SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
November 4, 1997
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Date of Report (Date of earliest event reported)
AMERICAN RESOURCES OF DELAWARE, INC.
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(Exact name of Registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-21472 86-0713506
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(Commission File Number) (IRS Employer Identification No.)
160 Morgan Street
P. O. Box 87
Versailles, Kentucky 40383
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(Address of principal executive offices) (Zip Code)
(606)873-5455
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(Registrant's Telephone Number, including Area Code)
Not Applicable
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(Former name or former address, if changed since last report)
<PAGE>
Item 1. Changes in Control of Registrant. Not Applicable.
Item 2. Acquisition or Disposition of Assets.
On November 4, 1997, the independent members of the
Board of Directors voted to approve the exercise of a Call
Agreement between the Company and Prima Capital LLC ("Prima")
which granted the Company the right to acquire 2,471.3 shares of
common stock (the "Shares") in Century Offshore Management
Corporation. A member of the Board owns a 20% interest in Prima,
and he abstained from the above-referenced vote. The Company had
previously advanced One Million Five Hundred Thousand Dollars
($1,500,000) to Prima pursuant to the Call Agreement; and in the
event the Company did not exercise its right to call the Shares
by December 31, 1997, the advance monies would be non-refundable.
The total purchase price for the Shares is Four Million Dollars
($4,000,000), and the balance of Two Million Five Hundred
Thousand Dollars ($2,500,000) is due on or before December 31,
1997.
Item 3. Bankruptcy Receivership. Not Applicable.
Item 4. Change in Registrant's Certified Accountant. Not
Applicable.
Item 5. Other Events.
On November 11, 1997, the Company entered into a First
Amended and Restated Credit Agreement (the "Credit Agreement")
with its primary lender, Den norske Bank, AS. The Credit
Agreement was deemed effective on November 1, 1997, increased the
Company's credit facility to Seventy Five Million Dollars
($75,000,000) and allowed the Company the option to elect, on a
monthly basis, whether its outstanding borrowing base will bear
interest under a Prime or LIBO (London Interbank Borrowing
Offering) rate. The Company's current Borrowing Base under the
Credit Agreement is Thirty Million Dollars ($30,000,000).
Item 6. Resignation of Registrant's Directors. Not applicable.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements. Not applicable.
(b) Pro Forma Financial Information. Not applicable.
(c) Exhibits:
Exhibit 10.85 Copy of the Stock Purchase
Agreement between Prima Capital LLC and the
Company.
Exhibit 10.86 Copy of the First Amended and
Restated Credit Agreement between the Company and
Den norske Bank, AS.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
AMERICAN RESOURCES OF DELAWARE, INC.
By: /s/ Ralph A. Currie
-------------------------------------
Ralph A. Currie
Its: Chief Financial Officer
Dated: November 19, 1997
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3
<PAGE>
EXHIBIT 10.85
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (the "agreement") is made and
entered into this 4th day of November, 1997, by and among Prima
Capital LLC, a Kentucky limited liability company, (the
"Shareholder"), and American Resources of Delaware, Inc., a
Delaware corporation (the "Purchaser").
WITNESSETH:
WHEREAS, Shareholder owns and desires to sell, and Purchaser
desires to purchase, Two Thousand Four Hundred and Seventy One
and One Third (2471.3) shares of capital stock of Century
Offshore Management Corporation (the "Shares"), in accordance
with and subject to the terms and provisions of this agreement.
NOW, THEREFORE, in consideration of the mutual agreements
contained in this agreement, and intending to be legally bound,
the Shareholder and Purchaser agree as follows:
1.01 PURCHASE AND SALE OF SHARES:
- ---- ---------------------------
At the closing (as defined in section (C) of this agreement),
Shareholder shall sell to Purchaser, and Purchaser shall purchase
from Shareholder, the Shares.
2.01 PURCHASE PRICE; PAYMENT:
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The aggregate purchase price for the Shares shall consist of
Four Million Dollars {$4,000,000.00} (the "Purchase Price"). The
Shareholder acknowledges that it has received One Million Five
Hundred Thousand Dollars ($1,500,000.00) as an advancement from
Purchaser for the Shares. The Remaining Purchase Price shall be
paid at Closing.
3.01 CLOSING:
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The closing of the transactions contemplated by this agreement
(the "Closing") shall take place at the offices of the Purchaser,
within Five (5) days after all conditions of this Agreement have
been satisfied or waived as provided therein, or at such other
time, date, or place upon which Purchaser and the Shareholder
shall agree in writing (the "Closing Date"), but in no event
shall the closing date be later than November 28, 1997.
3.02 SHAREHOLDER'S AND THE PURCHASER'S CLOSING ITEMS
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SHAREHOLDER SHALL DELIVER TO PURCHASER:
(a) the certificates representing the Shares, duly endorsed
in blank or with stock powers attached thereto duly signed
in blank, in each case guaranteed by a bank or a member firm
of the New York Stock Exchange, Inc, or otherwise in proper
<PAGE>
form for transfer, free of any notation of any adverse
claims, conveying to Purchaser good and marketable title to
the Shares, free and clear of all liens, claims, charges,
pledges, rights, and encumbrances of any nature whatsoever;
PURCHASER SHALL DELIVER TO THE SHAREHOLDER:
(a) immediately available funds in the amount and as
provided in section 2.01 of this agreement.
4.01 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
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The Shareholder represents and warrants to Purchaser, and
acknowledge that Purchaser relies on such representations and
warranties in entering into and proceeding under this agreement,
that:
(a) The Shareholder is a limited liability company, duly
organized, validly existing, and in good standing under the
laws of Kentucky. The Shareholder has full corporate power
and authority to own or hold under lease the properties it
now owns or holds under lease and to carry on the business
presently being conducted by it, and the corporation has
full corporate power and authority to enter into this
agreement and all other agreements contemplated by this
agreement and to consummate the transactions contemplated
hereunder and thereunder.
(b) This agreement has been duly executed and delivered by
Shareholder. The execution and delivery by Shareholder of
this agreement and the consummation by Shareholder of the
transactions contemplated hereby will not conflict with or
constitute a violation, breach, or default under any
material contract, trust agreement, mortgage, indenture, or
other agreement or instrument to which any shareholder is a
party or by which any shareholder is bound or to which any
shareholder or any of the properties of any shareholder is
subject.
(c) The Shareholder is the true and lawful owner of the Shares
and, as of the date of this agreement and at the closing,
has and will have full right, power, and authority to sell,
transfer, and deliver the Shares to Purchaser. The
shareholder has no knowledge of any adverse claims affecting
its Shares and there are no notations of any adverse claims
marked on the certificates for the Shares. At the closing,
Purchaser will acquire the Shares free and clear of any
security interests, mortgage, adverse claims, liens, or
encumbrances of any nature or description whatsoever.
<PAGE>
(d) No provision of any contract, trust agreement, mortgage,
indenture, or other agreement or instrument to which the
Shareholder is a party or is bound or to which any
shareholder is subject requires the consent or
authorization of any other person or entity as a condition
precedent to the consummation of the transactions
contemplated by this agreement.
(e) No representation or warranty made by the Shareholder in
this agreement and no statement made by it in any
certificate, document, exhibit, or schedule furnished or to
be furnished in connection with the transactions herein
contemplated contains or will contain any untrue statement
of a material fact or omits or will omit to state any
material fact necessary to make such representation or
warranty or any such statement not misleading to Purchaser.
4.02 REPRESENTATIONS AND WARRANTIES OF PURCHASER
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Purchaser represents and warrants to the Shareholder, and
acknowledges that the Shareholder relies on such representations
and warranties in entering into and proceeding under this
agreement, that:
(a) This agreement has been duly authorized by all necessary
corporate action of Purchaser and has been duly executed and
delivered by Purchaser. The execution and delivery by
Purchaser of this agreement and the consummation by
Purchaser of the transactions contemplated hereby will not
conflict with or constitute a violation of any provision of
the articles of incorporation or bylaws of Purchaser or
conflict with or constitute a violation, breach, or default
under any material contract, trust agreement, mortgage
indenture, or other agreement or instrument to which
Purchaser is a party or by which Purchaser is bound or to
which Purchaser or any of its properties is subject.
(b) No provision of the articles of incorporation or bylaws of
Purchaser or of any material contract, trust agreement,
mortgage, indenture, or other agreement or instrument to
which Purchaser is a party or by which it is bound or to
which Purchaser or any of its properties is subject requires
the consent or authorization of any other person or entity
as a condition precedent to the consummation of the
transactions contemplated hereby.
(c) No person or entity is entitled to any brokerage or finder's
fee or commission or other like payment in connection with
the negotiations relating to or the transactions
contemplated by this agreement, based on any agreement,
arrangement, or understanding with Purchaser, or any of
Purchaser's respective officers, directors, agents, or
employees.
<PAGE>
(d) Purchaser is acquiring the Shares for investment and not
with a view to the sale or other distribution thereof.
Purchaser agrees that it will not at any time sell,
exchange, transfer, or otherwise dispose of the Shares under
circumstances which would constitute a violation of the
Securities Act of 1933, as amended, and the rules and
regulations promulgated by the Securities and Exchange
Commission thereunder or any state statute, rule, or
regulation relating to the sale of securities.
5.01 CONDITIONS TO PURCHASER'S OBLIGATION
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The obligation of Purchaser to consummate on the closing date
the transactions contemplated by this agreement will be subject
to the satisfaction of each of the following conditions by the
time required but no later than on or prior to the closing date,
unless expressly waived by Purchaser:
(a) The representations and warranties of the Shareholder
contained in section 5.01 of this agreement shall be true
and correct in all material respects on and as of the
closing date as if made on and as of the closing date.
(b) No action or proceeding shall have been instituted or
threatened against the Shareholder or its members, before
any court or governmental department, agency, or commission
to restrain or prohibit, or to obtain substantial damages in
respect of, this agreement or the consummation of the
transactions contemplated hereby; and no party to this
agreement shall have received written notice from any court
or governmental department, agency, or commission of its
intention to institute any action or proceeding to restrain
or enjoin or commence any investigation (other than a
routine letter of inquiry) into the consummation of this
agreement and the transactions contemplated hereby or to
nullify or render ineffective this agreement or such
transactions if consummated, which in the opinion of
Purchaser would make it inadvisable to consummate such
transaction; provided, that in the event such an
investigation is instituted, this agreement may not be
abandoned by Purchaser for a period of 120 days (but
consummation hereof shall be delayed during such period),
and may not be abandoned thereafter except upon advice of
counsel that there is a reasonable probability that such an
investigation may result in an action or proceeding of the
type described in the second clause of this paragraph (G)(5)
(c) The Shareholder shall have tendered certificates
representing all of the Shares.
<PAGE>
5.02 CONDITIONS TO THE SHAREHOLDER OBLIGATIONS
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The obligation of the Shareholder to consummate on the closing
date the transactions contemplated by this agreement will be
subject to the satisfaction of each of the following conditions
at the time required but no later than on or prior to the closing
date, unless expressly waived by the Shareholder' representative:
(a) The representations and warranties of Purchaser contained in
section 5.02 of this agreement shall be true and correct in
all material respects on and as of the closing date as if
made on and as of the closing date, except for changes
resulting from the ordinary course of Purchaser's business
or as contemplated by this Agreement.
(b) No action or proceeding shall have been instituted against
Purchaser which reasonably could have a material and adverse
effect on its businesses; no action or proceeding shall have
been instituted or threatened against any of the parties to
this agreement, before any court or governmental department,
agency, or commission to restrain or prohibit, or to obtain
substantial damages in respect of, this agreement or the
consummation of the transactions contemplated hereby; and
neither Purchaser nor Shareholder shall have received
written notice from any court or governmental department,
agency, or commission of its intention to institute any
action or proceeding to restrain or enjoin or commence any
investigation (other than a routine letter of inquiry) into
the consummation of this agreement and the transactions
contemplated hereby or to nullify or render ineffective this
agreement or such transactions if consummated, which in the
opinion of the Shareholder would make it inadvisable to
consummate such transactions.
6.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS
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All representations, warranties, and covenants by any party to
this agreement contained in this agreement or in any certificate
or other instrument delivered by or on behalf of any party
pursuant to this agreement shall be continuous and shall survive
the closing for a three year period expiring on the third
anniversary of the closing date.
7.01 INDEMNIFICATION
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After the closing date, Shareholder shall, as to those
representations, warranties, covenants, and agreements which are
herein made or agreed to by the Shareholder, indemnify and hold
harmless Purchaser against and in respect of:
(a) Any damage, deficiency, or costs resulting from any
misrepresentation or breach of warranty or any
nonfulfillment of any covenant or agreement on the part
of the Shareholder under this agreement; and
<PAGE>
(b) Any claim, action, suit, proceeding, demand, judgment,
assessment, cost, and expense, including reasonable
counsel fees, incident to any of the foregoing.
Shareholder shall reimburse Purchaser for any liabilities,
damages, deficiencies, claims, actions, suits, proceedings,
demands, judgments, assessments, costs, and expenses to which
this section 7.01 relates only if a claim for indemnification is
made by Purchaser prior to the third anniversary of the closing
date.
8.01 RECORDS AND FURTHER ASSURANCES
- -----------------------------------
From time to time prior to or at the closing, the Shareholder
will execute all such instruments and will take all such actions
as Purchaser, being advised by counsel, shall reasonably request
in connection with carrying out and effectuating the intent and
purpose hereof and all transactions and things contemplated by
this agreement, including, without limitation, the execution and
delivery of any and all confirmatory and other instruments in
addition to those to be delivered on the closing date, and any
and all actions which may reasonably be necessary or desirable to
complete the transactions contemplated hereby.
9.01 REMEDIES
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Purchaser hereby acknowledges that there may not be an
adequate remedy at law for the breach of this Agreement and, in
addition to any other remedies available to the Shareholder,
injunctive relief may be granted to the Shareholder for such
breach.
10.01 CONSTRUCTION; GOVERNING LAW
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The table of contents and section headings contained in this
agreement are inserted as a matter of convenience and shall not
affect in any way the construction of the terms of this
agreement. This agreement shall be construed in accordance with
and governed by the laws of Kentucky.
11.01 ENTIRE AGREEMENT; AMENDMENT AND WAIVER
- --------------------------------------------
This agreement, including the schedules hereto, constitutes
and contains the entire agreement of the Shareholder, and
Purchaser with respect to the transactions contemplated hereby
and supersedes any prior writing by the parties. The parties may,
by mutual agreement in writing, amend this agreement in any
respect, and any party, as to such party, may in writing (1)
extend the time for the performance of any obligations of any
other party; (2) waive any inaccuracies in representations and
warranties by any other party; (3) waive performance of any
obligations by any other party; and (4) waive the fulfillment of
any condition that is precedent to the performance by such party
of any of its obligations hereunder. No such waiver shall be
deemed to constitute the waiver of any other breach of the same
<PAGE>
or of any other term or condition of this agreement. Any such
amendment or waiver by Purchaser must be signed by an officer of
Purchaser and any such amendment or waiver by Shareholder must be
signed by the Shareholder' representative.
12.01 SEVERABILITY
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If any provision of this agreement or the application thereof
to any person or circumstance shall to any extent be held in any
proceeding to be invalid or unenforceable, the remainder of this
agreement, or the application of such provision to persons or
circumstances other than those to which it was held to be invalid
or unenforceable, shall not be affected thereby, and shall be
valid and enforceable to the fullest extent permitted by law, but
only if and to the extent such enforcement would not materially
and adversely frustrate the parties' essential objectives as
expressed herein.
13.01 COUNTERPARTS
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This agreement may be executed concurrently in one or more
counterparts, any one of which need not contain the signatures of
more than one party but all of which taken together shall
constitute one and the same agreement.
IN WITNESS WHEREOF, the Shareholder and Purchaser have
executed this agreement as of the day and year first written
above.
PRIMA CAPITAL LLC
By: /s/ Rick G. Avare
--------------------------------
Its: Administrative Member
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AMERICAN RESOURCES OF DELAWARE, INC.
By: /s/ Ralph A. Currie
--------------------------------
Its: Chief Financial Officer
-------------------------------
<PAGE>
EXHIBIT 10.86
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FIRST AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
AMERICAN RESOURCES OF DELAWARE, INC.
SOUTHERN GAS CO. OF DELAWARE, INC.
