<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
Commission file number 1-12534
NEWFIELD EXPLORATION COMPANY
(Exact name of registrant as specified in its charter)
Delaware 72-1133047
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
363 N. Sam Houston Parkway E.
Suite 2020
Houston, Texas 77060
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (713)
847-6000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports, and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of July 25, 1996, there were 17,471,133 shares of the Registrant's
Common Stock, par value $.01 per share, outstanding.
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TABLE OF CONTENTS
<TABLE>
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Page
PART I
<S> <C> <C>
Item 1. Financial Statements:
Balance Sheet as of June 30, 1996
and December 31, 1995. . . . . . . . . . . . 1
Statement of Income for the three months ended
June 30, 1996 and 1995 and for the six
months ended June 30, 1996 and 1995 . . . 3
Statement of Cash Flows for the six months
ended June 30, 1996 and 1995 . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . 8
PART II
Item 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . 16
</TABLE>
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NEWFIELD EXPLORATION COMPANY
BALANCE SHEET
(In thousands of dollars, except share data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
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ASSETS
Current assets:
Cash and cash equivalents . . . . . . . $ 19,352 $ 12,533
Accounts receivable, oil and gas. . . . 25,013 25,332
Other . . . . . . . . . . . . . . . . . 2,379 4,952
------------ ------------
Total current assets. . . . . . . . . 46,744 42,817
------------ ------------
Oil and gas properties (full cost method,
of which $30,519 at June 30, 1996 and
$19,517 at December 31, 1995 were
excluded from amortization) . . . . . . 419,603 362,857
Furniture, fixtures and equipment . . . . 2,072 1,806
Less-accumulated depreciation,
depletion and amortization. . . . . . . (164,491) (135,148)
------------ ------------
257,184 229,515
------------ ------------
Other assets . . . . . . . . . . . . . . 5,584 5,074
------------ ------------
Total assets . . . . . . . . . . . . $ 309,512 $ 277,406
=========== ============
</TABLE>
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NEWFIELD EXPLORATION COMPANY
BALANCE SHEET
(In thousands of dollars, except share data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities. . . . . . . . . . . . . $ 32,482 $ 24,487
Advances from joint owners . . . . . . 4,363 1,673
Current maturities of capital
lease obligations. . . . . . . . . . 270 422
Current maturities of long-term debt . --- 5,000
----------- -----------
Total current liabilities. . . . . . 37,115 31,582
----------- -----------
Other liabilities. . . . . . . . . . . . 1,814 1,060
Long-term capital lease obligations. . . 52 152
Long-term debt . . . . . . . . . . . . . 24,000 25,000
Deferred taxes . . . . . . . . . . . . . 33,554 26,041
----------- -----------
Total long-term liabilities. . . . . 59,420 52,253
----------- -----------
Commitments and contingencies (Note 3) . --- ---
Stockholders' equity (Note 1):
Preferred stock ($.01 par value,
5,000,000 share authorized,
no shares issued). . . . . . . . . . --- ---
Common stock ($.01 par value,
50,000,000 shares authorized;
17,469,133 and 17,177,422
shares issued and outstanding
at June 30, 1996 and December 31,
1995, respectively). . . . . . . . . 173 171
Additional paid-in capital . . . . . . . 144,084 138,002
Unearned compensation . . . . . . . . . (3,669) (1,113)
Retained earnings . . . . . . . . . . . 72,389 56,511
----------- -----------
Total stockholders' equity . . . . . 212,977 193,571
----------- -----------
Total liabilities and
stockholders' equity . . . . . . . $ 309,512 $ 277,406
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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NEWFIELD EXPLORATION COMPANY
STATEMENT OF INCOME
(In thousands of dollars, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Oil and gas revenues. . . . $ 33,013 $ 24,811 $ 65,975 $ 43,840
---------- ---------- ---------- ----------
Operating expenses:
Lease operating . . . . . 4,052 3,740 7,398 6,345
Depreciation, depletion
and amortization. . . . 14,625 12,903 29,346 22,954
General and
administrative, net . . 1,643 1,329 4,073 2,606
Stock compensation. . . . 531 198 873 390
---------- ---------- ---------- ----------
Total operating
expenses. . . . . . . 20,851 18,170 41,690 32,295
---------- ---------- ---------- ----------
Income from operations. . . 12,162 6,641 24,285 11,545
Other income (expense):
Interest income . . . . . 129 210 283 612
Interest expense, net . . (70) (56) (144) (130)
---------- ---------- ---------- ----------
59 154 139 482
---------- ---------- ---------- ----------
Income before income taxes . 12,221 6,795 24,424 12,027
Income tax provision . . . . 4,272 2,378 8,546 4,207
---------- ---------- ---------- ----------
Net income . . . . . . . . . $ 7,949 $ 4,417 $ 15,878 $ 7,820
========== ========== ========== ==========
Earnings per common share. . $ 0.43 $ 0 .24 $ 0.86 $ 0.44
========== ========== ========== ==========
Weighted average number
of shares and common
stock equivalents
outstanding. . . . . . . . 18,662 18,099 18,503 17,911
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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NEWFIELD EXPLORATION COMPANY
STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
------------ ------------
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Cash flows from operating activities:
Net income . . . . . . . . . . . . . $ 15,878 $ 7,820
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion
and amortization . . . . . . . . 29,346 22,954
Deferred taxes . . . . . . . . . . 8,529 4,012
Stock compensation . . . . . . . . 873 390
Realized loss on sale of
investment securities. . . . . . --- 32
------------- ------------
54,626 35,208
Changes in operating assets and
liabilities:
Decrease in accounts receivable,
oil and gas. . . . . . . . . . . 383 2,211
Decrease (increase) in other
current assets . . . . . . . . . 2,573 (1,148)
Increase in other assets . . . . . (501) (76)
Increase (decrease) in accounts
payable and accrued
liabilities. . . . . . . . . . . 578 (1,561)
Increase in advance from
joint owners . . . . . . . . . . 2,680 733
Increase in other liabilities. . . 754 526
------------ ------------
Net cash provided by
operating activities . . . . . 61,103 35,893
------------ ------------
Cash flows from investing activities:
Additions to oil
and gas properties . . . . . . . (49,402) (48,511)
Additions to furniture,
fixtures and equipment . . . . . (269) (57)
Sales of investment securities . . --- 8,227
------------ ------------
Net cash used in
investing activities . . . . . (49,671) (40,341)
------------ ------------
</TABLE>
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NEWFIELD EXPLORATION COMPANY
STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
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<S> <C> <C>
Cash flows from financing activities:
Proceeds from borrowings . . . . . 97,000 40,000
Repayments of borrowings . . . . . (103,000) (30,000)
Proceeds from issuance of
common stock, net. . . . . . . . 1,637 3,221
Payments on capital
lease obligations. . . . . . . . (250) (281)
------------ ------------
Net cash provided by (used in)
financing activities . . . . . (4,613) 12,940
------------ ------------
Increase in cash and cash
equivalents. . . . . . . . . . . . 6,819 8,492
Cash and cash equivalents,
beginning of period. . . . . . . . 12,533 10,412
------------ ------------
Cash and cash equivalents,
end of period. . . . . . . . . . . $ 19,352 $ 18,904
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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NEWFIELD EXPLORATION COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(1) Accounting Policies
The unaudited financial statements of Newfield Exploration Company (the
"Company") reflect, in the opinion of management, all adjustments, consisting
only of normal and recurring adjustments, necessary to present fairly the
Company's financial position at June 30, 1996 and the Company's results of
operations for the three- and six-month periods ended June 30, 1996 and 1995
and cash flows for the six-month periods ended June 30, 1996 and 1995. The
financial statements have been prepared in accordance with the instructions to
Form 10-Q and therefore do not include all disclosures required of financial
statements prepared in conformity with generally accepted accounting
principles. Interim period results are not necessarily indicative of results
of operations or cash flows for a full-year period.
These financial statements and the notes thereto should be read in
conjunction with the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, including those financial statements and notes thereto
incorporated by reference from the Company's 1995 Annual Report to
Stockholders.
(2) Debt
On May 20, 1996 the Company executed an unsecured revolving credit
agreement with a current commitment of $125 million ("Aggregate Commitment").
As of June 30, 1996, $24.0 million was outstanding under this credit agreement
and the Company's borrowing base was $125 million ("Borrowing Base"). The
Borrowing Base is determined by the majority banks party to the agreement on
May 1 and November 1 of each year. The level of funds available to be borrowed
under the agreement will be established quarterly by the Company (the
"Designated Borrowing Base"). The Designated Borrowing Base is an amount
greater than or equal to the Designated Borrowing Base Floor Amount, $50
million through January 31, 1997 and $75 million thereafter but less than or
equal to the Borrowing Base. The Company retains the ability, subject to
notification, to increase the Designated Borrowing Base to an amount not to
exceed the Borrowing Base.
Borrowings under the credit agreement bear interest, payable quarterly, at
the Company's option at (i) the higher of (a) the federal fund rate (5.38% at
June 30, 1996) plus 1/2% and (b) the bank's prime rate (8.25% at June 30.
1996), plus a variable margin, which ranges up to 1/4% based upon the loan
amount outstanding relative to the borrowing base, or (ii) LIBOR (30 day LIBOR
was 5.50% at June 30, 1996) plus a variable margin, which ranges from 3/4% to
1-1/4% based upon the loan amount outstanding relative to the borrowing base.
The credit agreement also provides for a commitment fee, to be paid quarterly,
of 3/8ths of 1% per annum on the
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unused Designated Borrowing Base available to the Company. In addition, a
standby fee, to be paid quarterly, of 1/8th of 1% per annum will be paid or the
difference between the Designated Borrowing Base and the Aggregate Commitment.
The credit agreement provides for a revolving credit period through June
30, 1998, at which time the aggregate loans outstanding under the credit
agreement convert to a term loan with quarterly maturities through June 30,
2001.
The credit agreement contains affirmative and negative covenants, which,
among other things, require the Company to maintain a working capital ratio, as
defined, of at least 1.1 to 1.0 and a fixed charge coverage ratio, as defined,
of at least 1.5 to 1.0. The credit agreement also limits the incurrence of
additional debt, additional liens on properties, sale of certain assets and the
declaration or payment of dividends.
