
shares of Bridge Common Stock (the "Initial Shares") which,
immediately upon the consummation of the Offering and the Closing
hereunder, shall equal 10% of all issued and outstanding shares of
Bridge Common Stock excluding any shares of Bridge Common Stock issued
under the Bridge Oil & Gas, Inc. 1993 Stock Option Plan in such amount
and as described in the Initial Registration Statement; provided, that
if the product of the Initial Shares and the Offering Price (the
"Initial Stock Value") is less than $36,000,000, then Buyer shall, at
its option, either (a) increase the portion of the Purchase Price to
be paid in cash by an amount equal to the difference between
$36,000,000 and the Initial Stock Value, (b) increase the number of
shares of Bridge Common Stock to be tendered by an amount such that
the product of the total shares of Bridge Common Stock so tendered and
the Offering Price equals $36,000,000 or (c) increase the portion of
the Purchase Price to be paid in cash and increase the number of
shares of Bridge Common Stock to be tendered such that the sum of (i)
the additional cash referred to above in this clause (c), plus (ii)
the product of the additional shares of Bridge Common Stock referred
to above in this clause (c) and the Offering Price, plus (iii) the
Initial Stock Value equals $36,000,000; provided further, that if
Buyer makes a determination not to consummate the Offering in
accordance with the provisions of Section 7.6, the number of shares of
Bridge Common Stock shall be reduced to zero and the portion of the
Purchase Price to be paid in cash shall be increased to $51,000,000
(unless otherwise adjusted as provided below); and, provided further,
that if Buyer consummates the Offering and (A) the aggregate proceeds
realized therefrom is an amount less than $75,000,000 (prior to
underwriting discounts and payment of expenses attributable to the
Offering) or (B) the proceeds received by Buyer from the sale of
Bridge Common Stock, after deducting therefrom all amounts paid or,
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at the Closing Date, anticipated to be paid to Parent out of such
proceeds is less than $25,000,000 (prior to underwriting discounts and
payment of expenses attributable to the Offering), then, at Seller's
option, the number of shares of Bridge Common Stock shall be reduced
to zero and the portion of the Purchase Price to be paid in cash shall
be increased to $51,000,000 (unless otherwise adjusted as provided
below). Buyer shall also be required to tender to Seller additional
shares of Bridge Common Stock under the circumstances described in
SECTION 7.21. The portion of the Purchase Price to be paid in cash
shall be subject to adjustment as provided in this ARTICLE III, in
SECTIONS 7.1 and 7.12 and in ARTICLES VIII and XIV.
IV. THE CLOSING
4.1. CLOSING. The Closing of the transactions contemplated
hereunder (the "CLOSING") shall take place in the offices of SFER, at
10:00 a.m. local time, or at such other place or time as the parties
may agree in writing, (a) if the Offering is consummated, on the
Offering Closing Date or (b) if the Offering is not consummated, on
the date which is 10 days after the date on which Seller receives the
Offering Termination Notice from Buyer (or, if such date on which the
Closing would otherwise occur under this CLAUSE (b) is not a business
day in the State of Texas, on the first business day in the State of
Texas immediately thereafter). The date on which the Closing is
required to take place is herein referred to as the "CLOSING DATE."
4.2. SELLER'S CLOSING OBLIGATIONS. At the Closing, Seller shall
deliver to Buyer the following:
(a) a duly executed Conveyance, substantially in the form of
EXHIBIT 4.2(a) in all material respects, effective as of the
Effective Date;
(b) letters in lieu of transfer order (or similar
documentation), in form acceptable to both parties;
(c) the certificate of Seller referred to in SECTION 10.3;
(d) the legal opinion referred to in SECTION 10.4; and
(e) evidence of Seller's compliance with the HSR Act.
4.3. BUYER'S CLOSING OBLIGATIONS. At the Closing, Buyer shall
deliver to Seller the following:
(a) the Cash Portion of the Purchase Price by wire transfer
of immediately available funds to a bank account or bank accounts
designated by Seller;
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(b) a certificate or certificates representing the
Consideration Shares registered in the name of Seller;
(c) the certificate of Buyer referred to in SECTION 9.3;
(d) the legal opinions referred to in SECTION 9.4; and
(e) evidence of Buyer's compliance with the HSR Act.
V. REPRESENTATIONS AND WARRANTIES OF SELLER
SFER and SFEOP, jointly and severally, hereby represent and
warrant to Buyer that:
5.1. ORGANIZATION. SFER is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Delaware and SFEOP is a limited partnership duly formed, validly
existing and in good standing under the laws of the State of Delaware.
Seller has all requisite power and authority to own, lease, and
operate the Properties and to carry on its business as now being
conducted.
5.2. QUALIFICATION. Seller is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the
Properties are located to the extent such qualification or licensing
is required.
5.3. AUTHORITY RELATIVE TO THIS AGREEMENT. Seller has full
power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution,
delivery, and performance by Seller of this Agreement, and the
consummation by it of the transactions contemplated hereby, have been
duly authorized by all necessary corporate (in the case of SFER) or
partnership (in the case of SFEOP) action of Seller. This Agreement
has been duly executed and delivered by Seller and constitutes, and
each other agreement, instrument, or document executed or to be
executed by Seller in connection with the transactions contemplated
hereby has been, or when executed will be, duly executed and delivered
by Seller and constitutes, or when executed and delivered will
constitute, a valid and legally binding obligation of Seller,
enforceable against Seller in accordance with their respective terms,
except that such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and similar laws
affecting creditors' rights generally.
5.4. NONCONTRAVENTION. The execution, delivery, and performance
by Seller of this Agreement and the consummation by it of the
transactions contemplated hereby do not and will not (a) conflict with
or result in a violation of any provision of its Certificate of
Incorporation or Bylaws (in the case of SFER) or its partnership
agreement and other governing documents
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(in the case of SFEOP), (b) conflict with or result in a violation of
any provision of, or constitute (with or without the giving of notice
or the passage of time or both) a default under, or give rise (with or
without the giving of notice or the passage of time or both) to any
right of termination, cancellation, or acceleration under, any bond,
debenture, note, mortgage, indenture, lease, agreement, or other
instrument or obligation to which Seller is a party or by which Seller
or any of the Properties may be bound, (c) result in the creation or
imposition of any lien, charge, pledge, mortgage, security interest,
easement or other encumbrances of every type or description, whether
imposed by law, agreement or otherwise, upon any of the Properties, or
(d) assuming compliance with the matters referred to in SECTION 5.5,
violate any Applicable Law binding upon Seller or any of the
Properties.
5.5. GOVERNMENTAL CONSENTS. No consent, authorization or
approval of any Governmental Entity is required for the execution and
delivery by Seller of this Agreement or the transfer to Buyer in
accordance with this Agreement of the Properties except (a) for the
requirements of the HSR Act and (b) for filings which constitute a
Permitted Encumbrance in accordance with PARAGRAPH (g) of the
definition thereof.
5.6. LEGAL PROCEEDINGS. Except as otherwise set forth in
SCHEDULE 5.6, there are no Proceedings pending or, to Seller's
knowledge, overtly threatened against or involving Seller which might
result in the impairment or loss of title to any of the Oil and Gas
Properties or the value thereof or impede the operation of any of the
Oil and Gas Properties or that, if adversely determined, would delay
or prevent the consummation of the transactions contemplated hereby.
5.7. COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE 5.7,
Seller is not in violation of or in default under any Applicable Law
relating to the ownership or operation of the Oil and Gas Properties,
and no claim is pending or, to Seller's knowledge, overtly threatened
with respect to any such matters which if determined adversely to
Seller would have such effect (provided, that with respect to
Non-Operated Properties, the foregoing representation is limited to
Seller's knowledge). Without limitation of the foregoing, and except
as provided in SCHEDULE 5.7, all of the wells comprising a part of the
Oil and Gas Properties have been drilled and completed in accordance
with Applicable Law, and no well comprising a part of the Oil and Gas
Properties is or was subject to any penalty on production allowables
because of overproduction or any other violation of Applicable Law
which would now or hereafter prevent such well from being entitled to
its full legal and regular allowable production as prescribed by any
Governmental Entity (provided, that with respect to Non-Operated
Properties, the foregoing representation and warranty is limited to
Seller's knowledge).
5.8. COMMITMENTS. Except as provided in the Applicable
Contracts listed in the Santa Fe Separate Disclosure Schedule, the
oil, gas or mineral leases or other interests constituting the Oil and
Gas Properties listed on SCHEDULE A and the Applicable Contracts
relating thereto, under circumstances as they exist and will exist as
of the Closing Date (a) contain no provisions that
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require the drilling of additional wells or other material development
operations in order to earn or continue to hold all or a portion of
such Oil and Gas Properties and (b) contain no provisions that require
the commitment or investment of funds (other than routine expenses
incurred in the normal operation of existing wells on such Oil and Gas
Properties), which provisions described in CLAUSES (a) and (b) cannot
be avoided by no more than the release of all or part of such Oil and
Gas Properties.
5.9. TITLE TO OIL AND GAS PROPERTIES. Seller has good and
defensible title to the Oil and Gas Properties, free and clear of all
mortgages, liens, security interests, encumbrances and other burden
except for the Permitted Encumbrances. With respect to each Oil and
Gas Property listed on SCHEDULE A, the ownership of Seller in such Oil
and Gas Property (a) entitles Seller to receive not less than the net
revenue interest of Seller set forth in SCHEDULE A of the oil and gas
produced, saved and marketed from or attributable to such Oil and Gas
Property and (b) obligates Seller to bear the costs and expenses
relating to maintenance, development, production and operation in an
amount not greater than the working interest of Seller for such Oil
and Gas Property set forth in SCHEDULE A (without a corresponding
increase in the net revenue interest). With respect to each Oil and
Gas Property listed on SCHEDULE B, Seller has the right to explore
for, and produce and market, oil and gas attributable to the number of
net acres for such Oil and Gas Property stated on SCHEDULE B. All
preferential rights of purchase that exist with respect to the
transfer by Seller to Buyer of the Oil and Gas Properties will be as
set forth in the Santa Fe Separate Disclosure Schedule and will have
been exercised or waived prior to the Closing. All consents of third
parties that exist with respect to the transfer by Seller to Buyer of
the Oil and Gas Properties (exclusive of those described in SECTION
5.5) will be as set forth in the Santa Fe Separate Disclosure Schedule
and will have been obtained prior to the Closing. All of the wells
comprising a part of the Oil and Gas Properties have been drilled and
completed within the boundaries of the applicable leases or within
limits otherwise permitted by a valid and enforceable pooling, unit or
other agreement or contract.
5.10. COMPLIANCE WITH AGREEMENTS. The Santa Fe Separate
Disclosure Schedule will contain a complete and accurate list of all
Applicable Contracts in effect on the date of this Agreement, and
Seller is not in default with regard to any agreement listed therein
(except as to any such matters that may or would result in a Title
Defect); provided, however, that with respect to the Non-Operated
Properties, the representations and warranties in this SECTION 5.10
are made solely to the knowledge of Seller. Except as set forth in the
Santa Fe Separate Disclosure Schedule, Seller has not been notified or
advised in writing by any other party to an Applicable Contract of
such party's intention or desire to terminate or modify in any
material respect such Applicable Contract (exclusive, however, of any
such termination or modification permitted in SECTION 7.1).
5.11. TAKE OR PAY ARRANGEMENTS. Seller is not obligated by
virtue of a prepayment arrangement, "take or pay" arrangement,
production payment, or other instrument to deliver or
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suffer the delivery of oil, gas and other minerals produced from the
Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor without deduction or credit on account
of such arrangement from the price which would otherwise be received,
except as described in the Applicable Contracts listed in the Santa Fe
Separate Disclosure Schedule.
5.12. RECEIPTS AND PAYMENTS. Except for those matters
identified on SCHEDULE 5.12, Seller is currently receiving for each
well listed on SCHEDULE A-l (other than a well identified as a
"composite well" on SCHEDULE A-1) payment for at least the net revenue
interest set forth in SCHEDULE A-1 for such well without (a) any delay
such that payment is not received within 90 days as to wells operated
by Seller and six months as to wells not operated by Seller after the
end of the month in which production occurs; (b) suspense; or (c) any
indemnity other than indemnities customarily given in connection with
division orders or sales or other applicable contracts. Except as
shown on SCHEDULE 5.12, Seller is not currently paying more than the
percentage of operating and other costs for each well listed on
SCHEDULE A-1 (other than a well identified as a "composite well" on
SCHEDULE A-l) than the working interest set forth in SCHEDULE A-l for
such well and Seller is current for all costs and expenses pertaining
thereto for which it has been billed.
5.13. PAYMENT OF EXPENSES. All expenses, (including, without
limitation, all bills for labor, materials and supplies used or
furnished for use in connection with the Oil and Gas Properties, and
all severance, production, ad valorem and other similar taxes) and
liabilities relating to the ownership or operation of the Oil and Gas
Properties, have been, and are being, paid on a timely basis
(provided, however, with respect to Non-Operated Properties, the
representations and warranties in this SECTION 5.13 are made solely to
the knowledge of Seller).
5.14. SALES OF PRODUCTION. There exist no agreements or
arrangements for the sale of production from the Oil and Gas
Properties (including, without limitation, calls on, or other rights
to purchase, production, whether or not the same are currently being
exercised) other than (a) as contained in the agreements or other
documents identified in the Santa Fe Separate Disclosure Schedule and
(b) agreements or arrangements which are cancelable on 60 days' notice
or less without penalty or detriment (provided, that with respect to
Non-Operated Properties, the foregoing representation and warranty is
limited to Seller's knowledge).
5.15. AREA OF MUTUAL INTEREST AND OTHER AGREEMENTS. Except for
those agreements or tax partnerships listed in the Santa Fe Separate
Disclosure Schedule or otherwise referred to in the agreements or
other documents identified in the Santa Fe Separate Disclosure
Schedule, no Oil and Gas Property is subject to (a) any area of mutual
interest agreements, (b) any farm-out agreement under which any party
thereto is entitled to receive assignments not yet made, or could earn
additional assignments after the Effective Date, or (c) any tax
partnership.
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<PAGE> 5.16. CERTAIN FILINGS. With respect to Oil and Gas Properties
of which Seller is operator: (a) Seller has filed or caused to be
filed with applicable Federal agencies applications required to be
filed for well category determinations under the Natural Gas Policy
Act of 1978 (the "NGPA") and rules and regulations of the Federal
Energy Regulatory Commission under the NGPA (the "NGPA Regulations")
relating to the Oil and Gas Properties; (b) each such application has
been approved, withdrawn by Seller, or is pending approval by the
appropriate state and Federal agency; (c) all of such applications to
the extent filed and not amended or withdrawn are in compliance in all
material respects with the requirements of the NGPA and the NGPA
Regulations; and (d) no further applications are required under the
NGPA or the NGPA Regulations to allow the legal sale of all gas
produced from the Oil and Gas Properties at a price equal to the price
for such gas currently being received.
5.17. ERISA. Seller and its Related Companies (as defined
below) have paid and discharged when due all liabilities under ERISA
which if unpaid would result in the imposition of a lien against the
Properties. The term "Related Companies" means all corporations,
trades, or businesses during any period that they are, along with the
Seller, members of a controlled group of corporations or a controlled
group of trades or businesses (as described in Section 414(b) and (c),
respectively, of the Code).
5.18. TAXES. Seller and its affiliates have paid and discharged
when due all taxes due and owing by them which if unpaid would result
in a lien against the Properties. None of the Properties is subject to
any lease, safe harbor lease or other arrangement pursuant to which
Buyer will be treated after the Closing Date as the owner for Federal
income tax purposes.
5.19. UNDEVELOPED ACREAGE. With respect to the Properties
described in SCHEDULE B and except as otherwise contemplated in the
Exploration Agreement, Seller has not created any royalty interest,
overriding royalty interest or similar burdens in favor of Seller or
any affiliate of Seller.
5.20. FIRPTA DISCLAIMER. Seller is not a foreign person or
foreign corporation under the Deficit Reduction Act of 1984, 26 U.S.C.
Section 1445, ET SEQ. and none of the Purchase Price needs to be
withheld pursuant to such statute or the regulations promulgated
thereunder.
5.21. IMBALANCES. To Seller's knowledge, the information
relating to Imbalances stated in SCHEDULE 5.21 is true and correct as
of the date reflected in such Schedule.
5.22. ENVIRONMENTAL MATTERS. Except as described in SCHEDULE
5.22, Seller has complied with all applicable Environmental Laws
relating to the ownership and operation of the Oil and Gas Properties.
Except as described in SCHEDULE 5.22, there are no pending or, to
Seller's knowledge, overtly threatened, actions, suits, written
notices or Proceedings by any Governmental Entity or third party
relating to any violation or alleged violation by Seller of any
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applicable Environmental Laws with respect to the Oil and Gas
Properties. Seller has obtained or filed all environmental notices,
permits or similar authorizations required to be obtained or filed in
connection with the ownership or operation of the Oil and Gas
Properties. Except as described in SCHEDULE 5.22, no condition exists
on or with respect to any of the Oil and Gas Properties which would
subject Seller, Buyer or any of the Oil and Gas Properties to any
remedial obligations under any applicable Environmental Laws. Buyer
hereby acknowledges that this SECTION 5.22 is the exclusive
representation and warranty made by Seller in this Agreement with
respect to applicable Environmental Laws and no other representation
and warranty in this Agreement shall be deemed to cover such matters.
5.23. REGISTRATION STATEMENT. None of the information supplied
by Seller in writing specifically for use in the Registration
Statement, at the time it becomes effective, will contain any
statement which, at such time and in light of the circumstances under
which it shall be made, is false or misleading with respect to any
material fact, or will omit to state any material fact necessary in
order to make the statement therein not false or misleading.
5.24. TAYLORCO TRANSACTION. "Payout" (as defined in the
Taylorco Purchase Agreement) has occurred under the terms of the
Taylorco Purchase Agreement.
5.25. NO REPRESENTATION OR WARRANTY. Notwithstanding anything
to the contrary in this Agreement (including this ARTICLE V), Seller
makes no representation or warranty with respect to, and Buyer assumes
the risk of and shall satisfy itself with respect to, the physical
condition of the equipment, personal property and other fixtures
included in the Properties. THE EQUIPMENT, PERSONAL PROPERTY AND OTHER
FIXTURES INCLUDED IN THE PROPERTIES IS SOLD "AS IS, WHERE IS" AND
SELLER MAKES NO WARRANTY, WHETHER EXPRESS OR IMPLIED, IN FACT OR IN
LAW, OF MERCHANTABILITY, FITNESS FOR ANY PURPOSE, STATE OF REPAIR,
CONDITION OR SAFETY OF THE EQUIPMENT, PERSONAL PROPERTY AND OTHER
FIXTURES INCLUDED IN THE PROPERTIES. Seller also makes no
representation or warranty with respect to the quality, quantity or
volume of the Hydrocarbons in and under the Oil and Gas Properties.
VI. REPRESENTATION AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that:
6.1. ORGANIZATION. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Delaware and has all requisite power and authority to own, lease, and
operate its properties and to carry on its business as now being
conducted.
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6.2. QUALIFICATION. Buyer is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the
property owned, leased, or operated by it or the conduct of its
business requires such qualification or licensing.
6.3. AUTHORITY RELATIVE TO THIS AGREEMENT. Buyer has full power
and authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. The execution,
delivery, and performance by Buyer of this Agreement, and the
consummation by it of the transactions contemplated hereby, have been
duly authorized by all necessary corporate action of Buyer. This
Agreement has been duly executed and delivered by Buyer and
constitutes, and each other agreement, instrument, or document
executed or to be executed by Buyer in connection with the
transactions contemplated hereby has been, or when executed will be,
duly executed and delivered by Buyer and constitutes, or when executed
and delivered will constitute, a valid and legally binding obligation
of Buyer, enforceable against Buyer in accordance with their
respective terms, except that such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws affecting creditors' rights generally.
6.4. NONCONTRAVENTION. The execution, delivery, and performance
by Buyer of this Agreement and the consummation by it of the
transactions contemplated hereby do not and will not (a) conflict with
or result in a violation of any provision of the charter or bylaws of
Buyer, (b) conflict with or result in a violation of any provision of,
or constitute (with or without the giving of notice or the passage of
time or both) a default under, or give rise (with or without the
giving of notice or the passage of time or both) to any right of
termination, cancellation, or acceleration under, any bond, debenture,
note, mortgage, indenture, lease, agreement, or other instrument or
obligation to which Buyer is a party or by which Buyer or any of its
properties may be bound, (c) result in the creation or imposition of
any lien, charge, pledge, mortgage, security interest, easement or
other encumbrance of every type or description, whether imposed
by law, agreement or otherwise, upon the properties of Buyer, other
than the Properties, or (d) assuming compliance with the matters
referred to in SECTION 6.5, violate any Applicable Law binding upon
Buyer.
6.5. GOVERNMENTAL APPROVALS. No consent, approval, order, or
authorization of, or declaration, filing, or registration with, any
Governmental Entity is required to be obtained or
made by Buyer in connection with its execution, delivery, or
performance of this Agreement or the consummation by it of the
transactions contemplated hereby, other than (a) compliance with
any applicable requirements of the HSR Act; (b) compliance with any
applicable requirements of the Securities Act; (c) compliance with any
applicable state securities laws; and (d) filings with Governmental
Entities to occur in the ordinary course following the consummation of
the transactions contemplated hereby.
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6.6. CAPITALIZATION. All issued and outstanding shares of
capital stock of Buyer have been validly issued and are fully paid and
nonassessable, and no shares of capital stock of Buyer are subject to,
nor have any been issued in violation of, preemptive or similar
rights. Except for the obligations of Buyer pursuant to this Agreement
and except as otherwise disclosed in the Initial Registration
Statement, there are outstanding (a) no options or other rights to
acquire from Buyer, and no obligation of Buyer to issue or sell, any
shares of capital stock or other voting securities of Buyer or any
securities of Buyer convertible into or exchangeable for such capital
stock or voting securities, and (b) no equity equivalents, interests
in the ownership or earnings, or other similar rights of or with
respect to Buyer. There are no outstanding obligations of Buyer to
repurchase, redeem, or otherwise acquire any shares of its capital
stock.
6.7. CONSIDERATION SHARES. The Consideration Shares have been
duly authorized for issuance and, when issued and delivered by Buyer
in accordance with the provisions of this Agreement, will be validly
issued, fully paid and nonassessable. The issuance of the
Consideration Shares under this Agreement is not subject to any
preemptive or similar rights.
6.8. REGISTRATION STATEMENT. The Registration Statement
initially filed with the SEC (the "INITIAL REGISTRATION STATEMENT")
shall conform in all material respects to the draft of such document
attached hereto as EXHIBIT 6.8. The Initial Registration Statement
shall comply with the form, disclosure and other requirements of the
Securities Act. None of the information included by Buyer in the
Initial Registration Statement will contain any statement which, at
such time and in light of the circumstances under which it will be
made, is false or misleading with respect to any material fact, or
will omit to state any material fact necessary in order to make the
statements therein not false or misleading; provided that Buyer
assumes no responsibility for, and makes no representation or warranty
with respect to, information in the Initial Registration Statement
which is provided in writing by Seller for inclusion therein. There
will be no material change in any of the information set forth in the
form of the Registration Statement on the date declared effective by
the SEC and on the Closing Date from that set forth in the Initial
Registration Statement. None of the information included by Buyer in
the Registration Statement at the time the Registration Statement
becomes effective and on the Closing Date, will contain any statement
which, at such time and in light of the circumstances under which it
will be made, is false or misleading with respect to any material
fact, or will omit to state any material fact necessary in order to
make the statements therein not false or misleading; provided that
Buyer assumes no responsibility for, and makes no representation or
warranty with respect to, information included in the Registration
Statement which is provided in writing by Seller specifically for
inclusion therein. The Registration Statement shall comply when
declared effective by the SEC and on the Closing Date with the form,
disclosure and other requirements of the Securities Act.
6.9. CHARTER AND BYLAWS. Buyer has delivered to Seller accurate
and complete copies of the Certificate of Incorporation and Bylaws of
Buyer as currently in effect.
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VII. COVENANTS AND AGREEMENTS OF THE PARTIES PRIOR TO,
AT AND AFTER THE CLOSING
7.1. OPERATION OF PROPERTIES PRIOR TO CLOSING. From and after
the date of execution of this Agreement and until the Closing, except
as otherwise consented to by Buyer in writing, Seller shall:
(a) continue to operate the Properties in the ordinary course
of business (and where Seller is not the operator of a Property, will
continue its actions as a non-operator in the ordinary course of
business), consistent with its past operating practices;
(b) maintain in full force and effect primary insurance
covering the Properties having the coverages, deductibles, retentions
and co-insurance provisions substantially as described in EXHIBIT
7.1(b);
(c) use its reasonable best efforts to preserve in full force
and effect all leases, operating agreements, easements, rights-of-way,
permits, licenses, contracts and other agreements which relate to the
Properties (except for those contracts or other agreements which
expire on their own term without action by Seller) and perform all
obligations of Seller in or under any such agreement relating to such
Properties;
(d) use its reasonable best efforts to maintain its
relationships with suppliers, customers and others having business
relations with Seller with respect to the Properties so that they will
be preserved for Buyer on and after the Closing Date;
(e) not enter into any agreement or arrangement granting any
preferential right to purchase any of the Properties or requiring the
consent of any person to the transfer and assignment of any of the
Properties hereunder, except in connection with performance by Seller
of any Applicable Contract;
(f) not enter into any sales or supply contracts relating to
the Properties that are not terminable on notice of sixty (60) days or
less;
(g) (i) not sell, farmout, transfer, release, abandon (in each
case other than as required by any Applicable Contract or Applicable
Law) or otherwise dispose of any of the Properties, other than the
sale of Hydrocarbons in the ordinary course of business or as
permitted in SECTIONS 7.12 and 15.3 or (ii) mortgage, pledge or
otherwise encumber any of the Properties;
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(h) maintain all equipment included in the Properties in
accordance with customary industry operating practices and procedures
(to the extent that Seller is the operator with respect to such
Properties);
(i) promptly notify Buyer of the receipt of any notice or claim
of default, breach, termination or cancellation (whether by Seller or
another party) of any Applicable Contract (provided, however, that
with respect to the Non-Operated Properties, such notice shall be
delivered to Buyer promptly after Seller has knowledge of such);
(j) promptly notify Buyer of any destruction of or damage to
any of the Oil and Gas Properties which Seller reasonably estimates to
be in excess of $20,000 or of any event or condition that would in
Seller's reasonable opinion result in any such destruction or damage
(provided, however, that with respect to the Non-Operated Properties,
such notice shall be delivered to Buyer promptly after Seller has
knowledge of such);
(k) maintain the books, accounts and records of Seller relating
to the Oil and Gas Properties in the usual, regular and ordinary
manner of Seller on a basis consistent with prior years;
(l) safeguard, maintain and secure all files and records
(including computer programs and data banks), engineering, geological,
seismic and geophysical data, reports and maps and all other data of
Seller relating to the Oil and Gas Properties;
(m) not consent to any individual AFE exceeding $20,000
attributable to the Oil and Gas Properties;
(n) not make any other decision, including, without limitation,
casing point elections, which Seller expects to result in expenditures
after the date of this Agreement related to any Oil and Gas Property
in an amount greater than $20,000;
(o) not modify, amend, cancel or terminate any Applicable
Contract affecting any of the Oil and Gas Properties other than a
termination arising pursuant to the terms thereof without action by
Seller;
(p) not enter into any joint venture, partnership, mining
partnership or business association relating to any of the Oil and Gas
Properties, or enter into any unitization, communitization, pooling or
operating agreement relating to any of the Oil and Gas Properties
other than as required by Applicable Law;
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(q) not decline to participate in or not refuse to consent to
an activity or project with respect to any of the Oil and Gas
Properties, whether by action or inaction, such that the Seller's net
revenue interest in such properties is diminished or reduced, except
where such election or refusal is as a result of an election of Buyer
not to approve an AFE which requires its consent pursuant to CLAUSE
(m) above or not to grant its consent under PARAGRAPH (n) above (and
the failure of Buyer to notify Seller of its consent within five days
(or such shorter time as specified by Seller, if the applicable
agreements or other exigent circumstances outside of Seller's control
so require) following prompt written notice of such AFE from Seller
(in the case of PARAGRAPH (m)) or following a prompt written request
therefor from Seller (in the case of PARAGRAPH (n)) shall be deemed to
constitute its disapproval);
(r) except as permitted by SECTION 15.3 and as provided with
respect to the "Master Gas Purchase Agreement" described below, not
enter into any new transaction with any affiliate of Seller affecting
the costs and revenues of the Properties after the Effective Date,
including an amendment to any existing such agreement with any
affiliate of Seller relating to the Properties;
(s) comply with all Applicable Laws pertaining to the
Properties;
(t) cause all delay rentals, shut-in royalties, minimum
royalties, and other royalties or payments that are necessary to
maintain in force Seller's rights in and to the Oil and Gas Properties
to be timely and properly paid (subject, however, to the limitations
described below in this SECTION 7.1); and
(u) not acquire any additional interests in the Oil and Gas
Properties or lands adjoining the Oil and Gas Properties.
Notwithstanding the other provisions of this SECTION 7.1: (i) Seller
may take any actions it determines to be reasonably necessary under
emergency circumstances and provided Buyer is notified as soon
thereafter as possible; and (ii) Seller shall have no liability to
Buyer for the incorrect payments under PARAGRAPH (t) above or for any
failure to make any such payments, except in those instances in which
Seller is contractually obligated to make such payments and such
contractual obligations have not been assumed by another party. Any
consent requested of Buyer with respect to the matters covered by this
SECTION 7.1 shall not be unreasonably withheld or action with respect
thereto unduly delayed. Buyer agrees that Seller is authorized to
execute and deliver that certain Master Gas Purchase Agreement by and
among SFER, SFEOP and Adobe Gas Pipeline Company, in the form of the
agreement attached as an exhibit to that certain Agreement of Merger
dated July 28, 1993, by and among SFER, Adobe Gas Pipeline
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Company and Hadson Corporation, and (subject to the consummation of
the transactions contemplated hereby) Buyer agrees to expressly assume
SFER's obligations thereunder to the extent applicable to the Oil and
Gas Properties conveyed hereunder.
In connection with the provisions described in PARAGRAPHS (m),
(n) and (a) above, Seller and Buyer further agree as follows. If an
activity or other project is proposed with respect to an Oil and Gas
Property for which Seller is required to obtain Buyer's consent
pursuant to either PARAGRAPH (m) or PARAGRAPH (n) above, and (x) Buyer
declines to give its consent and (y) Seller, at the time of requesting
Buyer's consent, notifies Buyer that Seller desires to participate in
the proposed activity or other project (and to pay the costs
attributable to Seller's interest with respect thereto), then such Oil
and Gas Property will be excluded from the transactions contemplated
hereby (and will be deemed to be an Excluded Asset) and the Cash
Portion of the Purchase Price will be reduced by the amount allocated
to such Oil and Gas Property in SCHEDULE A or B. If an activity or
other project is proposed with respect to an Oil and Gas Property for
which Seller is required to obtain Buyer's prior consent pursuant to
either PARAGRAPH (m) or PARAGRAPH (n) above, and (x) Seller, at the
time of requesting Buyer's consent, informs Buyer in writing that
Seller would not recommend participation in such operation or
activity, (y) Seller is nonetheless required to participate in the
proposed activity or project pursuant to the provisions of PARAGRAPH
(q) above, and (z) the transactions contemplated by this Agreement are
not consummated and this Agreement is terminated pursuant to ARTICLE
XI, then, promptly after the point in time when this Agreement is so
terminated, Buyer shall purchase from Seller, and Seller shall convey
and assign to Buyer (without any warranties, of title or otherwise),
such Oil and Gas Property for an amount equal to the amount allocated
to such Oil and Gas Property in SCHEDULE A or B. In connection with
PARAGRAPH (u) above, Seller and Buyer further agree as follows. If
Seller is offered an additional interest in an Oil and Gas Property or
lands adjoining any Oil and Gas Property, Seller shall give prompt
notice to that effect to Buyer, which notice shall describe in
reasonable detail the interest involved, shall set forth the amount of
the proposed purchase price and any other obligations and commitments,
shall set forth whether Seller desires to acquire such interest for
its own account and shall set forth the time by which Buyer must
notify Seller as to whether or not Buyer consents to such acquisition.
If Buyer declines to grant its consent to the acquisition (or fails to
give a timely response) and Seller had indicated that it desired to
purchase the interest for its own account, then Seller may so purchase
such interest for its own account free and clear of any obligations to
Buyer hereunder. If Buyer grants its consent to the acquisition and
the transactions contemplated hereby are consummated, then Seller
shall convey such interest to Buyer at Closing and Buyer shall
reimburse Seller at the Closing for the amount of the purchase price
paid by Seller therefor and assume Seller's obligations and
commitments therewith. If Buyer grants its consent to the acquisition,
Seller had indicated it did not desire to purchase the interest for
its own account and the transactions contemplated hereby are not
consummated and this Agreement is terminated pursuant to ARTICLE XI,
then promptly after the
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point in time when this Agreement is so terminated, Seller shall
convey such interest to Buyer (without any warranties of title or
otherwise) and Buyer shall reimburse Seller for the amount of the
purchase price therefor and assume Seller's obligations and
commitments therewith. Notwithstanding the foregoing or anything else
herein to the contrary (including specifically PARAGRAPH (u) above,
Santa Fe shall be permitted to make an acquisition of additional
interests in Oil and Gas Properties and/or the lands adjoining the Oil
and Gas Properties and shall have no obligations or duties to Buyer
hereunder with respect thereto, provided that such additional
interests comprise 20% or less of the total value of the oil and gas
properties and other interests to be acquired by Seller in connection
with such acquisition.
7.2. CONDUCT OF BUYER'S BUSINESS PRIOR TO CLOSING. During the
period from the date hereof to the Closing, Buyer (a) shall conduct
its business and operations in accordance in all material respects
with the conduct of its business and operations as described in the
Initial Registration Statement and in compliance with all Applicable
Laws; (b) shall use its reasonable best efforts to preserve, maintain,
and protect its properties; and (c) shall use its reasonable best
efforts to preserve intact its business organization, to keep
available the services of its officers and employees, and to maintain
existing relationships with licensors, licensees, suppliers,
contractors, distributors, customers, and others having business
relationships with it. Without limiting the generality of the
foregoing, and except as otherwise expressly contemplated in this
Agreement or as described in the Initial Registration Statement, prior
to the Closing, Buyer shall not, without the prior written consent of
Seller:
(i) amend its charter or bylaws;
(ii) (A) issue, sell, or deliver (whether through the issuance
or granting of options, warrants, commitments, subscriptions, rights
to purchase, or otherwise) any shares of its capital stock of any
class or any other securities or equity equivalents; or (B) amend in
any respect any of the terms of any such securities outstanding as of
the date hereof; or
(iii) (A) split, combine, or reclassify any shares of its
capital stock; (B) declare, set aside, or pay any dividend or other
distribution (whether in cash, stock, or property or any combination
thereof) in respect of its capital stock; (C) repurchase, redeem, or
otherwise acquire any of its securities; or (D) adopt a plan of
complete or partial liquidation or resolutions providing for or
authorizing a liquidation, dissolution, merger, consolidation,
restructuring, recapitalization, or other reorganization of Buyer.
7.3. ACCESS TO INFORMATION. Between the date hereof and the
Closing, (a) Seller shall give Buyer and its authorized
representatives reasonable access to the offices, properties, records,
marketing agreements, files, seismic data, engineering reports and
evaluations, books of account, computer records and all other
information of Seller pertaining to the Properties, including all
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land material, for the investigation of the Properties, the status
thereof and the title thereto, through Buyer's employees, attorneys,
independent public accountants or outside consultants and (b) Buyer
shall give Seller and its authorized representatives reasonable access
to the offices, properties, records, marketing arrangements, files,
etc. of Buyer; provided, however, that such investigations shall be
conducted during normal business hours and in a manner that does not
unreasonably interfere with Seller's or Buyer's, as the case may be,
normal operations and employee relationships. Each party shall cause
its personnel to assist the other party in making such investigation
and transferring the Properties, and the operations thereof, and shall
cause its counsel, accountants, employees and other representatives to
be reasonably available to the other party for such purposes. During
such investigation, each party shall have the right to make copies of
such records, files and other materials of the other party as such
party may deem advisable.
7.4. CONFIDENTIALITY. The confidentiality agreements (a) dated
October 8, 1993, between Seller and Buyer and (b) dated October 1,
1993, between Seller and Parent, as each are modified by that certain
letter dated October 8, 1993, among Seller, Buyer and Parent, shall
remain in full force and effect.
7.5. HSR ACT NOTIFICATION. To the extent required by the HSR
Act, each of the parties hereto shall (a) file or cause to be filed,
as promptly as practicable but in no event later than 15 days after
the execution and delivery of this Agreement, with the Federal Trade
Commission and the United States Department of Justice, all reports
and other documents required to be filed by such party under the HSR
Act concerning the transactions contemplated hereby and (b) use its
reasonable best efforts to promptly comply with or cause to be
complied with any requests by the Federal Trade Commission or the
United States Department of Justice for additional information
concerning such transactions, in each case so that the waiting period
applicable to this Agreement and the transactions contemplated hereby
under the HSR Act shall expire as soon as practicable after the
execution and delivery of this Agreement. Each party hereto agrees to
request, and to cooperate with the other party or parties in
requesting, early termination of any applicable waiting period under
the HSR Act.
7.6. PUBLIC OFFERING. Buyer agrees that within ten days after
the execution and delivery of this Agreement, Buyer shall file a
registration statement (such registration statement, plus all
incorporated documents, exhibits and financial statements, and any
amendments thereto, being called the "REGISTRATION STATEMENT") with
the SEC in contemplation of a public offering of not less than
$75,000,000 of Bridge Common Stock. Buyer will use its best efforts to
cause the Registration Statement to become effective and to sell the
registered shares in the above contemplated public offering not later
than March 31, 1994, to realize aggregate proceeds therefrom in an
amount not less than $75,000,000 (prior to underwriting discounts and
payment of expenses attributable to the Offering) and to realize
proceeds, after deducting therefrom all amounts paid or, at the
Closing Date, anticipated to be paid to Parent out of such proceeds, in
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an amount not less than $25,000,000 (prior to underwriting discounts
and payment of expenses attributable to the Offering); provided, that
Buyer shall not be required to consummate such offering if it
determines in its sole and absolute discretion that the price per
share of Bridge Common Stock which would otherwise be received in
connection therewith is not an acceptable price per share of Bridge
Common Stock or that such offering is otherwise not in the best
interests of Buyer or Parent. If Buyer makes a determination not to
consummate the above contemplated public offering, it shall as
promptly as possible give written notice to that effect to Seller
(such notice being called the "OFFERING TERMINATION NOTICE") which
notice shall be given to Seller no later than March 31,1994; provided,
that if such offering is not consummated on or before March 31, 1994,
and if Seller has not otherwise received an Offering Termination
Notice by March 31, 1994, then Buyer shall be deemed to have given
Seller an Offering Termination Notice on March 31,1994. Seller will
cooperate with Buyer in the preparation of the Registration Statement
and will furnish or make available all information, including
financial information, with respect to the Properties which Buyer
reasonably requests for inclusion therein in order to comply with
Applicable Laws. Buyer will furnish to Seller a copy of the Initial
Registration Statement and each amendment or supplement thereto. Buyer
shall keep Seller informed from time to time as to the status of the
Registration Statement and in any event shall inform Seller (a) upon
the effectiveness of the Registration Statement under the Securities
Act, (b) upon pricing of the securities under the Registration
Statement or (c) upon receipt by Buyer of notice from the SEC of
notice of the issuance of a stop order with respect to the
Registration Statement. Seller and Buyer agree that a preliminary
closing of the transactions contemplated hereby shall be held on or
about one business day prior to the date on which the public offering
contemplated by the Registration Statement is consummated. At any such
preliminary closing, the closing documents under this Agreement shall
be presented and examined by Buyer and Seller and all documents deemed
satisfactory shall be held in escrow until the Closing.
7.7. REGISTRATION RIGHTS AGREEMENT. Seller and Buyer shall
enter into a "REGISTRATION RIGHTS AGREEMENT" (as herein called) at
(and subject to the occurrence of) the Closing in substantially the
form of such agreement as set forth as EXHIBIT 7.7 (provided, that at
the Closing Seller acquires Bridge Common Stock as provided in ARTICLE III).
7.8. INVESTMENT AGREEMENT. Seller, Buyer and Parent shall enter
into an "Investment Agreement" (as herein called) at (and subject to
the occurrence of) the Closing in substantially the form of such
agreement as set forth as EXHIBIT 7.8 (provided, that at the Closing
Seller acquires Bridge Common Stock as provided in ARTICLE III).
7.9. EXPLORATION AGREEMENT. SFEOP and Buyer shall enter into an
"Exploration Agreement" (as herein called) at (and subject to the
occurrence of) the Closing in substantially the form of such agreement
as set forth as EXHIBIT 7.9.
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7.10. NOTICE OF LITIGATION. Until the Closing, (a) Buyer, upon
learning of the same, shall promptly notify Seller of any Proceeding
which is commenced or threatened against Buyer and which affects this
Agreement or the transactions contemplated hereby and (b) Seller, upon
learning of the same, shall promptly notify Buyer of any Proceeding
which is commenced or threatened against Seller and which affects this
Agreement or the transactions contemplated hereby.
7.11. NOTIFICATION OF CERTAIN MATTERS. Seller shall give prompt
notice to Buyer of (a) the occurrence or nonoccurrence of any event
the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in ARTICLE V to be untrue or
inaccurate at or prior to the Closing and (b) any failure of Seller to
comply with or satisfy any covenant, condition, or agreement to be
complied with or satisfy any covenant, condition, or agreement to be
complied with or satisfied by Seller hereunder. Buyer shall give
prompt notice to Seller of (i) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would be likely to
cause any representation or warranty contained in ARTICLE VI to be
untrue or inaccurate at or prior to the Closing and (ii) any failure
of Buyer to comply with or satisfy any covenant, condition, or
agreement to be complied with or satisfied by Buyer hereunder. The
delivery of any notice pursuant to this Section shall not be deemed to
(A) modify the representations or warranties hereunder of the party
delivering such notice, (B) modify the conditions set forth in
ARTICLES IX and X, or (C) limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
7.12. PREFERENTIAL RIGHT TO PURCHASE. Seller shall request,
from the appropriate parties (and in accordance with the documents
creating such rights or requirements), waivers of the preferential
rights to purchase, or requirements that consent to assignments be
obtained, which exist with respect to the transfer by Seller to Buyer
of any of the Oil and Gas Properties. Seller shall have no obligation
hereunder other than to so request such waivers (I.E., Seller shall
have no obligation to assure that such waivers are obtained), and if
any such waiver is not obtained, Buyer may treat such failure to
obtain such waiver as a matter which constitutes a Title Defect;
provided, however, that if the third party holding a preferential
right to purchase exercises such right and completes the purchase of
the subject Oil and Gas Property prior to the Closing, such Oil and
Gas Property shall be excluded from the transactions contemplated
hereby (and shall be deemed to be an Excluded Asset) and the Cash
Portion of the Purchase Price shall be reduced by the amount allocated
to such Oil and Gas Property on SCHEDULE A or B; provided, further,
that if a third party holding a right to consent to an assignment of
an Oil and Gas Property listed in SCHEDULE A or B, which consent was
not obtained prior to Closing and was not treated as a Title Defect,
notifies Buyer or Seller after the Closing but prior to the second
anniversary date of the Closing Date that such third party objects to
the transfer of such Oil and Gas Property to Buyer, Buyer and Seller
shall take either of the following actions, as mutually determined:
(a) title to such Oil and Gas Property shall be reassigned to Seller
as of the Effective Date, Seller shall pay to Buyer an amount equal to
the amount allocated to such Oil and Gas Property on
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SCHEDULE A or B, and Buyer shall account to Seller for all revenues
and costs attributable to such Oil and Gas Property from and after the
Effective Date until the date of reassignment and tender to Seller the
amount of net income attributable to such Oil and Gas Property from
the Effective Date to the date of reassignment; or (b) title to such
Oil and Gas Property shall be reassigned to Seller, and Buyer and
Seller shall enter into a written arrangement on terms mutually
acceptable to the both of them the purpose of which will be to provide
Buyer the same economic benefits from such Oil and Gas Property as if
title to such Oil and Gas Property were still held by it.
7.13. PUBLIC ANNOUNCEMENTS. The parties hereto agree that prior
to making any public announcement or statement with respect to the
transactions contemplated by this Agreement, the party desiring to
make such public announcement or statement shall consult with the
other party hereto and exercise its reasonable best efforts to (a)
agree upon the text of a joint public announcement or statement to be
made by both or such parties or (b) obtain approval of the other party
hereto to the text of a public announcement or statement to be made
solely by Seller or Buyer, as the case may be. Nothing contained in
this Section shall be construed to require either party to obtain
approval of the other party hereto to disclose information with
respect to the transactions contemplated by this Agreement to any
state or federal governmental authority or agency to the extent
required by Applicable Laws or necessary to comply with the disclosure
requirements of any stock exchange having jurisdiction over the
disclosing party.
7.14. FILING AND RECORDING OF ASSIGNMENTS, ETC. Buyer shall be
solely responsible for all filings and recording of assignments and
other documents related to the Properties and for all fees connected
therewith, and Buyer shall furnish Seller with pertinent recording
data. Seller shall not be responsible for any loss to Buyer because of
Buyer's failure to file or record documents correctly or promptly.
Bearer shall promptly file all appropriate forms, declarations or
bonds with federal and state agencies relative to its assumption of
operations and Seller shall cooperate with Buyer in connection with
such filings.
7.15. ACCESS TO RECORDS AFTER CLOSING. Buyer agrees to maintain
the files and records of Seller that are acquired pursuant to this
Agreement until the fourth anniversary of the Closing Date (or for
such longer period of time as Seller shall advise Buyer is necessary
in order to have records available with respect to open years for tax
audit purposes), or, if any of such records pertain to any claim or
dispute pending on the fourth anniversary of the Closing Date, Buyer
shall maintain any of such records designated by Seller until such
claim or dispute is finally resolved and the time for all appeals has
been exhausted. Buyer shall provide Seller and its representatives
reasonable access to and the right to copy such files and records for
the purposes of (a) preparing and delivering any accounting provided
for under this Agreement and adjusting, prorating and settling the
charges and credits provided for in this Agreement, (b) complying with
any law, rule or regulation affecting Seller's interest in the
Properties prior to the Closing Date, (c) preparing any audit of the
books and records of any third party relating to Seller's interest in
the Properties
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prior to the Closing Date or responding to any audit prepared by such
third parties, (d) preparing tax returns, (e) responding to or
disputing any tax audit or (f) asserting, defending or otherwise
dealing with any claim or dispute under this Agreement. In no event
shall Buyer destroy any such files and records without giving Seller
sixty (60) days advance written notice thereof and the opportunity, at
Seller's expense, to obtain such files and records prior to their
destruction.
7.16. TRANSFER OF GEOSCIENCE DATA. The parties hereto
acknowledge and agree that Seller shall be required to transfer the
Geoscience Data to the extent that if, in Seller's reasonable opinion
at the Closing, it can do so without incurring liability by violating
the terms of a third-party agreement; provided, however, that in those
instances in which Seller can avoid such liability by obtaining the
consent of a third party, it will use its reasonable efforts (without
any obligation to pay additional fees or incur any significant or
undue cost or expense) to do so; provided, further, that to the extent
that a transfer of such data is prohibited, but the review by Buyer of
such data is not, then Seller shall (without obligation to pay
additional fees or incur any substantial or undue cost or expense)
maintain such data which shall be maintained in Houston, Texas, as
long as Seller or any affiliate of Seller maintains an office in
Houston, Texas, and thereafter at Seller's principal place of business
for five years following the Closing and Buyer shall have the
continuing right to review such data.
7.17. SANTA FE SEPARATE DISCLOSURE SCHEDULE. As promptly as
reasonably practicable and in any event no later than December 20,
1993, Seller shall deliver to Buyer a schedule or schedules setting
forth: (a) a list of all Applicable Contracts in effect on the
Effective Date and all Applicable Contracts in effect on the date of
this Agreement; (b) a list of all preferential rights of purchase that
exist with respect to the transfer by Seller to Buyer of the Oil and
Gas Properties; and (c) a list of all consents of third parties that
exist with respect to the transfer by Seller to Buyer of the Oil and
Gas Properties. Such schedule or schedules shall be herein called the
"SANTA FE SEPARATE DISCLOSURE SCHEDULE."
7.18. SALES AND OTHER TAXES. Buyer shall bear and timely pay
(a) upon receipt of the invoice of Seller thereof, all state or local
government sales taxes incident to the transfer of the Properties to
Buyer, (b) all documentary, transfer and other similar state and local
government taxes incident to the transfer of the Properties to Buyer
and (c) all costs or fees required to obtain consents to assign any
Federal or state leases included in the Properties.
7.19. FEES AND EXPENSES. Except as otherwise expressly
provided in this Agreement, all fees and expenses, including fees and
expenses of counsel, financial advisors, and accountants, incurred in
connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such fee or expense,
whether or not the Closing shall have occurred.
7.20. BROKERS. Seller agrees to indemnify and hold harmless
Buyer (without regard to the limitations set forth in ARTICLE XII)
from and against any and all losses, claims, damages,
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costs and expenses, including, without limitation, reasonable
attorneys' fees and expenses, Buyer may sustain or incur as a result
of any claim for a commission or fee by a broker or finder acting on
behalf of Seller. Buyer agrees to indemnify and hold harmless (without
regard to the limitations set forth in ARTICLE XII) Seller from and
against any and all losses, claims, damages, costs and expenses,
including, without limitation, reasonable attorneys' fees and
expenses, Seller may sustain or incur as a result of any claim for a
commission or fee by a broker or finder acting on behalf of Buyer.
7.21. OVER-ALLOTMENT OPTION AFTER CLOSING. If the Underwriters
exercise the over-allotment option granted to them by Buyer under the
Underwriting Agreement and the number of shares of Bridge Common Stock
has not been reduced to zero pursuant to ARTICLE III, Buyer shall,
within 15 days after the exercise of such option, deliver to Seller a
certificate or certificates representing shares (the "ADDITIONAL
SHARES") of Bridge Common Stock in an amount such that the sum of (a)
the shares of Bridge Common Stock tendered to Seller pursuant to
ARTICLE III plus (b) the Additional Shares, shall equal 10% of all
issued and outstanding shares of Bridge Common Stock excluding any
shares of Bridge Common Stock issued under the Bridge Oil & Gas Inc.
1993 Stock Option Plan in the amount and as described in the Initial
Registration Statement (but taking into account the exercise by the
Underwriters of such over-allotment option). In consideration therefor
and simultaneously therewith, Seller shall, in the event and to the
extent that the Initial Stock Value is less than $36,000,000, deliver
to Buyer cash in an amount equal to the number of Additional Shares
multiplied by the Offering Price.
7.22. AGREEMENT TO CONVEY. Except for any interest in any well,
which interest is burdened by the net profits interest conveyed to the
Royalty Trust, or except for any well located in any of the counties
listed in SCHEDULE 7.22, Seller agrees that to the extent not
otherwise conveyed to Buyer at the Closing, Seller will convey and
assign to Buyer any interest which Seller owns as of as of the date
hereof (exclusive of any interest disposed of by Seller in accordance
with SECTION 7.1) in any well that, under Applicable Law, is located
within one legal location of, and in the same reservoir as, any well
or unit listed on SCHEDULE A-1 or any proposed unit for an undrilled
well listed on SCHEDULE A-1.
7.23. BRITT RANCH IMBALANCE. Upon the consummation of the
transactions contemplated hereby, Buyer shall succeed to the position
of Seller with respect to the Imbalances. As a result of such
succession, Buyer shall (a) be entitled to receive any and all
benefits, including payments of proceeds of production in excess of
amounts which it would otherwise be entitled to produce and receive by
virtue of ownership of the Oil and Gas Properties, which Seller would
have been entitled to receive by virtue of such positions and (b)
shall be obligated to suffer any detriments (whether the same be in
the form of obligations to deliver production which would have
otherwise been attributable to its ownership of the Oil and Gas
Properties without receiving full payment therefor, or be in the form
of the obligation to make payment in cash) which Seller would have
been obligated to suffer by virtue of such positions. Notwithstanding
the foregoing or anything
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else herein to the contrary, Buyer and Seller agree that Buyer shall
pay to Seller, and Seller shall be entitled to receive from Buyer, 75%
of all amounts that Buyer or its assigns hereafter receives that is
attributable to the "under-produced" position of Seller with respect
to the Oil and Gas Property identified on SCHEDULE 5.21 as (and herein
called) "Britt Ranch." Buyer agrees that from and after the Closing it
will use and will cause its assigns to use its reasonable best efforts
to collect all amounts due and owing it attributable to the above-described
underproduction and to otherwise enforce all rights and
privileges under the applicable gas balancing provisions governing
Britt Ranch. Payment of amounts due and owing Seller under this
SECTION 7.23 shall be made by Buyer promptly after receipt of the
underlying funds in which Seller is accorded the above described
rights. All payments to Seller under this Section shall be accompanied
by a schedule prepared by Buyer that sets forth a reasonably detailed
description of the facts and circumstances giving rise to such payment
and the manner in which the amount paid to Seller was calculated.
Buyer agrees to provide Seller and its representatives with reasonable
access during Buyer's normal business hours to Buyer's books and
records maintained in connection with the Imbalance on Britt Ranch and
to such other information in Buyer's possession as Seller may
reasonably request with respect thereto.
7.24. WYOMING AD VALOREM TAX. Seller and Buyer specifically
agree that all ad valorem taxes in respect of the Properties imposed
by the State of Wyoming that are due and payable in calendar year 1994
and thereafter, shall be the sole responsibility of Buyer (and Seller
shall have no liability with respect thereto) and shall not be
included in the adjustments to the Purchase Price under ARTICLE XIV.
7.25. PURCHASE OF TAYLORCO NPI. If, prior to the transfer
hereunder by Seller to Buyer of an Oil and Gas Property that is
burdened with a net profits interest in favor of Taylorco pursuant to
the Taylorco Purchase Agreement, Taylorco elects to sell such net
profits interest to Seller pursuant to Section 4.8(b) of the Taylorco
Purchase Agreement at a price satisfactory to Buyer, Buyer shall
reimburse Seller at Closing for the amount paid by Seller to Taylorco.
7.26. FURTHER ASSURANCES. After the Closing each of the parties
will execute, acknowledge and deliver to the other such further
instruments, and take such other action, as may be reasonably
requested in order to more effectively assure to said party all of the
respective properties, rights, titles, interests, estates, and
privileges intended to be assigned, delivered or inuring to the
benefit of such party in consummation of the transactions contemplated
hereby.
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VIII. TITLE DEFECTS AND RELATED PURCHASE PRICE ADJUSTMENTS
8.1. NOTICE OF TITLE DEFECTS. Buyer shall, by no later than
December 27, 1993, give Seller written notice of any claimed Title
Defect, which notice shall set forth (a) a brief description of the
matter constituting the claimed Title Defect; (b) supporting documents
reasonably necessary for Seller to verify the claimed Title Defect;
(c) the identity of the Oil and Gas Property that is affected by the
claimed Title Defect; and (d) any claimed Purchase Price reduction
attributable to the claimed Title Defect. Buyer shall be deemed to
have waived all Title Defects of which Seller has not been given such
notice by such date. Seller shall have the right, but not the
obligation, to attempt to cure any claimed Title Defect within 20 days
after Seller receives Buyer's notice of Title Defect. Buyer shall be
obligated to notify Seller in writing of Buyer's acceptance or
rejection of the result obtained by Seller in its efforts to cure any
claimed Title Defects not more than five days after Seller notifies
Buyer in writing of such result. If Seller disagrees that a Title
Defect exists or is uncured or disagrees with the amount of the
related Purchase Price reduction claimed by Buyer in any notice given
in accordance with this SUBSECTION (A), then Buyer and Seller shall
promptly meet and negotiate in good faith in an attempt to resolve the
disagreement. If Buyer and Seller are unable to resolve their
disagreement and if the item is not waived by Buyer as a Title Defect
prior to Closing, then, for purposes hereof, the item which is the
subject of disagreement shall be deemed to be a Title Defect.
8.2. PURCHASE PRICE REDUCTIONS FOR TITLE DEFECTS. With respect
to any uncured Title Defect determined to exist pursuant to SECTION
8.1 and not waived by Buyer prior to the Closing, the amount allocated
to any Title Defect shall be determined as follows:
(a) If the Title Defect results in a complete failure of
Seller's title to any Oil and Gas Property listed on SCHEDULE A-1,
the amount allocated to that Title Defect shall equal the
dollar amount allocated to that Oil and Gas Property as set forth
in SCHEDULE A-1 attached hereto.
(b) If the Title Defect does not result in a complete
failure of Seller's title to any Oil and Gas Property listed on
SCHEDULE A-1 but results in a decrease in the net revenue
interest for that Oil and Gas Property from that shown in
SCHEDULE A-1, then the amount allocated to that Title Defect
shall be equal to the product of the dollar amount allocated to
that Oil and Gas Property as set forth in SCHEDULE A-1 multiplied
by a fraction the numerator of which is the difference between
(A) the net revenue interest for that Oil and Gas Property set
forth in SCHEDULE A-1 and (B) the actual net revenue interest of
Seller in that Oil and Gas Property, and the denominator of which
is the net revenue interest for that Oil and Gas Property set
forth in SCHEDULE A-1.
(c) If the Title Defect does not result in a complete
failure of Seller's title to any Oil and Gas Property listed on
SCHEDULE A-1 that is not a "composite property" (as
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reflected in such Schedule) but results in an increase in the
working interest for that Oil and Gas Property from that shown in
SCHEDULE A-1, then the amount allocated to such Title Defect
shall be an amount equal to the present value as of the Effective
Date (discounted at 10% compounded annually) of the future costs
and expenses related to the maintenance, development and
operation of such Oil and Gas Property which are forecasted in
the Reserve Report, multiplied by the amount (expressed in terms
of a percentage) that the increase in working interest in such
Oil and Gas Property exceeds any corresponding increase in net
revenue interest in such Oil and Gas Property from that shown in
SCHEDULE A-1.
(d) If the Title Defect results in a complete failure of
Seller's title to any Oil and Gas Property listed on SCHEDULE B,
then the amount allocated to such Title Defect shall be an amount
equal to the product of the dollar amount per acre set forth in
SCHEDULE B for that Oil and Gas Property multiplied by the number
of net acres set forth in SCHEDULE B for that Oil and Gas
Property.
(e) If the Title Defect does not result in a complete
failure of Seller's title to any Oil and Gas Property listed on
SCHEDULE B but results in a reduction in the number of net acres
for that Oil and Gas Property from that shown in SCHEDULE B, then
the amount allocated to such Title Defect shall be an amount
equal to the product of the dollar amount per acre set forth in
SCHEDULE B for that Oil and Gas Property multiplied by the
difference between (A) the number of net acres set forth in
SCHEDULE B for that Oil and Gas Property and (B) the actual
number of net acres of Seller in that Oil and Gas Property.
The sum of the amounts allocated to the Title Defects described above
shall be herein called the "PURCHASE PRICE REDUCTIONS." If a Title
Defect that is not waived by Buyer prior to Closing results in a
complete failure of Seller's title to an Oil and Gas Property, such
Oil and Gas Property shall be excluded from the transactions
contemplated hereby. If a Title Defect that is not waived by Buyer
prior to Closing does not result in a complete failure of Seller's
title to an Oil and Gas Property, that portion of such Oil and Gas
Property that is affected by the Title Defect shall be excluded from
the transactions contemplated hereby to the extent practicable.
8.3. PURCHASE PRICE INCREASES. Seller shall, by no later than
December 27, 1993, give Buyer written notice of any matters of the
type described in SUBSECTIONS (A) through (C) below, which Seller
believes should result in an increase in the Purchase Price. Such
notice shall set forth: (a) a brief description of the matter giving
rise to the claimed increase in the Purchase Price; (b) supporting
documents reasonably necessary for Buyer to verify the claimed
increase in Purchase Price; (c) the identity of the Oil and Gas
Property that is affected by the claimed increase in Purchase Price;
and (d) the amount of the claimed increase in Purchase Price. If Buyer
disagrees that a claimed increase in Purchase Price is warranted or
disagrees with the
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amount of the related increase in the Purchase Price claimed by Seller
in any notice given in accordance with this SECTION 8.3, then Buyer
and Seller shall promptly meet and negotiate in good faith in an
attempt to resolve the disagreement. If Buyer and Seller are unable to
resolve their disagreement and if Seller does not waive its claim for
an increase in the Purchase Price prior to the Closing, then, for
purposes hereof, the matter which is the subject of disagreement shall
result in an increase in the Purchase Price. The Purchase Price shall,
in any event, be increased in the event the circumstances described in
SUBSECTION (D) below are operative. An increase in the Purchase Price,
to the extent not waived by Seller prior to the Closing, shall be
determined as follows:
(a) If it is determined that the ownership by Seller of an
Oil and Gas Property listed in SCHEDULE A-1 entitles Seller to a
net revenue interest in that Oil and Gas Property in excess of
that shown in SCHEDULE A-1, then the amount of the increase to
the Purchase Price shall equal the product of the dollar amount
allocated to that Oil and Gas Property as set forth on SCHEDULE
A-1 multiplied by a fraction, the numerator of which is the
difference between (a) the actual net revenue interest of Seller
for that Oil and Gas Property and (B) the net revenue interest
for that Oil and Gas Property set forth in SCHEDULE A-1 and the
denominator of which is the net revenue interest for that Oil and
Gas Property set forth in SCHEDULE A-1.
(b) If it is determined that with respect to an Oil and Gas
Property listed in SCHEDULE A-1 (other than a "composite
property" as reflected thereon) that Seller's working interest
for that Oil and Gas Property is less than that shown on SCHEDULE
A-1, then the amount of the increase in the Purchase Price shall
be an amount equal to the present value as of the Effective Date
(discounted at 10% compounded annually) of the future costs and
expenses related to the maintenance, development and operation of
such Oil and Gas Property which are forecasted in the Reserve
Report, multiplied by the amount (expressed in terms of a
percentage) that the decrease in working interest in such Oil and
Gas Property exceeds any corresponding decrease in net revenue
interest in such Oil and Gas Property from that shown in SCHEDULE
A-1.
(c) If it is determined that the ownership by Seller of an
Oil and Gas Property listed in SCHEDULE B entitles Seller to net
acres in that Oil and Gas Property in excess of that shown in
SCHEDULE B, then the amount of the increase in the Purchase Price
shall equal the product of the dollar amount set forth in
SCHEDULE B for that Oil and Gas Property multiplied by the
difference between (A) the actual number of net acres of Seller
in that Oil and Gas Property and (B) the number of net acres set
forth in SCHEDULE B for that Oil and Gas Property.
(d) If (i) Seller owns a well that is not an Oil and Gas
Property and that, under Applicable Law, is more than one legal
location removed from and in the same reservoir
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as a well or unit that is listed on SCHEDULE A-1 or any proposed
unit for an undrilled well listed on SCHEDULE A-1, and with
respect to which Seller elects to offer to Buyer for inclusion
with the Properties to be conveyed hereunder and (ii) Seller and
Buyer mutually agree upon the purchase price for such well and to
include it with the Properties to be conveyed, then the Purchase
Price shall be increased by the amount of the mutually agreed
upon purchase price.
The sum of the increases in the Purchase Price described above shall
be herein called the "PURCHASE PRICE INCREASES."
8.4. ADJUSTMENT TO PURCHASE PRICE. If the Purchase Price
Reductions are greater than the Purchase Price Increases, then the
Cash Portion of the Purchase Price payable by Buyer at Closing shall
be reduced to the extent of the difference between such amounts. If
the Purchase Price Increases are greater than the Purchase Price
Reductions, then the Cash Portion of the Purchase Price shall be
increased to the extent of the difference between A and B, where A is
the difference between the Purchase Price Increases and the Purchase
Price Reductions, and where B is $400,000.
8.5. RIGHT TO TERMINATE. If the amount of the reduction or
increase to the Cash Portion of the Purchase Price determined pursuant
to SECTION 8.4 equals or exceeds $1,000,000, then, subject to
SUBSECTIONS (b) and (c) below of SECTION 8.6, either Seller or Buyer
shall have the right to terminate this Agreement.
8.6. CERTAIN AGREEMENTS REGARDING DISPUTES.
(a) If (i) neither party has the right to terminate this
Agreement pursuant to SECTION 8.5, (ii) the parties hereto were
unable to resolve their disagreement over any Claimed Defects or
any Claimed Increases pursuant to the terms hereof and (iii) the
Closing occurs, then, (A) at the Closing, the Cash Portion of the
Purchase Price shall be reduced by the amount of Agreed Defects
and increased by the amount of Agreed Increases and (B) within
five days after the Closing, either party hereto may submit its
disagreement over any Claimed Defects or any Claimed Increases
for resolution pursuant to the provisions of SUBSECTION (d)
below.
(b) If (i) either party has the right to terminate this
Agreement pursuant to SECTION 8.5, and (ii) the parties hereto
were unable to resolve their disagreement over Claimed Defects or
Claimed Increases pursuant to the terms hereof, then, upon the
election of Buyer, Seller shall forfeit its right to terminate
this Agreement pursuant to SECTION 8.5, provided, that (A) at the
Closing, the Cash Portion of the Purchase Price shall be reduced
by the amount of Agreed Defects and increased by the amount of
Agreed Increases (provided, that in no event can the Cash Portion
of the Purchase Price be
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reduced by more than $1,000,000), (B) within five days after the
Closing, either party hereto may submit its disagreement over
such Claimed Defects or Claimed Increases for resolution pursuant
to the provisions of SUBSECTION (D) below and (C) in no event can
the amount of the reduction to the Purchase Price, giving effect
to all Agreed Defects and Agreed Increases and after operation of
SUBSECTION (d) below, exceed $1,000,000.
(c) If (i) either party has the right to terminate this
Agreement pursuant to SECTION 8.5 and (ii) the parties hereto
were unable to resolve their disagreement over Claimed Defects or
Claimed Increases pursuant to the terms hereof, then, upon the
election of Seller, Buyer shall forfeit its right to terminate
this Agreement pursuant to SECTION 8.5, provided that (A) at the
Closing, the Cash Portion of the Purchase Price shall be reduced
by the amount of Agreed Defects and increased by the amount of
Agreed Increases (provided that in no event can the Cash Portion
of the Purchase Price be increased by more than $1,000,000) and
(B) within five days after the Closing, either party hereto shall
submit its disagreement over such Claimed Defects or Claimed
Increases for resolution pursuant to SUBSECTION (d) below and (C)
in no event can the amount of the increase to the Purchase Price,
giving effect to Agreed Defects and Agreed Increases and after
operation of SUBSECTION (d) below, exceed $1,000,000.
(d) Any disagreement between the parties hereto of the type
referenced in SUBSECTION (A), SUBSECTION (B) or SUBSECTION (C)
above, shall be finally settled by arbitration conducted in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association, except as such rules may conflict with
the provisions of this SUBSECTION (D) (in which event the
provisions of this SUBSECTION (D) shall control). Each party
shall choose one arbitrator and a third arbitrator shall be
selected by mutual agreement of the party-appointed arbitrators
within 30 days after the date of the last party-appointed
arbitrator. If for any reason a vacancy occurs in the panel of
arbitrators, a replacement arbitrator shall be appointed by the
party who selected the predecessor arbitrator (or, if the
predecessor arbitrator was appointed by the party-appointed
arbitrators, the party-appointed arbitrators shall appoint the
replacement arbitrator). Any decision of the arbitrators shall be
final and binding upon the parties hereto. If, as a result of the
decision of the arbitrators, the Cash Portion of the Purchase
Price should be reduced, Seller shall pay to Buyer in cash by
wire transfer of immediately available funds, within two business
days after the decision of the arbitrators, an amount equal to
such reduction with interest thereon from the Closing Date until
payment at the lower of the prime rate of interest charged by
Bank of Montreal (as adjusted from time to time to reflect
changes in such rate) or the highest lawful rate permitted by
applicable law. If, as a result of the decision of the
arbitrators, the Cash Portion of the Portion Price should be
increased, Buyer shall pay to Seller in cash by wire transfer of
immediately available funds, within two business days after the
decision of the arbitrators, an amount equal to such increase
with interest thereon from the Closing Date until payment at the
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lower of the prime rate of interest charged by Bank of Montreal
(as adjusted from time to time to reflect changes in such rate)
or the highest lawful rate permitted by applicable law. The fees
of the arbitrators and the costs of the arbitration shall be
shared equally by the parties hereto.
8.7. ALLOCATIONS. It is hereby agreed that the dollar amount
allocated to any Oil and Gas Property on either SCHEDULE A or SCHEDULE
B shall be used only for the purposes set forth in SECTION 7.1, in
this ARTICLE VIII and for purposes of determining value in the event
of the exercise of any preferential right of purchase relating to any
of the Oil and Gas Properties, and is not intended as a measure of
value for any other or general purpose.
IX. CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment on
or prior to the Closing Date of each of the following conditions:
9.1. REPRESENTATIONS AND WARRANTIES TRUE. All the
representations and warranties of Buyer contained in this Agreement,
and in any agreement, instrument, or document delivered pursuant
hereto or in connection herewith on or prior to the Closing Date,
shall be true and correct in all material respects on and as of the
Closing Date as if made on and as of such date.
9.2. COVENANTS AND AGREEMENTS PERFORMED. Buyer shall have
performed and complied with in all material respects all covenants and
agreements required by this Agreement to be performed or complied with
by it on or prior to the Closing Date.
9.3. CERTIFICATE. Seller shall have received a certificate
executed by a duly authorized officer of Buyer, dated the Closing
Date, representing and certifying that the conditions set forth in
SECTIONS 9.1 and 9.2 have been fulfilled.
9.4. OPINION OF COUNSEL. Seller shall have received an opinion
of Fulbright & Jaworski L.L.P., dated the Closing Date, covering the
matters described in EXHIBIT 9.4A and in a form reasonably acceptable
to Seller. Seller shall have received an opinion of legal counsel to
Parent (which counsel shall be reasonably acceptable to Seller) dated
the Closing Date, covering the matters described in EXHIBIT 9.4B and
in a form reasonably acceptable to Seller.
9.5. HSR ACT. All waiting periods (and any extensions thereof)
applicable to this Agreement and the transactions contemplated hereby
under the HSR Act shall have expired or been terminated.
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9.6. LEGAL PROCEEDINGS. No Proceedings shall, on the Closing
Date, be pending or threatened seeking to restrain, prohibit, or
obtain damages or other relief in connection with this Agreement or
the consummation of the transactions contemplated hereby.
X. CONDITIONS TO OBLIGATION OF BUYER
The obligations of Buyer to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment on
or prior to the Closing Date of each of the following conditions:
10.1. REPRESENTATIONS AND WARRANTIES TRUE. All the
representations and warranties of Seller contained in this Agreement,
and in any agreement, instrument, or document delivered pursuant
hereto or in connection herewith on or prior to the Closing Date,
shall be true and correct on and as of the Closing Date as if made on
and as of such date, except for such breaches of or inaccuracies in
such representations and warranties which individually or in the
aggregate would not result in any material adverse change in or
relating to the value to Buyer of the Properties taken as a whole
immediately after the Closing.
10.2. COVENANTS AND AGREEMENTS PERFORMED. Seller shall have
performed and complied with in all material respects all covenants and
agreements required by this Agreement to be performed or complied with
by it on or prior to the Closing Date.