AND
DEN NORSKE BANK, AS
November 1, 1997
------------------------------------------
REDUCING REVOLVING LINE OF CREDIT OF UP TO $75,000,000
(WITH $1,000,000.00 LETTER OF CREDIT SUB-FACILITY)
------------------------------------------
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<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above. . . . . . . . . . . . . . . . 1
1.2 Additional Defined Terms . . . . . . . . . . . . . 1
1.3 Undefined Financial Accounting Terms . . . . . . . 15
1.4 References . . . . . . . . . . . . . . . . . . . . 15
1.5 Articles and Sections. . . . . . . . . . . . . . . 15
1.6 Number and Gender. . . . . . . . . . . . . . . . . 15
1.7 Incorporation of Exhibits. . . . . . . . . . . . . 15
ARTICLE II TERMS OF FACILITY
2.1 Revolving Line of Credit . . . . . . . . . . . . . 15
2.2 Letter of Credit Facility. . . . . . . . . . . . . 16
2.3 Extension of Commitment Termination Date . . . . . 16
2.4 Use of Loan Proceeds and Letters of Credit . . . . 17
2.5 Interest . . . . . . . . . . . . . . . . . . . . . 17
2.6 Repayment of Loans and Interest. . . . . . . . . . 17
2.7 Outstanding Amounts. . . . . . . . . . . . . . . . 17
2.8 Time, Place, and Method of Payments. . . . . . . . 18
2.9 Borrowing Base Determinations. . . . . . . . . . . 18
2.10 Mandatory Prepayments. . . . . . . . . . . . . . . 19
2.11 Voluntary Prepayments and Conversions of Loans . . 19
2.12 Commitment Fee . . . . . . . . . . . . . . . . . . 19
2.13 Engineering Fee. . . . . . . . . . . . . . . . . . 20
2.14 Facility Fee . . . . . . . . . . . . . . . . . . . 20
2.15 Letter of Credit Fee . . . . . . . . . . . . . . . 20
2.16 Loans to Satisfy Obligations of Borrowers. . . . . 20
2.17 Security Interest in Accounts; Right of Offset . . 20
2.18 General Provisions Relating to Interest. . . . . . 21
2.19 Yield Protection . . . . . . . . . . . . . . . . . 22
2.20 Letters in Lieu of Transfer Orders . . . . . . . . 23
2.21 Power of Attorney. . . . . . . . . . . . . . . . . 24
2.22 Taxes. . . . . . . . . . . . . . . . . . . . . . . 24
2.23 Limitation on Types of Loans.. . . . . . . . . . . 26
2.24 Limitation on Interests Periods. . . . . . . . . . 26
ARTICLE III CONDITIONS
3.1 Receipt of Loan Documents and Other Items. . . . . 27
3.2 Each Loan and Letter of Credit . . . . . . . . . . 27
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<PAGE>
ARTICLE IV REPRESENTATIONS AND WARRANTIES
4.1 Due Authorization. . . . . . . . . . . . . . . . . 29
4.2 Corporate Existence. . . . . . . . . . . . . . . . 29
4.3 Valid and Binding Obligations. . . . . . . . . . . 29
4.4 Security Instruments . . . . . . . . . . . . . . . 29
4.5 Title to Assets. . . . . . . . . . . . . . . . . . 29
4.6 Scope and Accuracy of Financial Statements . . . . 29
4.7 No Material Misstatements. . . . . . . . . . . . . 29
4.8 Liabilities, Litigation, and Restrictions. . . . . 30
4.9 Authorizations; Consents . . . . . . . . . . . . . 30
4.10 Compliance with Laws . . . . . . . . . . . . . . . 30
4.11 ERISA. . . . . . . . . . . . . . . . . . . . . . . 30
4.12 Environmental Laws . . . . . . . . . . . . . . . . 31
4.13 Compliance with Federal Reserve Regulations. . . . 31
4.14 Investment Company Act Compliance. . . . . . . . . 31
4.15 Public Utility Holding Company Act Compliance. . . 31
4.16 Proper Filing of Tax Returns; Payment of Taxes Due 31
4.17 Refunds. . . . . . . . . . . . . . . . . . . . . . 32
4.18 Gas Contracts. . . . . . . . . . . . . . . . . . . 32
4.19 Intellectual Property. . . . . . . . . . . . . . . 32
4.20 Casualties or Taking of Property . . . . . . . . . 32
4.21 Locations of Borrowers . . . . . . . . . . . . . . 32
4.22 Subsidiaries . . . . . . . . . . . . . . . . . . . 32
ARTICLE V AFFIRMATIVE COVENANTS
5.1 Maintenance and Access to Records. . . . . . . . . 33
5.2 Quarterly Financial Statements; Compliance
Certificates . . . . . . . . . . . . . . . . . . . 33
5.3 Annual Financial Statements. . . . . . . . . . . . 33
5.4 Oil and Gas Reserve Reports. . . . . . . . . . . . 33
5.5 Title Opinions; Title Defects. . . . . . . . . . . 34
5.6 Notices of Certain Events. . . . . . . . . . . . . 34
5.7 Letters in Lieu of Transfer Orders; Division Orders35
5.8 Additional Information . . . . . . . . . . . . . . 35
5.9 Compliance with Laws . . . . . . . . . . . . . . . 36
5.10 Payment of Assessments and Charges . . . . . . . . 36
5.11 Maintenance of Corporate Existence and Good Standing36
5.12 Payment of Notes; Performance of Obligations . . . 36
5.13 Further Assurances . . . . . . . . . . . . . . . . 36
5.14 Initial Fees and Expenses of Counsel to Lender . . 36
5.15 Subsequent Fees and Expenses of Lender . . . . . . 36
5.16 Operation of Oil and Gas Properties. . . . . . . . 37
5.17 Maintenance and Inspection of Properties . . . . . 37
5.18 Maintenance of Insurance . . . . . . . . . . . . . 37
5.19 INDEMNIFICATION. . . . . . . . . . . . . . . . . . 38
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ARTICLE VI NEGATIVE COVENANTS
6.1 Indebtedness . . . . . . . . . . . . . . . . . . . 39
6.2 Contingent Obligations . . . . . . . . . . . . . . 39
6.3 Liens. . . . . . . . . . . . . . . . . . . . . . . 39
6.4 Sales of Assets. . . . . . . . . . . . . . . . . . 39
6.5 Leasebacks . . . . . . . . . . . . . . . . . . . . 40
6.6 Sale or Discount of Receivables. . . . . . . . . . 40
6.7 Loans or Advances. . . . . . . . . . . . . . . . . 40
6.8 Investments. . . . . . . . . . . . . . . . . . . . 40
6.9 Dividends and Distributions. . . . . . . . . . . . 40
6.10 Capital Expenditures . . . . . . . . . . . . . . . 40
6.11 Issuance of Stock; Changes in Corporate Structure. 40
6.12 Transactions with Affiliates . . . . . . . . . . . 41
6.13 Lines of Business. . . . . . . . . . . . . . . . . 41
6.14 Rental or Lease Agreements . . . . . . . . . . . . 41
6.15 ERISA Compliance . . . . . . . . . . . . . . . . . 41
6.16 Debt Coverage Ratio. . . . . . . . . . . . . . . . 41
6.17 Current Ratio. . . . . . . . . . . . . . . . . . . 41
6.18 Tangible Net Worth of Borrowers. . . . . . . . . . 41
6.19 General and Administrative Expenses. . . . . . . . 41
6.20 Changes to Operating Agreements. . . . . . . . . . 41
6.21 Hedging Contracts. . . . . . . . . . . . . . . . . 41
6.22 Quarterly Interest Ratio . . . . . . . . . . . . . 42
6.23 Conversion of Settle Oil and Gas Company Note. . . 42
ARTICLE VII EVENTS OF DEFAULT
7.1 Enumeration of Events of Default . . . . . . . . . 42
7.2 Remedies . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VIII MISCELLANEOUS
8.1 Transfers; Participations. . . . . . . . . . . . . 45
8.2 Release by Borrowers . . . . . . . . . . . . . . . 45
8.3 Survival of Representations, Warranties, and
Covenants. . . . . . . . . . . . . . . . . . . . . 45
8.4 Notices and Other Communications . . . . . . . . . 45
8.5 Parties in Interest. . . . . . . . . . . . . . . . 46
8.6 Rights of Third Parties. . . . . . . . . . . . . . 46
8.7 Renewals; Extensions . . . . . . . . . . . . . . . 47
8.8 No Waiver; Rights Cumulative . . . . . . . . . . . 47
8.9 Survival Upon Unenforceability . . . . . . . . . . 47
8.10 Amendments; Waivers. . . . . . . . . . . . . . . . 47
8.11 Controlling Agreement. . . . . . . . . . . . . . . 47
8.12 Disposition of Collateral. . . . . . . . . . . . . 47
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<PAGE>
8.13 GOVERNING LAW. . . . . . . . . . . . . . . . . . . 47
8.14 JURISDICTION AND VENUE . . . . . . . . . . . . . . 48
8.15 WAIVER OF RIGHTS TO JURY TRIAL . . . . . . . . . . 48
8.16 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . 48
8.17 Counterparts . . . . . . . . . . . . . . . . . . . 49
LIST OF EXHIBITS
Exhibit I - Form of Note
Exhibit II - Form of Borrowing Request
Exhibit III - Form of Compliance Certificate
Exhibit IV - Disclosures
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FIRST AMENDED AND RESTATED CREDIT AGREEMENT
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THIS FIRST AMENDED AND RESTATED CREDIT
AGREEMENT is made and entered into effective the 1st day of
November, 1997, by and among AMERICAN RESOURCES OF DELAWARE,
INC., a Delaware corporation ("ARI"), SOUTHERN GAS CO.OF
DELAWARE, INC., a
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Delaware corporation ("Southern"; Southern and ARI each being a
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"Borrower" and collectively being the "Borrowers"), and DEN
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NORSKE BANK, AS, a Norwegian bank (the "Lender").
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W I T N E S S E T H:
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In consideration of the mutual covenants and
agreements herein contained, the Borrowers and the Lender hereby
agree as follows, amending and restating in its entirety the
Amended and Restated Credit Agreement dated September 28, 1995
and the First Amendment through the Seventh Amendment thereof,
(the "Credit Agreement") by and between Borrowers and the Lender.
ARTICLE I
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DEFINITIONS AND INTERPRETATION
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1.1Terms Defined Above. As used in this
Credit
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Agreement, the terms "ARI," "Borrower," "Borrowers," "Lender,"
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and "Southern" shall have the meaning assigned to them
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hereinabove.
1.2Additional Defined Terms. As used in this
Credit
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Agreement, each of the following terms shall have the meaning
assigned thereto in this Section, unless the context otherwise
requires:
"Additional Costs" shall mean
costs which the
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Lender determines are attributable
to its obligation to make or its
making or maintaining any Fixed
Rate Loan, or any reduction in any
amount receivable by the Lender in
respect of any such obligation or
any Fixed Rate Loan, resulting from
any Regulatory Change which (a)
changes the basis of taxation of
any amounts payable to the Lender
under this Agreement or the Note in
respect of any Fixed Rate Loan
(other than taxes imposed on the
overall net income of the Lender),
(b) imposes or modifies any
reserve, special deposit, minimum
capital, capital rates, or similar
requirements relating to any
extensions of credit or other
assets of, or any deposits with or
other liabilities of, the Lender
(including Fixed Rate Loans and
Dollar deposits in the London
interbank market in connection with
LIBO Rate Loans), or any
commitments of the Lender
hereunder, (c) increases the
Assessment Rate, or (d) imposes any
other condition affecting this
Agreement or any of such extensions
of credit, liabilities, or
commitments.
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"Adjusted LIBO Rate" shall
mean, for any LIBO Rate
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Loan, an interest rate per annum
(rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined
by the Lender to be equal to the
sum of the LIBO Rate for such Loan
plus the Applicable Margin, but in
no event exceeding the Highest
Lawful Rate.
"Affiliate" shall mean any
Person directly or
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indirectly controlling, or under
common control with, either
Borrower, and includes any
Subsidiary of either Borrower and
any "affiliate" of either Borrower
within the meaning of Reg.
Section 240.12b-2 of the Securities
Exchange Act of 1934, as amended,
with "control," as used in this
definition, meaning possession,
directly or indirectly, of the
power to direct or cause the
direction of management, policies
or action through ownership of
voting securities, contract, voting
trust, or membership in management
or in the group appointing or
electing management or otherwise
through formal or informal
arrangements or business
relationships.
"Agreement" shall mean this
First Amended and
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Restated Credit Agreement, as it
may be amended, supplemented, or
restated from time to time.
"Applicable Lending Office"
shall mean the lending
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office of the Lender (or an
affiliate of the Lender) designated
for such Loan on the signature
pages hereof or such other office
of the Lender (or an affiliate of
the Lender) as the Lender may from
time to time specify to either
Borrower as the office by which
Loans of such type are to be made
and maintained.
"Applicable Margin" shall mean
as to each LIBO
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Rate Loan, the following:
Borrowing Base LIBO
Utilization Rate Loan
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1) greater than or equal two and one-half
to 75% of percent (2 1/2%)
Borrowing Base
2) less than 75% two and one-fourth
of Borrowing Base percent (2 1/2%)
"Assignment" shall mean the Assignment of Notes,
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Liens, Security Interests, and Other Rights, in form
and substance satisfactory to the Lender, executed by
the Existing Lender, assigning to the Lender the
Existing Note, the indebtedness evidenced thereby, the
Liens securing the Existing Note, and the rights of the
Existing Lender under the Existing Loan Documents, and
financing statement changes constituent thereto.
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"Available Commitment" shall mean, at any time, an
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amount equal to the remainder, if any, of (a) the
lesser of the Commitment Amount or the Borrowing Base
in effect at such time minus (b) the sum of the Loan
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Balance at such time plus the L/C Exposure at such
time.
"Borrowing Base" shall mean, at any time, the
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amount determined by the Lender in accordance with
Section 2.9 and then in effect.
"Borrowing Base Utilization" shall mean the
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aggregate principal amount of loans outstanding
hereunder as a percentage of the Borrowing Base.
"Borrowing Request" shall mean each written
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request, in substantially the form attached hereto as
Exhibit II, by the Borrowers to the Lender for a
borrowing, conversion, or prepayment pursuant to
Sections 2.1 or 2.11, each of which shall:
(a) be signed by a Responsible Officer
of each Borrower;
(b) when requesting a borrowing, be
accompanied by a Compliance Certificate;
(c) specify the amount requested or
prepaid and the date of the borrowing,
conversion, or prepayment (which shall be a
Business Day);
(d) be delivered to the Lender no later
than 11:00 a.m., Central Standard or Daylight
Savings Time, as the case may be, on the
Business Day of the requested borrowing,
conversion, or prepayment;
(e) when requesting a LIBO Rate Loan,
be delivered to the Lender no later than
10:00 a.m., Central Standard or Daylight
Savings Time, as the case may be, three
Business Days preceding the requested
borrowing, conversion, or prepayment and
designate the Interest Period requested with
respect to such Loan."
"Business Day" shall mean (a) for all purposes
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other than as covered by clause (b) of this definition,
a day other than a Saturday, Sunday, legal holiday for
commercial banks under the laws of the State of Texas,
or any other day when banking is suspended in the State
of Texas, and (b) with respect to all requests,
notices, and determinations in connection with, and
payments of principal and interest on, LIBO Rate Loans,
a day which is a Business Day described in clause (a)
of this definition and which is a day for trading by
and between banks for Dollar deposits in the London
interbank market.
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"Cash Flow" shall mean, for any period, net income
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of any Person from operations for such period plus
depreciation, amortization, depletion, and other non-
cash expenses of such Person for such period.
"Closing Date" shall mean the effective date of
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this Agreement.
"Code" shall mean the United States Internal
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Revenue Code of 1986, as amended from time to time.
"Collateral" shall mean the Mortgaged Properties
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and any other Property now or at any time used or
intended as security for the payment or performance of
all or any portion of the Obligations.
"Commitment" shall mean the obligation of the
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Lender, subject to applicable provisions of this
Agreement, to make Loans to or for the benefit of the
Borrowers pursuant to Section 2.1 and to issue Letters
of Credit pursuant to Section 2.2.
"Commitment Amount" shall mean the amount of the
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Borrowing Base as defined in Section 2.9.
"Commitment Fee" shall mean each fee payable to
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the Lender by the Borrowers pursuant to Section 2.12.
"Commitment Period" shall mean the period from and
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including the Closing Date to but not including the
Commitment Termination Date.
"Commitment Termination Date" shall mean February
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1, 2002.
"Commonly Controlled Entity" shall mean any Person
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which is under common control with either Borrower
within the meaning of Section 4001 of ERISA.
"Compliance Certificate" shall mean each
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certificate, substantially in the form attached hereto
as Exhibit III, executed by a Responsible Officer of
either Borrower and furnished to the Lender from time
to time in accordance with Section 5.2.
"Contingent Obligation" shall mean, as to any
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Person, any obligation of such Person guaranteeing or
in effect guaranteeing any Indebtedness, leases,
dividends, or other obligations of any other Person
(for purposes of this definition, a "primary
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obligation") in any manner, whether directly or
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indirectly, including, without limitation, any
obligation of such Person, regardless of whether such
obligation is contingent, (a) to purchase any primary
obligation or any Property constituting direct or
indirect security therefor, (b) to advance or supply
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funds (i) for the purchase or payment of any primary
obligation, or (ii) to maintain working or equity
capital of any other Person in respect of any primary
obligation, or otherwise to maintain the net worth or
solvency of any other Person, (c) to purchase Property,
securities or services primarily for the purpose of
assuring the owner of any primary obligation of the
ability of the Person primarily liable for such primary
obligation to make payment thereof, or (d) otherwise to
assure or hold harmless the owner of any such primary
obligation against loss in respect thereof, with the
amount of any Contingent Obligation being deemed to be
equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable,
the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith.
"Current Assets" shall mean all assets which
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would, in accordance with GAAP, be included as current
assets on a consolidated balance sheet of such Person
after eliminating any intercompany items, as of the
date of calculation, after deducting adequate reserves
in each case in which a reserve is proper in accordance
with GAAP plus an amount equal to the Available
Commitment.
"Current Liabilities" shall mean all liabilities
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which would, in accordance with GAAP, be included as
current liabilities on a consolidated balance sheet of
the Borrowers as of the date of calculation, but
excluding current maturities in respect of the
Obligations, both principal and interest and excluding
that portion of unearned revenue related to the
Williams Company production payment conveyance."
"Default" shall mean any event or occurrence which
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with the lapse of time or the giving of notice or both
would become an Event of Default.
"Default Rate" shall mean a per annum interest
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rate equal to the Prime Rate plus 5%, but in no event
exceeding the Highest Lawful Rate.
"Dollars" and "$" shall mean dollars in lawful
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currency of the United States of America.
"EBTDA" shall mean, for any Person during any
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period, (a) net income of such Person for such period
after taxes, as determined in accordance with GAAP,
excluding, however, extraordinary items, such as (i)
any net gain or loss during such period arising from
the sale, exchange, or other disposition of capital
assets (such term to include all fixed assets and all
securities) other than in the ordinary course of
business and (ii) any write-up of assets plus (b) to
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the extend deducted in determining net income pursuant
to the foregoing clause (a), income taxes and other
taxes measured by net income, and depreciation,
depletion and amortization for such period.
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"EBITDA" shall mean, for any Person during any
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period, (a) net income of such Person for such period
after taxes, as determined in accordance with GAAP,
excluding, however, extraordinary items, such as (i)
any net gain or loss during such period arising from
the sale, exchange, or other disposition of capital
assets (such term to include all fixed assets and all
securities) other than in the ordinary course of
business and (ii) any write-up of assets plus (b) to
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the extend deducted in determining net income pursuant
to the foregoing clause (a), interest expense, income
taxes and other taxes measured by net income, and
depreciation, depletion, and amortization for such
period.
"Engineering Fee" shall mean each fee payable to
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the Lender by the Borrowers pursuant to Section 2.13.
"Environmental Complaint" shall mean any written
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or oral complaint, order, directive, claim, citation,
notice of environmental report or investigation, or
other notice by any Governmental Authority or any other
Person with respect to (a) air emissions, (b) spills,
releases, or discharges to soils, any improvements
located thereon, surface water, groundwater, or the
sewer, septic, waste treatment, storage, or disposal
systems servicing any Property of either Borrower, (c)
solid or liquid waste disposal, (d) the use,
generation, storage, transportation, or disposal of any
Hazardous Substance, or (e) other environmental,
health, or safety matters affecting any Property of
either Borrower or the business conducted thereon.
"Environmental Laws" shall mean (a) the following
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federal laws as they may be cited, referenced, and
amended from time to time: the Clean Air Act, the
Clean Water Act, the Safe Drinking Water Act, the
Comprehensive Environmental Response, Compensation and
Liability Act, the Endangered Species Act, the Resource
Conservation and Recovery Act, the Occupational Safety
and Health Act, the Hazardous Materials Transportation
Act, the Superfund Amendments and Reauthorization Act,
and the Toxic Substances Control Act; (b) any and all
equivalent environmental statutes of any state in which
Property of either Borrower is situated, as they may be
cited, referenced and amended from time to time; (c)
any rules or regulations promulgated under or adopted
pursuant to the above federal and state laws; and (d)
any other equivalent federal, state, or local statute
or any requirement, rule, regulation, code, ordinance,
or order adopted pursuant thereto, including, without
limitation, those relating to the generation,
transportation, treatment, storage, recycling,
disposal, handling, or release of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income
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Security Act of 1974, as amended from time to time, and
the regulations thereunder and interpretations thereof.
"Event of Default" shall mean any of the events
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specified in Section 7.1.
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"Existing Note" shall mean the Note, as such term
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is defined in the Existing Credit Agreement, in
existence on the Closing Date immediately prior to the
Assignment.
"Facility Fee" shall mean the fee payable to the
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Lender by the Borrowers pursuant to Section 2.14.