(3) Contingencies
The Company has been named as a defendant in certain lawsuits arising in
the ordinary course of business. While the outcome of these lawsuits cannot be
predicted with certainty, management does not expect these matters to have a
material adverse effect on the financial position and results of operations of
the Company.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
As an independent oil and gas producer, the Company's revenue,
profitability and future rate of growth are substantially dependent upon
prevailing prices for natural gas, oil and condensate, which are dependent upon
numerous factors beyond the Company's control, such as economic, political and
regulatory developments and competition from other sources of energy. The
energy markets have historically been very volatile, as evidenced by the recent
volatility of oil and gas prices, and there can be no assurance that oil and
gas prices will not be subject to wide fluctuations in the future. A
substantial or extended decline in oil and gas prices could have a material
adverse effect on the Company's financial position, results of operations,
quantities of oil and gas reserves that may be economically produced and access
to capital.
The Company's results of operations may vary significantly from quarter to
quarter as a result of development operations, commodity prices, the
curtailment of production in association with workover and recompletion
activities and the incurrence of expenses related thereto, the timing and
amount of reimbursement for customary overhead costs received by the Company
and other factors, and, therefore, the results of operations for any one
quarter may not be indicative of results for the full fiscal year.
The Company uses the full cost method of accounting for its oil and gas
properties. Under this method, all acquisition, exploration and development
costs, including certain related employee costs (less any reimbursements for
such costs) incurred for the purpose of acquiring and finding oil and gas
reserves are capitalized in a "full cost pool" as incurred. The Company
records depletion of its full cost pool using the unit of production method and
uses its internal estimates of proved quantities of oil and gas reserves for
financial accounting matters. To the extent that such capitalized costs in the
full cost pool (net of depreciation, depletion and amortization and related
deferred taxes) exceed the present value (using a 10% discount rate) of
estimated future net after-tax cash flows from proved oil and gas reserves,
such excess costs are charged to operations. Once incurred, a write-down of
oil and gas properties is not reversible at a later date even if oil or gas
prices increase.
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<PAGE> 11
Results of Operations
The following table sets forth certain operating information with respect
to the oil and gas operations of the Company:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Production:
Oil and condensate (MBbls) 622 530 1,237 907
Gas (MMcf) 9,597 8,875 19,329 16,307
Total production (MMcfe) 13,326 12,056 26,750 21,752
Average Realized Price:
Oil and condensate (per Bbl) $ 19.69 $ 17.97 $ 18.94 $ 17.54
Gas (per Mcf) 2.17 1.72 2.20 1.71
Average Costs (per Mcfe)
Lease operating $ 0.30 $ 0.31 $ 0.28 $ 0.29
Depreciation, depletion
and amortization 1.10 1.07 1.10 1.06
General and
administrative, net 0.16 0.13 0.18 0.14
</TABLE>
Production. Net production increased 23%, from 21.8 billion cubic feet of
natural gas equivalent ("Bcfe") for the six months ended June 30, 1995, to 26.7
Bcfe for the six months ended June 30, 1996. Oil and condensate production for
the six months ended June 30, 1996 increased 329 thousand barrels ("Mbbls"), or
36%, compared to the same period of 1995. Increased oil production for the
first six months of 1996 was due primarily to production increases at Eugene
Island 182, High Island 537 and the acquisition of Eugene Island 128 in the
third quarter of 1995. Gas production increased by 3.0 billion cubic feet
("Bcf"), or 19%, from 16.3 Bcf for the six months ended June 30, 1995 to 19.3
Bcf for the comparable period of 1996. Increased gas production was due to
production increases at Eugene Island 251/262 and production from wells drilled
and placed on production at Vermilion 355 and Vermilion 297 during the fourth
quarter of 1995 and the first quarter of 1996, respectively. These increases
were partially offset by natural production decline on other properties of the
Company.
Net production increased 11%, from 12.1 Bcfe for the three months ended
June 30, 1995 to 13.3 Bcfe for the three months ended June 30, 1996. Oil and
condensate production for the three months ended June 30, 1996 increased 91
Mbbls, or 17%, compared to the same period of 1995. Increased oil production
was due primarily to production increases at Eugene Island 182, High Island 537
and the acquisition of Eugene Island 128 in the third quarter of 1995. Gas
production increased by 0.7 Bcf, or 8%, from 8.9 Bcf for the three months ended
June 30, 1995
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to 9.6 Bcf for the comparable period of 1996. Increased gas production was due
to production increases at High Island 537 and production from wells drilled
and placed on production at Vermilion 355 and Vermilion 297 during the fourth
quarter of 1995 and the first quarter of 1996, respectively.
Oil and Gas Revenues. Oil and gas revenues for the six months ended June
30, 1996 increased by $22.1 million, or 50%, compared to the same period of
1995, primarily as a result of increased oil and gas production and increased
oil and gas prices. The average realized price of oil and condensate increased
by 8% and the average realized price of natural gas increased by 29%.
For the six months ended June 30, 1996, the average realized gas price was
$2.20 per thousand cubic feet ("Mcf"), which, as a result of hedging
activities, was 80% of the $2.75 per Mcf average gas sales price that would
have otherwise been received, resulting in a $10.5 million decrease in gas
revenues. As a result of hedging activities for gas production for the six
months ended June 30, 1995, the Company realized an average gas price of $1.71
per Mcf, or 106% of the $1.61 per Mcf average gas sales price that would have
otherwise been received, resulting in a $1.7 million increase in gas revenues.
For the six months ended June 30, 1996, the average realized oil and condensate
price was $18.94, which, as a result of hedging activities, was 97% of the
$19.47 per barrel average oil and condensate sales price that would have
otherwise been received, resulting in a $0.7 million decrease in oil and
condensate revenues. Oil hedging activities for the six months ended June 30,
1995 had a negligible impact on oil and condensate revenues.
Oil and gas revenues for the three months ended June 30, 1996 increased by
$8.2 million, or 33%, compared to the same period of 1995, primarily as a
result of increased oil and gas production and increased oil and gas prices.
The average realized price of oil and condensate increased by 10% and the
average realized price of natural gas increased by 26%.
For the three months ended June 30, 1996, the average realized gas price
was $2.17 per Mcf, which, as a result of hedging activities, was 89% of the
$2.45 per Mcf average gas sales price that would have otherwise been received,
resulting in a $2.7 million decrease in gas revenues. As a result of hedging
activities for gas production for the three months ended June 30, 1995, the
Company realized an average gas price of $1.72 Mcf, or 103% of the $1.67 per
Mcf average gas sales price that would have otherwise been received, resulting
in a $0.5 million increase in gas revenues. For the three months ended June
30, 1996, the average realized oil and condensate price was $19.69, which, as a
result of hedging activities, was 97% of the $20.31 per barrel average oil and
condensate sales price that would have otherwise been received, resulting in a
$0.4 million decrease in oil and condensate revenues. Oil hedging activities
for the three months ended June 30, 1995 had a negligible impact on oil and
condensate revenues.
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Lease Operating Expense. Lease operating expense for the six months ended
June 30, 1996 increased to $7.4 million from $6.3 million for the comparable
period of 1995. Lease operating expense per Mcf equivalent ("Mcfe") decreased
from $0.29 for the six months ended June 30, 1995, to $0.28 for the comparable
period of 1996. The decrease is primarily attributable to higher production
volumes partially offset by lease operating costs associated with properties
the Company acquired after June 30, 1995.
Lease operating expense for the three months ended June 30, 1996 increased
to $4.1 million from $3.7 million for the comparable period of 1995. Lease
operating expense per Mcfe decreased from $0.31 for the three months ended June
30, 1995, to $0.30 for the comparable period of 1996. The decrease is
primarily attributable to higher production volumes partially offset by lease
operating costs associated with properties the Company acquired after June 30,
1995.
Depletion, Depreciation and Amortization Expense. During the six and
three months ended June 30, 1996, depletion, depreciation, and amortization
expense increased to $29.3 million and $14.6 million, respectively, from $23.0
million and $12.9 million, respectively, for the comparable periods of 1995.
The increases were the result of an increased depletion rate per Mcfe and
production increases from acquisitions and exploratory and development drilling
activities during 1995. The depletion rate per unit for the six and three
month periods ended June 30, 1996 increased to $1.10 per Mcfe from $1.06 per
Mcfe and $1.07 Mcfe, respectively, for the comparable periods of 1995. The
increase in the depletion rate per unit is primarily attributable to higher
cost reserve additions associated with proved properties the Company acquired
during 1995.
General and Administrative Expense, Net. General and administrative
expense, which is net of overhead reimbursements received by the Company from
other working interest owners, increased to $4.1 million and $1.6 million for
the six and three month periods ended June 30, 1996, respectively, as compared
to $2.6 million and $1.3 million for the same periods of 1995, respectively.
Performance based compensation, as a component of general and administrative
expense, increased from $1.1 million, or $0.05 per Mcfe, and $0.6 million, or
$0.05 per Mcfe, for the six and three month periods ended June 30, 1995,
respectively, to $2.2 million, or $0.08 per Mcfe, and $1.1 million, or $0.08
per Mcfe, for the six and three month periods ended June 30, 1996,
respectively. Direct costs associated with staff increases during 1995 were
offset to a significant extent by program and joint interest reimbursements.
To the extent that the Company continues to grow and increase its ownership in
certain properties, the Company expects the overall trend of general and
administrative expenses to continue to increase.
Net Income. As a result of the foregoing, the Company had net income of
$15.9 million and $7.9 million, or $0.86 and $0.43 per share, for the six and
three month periods ended June 30, 1996, respectively, as compared to $7.8
million and $4.4 million, or $0.44 per share and $0.24 per share,
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<PAGE> 14
for the comparable period of 1995. The increase in earnings per share is
primarily due to an increase in oil and gas revenues for the six and three
month periods ended June 30, 1996 as compared to the comparable period of 1995.
Liquidity and Capital Resources
The Company had $9.6 million of working capital at June 30, 1996 compared
to $11.2 million at December 31, 1995. The $1.6 million decrease in working
capital is primarily due to the repayment of $6 million of debt offset by the
impact of increased revenues during the period. Historically, the Company has
funded its oil and gas activities through cash flow from operations, equity
capital from private and public sources and bank borrowings.