10.3. CERTIFICATE. Buyer shall have received a certificate
executed by a duly authorized officer of Seller, dated the Closing
Date, representing and certifying that the conditions set forth in
SECTIONS 10.1 and 10.2 have been fulfilled.
10.4. OPINION OF COUNSEL. Buyer shall have received an opinion
of Thompson & Knight, P.C., dated the Closing Date, covering the
matters described in EXHIBIT 10.4 and in a form reasonably acceptable
to Buyer.
10.5. HSR ACT. All waiting periods (and any extensions thereof)
applicable to this Agreement and the transactions contemplated hereby
under the HSR Act shall have expired or been terminated.
10.6. LEGAL PROCEEDINGS. No Proceedings shall, on the Closing
Date, be pending or threatened seeking to restrain, prohibit, or
obtain damages or other relief in connection with this Agreement or
the consummation of the transactions contemplated hereby.
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XI. TERMINATION, AMENDMENT AND WAIVER
11.1. TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the
Closing in the following manner:
(a) by mutual written consent of Seller and Buyer; or
(b) by either Seller or Buyer, if:
(i) the Closing shall not have occurred on or
before April 11, 1994, unless such failure to close
shall be due to a breach of this Agreement by the party
seeking to terminate this Agreement pursuant to this
CLAUSE (i); or
(ii) there shall be any statute, rule, or
regulation that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited or
a Governmental Entity 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; or
(c) by either Seller or Buyer as the case may be, as
provided in SECTION 8.5; or
(d) by Buyer, as provided in ARTICLE XIII.
In the event of the termination of this Agreement pursuant to this
SECTION 11.1 by Seller or Buyer, written notice thereof shall
forthwith be given to the other party specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall
become void and have no effect, except that the agreements contained
in this Section and in SECTIONS 7.4, 7.13 and 7.19 and 7.20 shall
survive the termination hereof. Nothing contained in this Section
shall relieve any party from liability for any breach of this
Agreement.
11.2. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by or on behalf of all the partieshereto.
11.3. WAIVER. Each of Seller and Buyer may (a) waive any
inaccuracies in the representations and warranties of the other
contained herein or in any document, certificate, or writing delivered
pursuant hereto or (b) waive compliance by the other with any of the
other's agreements or fulfillment of any conditions to its own
obligations contained herein. Any agreement on the part of a party
hereto to any such waiver shall be valid only if set forth in an
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instrument in writing signed by or on behalf of such party. No failure
or delay by a party hereto in exercising any right, power, or
privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power, or
privilege.
XII. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
12.1. SURVIVAL. The representations, and warranties of the
parties hereto contained in this Agreement or in any certificate,
instrument, or document delivered pursuant hereto and the covenants of
the parties shall not survive the Closing, regardless of any
investigation made by or on behalf of any party, except as hereinafter
provided: (a) the representations and warranties of Seller contained
in SECTION 5.22 shall not survive the Closing, except as to any
Environmental Claim (as defined below), in which case such
representations and warranties shall survive until the fifth
anniversary of the Closing Date, (b) the representations and
warranties of Seller and Buyer contained in SECTIONS 5.23 and 6.8
shall survive until the expiration of the limitation period under the
applicable statute of limitations, (c) the representations and
warranties of Seller in SECTIONS 5.1, 5.2, 5.3, 5.4, 5.5, 5.8, 5.10,
5.11, 5.14, 5.15, 5.17, 5.18, 5.19, 5.20 and 5.24 shall survive until
the second anniversary of the Closing Date, (d) all representations
and warranties of Buyer, other than those contained in SECTION 6.8,
shall survive until the second anniversary of the Closing Date, (e)
the covenants of the parties in SECTIONS 7.1, 7.2, and 7.21 and in the
second proviso of SECTION 7.12 shall survive until the second
anniversary of the Closing Date, and (f) the covenants of the parties
in SECTIONS 7.14, 7.15, 7.16, 7.18, 7.19, 7.20, 7.22, 7.23, 7.24 and
7.26 shall survive the Closing Date (each such anniversary and time of
expiration, if any, a "SURVIVAL DATE"). From and after a Survival
Date, no party hereto or any shareholder, director, officer, employee,
or affiliate of such party shall be under any liability whatsoever
(whether pursuant to this SECTION 12.1 or otherwise with respect to
any representation, warranty or covenant to which such Survival Date
relates unless before the Survival Date for such representation or
warranty it shall have received from the party seeking indemnification
written notice of the existence of the claim for or in respect of
which indemnification is sought. Such notice shall set forth with
reasonable specificity, to the extent then known (i) the basis under
this Agreement, and the facts that otherwise form the basis, of such
claim, (ii) an estimate of the amount of such claim (which estimate
shall not be conclusive of the final amount of such claim) and an
explanation of the calculation of such estimate, including a statement
of any significant assumptions employed therein, and (iii) the date on
and manner in which the party delivering such notice became aware of
the existence of such claim. As used herein, "ENVIRONMENTAL CLAIM"
shall mean any claim, action, suit or proceeding made, brought or
filed, as the case may be, by a Governmental Entity or other third
party against Buyer, arising out of or relating to a condition
existing as of the Closing or an event occurring prior to the Closing
that is in contravention of or in breach of any of the representations
and warranties made by Seller in SECTION 5.22 as of the date hereof or
as of the Closing.
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12.2. INDEMNIFICATION BY SELLER. Subject to the terms and
conditions of this ARTICLE XII, Seller shall indemnify, defend, and
hold harmless Buyer, its affiliates, their respective directors,
officers, employees, and agents, and each of the heirs, legal
representatives, successors, and assigns of any of the foregoing
(collectively, the "BUYER GROUP"), from and against any and all
claims, actions, causes of action, demands, assessments, losses,
damages, liabilities, judgments, settlements, penalties, costs, and
expenses (including reasonable attorneys' fees and expenses), of any
nature whatsoever (collectively, "DAMAGES"), asserted against,
resulting to, imposed upon, or incurred by any member of the Buyer
Group, directly or indirectly, by reason of or resulting from:
(a) any inaccuracy in or breach of any representation
or warranty of Seller contained in this Agreement which
survives the Closing Date;
(b) any breach by Seller of any of its covenants or
agreements contained in this Agreement which survives the
Closing Date;
(c) any claim, action or proceeding made or brought by
a third party arising out of or attributable to the
ownership or operation of the Properties prior to the
Closing Date (other than matters covered in the
representations of Seller in SECTION 5.9 and described in
CLAUSE (D) below) and then only if Buyer gives notice to
Seller of the claim of Buyer for such indemnification prior
to the second anniversary of the Closing Date; and
(d) any Environmental Claim.
12.3. INDEMNIFICATION BY BUYER. Subject to the terms and
conditions of this ARTICLE XII, Buyer shall indemnify, defend, and
hold harmless Seller, its affiliates, their respective directors,
officers, employees, and agents, and each of the heirs, legal
representatives, successors, and assigns of any of the foregoing
(collectively, the "SELLER GROUP"), from and against any and all
Damages asserted against, resulting to, imposed upon, or incurred by
any member of the Seller Group, directly or indirectly, by reason of
or resulting from:
(a) any inaccuracy in or breach of any representation
or warranty of Buyer contained in this Agreement which
survives the Closing Date;
(b) any breach by Buyer of any of its covenants or
agreements contained in this Agreement which survives the
Closing Date; and
(c) any claim, action or proceeding made or brought by
a third party arising out of or attributable to the
ownership or operation of the Properties after the Closing
Date.
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12.4. CERTAIN LIMITATIONS ON SELLER'S LIABILITY.
Notwithstanding anything in this ARTICLE XII or elsewhere in this
Agreement to the contrary:
(a) No indemnification shall be required to be made by
Seller pursuant to SECTIONS 12.2(A), (B) and (C), until and
except to the extent that the aggregate amount of Damages
thereunder exceeds $1,000,000.
(b) The indemnification obligation of Seller under SECTION
12.2(d) shall be subject to the following. No indemnification
shall be required to be made by Seller pursuant to SECTION
12.2(d), until and except to the extent that the aggregate amount
of Damages thereunder exceeds $1,000,000 (the "THRESHOLD
AMOUNT"). Thereafter, Seller shall be required to indemnify the
Buyer Group for all Damages under SECTION 12.2(d) in excess of
the Threshold Amount until that point in time when Seller has
indemnified the Buyer Group for Damages in an aggregate amount
equal to $2,000,000 (the "SPLIT POINT"). From and after the Split
Point, Seller shall be required to indemnify the Buyer Group for
(i) 75% of all Damages under SECTION 12.2(d), to the extent that
Buyer gives notice to Seller of the claim of Buyer for such
indemnification prior to the second anniversary of the Closing
Date and (ii) 50% of all Damages under SECTION 12.2(d), to the
extent that Buyer gives notice to Seller of the claim of Buyer
for such indemnification on or after the second anniversary of
the Closing Date but prior to the fifth anniversary of the
Closing Date. Seller shall have no further liability under
Environmental Laws with respect to the Oil and Gas Properties as
to any claims in connection therewith arising after the fifth
anniversary of the Closing Date.
(c) The amount of Damages required to be paid by Seller to
indemnify the Buyer Group pursuant to this ARTICLE XII shall be
reduced to the extent of any amounts in excess of $1,000,000
actually received by any member of the Buyer Group after the
Closing Date pursuant to the terms of the insurance policies (if
any) covering the subject claim.
12.5. PROCEDURE FOR INDEMNIFICATION. Within ten days after
receipt by an indemnified party under SECTION 12.2 or 12.3 of notice
of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against an indemnifying party
under such Section, give written notice to the indemnifying party of
the commencement thereof, but the failure so to notify the
indemnifying party shall not relieve it of any liability that it may
have to any indemnified party except to the extent the indemnifying
party demonstrates that the defense of such action is materially
prejudiced thereby. In case any such action shall be brought against
an indemnified party and it shall give written notice to the
indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it
may wish, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. If the indemnifying party
elects to assume the defense of such action,
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the indemnified party shall have the right to employ separate counsel
at its own expense and to participate in the defense thereof. If the
indemnifying party elects not to assume (or fails to assume) the
defense of such action, the indemnified party shall be entitled to
assume the defense of such action with counsel of its own choice, at
the expense of the indemnifying party. If the action is asserted
against both the indemnifying party and the indemnified party and
there is a conflict of interests which renders it inappropriate for
the same counsel to represent both the indemnifying party and the
indemnified party, the indemnifying party shall be responsible for
paying for separate counsel for the indemnified party; provided,
however, that if there is more than one indemnified party, the
indemnifying party shall not be responsible for paying for more than
one separate firm of attorneys to represent the indemnified parties,
regardless of the number of indemnified parties. If the indemnifying
party elects to assume the defense of such action, (a) no compromise
or settlement thereof may be effected by the indemnifying party
without the indemnified party's written consent (which shall not be
unreasonably withheld) unless the sole relief provided is monetary
damages that are paid in full by the indemnifying party and (b) the
indemnifying party shall have no liability with respect to any
compromise or settlement thereof effected without its written consent
(which shall not be unreasonably withheld).
XIII. CASUALTY LOSS AND CONDEMNATION
If after the Effective Date and prior to the Closing, any part
of the Properties shall be destroyed by fire or any other cause (but
not to a substantial extent) or shall be taken by condemnation or the
exercise of eminent domain (but not to a substantial extent), then if
Closing occurs, Seller shall pay at Closing to Buyer all proceeds of
insurance or condemnation (to the extent then received and not subject
to payment or reimbursement by Seller or its affiliates) which were
paid in respect of such loss or taking; if any proceeds of insurance
or condemnation, to the extent not subject to payment or reimbursement
by Seller or its affiliates, are received by Seller after the Closing,
Seller shall promptly tender such proceeds to Buyer. In the event that
either so much of the Properties are damaged or destroyed by fire or
other event or taken by condemnation or purchase in lieu thereof,
after the Effective Date but before the Closing, to the extent that
the value allocated to all those Properties so affected, as set forth
on SCHEDULE A, exceeds $5,000,000, then the Properties shall be deemed
to have been destroyed or harmed to a substantial extent for the
purpose of this ARTICLE XIII. If the Properties are destroyed or
harmed to a substantial extent as above described, then Buyer shall
have the right to elect either (a) to close this transaction as if the
Properties had not been destroyed or harmed to a substantial extent,
whereupon Seller shall make the payments described in the first
sentence of this ARTICLE XIII, or (b) to terminate this Agreement,
whereupon Seller and Buyer shall be released and relieved of all
further obligation hereunder, as provided in ARTICLE XI.
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XIV. CERTAIN ACCOUNTING ADJUSTMENTS
14.1. ADJUSTMENTS. Except as otherwise provided herein, (x) all
costs and revenues attributable to the Properties and the operations
thereon prior to the Effective Date shall be the obligation of and for
the benefit of Seller and (y) all costs and revenues attributable to
the Properties and the operations thereon after the Effective Date
shall be the obligation of and for the benefit of Buyer. The Purchase
Price shall be adjusted upward by the following: (i) the value of all
merchantable, allowable oil in storage on the Effective Date at the
location of each Property that is credited to the Property, based upon
the actual prices being paid less the cost of transportation, however
paid, and less taxes and other expenses, if any, deducted by the
purchaser of the oil; and (ii) the amount (less amounts which have
been collected from others in reimbursement of the following direct
expenditures) of all actual expenditures of Seller (including
royalties, delay rentals and other charges, and ad valorem, property,
production, excise, severance, windfall profit and other taxes (other
than income taxes), based upon or measured by the ownership of
property or the production of Hydrocarbons or the receipt of proceeds
therefrom), expenses, including drilling and completion expenses,
billed under applicable operating agreements and, in the absence of an
operating agreement, expenses of the sort customarily billed under
such agreements, but excluding any of Seller's or any of its
affiliate's overhead and administrative expenses or office lease
expenses, paid by or on behalf of Seller and to the extent, in
accordance with generally accepted accounting principles, in
connection with the Properties in the ordinary course of business
after the Effective Date, plus an amount calculated at the rate of
$40,000 per month to the Closing as the sole compensation to Seller
for its overhead and administrative expenses and office lease expenses
in connection with supervising the Properties, plus the amount of any
expenditures attributable to the Oil and Gas Properties prior to the
Effective Date with respect to the projects or other activities listed
on SCHEDULE 14.1 or hereafter approved by Buyer.
The Purchase Price shall be adjusted downward by the following:
(A) the proceeds received by Seller in connection with the Properties
to the extent, in accordance with generally accepted accounting
principles, attributable to the period after the Effective Date,
including income resulting from combined fixed rate overhead charges
under applicable operating agreements and the proceeds received by
Seller from the disposition after the Effective Date (with or without
the prior consent from Buyer as provided in SECTION 7.1) of all or any
portion of the Properties; (B) an amount equal to all ad valorem,
property, production, excise, severance, windfall profit and similar
taxes and assessments (but not including income taxes) based upon or
measured by the ownership of property or the production of
Hydrocarbons or the receipt of proceeds therefrom accruing or relating
to the Properties prior to the Effective Date to the extent not paid
by Seller before the Closing Date and thereafter assumed by Buyer; (C)
the amount of all actual direct expenditures of Seller (including
royalties, rentals and other charges, expenses, including drilling and
completion expenses, billed under applicable operating agreements and,
in the absence of an operating agreement, expenses of the sort
customarily billed under such
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agreements), that are, in accordance with generally accepted
accounting principles, attributable to the ownership or the operation
of the Properties before the Effective Date, to the extent not paid by
the Seller before the Closing Date and thereafter assumed by Buyer;
(D) all amounts collected by Seller as operator (or otherwise) from
other working interest owners attributable to such parties' shares of
the costs and expenses of an operation or operations after the
Effective Date for which (and to the extent) Seller has not yet
actually paid such costs and expenses; and (E) the proceeds received
by Seller in connection with the Properties described in SCHEDULE 14.1
attributable to the period prior to the Effective Date.
14.2. ACCOUNTING. No later than 15 days prior to Closing,
Seller shall furnish Buyer with an estimated accounting showing in
reasonable detail the adjustments described in and subject to SECTION
14.1. If pursuant to such estimated accounting either Seller or Buyer
shall owe any obligation to the other, then the Cash Portion of the
Purchase Price paid at Closing shall be adjusted to reflect such
charges and credits which are necessary to accomplish such adjustment.
Promptly after the Closing Date (but not later than one hundred eighty
(180) days thereafter), Seller shall furnish Buyer with a final
accounting showing in reasonable detail the adjustments described in
and subject to SECTION 14.1. For a period of 90 days following receipt
by Buyer of such accounting, Seller shall provide Buyer and its
representatives with access to all records reasonably required to
compute all adjustments pursuant to this ARTICLE XIV. If within ninety
(90) days after Seller furnishes such final accounting to Buyer, Buyer
and Seller are unable to agree on such final accounting, then either
Seller or Buyer may submit such dispute to the accounting firm of
Arthur Andersen & Co. and the determination made as to such dispute by
such accounting firm shall be final and binding upon Seller and Buyer.
Final settlement shall be made within thirty (30) days following
agreement by the Buyer and Seller or final determination by said
accounting firm. The fees charged by said accounting firm for making
determinations under this SECTION 14.2 shall be paid one-half (1/2) by
Buyer and one-half (l/2) by Seller. The parties agree that if actual
ad valorem taxes on the Oil and Gas Properties for a particular state
for calendar year 1993 are still not known at the time of the final
accounting, appropriate adjustments consistent with SECTION 14.1 will
be made to reflect such actual ad valorem taxes after the final
accounting, provided such adjustments are made within one year after
the Closing.
XV. MISCELLANEOUS
15.1. NOTICES. All notices or other communications required or
permitted to be given pursuant to this Agreement shall be in writing
and shall be given either (a) in person, (b) by United States mail,
certified or registered, return receipt requested, postage prepaid,
(c) by prepaid telegram, telex, telecopy or similar means (with signed
confirmed copy to follow by mail
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in the same manner as provided in CLAUSE (B) above) or (d) by
expedited delivery service with proof of delivery, to the parties at
the following addresses (or at such other addresses as shall be
specified by the parties by like notice):
If to Seller:
Santa Fe Energy Resources, Inc.
Santa Fe Energy Operating Partners, L.P.
1616 South Voss Road, Suite 1000
Houston, Texas 77057
ATTN: John R. Womack
Fax: 713/268-5341
If to Buyer:
Bridge Oil (U.S.A.) Inc.
12404 Park Central Drive
Suite 400
Dallas, Texas 75251
ATTN: Dr. George G. Fenton
Fax: 214-788-0656
For purposes of the foregoing, any notice required or permitted to be
given shall be deemed to be delivered and given on the date actually
delivered to the address specified above.
15.2. ENTIRE AGREEMENT. This Agreement, together with the
Schedules, Exhibits and the other writings referred to herein or
delivered pursuant hereto, constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede
all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
15.3. BINDING EFFECT; SUCCESSORS AND ASSIGNS. This Agreement
shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto without the prior
written consent of the other parties; provided, that prior to the
Closing, either SFER or SFEOP (or both) may assign all or a portion of
its respective interest in the Properties to a wholly-owned subsidiary
of SFER (the "SFER SUB"), subject to the following: (a) SFER or SFEOP
(as appropriate) shall cause the SFER Sub to convey the Properties so
assigned to it to Buyer at the Closing in accordance with the terms
hereof; (b) SFER and SFEOP shall notify Buyer no later than two
business days prior to the Closing as to which of the parties (SFER,
SFEOP and SFER Sub) shall receive the Cash Portion of the Purchase
Price
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and the Bridge Common Stock to be delivered at the Closing; (c) SFER
Sub shall agree (in a form reasonably acceptable to Buyer) that it
will be jointly and severally liable with Seller for Seller's duties
and obligations to Buyer hereunder; and (d) in no event shall the
assignment of Properties by SFER or SFEOP to the SFER Sub in any way
relieve SFER or SFEOP of its duties and obligations hereunder;
provided, further, that Buyer shall have the right to designate Bridge
Oil Company, L.P., a Delaware limited partnership ("BRIDGE LP"), as
the party to whom Seller shall convey the Properties at the Closing
and assign its rights hereunder with respect thereto, subject to the
prior receipt by Seller of an agreement (in a form reasonably
acceptable to Seller) of Bridge LP to become jointly and severally
liable with Buyer for Buyer's duties and obligations to Seller
hereunder.
15.4. SEVERABILITY. If any provision of this Agreement is held to
be unenforceable, this Agreement shall be considered divisible and
such provision shall be deemed inoperative to the extent it is deemed
unenforceable, and in all other respects this Agreement shall remain
in full force and effect; provided, however, that if any such
provision may be made enforceable by limitation thereof, then such
provision shall be deemed to be so limited and shall be enforceable to
the maximum extent permitted by applicable law.
15.5. NO THIRD-PARTY BENEFICIARIES. It is the intent of the
parties hereto that no third-party beneficiary rights be created or
deemed to exist in favor of any person not a party to this Agreement,
unless otherwise expressly agreed to in writing by the parties.
15.6. DTPA WAIVER. TO THE EXTENT APPLICABLE TO THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, BUYER WAIVES THE PROVISIONS OF THE
TEXAS DECEPTIVE TRADE PRACTICES ACT, CHAPTER 17, SUBCHAPTER E, SECTION
17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION 17.55A, WHICH IS
NOT WAIVED), TEX. BUS. & COMM. CODE. IN ORDER TO EVIDENCE ITS ABILITY
TO GRANT SUCH WAIVER, BUYER HEREBY REPRESENTS AND WARRANTS TO SELLER
THAT BUYER (A) IS IN THE BUSINESS OF SEEKING OR ACQUIRING, BY PURCHASE
OR LEASE, GOODS OR SERVICES FOR COMMERCIAL OR BUSINESS USE, (B) HAS
ASSETS OF $5,000,000 OR MORE ACCORDING TO ITS MOST RECENT FINANCIAL
STATEMENT PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, (C) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS
MATTERS THAT ENABLE IT TO EVALUATE THE MERITS AND RISKS OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND (D) IS NOT IN A
SIGNIFICANTLY DISPARATE BARGAINING POSITION.
15.7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
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15.8. COUNTERPARTS. This Agreement may be executed by the
parties hereto in any number of counterparts, each of which shall be
deemed an original, but all of which shall constitute but one and the
same agreement.
IN WITNESS WHEREOF. THIS AGREEMENT HAS BEEN EXECUTED AS OF THE
DAY AND YEAR FIRST ABOVE WRITTEN.
SELLER
SANTA FE ENERGY RESOURCES, INC.
By: J. R. WOMACK
Name: J. R. Womack
Title: Vice President
SELLER:
SANTA FE ENERGY OPERATING
PARTNERS, L.P.
By: SANTA FE PACIFIC EXPLORATION
COMPANY, Managing Partner
By: J. R. WOMACK
Name: J. R. Womack
Title: Vice President
BUYER:
BRIDGE OIL (U.S.A.) INC.
By: GEORGE G. FENTON
Name: George G. Fenton
Title: President
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EXHIBIT 9.4A
BUYER
1. Buyer is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware.
2. The execution, delivery and performance by Buyer of the
Agreement, the Registration Rights Agreement, the Investment Agreement
and the Exploration Agreement (the "Buyer Documents") are within the
corporate power and authority of Buyer and do not (i) contravene or
violate any provisions of the Certificate of Incorporation or Bylaws
of Buyer, as amended to the date hereof, or (ii) contravene or result
in any breach of or constitute a default under any applicable law,
rule or regulation or any material loan, note or other agreement or
instrument known to us to which Buyer is a party or by which it or any
of its properties are bound.
3. The execution, delivery and performance by Buyer of the
Buyer Documents have each been duly authorized by the Board of
Directors of Buyer, and no other corporate or shareholder action is
required to be taken to authorize such execution, delivery andperformance.
4. The Buyer Documents have each been duly executed and
delivered by Buyer and constitute legal, valid and binding obligations
of Buyer enforceable in accordance with their respective terms, except
as enforcement may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or general
principles of equity, whether applied by a court of law or equity.
5. No consent, approval, authorization or order of any court or
governmental agency or authority which has not been obtained is
required in connection with the execution, delivery and performance by
Buyer of the Buyer Documents, except for filings with governmental
entities to occur in the ordinary course following consummation of the
transactions contemplated by the Agreement.
6. The Consideration Shares issued pursuant to the Agreement
have been duly authorized and are validly issued, fully paid and
nonassessable.
7. The Registration Statement has become effective and, to the
best of our knowledge, no stop order suspending its effectiveness has
been issued.
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EXHIBIT 9.4B
PARENT
1. Parent is a corporation duly organized, validly existing and
in good standing under the laws of Australia.
2. The execution, delivery and performance by Parent of the
Investment Agreement are within the corporate power and authority of
the Parent and do not (i) contravene or violate any provisions of the
charter provisions of Parent, as amended to the date hereof, or (ii)
contravene or result in any breach of or constitute a default under
any applicable law, rule or regulation or any material loan, note or
other agreement or instrument known to us to which Parent is a party
or by which it or any of its properties are bound.
3. The execution, delivery and performance by Parent of the
Investment Agreement has been duly authorized by the Board of
Directors of Parent, and no other corporate or shareholder action is
required to be taken to authorize such execution, delivery and
performance.
4. The Investment Agreement has been duly executed and
delivered by Parent and constitutes a legal, valid and binding
obligation of Parent enforceable in accordance with its terms, except
as enforcement may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or general
principles of equity, whether applied by a court of law or equity.
5. No consent, approval, authorization or order of any court or
governmental agency or authority which has not been obtained is
required in connection with the execution, delivery and performance by
Parent of the Investment Agreement.
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EXHIBIT 10.4
SFER
1. SFER is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware.
2. The execution, delivery and performance by SFER of the
Agreement, the Registration Rights Agreement and the Investment
Agreement (the "SFER Documents") are within the corporate power and
authority of SFER and do not (i) contravene or violate any provisions
of the Certificate of Incorporation or Bylaws of SFER, as amended to
the date hereof, or (ii) contravene or result in any breach of or
constitute a default under any applicable law, rule or regulation or
any material loan, note or other agreement or instrument known to us
to which SFER is a party or by which it or any of its properties are
bound.
3. The execution, delivery and performance by SFER of the SFER
Documents have each been duly authorized by the Board of Directors of
SFER, and no other corporate or shareholder action is required to be
taken to authorize such execution, delivery and performance.
4. The SFER Documents have each been duly executed and
delivered by SFER and constitute legal, valid and binding obligations
of SFER enforceable in accordance with their respective terms, except
as enforcement may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or general
principles of equity, whether applied by a court of law or equity.
5. No consent, approval, authorization or order of any court or
governmental agency or authority which has not been obtained is
required in connection with the execution, delivery and performance by
SFER of the SFER Documents, except for filings with governmental
entities to occur in the ordinary course following consummation of the
transactions contemplated by the Agreement and except no opinion is
expressed with respect to any preferential rights or consents to
assignment applicable to the Properties.
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EXHIBIT 10.4
SFEOP
1. SFEOP is a limited partnership duly formed, validly existing
and in good standing under the laws of the State of Delaware.
2. The execution, delivery and performance by SFEOP of the
Agreement and the Exploration Agreement (the "SFEOP Documents") are
within the partnership power and authority of the SFEOP and do not (i)
contravene or violate any provisions of the Agreement of Limited
Partnership of SFEOP, as amended to the date hereof, or (ii)
contravene or result in any breach of or constitute a default under
any applicable law, rule or regulation or any material loan, note or
other agreement or instrument known to us to which SFEOP is a party or
by which it or any of its properties are bound.
3. The execution, delivery and performance by SFEOP of the
SFEOP Documents have each been duly authorized in accordance with the
Agreement of Limited Partnership of SFEOP, as amended to the date
hereof, and no other partnership or partner action is required to be
taken to authorize such execution, delivery and performance.
4. The SFEOP Documents have each been duly executed and
delivered by SFEOP and constitute legal, valid and binding obligations
of SFEOP enforceable in accordance with their respective terms, except
as enforcement may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or general
principles of equity, whether applied by a court of law or equity.
5. No consent, approval, authorization or order of any court or
governmental agency or authority which has not been obtained is
required in connection with the execution, delivery and performance by
SFEOP of the SFEOP Documents, except for filings with governmental
entities to occur in the ordinary course following consummation of the
transactions contemplated by the Agreement and except no opinion is
expressed with respect to any preferential rights or consents to
assignment applicable to the Properties.
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EXHIBIT 10(v)
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
dated as of March 16, 1994
among
SANTA FE ENERGY RESOURCES, INC.,
the Banks signatory hereto,
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
as Co-Agent and Administrative Agent
and
NATIONSBANK OF TEXAS, N.A.
as Co-Agent
<PAGE>
TABLE OF CONTENTS
Section 1. Definitions and Accounting Matters . . . . . . . . . 1
1.1. Certain Defined Terms . . . . . . . . . . . . . . . . . 1
1.2. Accounting Terms and Determinations . . . . . . . . . . 40
1.3. Classes and Types of Loans . . . . . . . . . . . . . . 41
Section 2. Commitments . . . . . . . . . . . . . . . . . . . . . 42
2.1. Loans . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.2. Terminations, Reductions and Changes of Commitments and
Facility A Maximum Amounts . . . . . . . . . . . . . . 44
2.3. Fees . . . . . . . . . . . . . . . . . . . . . . . . . 46
2.4. Affiliates; Lending Offices . . . . . . . . . . . . . . 47
2.5. Several Obligations . . . . . . . . . . . . . . . . . . 47
2.6. Notes . . . . . . . . . . . . . . . . . . . . . . . . . 48
2.7. Optional Reserve Report . . . . . . . . . . . . . . . . 48
2.8. Release of Mortgages . . . . . . . . . . . . . . . . . 48
2.9. Use of Proceeds . . . . . . . . . . . . . . . . . . . . 49
2.10.Original Credit Documents Not Terminated . . . . . . . 49
2.11.Sale of Certain Properties . . . . . . . . . . . . . . 49
Section 3. Borrowings, Prepayments and Selection of
Interest Rates . . . . . . . . . . . . . . . . . 50
3.1. Borrowings . . . . . . . . . . . . . . . . . . . . . . 50
3.2. Prepayments . . . . . . . . . . . . . . . . . . . . . . 50
3.3. Selection of Interest Rates . . . . . . . . . . . . . . 52
Section 4. Payments of Principal and Interest . . . . . . . . . 53
4.1. Repayment of Loans . . . . . . . . . . . . . . . . . . 53
4.2. Interest . . . . . . . . . . . . . . . . . . . . . . . 53
Section 5. Payments; Pro Rata Treatment; Computations, Etc. . . 54
5.1. Payments . . . . . . . . . . . . . . . . . . . . . . . 54
5.2. Pro Rata Treatment . . . . . . . . . . . . . . . . . . 55
5.3. Computations . . . . . . . . . . . . . . . . . . . . . 55
5.4. Minimum and Maximum Amounts . . . . . . . . . . . . . . 55
5.5. Certain Actions, Notices, Etc . . . . . . . . . . . . . 55
5.6. Non-Receipt of Funds by the Agent . . . . . . . . . . . 57
5.7. Sharing of Payments, Etc. . . . . . . . . . . . . . . . . 57
Section 6. Yield Protection and Illegality . . . . . . . . . . . 58
6.1. Additional Costs. . . . . . . . . . . . . . . . . . . . 58
6.2. Limitation on Types of Loans . . . . . . . . . . . . . 60
6.3. Illegality . . . . . . . . . . . . . . . . . . . . . . 61
6.4. Substitute Alternate Base Rate Loans . . . . . . . . . 62
6.5. Compensation . . . . . . . . . . . . . . . . . . . . . 62
6.6. Capital Adequacy . . . . . . . . . . . . . . . . . . . 63
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Section 7. Conditions Precedent . . . . . . . . . . . . . . . . 64
7.1. Closing Conditions . . . . . . . . . . . . . . . . . . 64
7.2. All Loans . . . . . . . . . . . . . . . . . . . . . . . 66
Section 8. Representations and Warranties . . . . . . . . . . . 67
8.1. Corporate Existence . . . . . . . . . . . . . . . . . . 67
8.2. Information . . . . . . . . . . . . . . . . . . . . . . 68
8.3. Litigation; Compliance . . . . . . . . . . . . . . . . 68
8.4. No Breach . . . . . . . . . . . . . . . . . . . . . . . 69
8.5. Corporate Action . . . . . . . . . . . . . . . . . . . 69
8.6. Approvals . . . . . . . . . . . . . . . . . . . . . . . 69
8.7. Regulations G, U and X . . . . . . . . . . . . . . . . 70
8.8. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 70
8.9. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 70
8.10.Subsidiaries . . . . . . . . . . . . . . . . . . . . . 70
8.11.Investment Company Act . . . . . . . . . . . . . . . . 70
8.12.Public Utility Holding Company Act . . . . . . . . . . 70
8.13.Environmental Matters . . . . . . . . . . . . . . . . . 71
8.14.Title . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 9. Covenants . . . . . . . . . . . . . . . . . . . . . . 72
9.1. Financial Statements and Certificates . . . . . . . . . 72
9.2. Inspection of Property . . . . . . . . . . . . . . . . 76
9.3. Compliance with Environmental Laws . . . . . . . . . . 77
9.4. Payment of Taxes . . . . . . . . . . . . . . . . . . . 77
9.5. Maintenance of Insurance . . . . . . . . . . . . . . . 77
9.6. Restricted Payments and Restricted Investments . . . . 78
9.7. Lien, Debt and Other Restrictions. . . . . . . . . . . 79
9.8. Issuance of Stock by Restricted Subsidiaries . . . . . 91
9.9. Coverage Ratios . . . . . . . . . . . . . . . . . . . . 91
9.10.Prepayment of Junior Securities . . . . . . . . . . . . 91
Section 10. Defaults. . . . . . . . . . . . . . . . . . . . . . . 91
10.1.Events of Default. . . . . . . . . . . . . . . . . . . 91
Section 11. The Agent . . . . . . . . . . . . . . . . . . . . . . 96
11.1.Appointment, Powers and Immunities . . . . . . . . . . 96
11.2.Reliance by Agent . . . . . . . . . . . . . . . . . . . 96
11.3.Defaults . . . . . . . . . . . . . . . . . . . . . . . 97
11.4.Rights as a Bank . . . . . . . . . . . . . . . . . . . 97
11.5.INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . 98
11.6.Non-Reliance on the Agent and Other Banks . . . . . . . 98
11.7.Failure to Act . . . . . . . . . . . . . . . . . . . . 98
11.8.Resignation or Removal of the Agent . . . . . . . . . . 99
Section 12. Miscellaneous . . . . . . . . . . . . . . . . . . . 99
12.1.Waiver . . . . . . . . . . . . . . . . . . . . . . . . 99
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12.2.Notices . . . . . . . . . . . . . . . . . . . . . . . . 99
12.3.Expenses, Etc. . . . . . . . . . . . . . . . . . . . . 100
12.4.INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . 100
12.5.Amendments, Etc. . . . . . . . . . . . . . . . . . . . 101
12.6.Successors and Assigns . . . . . . . . . . . . . . . . 102
12.7.Survival; Term; Reinstatement . . . . . . . . . . . . . 105
12.8.Limitation of Interest . . . . . . . . . . . . . . . . 106
12.9.Captions . . . . . . . . . . . . . . . . . . . . . . . 107
12.10.Counterparts . . . . . . . . . . . . . . . . . . . . . 107
12.11.GOVERNING LAW . . . . . . . . . . . . . . . . . . . . 107
12.12.Severability . . . . . . . . . . . . . . . . . . . . . 107
12.13.Chapter 15 Not Applicable . . . . . . . . . . . . . . 108
Exhibit A - Form of Facility A Note
Exhibit B - Form of Facility B Note
Exhibit C - Request for Extension of Credit
Exhibit D - Assignment Agreement
Exhibit E - Facility A Maximum Amount
Exhibit F - Preliminary Available Amount
Schedule I - Restricted and Unrestricted Subsidiaries
Schedule II - Liens and Funded Debt
Schedule III - Initial Approved Assumptions and Price Protection
Agreements
Schedule IV - Coverage Report
Schedule V - Subordination Provisions
Schedule VI - Opinion of Andrews & Kurth, L.L.P.
Schedule VII - Opinion of David L. Hicks
Schedule VIII- Mortgages
Schedule IX - Jurisdictions for Which Certificates Are to Be
Provided
Schedule X - Designated Debt
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AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
This Amended and Restated Revolving Credit Agreement (as amended,
modified, supplemented and restated from time to time, this
"AGREEMENT") dated as of March 16, 1994, is by and among SANTA FE
ENERGY RESOURCES, INC. (the "COMPANY"), a Delaware corporation; each
of the lenders which is or which may from time to time become a
signatory hereto (individually a "BANK" and collectively the "BANKS");
TEXAS COMMERCE BANK NATIONAL ASSOCIATION ("TCB"), a national banking
association, as Administrative Agent for the Banks (in such capacity,
together with its successors in such capacity, the "AGENT"); and TCB
and NATIONSBANK OF TEXAS, N.A. ("NATIONSBANK"), a national banking
association, as Co-Agents (in such capacity, the "CO-AGENTS").
INTRODUCTION.
The Company, the Banks, the Agent and the Co-Agents entered into
that certain Revolving and Term Credit Agreement dated as of May 20,
1992. They now wish to amend and restate that agreement as it has
been amended prior to the date hereof.
AGREEMENTS.
The parties agree as follows:
Section 1. DEFINITIONS AND ACCOUNTING MATTERS.
1.1. CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings:
"ACHIEVEMENT DATE" shall mean the first date on which both (a)
the aggregate minimum Qualifying Amount of Junior Securities to be
used in determining the applicable table on EXHIBIT E for the Facility
A Maximum Amount and the applicable table on EXHIBIT F for the
Preliminary Available Amount has been issued and the gross proceeds
thereof received by the Company and (b) all Designated Debt for the
aggregate Qualifying Amount of Junior Securities actually issued, as
shown on SCHEDULE X, shall have been repaid or Defeased. In
determining any Achievement Date, the Qualifying Amounts of Junior
Securities issued on such date, on the Qualifying Date and on each
additional date, if any, on which Junior Securities have been issued
shall be aggregated. For example, if there is only one issuance of
Junior Securities and such issuance is in a Qualifying Amount of
$75,000,000, the Facility A Maximum Amount will thereafter be
<PAGE>
determined according to Table Four of EXHIBIT E, the Preliminary
Available Amount will thereafter be determined according to Table Four
of EXHIBIT F, and the Qualifying Date and the Achievement Date will be
the same. For example, if there are two issuances of Junior
Securities, one in the amount of $75,000,000 and a later one in the
amount of $50,000,000, the Qualifying Date will be the date of the
first issuance, which will also be the Achievement Date for the
$75,000,000 level in both EXHIBIT E and EXHIBIT F, and the Facility A
Maximum Amount will be determined according to Table Four of EXHIBIT E
and the Preliminary Available Amount will be determined according to
Table Four of EXHIBIT F until the date of the second issuance; the
date of the second issuance will be the Achievement Date for the
$125,000,000 level in both EXHIBIT E and EXHIBIT F, and the Facility A
Maximum Amount will thereafter be determined according to Table Two of
EXHIBIT E and the Preliminary Available Amount will thereafter be
determined according to Table Two of EXHIBIT F. An Achievement Date
must occur, if at all, prior to July 1, 1994.
"ADDITIONAL COSTS" shall have the meaning ascribed to such term
in SECTION 6.1.
"ADOBE" shall mean Adobe Resources Corporation, formerly a
Delaware corporation.
"ADOBE PROPERTIES" shall mean oil, gas and mineral properties and
other assets owned by Adobe at the time of the Merger.
"AFFILIATE" shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or
is controlled by, such Person; and with respect to an individual,
"AFFILIATE" shall also mean any individual related to such individual
by blood or marriage. As used in this definition, "CONTROLS",
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH" shall mean possession,
directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
"AGGREGATE COMMITMENT" shall mean the total of all Commitments of
all Banks.
"ALTERNATE ANNUAL DEBT SERVICE COVERAGE RATIO" shall mean, as of
any date of determination and for the Calculation Period in which such
date occurs and for each Calculation Period thereafter to and
including the Calculation Period including December 31, 1998, the
lowest of the ratios obtained by dividing (a) Combined CFADS
(calculated on the basis of the Most Recent Engineering Report) for
such Calculation Period by (b) the sum of (1) the Alternate Debt
Service of the Company and the Restricted Subsidiaries for such
Calculation Period PLUS (2), at all times and
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to the extent the Special Subsidiary Qualifying Conditions are met,
the Special Subsidiary Percentage times the Alternate Debt Service of
the Special Subsidiary for such Calculation Period (in each case
calculated on the basis set forth in the most recent Coverage Report
delivered pursuant to SECTION 9.1 and taking into account any
incurrence or prepayment of Covered Debt by the Company or any of the
Restricted Subsidiaries or the Special Subsidiary since the date of
such Coverage Report).
"ALTERNATE BASE RATE" shall mean, for any date, a rate per annum
(rounded upwards, if necessary, to the next higher 1/100%) equal to
the greater of (a) the Prime Rate in effect on such day or (b) the Fed
Funds Rate in effect for such day plus 1/2%. Any change in the
Alternate Base Rate due to a change in the Fed Funds Rate shall be
effective on the effective date of such change in the Fed Funds Rate.
If for any reason the Agent shall have determined (which determination
shall be conclusive absent manifest error) that it is unable to
ascertain the Fed Funds Rate for any reason, including the inability
or failure of the Agent to obtain sufficient bids or publications in
accordance with the terms hereof, the Alternate Base Rate shall be the
Prime Rate until the circumstances giving rise to such inability no
longer exist.
"ALTERNATE BASE RATE LOANS" shall mean Loans which bear interest
at a rate based upon the Alternate Base Rate.
"ALTERNATE DEBT SERVICE" shall mean, for any Calculation Period
and with respect to any Person, the total of principal payments in
respect of Covered Debt of such Person and the total of interest
payments (using, with respect to interest to accrue, the interest
rates set forth in the most recent Approved Assumptions for such
Covered Debt not bearing interest at a fixed rate; if some or all of
such Covered Debt bears interest at one or more fixed rates as of the
date of determination of Alternate Debt Service but such Covered Debt
will not bear interest at such fixed rate or rates to the end of such
Calculation Period, then interest payments in respect of Alternate
Debt Service with respect to such Covered Debt shall be calculated on
the basis of such fixed rate or rates for such time as the same shall
be applicable to such Covered Debt, and then at the interest rates set
forth in the most recent Approved Assumptions) in respect of Covered
Debt of such Person, in each case paid and scheduled to be paid during
such Calculation Period; PROVIDED that the principal amount of any
Covered Debt of such Person which by its terms matures on a date
within such Calculation Period but which may reasonably be expected to
be reborrowed in a Rollover on such date shall not be deemed, for
purposes of this definition, to be scheduled to be paid on such date;
and PROVIDED FURTHER that for purposes of this definition it shall be
assumed that (a) surety bonds for environmental purposes
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and letters of credit issued for the account of a Person will be fully
drawn upon their respective expiry dates, (b) the reimbursement
obligations of a Person with respect to all surety bonds for
environmental purposes and letters of credit issued for its account
shall be satisfied immediately and considered as a "principal payment"
for purposes of this definition.
"AMENDMENT TO DEED OF TRUST" shall mean that certain First
Amendment to Deed of Trust, Mortgage, Assignment of Production and
Security Agreement of even date herewith, in Proper Form, amending the
Deed of Trust to reflect the changes effected by this Agreement.
"AMENDMENT TO LEASEHOLD DEED OF TRUST" shall mean that certain
First Amendment to Leasehold Deed of Trust and Security Agreement of
even date herewith, in Proper Form, amending certain of the Mortgages
to reflect the changes effected by this Agreement.
"AMENDMENT TO LOUISIANA SECURITY AGREEMENT" shall mean that
certain First Amendment to Security Agreement, Assignment of
Production and Financing Statement of even date herewith, in Proper
Form, amending certain of the Mortgages to reflect the changes
effected by this Agreement.
"AMENDMENT TO SECURITY AGREEMENT -- CONTRACT RIGHTS" shall mean
that certain First Amendment to Security Agreement -- Accounts,
Inventory, Equipment and Contract Rights of even date herewith, in
Proper Form, amending certain of the Mortgages to reflect the changes
effected by this Agreement.
"AMENDMENT TO SECURITY AGREEMENT -- STOCK" shall mean that
certain First Amendment to Security Agreement -- Pledge of even date
herewith, in Proper Form, amending the Stock Pledge Agreement to
reflect the changes effected by this Agreement.
"ANNUAL DEBT SERVICE COVERAGE RATIO" shall mean, as of any date
of determination and for the Calculation Period in which such date
occurs and for each Calculation Period thereafter to and including the
Calculation Period including December 31, 1998, the lowest of the
ratios obtained by dividing (a) Combined CFADS (calculated on the
basis of the Most Recent Engineering Report) for such Calculation
Period by (b) the sum of (1) the Debt Service of the Company and the
Restricted Subsidiaries for such Calculation Period PLUS (2), at all
times and to the extent the Special Subsidiary Qualifying Conditions
are met, the Special Subsidiary Percentage times the Debt Service of
the Special Subsidiary for such Calculation Period (in each case
calculated on the basis set forth in the most recent Coverage Report
delivered pursuant to SECTION 9.1 and taking into account any
incurrence or prepayment of
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Covered Debt by the Company or the Restricted Subsidiaries or the
Special Subsidiary since the date of such Coverage Report).
"APPLICABLE ENVIRONMENTAL LAWS" shall mean all applicable
environmental or pollution-control Legal Requirements governing,
without limitation, wastewater effluent, solid and hazardous waste or
substances and air emissions, together with any other applicable
requirements for conducting, on a timely basis, reporting,
record-keeping, periodic tests and monitoring for contamination of
ground water, surface water, air and land and for biological toxicity
of the aforesaid, including, without limitation, the Resource
Conservation and Recovery Act of 1976, the Comprehensive Environmental
Response Compensation and Liability Act of 1980 (as amended by the
Superfund Amendments and Reauthorization Act), the Toxic Substances
Control Act, the Safe Drinking Water Act, the Hazardous Materials
Transportation Act, the Clean Air Act, the Clean Water Act, the Oil
Pollution Act, the Texas Water Code, the Texas Health and Safety Code,
the Texas Natural Resources Code, the Louisiana Environmental Quality
Act, the Louisiana Air Control Law, the Louisiana Water Control Law,
the Louisiana Solid Waste Management and Resource Recovery Law, the
Louisiana Hazardous Waste Control Law, the Louisiana Oil Spill
Prevention and Response Act, the Louisiana Resource Recovery and
Development Act, the Louisiana Waste Reduction Law, the Louisiana
Hazardous Material Information Development, Preparedness, and Response
Act, the Louisiana State and Local Coastal Resources Management Act of
1978, the Louisiana Coastal Wetlands Conservation and Restoration Act,
the Louisiana Abandoned Oilfield Waste Site Law, and the Louisiana
Mineral Code, in each case as amended from time to time.
"APPLICABLE LENDING OFFICE" shall mean, for each Bank and for
each Type of Loan, the lending office of such Bank (or of an Affiliate
of such Bank) designated for such Type of Loan below its name on the
signature pages hereof or such other office of such Bank (or of an
Affiliate of such Bank) as such Bank may from time to time specify to
the Agent and the Company as the office by which its Loans of such
Type are to be made and/or issued and maintained.
"APPLICABLE MARGIN" shall mean, on any day:
(a) With respect to any Alternate Base Rate Loan, the per annum
percentage set forth at the appropriate intersection in the table
shown below; where the vertical axis is the SLOR Coverage Ratio on
such day (assuming the Available Amount is fully drawn and that the
aggregate unpaid principal balance of the Facility A Notes is equal to
the Facility A Maximum Amount FOR DETERMINATIONS RELATED TO THE
INDEPENDENT ENGINEERING REPORT and on the basis of the actual
aggregate amount of outstanding Facility A Loans, Facility B Loans and
Letter of Credit Liabilities FOR ALL OTHER
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<PAGE>
DETERMINATIONS) and the horizontal axis is the Annual Debt Service
Coverage Ratio on such day (assuming the Available Amount is fully
drawn and that the aggregate unpaid principal balance of the
Facility A Notes is equal to the Facility A Maximum Amount for
determinations related to the Independent Engineering Report and on
the basis of the actual aggregate amount of outstanding Facility A
Loans, Facility B Loans and Letter of Credit Liabilities for all other
determinations):
ALTERNATE BASE RATE LOANS
SLOR Annual Debt Service
COVERAGE RATIO COVERAGE RATIO
Equal to or
greater than Equal to or
Less than 1.20 but less greater than
1.20 than 1.25 1.25
Less than 1.85 1.00% 1.00% 1.00%
Equal to or greater
than 1.85 but less
than 1.95 .75% .50% .50%
Equal to or greater
than 1.95 but less
than 2.00 .75% .25% .25%
Equal to or greater
than 2.00 .75% .25% 0%
The initial Applicable Margin for Alternate Base Rate Loans shall be
.75% per annum. The Applicable Margin shall be determined upon the
delivery of each Independent Engineering Report. Thereafter, the
Applicable Margin shall be determined according to the preceding table
at the time of each delivery of a Coverage Report and each Request for
Extension of Credit, but, except as provided in SUBSECTIONS (c) and
(d) below, shall never be less than the Applicable Margin determined
upon the delivery of such Independent Engineering Report until the
next determination of the SLOR Coverage Ratio and Annual Debt Service
Coverage Ratio in accordance with this definition at the time of the
delivery of the next Independent Engineering Report, whereupon the
minimum Applicable Margin shall be reset.
(b) The Applicable Margin for any Eurodollar Loan on any day
shall be 1.00% more than the Applicable Margin for Alternate Base
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Rate Loans in effect on such day. The initial Applicable Margin for
Eurodollar Loans shall be 1.75% per annum.
(c) On the Qualifying Date, the Applicable Margin for Alternate
Base Rate Loans and for Eurodollar Loans shall be automatically
reduced to .50% per annum and 1.50% per annum, respectively.
(d) At any time on or after the Qualifying Date but prior to
July 1, 1994 the Company may choose not more often than once to
recalculate the SLOR Coverage Ratio and the Annual Debt Service
Coverage Ratio by giving written notice to the Co-Agents. Such
recalculation shall be made using new Approved Assumptions approved in
connection with such recalculation by Banks with aggregate Commitment
Percentages of 75% or more and using the Independent Engineering
Report most recently furnished in accordance with this Agreement.
Upon any such recalculation, the Company shall notify the Co-Agents of
the recalculated ratios, whereupon the Agent shall redetermine the
Applicable Margin for Alternate Base Rate Loans and for Eurodollar
Loans according to the table set forth in SUBSECTION (a) above. The
Applicable Margin as so redetermined shall become effective on the
date of such redetermination and shall remain in effect until the next
determination of Applicable Margin in accordance with this Agreement.
"APPLICABLE PERIODS" shall mean the Applicable Periods identified
on EXHIBIT E and EXHIBIT F.
"APPROVED ASSUMPTIONS" shall mean:
(a) until the first delivery of an Independent Engineering
Report hereunder, those assumptions set forth on SCHEDULE III;
(b) thereafter, for each Independent Engineering Report
hereunder, assumptions as to product prices, interest rates,
escalation rates, discount rates and future levels of production
curtailment, which assumptions shall be determined by the Co-Agents
after consultation with the Company and set forth (x) in the case of
each Required Reserve Report, in a notice sent to the Banks on or
before January 21 of each such year and in a notice from the Agent to
the Company on or prior to the next succeeding February 1 or (y) in
the case of each Optional Reserve Report, in a notice
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sent to the Banks within 30 days of the delivery of the notice to the
Co-Agents required by SECTIONS 2.7 and 2.8 and in a notice from the
Agent to the Company on or prior to a date 10 days after the date of
such notice to the Banks, and
(c) for purposes of SUBSECTION (d) of the definition of
"Applicable Margin" and the second sentence of SECTION 2.8,
assumptions determined by the Co-Agents after consultation with the
Company and set forth in a notice sent to the Banks within 30 days of
the Company's notice to the Co-Agents and in a notice from the Agent
to the Company on or prior to a date 10 days after the date of such
notice to the Banks;
PROVIDED that, in the case of CLAUSES (b) and (c) preceding such
assumptions are, within ten days after any such notice is sent to the
Banks, approved (as indicated in one or more notices received by the
Agent within such ten-day period) by Banks with aggregate Commitment
Percentages of 75% or more. If the assumptions proposed by the
Co-Agents are not approved, the Banks will work to determine and
approve alternative assumptions in good faith in accordance with their
customary oil and gas lending practices. Approved Assumptions set
forth in a notice to the Company shall govern until new Approved
Assumptions are set forth in a notice to the Company as provided
herein, and shall be used, without limitation, in preparation of the
next Independent Engineering Report required to be delivered pursuant
to SECTION 9.1 or permitted to be delivered pursuant to SECTIONS 2.7
or 2.8.
"ASSIGNMENT AGREEMENT" shall mean an Assumption and Assignment
Agreement substantially in the form of EXHIBIT D.
"ATTRIBUTABLE DEBT" shall mean the lesser of (a) the fair market
value of the assets sold pursuant to any Sale and Leaseback
Transaction (which determination shall be based upon a written opinion
(the cost of which shall be borne exclusively by the Company) as to
valuation from an independent valuation expert selected by the
Company) or (b) the present value (discounted according to GAAP at the
interest rate implicit in the lease) of the obligations of the lessee
for rental payments during the term of any lease constituting a part
of such Sale and Leaseback Transaction.
"AVAILABLE AMOUNT" shall mean, subject always to the limitation
set forth in SECTION 2.8, the Preliminary Available Amount from time
to time in effect, as the same may be adjusted upward and downward in
accordance with SECTION 2.1(b)(2) or permanently decreased in
accordance with SECTION 2.2.
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<PAGE>
"AVAILABLE COMMITMENT" shall mean the Aggregate Commitment minus
the Unavailable Commitment.
"BOARD" shall mean the Board of Governors of the Federal Reserve
System of the United States.
"BUSINESS DAY" shall mean any day other than a day on which
commercial banks are authorized or required to close in Houston, Texas
or New York, New York, and where such term is used in the definition
of "QUARTERLY DATE" or, if such day relates to a borrowing of, a
payment or prepayment of principal of or interest on, or an Interest
Period for, a Eurodollar Loan or a notice by the Company with respect
to any such borrowing, payment, prepayment or Interest Period, which
is also a day on which dealings in dollar deposits are carried out in
the relevant Eurodollar interbank market.
"CALCULATION PERIOD" shall mean the year ending on the last day
of a March; with respect to calculations for a Calculation Period
determined with reference to amounts for two calendar years, it shall
be assumed (unless such amounts are due on scheduled dates, in which
case such calculations shall be made with reference to such dates)
that each such calendar year amount is spread evenly over the
appropriate calendar year, with the result that each such amount for a
Calculation Period beginning on an April 1 shall be composed of (a)
9/12 of the calendar year amount for the calendar year containing such
April 1 plus (b) 3/12 of the calendar year amount for the next
calendar year.
"CAPITAL GAINS" shall mean gains (net of expenses and income
taxes applicable thereto) in excess of losses resulting from the sale,
conversion or other disposition of capital assets (I.E., assets other
than current assets).
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation
which, under GAAP, is or will be required to be capitalized on the
books of the Company or any Restricted Subsidiary, taken at the amount
thereof accounted for as indebtedness (net of interest expense) in
accordance with such principles.
"CFADS" shall mean, for any Calculation Period and with respect
to any Person, (a) Net Oil and Gas Income (PROVIDED that in
calculating Combined CFADS, no more than 25% of Net Oil and Gas Income
may be attributable to proved nonproducing and proved undeveloped
Recognized Proved Reserves) LESS (b) Projected G & A Expense LESS (c)
Projected Income Tax Expense PLUS (d) anticipated net income (or minus
anticipated net losses) from the Price Protection Agreements
(determined on the basis of the Approved Assumptions), (e) PLUS any
anticipated gain, and MINUS any
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<PAGE>
anticipated loss, on Interest Rate Protection Agreements (determined
on the basis of the Approved Assumptions), PLUS (f) other income from
operations as reasonably projected under the Approved Assumptions, not
to exceed 5% of Combined CFADS, and PLUS (g) proceeds of sales of
assets permitted by the Credit Documents, to the extent (but only to
the extent) such proceeds are applied as prepayments pursuant to
SECTION 3.2(b), in each case for such Calculation Period and such
Person.
"CHANGE OF CONTROL" shall mean any change so that any Person (or
any Persons acting together which would constitute a Group), together
with any Affiliates or Related Persons thereof, shall at any time
either (a) Beneficially Own more than 50% of the aggregate voting
power of all classes of Voting Stock of the Company or (b) succeed in
having sufficient of its or their nominees elected to the Board of
Directors of the Company such that such nominees, when added to any
existing director remaining on the Board of Directors of the Company
after such election who is an Affiliate or Related Person of such
Person or Group, shall constitute a majority of the Board of Directors
of the Company. As used herein (a) "BENEFICIALLY OWN" shall mean
beneficially own as defined in Rule 13d-3 of the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), or any successor
provision thereto; (b) "GROUP" shall mean a "group" for purposes of
Section 13(d) of the Exchange Act; (c) "RELATED PERSON" of any Person
shall mean any other Person owning (1) 5% or more of the outstanding
common stock of such Person or (2) 5% or more of the Voting Stock of
such Person, and (d) "VOTING STOCK" of any Person shall mean capital
stock of such Person which ordinarily has voting power for the
election of directors (or persons performing similar functions) of
such Person, whether at all times or only so long as no senior class
of securities has such voting power by reason of any contingency.
"CHAPTER ONE" shall mean Chapter One of the Texas Credit Code, as
in effect on the date the document using such term was executed.
"CLASS" shall have the meaning ascribed to such term in
SECTION 1.3.
"CODE" shall mean the Internal Revenue Code of 1986, as amended,
or any successor statute, together with all publicly available written
regulations, rulings and interpretations thereof or thereunder by the
Internal Revenue Service.
"COLLATERAL" shall mean all property at any time subject to the
Security Documents.
"COMBINED CFADS" shall mean, for any Calculation Period, the sum
of (a) CFADS of the Company and the Restricted Subsidiaries
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PLUS, at all times and to the extent all Special Subsidiary Qualifying
Conditions are met, (b) the product of (1) the Special Subsidiary
Percentage times (2) the CFADS of the Special Subsidiary, in each case
for such Calculation Period.
"COMBINED COVERED DEBT" shall mean, as of any date, the sum of
(a) the Covered Debt of the Company and the Restricted Subsidiaries
PLUS, at all times and to the extent all Special Subsidiary Qualifying
Conditions are met as of such date, (b) the product of (1) the Special
Subsidiary Percentage times (2) the Covered Debt of the Special
Subsidiary, all as of such date.
"COMBINED GROUP" shall mean the Company, the Restricted
Subsidiaries and the Special Subsidiary.
"COMBINED RESERVE VALUE" shall mean, as of any date, the sum of
(a) the Reserve Value of the Company and the Restricted Subsidiaries
PLUS, at all times and to the extent all Special Subsidiary Qualifying
Conditions are met as of such date, (b) the product of (1) the Special
Subsidiary Percentage times (2) the Reserve Value of the Special
Subsidiary, all as of such date. In calculating the Combined Reserve
Value, no more than 25% of such Combined Reserve Value may be
attributable to the combination of proved nonproducing and proved
undeveloped Recognized Proved Reserves.
"COMMITMENT FEE" shall mean the commitment fees payable by the
Company to the Agent for the account of the Banks in their Commitment
Percentages as provided in SECTION 2.3.
"COMMITMENT PERCENTAGE" shall mean, as to any Bank, the per-
centage equivalent of a fraction, the numerator of which is the
aggregate of such Bank's Commitments, subject to reduction and the
identification of new Banks pursuant to SECTION 12.6, and the
denominator of which is the Aggregate Commitment.
"COMMITMENTS" shall mean, as to any Bank, the aggregate of such
Bank's Facility A Commitment, if any, and Facility B Commitment, if
any.
"CONSOLIDATED NET EARNINGS" shall mean consolidated gross
revenues (including Capital Gains) of the Company and the Restricted
Subsidiaries less all operating and non-operating expenses of the
Company and the Restricted Subsidiaries including all charges of a
proper character (including current and deferred taxes on income,
provision for taxes on unremitted foreign earnings which are included
in gross revenues, and current additions to reserves), but not
including in gross revenues any dividends, distributions or other
payments received by the Company or any of its Restricted
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Subsidiaries in connection with the Hadson Stock, unless received in
the form of cash, or any dividends, distributions or other payments
received by the Company or any of its Restricted Subsidiaries from the
Special Subsidiary or gains resulting from write-up of assets, any
equity of the Company or any Restricted Subsidiary in the unremitted
earnings of any Person which is not a Restricted Subsidiary, any
earnings of any Person acquired by the Company or any Restricted
Subsidiary through purchase, merger or consolidation or otherwise for
any year prior to the year of acquisition, or any deferred credit
representing the excess of equity in any Restricted Subsidiary at the
date of acquisition over the cost of the investment in such Restricted
Subsidiary; all determined in accordance with GAAP.
"CONSOLIDATED NET EARNINGS AVAILABLE FOR FIXED CHARGES" shall
mean for any period the sum of (a) Consolidated Net Earnings for such
period (PROVIDED that the maximum amount of Capital Gains included
therein shall be $3,000,000 through December 31, 1990 and such maximum
amount shall increase by $150,000 on the first day of each year
thereafter); without duplication, (b) cash distributions received
during such period by the Company and the Restricted Subsidiaries on
their Investment in the Special Subsidiary to the extent not
reinvested in the Special Subsidiary; to the extent deducted from
gross revenues in determining Consolidated Net Earnings, (c) all
provisions for any federal, state or other income taxes made by the
Company and the Restricted Subsidiaries during such period; (d) Fixed
Charges of the Company and the Restricted Subsidiaries during such
period; (e) depreciation, depletion and amortization charges of the
Company and the Restricted Subsidiaries for such period, and (f) all
other non-cash charges of the Company and the Restricted Subsidiaries
for such period, all determined in accordance with GAAP.
"CONSOLIDATED NET TANGIBLE ASSETS" shall mean the aggregate net
tangible assets of the Company and the Restricted Subsidiaries,
determined as follows:
(a) The MLP Investment (at such times as SFEP is treated as the
Special Subsidiary) plus the aggregate gross book value of all the
assets of the Company and the Restricted Subsidiaries, both real and
personal, shall be computed, EXCLUDING, however, the following items:
(1) all franchises, licenses, permits, patents, patent
applications, copyrights, trademarks, trade names, goodwill,
experimental or organizational expense, unamortized debt discount and
expense, and all other assets which under GAAP are deemed intangible;
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(2) any reacquired shares or reacquired Debt of the Company
or the Restricted Subsidiaries;
(3) any write-up of assets made after December 31, 1989;
(4) 50% of the value of all assets of the Company and the
Restricted Subsidiaries acquired after April 1, 1990 which are located
outside the United States of America and Canada and not freely
returnable to the United States of America or Canada, including any
notes or accounts receivable from any debtor having any substantial
part of its business, operations or properties located outside the
United States of America and Canada, except notes or accounts
receivable from such a debtor which arose in the ordinary course of
business of the Company or any Restricted Subsidiary, as the case may
be, to which such notes or accounts receivable are payable and which
otherwise constitute current assets, but only to the extent of an
amount of dollars readily realizable from such notes or accounts
receivable by liquidation either directly or through a currency freely
convertible into dollars; and
(5) all Restricted Investments of the Company and the
Restricted Subsidiaries (other than Restricted Investments in the
capital stock of Hadson).
(b) From the gross book value of the tangible assets of the
Company and the Restricted Subsidiaries, determined as provided in the
preceding CLAUSE (a), there shall be deducted the following items:
(1) all reserves for depreciation, depletion, obsolescence
and amortization of the assets of the Company and the Restricted
Subsidiaries (other than assets excluded as provided in the preceding
CLAUSE (a)), all proper reserves (other than reserves for deferred
taxes and general contingency reserves and other reserves representing
mere appropriations of surplus) which in accordance with GAAP should
be set aside in connection with the business conducted by them;
(2) all Current Debt of the Company and the Restricted
Subsidiaries; and
(3) all other liabilities of the Company and the Restricted
Subsidiaries, including the reduction in equity attributable to
minority interests but excluding deferred taxes, Funded Debt of the
Company and the Restricted Subsidiaries, capital shares, surplus and
general contingency reserves and other reserves representing mere
appropriations of surplus.
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(c) In the determination of Consolidated Net Tangible Assets, no
amount shall be included therein on account of any excess cost of
acquisition of shares of any Restricted Subsidiary over the net book
value of the assets of such Restricted Subsidiary attributable to such
shares at the date of such acquisition or on account of any excess of
the net book value of the assets of any Restricted Subsidiary
attributable to any shares of such Restricted Subsidiary at the date
of acquisition of such shares over the cost of acquisition of such
shares.
"COVERAGE REPORT" shall mean a report substantially in the form
of SCHEDULE IV setting forth the calculation of the TLOR Coverage
Ratio, the SLOR Coverage Ratio, the Annual Debt Service Coverage Ratio
and the Alternate Annual Debt Service Coverage Ratio.
"COVERED DEBT" shall mean, for any Person, without duplication,
(a) all obligations for borrowed money (including obligations for
borrowed money consisting of or arising in connection with Junior
Securities); (b) all obligations evidenced by bonds, debentures, notes
or other similar instruments; (c) all obligations to pay the deferred
purchase price of property or services, except trade accounts payable
arising in the ordinary course of business; (d) all Capitalized Lease
Obligations; (e) all obligations in respect of production payments,
proceeds production payments and similar financing arrangements; (f)
all reimbursement obligations and all letter of credit advances with
respect to letters of credit issued for the account of such Person,
including the Letter of Credit Liabilities; (g) surety bonds for
environmental purposes; (h) all obligations of the types described in
CLAUSES (a) through (g) of this definition (collectively, "ORDINARY
DEBT") of another Person secured by a Lien on any property of the
Person as to which Covered Debt is being determined, regardless of
whether such Ordinary Debt is assumed by such Person, and (i) all
Ordinary Debt of another Person guaranteed (but excluding the
obligations of the Company and the Restricted Subsidiaries arising
solely by virtue of their serving as general partner of SFEP) by such
Person; PROVIDED that Covered Debt shall not include Ordinary Debt or
any obligation of the types described in CLAUSES (h) or (i) of this
definition which is (1) non-recourse (either directly or contingently)
as to all members of the Combined Group and (2) secured only by assets
which are not Recognized Proved Reserves.
"CREDIT DOCUMENTS" shall mean this Agreement, the Notes, the
Letter of Credit Agreement, all Security Documents, the Notice of
Entire Agreement, and all instruments, certificates and agreements now
or hereafter executed or delivered to the Agent or any Bank pursuant
to any of the foregoing.
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"CURRENT DEBT" shall mean any obligation for borrowed money (and
any notes payable and drafts accepted representing obligations for
borrowed money) payable on demand or within a period of one year from
the date of the creation thereof and any Guaranty with respect to
Current Debt (of the kind otherwise described in this definition) of
another Person; PROVIDED that any obligation shall be treated as
Funded Debt, regardless of this term, if such obligation is renewable
pursuant to the terms thereof or of a revolving credit or similar
agreement effective for more than one year after the date of the
creation of such obligation, or may be payable out of the proceeds of
a similar obligation pursuant to the terms of such obligation or of
any such agreement.
"DEBT" shall mean Funded Debt and/or Current Debt, as the case
may be.
"DEBT SERVICE" shall mean, for any Calculation Period, the total
of principal payments in respect of Covered Debt of the Person as to
which Debt Service is to be determined and the total of interest
payments (using, with respect to interest to accrue, the interest
rates set forth in the most recent Approved Assumptions for such
Covered Debt not bearing interest at a fixed rate; if some or all of
such Covered Debt bears interest at one or more fixed rates as of the
date of determination of Debt Service but such Covered Debt will not
bear interest at such fixed rate or rates to the end of such
Calculation Period, then interest payments in respect of Debt Service
with respect to such Covered Debt shall be calculated on the basis of
such fixed rate or rates for such time as the same shall be applicable
to such Covered Debt, and then at the interest rates set forth in the
most recent Approved Assumptions) in respect of Covered Debt of such
Person, in each case paid and scheduled to be paid during such
Calculation Period; PROVIDED that the principal amount of any Covered
Debt of such Person which by its terms matures on a date within such
Calculation Period but which may reasonably be expected to be
reborrowed in a Rollover on such date shall not be deemed, for
purposes of this definition, to be scheduled to be paid on such date;
and PROVIDED FURTHER that for purposes of this definition it shall be
assumed (to the extent relevant with respect to such Person) that (a)
Letters of Credit will be fully drawn upon their respective expiry
dates; (b) other letters of credit issued for the account of such
Person will not be drawn; (c) surety bonds for environmental purposes
issued on behalf of such Person will not be drawn, and (d) the
reimbursement obligations of the Company under the Letter of Credit
Agreement shall be satisfied immediately and considered as a
"principal payment" for purposes of this definition.
"DEED OF TRUST" shall mean the Deed of Trust, Mortgage,
Assignment of Production and Security Agreement dated as of May 20,
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1992 from the Company to Gary K. Wright, Trustee for the benefit of
the Agent, and the Agent on behalf of the Banks, as amended and
modified from time to time, including pursuant to the Amendment to
Deed of Trust.
"DEFAULT" shall mean an Event of Default or an event which with
notice or lapse of time or both would, unless cured or waived, become
an Event of Default.
"DEFEASED" shall mean, with respect to any amount of Designated
Debt, that the Company (a) shall have given to the holders of such
Designated Debt irrevocable notice of the repayment of such Designated
Debt, (b) shall have deposited with the trustee or an independent
escrow or paying agent as trust funds the entire amount sufficient to
pay at the date fixed for such repayment all of such Designated Debt,
including principal, premium if any, and interest due or to become due
to such date of repayment, such amount to be invested only in readily
marketable direct full faith and credit obligations of the United
States of America having maturities of not more than one year from
date of issue, and (c) shall have paid or caused to be paid all other
sums payable by the Company in connection with such Designated Debt.
"DESIGNATED DEBT" shall mean the indebtedness of the Company
described on SCHEDULE X. SCHEDULE X sets forth, for each range of
Qualifying Amounts of Junior Securities, the maturities of Covered
Debt which must be repaid in order for the Facility A Maximum Amount
and the Preliminary Available Amount to reach the levels set forth in
EXHIBITS E and F.
"EBITD" shall mean for any period Consolidated Net Earnings for
such period, plus the aggregate amounts deducted in determining
Consolidated Net Earnings in respect of (a) all provisions for any
federal, state or other income taxes made by the Company and the
Restricted Subsidiaries during such period; (b) Fixed Charges of the
Company and the Restricted Subsidiaries during such period; (c)
depreciation, depletion and amortization charges of the Company and
the Restricted Subsidiaries for such period, and (d) all other
non-cash charges of the Company and the Restricted Subsidiaries for
such period, all determined in accordance with GAAP.
"ELIGIBLE ASSIGNEE" shall mean (a) a commercial bank having total
assets in excess of $1,000,000,000 or (b) a finance company, insurance
company, other financial institution or fund, acceptable to the Agent
and the Company, which is regularly engaged in making, purchasing or
investing in loans and having total assets in excess of
$1,000,000,000.