"Financial Statements" shall mean statements of
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the financial condition of each Borrower as at the
point in time and for the period indicated and
consisting of at least a balance sheet and related
statements of operations, common stock and other
stockholders' equity, and cash flows for such Borrower
and, when required by applicable provisions of this
Agreement to be audited, accompanied by the unqualified
certification of a nationally-recognized firm of
independent certified public accountants or other
independent certified public accountants acceptable to
the Lender and footnotes to any of the foregoing, all
of which shall be prepared in accordance with GAAP
consistently applied and in comparative form with
respect to the corresponding period of the preceding
fiscal period.
"Fixed Rate Loan" shall mean any LIBO Rate Loan.
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"Floating Rate" shall mean an interest rate per
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annum equal to the Prime Rate from time to time in
effect.
"GAAP" shall mean generally accepted accounting
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principles established by the Financial Accounting
Standards Board or the American Institute of Certified
Public Accountants and in effect in the United States
from time to time.
"Governmental Authority" shall mean any nation,
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country, commonwealth, territory, government, state,
county, parish, municipality, or other political
subdivision and any entity exercising executive,
legislative, judicial, regulatory, or administrative
functions of or pertaining to government.
"Hazardous Substances" shall mean flammables,
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explosives, radioactive materials, hazardous wastes,
asbestos, or any material containing asbestos,
polychlorinated biphenyls (PCBs), toxic substances or
related materials, petroleum, petroleum products,
associated oil or natural gas exploration, production,
and development wastes, or any substances defined as
"hazardous substances," "hazardous materials,"
"hazardous wastes," or "toxic substances" under the
Comprehensive Environmental Response, Compensation and
Liability Act, as amended, the Superfund Amendments and
Reauthorization Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended, the Toxic
Substances Control Act, as amended, or any other law or
regulation now or hereafter enacted or promulgated by
any Governmental Authority.
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"Highest Lawful Rate" shall mean the maximum non
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-usurious interest rate, if any (or, if the context so
requires, an amount calculated at such rate), that at
any time or from time to time may be contracted for,
taken, reserved, charged, or received under applicable
laws of the State of New York or the United States of
America, whichever authorizes the greater rate, as such
laws are presently in effect or, to the extent allowed
by applicable law, as such laws may hereafter be in
effect and which allow a higher maximum non-usurious
interest rate than such laws now allow.
"Indebtedness" shall mean, as to any Person,
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without duplication, (a) all liabilities (excluding
reserves for deferred income taxes, deferred
compensation liabilities, and other deferred
liabilities and credits) which in accordance with GAAP
would be included in determining total liabilities as
shown on the liability side of a balance sheet, (b) all
obligations of such Person evidenced by bonds,
debentures, promissory notes, or similar evidences of
indebtedness, (c) all other indebtedness of such Person
for borrowed money, and (d) all obligations of others,
to the extent any such obligation is secured by a Lien
on the assets of such Person (whether or not such
Person has assumed or become liable for the obligation
secured by such Lien).
"Insolvency Proceeding" shall mean application
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(whether voluntary or instituted by another Person) for
or the consent to the appointment of a receiver,
trustee, conservator, custodian, or liquidator of any
Person or of all or a substantial part of the Property
of such Person, or the filing of a petition (whether
voluntary or instituted by another Person) commencing a
case under Title 11 of the United States Code, seeking
liquidation, reorganization, or rearrangement or taking
advantage of any bankruptcy, insolvency, debtor's
relief, or other similar law of the United States, the
State of Texas, or any other jurisdiction.
"Insolvent" or "Insolvency" shall mean, with
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respect to any Multiemployer Plan, that such Plan is
insolvent within the meaning of such term as used in
Section 4245 of ERISA.
"Intellectual Property" shall mean patents, patent
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applications, trademarks, tradenames, copyrights,
technology, know-how, and processes.
"Interest Period" shall mean, with respect to any
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LIBO Rate Loan, a period commencing on the date such
Loan is made or converted from a Loan of another type
pursuant to this Agreement or the last day of the next
preceding Interest Period with respect to such Loan and
ending on the numerically corresponding day in the
calendar month that is one, two, three, or, subject to
availability, six months thereafter, as the Borrower
may request in the Borrowing Request for such Loan.
"Investment" in any Person shall mean any stock,
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bond, note, or other evidence of Indebtedness, or any
other security (other than current trade and customer
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accounts) of, investment or partnership interest in or
loan to, such Person.
"L/C Exposure" shall mean, at any time, the
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aggregate maximum amount available to be drawn under
outstanding Letters of Credit at such time.
"Letter of Credit" shall mean any commercial
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letter of credit issued by the Lender for the account
of the Borrowers pursuant to Section 2.2.
"Letter of Credit Application" shall mean the
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standard letter of credit application employed by the
Lender from time to time in connection with letters of
credit.
"Letter of Credit Fee" shall mean each fee payable
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to the Lender by the Borrowers pursuant to Section 2.15
upon or in connection with the issuance of a Letter of
Credit.
"LIBO Rate" shall mean, with respect to any
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Interest Period for any LIBO Rate Loan, the lesser of
(a) the rate per annum (rounded upwards, if necessary,
to the nearest 1/16 of 1%) equal to the average of the
offered quotations appearing on Telerate Page 3750 (or
if such Telerate Page shall not be available, any
successor or similar service selected by the Lender and
the Borrower) as of approximately 11:00 a.m., Central
Standard or Daylight Savings Time, as the case may be,
on the day three Business Days prior to the first day
of such Interest Period for Dollar deposits in an
amount comparable to the principal amount of such LIBO
Rate Loan and having a term comparable to the Interest
Period for such LIBO Rate Loan, or (b) the Highest
Lawful Rate. If neither such Telerate Page 3750 nor
any successor or similar service is available, the term
"LIBO Rate" shall mean, with respect to any Interest
Period for any LIBO Rate Loan, the lesser of (a) the
rate per annum (rounded upwards if necessary, to the
nearest 1/16 of 1%) quoted by the Lender at
approximately 11:00 a.m., London time (or as soon
thereafter as practicable) three Business Days prior to
the first day of the Interest Period for such LIBO Rate
Loan for the offering by the Lender to leading banks in
the London interbank market of Dollar deposits in an
amount comparable to the principal amount of such LIBO
Rate Loan and having a term comparable to the Interest
Period for such LIBO Rate Loan, or (b) the Highest
Lawful Rate.
"LIBO Rate Loan" shall mean any Loan and any
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portion of the Loan Balance which the Borrower has
requested, in the initial Borrowing Request for such
Loan or a subsequent Borrowing Request for such portion
of the Loan Balance, bear interest at the Adjusted LIBO
Rate and which is permitted by the terms hereof to bear
interest at the Adjusted LIBO Rate.
"Lien" shall mean any interest in Property
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securing an obligation owed to, or a claim by, a Person
other than the owner of such Property, whether such
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interest is based on common law, statute, or contract,
and including, but not limited to, the lien or security
interest arising from a mortgage, ship mortgage,
encumbrance, pledge, security agreement, conditional
sale or trust receipt, or a lease, consignment, or
bailment for security purposes (other than true leases
or true consignments), liens of mechanics, materialmen,
and artisans, maritime liens and reservations,
exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases, and other
title exceptions and encumbrances affecting Property
which secure an obligation owed to, or a claim by, a
Person other than the owner of such Property (for the
purpose of this Agreement, each Borrower shall be
deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale
agreement, financing lease, or other arrangement
pursuant to which title to the Property has been
retained by or vested in some other Person for security
purposes), and the filing or recording of any financing
statement or other security instrument in any public
office.
"Limitation Period" shall mean any period while
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any amount remains owing on the Note and interest on
such amount, calculated at the applicable interest
rate, plus any fees or other sums payable under any
Loan Document and deemed to be interest under
applicable law, would exceed the amount of interest
which would accrue at the Highest Lawful Rate.
"Loan" shall mean any loan made by the Lender to
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or for the benefit of the Borrowers pursuant to this
Agreement and any payment made by the Lender under a
Letter of Credit.
"Loan Balance" shall mean, at any time, the
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outstanding principal balance of the Note at such time.
"Loan Documents" shall mean this Agreement, the
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Note, the Letter of Credit Applications, the Letters of
Credit, the Security Instruments, and all other
documents and instruments now or hereafter delivered
pursuant to the terms of or in connection with this
Agreement, the Note, the Letter of Credit Applications,
the Letters of Credit, or the Security Instruments, and
all renewals and extensions of, amendments and
supplements to, and restatements of, any or all of the
foregoing from time to time in effect.
"Material Adverse Effect" shall mean (a) any
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material adverse effect on the business, operations,
properties, condition (financial or otherwise), or
prospects of either Borrower, (b) any adverse effect
upon the business operations, properties, condition
(financial or otherwise), or prospects of either
Borrower which increases the risk that any of the
Obligations will not be repaid as and when due, or (c)
any adverse effect upon the Collateral.
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"Mortgaged Properties" shall mean all Oil and Gas
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Properties of Borrowers subject to a perfected first-
priority Lien in favor of the Lender, subject only to
Permitted Liens, as security for the Obligations.
"Multiemployer Plan" shall mean a Plan which is a
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multiemployer plan as defined in Section 4001(a)(3) of
ERISA.
"Note" shall mean the promissory note of the
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Borrowers, in the form attached hereto as Exhibit I,
together with all renewals, extensions for any period,
increases, and rearrangements thereof.
"Obligations" shall mean, without duplication, (a)
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all Indebtedness evidenced by the Note, (b) the
Reimbursement Obligations, (c) the undrawn, unexpired
amount of all outstanding Letters of Credit, (d) the
obligation of the Borrowers for the payment of
Commitment Fees, Facility Fees, Letter of Credit Fees,
Engineering Fees, and (e) all other obligations and
liabilities of the Borrowers to the Lender, now
existing or hereafter incurred, under, arising out of
or in connection with any Loan Document, and to the
extent that any of the foregoing includes or refers to
the payment of amounts deemed or constituting interest,
only so much thereof as shall have accrued, been earned
and which remains unpaid at each relevant time of
determination.
"Oil and Gas Properties" shall mean fee,
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leasehold, or other interests in or under mineral
estates or oil, gas, and other liquid or gaseous
hydrocarbon leases with respect to Properties situated
in the United States or offshore from any State of the
United States, including, without limitation,
overriding royalty and royalty interests, leasehold
estate interests, net profits interests, production
payment interests, and mineral fee interests, together
with contracts executed in connection therewith and all
tenements, hereditaments, appurtenances and Properties
appertaining, belonging, affixed, or incidental
thereto.
"PBGC" shall mean the Pension Benefit Guaranty
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Corporation established pursuant to Subtitle A of Title
IV of ERISA or any entity succeeding to any or all of
its functions under ERISA.
"Permitted Liens" shall mean (a) Liens for taxes,
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assessments, or other governmental charges or levies
not yet due or which (if foreclosure, distraint, sale,
or other similar proceedings shall not have been
initiated) are being contested in good faith by
appropriate proceedings, and such reserve as may be
required by GAAP shall have been made therefor, (b)
Liens in connection with workers' compensation,
unemployment insurance or other social security (other
than Liens created by Section 4068 of ERISA), old-age
pension, or public liability obligations which are not
yet due or which are being contested in good faith by
appropriate proceedings, if such reserve as may be
required by GAAP shall have been made therefor, (c)
Liens in favor of vendors, carriers, warehousemen,
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repairmen, mechanics, workmen, materialmen,
construction, or similar Liens arising by operation of
law in the ordinary course of business in respect of
obligations which are not yet due or which are being
contested in good faith by appropriate proceedings, if
such reserve as may be required by GAAP shall have been
made therefor, (d) Liens in favor of operators and non-
operators under joint operating agreements or similar
contractual arrangements arising in the ordinary course
of the business of either Borrower to secure amounts
owing, which amounts are not yet due or are being
contested in good faith by appropriate proceedings, if
such reserve as may be required by GAAP shall have been
made therefor, (e) Liens under production sales
agreements, division orders, operating agreements, and
other agreements customary in the oil and gas business
for processing, producing, and selling hydrocarbons
securing obligations not constituting Indebtedness and
provided that such Liens do not secure obligations to
deliver hydrocarbons at some future date without
receiving full payment therefor within 90 days of
delivery, (f) easements, rights of way, restrictions,
and other similar encumbrances, and minor defects in
the chain of title which are customarily accepted in
the oil and gas financing industry, none of which
interfere with the ordinary conduct of the business of
either Borrower or materially detract from the value or
use of the Property to which they apply, (g) Liens
securing the purchase price of Property acquired by
either Borrower in the ordinary course of business
provided that such Liens cover only the acquired
Property and the aggregate unpaid purchase price
secured by such Liens shall not exceed $100,000, and
-------
(h) Liens in favor of the Lender and other Liens
expressly permitted under the Security Instruments.
"Person" shall mean an individual, corporation,
------
partnership, trust, unincorporated organization,
government, any agency or political subdivision of any
government, or any other form of entity.
"Plan" shall mean, at any time, any employee
----
benefit plan which is covered by ERISA and in respect
of which either Borrower or any Commonly Controlled
Entity is (or, if such plan were terminated at such
time, would under Section 4069 of ERISA be deemed to
be) an "employer" as defined in Section 3(5) of ERISA.
"Prime Rate" shall mean the rate announced by the
----------
New York branch of Lender, from time to time, as its
prime lending rate. For purposes of this Agreement,
the Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually
charged to any customer of Lender.
"Principal Office" shall mean the principal office
----------------
of the Lender in New York, New York, presently located
at 200 Park Avenue, 31st Floor, New York, New York
10166.
"Prohibited Transaction" shall have the meaning
----------------------
assigned to such term in Section 4975 of the Code.
12
<PAGE>
"Property" shall mean any interest in any kind of
--------
property or asset, whether real, personal or mixed,
tangible or intangible.
"Regulation D" shall mean Regulation D of the
------------
Board of Governors of the Federal Reserve System, as
the same may be amended or supplemented from time to
time.
"Regulatory Change" shall mean the passage,
-----------------
adoption or institution of, or change in, any federal,
state, or foreign Requirement of Law (including,
without limitation, Regulation D), or any
interpretation, directive, or request (whether or not
having the force of law) of any Governmental Authority
or monetary authority charged with the interpretation
or administration thereof, occurring after the Closing
Date and applying to a class of banks including the
Lender or its Applicable Lending Office.
"Reimbursement Obligation" shall mean the
------------------------
obligation of the Borrowers to provide to the Lender or
reimburse the Lender for any amounts payable, paid, or
incurred by the Lender with respect to Letters of
Credit.
"Release of Hazardous Substances" shall mean any
-------------------------------
emission, spill, release, disposal, or discharge,
except in accordance with a valid permit, license,
certificate, or approval of the relevant Governmental
Authority, of any Hazardous Substance into or upon (a)
the air, (b) soils or any improvements located thereon,
(c) surface water or groundwater, or (d) the sewer or
septic system, or the waste treatment, storage, or
disposal system servicing any Property of either
Borrower.
"Reorganization" shall mean, with respect to any
--------------
Multiemployer Plan, that such Plan is in reorganization
within the meaning of such term in Section 4241 of
ERISA.
"Reportable Event" shall mean any of the events
----------------
set forth in Section 4043(b) of ERISA, other than those
events as to which the thirty-day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20
of PBGC Reg. Section 2615.
"Requirement of Law" shall mean, as to any Person,
------------------
the certificate or articles of incorporation and by-
laws or other organizational or governing documents of
such Person, and any applicable law, treaty, ordinance,
order, judgment, rule, decree, regulation, or
determination of an arbitrator, court, or other
Governmental Authority, including, without limitation,
rules, regulations, orders, and requirements for
permits, licenses, registrations, approvals, or
authorizations, in each case as such now exist or may
be hereafter amended and are applicable to or binding
upon such Person or any of its Property or to which
such Person or any of its Property is subject.
13
<PAGE>
"Reserve Report" shall mean each report delivered
--------------
to the Lender pursuant to Section 5.4.
"Responsible Officer" shall mean, as to any
-------------------
Person, its President, Chief Executive Officer, or any
Vice President.
"Security Instruments" shall mean the Existing
--------------------
Security Instruments and the security instruments
executed and delivered in satisfaction of the condition
set forth in Section 3.1(g), and all other documents
and instruments at any time executed as security for
all or any portion of the Obligations, as such
instruments may be amended, restated, or supplemented
from time to time.
"Settle Oil and Gas Company Note" shall mean the
-------------------------------
22% Convertible Note dated November 28, 1994, in the
original principal amount of $5,000,000.00 with Settle
Oil and Gas Company as maker and American Resources of
Delaware, Inc. as payee.
"Single Employer Plan" shall mean any Plan which
--------------------
is covered by Title IV of ERISA, but which is not a
Multiemployer Plan.
"Subsidiary" shall mean, as to any Person, a
----------
corporation of which shares of stock having ordinary
voting power (other than stock having such power only
by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of
such corporation are at the time owned, or the
management of which is otherwise controlled, directly
or indirectly through one or more intermediaries, or
both, by such Person.
"Superfund Site" shall mean those sites listed on
--------------
the Environmental Protection Agency National Priority
List and eligible for remedial action or any comparable
state registries or list in any state of the United
States.
"Tangible Net Worth" shall mean (a) total assets,
------------------
as would be reflected on a balance sheet of the
Borrowers prepared on a consolidated basis and in
accordance with GAAP, exclusive of Intellectual
Property, experimental or organization expenses,
franchises, licenses, permits, and other intangible
assets, treasury stock, unamortized underwriters' debt
discount and expenses, and goodwill minus (b) total
liabilities, as would be reflected on a balance sheet
of the Borrowers prepared on a consolidated basis and
in accordance with GAAP.
"Transferee" shall mean any Person to which the
----------
Lender has sold, assigned, transferred, or granted a
participation in any of the Obligations, as authorized
pursuant to Section 8.1, and any Person acquiring, by
purchase, assignment, transfer, or participation, from
any such purchaser, assignee, transferee, or
participant, any part of such Obligations.
14
<PAGE>
"UCC" shall mean the Uniform Commercial Code as
---
from time to time in effect in the State of Texas.
1.3 Undefined Financial Accounting Terms. Undefined
------------------------------------
financial accounting terms used in this Agreement shall be
defined according to GAAP at the time in effect.
1.4 References. References in this Agreement to
----------
Exhibit, Article, or Section numbers shall be to Exhibits,
Articles, or Sections of this Agreement, unless expressly stated
to the contrary. References in this Agreement to "hereby,"
"herein," "hereinafter," "hereinabove," "hereinbelow," "hereof,"
"hereunder" and words of similar import shall be to this
Agreement in its entirety and not only to the particular Exhibit,
Article, or Section in which such reference appears.
1.5 Articles and Sections. This Agreement, for
---------------------
convenience only, has been divided into Articles and Sections;
and it is understood that the rights and other legal relations of
the parties hereto shall be determined from this instrument as an
entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to
such Articles or Sections.