From time to time, the Company has utilized hedging transactions with
respect to a portion of its oil and gas production to achieve a more
predictable cash flow, as well as to reduce its exposure to price fluctuations.
While the use of these hedging arrangements limits the downside risk of adverse
price movements, they may also limit future revenues from favorable price
movements. The use of hedging transactions also involves the risk that the
counterparties will be unable to meet the financial terms of such transactions.
All of the Company's hedging transactions to date were carried out in the
over-the-counter market and the obligations of the counterparties have been
guaranteed by entities with at least an investment grade rating or secured by
letters of credit. The Company accounts for these transactions as hedging
activities and, accordingly, gains or losses are included in oil and gas
revenues when the hedged production is delivered. As of June 30, 1996, the
Company had entered into commodity price swap contracts effectively fixing the
price of 7.2 Bcf of natural gas for July through December 1996 at a volume
weighted average price of $1.96 per MMBtu (or approximately $2.09 per Mcf based
upon the average energy content of the Company's gas production for the twelve
months ended December 31, 1995). Additionally, the Company has entered into a
collar for 0.6 Bcf of natural gas for October through December 1996 with a
floor price of $2.60 per MMBtu and a ceiling price of $3.08 per MMBtu (or
approximately $2.78 and $3.29 per Mcf, respectively). The Company has entered
into a put option agreement for 6.45 Bcf of natural gas for July through
September 1996 with a floor price of $2.02 per MMBtu (or approximately $2.16
per Mcf). These gas hedging transactions are settled based on reported sales
prices of natural gas delivered into those pipelines at the physical locations
where the Company sells its production, (the "Sales Point Price"). Because
substantially all of the Company's natural gas production is sold under spot
contracts that reference to the Sales Point Price, the Company has no basis
risk with respect to these transactions.
The Company established a $125 million reserve-based revolving credit
facility with The Chase Manhattan Bank, N.A., as agent on May 20, 1996. As of
June 30, 1996, $24 million was outstanding under this credit facility and the
borrowing base was $125 million. The credit facility replaces the Company's
prior $50 million facility with The Chase Manhattan Bank, N.A.
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<PAGE> 15
The Company's net cash flow from operations for the first six months of
1996 was $61.1 million compared to $35.9 million for the same period of 1995.
The increase is primarily due to increases in oil and gas production and
average realized oil and gas prices and working capital changes. Net cash flow
from operations before changes in operating assets and liabilities for the
first six months of 1996 was $54.6 million compared to $35.2 million for the
same period of 1995. The increase in net cash flow from operations before
changes in operating assets and liabilities is primarily attributable to
increases in oil and gas production and average realized oil and gas prices.
The Company had capital expenditures of $56.7 million for the six months
ended June 30, 1996 compared to $49.5 million for the same period of 1995.
As a result of a successful exploration and development drilling program
and access to additional opportunities, the 1996 capital budget has been
increased from $107 million to $135 million. The Company's exploration capital
expenditures for the first six months of 1996 were $25 million of the total of
approximately $53 million budgeted for 1996. Development drilling and
construction expenditures for platforms, facilities and pipelines were $26.6
million for the first six months of 1996 of the total of approximately $77
million budgeted for 1996. Expenditures for proved property acquisitions for
the first six months of 1996 were $4.8 million. The Company continues to
pursue attractive acquisition opportunities. The timing and size of any
acquisition and the associated capital commitments are unpredictable. No
significant abandonment or dismantlement costs are anticipated during 1996.
Actual levels of capital expenditures may vary significantly due to many
factors, including drilling results, oil and gas prices, industry conditions,
the prices of goods and services and the extent to which proved properties are
acquired. The Company anticipates that these capital expenditures will be
funded principally from cash flow from operations, working capital, and bank
borrowings. During the first six months of 1996, the Company borrowed $97
million and repaid $103 million under the credit facility. The Company
anticipates additional borrowings under this facility during the remainder of
1996.
To cover the various obligations of lessees on the Outer Continental Shelf
(the "OCS"), the United States Department of the Interior Minerals Management
Service (the "MMS") generally requires that lessees post substantial bonds or
other acceptable assurances that such obligations will be met. The cost of
such bonds or other surety can be substantial and there is no assurance that
bonds or other surety can be obtained in all cases. Additionally, the MMS may
require operators in the OCS to post supplemental bonds in excess of lease and
area wide bonds to assure that abandonment obligations on specific properties
will be met. The Company is currently exempt from the supplemental bonding
requirements of the MMS. Under certain circumstances, the MMS may require any
Company operations on federal leases to be suspended or terminated. Any such
suspension or termination could materially and adversely affect the
-13-
<PAGE> 16
Company's financial condition and operations.
The Company's operations are subject to various federal, state and local
laws and regulations relating to the protection of the environment. The
Company believes its current operations are in material compliance with current
environmental laws and regulations. There can be no assurance, however, that
current regulatory requirements will not change, currently unforseen
environmental incidents will not occur or past non- compliance with environment
laws will not be discovered.
The Company has been named as a defendant in certain lawsuits arising in
the ordinary course of business. While the outcome of these lawsuits cannot be
predicted with certainty, management does not expect these matters to have a
material adverse effect on the financial position, liquidity or results of
operations of the Company.
-14-
<PAGE> 17
Part II
Item 4. Submission of Matters to a Vote of Security Holders
At the May 2, 1996 Annual Meeting of Stockholders, the Company's
stockholders voted on two matters; 17,339,422 shares of common stock were
outstanding and entitled to vote as of the March 15, 1996 record date.
(1) Election of Eight Directors:
The stockholders elected the eight nominees as directors for a
one-year term by the following vote:
<TABLE>
<CAPTION>
Nominee Elected For Withheld
----------------------- ----------- -----------
<S> <C> <C>
Joe B. Foster 15,955,325 13,123
Robert W. Waldrup 15,955,325 13,123
Charles W. Duncan, Jr. 15,955,125 13,323
Jeffrey A. Harris 15,840,125 128,323
Howard H. Newman 15,840,325 128,123
Thomas G. Ricks 15,955,125 13,323
C.E. (Chuck) Shultz 15,955,325 13,123
Dale E. Zand 15,955,125 13,323
</TABLE>
(2) Appointment of Independent Public Accountants:
The stockholders ratified the appointment of Coopers & Lybrand
L.L.P. as the Company's independent public accountants for the
year 1996 by the following vote:
<TABLE>
<CAPTION>
For Against Abstentions
------------- -------------- -------------
<S> <C> <C>
15,963,336 742 690
</TABLE>
-15-
<PAGE> 18
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 Credit Agreement dated as of May 20, 1996 among the Company and
the Chase Manhattan Bank, N.A., as Agent, and the Banks
signatory thereto (without Exhibits)
11.1 Computation of Earnings per Share
27 Financial Data Schedule (included only in the electronic filing
of this document)
(b) Reports on Form 8-K:
None
-16-
<PAGE> 19
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 thereunto duly authorized.
NEWFIELD EXPLORATION COMPANY
Date: July 24, 1996 By: /s/ Terry W. Rathert
Terry W. Rathert
Vice President and
Chief Financial Officer
(Authorized Officer and Principal
Financial Officer)
-17-
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
--------- ------------------------
<S> <C>
10.1 Credit Agreement dated as of May 20, 1996
among the Company and the Chase Manhattan
Bank, N.A., as Agent, and the Banks signatory
thereto (without Exhibits)
11.1 Computation of Earnings per Share
27 Financial Data Schedule (included only in
the electronic filing of this document)
</TABLE>
-18-
<PAGE> 1
CREDIT AGREEMENT
DATED AS OF MAY 20, 1996
AMONG
NEWFIELD EXPLORATION COMPANY
AS THE COMPANY,
AND
THE CHASE MANHATTAN BANK, N.A.
AS AGENT
AND
THE BANKS SIGNATORY HERETO
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Definitions and Accounting Matters
1.01 Terms Defined Above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03 Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2. Commitments
2.01 Loans and Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.02 Borrowings, Continuations and Conversions; Letters of Credit . . . . . . . . . . . . . . . . . . . . . 16
2.03 Changes of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.04 Commitment Fee and Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.05 Several Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.06 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.07 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.08 Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.09 Assumption of Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.10 Obligation to Reimburse and to Prepay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.11 Lending Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3. Payments of Principal and Interest
3.01 Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.02 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4. Payments; Pro Rata Treatment; Computations; Etc.
4.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.02 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.03 Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.04 Non-receipt of Funds by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.05 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.06 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5. Capital Adequacy
5.01 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.02 Limitation on Eurodollar Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.03 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03 . . . . . . . . . . . . . . . . . . . . . . . 35
5.05 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 6. Conditions Precedent
6.01 Initial Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
6.02 Initial and Subsequent Loans and Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.03 Conditions Relating to Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7. Representations and Warranties
7.01 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.02 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.03 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.04 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.05 Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.06 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.07 Use of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.10 Titles, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.11 No Material Misstatements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.12 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.13 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.14 Subsidiaries and Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.15 Location of Business and Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.16 Rate Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.18 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.19 Compliance with the Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 8. Affirmative Covenants
8.01 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.02 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.03 Maintenance, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.04 Engineering Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.05 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.06 Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.07 ERISA Information and Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.08 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 9. Negative Covenants
9.01 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.02 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.03 Investments, Loans and Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.04 Dividends, Distributions and Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.05 Sales and Leasebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.06 Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.07 Limitation on Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
9.08 Mergers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.09 Proceeds of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.10 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.11 Sale or Discount of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.12 Working Capital Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.13 Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.14 Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.15 Sale of Oil and Gas Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.17 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.18 Subsidiaries and Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.19 Hydrocarbon Sales Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.20 Negative Pledge Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 10. Events of Default; Remedies
10.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.02 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 11. The Agent
11.01 Appointment, Powers and Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.02 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.03 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.04 Rights as a Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.05 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.06 Non-Reliance on Agent and other Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.07 Action by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.08 Resignation or Removal of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 12. Miscellaneous
12.01 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.03 Payment of Expenses, Indemnities, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.04 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
12.05 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
12.06 Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
12.07 Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
12.08 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
12.09 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
12.10 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
12.11 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
12.12 NO ORAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
12.13 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
12.14 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
12.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
12.16 Copies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
</TABLE>
Annex I - Maximum Credit Amounts
Exhibit A - Form of Note
Exhibit B - Form of Borrowing, Continuation or Conversion Request
Exhibit C - Form of Compliance Certificate
Exhibit D - Form of Opinion of Agent's Counsel
Exhibit E - Form of Assignment Agreement
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.09 - Taxes
Schedule 7.10 - Titles, etc.