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"ENGINEERING SHORTFALL" shall mean the amount, if any, by which
the sum of (a) the aggregate outstanding principal balance of the
Facility B Notes PLUS (b) the aggregate Letter of Credit Liabilities
shall exceed the Available Amount at the time of any delivery of (and
as determined in accordance with) an Independent Engineering Report
and its related Coverage Report. The effects of an Engineering
Shortfall are described, among other places herein, in
SECTIONS 2.1(a)(4), 2.1(b)(4), 2.2(a)(3), 2.8, 7.2(a), 7.2(e), 9.9,
and 10.1(d) AND (e). An Engineering Shortfall shall continue until
cured by presentation of a new Coverage Report demonstrating that the
sum of (a) and (b) is equal to or less than the Available Amount then
in effect.
"ENVIRONMENTAL CLAIM" shall mean any claim, demand, action, cause
of action, suit, judgment, governmental or private investigation
relating to remediation or compliance with Applicable Environmental
Laws, proceeding or lien, whether threatened, sought, brought or
imposed, that seeks to recover costs, damages, punitive damages,
expenses, fines, criminal liability, judgments, response costs,
investigative and monitoring costs, abatement costs, attorney's fees,
expert's fees or consultant's fees, or seeks to impose liability
regarding the Company or any of its Subsidiaries, or any of their
sites or properties for violations of Applicable Environmental Laws or
for pollution, contamination, investigation, preservation, protection,
remediation or clean up of the air, surface water, ground water, soil
or wetlands, or otherwise in relation to the use, storage, generation,
release, handling or disposal of materials and substances that are
regulated by or subject to Applicable Environmental Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and all rules, regulations and
interpretations by the Internal Revenue Service or the Department of
Labor thereunder.
"ERISA AFFILIATE" shall mean any trade or business (whether or
not incorporated) which on and after December 5, 1990 is under common
control with the Company within the meaning of the regulations under
Section 414 of the Code.
"EURODOLLAR BASE RATE" shall mean, with respect to any Interest
Period for any Eurodollar Loan, the lesser of (a) the rate per annum
(rounded upwards, if necessary, to the nearest 1/100%) determined by
the Agent based upon rates quoted at approximately 11:00 a.m. (local
time in the relevant Eurodollar interbank market) (or as soon
thereafter as practicable) on the day two Business Days prior to the
first day of such Interest Period for the offering BY TCB TO leading
dealers in such Eurodollar interbank market of dollar deposits for
delivery on the first day of such Interest
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Period, in immediately available funds and having a term comparable to
such Interest Period and in an amount comparable to the principal
amount of the respective Eurodollar Loan to which such Interest Period
relates or (b) the Highest Lawful Rate. Each determination of the
Eurodollar Base Rate shall be conclusive and binding, absent manifest
error, and may be computed using any reasonable averaging and
attribution method.
"EURODOLLAR LOANS" shall mean Loans the interest on which is
determined on the basis of rates referred to in the definition of
"EURODOLLAR BASE RATE".
"EURODOLLAR RATE" shall mean, for any Interest Period for any
Eurodollar Loan, a rate per annum (rounded upwards, if necessary, to
the nearest 1/100%) determined by the Agent to be equal to the product
of (a) the Eurodollar Base Rate for such Loan for such Interest Period
times (b) Statutory Reserves.
"EVENT OF DEFAULT" shall have the meaning assigned to such term
in SECTION 10.
"EXISTING PRIORITY DEBT" at any time shall mean, to the extent
that it is otherwise Priority Debt, an amount equal to the sum of (a)
the Merger Debt at such time, (b) the outstanding principal amount of
Debt under the Springing Lien Agreement at such time, and (c) the
outstanding principal amount of Debt under those certain Credit
Agreements of Petrolera Santa Fe S.A., dated as of June 25, 1991 and
April 28, 1992, at such time.
"FACILITY A COMMITMENT" shall mean, as to any Bank, the
obligation, if any, of such Bank to make Facility A Loans to the
Company in an initial principal amount up to but not exceeding such
Bank's Commitment Percentage of the Facility A Maximum Amount from
time to time in effect, which shall never exceed the amount set forth
opposite such Bank's name on the signature pages hereof under the
caption "Facility A Commitment" (as the same may be reduced from time
to time pursuant to SECTION 2.2), and such Bank's obligation, if any,
to make Facility A Readvances to the Company in an aggregate principal
amount at any one time outstanding up to but not exceeding an amount
equal to such Bank's Commitment Percentage times the Facility A Unused
Commitment then in effect (as the same may be reduced from time to
time pursuant to SECTION 2.2).
"FACILITY A LOAN" shall mean a Loan (including a Facility A
Readvance) made pursuant to SECTION 2.1(a).
"FACILITY A MATURITY DATE" shall mean the earlier of (a) the date
the principal amount then outstanding of and the accrued interest on
the Facility A Loans and all fees and all other amounts
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payable hereunder and under the Facility A Notes become due and
payable pursuant to SECTION 10.1 or (b) December 31, 1998.
"FACILITY A MAXIMUM AMOUNT" shall mean, on any day occurring
during the respective Applicable Periods set forth in EXHIBIT E, the
amount set forth for such Applicable Period in the applicable table in
EXHIBIT E (as the same may be reduced from time to time pursuant to
SECTION 2.2). The applicable table shall be determined according to
the aggregate Qualifying Amount of Junior Securities issued by the
Company as of the most recent Achievement Date, but to qualify for a
particular table (other than Table Five), the Company must have repaid
or Defeased, on or before such Achievement Date, all Designated Debt
for such aggregate Qualifying Amount set forth on SCHEDULE X.
"FACILITY A NOTES" shall mean the promissory notes of the Company
evidencing the Facility A Loans, in the form of EXHIBIT A.
"FACILITY A OPTIONAL PREPAYMENT" shall mean any prepayment of the
Facility A Notes made pursuant to SECTION 3.2(a).
"FACILITY A READVANCE" shall mean a readvance made pursuant to
SECTION 2.1(a)(2) of any Facility A Optional Prepayment.
"FACILITY A TERMINATION DATE" shall mean the earlier of (a) the
Facility A Maturity Date and (b) the date the Facility A Commitments
are terminated pursuant to SECTION 2.2.
"FACILITY A UNUSED COMMITMENT" shall mean, on any date, the
difference of (a) the Facility A Maximum Amount MINUS (b) the
aggregate outstanding principal balance of the Facility A Notes, all
determined on such date.
"FACILITY B COMMITMENT" shall mean, as to any Bank, the
obligation, if any, of such Bank to make Facility B Loans to the
Company in an aggregate principal amount at any one time outstanding
up to but not exceeding such Bank's Commitment Percentage times the
difference between (a) the Available Amount then in effect and (b) the
aggregate Letter of Credit Liabilities, which amount shall never
exceed the amount set forth opposite such Bank's name on the signature
pages hereof under the caption "Facility B Commitment" (as the same
may be reduced from time to time pursuant to SECTION 2.2).
"FACILITY B LOAN" shall mean a Loan made pursuant to
SECTION 2.1(b).
"FACILITY B MATURITY DATE" shall mean the earlier of (a) the date
the principal amount then outstanding of and accrued interest
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on the Facility B Loans and all fees and all other amounts payable
hereunder and under the Facility B Notes become due and payable
pursuant to SECTION 10.1 or (b) December 31, 1996.
"FACILITY B NOTES" shall mean the promissory notes of the Company
evidencing the Facility B Loans, in the form of EXHIBIT B.
"FACILITY B TERMINATION DATE" shall mean the earlier of (a) the
Facility B Maturity Date and (b) the date the Facility B Commitments
are terminated pursuant to SECTION 2.2.
"FACILITY B UNUSED COMMITMENT" shall mean, on any date, the
difference of (a) the Available Amount minus (b) the sum of (1) the
aggregate outstanding principal balance of the Facility B Notes plus
(2) the Letter of Credit Liabilities, all determined on such date.
"FDIC" shall mean the Federal Deposit Insurance Corporation or
any entity succeeding to any or all of its functions.
"FED FUNDS RATE" shall mean, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal funds
brokers, as published on the succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for the day
of such transactions received by the Agent from three federal funds
brokers of recognized standing selected by it.
"FINANCING STATEMENTS" shall mean all such Uniform Commercial
Code financing statements as the Agent or any Bank shall reasonably
require, in Proper Form, duly executed by the Company or others to
give notice of and to perfect or continue perfection of the Agent's
security interest in all Collateral.
"FIXED CHARGES" shall mean (without duplication) for any period
the sum of interest expense in respect of all Debt of the Person for
which the determination is made (calculated, in the case of Debt which
bears interest at a floating rate, at the rate in effect at the time
of calculation), including imputed interest expense in respect of
Capitalized Lease Obligations.
"FUNDED DEBT" shall mean and include, without duplication, any
obligation (including the current maturities thereof)
(a) payable more than one year from the date of creation thereof
(1) for borrowed money; (2) evidenced by bonds, debentures,
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notes or reimbursement obligations in respect of letters of credit or
other similar instruments (other than letters of credit and surety
bonds relating to trade obligations incurred in the ordinary course of
business and includable, under GAAP, in current liabilities on a
balance sheet or in the notes relating thereto); (3) for the payment
of the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business; (4)
constituting Capitalized Lease Obligations; (5) in respect of
production payments, proceeds production payments or similar financing
arrangements; (6) which is, under GAAP, shown on a balance sheet
(after giving effect, in the case of the balance sheet of the Company
or a Restricted Subsidiary, to the eliminating entries, if any, for
the Unrestricted Subsidiaries as a group and the Special Subsidiary)
as long-term debt (excluding provisions for deferred income taxes,
unfunded pension obligations, unfunded liabilities for other
post-employment benefits and other reserves or provisions to the
extent that such reserves or provisions do not constitute an
obligation), or (7) for any item described in any of the foregoing
CLAUSES (1) through (6) which is secured by any Lien on property owned
by the Company or any Restricted Subsidiary, whether or not the
obligations secured thereby shall have been assumed by the Company or
such Restricted Subsidiary; or
(b) payable more than one year from the date of creation
thereof, which under GAAP is shown on the balance sheet as a long-term
liability (EXCLUDING provisions for deferred income taxes, unfunded
pension obligations, unfunded liabilities for other post-employment
benefits and other reserves or provisions to the extent that such
reserves or provisions do not constitute an obligation); or
(c) constituting a Guaranty with respect to Funded Debt (of the
kind otherwise described in CLAUSES (a) and (b) of this definition) of
another Person, including any obligation by the Company or a
Restricted Subsidiary for Funded Debt of SFEP or any other Person,
regardless of the percentage of equity interest owned therein by the
Company or a Restricted Subsidiary, by virtue of its capacity as a
general partner of SFEP or such other Person.
"GAAP" shall mean, as to a particular Person, such accounting
practice as, in the opinion of the independent accountants of
recognized national standing regularly retained by such Person and
acceptable to the Agent, conforms at the time to generally accepted
accounting principles, consistently applied. Generally accepted
accounting principles means those principles and practices which are
(a) recognized as such by the Financial Accounting Standards Board;
(b) applied for all periods after the date hereof in a manner
consistent with the manner in which such principles and practices were
applied to the financial statements of the relevant
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Person dated December 31, 1989 and for the period then ended, and (c)
consistently applied for all periods after the date hereof so as to
reflect properly the financial condition and results of operations of
such Person.
"GAS PLANT" shall mean the gas treatment and processing plant
known as the "Sale Ranch Plant" formerly owned by the Company and
located in Martin County, Texas, and all related facilities.
"GOVERNMENTAL AUTHORITY" shall mean any sovereign governmental
authority, the United States of America, any State of the United
States and any political subdivision of any of the foregoing, and any
agency, instrumentality, department, commission, board, bureau,
central bank, authority, court or other tribunal, in each case whether
executive, legislative, judicial, regulatory or administrative, having
jurisdiction over the Company, any of the Company's Subsidiaries, any
of their respective property, the Agent, the Co-Agent or any Bank.
"GUARANTY" shall mean and include, without limitation, any
obligation of the Company or a Restricted Subsidiary
(a) constituting a guaranty, endorsement (other than an
endorsement of a negotiable instrument for collection in the ordinary
course of business) or other contingent liability (whether direct or
indirect) in connection with the obligations, stock or dividends of
any Person (other than the Company or a Restricted Subsidiary);
(b) payable under any contract (other than the Tax
Indemnification Agreement and any other tax indemnification or sharing
agreement) providing for the making of loans, advances or capital
contributions to any Person (other than the Company or a Restricted
Subsidiary), or for the purchase of any property from any Person, in
each case in order primarily to enable such Person to maintain working
capital, net worth or any other balance sheet condition or to pay
debts, dividends or expenses;
(c) payable under any contract for the purchase of materials,
supplies or other property or services (other than any natural gas
transportation contract or any electrical, water supply, steam
purchase or other utility supply contract) if such contract (or any
related document) requires that payment for such materials, supplies
or other property or services shall be made regardless of whether or
not delivery of such materials, supplies or other property or services
is ever made or tendered; PROVIDED that the exceptions contained in
this CLAUSE (c) shall not apply to any contract for the purchase or
transportation of natural gas where payment is required regardless of
whether the delivery of such
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natural gas is ever made or tendered, unless at the time such contract
is entered into the aggregate of payments under such contract and all
such existing contracts would not exceed $20,000,000 in any calendar
year based on existing rates and automatic escalations in such rates
under such contracts;
(d) payable under any contract to rent or lease (as lessee) any
real or personal property (other than any oil and gas leases) if such
contract (or any related document) provides that the obligation to
make payments thereunder is absolute and unconditional under
conditions not customarily found in commercial leases then in general
use or requires that the lessee purchase or otherwise acquire
securities or obligations of the lessor; or
(e) payable under any other contract which, in economic effect,
is substantially equivalent to a guarantee for any payment or
performance of an obligation of a Person other than the Company or a
Restricted Subsidiary.
"HADSON" shall mean Hadson Corporation, a Delaware corporation,
and any successor corporation thereto.
"HADSON STOCK" shall mean, to the extent held continuously by the
Company or any of its Restricted Subsidiaries after the merger of SFER
Pipeline, Inc. into the Company, (a) any of the 2,080,000 shares of
the Senior Cumulative Preferred Stock, Series A, par value $.01 per
share, of Hadson and the 10,395,665 shares of the common stock, par
value $.01 per share, of Hadson, acquired by the Company or any of its
Subsidiaries on or before January 31, 1994, (b) any stock acquired by
virtue of one or more stock splits or recapitalizations involving such
common stock or Senior Cumulative Preferred Stock and not involving
any additional economic consideration on the part of the Company or
any of its Subsidiaries, and (c) any dividend paid on such common
stock or Senior Cumulative Preferred Stock solely in the capital stock
of Hadson.
"HIGHEST LAWFUL RATE" shall mean, on any day, the maximum
nonusurious rate of interest permitted for that day by whichever of
applicable federal or Texas law permits the higher interest rate,
stated as a rate per annum. On each day, if any, that Chapter One
establishes the Highest Lawful Rate, the Highest Lawful Rate shall be
the "indicated rate ceiling" (as defined in Chapter One) for that day.
"HYDROCARBONS" shall mean crude oil, condensate, natural gas,
natural gas liquids and associated substances.
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"INDEPENDENT ENGINEERING REPORT" shall mean a report prepared by
an Independent Petroleum Engineer which sets forth the gross and net
volume of Hydrocarbons projected to be produced from the Petroleum
Properties, by calendar years, for the remaining economic life of the
Petroleum Properties. The Petroleum Properties of the Special
Subsidiary shall be segregated from the Petroleum Properties of the
other members of the Combined Group, and the Adobe Properties shall be
separately identified. Each Independent Engineering Report shall also
contain a list of Petroleum Properties of the members of the Combined
Group and indicate the Net Oil and Gas Income for each calendar year
attributable thereto, all in reasonable detail. Each such report
shall identify which of the Petroleum Properties covered thereby are
"proved developed producing", "proved developed non-producing" and
"proved undeveloped" (as defined in the "Definitions for Oil and Gas
Reserves" as published by the Society of Petroleum Engineers). Each
such report shall be prepared in accordance with established criteria
generally accepted in the oil and gas industry and standards
customarily used by independent petroleum engineers well regarded in
the industry in making reserve determinations or appraisals, and shall
be based on Approved Assumptions and such other assumptions, estimates
and projections as are fully disclosed in such Independent Engineering
Report.
"INDEPENDENT PETROLEUM ENGINEER" shall mean Ryder Scott Company
Petroleum Engineers or another independent petroleum engineer retained
by the Company acceptable to the Required Banks.
"INTEREST PAYMENT DATE" shall mean with respect to any Eurodollar
Loan or Alternate Base Rate Loan, the last day of each Interest Period
applicable thereto; PROVIDED that in the case of a Eurodollar Loan
with an Interest Period of six months, the Interest Payment Dates
shall be the days that would have been the Interest Payment Dates for
such Loan had two successive Interest Periods of three months been
applicable to such Loan.
"INTEREST PERIOD" shall mean:
(a) with respect to any Eurodollar Loan, the period commencing
on (1) the date such Loan is designated as or converted into or
continued as a Eurodollar Loan or (2) in the case of a Rollover to a
successive Interest Period, the last day of the immediately preceding
Interest Period and ending on the numerically corresponding day in the
first, second, third or sixth calendar month thereafter, as the
Company may select as provided in SECTION 3.3, except that each such
Interest Period which commences on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar
month shall end on the last Business Day of the appropriate subsequent
calendar month; and
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(b) with respect to any Alternate Base Rate Loan, the period
commencing on the date such Loan is made as, or converted into, an
Alternate Base Rate Loan and on each Quarterly Date thereafter and
ending on each next succeeding Quarterly Date;
PROVIDED that (x) if any Interest Period would end on a day which
shall not be a Business Day, such Interest Period shall be extended to
the next succeeding Business Day unless, with respect to Eurodollar
Loans only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the
next preceding Business Day; (y) no Interest Period may be selected
for any Loan that ends later than the Termination Date for Loans of
that Class or that causes the aggregate amount of Loans subject to
Interest Periods extending beyond the next scheduled reduction in
Facility A Maximum Amount or Preliminary Available Amount to exceed
the Facility A Maximum Amount or Preliminary Available Amount, as the
case may be, scheduled to be in effect after such reduction; and (z)
no Interest Period may be selected that ends later than December 31,
1998. Interest shall accrue from and including the first day of an
Interest Period to but excluding the last day of such Interest Period.
"INTEREST RATE PROTECTION AGREEMENTS" shall mean an interest rate
swap agreement, interest rate cap agreement or other similar
arrangement which satisfies all of the following requirements: (a) a
member of the Combined Group is a party to such agreement; (b) the
Company has given evidence (satisfactory to the Agent) of such
agreement to the Agent; (c) the terms and parties to such agreement,
taking into account all similar agreements to which members of the
Combined Group are parties, are satisfactory to the Required Banks;
and (d) such agreement is in full force and effect and has not been
unwound.
"INVESTMENT" shall mean any purchase or other acquisition of the
stock, obligations or securities of, or any interest in, or any
capital contribution, loan or advance to, or any Guaranty in respect
of the obligations of (but excluding the obligations of the Company
and the Restricted Subsidiaries arising solely by virtue of their
serving as general partner of SFEP) any Person, but in any event shall
include as an investment in any Person the amount of all Debt owed by
such Person, and all accounts receivable from such Person which are
not current assets or did not arise from sales to such Person in the
ordinary course of business. As used herein, any capital contribution
of assets by the Company or any Restricted Subsidiary shall be valued
at the book value of such assets as reflected in the consolidated
financial statements of the Company and the Restricted Subsidiaries as
at the end of the quarter ending immediately prior to such
contribution.
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"JUNIOR SECURITIES" shall mean (a) equity (including preferred
stock but excluding any equity which the holder thereof may have any
right to put back to the Company for cash and excluding any equity
mandatorily redeemable for cash) of the Company or (b) indebtedness of
the Company which in the sole discretion of the Required Banks
satisfies all of the following requirements: (1) such indebtedness
shall be subordinated by writing in Proper Form in right of payment to
all existing and future indebtedness of the Company under the Credit
Documents, as renewed, extended, amended, modified, supplemented and
increased from time to time; (2) such indebtedness shall be unsecured;
(3) no principal of such indebtedness shall be scheduled to be due
before January 31, 1999; (4) such indebtedness shall not be governed
by any covenant or event of default more restrictive than those set
forth in the Credit Documents; (5) the provisions applicable to such
indebtedness with respect to a change in the control of the Company
and the sale of assets by any member of the Combined Group shall be
not more restrictive than those set forth in the Credit Documents; (6)
such indebtedness shall be subject to Blockage for periods aggregating
up to 180 days within any 365 day period; (7) the holders of such
indebtedness shall be required to give the Agent at least five days'
prior written notice of any intended acceleration of such indebtedness
(which the Agent shall transmit to each Bank promptly upon receipt);
and (8) the holders of such indebtedness shall not have the right to
declare a default with respect to, or to accelerate, any of such
indebtedness in the event of a default on other indebtedness of any
member of the Combined Group except (i) at the scheduled maturity of
such other indebtedness or (ii) in the event that principal of such
other indebtedness in excess of $25,000,000 shall be duly accelerated.
For purposes of this definition, "BLOCKAGE" shall mean, upon the
occurrence of a default and so long as it is continuing, the
prohibition of the payment (including principal of, interest or
premium on or sinking fund requirements) of any indebtedness or
obligations of the Company consisting of or arising in connection with
any Junior Securities. For purposes of this definition, "PAYMENT" and
its correlatives shall include any deposit of property to defease any
Junior Securities.
"LEGAL REQUIREMENT" shall mean any applicable law, statute,
ordinance, decree, requirement, order, judgment, rule, regulation (or
official interpretation by any Governmental Authority of any of the
foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority, in each case as now or hereafter in effect.
"LETTER OF CREDIT" shall have the meaning ascribed to such term
in the Letter of Credit Agreement.
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"LETTER OF CREDIT AGREEMENT" shall mean that certain Letter of
Credit Agreement of even date herewith, among the Company, the Agent,
the Co-Agents, and the Banks.
"LETTER OF CREDIT COMMITMENT" shall have the meaning ascribed to
it in the Letter of Credit Agreement.
"LETTER OF CREDIT LIABILITIES" shall have the meaning ascribed to
such term in the Letter of Credit Agreement.
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing), any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing
of, or agreement to give, any financing statement under the Uniform
Commercial Code of any jurisdiction or any other type of preferential
arrangement.
"LOANS" shall mean the loans provided for by SECTION 2.1,
including Rollovers of Loans.
"MATERIAL ADVERSE CHANGE" shall mean an occurrence of whatever
nature (including any adverse determination in any litigation,
arbitration or governmental investigation or proceeding), which after
taking into account actual insurance coverage and effective
indemnification with respect to such occurrence, (a) has a material
adverse effect on the financial condition, business, operations or
properties of the Company and its Subsidiaries taken as a whole and
(b) impairs in any material respect either (1) the ability of the
Company to perform any of its obligations under the Credit Documents
or (2) the ability of the Banks to enforce any of such obligations or
any of their remedies under the Credit Documents.
"MERGER" shall mean the merger of Adobe into the Company which
occurred May 19, 1992.
"MERGER DEBT", for purposes of the definition of "Existing
Priority Debt" used in SECTION 9.7(b)(3) and 9.7(b)(4) of this
Agreement, shall mean at any time, with respect to the Debt of the
Company incurred as of May 20, 1992, in connection with the Merger, as
such Debt may have been or hereafter may be renewed, extended or
otherwise modified, the maximum principal amount of such Debt that can
be outstanding at such time, but only to the extent that such amount
is equal to or less than (a) $90,000,000, at any time during the
period from and including December 31, 1993, to and including December
30, 1994, (b) $72,000,000, at any time during the period from and
including December 31, 1994, to and including December 30, 1995, (c)
$54,000,000, at any time during the period from and including December
31, 1995, to and including December 30, 1996,
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(d) $36,000,000, at any time during the period from and including
December 31, 1996, to and including December 30, 1997, (e)
$18,000,000, at any time during the period from and including December
31, 1997, to and including December 30, 1998, and (f) $0.00 at any
time thereafter.
"MLP INVESTMENT" shall mean, at any time, the lesser of (a) the
book value of the Investment of the Company and the Restricted
Subsidiaries in the Special Subsidiary, as determined from the most
recent consolidated balance sheet of the Company or (b) the product of
(1) the average closing price of the publicly traded limited partner
interests of the Special Subsidiary for the 30 days immediately
preceding the date upon which such determination is made multiplied by
(2) the total limited partner interests in the Special Subsidiary
owned by the Company and the Restricted Subsidiaries on the date such
determination was made.
"MORTGAGED PROPERTIES" shall mean all property, whether now
existing or hereafter acquired, which is or is to become subject to
the Liens of a Mortgage.
"MORTGAGES" shall mean, collectively, the Deed of Trust and the
mortgages, deeds of trust, assignments, security agreements,
collateral mortgages, collateral mortgage notes, pledge agreements and
other devices described or referenced on SCHEDULE VIII, executed by
the Company in favor of the Agent.
"MOST RECENT ENGINEERING REPORT" shall mean, as of any date of
determination, (a) until the first Independent Engineering Report is
delivered pursuant to SECTION 9.1 or SECTION 2.7, the Independent
Engineering Report of Ryder Scott Company Petroleum Engineers dated
February 3, 1994; (b) thereafter, the most recent Independent
Engineering Report delivered pursuant to either SECTION 9.1 or
SECTION 2.7 on or prior to such date of determination.
"NET OIL AND GAS INCOME" shall mean, for any calendar year (or
portion thereof) and for any Person, (a) an amount (or, with respect
to any portion of a calendar year, PRO RATA in accordance with the
number of days in such portion of such calendar year) of projected
gross revenues (based on the prices set forth in the Approved
Assumptions) from the sale of Hydrocarbons produced from the
Recognized Proved Reserves to be received, subject to no entitlement
of any other Person but including appropriate adjustments for over-
and under-produced status, by such Person during such calendar year as
set forth in the Most Recent Engineering Report LESS (b) an amount
(or, with respect to any portion of a calendar year, PRO RATA in
accordance with the number of days in such portion of such calendar
year) of projected
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royalties and windfall profit, production, ad valorem, severance and
all other similar taxes and operating and capital expenditures
required to be incurred during such calendar year in order to generate
such gross revenues (but not including general and administrative
expenses or principal and interest payable with respect to Debt), as
set forth in the Most Recent Engineering Report.
"NOTES" shall mean the Facility A Notes and the Facility B Notes.
"NOTICE OF ENTIRE AGREEMENT" shall mean that certain Notice of
Entire Agreement, DTPA Waiver and Release of Claims of even date
herewith between the Company and the Agent.
"OBLIGATIONS" shall mean, as at any date of determination
thereof, the sum of (a) the aggregate principal amount of Loans out-
standing hereunder PLUS (b) the aggregate amount of the Reimbursement
Obligations.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the
name of the Company by its President, one of its Vice Presidents or
its Treasurer.
"OPTIONAL RESERVE REPORT" shall mean the Independent Engineering
Report permitted by SECTION 2.7.
"ORGANIZATIONAL DOCUMENTS" shall mean, with respect to a
corporation, the certificate of incorporation, articles of
incorporation and bylaws of such corporation; with respect to a
partnership or a limited partnership, the partnership agreement
establishing such partnership; with respect to a joint venture, the
joint venture agreement establishing such joint venture; and with
respect to a trust, the instrument establishing such trust; in each
case including any and all modifications thereof as of the date of the
Credit Document referring to such Organizational Document.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERMITTED ENCUMBRANCES" shall have the meaning ascribed to such
term in the Deed of Trust.
"PERSON" shall mean and include an individual or legal entity in
the form of a partnership, a limited liability company, a joint
venture, a corporation, a trust, an unincorporated organization or a
government or any department or agency thereof. The term "Person"
shall not, however, mean and include an arrangement that is not a
separate legal entity such as the legal arrangement
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between two or more parties owning interests in the same property or
unit.
"PETROLEUM PROPERTIES" shall mean, at any time and with respect
to any Person, all Recognized Proved Reserves which are (a) owned by
such Person at such time free and clear of any Lien (other than
Permitted Encumbrances and Liens permitted by SECTION 9.7) and
(b) covered in the Most Recent Engineering Report.
"PLAN" shall mean an employee benefit plan which is covered by
ERISA which is either (a) maintained by the Company or any ERISA
Affiliate for employees of the Company or such ERISA Affiliate or (b)
a multiemployer plan as defined in Section 4001(a)(3) of ERISA to
which (i) the Company, (ii) any ERISA Affiliate or (iii) any trade or
business which was previously under common control with the Company
within the meaning of Section 414 of the Code (but only with respect
to such period of common control with the Company), has an obligation
to make contributions (or with respect to (iii) above, had an
obligation to make contributions during any portion of time that the
limitations period under Section 4301(f) of ERISA with respect to such
obligation has not expired).
"POST-DEFAULT RATE" shall mean, in respect of any principal of
any Loan or any other amount payable by the Company under any Credit
Document which is not paid when due (whether at stated maturity, by
acceleration, or otherwise), a rate per annum on each day during the
period commencing on the due date until such amount is paid in full
equal to the lesser of (a) the Alternate Base Rate as in effect for
that day PLUS the Applicable Margin for Alternate Base Rate Loans in
effect for that day plus 2% or (b) the Highest Lawful Rate for that
day.
"PRELIMINARY AVAILABLE AMOUNT" shall mean, on any day occurring
during the respective Applicable Periods set forth on EXHIBIT F, the
amount set forth for such Applicable Period in the applicable table in
EXHIBIT F (as the same may be reduced from time to time pursuant to
SECTION 2.2). The applicable table shall be determined according to
the aggregate Qualifying Amount of Junior Securities issued by the
Company as of the most recent Achievement Date, but to qualify for a
particular table (other than Table Five), the Company must have repaid
or Defeased, on or before such Achievement Date, all Designated Debt
for such aggregate Qualifying Amount set forth on SCHEDULE X.
"PRICE PROTECTION AGREEMENT" shall mean a product price
protection agreement which satisfies all of the following
requirements: (a) a member of the Combined Group is a party to such
agreement; (b) the Company has given evidence (satisfactory to the
Agent) of such agreement to the Agent; (c) the terms and
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parties to such agreement, taking into account all similar agreements
to which members of the Combined Group are parties, are satisfactory
to the Required Banks; and (d) such agreement is in full force and
effect and has not been unwound. The agreements described on
SCHEDULE III are Price Protection Agreements for purposes of this
Agreement as of the date hereof.
"PRIME RATE" shall mean, as of a particular date, the prime rate
most recently announced by TCB and thereafter entered in the minutes
of TCB's Loan and Discount Committee, automatically fluctuating upward
and downward with and at the time specified in each such announcement
without special notice to the Company or any other Person, which prime
rate may not necessarily represent the lowest or best rate actually
charged to a customer.
"PRINCIPAL OFFICE" shall mean the principal banking building of
the Agent, presently located at 712 Main Street, Houston, Harris
County, Texas 77002.
"PRIORITY DEBT" at any time shall mean an amount equal to the sum
of (without duplication) the amount of all Special Debt outstanding at
such time and the amount of all Debt of the Company and its Restricted
Subsidiaries outstanding at such time that is secured by one or more
Liens permitted under CLAUSE (4), (5), (6), (7), (8), (9), (10), (11),
(12) or (13) of SECTION 9.7(a).
"PROJECTED G & A EXPENSE" shall mean, for any Person, the
appropriate projected annual levels of general and administrative
expense and district overhead to be used in the calculation of CFADS
of such Person, as mutually agreed among the Agent, the Co-Agents and
the Company as soon as practical after the delivery of the Most Recent
Engineering Report.
"PROJECTED INCOME TAX EXPENSE" shall mean, for any Person, the
appropriate projected annual levels of income tax expense to be used
in the calculation of CFADS of such Person, as determined by the Agent
after consultation with the Company and based on such Person's current
tax position projected into the future and the Most Recent Engineering
Report; the Agent will give written notice of the Projected Income Tax
Expense of each such Person to the Company as soon as practical after
the delivery of the Most Recent Engineering Report.
"PROPER FORM" shall mean in form and substance satisfactory to
the Agent.
"PROVED RESERVES" shall mean reserves of Hydrocarbons in place
which are estimated to be recoverable with reasonable certainty and
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are consistent with the "Definitions for Oil and Gas Reserves" as
published by the Society of Petroleum Engineers.
"QUALIFYING AMOUNT" shall mean that amount of Junior Securities
which results in gross cash proceeds to the Company of not less than
the amounts specified herein.
"QUALIFYING DATE" shall mean the first date prior to July 1,
1994, on which the Agent shall have received evidence satisfactory to
it in its sole discretion that both (a) Junior Securities in a
Qualifying Amount of at least $75,000,000 shall have been issued (such
issuance may be in one or more transactions on one or more dates) and
cash proceeds thereof shall have been received by the Company and (b)
all Designated Debt for the aggregate Qualifying Amount of Junior
Securities actually issued, as shown on SCHEDULE X, shall have been
repaid or Defeased. The Qualifying Date must occur, if at all, before
July 1, 1994.
"QUARTERLY DATES" shall mean the last day of each March, June,
September and December; PROVIDED that if any such date is not a
Business Day, the relevant Quarterly Date shall be the next succeeding
Business Day.
"RECOGNIZED PROVED RESERVES" shall mean Proved Reserves if (a)
the designation of such Proved Reserves was by an Independent
Petroleum Engineer; (b) a member of the Combined Group owns such
Proved Reserves; (c) the estimates with respect to such Proved
Reserves were made on the basis of the most recent Approved
Assumptions, and (d) either (1) such Proved Reserves are located
onshore or offshore the United States or Canada or (2) the Required
Banks have consented to the inclusion of such Proved Reserves in the
Recognized Proved Reserves.
"REGULATION D" shall mean Regulation D of the Board as the same
may be amended or supplemented from time to time and any successor or
other regulation relating to reserve requirements.
"REGULATORY CHANGE" shall mean, with respect to any Bank, any
change on or after the date of this Agreement in any Legal Requirement
(including Regulation D) or the adoption or making on or after such
date of any official interpretation, directive or request applying to
a class of banks including such Bank under any Legal Requirement
(whether or not having the force of law) by any Governmental Authority
charged with the interpretation or administration thereof.
"REIMBURSEMENT OBLIGATIONS" shall have the meaning ascribed to
that term in the Letter of Credit Agreement.
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"REQUEST FOR EXTENSION OF CREDIT" shall mean a request for
extension of credit duly executed by the chief executive officer,
chief financial officer or treasurer of the Company, or such other
officer of the Company as its chief financial officer shall from time
to time designate in a writing delivered to the Agent, appropriately
completed and substantially in the form of EXHIBIT C.
"REQUIRED BANKS" shall mean Banks having equal to or greater than
66-2/3% of the Aggregate Commitment.
"REQUIRED RATIOS" shall mean (a) an Annual Debt Service Coverage
Ratio of at least 1.15 to 1.00; (b) an Alternate Annual Debt Service
Coverage Ratio of at least 1.00 to 1.00; (c) a TLOR Coverage Ratio of
at least 1.50 to 1.00, and (d) an SLOR Coverage Ratio of at least 1.75
to 1.00.
"REQUIRED RESERVE REPORT" shall mean each Independent Engineering
Report required to be provided pursuant to SECTION 9.1(g).
"RESERVE VALUE" shall mean, as of any date and with respect to a
Person, the net present value (discounted at the discount rate set
forth in the most recent Approved Assumptions) of projected Net Oil
and Gas Income (calculated on the basis of the Most Recent Engineering
Report) attributable to the Petroleum Properties of such Person for
the period commencing on such date and ending at the end of the
economic life of such Petroleum Properties.
"RESTRICTED INVESTMENT" shall mean any Investment other than:
(a) Investments in the Company or a Restricted Subsidiary or in
an entity which immediately after or concurrently with such Investment
will be a Restricted Subsidiary;
(b) Investments in the Special Subsidiary;
(c) readily marketable direct full faith and credit obligations
of the United States of America or any agency thereof or obligations
unconditionally guaranteed by the full faith and credit of the United
States of America or any agency thereof, due within three years of the
making of the Investment;
(d) readily marketable direct obligations of any State of the
United States of America or any political subdivision of any such
State having a credit rating of at least "Aa" by Moody's Investors
Service, Inc. ("MOODY'S") or "AA" by Standard & Poor's Corporation
("S&P"), in each case due within three years from the making of the
Investment;
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(e) domestic and eurodollar certificates of deposit maturing
within one year from the making of the Investment issued by, deposits
in, eurodollar deposits through, and banker's acceptances of,
commercial banks incorporated under the laws of the United States or
any State thereof, Canada, Japan or any Western European country, and
having combined capital, surplus and undivided profits of at least
$100,000,000;
(f) readily marketable commercial paper of any commercial bank
or corporation doing business and incorporated under the laws of the
United States of America or any State thereof having a credit rating
of at least "A-1" from S&P or at least "P-1" by Moody's, in each case
due within 270 days after the making of the Investment;
(g) money market investment programs which primarily invest in
the types of Investments described in CLAUSES (c) through (f) above
and which are classified as a current asset in accordance with GAAP
and which are administered by broker-dealers acceptable to the Agent;
(h) repurchase agreements with major dealers or banks, pursuant
to which physical delivery of the respective securities is required,
except for obligations of the U.S. Treasury to be delivered through
the Federal Reserve book entry system;
(i) travel and other like advances to officers and employees of
the Company or a Restricted Subsidiary in the ordinary course of
business;
(j) Investments in the Hadson Stock; or
(k) Investments not described in CLAUSES (a) through (j) of this
definition in an aggregate principal amount not to exceed $10,000,000.
"RESTRICTED SUBSIDIARY" shall mean each Subsidiary of the Company
designated as a Restricted Subsidiary on SCHEDULE I, together with any
Subsidiary hereafter created or acquired and, at the time of creation
or acquisition, not designated by the Board of Directors of the
Company as an Unrestricted Subsidiary. Any Subsidiary of the Company
designated as an Unrestricted Subsidiary for purposes of this
Agreement may thereafter be designated a Restricted Subsidiary upon 30
days' prior written notice to the Banks if, at the time of such
designation and after giving effect thereto and to the concurrent
retirement of any Debt, (a) no Default shall have occurred and be
continuing; (b) such Subsidiary is organized under the laws of the
United States or any state thereof; (c) 80% or more of each class of
voting stock outstanding
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of such Subsidiary is owned by the Company or a wholly owned
Restricted Subsidiary, and (d) such Subsidiary could incur at least
$1.00 of additional Funded Debt without violation of
SECTION 9.7(b)(4).
"ROLLOVER" shall mean any reborrowing from a lender of a loan
which is prepaid, or by its terms is due, to such lender on the date
of such reborrowing if the instrument or agreement governing such Debt
specifically contemplates the periodic prepayment or repayment and
simultaneous reborrowing of such loan, PROVIDED that such reborrowing
results in no net increase in the aggregate outstanding principal
balance of such loan; without limiting the generality of the
foregoing, "Rollover" shall include specifically the repayment of a
Loan at the end of the Interest Period applicable thereto and the
simultaneous reborrowing by the Company of a new Loan in the same
principal amount.
"SALE" shall mean any sale, transfer, exchange, or other
disposition for value.
"SALE AND LEASEBACK TRANSACTION" shall mean any arrangement in
which the Company or a Restricted Subsidiary shall sell its buildings,
equipment or surface real properties, which was acquired or occupied
by the Company or a Restricted Subsidiary for more than 180 days, and
within 180 days from the date of such sale, enter into a lease as
lessee of such buildings, equipment or surface real properties having
a term (including terms of renewal or extension at the option of the
lessor or the lessee, whether or not such option has been exercised)
expiring three or more years after the commencement of the initial
term.
"SECURED DEBT" shall mean all Funded Debt that is secured by a
Lien permitted by SECTION 9.7(a)(13) on any property or assets of the
Company or any Restricted Subsidiary.
"SECURITY AGREEMENT" shall mean the Security Agreement dated
May 20, 1992 between the Company and the Agent on behalf of the Banks
covering all of the interest of the Company in all accounts, general
intangibles, equipment, fixtures, inventory, contract rights,
partnerships, joint ventures and other forms of property, of whatever
kind and character, at any time comprising, relating to, or evidencing
or effectuating ownership of, the Gas Plant, as amended and modified
from time to time.
"SECURITY DOCUMENTS" shall mean, collectively, the Deed of Trust,
the Mortgages, the Amendment to Deed of Trust, the Amendment to
Louisiana Security Agreement, the Amendment to Leasehold Deed of
Trust, the Amendment to Security Agreement-Contract Rights, the
Amendment to Security Agreement -- Stock, the Security Agreement,
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the Stock Pledge Agreement, all applicable Financing Statements and
any and all other agreements, deeds of trust, mortgages, chattel
mortgages, security agreements, pledges, guaranties, assignments of
production or proceeds of production, assignments of income,
assignments of contract rights, assignments of partnership interest,
assignments of royalty interests, assignments of performance,
completion or surety bonds, standby agreements, subordination
agreements, undertakings, stock powers and other instruments and
Financing Statements now or hereafter executed and delivered by any
Person (other than solely by a Bank and/or any other creditor
participating in the Facility A Loans or any collateral or security
therefor) in connection with, or as security for the payment or
performance of, the Facility A Notes; and, from and after the
execution and delivery thereof, shall include any supplemental such
document.
"SENIOR INDEBTEDNESS" shall mean, without duplication, that part
of Covered Debt consisting of (a) all indebtedness and obligations
evidenced by, arising under or incurred in connection with the Credit
Documents and all renewals, extensions, rearrangements, refundings,
and modifications of any thereof; (b) all other indebtedness and
obligations of the Company, the Restricted Subsidiaries or the Special
Subsidiary, which is PARI PASSU with or senior to the indebtedness and
obligations described in CLAUSE (a) above, (c) Capitalized Lease
Obligations, and (d) all indebtedness and obligations of the Company,
the Restricted Subsidiaries or the Special Subsidiary which is at the
time of any determination of Senior Indebtedness secured by any Lien.
"SERIAL NOTE AGREEMENT" shall mean that certain Note Agreement
dated as of March 31, 1990, evidencing the issuance of Series A, B, C,
D, E, F and G Notes by the Company in the aggregate amount of
$365,000,000, as amended from time to time.
"SFEP" shall mean, collectively, Santa Fe Energy Partners, L.P.
and Santa Fe Energy Operating Partners, L.P., each a Delaware limited
partnership.
"SFP GROUP" shall mean Santa Fe Pacific Corporation and its
affiliated group of corporations which together constitute an
affiliated group of corporations within the meaning of Section 1504(a)
of the Code.
"SLOR COVERAGE RATIO" shall mean, as of any date of
determination, the ratio of (a) the Combined Reserve Value to (b) all
Senior Indebtedness included in Combined Covered Debt, in each case as
of such date.
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"SPECIAL DEBT" shall mean the sum of (a) Attributable Debt; (b)
Secured Debt, and (c) Funded Debt of the Restricted Subsidiaries.
"SPECIAL SUBSIDIARY" shall mean SFEP until (a) the Company
designates SFEP a Restricted Subsidiary pursuant to the terms of the
Serial Note Agreement or (b) the Company designates or continues to
designate SFEP as an Unrestricted Subsidiary subsequent to the
acquisition by the Company and the Restricted Subsidiaries of all of
the outstanding limited partnership interests in SFEP.
"SPECIAL SUBSIDIARY PERCENTAGE" shall mean, as of any date, the
percentage ownership interest of the Company and the Restricted
Subsidiaries in the Special Subsidiary on such date.
"SPECIAL SUBSIDIARY QUALIFYING CONDITIONS" shall mean all of the
following conditions: (a) the Company or a Restricted Subsidiary owns
more than 50% of the outstanding indicia of equity rights issued by
Santa Fe Energy Partners, L.P. and serves as the sole managing general
partner of Santa Fe Energy Partners, L.P.; (b) Santa Fe Energy
Partners, L.P. owns more than 50% of the outstanding indicia of equity
rights issued by Santa Fe Energy Operating Partners, L.P.; (c) the
Company or a Restricted Subsidiary serves as the sole managing general
partner of Santa Fe Energy Operating Partners, L.P., and (d) both
Santa Fe Energy Partners, L.P. and Santa Fe Energy Operating Partners,
L.P. are permitted (by applicable law and applicable contract) to make
distributions to their partners.
"SPIN-OFF" shall mean (a) the distribution, by dividend to the
stockholders of Santa Fe Pacific Corporation of the shares of capital
stock of the Company owned by Santa Fe Pacific Corporation, which
distribution was commenced on December 4, 1990, and (b) the
distribution by SFP Properties, Inc. to Santa Fe Pacific Corporation
of the capital stock of the Company that was made on December 27,
1989.
"SPRINGING LIEN" shall mean the Liens on real property of SFEP
that come into existence at any time SFEP is a Restricted Subsidiary
pursuant to section 5.08(b) or 5.11 of the Credit Agreement (the
"SPRINGING LIEN AGREEMENT") dated as of June 30, 1987 among Santa Fe
Energy Operating Partners, L.P., the lenders listed on the signature
pages thereof and Morgan Guaranty Trust Company of New York, as the
Agent, as the same may be amended, PROVIDED that (a) the Debt under
the Springing Lien Agreement is not increased, extended or renewed and
(b) the Springing Lien Agreement is not amended in any way which would
increase the likelihood or potential circumstances under which such
Liens may arise; if either clause of
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the foregoing proviso is violated, then such Liens shall not be
"Springing Liens" for purposes of this Agreement.
"STATUTORY RESERVES" shall mean a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator
of which is the number one minus the weighted average of the reserve
percentages (including any marginal, special, emergency, or
supplemental reserves), expressed as a decimal, actually required to
be maintained by any Bank by the Board or any other Governmental
Authority to which any of the Banks is subject as required by
Regulation D during the applicable Interest Period for "eurocurrency
liabilities" (as such term is used in Regulation D) and any other
reserves actually required to be maintained by any Bank by reason of
any Regulatory Change against (1) any category of liabilities which
includes deposits by reference to which the Eurodollar Rate is to be
determined as provided in the definition of "Eurodollar Base Rate" or
(2) any category of extensions of credit or other assets which include
Eurodollar Loans. Such reserve percentages shall include, without
limitation, those imposed under Regulation D. Statutory Reserves
shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage. Each determination of the Statutory
Reserves by the Agent shall be conclusive and binding, absent manifest
error, and may be made using any reasonable averaging and attribution
method.
"STOCK PLEDGE AGREEMENT" shall mean the Security Agreement --
Pledge dated May 20, 1992, from the Company to the Agent, covering all
of the issued and outstanding capital stock of Trend, as amended and
modified from time to time, including pursuant to the Amendment to
Security Agreement -- Stock.
"SUBSIDIARY" shall mean, with respect to any Person (the
"PARENT"), any corporation or entity, a majority of the shares of
voting stock (or in the case of an entity which is not a corporation,
of the equity interests that provide the power to manage or direct the
management of such entity) of which is at the time any determination
is being made, owned, directly or indirectly, by the parent.
"TAX ALLOCATION AGREEMENTS" shall mean those nine certain
agreements among the SFP Group, dated as of January 1, 1990 unless
otherwise specified in this definition and styled as follows: (a)
Agreement for the Allocation of the Combined Utah Franchise Tax
Liability; (b) Agreement for the Allocation of the Combined Oregon
Excise Tax Liability; (c) Agreement for the Allocation of the
Consolidated New Mexico Income Tax Liability; (d) Agreement for the
Allocation of the Combined Kansas Income Tax Liability; (e) Agreement
for the Allocation of the Combined Illinois Income Tax
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Liability; (f) Agreement for the Allocation of the Combined California
Franchise Tax Liability; (g) Agreement for the Allocation of the
Combined Arizona Income Tax Liability; (h) Agreement Concerning Taxes,
and (i) Agreement for the Allocation of the Consolidated Federal
Income Tax Liability Among the Members of the Santa Fe Southern
Pacific Corporation Affiliated Group, dated as of January 1, 1987.
"TAX INDEMNIFICATION AGREEMENT" shall mean any agreement pursuant
to which the Company agrees to indemnify Santa Fe Pacific Corporation
or any member of the SFP Group from and against any and all federal,
state or local taxes, interest, penalties or additions to tax imposed
upon or incurred by the SFP Group or any member thereof as a result of
the Spin-Off to the extent specified in any such agreement.
"TERMINATION DATE" shall mean the Facility A Termination Date or
the Facility B Termination Date, as the case may be, and "TERMINATION
DATES" means both such dates.
"TEXAS CREDIT CODE" shall mean Title 79, Revised Civil Statutes
of Texas, 1925, as amended.
"TLOR COVERAGE RATIO" shall mean, as of any date of
determination, the ratio of (a) the Combined Reserve Value to (b) the
Combined Covered Debt, in each case as of such date.
"TREND" shall mean Santa Fe Energy Resources (Delaware) Inc. a
wholly-owned Subsidiary of the Company.
"TYPE" shall have the meaning assigned to such term in
SECTION 1.3.
"UNAVAILABLE COMMITMENT" shall mean (a) prior to the first
Achievement Date, $50,000,000; (b) as of and following any Achievement
Date, the difference of (1) $85,000,000 and (2) the Preliminary
Available Amount determined for such Achievement Date according to the
applicable table in EXHIBIT F; and (c) if no Achievement Date has
occurred by July 1, 1994, zero.
"UNFUNDED LIABILITIES" shall mean, with respect to any Plan, at
any time, the amount (if any) by which (a) the present value of all
benefits under such Plan exceeds (b) the fair market value of all Plan
assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan (in accordance with GAAP), but
only to the extent that such excess represents a potential liability
of the Company or any ERISA Affiliate to the PBGC or a Plan under
Title IV of ERISA.
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"UNIMPAIRED CONSOLIDATED NET EARNINGS" shall mean, for any
period, the amount of Consolidated Net Earnings for such period except
that with respect to the oil and gas properties impairments taken by
the Company and its Restricted Subsidiaries in the fourth quarter of
1993 in the amount of up to $100 million as reflected in the Company's
consolidated financial statements for the year ended December 31,
1993:
(a) for any calculation of "Unimpaired Consolidated Net
Earnings" for any fiscal period of the Company and its Restricted
Subsidiaries ending on or after December 31, 1993, the net
earnings of the Company and its Restricted Subsidiaries shall not
be reduced by the amount of such oil and gas properties
impairments; and
(b) for any such calculation for any fiscal period of the
Company and its Restricted Subsidiaries ending on or after
December 31, 1993, the depreciation, depletion and amortization
expenses of the Company and its Restricted Subsidiaries shall be
calculated on a pro forma basis as if such oil and gas properties
impairments had never occurred.
"UNRESTRICTED SUBSIDIARY" shall mean each Subsidiary of the
Company designated as an Unrestricted Subsidiary on SCHEDULE I,
together with any Subsidiary of the Company which is hereafter
designated by the Board of Directors of the Company as an Unrestricted
Subsidiary. Unless designated as a Restricted Subsidiary after the
date hereof, SFEP shall be treated hereunder as an Unrestricted
Subsidiary except as SFEP is otherwise treated hereunder as a Special
Subsidiary. Any Subsidiary may be designated an Unrestricted
Subsidiary upon 30 days' prior written notice to the Banks if, at the
time of such designation and after giving effect thereto and to the
concurrent retirement of any Debt, (a) no Default shall have occurred
and be continuing; (b) such Subsidiary does not own, directly or
indirectly, any Funded Debt or capital stock of the Company or a
Restricted Subsidiary, and (c) the Company could incur at least $1.00
of additional Funded Debt without violation of SECTION 9.7(b)(3).
1.2. ACCOUNTING TERMS AND DETERMINATIONS. Except where
specifically otherwise provided:
(a) The symbol "$" and the word "dollars" shall mean lawful
money of the United States of America.
(b) For purposes of SECTIONS 9.6 and 9.7 and the definitions
used solely therein, any accounting term not otherwise defined shall
have the meaning ascribed to it under GAAP. For all other purposes
any accounting term not otherwise defined shall have the
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meaning ascribed to it under generally accepted accounting principles.
(c) Unless otherwise expressly provided, any accounting concept
and all financial covenants shall be determined on a consolidated
basis, and financial measurements shall be computed without
duplication.
(d) Wherever the term "including" or any of its correlatives
appears in the Credit Documents, it shall be read as if it were
written "including (by way of example and without limiting the
generality of the subject or concept referred to)".
(e) Wherever the word "herein" or "hereof" is used in any Credit
Document, it is a reference to that entire Credit Document and not
just to the subdivision of it in which the word is used.
(f) References in any Credit Document to Section numbers are
references to the Sections of such Credit Document.
(g) References in any Credit Document to Exhibits, Schedules,
Annexes and Appendices are to the Exhibits, Schedules, Annexes and
Appendices to such Credit Document, and they shall be deemed
incorporated into such Credit Document by reference.
(h) Any term defined in the Credit Documents which refers to a
particular agreement, instrument or document shall also mean, refer to
and include all modifications, amendments, supplements, restatements,
renewals, extensions and substitutions of the same; PROVIDED that
nothing in this subsection shall be construed to authorize any such
modification, amendment, supplement, restatement, renewal, extension
or substitution except as may be permitted by other provisions of the
Credit Documents.
(i) All times of day used in the Credit Documents mean local
time in Houston, Texas.
(j) Defined terms may be used in the singular or plural, as the
context requires.
1.3. CLASSES AND TYPES OF LOANS. Loans hereunder are
distinguished by "Class" and by "Type". The "Class" of a Loan (or of
a Commitment to make such a Loan) refers to the determination whether
such Loan is a Facility A Loan or a Facility B Loan, each of which
constitutes a Class. The "Type" of a Loan refers to the determination
whether such Loan is a Eurodollar Loan or an Alternate Base Rate Loan.
A Loan may be identified by both Class and Type (E.G., a "Eurodollar
Facility B Loan" indicates that such Loan is both a Eurodollar Loan
and a Facility B Loan).
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Section 2. COMMITMENTS.
2.1. LOANS. Each Bank severally agrees, subject to the terms and
conditions of this Agreement, to make Loans as follows:
(a) FACILITY A LOANS.
(1) On the date hereof, each Bank shall make to the Company
(and the Company shall borrow from each Bank) a Loan under this
SECTION 2.1(a) in an amount not to exceed such Bank's Facility A
Commitment then in effect. The aggregate of the Facility A Commitments
on the date hereof is $90,000,000.
(2) From time to time after the date hereof and prior to
the Facility A Termination Date, each Bank shall readvance Facility A
Optional Prepayments under this SECTION 2.1(a) to the Company in an
aggregate principal amount at any one time outstanding up to but not
exceeding such Bank's Commitment Percentage of the Facility A Unused
Commitment then in effect. Each Facility A Readvance shall be in an
amount that is an integral multiple of $1,000,000. Subject to the
conditions herein, any such Facility A Optional Prepayment made prior
to the Facility A Termination Date may be reborrowed pursuant to the
terms of this Agreement; PROVIDED, that any and all Facility A Loans
shall be due and payable in full at the Facility A Maturity Date.
(3) Notwithstanding anything in this Agreement to the
contrary, (A) no Bank shall be required to make any Facility A
Readvance if by virtue thereof the aggregate of the Facility A
Readvances of such Bank at any one time outstanding would exceed such
Bank's Commitment Percentage of the Facility A Unused Commitment then
in effect, and (B) if a Bank fails to make a Facility A Readvance as
and when required hereunder and the Company subsequently makes a
repayment on the Facility A Notes, such repayment shall be split among
the non-defaulting Banks ratably in accordance with their respective
Commitment Percentages until each Bank has its Commitment Percentage
of all of the outstanding Facility A Loans, and the balance of such
repayment shall be divided among all of the Banks in accordance with
their respective Commitment Percentages.
(4) Notwithstanding anything in this Agreement to the
contrary, no Bank shall be required to make a Facility A Readvance
(but each Bank shall permit Rollovers) during the existence of an
Engineering Shortfall.
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(b) FACILITY B LOANS.
(1) Subject to the conditions herein (including CLAUSE (6)
of this section), from time to time on or after the date hereof and
prior to the Facility B Termination Date, each Bank shall make Loans
under this SECTION 2.1(b) to the Company in an aggregate principal
amount at any one time outstanding up to but not exceeding such Bank's
Facility B Commitment; PROVIDED HOWEVER, that the foregoing
notwithstanding, prior to the Qualifying Date or, if no Qualifying
Date occurs, July 1, 1994, the aggregate Facility B Loans shall never
exceed the aggregate of the Facility B Commitments of all Banks minus
the Unavailable Commitment. Subject to the conditions herein
(including CLAUSE (6) of this section), any such Facility B Loan
repaid prior to the Facility B Termination Date may be reborrowed
pursuant to the terms of this Agreement; PROVIDED, that any and all
such Facility B Loans shall be due and payable in full on the
Facility B Maturity Date.
(2) Concurrently with the delivery of each Independent
Engineering Report and related Coverage Report required or permitted
hereby, there shall be determined, based on the Most Recent
Engineering Report and Approved Assumptions, the total maximum amount
of Facility B Loans and Letters of Credit to be available to the
Company hereunder and under the Letter of Credit Agreement without
violation of any Required Ratio. Upon each such delivery, the Company
may by notice to the Co-Agents designate as the Available Amount any
amount (not to exceed the Preliminary Available Amount as of the most
recent Achievement Date (or, if no Achievement Date occurs, the
Preliminary Available Amount then in effect) according to the
applicable table in EXHIBIT F) equal to or less than such total
maximum amount. The Available Amount so designated shall remain in
effect as the Available Amount until the next determination under this
SECTION 2.1(b)(2). If no amount lesser than (a) or (b) in this
sentence is designated in accordance with this SECTION 2.1(b)(2), the
Available Amount shall be the lesser of (a) the Preliminary Available
Amount then in effect according to the applicable table in EXHIBIT F
or (b) such total maximum amount.
(3) Notwithstanding anything in this Agreement to the
contrary, (A) no Bank shall be required to make Facility B Loans at
any one time outstanding in excess of such Bank's Commitment
Percentage of the lesser of (x) the aggregate of the Facility B
Commitments of all Banks then in effect (minus, prior to the
Qualifying Date or, if no Qualifying Date occurs, July 1, 1994, the
Unavailable Commitment) and (y) the difference between (i) the
Available Amount and (ii) the aggregate Letter of Credit Liabilities,
and (B) if a Bank fails to make a Facility B Loan as and when required
hereunder and the Company subsequently makes a
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repayment on the Facility B Notes, such repayment shall be split among
the non-defaulting Banks ratably in accordance with their respective
Commitment Percentages until each Bank has its Commitment Percentage
of all of the outstanding Facility B Loans, and the balance of such
repayment shall be divided among all of the Banks in accordance with
their respective Commitment Percentages.
(4) Notwithstanding anything in this Agreement to the
contrary, no Bank shall be required to make Facility B Loans (but each
Bank shall permit Rollovers) during the existence of an Engineering
Shortfall.
(5) Upon each delivery of the financial statements required
by SECTION 9.1(b) and the Independent Engineering Report required by
SECTION 9.1(g), the Company may request the Banks to extend the
Facility B Termination Date then in effect by a period not to exceed
one year (but in no event later than December 31, 1998). Such request
shall be made by giving its written request to the Agent specifying
the date to which the Facility B Termination Date is to be extended.
The Agent, the Co-Agents and the Banks shall consider any such request
in a timely fashion and in good faith and in light of all relevant
facts and circumstances at the time of such request, but the granting
of any such extension shall be at all times within the sole and
absolute discretion of the Agent, the Co-Agents and the Banks. The
granting of any such extension would require the unanimous consent of
the Agent, the Co-Agents and the Banks and may be conditional on such
terms and conditions as the Agent, the Co-Agents and the Banks may in
their discretion propose. Failure to obtain such an extension shall
not IPSO FACTO either constitute or excuse a Default or an Event of
Default.
(6) Notwithstanding anything contained in this Section,
except in the case of a Rollover or a Facility B Loan to satisfy a
Reimbursement Obligation pursuant to SECTION 4.1, the Company may not
obtain Facility B Loans at any time unless the Facility A Unused
Commitment is equal to zero at such time.
2.2. TERMINATIONS, REDUCTIONS AND CHANGES OF COMMITMENTS AND
FACILITY A MAXIMUM AMOUNTS.
(a) MANDATORY. (1) On the Facility A Termination Date, all
Facility A Commitments shall be terminated in their entirety. On the
Facility B Termination Date, all Facility B Commitments shall be
terminated in their entirety.
(2) In the event that the Company is required to make a
prepayment of the Facility A Loans pursuant to SECTION 3.2(b)(2)(A) or
3.2(b)(2)(B), the Facility A Maximum Amount for the Applicable
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Period then in effect shall be reduced by the amount of such
prepayment and an amount equal to such prepayment shall be deducted
from the Facility A Maximum Amounts for each subsequent Applicable
Period PRO RATA according to their respective amounts in effect
immediately prior to such reduction; PROVIDED, that if such PRO RATA
deduction does not result in compliance by the Company with all
Required Ratios, such amount shall be reallocated among such
subsequent Applicable Periods (and, if necessary, to the aggregate
Facility B Commitments) as the Company shall direct to the extent
necessary to bring the Company into compliance with all Required
Ratios.
(3) The Company shall from time to time reduce the
aggregate Facility B Commitments for present and future Applicable
Periods (and, if necessary, the Facility A Maximum Amount) to the
extent necessary to bring the Company into compliance with all
Required Ratios. Any such reduction or termination of Commitments
shall be made against the Facility B Commitments; PROVIDED, that if
the Company can comply with all Required Ratios only by reducing the
Facility A Maximum Amount, the Company may reduce or terminate the
Facility A Maximum Amount, but only to the extent necessary to achieve
such compliance. Any such reduction shall be accomplished within 10
Business Days after demand therefor by the Agent; PROVIDED, that in
the case of any noncompliance with Required Ratios resulting solely
from an Engineering Shortfall, the Company shall remedy such
noncompliance, but no Event of Default shall occur until the
expiration of the cure period provided in SECTION 10.1(e).
(4) In addition, in the event the Company is required to
make a prepayment of Facility A Loans pursuant to SECTION 3.2(b)(3),
an amount equal to such prepayment shall be deducted from the Facility
A Maximum Amounts for present and future Applicable Periods (and, if
necessary, to the aggregate Facility B Commitments) in such manner as
the Company may direct to the extent necessary to bring the Company
into compliance with all Required Ratios.
(5) Except where reductions in the Facility A Maximum
Amounts for the Applicable Periods are made PRO RATA pursuant to
SECTION 2.2(a)(2), if at any time the Facility A Maximum Amount is
reduced for any future Applicable Period pursuant to
SECTION 2.2(a)(2), 2.2(a)(3) or 2.2(a)(4) to bring the Company in
compliance with all Required Ratios, the Facility A Maximum Amount for
the Applicable Period in effect at such time and each Applicable
Period subsequent thereto and prior to such future Applicable Period
shall be reduced by a like amount.
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(b) THE COMPANY'S OPTION.
(1) The Company shall have the right to terminate or reduce
the unused portion of the Facility B Commitments at any time or from
time to time; PROVIDED that (A) the Company shall give notice of each
such termination or reduction to the Agent as provided in SECTION 5.5;
(B) each such partial reduction shall be in an integral multiple of
$5,000,000, and (C) the Company may not cause the Available Amount to
be less than the aggregate principal amount of the Facility B Loans
then outstanding plus the Letter of Credit Liabilities then
outstanding. No voluntary reduction in the Available Amount prior to
any scheduled reduction in the Available Amount shall affect the
Available Amount after such scheduled reduction date unless such
voluntarily reduced Available Amount is less than the amount scheduled
to be the Available Amount after such scheduled reduction date, in
which case the Available Amount after such scheduled reduction date
shall be no greater than such voluntarily reduced Available Amount.
Reference is made to SECTION 2.8 for restrictions on the Company's
right to increase the Available Amount under certain circumstances.
(2) The Company shall have the right to (A) terminate or
reduce the Facility A Unused Commitment at any time or from time to
time or (B) reduce the Facility A Maximum Amount for any particular
Applicable Period at any time or from time to time; PROVIDED that (i)
the Company shall give notice of each such termination or reduction to
the Agent as provided in SECTION 5.5, (ii) each such partial reduction
shall be in an integral multiple of $5,000,000, (iii) the Company may
not cause the Facility A Maximum Amount to be less than the aggregate
principal amount of the Facility A Loans then outstanding; and (iv)
the Company shall not terminate or reduce the Facility A Unused
Commitment unless at the same time the aggregate Facility B
Commitments are terminated or reduced by the same amount. Reductions
in the Facility A Maximum Amount may be applied to any Applicable
Period at the option of the Company PROVIDED that after such
application the Company is in compliance with all Required Ratios.
(c) NO REINSTATEMENT. NO reduction in or termination of the
Commitments pursuant to SECTION 2.2 and no reduction in any Facility A
Maximum Amount may be reinstated without the written approval of the
Agent and all Banks.
2.3. FEES. (a) In consideration of the Commitments, the Company
shall pay to the Agent for the account of each Bank in accordance with
its Commitment Percentage commitment fees (the "COMMITMENT FEES") for
the period from the date of the effectiveness of this Agreement to and
including the date the last of the Commitments are terminated at a
rate per annum equal to the
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sum of (a) 1/2% of the unused portion of the Available Commitment and
(b) 1/4% of the Unavailable Commitment. The Commitment Fees shall be
computed for each day and shall be based on the unused portion of the
Available Commitment and the Unavailable Commitment for such day.
Accrued Commitment Fees shall be payable in arrears on the date of the
initial Loans or Facility A Readvances, within three days after demand
therefor on or about the Quarterly Dates, and within three days after
demand therefor on or about the relevant Termination Date.
(b) In consideration of the Commitments and of the agreement of
the Banks to enter into this Agreement, the Company shall pay to the
Agent for the account of each Bank in accordance with its Commitment
Percentage a facility fee in an amount equal to .125% of such Bank's
Commitment Percentage of the Unavailable Commitment. Such facility
fee shall be due on the Qualifying Date and will never be due if the
Qualifying Date does not occur.
(c) All past due fees payable pursuant to this section shall bear
interest at the Post-Default Rate. Upon receipt, the Agent shall
disburse such fees to the Banks in accordance with their Commitment
Percentages.
2.4. AFFILIATES; LENDING OFFICES.
(a) Any Bank may, if it so elects, fulfill its Commitment as to
any Eurodollar Loan by causing a branch, foreign or otherwise, or
Affiliate of such Bank to make such Loan and may transfer and carry
such Loan at, to or for the account of any branch office or Affiliate
of such Bank; PROVIDED that in such event, for the purposes of this
Agreement, such Loan shall be deemed to have been made by such Bank
and the obligation of the Company to repay such Loan shall
nevertheless be to such Bank and shall be deemed to be held by such
Bank, to the extent of such Loan, for the account of such branch or
Affiliate.
(b) Notwithstanding any provision of this Agreement to the
contrary, each Bank shall be entitled to fund and maintain its funding
of all or any part of its Loans hereunder in any manner it sees fit,
it being understood, however, that for the purposes of this Agreement
all determinations hereunder shall be made as if such Bank had
actually funded and maintained each Eurodollar Loan during each
Interest Period through the purchase of deposits having a maturity
corresponding to such Interest Period and bearing an interest rate
equal to the applicable Eurodollar Base Rate for such Interest Period.
2.5. SEVERAL OBLIGATIONS. The failure of any Bank to make any
Loan to be made by it on the date specified therefor shall not
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relieve any other Bank of its obligation to make its Loan on such
date, but neither the Agent nor any Bank shall be responsible for the
failure of any other Bank to make a Loan to be made by such other
Bank.
2.6. NOTES. The Loans made by each Bank shall be evidenced by a
single Facility A Note or Facility B Note, as the case may be, of the
Company (each, together with all renewals, extensions, modifications
and replacements thereof and substitutions therefor, a "NOTE") dated
the date hereof, payable to the order of such Bank in a principal
amount equal to the Commitment of such Class of such Bank as
originally in effect and otherwise duly completed. Each Bank is
hereby authorized by the Company to endorse on the schedule (or a
continuation thereof) attached to each Note of such Bank, to the
extent applicable, the date, amount and Type of and the Interest
Period for each Loan made by such Bank to the Company hereunder, and
the amount of each payment or prepayment of principal of such Loan
received by such Bank; PROVIDED that any failure by such Bank to make
any such endorsement shall not affect the obligations of the Company
under such Note, in respect of such Loan, or hereunder.
2.7. OPTIONAL RESERVE REPORT. The Company may from time to time
at its option, exercisable by giving written notice to the Co-Agents
not more often than once in any Calculation Period, provide to the
Co-Agents an Independent Engineering Report. Upon the receipt of such
notice, the Co-Agents shall consult with the Company to determine new
Approved Assumptions, which shall be furnished to the Banks by a
notice as provided in the definition of "Approved Assumptions" and
shall be subject to the approval by Banks with aggregate Commitment
Percentages of 75% or more as provided therein. The Optional Reserve
Report shall be based on the new Approved Assumptions and shall be
accompanied by a Coverage Report as of the date such Optional Reserve
Report is furnished. The Annual Debt Service Coverage Ratio, the
Alternate Annual Debt Service Coverage Ratio, the TLOR Coverage Ratio
and the SLOR Coverage Ratio (and the Applicable Margin) shall each be
redetermined in accordance with this Agreement on the basis of each
such Optional Reserve Report and Coverage Report, and the Available
Amount recalculated as provided in SECTION 2.1(b)(2).
2.8. RELEASE OF MORTGAGES. The Company shall be entitled to a
release of the Mortgaged Properties from the liens, assignments and
security interests of the Deed of Trust and the other Mortgages,
PROVIDED that (a) immediately before and immediately after giving
effect to such release, no Default shall have occurred and be
continuing; and (b) the Annual Debt Service Coverage Ratio and the
SLOR Coverage Ratio (each calculated assuming the Available Amount is
fully drawn and that the aggregate unpaid principal
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balance of the Facility A Notes is equal to the Facility A Maximum
Amount) immediately before and immediately after giving effect to any
such release shall be at least 1.25 to 1.00 and 2.00 to 1.00,
respectively. At any time on or after the Qualifying Date, but prior
to July 1, 1994, the Company may choose not more often than once by
giving written notice to the Co-Agents to recalculate the Annual Debt
Service Coverage Ratio and the SLOR Coverage Ratio to determine if the
Company qualifies for release of the Mortgaged Properties pursuant to
this section; such recalculation shall be based on new Approved
Assumptions to be determined in connection with such recalculation by
Banks with Commitment Percentages of 75% or more and using the
Independent Engineering Report most recently furnished in accordance
with this Agreement. Notwithstanding any other provision of this
Agreement to the contrary, should both (x) the Company at any time
designate as the Available Amount an amount less than the maximum
amount then offered to it as the Available Amount and (y) as a result
the Company shall obtain the release of any Mortgaged Properties, the
Available Amount may never thereafter exceed the amount so designated
by the Company.
2.9. USE OF PROCEEDS. The proceeds of the Loans shall be used by
the Company for working capital and for general corporate purposes and
may not be utilized (a) to pay dividends other than usual dividends in
the ordinary course of business or (b) for the buyout or acquisition
of any business unless the board of directors of such Person or any
other similar body has first approved such buyout or acquisition.
2.10. ORIGINAL CREDIT DOCUMENTS NOT TERMINATED. The
execution and delivery of this Agreement and the other Credit
Documents in connection with this Agreement, including the Notes, does
not and shall not constitute payment, prepayment or novation of any
indebtedness outstanding under the Revolving and Term Credit Agreement
dated as of May 20, 1992, by and among the parties hereto, as amended,
or the notes outstanding thereunder on the date hereof (the "ORIGINAL
NOTES"). The Original Notes have been marked "renewed" rather than
"paid". All Liens securing the Original Notes as amended and modified
from time to time by the Credit Documents executed and delivered
concurrently with this Agreement are hereby ratified, confirmed,
extended, renewed and brought forward as security for the Notes and
all other Obligations of the Company described therein as being
secured thereby.