1.6 Number and Gender. Whenever the context requires,
-----------------
reference herein made to the single number shall be understood to
include the plural; and likewise, the plural shall be understood
to include the singular. Definitions of terms defined in the
singular or plural shall be equally applicable to the plural or
singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine,
feminine and neuter, when such construction is appropriate; and
specific enumeration shall not exclude the general but shall be
construed as cumulative.
1.7 Incorporation of Exhibits. The Exhibits attached
-------------------------
to this Agreement are incorporated herein and shall be considered
a part of this Agreement for all purposes.
ARTICLE II
----------
TERMS OF FACILITY
-----------------
2.1 Revolving Line of Credit. (a) Upon the terms and
------------------------
conditions (including, without limitation, the right of the
Lender to decline to make any Loan so long as any Default or
Event of Default exists) and relying on the representations and
warranties contained in this Agreement, the Lender agrees, during
the Commitment Period, to make Loans, in immediately available
funds at the Applicable Lending Office or the Principal Office,
to or for the benefit of the Borrowers, from time to time on any
Business Day designated by the Borrowers following receipt by the
Lender of a Borrowing Request; provided, however, no Loan shall
exceed the then existing Available Commitment.
15
<PAGE>
(b) Subject to the terms of this Agreement,
during the Commitment Period, the Borrowers may borrow, repay,
and reborrow. Except for prepayments made pursuant to Section
2.10, each borrowing, conversion, and prepayment of principal of
Loans shall be in an amount at least equal to $100,000.00. Each
borrowing, prepayment, or conversion of or into a Loan of a
different type or, in the case of a Fixed Rate Loan, having a
different Interest Period, shall be deemed a separate borrowing,
conversion, and prepayment for purposes of the foregoing, one for
each type of Loan or Interest Period. Anything in this Agreement
to the contrary notwithstanding, the aggregate principal amount
of LIBO Rate Loans having the same Interest Period shall be at
least equal to $100,000; and if any LIBO Rate Loan would
otherwise be in a lesser principal amount for any period, such
Loan shall be a Floating Rate Loan during such period.
(c) The Loans shall be made and maintained at the
Applicable Lending Office or the Principal Office and shall be
evidenced by the Note.
2.2 Letter of Credit Facility. (a) Upon the terms and
-------------------------
conditions (including, without limitation, the right of the
Lender to decline to issue any Letter of Credit so long as any
Default or Event of Default exists) and relying on the
representations and warranties contained in this Agreement, the
Lender agrees, during the Commitment Period, to issue Letters of
Credit following the receipt, not less than two Business Days
prior to the requested date for issuance of the relevant Letter
of Credit, of a Letter of Credit Application executed by the
Borrowers; provided, however, (a) no Letter of Credit shall have
an expiration date which is subsequent to the Commitment
Termination Date, and (b) the Lender shall not be obligated to
issue any Letter of Credit if (i) the face amount thereof would
exceed the Available Commitment, or (ii) after giving effect to
the issuance thereof, (A) the L/C Exposure, when added to the
Loan Balance then outstanding, would exceed the lesser of the
Commitment Amount or the Borrowing Base then in effect, or (B)
the L/C Exposure would exceed $1,000,000.00.
(b) Should the Lender be called upon by the
beneficiary of any Letter of Credit to honor all or any portion
of the commitment thereunder, whether upon the presentation of
drafts or otherwise, such payment by the Lender on account of
such Letter of Credit shall be treated, for all purposes, as an
advance against the Note.
2.3 Extension of Commitment Termination Date. The
----------------------------------------
Lender agrees, upon written request of the Borrowers received not
less than 30 days nor more than 90 days prior to the Commitment
Termination Date, to review the financial condition of the
Borrowers and the value of the Mortgaged Properties. At such
time, the Lender may, at its sole discretion, but shall not be
obligated to, extend the Commitment Termination Date for a period
selected by the Lender. The Lender shall furnish the Borrowers
with written confirmation as to its decision with respect to any
requested extension of the Commitment Termination Date, which
written confirmation shall be delivered to the Borrowers not less
than five days prior to the then existing Commitment Termination
Date. Should the Lender extend the Commitment Termination Date,
the newly established date shall become the Commitment
Termination Date for all purposes of this Agreement. Should the
Lender, in the exercise of its discretion, elect not to extend
16
<PAGE>
the Commitment Termination Date or fail to advise the Borrowers
of any extension within the time provided above in this Section,
the Commitment Termination Date shall remain unchanged.
2.4 Use of Loan Proceeds and Letters of Credit. (a)
------------------------------------------
Proceeds of all Loans shall be used solely for the development of
Borrowers' gas properties and for general corporate purposes of
the Borrowers.
(b) Letters of Credit shall be used solely for
the development of Borrowers' gas properties and the general
corporate purposes of the Borrowers.
2.5 Interest. Subject to the terms of this Agreement
--------
(including, without limitation, Section 2.18), interest on the
Loans shall accrue and be payable at a rate per annum equal to
the Floating Rate for each Floating Rate Loan and the Adjusted
LIBO Rate for each LIBO Rate Loan. Interest on all Floating Rate
Loans 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) during the period for which payable. Interest on all
Fixed Rate Loans 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) during the period for which payable.
Notwithstanding the foregoing, interest on past-due principal
and, to the extent permitted by applicable law, past-due
interest, shall accrue at the Default Rate, computed on the basis
of a year of 365 or 366 days, as the case may be, and actual days
elapsed (including the first day but excluding the last day)
during the period for which payable, and shall be payable upon
demand by the Lender at any time as to all or any portion of such
interest. Interest provided for herein shall be calculated on
unpaid sums actually advanced and outstanding pursuant to the
terms of this Agreement and only for the period from the date or
dates of such advances until repayment.
2.6 Repayment of Loans and Interest. Accrued and
-------------------------------
unpaid interest on each outstanding Floating Rate Loan shall be
due and payable monthly commencing on the first day of November,
1997, and continuing on the first day of each calendar month
thereafter while any Floating Rate Loan remains outstanding, the
payment in each instance to be the amount of interest which has
accrued and remains unpaid in respect of the relevant Loan.
Accrued and unpaid interest on each outstanding Fixed Rate Loan
shall be due and payable on the last day of the Interest Period
for such Fixed Rate Loan and, in the case of any Interest Period
in excess of three months, on the day of the third calendar month
following the commencement of such Interest Period corresponding
to the day of the calendar month on which such Interest Period
commenced, the payment in each instance to be the amount of
interest which has accrued and remains unpaid in respect of the
relevant Loan. The Loan Balance, together with all accrued and
unpaid interest thereon, shall be due and payable at Final
Maturity. At the time of making each payment hereunder or under
the Note, the Borrower shall specify to the Lender the Loans or
other amounts payable by the Borrower hereunder to which such
payment is to be applied. In the event the Borrower fails to so
specify, or if an Event of Default has occurred and is
continuing, the Lender may apply such payment as it may elect in
its sole discretion.
2.7 Outstanding Amounts. The Lender is irrevocably
-------------------
authorized by the Borrowers to attach to and make a part of the
Note a ledger reflecting amounts advanced to or paid by the
17
<PAGE>
Borrowers and to attach to and make a part of the Note a
continuation of any such schedule of advances and payments, as
and when required. All Loans and all payments and prepayments
made on account of the principal thereof and all conversions of
Loans shall be reflected by an appropriate notation on such
ledger or any continuation thereof attached to the Note;
provided, however, the failure of the Lender to do so shall not
relieve the Borrowers of its liability hereunder or under the
Note or subject the Borrowers to additional liability hereunder
or under the Note. The outstanding principal balance of the Note
reflected by the notations by the Lender on its records or ledger
sheets affixed to the Note shall be deemed rebuttably presumptive
evidence of the principal amount owing on the Note. The
liability for payment of principal and interest evidenced by the
Note shall be limited to principal amounts actually advanced and
outstanding pursuant to this Agreement and interest on such
amounts calculated in accordance with this Agreement.
2.8 Time, Place, and Method of Payments. All payments
-----------------------------------
required pursuant to this Agreement or the Note shall be made in
lawful money of the United States of America and in immediately
available funds, shall be deemed received by the Lender on the
next Business Day following receipt if such receipt is after 2:00
p.m., Central Standard or Daylight Savings Time, as the case may
be, on any Business Day, and shall be made at the Principal
Office. Except as provided to the contrary herein, if the due
date of any payment hereunder or under the Note would otherwise
fall on a day which is not a Business Day, such date 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.
2.9 Borrowing Base Determinations. (a) The Borrowing
-----------------------------
Base as of November 1, 1997, is acknowledged by the Borrowers and
the Lender to be $60,000,000.00. Commencing on December 1, 1997,
and continuing thereafter on the first day of each calendar month
through the Commitment Termination Date, the amount of the
Borrowing Base shall be reduced by $700,000. In addition to such
reductions, the Borrower shall further reduce the Borrowing Base
by $14,000,000 on May 1, 1998.
(b) The Borrowing Base shall be redetermined
semi-annually, on each October 1 and April 1 prior to the
Commitment Termination Date, on the basis of information supplied
by the Borrowers in compliance with the provisions of this
Agreement, including, without limitation, Reserve Reports, and
all other information available to the Lender. In addition, the
Lender shall, in the normal course of business following a
request of the Borrowers, redetermine the Borrowing Base;
provided, however, the Lender shall not be obligated to respond
to more than three such requests during any calendar year, and in
no event shall the Lender be required to redetermine the
Borrowing Base more than once in any three-month period,
including, without limitation, each scheduled semi-annual
redetermination provided for above. Notwithstanding the
foregoing, the Lender may at its discretion redetermine the
Borrowing Base at any time and from time to time.
(c) Upon each determination of the Borrowing Base
by the Lender, the Lender shall notify the Borrowers verbally
(confirming such notice promptly in writing) of such
determination, and the Borrowing Base so communicated to the
18
<PAGE>
Borrowers shall become effective upon such verbal notification
and shall remain in effect until the next subsequent
determination of the Borrowing Base.
(d) The Borrowing Base shall represent the
determination by the Lender, in accordance with the applicable
definitions and provisions herein contained and its customary
lending practices for loans of this nature, of the value, for
loan purposes, of the Mortgaged Properties, subject, in the case
of any increase in the Borrowing Base, to the credit approval
process of the Lender. Furthermore, the Borrowers acknowledges
that the determination of the Borrowing Base contains an equity
cushion (market value in excess of loan value), which is
acknowledged by the Borrowers to be essential for the adequate
protection of the Lender.
2.10 Mandatory Prepayments. (a) If at any time the sum
---------------------
of the Loan Balance and the L/C Exposure exceeds the lesser of
the Commitment Amount or the Borrowing Base then in effect, the
Borrowers shall, within 30 days of notice from the Lender of such
occurrence, (i) prepay, or make arrangements acceptable to the
Lender for the prepayment of, the amount of such excess for
application on the Loan Balance, (ii) provide additional
collateral, of character and value satisfactory to the Lender in
its sole discretion, to secure the Obligations by the execution
and delivery to the Lender of security instruments in form and
substance satisfactory to the Lender, or (iii) effect any
combination of the alternatives described in clauses (i) and (ii)
of this Section and acceptable to the Lender in its sole
discretion. In the event that a mandatory prepayment is required
under this Section and the Loan Balance is less than the amount
required to be prepaid, the Borrowers shall repay the entire Loan
Balance and, in accordance with the provisions of the relevant
Letter of Credit Applications executed by the Borrowers or
otherwise to the satisfaction of the Lender, deposit with the
Lender, as additional collateral securing the Obligations, an
amount of cash, in immediately available funds, equal to the L/C
Exposure minus the lesser of the Commitment Amount or the
Borrowing Base. The cash deposited with the Lender in
satisfaction of the requirement provided in this Section may be
invested, at the sole discretion of the Lender and then only at
the express direction of the Borrowers as to investment vehicle
and maturity (which shall be no later than the latest expiry date
of any then outstanding Letter of Credit), for the account of the
Borrowers in cash or cash equivalent investments offered by or
through the Lender.
(b) The Borrowers shall also make prepayments equal to 50%
of any amount of principal received as payment on the Settle Oil
and Gas Company Note within three days from receipt of such
payment.
2.11 Voluntary Prepayments and Conversions of Loans.
----------------------------------------------
Subject to applicable provisions of this Agreement, the Borrowers
shall have the right at any time or from time to time to prepay
Loans; provided, however, that (a) the Borrowers shall pay all
accrued and unpaid interest on the amounts prepaid or converted,
and (b) no such prepayment or conversion shall serve to postpone
the repayment when due of any Obligation.
2.12 Commitment Fee. In addition to interest on the
--------------
Note as provided herein and the Engineering Fees, Facility Fees,
and Letter of Credit Fees payable hereunder and to compensate the
Lender for maintaining funds available, the Borrowers shall pay
19
<PAGE>
to the Lender, in immediately available funds, on the first day
of January, 1996, and on the first day of each third calendar
month thereafter during the Commitment Period, a fee in the
amount of one-half percent (1/2%) per annum, calculated on the
basis of a year of 360 days and actual days elapsed (including
the first day but excluding the last day), on the average daily
amount of the Available Commitment during the preceding three
month period.
2.13 Engineering Fee. In addition to interest on the
---------------
Note as provided herein and the Commitment Fees, Facility Fees,
and Letter of Credit Fees payable hereunder and to compensate the
Lender for the costs of evaluating the Mortgaged Properties and
reviewing the Reserve Reports, the Borrowers shall pay to the
Lender, in immediately available funds, on the Closing Date, an
engineering fee in the amount of $5,000.00.
2.14 Facility Fee. In addition to interest on the Note
------------
as provided herein and Commitment Fees, Engineering Fees, and
Letter of Credit Fees payable hereunder and to compensate the
Lender for the costs of the extension of credit hereunder, the
Borrowers shall pay to the Lender a facility fee in the amount of
one percent (1%) of any future increase in the Borrowing Base.
2.15 Letter of Credit Fee. In addition to interest on
--------------------
the Note as provided herein and Commitment Fees and Facility Fees
payable hereunder, the Borrowers agrees to pay to the Lender, on
the date of issuance of each Letter of Credit, a fee equal to one
percent (1.0%) per annum, calculated on the basis of a year of
360 days and actual days elapsed (including the first day but
excluding the last day), on the face amount of such Letter of
Credit during the period for which such Letter of Credit is
issued with a minimum fee of $400.00; provided, however, in the
event such Letter of Credit is canceled prior to its original
expiry date or a payment is made by the Lender with respect to
such Letter of Credit, the Lender shall, within 30 days after
such cancellation or the making of such payment, rebate to the
Borrowers the unearned portion of such fee. The Borrowers also
agree to pay to the Lender on demand its customary letter of
credit transactional fees, including, without limitation,
amendment fees, payable with respect to each Letter of Credit.
2.16 Loans to Satisfy Obligations of Borrowers. The
-----------------------------------------
Lender may, but shall not be obligated to, make Loans for the
benefit of the Borrowers and apply proceeds thereof to the
satisfaction of any condition, warranty, representation, or
covenant of either Borrower contained in this Agreement or any
other Loan Document. Any such Loan shall be evidenced by the
Note.
2.17 Security Interest in Accounts; Right of Offset.
----------------------------------------------
As security for the payment and performance of the Obligations,
the Borrowers hereby each transfer, assign, and pledge to the
Lender and grants to the Lender a security interest in all funds
of such Borrower now or hereafter or from time to time on deposit
with the Lender, with such interest of the Lender to be
retransferred, reassigned, and/or released by the Lender, as the
case may be, at the expense of such Borrower upon payment in full
and complete performance by such Borrower of all Obligations.
All remedies as secured party or assignee of such funds shall be
exercisable by the Lender upon the occurrence of any Event of
Default, regardless of whether the exercise of any such remedy
would result in any penalty or loss of interest or profit with
20
<PAGE>
respect to any withdrawal of funds deposited in a time deposit
account prior to the maturity thereof. Furthermore, each
Borrower hereby grants to the Lender the right, exercisable at
such time as any Obligation shall mature, whether by acceleration
of maturity or otherwise, of offset or banker's lien against all
funds of such Borrower now or hereafter or from time to time on
deposit with the Lender, regardless of whether the exercise of
any such remedy would result in any penalty or loss of interest
or profit with respect to any withdrawal of funds deposited in a
time deposit account prior to the maturity thereof.
2.18 General Provisions Relating to Interest. (a) It
---------------------------------------
is the intention of the parties hereto to comply strictly with
the usury laws of the State of New York and the United States of
America or any other applicable law. In this connection, there
shall never be collected, charged, or received on the sums
advanced hereunder interest in excess of that which would accrue
at the Highest Lawful Rate.
(b) Notwithstanding anything herein or in the
Note to the contrary, during any Limitation Period, the interest
rate to be charged on amounts evidenced by the Note shall be the
Highest Lawful Rate, and the obligation, if any, of the Borrowers
for the payment of fees or other charges deemed to be interest
under applicable law shall be suspended. During any period or
periods of time following a Limitation Period, to the extent
permitted by applicable laws of the State of New York or the
United States of America or any other applicable law, the
interest rate to be charged hereunder shall remain at the Highest
Lawful Rate until such time as there has been paid to the Lender
(i) the amount of interest in excess of that accruing at the
Highest Lawful Rate that the Lender would have received during
the Limitation Period had the interest rate remained at the
otherwise applicable rate, and (ii) all interest and fees
otherwise payable to the Lender but for the effect of such
Limitation Period.
(c) If, under any circumstances, the aggregate
amounts paid on the Note or under this Agreement or any other
Loan Document include amounts which by law are deemed interest
and which would exceed the amount permitted if the Highest Lawful
Rate were in effect, the Borrowers stipulate that such payment
and collection will have been and will be deemed to have been, to
the extent permitted by applicable laws of the State of New York
or the United States of America or any other applicable law, the
result of mathematical error on the part of the Borrowers and the
Lender; and the Lender shall promptly refund the amount of such
excess (to the extent only of such interest payments in excess of
that which would have accrued and been payable on the basis of
the Highest Lawful Rate) upon discovery of such error by the
Lender or notice thereof from the Borrowers. In the event that
the maturity of any Obligation is accelerated, by reason of an
election by the Lender or otherwise, or in the event of any
required or permitted prepayment, then the consideration
constituting interest under applicable laws may never exceed the
Highest Lawful Rate; and excess amounts paid which by law are
deemed interest, if any, shall be credited by the Lender on the
principal amount of the Obligations, or if the principal amount
of the Obligations shall have been paid in full, refunded to the
Borrowers.
(d) All sums paid, or agreed to be paid, to the
Lender for the use, forbearance and detention of the proceeds of
any advance hereunder shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread
21
<PAGE>
throughout the full term hereof until paid in full so that the
actual rate of interest is uniform but does not exceed the
Highest Lawful Rate throughout the full term hereof.
2.19 Yield Protection. (a) Without limiting the effect
----------------
of the other provisions of this Section (but without
duplication), the Borrowers shall pay to the Lender from time to
time such amounts as the Lender may determine are necessary to
compensate it for any Additional Costs incurred by the Lender.