Schedule 7.14 - Subsidiaries and Partnerships
Schedule 7.17 - Environmental Matters
Schedule 7.20 - Insurance
Schedule 9.01 - Debt
Schedule 9.03 - Investments, Loans and Advances
-iv-
<PAGE> 6
CREDIT AGREEMENT dated as of May 20, 1996 among: NEWFIELD
EXPLORATION COMPANY, a corporation duly organized and validly existing under
the laws of the State of Delaware (the "Company"); each of the banks that is or
becomes a party hereto as provided in Section 12.06 and their successors and
assigns (individually, a "Bank" and, collectively, the "Banks"); and THE CHASE
MANHATTAN BANK, N.A., as agent for the Banks (in such capacity, together with
its successors in such capacity, the "Agent").
RECITALS
A. The Company has requested that the Banks provide certain loans
to and extensions of credit on behalf of the Company; and
B. The Banks have agreed to make such loans and extensions of
credit subject to the terms and conditions of this Agreement.
C. In consideration of the mutual covenants and agreements herein
contained and of the loans, extensions of credit and commitments hereinafter
referred to, the parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
1.01 Terms Defined Above. As used in this Agreement, the
terms "Agent", "Bank", "Banks", "Company" and "Prior Credit Agreement" shall
have the meanings indicated above.
1.02 Certain Defined Terms. As used herein, the following
terms shall have the following meanings (all terms defined in this Section 1 or
in other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
"Additional Costs" shall have the meaning assigned to that
term in Section 5.01(a).
"Affected Loans" shall have the meaning assigned to that term
in Section 5.04.
"Affiliate" of any Person shall mean (i) any Person directly
or indirectly controlled by, controlling or under common control with
such first Person, (ii) any director or officer of such first Person
or of any Person referred to in clause (i) above and (iii) if any
Person in clause (i) above is an individual, any member of the
immediate family (including parents, spouse and children) of such
individual and any trust whose principal beneficiary is such
individual or one or more members of such immediate family and any
Person who is controlled by any such member or trust. For purposes of
this definition, any
<PAGE> 7
Person which owns directly or indirectly 10% or more of the securities
having ordinary voting power for the election of directors or other
governing body of a corporation or 10% or more of the partnership or
other ownership interests of any other Person (other than as a limited
partner of such other Person) will be deemed to "control" (including,
with its correlative meanings, "controlled by" and "under common
control with") such corporation or other Person.
"Agreement" shall mean this Credit Agreement, as the same may
from time to time be amended, modified or supplemented.
"Aggregate Commitments" at any time shall equal the amount
calculated in accordance with Section 2.03 hereof.
"Aggregate Maximum Credit Amounts" at any time shall equal
$125,000,000 as the same may be reduced pursuant to Section 2.03(b).
"Applicable Lending Office" shall mean, for each Bank and for
each type of Loan, the lending office of such Bank (or an Affiliate of
such Bank) designated for such type of Loan on the signature pages
hereof or such other offices of such Bank (or of an Affiliate of such
Bank) as such Bank may from time to time specify to the Agent and the
Company as the office by which its Loans of such Type are to be made
and maintained.
"Applicable Margin" shall mean for Base Rate Loans or
Eurodollar Loans the following rate per annum as applicable based on
the Borrowing Base Utilization Percentage in effect from time to time:
<TABLE>
<CAPTION>
Borrowing Base Less than 30% Equal to or greater than Greater than 60%
Utilization Percentage 30% but less than or
equal to 60%
<S> <C> <C> <C>
Eurodollar 0.75% 1.00% 1.25%
Base Rate 0.00% 0.00% 0.25%
</TABLE>
"Assignment" shall have the meaning assigned such term in
Section 12.06(b).
"Base Rate" shall mean, with respect to any Base Rate Loan,
for any day, the higher of (a) the highest Federal Funds Rate for any
such day plus 1/2 of 1% or (b) the Prime Rate for such day. Each
change in any interest rate
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<PAGE> 8
provided for herein based upon the Base Rate resulting from a change
in the Base Rate shall take effect at the time of such change in the
Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates
based upon the Base Rate.
"Borrowing Base" shall mean at any time an amount equal to the
amount determined in accordance with Section 2.08.
"Borrowing Base Notice" shall mean a written notice sent to
the Company by the Agent notifying the Company of the Borrowing Base
determined by the Banks for the upcoming Borrowing Base Period.
"Borrowing Base Period" shall mean (a) initially, the period
from the Closing Date through October 31, 1996; and (b) thereafter,
each six month period beginning on May 1 or November 1 of each year.
"Borrowing Base Quarter " shall mean the period from the
Closing Date through July 31, 1996 and each subsequent three-month
period beginning with the first day of August, November, February or
May during the term of this Agreement.
"Borrowing Base Utilization Percentage" shall mean, as of any
day, the fraction expressed as a percentage, the numerator of which is
the balance of all Loans and the LC Exposure outstanding on such day,
and the denominator of which is the Borrowing Base in effect on such
day.
"Business Day" shall mean any day other than a day on which
commercial banks are authorized or required to close in New York, New
York and, where such term is used in the definition of "Quarterly
Date" in this Section 1.02 or if such day relates to a borrowing or
continuation of, a payment or prepayment of principal of or interest
on, or a conversion of or into, or the Interest Period for, a
Eurodollar Loan or a notice by the Company with respect to any such
borrowing or continuation, payment, prepayment, conversion or Interest
Period, any day which is also a day on which dealings in Dollar
deposits are carried out in the London interbank market.
"Chase" shall mean The Chase Manhattan Bank, N.A.
"Closing Date" shall mean May 20, 1996.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
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<PAGE> 9
"Commitment" shall mean for any Bank its obligation to make
Loans up to the lesser of the Bank's Maximum Credit Amount or the
Bank's Percentage Share of the then effective Aggregate Commitments
and to participate in the Letters of Credit as provided in Section
2.01(b).
"Consolidated Subsidiaries" shall mean each Subsidiary of the
Company (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been)
consolidated with the financial statements of the Company in
accordance with GAAP.
"Debt" shall mean, for any Person the sum of the following
(without duplication): (a) all obligations of such Person for borrowed
money or evidenced by bonds, debentures, notes or other similar
instruments; (b) all obligations of such Person (whether contingent or
otherwise) with respect to bankers' acceptances, letters of credit,
surety or other bonds and similar instruments; (c) all obligations of
such Person to pay the deferred purchase price of Property or
services, (other than for borrowed money) arising in the ordinary
course of business of such Person; (d) all obligations under leases
which shall have been, or should have been, in accordance with GAAP,
recorded as capital leases in respect of which such Person is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which obligations such Person otherwise assures a creditor
against loss; (e) all Debt and other obligations of others secured by
a Lien on any asset of such Person, whether or not such Debt is
assumed by such Person; (f) all Debt and other obligations of others
guaranteed by such Person; (g) all obligations or undertakings of such
Person to maintain or cause to be maintained the financial position or
covenants of other Persons; (h) all obligations or undertakings of
such Person with respect to payments received in consideration of oil,
gas, or other minerals yet to be acquired or produced at the time of
payment (including without limitation obligations under "take-or- pay"
contracts to deliver gas in return for payments already received and
the undischarged balance of any production payment created by such
Person or for the creation of which such Person directly or indirectly
received payment) or with respect to other obligations to deliver
goods or services in consideration of advance payments therefor but
excluding gas imbalances arising in the ordinary course of business
between joint working interest owners of production; and (i)
obligations arising under future contracts, swap contracts, or similar
hedging agreements.
"Default" shall mean an Event of Default or an event which
with notice or lapse of time or both would become an Event of Default.
"Designated Borrowing Base" shall mean an amount determined by
the Company for each Borrowing Base Quarter, of which the Company
gives
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<PAGE> 10
notice to the Agent within three (3) days (i) after the Company's
receipt of a Borrowing Base Notice or (ii) prior to the beginning of
the second Borrowing Base Quarter during a Borrowing Base Period;
which amount shall be equal to or greater than the Designated
Borrowing Base Floor Amount, but less than or equal to 100 percent
(100%) of the Borrowing Base for the then current Borrowing Base
Period; provided, that the Designated Borrowing Base may be adjusted
from time to time pursuant to the terms and provisions of Sections
2.03(c) and 2.08(e) of this Agreement, and provided, further that the
Company may decrease the Designated Borrowing Base only (i) at the
beginning of each Borrowing Base Quarter to an amount equal to or
greater than the Designated Borrowing Base Floor Amount or (ii) in
accordance with the provisions of Section 2.03(c) hereof. The initial
Designated Borrowing Base for the first Borrowing Base Quarter is
$50,000,000.
"Designated Borrowing Base Floor Amount" shall mean (i) from
Closing Date until January 31, 1997, $50,000,000 and (ii) thereafter,
$75,000,000 or such other amount as is determined pursuant to Section
2.03(c) hereof.
"Dollars" and "$" shall mean lawful money of the United
States of America.
"Engineering Reports" shall have the meaning assigned to that
term in Section 2.08.
"Environmental Laws" shall mean any and all Governmental
Requirements pertaining to health or the environment in effect in any
and all jurisdictions in which the Borrower or any Subsidiary is
conducting or at any time has conducted business, or where any
Property of the Borrower or any Subsidiary is located, including
without limitation, the Oil Pollution Act of 1990 ("OPA"), the Clean
Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the
Federal Water Pollution Control Act, as amended, the Occupational
Safety and Health Act of 1970, as amended, the Resource Conservation
and Recovery Act of 1976 ("RCRA"), as amended, the Safe Drinking Water
Act, as amended, the Toxic Substances Control Act, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, the
Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection laws. The term "oil" shall
have the meaning specified in OPA, the terms "hazardous substance"
and "release" (or "threatened release") have the meanings specified in
CERCLA, and the terms "solid waste" and "disposal" (or "disposed")
have the meanings specified in RCRA; provided, however, that (i) in
the event either OPA, CERCLA or RCRA is amended so as to broaden the
meaning of any
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<PAGE> 11
term defined thereby, such broader meaning shall apply subsequent to
the effective date of such amendment, and (ii) to the extent the laws
of the state in which any Property of the Borrower or any Subsidiary
is located establish a meaning for "oil," "hazardous substance,"
"release," "solid waste" or "disposal" which is broader than that
specified in either OPA, CERCLA or RCRA, such broader meaning shall
apply.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and any successor statute.