2.11. SALE OF CERTAIN PROPERTIES. Notwithstanding the
provisions of SECTIONS 2.2, 2.8 and 3.2, the sale of the properties by
the Company pursuant to the agreement dated December 2, 1993 by and
among the Company, Santa Fe Energy Operating Partners, L.P. and Bridge
Oil U.S.A. and with respect to the Manila Village properties,
Plaquemines Parish, Louisiana, pursuant to the
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agreement dated October 26, 1993, by and among the Company, Santa Fe
Energy Operating Partners, L.P., Santa Fe Oil Company and Vintage
Petroleum, Inc. shall be made with a release from the Liens of the
Security Documents, without any required prepayment and without
reducing either any Facility A Maximum Amount or any Preliminary
Available Amount.
Section 3. BORROWINGS, PREPAYMENTS AND SELECTION OF INTEREST
RATES.
3.1. BORROWINGS. The Company shall give the Agent notice of each
borrowing to be made hereunder as provided in SECTION 5.5. Each
borrowing shall be in an amount of $1,000,000 or any integral multiple
thereof. Not later than 1:00 p.m. on the date specified for each such
borrowing hereunder, each Bank shall make available the amount of the
Loan, if any, to be made by it on such date to the Agent, at its
Principal Office, in immediately available funds, for the account of
the Company. The amount so received by the Agent shall, subject to
the terms and conditions of this Agreement, be made available to the
Company by depositing the same, in immediately available funds, in an
account designated by the Company and maintained with the Agent at its
Principal Office.
3.2. PREPAYMENTS.
(a) OPTIONAL PREPAYMENTS. Except as provided in SECTIONS 3,
4.2(c), 5 and 6, the Company shall have the right to prepay, on any
Business Day, in whole or in part, without the payment of any penalty
or fee, Loans at any time or from time to time; PROVIDED that the
Company shall give the Agent notice of each such prepayment as
provided in SECTION 5.5. Eurodollar Loans may be prepaid on the last
day of an Interest Period applicable thereto. Eurodollar Loans may
not be otherwise prepaid unless prepayment is accompanied by payment
of all compensation required by SECTION 6.5. All optional prepayments
shall be applied to Facility B Loans and Reimbursement Obligations
until all such Facility B Loans and Reimbursement Obligations have
been repaid, then to Facility A Loans.
(b) MANDATORY PREPAYMENTS. (1) The Company shall from time to
time on demand by the Agent prepay the Facility B Loans in such
amounts as shall be necessary (A) so that at all times the aggregate
outstanding principal amount of the Facility B Loans and Letter of
Credit Liabilities shall not be in excess of the Available Amount or
(B) to comply with SECTION 9.9. Any such payment shall be allocated
between Facility B Loans and Letter of Credit Liabilities and, if to
Letter of Credit Liabilities, first to Reimbursement Obligations and
then to other obligations as the Company may elect.
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In addition, the Company shall from time to time on demand by the
Agent prepay the Facility A Loans in such amounts as shall be
necessary (A) so that at all times the aggregate outstanding principal
amount of the Facility A Loans (including Facility A Readvances) shall
not be in excess of the Facility A Maximum Amount or (B) to comply
with SECTION 9.9.
(2) (A) Upon any sale for cash or cash equivalent
consideration of any Proved Reserves included in the Adobe Properties
in excess of $1,000,000 in any one transaction or $5,000,000 for all
transactions, the Company shall prepay on the Business Day following
the date of such sale for application to the unpaid principal balance
of the Facility A Notes an amount equal to the greater of (i) 100% of
the total proceeds of such sale or (ii) 58% of the present worth
assigned to the property sold in the Most Recent Engineering Report.
(B) Except as otherwise permitted by the Mortgages,
Mortgaged Properties cannot be sold for consideration other than cash
without the approval of all Banks. Upon any sale of any Proved
Reserves included in the Adobe Properties (other than Mortgaged
Properties) for consideration other than cash which causes the
aggregate net present value (at the discount rate included in the
Approved Assumptions on the date of each such sale) of all Adobe
Properties sold for consideration other than cash (determined in
accordance with the applicable Most Recent Engineering Report) in any
one Calculation Period to exceed $5,000,000, the Company shall prepay
on the Business Day following the date of such sale for application to
the unpaid principal balance of the Facility A Notes an amount equal
to 100% of the net present value (at the discount rate included in the
Approved Assumptions in effect on the date of such sale) of the Adobe
Properties so sold (determined in accordance with the Most Recent
Engineering Report).
(C) All amounts prepaid pursuant to
SECTION 3.2(b)(2)(A) or (B) shall be applied to the unpaid principal
balance of the Facility A Notes. The Company may in its discretion
defer making the prepayment required by SECTION 3.2(b)(2) (A) or (B)
until the earlier of (i) the time the aggregate amount of such
prepayments so deferred equals or exceeds $1,000,000 or (ii) one month
after the date the first such prepayment would otherwise be due.
(3) Concurrently with any sale of any Proved Reserves
(whether or not included in the Adobe Properties) which would cause
the aggregate amount of such sales since the effective date of the
last calculation of compliance with the Required Ratios to exceed
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$20,000,000 in the aggregate, each of the Annual Debt Service Coverage
Ratio and the Alternate Annual Debt Service Coverage Ratio shall be
redetermined for the Calculation Period in which such sales occur and
for each Calculation Period thereafter to and including December 31,
1998 and the SLOR Coverage Ratio and the TLOR Coverage Ratio shall be
redetermined, in each case to the effective date of the sale on the
basis of the most recent Approved Assumptions and the Most Recent
Engineering Report and the most recent Coverage Report delivered to
the Agent pursuant to SECTION 9.1. In making such redeterminations,
(a) the Proved Reserves (whether or not included in the Adobe
Properties) described in the Most Recent Engineering Report which are
no longer owned by members of the Combined Group (the "SOLD
PROPERTIES") shall be identified; (b) there shall be determined the
gross and net volumes of Hydrocarbons projected in the Most Recent
Engineering Report to be produced from the Petroleum Properties
(including the Sold Properties) minus the gross and net volumes of
Hydrocarbons projected in the Most Recent Engineering Report to be
produced from the Sold Properties; (c) there shall be determined by
calendar years the Net Oil and Gas Income shown in the Most Recent
Engineering Report as attributable to the Petroleum Properties
(including the Sold Properties) of members of the Combined Group minus
the Net Oil and Gas Income shown in the Most Recent Engineering Report
as attributable to the Sold Properties; and (d) the discount rate and
other factors set forth in the most recent Approved Assumptions shall
be used. In addition to any prepayments required by SECTION
3.2(b)(2)(A) and (B), if the Company upon any such redetermination
shall not be in compliance with all Required Ratios, the Company shall
prepay on the Business Day following the date of such sale an amount
of the proceeds of all sales of any Adobe Properties not previously
prepaid for application to the unpaid principal balance of the
Facility A Notes. The Company may in its discretion defer making the
prepayments required by the preceding sentence until the earlier of
(a) the time the aggregate amount of such prepayments so deferred
equals or exceeds $1,000,000 or (b) one month after the date the first
such prepayment would otherwise be due.
(4) The Company shall maintain records of all sales of
Proved Reserves, shall clearly designate each such sale as a sale of
an Adobe Property or other property, and shall otherwise maintain
books and records which enable it to comply, and to demonstrate to the
Agent on request compliance, with the obligations of the Company in
this SECTION 3.2(b).
3.3. SELECTION OF INTEREST RATES. Subject to SECTIONS 5, 6 and
12.8, the Company shall have the right, by giving written notice to
the Agent as provided in SECTION 5.5, either to convert any Loan (in
whole or in part) into a Loan of another Type or to
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continue such Loan (in whole or in part) as a Loan of the same Type.
Any such notice of conversion of a Loan into, or continuation of a
Loan as, a Eurodollar Loan shall specify the new Interest Period. In
the event the Company fails to so give such notice prior to the end of
any Interest Period for any Eurodollar Loan, such Loan shall become an
Alternate Base Rate Loan on the last day of such Interest Period. No
more than 10 Eurodollar Interest Periods shall be in effect at any
time. Except as otherwise provided herein, each designation of an
interest rate with respect to the Facility A Notes or Facility B Notes
shall apply to all Facility A Notes and Facility B Notes ratably in
accordance with their respective outstanding principal balances. If
any Bank assigns an interest in any of its Notes when any Eurodollar
Loan is outstanding with respect thereto, the assignee shall have its
ratable interest in such Eurodollar Loan.
Section 4. PAYMENTS OF PRINCIPAL AND INTEREST.
4.1. REPAYMENT OF LOANS. (a) The Company will pay to the Agent
for the account of each Bank the principal of each Loan made by such
Bank on the dates provided in the respective Notes and herein and the
amount of each Reimbursement Obligation forthwith upon its incurrence.
The amount of any Reimbursement Obligation may, if the applicable
conditions precedent specified in SECTION 7 (other than any Default
resulting solely from the nonpayment of such Reimbursement Obligation)
have been satisfied, be paid with the proceeds of Loans.
(b) Subject to SECTIONS 3.2 and 10.1, the Company shall pay the
outstanding principal amount of all Facility A Loans on the Facility A
Maturity Date and the outstanding principal amount of all Facility B
Loans on the Facility B Maturity Date.
4.2. INTEREST. (a) Subject to SECTION 12.8, the Company will pay
to the Agent for the account of each Bank interest on the unpaid
principal amount of each Loan made by such Bank for the period
commencing on the date of such Loan to but excluding the date such
Loan shall be paid in full, at the lesser of (1) the following rates
per annum:
(A) if such Loan is an Alternate Base Rate Loan, the Alternate
Base Rate PLUS the Applicable Margin for Alternate Base Rate Loans; or
(B) if such Loan is a Eurodollar Loan, the applicable Eurodollar
Rate PLUS the Applicable Margin for Eurodollar Loans; or
(2) the Highest Lawful Rate.
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(b) Notwithstanding any of the foregoing but subject to
SECTION 12.8, the Company will pay to the Agent for the account of
each Bank interest at the applicable Post-Default Rate on any
principal of any Loan made by such Bank and on any other amount
payable by the Company hereunder to or for the account of such Bank
(but, if such amount is interest, only to the extent legally
enforceable), which shall not be paid in full when due (whether at
stated maturity, by acceleration or otherwise), for the period
commencing on the due date thereof through and including the date the
same is paid in full.
(c) Accrued interest shall be due and payable on the applicable
Interest Payment Dates, except that (1) accrued interest payable at
the Post-Default Rate shall be due and payable from time to time on
demand of the Agent or the Required Banks (through the Agent), (2)
accrued interest on any amount converted from one Type of Loan to
another Type of Loan shall be paid on the amount so converted at the
time of such conversion, and (3) accrued interest on any Eurodollar
Loan paid or prepaid shall be due at the time of such payment or
prepayment.
Section 5. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS, ETC.
5.1. PAYMENTS. (a) Except to the extent otherwise provided
herein, all payments of principal of or interest on the Loans and
other amounts to be made by the Company hereunder and under the Notes
and the Security Documents shall be made in dollars, in immediately
available funds, to the Agent at its Principal Office (or in the case
of a successor Agent, at the principal office of such successor Agent
in the United States), not later than 11:00 a.m. on the date on which
such payment shall become due (each such payment made after such time
on such due date to be deemed to have been made on the next succeeding
Business Day).
(b) The Company shall, at the time of making each payment
hereunder or under any Note or any Security Document, specify to the
Agent the Loans or other amounts payable by the Company hereunder or
thereunder to which such payment is to be applied (and in the event
that it fails so to specify, such payment shall be applied as the
Agent may designate to the Loans or other amounts then due and
payable); PROVIDED that if no Loans are then due and payable or an
Event of Default has occurred and is continuing, the Agent may apply
such payment to the Obligations in such order as it may elect in its
sole discretion, but subject to the other terms and conditions of this
Agreement, including SECTION 5.2). Each payment received by the Agent
hereunder or under any Note or any Security Document for the account
of a Bank shall be paid promptly to such Bank, in immediately
available funds for the account of such Bank's Applicable Lending
Office.
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(c) If the due date of any payment hereunder or under any Note
or Security Document falls on a day which is not a Business Day, the
due date for such payment (subject to the definition of Interest
Period) shall be extended to the next succeeding Business Day and
interest shall be payable for any principal so extended for the period
of such extension.
5.2. PRO RATA TREATMENT. Except to the extent otherwise provided
herein, (a) each borrowing from the Banks hereunder, each payment of
Commitment Fees and other fees and each termination or reduction of
the Commitments of the Banks under SECTION 2.3 shall be made PRO RATA
according to the Banks' respective Commitments, and (b) each payment
by the Company of principal of or interest on Loans of a particular
Type shall be made to the Agent for the account of the Banks PRO RATA
in accordance with the respective unpaid principal amounts of such
Loans held by the Banks (subject to SECTION 6.4).
5.3. COMPUTATIONS. Interest based on the Alternate Base Rate (to
the extent determined by reference to the Prime Rate), and fees
hereunder, will be computed on the basis of 365 (or 366) days and
actual days elapsed (including the first day but excluding the last
day) occurring in the period for which payable. All other interest
shall be computed on the basis of a year of 360 days and actual days
elapsed (including the first day but excluding the last day) occurring
in the period for which payable, unless the effect of so computing
shall be to cause the rate of interest to exceed the Highest Lawful
Rate (in which event interest shall be calculated on the basis of the
actual number of days elapsed in a year composed of 365 or 366 days,
as the case may be).
5.4. MINIMUM AND MAXIMUM AMOUNTS. Except for prepayments made
pursuant to SECTION 3.2(b), each borrowing and repayment of principal
of Loans, each optional prepayment and each conversion of Type shall
be in an aggregate principal amount equal to $1,000,000, or an
integral multiple thereof (borrowings or prepayments of Loans of
different Types or, in the case of Eurodollar Loans, having different
Interest Periods at the same time hereunder, to be deemed separate
borrowings and prepayments for purposes of the foregoing, one for each
Type or Interest Period), and each termination or reduction of
Commitments shall be in an aggregate principal amount equal to
$5,000,000 or an integral multiple thereof. Upon any mandatory
prepayment that would reduce Eurodollar Loans having the same Interest
Period to less than $1,000,000, such Loans shall automatically be
converted into Alternate Base Rate Loans.
5.5. CERTAIN ACTIONS, NOTICES, ETC. Notices to the Agent of any
termination or reduction of Commitments, prepayments of Loans and of
the duration of Interest Periods and Requests for Extension
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of Credit shall be irrevocable and shall be effective only if received
by the Agent not later than 11:00 a.m. on the number of Business Days
prior to the date of the relevant termination, reduction, borrowing
and/or prepayment specified below:
Number of Business
Days Prior
Notice
Termination or reduction
of Commitments 10
Borrowing or prepayment
of or conversion into
Alternate Base Rate Loans same day
Borrowing or prepayment
of or conversion into or
continuance of Eurodollar
Loans 3
Prepayments required
pursuant to SECTION 3.2 1
Each such notice of termination or reduction shall specify the amount
of the Commitment to be terminated or reduced. Each such notice of
prepayment or Request for Extension of Credit shall specify the
amount, Class and Type of the Loans to be borrowed or prepaid (subject
to SECTIONS 3.2(a) and 5.4), the date of borrowing or prepayment
(which shall be a Business Day) and, in the case of Eurodollar Loans,
the duration of the Interest Period therefor (subject to the
definition of Interest Period). Any such notice of conversion of a
Loan into a Loan of another Type shall identify such Loan (or portion
thereof) being converted and specify the Type of Loan into which such
Loan is being converted (subject to SECTION 5.4) and the date for
conversion (which shall be a Business Day) and, unless such Loan is
being converted into an Alternate Base Rate Loan, the duration
(subject to the definition of Interest Period) of the Interest Period
therefor which is to commence as of the last day of the then current
Interest Period therefor (or the date of conversion, if such Loan is
being converted from an Alternate Base Rate Loan). Each such notice
of continuation of a Loan (or portion thereof) as the same Type of
Loan shall identify such Loan (or portion thereof) being continued
(subject to SECTION 5.4) and the duration (subject to the definition
of Interest Period) of the Interest Period therefor which is to
commence as of the last day of the then current Interest Period
therefor. The Agent shall promptly notify the Banks of the contents
of each such notice or Request for Extension of Credit.
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Notice of any prepayment having been given, the principal amount
specified in such notice, together with interest thereon to the date
of prepayment, shall be due and payable on such prepayment date.
5.6. NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Agent shall
have been notified by a Bank prior to noon on the date on which such
Bank is to make payment to the Agent of the proceeds of a Loan to be
made by it hereunder or by the Company prior to the date on which the
Company is to make a payment to the Agent for the account of one or
more of the Banks, as the case may be (such Bank or the Company being
herein called the "PAYOR" and such payment being herein called the
"REQUIRED PAYMENT"), which notice shall be effective upon receipt,
that the Payor does not intend to make the Required Payment to the
Agent, the Agent may assume that the Required Payment has been made
and may, in reliance upon such assumption (but shall not be required
to), make the amount thereof available to the intended recipient on
the date that such Required Payment is to be made. If the Payor is
the Company and the Company has not in fact made the Required Payment
to the Agent on or before such date, the recipient of such payment
shall, on demand, pay to the Agent the amount made available by the
Agent, together with interest thereon from the date such amount was so
made available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to the Fed Funds Rate for the first
three days after demand and thereafter at the Fed Funds Rate plus 2%.
If the Payor is a Bank and such Bank has not in fact made the Required
Payment to the Agent on or before such date, then such Bank shall pay
to the Agent the amount made available by the Agent on behalf of such
Bank, together with interest thereon from the date such amount was so
made available by the Agent until the Agent recovers such amount at a
rate per annum equal to the Fed Funds Rate for the first three days
and thereafter at the Fed Funds Rate plus 2%.
5.7. SHARING OF PAYMENTS, ETC. If a Bank or any participant of a
Bank shall obtain payment of any obligation to it under this
Agreement, through the exercise of any right of set-off, banker's
lien, counterclaim or similar right, or otherwise, then such Bank or
participant shall promptly purchase from the other Banks participa-
tions in the Loans made or other obligations held by the other Banks
in such amounts, and make such other adjustments from time to time as
shall be equitable to the end that all the Banks and participants
shall share the benefit of such payment (net of any expenses which may
be incurred by such Bank or its participant in obtaining or preserving
such benefit) PRO RATA in accordance with the unpaid principal and
interest then due to each of them. To such end all the Banks and
their participants shall make appropriate adjustments among themselves
(by the resale of participations sold or otherwise) if such payment is
rescinded or
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must otherwise be restored. The Company agrees, to the fullest extent
it may effectively do so under applicable law, that any Person so
purchasing a participation in the Loans made or other obligations held
by other Banks may exercise all rights of set-off, bankers' lien,
counterclaim or similar rights with respect to such participation as
fully as if such Bank were a direct holder of Loans or other
obligations in the amount of such participation. Nothing contained
herein shall require any Bank to exercise any such right or shall
affect the right of any Bank to exercise, and retain the benefits of
exercising, any such right with respect to any other indebtedness or
obligation of the Company.
Section 6. YIELD PROTECTION AND ILLEGALITY.
6.1. ADDITIONAL COSTS.
(a) Subject to SECTION 12.8, the Company shall pay to the Agent,
on demand for the account of such Bank, from time to time such amounts
as any Bank may reasonably determine to be necessary to compensate it
for any costs incurred by such Bank which such Bank reasonably
determines are attributable to its making or maintaining of any
Eurodollar Loan hereunder or its obligation to make or maintain any
such Loan hereunder, or any reduction in any amount receivable by such
Bank hereunder in respect of any of such Loans or such obligation
(such increases in costs and reductions in amounts receivable being
herein called "ADDITIONAL COSTS"), in each case resulting from any
Regulatory Change which:
(1) subjects such Bank (or makes it apparent that such Bank
is subject) to any tax (including any United States interest equali-
zation tax), levy, impost, duty, charge or fee (collectively,
"TAXES"), or any deduction or withholding for any Taxes on or from the
payment due under any Eurodollar Loan or other amounts due hereunder,
other than income and franchise taxes of the jurisdiction (or any
subdivision thereof) in which such Bank has an office or its
Applicable Lending Office; or
(2) changes the basis of taxation of any amounts payable to
such Bank under this Agreement or its Notes in respect of any of such
Loans, other than changes which affect taxes measured by or imposed on
the overall net income or franchise taxes of such Bank or of its
Applicable Lending Office for any of such Loans by the jurisdiction
(or any subdivision thereof) in which such Bank has an office or such
Applicable Lending Office; or
(3) imposes or modifies or increases or deems applicable
any reserve, special deposit or similar requirement (including any
such requirement imposed by the Board) relating to any extensions of
credit or other assets of, or any deposits with or other
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liabilities of, such Bank or loans made by such Bank, or against any
other funds, obligations or other property owned or held by such Bank; or
(4) imposes any other condition affecting this Agreement
(or any of such extensions of credit or liabilities).
Each Bank will notify the Company through the Agent of any event
occurring after the date of this Agreement which will entitle such
Bank to compensation pursuant to this section as promptly as
practicable after it obtains knowledge thereof and determines to
request such compensation, and (if so requested by the Company through
the Agent) will designate a different available Applicable Lending
Office for the Eurodollar Loans of such Bank or take such other action
as the Company may reasonably request if such designation or action is
consistent with the internal policy of such Bank and legal and
regulatory restrictions, can be undertaken at no additional cost, will
avoid the need for, or reduce the amount of, such compensation and
will not, in the sole opinion of such Bank, be disadvantageous to such
Bank (PROVIDED that such Bank shall have no obligation so to designate
an Applicable Lending Office located in the United States of America).
Each Bank will furnish the Company with a statement setting forth the
basis and amount of each request by such Bank for compensation under
this section, with each such statement to cover amounts accruing under
this section with respect to a period beginning not earlier than 120
days from the date thereof and using any reasonable averaging and
attribution methods.
(b) Without limiting the effect of the foregoing provisions of
this section, in the event that, by reason of any Regulatory Change,
any Bank either (1) incurs Additional Costs based on or measured by
the excess above a specified level of the amount of a category of
deposits or other liabilities of such Bank which includes deposits by
reference to which the interest rate on Eurodollar Loans is determined
as provided in this Agreement or a category of extensions of credit or
other assets of such Bank which includes Eurodollar Loans or (2)
becomes subject to restrictions on the amount of such a category of
liabilities or assets which it may hold, then, if such Bank so elects
by notice to the Company (with a copy to the Agent), the obligation of
such Bank to make Eurodollar Loans hereunder shall be suspended until
the date such Regulatory Change ceases to be in effect (in which case
the provisions of SECTION 6.4 shall be applicable).
(c) Determinations and allocations by any Bank for purposes of
this section of the effect of any Regulatory Change on its costs of
maintaining its obligations to make Loans or of making or maintaining
Loans or on amounts receivable by it in respect of
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Loans, and of the additional amounts required to compensate such Bank
in respect of any Additional Costs, shall be conclusive, absent
manifest error, and may be prepared using any reasonable averaging and
attribution methods.
(d) In the event any Bank shall seek compensation pursuant to
this SECTION 6.1, the Company may give notice to such Bank (with
copies to the Agent) that it wishes to seek one or more Eligible
Assignees (which may be one or more of the Banks) to purchase and
assume the Commitments, Loans, Notes and Letter of Credit Liabilities
of such Bank. Each Bank requesting compensation pursuant to this
SECTION 6.1 agrees to sell its Commitments, Loans, Notes, Letter of
Credit Liabilities and interests in this Agreement and in the Letter
of Credit Agreement pursuant to SECTION 12.6 (without recourse,
representation or warranty except as provided in SECTION 12.6) to any
such Eligible Assignee for an amount equal to the sum of the
outstanding unpaid principal of and accrued interest on such Loans,
Notes and Letter of Credit Liabilities plus all other fees and amounts
(including any compensation claimed by such Bank under this
SECTION 6.1) owing to such Bank hereunder and under the Letter of
Credit Agreement calculated, in each case, to the date such
Commitments, Loans, Notes, Letter of Credit Liabilities and interests
are purchased, whereupon such Bank shall have no further Commitment or
other obligation to the Company hereunder or under any Note or under
the Letter of Credit Agreement.
6.2. LIMITATION ON TYPES OF LOANS. Anything herein to the
contrary notwithstanding, if, with respect to any Eurodollar Loans:
(a) the Agent determines (which determination shall be
conclusive absent manifest error) that quotations of interest rates
for the relevant deposits referred to in the definition of "Eurodollar
Base Rate" in SECTION 1.1 are not being provided in the relevant
amounts or for the relevant maturities for purposes of determining the
rate of interest for such Loans for Interest Periods therefor as
provided in this Agreement; or
(b) the Required Banks determine (which determination shall be
conclusive absent manifest error) and notify the Agent that the
relevant rates of interest referred to in the definition of "Eurodol-
lar Base Rate" in SECTION 1.1 upon the basis of which the rates of
interest for such Loans are to be determined do not accurately reflect
the cost to such Banks of making or maintaining such Loans for any
proposed Interest Periods therefor; or
(c) the Agent determines (which determination shall be
conclusive absent manifest error) that by reason of circumstances
affecting the Eurodollar interbank market generally, deposits in
dollars in the relevant Eurodollar interbank market are not being
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offered for the applicable Interest Period and in an amount equal to
the amount of the Eurodollar Loan requested by the Company;
then the Agent shall promptly notify the Company and each Bank
thereof, and, so long as such condition remains in effect, the Banks
shall be under no obligation to make Eurodollar Loans (but shall
maintain until the end of the Interest Period then in effect the
Eurodollar Loans then outstanding).
6.3. ILLEGALITY. Notwithstanding any other provision of this
Agreement to the contrary, if by reason of (x) the adoption of any
applicable Legal Requirement or any change in any applicable Legal
Requirement or in the interpretation or administration thereof by any
Governmental Authority or compliance by any Bank with any request or
directive (whether or not having the force of law) of any central bank
or other Governmental Authority or (y) circumstances affecting the
relevant Eurodollar interbank market or the position of a Bank
therein, it shall at any time be unlawful or impracticable in the sole
discretion of a Bank for such Bank or its Applicable Lending Office to
(a) honor its obligation to permit the establishment of Eurodollar
Loans hereunder or (b) maintain Eurodollar Loans hereunder, then such
Bank through the Agent shall promptly notify the Company thereof and
the obligation of such Bank to establish or maintain Eurodollar Loans
hereunder shall be suspended until such time as such Bank may again
establish and maintain Eurodollar Loans, in which case the provisions
of SECTION 6.4 shall be applicable. Before giving such notice
pursuant to this section, such Bank will designate a different
available Applicable Lending Office for the Eurodollar Loans of such
Bank or take such other action as the Company may reasonably request
if such designation or action is consistent with the internal policy
of such Bank and legal and regulatory restrictions, can be undertaken
at no additional cost, will avoid the need to suspend such Bank's
obligation to make Eurodollar Loans hereunder and will not, in the
sole opinion of such Bank, be disadvantageous to such Bank (PROVIDED
that such Bank shall have no obligation so to designate an Applicable
Lending Office located in the United States of America). In the event
any Bank shall seek to invoke the benefits of this section, the
Company may give notice to such Bank (with copies to the Agent) that
it wishes to seek one or more Eligible Assignees (which may be one or
more of the Banks) to purchase and assume the Commitments, Loans,
Notes and Letter of Credit Liabilities of such Bank. Each Bank
requesting to invoke the benefits of this SECTION 6.3 agrees to sell
its Commitments, Loans, Notes, Letter of Credit Liabilities and
interests in this Agreement and in the Letter of Credit Agreement
pursuant to SECTION 12.6 (without recourse, representation or warranty
except as provided in SECTION 12.6) to any such Eligible Assignee for
an amount equal to the sum of the outstanding unpaid principal of and
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accrued interest on such Loans, Notes and Letter of Credit Liabilities
plus all other fees and amounts owing to such Bank hereunder and under
the Letter of Credit Agreement calculated, in each case, to the date
such Commitments, Loans, Notes, Letter of Credit Liabilities and
interests are purchased, whereupon such Bank shall have no further
Commitment or other obligation to the Company hereunder or under any
Note or under the Letter of Credit Agreement.
6.4. SUBSTITUTE ALTERNATE BASE RATE LOANS. If the obligation of
any Bank to make or maintain Eurodollar Loans shall be suspended
pursuant to SECTION 6.1, 6.2 or 6.3, all Loans which would otherwise
be made by such Bank as Eurodollar Loans shall be made instead as
Alternate Base Rate Loans (and, if an event referred to in
SECTION 6.1(b) or 6.3 has occurred and such Bank so requests by notice
to the Company with a copy to the Agent, each Eurodollar Loan of such
Bank then outstanding shall be automatically converted into an
Alternate Base Rate Loan on the date specified by such Bank in such
notice) and, to the extent that such Loans are so made as (or
converted into) Alternate Base Rate Loans, all payments of principal
which would otherwise be applied to such Loans shall be applied
instead to such Alternate Base Rate Loans.
6.5. COMPENSATION. Subject to SECTION 12.8, the Company shall
pay to the Agent for the account of each Bank, within two Business
Days after demand therefor by such Bank through the Agent, such amount
or amounts as shall be sufficient (in the reasonable opinion of such
Bank) to compensate it for any loss, cost or expense incurred by it as
a result of:
(a) any payment, prepayment or conversion of a Eurodollar Loan
made by such Bank on a date other than the last day of an Interest
Period for such Loan; or
(b) any failure by the Company to borrow a Eurodollar Loan to be
made by such Bank on the date for such borrowing specified in the
relevant notice of borrowing under SECTION 5.5 or to convert an
Alternate Base Rate Loan into a Eurodollar Loan on such date after
giving notice of such conversion or to continue a Eurodollar Loan
after giving notice of such continuance; or
(c) any cessation of the Eurodollar Rate to apply to any Loan or
any part thereof;
such compensation to include, without limitation, an amount equal to
the excess, if any, as reasonably determined by each Bank, of (1) its
cost of obtaining the funds for the Loan being paid, prepaid or
converted or not borrowed, converted or continued (assumed to be the
applicable Eurodollar Base Rate) for the period
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from the date of such payment, prepayment or conversion or failure to
borrow convert or continue to the last day of the Interest Period for
such Loan (or, in the case of a failure to borrow, convert or continue
the Interest Period for the Loan which would have commenced on the
date of such failure to borrow convert or continue) over (2) the
amount of interest (as reasonably determined by such Bank) that would
be realized by such Bank in reemploying the funds so paid, prepaid or
converted or not borrowed, converted or continued for such period or
Interest Period, as the case may be. Each determination of the amount
of such compensation by a Bank shall be conclusive and binding, absent
manifest error, and may be computed using any reasonable averaging and
attribution method.
6.6. CAPITAL ADEQUACY. If any Bank shall have determined that
the adoption after the date hereof or effectiveness after the date
hereof (regardless of whether previously announced) of any applicable
Legal Requirement or treaty regarding capital adequacy, or any change
after the date hereof in any existing or future Legal Requirement or
treaty regarding capital adequacy, or any change in the interpretation
or administration thereof after the date hereof by any Governmental
Authority or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable
Lending Office) with any request or directive after the date hereof
regarding capital adequacy (whether or not having the force of law) of
any such Governmental Authority or comparable agency has or would have
the effect of reducing the rate of return on the capital of such Bank
(or any holding company of which such Bank is a part) as a consequence
of its obligations hereunder and under or in respect of the Notes held
by it to a level below that which such Bank or holding company could
have achieved but for such adoption, change or compliance by an amount
deemed by such Bank to be material, then from time to time, upon
demand by such Bank (with a copy to the Agent), the Company (subject
to SECTION 12.8) shall pay to such Bank such additional amount or
amounts as will compensate such Bank or holding company for such
reduction. The certificate of any Bank setting forth such amount or
amounts as shall be necessary to compensate it and the basis therefor
shall cover amounts accruing under this section with respect to a
period beginning not earlier than 120 days from the date thereof and
shall be conclusive and binding, absent manifest error. The Company
shall pay the amount shown as due on any such certificate upon
delivery of such certificate. In preparing such certificate, a Bank
may employ such assumptions and allocations of costs and expenses as
it shall in good faith deem reasonable and may use any reasonable
averaging and attribution method. In the event any Bank shall seek
compensation pursuant to this section, the Company may give notice to
such Bank (with copies to the Agent) that it wishes to seek one or
more Eligible Assignees (which may be
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one or more of the Banks) to purchase and assume the Commitments,
Loans, Notes and Letter of Credit Liabilities of such Bank. Each Bank
requesting compensation pursuant to this section agrees to sell its
Commitments, Loans, Notes, Letter of Credit Liabilities and interests
in this Agreement and in the Letter of Credit Agreement pursuant to
SECTION 12.6 (without recourse, representation or warranty except as
provided in SECTION 12.6) to any such Eligible Assignee for an amount
equal to the sum of the outstanding unpaid principal of and accrued
interest on such Loans, Notes and Letter of Credit Liabilities plus
all other fees and amounts (including any compensation claimed by such
Bank under this section owing to such Bank hereunder and under the
Letter of Credit Agreement calculated, in each case, to the date such
Commitments, Loans, Notes, Letter of Credit Liabilities and interests
are purchased, whereupon such Bank shall have no further Commitment or
other obligation to the Company hereunder or under any Note or the
Letter of Credit Agreement.
Section 7. CONDITIONS PRECEDENT.
7.1. CLOSING CONDITIONS. The effectiveness of this Agreement is
subject to the following conditions precedent, each of which shall
have been fulfilled or waived to the satisfaction of the Agent:
(a) CORPORATE ACTION AND STATUS. The Agent shall have received
copies of the Organizational Documents of the Company certified by the
Secretary of the Company, and resolutions of the Board of Directors of
the Company, certified by the Secretary of the Company, for all corpo-
rate action taken by the Company authorizing the execution, delivery
and performance of the Credit Documents and all other documents
related to this Agreement, together with such certificates as may be
appropriate to demonstrate the qualification and good standing of and
payment of taxes by each member of the Combined Group in each
jurisdiction set forth on SCHEDULE IX.
(b) INCUMBENCY. The Company shall have delivered to the Agent a
certificate in respect of the name and signature of each officer who
(1) is authorized to sign on its behalf the applicable Credit
Documents related to any Loan and (2) will, until replaced by another
officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving
notices and other communications in connection with any Loan. The
Agent and each Bank may conclusively rely on such certificates until
they receive notice in writing from the Company to the contrary.
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(c) NOTES. The Agent shall have received the appropriate Notes
of the Company for each Bank, duly completed and executed.
(d) SECURITY MATTERS. The Security Documents, including the
Amendment to Security Agreement -- Contract Rights, the Amendment to
Security Agreement -- Stock and the Amendment to Louisiana Security
Agreement, shall have been duly executed and delivered by the
respective parties thereto, and such other action (including the
endorsement and/or pledge of the property covered thereby, notice to
and any necessary consent by the obligor on or issuer of pledged
instruments or assigned contracts) as may be necessary or as the Agent
shall have requested (other than any filing and recording required in
connection with the amendment of the Security Documents) to perfect
the security interests created pursuant thereto shall have been taken.
The Agent shall have received evidence satisfactory to it that the
Liens created by the Security Documents will constitute first priority
Liens, except for Permitted Encumbrances. The Agent shall have
received such opinions of local counsel in the States of Alabama,
Louisiana and Oklahoma as the Agent may reasonably request.
(e) CREDIT DOCUMENTS. The Company shall have duly executed and
delivered the other Credit Documents to which it is a party and each
such Credit Document shall be in Proper Form. Each such Credit
Document shall be in substantially the form furnished to the Banks
prior to their execution of this Agreement, together with such changes
therein as the Agent and the Banks may approve.
(f) SECURITY DOCUMENTS. The Mortgages and the Amendment to Deed
of Trust and the Amendment to Leasehold Deed of Trust shall have been
duly executed and delivered by the Company and the Agent in recordable
form (in such number of copies as the Agent shall have requested), and
to the extent permitted by applicable law the Company shall have paid
to the Agent in immediately available funds all expenses (including
mortgage recording and other similar taxes) and premiums reasonably
expected to be incurred by it in connection with recording the
Mortgages and all related documents in the appropriate offices (with
the Agent to repay to the Company any such sums not expended for that
purpose).
(g) FEES AND EXPENSES. The Company shall have paid to the Agent
for the account of each Bank (1) an extension fee equal to .25% of
each Bank's Commitment Percentage of the Available Commitment and (2)
a facility fee equal to .125% of each Bank's Commitment Percentage of
the Unavailable Commitment, and shall have paid to the Agent all fees
then due in the amounts previously agreed upon in writing among the
Company and the Agent.
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(h) OPINION OF COUNSEL TO THE COMPANY. The Agent shall have
received the opinions of Andrews & Kurth L.L.P. and of David L. Hicks,
counsel to the Company, substantially in the forms of SCHEDULES VI and
VII, respectively.
(i) COUNTERPARTS. The Agent shall have received counterparts of
each of the Credit Documents duly executed and delivered by or on
behalf of each of the parties thereto (or, in the case of any Bank as
to which the Agent shall not have received such a counterpart, the
Agent shall have received evidence satisfactory to it of the execution
and delivery by such Bank of a counterpart hereof).
(j) CONSENTS. The Agent shall have received evidence
satisfactory to it that all consents of each Governmental Authority
and of each other Person, if any, required in connection with (1) the
Loans, (2) the execution, delivery and performance of the Credit
Documents, and (3) the transfer effected by the Security Documents of
the Company's rights in and to those agreements in which a security
interest or lien is granted or which are assigned under the Security
Documents have been received and remain in full force and effect.
(k) LETTER OF CREDIT AGREEMENT. The Letter of Credit Agreement
shall have been executed and delivered by all parties thereto and
shall be in full force and effect.
(l) OTHER DOCUMENTS. The Agent shall have received such other
documents consistent with the terms of this Agreement and relating to
the transactions contemplated hereby as the Agent may reasonably
request.
All provisions and payments required by this SECTION 7.1 are
subject to the provisions of SECTION 12.8.
7.2. ALL LOANS. The obligation of each Bank to make any Loan
(including its initial Loan) to be made by it hereunder is subject to
the additional conditions precedent that, as of the date of such Loan,
and after giving effect thereto:
(a) no Default shall have occurred and be continuing (PROVIDED,
that a Default resulting solely from an Engineering Shortfall shall
not bar a Rollover), and no "Default", as that term is defined in the
Letter of Credit Agreement, shall have occurred and be continuing
under the Letter of Credit Agreement;
(b) if the Loan is not a Rollover, there has been no Material
Adverse Change since December 31, 1993;
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(c) if the Loan is not a Rollover, all representations and
warranties made in each Credit Document shall be true and correct in
all material respects on and as of the date of the making of such
Loan, with the same force and effect as if made on and as of such
date; if the Loan is a Rollover, all representations and warranties
made in each Credit Document (other than and except for the
representations and warranties set forth in SECTION 8.2(a)(2), 8.2(b),
8.3, 8.8 and 8.13) shall be true and correct in all material respects
on and as of the date of the making of such Loan, with the same force
and effect as if made on and as of such date;
(d) except for Loans on the date hereof, the Company shall have
delivered to the Agent a Request for Extension of Credit within the
time specified in SECTION 5.5;
(e) if such Loan is not a Rollover and after giving effect to
such Loan and the Loans of the other Banks to be made
contemporaneously therewith, the Company shall be in compliance with
all Required Ratios and no Engineering Shortfall shall exist; and
(f) the making of such Loan shall not be prohibited by, or
subject any Bank to any penalty under, any Legal Requirement
applicable to any Bank.
Each Request for Extension of Credit by the Company hereunder
shall include a representation and warranty by the Company to the
effect set forth in SUBSECTIONS (a) through (e) (if applicable) of
this SECTION 7.2 (both as of the date of such notice and, unless the
Company otherwise notifies the Agent prior to the date of such
borrowing, as of the date of such borrowing). Except in the case of
Loans on the date hereof, such representation and warranty shall be
accompanied by a certificate of the President or chief financial
officer of the Company setting forth in reasonable detail the
calculations of the Company in making such representation and
warranty.
Section 8. REPRESENTATIONS AND WARRANTIES. To induce the Banks
to enter into this Agreement and to make the Loans, the Company
represents and warrants (such representations and warranties to
survive any investigation and the making of the Loans) to the Banks
and the Agent as follows:
8.1. CORPORATE EXISTENCE. Each member of the Combined Group (a)
is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization; (b) has all requisite
power, and has all licenses, permits, authorizations, consents and
approvals necessary, to own its property and carry on its business as
now being conducted, and (c) is qualified to do
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business, and is in good standing, in (1) all jurisdictions in which
any of the Recognized Proved Reserves which it owns are located and
(2) any other jurisdiction in which the nature of the business
conducted by it makes such qualification necessary or advisable,
unless (for purposes only of this CLAUSE (2)) the failure to be so
qualified or in good standing would not individually or in the
aggregate have a material adverse effect on the business, financial
condition or results of operations of the Combined Group taken as a
whole.
8.2. INFORMATION.
(a) (1) The most recent consolidated balance sheet of the
Company and its Subsidiaries and the related consolidated statements
of operations, changes in financial position and cash flows for the
period then ended, together with the respective notes thereto,
delivered to each of the Banks prior to the execution of this
Agreement (which financial statements are dated December 31, 1993), or
in accordance with the provisions of SECTION 9.1(a) or (b), as the
case may be (the latest of such financial statements and the notes
thereto being referred to herein as the "MOST RECENT FINANCIAL
STATEMENTS"), fairly present in all material respects the consolidated
financial position of the Company and its Subsidiaries as of such date
and their consolidated results of operations for the period then ended
in conformity with generally accepted accounting principles.
(2) The Company and its Subsidiaries did not on the date of
the Most Recent Financial Statements, and do not on the date as of
which this representation is made in accordance with the terms of this
Agreement, have any material contingent liabilities, material
liabilities for taxes, unusual and material forward or long-term
commitments or material unrealized or anticipated losses from any
commitments, except (A) as referred to or reflected or provided for in
the Most Recent Financial Statements; (B) as otherwise hereafter
disclosed to the Banks in writing in accordance with the terms of this
Agreement, or (C) in connection with the obligations of the Company
under this Agreement and the Letter of Credit Agreement.
(b) Since December 31, 1993, there has been no Material Adverse
Change.
8.3. LITIGATION; COMPLIANCE. Except as disclosed in writing to
the Banks prior to the date hereof, or as hereafter disclosed to the
Banks in accordance with the provisions of SECTION 9.1(E), there are
no legal or arbitral proceedings or any proceedings by or before any
Governmental Authority now pending, or, to the knowledge of the
Company, threatened, against or affecting the Company or any
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of its Subsidiaries which, if adversely determined, would cause a
Material Adverse Change. The Company and its Subsidiaries comply in
all material respects with all applicable material (based on the
Company and its Subsidiaries taken as a whole) Legal Requirements
(other than the Applicable Environmental Laws, representations
regarding which are subject to SECTION 8.13). Neither the Company nor
any of its Subsidiaries is in default in any material respect under or
violation of any material (based on the Company and its Subsidiaries
taken as a whole) judgment, order or decree of any Governmental
Authority.
8.4. NO BREACH. None of the execution and delivery of the Credit
Documents, the consummation of the transactions therein contemplated
or compliance with the terms and provisions thereof will conflict with
or result in a breach of, or require any consent that has not been
obtained under, the Serial Note Agreement, the Organizational
Documents of the Company or any of its Subsidiaries or any material
Legal Requirement (including any securities law, rule or regulation)
applicable to the Company or any of its Subsidiaries or (except for
the Liens required or permitted by this Agreement and the Security
Documents) result in the creation or imposition of any Lien upon any
of the revenues or property of the Company or any of its Subsidiaries.
Such execution, delivery, consummation and compliance do not and will
not conflict with or result in a breach of any material agreement or
instrument to which the Company is a party or by which the Company is
bound or to which it is subject, or constitute a default under any
such agreement or instrument.
8.5. CORPORATE ACTION. The Company has all necessary corporate
power and authority to execute, deliver and perform its obligations
under the Credit Documents. The execution, delivery and performance
of the Credit Documents by the Company have been duly authorized by
all necessary corporate action. The Credit Documents have been duly
and validly executed and delivered by the Company and constitute the
legal, valid and binding obligations of the Company, enforceable in
accordance with their respective terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating
to the enforcement of creditors' rights generally and by general
equitable principles.
8.6. APPROVALS. All authorizations, approvals and consents of,
and all filings and registrations with, all Governmental Authorities
and each other Person necessary for the execution, delivery or
performance of any Credit Document or for the validity or
enforceability thereof, except for the filings and recordings of the
Liens created pursuant to the Security Documents, have been obtained
by the Company and are in full force and effect.
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8.7. REGULATIONS G, U AND X. Neither the Company nor any of its
Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation
G, U or X of the Board) and no part of the proceeds of any extension
of credit hereunder will be used to acquire or carry, directly or
indirectly, any such margin stock.
8.8. ERISA. The Company and each ERISA Affiliate have fulfilled
their contribution obligations under each Plan subject to Title IV of
ERISA and have fulfilled their obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan subject to
Title IV of ERISA, and in all other regards with respect to each Plan
are in material compliance with the applicable provisions of ERISA,
the Code, and all other applicable laws, regulations and rules, to the
extent that noncompliance with such provisions would result in a
Material Adverse Change. The Company has no knowledge of any event
with respect to each Plan which could result in a Material Adverse
Change.
8.9. TAXES. Each of the Company and its Subsidiaries has filed
all United States federal income tax returns and all other material
tax returns which are required to be filed by it and has paid all
taxes due pursuant to such returns or pursuant to any assessment
received by it, except to the extent the same may be contested in good
faith by appropriate proceedings diligently conducted for which
adequate reserves have been established in accordance with generally
accepted accounting principles. The charges, accruals and reserves on
the books of the Company and its Subsidiaries in respect of taxes and
other governmental charges, as made on a periodic basis, are adequate.
8.10. SUBSIDIARIES. SCHEDULE I is a complete and correct list, as
of the date of this Agreement, of all Subsidiaries of the Company.
All shares or other indicia of equity interest of the Restricted
Subsidiaries and the Special Subsidiary directly or indirectly owned
by the Company are free and clear of Liens, and all such shares are
validly issued, fully paid and non-assessable.
8.11. INVESTMENT COMPANY ACT. No member of the Combined Group is
an investment company within the meaning of the Investment Company Act
of 1940, as amended, or directly or indirectly controlled by or acting
on behalf of any Person which is an investment company, within the
meaning of said Act.
8.12. PUBLIC UTILITY HOLDING COMPANY ACT. No member of the
Combined Group is a "public utility company", or, to the knowledge of
the Company, an "affiliate" or a "subsidiary company" of a "public
utility company", or a "holding company", or an "affiliate"
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or a "subsidiary company" of a "holding company" or of a "subsidiary
company" of a "holding company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended.
8.13. ENVIRONMENTAL MATTERS. Except as disclosed in writing to
the Agent prior to the date hereof, the Company and its Subsidiaries,
and the plants and sites of each, have complied with all Applicable
Environmental Laws, except, in any such case, where such failure to so
comply would not result in a Material Adverse Change. Without
limiting the generality of the preceding sentence, neither the Company
nor any of its Subsidiaries has received notice of or has actual
knowledge of any actual or claimed or asserted failure so to comply
with Applicable Environmental Laws or of any other Environmental Claim
which alone or together with all other such failures or Environmental
Claims is material and would result in a Material Adverse Change.
Except as disclosed in writing to the Agent prior to the date hereof,
neither the Company nor any of its Subsidiaries nor their plants or
other sites manage, generate or dispose of, or during their respective
period of use, ownership, occupancy or operation by the Company or its
Subsidiaries have managed, generated, released or disposed of, any
hazardous wastes, hazardous substances, hazardous materials, toxic
substances or toxic pollutants, as those terms are used or defined in
the Applicable Environmental Laws, in material violation of or in a
manner which would result in liability under the Applicable
Environmental Laws or any other applicable Legal Requirement, or in a
manner which would result in an Environmental Claim except where such
noncompliance or liability or Environmental Claim would not result in
a Material Adverse Change. The representation and warranty contained
in this section is based in its entirety upon (a) current
interpretations and enforcement policies that have been publicly
disseminated and are used by Governmental Authorities charged with the
enforcement of the Applicable Environmental Laws or which apply to the
Company or any of its Subsidiaries with respect to any property or
sites in a particular jurisdiction and (b) current levels of publicly
disseminated scientific knowledge concerning the detection of, and the
health and environmental risks associated with the discharge of,
substances and pollutants regulated pursuant to the Applicable
Environmental Laws.
8.14. TITLE. (a) The Company has good and defensible title
to the oil, gas and mineral properties included in the Adobe
Properties in the Most Recent Engineering Report furnished to the
Banks.
(b) Such properties and facilities are free and clear of all
Liens, except Permitted Encumbrances and other Liens permitted hereby.
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(c) The Company has full right, power and authority to execute,
deliver and perform the Security Documents with respect to all such
properties and to convey, assign and mortgage the same, without the
necessity of any consent, approval or other action of any kind of or
by any other Person, failure to obtain which could cause a Material
Adverse Change, and such execution, delivery and performance will not
result in the breach of or constitute a default under any agreement,
instrument, judgment, license, order or permit to which the Company is
a party or by which the Company or any of its property may be bound,
which together with all other such breaches and defaults could cause a
Material Adverse Change.
(d) All oil, gas and mineral leases and leasehold estates, gas
purchase and sales contracts, and other agreements comprising or
relating to any of such properties are valid and subsisting and in
full force and effect, except for those leases, estates, contracts,
easements, rights-of-way and agreements which are in the aggregate not
material to oil, gas and mineral properties included in the Adobe
Properties in the Most Recent Engineering Report furnished to the
Banks, taken as a whole.
(e) All rights, permits, easements, servitudes and
rights-of-way, failure to have or maintain which would materially
interfere with the development, maintenance and operation of such
properties so as to cause a Material Adverse Change, have been
obtained by the Company and are in full force and effect.
(f) Each of the Security Documents creates or will create, when
executed and delivered, a valid Lien upon the Property therein
described.
Section 9. COVENANTS. The Company agrees with the Banks and the
Agent that until the termination of this Agreement:
9.1. FINANCIAL STATEMENTS AND CERTIFICATES. The Company will
deliver in duplicate:
(a) to each Bank, as soon as practicable and in any event within
45 days after the end of each quarterly period (other than the last
quarterly period) in each fiscal year, consolidated and consolidating
statements of operations, stockholders' equity and cash flows of the
Company and its Subsidiaries for the period from the beginning of the
current fiscal year to the end of such quarterly period, and a
consolidated and consolidating balance sheet of the Company and its
Subsidiaries as of the end of such quarterly period, setting forth (1)
as to each account affected thereby, all eliminating entries for the
Unrestricted Subsidiaries as a group and for the Special Subsidiary,
respectively, and (2) the resulting consolidated and consolidating
figures for the
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Company and the Restricted Subsidiaries, and setting forth in each
case in comparative form figures for the corresponding period in the
preceding fiscal year, all in reasonable detail and unaudited but
certified by an authorized financial officer of the Company as fairly
presenting the financial position and results of operations of the
Company and its Subsidiaries as of the date thereof and the period
then ended, subject to changes resulting from year-end adjustments;
(b) to each Bank, as soon as practicable and in any event within
90 days after the end of each fiscal year, consolidated and
consolidating statements of operations, stockholders' equity and cash
flows of the Company and its Subsidiaries for such year, and a
consolidated and consolidating balance sheet of the Company and its
Subsidiaries as of the end of such fiscal year, setting forth (1) as
to each account affected thereby, all eliminating entries for the
Unrestricted Subsidiaries as a group and for the Special Subsidiary,
respectively, and (2) the resulting consolidating figures for the
Company and the Restricted Subsidiaries, and setting forth in each
case in comparative form corresponding consolidating figures from the
preceding annual audit, all in reasonable detail and which shall be
reported on by Price Waterhouse & Co. or other independent public
accountants of recognized national standing selected by the Company
whose report shall (A) contain an opinion that shall be unqualified as
to the scope or limitations imposed by the Company and shall not be
subject to any other material qualification and (B) state that such
financial statements present fairly, in all material respects, the
financial position of the Company and its Subsidiaries at the dates
indicated and their cash flows and the results of their operations and
the changes in their financial position for the periods indicated in
conformity with generally accepted accounting principles, and shall be
accompanied by a report of such independent public accountants stating
that (W) such audit was made for the purpose of forming an opinion on
the consolidated financial statements taken as a whole; (X) the
consolidating information set forth therein is presented for purposes
of additional analysis rather than to present the financial position,
results of operations and cash flows of the individual companies; (Y)
such consolidating information has been subjected to the auditing
procedures applied in the audit of the basic financial statements, and
(Z) in such independent public accountants' opinion, such
consolidating information is fairly stated in all material respects in
relation to the consolidated financial statements taken as a whole,
with such changes thereto as such accountants reasonably determine to
be appropriate under the circumstances;
(c) to each Bank, promptly upon transmission thereof, copies of
all financial statements, proxy statements, notices and reports
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as it shall send to its public stockholders and copies of all
registration statements (without exhibits, and other than registration
statements and reports relating to employee benefit or compensation
plans) and all reports which it files with the Securities and Exchange
Commission (or any governmental body or agency succeeding to the
functions of the Securities and Exchange Commission);
(d) to each Bank, promptly upon receipt thereof, a copy of each
other report submitted to the Company or any of its Subsidiaries by
independent accountants in connection with any annual, interim or
special audit made by them of the books of the Company or any such
Subsidiary;
(e) to each Bank, as soon as practicable and in any event within
15 days after any executive officer of the Company obtains knowledge
(1) of any Default or any condition or event which, in the opinion of
management of the Company, would have a Material Adverse Change (to
the extent affecting the Company and its Subsidiaries in a materially
different manner or extent than the oil and gas industry generally);
(2) that any Person has given any notice to the Company or any of its
Subsidiaries or taken any other action with respect to a claimed
default or event or condition of the type referred to in
SECTION 10.1(b) or (m); (3) of the institution of any litigation
involving claims against the Company or any of its Subsidiaries equal
to or greater than $5,000,000 with respect to any single cause of
action or of any adverse determination in any court proceeding in any
litigation involving a potential liability to the Company or any of
its Subsidiaries equal to or greater than $5,000,000 with respect to
any single cause of action which makes the likelihood of an adverse
determination in such litigation against the Company or such Sub-
sidiary substantially more probable, or (4) of any regulatory
proceeding which, if determined adversely to the Company, would have a
Material Adverse Change (to the extent affecting the Company and its
Subsidiaries in a materially different manner or extent than the oil
and gas industry generally), an Officer's Certificate specifying the
nature and period of existence of any such Default, condition or
event, or specifying the notice given or action taken by such Person
and the nature of any such claimed Default, event or condition, or
specifying the details of such proceeding, litigation or dispute and,
in each case, what action the Company or any of its Subsidiaries has
taken, is taking or proposes to take with respect thereto;
(f) to each Bank, (1) promptly after the filing or receiving
thereof, copies of all annual reports and such other material reports
and notices which the Company or any ERISA Affiliate files under ERISA
with the Internal Revenue Service, the PBGC or the U.S.
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Department of Labor with respect to a Plan that is subject to Title IV
of ERISA; (2) promptly upon acquiring knowledge of any "reportable
event" (as defined in Section 4043 of ERISA) or of any "prohibited
transaction," as such term is defined in the Code or ERISA, in
connection with any Plan which may result in a Material Adverse
Change, a statement executed by the president or chief financial
officer of the Company or the applicable ERISA Affiliate, setting
forth the details thereof and the action which the Company or the
ERISA Affiliate proposes to take with respect thereto and, when known,
any action taken by the PBGC, the Internal Revenue Service or the U.S.
Department of Labor with respect thereto; (3) promptly after the
filing or receiving thereof by the Company or any ERISA Affiliate, any
notice of the institution of any proceedings or other actions which
may result in the termination of any Plan or notice of complete or
partial withdrawal liability under Title IV of ERISA, and (4) each
request for waiver of the funding standards or extension of the
amortization periods required by Sections 303 and 304 of ERISA or
Section 412 of the Code promptly after the request is submitted by the
Company or any ERISA Affiliate, to the Secretary of the Treasury, the
U.S. Department of Labor or the Internal Revenue Service, as the case
may be;
(g) to each Bank, as soon as available but in no event later
than February 28 of each year, an Independent Engineering Report
reflecting data as of December 31 of the prior year; and
(h) to each Bank, with reasonable promptness, such other
information respecting the business, financial condition or results of
operations of the Company or any of its Subsidiaries as such Bank may
reasonably request.
Additionally, the Company will deliver to each Bank:
(x) Together with each delivery of financial statements required
by SUBSECTION (a) above, each Required Reserve Report and each
Optional Reserve Report, an Officer's Certificate and a Coverage
Report demonstrating (with computations in reasonable detail)
compliance by the Company and the Restricted Subsidiaries with the
provisions of SECTIONS 9.6, 9.7(b)(3), (4) and (6), 9.7(c)(2) and
(3), 9.7(d), 9.7(e), 9.7(f), 9.7(g) and 9.9 (and in the case of each
Coverage Report accompanying a Required Reserve Report or an Optional
Reserve Report, calculating the SLOR Coverage Ratio and the Annual
Debt Service Coverage Ratio for purposes of and as provided in SECTION 2.7
or SECTION 2.8 and, in the case of each Coverage Report furnished
pursuant to CLAUSE (d) of the definition of "Applicable Margin", such
CLAUSE (d)), demonstrating that no Default exists under
SECTION 10.1(i) and stating that there then exists no Default, or, if
any Default exists, specifying the
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nature and period of existence thereof and what action the Company
proposes to take with respect thereto.
(y) Together with each delivery of financial statements required
by SUBSECTION (b) above, a certificate of such accountants stating
that, in conducting the audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards
they have obtained no knowledge of any Default arising under
SECTION 10.1(a), (b) or (i) or any Default arising under
SECTION 10.1(d) that occurs as result of the breach or violation by
the Company or the Restricted Subsidiaries of SECTIONS 9.6, 9.7(b),
(c), (d), (e), (f), (g), (h), (i) or 9.8, or, if they have obtained
knowledge of any such Default, specifying the nature and period of
existence thereof. Such accountants, however, shall not be liable to
the Agent or any Bank by reason of their failure to obtain knowledge
of any such Default which would not be disclosed in the course of an
audit conducted in accordance with generally accepted auditing
standards. The Company also covenants that forthwith upon the chief
executive officer, principal financial officer or principal accounting
officer of the Company obtaining knowledge of a Default, it will
deliver to each Bank an Officer's Certificate specifying the nature
and period of existence thereof and what action the Company proposes
to take with respect thereto.
(z) Together with each delivery of financial statements required
by SUBSECTIONS (a) or (b) above, the Company will deliver to each Bank
a pro forma statement of operations of the Company and its Restricted
Subsidiaries for the same fiscal period as such financial statements
that assumes that the impairments of oil and gas properties taken by
the Company and its Restricted Subsidiaries in the fourth quarter of
1993 in the amount of up to $100 million as reflected in the Company's
consolidated financial statements for the year ended December 31,
1993, shall not have occurred and a calculation in reasonable detail
showing the determination of Consolidated Net Earnings and Unimpaired
Consolidated Net Earnings for such fiscal period.
9.2. INSPECTION OF PROPERTY. The Company covenants that it will
permit any Person designated in writing by any Bank, at such Bank's
expense and risk, to visit and inspect any of the properties of the
Company and its Subsidiaries; and also to examine the corporate books
and financial records of the Company and its Subsidiaries and to make
copies thereof or extracts therefrom and to discuss the affairs,
finances and accounts of such Persons with the executive officers of
the Company, the petroleum reserve engineers employed by the Company
and its Subsidiaries and the Company's independent public accountants,
all at such reasonable times, with a representative of the Company
present and as often as
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such Bank may reasonably request, and will assist such Person or
Persons in all such activities.
9.3. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Company will, and
will cause each of its Subsidiaries and each of its Affiliates that
are controlled by the Company or its Subsidiaries to, comply in a
timely fashion with, or operate pursuant to valid waivers of the
provisions of, all Applicable Environmental Laws, except where
non-compliance would neither (a) result in a Material Adverse Change
nor (b) subject the Agent or any Bank to any liability for such
non-compliance (PROVIDED that the Company shall not be in default of
this SUBSECTION (b) if the Company indemnifies each of the Agent,
Banks or any of them subjected to such liability and provides
collateral to secure such indemnification, all to the extent required
by the Person subjected to such liability in its sole and unfettered
discretion). THE COMPANY AGREES TO INDEMNIFY AND HOLD THE AGENT AND
EACH BANK, AND THEIR RESPECTIVE OFFICERS, AGENTS AND EMPLOYEES
HARMLESS FROM ANY LOSS, LIABILITY, CLAIM OR EXPENSE WHICH ANY SUCH
PERSON MAY INCUR OR SUFFER AS A RESULT OF A BREACH BY THE COMPANY OR
ITS SUBSIDIARIES OR AFFILIATES, AS THE CASE MAY BE, OF THIS COVENANT.
The Company shall not be deemed to have breached or violated this
section if the Company or its Subsidiary or Affiliate, as the case may
be, is challenging in good faith by appropriate proceedings diligently
pursued the application or enforcement of any such Applicable
Environmental Laws for which adequate reserves have been established
in accordance with generally accepted accounting principles.
9.4. PAYMENT OF TAXES. The Company will, and will cause each of
its Subsidiaries to, pay, or have paid on its behalf, before the same
become delinquent all taxes, assessments and governmental charges
imposed upon it or upon its property, except to the extent contested
in good faith by appropriate proceedings diligently conducted for
which adequate reserves have been established in accordance with
generally accepted accounting principles.
9.5. MAINTENANCE OF INSURANCE. The Company covenants that it and
each of its Subsidiaries will carry and maintain insurance (subject to
self-insurance in the maximum amount of $10,000,000, customary
deductibles and retentions) in at least such amounts and against such
liabilities and hazards and by such methods as customarily maintained
by other companies operating similar businesses and, together with
each delivery of financial statements required by SECTION 9.1(b) will
deliver to the Agent for each Bank an Officer's Certificate specifying
the details of such insurance in effect. Upon the request of the
Agent or any Bank, the Company shall promptly deliver to the Agent one
or more current certificates of the insurer or insurers providing the
insurance required by this SECTION 9.5 to the effect that such
insurance may
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not be canceled, reduced or affected in any manner without 30 days'
prior written notice to the Agent.
9.6. RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS. The Company
will not and will not permit any Restricted Subsidiary to (a) make any
Restricted Investment; (b) pay or declare any dividend on any class of
its stock or make any other distribution on account of any class of
its stock, or redeem, purchase or otherwise acquire, directly or
indirectly, any shares of its stock, or (c) make any additional
Investment in the Special Subsidiary (all of the foregoing described
in SUBSECTIONS (b) and (c) above being herein called "RESTRICTED
PAYMENTS") (1) except out of Consolidated Net Earnings Available for
Restricted Payments and Restricted Investments; PROVIDED that the
Company or any wholly owned Restricted Subsidiary may, without
violation of this clause, in a single transaction or a series of
publicly announced related transactions to be completed within six
months, make an Investment in the Special Subsidiary which results in
the ownership by the Company and the wholly owned Restricted
Subsidiaries of 100% of the outstanding general and limited partner
interests in the Special Subsidiary; PROVIDED FURTHER that the amount
of such Investment shall be included in any subsequent computations of
Restricted Payments and of Consolidated Net Earnings Available for
Restricted Payments and Restricted Investments under this Section
unless immediately after giving effect to such Investment in the
Special Subsidiary, the Special Subsidiary is designated as a
Restricted Subsidiary; (2) unless, after giving effect to any such
Restricted Investment or Restricted Payment, as the case may be, (A)
no Default shall have occurred and be continuing and (B) the Company
could incur at least $1.00 of additional Funded Debt without violation
of SECTION 9.7(b)(3), and (3) unless, in the case of Investments in
the Special Subsidiary, such Investment shall otherwise be permitted
by SECTION 9.7(g).
"CONSOLIDATED NET EARNINGS AVAILABLE FOR RESTRICTED PAYMENTS AND
RESTRICTED INVESTMENTS" shall mean an amount equal to
(a) the sum of (1) $45,000,000; (2) 100% (or minus 100% in case
of a deficit) of Unimpaired Consolidated Net Earnings for the period
(taken as one accounting period) commencing on April 1, 1990 (the
"COMMENCEMENT DATE") and terminating at the end of the last fiscal
quarter preceding the date of any proposed Restricted Investment or
Restricted Payment, as the case may be; (3) the net cash proceeds
received by the Company or any Restricted Subsidiary from the sale of
any shares of its stock on or after the Commencement Date, except (A)
any such proceeds used as a basis for a prepayment in respect of the
then-outstanding notes issued under the Serial Note Agreement pursuant
to Paragraphs 4A, 4B or 4C thereof and (B) any proceeds from the sale
of stock to the Company
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or any of its Subsidiaries on or after the Commencement Date; (4) the
net cash proceeds received by the Company or any Restricted Subsidiary
from the sale, on or after the Commencement Date, of any convertible
debt security which has been converted into stock of the Company or a
Restricted Subsidiary, except (A) any such proceeds used as a basis
for a prepayment in respect of the then-outstanding notes issued under
the Serial Note Agreement pursuant to Paragraphs 4A, 4B or 4C thereof
and (B) any proceeds from the sale of such convertible debt security
to the Company or any of its Subsidiaries; (5) any cash distributions
from the Special Subsidiary received by the Company or any Restricted
Subsidiary on or after the Commencement Date, and (6) any return of
capital from Unrestricted Subsidiaries or Restricted Investments
received by the Company or any Restricted Subsidiary on or after the
Commencement Date, less
(b) the sum of all Restricted Investments and all Restricted
Payments made on or after the Commencement Date.
There shall not be included in Restricted Payments or in any
computation of Consolidated Net Earnings Available for Restricted
Payments and Restricted Investments (w) dividends paid or declared in
respect of stock held by any Person, or distributions made to any
Person, in stock of the Company or any Restricted Subsidiary; (x)
exchanges of stock of one or more classes of the Company or any
Restricted Subsidiary for common stock of the Company or such
Restricted Subsidiary, as the case may be, or for stock of the Company
or such Restricted Subsidiary, as the case may be, of the same class,
except to the extent that cash or other value is involved in such
exchange; (y) dividends paid or declared in respect of stock held by,
or distributions made to, or redemptions, purchases or other
acquisitions of stock made from, the Company or a wholly owned
Restricted Subsidiary, or (z) any advances to the Special Subsidiary
not in excess of $20,000,000 in the aggregate at any one time
outstanding that are repaid in full within 60 days pursuant to
customary cash management services provided to the Special Subsidiary.
The term "stock" as used in this Section shall include warrants,
options to purchase stock and redeemable rights.
9.7. LIEN, DEBT AND OTHER RESTRICTIONS. The Company will not and
will not permit any Restricted Subsidiary to:
(a) LIENS. Create, assume or suffer to exist any Lien upon any
of its properties or assets, whether now owned or hereafter acquired
except
(1) Liens for taxes or assessments or other governmental
charges or levies not yet due or which are being actively contested in
good faith by appropriate proceedings;
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(2) Liens (including mechanics' and materialmen's liens,
landlord liens, easements, rights-of-way or the like) incidental to
the conduct of its business or the ownership of its property and
assets which are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than advances or
credit on open account, includable in current liabilities, for goods
and services in the ordinary course of business and on terms and
conditions which are customary in the oil, gas and mineral exploration
and development business) or the guaranteeing of the obligations of
another Person, and which do not in the aggregate materially detract
from the value of its property or assets or materially impair the use
thereof in the operation of its business;
(3) Liens for lessor's royalties, overriding royalties, net
profits interests, carried interests, reversionary interests and other
similar burdens, production sales contracts, division orders,
contracts for the sale, purchase, exchange, or processing of
hydrocarbons, unitization and pooling designations, declarations,
orders and agreements, operating agreements, agreements of
development, area of mutual interest agreements, gas balancing or
deferred production agreements, processing agreements, plant
agreements, pipeline gathering and transportation agreements,
injection, repressuring and recycling agreements, salt water or other
disposal agreements, seismic or geophysical permits or agreements, and
other agreements which are customary in the oil, gas and mineral
exploration and development business or in the business of processing
gas and gas condensate production for the extraction of products
therefrom, if the net cumulative effect of such burdens does not
operate to reduce the net revenue interest of any oil and gas
properties to less than (A) the "Net Revenue Interest" set forth in
the Most Recent Engineering Report for those oil and gas properties
included in the Most Recent Engineering Report or (B) the net revenue
interest so acquired for those oil and gas properties acquired after
the date of the Most Recent Engineering Report; PROVIDED that such
Liens are not incurred in connection with the borrowing of money or
the obtaining of advances or credit (other than advances or credit on
open account, includable in current liabilities, for goods and
services in the ordinary course of business and on terms and
conditions which are customary in the oil, gas and mineral exploration
and development business) or the guaranteeing of the obligations of
another Person;
(4) Liens described in SCHEDULE II securing Debt of the
Company or a Restricted Subsidiary set forth in SCHEDULE II;
(5) the Springing Lien, Liens existing on any real property
of any Person at the time such Person becomes a Restricted Subsidiary,
or any Liens existing prior to the time of acquisition upon any real
property acquired by the Company or any Restricted
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Subsidiary through purchase, merger or consolidation or otherwise,
whether or not the obligation secured by such Lien is assumed by the
Company or such Restricted Subsidiary; PROVIDED that except as
otherwise permitted by SECTION 9.7(a), any such Springing Lien or Lien
(A) shall not encumber any other property of the Company or any
Restricted Subsidiary and (B) shall not have been created in
anticipation of such Person becoming a Restricted Subsidiary or in
anticipation of the acquisition by the Company or any Restricted
Subsidiary of the real property secured thereby;
(6) Liens placed on property at the time of acquisition,
construction, development or improvement thereof, or created in
respect of such property within six months after the time of
acquisition thereof or the commencement of construction, development
or improvement thereof, as the case may be, to secure all or a portion
of (or to secure Debt incurred to pay all or a portion of) the
purchase price of such acquisition, or the cost of such construction,
development or improvement, as the case may be; PROVIDED that (A) such
property is not and shall not thereby become encumbered in an amount
in excess of the lesser of the cost or fair market value thereof; (B)
except as otherwise permitted in SECTION 9.7(a), any such Lien shall
not encumber any other property of the Company or a Restricted
Subsidiary, and (C) any such Lien shall not encumber property of the
Company or a Restricted Subsidiary for the purpose of securing an
obligation of the Company or a Restricted Subsidiary or securing a
Guaranty by the Company or any Restricted Subsidiary in connection
with the sale, exchange, transfer or other disposition by the Company
or a Restricted Subsidiary of net profits interests; PROVIDED that the
Company or a Restricted Subsidiary may assign all or part of the
proceeds of production of property in which a net profits interest has
been granted to secure its obligation to make net profits interests
payments therefrom; and PROVIDED FURTHER that any such Lien shall not
encumber any other property of the Company or any Restricted Subsid-
iary.