(b) Without limiting the effect of the other
provisions of this Section (but without duplication),
the Borrowers shall pay to the Lender from time to time
on request such amounts as the Lender may determine are
necessary to compensate the Lender for any costs
attributable to the maintenance by the Lender (or any
Applicable Lending Office), pursuant to any Regulatory
Change, of capital in respect of the Commitment, such
compensation to include, without limitation, an amount
equal to any reduction of the rate of return on assets
or equity of the Lender (or any Applicable Lending
Office) to a level below that which the Lender (or any
Applicable Lending Office) could have achieved but for
such Regulatory Change.
(c) Without limiting the effect of the other
provisions of this Section (but without duplication),
in the event that any Requirement of Law or Regulatory
Change or the compliance by the Lender therewith shall
(i) impose, modify, or hold applicable any reserve,
special deposit, or similar requirement against any
Letter of Credit or obligation to issue Letters of
Credit, or (ii) impose upon the Lender any other
condition regarding any Letter of Credit or obligation
to issue Letters of Credit, and the result of any such
event shall be to increase the cost to the Lender of
issuing or maintaining any Letter of Credit or
obligation to issue Letters of Credit or any liability
with respect to payments by the Lender under Letters of
Credit, or to reduce any amount receivable in
connection therewith, then upon demand by the Lender,
the Borrowers shall pay to the Lender, from time to
time as specified by the Lender, additional amounts
which shall be sufficient to compensate the Lender for
such increased cost or reduced amount receivable.
(d) Without limiting the effect of the other
provisions of this Section (but without duplication),
the Borrower shall pay to the Lender such amounts as
shall be sufficient in the reasonable opinion of the
Lender to compensate it for any loss, cost, or expense
incurred by and as a result of:
(i) any payment, prepayment, or
conversion by the Borrower of a Fixed Rate
Loan on a date other than the last day of an
Interest Period for such Loan; or
(ii) any failure by the Borrower to
borrow a Fixed Rate Loan from the Lender on
the date for such borrowing specified in the
relevant Borrowing Request;
22
<PAGE>
such compensation to include, without limitation, with
respect to any LIBO Rate Loan, an amount equal to the
excess, if any, of (A) the amount of interest which
would have accrued on the principal amount so paid,
prepaid, converted, or not borrowed for the period from
the date of such payment, prepayment, conversion, or
failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a
failure to borrow, the Interest Period for such Loan
which would have commenced on the date of such failure
to borrow) at the applicable rate of interest for such
Loan provided for herein over (B) the interest
component (as reasonably determined by the Lender) of
the amount (as reasonably determined by the Lender) the
Lender would have bid in the London interbank market
for Dollar deposits of amounts comparable to such
principal amount and maturities comparable to such
period.
(e) Determinations by the Lender for purposes of
this Section of the effect of any Regulatory Change on
capital maintained, its costs or rate of return,
maintaining Loans, issuing Letters of Credit, its
obligation to make Loans and issue Letters of Credit,
or on amounts receivable by it in respect of Loans,
Letters of Credit, or such obligations, and the
additional amounts required to compensate the Lender
under this Section shall be conclusive, absent manifest
error, provided that such determinations are made on a
reasonable basis. The Lender shall furnish the
Borrowers with a certificate setting forth in
reasonable detail the basis and amount of increased
costs incurred or reduced amounts receivable as a
result of any such event, and the statements set forth
therein shall be conclusive, absent manifest error.
The Lender shall (i) notify the Borrowers, as promptly
as practicable after the Lender obtains knowledge of
any Additional Costs or other sums payable pursuant to
this Section and determines to request compensation
therefor, of any event occurring after the Closing Date
which will entitle the Lender to compensation pursuant
to this Section; provided that the Borrowers shall not
be obligated for the payment of any Additional Costs or
other sums payable pursuant to this Section to the
extent such Additional Costs or other sums accrued more
than 90 days prior to the date upon which the Borrowers
was given such notice; and (ii) designate a different
Applicable Lending Office for the Loans of the Lender
affected by such event if such designation will avoid
the need for or reduce the amount of such compensation
and will not, in the sole opinion of the Lender, be
disadvantageous to the Lender. Any compensation
requested by the Lender pursuant to this Section shall
be due and payable to the Lender within five days of
delivery of any such notice by the Lender to the
Borrowers.
2.20 Letters in Lieu of Transfer Orders. The Lender
----------------------------------
agrees that none of the letters in lieu of transfer or division
orders provided by Borrowers pursuant to Section 3.1(g)(iii) or
Section 5.7 will be sent to the addressees thereof prior to the
occurrence of an Event of Default, at which time the Lender may,
at its option and in addition to the exercise of any of its other
rights and remedies, send any or all of such letters.
23
<PAGE>
2.21 Power of Attorney. Each Borrower hereby
-----------------
designates the Lender as its agent and attorney-in-fact, to act
in its name, place, and stead for the purpose of completing and,
upon the occurrence of an Event of Default, delivering any and
all of the letters in lieu of transfer orders delivered by
Borrowers to the Lender pursuant to Section 3.1(g)(iii) or
Section 5.7, including, without limitation, completing any blanks
contained in such letters and attaching exhibits thereto
describing the relevant Collateral. Each Borrower hereby
ratifies and confirms all that the Lender shall lawfully do or
cause to be done by virtue of this power of attorney and the
rights granted with respect to such power of attorney. This
power of attorney is coupled with the interests of the Lender in
the Collateral, shall commence and be in full force and effect as
of the Closing Date and shall remain in full force and effect and
shall be irrevocable so long as any Obligation remains
outstanding or unpaid or any Commitment exists. The powers
conferred on the Lender by this appointment are solely to protect
the interests of the Lender under the Loan Documents and shall
not impose any duty upon the Lender to exercise any such powers.
The Lender shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers and shall not
be responsible to the Borrowers or any other Person for any act
or failure to act with respect to such powers, except for gross
negligence or willful misconduct.
2.22 Taxes. (a) Any and all payments by the Borrower
-----
shall be made free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto,
excluding taxes imposed on Lender's income, and franchise taxes
imposed on it, by the jurisdiction under the laws of which Lender
is organized or any political subdivision of the jurisdiction
(all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred
to as "Taxes") and, by the jurisdiction of Lender's Applicable
Lending Office or any political subdivision of such jurisdiction.
If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable to the Lender, (i) the sum
payable shall be increased as may be necessary so that, after
making all required deductions (including deductions applicable
to additional sum payable under this Section 2.22), Lender
receives an amount equal to the sum it would have received had no
such deductions been made; provided, however, that if the
--------
Borrower's obligation to deduct or withhold Taxes is caused
solely by Lender's failure to provide the forms described in
paragraph (d) of this Section 2.22 and Lender could have provided
such forms, no such increase shall be required; (ii) the Borrower
shall make such deductions; and (iii) the Borrower shall pay the
full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law and provide to Lender
a receipt or a copy of a payment voucher from such relevant
taxation authority or other authority evidencing such payment.
(b) Other Taxes. In addition, the Borrower agrees to pay
-----------
any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies which arise
from any payment made or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement,
the Notes, or the other Loan Documents (hereinafter referred to
as "Other Taxes").
(c) Indemnification. THE BORROWER INDEMNIFIES LENDER FOR
---------------
THE FULL AMOUNT OF TAXES OR OTHER TAXES (INCLUDING, WITHOUT
LIMITATION, ANY TAXES (AS DEFINED IN SECTION 2.22(a) ABOVE) OR
24
<PAGE>
OTHER TAXES (AS DEFINED IN SECTION 2.22(a) ABOVE) IMPOSED BY ANY
JURISDICTION ON AMOUNTS PAYABLE UNDER THIS SECTION 2.22 PAID BY
LENDER AND ANY LIABILITY (INCLUDING INTEREST, PENALTIES AND
EXPENSES (OTHER THAN INTEREST, PENALTIES AND EXPENSES ARISING
SOLELY FROM THE FAILURE OF THE LENDER TO PROVIDE THE FORMS
DESCRIBED IN PARAGRAPH (d) OF THIS SECTION 2.22) ARISING
THEREFROM OR WITH RESPECT THERETO, WHETHER OR NOT SUCH TAXES (AS
DEFINED IN SECTION 2.22(a) ABOVE) WHERE CORRECTLY OR LEGALLY
ASSERTED, EACH PAYMENT REQUIRED TO BE MADE BY THE BORROWER IN
RESPECT OF THIS INDEMNIFICATION SHALL BE MADE TO THE LENDER
WITHIN 30 DAYS FROM THE DATE THE BORROWER RECEIVES WRITTEN DEMAND
THEREFOR FROM THE LENDER. IF LENDER RECEIVES A REFUND OR TAX
CREDIT IN RESPECT OF ANY TAXES (AS DEFINED IN SECTION 2.22(a)
ABOVE) PAID BY THE BORROWER UNDER THIS PARAGRAPH (C), LENDER
SHALL PROMPTLY PAY TO THE BORROWER THE BORROWER'S SHARE OF SUCH
REFUND OR TAX CREDIT.
(d) Foreign Bank Withholding Exemption. Lender agrees that
----------------------------------
it will deliver to the Borrower (i) two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224 or
successor applicable form, as the case may be, certifying in each
case that Lender is entitled to receive payments under this
Agreement and the Notes payable to it, without deduction or
withholding of any United States federal income taxes, (ii) if
applicable, an Internal Revenue Service Form W-8 or W-9 or
successor applicable form, as the case may be, to establish an
exemption from United States back up withholding tax, and (iii)
any other governmental forms which are necessary or required
under the applicable tax treaty or otherwise by law to reduce or
eliminate any withholding tax, which have been reasonably
requested by the Borrower. When Lender delivers to the Borrower
a Form 1001 or 4224 and Form W-8 or W-9 pursuant to the next
preceding sentence further undertakes to deliver to the Borrower
two further copies of the said letter and Form 1001 or 4224 and
Form W-8 or W-9, or successor applicable forms, or other manner
of certification, as the case may be, on or before the date that
any such letter or form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent
letter and form previously delivered by it to the Borrower and
such extensions or renewals thereof as may reasonably be
requested by the Borrower certifying in the case of a Form 1001
or 4224 that Lender is entitled to receive payments under this
Agreement without deduction or withholding of any United States
federal income taxes. If an event (including without limitation
any change in treaty, law or regulation) has occurred prior to
the date on which any delivery required by the preceding sentence
would otherwise be required which renders all such forms
inapplicable or which would prevent Lender from duly completing
and delivering any such letter or form with respect to it and
Lender advises the Borrower that it is not capable of receiving
payments without any deduction or withholding of United States
federal income tax, and in the case of a Form W-8 or W-9,
establishing an exemption from United States backup withholding
tax, Lender shall not be required to deliver such letter or
forms. The Borrower shall withhold tax at the rate and in the
manner required by the laws of the United States with respect to
payments made to Lender if failing to timely provide the
requisite Internal Revenue Service forms.
2.23 Limitation on Types of Loans. Anything herein to
----------------------------
the contrary notwithstanding, no more than three separate Loans
25
<PAGE>
shall be outstanding at any one time, with, for purposes of this
Section, all Floating Rate Loans constituting one Loan, and all
LIBO Rate Loans for the same Interest Period constituting one
Loan. Anything herein to the contrary notwithstanding, if, on or
prior to the determination of any interest rate for any LIBO Rate
Loan for any Interest Period therefor:
(a) the Lender determines (which
determination shall be conclusive) that
quotations of interest rates for the deposits
referred to in the definition of "LIBO Rate"
in Section 1.2 are not being provided in the
relevant amounts or for the relevant
maturities for purposes of determining the
rate of interest for such Loan as provided in
this Agreement; or
(b) the Lender determines (which
determination shall be conclusive) that the
rates of interest referred to in the
definition of "LIBO Rate" in Section 1.2 upon
the basis of which the rate of interest for
such Loan for such Interest Period is to be
determined do not accurately reflect the cost
to the Lender of making or maintaining such
Loan for such Interest Period,
then the Lender shall give the Borrower prompt notice thereof;
and so long as such condition remains in effect, the Lender shall
be under no obligation to make LIBO Rate Loans or to convert
Loans of any other type into LIBO Rate Loans, and the Borrower
shall, on the last day of the then current Interest Period for
each outstanding LIBO Rate Loan, either prepay such LIBO Rate
Loan or convert such Loan into another type of Loan in accordance
with Section 2.11. Before giving such notice pursuant to this
Section, the Lender will designate a different available
Applicable Lending Office for LIBO Rate Loans or take such other
action as the Borrower may request if such designation or action
will avoid the need to suspend the obligation of the Lender to
make LIBO Rate Loans hereunder and will not, in the opinion of
the Lender, be disadvantageous to the Lender.
2.24 Limitation on Interests Periods. Each Interest
-------------------------------
Period selected by the Borrower (a) which commences on the last
Business Day of a calendar month (or, with respect to any LIBO
Rate Loan, 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, (b) which would otherwise end on a day which is
not a Business Day shall end on the next succeeding Business Day
(or, if such next succeeding Business Day falls in the next
succeeding calendar month, on the next preceding Business Day),
(c) which would otherwise commence before and end after Final
Maturity shall end on Final Maturity, and (d) shall have a
duration of not less than one month, as to any LIBO Rate Loan,
and, if any Interest Period would otherwise be a shorter period,
the relevant Loan shall be a Floating Rate Loan during such
period.
26
<PAGE>
ARTICLE III
-----------
CONDITIONS
----------
The obligations of the Lender to enter into this
Agreement and to make Loans and issue Letters of Credit are
subject to the satisfaction of the following conditions
precedent:
3.1 Receipt of Loan Documents and Other Items. The
-----------------------------------------
Lender shall have no obligation under this Agreement unless and
until all matters incident to the consummation of the
transactions contemplated herein, including, without limitation,
the review by the Lender or its counsel of the title of Borrowers
to their Oil and Gas Properties, shall be satisfactory to the
Lender, and the Lender shall have received, reviewed, and
approved the following documents and other items, appropriately
executed when necessary and, where applicable, acknowledged by
one or more authorized officers of the Borrowers, all in form and
substance satisfactory to the Lender and dated, where applicable,
of even date herewith or a date prior thereto and acceptable to
the Lender:
(a) multiple counterparts of this Agreement, as
requested by the Lender;
(b) the Note; and
(c) such other agreements, documents,
instruments, opinions, certificates, waivers, consents,
and evidence as the Lender may reasonably request.
3.2 Each Loan and Letter of Credit. In addition to
------------------------------
the conditions precedent stated elsewhere herein, the Lender
shall not be obligated to make any Loan or issue any Letter of
Credit unless:
(a) the Borrowers shall have delivered to the
Lender a Borrowing Request at least the requisite time
prior to the requested date for the relevant Loan, or a
Letter of Credit Application at least two Business Days
prior to the requested issuance date for the relevant
Letter of Credit; and each statement or certification
made in such Borrowing Request or Letter of Credit
Application, as the case may be, shall be true and
correct in all material respects on the requested date
for such Loan or the issuance of such Letter of Credit;
(b) no Event of Default or Default shall exist or
will occur as a result of the making of the requested
Loan or the issuance of the requested Letter of Credit;
(c) if requested by the Lender, the Borrowers
shall have delivered evidence satisfactory to the
Lender substantiating any of the matters contained in
this Agreement which are necessary to enable the
Borrowers to qualify for such Loan or the issuance of
such Letter of Credit;
27
<PAGE>
(d) the Lender shall have received, reviewed, and
approved such additional documents and items as
described in Section 3.1 as may be requested by the
Lender with respect to such Loan or Letter of Credit;
(e) no event shall have occurred which, in the
reasonable opinion of the Lender, could have a Material
Adverse Effect;
(f) each of the representations and warranties
contained in this Agreement shall be true and correct
and shall be deemed to be repeated by each Borrower as
if made on the requested date for such Loan or the
issuance of such Letter of Credit;
(g) all of the Security Instruments shall be in
full force and effect and provide to the Lender the
security intended thereby;
(h) neither the consummation of the transactions
contemplated hereby nor the making of such Loan or the
issuance of such Letter of Credit shall contravene,
violate, or conflict with any Requirement of Law;
(i) each Borrower shall hold full legal title to
the Collateral pledged by such entity and be the sole
beneficial owner thereof;
(j) the Lender shall have received reimbursement
from the Borrowers, or special legal counsel for the
Lender shall have received payment from the Borrowers,
for (i) all reasonable fees and expenses of counsel to
the Lender for which the Borrowers are responsible
pursuant to applicable provisions of this Agreement and
for which invoices have been presented as of or prior
to the date of the relevant Loan or Letter of Credit
Application, and (ii) estimated fees charged by filing
officers and other public officials incurred or to be
incurred in connection with the filing and recordation
of any Security Instruments, for which invoices have
been presented as of or prior to the date of the
requested Loan or Letter of Credit Application; and
(k) all matters incident to the consummation of
the transactions hereby contemplated shall be
satisfactory to the Lender.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Lender to enter into this Agreement and
to make the Loans and issue Letters of Credit, each Borrower
represents and warrants to the Lender (which representations and
warranties shall survive the delivery of the Note) that:
28
<PAGE>
4.1 Due Authorization. The execution and delivery by
-----------------
the Borrowers of this Agreement and the borrowings hereunder, the
execution and delivery by the Borrowers of the Note, the
repayment of the Note and interest and fees provided for in the
Note and this Agreement, the execution and delivery of the
Security Instruments by the Borrowers and the performance of all
obligations of the Borrowers under the Loan Documents are within
the power of each Borrower, have been duly authorized by all
necessary corporate action by each Borrower, and do not and will
not (a) require the consent of any Governmental Authority, (b)
contravene or conflict with any Requirement of Law, (c)
contravene or conflict with any indenture, instrument, or other
agreement to which either Borrower is a party or by which any
Property of either Borrower may be presently bound or encumbered,
or (d) result in or require the creation or imposition of any
Lien in, upon or of any Property of either Borrower under any
such indenture, instrument, or other agreement, other than the
Loan Documents.
4.2 Corporate Existence. Each Borrower is a
-------------------
corporation duly organized, legally existing, and in good
standing under the laws of its state of incorporation and is duly
qualified as a foreign corporation and is in good standing in all
jurisdictions wherein the ownership of Property or the operation
of its business necessitates same, other than those jurisdictions
wherein the failure to so qualify will not have a Material
Adverse Effect.
4.3 Valid and Binding Obligations. All Loan Documents
-----------------------------
to which either Borrower is a party, when duly executed and
delivered by such Borrower, will be the legal, valid, and binding
obligations of such Borrower, enforceable against such Borrower
in accordance with their respective terms.
4.4 Security Instruments. The provisions of each
--------------------
Security Instrument are effective to create in favor of the
Lender, a legal, valid, and enforceable Lien in all right, title,
and interest of the relevant Borrower in the Collateral described
therein, which Liens, assuming the accomplishment of recording
and filing in accordance with applicable laws prior to the
intervention of rights of other Persons, shall constitute fully
perfected first-priority Liens on all right, title, and interest
of the Borrower in the Collateral described therein.
4.5 Title to Assets. Each Borrower has good and
---------------
indefeasible title to all of its Properties, free and clear of
all Liens except Permitted Liens.