"ERISA Affiliate" shall mean each trade or business (whether
or not incorporated) which together with the Company would be deemed
to be a "single employer" within the meaning of section 4001(b)(1) of
ERISA or subsections (b), (c), (m) or (o) of section 414 of the Code.
"ERISA Event" shall mean (i) a "Reportable Event" described in
Section 4043 of ERISA and the regulations issued thereunder, (ii) the
withdrawal of the Company, any Subsidiary or any ERISA Affiliate from
a Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA, (iii) the filing of a notice
of intent to terminate a Plan or the treatment of a Plan amendment as
a termination under Section 4041 of ERISA, (iv) the institution of
proceedings to terminate a Plan by the PBGC or (v) any other event or
condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer,
any Plan.
"Eurodollar Loans" shall mean Loans the interest rates on
which are determined on the basis of rates referred to in the
definition of "Fixed Eurodollar Rate" in this Section 1.02.
"Event of Default" shall have the meaning assigned to that
term in Section 10.01(a).
"Excepted Liens" shall mean: (i) Liens for taxes, assessments
or other governmental charges or levies not yet due or which are being
contested in good faith by appropriate action and for which adequate
reserves have been maintained; (ii) Liens in connection with workmen's
compensation, unemployment insurance or other social security, old age
pension or public liability obligations not yet due or which are being
contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP; (iii)
operator's, vendors', carriers', warehousemen's, repairmen's,
mechanics', workmen's, materialmen's, construction or other like Liens
arising by operation of law in the ordinary course of business or
incident
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<PAGE> 12
to the exploration, development, operation and maintenance of Oil and
Gas Properties or statutory landlord's liens, each of which is in
respect of obligations that have not been outstanding more than 90
days or which are being contested in good faith by appropriate
proceedings and for which adequate reserves have been maintained in
accordance with GAAP; (iv) any Liens reserved in leases or farmout
agreements for rent or royalties and for compliance with the terms of
the farmout agreements or leases in the case of leasehold estates, to
the extent that any such Lien referred to in this clause does not
materially impair the use of the Property covered by such Lien for the
purposes for which such Property is held by the Company or materially
impair the value of such Property subject thereto; (v) encumbrances
(other than to secure the payment of borrowed money or the deferred
purchase price of Property or services), easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations
in any rights of way or other Property of the Company for the purpose
of roads, pipelines, transmission lines, transportation lines,
distribution lines for the removal of gas, oil, coal or other minerals
or timber, and other like purposes, or for the joint or common use of
real estate, rights of way, facilities and equipment, and defects,
irregularities, zoning restrictions and deficiencies in title of any
rights of way or other Property which in the aggregate do not
materially impair the use of such rights of way or other Property for
the purposes of which such rights of way and other Property are held
by the Company or materially impair the value of such Property subject
thereto; and (vi) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations and other obligations of a
like nature incurred in the ordinary course of business.
"Federal Funds Rate" shall mean, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
equal to the weighted average of the rates on overnight Federal funds
transactions with a member of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day,
provided that (i) if the date for which such rate is to be determined
is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day, and (ii) if such
rate is not so published for any day, the Federal Funds Rate for such
day shall be the average rate charged to Chase on such day on such
transactions as determined by the Agent.
"Fee Letter" shall mean the letter agreement between Chase to
the Company dated April 23, 1996 concerning certain fees in connection
with this Agreement and any agreements or instruments executed in
connection therewith, as the same may be amended or replaced from time
to time.
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<PAGE> 13
"Financial Statements" shall mean the financial statement or
statements of the Company described or referred to in Section 7.02.
"Fixed Eurodollar Rate" shall mean, with respect to any
Eurodollar Loan, the rate per annum (rounded upwards, if necessary, to
the nearest 1/16 of 1%) quoted by Chase at approximately 11:00 a.m.
London time (or as soon thereafter as practicable) two Business Days
prior to the first day of the Interest Period for such Loan for the
offering by Chase to leading banks in the London interbank market of
Dollar deposits having a term comparable to such Interest Period and
in an amount comparable to the principal amount of the Eurodollar Loan
to be made by the Banks for such Interest Period.
"Fixed Rate" shall mean, with respect to any Eurodollar Loan,
a rate per annum (rounded upwards, if necessary, to the nearest 1/100
of 1%) determined by the Agent to be equal to the Fixed Eurodollar
Rate for such Loan for the Interest Period for such Loan.
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time.
"Governmental Authority" shall include the country, the state,
county, city and political subdivisions in which any Person or such
Person's Property is located or which exercises valid jurisdiction
over any such Person or such Person's Property, and any court, agency,
department, commission, board, bureau or instrumentality of any of
them including monetary authorities which exercises valid jurisdiction
over any such Person or such Person's Property. Unless otherwise
specified, all references to Governmental Authority herein shall mean
a Governmental Authority having jurisdiction over, where applicable,
the Company or any of its Properties or the Agent, any Bank or any
Applicable Lending Office.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization or
other directive or requirement (whether or not having the force of
law), including, without limitation, Environmental Laws, energy
regulations and occupational, safety and health standards or controls,
of any Governmental Authority.
"Highest Lawful Rate" shall mean, with respect to each Bank,
the maximum nonusurious interest rate, if any, that at any time or
from time to time may be contracted for, taken, reserved, charged or
received on the Notes or on other Indebtedness under laws applicable
to such Bank which are presently in effect or, to the extent allowed
by law, under such applicable laws
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<PAGE> 14
which may hereafter be in effect and which allow a higher maximum
nonusurious interest rate than applicable laws now allow.
"Hydrocarbon Interests" shall mean all rights, titles,
interests and estates now or hereafter acquired in and to oil and gas
leases, oil, gas and mineral leases, or other liquid or gaseous
hydrocarbon leases, mineral fee interests, overriding royalty and
royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever
nature.
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip
gasoline, natural gasoline, condensate, distillate, liquid
hydrocarbons, gaseous hydrocarbons and all products refined or
separated therefrom.
"Indebtedness" shall mean any and all amounts owing or to be
owing by the Company to the Banks including the Loans and the LC
Exposure in connection with the Notes or any Loan Document and all
renewals, extensions and/or rearrangements of any of the above.
"Indemnified Parties" shall have the meaning assigned to that
term in Section 12.03(b).
"Indemnity Matters" shall mean any and all actions, suits,
proceedings (including any investigations, litigation or inquiries),
claims, demands and causes of action made or threatened against a
Person and, in connection therewith, all losses, liabilities, damages
(including, without limitation, consequential damages) or reasonable
costs and expenses of any kind or nature whatsoever incurred by such
Person whether caused by the sole or concurrent negligence of such
Person seeking indemnification.
"Initial Funding" shall mean the funding of the initial Loans
or issuance of the initial Letters of Credit pursuant to Section 6.01
hereof.
"Interest Period" shall mean with respect to any Eurodollar
Loan, the period commencing on the date such Eurodollar Loan is made
and ending on the fourteenth day thereafter (subject to availability)
("Irregular Interest Period") or on the numerically corresponding day
in the first, second, third or sixth calendar month thereafter, as the
Company may select as provided in Section 2.02 (or such longer period
as may be requested by the Company and agreed to by the Majority
Banks), except that each Interest Period (other than an Irregular
Interest Period) which commences on the last Business Day of a
calendar month (or on any day for which there is no numerically
corresponding
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<PAGE> 15
day in the appropriate subsequent calendar month) shall end on the
last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) no Interest Period may
commence before and end after the scheduled maturity of the Notes;
(ii) no Interest Period for any Eurodollar Loan may end after the due
date of any installment, if any, provided for in Section 3.01 hereof
to the extent that such Eurodollar Loan would need to be prepaid prior
to the end of such Interest Period in order for such installment to be
paid when due; (iii) each Interest Period 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
(other than an Irregular Interest Period)); and (iv) no Interest
Period (other than an Irregular Interest Period) shall have a duration
of less than one month and, if the Interest Period for any Eurodollar
Loans would otherwise be for a shorter period (other than an Irregular
Interest Period), such Loans shall not be available hereunder.
"LC Exposure" at any time shall mean the difference between
(i) the aggregate face amount of all undrawn and uncancelled Letters
of Credit and the aggregate of all amounts drawn under all Letters of
Credit and not yet reimbursed and (ii) the aggregate amount of all
cash securing outstanding Letters of Credit pursuant to Section
2.10(b).
"Letters of Credit" shall mean the letters of credit issued
pursuant to Section 2.01(b) and all reimbursement obligations
pertaining to any such letter of credit, and "Letter of Credit" shall
mean any one of the Letters of Credit and the reimbursement
obligations pertaining thereto.
"Letter of Credit Agreements" shall mean the written
agreements with the Agent, as issuing bank for any Letter of Credit,
executed or hereafter executed in connection with the issuance by the
Agent of the Letters of Credit, such agreements to be on the Agent's
customary form for letters of credit of comparable amount and
purpose, as from time to time in effect or otherwise agreed to by the
Company and the Agent.
"Lien" shall mean any interest in Property securing an
obligation owed to, or a claim by, a Person other than the owner of
the Property, whether such interest is based on the common law,
statute or contract, and whether such obligation or claim is fixed or
contingent, and including but not limited to (i) the lien or security
interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes or (ii) production payments and the
like payable
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<PAGE> 16
out of Oil and Gas Properties. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases and other title exceptions
and encumbrances affecting Property. For the purposes of this
Agreement, the Company shall be deemed to be the owner of any Property
which it has acquired or holds subject to a conditional sale
agreement, or leases under a financing lease or other arrangement
pursuant to which title to the Property has been retained by or vested
in some other Person in a transaction intended to create a financing.