(7) Liens on the capital stock of a Restricted Subsidiary
acquired after April 11, 1990 by the Company or a Restricted
Subsidiary and created or assumed contemporaneously with such
acquisition, to secure Debt assumed or incurred to finance all or a
part of the purchase price of such acquisition;
(8) Liens on the capital stock of an Unrestricted Subsid-
iary other than the Special Subsidiary;
(9) from and after the time that the Company and the wholly
owned Restricted Subsidiaries shall have become the owners of all of
the outstanding general and limited partner interests in the Special
Subsidiary, (A) Liens on all or any portion of the
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limited partner interests in SFEP, at such times as SFEP shall be an
Unrestricted Subsidiary or (B) at such times as SFEP shall be a
Restricted Subsidiary, Liens securing Debt incurred to finance all or
a part of the purchase price of limited partner interests in the
Special Subsidiary acquired by the Company and the wholly owned
Restricted Subsidiaries from Persons other than the Special Subsidiary
in a single transaction or a series of publicly announced related
transactions that were completed within six months and that result in
the ownership by the Company and the wholly owned Restricted
Subsidiaries of 100% of the general and limited partner interests
therein; PROVIDED that the Liens described in this CLAUSE (B) shall
extend only to the limited partner interests so acquired;
(10) Liens on property of the Company or a Restricted
Subsidiary to secure Debt assumed or incurred in the form of
Capitalized Lease Obligations or industrial revenue bonds, pollution
control bonds or similar tax-exempt financings; PROVIDED that any such
Lien shall not encumber any property of the Company or a Restricted
Subsidiary other than the property the acquisition or construction of
which is financed or refinanced, in whole or in part, with proceeds
from such Debt;
(11) Liens created pursuant to the Security Documents;
(12) any Lien renewing or extending any Lien permitted by
CLAUSES (4), (5), (6), (7), (8), (9), (10) or (11) above; PROVIDED
that the principal amount of the Debt secured thereby is not increased
and such Lien is not extended to other property; and
(13) other Liens on any property of the Company or a
Restricted Subsidiary securing any Funded Debt of the Company or a
Restricted Subsidiary permitted by SECTION 9.7(b)(3)(C) or (4)(C).
(b) DEBT. Create, incur, assume or suffer to exist any Debt,
except
(1) Funded Debt of the Company hereunder or represented by
the notes issued pursuant to the Serial Note Agreement;
(2) Funded Debt of the Company or any Restricted Subsidiary
set forth in SCHEDULE II, which may not be renewed, extended, refunded
or permitted to remain outstanding after the stated maturities thereof
except by the Person primarily liable thereon and unless, after giving
effect to such renewal, extension or refunding, neither the principal
amount thereof nor the aggregate Funded Debt of the Company and the
Restricted Subsidiaries is increased thereby;
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(3) Funded Debt of the Company if at the time it is
created, incurred or assumed and after giving effect thereto, to the
receipt of the proceeds thereof, and to the concurrent retirement of
any Debt, (A) the aggregate amount of all Funded Debt of the Company
and the Restricted Subsidiaries shall not exceed 65% of Consolidated
Net Tangible Assets; (B) Consolidated Net Earnings Available for Fixed
Charges for the four fiscal quarters of the Company (taken as a single
period) most recently ended shall equal at least 225% of Fixed Charges
for the four fiscal quarters of the Company (taken as a single period)
commencing with and including the fiscal quarter during which such
Funded Debt is created, incurred or assumed, and (C) (1) for any such
creation, incurrence or assumption occurring prior to December 31,
1998, Priority Debt (other than Existing Priority Debt) shall not
exceed the lesser of (y)(I) 40% of Consolidated Net Tangible Assets
minus (II) Existing Priority Debt and (z) 33% of Consolidated Net
Tangible Assets, and (2) for any such creation, incurrence or
assumption occurring on or after December 31, 1998, Priority Debt
shall not exceed 33% of Consolidated Net Tangible Assets, and (3) if
such Funded Debt is Secured Debt, Special Debt shall not exceed 10% of
Consolidated Net Tangible Assets;
(4) Funded Debt of a Restricted Subsidiary if at the time
it is created, incurred or assumed and after giving effect thereto, to
the receipt of the proceeds thereof, and to the concurrent retirement
of any Debt, (A) the aggregate amount of all Funded Debt of the
Company and the Restricted Subsidiaries shall not exceed 65% of
Consolidated Net Tangible Assets; (B) Consolidated Net Earnings
Available for Fixed Charges for the four fiscal quarters of the
Company (taken as a single period) most recently ended shall equal at
least 225% of Fixed Charges for the four fiscal quarters of the
Company (taken as a single period) commencing with and including the
fiscal quarter during which such Funded Debt is created, incurred or
assumed, and (C) (1) for any such creation, incurrence or assumption
occurring prior to December 31, 1998, Priority Debt (other than
Existing Priority Debt) shall not exceed the lesser of (y)(I) 40% of
Consolidated Net Tangible Assets minus (II) Existing Priority Debt and
(z) 33% of Consolidated Net Tangible Assets, and (2) for any such
creation, incurrence or assumption occurring on or after December 31,
1998, Priority Debt shall not exceed 33% of Consolidated Net Tangible
Assets, and (3) Special Debt shall not exceed 10% of Consolidated Net
Tangible Assets;
(5) Debt of the Company owing to a wholly owned Restricted
Subsidiary which is subordinated to the Obligations upon terms set
forth on SCHEDULE V, and Debt of a Restricted Subsidiary owing to the
Company or any other wholly owned Restricted Subsidiary; and
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(6) Current Debt of the Company not secured by any Lien on
any property owned by the Company or the Restricted Subsidiaries;
PROVIDED that for a period of at least 45 consecutive days in each
period of 18 consecutive months commencing April 1, 1990, the amount
of Current Debt (other than Current Debt existing pursuant to
customary cash management services provided to the Special Subsidiary
which is repaid in full within 60 days) permitted by this clause shall
at no time exceed the maximum amount of Funded Debt that the Company
could then incur under SECTION 9.7(b)(3) without violation thereof.
For purposes of this SECTION 9.7(b), any Debt (i) which is
extended, renewed or refunded shall be deemed to have been incurred
when extended, renewed or refunded (except as provided pursuant to
CLAUSE (2) above); (ii) of a Person when it becomes, or is merged
into, or is consolidated with a Restricted Subsidiary or the Company
shall be deemed to have been incurred at that time; (iii) which is
permitted by CLAUSE (5) above and which is owing to a wholly owned
Restricted Subsidiary when it ceases to be a wholly owned Restricted
Subsidiary shall be deemed to have been incurred at that time; (iv) of
a Restricted Subsidiary which is owing to the Company or any other
Restricted Subsidiary shall be deemed to have been incurred at the
time the Company or such other Restricted Subsidiary disposes of such
Debt to any Person other than the Company or a wholly owned Restricted
Subsidiary; (v) which is Funded Debt of the Company or a Restricted
Subsidiary consisting of a reimbursement obligation in respect of a
letter of credit or similar instrument shall be deemed to be incurred
when such letter of credit or similar instrument is issued, or (vi)
which is Funded Debt of the type described in CLAUSE (b) of the
definition of Funded Debt, or any Guaranty of such Funded Debt, shall
not be deemed to have been created, incurred or assumed, as the case
may be, at the time it becomes Funded Debt, but shall be included in
all subsequent calculations of Funded Debt for all purposes of this
Agreement.
(c) SALE OF LESS THAN SUBSTANTIALLY ALL ASSETS. Sell, exchange,
transfer or otherwise dispose of part, but less than all or
substantially all, of their respective assets, unless
(1) such sale, exchange, transfer or other disposition is
made in the ordinary course of business (including abandonments,
farm-ins, farm-outs, leases and subleases of developed or undeveloped
properties owned or held by the Company or any Restricted Subsidiary
that are made or entered into in the ordinary course of business, but
EXCLUDING, however, any sale of net profits interests in developed oil
and gas properties); or
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(2) after giving effect to such sale, exchange, transfer or
other disposition, (A) the aggregate net book value of (i) all assets
of the Company and the Restricted Subsidiaries (including the sale of
net profits interests in developed oil and gas properties) sold, ex-
changed, transferred or otherwise disposed of (on a consolidated
basis) (but excluding assets sold, exchanged, transferred or otherwise
disposed of in the ordinary course of business pursuant to
SECTION 9.7(c)(1)) during the period of 12 consecutive months
immediately preceding such sale, exchange, transfer or other
disposition and (ii) the assets of all Restricted Subsidiaries, the
stock of which have been sold or otherwise disposed of pursuant to
SECTION 9.7(d)(2)(A) during such 12-month period shall not exceed 10%
of Consolidated Net Tangible Assets of the Company and the Restricted
Subsidiaries as of the end of the fiscal quarter immediately preceding
or coinciding with such sale, exchange, transfer or other disposition,
and (B) the assets described in the foregoing CLAUSE (A) shall not
have contributed more than 10% of EBITD of the Company and the
Restricted Subsidiaries for the four most recently completed fiscal
quarters taken as a single accounting period; or
(3) after giving effect to such sale, exchange, transfer or
other disposition, (A) the aggregate net book value of (i) all assets
of the Company and the Restricted Subsidiaries (including the sale of
net profits interests in developed oil and gas properties) sold, ex-
changed, transferred or otherwise disposed of (on a consolidated
basis) (but excluding assets sold, exchanged, transferred or otherwise
disposed of pursuant to SECTION 9.7(c)(1) and (2)) during the period
of 12 consecutive months immediately preceding such sale, exchange,
transfer or other disposition and (ii) the assets of all Restricted
Subsidiaries, the stock of which has been sold or otherwise disposed
of pursuant to SECTION 9.7(d)(2)(B) during such 12-month period, shall
not exceed 10% of Consolidated Net Tangible Assets of the Company and
the Restricted Subsidiaries as of the end of the fiscal quarter
immediately preceding or coinciding with such sale, exchange, transfer
or other disposition; (B) the assets described in the foregoing CLAUSE
(A) shall not have contributed more than 10% of EBITD for the four
most recently completed fiscal quarters taken as a single accounting
period, and (C) within six months after such sale, exchange, transfer
or other disposition, the net proceeds thereof are applied toward, or
the exchange results in, (1) the acquisition by the Company or a
Restricted Subsidiary of (i) assets which have an aggregate fair
market value at least equal to the net proceeds received by the
Company and its Restricted Subsidiaries from such sale, exchange,
transfer or other disposition; (ii) if the assets so sold, exchanged,
transferred or otherwise disposed of were located in the United States
of America or Canada, the assets acquired are located in the United
States of America or Canada, and
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(iii) the assets so acquired are of a type usual and customary in the
oil and gas business; PROVIDED that no Liens shall at any time exist
on the assets so acquired which secure any Debt except as permitted by
SECTION 9.7(a)(13) or (2) the prepayment of an aggregate principal
amount of all Obligations plus accrued interest and premium, if any,
thereon in accordance with this Agreement and the Letter of Credit
Agreement, or the payment of an aggregate principal amount of other
Funded Debt (other than Funded Debt subordinate in right of payment to
the Obligations) plus accrued interest and premium, if any, in either
case in an amount at least equal to the aggregate net proceeds that
the Company or a Restricted Subsidiary receives from the sale,
exchange, transfer or other disposition of such assets.
(d) SALE OF STOCK OF RESTRICTED SUBSIDIARIES. Sell or otherwise
dispose of, or part with control of, any shares of stock of any
Restricted Subsidiary, except (1) to the Company or another wholly
owned Restricted Subsidiary and (2) that all shares of stock of any
Restricted Subsidiary at the time owned by the Company and all
Restricted Subsidiaries may be sold as an entirety for a cash
consideration which represents the fair market value (as determined in
good faith by the Board of Directors of the Company) at the time of
sale of the shares of stock so sold; PROVIDED that for purposes of
this exception:
(A) (i) the net book value of the assets of such Restricted
Subsidiary together with (x) the net book value of the assets of any
other Restricted Subsidiary the stock of which was sold during the
preceding 12-month period and (y) the net book value of the assets of
the Company and all Restricted Subsidiaries sold, exchanged,
transferred or otherwise disposed of pursuant to SECTION 9.7(c)(2)
during the preceding 12-month period, does not represent more than 10%
of Consolidated Net Tangible Assets as of the end of the fiscal
quarter immediately preceding or coinciding with such sale, exchange,
transfer or other disposition and (ii) the earnings of such Restricted
Subsidiary together with (x) the earnings of any other Restricted
Subsidiary the stock of which was sold or otherwise disposed of
pursuant to the exception described in this CLAUSE (A) during the
preceding 12-month period and (y) the earnings attributable to the
assets sold, exchanged, transferred or otherwise disposed of pursuant
to SECTION 9.7(c)(2) during such 12-month period, do not represent
more than 10% of EBITD for the four most recently completed fiscal
quarters taken as a single accounting period; and PROVIDED FURTHER
that, at the time of such sale, such Restricted Subsidiary shall not
own, directly or indirectly, any shares of stock of the Company or any
other Restricted Subsidiary unless all of the shares of stock of such
other Restricted Subsidiary owned, directly or indirectly, by the
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Company and all Restricted Subsidiaries are simultaneously being sold
as permitted by the exception described in this CLAUSE (A); or
(B) (i) the net book value of the assets of such Restricted
Subsidiary together with (x) the net book value of the assets of any
other Restricted Subsidiary the stock of which was sold during the
preceding 12-month period and (y) the net book value of the assets of
the Company and any Restricted Subsidiary sold, exchanged, transferred
or otherwise disposed of pursuant to SECTION 9.7(c)(3) during the
preceding 12-month period, does not represent more than 10% of the
Consolidated Net Tangible Assets as of the end of the fiscal quarter
immediately preceding or coinciding with such sale, exchange, transfer
or other disposition; (ii) the earnings of such Restricted Subsidiary
together with (x) the earnings of any other Restricted Subsidiary the
stock of which was sold or otherwise disposed of pursuant to the
exception described in this CLAUSE (B) during the preceding 12-month
period and (y) the earnings attributable to the assets sold,
exchanged, transferred or otherwise disposed of pursuant to
SECTION 9.7(c)(3) during such 12-month period, do not represent more
than 10% of EBITD for the four most recently completed fiscal quarters
taken as a single accounting period, and (iii) within six months after
such sale or other disposition, the proceeds thereof are applied
toward (i) the acquisition by the Company or a Restricted Subsidiary
of (1) assets which have an aggregate fair market value at least equal
to the net proceeds received by the Company and the Restricted
Subsidiaries from such sale or other disposition and (2) the assets so
acquired are of a type usual and customary in the oil and gas
business; PROVIDED that no Liens shall at any time exist on the assets
so acquired which secure any Debt except as permitted by
SECTION 9.7(a)(13), or (ii) the prepayment of an aggregate principal
amount of all Obligations in accordance with this Agreement and the
Letter of Credit Agreement, or the payment of an aggregate principal
amount of other Funded Debt (other than Funded Debt subordinate in
right of payment to the Obligations) plus accrued interest and
premium, if any, in either case in an amount at least equal to the
aggregate net proceeds that the Company or a Restricted Subsidiary
receives from the sale or other disposition; and PROVIDED FURTHER
that, at the time of such sale or other disposition, such Restricted
Subsidiary shall not own, directly or indirectly, (y) any shares of
stock of the Company or any other Restricted Subsidiary unless all of
the shares of stock of such other Restricted Subsidiary owned,
directly or indirectly, by the Company and all Restricted Subsidiaries
are simultaneously being sold as permitted by the exception described
in this CLAUSE (B).
(e) MERGER AND SALE OF ALL OR SUBSTANTIALLY ALL ASSETS. Merge
or consolidate with or into any other Person or convey, exchange,
transfer or otherwise dispose of all or a substantial
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part of its assets (I.E., assets which could not otherwise be disposed
of pursuant to SECTION 9.7(c)(2) or (3)) to any Person except that
(1) any wholly owned Restricted Subsidiary may merge with
the Company (PROVIDED that the Company shall be the continuing or
surviving corporation) or with any one or more other wholly owned
Restricted Subsidiaries;
(2) any Restricted Subsidiary may sell, exchange, transfer
or otherwise dispose of any of its assets to the Company or to a
wholly owned Restricted Subsidiary;
(3) any Restricted Subsidiary may sell, exchange, transfer
or otherwise dispose of all or substantially all of its assets subject
to the conditions and provisions specified in SECTIONS 9.7(c)(2) and
(3);
(4) any Restricted Subsidiary may merge into or consolidate
with any Person which does not thereupon become a Restricted
Subsidiary, subject to the conditions and provisions specified in
SECTION 9.7(d) with respect to a sale or other disposition of the
stock of such Restricted Subsidiary;
(5) any Restricted Subsidiary may permit any Person to be
merged into such Restricted Subsidiary or may consolidate with or
merge into a Person which thereupon becomes a Restricted Subsidiary;
PROVIDED that immediately after any such merger or consolidation, no
Default shall have occurred and be continuing;
(6) the Company may permit any Person to be merged into the
Company (such that the Company shall be the continuing or surviving
corporation); and
(7) the Company may permit any corporation to consolidate
with the Company and the Company may merge into or otherwise dispose
of its assets as an entirety or substantially as an entirety to any
solvent corporation organized under the laws of the United States of
America or any state thereof and having at least 80% of its
consolidated assets located in the United States of America and Canada
which expressly assumes in writing the due and punctual performance of
the obligations of the Company under the Credit Documents, to the same
extent as if such successor or transferee corporation had originally
executed the Credit Documents in the place of the Company (it being
agreed that such assumption shall, upon the request of any Bank and at
the expense of such successor or transferee corporation, be evidenced
by the exchange of such Note for another Note executed by such
successor or transferee corporation, with such changes in phraseology
and form
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as may be appropriate but in substance of like terms as the Note
surrendered for such exchange and of like unpaid principal amount, and
that each Note executed pursuant to this Agreement after such assump-
tion shall be executed by and in the name of such successor or
transferee corporation);
PROVIDED that for purposes of SECTIONS 9.7(e)(6) and (7) immediately
after such merger, consolidation, sale or other disposition, and after
giving effect thereto, (x) such successor or transferee Person could
incur at least $1.00 of additional Funded Debt without violation of
SECTION 9.7(b)(3) and (y) no Default shall have occurred and be
continuing. As soon as practicable, and in any event at least 75 days
prior to the proposed consummation date of any merger, consolidation,
sale or other disposition described in SECTION 9.7(e)(7), the Company
shall give written notice thereof to each Bank describing in
reasonable detail the proposed transaction, the date on which it is
proposed to be consummated and the identity, jurisdiction of
organization, and geographic composition of assets of the proposed
successor or transferee corporation. No disposition by the Company of
its assets as an entirety or substantially as an entirety under
SECTION 9.7(e)(7) shall release the Company as the maker of the Notes
from its liability as obligor thereon.
(f) SALE AND LEASEBACK. Enter into any Sale and Leaseback
Transaction unless:
(1) immediately after giving effect thereto and to the
application of any sales proceeds received in connection therewith,
Special Debt shall not exceed 10% of the Consolidated Net Tangible
Assets; or
(2) the net sales proceeds received by the Company or a
Restricted Subsidiary in respect of the assets sold pursuant to such
Sale and Leaseback Transaction are greater than or equal to the fair
market value of the assets sold (which determination shall be based
upon a written opinion (the cost of which shall be borne exclusively
by the Company) as to valuation from an independent valuation expert
selected by the Company) and such proceeds are concurrently applied to
(A) the purchase, acquisition, development or construction of assets
having a value at least equal to such net proceeds, and to be used in
the Company's or such Restricted Subsidiary's business; PROVIDED that
no Liens shall at any time exist on such assets which secure any Debt
except as permitted by SECTION 9.7(a)(13); (B) the prepayment in
accordance with this Agreement of any aggregate principal amount of
all the Obligations (plus accrued interest and premium, if any) at
least equal to the amount of such net proceeds; or (C) the payment of
other Funded Debt (other than Funded Debt subordinate in right of
payment to the
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Obligations) in an aggregate principal amount at least equal to the
amount of such net sales proceeds; or
(3) the Sale and Leaseback Transaction involves the sale of
assets by the Company to a wholly owned Restricted Subsidiary or by a
Restricted Subsidiary to the Company or to another wholly owned
Restricted Subsidiary; PROVIDED that if the Company is the seller
under any such Sale and Leaseback Transaction, its lease obligations
thereunder shall be subordinated to the Funded Debt represented by the
Notes upon terms set forth on SCHEDULE V.
(g) INVESTMENTS IN THE SPECIAL SUBSIDIARY. Directly or
indirectly make an Investment in the Special Subsidiary after
March 31, 1990, unless (1) the aggregate amount of all other
Investments in the Special Subsidiary made, directly or indirectly, by
the Company and the Restricted Subsidiaries after March 31, 1990 shall
not exceed the aggregate amount of cash distributions received by the
Company and the Restricted Subsidiaries from the Special Subsidiary
after March 31, 1990 or (2) in the opinion of the Board of Directors
of the Company, the Investment would not impair the ability of the
Company to make when due any payment (including any prepayment
required by SECTION 3.2(b)) of principal of or interest on the Notes.
(h) TRANSACTIONS WITH AFFILIATES. Directly or indirectly
purchase, acquire or lease any property from, or sell, transfer or
lease any property to, or otherwise deal with, in the ordinary course
of business or otherwise, (1) any Affiliate (except any employee
compensation benefit plan or any Restricted Subsidiary) or (2) any
Person (other than a Restricted Subsidiary) in which an Affiliate or
the Company (directly or indirectly) owns, beneficially or of record,
5% or more of the outstanding voting stock or similar equity interest,
except that (A) any Affiliate may be a director, officer or employee
of the Company or any Restricted Subsidiary and may be paid reasonable
compensation in connection therewith and (B) subject to applicable
fiduciary standards with respect to the Special Subsidiary, acts and
transactions that would otherwise be prohibited by this Subsection may
be performed or engaged in if upon terms not less favorable to the
Company or any Restricted Subsidiary than if no relationship described
in CLAUSES (1) and (2) above existed.
(i) TAX CONSOLIDATION. Except for the Tax Allocation
Agreements, the Company will not, and will not permit any of its
Subsidiaries to, file or consent to the filing of any consolidated
income tax return with any Person unless such other Person shall have
agreed in writing with the Company that the Company's or such
Subsidiary's liability with respect to taxes as a result of the filing
of any such consolidated income tax return with such Person
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shall not be materially greater, nor the receipt of any tax benefits
materially less, than they would have been had the Company and its
Subsidiaries continued to file a consolidated income tax return with
the Company as the parent corporation.
9.8. ISSUANCE OF STOCK BY RESTRICTED SUBSIDIARIES. The Company
covenants that it will not permit any Restricted Subsidiary (either
directly or indirectly, by the issuance of rights or options for, or
securities convertible into, such shares) to issue, sell or otherwise
dispose of any shares of any authorized but unissued or treasury class
of such Restricted Subsidiary's stock (other than directors'
qualifying shares) except to the Company or another Restricted
Subsidiary.
9.9. COVERAGE RATIOS. As of the end of each fiscal quarter of
the Company, and each delivery of a Required Reserve Report or
Optional Reserve Report, the Company shall be in compliance with all
Required Ratios (except for any noncompliance resulting solely from an
Engineering Shortfall, and then only prior to the cure thereof
permitted by SECTION 10.1(e)).
9.10. PREPAYMENT OF JUNIOR SECURITIES. Without the prior
written consent of the Required Banks, the Company shall not prepay
(or deposit any property to defease) any indebtedness consisting of
Junior Securities before the payment in full of all indebtedness under
the Credit Documents.
Section 10. DEFAULTS.
10.1. EVENTS OF DEFAULT. If one or more of the following
events (herein called "EVENTS OF DEFAULT") shall occur and be
continuing:
(a) the Company shall fail to pay any principal of any Loan or
any fee or other principal amount payable hereunder or under any other
Credit Document when due, or shall fail to pay any interest on any
amount hereunder or under any other Credit Document for more than
three days after the date due; or
(b) any member of the Combined Group shall default in any
payment of principal of or interest on any other obligation for money
borrowed (or any Capitalized Lease Obligation, any obligation under a
conditional sale or other title retention agreement, any obligation
issued or assumed as full or partial payment for property whether or
not secured by a purchase money mortgage or any obligation under notes
payable or drafted accepted representing extensions of credit) beyond
any period of grace provided with respect thereto, or any member of
the Combined Group shall fail to perform or observe any other
agreement, term or condition contained
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in any agreement under which any such obligation is created (or if any
other event thereunder or under any such agreement shall occur and be
continuing) and the effect of such failure or other event is to cause,
or to permit the holder or holders of such obligation (or a trustee on
behalf of such holder or holders) to cause, such obligation to become
due prior to any stated maturity, or any member of the Combined Group
shall fail to pay any Guaranty relating to Debt for borrowed money in
accordance with its terms, PROVIDED that the aggregate amount of all
obligations as to which such a payment default shall occur and be
continuing or such a failure or other event causing or permitting
acceleration shall occur and be continuing shall exceed $10,000,000;
or
(c) any representation or warranty by the Company or any of its
officers in any Credit Document or in any writing furnished to the
Agent or the Banks in connection herewith shall prove to have been
false or misleading in any material respect as of the date as of which
it was made; or
(d) the Company shall default in the performance of any of its
obligations under SECTIONS 9.6 through 9.8 or under SECTION 9.9 (other
than a Default resulting solely from an Engineering Shortfall) or
under SECTION 9.10; or
(e) the Company shall deliver any Independent Engineering Report
and related Coverage Report to the Banks in accordance with
SECTION 9.1 or SECTION 2.7 reflecting noncompliance with any Required
Ratio and such noncompliance shall result solely from an Engineering
Shortfall and shall not be cured (such cure to be evidenced by a new
Coverage Report demonstrating compliance with all Required Ratios) on
or before the date 180 days after the Company delivers such
Independent Engineering Report and related Coverage Report; or
(f) the Company shall default in the performance of any of its
obligations in any Credit Document other than those specified
elsewhere in this SECTION 10.1 and such default shall not be remedied
within 30 days after any executive officer of the Company obtains
actual knowledge thereof; or
(g) any member of the Combined Group shall (1) make an
assignment for the benefit of creditors; (2) generally fail to pay its
debts as such debts become due, or (3) admit in writing its inability
to generally pay its debts as such debts become due; or
(h) a Governmental Authority shall enter any decree or order for
relief in respect of any member of the Combined Group under any
bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law,
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whether now or hereafter in effect (herein called the "BANKRUPTCY
Law"), of any jurisdiction; or
(i) any member of the Combined Group shall petition or apply to
any Governmental Authority for, or consent to, the appointment of, or
taking possession by, a trustee, receiver, custodian, liquidator or
similar official of such member of the Combined Group, or of any
substantial part of the assets of such member of the Combined Group,
or shall commence a voluntary case under the Bankruptcy Law of the
United States or any proceedings (other than proceedings for the
voluntary liquidation and dissolution of a Restricted Subsidiary)
relating to any member of the Combined Group under the Bankruptcy Law
of any other jurisdiction; or
(j) any such petition or application referred to in
SECTION 10.1(i) shall be filed, or any such proceedings referred to in
SECTION 10.1(i) shall be commenced, against any member of the Combined
Group and such member of the Combined Group by any act shall indicate
its approval thereof, consent thereto or acquiescence therein, or an
order, judgment or decree shall be entered appointing any such
trustee, receiver, custodian, liquidator or similar official, or
approving the petition in any such proceedings, and such order,
judgment or decree shall remain unstayed and in effect for more than
60 consecutive days; or
(k) any order, judgment or decree shall be entered in any
proceedings against any member of the Combined Group decreeing the
dissolution of any member of the Combined Group and such order,
judgment or decree shall remain unstayed and in effect for more than
the appeal time provided by law; or
(l) any order, judgment or decree shall be entered in any
proceedings against any member of the Combined Group decreeing a
split-up of such member of the Combined Group which requires (1) the
divestiture of assets which exceed, or the divestiture of partnership
interest in the Special Subsidiary or of the stock of a Restricted
Subsidiary whose assets exceed, 10% of Consolidated Net Tangible
Assets as of the end of the fiscal quarter immediately preceding or
coinciding with such divestiture or (2) the divestiture of assets or
stock of a Restricted Subsidiary or assets of or partnership interest
in the Special Subsidiary, which shall have contributed more than 10%
of EBITD for the four most recently completed fiscal quarters, and
such order, judgment or decree shall remain unstayed and in effect for
more than 60 consecutive days; or
(m) any judgment or order, or series of judgments or orders, for
the payment of money in an amount in excess of $5,000,000 shall be
rendered against any member of the Combined Group and the same shall
not be discharged (or provision shall not be made for such
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discharge), or a stay of execution thereof shall not be procured,
within the appeal time provided by law from the date of entry thereof,
or such member of the Combined Group shall not, within said appeal
time, or such longer period during which execution of the same shall
have been stayed, appeal therefrom and cause the execution thereof to
be stayed during such appeal; or
(n) so long as any of the Mortgages is in effect, the making of
any levy, seizure or attachment on or of any substantial portion of
the Collateral which is not stayed or lifted within the appeal time
provided by applicable law; or the loss, theft, substantial damage, or
destruction of any such Collateral which is not replaced if the amount
of such loss, theft, damage or destruction not covered by insurance
together with the dollar value of all other previous such loss, theft,
damage, or destruction during the term of this Agreement and not
covered by insurance exceeds $10,000,000; or
(o) so long as the Stock Pledge Agreement is in effect, the
making of any levy, seizure or attachment on or of, or the seizure,
nationalization, expropriation or forfeiture of, any properties of
Trend or any of its Subsidiaries which net of insurance results in a
diminution of value equaling or exceeding the greater of (i) any
substantial portion of the properties of Trend and its Subsidiaries
taken as a whole, or (ii) a loan value (based on the Most Recent
Engineering Report) which equals or exceeds $5,000,000 as of the most
recent determination thereof; or
(p) the Company or any ERISA Affiliate shall fail to pay when
due an amount or amounts aggregating in excess of $5,000,000 which it
shall have become liable to pay with respect to any Plan; or notice of
intent to terminate a Plan or Plans (other than a multiemployer plan
under Section 4001(a)(3) of ERISA) having aggregate Unfunded
Liabilities in excess of $5,000,000 shall be filed under Title IV of
ERISA by the Company or any ERISA Affiliate, any plan administrator or
any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a trustee
to be appointed to administer any Plan or Plans (other than a
multiemployer plan under Section 4001(a)(3) of ERISA) having aggregate
Unfunded Liabilities in
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excess of $5,000,000 or a proceeding shall be instituted by a
fiduciary of any such Plan or Plans against the Company or any ERISA
Affiliate to enforce Section 515 or 4219(c)(5) of ERISA; or the
Company or any ERISA Affiliate shall incur a complete or partial
withdrawal liability under Title IV of ERISA in an annual amount in
excess of $2,000,000 (and in the aggregate $5,000,000) in connection
with any Plan; or a condition shall exist by reason of which the PBGC
would be entitled to obtain a decree adjudicating that any Plan or
Plans having aggregate Unfunded Liabilities in excess of $5,000,000
must be terminated; or there shall occur any event or condition that
might reasonably constitute grounds for the termination of any Plan or
Plans having aggregate Unfunded Liabilities in excess of $5,000,000 or
with respect to such Plan or Plans either the imposition of any
liability in excess of $5,000,000 (other than contributions in the
ordinary course) or any Lien provided under Section 4068 of ERISA
securing an amount in excess of $5,000,000 on any property of the
Company or any ERISA Affiliate; PROVIDED, however, any amounts owing
by Santa Fe Pacific Corporation pursuant to the ERISA Indemnification
Agreement between Santa Fe Pacific Corporation and the Company shall
first be offset against the dollar threshold amounts set forth above
before any such condition or event constitutes an event of default
under this paragraph; or
(q) one or more demands for payment is made upon the Company by
Santa Fe Pacific Corporation or any other Person pursuant to the Tax
Indemnification Agreement and such demands would exceed $5,000,000 in
the aggregate; or
(r) any Change of Control shall occur; or
(s) any Event of Default shall occur and be continuing under the
Letter of Credit Agreement,
THEREUPON: (I) the Agent may (and, if directed by the Required Banks,
shall) do any or all of the following: (a) declare the Commitments
terminated (whereupon the Commitments shall be terminated); and (b)
declare the principal amount then outstanding of and the accrued
interest on the Loans and all fees and all other amounts payable
hereunder and under the Notes to be forthwith due and payable, where-
upon such amounts shall be and become immediately due and payable,
without notice (including notice of acceleration and notice of intent
to accelerate), presentment, demand, protest or other formalities of
any kind, all of which are hereby expressly WAIVED by the Company;
PROVIDED that in the case of the occurrence of an Event of Default
with respect to the Company referred to in SECTION 10.1(g) through
(l), the Commitments shall be automatically terminated and the prin-
cipal amount then outstanding of and the accrued interest on the Loans
and fees and all other amounts payable hereunder and under the Notes
shall be and become automatically and immediately due and payable,
without notice (including notice of intent to accelerate and notice of
acceleration) and without presentment, demand, protest or other for-
malities of any kind, all of which are hereby expressly WAIVED by the
Company; (II) each Bank may exercise its rights of offset against each
account and all other property of the Company in the possession of
such Bank, which right is hereby granted by the Company to the Banks;
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and (III) the Agent and each Bank may exercise any and all other
rights pursuant to the Credit Documents, at law and in equity.
Section 11. THE AGENT.
11.1. APPOINTMENT, POWERS AND IMMUNITIES. Each Bank hereby
irrevocably appoints and authorizes the Agent to act as its Agent
under the Credit Documents with such powers as are specifically
delegated to the Agent by the terms thereof, together with such other
powers as are reasonably incidental thereto, including the execution
and delivery of the First Amendment to Deed of Trust. The Agent
(which term as used in this section shall include reference to its
Affiliates and its own and its Affiliates' officers, directors,
employees and agents) shall (a) have no duties or responsibilities
except those expressly set forth in the Credit Documents, and shall
not by reason of any Credit Document be a trustee or fiduciary for any
Bank; (b) not be responsible to any Bank for any recitals, statements,
representations or warranties contained in any Credit Document, or in
any certificate or other document referred to or provided for in, or
received by any of them under, any Credit Document, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of
any Credit Document or any other document referred to or provided for
therein or any property covered thereby or for any failure by the
Company or any other Person to perform any of its obligations
thereunder; (c) not be required to initiate or conduct any litigation
or collection proceedings hereunder or under any Credit Document
except to the extent requested by the Required Banks (and SECTION 11.7
shall apply), and (d) not be responsible for any action taken or
omitted to be taken by it under any Credit Document or any other
document or instrument referred to or provided for therein or in
connection therewith, including pursuant to its own negligence, except
for its own gross negligence or willful misconduct. The Agent may
employ agents and attorneys-in-fact and shall not be responsible for
the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. In any foreclosure proceeding
concerning any collateral for the Notes or other obligations of the
Company hereunder, each holder of a Note or other obligations of the
Company hereunder if bidding for its own account or for its own
account and the accounts of other Banks is prohibited from including
in the amount of its bid an amount to be applied as a credit against
its Notes or the Notes of the other Banks; instead, such holder must
bid in cash only.
11.2. RELIANCE BY AGENT. The Agent shall be entitled to rely
upon any certification, notice or other communication (including any
thereof by telephone, telex, telegram or cable) believed by it to be
genuine and correct and to have been signed or sent by or on behalf of
the proper Person or Persons, and upon
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advice and statements of legal counsel (which may be counsel for the
Company), independent accountants and other experts selected by the
Agent. As to any matters not expressly provided for by any Credit
Document, the Agent shall in all cases be fully protected in acting,
or in refraining from acting, hereunder and thereunder in accordance
with instructions of the Required Banks, and any action taken or
failure to act pursuant thereto shall be binding on all of the Banks.
Pursuant to instructions of all Banks or the Required Banks, as
appropriate, the Agent shall have the authority to execute releases of
the Security Documents on behalf of the Banks without the joinder of
any Bank.
11.3. DEFAULTS. The Agent shall not be deemed to have know-
ledge of the occurrence of a Default (other than the non-payment of
principal of or interest on Loans) unless it has received notice from
a Bank or the Company specifying such Default and stating that such
notice is a "Notice of Default". In the event that the Agent receives
such a notice of the occurrence of a Default, the Agent shall give
prompt notice thereof to the Banks (and shall give each Bank prompt
notice of each such non-payment). The Agent shall (subject to
SECTIONS 11.7 and 12.5) take such action with respect to such Default
as shall be directed by all Banks or the Required Banks, as
appropriate, and within its rights under the Credit Documents and at
law or in equity; PROVIDED that, unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, permitted
hereby with respect to such Default as it shall deem advisable in the
best interests of the Banks and within its rights under the Credit
Documents, at law or in equity.
11.4. RIGHTS AS A BANK. With respect to their Commitments
and Loans, TCB and NationsBank in their capacities as Banks hereunder
shall have the same rights and powers hereunder as any other Bank and
may exercise the same as though they were not acting as the Agent or
the Co-Agents, and the term "Bank" or "Banks" shall, unless the
context otherwise indicates, include the Agent and the Co-Agents in
their individual capacity. The Agent and the Co-Agents may (without
having to account therefor to any Bank) accept deposits from, lend
money to and generally engage in any kind of banking, trust, letter of
credit, agency or other business with the Company (and any of its
Affiliates) as if they were not acting as the Agent and the Co-Agents,
and the Agent and the Co-Agents may accept fees and other considera-
tion from the Company and its Affiliates (in addition to the fees
heretofore agreed to between the Company and the Agent or the
Co-Agents) for services in connection with this Agreement or otherwise
without having to account for the same to the Banks.
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11.5. INDEMNIFICATION. THE BANKS AGREE TO INDEMNIFY THE
AGENT (TO THE EXTENT NOT REIMBURSED UNDER SECTION 12.3 OR 12.4, BUT
WITHOUT LIMITING THE OBLIGATIONS OF THE COMPANY UNDER SAID
SECTIONS 12.3 AND 12.4), RATABLY IN ACCORDANCE WITH THEIR RESPECTIVE
COMMITMENTS, FOR ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR
DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER (INCLUDING THE
CONSEQUENCES OF THE NEGLIGENCE OF THE AGENT) WHICH MAY BE IMPOSED ON,
INCURRED BY OR ASSERTED AGAINST THE AGENT IN ANY WAY RELATING TO OR
ARISING OUT OF ANY CREDIT DOCUMENT (AS DEFINED HEREIN) OR ANY OTHER
DOCUMENTS CONTEMPLATED BY OR REFERRED TO THEREIN OR THE TRANSACTIONS
CONTEMPLATED THEREBY (INCLUDING THE COSTS AND EXPENSES WHICH THE
COMPANY IS OBLIGATED TO PAY UNDER SECTIONS 12.3 AND 12.4 BUT
EXCLUDING, UNLESS A DEFAULT HAS OCCURRED AND IS CONTINUING, NORMAL
ADMINISTRATIVE COSTS AND EXPENSES INCIDENT TO THE PERFORMANCE OF ITS
AGENCY DUTIES HEREUNDER) OR THE ENFORCEMENT OF ANY OF THE TERMS HEREOF
OR THEREOF OR OF ANY SUCH OTHER DOCUMENTS, INCLUDING THE NEGLIGENCE OF
THE AGENT; PROVIDED THAT NO BANK SHALL BE LIABLE FOR ANY OF THE
FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE PARTY TO BE INDEMNIFIED. The obligations of
the Banks under this SECTION 11.5 shall survive the termination of
this Agreement.
11.6. NON-RELIANCE ON THE AGENT AND OTHER BANKS. Each Bank
agrees that it has received current financial information with respect
to the Company and that it has, independently and without reliance on
the Agent, the Co-Agents or any other Bank and based on such documents
and information as it has deemed appropriate, made its own credit
analysis of the Company and decision to enter into this Agreement and
that it will, independently and without reliance upon the Agent, the
Co-Agents or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make
its own analysis and decisions in taking or not taking action under
the Credit Documents. The Agent and the Co-Agents shall not be
required to keep themselves informed as to the performance or
observance by the Company of any Credit Document or any other document
referred to or provided for therein or to inspect the property or
books of the Company or any other Person. Except for notices, reports
and other documents and information expressly required to be furnished
to the Banks by the Agent and the Co-Agents under the Credit
Documents, the Agent and the Co-Agents shall not have any duty or
responsibility to provide any Bank with any credit or other
information concerning the affairs, financial condition or business of
the Company (or any of its Affiliates) which may come into the
possession of the Agent or either Co-Agent.
11.7. FAILURE TO ACT. Except for action expressly required
of the Agent under the Credit Documents, the Agent shall
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in all cases be fully justified in failing or refusing to act
hereunder and thereunder unless it shall receive further assurances to
its satisfaction by the Banks of their indemnification obligations
under SECTION 11.5 against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such
action.
11.8. RESIGNATION OR REMOVAL OF THE AGENT. Subject to the
appointment and acceptance of a successor Agent as provided below, the
Agent may resign at any time by giving notice thereof to the Banks and
the Company, and the Agent may be removed at any time with or without
cause by the Required Banks. Upon any such resignation or removal,
the Required Banks shall have the right to appoint a successor Agent.
If no successor Agent shall have been so appointed by the Required
Banks and shall have accepted such appointment within 30 days after
the retiring Agent's giving of notice of resignation or the Required
Banks' removal of the retiring Agent, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent. Any successor Agent
shall be a bank which has an office in the United States and a
combined capital and surplus of at least $250,000,000 and with its
deposits insured by the FDIC. Upon the acceptance of any appointment
as the 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 hereunder.
Such successor Agent shall promptly specify its Principal Office
referred to in SECTIONS 3.1 and 5.1 by notice to the Company. After
any retiring Agent's resignation or removal hereunder as the Agent,
the provisions of this SECTION 11 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it
while it was acting as the Agent.
Section 12. MISCELLANEOUS.
12.1. WAIVER. No waiver of any Default shall be a waiver of
any other Default. No failure on the part of the Agent or any Bank to
exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under any Credit Document
shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege thereunder preclude any
other or further exercise thereof or the exercise of any other right,
power or privilege. The remedies provided in the Credit Documents are
cumulative and not exclusive of any remedies provided by law or in
equity.
12.2. NOTICES. All notices and other communications provided for
herein (including any modifications of, or waivers or consents under,
this Agreement) shall be given or made by telex, telegraph,
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telecopy (confirmed by mail), cable or other writing and telexed,
telecopied, telegraphed, cabled, mailed or delivered to the intended
recipient at the "Address for Notices" specified below its name on the
signature pages hereof; or, as to any party, at such other address as
shall be designated by such party in a notice to the Company and the
Agent given in accordance with this section. Except as otherwise
provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telex or telecopier,
delivered to the telegraph or cable office or personally delivered or,
in the case of a mailed notice, upon receipt, in each case given or
addressed as aforesaid.
12.3. EXPENSES, ETC. Whether or not any Loan is ever made,
the Company shall pay or reimburse on demand each of the Banks, the
Agent and the Co-Agents for paying: (a) the reasonable fees and
expenses of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., special
counsel to the Agent, and of local counsel to the Agent in the States
of Louisiana, Oklahoma and Alabama in connection with (1) the
preparation, execution and delivery of the Credit Documents (including
the exhibits and schedules hereto), the making of the Loans hereunder
and (2) any modification, supplement or waiver of any of the terms of
any Credit Document; (b) all reasonable out-of-pocket costs and expen-
ses of the Banks, the Agent and the Co-Agents (including costs of
preparing an Independent Engineering Report and reasonable counsels'
fees) in connection with any Event of Default under or the enforcement
of any Credit Document; (c) all transfer, stamp, documentary or other
similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of any Credit Document or any other
document referred to therein; (d) all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest
contemplated by this Agreement, any Security Document or any document
referred to herein or therein; and (e) reasonable expenses of due
diligence and syndication, and mutually agreed advertising and
marketing costs.
12.4. INDEMNIFICATION. THE COMPANY SHALL INDEMNIFY THE
AGENT, THE CO-AGENTS, THE BANKS, AND EACH AFFILIATE THEREOF AND THEIR
RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND COUNSEL FROM,
AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES,
LIABILITIES, COSTS, EXPENSES, CLAIMS OR DAMAGES TO WHICH ANY OF THEM
MAY BECOME SUBJECT, REGARDLESS OF AND INCLUDING LOSSES, LIABILITIES,
COSTS, EXPENSES, CLAIMS AND DAMAGES ARISING FROM THE NEGLIGENCE OF THE
AGENT OR THE CO-AGENTS OR THE BANKS OR ANY OTHER INDEMNITEE, INSOFAR
AS SUCH LOSSES, LIABILITIES, COSTS, EXPENSES, CLAIMS OR DAMAGES ARISE
OUT OF OR RESULT FROM ANY (A) ACTUAL OR PROPOSED USE BY THE COMPANY OF
THE PROCEEDS OF ANY EXTENSION OF CREDIT BY ANY BANK HEREUNDER;
(B) BREACH BY THE COMPANY OF ANY CREDIT DOCUMENT (AS DEFINED HEREIN);
(C) VIOLATION BY THE COMPANY
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OR ANY OF ITS SUBSIDIARIES OF ANY LEGAL REQUIREMENT INCLUDING, WITHOUT
LIMITATION, APPLICABLE ENVIRONMENTAL LAWS; (D) ANY BANK'S OR THE
AGENT'S OR ANY CO-AGENT'S BEING DEEMED AN OWNER OR OPERATOR OF ANY
ASSETS OF THE COMPANY OR ITS SUBSIDIARIES BY A COURT OR OTHER
REGULATORY OR ADMINISTRATIVE AGENCY OR TRIBUNAL IN CIRCUMSTANCES IN
WHICH NEITHER THE AGENT, EITHER CO-AGENT NOR ANY OF THE BANKS IS
GENERALLY OPERATING OR GENERALLY EXERCISING CONTROL OVER SUCH ASSETS,
TO THE EXTENT SUCH LOSSES, LIABILITIES, CLAIMS OR DAMAGES ARISE OUT OF
OR RESULT FROM ANY LEGAL REQUIREMENT INCLUDING, WITHOUT LIMITATION,
APPLICABLE ENVIRONMENTAL LAWS PERTAINING TO THE CONDITION OF SUCH
ASSETS, (E) ENVIRONMENTAL CLAIMS OR (F) ANY INVESTIGATION, LITIGATION
OR OTHER PROCEEDING (INCLUDING ANY THREATENED INVESTIGATION OR
PROCEEDING) RELATING TO ANY OF THE FOREGOING, and the Company shall
reimburse the Agent, each Co-Agent, each Bank, and each Affiliate
thereof and their respective directors, officers, employees, agents
and counsel, upon demand, for any expenses (including legal fees)
incurred in connection with any such investigation or proceeding; but
excluding any such losses, liabilities, claims, damages, costs or
expenses incurred by a Person or any Affiliate thereof or their
respective directors, officers, employees, agents or counsel by reason
of the gross negligence or willful misconduct of such Person,
Affiliate, director, officer, employee, agent or counsel. The
obligation of the Company to provide indemnification under this
section for fees and expenses of counsel shall be limited to the fees
and expenses of one counsel in each jurisdiction representing all of
the Persons entitled to such indemnification, except to the extent
that, in the reasonable judgment of any such indemnified Person, the
existence of actual or potential conflicts of interest make
representation of all of such indemnified Persons by the same counsel
inappropriate; in such a case, the Person exercising such judgment
shall be indemnified for the reasonable fees and expenses of its
separate counsel to the extent provided in this Section without giving
effect to the first clause of this sentence. Nothing in this
SECTION 12.4 is intended to limit the obligations of the Company under
any other provision of this Agreement.
12.5. AMENDMENTS, ETC. No amendment or waiver of any
provision of any Credit Document, nor any consent to any departure by
the Company therefrom, shall in any event be effective unless the same
shall be agreed or consented to by the Required Banks and the Company,
and each 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 each Bank affected thereby, (a) increase any Commitment
of any of the Banks or subject the Banks to any additional obliga-
tions; (b) reduce the principal of, or interest on, any Loan, fee or
other sum to be paid under any Credit Document; (c) postpone any
scheduled date fixed for any payment of
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principal of, or interest on, any Loan, fee or other sum to be paid
under any Credit Document; (d) change the percentage of any of the
Commitments, or of the aggregate unpaid principal amount of any of the
Loans, or the number of Banks which shall be required for the Banks or
any of them to take any action under this Agreement; (e) change any
provision contained in SECTIONS 2.5, 5.2, 5.7, 6, 12.3 or 12.4 or this
SECTION 12.5, or in the definition of "Required Ratios", or (f) except
as provided in the Credit Documents, release any material part of the
security for the obligations of the Company under any Credit Document.
Except as permitted by the Mortgages, Mortgaged Properties cannot be
sold for consideration other than cash without the approval of all
Banks. Anything in this SECTION 12.5 to the contrary, no amendment,
waiver or consent shall be made with respect to SECTION 11 without the
consent of the Agent and the Co-Agents.
12.6. SUCCESSORS AND ASSIGNS. (a) This Agreement shall be
binding upon and inure to the benefit of the Company, the Agent, the
Co-Agents and the Banks and their respective successors and assigns.
The Company may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of all of the
Banks.
(b) Each Bank may sell participations to any Person in all or
part of any Loan, or all or part of its Notes or Commitments, in which
event, without limiting the foregoing, the provisions of SECTION 6
shall inure to the benefit of each purchaser of a participation and
the PRO RATA treatment of payments, as described in SECTION 5.2, shall
be determined as if such Bank had not sold such participation. In the
event any Bank shall sell any participation, (1) the Company, the
Agent, the Co-Agents and the other Banks shall continue to deal solely
and directly with such selling Bank in connection with such selling
Bank's rights and obligations under the Credit Documents (including
the Notes held by such selling Bank); (2) such Bank shall retain the
sole right and responsibility to enforce the obligations of the
Company relating to the Loans, including the right to approve any
amendment, modification or waiver of any provision of this Agreement
other than amendments, modifications or waivers with respect to (A)
any fees payable hereunder to the Banks, (B) the amount of principal
or the rate of interest payable on, or the dates fixed for the
scheduled repayment of principal of, the Loans and other sums to be
paid to the Banks hereunder, and (C) the release or termination of all
or substantially all of the security for the Loans, and (3) the
Company agrees, to the fullest extent it may effectively do so under
applicable law, that any participant of a Bank may exercise all rights
of set-off, bankers' lien, counterclaim or similar rights with respect
to such participation as fully as if such
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participant were a direct holder of Loans if such Bank has previously
given notice of such participation to the Company.
(c) Each Bank may assign to one or more Banks or Eligible
Assignees all or a portion of its interests, rights and obligations
under this Agreement (including all or a portion of its Commitments
and the same portion of the related Loans at the time owing to it and
the related Note held by it); PROVIDED (1) other than in the case of
an assignment to a Person at least 50% owned by the assignor Bank, or
by a common parent of both, or to another Bank, the Agent and the
Company must give their respective prior written consent, which
consent will not be unreasonably withheld; (2) the aggregate amount of
the Commitments and/or Loans of the assigning Bank subject to each
such assignment (determined as of the date the Assignment Agreement
with respect to such assignment is delivered to the Agent) shall in no
event be less $10,000,000 (or $1,000,000 in the case of an assignment
between Banks) (except for certain exceptions approved by the Company
and the Agent or where all of a Bank's Commitments and Loans are being
assigned) and shall be in an amount that is an integral multiple of
$1,000,000 (except for certain exceptions approved by the Company and
the Agent or where all of a Bank's Commitments and Loans are being
assigned); (3) the assigning Bank shall contemporaneously assign to
such assignee Bank or Eligible Assignee an equal percentage of the
assigning Bank's Letter of Credit Commitment and all of the assigning
Bank's other rights and obligations under the Letter of Credit
Agreement; and (4) the parties to each such assignment shall execute
and deliver to the Agent, for its acceptance and recording in its
records, an Assignment Agreement with blanks appropriately completed,
together with the Notes subject to such assignment and a processing
and recordation fee of $2,000 (for which the Company shall have no
liability except in the case of assignments required by the Company
pursuant to SECTION 6.1, 6.3 or 6.6, in which case such fee shall be
paid by the Company). Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each
Assignment Agreement, (A) the assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment Agreement, have
the rights and obligations of a Bank hereunder, and (B) the Bank
making such assignment shall, to the extent provided in such
assignment, be released from its obligations under this Agreement
(and, in the case of an Assignment Agreement 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).
(d) By executing and delivering an Assignment Agreement, the
Bank assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (1)
other than the representation and warranty that it is the legal and
beneficial owner of the interest being assigned thereby, such
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assignor Bank makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with any Credit Document or
the execution, legality, validity, enforceability, genuineness,
sufficiency or value of any Credit Document; (2) such assignor Bank
makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Company or the performance
or observance by the Company of any of its obligations under any
Credit Document; (3) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial
statements of the Company previously delivered in accordance herewith
and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such
Assignment Agreement; (4) such assignee will, independently and
without reliance upon the Agent, such assignor Bank or any other Bank
and based on such documents and information as it shall deem appropri-
ate at the time, continue to make its own credit decisions in taking
or not taking action under the Credit Documents; (5) such assignee
appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under the Credit Documents as are
delegated to the Agent by the terms hereof, together with such powers
as are reasonably incidental thereto, and (6) such assignee agrees
that it will perform in accordance with their terms all obligations
that by the terms of the Credit Documents are required to be performed
by it as a Bank.
(e) The Agent shall maintain at its office a copy of each
Assignment Agreement delivered to it and a record of the names and
addresses of the Banks and the Commitments of, and principal amount of
the Loans owing to, each Bank from time to time. The entries in such
record shall be conclusive, in the absence of manifest error, and the
Company, the Agent and the Banks may treat each Person the name of
which is recorded therein as a Bank hereunder for all purposes of the
Credit Documents. Such records shall be available for inspection by
the Company or any Bank at any reasonable time and from time to time
upon reasonable prior notice.
(f) Upon its receipt of an Assignment Agreement executed by an
assigning Bank and the assignee thereunder together with the Note
subject to such assignment, the written consent to such assignment and
the fee payable in respect thereto, the Agent shall, if such
Assignment Agreement has been completed with blanks appropriately
filled, (1) accept such Assignment Agreement; (2) record the
information contained therein in its records, and (3) give prompt
notice thereof to the Company. Contemporaneously with the receipt by
the Agent of an Assignment Agreement, the Company, at its own expense,
shall execute and deliver to the Agent in exchange for each
surrendered Note a new Note payable to the order
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of such assignee in an amount equal to the Commitments and/or Loans
assumed by it pursuant to such Assignment Agreement and, if the
assignor Bank has retained Commitments and/or Loans hereunder, new
Notes payable to the order of the assignor Bank in an amount equal to
the Commitments and/or Loans retained by it. Such new Notes shall be
in an aggregate principal amount equal to the principal amount of each
surrendered Note, shall be dated the effective date of such Assignment
Agreement and shall otherwise be in substantially the form of the
surrendered Notes. Thereafter, each surrendered Note shall be marked
cancelled and returned to the Company.
(g) Any Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section, disclose to the assignee or participant or proposed assignee
or participant any information relating to the Company furnished to
such Bank by or on behalf of the Company.
(h) Any assignment by a Bank pursuant to this SECTION 12.6 shall
not result in any single Bank holding in excess of 25% of the
Aggregate Commitment at any one time.
(i) Notwithstanding any other provision of this SECTION 12.6,
TCB and its Affiliates may not assign their rights hereunder unless,
after giving effect to such assignment, TCB and its Affiliates would
have an aggregate Commitment Percentage of at least 10%.
(j) Notwithstanding anything herein to the contrary, each Bank
may pledge and assign all or any portion of its rights and interests
under the Credit Documents to any Federal Reserve Bank.
12.7. SURVIVAL; TERM; REINSTATEMENT. In addition to the
other provisions of this Agreement expressly stated to survive the
termination of this Agreement, the obligations of the Company under
SECTIONS 6, 12.3 and 12.4 and the last sentence of this SECTION 12.7
and the obligations of the Banks under SECTION 12.8 shall survive the
termination of this Agreement. The term of this Agreement shall be
until (a) the full and final payment of all Notes, (b) the termination
of all Commitments and (c) the payment of all amounts due under the
Credit Documents. The Company agrees that if at any time all or any
part of any payment previously applied by any Bank to any Loan or
other sum hereunder is or must be returned by or recovered from such
Bank for any reason (including the order of any bankruptcy court), the
Credit Documents shall automatically be reinstated to the same effect
as if the prior application had not been made, and the Company hereby
agrees to indemnify such Bank against, and to save and hold such Bank
harmless from, any required return by or recovery from such Bank of
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any such payment because of its being deemed preferential under
applicable Legal Requirements, or for any other reason.
12.8. LIMITATION OF INTEREST. The parties to this Agreement
intend to strictly comply with all applicable laws, including
applicable usury laws. Accordingly, the provisions of this
SECTION 12.8 shall govern and control over every other provision of
any Credit Document which conflicts or is inconsistent with this
Section, even if such provision declares that it controls. As used in
this Section, the term "interest" includes the aggregate of all
charges, fees, benefits or other compensation which constitute
interest under applicable law; PROVIDED that, to the maximum extent
permitted by applicable law, (a) any non-principal payment shall be
characterized as an expense or as compensation for something other
than the use, forbearance or detention of money, and not as interest
and (b) all interest at any time contracted for, taken, reserved,
retained, charged or received shall be amortized, prorated, allocated
and spread, in equal parts during the full term of the Loans and the
Commitments. In no event shall the Company or any other Person be
obligated to pay, or the Agent or any Bank have any right or privilege
to reserve, receive or retain, (x) any interest in excess of the
maximum amount of nonusurious interest permitted under the laws of the
State of Texas or the applicable laws (if any) of the United States or
of any other state or (y) total interest in excess of the amount which
the Agent or such Bank could lawfully have contracted for, taken,
reserved, received, retained or charged had the interest been
calculated for the full term of the Loans at the Highest Lawful Rate.
On each day, if any, that the interest rate (the "STATED RATE") called
for under any Credit Document exceeds the Highest Lawful Rate, the
rate at which interest shall accrue shall automatically be fixed by
operation of this sentence at the Highest Lawful Rate for that day,
and shall remain fixed at the Highest Lawful Rate for each day
thereafter until the total amount of interest accrued equals the total
amount of interest which would have accrued if there were no such
ceiling rate as is imposed by this sentence. Thereafter, interest
shall accrue at the Stated Rate unless and until the Stated Rate again
exceeds the Highest Lawful Rate when the provisions of the immediately
preceding sentence shall again automatically operate to limit the
interest accrual rate. The daily interest rates to be used in
calculating interest at the Highest Lawful Rate shall be determined by
dividing the applicable Highest Lawful Rate per annum by the number of
days in the calendar year for which such calculation is being made.
None of the terms and provisions contained in any Credit Document
which directly or indirectly relate to interest shall ever be
construed without reference to this Section, or be construed to create
a contract to pay for the use, forbearance or detention of money at an
interest rate in excess of the Highest Lawful Rate. If
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the term of any of the Notes is shortened by reason of acceleration of
maturity as a result of any Default or by any other cause, or by
reason of any required or permitted prepayment, and if for that (or
any other) reason the Agent or any Bank at any time, including the
stated maturity, is owed or receives (and/or has received) interest in
excess of interest calculated at the Highest Lawful Rate, then and in
any such event all of any such excess interest shall be cancelled
automatically as of the date of such acceleration, prepayment or other
event which produces the excess, and, if such excess interest has been
paid to the Agent or such Bank, it shall be credited PRO TANTO against
the then-outstanding principal balance of the Company's obligations to
the Agent or such Bank, effective as of the date or dates when the
event occurs which causes it to be excess interest, until such excess
is exhausted or all of such principal has been fully paid and
satisfied, whichever occurs first, and any remaining balance of such
excess shall be promptly refunded to its payor.
12.9. CAPTIONS. Captions and section headings appearing
herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this
Agreement.
12.10. COUNTERPARTS. Each Credit Document may be executed in
any number of counterparts, all of which taken together shall consti-
tute one and the same agreement and any of the parties hereto may
execute such Credit Document by signing any such counterpart.
12.11. GOVERNING LAW. EXCEPT TO THE EXTENT OTHERWISE
SPECIFIED THEREIN, EACH CREDIT DOCUMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF TEXAS AND THE
UNITED STATES OF AMERICA. THE COMPANY HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF TEXAS AND OF ANY TEXAS STATE COURT SITTING IN
HARRIS COUNTY, TEXAS FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT
OF OR RELATING TO THE CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
12.12. SEVERABILITY. Whenever possible, each provision of the
Credit Documents shall be interpreted in such manner as to be
effective and valid under applicable law. If any provision of any
Credit Document shall be invalid, illegal or unenforceable in any
respect under any applicable law, the validity, legality and
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<PAGE>
enforceability of the remaining provisions of such Credit Document
shall not be affected or impaired thereby.
12.13. CHAPTER 15 NOT APPLICABLE. Chapter 15 of the Texas
Credit Code shall not apply to any Credit Document or to any
Commitment or Loan, nor shall any Credit Document be governed by or be
subject to the provisions of such Chapter 15 in any manner whatsoever.
-108-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered effective as of the day and year
first above written.
SANTA FE ENERGY RESOURCES, INC.,
a Delaware corporation
By:M. J. ROSINSKI
M. J. Rosinski
Vice President and Chief
Financial Officer
Address for Notices:
Santa Fe Energy Resources, Inc.
1616 South Voss, Suite 1000
Houston, Texas 77057
Telecopy: (713) 268-5341
Attention: Vice President and
Chief Financial Officer
Telex: 794-567
(Answerback: SFEPROD HOU)
<PAGE>
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, individually,
as Administrative Agent and as
Co-Agent
By:JAMES R. MCBRIDE
James R. McBride
Senior Vice President
Address for Notices:
Domestic and Eurodollar Texas Commerce Bank National
Lending Offices: Association
712 Main Street
Texas Commerce Bank National Houston, Texas 77002
Association Attention: Manager, Energy Group
ABA #113000609 Telecopy: (713) 236-4117
For Credit To: Acct. #10967 Telex: 166-053
(Answerback:TCB HOU)
Attention: Investment
Operations/Norma Benzon with copies to:
Reference: Santa Fe Energy
Resources, Inc. Texas Commerce Bank National
Association
Facility A P. O. Box 2558
COMMITMENT: $11,828,571.41 Houston, Texas 77252
Attention: Manager, Capital
Facility B Markets Division
COMMITMENT: $11,171,428.59
and
Texas Commerce Bank National
Association
P. O. Box 2558
Houston, Texas 77252
Attention: Manager, Loan
Agreements Division
<PAGE>
NATIONSBANK OF TEXAS, N.A.,
individually and as Co-Agent
By:H. GENE SHIELS
Name:H. Gene Shiels
Title:Vice President
Domestic and Eurodollar Address for Notices:
Lending Offices:
NationsBank of Texas, N.A. NationsBank of Texas, N.A.
ABA #111000025 700 Louisiana
For Credit to: Acct. # P.O. Box 2518
0180019828 Houston, Texas 77252-2518
Attention: Loan Funds Attention: H. Gene Shiels
Transfer Telecopy: (713) 247-6432
Reference: Santa Fe Energy
Resources, Inc.
Facility A
COMMITMENT: $11,314,285.71
Facility B
COMMITMENT: $10,685,714.29
<PAGE>
THE BANK OF NEW YORK
By:DANIEL T. GATES
Name:Daniel T. Gates
Title:Vice President
Domestic Lending Office: Address for Notices:
The Bank of New York
ABA #021000018 The Bank of New York
For Credit To: Commercial One Wall Street, 19th Floor
Loan Servicing Department New York, New York 10286
GLA #111-556 Attention: Daniel Gates
Reference: Santa Fe Energy Telecopy: (212) 635-7923
Resources, Inc. Telex: 232-060
(Answerback:BONY UR)
Eurodollar Lending Office: with a copy to:
The Bank of New York Ms. Ann Marie Schron
ABA #021000018 The Bank of New York
For Credit To: Eurodollar/ One Wall Street, 19th Floor
Cayman Funding Area New York, New York 10286
LIBOR Account No.: Telecopy: (212) 635-7923
803-3140-992 Telex: 232-060
(Answerback:BONY UR)
Reference: Santa Fe Energy
Resources, Inc.
Facility A
COMMITMENT: $9,257,142.86
Facility B
COMMITMENT: $8,742,857.14
<PAGE>
THE BANK OF NOVA SCOTIA
By:A. S. NORSWORTHY
Name:A. S. Norsworthy
Title:Assistant Agent
Domestic and Eurodollar Address for Notices:
Lending Offices:
Bank of Nova Scotia, New The Bank of Nova Scotia
York Agency 600 Peachtree Street, Suite 2700
ABA #026002532 Atlanta, Georgia 30308
For Credit To: Atlanta Attention: Claude Ashby
Agency Telecopy: (404) 888-8998
Reference: Santa Fe Energy Telex: 00542319
Resources, Inc. (Answerback: SCOTIABANK ATL)
Facility A
COMMITMENT: $9,257,142.86
with a copy to:
Facility B
COMMITMENT: $8,742,857.14 The Bank of Nova Scotia
1100 Louisiana, Suite 3000
Houston, Texas 77002
Attention: Mark Ammerman
Telecopy: (713) 752-2425
<PAGE>
BANK OF MONTREAL
By:MARK GREEN
Name:Mark Green
Title:Director
Domestic and Eurodollar Address for Notices:
Lending Offices:
Harris Bank Bank of Montreal
ABA #071000288 700 Louisiana, Suite 4400
For Credit To: Bank of Houston, Texas 77002
Montreal, Chicago Branch Attention: Dennis Spencer
Attention: E. Rios Telecopy: (713) 223-4007
Reference: Santa Fe Energy Telex: 77-5640
Resources, Inc. (Answerback: BKMONTREAL HOU)
Facility A
COMMITMENT: $10,285,714.29
Facility B
COMMITMENT: $9,714,285.71
<PAGE>
CIBC, INC.
By:J. D. WESTLAND
Name:J. D. Westland
Title:Vice President
Domestic and Eurodollar Address for Notices:
Lending Offices:
Morgan Guaranty Trust CIBC, Inc.
Company of New York Two Paces West, 2727 Paces Ferry Road
ABA #021-000-238 Suite 1200
For Credit To: CIBC, Atlanta, Georgia 30339
Atlanta Acct. #630-00-480 Attention: Vice President
Telephone No: (404) 319-4999
Telecopier No.: (404) 319-4950
Attention: Loan Operations Telex: 54-2413
Reference: Santa Fe Energy answer back: CANBANK ATL
Resources, Inc.
Facility A
COMMITMENT: $9,257,142.86
with a copy to:
Facility B
COMMITMENT: $8,742,857.14 Canadian Imperial Bank of
Commerce
2 Houston Center, Suite 1200
Houston, Texas 77010
Attention: Brian R. Swinford
Telecopy: (713) 658-9922
<PAGE>
BANQUE PARIBAS HOUSTON AGENCY
By:BRIAN MALONE
Name:Brian Malone
Title:Vice President
By:PATRICK J. MILOR
Name:Patrick J. Milor
Title:SVP-Deputy General Manager
Domestic and Eurodollar Address for Notices:
Lending Offices:
Bankers Trust Co. Banque Paribas Houston Agency
ABA #02-100-1033 1200 Smith Street, Suite 3100
Houston, Texas 77002
For Credit To: Banque Attention: Barton D. Schouest
Paribas New York Telecopy: (713) 659-3832
#04202195
Final Credit 2144-001545
Banque Paribas Houston Agency
Reference: Santa Fe Energy
Resources, Inc.
Facility A
COMMITMENT: $9,257,142.86
Facility B
COMMITMENT: $8,742,857.14
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
By:FRANK T. SMITH
Name:Frank T. Smith
Title:Director
Domestic and Eurodollar Address for Notices:
Lending Offices:
Bank of Boston The First National Bank of Boston
ABA #011000390 100 Federal Street
Boston, Massachusetts 02110
For Credit To: Attention: George W. Passela
not applicable Telecopy: (617) 434-3652
Reference: Santa Fe Energy
Resources, Inc.
Facility A
COMMITMENT: $9,257,142.86
Facility B
COMMITMENT: $8,742,857.14
<PAGE>
ABN AMRO Bank N.V., HOUSTON AGENCY
By:W. BRYAN CHAPMAN
Name:W. Bryan Chapman
Title:Vice President
By:CHARLES W. RANDALL
Name:Charles W. Randall
Title:Group Vice President
Domestic and Eurodollar Address for Notices:
Lending Offices:
ABN AMRO New York ABN AMRO Bank N.V., Houston Agency
ABA #026009580 Three Riverway, Suite 1600
Houston, Texas 77056
For Credit To: ABN AMRO Attention: Mr. Bryan Chapman
Houston Agency Telecopy: (713) 629-7533
Acct. #651001071541
Reference: Santa Fe Energy
Resources, Inc.
Facility A
COMMITMENT: $10,285,714.29
Facility B
COMMITMENT: $9,714,285.71
<PAGE>
EXHIBITS:
A - Form of Facility A Note
B - Form of Facility B Note
C - Request for Extension of Credit
D - Assignment Agreement
E - Facility A Maximum Amount
F - Preliminary Available Amount
SCHEDULES:
I - Restricted and Unrestricted Subsidiaries
II - Liens and Funded Debt
III - Initial Approved Assumptions and Price Protection
Agreements
IV - Coverage Report
V - Subordination Provisions
VI - Opinion of Andrews & Kurth, L.L.P.