4.6 Scope and Accuracy of Financial Statements. The
------------------------------------------
Financial Statements of each Borrower as of December 31, 1996,
present fairly the financial position and results of operations
and cash flows of such Borrower in accordance with GAAP as at the
relevant point in time or for the period indicated, as
applicable. No event or circumstance has occurred since December
31, 1996, which could reasonably be expected to have a Material
Adverse Effect.
4.7 No Material Misstatements. No information,
-------------------------
exhibit, statement, or report furnished to the Lender by or at
the direction of either Borrower in connection with this
Agreement contains any material misstatement of fact or omits to
state a material fact or any fact necessary to make the
statements contained therein not misleading as of the date made
or deemed made.
29
<PAGE>
4.8 Liabilities, Litigation, and Restrictions. Other
-----------------------------------------
than as listed under the heading "Liabilities" on Exhibit IV
attached hereto, neither Borrower has liabilities, direct, or
contingent, which may materially and adversely affect its
business or operations or its ownership of the Collateral.
Except as set forth under the heading "Litigation" on Exhibit IV
hereto, no litigation or other action of any nature affecting
either Borrower is pending before any Governmental Authority or,
to the best knowledge of the Borrowers, threatened against or
affecting either Borrower which might reasonably be expected to
result in any impairment of its ownership of any Collateral or
have a Material Adverse Effect. No unusual or unduly burdensome
restriction, restraint, or hazard exists by contract, Requirement
of Law, or otherwise relative to the business or operations of
either Borrower or the ownership and operation of the Collateral
other than such as relate generally to Persons engaged in
business activities similar to those conducted by the Borrowers.
4.9 Authorizations; Consents. Except as expressly
------------------------
contemplated by this Agreement, no authorization, consent,
approval, exemption, franchise, permit, or license of, or filing
with, any Governmental Authority or any other Person is required
to authorize or is otherwise required in connection with the
valid execution and delivery by either Borrower of the Loan
Documents or any instrument contemplated hereby, the repayment by
either Borrower of the Note and interest and fees provided in the
Note and this Agreement, or the performance by either Borrower of
the Obligations.
4.10 Compliance with Laws. Each Borrower and its
--------------------
Property, including, without limitation, the Mortgaged Property,
are in compliance with all applicable Requirements of Law,
including, without limitation, Environmental Laws, the Natural
Gas Policy Act of 1978, as amended, and ERISA, except to the
extent non-compliance with any such Requirements of Law could not
reasonably be expected to have a Material Adverse Effect.
4.11 ERISA. No Reportable Event has occurred with
-----
respect to any Single Employer Plan, and each Single Employer
Plan has complied with and been administered in all material
respects in accordance with applicable provisions of ERISA and
the Code. To the best knowledge of the Borrowers, (a) no
Reportable Event has occurred with respect to any Multiemployer
Plan, and (b) each Multiemployer Plan has complied with and been
administered in all material respects with applicable provisions
of ERISA and the Code. The present value of all benefits vested
under each Single Employer Plan maintained by the Borrowers or
any Commonly Controlled Entity (based on the assumptions used to
fund such Plan) did not, as of the last annual valuation date
applicable thereto, exceed the value of the assets of such Plan
allocable to such vested benefits. Neither the Borrowers nor any
Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan for which there is any
withdrawal liability. As of the most recent valuation date
applicable to any Multiemployer Plan, neither the Borrowers nor
any Commonly Controlled Entity would become subject to any
liability under ERISA if the Borrowers or such Commonly
Controlled Entity were to withdraw completely from such
Multiemployer Plan. Neither the Borrowers nor any Commonly
Controlled Entity has received notice that any Multiemployer Plan
is Insolvent or in Reorganization. To the best knowledge of the
Borrowers, no such Insolvency or Reorganization is reasonably
likely to occur. Based upon GAAP existing as of the date of this
Agreement and current factual circumstances, neither Borrower has
30
<PAGE>
any reason to believe that the annual cost during the term of
this Agreement to the Borrowers and all Commonly Controlled
Entities for post-retirement benefits to be provided to the
current and former employees of either Borrower and all Commonly
Controlled Entities under Plans which are welfare benefit plans
(as defined in Section 3(1) of ERISA) will, in the aggregate,
have a Material Adverse Effect.
4.12 Environmental Laws. Except as would not have a
------------------
Material Adverse Effect, or as described on Exhibit IV under the
heading "Environmental Matters:"
(a) no Property of either Borrower is currently
on or has ever been on, or is adjacent to any Property
which is on or has ever been on, any federal or state
list of Superfund Sites;
(b) no Hazardous Substances have been generated,
transported, and/or disposed of by either Borrower at a
site which was, at the time of such generation,
transportation, and/or disposal, or has since become, a
Superfund Site;
(c) except in accordance with applicable
Requirements of Law or the terms of a valid permit,
license, certificate, or approval of the relevant
Governmental Authority, no Release of Hazardous
Substances by either Borrower or from, affecting, or
related to any Property of either Borrower or adjacent
to any Property of either Borrower has occurred; and
(d) no Environmental Complaint has been received
by either Borrower.
4.13 Compliance with Federal Reserve Regulations. No
-------------------------------------------
transaction contemplated by the Loan Documents is in violation of
any regulations promulgated by the Board of Governors of the
Federal Reserve System, including, without limitation,
Regulations G, T, U, or X.
4.14 Investment Company Act Compliance. Neither
---------------------------------
Borrower is, nor is directly or indirectly controlled by or
acting on behalf of any Person which is, an "investment company"
or an "affiliated person" of an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
4.15 Public Utility Holding Company Act Compliance.
---------------------------------------------
Neither Borrower is a "holding company," or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
4.16 Proper Filing of Tax Returns; Payment of Taxes
----------------------------------------------
Due. Each Borrower has duly and properly filed its United States
- ---
income tax return and all other tax returns which are required to
be filed and has paid all taxes due except such as are being
contested in good faith and as to which adequate provisions and
disclosures have been made. The respective charges and reserves
on the books of each Borrower with respect to taxes and other
governmental charges are adequate.
31
<PAGE>
4.17 Refunds. Except as described on Exhibit IV under
-------
the heading "Refunds," no orders of, proceedings pending before,
or other requirements of, the Federal Energy Regulatory
Commission, the Texas Railroad Commission, or any Governmental
Authority exist which could result in either Borrower being
required to refund any material portion of the proceeds received
or to be received from the sale of hydrocarbons constituting part
of the Mortgaged Property.
4.18 Gas Contracts. Except as described on Exhibit IV
-------------
under the heading "Gas Contracts," neither Borrower (a) is
obligated in any material respect by virtue of any prepayment
made under any contract containing a "take-or-pay" or
"prepayment" provision or under any similar agreement to deliver
hydrocarbons produced from or allocated to any of the Mortgaged
Property at some future date without receiving full payment
therefor within 90 days of delivery, or (b) has produced gas, in
any material amount, subject to, and neither Borrower nor any of
the Mortgaged Properties is subject to, balancing rights of third
parties or subject to balancing duties under governmental
requirements, except as to such matters for which a Borrower has
established monetary reserves adequate in amount to satisfy such
obligations and has segregated such reserves from other accounts.
4.19 Intellectual Property. Each Borrower owns or is
---------------------
licensed to use all Intellectual Property necessary to conduct
all business material to its condition (financial or otherwise),
business, or operations as such business is currently conducted.
No claim has been asserted or is pending by any Person with the
respect to the use of any such Intellectual Property or
challenging or questioning the validity or effectiveness of any
such Intellectual Property; and neither Borrower knows of no
valid basis for any such claim. The use of such Intellectual
Property by such Borrower does not infringe on the rights of any
Person, except for such claims and infringements as do not, in
the aggregate, give rise to any material liability on the part of
the Borrowers.
4.20 Casualties or Taking of Property. Except as
--------------------------------
disclosed on Exhibit IV under the heading "Casualties," since
December 31, 1996, neither the business nor any Property of
either Borrower has been materially adversely affected as a
result of any fire, explosion, earthquake, flood, drought,
windstorm, accident, strike or other labor disturbance, embargo,
requisition or taking of Property, or cancellation of contracts,
permits, or concessions by any Governmental Authority, riot,
activities of armed forces, or acts of God.
4.21 Locations of Borrowers. The principal place of
----------------------
business and chief executive office of the Borrowers is located
at the address of the Borrowers set forth in Section 8.4 or at
such other location as the Borrowers may have, by proper written
notice hereunder, advised the Lender, provided that such other
location is within a state in which appropriate financing
statements from the Borrowers in favor of the Lender have been
filed.
4.22 Subsidiaries. American Resources has no
------------
Subsidiaries other than Southern except those described on
Exhibit IV under the heading "Subsidiaries", and Southern has no
Subsidiaries.
32
<PAGE>
ARTICLE V
---------
AFFIRMATIVE COVENANTS
---------------------
So long as any Obligation remains outstanding or unpaid
or any Commitment exists, each Borrower shall:
5.1 Maintenance and Access to Records. Keep adequate
---------------------------------
records, in accordance with GAAP, of all its transactions so that
at any time, and from time to time, its true and complete
financial condition may be readily determined, and promptly
following the reasonable request of the Lender, make such records
available for inspection by the Lender and, at the expense of
such Borrower, allow the Lender to make and take away copies
thereof.
5.2 Quarterly Financial Statements; Compliance
------------------------------------------
Certificates. Deliver to the Lender, (a) on or before the 45th
- ------------
day after the close of each of the first three quarterly periods
of each fiscal year of each Borrower, a copy of the unaudited
consolidated and consolidating Financial Statements of such
Borrower as at the close of such quarterly period and from the
beginning of such fiscal year to the end of such period, such
Financial Statements to be certified by Responsible Officer of
such Borrower as having been prepared in accordance with GAAP
consistently applied and as a fair presentation of the condition
of such Borrower, subject to changes resulting from normal
year-end audit adjustments, and (b) on or before the 45th day
after the close of each fiscal quarter, a Compliance Certificate.
5.3 Annual Financial Statements. Deliver to the
---------------------------
Lender, on or before the 90th day after the close of each fiscal
year of each Borrower, a copy of the annual audited consolidated
and consolidating Financial Statements of such Borrower.
5.4 Oil and Gas Reserve Reports. (a) Deliver to the
---------------------------
Lender no later than March 15 of each year during the term of
this Agreement, engineering reports in form and substance
satisfactory to the Lender and meeting the requirements of the
Securities and Exchange Commission for financial reporting
purposes, certified by any nationally or regionally-recognized
independent consulting petroleum engineers acceptable to the
Lender as fairly and accurately setting forth (i) the proven and
producing, shut-in, behind-pipe, and undeveloped oil and gas
reserves (separately classified as such) attributable to the
Mortgaged Properties as of December 31 of the year for which such
reserve reports are furnished, (ii) the aggregate present value
of the future net income with respect to such Mortgaged
Properties, discounted at a stated per annum discount rate of
proven and producing reserves, (iii) projections of the annual
rate of production, gross income, and net income with respect to
such proven and producing reserves, and (iv) information with
respect to the "take-or-pay," "prepayment," and gas-balancing
liabilities of the Borrowers.
(b) Deliver to the Lender no later than
September 15 of each year during the term of this Agreement,
engineering reports in form and substance satisfactory to the
Lender prepared by or under the supervision of the chief
petroleum engineer of the Borrowers evaluating the Mortgaged
33
<PAGE>
Properties as of June 30 of the year for which such reserve
reports are furnished and updating the information provided in
the reports pursuant to Section 5.4(a).
(c) Each of the reports provided pursuant to this
Section shall be submitted to the Lender together with additional
data concerning pricing, quantities of production from the
Mortgaged Properties, volumes of production sold, purchasers of
production, gross revenues, expenses, and such other information
and engineering and geological data with respect thereto as the
Lender may reasonably request.
5.5 Title Opinions; Title Defects. Promptly upon the
-----------------------------
request of the Lender, furnish to the Lender title opinions, in
form and substance and by counsel satisfactory to the Lender, or
other confirmation of title acceptable to the Lender, covering
Oil and Gas Properties, and promptly, but in any event within 60
days after notice by the Lender of any defect, material in the
opinion of the Lender in value, in the title of Borrowers to any
of their Oil and Gas Properties, clear such title defects, and,
in the event any such title defects are not cured in a timely
manner, pay all related costs and fees incurred by the Lender to
do so.
5.6 Notices of Certain Events. Deliver to the Lender,
-------------------------
immediately upon having knowledge of the occurrence of any of the
following events or circumstances, a written statement with
respect thereto, signed by a Responsible Officer of each Borrower
and setting forth the relevant event or circumstance and the
steps being taken by each Borrower with respect to such event or
circumstance:
(a) any Default or Event of Default;
(b) any default or event of default under any
contractual obligation of either Borrower, or any
litigation, investigation, or proceeding between either
Borrower and any Governmental Authority which, in
either case, if not cured or if adversely determined,
as the case may be, could reasonably be expected to
have a Material Adverse Effect;
(c) any litigation or proceeding involving either
Borrower as a defendant or in which any Property of
either Borrower is subject to a claim and in which the
amount involved is $250,000.00 or more and which is not
covered by insurance or in which injunctive or similar
relief is sought;
(d) the receipt by either Borrower of any
Environmental Complaint;
(e) any actual, proposed, or threatened testing
or other investigation by any Governmental Authority or
other Person concerning the environmental condition of,
or relating to, any Property of either Borrower or
adjacent to any Property of either Borrower following
any allegation of a violation of any Requirement of
Law;
34
<PAGE>
(f) any Release of Hazardous Substances by either
Borrower or from, affecting, or related to any Property
of either Borrower or adjacent to any Property of
either Borrower except in accordance with applicable
Requirements of Law or the terms of a valid permit,
license, certificate, or approval of the relevant
Governmental Authority, or the violation of any
Environmental Law, or the revocation, suspension, or
forfeiture of or failure to renew, any permit, license,
registration, approval, or authorization which could
reasonably be expected to have a Material Adverse
Effect;
(g) the change in identity or address of any
Person remitting to either Borrower proceeds from the
sale of hydrocarbon production from or attributable to
any Mortgaged Property;
(h) any Reportable Event or imminently expected
Reportable Event with respect to any Plan; any
withdrawal from, or the termination, Reorganization or
Insolvency of, any Multiemployer Plan; the institution
of proceedings or the taking of any other action by the
PBGC, either Borrower or any Commonly Controlled Entity
or Multiemployer Plan with respect to the withdrawal
from, or the termination, Reorganization or Insolvency
of, any Single Employer Plan or Multiemployer Plan; or
any Prohibited Transaction in connection with any Plan
or any trust created thereunder and the action being
taken by the Internal Revenue Service with respect
thereto;
(i) any change in the senior management of either
Borrower; and
(j) any other event or condition which could
reasonably be expected to have a Material Adverse
Effect.
5.7 Letters in Lieu of Transfer Orders; Division
--------------------------------------------
Orders. Promptly upon request by the Lender at any time and from
- ------
time to time, and without limitation on the rights of the Lender
pursuant to Sections 2.20 and 2.21, execute such letters in lieu
of transfer orders, in addition to the letters signed by
Borrowers and delivered to the Lender in satisfaction of the
condition set forth in Section 3.1(g)(iii), and/or division
and/or transfer orders as are necessary or appropriate to
transfer and deliver to the Lender proceeds from or attributable
to any Mortgaged Property.
5.8 Additional Information. Furnish to the Lender,
----------------------
within five days after any material report (other than financial
statements) or other communication is sent by either Borrower, to
its stockholders or filed by such Borrower with the Securities
and Exchange Commission or any successor or analogous
Governmental Authority, copies of such report or communication
and, promptly upon the request of the Lender, such additional
financial or other information concerning the assets,
liabilities, operations, and transactions of such Borrower as the
Lender may from time to time request; and notify the Lender not
less than ten Business Days prior to the occurrence of any
condition or event that may change the proper location for the
filing of any financing statement or other public notice or
recording for the purpose of perfecting a Lien in any Collateral,
including, without limitation, any change in its name or the
35
<PAGE>
location of its principal place of business or chief executive
office; and upon the request of the Lender, execute such
additional Security Instruments as may be necessary or
appropriate in connection therewith.
5.9 Compliance with Laws. Comply with all applicable
--------------------
Requirements of Law, including, without limitation, (a) the
Natural Gas Policy Act of 1978, as amended, (b) ERISA, (c)
Environmental Laws, and (d) all permits, licenses, registrations,
approvals, and authorizations (i) related to any natural or
environmental resource or media located on, above, within, in the
vicinity of, related to or affected by any Property of either
Borrower, (ii) required for the performance of the operations of
either Borrower, or (iii) applicable to the use, generation,
handling, storage, treatment, transport, or disposal of any
Hazardous Substances; and cause all employees, crew members,
agents, contractors, subcontractors, and future lessees (pursuant
to appropriate lease provisions) of either Borrower, while such
Persons are acting within the scope of their relationship with
such Borrower, to comply with all such Requirements of Law as may
be necessary or appropriate to enable such Borrower to so comply.
5.10 Payment of Assessments and Charges. Pay all
----------------------------------
taxes, assessments, governmental charges, rent, and other
Indebtedness which, if unpaid, might become a Lien against the
Property of either Borrower, except any of the foregoing being
contested in good faith and as to which adequate reserve in
accordance with GAAP has been established or unless failure to
pay would not have a Material Adverse Effect.
5.11 Maintenance of Corporate Existence and Good
-------------------------------------------
Standing. Maintain its corporate existence or qualification and
- --------
good standing in its jurisdictions of incorporation and in all
jurisdictions wherein the Property now owned or hereafter
acquired or business now or hereafter conducted necessitates
same.
5.12 Payment of Notes; Performance of Obligations. Pay
--------------------------------------------
the Note according to the reading, tenor, and effect thereof, as
modified hereby, and do and perform every act and discharge all
of its other Obligations.
5.13 Further Assurances. Promptly cure any defects in
------------------
the execution and delivery of any of the Loan Documents and all
agreements contemplated thereby, and execute, acknowledge, and
deliver such other assurances and instruments as shall, in the
opinion of the Lender, be necessary to fulfill the terms of the
Loan Documents.
5.14 Initial Fees and Expenses of Counsel to Lender.
----------------------------------------------
Upon request by the Lender, promptly reimburse the Lender for all
reasonable fees and expenses of Jackson Walker L.L.P., special
counsel to the Lender, in connection with the preparation of this
Agreement and all documentation contemplated hereby, the
satisfaction of the conditions precedent set forth herein, the
filing and recordation of Security Instruments, and the
consummation of the transactions contemplated in this Agreement.