"Loan Documents" shall mean the Notes, this Agreement, the
Letters of Credit, the Letter of Credit Agreements, the Fee Letter and
any and all other agreements or instruments now or hereafter executed
and delivered by the Company or any other Person (other than
participation or similar agreements between any Bank and any other
bank or creditor with respect to any Indebtedness pursuant to this
Agreement) in connection with, or as security for the payment or
performance of, the Notes, this Agreement or reimbursement obligations
under the Letters of Credit, as such agreements may be amended,
supplemented or restated from time to time.
"Loans" shall mean the loans as provided for by Section
2.01(a).
"Majority Banks" shall mean, at any time while no Loans are
outstanding, Banks having at least sixty-six and two-thirds percent
(66-2/3%) of the Aggregate Commitments and, at any time while Loans
are outstanding, Banks holding at least sixty-six and two-thirds
percent (66-2/3%) of the outstanding aggregate principal amount of the
Loans (without regard to any sale by a Bank of a participation in any
Loan under Section 12.06(c)).
"Material Adverse Effect" shall mean the occurrence or
non-occurrence of any condition, event, or state of affairs (a) which
has a present (as of the time in question) material and adverse effect
on the financial condition or affairs of the Company and its
Subsidiaries or (b) which has a reasonable probability of having a
material and adverse effect, after the time in question, on the
financial or affairs of the Company and its Subsidiaries. Periodic
and/or seasonal declines in energy prices shall not constitute a
Material Adverse Effect.
"Maturity Date" shall mean June 30, 2001.
"Maximum Credit Amount" shall mean, as to each Bank, the
amount set forth opposite such Bank's name on Annex I under the
caption "Maximum Credit Amount" (as the same may be reduced pursuant
to Section 2.03(b)
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<PAGE> 17
hereof pro rata to each Bank based on its Percentage Share) as
modified from time to time to reflect any assignments permitted by
Section 12.06(b).
"Multiemployer Plan" shall mean a Plan defined as such in
Section 3(37) or 4001(a)(3) of ERISA.
"Notes" shall mean the Notes provided for in Section 2.06,
together with any and all renewals, extensions for any period,
increases, rearrangements, substitutions or modifications thereof.
"Oil and Gas Properties" shall mean Hydrocarbon Interests; the
Properties now or hereafter pooled or unitized with Hydrocarbon
Interests; all presently existing or future unitization, pooling
agreements and declarations of pooled units and the units created
thereby (including without limitation all units created under orders,
regulations and rules of any Governmental Authority) which may affect
all or any portion of the Hydrocarbon Interests; all operating
agreements, contracts and other agreements which relate to any of the
Hydrocarbon Interests or the production, sale, purchase, exchange or
processing of Hydrocarbons from or attributable to such Hydrocarbon
Interests; all Hydrocarbons in and under and which may be produced and
saved or attributable to the Hydrocarbon Interests, including all oil
in tanks, the lands covered thereby and all rents, issues, profits,
proceeds, products, revenues and other incomes from or attributable to
the Hydrocarbon Interests; all tenements, hereditaments, appurtenances
and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests and all Properties, rights,
titles, interests and estates described or referred to above,
including any and all Property, real or personal, now owned or
hereafter acquired and situated upon, used, held for use or useful in
connection with the operating, working or development of any of such
Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment or other personal property which may be on such premises for
the purpose of drilling a well or for other similar temporary uses)
and including any and all oil wells, gas wells, injection wells or
other wells, buildings, structures, fuel separators, liquid
extraction plants, plant compressors, pumps, pumping units, field
gathering systems, tanks and tank batteries, fixtures, valves,
fittings, machinery and parts, engines, boilers, meters, apparatus,
equipment, appliances, tools, implements, cables, wires, towers,
casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements,
accessions and attachments to any and all of the foregoing.
"Other Taxes" shall have the meaning assigned to such term in
Section 4.06(b).
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<PAGE> 18
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions.
"Percentage Share" shall mean the percentage of the Loans and
Commitments to be provided by a Bank under this Agreement as indicated
on Annex I hereto, as modified from time to time to reflect any
assignments permitted by Section 12.06(b).
"Person" shall mean any individual, corporation, company,
voluntary association, partnership, joint venture, trust,
unincorporated organization or government or any agency,
instrumentality or political subdivision thereof, or any other form of
entity.
"Plan" shall mean any employee pension benefit plan, as
defined in Section 3(2) of ERISA, which (a) is currently or hereafter
sponsored, maintained or contributed to by the Company, any Subsidiary
or an ERISA Affiliate or (b) was at any time during the preceding six
calendar years sponsored, maintained or contributed to, by the
Company, any Subsidiary or an ERISA Affiliate.
"Post-Default Rate" shall mean, in respect of any principal of
any Loan or any other amount payable by the Company under this
Agreement or any Note which is not paid when due (whether at stated
maturity, by acceleration or otherwise), a rate per annum during the
period commencing on the due date until such amount is paid in full or
the default is cured or waived equal to 2% per annum above the Base
Rate as in effect from time to time plus the Applicable Margin (if
any), but in no event to exceed the Highest Lawful Rate provided that,
if such amount in default is principal of a Eurodollar Loan, the
"Post-Default Rate" for such principal shall be, for the period
commencing on the due date and ending on the last day of the Interest
Period therefor, 2% per annum above the interest rate for such Loan
as provided in Section 3.02(b), but in no event to exceed the Highest
Lawful Rate.
"Prime Rate" shall mean the rate of interest from time to time
announced publicly by Chase at the Principal Office as its prime
commercial lending rate. Such rate is set by Chase as a general
reference rate of interest, taking into account such factors as Chase
may deem appropriate, it being understood that many of Chase's
commercial or other loans are priced in relation to such rate, that it
is not necessarily the lowest or best rate actually charged to any
customer and that Chase may make various commercial or other loans at
rates of interest having no relationship to such rate.
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<PAGE> 19
"Principal Office" shall mean the principal office of the
Agent, presently located at 270 Park Avenue, New York, New York 10017.
"Prior Credit Agreement" shall mean that certain Credit
Agreement dated as of June 30, 1994 among the Company, the Agent and
the banks parties thereto.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Quarterly Dates" shall mean the last Business Day of each
June, September, December, and March in each year, the first of which
shall be September 30, provided, however, that if such day is not a
Business Day, such Quarterly Date shall be the next succeeding
Business Day.
"Redetermination Date" shall have the meaning assigned to that
term in Section 2.08(a).
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System (or any successor), as the
same may be amended or supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Bank, any
change after the Closing Date in any Governmental Requirement
(including Regulation D) or the adoption or making after such date of
any interpretations, directives or requests applying to a class of
banks (including such Bank or its Applicable Lending Office) of or
under any Governmental Requirement (whether or not having the force of
law) by any court or Governmental Authority charged with the
interpretation or administration thereof.
"Required Payment" shall have the meaning assigned to that
term in Section 4.04.
"Reserve Report" shall mean a report, in form and substance
satisfactory to the Agent, setting forth, as of the last day of each
December (the "December 31 Reserve Report") (or such other date in the
event of an unscheduled redetermination) the proved oil and gas
reserves attributable to the Company's Oil and Gas Properties,
together with a projection of the rate of production and future net
income, production, severance or similar taxes, operating expenses and
capital expenditures with respect thereto as of such date, based upon
the pricing assumptions consistent with SEC reporting requirements at
the time. Furthermore, such information shall be provided for each
individual well, unit or lease comprising the Company's Oil and Gas
Properties and by category of
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<PAGE> 20
the reserves contained in each well, unit or lease including proved
producing, proved non-producing and proved undeveloped. The term
"Reserve Report" shall also include the information to be provided by
the Company by June 30 of each year pursuant to Section 8.04(a) (the
"June 30 Reserve Report").
"Responsible Officer" shall mean as to any Person, the Chief
Executive Officer, the President or any Vice President of such Person
and, with respect to financial matters, the term "Responsible Officer"
shall include the Chief Financial Officer of such Person. Unless
otherwise specified, all references to a Responsible Officer herein
shall mean a Responsible Officer of the Company.
"Revolving Credit Period" shall mean the period from the date
hereof to and ending on the Revolving Credit Termination Date.
"Revolving Credit Termination Date" shall mean June 30, 1998.
"Scheduled Redetermination Date" shall have the meaning
assigned to that term in Section 2.08(d).
"SEC" shall mean the Securities and Exchange Commission or any
successor Governmental Authority.
"Subsidiary" shall mean any corporation of which a majority of
the outstanding shares of stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such
corporation (irrespective of whether or not at the time stock of any
other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by the Company or one
or more of the Subsidiaries or by the Company and one or more of the
Subsidiaries. For the purposes of Section 9.12 and Section 9.13 of
the Credit Agreement, the definition of Subsidiary shall not include
any Special Purpose Subsidiaries.
"Special Purpose Subsidiary" shall mean any Subsidiary
incurring Debt for the purpose of acquisition and/or exploration and
development of Oil & Gas Properties if and only if the Company and all
other Subsidiaries are not liable, whether directly or indirectly,
contingently or otherwise, for such Debt.
"Swap Contract" shall mean any crude oil or natural gas price
swap, price cap, price floor, price collar, forward agreement, or
other exchange or price protection transaction or any combination of
such transactions or agreements or options with respect to any such
transaction or agreement.
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"Taxes" shall have the meaning assigned such term in Section
4.06(a).
"Term Loan Period" shall mean the period commencing
immediately after the Revolving Credit Termination Date and ending on
the Maturity Date.
"Type" shall mean, with respect to any Loan, a Base Rate Loan
or a Eurodollar Loan.
"Unavailable Amount" shall mean, at any time, the difference
between the Aggregate Maximum Credit Amounts and the Aggregate
Commitments.
1.03 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Agent or the Banks hereunder shall be prepared,
in accordance with GAAP as in effect, applied on a basis consistent with the
audited financial statements of the Company referred to in Section 7.02 (except
for changes concurred with by the Company's independent public accountants).
Section 2. Commitments.
2.01 Loans and Letters of Credit.
(a) Each Bank severally agrees, on the terms of this
Agreement, to make Loans to the Company during the period from and
including (i) the Closing Date or (ii) such later date that such Bank
becomes a party to this Agreement as provided in Section 12.06(b), to
and up to, but excluding the Revolving Credit Termination Date in an
aggregate principal amount at any one time outstanding up to but not
exceeding the amount of such Bank's Commitment as then in effect;
provided, however, that the aggregate principal amount of all such
Loans by all Banks hereunder at any one time outstanding together with
the LC Exposure shall not exceed the Aggregate Commitments. Subject
to the terms of this Agreement, during the period from the Closing
Date to and up to, but excluding the Revolving Credit Termination
Date, the Company may borrow, repay and reborrow the amount described
in this Section 2.01(a).