VII - Opinion of David L. Hicks
VIII- Mortgages
IX - Jurisdictions for Which Certificates Are to Be Provided
X - Designated Debt
<PAGE>
EXHIBIT 10(W)
LETTER OF CREDIT AGREEMENT
dated as of March 16, 1994
among
SANTA FE ENERGY RESOURCES, INC.;
the Banks signatory hereto,
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
as Co-Agent and Administrative Agent
and
NATIONSBANK OF TEXAS, N.A.
as Co-Agent
<PAGE>
TABLE OF CONTENTS
Section 1. Definitions and Accounting Matters . . . . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms and Determinations . . . . . . . . . . 31
Section 2. Commitments . . . . . . . . . . . . . . . . . . . . . 32
2.1 Letters of Credit . . . . . . . . . . . . . . . . . . . 32
2.3 Reductions and Changes of Commitments . . . . . . . . . 37
2.4 Several Obligations . . . . . . . . . . . . . . . . . . 38
2.5 Fees . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 3. Prepayments . . . . . . . . . . . . . . . . . . . . . 38
3.1 (a) Commitment Amount . . . . . . . . . . . . . . . 38
Section 4. Payments of Principal and Interest . . . . . . . . . 39
4.1 Repayment of Reimbursement Obligations . . . . . . . . 39
4.2 Interest . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5. Payments; Pro Rata Treatment; Computations, Etc. . . 39
5.1 Payments . . . . . . . . . . . . . . . . . . . . . . . 39
5.2 Pro Rata Treatment . . . . . . . . . . . . . . . . . . 40
5.3 Computations . . . . . . . . . . . . . . . . . . . . . 40
5.4 Minimum and Maximum Amounts . . . . . . . . . . . . . . 40
5.5 Certain Actions, Notices, Etc . . . . . . . . . . . . . 40
5.6 Non-Receipt of Funds by the Agent . . . . . . . . . . . 41
5.7 Sharing of Payments, Etc. . . . . . . . . . . . . . . . 42
5.8 Other Expenses . . . . . . . . . . . . . . . . . . . . 42
Section 6. Yield Protection and Illegality . . . . . . . . . . . 42
6.1 Additional Costs in Respect of Letters of Credit . . . 42
6.2 Capital Adequacy . . . . . . . . . . . . . . . . . . . 43
Section 7. Conditions Precedent . . . . . . . . . . . . . . . . 44
7.1 Closing Conditions . . . . . . . . . . . . . . . . . . 44
7.2 All Letters of Credit . . . . . . . . . . . . . . . . . 46
Section 8. Representations and Warranties . . . . . . . . . . . 46
8.1 Corporate Existence . . . . . . . . . . . . . . . . . . 47
8.2 Information . . . . . . . . . . . . . . . . . . . . . . 47
8.3 Litigation; Compliance . . . . . . . . . . . . . . . . 47
8.4 No Breach . . . . . . . . . . . . . . . . . . . . . . . 48
8.5 Corporate Action . . . . . . . . . . . . . . . . . . . 48
8.6 Approvals . . . . . . . . . . . . . . . . . . . . . . . 48
8.7 Regulations G, U and X . . . . . . . . . . . . . . . . 49
8.8 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.10 Subsidiaries . . . . . . . . . . . . . . . . . . . . . 49
8.11 Investment Company Act . . . . . . . . . . . . . . . . 49
8.12 Public Utility Holding Company Act . . . . . . . . . . 49
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<PAGE>
8.13 Environmental Matters . . . . . . . . . . . . . . . . . 50
Section 9. Covenants . . . . . . . . . . . . . . . . . . . . . . 50
9.1 Financial Statements and Certificates . . . . . . . . 50
9.2 Inspection of Property . . . . . . . . . . . . . . . . 54
9.3 Compliance with Environmental Laws . . . . . . . . . . 54
9.4 Payment of Taxes . . . . . . . . . . . . . . . . . . . 55
9.5 Maintenance of Insurance . . . . . . . . . . . . . . . 55
9.6 Restricted Payments and Restricted Investments . . . . 55
9.7 Lien, Debt and Other Restrictions. . . . . . . . . . . 57
9.8 Issuance of Stock by Restricted Subsidiaries . . . . . 68
9.10 Prepayment of Junior Securities . . . . . . . . . . . 68
Section 10. Defaults. . . . . . . . . . . . . . . . . . . . . . 68
10.1 Events of Default. . . . . . . . . . . . . . . . . . . 68
Section 11. The Agent . . . . . . . . . . . . . . . . . . . . . 72
11.1 Appointment, Powers and Immunities . . . . . . . . . . 72
11.2 Reliance by Agent . . . . . . . . . . . . . . . . . . 73
11.3 Defaults . . . . . . . . . . . . . . . . . . . . . . . 73
11.4 Rights as a Bank . . . . . . . . . . . . . . . . . . . 73
11.5 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . 74
11.6 Non-Reliance on the Agent and Other Banks . . . . . . 74
11.7 Failure to Act . . . . . . . . . . . . . . . . . . . . 75
11.8 Resignation or Removal of the Agent . . . . . . . . . 75
Section 12. Miscellaneous . . . . . . . . . . . . . . . . . . . 75
12.1 Waiver . . . . . . . . . . . . . . . . . . . . . . . . 75
12.2 Notices . . . . . . . . . . . . . . . . . . . . . . . 76
12.3 Expenses, Etc. . . . . . . . . . . . . . . . . . . . . 76
12.4 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . 76
12.5 Amendments, Etc. . . . . . . . . . . . . . . . . . . . 77
12.6 Successors and Assigns . . . . . . . . . . . . . . . . 78
12.7 Survival; Term; Reinstatement . . . . . . . . . . . . 81
12.8 Limitation of Interest . . . . . . . . . . . . . . . . 81
12.9 Captions . . . . . . . . . . . . . . . . . . . . . . . 82
12.10 Counterparts . . . . . . . . . . . . . . . . . . . . . 82
12.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . 83
12.12 Severability . . . . . . . . . . . . . . . . . . . . . 83
12.13 Chapter 15 Not Applicable . . . . . . . . . . . . . . 83
-ii-
<PAGE>
LETTER OF CREDIT AGREEMENT
This Letter of Credit Agreement (as amended, modified,
supplemented and restated from time to time, this "AGREEMENT") dated as
of March 16, 1994, is by and among SANTA FE ENERGY RESOURCES, INC.
(the "COMPANY"), a Delaware corporation; each of the lenders which is
or which may from time to time become a signatory hereto (individually
a "BANK" and collectively the "BANKS"); TEXAS COMMERCE BANK NATIONAL
ASSOCIATION ("TCB"), a national banking association, as Administrative
Agent for the Banks (in such capacity, together with its successors in
such capacity, the "AGENT"); and TCB and NATIONSBANK OF TEXAS, N.A., a
national banking association, as Co-Agents (in such capacity, the "CO-
AGENTS").
The parties agree as follows:
Section 1. DEFINITIONS AND ACCOUNTING MATTERS.
1.1 CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings:
"ACHIEVEMENT DATE" shall mean the first date on which both (a)
the aggregate minimum Qualifying Amount of Junior Securities to be
used in determining the applicable table on EXHIBIT C for the
Preliminary Available Amount has been issued and the gross proceeds
thereof received by the Company and (b) all Designated Debt for the
aggregate Qualifying Amount of Junior Securities actually issued, as
shown on SCHEDULE X, shall have been repaid or Defeased. In
determining any Achievement Date, the Qualifying Amounts of Junior
Securities issued on such date, on the Qualifying Date and on each
additional date, if any, on which Junior Securities have been issued
shall be aggregated. For example, if there is only one issuance of
Junior Securities and such issuance is in a Qualifying Amount of
$75,000,000, the Preliminary Available Amount will thereafter be
determined according to Table Four of EXHIBIT C, and the Qualifying
Date and the Achievement Date will be the same. For example, if there
are two issuances of Junior Securities, one in the amount of
$75,000,000 and a later one in the amount of $50,000,000, the
Qualifying Date will be the date of the first issuance, which will
also be the Achievement Date for the $75,000,000 level in EXHIBIT C,
and the Preliminary Available Amount will be determined according to
Table Four of EXHIBIT C until the date of the second issuance; the
date of the second issuance will be the Achievement Date for the
$125,000,000 level EXHIBIT C, and the Preliminary Available Amount
will thereafter be determined according to Table Two of EXHIBIT F. An
Achievement Date must occur, if at all, prior to July 1, 1994.
<PAGE>
"ADDITIONAL COSTS" shall have the meaning ascribed to such term
in SECTION 6.1.
"ADOBE" shall mean Adobe Resources Corporation, formerly a
Delaware corporation.
"ADOBE PROPERTIES" shall mean oil, gas and mineral properties and
other assets owned by Adobe at the time of the Merger.
"AFFILIATE" shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or
is controlled by, such Person; and with respect to an individual,
"AFFILIATE" shall also mean any individual related to such individual
by blood or marriage. As used in this definition, "CONTROLS",
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH" shall mean possession,
directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
"AGGREGATE COMMITMENT" shall mean the total of all Commitments of
all Banks.
"ALTERNATE ANNUAL DEBT SERVICE COVERAGE RATIO" shall mean, as of
any date of determination and for the Calculation Period in which such
date occurs and for each Calculation Period thereafter to and
including the Calculation Period including the Termination Date, the
lowest of the ratios obtained by dividing (a) Combined CFADS
(calculated on the basis of the Most Recent Engineering Report) for
such Calculation Period by (b) the sum of (1) the Alternate Debt
Service of the Company and the Restricted Subsidiaries for such
Calculation Period PLUS (2), at all times and to the extent the
Special Subsidiary Qualifying Conditions are met, the Special
Subsidiary Percentage times the Alternate Debt Service of the Special
Subsidiary for such Calculation Period (in each case calculated on the
basis set forth in the most recent Coverage Report delivered to the
Agent pursuant to SECTION 9.1 and taking into account any incurrence
or prepayment of Covered Debt by the Company or any of the Restricted
Subsidiaries or the Special Subsidiary since the date of such Coverage
Report).
"ALTERNATE BASE RATE" shall mean, for any date, a rate per annum
(rounded upwards, if necessary, to the next higher 1/100%) equal to
the greater of (a) the Prime Rate in effect on such day or (b) the Fed
Funds Rate in effect for such day plus 1/2%. Any change in the
Alternate Base Rate due to a change in the Fed Funds Rate shall be
effective on the effective date of such change in the Fed Funds Rate.
If for any reason the Agent shall have determined (which determination
shall be conclusive absent manifest error) that it is unable to
ascertain the Fed Funds Rate for any reason, including the inability
or failure of the Agent to obtain sufficient bids or publications in
accordance with the terms
-2-
<PAGE>
hereof, the Alternate Base Rate shall be the Prime Rate until the
circumstances giving rise to such inability no longer exist.
"ALTERNATE DEBT SERVICE" shall mean, for any Calculation Period
and with respect to any Person, the total of principal payments in
respect of Covered Debt of such Person and the total of interest
payments (using, with respect to interest to accrue, the interest
rates set forth in the most recent Approved Assumptions for such
Covered Debt not bearing interest at a fixed rate; if some or all of
such Covered Debt bears interest at one or more fixed rates as of the
date of determination of Alternate Debt Service but such Covered Debt
will not bear interest at such fixed rate or rates to the end of such
Calculation Period, then interest payments in respect of Alternate
Debt Service with respect to such Covered Debt shall be calculated on
the basis of such fixed rate or rates for such time as the same shall
be applicable to such Covered Debt, and then at the interest rates set
forth in the most recent Approved Assumptions) in respect of Covered
Debt of such Person, in each case paid and scheduled to be paid during
such Calculation Period; PROVIDED that the principal amount of any
Covered Debt of such Person which by its terms matures on a date
within such Calculation Period but which may reasonably be expected to
be reborrowed in a Rollover on such date shall not be deemed, for
purposes of this definition, to be scheduled to be paid on such date;
and PROVIDED FURTHER that for purposes of this definition it shall be
assumed that (a) surety bonds for environmental purposes and letters
of credit issued for the account of a Person will be fully drawn upon
their respective expiry dates, (b) the reimbursement obligations of a
Person with respect to all surety bonds for environmental purposes and
letters of credit issued for its account shall be satisfied
immediately and considered as a "principal payment" for purposes of
this definition.
"AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT" shall mean that
certain Amended and Restated Revolving Credit Agreement dated as of
March 16, 1994, among the Company, the Agent, the Co-Agents, and the
Banks.
"ANNUAL DEBT SERVICE COVERAGE RATIO" shall mean, as of any date
of determination and for the Calculation Period in which such date
occurs and for each Calculation Period thereafter to and including the
Calculation Period including the Termination Date, the lowest of the
ratios obtained by dividing (a) Combined CFADS (calculated on the
basis of the Most Recent Engineering Report) for such Calculation
Period by (b) the sum of (1) the Debt Service of the Company and the
Restricted Subsidiaries for such Calculation Period PLUS (2), at all
times and to the extent the Special Subsidiary Qualifying Conditions
are met, the Special Subsidiary Percentage times the Debt Service of
the Special Subsidiary for such Calculation Period (in each case
calculated on the basis set forth in the most recent Coverage Report
delivered to the Agent pursuant to SECTION 9.1 and taking into account
any incurrence or
-3-
<PAGE>
prepayment of Covered Debt by the Company or the Restricted
Subsidiaries or the Special Subsidiary since the date of such Coverage
Report).
"APPLICABLE ENVIRONMENTAL LAWS" shall mean all applicable
environmental or pollution-control Legal Requirements governing,
without limitation, wastewater effluent, solid and hazardous waste or
substances and air emissions, together with any other applicable
requirements for conducting, on a timely basis, reporting, record-
keeping, periodic tests and monitoring for contamination of ground
water, surface water, air and land and for biological toxicity of the
aforesaid, including, without limitation, the Resource Conservation
and Recovery Act of 1976, the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (as amended by the Superfund
Amendments and Reauthorization Act), the Toxic Substances Control Act,
the Safe Drinking Water Act, the Hazardous Materials Transportation
Act, the Clean Air Act, the Clean Water Act, the Oil Pollution Act,
the Texas Water Code, the Texas Health and Safety Code, the Texas
Natural Resources Code, the Louisiana Environmental Quality Act, the
Louisiana Air Control Law, the Louisiana Water Control Law, the
Louisiana Solid Waste Management and Resource Recovery Law, the
Louisiana Hazardous Waste Control Law, the Louisiana Oil Spill
Prevention and Response Act, the Louisiana Resource Recovery and
Development Act, the Louisiana Waste Reduction Law, the Louisiana
Hazardous Material Information Development, Preparedness, and Response
Act, the Louisiana State and Local Coastal Resources Management Act of
1978, the Louisiana Coastal Wetlands Conservation and Restoration Act,
the Louisiana Abandoned Oilfield Waste Site Law, and the Louisiana
Mineral Code, in each case as amended from time to time.
"APPLICABLE LENDING OFFICE" shall mean, for each Bank the office
of such Bank (or of an Affiliate of such Bank) designated below its
name on the signature pages hereof or such other office of such Bank
(or of an Affiliate of such Bank) as such Bank may from time to time
specify to the Agent and the Company as the office by which its
Letters of Credit are to be issued and maintained.
"APPLICABLE MARGIN" for Letters of Credit shall mean 1.00% per
annum.
"APPLICABLE PERIODS" shall mean the Applicable Periods identified
on EXHIBIT C.
"APPLICATION" shall mean each application and agreement for a
Letter of Credit, or similar instrument or agreement, substantially in
the form of EXHIBIT A, now or hereafter executed by the Company in
connection with any Letter of Credit at any time issued or to be
issued hereunder; to the extent that an Application is inconsistent
with this Agreement, this Agreement shall control.
-4-
<PAGE>
"APPROVED ASSUMPTIONS" shall mean:
(a) until the first delivery of an Independent Engineering
Report hereunder, those assumptions set forth on SCHEDULE
III; and
(b) thereafter, for each Independent Engineering Report
hereunder, assumptions as to product prices, interest rates,
escalation rates, discount rates and future levels of
production curtailment, which assumptions shall be
determined by the Co-Agents after consultation with the
Company and set forth (x) in the case of each Required
Reserve Report, in a notice sent to the Banks on or before
January 21 of each such year and in a notice from the Agent
to the Company on or prior to the next succeeding February 1
or (y) in the case of each Optional Reserve Report, in a
notice sent to the Banks within 30 days of the delivery of
the notice to the Co-Agents required by SECTION 2.2(d) and
in a notice from the Agent to the Company on or prior to a
date 10 days after the date of such notice to the Banks;
PROVIDED that, in the case of CLAUSE (b) preceding such assumptions
are, within ten days after any such notice is sent to the Banks,
approved (as indicated in one or more notices received by the Agent
within such ten-day period) by Banks with aggregate Commitment
Percentages of 75% or more. If the assumptions proposed by the Co-
Agents are not approved, the Banks will work to determine and approve
alternative assumptions in good faith in accordance with their
customary oil and gas lending practices. Approved Assumptions set
forth in a notice to the Company shall govern until new Approved
Assumptions are set forth in a notice to the Company as provided
herein, and shall be used, without limitation, in preparation of the
next Independent Engineering Report required to be delivered pursuant
to SECTION 9.1 or permitted to be delivered pursuant to SECTION
2.2(d).
"ASSIGNMENT AGREEMENT" shall mean an Assumption and Assignment
Agreement substantially in the form of EXHIBIT B.
"ATTRIBUTABLE DEBT" shall mean the lesser of (a) the fair market
value of the assets sold pursuant to any Sale and Leaseback
Transaction (which determination shall be based upon a written opinion
(the cost of which shall be borne exclusively by the Company) as to
valuation from an independent valuation expert selected by the
Company) or (b) the present value (discounted according to GAAP at the
interest rate implicit in the lease) of the obligations of the lessee
for rental payments during the term of any lease constituting a part
of such Sale and Leaseback Transaction.
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"AVAILABLE AMOUNT" shall mean subject always to the limitation
set forth in SECTION 2.2(e), the Preliminary Available Amount from
time to time in effect, as the same may be adjusted upward and
downward in accordance with SECTION 2.2 or permanently decreased in
accordance with SECTION 2.3.
"BOARD" shall mean the Board of Governors of the Federal Reserve
System of the United States.
"BUSINESS DAY" shall mean any day other than a day on which
commercial banks are authorized or required to close in Houston, Texas
or New York, New York.
"CALCULATION PERIOD" shall mean the year ending on the last day
of a March; with respect to calculations for a Calculation Period
determined with reference to amounts for two calendar years, it shall
be assumed (unless such amounts are due on scheduled dates, in which
case such calculations shall be made with reference to such dates)
that each such calendar year amount is spread evenly over the
appropriate calendar year, with the result that each such amount for a
Calculation Period beginning on an April 1 shall be composed of (a)
9/12 of the calendar year amount for the calendar year containing such
March 1 plus (b) 3/12 of the calendar year amount for the next
calendar year.
"CAPITAL GAINS" shall mean gains (net of expenses and income
taxes applicable thereto) in excess of losses resulting from the sale,
conversion or other disposition of capital assets (I.E., assets other
than current assets).
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation
which, under GAAP, is or will be required to be capitalized on the
books of the Company or any Restricted Subsidiary, taken at the amount
thereof accounted for as indebtedness (net of interest expense) in
accordance with such principles.
"CFADS" shall mean, for any Calculation Period and with respect
to any Person, (a) Net Oil and Gas Income (PROVIDED that in
calculating Combined CFADS, no more than 25% of Net Oil and Gas Income
may be attributable to proved nonproducing and proved undeveloped
Recognized Proved Reserves) LESS (b) Projected G & A Expense LESS (c)
Projected Income Tax Expense PLUS (d) anticipated net income (or minus
anticipated net losses) from the Price Protection Agreements
(determined on the basis of the Approved Assumptions), (e) PLUS any
anticipated gain, and MINUS any anticipated loss, on Interest Rate
Protection Agreements (determined on the basis of the Approved
Assumptions), PLUS (f) other income from operations as reasonably
projected under the Approved Assumptions, not to exceed 5% of Combined
CFADS, and PLUS (g) proceeds of sales of assets permitted by the
Credit Documents, to the extent (but only to the extent) such proceeds
are applied as
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prepayments pursuant to SECTION 3.1, in each case for such Calculation
Period and such Person.
"CHANGE OF CONTROL" shall mean any change so that any Person (or
any Persons acting together which would constitute a Group), together
with any Affiliates or Related Persons thereof, shall at any time
either (a) Beneficially Own more than 50% of the aggregate voting
power of all classes of Voting Stock of the Company or (b) succeed in
having sufficient of its or their nominees elected to the Board of
Directors of the Company such that such nominees, when added to any
existing director remaining on the Board of Directors of the Company
after such election who is an Affiliate or Related Person of such
Person or Group, shall constitute a majority of the Board of Directors
of the Company. As used herein (a) "BENEFICIALLY OWN" shall mean
beneficially own as defined in Rule 13d-3 of the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), or any successor
provision thereto; (b) "GROUP" shall mean a "group" for purposes of
Section 13(d) of the Exchange Act; (c) "RELATED PERSON" of any Person
shall mean any other Person owning (1) 5% or more of the outstanding
common stock of such Person or (2) 5% or more of the Voting Stock of
such Person, and (d) "VOTING STOCK" of any Person shall mean capital
stock of such Person which ordinarily has voting power for the
election of directors (or persons performing similar functions) of
such Person, whether at all times or only so long as no senior class
of securities has such voting power by reason of any contingency.
"CHAPTER ONE" shall mean Chapter One of the Texas Credit Code, as
in effect on the date the document using such term was executed.
"CODE" shall mean the Internal Revenue Code of 1986, as amended,
or any successor statute, together with all publicly available written
regulations, rulings and interpretations thereof or thereunder by the
Internal Revenue Service.
"COLLATERAL" shall mean all property at any time subject to the
Security Documents under the Amended and Restated Revolving Credit
Agreement.
"COMBINED CFADS" shall mean, for any Calculation Period, the sum
of (a) CFADS of the Company and the Restricted Subsidiaries PLUS, at
all times and to the extent all Special Subsidiary Qualifying
Conditions are met, (b) the product of (1) the Special Subsidiary
Percentage times (2) the CFADS of the Special Subsidiary, in each case
for such Calculation Period.
"COMBINED COVERED DEBT" shall mean, as of any date, the sum of
(a) the Covered Debt of the Company and the Restricted Subsidiaries
PLUS, at all times and to the extent all Special Subsidiary Qualifying
Conditions are met as of such date, (b) the product of (1) the Special
Subsidiary Percentage times (2) the Covered Debt of the Special
Subsidiary, all as of such date.
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"COMBINED GROUP" shall mean the Company, the Restricted
Subsidiaries and the Special Subsidiary.
"COMBINED RESERVE VALUE" shall mean, as of any date, the sum of
(a) the Reserve Value of the Company and the Restricted Subsidiaries
PLUS, at all times and to the extent all Special Subsidiary Qualifying
Conditions are met as of such date, (b) the product of (1) the Special
Subsidiary Percentage times (2) the Reserve Value of the Special
Subsidiary, all as of such date. In calculating the Combined Reserve
Value, no more than 25% of such Combined Reserve Value may be
attributable to the combination of proved nonproducing and proved
undeveloped Recognized Proved Reserves.
"COMMITMENT" shall mean, as to any Bank, the obligation, if any,
of such Bank to incur Letter of Credit Liabilities in an aggregate
principal amount at any one time outstanding up to but not exceeding
such Bank's Commitment Percentage times the difference between (a) the
Available Amount then in effect, and (b) the aggregate unpaid balance
of the Facility B Notes, which amount shall be up to but not exceeding
the amount set forth opposite such Bank's name on the signature pages
hereof under the caption "Commitment" (as the same may be reduced from
time to time pursuant to SECTION 2.3).
"COMMITMENT FEE" shall mean the commitment fees payable by the
Company to the Agent for the account of the Banks in their Commitment
Percentages as provided in SECTION 2.5.
"COMMITMENT PERCENTAGE" shall mean, as to any Bank, the
percentage equivalent of a fraction, the numerator of which is the amount
of such Bank's Commitment as shown opposite such Bank's name on the
signature pages hereof under the caption "Commitment", subject to
reduction and the identification of new Banks pursuant to SECTION
12.6, and the denominator of which is the Aggregate Commitment.
"CONSOLIDATED NET EARNINGS" shall mean consolidated gross
revenues (including Capital Gains) of the Company and the Restricted
Subsidiaries less all operating and non-operating expenses of the
Company and the Restricted Subsidiaries including all charges of a
proper character (including current and deferred taxes on income,
provision for taxes on unremitted foreign earnings which are included
in gross revenues, and current additions to reserves), but not
including in gross revenues any dividends, distributions or other
payments received by the Company or any of its Restricted Subsidiaries
in connection with the Hadson Stock, unless received in the form of
cash, or any dividends, distributions or other payments received by
the Company or any of its Restricted Subsidiaries from the Special
Subsidiary or gains resulting from write-up of assets, any equity of
the Company or any Restricted Subsidiary in the unremitted earnings of
any Person which is not a Restricted
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Subsidiary, any earnings of any Person acquired by the Company or any
Restricted Subsidiary through purchase, merger or consolidation or
otherwise for any year prior to the year of acquisition, or any
deferred credit representing the excess of equity in any Restricted
Subsidiary at the date of acquisition over the cost of the investment
in such Restricted Subsidiary; all determined in accordance with GAAP.
"CONSOLIDATED NET EARNINGS AVAILABLE FOR FIXED CHARGES" shall
mean for any period the sum of (a) Consolidated Net Earnings for such
period (PROVIDED that the maximum amount of Capital Gains included
therein shall be $3,000,000 through December 31, 1990 and such maximum
amount shall increase by $150,000 on the first day of each year
thereafter); without duplication, (b) cash distributions received
during such period by the Company and the Restricted Subsidiaries on
their Investment in the Special Subsidiary to the extent not
reinvested in the Special Subsidiary; to the extent deducted from
gross revenues in determining Consolidated Net Earnings, (c) all
provisions for any federal, state or other income taxes made by the
Company and the Restricted Subsidiaries during such period; (d) Fixed
Charges of the Company and the Restricted Subsidiaries during such
period; (e) depreciation, depletion and amortization charges of the
Company and the Restricted Subsidiaries for such period, and (f) all
other non-cash charges of the Company and the Restricted Subsidiaries
for such period, all determined in accordance with GAAP.
"CONSOLIDATED NET TANGIBLE ASSETS" shall mean the aggregate net
tangible assets of the Company and the Restricted Subsidiaries,
determined as follows:
(a) The MLP Investment (at such times as SFEP is treated as the
Special Subsidiary) plus the aggregate gross book value of all the
assets of the Company and the Restricted Subsidiaries, both real and
personal, shall be computed, EXCLUDING, however, the following items:
(i) all franchises, licenses, permits, patents, patent
applications, copyrights, trademarks, trade names, goodwill,
experimental or organizational expense, unamortized debt discount and
expense, and all other assets which under GAAP are deemed intangible;
(ii) any reacquired shares or reacquired Debt of the Company
or the Restricted Subsidiaries;
(iii) any write-up of assets made after December 31, 1989;
(iv) 50% of the value of all assets of the Company and the
Restricted Subsidiaries acquired after April 1, 1990 which are located
outside the United States of America and Canada and not
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freely returnable to the United States of America or Canada, including
any notes or accounts receivable from any debtor having any
substantial part of its business, operations or properties located
outside the United States of America and Canada, except notes or
accounts receivable from such a debtor which arose in the ordinary
course of business of the Company or any Restricted Subsidiary, as the
case may be, to which such notes or accounts receivable are payable
and which otherwise constitute current assets, but only to the extent
of an amount of dollars readily realizable from such notes or accounts
receivable by liquidation either directly or through a currency freely
convertible into dollars; and
(v) all Restricted Investments of the Company and the
Restricted Subsidiaries (other than Restricted Investments in the
capital stock of Hadson).
(b) From the gross book value of the tangible assets of the
Company and the Restricted Subsidiaries, determined as provided in the
preceding CLAUSE (a), there shall be deducted the following items:
(i) all reserves for depreciation, depletion, obsolescence
and amortization of the assets of the Company and the Restricted
Subsidiaries (other than assets excluded as provided in the preceding
CLAUSE (a)), all proper reserves (other than reserves for deferred
taxes and general contingency reserves and other reserves representing
mere appropriations of surplus) which in accordance with GAAP should
be set aside in connection with the business conducted by them;
(ii) all Current Debt of the Company and the Restricted
Subsidiaries; and
(iii) all other liabilities of the Company and the
Restricted Subsidiaries, including the reduction in equity attri-
butable to minority interests but excluding deferred taxes, Funded
Debt of the Company and the Restricted Subsidiaries, capital shares,
surplus and general contingency reserves and other reserves
representing mere appropriations of surplus.
(c) In the determination of Consolidated Net Tangible Assets, no
amount shall be included therein on account of any excess cost of
acquisition of shares of any Restricted Subsidiary over the net book
value of the assets of such Restricted Subsidiary attributable to such
shares at the date of such acquisition or on account of any excess of
the net book value of the assets of any Restricted Subsidiary
attributable to any shares of such Restricted Subsidiary at the date
of acquisition of such shares over the cost of acquisition of such
shares.
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"COVERAGE REPORT" shall mean a report substantially in the form
of SCHEDULE IV setting forth the calculation of the TLOR Coverage
Ratio, the SLOR Coverage Ratio, the Annual Debt Service Coverage Ratio
and the Alternate Annual Debt Service Coverage Ratio.
"COVERED DEBT" shall mean, for any Person, without duplication,
(a) all obligations for borrowed money (including obligations for
borrowed money consisting of or arising in connection with Junior
Securities); (b) all obligations evidenced by bonds, debentures, notes
or other similar instruments; (c) all obligations to pay the deferred
purchase price of property or services, except trade accounts payable
arising in the ordinary course of business; (d) all Capitalized Lease
Obligations; (e) all obligations in respect of production payments,
proceeds production payments and similar financing arrangements; (f)
all reimbursement obligations and all letter of credit advances with
respect to letters of credit issued for the account of such Person,
including the Letter of Credit Liabilities; (g) surety bonds for
environmental purposes; (h) all obligations of the types described in
CLAUSES (a) through (g) of this definition (collectively, "ORDINARY
DEBT") of another Person secured by a Lien on any property of the
Person as to which Covered Debt is being determined, regardless of
whether such Ordinary Debt is assumed by such Person, and (i) all
Ordinary Debt of another Person guaranteed (but excluding the
obligations of the Company and the Restricted Subsidiaries arising
solely by virtue of their serving as general partner of SFEP) by such
Person; PROVIDED that Covered Debt shall not include Ordinary Debt or
any obligation of the types described in CLAUSES (h) or (i) of this
definition which is (1) non-recourse (either directly or contingently)
as to all members of the Combined Group and (2) secured only by assets
which are not Recognized Proved Reserves.
"CREDIT DOCUMENTS" shall mean this Agreement, all Applications,
all Letters of Credit, the Notice of Entire Agreement, the Amended and
Restated Revolving Credit Agreement and all instruments, certificates
and agreements now or hereafter executed or delivered to the Agent or
any Bank pursuant to any of the foregoing.
"CURRENT DEBT" shall mean any obligation for borrowed money (and
any notes payable and drafts accepted representing obligations for
borrowed money) payable on demand or within a period of one year from
the date of the creation thereof and any Guaranty with respect to
Current Debt (of the kind otherwise described in this definition) of
another Person; PROVIDED that any obligation shall be treated as
Funded Debt, regardless of this term, if such obligation is renewable
pursuant to the terms thereof or of a revolving credit or similar
agreement effective for more than one year after the date of the
creation of such obligation, or may be payable out
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of the proceeds of a similar obligation pursuant to the terms of such
obligation or of any such agreement.
"DEBT" shall mean Funded Debt and/or Current Debt, as the case
may be.
"DEBT SERVICE" shall mean, for any Calculation Period, the total
of principal payments in respect of Covered Debt of the Person as to
which Debt Service is to be determined and the total of interest
payments (using, with respect to interest to accrue, the interest
rates set forth in the most recent Approved Assumptions for such
Covered Debt not bearing interest at a fixed rate; if some or all of
such Covered Debt bears interest at one or more fixed rates as of the
date of determination of Debt Service but such Covered Debt will not
bear interest at such fixed rate or rates to the end of such
Calculation Period, then interest payments in respect of Debt Service
with respect to such Covered Debt shall be calculated on the basis of
such fixed rate or rates for such time as the same shall be applicable
to such Covered Debt, and then at the interest rates set forth in the
most recent Approved Assumptions) in respect of Covered Debt of such
Person, in each case paid and scheduled to be paid during such
Calculation Period; PROVIDED that the principal amount of any Covered
Debt of such Person which by its terms matures on a date within such
Calculation Period but which may reasonably be expected to be
reborrowed in a Rollover on such date shall not be deemed, for
purposes of this definition, to be scheduled to be paid on such date;
and PROVIDED FURTHER that for purposes of this definition it shall be
assumed (to the extent relevant with respect to such Person) that (a)
Letters of Credit will be fully drawn upon their respective expiry
dates; (b) other letters of credit issued for the account of such
Person will not be drawn; (c) surety bonds for environmental purposes
issued on behalf of such Person will not be drawn, and (d) the
reimbursement obligations of the Company under this Agreement shall be
satisfied immediately and considered as a "principal payment" for
purposes of this definition.
"DEFAULT" shall mean an Event of Default or an event which with
notice or lapse of time or both would, unless cured or waived, become
an Event of Default.
"DEFEASED" shall mean, with respect to any amount of Designated
Debt, that the Company (a) shall have given to the holders of such
Designated Debt irrevocable notice of the repayment of such Designated
Debt, (b) shall have deposited with the trustee or an independent
escrow or paying agent as trust funds the entire amount sufficient to
pay at the date fixed for such repayment all of such Designated Debt,
including principal, premium if any, and interest due or to become due
to such date of repayment, such amount to be invested only in readily
marketable direct full faith and credit obligations of the United
States of America having maturities of not more than one year from
date of issue, and (c)
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shall have paid or caused to be paid all other sums payable by the
Company in connection with such Designated Debt.
"DESIGNATED DEBT" shall mean the indebtedness of the Company
described on SCHEDULE X. SCHEDULE X sets forth, for each range of
Qualifying Amounts of Junior Securities, the maturities of Covered
Debt which must be repaid in order for the Facility A Maximum Amount
and the Preliminary Available Amount to reach the levels set forth in
EXHIBITS C.
"EBITD" shall mean for any period Consolidated Net Earnings for
such period, plus the aggregate amounts deducted in determining
Consolidated Net Earnings in respect of (a) all provisions for any
federal, state or other income taxes made by the Company and the
Restricted Subsidiaries during such period; (b) Fixed Charges of the
Company and the Restricted Subsidiaries during such period; (c)
depreciation, depletion and amortization charges of the Company and
the Restricted Subsidiaries for such period, and (d) all other non-
cash charges of the Company and the Restricted Subsidiaries for such
period, all determined in accordance with GAAP.
"ELIGIBLE ASSIGNEE" shall mean (a) a commercial bank having total
assets in excess of $1,000,000,000 or (b) a finance company, insurance
company, other financial institution or fund, acceptable to the Agent
and the Company, which is regularly engaged in making, purchasing or
investing in loans and having total assets in excess of
$1,000,000,000.
"ENGINEERING SHORTFALL" shall mean the amount, if any, by which
the sum of (a) the aggregate outstanding principal balance of the
Facility B Notes PLUS (b) the aggregate Letter of Credit Liabilities
shall exceed the Available Amount at the time of any delivery of (and
as determined in accordance with) an Independent Engineering Report
and its related Coverage Report. The effects of an Engineering
Shortfall are described, among other places herein, in
SECTIONS 2.2(c), 7.2(a), 7.2(f), 9.9, and 10.1(d) AND (e). An
Engineering Shortfall shall continue until cured by presentation of a
new Coverage Report demonstrating that the sum of (a) and (b) is equal
to or less than the Available Amount then in effect.
"ENVIRONMENTAL CLAIM" shall mean any claim, demand, action, cause
of action, suit, judgment, governmental or private investigation
relating to remediation or compliance with Applicable Environmental
Laws, proceeding or lien, whether threatened, sought, brought or
imposed, that seeks to recover costs, damages, punitive damages,
expenses, fines, criminal liability, judgments, response costs,
investigative and monitoring costs, abatement costs, attorney's fees,
expert's fees or consultant's fees, or seeks to impose liability
regarding the Company or any of its Subsidiaries, or any of their
sites or properties for violations of Applicable Environmental Laws or
for pollution, contamination, investigation, preservation, protection,
remediation or clean up of the air,
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surface water, ground water, soil or wetlands, or otherwise in
relation to the use, storage, generation, release, handling or
disposal of materials and substances that are regulated by or subject
to Applicable Environmental Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and all rules, regulations and
interpretations by the Internal Revenue Service or the Department of
Labor thereunder.
"ERISA AFFILIATE" shall mean any trade or business (whether or
not incorporated) which on and after December 5, 1990 is under common
control with the Company within the meaning of the regulations under
Section 414 of the Code.
"EVENT OF DEFAULT" shall have the meaning assigned to such term
in SECTION 10.
"EXISTING LETTERS OF CREDIT" shall mean the letters of credit
listed on SCHEDULE VIII.
"EXISTING PRIORITY DEBT" at any time shall mean, to the extent
that it is otherwise Priority Debt, an amount equal to the sum of (a)
the Merger Debt at such time, (b) the outstanding principal amount of
Debt under the Springing Lien Agreement at such time, and (c) the
outstanding principal amount of Debt under those certain Credit
Agreements of Petrolera Santa Fe S.A., dated as of June 25, 1991 and
April 28, 1992, at such time.
"FACILITY B COMMITMENT" shall have the meaning ascribed to such
term in the Amended and Restated Revolving Credit Agreement.
"FACILITY B LOAN" shall mean a Loan made pursuant to SECTION
2.1(b) of the Amended and Restated Revolving Credit Agreement.
"FACILITY B NOTES" shall mean the Facility B Notes of the Company
under (and as defined in) the Amended and Restated Revolving Credit
Agreement.
"FDIC" shall mean the Federal Deposit Insurance Corporation or
any entity succeeding to any or all of its functions.
"FED FUNDS RATE" shall mean, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal funds
brokers, as published on the succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for the day
of such transactions received by the Agent from three federal funds
brokers of recognized standing selected by it.
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"FIXED CHARGES" shall mean (without duplication) for any period
the sum of interest expense in respect of all Debt of the Person for
which the determination is made (calculated, in the case of Debt which
bears interest at a floating rate, at the rate in effect at the time
of calculation), including imputed interest expense in respect of
Capitalized Lease Obligations.
"FUNDED DEBT" shall mean and include, without duplication, any
obligation (including the current maturities thereof)
(a) payable more than one year from the date of creation thereof
(1) for borrowed money; (2) evidenced by bonds, debentures, notes or
reimbursement obligations in respect of letters of credit or other
similar instruments (other than letters of credit and surety bonds
relating to trade obligations incurred in the ordinary course of
business and includable, under GAAP, in current liabilities on a
balance sheet or in the notes relating thereto); (3) for the payment
of the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business; (4)
constituting Capitalized Lease Obligations; (5) in respect of
production payments, proceeds production payments or similar financing
arrangements; (6) which is, under GAAP, shown on a balance sheet
(after giving effect, in the case of the balance sheet of the Company
or a Restricted Subsidiary, to the eliminating entries, if any, for
the Unrestricted Subsidiaries as a group and the Special Subsidiary)
as long-term debt (excluding provisions for deferred income taxes,
unfunded pension obligations, unfunded liabilities for other post-
employment benefits and other reserves or provisions to the extent
that such reserves or provisions do not constitute an obligation), or
(7) for any item described in any of the foregoing CLAUSES (1) through
(6) which is secured by any Lien on property owned by the Company or
any Restricted Subsidiary, whether or not the obligations secured
thereby shall have been assumed by the Company or such Restricted
Subsidiary; or
(b) payable more than one year from the date of creation
thereof, which under GAAP is shown on the balance sheet as a long-term
liability (EXCLUDING provisions for deferred income taxes, unfunded
pension obligations, unfunded liabilities for other post-employment
benefits and other reserves or provisions to the extent that such
reserves or provisions do not constitute an obligation); or
(c) constituting a Guaranty with respect to Funded Debt (of the
kind otherwise described in CLAUSES (a) and (b) of this definition) of
another Person, including any obligation by the Company or a
Restricted Subsidiary for Funded Debt of SFEP or any other Person,
regardless of the percentage of equity interest owned therein by the
Company or a Restricted Subsidiary, by virtue of its capacity as a
general partner of SFEP or such other Person.
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"GAAP" shall mean, as to a particular Person, such accounting
practice as, in the opinion of the independent accountants of
recognized national standing regularly retained by such Person and
acceptable to the Agent, conforms at the time to generally accepted
accounting principles, consistently applied. Generally accepted
accounting principles means those principles and practices which are
(a) recognized as such by the Financial Accounting Standards Board;
(b) applied for all periods after the date hereof in a manner
consistent with the manner in which such principles and practices were
applied to the financial statements of the relevant Person dated
December 31, 1989 and for the period then ended, and (c) consistently
applied for all periods after the date hereof so as to reflect
properly the financial condition and results of operations of such
Person.
"GOVERNMENTAL AUTHORITY" shall mean any sovereign governmental
authority, the United States of America, any State of the United
States and any political subdivision of any of the foregoing, and any
agency, instrumentality, department, commission, board, bureau,
central bank, authority, court or other tribunal, in each case whether
executive, legislative, judicial, regulatory or administrative, having
jurisdiction over the Company, any of the Company's Subsidiaries, any
of their respective property, the Agent, the Co-Agent or any Bank.
"GUARANTY" shall mean and include, without limitation, any
obligation of the Company or a Restricted Subsidiary
(a) constituting a guaranty, endorsement (other than an
endorsement of a negotiable instrument for collection in the ordinary
course of business) or other contingent liability (whether direct or
indirect) in connection with the obligations, stock or dividends of
any Person (other than the Company or a Restricted Subsidiary);
(b) payable under any contract (other than the Tax
Indemnification Agreement and any other tax indemnification or sharing
agreement) providing for the making of loans, advances or capital
contributions to any Person (other than the Company or a Restricted
Subsidiary), or for the purchase of any property from any Person, in
each case in order primarily to enable such Person to maintain working
capital, net worth or any other balance sheet condition or to pay
debts, dividends or expenses;
(c) payable under any contract for the purchase of materials,
supplies or other property or services (other than any natural gas
transportation contract or any electrical, water supply, steam
purchase or other utility supply contract) if such contract (or any
related document) requires that payment for such materials, supplies
or other property or services shall be made regardless of whether or
not delivery of such materials, supplies or other property or services
is ever made or tendered; PROVIDED that the
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exceptions contained in this CLAUSE (c) shall not apply to any
contract for the purchase or transportation of natural gas where
payment is required regardless of whether the delivery of such natural
gas is ever made or tendered, unless at the time such contract is
entered into the aggregate of payments under such contract and all
such existing contracts would not exceed $20,000,000 in any calendar
year based on existing rates and automatic escalations in such rates
under such contracts;
(d) payable under any contract to rent or lease (as lessee) any
real or personal property (other than any oil and gas leases) if such
contract (or any related document) provides that the obligation to
make payments thereunder is absolute and unconditional under
conditions not customarily found in commercial leases then in general
use or requires that the lessee purchase or otherwise acquire
securities or obligations of the lessor; or
(e) payable under any other contract which, in economic effect,
is substantially equivalent to a guarantee for any payment or
performance of an obligation of a Person other than the Company or a
Restricted Subsidiary.
"HADSON" shall mean Hadson Corporation, a Delaware corporation,
and any successor corporation thereto.
"HADSON STOCK" shall mean, to the extent held continuously by the
Company or any of its Restricted Subsidiaries after the merger of SFER
Pipeline, Inc. into the Company, (a) any of the 2,080,000 shares of
the Senior Cumulative Preferred Stock, Series A, par value $.01 per
share, of Hadson and the 10,395,665 shares of the common stock, par
value $.01 per share, of Hadson, acquired by the Company or any of its
Subsidiaries on or before January 31, 1994, (b) any stock acquired by
virtue of one or more stock splits or recapitalizations involving such
common stock or Senior Cumulative Preferred Stock and not involving
any additional economic consideration on the part of the Company or
any of its Subsidiaries, and (c) any dividend paid on such common
stock or Senior Cumulative Preferred Stock solely in the capital stock
of Hadson.
"HIGHEST LAWFUL RATE" shall mean, on any day, the maximum
nonusurious rate of interest permitted for that day by whichever of
applicable federal or Texas law permits the higher interest rate,
stated as a rate per annum. On each day, if any, that Chapter One
establishes the Highest Lawful Rate, the Highest Lawful Rate shall be
the "indicated rate ceiling" (as defined in Chapter One) for that day.
"HYDROCARBONS" shall mean crude oil, condensate, natural gas,
natural gas liquids and associated substances.
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"INDEPENDENT ENGINEERING REPORT" shall mean a report prepared by
an Independent Petroleum Engineer which sets forth the gross and net
volume of Hydrocarbons projected to be produced from the Petroleum
Properties, by calendar years, for the remaining economic life of the
Petroleum Properties. The Petroleum Properties of the Special
Subsidiary shall be segregated from the Petroleum Properties of the
other members of the Combined Group, and the Adobe Properties shall be
separately identified. Each Independent Engineering Report shall also
contain a list of Petroleum Properties of the members of the Combined
Group and indicate the Net Oil and Gas Income for each calendar year
attributable thereto, all in reasonable detail. Each such report
shall identify which of the Petroleum Properties covered thereby are
"proved developed producing", "proved developed non-producing" and
"proved undeveloped" (as defined in the "Definitions for Oil and Gas
Reserves" as published by the Society of Petroleum Engineers). Each
such report shall be prepared in accordance with established criteria
generally accepted in the oil and gas industry and standards
customarily used by independent petroleum engineers well regarded in
the industry in making reserve determinations or appraisals, and shall
be based on Approved Assumptions and such other assumptions, estimates
and projections as are fully disclosed in such Independent Engineering
Report.
"INDEPENDENT PETROLEUM ENGINEER" shall mean Ryder Scott Company
Petroleum Engineers or another independent petroleum engineer retained
by the Company acceptable to the Required Banks.
"INTEREST RATE PROTECTION AGREEMENTS" shall mean an interest rate
swap agreement, interest rate cap agreement or other similar
arrangement which satisfies all of the following requirements: (a) a
member of the Combined Group is a party to such agreement; (b) the
Company has given evidence (satisfactory to the Agent) of such
agreement to the Agent; (c) the terms and parties to such agreement,
taking into account all similar agreements to which members of the
Combined Group are parties, are satisfactory to the Required Banks;
and (d) such agreement is in full force and effect and has not been
unwound.
"INVESTMENT" shall mean any purchase or other acquisition of the
stock, obligations or securities of, or any interest in, or any
capital contribution, loan or advance to, or any Guaranty in respect
of the obligations of (but excluding the obligations of the Company
and the Restricted Subsidiaries arising solely by virtue of their
serving as general partner of SFEP) any Person, but in any event shall
include as an investment in any Person the amount of all Debt owed by
such Person, and all accounts receivable from such Person which are
not current assets or did not arise from sales to such Person in the
ordinary course of business. As used herein, any capital contribution
of assets by the Company or any Restricted Subsidiary shall be valued
at the book value of such assets as reflected in the consolidated
financial statements of the Company
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and the Restricted Subsidiaries as at the end of the quarter ending
immediately prior to such contribution.
"JUNIOR SECURITIES" shall mean (a) equity (including preferred
stock but excluding any equity which the holder thereof may have any
right to put back to the Company for cash and excluding any equity
mandatorily redeemable for cash) of the Company or (b) indebtedness of
the Company which in the sole discretion of the Required Banks
satisfies all of the following requirements: (1) such indebtedness
shall be subordinated by writing in Proper Form in right of payment to
all existing and future indebtedness of the Company under the Credit
Documents, as renewed, extended, amended, modified, supplemented and
increased from time to time; (2) such indebtedness shall be unsecured;
(3) no principal of such indebtedness shall be scheduled to be due
before January 31, 1999; (4) such indebtedness shall not be governed
by any covenant or event of default more restrictive than those set
forth in the Credit Documents; (5) the provisions applicable to such
indebtedness with respect to a change in the control of the Company
and the sale of assets by any member of the Combined Group shall be
not more restrictive than those set forth in the Credit Documents; (6)
such indebtedness shall be subject to Blockage for periods aggregating
up to 180 days within any 365 day period; (7) the holders of such
indebtedness shall be required to give the Agent at least five days'
prior written notice of any intended acceleration of such indebtedness
(which the Agent shall transmit to each Bank promptly upon receipt);
and (8) the holders of such indebtedness shall not have the right to
declare a default with respect to, or to accelerate, any of such
indebtedness in the event of a default on other indebtedness of any
member of the Combined Group except (i) at the scheduled maturity of
such other indebtedness or (ii) in the event that principal of such
other indebtedness in excess of $25,000,000 shall be duly accelerated.
For purposes of this definition, "BLOCKAGE" shall mean, upon the
occurrence of a default and so long as it is continuing, the
prohibition of the payment (including principal of, interest or
premium on or sinking fund requirements) of any indebtedness or
obligations of the Company consisting of or arising in connection with
any Junior Securities. For purposes of this definition, "PAYMENT"
shall include any deposit of property to defease any JuniorSecurities.
"LEGAL REQUIREMENT" shall mean any applicable law, statute,
ordinance, decree, requirement, order, judgment, rule, regulation (or
official interpretation by any Governmental Authority of any of the
foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority, in each case as now or hereafter in effect.
"LETTER OF CREDIT" shall have the meaning ascribed to such term
in SECTION 2.1(a).
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"LETTER OF CREDIT FEE" shall mean with respect to any Letter of
Credit issued pursuant hereto a fee equal to 1% per annum of the face
amount of each such Letter of Credit issued; PROVIDED, that each
Letter of Credit Fee shall in no event be less than $600.
"LETTER OF CREDIT LIABILITIES" shall mean, at any time and in
respect of Letters of Credit under this Agreement, the sum of (i) the
aggregate amounts then or thereafter available for drawings under such
outstanding Letters of Credit PLUS (without duplication) (ii) the
aggregate unpaid amount of all Reimbursement Obligations at the time
due and payable in respect of previous drawings made under such
Letters of Credit.
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing), any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing
of, or agreement to give, any financing statement under the Uniform
Commercial Code of any jurisdiction or any other type of preferential
arrangement.
"LOANS" shall mean the loans and Rollover of loans provided for
by the Amended and Restated Revolving Credit Agreement.
"MATERIAL ADVERSE CHANGE" shall mean an occurrence of whatever
nature (including any adverse determination in any litigation,
arbitration or governmental investigation or proceeding), which after
taking into account actual insurance coverage and effective
indemnification with respect to such occurrence, (a) has a material
adverse effect on the financial condition, business, operations or
properties of the Company and its Subsidiaries taken as a whole and
(b) impairs in any material respect either (1) the ability of the
Company to perform any of its obligations under the Credit Documents
or (2) the ability of the Banks to enforce any of such obligations or
any of their remedies under the Credit Documents.
"MERGER" shall mean the merger of Adobe into the Company, which
occurred May 19, 1992.
"MERGER DEBT", for purposes of the definition of "Existing
Priority Debt" used in SECTION 9.7(b)(3) and 9.7(b)(4) of this
Agreement, shall mean at any time, with respect to the Debt of the
Company incurred as of May 20, 1992, in connection with the Merger, as
such Debt may have been or hereafter may be renewed, extended or
otherwise modified, the maximum principal amount of such Debt that can
be outstanding at such time, but only to the extent that such amount
is equal to or less than (a) $90,000,000, at any time during the
period from and including December 31, 1993, to and including December
30, 1994, (b) $72,000,000, at any time during the period from and
including December 31, 1994, to and including December 30, 1995, (c)
$54,000,000, at any time during the period from and including December
31, 1995, to and including December 30, 1996,
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(d) $36,000,000, at any time during the period from and including
December 31, 1996, to and including December 30, 1997, (e)
$18,000,000, at any time during the period from and including December
31, 1997, to and including December 30, 1998, and (f) $0.00 at any
time thereafter.
"MLP INVESTMENT" shall mean, at any time, the lesser of (a) the
book value of the Investment of the Company and the Restricted
Subsidiaries in the Special Subsidiary, as determined from the most
recent consolidated balance sheet of the Company or (b) the product of
(1) the average closing price of the publicly traded limited partner
interests of the Special Subsidiary for the 30 days immediately
preceding the date upon which such determination is made multiplied by
(2) the total limited partner interests in the Special Subsidiary
owned by the Company and the Restricted Subsidiaries on the date such
determination was made.
"MOST RECENT ENGINEERING REPORT" shall mean, as of any date of
determination, (a) until the first Independent Engineering Report is
delivered pursuant to SECTION 9.1 or SECTION 2.2(d), the Independent
Engineering Report of Ryder Scott Company Petroleum Engineers dated
February 3, 1994; (b) thereafter, the most recent Independent
Engineering Report delivered pursuant to either SECTION 9.1 or SECTION
2.2(d) on or prior to such date of determination.
"NET OIL AND GAS INCOME" shall mean, for any calendar year (or
portion thereof) and for any Person, (a) an amount (or, with respect
to any portion of a calendar year, PRO RATA in accordance with the
number of days in such portion of such calendar year) of projected
gross revenues (based on the prices set forth in the Approved
Assumptions) from the sale of Hydrocarbons produced from the
Recognized Proved Reserves to be received, subject to no entitlement
of any other Person but including appropriate adjustments for over-
and under-produced status, by such Person during such calendar year as
set forth in the Most Recent Engineering Report LESS (b) an amount
(or, with respect to any portion of a calendar year, PRO RATA in
accordance with the number of days in such portion of such calendar
year) of projected royalties and windfall profit, production, ad
valorem, severance and all other similar taxes and operating and
capital expenditures required to be incurred during such calendar year
in order to generate such gross revenues (but not including general
and administrative expenses or principal and interest payable with
respect to Debt), as set forth in the Most Recent Engineering Report.
"NOTICE OF ENTIRE AGREEMENT" shall mean that certain Notice of
Entire Agreement, DTPA Waiver and Release of Claims of even date
herewith between the Company and the Agent.
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"OBLIGATIONS" shall mean, as at any date of determination
thereof, the sum of (a) the aggregate principal amount of Loans out-
standing under the Amended and Restated Revolving Credit Agreement
PLUS (b) the aggregate amount of the Reimbursement Obligations.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the
name of the Company by its President, one of its Vice Presidents or
its Treasurer.
"OPTIONAL RESERVE REPORT" shall mean the Independent Engineering
Report permitted by SECTION 2.2(d).
"ORGANIZATIONAL DOCUMENTS" shall mean, with respect to a
corporation, the certificate of incorporation, articles of
incorporation and bylaws of such corporation; with respect to a
partnership or a limited partnership, the partnership agreement
establishing such partnership; with respect to a joint venture, the
joint venture agreement establishing such joint venture; and with
respect to a trust, the instrument establishing such trust; in each
case including any and all modifications thereof as of the date of the
Credit Document referring to such Organizational Document.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERSON" shall mean and include an individual or legal entity in
the form of a partnership, a limited liability company, a joint
venture, a corporation, a trust, an unincorporated organization or a
government or any department or agency thereof. The term "Person"
shall not, however, mean and include an arrangement that is not a
separate legal entity such as the legal arrangement between two or
more parties owning interests in the same property or unit.
"PETROLEUM PROPERTIES" shall mean, at any time and with respect
to any Person, all Recognized Proved Reserves which are (a) owned by
such Person at such time free and clear of any Lien (other than Liens
permitted by SECTION 9.7) and (b) covered in the Most Recent
Engineering Report.
"PLAN" shall mean an employee benefit plan which is covered by
ERISA which is either (a) maintained by the Company or any ERISA
Affiliate for employees of the Company or such ERISA Affiliate or (b)
a multiemployer plan as defined in Section 4001(a)(3) of ERISA to
which (i) the Company, (ii) any ERISA Affiliate or (iii) any trade or
business which was previously under common control with the Company
within the meaning of Section 414 of the Code (but only with respect
to such period of common control with the Company), has an obligation
to make contributions (or with respect to (iii) above, had an
obligation to make contributions during any portion
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of time that the limitations period under Section 4301(f) of ERISA with
respect to such obligation has not expired).
"POST-DEFAULT RATE" shall mean, in respect of any principal of
any Reimbursement Obligation or any other amount payable by the
Company under any Credit Document which is not paid when due (whether
at stated maturity, by acceleration, or otherwise), a rate per annum
on each day during the period commencing on the due date until such
amount is paid in full equal to the lesser of (a) the Alternate Base
Rate as in effect for that day PLUS the Applicable Margin in effect
for that day PLUS 2% or (b) the Highest Lawful Rate for that day.
"PRELIMINARY AVAILABLE AMOUNT" shall mean, on any day occurring
during the respective Applicable Periods set forth on EXHIBIT C, the
amount set forth for such Applicable Period in the applicable table in
EXHIBIT C (as the same may be reduced from time to time pursuant to
SECTION 2.3). The applicable table shall be determined according to
the aggregate Qualifying Amount of Junior Securities issued by the
Company as of the most recent Achievement Date, but to qualify for a
particular table (other than Table Five), the Company must have repaid
or Defeased, on or before such Achievement Date, all Designated Debt
for such aggregate Qualifying Amount set forth on SCHEDULE X.
"PRICE PROTECTION AGREEMENT" shall mean a product price
protection agreement which satisfies all of the following
requirements: (a) a member of the Combined Group is a party to such
agreement; (b) the Company has given evidence (satisfactory to the
Agent) of such agreement to the Agent; (c) the terms and parties to
such agreement, taking into account all similar agreements to which
members of the Combined Group are parties, are satisfactory to the
Required Banks; and (d) such agreement is in full force and effect and
has not been unwound. The agreements described on SCHEDULE III are
Price Protection Agreements for purposes of this Agreement as of the
date hereof.
"PRIME RATE" shall mean, as of a particular date, the prime rate
most recently announced by TCB and thereafter entered in the minutes
of TCB's Loan and Discount Committee, automatically fluctuating upward
and downward with and at the time specified in each such announcement
without special notice to the Company or any other Person, which prime
rate may not necessarily represent the lowest or best rate actually
charged to a customer.
"PRINCIPAL OFFICE" shall mean the principal banking building of
the Agent, presently located at 712 Main Street, Houston, Harris
County, Texas 77002.
"PRIORITY DEBT" at any time shall mean an amount equal to the sum
of (without duplication) the amount of all Special Debt outstanding at
such time and the amount of all Debt of the Company
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and its Restricted Subsidiaries outstanding at such time that is
secured by one or more Liens permitted under CLAUSE (4), (5), (6),
(7), (8), (9), (10), (11), (12) or (13) of SECTION 9.7(a).
"PROJECTED G & A EXPENSE" shall mean, for any Person, the
appropriate projected annual levels of general and administrative
expense and district overhead to be used in the calculation of CFADS
of such Person, as mutually agreed among the Agent, the Co-Agents and
the Company as soon as practical after the delivery of the Most Recent
Engineering Report.
"PROJECTED INCOME TAX EXPENSE" shall mean, for any Person, the
appropriate projected annual levels of income tax expense to be used
in the calculation of CFADS of such Person, as determined by the Agent
after consultation with the Company and based on such Person's current
tax position projected into the future and the Most Recent Engineering
Report; the Agent will give written notice of the Projected Income Tax
Expense of each such Person to the Company as soon as practical after
the delivery of the Most Recent Engineering Report.
"PROPER FORM" shall mean in form and substance satisfactory to
the Agent.
"PROVED RESERVES" shall mean reserves of Hydrocarbons in place
which are estimated to be recoverable with reasonable certainty and
are consistent with the "Definitions for Oil and Gas Reserves" as
published by the Society of Petroleum Engineers.
"QUALIFYING AMOUNT" shall mean that amount of Junior Securities
which results in gross cash proceeds to the Company of not less than
the amounts specified herein.
"QUALIFYING DATE" shall mean the first date prior to July 1,
1994, on which the Agent shall have received evidence satisfactory to
it in its sole discretion that both (a) Junior Securities in a
Qualifying Amount of at least $75,000,000 shall have been issued (such
issuance may be in one or more transactions on one or more dates) and
cash proceeds thereof shall have been received by the Company and (b)
all Designated Debt for the aggregate Qualifying Amount of Junior
Securities actually issued, as shown on SCHEDULE X, shall have been
repaid or Defeased. The Qualifying Date must occur, if at all, before
July 1, 1994.
"QUARTERLY DATES" shall mean the last day of each March, June,
September and December; PROVIDED that if any such date is not a
Business Day, the relevant Quarterly Date shall be the next succeeding
Business Day.
"RECOGNIZED PROVED RESERVES" shall mean Proved Reserves if (a)
the designation of such Proved Reserves was by an Independent
Petroleum Engineer; (b) a member of the Combined Group owns such
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Proved Reserves; (c) the estimates with respect to such Proved
Reserves were made on the basis of the most recent Approved
Assumptions, and (d) either (1) such Proved Reserves are located
onshore or offshore the United States or Canada or (2) the Required
Banks have consented to the inclusion of such Proved Reserves in the
Recognized Proved Reserves.
"REGISTRATION STATEMENT" shall mean the Registration Statement on
Form S-4 filed by the Company with the Securities and Exchange
Commission and declared effective by the Commission on February 27,
1992, true and correct copies of which have been delivered to the
Banks.
"REGULATION D" shall mean Regulation D of the Board as the same
may be amended or supplemented from time to time and any successor or
other regulation relating to reserve requirements.
"REGULATORY CHANGE" shall mean, with respect to any Bank, any
change on or after the date of this Agreement in any Legal Requirement
(including Regulation D) or the adoption or making on or after such
date of any official interpretation, directive or request applying to
a class of banks including such Bank under any Legal Requirement
(whether or not having the force of law) by any Governmental Authority
charged with the interpretation or administration thereof.
"REIMBURSEMENT OBLIGATIONS" shall mean, at any date, the
obligations of the Company then outstanding in respect of Letters of
Credit under this Agreement to reimburse the Banks for the amount paid
by such Banks in respect of any drawing under such Letters of Credit
or otherwise owing under this Agreement.
"REQUIRED BANKS" shall mean Banks having equal to or greater than
66-2/3% of the Aggregate Commitment.
"REQUIRED RATIOS" shall mean (a) an Annual Debt Service Coverage
Ratio of at least 1.15 to 1.00; (b) an Alternate Annual Debt Service
Coverage Ratio of at least 1.00 to 1.00; (c) a TLOR Coverage Ratio of
at least 1.50 to 1.00, and (d) an SLOR Coverage Ratio of at least 1.75
to 1.00.
"REQUIRED RESERVE REPORT" shall mean each Independent Engineering
Report required to be provided pursuant to SECTION 9.1(g).
"RESERVE VALUE" shall mean, as of any date and with respect to a
Person, the net present value (discounted at the discount rate set
forth in the most recent Approved Assumptions) of projected Net Oil
and Gas Income (calculated on the basis of the Most Recent Engineering
Report) attributable to the Petroleum Properties of such Person for
the period commencing on such date and ending at the end of the
economic life of such Petroleum Properties.
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"RESTRICTED INVESTMENT" shall mean any Investment other than:
(a) Investments in the Company or a Restricted Subsidiary or in
an entity which immediately after or concurrently with such Investment
will be a Restricted Subsidiary;
(b) Investments in the Special Subsidiary;
(c) readily marketable direct full faith and credit obligations
of the United States of America or any agency thereof or obligations
unconditionally guaranteed by the full faith and credit of the United
States of America or any agency thereof, due within three years of the
making of the Investment;
(d) readily marketable direct obligations of any State of the
United States of America or any political subdivision of any such
State having a credit rating of at least "Aa" by Moody's Investors
Service, Inc. ("MOODY'S") or "AA" by Standard & Poor's Corporation
("S&P"), in each case due within three years from the making of the
Investment;
(e) domestic and eurodollar certificates of deposit maturing
within one year from the making of the Investment issued by, deposits
in, Eurodollar deposits through, and banker's acceptances of,
commercial banks incorporated under the laws of the United States or
any State thereof, Canada, Japan or any Western European country, and
having combined capital, surplus and undivided profits of at least
$100,000,000;
(f) readily marketable commercial paper of any commercial bank
or corporation doing business and incorporated under the laws of the
United States of America or any State thereof having a credit rating
of at least "A-1" from S&P or at least "P-1" by Moody's, in each case
due within 270 days after the making of the Investment;
(g) money market investment programs which primarily invest in
the types of Investments described in CLAUSES (c) through (f) above
and which are classified as a current asset in accordance with GAAP
and which are administered by broker-dealers acceptable to the Agent;
(h) repurchase agreements with major dealers or banks, pursuant
to which physical delivery of the respective securities is required,
except for obligations of the U.S. Treasury to be delivered through
the Federal Reserve book entry system;
(i) travel and other like advances to officers and employees of
the Company or a Restricted Subsidiary in the ordinary course of
business;
(j) Investments in the Hadson Stock; or
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(k) Investments not described in CLAUSES (a) through (j) of this
definition in an aggregate principal amount not to exceed $10,000,000.
"RESTRICTED SUBSIDIARY" shall mean each Subsidiary of the Company
designated as a Restricted Subsidiary on SCHEDULE I, together with any
Subsidiary hereafter created or acquired and, at the time of creation
or acquisition, not designated by the Board of Directors of the
Company as an Unrestricted Subsidiary. Any Subsidiary of the Company
designated as an Unrestricted Subsidiary for purposes of this
Agreement may thereafter be designated a Restricted Subsidiary upon 30
days' prior written notice to the Banks if, at the time of such
designation and after giving effect thereto and to the concurrent
retirement of any Debt, (a) no Default shall have occurred and be
continuing; (b) such Subsidiary is organized under the laws of the
United States or any state thereof; (c) 80% or more of each class of
voting stock outstanding of such Subsidiary is owned by the Company or
a wholly owned Restricted Subsidiary, and (d) such Subsidiary could
incur at least $1.00 of additional Funded Debt without violation of
SECTION 9.7(b)(4).
"ROLLOVER" shall mean any reborrowing from a lender of a loan
which is prepaid, or by its terms is due, to such lender on the date
of such reborrowing if the instrument or agreement governing such Debt
specifically contemplates the periodic prepayment or repayment and
simultaneous reborrowing of such loan, PROVIDED that such reborrowing
results in no net increase in the aggregate outstanding principal
balance of such loan; without limiting the generality of the
foregoing, "Rollover" shall include specifically the repayment of a
Loan at the end of the Interest Period applicable thereto and the
simultaneous reborrowing by the Company of a new Loan in the same
principal amount.
"SALE AND LEASEBACK TRANSACTION" shall mean any arrangement in
which the Company or a Restricted Subsidiary shall sell its buildings,
equipment or surface real properties, which was acquired or occupied
by the Company or a Restricted Subsidiary for more than 180 days, and
within 180 days from the date of such sale, enter into a lease as
lessee of such buildings, equipment or surface real properties having
a term (including terms of renewal or extension at the option of the
lessor or the lessee, whether or not such option has been exercised)
expiring three or more years after the commencement of the initial
term.
"SECURED DEBT" shall mean all Funded Debt that is secured by a
Lien permitted by SECTION 9.7(a)(13) on any property or assets of the
Company or any Restricted Subsidiary.
"SENIOR INDEBTEDNESS" shall mean, without duplication, that part
of Covered Debt consisting of (a) all indebtedness and obligations
evidenced by, arising under or incurred in connection
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with the Credit Documents and all renewals, extensions,
rearrangements, refundings, and modifications of any thereof; (b) all
other indebtedness and obligations of the Company, the Restricted
Subsidiaries or the Special Subsidiary, which is PARI PASSU with or
senior to the indebtedness and obligations described in CLAUSE (a)
above, (c) Capitalized Lease Obligations, and (d) all indebtedness and
obligations of the Company, the Restricted Subsidiaries or the Special
Subsidiary which is at the time of any determination of Senior
Indebtedness secured by any Lien.
"SERIAL NOTE AGREEMENT" shall mean that certain Note Agreement
dated as of March 31, 1990, evidencing the issuance of Series A, B, C,
D, E, F and G Notes by the Company in the aggregate amount of
$365,000,000, as amended from time to time.
"SFEP" shall mean, collectively, Santa Fe Energy Partners, L.P.
and Santa Fe Energy Operating Partners, L.P., each a Delaware limited
partnership.
"SFP GROUP" shall mean Santa Fe Pacific Corporation and its
affiliated group of corporations which together constitute an
affiliated group of corporations within the meaning of Section 1504(a)
of the Code.
"SLOR COVERAGE RATIO" shall mean, as of any date of
determination, the ratio of (a) the Combined Reserve Value to (b) all
Senior Indebtedness included in Combined Covered Debt, in each case as
of such date.
"SPECIAL DEBT" shall mean the sum of (a) Attributable Debt; (b)
Secured Debt, and (c) Funded Debt of the Restricted Subsidiaries.
"SPECIAL SUBSIDIARY" shall mean SFEP until (a) the Company
designates SFEP a Restricted Subsidiary pursuant to the terms of the
Serial Note Agreement or (b) the Company designates or continues to
designate SFEP as an Unrestricted Subsidiary subsequent to the
acquisition by the Company and the Restricted Subsidiaries of all of
the outstanding limited partnership interests in SFEP.
"SPECIAL SUBSIDIARY PERCENTAGE" shall mean, as of any date, the
percentage ownership interest of the Company and the Restricted
Subsidiaries in the Special Subsidiary on such date.
"SPECIAL SUBSIDIARY QUALIFYING CONDITIONS" shall mean all of the
following conditions: (a) the Company or a Restricted Subsidiary owns
more than 50% of the outstanding indicia of equity rights issued by
Santa Fe Energy Partners, L.P. and serves as the sole managing general
partner of Santa Fe Energy Partners, L.P.; (b) Santa Fe Energy
Partners, L.P. owns more than 50% of the outstanding indicia of equity
rights issued by Santa Fe Energy
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Operating Partners, L.P.; (c) the Company or a Restricted Subsidiary
serves as the sole managing general partner of Santa Fe Energy
Operating Partners, L.P., and (d) both Santa Fe Energy Partners, L.P.
and Santa Fe Energy Operating Partners, L.P. are permitted (by
applicable law and applicable contract) to make distributions to their
partners.
"SPIN-OFF" shall mean (a) the distribution, by dividend to the
stockholders of Santa Fe Pacific Corporation of the shares of capital
stock of the Company owned by Santa Fe Pacific Corporation, which
distribution was commenced on December 4, 1990, and (b) the
distribution by SFP Properties, Inc. to Santa Fe Pacific Corporation
of the capital stock of the Company that was made on December 27,
1989.
"SPRINGING LIEN" shall mean the Liens on real property of SFEP
that come into existence at any time SFEP is a Restricted Subsidiary
pursuant to section 5.08(b) or 5.11 of the Credit Agreement (the
"SPRINGING LIEN AGREEMENT") dated as of June 30, 1987 among Santa Fe
Energy Operating Partners, L.P., the lenders listed on the signature
pages thereof and Morgan Guaranty Trust Company of New York, as the
Agent, as the same may be amended, PROVIDED that (a) the Debt under
the Springing Lien Agreement is not increased, extended or renewed and
(b) the Springing Lien Agreement is not amended in any way which would
increase the likelihood or potential circumstances under which such
Liens may arise; if either clause of the foregoing proviso is
violated, then such Liens shall not be "Springing Liens" for purposes
of this Agreement.
"SUBSIDIARY" shall mean, with respect to any Person (the
"PARENT"), any corporation or entity, a majority of the shares of
voting stock (or in the case of an entity which is not a corporation,
of the equity interests that provide the power to manage or direct the
management of such entity) of which is at the time any determination
is being made, owned, directly or indirectly, by the parent.
"TAX ALLOCATION AGREEMENTS" shall mean those nine certain
agreements among the SFP Group, dated as of January 1, 1990 unless
otherwise specified in this definition and styled as follows: (a)
Agreement for the Allocation of the Combined Utah Franchise Tax
Liability; (b) Agreement for the Allocation of the Combined Oregon
Excise Tax Liability; (c) Agreement for the Allocation of the
Consolidated New Mexico Income Tax Liability; (d) Agreement for the
Allocation of the Combined Kansas Income Tax Liability; (e) Agreement
for the Allocation of the Combined Illinois Income Tax Liability; (f)
Agreement for the Allocation of the Combined California Franchise Tax
Liability; (g) Agreement for the Allocation of the Combined Arizona
Income Tax Liability; (h) Agreement Concerning Taxes, and (i)
Agreement for the Allocation of the Consolidated Federal Income Tax
Liability Among the Members of
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the Santa Fe Southern Pacific Corporation Affiliated Group, dated as
of January 1, 1987.
"TAX INDEMNIFICATION AGREEMENT" shall mean any agreement pursuant
to which the Company agrees to indemnify Santa Fe Pacific Corporation
or any member of the SFP Group from and against any and all federal,
state or local taxes, interest, penalties or additions to tax imposed
upon or incurred by the SFP Group or any member thereof as a result of
the Spin-Off to the extent specified in any such agreement.
"TERMINATION DATE" shall mean the earliest of (a) the date the
Commitments are terminated pursuant to SECTION 10.1, (b) the date the
Commitments are terminated pursuant to SECTION 32.3, or (c) March 15,
1995.
"TEXAS CREDIT CODE" shall mean Title 79, Revised Civil Statutes
of Texas, 1925, as amended.
"TLOR COVERAGE RATIO" shall mean, as of any date of
determination, the ratio of (a) the Combined Reserve Value to (b) the
Combined Covered Debt (including obligations in connection with any
Junior Securities), in each case as of such date.
"UNFUNDED LIABILITIES" shall mean, with respect to any Plan, at
any time, the amount (if any) by which (a) the present value of all
benefits under such Plan exceeds (b) the fair market value of all Plan
assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan (in accordance with GAAP), but
only to the extent that such excess represents a potential liability
of the Company or any ERISA Affiliate to the PBGC or a Plan under
Title IV of ERISA.