5.15 Subsequent Fees and Expenses of Lender. Upon
--------------------------------------
request by the Lender, promptly reimburse the Lender (to the
fullest extent permitted by law) for all amounts reasonably
expended, advanced, or incurred by or on behalf of the Lender to
36
<PAGE>
satisfy any obligation of either Borrower under any of the Loan
Documents; to collect the Obligations; to ratify, amend, restate,
or prepare additional Loan Documents, as the case may be; for the
filing and recordation of Security Instruments; to enforce the
rights of the Lender under any of the Loan Documents; and to
protect the Properties or business of either Borrower, including,
without limitation, the Collateral, which amounts shall be deemed
compensatory in nature and liquidated as to amount upon notice to
either Borrower by the Lender and which amounts shall include,
but not be limited to (a) all court costs, (b) reasonable
attorneys' fees, (c) reasonable fees and expenses of auditors and
accountants incurred to protect the interests of the Lender, (d)
fees and expenses incurred in connection with the participation
by the Lender as a member of the creditors' committee in a case
commenced under any Insolvency Proceeding, (e) fees and expenses
incurred in connection with lifting the automatic stay prescribed
in Section 362 Title 11 of the United States Code, and (f) fees
and expenses incurred in connection with any action pursuant to
Section 1129 Title 11 of the United States Code all reasonably
incurred by the Lender in connection with the collection of any
sums due under the Loan Documents, together with interest at the
per annum interest rate equal to the Floating Rate, calculated on
a basis of a calendar year of 360 days, counting the actual
number of days elapsed, on each such amount from the date of
notification that the same was expended, advanced, or incurred by
the Lender until the date it is repaid to the Lender, with the
obligations under this Section surviving the non-assumption of
this Agreement in a case commenced under any Insolvency
Proceeding and being binding upon the Borrowers and/or a trustee,
receiver, custodian, or liquidator of either Borrower appointed
in any such case.
5.16 Operation of Oil and Gas Properties. Borrowers
-----------------------------------
shall develop, maintain, and operate their Oil and Gas Properties
in a prudent and workmanlike manner in accordance with industry
standards.
5.17 Maintenance and Inspection of Properties.
----------------------------------------
Maintain all of its tangible Properties in good repair and
condition, ordinary wear and tear excepted; make all necessary
replacements thereof and operate such Properties in a good and
workmanlike manner; and permit any authorized representative of
the Lender to visit and inspect, at the expense of the Borrowers,
any tangible Property of either Borrower.
5.18 Maintenance of Insurance. Maintain insurance with
------------------------
respect to its Properties and businesses against such
liabilities, casualties, risks, and contingencies as is customary
in the relevant industry and sufficient to prevent a Material
Adverse Effect, all such insurance to be in amounts and from
insurers acceptable to the Lender and, within 90 days of the
Closing Date for property damage insurance covering Collateral
and business interruption insurance, if any, maintained by
Borrowers, naming the Lender as loss payee, and, upon any renewal
of any such insurance and at other times upon request by the
Lender, furnish to the Lender evidence, satisfactory to the
Lender, of the maintenance of such insurance. The Lender shall
have the right to collect, and the Borrowers hereby assign to the
Lender, any and all monies that may become payable under any
policies of insurance relating to business interruption or by
reason of damage, loss, or destruction of any of the Collateral.
5.19 INDEMNIFICATION. INDEMNIFY AND HOLD THE LENDER
---------------
AND ITS SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
38
<PAGE>
ATTORNEYS-IN-FACT, AND AFFILIATES AND EACH TRUSTEE FOR THE
BENEFIT OF THE LENDER UNDER ANY SECURITY INSTRUMENT HARMLESS FROM
AND AGAINST ANY AND ALL CLAIMS, LOSSES, DAMAGES, LIABILITIES,
FINES, PENALTIES, CHARGES, ADMINISTRATIVE AND JUDICIAL
PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS
AND ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES
INCURRED IN CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION,
ATTORNEYS' FEES AND EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN
WHOLE OR IN PART, FROM (A) THE PRESENCE OF ANY HAZARDOUS
SUBSTANCES ON, UNDER, OR FROM ANY PROPERTY OF EITHER BORROWER,
WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY
CARRIED ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF EITHER
BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, AND WHETHER
BY EITHER BORROWER OR ANY PREDECESSOR IN TITLE, EMPLOYEE, AGENT,
CONTRACTOR, OR SUBCONTRACTOR OF EITHER BORROWER OR ANY OTHER
PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY, IN
CONNECTION WITH THE HANDLING, TREATMENT, REMOVAL, STORAGE,
DECONTAMINATION, CLEANUP, TRANSPORTATION, OR DISPOSAL OF ANY
HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR UNDER
SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON OR UNDER ANY
PROPERTY OF EITHER BORROWER, (D) ANY CONTAMINATION OF ANY
PROPERTY OR NATURAL RESOURCES ARISING IN CONNECTION WITH THE
GENERATION, USE, HANDLING, STORAGE, TRANSPORTATION OR DISPOSAL OF
ANY HAZARDOUS SUBSTANCES BY EITHER BORROWER OR ANY EMPLOYEE,
AGENT, CONTRACTOR, OR SUBCONTRACTOR OF SUCH BORROWER WHILE SUCH
PERSONS ARE ACTING WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH
SUCH BORROWER, IRRESPECTIVE OF WHETHER ANY OF SUCH ACTIVITIES
WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH APPLICABLE
REQUIREMENTS OF LAW, OR (E) THE PERFORMANCE AND ENFORCEMENT OF
ANY LOAN DOCUMENT, ANY ALLEGATION BY ANY BENEFICIARY OF A LETTER
OF CREDIT OF A WRONGFUL DISHONOR BY THE LENDER OF A CLAIM OR
DRAFT PRESENTED THEREUNDER, OR ANY OTHER ACT OR OMISSION IN
CONNECTION WITH OR RELATED TO ANY LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING, WITHOUT LIMITATION,
ANY OF THE FOREGOING IN THIS SECTION ARISING FROM NEGLIGENCE,
WHETHER SOLE OR CONCURRENT, ON THE PART OF THE LENDER OR ANY OF
ITS SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT, OR AFFILIATES OR ANY TRUSTEE FOR THE BENEFIT
OF THE LENDER UNDER ANY SECURITY INSTRUMENT; WITH THE FOREGOING
INDEMNITY SURVIVING SATISFACTION OF ALL OBLIGATIONS AND THE
TERMINATION OF THIS AGREEMENT, UNLESS ALL SUCH OBLIGATIONS HAVE
BEEN SATISFIED WHOLLY IN CASH FROM THE BORROWERS AND NOT BY WAY
OF REALIZATION AGAINST ANY COLLATERAL OR THE CONVEYANCE OF ANY
PROPERTY IN LIEU THEREOF, PROVIDED THAT SUCH INDEMNITY SHALL NOT
--------
EXTEND TO ANY ACT OR OMISSION BY THE LENDER WITH RESPECT TO ANY
PROPERTY SUBSEQUENT TO THE LENDER BECOMING THE OWNER OF SUCH
PROPERTY AND WITH RESPECT TO WHICH PROPERTY SUCH CLAIM, LOSS,
38
<PAGE>
DAMAGE, LIABILITY, FINE, PENALTY, CHARGE, PROCEEDING, ORDER,
JUDGMENT, ACTION, OR REQUIREMENT ARISES SUBSEQUENT TO THE
ACQUISITION OF TITLE THERETO BY THE LENDER.
ARTICLE VI
----------
NEGATIVE COVENANTS
------------------
So long as any Obligation remains outstanding or unpaid
or any Commitment exists without the Lender's consent, which
consent will not be unreasonably withheld, neither Borrower will:
6.1 Indebtedness. Create, incur, assume, or suffer to
------------
exist any Indebtedness, whether by way of loan or otherwise;
provided, however, the foregoing restriction shall not apply to
(a) the Obligations, (b) unsecured accounts payable incurred in
the ordinary course of business, which are not unpaid in excess
of 90 days beyond invoice date or are being contested in good
faith and as to which such reserve as is required by GAAP has
been made. Notwithstanding the above, the Borrower may incur up
to $3,000,000 in non-recourse debt to purchase certain Oil and
Gas Properties situated in Jones, Wayne and Jefferson Davis
Counties, Mississippi.
6.2 Contingent Obligations. Create, incur, assume, or
----------------------
suffer to exist any Contingent Obligation; provided, however, the
foregoing restriction shall not apply to (a) performance
guarantees and performance surety or other bonds provided in the
ordinary course of business, or (b) trade credit incurred or
operating leases entered into in the ordinary course of business.
6.3 Liens. Create, incur, assume, or suffer to exist
-----
any Lien on any of its Oil and Gas Properties or any other
Property, whether now owned or hereafter acquired; provided,
------------------
however, the foregoing restrictions shall not apply to Permitted
Liens.
6.4 Sales of Assets. Without the prior written
---------------
consent of the Lender, sell, transfer, or otherwise dispose of,
in one or any series of transactions within any 12-month period,
assets, whether now owned or hereafter acquired, the aggregate
book value of which exceeds $250,000.00, or enter into any
agreement to do so; provided, however, the foregoing restriction
shall not apply to (a) the sale of hydrocarbons or inventory in
the ordinary course of business provided that no contract for the
sale of hydrocarbons shall obligate the Borrowers to deliver
hydrocarbons produced from any of the Mortgaged Property at some
future date without receiving full payment therefor within 45
days of delivery, or (b) the sale or other disposition of
Property destroyed, lost, worn out, damaged, or having only
salvage value or no longer used or useful in the business of the
Borrowers.
6.5 Leasebacks. Enter into any agreement to sell or
----------
transfer any Property and thereafter rent or lease as lessee such
Property or other Property intended for the same use or purpose
as the Property sold or transferred.
39
<PAGE>
6.6 Sale or Discount of Receivables. Except to
-------------------------------
minimize losses on bona fide debts previously contracted,
discount or sell with recourse, or sell for less than the greater
of the face or market value thereof, any of its notes receivable
or accounts receivable.
6.7 Loans or Advances. Make or agree to make or allow
-----------------
to remain outstanding any loans or advances to any Person;
provided, however, the foregoing restrictions shall not apply to
(a) advances or extensions of credit in the form of accounts
receivable incurred in the ordinary course of business and upon
terms common in the industry for such accounts receivable, or
(b) advances to employees of either Borrower for the payment of
expenses in the ordinary course of business.
6.8 Investments. Acquire Investments in, or purchase
-----------
or otherwise acquire all or substantially all of the assets of,
any Person; provided, however, the foregoing restriction shall
not apply to the purchase or acquisition of (a) Oil and Gas
Properties, (b) Investments in the form of (i) debt securities
issued or directly and fully guaranteed or insured by the United
States Government or any agency or instrumentality thereof, with
maturities of no more than one year, (ii) commercial paper of a
domestic issuer rated at the date of acquisition at least P-2 by
Moody's Investor Service, Inc. or A-2 by Standard & Poor's
Corporation and with maturities of no more than one year from the
date of acquisition, or (iii) repurchase agreements covering debt
securities or commercial paper of the type permitted in this
Section, certificates of deposit, demand deposits, eurodollar
time deposits, overnight bank deposits and bankers' acceptances,
with maturities of no more than one year from the date of
acquisition, issued by or acquired from or through the Lender or
any bank or trust company organized under the laws of the United
States or any state thereof and having capital surplus and
undivided profits aggregating at least $100,000,000, (c) other
short-term Investments similar in nature and degree of risk to
those described in clause (b) of this Section, (d) money-market
funds, or (e) a $2,500,000 investment in the common stock of
Century Offshore Management Company.
6.9 Dividends and Distributions. Declare, pay, or
---------------------------
make, whether in cash or Property of either Borrower, any
dividend or distribution on, or purchase, redeem, or otherwise
acquire for value, any share of any class of its capital stock;
provided, however, the foregoing restriction shall not apply to
common stock dividends paid on preferred stock of either
Borrower.
6.10 Capital Expenditures. Make expenditures for
--------------------
capital or fixed assets in any fiscal year exceeding the
aggregate amount of $400,000.00; provided, however, the foregoing
restriction shall not apply to expenditures for the acquisition
of Oil and Gas Property.
6.11 Issuance of Stock; Changes in Corporate Structure.
-------------------------------------------------
Enter into any transaction of consolidation, merger, or
amalgamation; change its senior management; liquidate, wind up,
or dissolve (or suffer any liquidation or dissolution).
6.12 Transactions with Affiliates. Directly or
----------------------------
indirectly, enter into any transaction (including the sale,
lease, or exchange of Property or the rendering of service) with
any of its Affiliates, other than upon fair and reasonable terms
no less favorable than could be obtained in an arm's length
transaction with a Person which was not an Affiliate.
40
<PAGE>
6.13 Lines of Business. Expand, on its own or through
-----------------
any Subsidiary, into any line of business other than those in
which the Borrower is engaged as of the date hereof or other
energy related business.
6.14 Rental or Lease Agreements. Enter into any
--------------------------
contract to rent or lease any Properties, real or personal;
provided, however, the foregoing restriction shall not apply to
oil, gas, and mineral leases.
6.15 ERISA Compliance. Permit any Plan maintained by
----------------
it or any Commonly Controlled Entity to (a) engage in any
Prohibited Transaction, (b) incur any "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA, or
(c) terminate in a manner which could result in the imposition of
a Lien on any Property of the Borrower pursuant to Section 4068
of ERISA; or assume an obligation to contribute to any
Multiemployer Plan; or acquire any Person or the assets of any
Person which has now or has had at any time an obligation to
contribute to any Multiemployer Plan.
6.16 Debt Coverage Ratio. Permit the ratio of EBTDA
-------------------
for the previous four fiscal quarters to one seventh of the
average loan balance for the same period, to be less than 1.20 to
1.0.
6.17 Current Ratio. For either Borrower, permit the
-------------
ratio of Current Assets of such Borrower to Current Liabilities
of such Borrower to be less than 1.01 to 1.0 at any time.
6.18 Tangible Net Worth of Borrowers. Permit Tangible
-------------------------------
Net Worth of Borrowers as of the close of any fiscal quarter to
be less than $17,540,000 as of June 30, 1997, plus 75% of
quarterly net income beginning September 30, 1997.
6.19 General and Administrative Expenses. Permit the
-----------------------------------
aggregate general and administrative expenses of the Borrowers to
exceed 30% of revenue, having netted out marketing revenue and
expenses for any fiscal year of the Borrowers.
6.20 Changes to Operating Agreements. Permit any
-------------------------------
change or modification to any joint operating agreement or
similar contractual arrangement currently in place and affecting
the Mortgaged Properties which would have a Material Adverse
Effect.
6.21 Hedging Contracts. Borrower will not enter into
-----------------
or become obligated under any contract for sale for future
delivery of oil or gas (whether or not the subject oil or gas is
to be delivered), hedging contract, forward contract, swap
agreement, futures contract or any other similar agreement except
for those currently existing.
6.22 Quarterly Interest Ratio. Permit the ratio of
------------------------
EBITDA for the previous fiscal quarter to Borrowers interest
expenses for such period to be less than 3.0 to 1.0.
41
<PAGE>
6.23 Conversion of Settle Oil and Gas Company Note.
---------------------------------------------
Borrower will not convert the Settle Oil and Gas Company Note to
equity in Settle Oil and Gas Company or Century Offshore
Management without the prior written consent of the Lender.
ARTICLE VII
-----------
EVENTS OF DEFAULT
-----------------
7.1 Enumeration of Events of Default. Any of the
--------------------------------
following events shall constitute an Event of Default:
(a) default shall be made in the payment when due
of any installment of principal or interest under this
Agreement or the Note or in the payment when due of any
fee or other sum payable under any Loan Document;
(b) default shall be made by either Borrower in
the due observance or performance of any of its
obligations under the Loan Documents;
(c) any representation or warranty made by either
Borrower in any of the Loan Documents proves to have
been untrue in any material respect or any
representation, statement (including Financial
Statements), certificate, or data furnished or made to
the Lender in connection herewith proves to have been
untrue in any material respect as of the date the facts
therein set forth were stated or certified;
(d) default shall be made by either Borrower (as
principal or guarantor or other surety) in the payment
or performance of any bond, debenture, note, or other
Indebtedness or under any credit agreement, loan
agreement, indenture, promissory note, or similar
agreement or instrument executed in connection with any
of the foregoing, and such default shall remain
unremedied for in excess of the period of grace, if
any, with respect thereto;
(e) either Borrower shall be unable to satisfy
any condition or cure any circumstance specified in
Article III, the satisfaction or curing of which is
precedent to the right of such Borrower to obtain a
Loan or the issuance of a Letter of Credit, and such
inability shall continue for a period in excess of 30
days;
(f) either Borrower shall (i) apply for or
consent to the appointment of a receiver, trustee, or
liquidator of it or all or a substantial part of its
assets, (ii) file a voluntary petition commencing an
Insolvency Proceeding, (iii) make a general assignment
for the benefit of creditors, (iv) be unable, or admit
in writing its inability, to pay its debts generally as
they become due, or (v) file an answer admitting the
material allegations of a petition filed against it in
any Insolvency Proceeding;
42
<PAGE>
(g) an order, judgment, or decree shall be
entered against either Borrower by any court of
competent jurisdiction or by any other duly authorized
authority, on the petition of a creditor or otherwise,
granting relief in any Insolvency Proceeding or
approving a petition seeking reorganization or an
arrangement of its debts or appointing a receiver,
trustee, conservator, custodian, or liquidator of it or
all or any substantial part of its assets, and such
order, judgment, or decree shall not be dismissed or
stayed within 30 days;
(h) the levy against any significant portion of
the Property of either Borrower, or any execution,
garnishment, attachment, sequestration, or other writ
or similar proceeding which is not permanently
dismissed or discharged within 30 days after the levy;
(i) a final and non-appealable order, judgment,
or decree shall be entered against either Borrower for
money damages and/or Indebtedness due in an amount in
excess of $200,000, and such order, judgment, or decree
shall not be dismissed or stayed within 30 days;
(j) any charges are filed or any other action or
proceeding is instituted by any Governmental Authority
against either Borrower under the Racketeering
Influence and Corrupt Organizations Statute
(18 U.S.C. Section 1961 et seq.), the result of which
-- ---
ould be the forfeiture or transfer of any material
Property of such Borrower subject to a Lien in favor of
the Lender without (i) satisfaction or provision for
satisfaction of such Lien, or (ii) such forfeiture or
transfer of such Property being expressly made subject
to such Lien;
(k) either Borrower shall have (i) concealed,
removed, or diverted, or permitted to be concealed,
removed, or diverted, any part of its Property, with
intent to hinder, delay, or defraud its creditors or
any of them, (ii) made or suffered a transfer of any of
its Property which may be fraudulent under any
bankruptcy, fraudulent conveyance, or similar law,
(iii) made any transfer of its Property to or for the
benefit of a creditor at a time when other creditors
similarly situated have not been paid, or (iv) shall
have suffered or permitted, while insolvent, any
creditor to obtain a Lien upon any of its Property
through legal proceedings or distraint which is not
vacated within 30 days from the date thereof;
(l) any Security Instrument shall for any reason
not, or cease to, create valid and perfected first-
priority Liens against the Collateral purportedly
covered thereby;
(m) any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) involving any Plan; any
"accumulated funding deficiency" (as defined in Section
302 of ERISA), whether or not waived, shall exist with
respect to any Plan for which an excise tax is due or
would be due in the absence of a waiver; a Reportable
43
<PAGE>
Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or
commencement of proceedings or appointment of a trustee
is, in the reasonable opinion of the Lender, likely to
result in the termination of such Plan for purposes of
Title IV of ERISA; any Single Employer Plan shall
terminate for purposes of Title IV of ERISA; either
Borrower or any Commonly Controlled Entity shall incur,
or in the reasonable opinion of the Lender, be likely
to incur any liability in connection with a withdrawal
from, or the Insolvency or Reorganization of, a
Multiemployer Plan; or any other event or condition
shall occur or exist with respect to a Plan and the
result of such events or conditions referred to in this
Section 7.1(m) could subject either Borrower or any
Commonly Controlled Entity to any tax (other than an
excise tax under Section 4980 of the Code), penalty or
other liabilities which taken in the aggregate would
have a Material Adverse Effect and any such
circumstance shall exist for in excess of 30 days; or
(n) the occurrence of a Material Adverse Effect
(including, without limitation, a Material Adverse
Effect in the financial condition of either Borrower),
and the same shall remain unremedied for in excess of
30 days after notice given by the Lender.