(b) During the period from and including the Closing Date
to but excluding the Revolving Credit Termination Date, the Agent, as
issuing bank for the Banks, agrees to extend credit for the account of
the Company at any time and from time to time by issuing, renewing,
extending or reissuing Letters of Credit; provided however, the LC
Exposure at any one time outstanding shall not exceed the lesser of
(A) $25,000,000 or (B) the Aggregate Commitments, as then in effect,
minus the aggregate
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principal amount of all Loans then outstanding. The Banks shall
automatically participate in such Letters of Credit according to their
respective Percentage Shares.
(c) Subject to the other terms and provisions of this
Agreement, at the option of the Company, the Loans may be Base Rate
Loans or Eurodollar Loans; provided that, without the prior written
consent of the Majority Banks, no more than six (6) Eurodollar Loans
may be outstanding at any time.
2.02 Borrowings, Continuations and Conversions; Letters of
Credit.
(a) The Company shall give the Agent (which shall
promptly notify the Banks) advance notice as hereinafter provided of
each borrowing hereunder, which shall specify the aggregate amount of
such borrowing and the date (which shall be a Business Day) of the
Loans to be borrowed and, in the case of Eurodollar Loans, the
duration of the Interest Period therefor.
(b) All Base Rate Loan borrowings shall be in amounts of
at least $500,000, or the remaining balance of the Aggregate
Commitments, if less or any whole multiple of $500,000 in excess
thereof and all Eurodollar Loans shall be in amounts of at least
$1,000,000 or any whole multiple of $1,000,000 in excess thereof.
(c) All borrowings, continuations and conversions shall
require advance written notice to the Agent (which shall promptly
notify the Banks) in the form of Exhibit B hereto (or telephonic
notice promptly confirmed by such a written notice), which in each
case shall be irrevocable, from the Company to be received by the
Agent not later than 11:00 a.m. New York time at least one Business
Day prior to the date of such Base Rate borrowing and three Business
Days prior to the date of each Eurodollar Loan borrowing, continuation
or conversion. Without in any way limiting the Company's obligation to
confirm in writing any telephonic notice, the Agent may act without
liability upon the basis of telephonic notice believed by the Agent in
good faith to be from the Company prior to receipt of written
confirmation. In each such case, the Company hereby waives the right
to dispute the Agent's record of the terms of such telephonic notice
except in the case of gross negligence or wilful misconduct by the
Agent.
(d) Subject to the provisions made in this Section
2.02(d), the Company may elect to continue all or any part of any
Eurodollar Loan beyond the expiration of the then current Interest
Period relating thereto by giving advance notice as provided in
Section 2.02(c) to the Agent (which shall promptly notify the Banks)
of such election, specifying the amount of such Loan to be continued
and the Interest Period therefor. In the absence of such a timely and
proper election, the Company shall be deemed to have elected to
convert such Eurodollar Loan to a Base Rate Loan pursuant to Section
2.02(e). All or any part of any Eurodollar Loan may be continued as
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provided herein, provided that (i) any continuation of any such Loan
shall be (as to each Loan as continued for an applicable Interest
Period) in amounts of at least $1,000,000 or any whole multiple of
$1,000,000 in excess thereof and (ii) no Default shall have occurred
and be continuing. If a Default shall have occurred and be
continuing, each Eurodollar Loan shall be converted to a Base Rate
Loan on the last day of the Interest Period applicable thereto.
(e) The Company may elect to convert all or any part of
any Eurodollar Loan on the last day of the then current Interest
Period relating thereto to a Base Rate Loan by giving advance notice
to the Agent (which shall promptly notify the Banks) of such election.
Subject to the provisions made in this Section 2.02(e), the Company
may elect to convert all or any part of any Base Rate Loan at any time
and from time to time to a Eurodollar Loan by giving advance notice as
provided in Section 2.02(c) to the Agent (which shall promptly notify
the Banks) of such election. All or any part of any outstanding Loan
may be converted as provided herein, provided that (i) any conversion
of any Base Rate Loan into a Eurodollar Loan shall be (as to each such
Loan into which there is a conversion for an applicable Interest
Period) in amounts of at least $1,000,000 or any whole multiple of
$1,000,000 in excess thereof and (ii) no Default shall have occurred
and be continuing. If a Default shall have occurred and be
continuing, no Loan may be converted into a Eurodollar Loan.
(f) Not later than 11:00 a.m. New York time on the date
specified for each borrowing hereunder, each Bank shall make available
the amount of the Loan to be made by it on such date to the Agent, to
an account which the Agent shall specify, in immediately available
funds, for the account of the Company. The amounts so received by the
Agent shall, subject to the terms and conditions of this Agreement, be
made available to the Company by transferring the same, in immediately
available funds, to an account of the Company, designated by the
Company and maintained with Chase at the Principal Office.
(g) The Company shall give the Agent (which shall promptly
notify the Banks of such request and their Percentage Share of such
Letter of Credit) advance notice to be received by the Agent not later
than 11:00 a.m. New York time not less than three (3) Business Days
prior thereto of each request for the issuance and at least three (3)
Business Days (or such longer notice as may be required by the Agent
to allow the Agent to comply with the notice requirement for extension
embodied in the Letter of Credit) prior to the date of the renewal,
extension or reissuance of a Letter of Credit hereunder which request
shall specify the amount of such Letter of Credit, the date (which
shall be a Business Day) such Letter of Credit is to be issued,
renewed or extended, the duration thereof, the name and address of the
beneficiary thereof, the form of the Letter of Credit and such other
information as the Agent may reasonably request all of which shall be
reasonably satisfactory to the Agent. Subject to the terms and
conditions of this Agreement, on the date specified for the issuance,
renewal or
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<PAGE> 24
extension of a Letter of Credit, the Agent shall issue such Letter of
Credit to the beneficiary thereof.
In conjunction with the issuance of each Letter of Credit, the
Company shall execute a Letter of Credit Agreement. In the event of
any conflict between any provision of a Letter of Credit Agreement and
this Agreement, the Company, the Agent and the Banks hereby agree that
the provisions of this Agreement shall govern.
The Agent will send to the Company and each Bank, immediately
upon issuance of any Letter of Credit, or an amendment thereto, a true
and complete copy of such Letter of Credit, or such amendment thereto.
2.03 Changes of Commitments.
(a) The Aggregate Commitments shall at all times be equal
to the lesser of (i) the Aggregate Maximum Credit Amounts after
adjustments resulting from reductions pursuant to Section 2.03(b)
hereof, (ii) the Borrowing Base as determined from time to time and
(iii) the Designated Borrowing Base as determined from time to time.
(b) The Company shall have the right to terminate or to
reduce the amount of the Aggregate Maximum Credit Amounts at any time
or from time to time upon not less than three (3) Business Days' prior
notice to the Agent (which shall promptly notify the Banks) of each
such termination or reduction, which notice shall specify the
effective date thereof and the amount of any such reduction (which
shall not be less than $5,000,000, or any whole multiple of $1,000,000
in excess thereof) and shall be irrevocable and effective only upon
receipt by the Agent. The Aggregate Maximum Credit Amounts once
terminated or reduced may not be reinstated.
(c) At each such time as the Aggregate Maximum Credit
Amounts are reduced pursuant to Section 2.03(b), the Designated
Borrowing Base Floor Amount shall be redetermined by the Majority
Banks and the Company and shall be mutually agreeable to the Majority
Banks and the Company. If no mutually agreeable Designated Borrowing
Base Floor Amount can be determined, the Designated Borrowing Base
Floor Amount shall be reduced by a proportionate amount.
2.04 Commitment Fee and Other Fees.
(a) The Company shall pay to the Agent for the account of
each Bank a commitment fee on:
(i) the daily average unused amount of the
Aggregate Commitments for the period from and including the
Closing Date up to but excluding the
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<PAGE> 25
earlier of the date the Aggregate Commitments are terminated
or the Revolving Credit Termination Date, at a rate per annum
equal to .375%.
(ii) the Unavailable Amount from time to time in
effect for the period from and including the Closing Date up
to but excluding the earlier of the date the Aggregate
Commitments are terminated or the Revolving Credit Termination
Date, at a rate per annum equal to .125%.
Accrued commitment fees shall be payable on each Quarterly Date in
arrears and on the earlier of the date the Aggregate Commitments are
terminated or the Revolving Credit Termination Date.
(b) The Company agrees to pay the Agent commissions for
issuing the Letters of Credit (calculated separately for each Letter
of Credit) at the rate per annum equal to the then effective
Applicable Margin for Eurodollar Loans times the daily average
outstanding of the maximum liability of the Agent projected to be
existing from time to time under such Letter of Credit, provided that
each Letter of Credit shall bear a minimum commission of $500.00 and
that each Letter of Credit shall be deemed to be outstanding up to the
full face amount of the Letter of Credit until the Agent has received
the cancelled Letter of Credit or a written cancellation of the Letter
of Credit from the beneficiary of such Letter of Credit in form and
substance acceptable to the Agent, or for any reductions in the amount
of the Letter of Credit (other than from a drawing), written
notification from the beneficiary of such Letter of Credit. Such
commissions are payable in advance at issuance of the Letter of
Credit. The Agent shall retain 1/8% as an issuing fee and pay to the
Banks the remaining balance of the fee.
(c) The Company shall pay to Chase for the account of
Chase such other fees as are set forth in the Fee Letter on the dates
specified therein to the extent not paid prior to the date of this
Agreement, or as may be mutually agreed upon in writing by the Company
and Chase.
2.05 Several Obligations. The failure of any Bank to make
any Loan to be made by it or to provide funds for disbursements or
reimbursements under the Letters of Credit on the date specified therefor shall
not relieve any other Bank of its obligation to make its Loan or to provide
funds on such date, but no Bank shall be responsible for the failure of any
other Bank to make a Loan to be made by such other Bank or to provide funds to
be provided by such other Bank. If a Bank (or Banks) fails or refuses to make
any Loan or to provide funds for disbursements or reimbursements under Letters
of Credit under circumstances contemplated in this subparagraph, then, the
Company may replace such Bank with a bank acceptable to the Agent. The
nonperforming Bank shall promptly assign its Loans and Commitment to the new
bank as provided in Section 12.06(b).