"UNIMPAIRED CONSOLIDATED NET EARNINGS" shall mean, for any
period, the amount of Consolidated Net Earnings for such period except
that with respect to the oil and gas properties impairments taken by
the Company and its Restricted Subsidiaries in the fourth quarter of
1993 in the amount of up to $100 million as reflected in the Company's
consolidated financial statements for the year ended December 31,
1993:
(a) for any calculation of "Unimpaired Consolidated Net
Earnings" for any fiscal period of the Company and its Restricted
Subsidiaries ending on or after December 31, 1993, the net
earnings of the Company and its Restricted Subsidiaries shall not
be reduced by the amount of such oil and gas properties
impairments; and
(b) for any such calculation for any fiscal period of the
Company and its Restricted Subsidiaries ending on or after
December 31, 1993, the depreciation, depletion and amortization
expenses of the Company and its Restricted
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Subsidiaries shall be calculated on a pro forma basis as if such
oil and gas properties impairments had never occurred.
"UNRESTRICTED SUBSIDIARY" shall mean each Subsidiary of the
Company designated as an Unrestricted Subsidiary on SCHEDULE I,
together with any Subsidiary of the Company which is hereafter
designated by the Board of Directors of the Company as an Unrestricted
Subsidiary. Unless designated as a Restricted Subsidiary after the
date hereof, SFEP shall be treated hereunder as an Unrestricted
Subsidiary except as SFEP is otherwise treated hereunder as a Special
Subsidiary. Any Subsidiary may be designated an Unrestricted
Subsidiary upon 30 days' prior written notice to the Banks if, at the
time of such designation and after giving effect thereto and to the
concurrent retirement of any Debt, (a) no Default shall have occurred
and be continuing; (b) such Subsidiary does not own, directly or
indirectly, any Funded Debt or capital stock of the Company or a
Restricted Subsidiary, and (c) the Company could incur at least $1.00
of additional Funded Debt without violation of SECTION 9.7(b)(3).
"UNUSED COMMITMENT" shall mean, on any date, the difference of
(a) the Aggregate Commitment minus (b) the Letter of Credit
Liabilities, all determined on such date.
1.2 ACCOUNTING TERMS AND DETERMINATIONS. Except where
specifically otherwise provided:
(a) The symbol "$" and the word "dollars" shall mean lawful
money of the United States of America.
(b) For purposes of SECTIONS 9.6 and 9.7 and the definitions
used solely therein, any accounting term not otherwise defined shall
have the meaning ascribed to it under GAAP. For all other purposes
any accounting term not otherwise defined shall have the meaning
ascribed to it under GAAP.
(c) Unless otherwise expressly provided, any accounting concept
and all financial covenants shall be determined on a consolidated
basis, and financial measurements shall be computed without
duplication.
(d) Wherever the term "including" or any of its correlatives
appears in the Credit Documents, it shall be read as if it were
written "including (by way of example and without limiting the
generality of the subject or concept referred to)".
(e) Wherever the word "herein" or "hereof" is used in any Credit
Document, it is a reference to that entire Credit Document and not
just to the subdivision of it in which the word is used.
(f) References in any Credit Document to Section numbers are
references to the Sections of such Credit Document.
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(g) References in any Credit Document to Exhibits, Schedules,
Annexes and Appendices are to the Exhibits, Schedules, Annexes and
Appendices to such Credit Document, and they shall be deemed
incorporated into such Credit Document by reference.
(h) Any term defined in the Credit Documents which refers to a
particular agreement, instrument or document shall also mean, refer to
and include all modifications, amendments, supplements, restatements,
renewals, extensions and substitutions of the same; PROVIDED that
nothing in this subsection shall be construed to authorize any such
modification, amendment, supplement, restatement, renewal, extension
or substitution except as may be permitted by other provisions of the
Credit Documents.
(i) All times of day used in the Credit Documents mean local
time in Houston, Texas.
(j) Defined terms may be used in the singular or plural, as the
context requires.
Section 2. COMMITMENTS.
2.1 LETTERS OF CREDIT. (a) COMMITMENTS. Subject to the terms
and conditions of this Agreement, the Agent agrees, upon receipt by
Agent of an Application therefor, to issue, and each Bank severally
agrees to purchase from the Agent a participation in (according to
such Bank's Commitment Percentage), letters of credit containing such
provisions not inconsistent with the terms of this Agreement as the
Company may reasonably request and such provisions not inconsistent
with the terms of this Agreement as the Banks may reasonably require
(together with the Existing Letters of Credit, the "LETTERS OF
CREDIT") for the account of the Company and on behalf of the Company,
or for the joint and several account of and on behalf of the Company
and one or more of its Subsidiaries, as follows. From time to time on
or after the conditions herein set forth to issue such Letters of
Credit have been satisfied, and prior to the Termination Date, the
Agent shall issue and/or may have outstanding Letters of Credit under
this SECTION 2.1 in an aggregate principal amount at any one time
outstanding (including all Letter of Credit Liabilities at such time)
up to but not exceeding the lesser of (1) $15,000,000 (as adjusted
downward from time to time in accordance herewith) or (2) the lesser
of (I) the Available Amount and (II) the aggregate Facility B
Commitments less (in each case of (I) and (II)) the aggregate unpaid
principal balance of the Facility B Notes; PROVIDED, that the
aggregate Letter of Credit Liabilities at any one time outstanding
together with the aggregate principal amount of Facility B Loans at
any time outstanding shall never exceed the Available Amount then in
effect and PROVIDED, that anything to the contrary in this Agreement
notwithstanding, the Agent shall have no obligation to issue any
Letter of Credit on or after the Termination Date. Upon the date of
the issuance of a Letter of Credit on or after the date hereof,
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the Agent 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 Agent,
a participation, to the extent of such Bank's Commitment Percentage,
in such Letter of Credit and the related Letter of Credit Liabilities.
No Letter of Credit issued pursuant to this Agreement shall have an
expiry date later than one year from date of issuance. Each Bank has
heretofore purchased participations in each of the Existing Letters of
Credit and the related Letter of Credit Liabilities, to the extent of
such Bank's Commitment Percentage. Such participations are hereby
ratified and confirmed and made subject hereto. All provisions of
this Agreement applicable to participations in Letters of Credit
hereunder shall be deemed to apply to participations in the Existing
Letters of Credit.
(b) ADDITIONAL PROVISIONS. The following additional provisions
shall apply to each Letter of Credit:
(i) The Company shall give the Agent and each other Bank at
least five Business Days' irrevocable prior notice (effective upon
receipt) specifying the date such Letter of Credit is to be issued and
describing the proposed terms of such Letter of Credit and the nature
of the transaction proposed to be supported thereby. The Company
shall furnish such additional information regarding such transaction
as the Agent may reasonably request. Upon receipt of such notice, the
Agent shall promptly notify each Bank of such Bank's Commitment
Percentage of the amount of the proposed Letter of Credit and not
later than two Business Days prior to the requested issuance date for
such Letter of Credit shall furnish to each Bank and the Company a
proposed form of an Application for such Letter of Credit. The
issuance by the Agent of each Letter of Credit shall, in addition to
the conditions precedent set forth in SECTION 7, be subject to the
conditions precedent that such Letter of Credit shall be in such form
and contain such terms as shall be reasonably satisfactory to the
Agent and that the Company shall have executed and delivered to the
Agent an Application and such other instruments and agreements
relating to such Letter of Credit not inconsistent with terms of this
Agreement as the Agent shall have reasonably requested and are not
inconsistent with the terms of this Agreement.
(ii) No Letter of Credit may be issued if after giving effect
thereto the sum of (a) the aggregate outstanding principal amount of
the Facility B Loans plus (b) the aggregate Letter of Credit
Liabilities would exceed the Available Amount. On each day during the
period commencing with the issuance of any Letter of Credit and until
such Letter of Credit shall have expired or been terminated, the
Facility B 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 amount then or thereafter available for drawings
under such Letter of Credit.
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(iii) In consideration of the issuance of each Letter of Credit
the Company agrees to pay to the Agent, for the ratable benefit of the
Banks, the Letter of Credit Fee. The Letter of Credit Fee shall be
payable concurrently with the issuance of each such Letter of Credit
and shall be separate from and in addition to interest on any
Reimbursement Obligation. The Agent will pay to each Bank, promptly
after receiving any payment in respect of Letter of Credit Fees, an
amount equal to such Bank's Commitment Percentage of such Letter of
Credit Fees.
(iv) Upon receipt from the beneficiary of any Letter of Credit of
any demand for payment thereunder, the Agent shall promptly notify the
Company and each Bank as to the amount to be paid as a result of such
demand and the payment date. If at any time the Agent shall have made
a payment to a beneficiary of a Letter of Credit in respect of a
drawing or in respect of an acceptance created in connection with a
drawing under such Letter of Credit, each Bank will pay to the Agent
immediately upon demand (or, if such demand is made after 1:00 p.m.,
on the next succeeding Business Day) by the Agent at any time during
the period commencing after such payment until reimbursement thereof
in full by the Company, an amount equal to such Bank's Commitment
Percentage of such payment, together with interest on such amount for
each day from the later of (x) the date such payment is due as
provided in the preceding sentence or (y) the date such payment is
made under such Letter of Credit to the date of payment by such Bank
of such amount at a rate of interest per annum equal to the Fed Funds
Rate for such period. No interest shall be due from any Bank that
makes full payment to the Agent on the date such payment is due.
Nothing herein shall be deemed to require any Bank to pay to the Agent
any amount as reimbursement for any payment made by the Agent to
acquire (discount) for its own account prior to maturity thereof any
acceptance created under a Letter of Credit.
(v) The Company shall be irrevocably and unconditionally
obligated forthwith to reimburse the Agent for the account of each
Bank for any amount paid by the Agent or such Bank upon any drawing
under any Letter of Credit, without presentment, demand, protest or
other formalities of any kind all of which are hereby expressly waived
by the Company. Each drawing under any Letter of Credit shall bear
interest at the Post-Default Rate until the Company shall have made
reimbursement for such drawing. If the Company shall fail to make
reimbursement for any such drawing prior to noon on the second
Business Day after such notice is given, the Agent may in its
discretion and without the consent of (but with concurrent notice to)
the Company effect such reimbursement of any Letter of Credit, subject
to the satisfaction of the conditions in SECTION 7 of the Amended and
Restated Revolving Credit Agreement and to the existence of Facility B
Commitment, by borrowing of Facility B Loans and the application of
the proceeds thereof to the related Reimbursement Obligations. The
Reimbursement Obligations shall survive the Termination Date and the
termination of this
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Agreement. The Agent will pay to each Bank such Bank's Commitment
Percentage of all amounts received from the Company for application in
payment, in whole or in part, of the Reimbursement Obligation in
respect of any Letter of Credit, but only to the extent such Bank has
made payment to the Agent in respect of such Letter of Credit pursuant
to CLAUSE (iv) above. Nothing herein shall be deemed to require the
Agent to pay to any Bank any part of the proceeds of disposition
(rediscount) by the Agent for its own account to any other Person of
any acceptance created under a Letter of Credit which is acquired
(discounted) by the Agent prior to the maturity thereof or to require
any Bank to reimburse the Agent for the consequences of the Agent's
own gross negligence or willful misconduct.
(vi) The obligations of the Company to pay Reimbursement
Obligations under this Agreement shall be absolute, unconditional and
irrevocable and shall be paid or performed strictly in accordance with
the terms of this Agreement under all circumstances whatsoever,
including, without limitation, the following circumstances:
(a) any lack of legality, validity, regularity or
enforceability of this Agreement, any Letter of Credit, any
Application or any agreement or document related to any of the
foregoing;
(b) any amendment or waiver of (including any default), or
any consent to departure from, any Letter of Credit, this Agreement,
any Application or any agreement or document related to any of the
foregoing;
(c) the existence of any claim, set-off, defense or other
rights which the Company may have at any time against any beneficiary
or any transferee of any Letter of Credit (or any Persons or entities
for which such beneficiary or any such transferee may be acting), the
Agent, any Bank or any other Person, whether in connection with this
Agreement, any Letter of Credit, any Application or any agreement or
document related to any of the foregoing, the transactions
contemplated hereby or any unrelated transaction;
(d) any statement, certificate, draft or any other document
presented under any Letter of Credit proves to have been forged,
fraudulent, invalid or insufficient in any respect or any statement
therein proves to have been untrue or inaccurate in any respect
whatsoever;
(e) payment by the Agent under any Letter of Credit against
presentation of a draft or certificate which appears on its face to
comply but does not in fact comply with the terms of such Letter of
Credit;
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(f) any defense based upon the failure of any beneficiary
or any transferee to receive all or any part of the proceeds of a draw
under any Letter of Credit transmitted by the Agent, or any non-
application or misapplication by any beneficiary or other transferee
of the proceeds of demand for payment under any Letter of Credit; and
(g) any bankruptcy, insolvency, reorganization,
arrangement, assignment for the benefit of creditors, readjustment of
debt, dissolution, liquidation or other similar event with respect to
the Company.
PROVIDED, that no such payment shall impair any claim the Company may
have against the Agent or any Bank.
(c) ILLEGALITY. In the event that any restriction or limitation
is imposed upon or determined or held to be applicable to the Agent,
any Bank or the Company by, under or pursuant to any Legal
Requirement, which in the reasonable judgment of the Agent or any Bank
would prevent the Agent or such Bank from legally incurring liability
under or in respect of a Letter of Credit issued or proposed to be
issued hereunder, then the Agent shall give prompt written notice
thereof to the Company, whereupon the Agent and the Bank or Banks
affected shall have no obligation to issue or purchase participations
in any such Letter of Credit.
2.2 AVAILABLE AMOUNT.
(a) Concurrently with the delivery of each Independent
Engineering Report and related Coverage Report required or permitted
hereby, there shall be determined, based on the Most Recent
Engineering Report and Approved Assumptions, the total maximum amount
of Facility B Loans and Letter of Credit Liabilities to be available
to the Company hereunder without violation of any Required Ratio.
Upon each such delivery, the Company may by notice to the Co-Agents
designate as the Available Amount any amount (not to exceed the
Preliminary Available Amount as of the most recent Achievement Date
(or, if no Achievement Date occurs, the Preliminary Available Amount
then in effect), according to the applicable table in EXHIBIT C equal
to or less than such total maximum amount. The Available Amount so
designated shall remain in effect as the Available Amount until the
next determination under this SECTION 2.2. If no amount lesser than
(a) or (b) in this sentence is designated in accordance with this
SECTION 2.2, the Available Amount shall be the lesser of (a) the
Preliminary Available Amount then in effect according to the
applicable table in EXHIBIT C or (b) such total maximum amount.
(b) Notwithstanding anything in this Agreement to the
contrary, (1) no Bank shall be required to have aggregate Letters of
Credit Liabilities at any one time outstanding in excess of such
Bank's Commitment Percentage of the lesser of (x) $15,000,000 and
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(y) the difference between (i) the Available Amount and (ii) the
aggregate Facility B Loans, and (2) if a Bank fails to participate in
a Letter of Credit as and when required hereunder and the Company
subsequently makes a repayment on the Reimbursement Obligations with
respect to such Letter of Credit, such repayment shall be split among
the non-defaulting Banks ratably in accordance with their respective
Commitment Percentages until each Bank has its Commitment Percentage
of all of the outstanding Reimbursement Obligations, and the balance
of such repayment shall be divided among all of the Banks in
accordance with their respective Commitment Percentages.
(c) Notwithstanding anything in this Agreement to the
contrary, the Agent shall not be required to issue any Letter of
Credit during the existence of an Engineering Shortfall.
(d) The Company may from time to time at its option,
exercisable by giving written notice to the Co-Agents not more often
than once in any Calculation Period, provide to the Co-Agents an
Independent Engineering Report. Upon the receipt of such notice, the
Co-Agents shall consult with the Company to determine new Approved
Assumptions, which shall be furnished to the Banks by a notice as
provided in the definition of "Approved Assumptions" and shall be
subject to the approval by Banks with aggregate Commitment Percentages
of 75% or more as provided therein. The Optional Reserve Report shall
be based on the new Approved Assumptions and shall be accompanied by a
Coverage Report as of the date such Optional Reserve Report is
furnished. The Annual Debt Service Coverage Ratio, the Alternate
Annual Debt Service Coverage Ratio, the TLOR Coverage Ratio and the
SLOR Coverage Ratio shall each be redetermined in accordance with this
Agreement on the basis of each such Optional Reserve Report and
Coverage Report, and the Available Amount recalculated as provided in
this SECTION 2.2.
(e) Notwithstanding any other provision of this Agreement
to the contrary, should both (x) the Company at any time designate as
the Available Amount an amount less than the maximum amount then
offered to it as the Available Amount by the Co-Agents and (y) as a
result the Company shall obtain the release of any Mortgaged
Properties under the Amended and Restated Revolving Credit Agreement,
the Available Amount may never thereafter exceed the amount so
designated by the Company.
2.3 REDUCTIONS AND CHANGES OF COMMITMENTS.
(a) MANDATORY. On the Termination Date the aggregate
Commitments shall be terminated in their entirety.
(b) THE COMPANY'S OPTION. The Company shall have the right to
terminate or reduce the unused portion of the Commitments at any time
or from time to time; PROVIDED that: (i) the Company shall give
notice of each such termination or reduction to the Agent as
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provided in SECTION 5.5; (ii) each such partial reduction shall be in
minimum increments equal to $5,000,000; and (iii) the Company may not
cause the Available Amount to be less than the aggregate principal
amount of the Facility B Loans then outstanding plus the Letter of
Credit Liabilities then outstanding. Any voluntary reduction in the
Available Amount prior to any scheduled reduction in the Available
Amount shall not affect the Available Amount after such scheduled
reduction date unless such voluntarily reduced Available Amount is
less than the amount scheduled to be the Available Amount after such
scheduled reduction date, in which case the Available Amount after
such scheduled reduction date shall be no greater than such
voluntarily reduced Available Amount. Reference is made to
SECTION 2.8 of the Amended and Restated Revolving Credit Agreement for
restrictions on the Company's right to increase the Available Amount
under certain circumstances.
(c) NO REINSTATEMENT. No reduction in or termination of
Commitments pursuant to this Section may be reinstated without the
written approval of the Agent and all Banks.
2.4 SEVERAL OBLIGATIONS. The failure of any Bank to participate
in any Letter of Credit shall not relieve any other Bank of its
obligation to participate in any Letter of Credit (the face amount of
which shall be reduced dollar for dollar by the amount of the share of
the Bank that failed to participate in such Letter of Credit) on such
date, but neither the Agent nor any Bank shall be responsible for the
failure of any other Bank to participate in any Letter of Credit.
2.5 FEES. In consideration of the Commitments, the Company
shall pay to the Agent for the account of each Bank in accordance with
its Commitment Percentage commitment fees (the "COMMITMENT FEES") for
the period from the date of the execution of this Agreement to and
including the earlier of the date the Commitments are terminated or
the Termination Date at a rate per annum equal to 1/2% of the Unused
Commitment. The Company shall be entitled to credit on the Commitment
Fees any amount paid pursuant to SECTION 2.3 of the Amended and
Restated Revolving Credit Agreement. The Commitment Fees shall be
computed for each day and shall be based on the Unused Commitment for
such day. Accrued Commitment Fees shall be payable in arrears on the
date of the initial Letter of Credit, within three days after demand
therefor on or about the Quarterly Dates, and within three days after
demand therefor on or about the Termination Date. All past due
Commitment Fees shall bear interest at the Post-Default Rate. Upon
receipt, the Agent shall disburse the Commitment Fees to the Banks in
accordance with their Commitment Percentages.
Section 3. PREPAYMENTS.
3.1 (a) COMMITMENT AMOUNT. The Company shall from time to time
on demand by the Agent prepay the Facility B Loans or reduce
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Letter of Credit Liabilities in such amounts as shall be necessary (A)
so that at all times the aggregate outstanding principal amount of all
Facility B Loans and all Letter of Credit Liabilities hereunder shall
not be in excess of the aggregate of the Available Amount or (B) to
comply with SECTION 9.9. Any such payment shall be allocated between
Facility B Loans, Letter of Credit Liabilities (and if to Letter of
Credit Liabilities, first, to Reimbursement Obligations) and other
obligations as the Company may elect.
(b) AVAILABLE AMOUNT. The Company shall from time to time on
demand by the Agent and on the Termination Date prepay the Facility B
Loans or reduce Letter of Credit Liabilities in such amounts as shall
be necessary so that at all times the aggregate outstanding principal
amount of all Facility B Loans and all Letter of Credit Liabilities of
the Company hereunder shall be less than or equal to the Available
Amount. Any such payment shall be allocated between Facility B Loans,
Letter of Credit Liabilities (and if to Letter of Credit Liabilities,
first, to Reimbursement Obligations) and then to other obligations as
the Company may elect.
Section 4. PAYMENTS OF PRINCIPAL AND INTEREST.
4.1 REPAYMENT OF REIMBURSEMENT OBLIGATIONS. The Company will
pay to the Agent for the account of each Bank the amount of each
Reimbursement Obligation forthwith upon its incurrence. The amount of
any Reimbursement Obligation may, if the applicable conditions
precedent specified in SECTION 7 of the Amended and Restated Revolving
Credit Agreement have been satisfied, be paid with the proceeds of
Facility B Loans.
4.2 INTEREST. Subject to SECTION 12.8, the Company will pay to
the Agent for the account of each Bank interest on the unpaid
principal amount of each Reimbursement Obligation owed to such Bank
for the period commencing on the date such Reimbursement Obligation
arises to but excluding the date such Reimbursement Obligation shall
be paid in full, at the Post-Default Rate.
Accrued interest shall be due and payable from time to time on
demand of the Agent or the Required Banks (through the Agent).
Section 5. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS, ETC.
5.1 PAYMENTS. (a) Except to the extent otherwise provided
herein, all payments of principal of or interest on the Reimbursement
Obligations and other amounts to be made by the Company hereunder
shall be made in dollars, in immediately available funds, to the Agent
at its Principal Office (or in the case of a successor Agent, at the
principal office of such successor Agent in the United States), not
later than 11:00 a.m. on the date on which such payment shall become
due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day).
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(b) The Company shall, at the time of making each payment
hereunder, specify to the Agent the Reimbursement Obligations or other
amounts payable by the Company hereunder to which such payment is to
be applied (and in the event that it fails so to specify, such payment
shall be applied as the Agent may designate to the amounts then due
and payable); PROVIDED that if no Reimbursement Obligations are then
due and payable or an Event of Default has occurred and is continuing,
the Agent may apply such payment to the Obligations in such order as
it may elect in its sole discretion, but subject to the other terms
and conditions of this Agreement, including SECTION 5.2). Each
payment received by the Agent hereunder for the account of a Bank
shall be paid promptly to such Bank, in immediately available funds
for the account of such Bank's Applicable Lending Office.
(c) If the due date of any payment hereunder falls on a day
which is not a Business Day, the due date for such payment shall be
extended to the next succeeding Business Day and interest shall be
payable for any principal so extended for the period of such
extension.
5.2 PRO RATA TREATMENT. Except to the extent otherwise provided
herein, (a) each issuance of a Letter of Credit and each termination
or reduction of the Commitments of the Banks under SECTION 2.3 shall
be made PRO RATA according to the Banks' respective Commitments; (b)
each payment by the Company of principal of or interest on any
Reimbursement Obligation shall be made to the Agent for the account of
the Banks PRO RATA in accordance with the respective unpaid principal
amounts of such Reimbursement Obligation held by the Banks; and (c)
the Banks (other than the Agent) shall purchase from the Agent
participations in the Letters of Credit in accordance with their
respective Commitment Percentages.
5.3 COMPUTATIONS. Interest based on the Alternate Base Rate (to
the extent determined by reference to the Prime Rate), and fees
hereunder, will be computed on the basis of 365 (or 366) days and
actual days elapsed (including the first day but excluding the last
day) occurring in the period for which payable. All other interest
shall be computed on the basis of a year of 360 days and actual days
elapsed (including the first day but excluding the last day) occurring
in the period for which payable, unless the effect of so computing
shall be to cause the rate of interest to exceed the Highest Lawful
Rate (in which event interest shall be calculated on the basis of the
actual number of days elapsed in a year composed of 365 or 366 days,
as the case may be).
5.4 MINIMUM AND MAXIMUM AMOUNTS. Each Letter of Credit shall be
in a face amount at least equal to $100,000.
5.5 CERTAIN ACTIONS, NOTICES, ETC. Notices to the Agent of any
termination or reduction of Commitments, prepayments under
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SECTION 3.1 and requests for the issuance of Letters of Credit shall
be irrevocable and shall be effective only if received by the Agent
not later than 11:00 a.m. on the number of Business Days prior to the
date of the relevant issuance, termination, reduction, and/or
prepayment specified below:
Number of Business
Days Prior
NOTICE
Termination or reduction
of Commitments 10
Issuance of Letters of Credit 5
Prepayments 1
Each such notice of termination or reduction shall specify the amount
of the Commitments to be terminated or reduced. Each such notice of
prepayment shall specify the amount to be prepaid (subject to SECTION
3.1) and the date of prepayment (which shall be a Business Day). The
Agent shall promptly notify the Banks of the contents of each such
notice or Application. Notice of any prepayment having been given,
the principal amount specified in such notice, together with interest
thereon to the date of prepayment, shall be due and payable on such
prepayment date.
5.6 NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Agent shall
have been notified by a Bank prior to noon on the date on which such
Bank is to make payment to the Agent of any amount to be paid by such
Bank to reimburse the Agent for a drawing under any Letter of Credit
or by the Company prior to the date on which the Company is to make a
payment to the Agent for the account of one or more of the Banks, as
the case may be (such Bank or the Company being herein called the
"PAYOR" and such payment being herein called the "REQUIRED PAYMENT"),
which notice shall be effective upon receipt, that the Payor does not
intend to make the Required Payment to the Agent, the Agent may assume
that the Required Payment has been made and may, in reliance upon such
assumption (but shall not be required to), make the amount thereof
available to the intended recipient on the date that such Required
Payment is to be made. If the Payor is the Company and the Company
has not in fact made the Required Payment to the Agent on or before
such date, the recipient of such payment (or, if the recipient is the
beneficiary of a Letter of Credit, the Company, and, if the Company
fails to pay the amount thereof to the Agent on demand, then the
Banks, to the extent not already paid, ratably in proportion to their
respective Commitment Percentages) shall, on demand, pay to the Agent
the amount made available by the Agent, together with interest thereon
from the date such amount was so made available by the Agent until the
date the Agent recovers such amount at a rate per annum equal to the
Fed Funds Rate for the first three days
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after demand and thereafter at the Fed Funds Rate plus 2%. If the
Payor is a Bank and such Bank has not in fact made the Required
Payment to the Agent on or before such date, then such Bank shall pay
to the Agent the amount made available by the Agent on behalf of such
Bank, together with interest thereon from the date such amount was so
made available by the Agent until the Agent recovers such amount at a
rate per annum equal to the Fed Funds Rate for the first three days
and thereafter at the Fed Funds Rate plus 2%.
5.7 SHARING OF PAYMENTS, ETC. If a Bank or any participant of a
Bank shall obtain payment of any obligation to it under this
Agreement, through the exercise of any right of set-off, banker's
lien, counterclaim or similar right, or otherwise, then such Bank or
participant shall promptly purchase from the other Banks participa-
tions in the Reimbursement Obligations or other obligations held by
the other Banks in such amounts, and make such other adjustments from
time to time as shall be equitable to the end that all the Banks and
participants shall share the benefit of such payment (net of any
expenses which may be incurred by such Bank or its participant in
obtaining or preserving such benefit) PRO RATA in accordance with the
unpaid principal and interest on such obligations then due to each of
them. To such end all the Banks and their participants shall make
appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must
otherwise be restored. The Company agrees, to the fullest extent it
may effectively do so under applicable law, that any Bank so
purchasing a participation in the Reimbursement Obligations or other
obligations held by other Banks may exercise all rights of set-off,
bankers' lien, counterclaims or similar rights with respect to such
participation as fully as if such Bank were a direct holder of
Reimbursement Obligations or other obligations in the amount of such
participation. Nothing contained herein shall require any Bank to
exercise any such right or shall affect the right of any Bank to
exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of the Company.
5.8 OTHER EXPENSES. The Company agrees to pay the Agent, for
the account of the Agent, the usual and customary charges of TCB for
each extension, amendment and wire advice of and drawing under the
Letters of Credit.
Section 6. YIELD PROTECTION AND ILLEGALITY.
6.1 ADDITIONAL COSTS IN RESPECT OF LETTERS OF CREDIT. If as a
result of any Regulatory Change there shall be imposed, modified or
deemed applicable any tax, reserve, special deposit or similar
requirement against or with respect to or measured by reference to
Letters of Credit issued or to be issued hereunder and the result
shall be to increase the cost to the Agent or any Bank of issuing or
maintaining or participating in any Letter of Credit or reduce
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any amount receivable by the Agent or any Bank hereunder in respect of
any Letter of Credit or participation therein, then such Bank shall
notify the Company through the Agent, and upon demand therefor by such
Bank through the Agent, the Company (subject to SECTION 12.8) shall
pay to the Agent or such Bank, from time to time as specified by the
Agent or such Bank, such additional amounts as shall be sufficient to
compensate the Agent or such Bank for such increased costs or
reductions in amount. Before making such demand pursuant to this
SECTION 6.1, the Agent or such Bank will designate a different
available Applicable Lending Office for the Letter of Credit or
participation or take such other action as the Company may request, if
such designation or action will avoid the need for, or reduce the
amount of, such compensation and will not, in the sole opinion of the
Agent or such Bank, be disadvantageous to the Agent or such Bank. A
statement as to such increased costs or reductions in amount incurred
by the Agent or such Bank, submitted by the Agent or such Bank to the
Company, shall cover amounts accruing under this section with respect
to a period beginning not earlier than 120 days from the date thereof
and be conclusive as to the amount thereof, absent manifest error.
In the event any Bank shall seek compensation pursuant to this
SECTION 6.1, the Company may give notice to such Bank (with copies to
the Agent) that it wishes to seek one or more Eligible Assignees
(which may be one or more of the Banks) to assume the Commitment of
such Bank and to purchase and assume its outstanding Letter of Credit
Liabilities. Each Bank requesting compensation pursuant to this
SECTION 6.1 agrees to sell its Commitment and interest in this
Agreement and in the Obligations and in the Amended and Restated
Revolving Credit Agreement pursuant to SECTION 12.6 (without recourse,
representation or warranty except as provided in SECTION 12.6) to any
such Eligible Assignee for an amount equal to the sum of the
outstanding unpaid principal of and accrued interest on such
Obligations plus all other fees and amounts (including any
compensation claimed by such Bank under this SECTION 6.1) owing to
such Bank hereunder and under the Amended and Restated Revolving
Credit Agreement calculated, in each case, to the date such
Commitment, Obligations and interests are purchased, whereupon such
Bank shall have no further Commitment or other obligation to the
Company hereunder or under the Amended and Restated Revolving Credit
Agreement.
6.2 CAPITAL ADEQUACY. If any Bank shall have determined that
the adoption after the date hereof or effectiveness after the date
hereof (regardless of whether previously announced) of any applicable
Legal Requirement or treaty regarding capital adequacy, or any change
after the date hereof in any existing or future Legal Requirement or
treaty regarding capital adequacy, or any change in the interpretation
or administration thereof after the date hereof by any Governmental
Authority or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable
Lending Office) with any request or directive
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after the date hereof regarding capital adequacy (whether or not
having the force of law) of any such Governmental Authority or
comparable agency has or would have the effect of reducing the rate of
return on the capital of such Bank (or any holding company of which
such Bank is a part) as a consequence of its obligations hereunder and
under or in respect of the Letters of Credit to a level below that
which such Bank or holding company could have achieved but for such
adoption, change or compliance by an amount deemed by such Bank to be
material, then from time to time, upon demand by such Bank (with a
copy to the Agent), the Company (subject to SECTION 12.8) shall pay to
such Bank such additional amount or amounts as will compensate such
Bank or holding company for such reduction. The certificate of any
Bank setting forth such amount or amounts as shall be necessary to
compensate it and the basis therefor shall cover amounts accruing
under this SECTION 6.2 with respect to a period beginning not earlier
than 120 days from the date thereof and shall be conclusive and
binding, absent manifest error. The Company shall pay the amount
shown as due on any such certificate upon delivery of such
certificate. In preparing such certificate, a Bank may employ such
assumptions and allocations of costs and expenses as it shall in good
faith deem reasonable and may use any reasonable averaging and
attribution method. In the event any Bank shall seek compensation
pursuant to this SECTION 6.2, the Company may give notice to such Bank
(with copies to the Agent) that it wishes to seek one or more Eligible
Assignees (which may be one or more of the Banks) to assume the
Commitment of such Bank and to purchase and assume its outstanding
Letter of Credit Liabilities. Each Bank requesting compensation
pursuant to this SECTION 6.2 agrees to sell its Commitment and
interest in this Agreement and in the Obligations and in the Amended
and Restated Revolving Credit Agreement pursuant to SECTION 12.6
(without recourse, representation or warranty except as provided in
SECTION 12.6) to any such Eligible Assignee for an amount equal to the
sum of the outstanding unpaid principal of and accrued interest on
such Obligations plus all other fees and amounts (including any
compensation claimed by such Bank under this SECTION 6.2) owing to
such Bank hereunder and under the Amended and Restated Revolving
Credit Agreement calculated, in each case, to the date such
Commitment, Obligations, and interests are purchased, whereupon such
Bank shall have no further Commitment or other obligation to the
Company hereunder or under the Amended and Restated Revolving Credit
Agreement.
Section 7. CONDITIONS PRECEDENT.
7.1 CLOSING CONDITIONS. The effectiveness of this Agreement is
subject to the following conditions precedent, each of which shall
have been fulfilled or waived to the satisfaction of the Agent:
(a) CORPORATE ACTION AND STATUS. The Agent shall have received
copies of the Organizational Documents of the Company
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certified by the Secretary of the Company, and resolutions of the
Board of Directors of the Company, certified by the Secretary of the
Company, for all corporate action taken by the Company authorizing the
execution, delivery and performance of the Credit Documents and all
other documents related to this Agreement, together with such
certificates as may be appropriate to demonstrate the qualification
and good standing of and payment of taxes by each member of the
Combined Group in each jurisdiction set forth on SCHEDULE VIII.
(b) INCUMBENCY. The Company shall have delivered to the Agent a
certificate in respect of the name and signature of each officer who
(1) is authorized to sign on its behalf the applicable Credit
Documents related to any Letter of Credit and (2) will, until replaced
by another officer or officers duly authorized for that purpose, act
as its representative for the purposes of signing documents and giving
notices and other communications in connection with any Letter of
Credit hereunder. The Agent and each Bank may conclusively rely on
such certificates until they receive notice in writing from the
Company to the contrary.
(c) CREDIT DOCUMENTS. The Company shall have duly executed and
delivered the other Credit Documents to which it is a party and each
such Credit Document shall be in Proper Form.
(d) FEES AND EXPENSES. The Company shall have paid to the Agent
all fees in the amounts previously agreed upon in writing among the
Company and the Agent.
(e) OPINION OF COUNSEL TO THE COMPANY. The Agent shall have
received the opinions of Andrews & Kurth, L.L.P. and David L. Hicks,
counsel to the Company, substantially in the forms of SCHEDULES VI and
VII hereto, respectively.
(f) COUNTERPARTS. The Agent shall have received counterparts of
each of the Credit Documents duly executed and delivered by or on
behalf of each of the parties thereto (or, in the case of any Bank as
to which the Agent shall not have received such a counterpart, the
Agent shall have received evidence satisfactory to it of the execution
and delivery by such Bank of a counterpart hereof).
(g) CONSENTS. The Agent shall have received evidence
satisfactory to it that all consents of each Governmental Authority
and of each other Person, if any, required in connection with (1) the
Letters of Credit and (2) the execution, delivery and performance of
the Credit Documents have been received and remain in full force and
effect.
(h) AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT. The
Amended and Restated Revolving Credit Agreement shall be executed and
delivered by the parties thereto and shall be in full force and
effect.
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(i) OTHER DOCUMENTS. The Agent shall have received such other
documents consistent with the terms of this Agreement and relating to
the transactions contemplated hereby as the Agent may reasonably
request.
All provisions and payments required by this SECTION 7.1 are
subject to the provisions of SECTION 12.8.
7.2 ALL LETTERS OF CREDIT. In addition to the conditions
precedent described in SECTION 2, the obligation of the Agent to issue
and each Bank to participate in any Letter of Credit is subject to the
additional conditions precedent that, as of the date of such issuance,
and after giving effect thereto:
(a) no Default shall have occurred and be continuing, and no
"Default" shall have occurred and be continuing under the Amended and
Restated Revolving Credit Agreement;
(b) there has been no Material Adverse Change since December 31,
1993;
(c) the representations and warranties made in each Credit
Document shall be true and correct in all material respects on and as
of the date of the issuance of such Letter of Credit, with the same
force and effect as if made on and as of such date;
(d) the Company shall have delivered to the Agent an Application
within the time specified in SECTION 5.5;
(e) the issuance of such Letter of Credit shall not be
prohibited by, or subject any Bank to any penalty under, any Legal
Requirement applicable to any Bank; and
(f) after giving effect to such Letter of Credit the Company
shall be in compliance with all Required Ratios and no Engineering
Shortfall shall exist.
Each request for issuance of a Letter of Credit by the Company
hereunder shall include a representation and warranty by the Company
to the effect set forth in SUBSECTIONS (a) through (d) and SUBSECTION
(f) (if applicable) of this SECTION 7.2 (both as of the date of such
notice and, unless the Company otherwise notifies the Agent prior to
the date of such issuance, as of the date of such issuance).
Section 8. REPRESENTATIONS AND WARRANTIES. To induce the Agent
and the Banks to enter into this Agreement and to issue and
participate in Letters of Credit, the Company represents and warrants
(such representations and warranties to survive any investigation and
the issuance of Letters of Credit) to the Banks and the Agent as
follows:
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8.1 CORPORATE EXISTENCE. Each member of the Combined Group (a)
is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization; (b) has all requisite
power, and has all licenses, permits, authorizations, consents and
approvals necessary, to own its property and carry on its business as
now being conducted, and (c) is qualified to do business, and is in
good standing, in (1) all jurisdictions in which any of the Recognized
Proved Reserves which it owns are located and (2) any other
jurisdiction in which the nature of the business conducted by it makes
such qualification necessary or advisable, unless (for purposes only
of this CLAUSE (2)) the failure to be so qualified or in good standing
would not individually or in the aggregate have a material adverse
effect on the business, financial condition or results of operations
of the Combined Group taken as a whole.
8.2 INFORMATION.
(a) (i) The most recent consolidated balance sheet of the
Company and its Subsidiaries and the related consolidated statements
of operations, changes in financial position and cash flows for the
period then ended, together with the respective notes thereto,
delivered to each of the Banks prior to the execution of this
Agreement (which financial statements are dated December 31, 1993) or
in accordance with the provisions of SECTION 9.1(a) or (b), as the
case may be (the latest of such financial statements and the notes
thereto being referred to herein as the "MOST RECENT FINANCIAL
STATEMENTS"), fairly present in all material respects the consolidated
financial position of the Company and its Subsidiaries as of such date
and their consolidated results of operations for the period then ended
in conformity with generally accepted accounting principles.
(ii) The Company and its Subsidiaries did not on the date of
the Most Recent Financial Statements, and do not on the date as of
which this representation is made in accordance with the terms of this
Agreement, have any material contingent liabilities, material
liabilities for taxes, unusual and material forward or long-term
commitments or material unrealized or anticipated losses from any
commitments, except (A) as referred to or reflected or provided for in
the Most Recent Financial Statements; (B) as otherwise hereafter
disclosed to the Banks in writing in accordance with the terms of this
Agreement, or (C) in connection with the obligations of the Company
under this Agreement and the Amended and Restated Revolving Credit
Agreement.
(b) Since December 31, 1991, there has been no Material Adverse
Change.
8.3 LITIGATION; COMPLIANCE. Except as disclosed in writing to
the Banks prior to the date hereof, or as hereafter disclosed to the
Banks in accordance with the provisions of SECTION 9.1(e),
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there are no legal or arbitral proceedings or any proceedings by or
before any Governmental Authority now pending, or, to the knowledge of
the Company, threatened, against or affecting the Company or any of
its Subsidiaries which, if adversely determined, would cause a
Material Adverse Change. The Company and its Subsidiaries comply in
all material respects with all applicable material (based on the
Company and its Subsidiaries taken as a whole) Legal Requirements
(other than the Applicable Environmental Laws, representations
regarding which are subject to SECTION 8.13). Neither the Company nor
any of its Subsidiaries is in default in any material respect under or
violation of any material (based on the Company and its Subsidiaries
taken as a whole) judgment, order or decree of any Governmental
Authority.
8.4 NO BREACH. None of the execution and delivery of the Credit
Documents, the consummation of the transactions therein contemplated
or compliance with the terms and provisions thereof will conflict with
or result in a breach of, or require any consent that has not been
obtained under, the Serial Note Agreement, the Organizational
Documents of the Company or any of its Subsidiaries or any material
Legal Requirement (including any securities law, rule or regulation)
applicable to the Company or any of its Subsidiaries or (except for
the Liens required or permitted by this Agreement) result in the
creation or imposition of any Lien upon any of the revenues or
property of the Company or any of its Subsidiaries. Such execution,
delivery, consummation and compliance do not and will not conflict
with or result in a breach of any material agreement or instrument to
which the Company is a party or by which the Company is bound or to
which it is subject, or constitute a default under any such agreement
or instrument.
8.5 CORPORATE ACTION. The Company has all necessary corporate
power and authority to execute, deliver and perform its obligations
under the Credit Documents. The execution, delivery and performance
of the Credit Documents by the Company have been duly authorized by
all necessary corporate action. The Credit Documents have been duly
and validly executed and delivered by the Company and constitute the
legal, valid and binding obligations of the Company, enforceable in
accordance with their respective terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating
to the enforcement of creditors' rights generally and by general
equitable principles.
8.6 APPROVALS. All authorizations, approvals and consents of,
and all filings and registrations with, all Governmental Authorities
and each other Person necessary for the execution, delivery or
performance of any Credit Document or for the validity or
enforceability thereof, except for the filings and recordings of the
Liens created pursuant to the Security Documents under the Amended and
Restated Revolving Credit Agreement, have been obtained by the Company
and are in full force and effect.
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8.7 REGULATIONS G, U AND X. Neither the Company nor any of its
Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation
G, U or X of the Board) and no Letter of Credit hereunder will be used
to acquire or carry, directly or indirectly, any such margin stock.
8.8 ERISA. The Company and each ERISA Affiliate have fulfilled
their contribution obligations under each Plan subject to Title IV of
ERISA and have fulfilled their obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan subject to
Title IV of ERISA, and in all other regard with respect to each Plan
are in material compliance with the applicable provisions of ERISA,
the Code, and all other applicable laws, regulations and rules, to the
extent that noncompliance with such provisions would result in a
Material Adverse Change. The Company has no knowledge of any event
with respect to each Plan which could result in a Material Adverse
Change.
8.9 TAXES. Each of the Company and its Subsidiaries has filed
all United States federal income tax returns and all other material
tax returns which are required to be filed by it and has paid all
taxes due pursuant to such returns or pursuant to any assessment
received by it, except to the extent the same may be contested in good
faith by appropriate proceedings diligently conducted for which
adequate reserves have been established in accordance with generally
accepted accounting principles. The charges, accruals and reserves on
the books of the Company and its Subsidiaries in respect of taxes and
other governmental charges, as made on a periodic basis, are adequate.
8.10 SUBSIDIARIES. SCHEDULE I is a complete and correct list, as
of the date of this Agreement, of all Subsidiaries of the Company.
All shares or other indicia of equity interest of the Restricted
Subsidiaries and the Special Subsidiary directly or indirectly owned
by the Company are free and clear of Liens, and all such shares are
validly issued, fully paid and non-assessable.
8.11 INVESTMENT COMPANY ACT. No member of the Combined Group is
an investment company within the meaning of the Investment Company Act
of 1940, as amended, or, directly or indirectly controlled by or
acting on behalf of any Person which is an investment company, within
the meaning of said Act.
8.12 PUBLIC UTILITY HOLDING COMPANY ACT. No member of the
Combined Group is a "public utility company", or, to the knowledge of
the Company, an "affiliate" or a "subsidiary company" of a "public
utility company", or a "holding company", or an "affiliate" or a
"subsidiary company" of a "holding company" or of a "subsidiary
company" of a "holding company", as such terms are
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defined in the Public Utility Holding Company Act of 1935, as amended.
8.13 ENVIRONMENTAL MATTERS. Except as disclosed in writing to
the Agent prior to the date hereof, the Company and its Subsidiaries,
and the plants and sites of each, have complied with all Applicable
Environmental Laws, except, in any such case, where such failure to so
comply would not result in a Material Adverse Change. Without
limiting the generality of the preceding sentence, neither the Company
nor any of its Subsidiaries has received notice of or has actual
knowledge of any actual or claimed or asserted failure so to comply
with Applicable Environmental Laws or of any other Environmental Claim
which alone or together with all other such failures or Environmental
Claims is material and would result in a Material Adverse Change. Except
as disclosed in writing to the Agent prior to the date hereof,
neither the Company nor any of its Subsidiaries nor their plants or
other sites manage, generate or dispose of, or during their respective
period of use, ownership, occupancy or operation by the Company or its
Subsidiaries have managed, generated, released or disposed of, any
hazardous wastes, hazardous substances, hazardous materials, toxic
substances or toxic pollutants, as those terms are used or defined in
the Applicable Environmental Laws, in material violation of or in a
manner which would result in liability under the Applicable
Environmental Laws or any other applicable Legal Requirement, or in a
manner which would result in an Environmental Claim except where such
noncompliance or liability or Environmental Claim would not result in
a Material Adverse Change. The representation and warranty contained
in this SECTION 8.13 is based in its entirety upon (a) current
interpretations and enforcement policies that have been publicly
disseminated and are used by Governmental Authorities charged with the
enforcement of the Applicable Environmental Laws or which apply to the
Company or any of its Subsidiaries with respect to any property or
sites in a particular jurisdiction and (b) current levels of publicly
disseminated scientific knowledge concerning the detection of, and the
health and environmental risks associated with the discharge of,
substances and pollutants regulated pursuant to the Applicable
Environmental Laws.
Section 9. COVENANTS. The Company agrees with the Banks and the
Agent that until the termination of this Agreement:
9.1 FINANCIAL STATEMENTS AND CERTIFICATES. The Company will
deliver in duplicate:
(a) to each Bank, as soon as practicable and in any event within
45 days after the end of each quarterly period (other than the last
quarterly period) in each fiscal year, consolidated and consolidating
statements of operations, stockholders' equity and cash flows of the
Company and its Subsidiaries for the period from the beginning of the
current fiscal year to the end of such quarterly period, and a
consolidated and consolidating balance
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sheet of the Company and its Subsidiaries as of the end of such
quarterly period, setting forth (1) as to each account affected
thereby, all eliminating entries for the Unrestricted Subsidiaries as
a group and for the Special Subsidiary, respectively, and (2) the
resulting consolidated and consolidating figures for the Company and
the Restricted Subsidiaries, and setting forth in each case in
comparative form figures for the corresponding period in the preceding
fiscal year, all in reasonable detail and unaudited but certified by
an authorized financial officer of the Company as fairly presenting
the financial position and results of operations of the Company and
its Subsidiaries as of the date thereof and the period then ended,
subject to changes resulting from year-end adjustments;
(b) to each Bank, as soon as practicable and in any event within
90 days after the end of each fiscal year, consolidated and
consolidating statements of operations, stockholders' equity and cash
flows of the Company and its Subsidiaries for such year, and a
consolidated and consolidating balance sheet of the Company and its
Subsidiaries as of the end of such fiscal year, setting forth (1) as
to each account affected thereby, all eliminating entries for the
Unrestricted Subsidiaries as a group and for the Special Subsidiary,
respectively, and (2) the resulting consolidating figures for the
Company and the Restricted Subsidiaries, and setting forth in each
case in comparative form corresponding consolidating figures from the
preceding annual audit, all in reasonable detail and which shall be
reported on by Price Waterhouse & Co. or other independent public
accountants of recognized national standing selected by the Company
whose report shall (A) contain an opinion that shall be unqualified as
to the scope or limitations imposed by the Company and shall not be
subject to any other material qualification and (B) state that such
financial statements present fairly, in all material respects, the
financial position of the Company and its Subsidiaries at the dates
indicated and their cash flows and the results of their operations and
the changes in their financial position for the periods indicated in
conformity with generally accepted accounting principles, and shall be
accompanied by a report of such independent public accountants stating
that (W) such audit was made for the purpose of forming an opinion on
the consolidated financial statements taken as a whole; (X) the
consolidating information set forth therein is presented for purposes
of additional analysis rather than to present the financial position,
results of operations and cash flows of the individual companies; (Y)
such consolidating information has been subjected to the auditing
procedures applied in the audit of the basic financial statements, and
(Z) in such independent public accountants' opinion, such
consolidating information is fairly stated in all material respects in
relation to the consolidated financial statements taken as a whole,
with such changes thereto as such accountants reasonably determine to
be appropriate under the circumstances;
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(c) to each Bank, promptly upon transmission thereof, copies of
all financial statements, proxy statements, notices and reports as it
shall send to its public stockholders and copies of all registration
statements (without exhibits, and other than registration statements
and reports relating to employee benefit or compensation plans) and
all reports which it files with the Securities and Exchange Commission
(or any governmental body or agency succeeding to the functions of the
Securities and Exchange Commission);
(d) to each Bank, promptly upon receipt thereof, a copy of each
other report submitted to the Company or any of its Subsidiaries by
independent accountants in connection with any annual, interim or
special audit made by them of the books of the Company or any such
Subsidiary;
(e) to each Bank, as soon as practicable and in any event within
15 days after any executive officer of the Company obtains knowledge
(1) of any Default or any condition or event which, in the opinion of
management of the Company, would have a Material Adverse Change (to
the extent affecting the Company and its Subsidiaries in a materially
different manner or extent than the oil and gas industry generally);
(2) that any Person has given any notice to the Company or any of its
Subsidiaries or taken any other action with respect to a claimed
default or event or condition of the type referred to in SECTION
10.1(b) or (m); (3) of the institution of any litigation involving
claims against the Company or any of its Subsidiaries equal to or
greater than $5,000,000 with respect to any single cause of action or
of any adverse determination in any court proceeding in any litigation
involving a potential liability to the Company or any of its
Subsidiaries equal to or greater than $5,000,000 with respect to any
single cause of action which makes the likelihood of an adverse
determination in such litigation against the Company or such
Subsidiary substantially more probable, or (4) of any regulatory
proceeding which, if determined adversely to the Company, would have a
Material Adverse Change (to the extent affecting the Company and its
Subsidiaries in a materially different manner or extent than the oil
and gas industry generally), an Officer's Certificate specifying the
nature and period of existence of any such Default, condition or
event, or specifying the notice given or action taken by such Person
and the nature of any such claimed Default, event or condition, or
specifying the details of such proceeding, litigation or dispute and,
in each case, what action the Company or any of its Subsidiaries has
taken, is taking or proposes to take with respect thereto;
(f) to each Bank, (1) promptly after the filing or receiving
thereof, copies of all annual reports and such other material reports
and notices which the Company or any ERISA Affiliate files under ERISA
with the Internal Revenue Service, the PBGC or the U.S. Department of
Labor with respect to a Plan that is subject to Title
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IV of ERISA; (2) promptly upon acquiring knowledge of any "reportable
event" (as defined in Section 4043 of ERISA) or of any "prohibited
transaction," as such term is defined in the Code or ERISA, in
connection with any Plan which may result in a Material Adverse
Change, a statement executed by the president or chief financial
officer of the Company or the applicable ERISA Affiliate, setting
forth the details thereof and the action which the Company or the
ERISA Affiliate proposes to take with respect thereto and, when known,
any action taken by the PBGC, the Internal Revenue Service or the U.S.
Department of Labor with respect thereto; (3) promptly after the
filing or receiving thereof by the Company or any ERISA Affiliate, any
notice of the institution of any proceedings or other actions which
may result in the termination of any Plan or notice of complete or
partial withdrawal liability under Title IV of ERISA, and (4) each
request for waiver of the funding standards or extension of the
amortization periods required by Sections 303 and 304 of ERISA or
Section 412 of the Code promptly after the request is submitted by the
Company or any ERISA Affiliate, to the Secretary of the Treasury, the
U.S. Department of Labor or the Internal Revenue Service, as the case
may be;
(g) to each Bank, as soon as available but in no event later
than February 28 of each year, an Independent Engineering Report
reflecting data as of December 31 of the prior year; and
(h) to each Bank, with reasonable promptness, such other
information respecting the business, financial condition or results of
operations of the Company or any of its Subsidiaries as such Bank may
reasonably request.
Additionally, the Company will deliver to each Bank:
(x) Together with each delivery of financial statements required
by SUBSECTION (a) above, each Required Reserve Report and each
Optional Reserve Report, an Officer's Certificate and a Coverage
Report demonstrating (with computations in reasonable detail)
compliance by the Company and the Restricted Subsidiaries with the
provisions of SECTIONS 9.6, 9.7(b)(3), (4) and (6), 9.7(c)(2) and (3),
9.7(d), 9.7(e), 9.7(f), 9.7(g) and 9.9, demonstrating that no Default
exists under SECTION 10.1(i) and stating that there then exists no
Default, or, if any Default exists, specifying the nature and period
of existence thereof and what action the Company proposes to take with
respect thereto.
(y) Together with each delivery of financial statements required
by SUBSECTION (b) above, a certificate of such accountants stating
that, in conducting the audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards
they have obtained no knowledge of any Default arising under SECTION
10.1(a), (b) or (i) or any Default arising under SECTION 10.1(d) that
occurs as result of the breach or violation by the Company or the
Restricted Subsidiaries of SECTIONS 9.6, 9.7(b),
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(c), (d), (e), (f), (g), (h), (i) or 9.8, or, if they have obtained
knowledge of any such Default, specifying the nature and period of
existence thereof. Such accountants, however, shall not be liable to
the Agent or any Bank by reason of their failure to obtain knowledge
of any such Default which would not be disclosed in the course of an
audit conducted in accordance with generally accepted auditing
standards. The Company also covenants that forthwith upon the chief
executive officer, principal financial officer or principal accounting
officer of the Company obtaining knowledge of a Default, it will
deliver to each Bank an Officer's Certificate specifying the nature
and period of existence thereof and what action the Company proposes
to take with respect thereto.
(z) Together with each delivery of financial statements required
by SUBSECTIONS (a) or (b) above, the Company will deliver to each Bank
a pro forma statement of operations of the Company and its Restricted
Subsidiaries for the same fiscal period as such financial statements
that assumes that the impairments of oil and gas properties taken by
the Company and its Restricted Subsidiaries in the fourth quarter of
1993 in the amount of up to $100 million as reflected in the Company's
consolidated financial statements for the year ended December 31,
1993, shall not have occurred and a calculation in reasonable detail
showing the determination of Consolidated Net Earnings and Unimpaired
Consolidated Net Earnings for such fiscal period.
9.2 INSPECTION OF PROPERTY. The Company covenants that it will
permit any Person designated in writing by any Bank, at such Bank's
expense and risk, to visit and inspect any of the properties of the
Company and its Subsidiaries; and also to examine the corporate books
and financial records of the Company and its Subsidiaries and to make
copies thereof or extracts therefrom and to discuss the affairs,
finances and accounts of such Persons with the executive officers of
the Company, the petroleum reserve engineers employed by the Company
and its Subsidiaries and the Company's independent public accountants,
all at such reasonable times, with a representative of the Company
present and as often as such Bank may reasonably request, and will
assist such Person or Persons in all such activities.
9.3 COMPLIANCE WITH ENVIRONMENTAL LAWS. The Company will, and
will cause each of its Subsidiaries and each of its Affiliates that
are controlled by the Company or its Subsidiaries to, comply in a
timely fashion with, or operate pursuant to valid waivers of the
provisions of, all Applicable Environmental Laws, except where
non-compliance would neither (a) result in a Material Adverse Change nor
(b) subject the Agent or any Bank to any liability for such
non-compliance (PROVIDED that the Company shall not be in default of this
SUBSECTION (b) if the Company indemnifies each of the Agent, Banks or
any of them subjected to such liability and provides collateral to
secure such indemnification, all to the extent required by the Person
subjected to such liability in its
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sole and unfettered discretion). THE COMPANY AGREES TO INDEMNIFY AND
HOLD THE AGENT AND EACH BANK, AND THEIR RESPECTIVE OFFICERS, AGENTS
AND EMPLOYEES HARMLESS FROM ANY LOSS, LIABILITY, CLAIM OR EXPENSE
WHICH ANY SUCH PERSON MAY INCUR OR SUFFER AS A RESULT OF A BREACH BY
THE COMPANY OR ITS SUBSIDIARIES OR AFFILIATES, AS THE CASE MAY BE, OF
THIS COVENANT. The Company shall not be deemed to have breached or
violated this SECTION 9.3 if the Company or its Subsidiary or
Affiliate, as the case may be, is challenging in good faith by
appropriate proceedings diligently pursued the application or
enforcement of any such Applicable Environmental Laws for which
adequate reserves have been established in accordance with generally
accepted accounting principles.
9.4 PAYMENT OF TAXES. The Company will, and will cause each of
its Subsidiaries to, pay, or have paid on its behalf, before the same
become delinquent all taxes, assessments and governmental charges
imposed upon it or upon its property, except to the extent contested
in good faith by appropriate proceedings diligently conducted for
which adequate reserves have been established in accordance with
generally accepted accounting principles.
9.5 MAINTENANCE OF INSURANCE. The Company covenants that it and
each of its Subsidiaries will carry and maintain insurance (subject to
self-insurance in the maximum amount of $10,000,000, customary
deductibles and retentions) in at least such amounts and against such
liabilities and hazards and by such methods as customarily maintained
by other companies operating similar businesses and, together with
each delivery of financial statements required by SECTION 9.1(b), will
deliver to the Agent for each Bank an Officer's Certificate specifying
the details of such insurance in effect. Upon the request of the
Agent or any Bank, the Company shall promptly deliver to the Agent one
or more current certificates of the insurer or insurers providing the
insurance required by this SECTION 9.5 to the effect that such
insurance may not be canceled, reduced or affected in any manner
without 30 days' prior written notice to the Agent.
9.6 RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS. The Company
will not and will not permit any Restricted Subsidiary to (a) make any
Restricted Investment; (b) pay or declare any dividend on any class of
its stock or make any other distribution on account of any class of
its stock, or redeem, purchase or otherwise acquire, directly or
indirectly, any shares of its stock, or (c) make any additional
Investment in the Special Subsidiary (all of the foregoing described
in SUBSECTIONS (b) and (c) above being herein called "RESTRICTED
PAYMENTS") (1) except out of Consolidated Net Earnings Available for
Restricted Payments and Restricted Investments; PROVIDED that the
Company or any wholly owned Restricted Subsidiary may, without
violation of this clause, in a single transaction or a series of
publicly announced related transactions to be completed within six
months, make an Investment in the Special Subsidiary which results in
the ownership by the
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Company and the wholly owned Restricted Subsidiaries of 100% of the
outstanding general and limited partner interests in the Special
Subsidiary; PROVIDED FURTHER that the amount of such Investment shall
be included in any subsequent computations of Restricted Payments and
of Consolidated Net Earnings Available for Restricted Payments and
Restricted Investments under this Section unless immediately after
giving effect to such Investment in the Special Subsidiary, the
Special Subsidiary is designated as a Restricted Subsidiary; (2)
unless, after giving effect to any such Restricted Investment or
Restricted Payment, as the case may be, (A) no Default shall have
occurred and be continuing and (B) the Company could incur at least
$1.00 of additional Funded Debt without violation of SECTION
9.7(b)(3), and (3) unless, in the case of Investments in the Special
Subsidiary, such Investment shall otherwise be permitted by SECTION
9.7(g).
"CONSOLIDATED NET EARNINGS AVAILABLE FOR RESTRICTED PAYMENTS AND
RESTRICTED INVESTMENTS" shall mean an amount equal to
(a) the sum of (1) $45,000,000; (2) 100% (or minus 100% in case
of a deficit) of Unimpaired Consolidated Net Earnings for the period
(taken as one accounting period) commencing on April 1, 1990 (the
"COMMENCEMENT DATE") and terminating at the end of the last fiscal
quarter preceding the date of any proposed Restricted Investment or
Restricted Payment, as the case may be; (3) the net cash proceeds
received by the Company or any Restricted Subsidiary from the sale of
any shares of its stock on or after the Commencement Date, except (A)
any such proceeds used as a basis, for a prepayment in respect of the
then-outstanding notes issued under the Serial Note Agreement pursuant
to Paragraphs 4A, 4B or 4C thereof and (B) any proceeds from the sale
of stock to the Company or any of its Subsidiaries on or after the
Commencement Date; (4) the net cash proceeds received by the Company
or any Restricted Subsidiary from the sale, on or after the
Commencement Date, of any convertible debt security which has been
converted into stock of the Company or a Restricted Subsidiary, except
(A) any such proceeds used as a basis for a prepayment in respect of
the then-outstanding notes issued under the Serial Note Agreement
pursuant to Paragraphs 4A, 4B or 4C thereof and (B) any proceeds from
the sale of such convertible debt security to the Company or any of
its Subsidiaries; (5) any cash distributions from the Special
Subsidiary received by the Company or any Restricted Subsidiary on or
after the Commencement Date, and (6) any return of capital from
Unrestricted Subsidiaries or Restricted Investments received by the
Company or any Restricted Subsidiary on or after the Commencement
Date, less
(b) the sum of all Restricted Investments and all Restricted
Payments made on or after the Commencement Date.
There shall not be included in Restricted Payments or in any
computation of Consolidated Net Earnings Available for Restricted
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Payments and Restricted Investments (w) dividends paid or declared in
respect of stock held by any Person, or distributions made to any
Person, in stock of the Company or any Restricted Subsidiary; (x)
exchanges of stock of one or more classes of the Company or any
Restricted Subsidiary for common stock of the Company or such
Restricted Subsidiary, as the case may be, or for stock of the Company
or such Restricted Subsidiary, as the case may be, of the same class,
except to the extent that cash or other value is involved in such
exchange; (y) dividends paid or declared in respect of stock held by,
or distributions made to, or redemptions, purchases or other
acquisitions of stock made from, the Company or a wholly owned
Restricted Subsidiary, or (z) any advances to the Special Subsidiary
not in excess of $20,000,000 in the aggregate at any one time
outstanding that are repaid in full within 60 days pursuant to
customary cash management services provided to the Special Subsidiary.
The term "stock" as used in this Section shall include warrants,
options to purchase stock and redeemable rights.
9.7 LIEN, DEBT AND OTHER RESTRICTIONS. The Company will not and
will not permit any Restricted Subsidiary to:
(a) LIENS. Create, assume or suffer to exist any Lien upon any
of its properties or assets, whether now owned or hereafter acquired
except
(1) Liens for taxes or assessments or other governmental
charges or levies not yet due or which are being actively contested in
good faith by appropriate proceedings;
(2) Liens (including mechanics' and materialmen's liens,
landlord liens, easements, rights-of-way or the like) incidental to
the conduct of its business or the ownership of its property and
assets which are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than advances or
credit on open account, includable in current liabilities, for goods
and services in the ordinary course of business and on terms and
conditions which are customary in the oil, gas and mineral exploration
and development business) or the guaranteeing of the obligations of
another Person, and which do not in the aggregate materially detract
from the value of its property or assets or materially impair the use
thereof in the operation of its business;
(3) Liens for lessor's royalties, overriding royalties, net
profits interests, carried interests, reversionary interests and other
similar burdens, production sales contracts, division orders,
contracts for the sale, purchase, exchange, or processing of
hydrocarbons, unitization and pooling designations, declarations,
orders and agreements, operating agreements, agreements of
development, area of mutual interest agreements, gas balancing or
deferred production agreements, processing agreements, plant
agreements, pipeline gathering and transportation agreements,
injection, repressuring and recycling agreements, salt water or
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other disposal agreements, seismic or geophysical permits or
agreements, and other agreements which are customary in the oil, gas
and mineral exploration and development business or in the business of
processing gas and gas condensate production for the extraction of
products therefrom, if the net cumulative effect of such burdens does
not operate to reduce the net revenue interest of any oil and gas
properties to less than (A) the "Net Revenue Interest" set forth in
the Most Recent Engineering Report for those oil and gas properties
included in the Most Recent Engineering Report or (B) the net revenue
interest so acquired for those oil and gas properties acquired after
the date of the Most Recent Engineering Report; PROVIDED that such
Liens are not incurred in connection with the borrowing of money or
the obtaining of advances or credit (other than advances or credit on
open account, includable in current liabilities, for goods and
services in the ordinary course of business and on terms and
conditions which are customary in the oil, gas and mineral exploration
and development business) or the guaranteeing of the obligations of
another Person;
(4) Liens described in SCHEDULE II securing Debt of the
Company or a Restricted Subsidiary set forth in SCHEDULE II;
(5) the Springing Lien, Liens existing on any real property
of any Person at the time such Person becomes a Restricted Subsidiary,
or any Liens existing prior to the time of acquisition upon any real
property acquired by the Company or any Restricted Subsidiary through
purchase, merger or consolidation or otherwise, whether or not the
obligation secured by such Lien is assumed by the Company or such
Restricted Subsidiary; PROVIDED that except as otherwise permitted by
SECTION 9.7(a), any such Springing Lien or Lien (A) shall not encumber
any other property of the Company or any Restricted Subsidiary and (B)
shall not have been created in anticipation of such Person becoming a
Restricted Subsidiary or in anticipation of the acquisition by the
Company or any Restricted Subsidiary of the real property secured
thereby;
(6) Liens placed on property at the time of acquisition,
construction, development or improvement thereof, or created in
respect of such property within six months after the time of
acquisition thereof or the commencement of construction, development
or improvement thereof, as the case may be, to secure all or a portion
of (or to secure Debt incurred to pay all or a portion of) the
purchase price of such acquisition, or the cost of such construction,
development or improvement, as the case may be; PROVIDED that (A) such
property is not and shall not thereby become encumbered in an amount
in excess of the lesser of the cost or fair market value thereof; (B)
except as otherwise permitted in SECTION 9.7(a), any such Lien shall
not encumber any other property of the Company or a Restricted
Subsidiary, and (C) any such Lien shall not encumber property of the
Company or a Restricted Subsidiary for the purpose of securing an
obligation of the Company or a Restricted Subsidiary or securing a
Guaranty by the Company or any
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Restricted Subsidiary in connection with the sale, exchange, transfer
or other disposition by the Company or a Restricted Subsidiary of net
profits interests; PROVIDED that the Company or a Restricted
Subsidiary may assign all or part of the proceeds of production of
property in which a net profits interest has been granted to secure
its obligation to make net profits interests payments therefrom; and
PROVIDED FURTHER that any such Lien shall not encumber any other
property of the Company or any Restricted Subsidiary;
(7) Liens on the capital stock of a Restricted Subsidiary
acquired after April 11, 1990 by the Company or a Restricted
Subsidiary and created or assumed contemporaneously with such
acquisition, to secure Debt assumed or incurred to finance all or a
part of the purchase price of such acquisition;
(8) Liens on the capital stock of an Unrestricted Subsid-
iary other than the Special Subsidiary;
(9) from and after the time that the Company and the wholly
owned Restricted Subsidiaries shall have become the owners of all of
the outstanding general and limited partner interests in the Special
Subsidiary, (A) Liens on all or any portion of the limited partner
interests in SFEP, at such times as SFEP shall be an Unrestricted
Subsidiary or (B) at such times as SFEP shall be a Restricted
Subsidiary, Liens securing Debt incurred to finance all or a part of
the purchase price of limited partner interests in the Special
Subsidiary acquired by the Company and the wholly owned Restricted
Subsidiaries from Persons other than the Special Subsidiary in a
single transaction or a series of publicly announced related
transactions that were completed within six months and that result in
the ownership by the Company and the wholly owned Restricted
Subsidiaries of 100% of the general and limited partner interests
therein; PROVIDED that the Liens described in this CLAUSE (B) shall
extend only to the limited partner interests so acquired;
(10) Liens on property of the Company or a Restricted
Subsidiary to secure Debt assumed or incurred in the form of
Capitalized Lease Obligations or industrial revenue bonds, pollution
control bonds or similar tax-exempt financings; PROVIDED that any such
Lien shall not encumber any property of the Company or a Restricted
Subsidiary other than the property the acquisition or construction of
which is financed or refinanced, in whole or in part, with proceeds
from such Debt;
(11) Liens created pursuant to the Security Documents under
the Amended and Restated Revolving Credit Agreement;
(12) any Lien renewing or extending any Lien permitted by
CLAUSES (4), (5), (6), (7), (8), (9), (10) or (11) above; PROVIDED
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that the principal amount of the Debt secured thereby is not increased
and such Lien is not extended to other property; and
(13) other Liens on any property of the Company or a
Restricted Subsidiary securing any Funded Debt of the Company or a
estricted Subsidiary permitted by SECTION 9.7(b)(3)(C) or (4)(C).
(b) DEBT. Create, incur, assume or suffer to exist any Debt,
except
(1) Funded Debt of the Company under the Amended and
Restated Revolving Credit Agreement and Funded Debt of the Company
hereunder or represented by the notes issued pursuant to the Serial
Note Agreement;
(2) Funded Debt of the Company or any Restricted Subsidiary
set forth in SCHEDULE II, which may not be renewed, extended, refunded
or permitted to remain outstanding after the stated maturities thereof
except by the Person primarily liable thereon and unless, after giving
effect to such renewal, extension or refunding, neither the principal
amount thereof nor the aggregate Funded Debt of the Company and the
Restricted Subsidiaries is increased thereby;
(3) Funded Debt of the Company if at the time it is
created, incurred or assumed and after giving effect thereto, to the
receipt of the proceeds thereof, and to the concurrent retirement of
any Debt, (A) the aggregate amount of all Funded Debt of the Company
and the Restricted Subsidiaries shall not exceed 65% of Consolidated
Net Tangible Assets; (B) Consolidated Net Earnings Available for Fixed
Charges for the four fiscal quarters of the Company (taken as a single
period) most recently ended shall equal at least 225% of Fixed Charges
for the four fiscal quarters of the Company (taken as a single period)
commencing with and including the fiscal quarter during which such
Funded Debt is created, incurred or assumed, and (C) (1) for any such
creation, incurrence or assumption occurring prior to December 31,
1998, Priority Debt (other than Existing Priority Debt) shall not
exceed the lesser of (y)(I) 40% of Consolidated Net Tangible Assets
minus (II) Existing Priority Debt and (z) 33% of Consolidated Net
Tangible Assets, and (2) for any such creation, incurrence or
assumption occurring on or after December 31, 1998, Priority Debt
shall not exceed 33% of Consolidated Net Tangible Assets, and (3) if
such Funded Debt is Secured Debt, Special Debt shall not exceed 10% of
Consolidated Net Tangible Assets;
(4) Funded Debt of a Restricted Subsidiary if at the time
it is created, incurred or assumed and after giving effect thereto, to
the receipt of the proceeds thereof, and to the concurrent retirement
of any Debt, (A) the aggregate amount of all Funded Debt of the
Company and the Restricted Subsidiaries shall not exceed 65% of
Consolidated Net Tangible Assets; (B)
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Consolidated Net Earnings Available for Fixed Charges for the four
fiscal quarters of the Company (taken as a single period) most
recently ended shall equal at least 225% of Fixed Charges for the four
fiscal quarters of the Company (taken as a single period) commencing
with and including the fiscal quarter during which such Funded Debt is
created, incurred or assumed, and (C) (1) for any such creation,
incurrence or assumption occurring prior to December 31, 1998,
Priority Debt (other than Existing Priority Debt) shall not exceed the
lesser of (y)(I) 40% of Consolidated Net Tangible Assets minus (II)
Existing Priority Debt and (z) 33% of Consolidated Net Tangible
Assets, and (2) for any such creation, incurrence or assumption
occurring on or after December 31, 1998, Priority Debt shall not
exceed 33% of Consolidated Net Tangible Assets, and (3) Special Debt
shall not exceed 10% of Consolidated Net Tangible Assets;
(5) Debt of the Company owing to a wholly owned Restricted
Subsidiary which is subordinated to the Obligations upon terms set
forth on SCHEDULE V, and Debt of a Restricted Subsidiary owing to the
Company or any other wholly owned Restricted Subsidiary; and
(6) Current Debt of the Company not secured by any Lien on
any property owned by the Company or the Restricted Subsidiaries;
PROVIDED that for a period of at least 45 consecutive days in each
period of 18 consecutive months commencing April 1, 1990, the amount
of Current Debt (other than Current Debt existing pursuant to
customary cash management services provided to the Special Subsidiary
which is repaid in full within 60 days) permitted by this clause shall
at no time exceed the maximum amount of Funded Debt that the Company
could then incur under SECTION 9.7(b)(3) without violation thereof.