7.2 Remedies. (a) Upon the occurrence of an Event of
--------
Default specified in Sections 7.1(f) or 7.1(g), immediately and
without notice, (i) all Obligations shall automatically become
immediately due and payable, without presentment, demand,
protest, notice of protest, default, or dishonor, notice of
intent to accelerate maturity, notice of acceleration of
maturity, or other notice of any kind, except as may be provided
to the contrary elsewhere herein, all of which are hereby
expressly waived by each Borrower; (ii) the Commitment shall
immediately cease and terminate unless and until reinstated by
the Lender in writing; and (iii) the Lender is hereby authorized
at any time and from time to time, without notice to either
Borrower (any such notice being expressly waived by the
Borrowers), to set-off and apply any and all deposits (general or
special, time or demand, provisional or final) held by the Lender
and any and all other indebtedness at any time owing by the
Lender to or for the credit or account of either Borrower against
any and all of the Obligations.
(b) Upon the occurrence of any Event of Default
other than those specified in Sections 7.1(f) or 7.1(g), (i) the
Lender may, by notice to the Borrowers, declare all Obligations
immediately due and payable, without presentment, demand,
protest, notice of protest, default, or dishonor, notice of
intent to accelerate maturity, notice of acceleration of
maturity, or other notice of any kind, except as may be provided
to the contrary elsewhere herein, all of which are hereby
expressly waived by each Borrower; (ii) the Commitment shall
immediately cease and terminate unless and until reinstated by
the Lender in writing; and (iii) the Lender is hereby authorized
at any time and from time to time, without notice to either
Borrower (any such notice being expressly waived by each
Borrower), to set-off and apply any and all deposits (general or
special, time or demand, provisional or final) held by the Lender
and any and all other indebtedness at any time owing by the
Lender to or for the credit or account of each Borrower against
any and all of the Obligations although such Obligations may be
unmatured.
44
<PAGE>
(c) Upon the occurrence of any Event of Default,
the Lender may, in addition to the foregoing in this Section,
exercise any or all of its rights and remedies provided by law or
pursuant to the Loan Documents.
ARTICLE VIII
------------
MISCELLANEOUS
-------------
8.1 Transfers; Participations. The Lender may, at any
-------------------------
time, sell, transfer, assign, or grant participations in the
Obligations or any portion thereof; and the Lender may forward to
each Transferee and prospective Transferee all documents and
information relating to such Obligations, whether furnished by
the Borrowers or otherwise obtained, as the Lender determines
necessary or desirable. The Borrowers agree that each
Transferee, regardless of the nature of any transfer to it, may
exercise all rights (including, without limitation, rights of
set-off) with respect to the portion of the Obligations held by
it as fully as if such Transferee were the direct holder thereof,
subject to any agreements between such Transferee and the
transferor to such Transferee.
8.2 Release by Borrowers. Notwithstanding the
--------------------
assignment made and evidenced by the Assignment and the
assumption by the Lender of certain obligations and liabilities
of the Existing Lender pursuant thereto, the Borrowers hereby
release and discharge the Lender from all obligations, claims,
losses, causes of action, and liabilities, of whatsoever kind or
nature, whether heretofore or hereafter accruing, whether now
known or unknown, arising under or in connection with any
Existing Loan Document or Existing Letter of Credit or any act or
omission by the Existing Lender under or in connection with any
Existing Loan Document or Existing Letter of Credit; provided,
however, nothing set forth in this Section shall relieve the
Lender from its obligations and liabilities under the Loan
Documents (other than the Assignment) to which it is a party.
8.3 Survival of Representations, Warranties, and
--------------------------------------------
Covenants. All representations and warranties of each Borrower
- ---------
and all covenants and agreements herein made shall survive the
execution and delivery of the Note and the Security Instruments
and shall remain in force and effect so long as any Obligation is
outstanding or any Commitment exists.
8.4 Notices and Other Communications. Except as to
--------------------------------
verbal notices expressly authorized herein, which verbal notices
shall be confirmed in writing, all notices, requests, and
communications hereunder shall be in writing (including by
telecopy). Unless otherwise expressly provided herein, any such
notice, request, demand, or other communication shall be deemed
to have been duly given or made when delivered by hand, or, in
the case of delivery by mail, when deposited in the mail,
certified mail, return receipt requested, postage prepaid, or, in
the case of telecopy notice, when receipt thereof is acknowledged
orally or by written confirmation report, addressed as follows:
45
<PAGE>
(a) if to the Lender, to:
Den norske Bank AS
Three Allen Center
333 Clay Street
Houston, Texas 77002
Attention: William V. Moyer
Telecopy: (713) 757-1167
(b) if to the Borrowers, to:
American Resources of Delaware, Inc.
Southern Gas Company of Delaware, Inc.
160 Morgan Street
Versailles, Kentucky 40383
Attention: ________________
Telecopy: (606) 873-4689
(c) with a copy to:
David J. Stetson
American Resources of Delaware, Inc.
Southern Gas Company of Delaware, Inc.
160 Morgan Street
Versailles, Kentucky 40383
Any party may, by proper written notice hereunder to
the others, change the individuals or addresses to which such
notices to it shall thereafter be sent.
8.5 Parties in Interest. Subject to the restrictions
-------------------
on changes in corporate structure set forth in Section 6.11 and
other applicable restrictions contained herein, all covenants and
agreements herein contained by or on behalf of the Borrowers or
the Lender shall be binding upon and inure to the benefit of the
Borrowers or the Lender, as the case may be, and their respective
legal representatives, successors, and assigns.
8.6 Rights of Third Parties. All provisions herein
-----------------------
are imposed solely and exclusively for the benefit of the Lender
and the Borrowers. No other Person shall have any right,
benefit, priority, or interest hereunder or as a result hereof or
have standing to require satisfaction of provisions hereof in
accordance with their terms, and any or all of such provisions
may be freely waived in whole or in part by the Lender at any
time if in its sole discretion it deems it advisable to do so.
8.7 Renewals; Extensions. All provisions of this
--------------------
Agreement relating to the Note shall apply with equal force and
effect to each promissory note hereafter executed which in whole
46
<PAGE>
or in part represents a renewal or extension of any part of the
Indebtedness of the Borrowers under this Agreement, the Note, or
any other Loan Document.
8.8 No Waiver; Rights Cumulative. No course of
----------------------------
dealing on the part of the Lender, its officers or employees, nor
any failure or delay by the Lender with respect to exercising any
of its rights under any Loan Document shall operate as a waiver
thereof. The rights of the Lender under the Loan Documents shall
be cumulative and the exercise or partial exercise of any such
right shall not preclude the exercise of any other right.
Neither the making of any Loan nor the issuance of a Letter of
Credit shall constitute a waiver of any of the covenants,
warranties, or conditions of the Borrowers contained herein. In
the event either Borrower is unable to satisfy any such covenant,
warranty, or condition, neither the making of any Loan nor the
issuance of a Letter of Credit shall have the effect of
precluding the Lender from thereafter declaring such inability to
be an Event of Default as hereinabove provided.
8.9 Survival Upon Unenforceability. In the event any
------------------------------
one or more of the provisions contained in any of the Loan
Documents or in any other instrument referred to herein or
executed in connection with the Obligations shall, for any
reason, be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall
not affect any other provision of any Loan Document or of any
other instrument referred to herein or executed in connection
with such Obligations.
8.10 Amendments; Waivers. Neither this Agreement nor
-------------------
any provision hereof may be amended, waived, discharged, or
terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of the amendment, waiver,
discharge, or termination is sought.
8.11 Controlling Agreement. In the event of a conflict
---------------------
between the provisions of this Agreement and those of any other
Loan Document, the provisions of this Agreement shall control.
8.12 Disposition of Collateral. Notwithstanding any
-------------------------
term or provision, express or implied, in any of the Security
Instruments, the realization, liquidation, foreclosure, or any
other disposition on or of any or all of the Collateral shall be
in the order and manner and determined in the sole discretion of
the Lender; provided, however, that in no event shall the Lender
violate applicable law or exercise rights and remedies other than
those provided in such Security Instruments or otherwise existing
at law or in equity.
8.13 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL
-------------
BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS
OF LAW.
8.14 JURISDICTION AND VENUE. ALL ACTIONS OR
----------------------
PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN
47
<PAGE>
CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION
AND ELECTION OF THE LENDER, IN COURTS HAVING SITUS IN NEW YORK,
NEW YORK. EACH BORROWER HEREBY SUBMITS TO THE JURISDICTION OF
ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN NEW YORK, NEW YORK,
AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE
THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY
THE LENDER IN ACCORDANCE WITH THIS SECTION.
8.15 WAIVER OF RIGHTS TO JURY TRIAL. THIS AGREEMENT
------------------------------
AMENDS, RESTATES, AND REPLACES THE EXISTING CREDIT AGREEMENT AND
CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE ANY PRIOR
AGREEMENT AMONG THE PARTIES HERETO, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT HEREOF, INCLUDING, WITHOUT LIMITATION,
THE EXISTING CREDIT AGREEMENT; AND THE BORROWERS AND THE LENDER
HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND
UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES
TO OR ARISES OUT OF ANY OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR THE ACTS OR OMISSIONS OF THE LENDER IN THE
ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO.
THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE
LENDER ENTERING INTO THIS AGREEMENT.
8.16 ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE
----------------
ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT HEREOF AND SHALL SUPERSEDE ANY PRIOR AGREEMENT AMONG THE
PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT
HEREOF, INCLUDING, WITHOUT LIMITATION, THE TERM SHEET DATED
AUGUST 24, 1995. FURTHERMORE, IN THIS REGARD, THIS AGREEMENT AND
THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE
FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG SUCH PARTIES.
8.17 Counterparts. For the convenience of the parties,
------------
this Agreement may be executed in multiple counterparts, each of
which for all purposes shall be deemed to be an original, and all
such counterparts shall together constitute but one and the same
Agreement.
48
<PAGE>
IN WITNESS WHEREOF, this Agreement is deemed executed
effective as of the date first above written.
BORROWERS:
AMERICAN RESOURCES OF DELAWARE,
INC.
By: /S/Rick G. Avare
------------------------------
Rick G. Avare
President
SOUTHERN GAS CO. OF DELAWARE,
INC.
By: /S/Leonard K. Nave
------------------------------
Leonard K. Nave
President
(Signatures Continued on Next Page)
49
<PAGE>
LENDER:
DEN NORSKE BANK, AS
By: /S/William V. Moyer
------------------------------
William V. Moyer
First Vice President
DEN NORSKE BANK, AS
By: /S/Charles E. Hall
------------------------------
Charles E. Hall
Senior Vice President
50
<PAGE>
EXHIBIT I
---------
FORM OF NOTE
PROMISSORY NOTE
---------------
$75,000,000.00 Houston, Texas November 1, 1997
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of DEN NORSKE BANK, AS,
-----
("Payee"), at its office at 200 Park Avenue, 31st Floor, New
-----
York, New York 10020, the sum of SEVENTY-FIVE MILLION AND NO/100
DOLLARS ($75,000,000.00), or so much thereof as may be advanced
against this Note pursuant to the First Amended and Restated
Credit Agreement dated of even date herewith by and among Maker
and Payee (as amended, supplemented, or restated from time to
time, the "Credit Agreement"), together with interest at the
----------------
rates and calculated as provided in the Credit Agreement.
Reference is hereby made to the Credit Agreement for
matters governed thereby, including, without limitation, certain
events which will entitle the holder hereof to accelerate the
maturity of all amounts due hereunder. Capitalized terms used
but not defined in this Note shall have the meanings assigned to
such terms in the Credit Agreement.
This Note is issued pursuant to, is the "Note" under,
and is payable as provided in the Credit Agreement. Subject to
compliance with applicable provisions of the Credit Agreement,
Maker may at any time pay the full amount or any part of this
Note without the payment of any premium or fee, but such payment
shall not, until this Note is fully paid and satisfied, excuse
the payment as it becomes due of any payment on this Note
provided for in the Credit Agreement.
This Note is issued, in whole or in part, in renewal
and extension, but not in novation or discharge, of the remaining
principal balance of the Existing Note.
Without being limited thereto or thereby, this Note is
secured by the Security Instruments.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS
OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAW.
I-i
<PAGE>
AMERICAN RESOURCES OF DELAWARE, INC.
By:
---------------------------------
David K. Stetson
General Counsel
SOUTHERN GAS CO. OF DELAWARE, INC.
By:
---------------------------------
David K. Stetson
General Counsel
I-ii
<PAGE>
EXHIBIT II
----------
FORM OF BORROWING REQUEST
Den norske Bank AS
Three Allen Center
333 Clay Street
Houston, Texas 77002
Attention: William V. Moyer
and
Den norske Bank AS
Customer Services Department
200 Park Avenue
31st Floor
New York, New York 10020
Attention:
--------------------
Re: First Amended and Restated Credit Agreement dated
as of November 1, 1997, by and among American
Resources of Delaware, Inc., Southern Gas Co. of
Delaware, Inc., and Den norske Bank, AS (as
amended, restated, or supplemented from time to
time, the "Credit Agreement")
----------------
Ladies and Gentlemen:
Pursuant to the Credit Agreement, the Borrower hereby
makes the requests indicated below:
[ ] 1. Loans
(a) Amount of new Loan: $
--------------
(b) Requested funding date: , 19
------------ ----
(c) $ of such Loan is to be a Floating Rate
----------------
Loan;
$ of such Loan is to be a LIBO Rate
---------------
Loan.
(d) Requested Interest Period for LIBO Rate Loan:
months.
- ----
[ ] 2. Continuation or conversion of LIBO Rate Loan maturing
on :
----------
II-i
<PAGE>
(a) Amount to be continued as a LIBO Rate Loan is $ ,
-------
with an Interest Period of months;
----
(b) Amount to be converted to a Floating Rate Loan is
$ ; and
-------------
[ ] 3. Conversion of Floating Rate Loan:
(a) Requested conversion date: , 19 .
----------- ----
(b) Amount to be converted to a LIBO Rate Loan is
$ , with an Interest Period of months.
-------- -----
The undersigned certifies that [s]he is the [ ]
---------
of the Borrower, has obtained all consents necessary, and as such
[s]he is authorized to execute this request on behalf of the
Borrower. The undersigned further certifies, represents, and
warrants on behalf of the Borrower that the Borrower is entitled
to receive the requested borrowing, continuation, or conversion
under the terms and conditions of the Credit Agreement.
Each capitalized term used but not defined herein shall
have the meaning assigned to such term in the Credit Agreement.
Very truly yours,
AMERICAN RESOURCES OF DELAWARE,
INC.
By:
---------------------------------
Rick G. Avare
President
SOUTHERN GAS CO. OF DELAWARE, INC.
By:
---------------------------------
Leonard K. Nave
President
II-ii
<PAGE>
EXHIBIT III
-----------
FORM OF COMPLIANCE CERTIFICATE
, 19
------------- ---
Den norske Bank AS
Three Allen Center
333 Clay Street
Houston, Texas 77002
Attention: William V. Moyer
Re: First Amended and Restated Credit Agreement dated
as of November 1, 1997, by and among American
Resources of Delaware, Inc., Southern Gas Co. of
Delaware, Inc., and Den norske Bank, AS (as
amended, restated, or supplemented from time to
time, the "Credit Agreement")
----------------
Ladies and Gentlemen:
Pursuant to applicable requirements of the Credit
Agreement, the undersigned, as a Responsible Officer of
, hereby certifies to you the following information
- --------------
as true and correct as of the date hereof or for the period
indicated, as the case may be:
[1. TO THE BEST OF THE KNOWLEDGE OF THE UNDERSIGNED, NO
DEFAULT OR EVENT OF DEFAULT EXISTS AS OF THE DATE HEREOF OR
HAS OCCURRED SINCE THE DATE OF OUR PREVIOUS CERTIFICATION TO
YOU, IF ANY.]
[1. TO THE BEST OF THE KNOWLEDGE OF THE UNDERSIGNED, THE
FOLLOWING DEFAULTS OR EVENTS OF DEFAULT EXIST AS OF THE DATE
HEREOF OR HAVE OCCURRED SINCE THE DATE OF OUR PREVIOUS
CERTIFICATION TO YOU, IF ANY, AND THE ACTIONS SET FORTH
BELOW ARE BEING TAKEN TO REMEDY SUCH CIRCUMSTANCES:]
2. The compliance of the Borrowers with the financial
covenants of the Credit Agreement, as of the close of
business on , is evidenced by the
--------------------
following:
(a) SECTION 6.16 DEBT COVERAGE RATIO - Permit the ratio of
EBTDA for the previous four fiscal quarters to one
seventh of the average loan balance for the same
period, to be less than 1.20 to 1.0.
Cash Flow during the period:
----------
Avg. Loan Balance during
the period divided by seven:
---------
III-i
<PAGE>
Actual:
----------
Required:
----------
(b) SECTION 6.17 CURRENT Ratio - Current Assets to Current
Liabilities (excluding CMLTD) to be less than 1.1 to
1.0.
Required:
----------
Actual:
----------
(c) SECTION 6.18 TANGIBLE NET WORTH - Permit Tangible Net
Worth of Borrower as of the close of any fiscal quarter
to be less than $16,000,000 M plus 75% of positive Net
Income for all fiscal periods beginning September 30,
1995.
TNW required as of last quarter
ending :
------------ ----------
Net Income for this quarter
of $ * 75%:
------ ----------
Total required:
----------
Actual:
----------
(d) SECTION 6.22 QUARTERLY INTEREST RATIO - Permit the
ratio of EBITDA for the previous fiscal quarter to
Borrower's interest expenses for such period to be less
than 3.0 to 1.0.
Required:
----------
Actual:
----------
3. No Material Adverse Effect has occurred since the date
of the Financial Statements dated as of .
----------
Each capitalized term used but not defined herein shall
have the meaning assigned to such term in the Credit Agreement.
III-ii
<PAGE>
Very truly yours,
AMERICAN RESOURCES OF DELAWARE,
INC.
By:
---------------------------------
Rick G. Avare
President
SOUTHERN GAS CO. OF DELAWARE, INC.
By:
--------------------------------
Leonard K. Nave
President
III-iii
<PAGE>
EXHIBIT IV
DISCLOSURES
Section 4.8 Liabilities
-----------
Litigation
----------
Section 4.12 Environmental Matters
---------------------
Section 4.17 Refunds
-------
Section 4.18 Gas Contracts
-------------
Section 4.20 Casualties
----------
Section 4.22 Subsidiaries
------------
IV-i