For purposes of this SECTION 9.7(b), any Debt (i) which is
extended, renewed or refunded shall be deemed to have been incurred
when extended, renewed or refunded (except as provided pursuant to
CLAUSE (2) above); (ii) of a Person when it becomes, or is merged
into, or is consolidated with a Restricted Subsidiary or the Company
shall be deemed to have been incurred at that time; (iii) which is
permitted by CLAUSE (5) above and which is owing to a wholly owned
Restricted Subsidiary when it ceases to be a wholly owned Restricted
Subsidiary shall be deemed to have been incurred at that time; (iv) of
a Restricted Subsidiary which is owing to the Company or any other
Restricted Subsidiary shall be deemed to have been incurred at the
time the Company or such other Restricted Subsidiary disposes of such
Debt to any Person other than the Company or a wholly owned Restricted
Subsidiary; (v) which is Funded Debt of the Company or a Restricted
Subsidiary consisting of a reimbursement obligation in respect of a
letter of credit or similar instrument shall be deemed to be incurred
when such letter of credit or similar instrument is issued, or (vi)
which is Funded Debt of the type described in CLAUSE (b) of the
definition of
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Funded Debt, or any Guaranty of such Funded Debt, shall not be deemed
to have been created, incurred or assumed, as the case may be, at the
time it becomes Funded Debt, but shall be included in all subsequent
calculations of Funded Debt for all purposes of this Agreement.
(c) SALE OF LESS THAN SUBSTANTIALLY ALL ASSETS. Sell, exchange,
transfer or otherwise dispose of part, but less than all or
substantially all, of their respective assets, unless
(1) such sale, exchange, transfer or other disposition is
made in the ordinary course of business (including abandonments,
farm-ins, farm-outs, leases and subleases of developed or undeveloped
properties owned or held by the Company or any Restricted Subsidiary
that are made or entered into in the ordinary course of business, but
EXCLUDING, however, any sale of net profits interests in developed oil
and gas properties); or
(2) after giving effect to such sale, exchange, transfer or
other disposition, (A) the aggregate net book value of (i) all assets
of the Company and the Restricted Subsidiaries (including the sale of
net profits interests in developed oil and gas properties) sold,
exchanged, transferred or otherwise disposed of (on a consolidated
basis) (but excluding assets sold, exchanged, transferred or otherwise
disposed of in the ordinary course of business pursuant to SECTION
9.7(c)(1)) during the period of 12 consecutive months immediately
preceding such sale, exchange, transfer or other disposition and (ii)
the assets of all Restricted Subsidiaries, the stock of which have
been sold or otherwise disposed of pursuant to SECTION 9.7(d)(2)(A)
during such 12-month period shall not exceed 10% of Consolidated Net
Tangible Assets of the Company and the Restricted Subsidiaries as of
the end of the fiscal quarter immediately preceding or coinciding with
such sale, exchange, transfer or other disposition, and (B) the assets
described in the foregoing CLAUSE (A) shall not have contributed more
than 10% of EBITD of the Company and the Restricted Subsidiaries for
the four most recently completed fiscal quarters taken as a single
accounting period; or
(3) after giving effect to such sale, exchange, transfer or
other disposition, (A) the aggregate net book value of (i) all assets
of the Company and the Restricted Subsidiaries (including the sale of
net profits interests in developed oil and gas properties) sold,
exchanged, transferred or otherwise disposed of (on a consolidated
basis) (but excluding assets sold, exchanged, transferred or otherwise
disposed of pursuant to SECTION 9.7(c)(1) and (2)) during the period
of 12 consecutive months immediately preceding such sale, exchange,
transfer or other disposition and (ii) the assets of all Restricted
Subsidiaries, the stock of which has been sold or otherwise disposed
of pursuant to SECTION 9.7(d)(2)(B) during such 12-month period, shall
not exceed 10% of Consolidated Net Tangible Assets of the Company and
the Restricted
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Subsidiaries as of the end of the fiscal quarter immediately preceding
or coinciding with such sale, exchange, transfer or other disposition;
(B) the assets described in the foregoing CLAUSE (A) shall not have
contributed more than 10% of EBITD for the four most recently
completed fiscal quarters taken as a single accounting period, and (C)
within six months after such sale, exchange, transfer or other
disposition, the net proceeds thereof are applied toward, or the
exchange results in, (1) the acquisition by the Company or a
Restricted Subsidiary of (i) assets which have an aggregate fair
market value at least equal to the net proceeds received by the
Company and its Restricted Subsidiaries from such sale, exchange,
transfer or other disposition; (ii) if the assets so sold, exchanged,
transferred or otherwise disposed of were located in the United States
of America or Canada, the assets acquired are located in the United
States of America or Canada, and (iii) the assets so acquired are of a
type usual and customary in the oil and gas business; PROVIDED that no
Liens shall at any time exist on the assets so acquired which secure
any Debt except as permitted by SECTION 9.7(a)(13) or (2) the
prepayment of an aggregate principal amount of all Obligations plus
accrued interest and premium, if any, thereon in accordance with this
Agreement and the Amended and Restated Revolving Credit Agreement, or
the payment of an aggregate principal amount of other Funded Debt
(other than Funded Debt subordinate in right of payment to the
Obligations) plus accrued interest and premium, if any, in either case
in an amount at least equal to the aggregate net proceeds that the
Company or a Restricted Subsidiary receives from the sale, exchange,
transfer or other disposition of such assets.
(d) SALE OF STOCK OF RESTRICTED SUBSIDIARIES. Sell or otherwise
dispose of, or part with control of, any shares of stock of any
Restricted Subsidiary, except (1) to the Company or another wholly
owned Restricted Subsidiary and (2) that all shares of stock of any
Restricted Subsidiary at the time owned by the Company and all
Restricted Subsidiaries may be sold as an entirety for a cash
consideration which represents the fair market value (as determined in
good faith by the Board of Directors of the Company) at the time of
sale of the shares of stock so sold; PROVIDED that for purposes of
this exception:
(A) (i) the net book value of the assets of such Restricted
Subsidiary together with (x) the net book value of the assets of any
other Restricted Subsidiary the stock of which was sold during the
preceding 12-month period and (y) the net book value of the assets of
the Company and all Restricted Subsidiaries sold, exchanged,
transferred or otherwise disposed of pursuant to SECTION 9.7(c)(2)
during the preceding 12-month period, does not represent more than 10%
of Consolidated Net Tangible Assets as of the end of the fiscal
quarter immediately preceding or coinciding with such sale, exchange,
transfer or other disposition and (ii) the earnings of such Restricted
Subsidiary together with (x) the earnings of any other Restricted
Subsidiary the stock of which was
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sold or otherwise disposed of pursuant to the exception described in
this CLAUSE (A) during the preceding 12-month period and (y) the
earnings attributable to the assets sold, exchanged, transferred or
otherwise disposed of pursuant to SECTION 9.7(c)(2) during such
12-month period, do not represent more than 10% of EBITD for the four
most recently completed fiscal quarters taken as a single accounting
period; and PROVIDED FURTHER that, at the time of such sale, such
Restricted Subsidiary shall not own, directly or indirectly, any
shares of stock of the Company or any other Restricted Subsidiary
unless all of the shares of stock of such other Restricted Subsidiary
owned, directly or indirectly, by the Company and all Restricted
Subsidiaries are simultaneously being sold as permitted by the
exception described in this CLAUSE (A); or
(B) (i) the net book value of the assets of such Restricted
Subsidiary together with (x) the net book value of the assets of any
other Restricted Subsidiary the stock of which was sold during the
preceding 12-month period and (y) the net book value of the assets of
the Company and any Restricted Subsidiary sold, exchanged, transferred
or otherwise disposed of pursuant to SECTION 9.7(c)(3) during the
preceding 12-month period, does not represent more than 10% of the
Consolidated Net Tangible Assets as of the end of the fiscal quarter
immediately preceding or coinciding with such sale, exchange, transfer
or other disposition; (ii) the earnings of such Restricted Subsidiary
together with (x) the earnings of any other Restricted Subsidiary the
stock of which was sold or otherwise disposed of pursuant to the
exception described in this CLAUSE (B) during the preceding 12-month
period and (y) the earnings attributable to the assets sold,
exchanged, transferred or otherwise disposed of pursuant to SECTION
9.7(c)(3) during such 12-month period, do not represent more than 10%
of EBITD for the four most recently completed fiscal quarters taken as
a single accounting period, and (iii) within six months after such
sale or other disposition, the proceeds thereof are applied toward (i)
the acquisition by the Company or a Restricted Subsidiary of (1)
assets which have an aggregate fair market value at least equal to the
net proceeds received by the Company and the Restricted Subsidiaries
from such sale or other disposition and (2) the assets so acquired are
of a type usual and customary in the oil and gas business; PROVIDED
that no Liens shall at any time exist on the assets so acquired which
secure any Debt except as permitted by SECTION 9.7(a)(13), or (ii) the
prepayment of an aggregate principal amount of all Obligations in
accordance with this Agreement and the Amended and Restated Revolving
Credit Agreement, or the payment of an aggregate principal amount of
other Funded Debt (other than Funded Debt subordinate in right of
payment to the Obligations) plus accrued interest and premium, if any,
in either case in an amount at least equal to the aggregate net
proceeds that the Company or a Restricted Subsidiary receives from the
sale or other disposition; and PROVIDED FURTHER that, at the time of
such sale or other disposition, such Restricted Subsidiary shall not
own, directly or indirectly, (y) any shares of stock of the Company
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or any other Restricted Subsidiary unless all of the shares of stock
of such other Restricted Subsidiary owned, directly or indirectly, by
the Company and all Restricted Subsidiaries are simultaneously being
sold as permitted by the exception described in this CLAUSE (B).
(e) MERGER AND SALE OF ALL OR SUBSTANTIALLY ALL ASSETS. Merge
or consolidate with or into any other Person or convey, exchange,
transfer or otherwise dispose of all or a substantial part of its
assets (I.E., assets which could not otherwise be disposed of pursuant
to SECTION 9.7(c)(2) or (3)) to any Person except that
(1) any wholly owned Restricted Subsidiary may merge with
the Company (PROVIDED that the Company shall be the continuing or
surviving corporation) or with any one or more other wholly owned
Restricted Subsidiaries;
(2) any Restricted Subsidiary may sell, exchange, transfer
or otherwise dispose of any of its assets to the Company or to a
wholly owned Restricted Subsidiary;
(3) any Restricted Subsidiary may sell, exchange, transfer
or otherwise dispose of all or substantially all of its assets subject
to the conditions and provisions specified in SECTIONS 9.7(c)(2) and
(3);
(4) any Restricted Subsidiary may merge into or consolidate
with any Person which does not thereupon become a Restricted
Subsidiary, subject to the conditions and provisions specified in
SECTION 9.7(d) with respect to a sale or other disposition of the
stock of such Restricted Subsidiary;
(5) any Restricted Subsidiary may permit any Person to be
merged into such Restricted Subsidiary or may consolidate with or
merge into a Person which thereupon becomes a Restricted Subsidiary;
PROVIDED that immediately after any such merger or consolidation, no
Default shall have occurred and be continuing;
(6) the Company may permit any Person to be merged into the
Company (such that the Company shall be the continuing or surviving
corporation); and
(7) the Company may permit any corporation to consolidate
with the Company and the Company may merge into or otherwise dispose
of its assets as an entirety or substantially as an entirety to any
solvent corporation organized under the laws of the United States of
America or any state thereof and having at least 80% of its
consolidated assets located in the United States of America and Canada
which expressly assumes in writing the due and punctual performance of
the obligations of the Company under the Credit Documents, to the same
extent as if such successor or
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transferee corporation had originally executed the Credit Documents in
the place of the Company (it being agreed that such assumption shall,
upon the request of any Bank and at the expense of such successor or
transferee corporation, be evidenced by the exchange of each
outstanding Application for another Application executed by such
successor or transferee corporation, with such changes in phraseology
and form as may be appropriate but in substance of like terms as the
Application surrendered for such exchange and of like unpaid principal
amount, and that each Application executed pursuant to this Agreement
after such assumption shall be executed by and in the name of such
successor or transferee corporation);
PROVIDED that for purposes of SECTIONS 9.7(e)(6) and (7) immediately
after such merger, consolidation, sale or other disposition, and after
giving effect thereto, (x) such successor or transferee Person could
incur at least $1.00 of additional Funded Debt without violation of
SECTION 9.7(b)(3) and (y) no Default shall have occurred and be
continuing. As soon as practicable, and in any event at least 75 days
prior to the proposed consummation date of any merger, consolidation,
sale or other disposition described in SECTION 9.7(e)(7), the Company
shall give written notice thereof to each Bank describing in
reasonable detail the proposed transaction, the date on which it is
proposed to be consummated and the identity, jurisdiction of
organization, and geographic composition of assets of the proposed
successor or transferee corporation. No disposition by the Company of
its assets as an entirety or substantially as an entirety under
SECTION 9.7(e)(7) shall release the Company as the applicant under any
Application from its liability as obligor thereon.
(f) SALE AND LEASEBACK. Enter into any Sale and Leaseback
Transaction unless:
(1) immediately after giving effect thereto and to the
application of any sales proceeds received in connection therewith,
Special Debt shall not exceed 10% of the Consolidated Net Tangible
Assets; or
(2) the net sales proceeds received by the Company or a
Restricted Subsidiary in respect of the assets sold pursuant to such
Sale and Leaseback Transaction are greater than or equal to the fair
market value of the assets sold (which determination shall be based
upon a written opinion (the cost of which shall be borne exclusively
by the Company) as to valuation from an independent valuation expert
selected by the Company) and such proceeds are concurrently applied to
(A) the purchase, acquisition, development or construction of assets
having a value at least equal to such net proceeds, and to be used in
the Company's or such Restricted Subsidiary's business; PROVIDED that
no Liens shall at any time exist on such assets which secure any Debt
except as permitted by SECTION 9.7(a)(13); (B) the prepayment in
accordance with this Agreement of any aggregate principal amount of
all the Obligations
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(plus accrued interest and premium, if any) at least equal to the
amount of such net proceeds; or (C) the payment of other Funded Debt
(other than Funded Debt subordinate in right of payment to the
Obligations) in an aggregate principal amount at least equal to the
amount of such net sales proceeds; or
(3) the Sale and Leaseback Transaction involves the sale of
assets by the Company to a wholly owned Restricted Subsidiary or by a
Restricted Subsidiary to the Company or to another wholly owned
Restricted Subsidiary; PROVIDED that if the Company is the seller
under any such Sale and Leaseback Transaction, its lease obligations
thereunder shall be subordinated to the Obligations represented by the
Applications upon terms set forth on SCHEDULE V.
(g) INVESTMENTS IN THE SPECIAL SUBSIDIARY. Directly or
indirectly make an Investment in the Special Subsidiary after
March 31, 1990, unless (1) the aggregate amount of all other
Investments in the Special Subsidiary made, directly or indirectly, by
the Company and the Restricted Subsidiaries after March 31, 1990 shall
not exceed the aggregate amount of cash distributions received by the
Company and the Restricted Subsidiaries from the Special Subsidiary
after March 31, 1990 or (2) in the opinion of the Board of Directors
of the Company, the Investment would not impair the ability of the
Company to make when due any payment (including any prepayment
required by SECTION 3 of principal of or interest on the Reimbursement
Obligations.
(h) TRANSACTIONS WITH AFFILIATES. Directly or indirectly
purchase, acquire or lease any property from, or sell, transfer or
lease any property to, or otherwise deal with, in the ordinary course
of business or otherwise, (1) any Affiliate (except any employee
compensation benefit plan or any Restricted Subsidiary) or (2) any
Person (other than a Restricted Subsidiary) in which an Affiliate or
the Company (directly or indirectly) owns, beneficially or of record,
5% or more of the outstanding voting stock or similar equity interest,
except that (A) any Affiliate may be a director, officer or employee
of the Company or any Restricted Subsidiary and may be paid reasonable
compensation in connection therewith and (B) subject to applicable
fiduciary standards with respect to the Special Subsidiary, acts and
transactions that would otherwise be prohibited by this Subsection may
be performed or engaged in if upon terms not less favorable to the
Company or any Restricted Subsidiary than if no relationship described
in CLAUSES (1) and (2) above existed.
(i) TAX CONSOLIDATION. Except for the Tax Allocation
Agreements, the Company will not, and will not permit any of its
Subsidiaries to, file or consent to the filing of any consolidated
income tax return with any Person unless such other Person shall have
agreed in writing with the Company that the Company's or such
Subsidiary's liability with respect to taxes as a result of the filing
of any such consolidated income tax return with such Person
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shall not be materially greater, nor the receipt of any tax benefits
materially less, than they would have been had the Company and its
Subsidiaries continued to file a consolidated income tax return with
the Company as the parent corporation.
9.8 ISSUANCE OF STOCK BY RESTRICTED SUBSIDIARIES. The Company
covenants that it will not permit any Restricted Subsidiary (either
directly or indirectly, by the issuance of rights or options for, or
securities convertible into, such shares) to issue, sell or otherwise
dispose of any shares of any authorized but unissued or treasury class
of such Restricted Subsidiary's stock (other than directors'
qualifying shares) except to the Company or another Restricted
Subsidiary.
9.9 COVERAGE RATIOS. As of the end of each fiscal quarter of
the Company, and each delivery of a Required Reserve Report or
Optional Reserve Report, the Company shall be in compliance with all
Required Ratios (except for any noncompliance resulting solely from an
Engineering Shortfall, and then only prior to the cure thereof
permitted by SECTION 10.1(e)).
9.10 PREPAYMENT OF JUNIOR SECURITIES. Without the prior written
consent of the Required Banks, the Company shall not prepay (or
deposit any property to defease) any indebtedness consisting of Junior
Securities before the payment in full of all indebtedness under the
Credit Documents.
Section 10. DEFAULTS.
10.1 EVENTS OF DEFAULT. If one or more of the following events
(herein called "EVENTS OF DEFAULT") shall occur and be continuing:
(a) the Company shall fail to pay any principal of any
Reimbursement Obligation or any fee or other principal amount payable
hereunder or under any other Credit Document when due, or shall fail
to pay any interest on any amount hereunder or under any other Credit
Document for more than three days after the date due; or
(b) any member of the Combined Group shall default in any
payment of principal of or interest on any other obligation for money
borrowed (or any Capitalized Lease Obligation, any obligation under a
conditional sale or other title retention agreement, any obligation
issued or assumed as full or partial payment for property whether or
not secured by a purchase money mortgage or any obligation under notes
payable or drafted accepted representing extensions of credit) beyond
any period of grace provided with respect thereto, or any member of
the Combined Group shall fail to perform or observe any other
agreement, term or condition contained in any agreement under which
any such obligation is created (or if any other event thereunder or
under any such agreement shall occur
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and be continuing) and the effect of such failure or other event is to
cause, or to permit the holder or holders of such obligation (or a
trustee on behalf of such holder or holders) to cause, such obligation
to become due prior to any stated maturity, or any member of the
Combined Group shall fail to pay any Guaranty relating to Debt for
borrowed money in accordance with its terms, PROVIDED that the
aggregate amount of all obligations as to which such a payment default
shall occur and be continuing or such a failure or other event causing
or permitting acceleration shall occur and be continuing shall exceed
$10,000,000; or
(c) any representation or warranty by the Company or any of its
officers in any Credit Document or in any writing furnished to the
Agent or the Banks in connection herewith shall prove to have been
false or misleading in any material respect as of the date as of which
it was made; or
(d) the Company shall default in the performance of any of its
obligations under SECTIONS 9.6 through 9.8 or under SECTION 9.9 (other
than a Default resulting solely from an Engineering Shortfall) or
under SECTION 9.10; or
(e) the Company shall deliver any Independent Engineering Report
and related Coverage Report to the Banks in accordance with SECTION
9.1 or SECTION 2.2(d) reflecting noncompliance with any Required Ratio
and such noncompliance shall result solely from an Engineering
Shortfall and shall not be cured (such cure to be evidenced by a new
Coverage Report demonstrating compliance with all Required Ratios) on
or before the date 180 days after the Company delivers such
Independent Engineering Report and related Coverage Report; or
(f) the Company shall default in the performance of any of its
obligations in any Credit Document other than those specified
elsewhere in this SECTION 10.1 and such default shall not be remedied
within 30 days after any executive officer of the Company obtains
actual knowledge thereof; or
(g) any member of the Combined Group shall (1) make an
assignment for the benefit of creditors; (2) generally fail to pay its
debts as such debts become due, or (3) admit in writing its inability
to generally pay its debts as such debts become due; or
(h) a Governmental Authority shall enter any decree or order for
relief in respect of any member of the Combined Group under any
bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law,
whether now or hereafter in effect (herein called the "BANKRUPTCY
LAW"), of any jurisdiction; or
(i) any member of the Combined Group shall petition or apply to
any Governmental Authority for, or consent to, the appointment
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of, or taking possession by, a trustee, receiver, custodian,
liquidator or similar official of such member of the Combined Group,
or of any substantial part of the assets of such member of the
Combined Group, or shall commence a voluntary case under the
Bankruptcy Law of the United States or any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a
Restricted Subsidiary) relating to any member of the Combined Group
under the Bankruptcy Law of any other jurisdiction; or
(j) any such petition or application referred to in SECTION
10.1(i) shall be filed, or any such proceedings referred to in SECTION
10.1(i) shall be commenced, against any member of the Combined Group
and such member of the Combined Group by any act shall indicate its
approval thereof, consent thereto or acquiescence therein, or an
order, judgment or decree shall be entered appointing any such
trustee, receiver, custodian, liquidator or similar official, or
approving the petition in any such proceedings, and such order,
judgment or decree shall remain unstayed and in effect for more than
60 consecutive days; or
(k) any order, judgment or decree shall be entered in any
proceedings against any member of the Combined Group decreeing the
dissolution of any member of the Combined Group and such order,
judgment or decree shall remain unstayed and in effect for more than
the appeal time provided by law; or
(l) any order, judgment or decree shall be entered in any
proceedings against any member of the Combined Group decreeing a
split-up of such member of the Combined Group which requires (1) the
divestiture of assets which exceed, or the divestiture of partnership
interest in the Special Subsidiary or of the stock of a Restricted
Subsidiary whose assets exceed, 10% of Consolidated Net Tangible
Assets as of the end of the fiscal quarter immediately preceding or
coinciding with such divestiture or (2) the divestiture of assets or
stock of a Restricted Subsidiary or assets of or partnership interest
in the Special Subsidiary, which shall have contributed more than 10%
of EBITD for the four most recently completed fiscal quarters, and
such order, judgment or decree shall remain unstayed and in effect for
more than 60 consecutive days; or
(m) any judgment or order, or series of judgments or orders, for
the payment of money in an amount in excess of $5,000,000 shall be
rendered against any member of the Combined Group and the same shall
not be discharged (or provision shall not be made for such discharge),
or a stay of execution thereof shall not be procured, within the
appeal time provided by law from the date of entry thereof, or such
member of the Combined Group shall not, within said appeal time, or
such longer period during which execution of the same shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal; or
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(n) the Company or any ERISA Affiliate shall fail to pay when
due an amount or amounts aggregating in excess of $5,000,000 which it
shall have become liable to pay with respect to any Plan; or notice of
intent to terminate a Plan or Plans (other than a multiemployer plan
under Section 4001(a)(3) of ERISA) having aggregate Unfunded
Liabilities in excess of $5,000,000 shall be filed under Title IV of
ERISA by the Company or any ERISA Affiliate, any plan administrator or
any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a trustee
to be appointed to administer any Plan or Plans (other than a
multiemployer plan under Section 4001(a)(3) of ERISA) having aggregate
Unfunded Liabilities in excess of $5,000,000 or a proceeding shall be
instituted by a fiduciary of any such Plan or Plans against the
Company or any ERISA Affiliate to enforce Section 515 or 4219(c)(5) of
ERISA; or the Company or any ERISA Affiliate shall incur a complete or
partial withdrawal liability under Title IV of ERISA in an annual
amount in excess of $2,000,000 (and in the aggregate $5,000,000) in
connection with any Plan; or a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that
any Plan or Plans having aggregate Unfunded Liabilities in excess of
$5,000,000 must be terminated; or there shall occur any event or
condition that might reasonably constitute grounds for the termination
of any Plan or Plans having aggregate Unfunded Liabilities in excess
of $5,000,000 or with respect to such Plan or Plans either the
imposition of any liability in excess of $5,000,000 (other than
contributions in the ordinary course) or any Lien provided under
Section 4068 of ERISA securing an amount in excess of $5,000,000 on
any property of the Company or any ERISA Affiliate; provided, however,
any amounts owing by Santa Fe Pacific Corporation pursuant to the
ERISA Indemnification Agreement between Santa Fe Pacific Corporation
and the Company shall first be offset against the dollar threshold
amounts set forth above before any such condition or event constitutes
an event of default under this paragraph; or
(o) one or more demands for payment is made upon the Company by
Santa Fe Pacific Corporation or any other Person pursuant to the Tax
Indemnification Agreement and such demands would exceed $5,000,000 in
the aggregate; or
(p) any Change of Control shall occur; or
(q) any Event of Default shall occur and be continuing under the
Amended and Restated Revolving Credit Agreement,
THEREUPON: (I) the Agent may (and, if directed by the Required Banks,
shall) do any or all of the following: (a) terminate any Letter of
Credit providing for such termination by sending a notice of
termination as provided therein; (b) declare the Commitments
terminated (whereupon the Commitments shall be terminated); and (c)
declare the principal amount then outstanding of and the accrued
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interest on all Reimbursement Obligations and all fees and all other
amounts payable hereunder and under the Applications to be forthwith
due and payable, whereupon such amounts shall be and become
immediately due and payable, without notice (including notice of
acceleration and notice of intent to accelerate), presentment, demand,
protest or other formalities of any kind, all of which are hereby
expressly WAIVED by the Company; PROVIDED that in the case of the
occurrence of an Event of Default with respect to the Company referred
to in SECTION 10.1(g) through (l), the Commitments shall be
automatically terminated and the principal amount then outstanding of
and the accrued interest on the Reimbursement Obligations and fees and
all other amounts payable hereunder and under the Applications shall
be and become automatically and immediately due and payable, without
notice (including notice of intent to accelerate and notice of
acceleration) and without presentment, demand, protest or other for-
malities of any kind, all of which are hereby expressly WAIVED by the
Company; (II) each Bank may exercise its rights of offset against each
account and all other property of the Company in the possession of
such Bank, which right is hereby granted by the Company to the Banks;
and (III) the Agent and each Bank may exercise any and all other
rights pursuant to the Credit Documents, at law and in equity.
Section 11. THE AGENT.
11.1 APPOINTMENT, POWERS AND IMMUNITIES. Each Bank hereby
irrevocably appoints and authorizes the Agent to act as its Agent
under the Credit Documents and under the Letters of Credit with such
powers as are specifically delegated to the Agent by the terms
thereof, together with such other powers as are reasonably incidental
thereto, including the execution and delivery of the First Amendment
to Deed of Trust (as that term is defined in the Amended and Restated
Revolving Credit Agreement). The Agent (which term as used in this
SECTION 11 shall include reference to its Affiliates and its own and
its Affiliates' officers, directors, employees and agents) shall (a)
have no duties or responsibilities except those expressly set forth in
the Letters of Credit and the Credit Documents, and shall not by
reason of any Credit Document be a trustee or fiduciary for any Bank;
(b) not be responsible to any Bank for any recitals, statements,
representations or warranties contained in any Credit Document, or in
any certificate or other document referred to or provided for in, or
received by any of them under, any Credit Document, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of
any Credit Document or any other document referred to or provided for
therein or any property covered thereby or for any failure by the
Company or any other Person to perform any of its obligations
thereunder; (c) not be required to initiate or conduct any litigation
or collection proceedings hereunder or under any Credit Document
except to the extent requested by the Required Banks (and SECTION 11.7
shall apply), and (d) not be responsible for any action taken or
omitted to be taken by it under any Credit Document
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or any other document or instrument referred to or provided for
therein or in connection therewith, including pursuant to its own
negligence, except for its own gross negligence or willful misconduct.
The Agent may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Without in any
way limiting any of the foregoing, each Bank acknowledges that the
Agent shall have no greater responsibility in the operation of the
Letters of Credit than is specified in the Uniform Customs and
Practice of Documentary Credits (1993 Revision, International Chamber
of Commerce Publication No. 500).
11.2 RELIANCE BY AGENT. The Agent shall be entitled to rely upon
any certification, notice or other communication (including any
thereof by telephone, telex, telegram or cable) believed by it to be
genuine and correct and to have been signed or sent by or on behalf of
the proper Person or Persons, and upon advice and statements of legal
counsel (which may be counsel for the Company), independent
accountants and other experts selected by the Agent. As to any
matters not expressly provided for by any Credit Document, the Agent
shall in all cases be fully protected in acting, or in refraining from
acting, hereunder and thereunder in accordance with instructions of
the Required Banks, and any action taken or failure to act pursuant
thereto shall be binding on all of the Banks.
11.3 DEFAULTS. The Agent shall not be deemed to have knowledge
of the occurrence of a Default (other than the non-payment of
principal of or interest on Reimbursement Obligations) unless it has
received notice from a Bank or the Company specifying such Default and
stating that such notice is a "Notice of Default". In the event that
the Agent receives such a notice of the occurrence of a Default, the
Agent shall give prompt notice thereof to the Banks (and shall give
each Bank prompt notice of each such non-payment). The Agent shall
(subject to SECTIONS 11.7 and 12.5) take such action with respect to
such Default as shall be directed by all Banks or the Required Banks,
as appropriate, and within its rights under the Credit Documents and
at law or in equity; PROVIDED that, unless and until the Agent shall
have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action,
permitted hereby with respect to such Default as it shall deem
advisable in the best interests of the Banks and within its rights
under the Credit Documents, at law or in equity.
11.4 RIGHTS AS A BANK. With respect to their Commitments, the
Letters of Credit and the Reimbursement Obligations, TCB and
NationsBank in their capacities as Banks hereunder shall have the same
rights and powers hereunder as any other Bank and may exercise the
same as though they were not acting as the Agent or the Co-Agents, and
the term "Bank" or "Banks" shall, unless the context otherwise
indicates, include the Agent and the Co-Agents in their
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individual capacity. The Agent and the Co-Agents may (without having
to account therefor to any Bank) accept deposits from, lend money to
and generally engage in any kind of banking, trust, letter of credit,
agency or other business with the Company (and any of its Affiliates)
as if they were not acting as the Agent and the Co-Agents, and the
Agent and the Co-Agents may accept fees and other consideration from
the Company and its Affiliates (in addition to the fees heretofore
agreed to between the Company and the Agent or the Co-Agents) for
services in connection with this Agreement or otherwise without having
to account for the same to the Banks.
11.5 INDEMNIFICATION. THE BANKS AGREE TO INDEMNIFY THE AGENT (TO
THE EXTENT NOT REIMBURSED UNDER SECTION 12.3 OR 12.4, BUT WITHOUT
LIMITING THE OBLIGATIONS OF THE COMPANY UNDER SAID SECTIONS 12.3 AND
12.4), RATABLY IN ACCORDANCE WITH THEIR RESPECTIVE COMMITMENTS, FOR
ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY
KIND AND NATURE WHATSOEVER (INCLUDING THE CONSEQUENCES OF THE
NEGLIGENCE OF THE AGENT) WHICH MAY BE IMPOSED ON, INCURRED BY OR
ASSERTED AGAINST THE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF
ANY CREDIT DOCUMENT (AS DEFINED HEREIN) OR ANY OTHER DOCUMENTS
CONTEMPLATED BY OR REFERRED TO THEREIN OR THE TRANSACTIONS CONTEM-
PLATED THEREBY (INCLUDING THE COSTS AND EXPENSES WHICH THE COMPANY IS
OBLIGATED TO PAY UNDER SECTIONS 12.3 AND 12.4 BUT EXCLUDING, UNLESS A
DEFAULT HAS OCCURRED AND IS CONTINUING, NORMAL ADMINISTRATIVE COSTS
AND EXPENSES INCIDENT TO THE PERFORMANCE OF ITS AGENCY DUTIES
HEREUNDER) OR THE ENFORCEMENT OF ANY OF THE TERMS HEREOF OR THEREOF OR
OF ANY SUCH OTHER DOCUMENTS, INCLUDING THE NEGLIGENCE OF THE AGENT;
PROVIDED THAT NO BANK SHALL BE LIABLE FOR ANY OF THE FOREGOING TO THE
EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
THE PARTY TO BE INDEMNIFIED. THE OBLIGATIONS OF THE BANKS UNDER THIS
SECTION 11.5 SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT.
11.6 NON-RELIANCE ON THE AGENT AND OTHER BANKS. Each Bank agrees
that it has received current financial information with respect to the
Company and that it has, independently and without reliance on the
Agent, the Co-Agents or any other Bank and based on such documents and
information as it has deemed appropriate, made its own credit analysis
of the Company and decision to enter into this Agreement and that it
will, independently and without reliance upon the Agent, the Co-Agents
or any other Bank, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis
and decisions in taking or not taking action under the Credit
Documents. The Agent and the Co-Agents shall not be required to keep
themselves informed as to the performance or observance by the Company
of any Credit Document or any other document referred to or provided
for therein or to inspect the property or books of the Company or any
other Person. Except for notices, reports and other documents and
information expressly required to be furnished to the Banks by the
Agent and the Co-Agents under the Credit Documents, the Agent and the
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Agents shall not have any duty or responsibility to provide any Bank
with any credit or other information concerning the affairs, financial
condition or business of the Company (or any of its Affiliates) which
may come into the possession of the Agent or either Co-Agent.
11.7 FAILURE TO ACT. Except for action expressly required of the
Agent under the Credit Documents, the Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder
unless it shall receive further assurances to its satisfaction by the
Banks of their indemnification obligations under SECTION 11.5 against
any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action.
11.8 RESIGNATION OR REMOVAL OF THE AGENT. Subject to the
appointment and acceptance of a successor Agent as provided below, the
Agent may resign at any time by giving notice thereof to the Banks and
the Company, and the Agent may be removed at any time with or without
cause by the Required Banks. Upon any such resignation or removal,
the Required Banks shall have the right to appoint a successor Agent.
If no successor Agent shall have been so appointed by the Required
Banks and shall have accepted such appointment within 30 days after
the retiring Agent's giving of notice of resignation or the Required
Banks' removal of the retiring Agent, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent. Any successor Agent
shall be a bank which has an office in the United States and a
combined capital and surplus of at least $250,000,000 and with its
deposits insured by the FDIC. Upon the acceptance of any appointment
as the 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 hereunder.
Such successor Agent shall promptly specify its Principal Office
referred to in SECTIONS 3.1 and 5.1 by notice to the Company. After
any retiring Agent's resignation or removal hereunder as the Agent,
the provisions of this SECTION 11 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it
while it was acting as the Agent.
Section 12. MISCELLANEOUS.
12.1 WAIVER. No waiver of any Default shall be a waiver of any
other Default. No failure on the part of the Agent or any Bank to
exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under any Credit Document
shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege thereunder preclude any
other or further exercise thereof or the exercise of any other right,
power or privilege. The remedies provided in the
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Credit Documents are cumulative and not exclusive of any remedies
provided by law or in equity.
12.2 NOTICES. All notices and other communications provided for
herein (including any modifications of, or waivers or consents under,
this Agreement) shall be given or made by telex, telegraph, telecopy
(confirmed by mail), cable or other writing and telexed, telecopied,
telegraphed, cabled, mailed or delivered to the intended recipient at
the "Address for Notices" specified below its name on the signature
pages hereof; or, as to any party, at such other address as shall be
designated by such party in a notice to the Company and the Agent
given in accordance with this Section. Except as otherwise provided
in this Agreement, all such communications shall be deemed to have
been duly given when transmitted by telex or telecopier, delivered to
the telegraph or cable office or personally delivered or, in the case
of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
12.3 EXPENSES, ETC. Whether or not any Letter of Credit is ever
issued, the Company shall pay or reimburse on demand each of the
Banks, the Agent and the Co-Agents for paying: (a) the reasonable
fees and expenses of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.,
special counsel to the Agent, in connection with (1) the preparation,
execution and delivery of the Credit Documents (including the exhibits
and schedules hereto), the issuance of the Letters of Credit hereunder
and (2) any modification, supplement or waiver of any of the terms of
any Credit Document; (b) all reasonable out-of-pocket costs and expenses
of the Banks, the Agent and the Co-Agents (including costs of
preparing an Independent Engineering Report and reasonable counsels'
fees) in connection with any Event of Default under or the enforcement
of any Credit Document; (c) all transfer, stamp, documentary or other
similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of any Credit Document or any other
document referred to therein; and (d) reasonable expenses of due
diligence and syndication, and mutually agreed advertising and
marketing costs.
12.4 INDEMNIFICATION. THE COMPANY SHALL INDEMNIFY THE AGENT
(INCLUDING THE AGENT WHEN ACTING AS ISSUER OF THE LETTERS OF CREDIT),
THE CO-AGENTS, THE BANKS, AND EACH AFFILIATE THEREOF AND THEIR
RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND COUNSEL FROM,
AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES,
LIABILITIES, COSTS, EXPENSES, CLAIMS OR DAMAGES TO WHICH ANY OF THEM
MAY BECOME SUBJECT, REGARDLESS OF AND INCLUDING LOSSES ARISING FROM
THE NEGLIGENCE OF THE AGENT OR THE CO-AGENTS OR THE BANKS OR ANY OTHER
INDEMNITEE, (A) IN CONNECTION WITH THE EXECUTION AND DELIVERY OR
TRANSFER OF OR PAYMENT OR FAILURE TO PAY UNDER ANY LETTER OF CREDIT,
INCLUDING, WITHOUT LIMITATION, ANY CLAIMS, DAMAGES, LOSSES,
LIABILITIES, COSTS OR EXPENSES WHICH THE AGENT, SUCH CO-AGENT OR SUCH
BANK, AS THE CASE MAY BE, MAY INCUR (WHETHER INCURRED AS A RESULT OF
ITS OWN NEGLIGENCE OR OTHERWISE) BY REASON
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OF OR IN CONNECTION WITH THE FAILURE OF ANY OTHER BANK (WHETHER AS A
RESULT OF ITS OWN NEGLIGENCE OR OTHERWISE) TO FULFILL OR COMPLY WITH
ITS OBLIGATIONS TO THE AGENT OR SUCH BANK, AS THE CASE MAY BE,
HEREUNDER (BUT NOTHING HEREIN CONTAINED SHALL AFFECT THE RIGHTS THE
COMPANY MAY HAVE AGAINST SUCH DEFAULTING BANK); AND (B) INSOFAR AS
SUCH LOSSES, LIABILITIES, COSTS, EXPENSES, CLAIMS OR DAMAGES ARISE OUT
OF OR RESULT FROM ANY (A) ACTUAL OR PROPOSED USE BY THE COMPANY OF THE
PROCEEDS OF ANY EXTENSION OF CREDIT BY THE AGENT OR ANY BANK HEREUNDER;
(B) BREACH BY THE COMPANY OF ANY CREDIT DOCUMENT (AS DEFINED
HEREIN); (C) VIOLATION BY THE COMPANY OR ANY OF ITS SUBSIDIARIES OF
ANY LEGAL REQUIREMENT INCLUDING APPLICABLE ENVIRONMENTAL LAWS; (D) ANY
BANK'S OR THE AGENT'S OR ANY CO-AGENT'S BEING DEEMED AN OWNER OR
OPERATOR OF ANY ASSETS OF THE COMPANY OR ITS SUBSIDIARIES BY A COURT
OR OTHER REGULATORY OR ADMINISTRATIVE AGENCY OR TRIBUNAL IN CIRCUMSTANCES
IN WHICH NEITHER THE AGENT, EITHER CO-AGENT NOR ANY OF THE
BANKS IS GENERALLY OPERATING OR GENERALLY EXERCISING CONTROL OVER SUCH
ASSETS, TO THE EXTENT SUCH LOSSES, LIABILITIES, CLAIMS OR DAMAGES
ARISE OUT OF OR RESULT FROM ANY LEGAL REQUIREMENT INCLUDING APPLICABLE
ENVIRONMENTAL LAWS PERTAINING TO THE CONDITION OF SUCH ASSETS, (E)
ENVIRONMENTAL CLAIM OR (F) INVESTIGATION, LITIGATION OR OTHER PROCEEDING
(INCLUDING ANY THREATENED INVESTIGATION OR PROCEEDING) RELATING TO
ANY OF THE FOREGOING, and the Company shall reimburse the Agent,
Co-Agent, each Bank, and each Affiliate thereof and their respective
directors, officers, employees, agents and counsel, upon demand, for
any expenses (including legal fees) incurred in connection with any
such investigation or proceeding; but excluding any such losses,
liabilities, claims, damages, costs or expenses incurred by a Person
or any Affiliate thereof or their respective directors, officers,
employees, agents or counsel by reason of the gross negligence or
willful misconduct of such Person, Affiliate, director, officer,
employee, agent or counsel. The obligation of the Company to provide
indemnification under this SECTION 12.4 for fees and expenses of
counsel shall be limited to the fees and expenses of one counsel in
each jurisdiction representing all of the Persons entitled to such
indemnification, except to the extent that, in the reasonable judgment
of any such indemnified Person, the existence of actual or potential
conflicts of interest make representation of all of such indemnified
Persons by the same counsel inappropriate; in such a case, the Person
exercising such judgment shall be indemnified for the reasonable fees
and expenses of its separate counsel to the extent provided in this
SECTION 12.4 without giving effect to the first clause of this
sentence. Nothing in this SECTION 12.4 is intended to limit the
obligations of the Company under any other provision of this
Agreement.
12.5 AMENDMENTS, ETC. No amendment or waiver of any provision of
any Credit Document, nor any consent to any departure by the Company
therefrom, shall in any event be effective unless the same shall be
agreed or consented to by the Required Banks and the Company, and each
such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given;
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PROVIDED that no amendment, waiver or consent shall, unless in writing
and signed by each Bank affected thereby, (a) increase the Commitment
of any of the Banks or subject the Banks to any additional obligations;
(b) reduce the principal of, or interest on, any Reimbursement
Obligation, fee or other sum to be paid under any Credit Document; (c)
postpone any scheduled date fixed for any payment of principal of, or
interest on, any Reimbursement Obligation, fee or other sum to be paid
under any Credit Document; (d) change the percentage of any of the
Commitments, or of the aggregate unpaid principal amount of the
Reimbursement Obligations, or the number of Banks which shall be
required for the Banks or any of them to take any action under this
Agreement; (e) change any provision contained in SECTIONS 2.3, 5.2,
5.7, 6, 12.3 or 12.4 or this SECTION 12.5, or in the definition of
"Required Ratios". Anything in this SECTION 12.5 to the contrary, no
amendment, waiver or consent shall be made with respect to SECTION 11
without the consent of the Agent and the Co-Agents.
12.6 SUCCESSORS AND ASSIGNS. (a) This Agreement shall be
binding upon and inure to the benefit of the Company, the Agent, the
Co-Agents and the Banks and their respective successors and assigns.
The Company may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of all of the
Banks.
(b) Each Bank may sell participations to any Person in all or
part of its Reimbursement Obligation, or all or part of its
Commitment, in which event, without limiting the foregoing, the
provisions of SECTION 6 shall inure to the benefit of each purchaser
of a participation and the PRO RATA treatment of payments, as
described in SECTION 5.2, shall be determined as if such Bank had not
sold such participation. In the event any Bank shall sell any
participation, (1) the Company, the Agent, the Co-Agent and the other
Banks shall continue to deal solely and directly with such selling
Bank in connection with such selling Bank's rights and obligations
under the Credit Documents (including the Applications held by such
selling Bank); (2) such Bank shall retain the sole right and
responsibility to enforce the Reimbursement Obligations, including the
right to approve any amendment, modification or waiver of any
provision of this Agreement other than amendments, modifications or
waivers with respect to (A) any fees payable hereunder to the Banks,
and (B) the amount of principal or the rate of interest payable on, or
the dates fixed for the scheduled repayment of principal of, the
Reimbursement Obligations and other sums to be paid to the Banks
hereunder, and (3) the Company agrees, to the fullest extent it may
effectively do so under applicable law, that any participant of a Bank
may exercise all rights of set-off, bankers' lien, counterclaim or
similar rights with respect to such participation as fully as if such
participant were a direct holder of Reimbursement Obligations if such
Bank has previously given notice of such participation to the Company.
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(c) Each Bank may assign to one or more Banks or Eligible
Assignees all or a portion of its interests, rights and obligations
under this Agreement (including all or a portion of its Commitment and
the same portion of the related Reimbursement Obligations at the time
owing to it); PROVIDED (1) other than in the case of an assignment to
a Person at least 50% owned by the assignor Bank, or by a common
parent of both, or to another Bank, the Agent and the Company must
give their respective prior written consent, which consent will not be
unreasonably withheld; (2) the aggregate amount of the Commitment
and/or Reimbursement Obligations of the assigning Bank subject to each
such assignment (determined as of the date the Assignment Agreement
with respect to such assignment is delivered to the Agent) shall in no
event be less than $750,000 (or $75,000 in the case of an assignment
between Banks) (except for certain exceptions approved by the Company
and the Agent) and shall be in an amount that is an integral multiple
of $75,000; (3) the assigning Bank shall contemporaneously assign to
such assignee Bank or Eligible Assignee an equal percentage of the
assigning Bank's Facility B Commitment and Facility A Commitment (as
that term is defined in the Amended and Restated Revolving Credit
Agreement) and all of the assigning Bank's other rights and
obligations under the Amended and Restated Revolving Credit Agreement;
and (4) the parties to each such assignment shall execute and deliver
to the Agent, for its acceptance and recording in its records, an
Assignment Agreement with blanks appropriately completed, together
with the Applications subject to such assignment and a processing and
recordation fee of $2,000 (for which the Company shall have no liability
except in the case of assignments required by the Company pursuant
to SECTION 6.1 or 6.2, in which case such fee shall be paid by the
Company). Upon such execution, delivery, acceptance and recording,
from and after the effective date specified in each Assignment
Agreement, (A) the assignee thereunder shall be a party hereto and, to
the extent provided in such Assignment Agreement, have the rights and
obligations of a Bank hereunder, and (B) the Bank making such
assignment shall, to the extent provided in such assignment, be
released from its obligations under this Agreement (and, in the case
of an Assignment Agreement 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).
(d) By executing and delivering an Assignment Agreement, the
Bank assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (1)
other than the representation and warranty that it is the legal and
beneficial owner of the interest being assigned thereby, such assignor
Bank makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made in
or in connection with any Credit Document or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of any
Credit Document; (2) such assignor Bank makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Company or the
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performance or observance by the Company of any of its obligations
under any Credit Document; (3) such assignee confirms that it has
received a copy of this Agreement, together with copies of the
financial statements of the Company previously delivered in accordance
herewith and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into
such Assignment Agreement; (4) such assignee will, independently and
without reliance upon the Agent, such assignor Bank or any other Bank
and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking
or not taking action under the Credit Documents; (5) such assignee
appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under the Credit Documents as are
delegated to the Agent by the terms hereof, together with such powers
as are reasonably incidental thereto, and (6) such assignee agrees
that it will perform in accordance with their terms all obligations
that by the terms of the Credit Documents are required to be performed
by it as a Bank.
(e) The Agent shall maintain at its office a copy of each
Assignment Agreement delivered to it and a record of the names and
addresses of the Banks and the Commitment of, and principal amount of
the Reimbursement Obligations owing to, each Bank from time to time.
The entries in such record shall be conclusive, in the absence of
manifest error, and the Company, the Agent and the Banks may treat
each Person the name of which is recorded therein as a Bank hereunder
for all purposes of the Credit Documents. Such records shall be
available for inspection by the Company or any Bank at any reasonable
time and from time to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment Agreement executed by an
assigning Bank and the assignee thereunder together with the
Application subject to such assignment, the written consent to such
assignment and the fee payable in respect thereto, the Agent shall, if
such Assignment Agreement has been completed with blanks appropriately
filled, (1) accept such Assignment Agreement; (2) record the
information contained therein in its records, and (3) give prompt
notice thereof to the Company.
(g) Any Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section, disclose to the assignee or participant or proposed assignee
or participant, any information relating to the Company furnished to
such Bank by or on behalf of the Company.
(h) Any assignment by a Bank pursuant to this SECTION 12.6 shall
not result in any single Bank holding in excess of 25% of the
Aggregate Commitment at any one time.
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(i) Notwithstanding any other provision of this SECTION 12.6,
TCB and its Affiliates may not assign their rights hereunder unless,
after giving effect to such assignment, TCB and its Affiliates would
have an aggregate Commitment Percentage of at least 10%.
(j) Notwithstanding anything herein to the contrary, each Bank
may pledge and assign all or any portion of its rights and interests
under the Credit Documents to any Federal Reserve Bank.
12.7 SURVIVAL; TERM; REINSTATEMENT. In addition to the other
provisions of this Agreement expressly stated to survive the
termination of this Agreement, the obligations of the Company under
SECTIONS 6, 12.3 and 12.4 and the last sentence of this SECTION 12.7
and the obligations of the Banks under SECTION 12.8 shall survive the
termination of this Agreement. The term of this Agreement shall be
until (a) the full and final payment of all Reimbursement Obligations,
(b) the expiry of all Letters of Credit, (c) the termination of all
Commitments and (d) the payment of all amounts due under the Credit
Documents. The Company agrees that if at any time all or any part of
any payment previously applied by any Bank to any Reimbursement
Obligation or other sum hereunder is or must be returned by or
recovered from such Bank for any reason (including the order of any
bankruptcy court), the Credit Documents shall automatically be
reinstated to the same effect as if the prior application had not been
made, and the Company hereby agrees to indemnify such Bank against,
and to save and hold such Bank harmless from, any required return by
or recovery from such Bank of any such payment because of its being
deemed preferential under applicable Legal Requirements, or for any
other reason.
12.8 LIMITATION OF INTEREST. The parties to this Agreement
intend to strictly comply with all applicable laws, including
applicable usury laws. Accordingly, the provisions of this Section
shall govern and control over every other provision of any Credit
Document which conflicts or is inconsistent with this Section, even if
such provision declares that it controls. As used in this SECTION
12.8, the term "interest" includes the aggregate of all charges, fees,
benefits or other compensation which constitute interest under
applicable law; PROVIDED that, to the maximum extent permitted by
applicable law, (a) any non-principal payment shall be characterized
as an expense or as compensation for something other than the use,
forbearance or detention of money, and not as interest and (b) all
interest at any time contracted for, taken, reserved, retained,
charged or received shall be amortized, prorated, allocated and
spread, in equal parts during the full term of this Agreement and the
Commitments. In no event shall the Company or any other Person be
obligated to pay, or the Agent or any Bank have any right or privilege
to reserve, receive or retain, (x) any interest in excess of the
maximum amount of nonusurious interest permitted under the laws of the
State of Texas or the applicable laws (if any) of the United States or
of any other state
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or (y) total interest in excess of the amount which the Agent or such
Bank could lawfully have contracted for, taken, reserved, received,
retained or charged had the interest been calculated for the full term
of this Agreement at the Highest Lawful Rate. On each day, if any,
that the interest rate (the "STATED RATE") called for under any Credit
Document exceeds the Highest Lawful Rate, the rate at which interest
shall accrue shall automatically be fixed by operation of this
sentence at the Highest Lawful Rate for that day, and shall remain
fixed at the Highest Lawful Rate for each day thereafter until the
total amount of interest accrued equals the total amount of interest
which would have accrued if there were no such ceiling rate as is
imposed by this sentence. Thereafter, interest shall accrue at the
Stated Rate unless and until the Stated Rate again exceeds the Highest
Lawful Rate when the provisions of the immediately preceding sentence
shall again automatically operate to limit the interest accrual rate.
The daily interest rates to be used in calculating interest at the
Highest Lawful Rate shall be determined by dividing the applicable
Highest Lawful Rate per annum by the number of days in the calendar
year for which such calculation is being made. None of the terms and
provisions contained in any Credit Document which directly or
indirectly relate to interest shall ever be construed without
reference to this Section, or be construed to create a contract to pay
for the use, forbearance or detention of money at an interest rate in
excess of the Highest Lawful Rate. If the term of this Agreement is
shortened by reason of acceleration of maturity as a result of any
Default or by any other cause, or by reason of any required or
permitted prepayment, and if for that (or any other) reason the Agent
or any Bank at any time, including the stated maturity, is owed or
receives (and/or has received) interest in excess of interest
calculated at the Highest Lawful Rate, then and in any such event all
of any such excess interest shall be canceled automatically as of the
date of such acceleration, prepayment or other event which produces
the excess, and, if such excess interest has been paid to the Agent or
such Bank, it shall be credited PRO TANTO against the then-outstanding
principal balance of the Company's obligations to the Agent or such
Bank, effective as of the date or dates when the event occurs which
causes it to be excess interest, until such excess is exhausted or all
of such principal has been fully paid and satisfied, whichever occurs
first, and any remaining balance of such excess shall be promptly
refunded to its payor.
12.9 CAPTIONS. Captions and section headings appearing herein
are included solely for convenience of reference and are not intended
to affect the interpretation of any provision of this Agreement.
12.10 COUNTERPARTS. Each Credit Document may be executed in
any number of counterparts, all of which taken together shall constitute
one and the same agreement and any of the parties hereto may
execute such Credit Document by signing any such counterpart.
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12.11 GOVERNING LAW. EXCEPT TO THE EXTENT OTHERWISE
SPECIFIED THEREIN, EACH CREDIT DOCUMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF TEXAS AND THE
UNITED STATES OF AMERICA. THE COMPANY HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF TEXAS AND OF ANY TEXAS STATE COURT SITTING IN
HARRIS COUNTY, TEXAS FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT
OF OR RELATING TO THE CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
12.12 SEVERABILITY. Whenever possible, each provision of the
Credit Documents shall be interpreted in such manner as to be
effective and valid under applicable law. If any provision of any
Credit Document shall be invalid, illegal or unenforceable in any
respect under any applicable law, the validity, legality and
enforceability of the remaining provisions of such Credit Document
shall not be affected or impaired thereby.
12.13 CHAPTER 15 NOT APPLICABLE. Chapter 15 of the Texas
Credit Code shall not apply to any Credit Document or to any
Commitment or Letter of Credit or Application or Reimbursement
Obligation, nor shall any Credit Document be governed by or be subject
to the provisions of such Chapter 15 in any manner whatsoever.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered effective as of the day and year
first above written.
SANTA FE ENERGY RESOURCES, INC.,
a Delaware corporation
By:M. J. ROSINSKI
M. J. Rosinski,
Vice President and
Chief Financial Officer
Address for Notices:
Santa Fe Energy Resources, Inc.
1616 South Voss, Suite 1000
Houston, Texas 77057
Telecopy: (713) 268-5341
Attention: Vice President-Finance
Telex: 794-567
(Answerback: SFEPROD HOU)
<PAGE>
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, individually,
as Administrative Agent
and as Co-Agent
By:JAMES R. MCBRIDE
James R. McBride
Senior Vice President
Address for Notices:
Texas Commerce Bank National
Lending Offices: Association
712 Main Street
Texas Commerce Bank National Houston, Texas 77002
Association Attention: Manager, Energy Group
ABA #113000609 Telecopy: (713) 236-4117
For Credit To: Acct. #10967 Telex: 166-053
(Answerback:TCB HOU)
Attention: Investment
Operations/Norma Benzon with copies to:
Reference: Santa Fe Energy
Resources, Inc. Texas Commerce Bank National
Association
P. O. Box 2558
Commitment: $1,971,428.59 Houston, Texas 77252
Attention: Manager, Capital
Markets Division
and
Texas Commerce Bank National
Association
P. O. Box 2558
Houston, Texas 77252
Attention: Manager, Loan
Agreements Division
<PAGE>
NATIONSBANK OF TEXAS, N.A.,
individually and as Co-Agent
By:H. GENE SHIELS
Name:H. Gene Shiels
Title:Vice President
Address for Notices:
Lending Offices:
NationsBank of Texas, N.A. NationsBank of Texas, N.A.
ABA #111000025 700 Louisiana
For Credit to: Acct. # P.O. Box 2518
0180019828 Houston, Texas 77252-2518
Attention: Loan Funds Attention: H. Gene Shiels
Transfer Telecopy: (713) 247-6432
Reference: Santa Fe Energy
Resources, Inc.
Commitment: $1,885,714.29
<PAGE>
THE BANK OF NEW YORK
By:DANIEL T. GATES
Name:Daniel T. Gates
Title:Vice President
Lending Office: Address for Notices:
The Bank of New York
ABA #021000018 The Bank of New York
For Credit To: Special One Wall Street, 19th Floor
Financial Products Dept. New York, New York 10286
Account No. 803-329-7689 Attention: Daniel T. Gates
Reference: Santa Fe Energy Telecopy: (212) 635-7923
Resources, Inc. Telex: 420-268 (Answerback:BONY UR)
Specify fees, period.
With a copy to:
Commitment: $1,542,857.14
The Bank of New York
One Wall Street, 19th Floor
New York, N.Y. 10286
Attention: Ann Marie Schron
Telecopy: (212) 635-7923
Telex: 232 060 (Answerback: BONY UR)
<PAGE> THE BANK OF NOVA SCOTIA
By:A. S. NORSWORTHY
Name:A. S. Norsworthy
Title:Assistant Agent
Address for Notices:
Lending Office:
Bank of Nova Scotia, New The Bank of Nova Scotia
York Agency 600 Peachtree Street, Suite 2700
ABA #026002532 Atlanta, Georgia 30308
For Credit To: Atlanta Agency Attention: Claude Ashby
Account #0606634 Telecopy: (404) 888-8998
Reference: Santa Fe Energy Telex: 00542319
Resources, Inc. (Answerback: SCOTIABANK ATL)
Commitment: $1,542,857.14
with a copy to:
The Bank of Nova Scotia
1100 Louisiana, Suite 3000
Houston, Texas 77002
Attention: Mark Ammerman
Telecopy: (713) 752-2425
<PAGE>
BANK OF MONTREAL
By:MARK M. GREEN
Name:Mark M. Green
Title:Director
Address for Notices:
Lending Offices:
Harris Bank Bank of Montreal
ABA #071000288 700 Louisiana, Suite 4400
For Credit To: Bank of Houston, Texas 77002
Montreal, Chicago Branch Attention: Dennis Spencer
Attention: E. Rios Telecopy: (713) 223-4007
Reference: Santa Fe Energy Telex: 77-5640
Resources, Inc. (Answerback: BKMONTREAL HOU)
Commitment: $1,714,285.71
<PAGE>
CIBC, INC.
By:J. D. WESTLAND
Name:J. D. Westland
Title:Vice President
Address for Notices:
Lending Offices:
Morgan Guaranty Trust CIBC, Inc.
Company of New York Two Paces West, 2727 Paces Ferry Road
ABA #021-000-238 Suite 1200
For Credit To: CIBC, Atlanta, Georgia 30339
Atlanta Acct. #630-00-480 Attention: Vice President
For Further Credit To: Telephone: (404) 319-4999
Acct. #0701610 Telecopier No.: (404) 319-4950
Attention: Loan Operations Telex: 54-2413
Reference: Santa Fe Energy answer back: CANBANK ATL
Resources, Inc.
Commitment: $1,542,857.14
with a copy to:
Canadian Imperial Bank of
Commerce
2 Houston Center, Suite 1200
Houston, Texas 77010
Attention: Brian R. Swinford
Telecopy: (713) 658-9922
<PAGE>
BANQUE PARIBAS HOUSTON AGENCY
By:BRIAN MALONE
Name:Brian Malone
Title:Vice President
By:PATRICK J. MILOR
Name:Patrick J. Milor
Title:SVP-Deputy General Manager
Address for Notices:
Lending Offices:
Bankers Trust Co. Banque Paribas Houston Agency
ABA #02-100-1033 1200 Smith Street, Suite 3100
Houston, Texas 77002
For Credit To: Banque Attention: Brian Malone
Paribas New York Telecopy: (713) 659-3832
#04202195
Final Credit 2144-001545
Banque Paribas Houston Agency
Reference: Santa Fe Energy
Resources, Inc.
Commitment: $1,542,857.14
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
By:FRANK T. SMITH
Name:Frank T. Smith
Title:Director
Address for Notices:
Lending Offices:
Bank of Boston The First National Bank of Boston
ABA #011000390 100 Federal Street
Boston, Massachusetts 02110
For Credit To: Attention: George W. Passela
not applicable Telecopy: (617) 434-3652
Reference: Santa Fe Energy
Resources, Inc.
Commitment: $1,542,857.14
<PAGE>
ABN AMRO Bank N.V., HOUSTON AGENCY
By:W. BRYAN CHAPMAN
Name:W. Bryan Chapman
Title:Vice President
By:CHARLES W. RANDALL
Name:Charles W. Randall
Title:Group Vice President
Address for Notices:
Lending Offices:
ABN AMRO New York ABN AMRO Bank N.V., Houston Agency
ABA #026009580 Three Riverway, Suite 1600
Houston, Texas 77056
For Credit To: ABN AMRO Attention: Mr. Bryan Chapman
Houston Agency Telecopy: (713) 629-7533
Acct. #651001071541
Reference: Santa Fe Energy
Resources, Inc.
Commitment: $1,714,285.71
<PAGE>
EXHIBITS:
A - Form of Application
B - Assignment Agreement
C - Preliminary Available Amount
SCHEDULES:
I - Restricted and Unrestricted Subsidiaries
II - Liens and Funded Debt
III - Initial Approved Assumptions and Price Protection
Agreements
IV - Coverage Report
V - Subordination Provisions
VI - Opinion of Andrews & Kurth, L.L.P.
VII - Opinion of David L. Hicks
VIII - Existing Letters of Credit
IX - Jurisdictions for Which Certificates Are to Be Provided
X - Designated Debt
<PAGE>
EXHIBIT 23(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (Nos. 33-37175,
33-44541 and 33-44542) of Santa Fe Energy Resources, Inc. of our report dated
February 18, 1994 appearing on page 31 of this Form 10-K.
PRICE WATERHOUSE
Houston, Texas
March 22, 1994
<PAGE>
EXHIBIT 23(B)
CONSENT OF EXPERTS
As petroleum engineers, we hereby consent to the incorporation by reference
in the Prospectuses constituting part of the Registration Statements on Form S-8
(Nos. 33-37175, 33-44541 and
33-44542) of Santa Fe Energy Resources, Inc. of our oil and gas reserve reports
as of December 31, 1990, December 31, 1991, December 31, 1992 and December 31,
1993 included in the Santa Fe Resources, Inc. Form 10-K for the year ended
December 31, 1993.
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
March 21, 1994
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
Know all men by these presents that J. L. PAYNE, constitutes and
appoints M. J. ROSINSKI and DAVID L. HICKS and each or any of them, as
his true and lawful attorneys-in-fact and agents, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities to sign in his name to the Annual Report on Form 10-K of
SANTA FE ENERGY RESOURCES, INC. for the fiscal year ended December 31,
1993 and to file the same, and with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents,
or any of them or their substitutes may lawfully do or cause to be
done by virtue hereof.
Dated: February 18, 1994 J. L. PAYNE
J. L. Payne
<PAGE>
POWER OF ATTORNEY
Know all men by these presents that R. F. DAMMEYER constitutes
and appoints J. L. PAYNE, M. J. ROSINSKI and DAVID L. HICKS and each
or any of them, as his true and lawful attorneys-in-fact and agents,
with full power of substitution, for him and in his name, place and
stead, in any and all capacities to sign in his name to the Annual
Report on Form 10-K of SANTA FE ENERGY RESOURCES, INC. for the fiscal
year ended December 31, 1993 and to file the same, and with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them or their
substitutes may lawfully do or cause to be done by virtue hereof.
Dated: February 18, 1994 R. F. DAMMEYER
R. F. Dammeyer
<PAGE>
POWER OF ATTORNEY
Know all men by these presents that W. E. GREEHEY constitutes and
appoints J. L. PAYNE, M. J. ROSINSKI and DAVID L. HICKS and each or
any of them, as his true and lawful attorneys-in-fact and agents, with
full power of substitution, for him and in his name, place and stead,
in any and all capacities to sign in his name to the Annual Report on
Form 10-K of SANTA FE ENERGY RESOURCES, INC. for the fiscal year ended
December 31, 1993 and to file the same, and with all exhibits thereto
and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents
full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them or their substitutes may lawfully do or cause
to be done by virtue hereof.
Dated: February 18, 1994 W. E. GREEHEY
W. E. Greehey
<PAGE>
POWER OF ATTORNEY
Know all men by these presents that M. N. KLEIN constitutes and
appoints J. L. PAYNE, M. J. ROSINSKI and DAVID L. HICKS and each or
any of them, as his true and lawful attorneys-in-fact and agents, with
full power of substitution, for him and in his name, place and stead,
in any and all capacities to sign in his name to the Annual Report on
Form 10-K of SANTA FE ENERGY RESOURCES, INC. for the fiscal year ended
December 31, 1993 and to file the same, and with all exhibits thereto
and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents
full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them or their substitutes may lawfully do or cause
to be done by virtue hereof.
Dated: February 18, 1994 M. N. KLEIN
M. N. Klein
<PAGE>
POWER OF ATTORNEY
Know all men by these presents that R. D. KREBS constitutes and
appoints J. L. PAYNE, M. J. ROSINSKI and DAVID L. HICKS and each or
any of them, as his true and lawful attorneys-in-fact and agents, with
full power of substitution, for him and in his name, place and stead,
in any and all capacities to sign in his name to the Annual Report on
Form 10-K of SANTA FE ENERGY RESOURCES, INC. for the fiscal year ended
December 31, 1993 and to file the same, and with all exhibits thereto
and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents
full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them or their substitutes may lawfully do or cause
to be done by virtue hereof.
Dated: February 18, 1994 R. D. KREBS
R. D. Krebs
<PAGE>
POWER OF ATTORNEY
Know all men by these presents that A. V. MARTINI constitutes and
appoints J. L. PAYNE, M. J. ROSINSKI and DAVID L. HICKS and each or
any of them, as his true and lawful attorneys-in-fact and agents, with
full power of substitution, for him and in his name, place and stead,
in any and all capacities to sign in his name to the Annual Report on
Form 10-K of SANTA FE ENERGY RESOURCES, INC. for the fiscal year ended
December 31, 1993 and to file the same, and with all exhibits thereto
and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents
full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them or their substitutes may lawfully do or cause
to be done by virtue hereof.
Dated: February 18, 1994
A. V. Martini
<PAGE>
POWER OF ATTORNEY
Know all men by these presents that M. A. MORPHY constitutes and
appoints J. L. PAYNE, M. J. ROSINSKI and DAVID L. HICKS and each or
any of them, as his true and lawful attorneys-in-fact and agents, with
full power of substitution, for him and in his name, place and stead,
in any and all capacities to sign in his name to the Annual Report on
Form 10-K of SANTA FE ENERGY RESOURCES, INC. for the fiscal year ended
December 31, 1993 and to file the same, and with all exhibits thereto
and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents
full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them or their substitutes may lawfully do or cause
to be done by virtue hereof.
Dated: February 18, 1994 M. A. MORPHY
M. A. Morphy
<PAGE>
POWER OF ATTORNEY
Know all men by these presents that R. F. RICHARDS constitutes
and appoints J. L. PAYNE, M. J. ROSINSKI and DAVID L. HICKS and each
or any of them, as his true and lawful attorneys-in-fact and agents,
with full power of substitution, for him and in his name, place and
stead, in any and all capacities to sign in his name to the Annual
Report on Form 10-K of SANTA FE ENERGY RESOURCES, INC. for the fiscal
year ended December 31, 1993 and to file the same, and with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them or their
substitutes may lawfully do or cause to be done by virtue hereof.
Dated: February 18, 1994 R. F. RICHARDS
R. F. Richards
<PAGE>
POWER OF ATTORNEY
Know all men by these presents that DAVID M. SCHULTE constitutes
and appoints J. L. PAYNE, M. J. ROSINSKI and DAVID L. HICKS and each
or any of them, as his true and lawful attorneys-in-fact and agents,
with full power of substitution, for him and in his name, place and
stead, in any and all capacities to sign in his name to the Annual
Report on Form 10-K of SANTA FE ENERGY RESOURCES, INC. for the fiscal
year ended December 31, 1993 and to file the same, and with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them or their
substitutes may lawfully do or cause to be done by virtue hereof.
Dated: February 18, 1994 DAVID M. SCHULTE
David M. Schulte
<PAGE>
POWER OF ATTORNEY
Know all men by these presents that M. J. SHAPIRO constitutes and
appoints J. L. PAYNE, M. J. ROSINSKI and DAVID L. HICKS and each or
any of them, as his true and lawful attorneys-in-fact and agents, with
full power of substitution, for him and in his name, place and stead,
in any and all capacities to sign in his name to the Annual Report on
Form 10-K of SANTA FE ENERGY RESOURCES, INC. for the fiscal year ended
December 31, 1993 and to file the same, and with all exhibits thereto
and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents
full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them or their substitutes may lawfully do or cause
to be done by virtue hereof.
Dated: February 18, 1994 M. J. SHAPIRO
M. J. Shapiro
<PAGE>
POWER OF ATTORNEY
Know all men by these presents that R. F. VAGT constitutes and
appoints J. L. PAYNE, M. J. ROSINSKI and DAVID L. HICKS and each or
any of them, as his true and lawful attorneys-in-fact and agents, with
full power of substitution, for him and in his name, place and stead,
in any and all capacities to sign in his name to the Annual Report on
Form 10-K of SANTA FE ENERGY RESOURCES, INC. for the fiscal year ended
December 31, 1993 and to file the same, and with all exhibits thereto
and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents
full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them or their substitutes may lawfully do or cause
to be done by virtue hereof.
Dated: February 18, 1994 R. F. VAGT
R. F. Vagt
<PAGE>
POWER OF ATTORNEY
Know all men by these presents that K. D. WRISTON constitutes and
appoints J. L. PAYNE, M. J. ROSINSKI and DAVID L. HICKS and each or
any of them, as his true and lawful attorneys-in-fact and agents, with
full power of substitution, for him and in his name, place and stead,
in any and all capacities to sign in his name to the Annual Report on
Form 10-K of SANTA FE ENERGY RESOURCES, INC. for the fiscal year ended
December 31, 1993 and to file the same, and with all exhibits thereto
and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents
full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them or their substitutes may lawfully do or cause
to be done by virtue hereof.
Dated: February 18, 1994 K. D. WRISTON
K. D. Wriston