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<PAGE> 26
2.06 Notes. The Loans made by each Bank shall be evidenced
by a single promissory note of the Company in substantially the form of Exhibit
A hereto, dated (i) the Closing Date or (ii) the effective date of an
Assignment pursuant to Section 12.06(b), payable to the order of such Bank in a
principal amount equal to its Maximum Credit Amount as originally in effect and
otherwise duly completed. The date, amount, Type, interest rate and Interest
Period of each Loan made by each Bank, and all payments made on account of the
principal thereof, shall be recorded by such Bank on its books for its Note,
and, prior to any transfer, endorsed by such Bank on the schedule attached to
such Note or any continuation thereof.
2.07 Prepayments.
(a) The Company may prepay the Base Rate Loans upon not
less than one (1) Business Days' prior notice to the Agent (which
shall promptly notify the Banks), which notice shall specify the
prepayment date (which shall be a Business Day) and the amount of the
prepayment (which shall be at least $1,000,000 or the remaining
aggregate principal balance outstanding on the Notes, if less) and
shall be irrevocable and effective only upon receipt by the Agent,
provided that interest on the principal prepaid, accrued to the
prepayment date, shall be paid on the prepayment date. The Company
may not prepay any Eurodollar Loan (provided that this sentence shall
not affect the Company's obligation to prepay Loans pursuant to
Section 2.07(b) or (c) or Section 10.02 hereof).
(b) If, after giving effect to any termination or
reduction of the Aggregate Maximum Credit Amounts pursuant to Section
2.03(b), the outstanding aggregate principal amount of the Loans plus
the LC Exposure exceeds the Aggregate Maximum Credit Amounts, the
Company shall (i) pay or prepay the Loans on the date of such
termination or reduction in an aggregate principal amount equal to the
excess, together with interest on the principal amount paid accrued to
the date of such prepayment and (ii) if any excess remains after
prepaying all of the Loans, pay to the Agent on behalf of the Banks an
amount equal to the excess, to be held as cash collateral as provided
in Section 2.10 hereof.
(c) Upon any redetermination of the amount of the
Borrowing Base in accordance with Section 2.08, if the redetermined
Borrowing Base is less than the aggregate outstanding principal amount
of the Loans plus the LC Exposure ("Borrowing Base Deficiency"), then
the Company shall within ninety (90) days of receipt of written notice
thereof: (i) prepay the Loans in an aggregate principal amount equal
to such excess together with interest on the principal amount paid
accrued to the date of such prepayment and (ii) if a Borrowing Base
Deficiency remains after prepaying all of the Loans because of LC
Exposure, pay to the Agent on behalf of the Banks an amount equal to
such Borrowing Base Deficiency to be held as cash collateral as
provided in Section 2.10(b) hereof.
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(d) Upon any change of the Designated Borrowing Base, if
the new Designated Borrowing Base is less than the aggregate
outstanding principal amount of the Loans plus the LC Exposure
("Designated Borrowing Base Deficiency"), then the Company shall on
the effective date of such new Designated Borrowing Base Deficiency:
(i) prepay the Loans in an aggregate principal amount equal to such
excess together with interest on the principal amount paid accrued to
the date of such prepayment and (ii) if a Designated Borrowing Base
Deficiency remains after prepaying all of the Loans because of LC
Exposure, pay to the Agent on behalf of the Banks an amount equal to
such Designated Borrowing Base Deficiency to be held as cash
collateral as provided in Section 2.10(b) hereof.
(e) Prepayments permitted or required under this Section
2.07 shall be without premium or penalty except as required under
Section 5.05 for prepayment of Eurodollar Loans. Any prepayment made
during the Revolving Credit Period may be reborrowed subject to the
then effective Aggregate Commitments. Any prepayments made during the
Term Loan Period shall be applied to installments on the Notes in the
inverse order of their maturity.
2.08 Borrowing Base.
(a) The Borrowing Base shall be determined in accordance
with Section 2.08(b) by the Agent with the concurrence of the Majority
Banks and is subject to redetermination in accordance with Section
2.08(d). Upon any redetermination of the Borrowing Base, such
redetermination shall remain in effect until the next successive
Redetermination Date. "Redetermination Date" shall mean the date that
the redetermined Borrowing Base becomes effective subject to the
notice requirements specified in Section 2.08(e) both for scheduled
redeterminations and unscheduled redeterminations. So long as any of
the Commitments are in effect and until all of the Loans outstanding
hereunder are paid in full, this facility shall be governed by the
then effective Borrowing Base. During the period from and after the
Closing Date until the next Redetermination Date, the amount of the
Borrowing Base shall be $125,000,000.
(b) Upon receipt of the reports required by Section 8.04
and such other reports, data and supplemental information as may from
time to time be reasonably requested by the Agent (the "Engineering
Reports"), the Agent will redetermine a new Borrowing Base. Such
redetermination will be in accordance with the Agent's normal and
customary procedures for evaluating oil and gas reserves and other
related assets as such exist at that particular time. The Agent in
its sole discretion, may make adjustments to the rates, volumes,
prices and other assumptions set forth therein. The Agent shall
propose to the Banks a new Borrowing Base within 30 days following
receipt by the Agent of the Engineering Reports in a timely and
complete manner. After having received notice of such proposal by the
Agent, the Majority Banks shall
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have ten (10) days to agree or disagree with such proposal. If at the
end of 10 days, the Majority Banks have not communicated their
approval or disapproval, such silence shall be deemed to be an
approval and the Agent's proposal shall be the new Borrowing Base. If
however, the Majority Banks notify the Agent within 10 days of their
disapproval, the Majority Banks shall, within a reasonable period of
time, agree on a new Borrowing Base.
(c) The Agent may exclude any Oil and Gas Property or
portion of production therefrom or any income from any other Property
from the Borrowing Base, at any time, because title information is not
reasonably satisfactory or such Property is not assignable.
(d) So long as any of the Commitments are in effect and
until payment in full of all Loans hereunder, on or around the first
Business Day of each May and November, commencing November 1, 1996
(each being a "Scheduled Redetermination Date"), the Banks shall
redetermine the amount of the Borrowing Base in accordance with
Section 2.08(b). In addition, the Company may request an unscheduled
redetermination of the Borrowing Base at any other time by specifying
in writing to the Agent the date on which such redetermination is to
occur and providing a Reserve Report in accordance with Section
8.04(b) at least 60 days prior to the requested redetermination date.
Also, the Majority Banks may initiate only one (1) unscheduled
redetermination during any consecutive twelve (12) month period by
specifying in writing to the Company the date on which the Company is
to furnish a Reserve Report in accordance with Section 8.04(b) and the
date on which such redetermination is to occur.
(e) The Agent shall promptly notify in writing the
Company and the Banks of the new Borrowing Base. Any redetermination
of the Borrowing Base shall not be in effect until three (3) days
after written notice is received by the Company. The Company shall
have the right, by giving notice to the Agent (i) within three (3)
days after its receipt of a Borrowing Base Notice for a Borrowing Base
Period or (ii) three (3) days prior to the first day of the second
Borrowing Base Quarter during any Borrowing Base Period, to elect to
have a Designated Borrowing Base take effect for such Borrowing Base
Quarter; provided that if the Company has elected a Designated
Borrowing Base for a Borrowing Base Quarter, the Company may, at any
time prior to the end of such Borrowing Base Quarter, by giving three
(3) days prior written notice to the Agent, elect to increase the
Designated Borrowing Base for that Borrowing Base Quarter to an amount
not greater than the amount of the Borrowing Base for such Borrowing
Base Quarter; provided further that if the Company so elects to
increase the Designated Borrowing Base, then all commitment fees
payable pursuant to Section 2.04(a) with respect to the Borrowing Base
Quarter in which such increase took place shall be calculated as if
the increased Designated Borrowing Base had been in effect for the
entire Borrowing Base Quarter.
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2.09 Assumption of Risks. The Company assumes all risks of
the acts or omissions of any beneficiary of any Letter of Credit or any
transferee thereof with respect to its use of such Letter of Credit. Neither
the Agent (except in the case of wilful misconduct or bad faith on the part of
the Agent or any of its employees), its correspondents nor any Bank shall be
responsible for the validity, sufficiency or genuineness of certificates or
other documents or any endorsements thereon, even if such certificates or other
documents should in fact prove to be invalid, insufficient, fraudulent or
forged; for errors, omissions, interruptions or delays in transmissions or
delivery of any messages by mail, telex, or otherwise, whether or not they be
in code; for errors in translation or for errors in interpretation of technical
terms; the validity or sufficiency of any instrument transferring or assigning
or purporting to transfer or assign any Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason; the failure of any beneficiary or
any transferee of any Letter of Credit to comply fully with conditions required
in order to draw upon any Letter of Credit other than as expressly required by
such Letter of Credit; or for any other consequences arising from causes beyond
the Agent's control or the control of the Agent's correspondents. In addition,
neither the Agent nor any Bank shall be responsible for any error, neglect, or
default of any of the Agent's correspondents; and none of the above shall
affect, impair or prevent the vesting of any of the Agent's or any Bank's
rights or powers hereunder or under the Letter of Credit Agreements, all of
which rights shall be cumulative. The Agent and its correspondents may accept
certificates or other documents that appear on their face to be in order,
without responsibility for further investigation of any matter contained
therein regardless of any notice or information to the contrary. In
furtherance and not in limitation of the foregoing provisions, the Company
agrees that any action, inaction or omission taken or not taken by the Agent or
by any correspondent for the Agent in good faith in connection with any Letter
of Credit, or any related drafts, certificates, documents or instruments, shall
be binding on the Company and shall not put the Agent or its correspondents
under any resulting liability to the Company.
2.10 Obligation to Reimburse and to Prepay.
(a) If a disbursement by the Agent is made under any
Letter of Credit, the Company shall pay to the Agent within two (2)
Business Days after notice of any such disbursement is received by the
Company, the amount of each such disbursement made by the Agent under
the Letter of Credit (if such payment is not sooner effected as may be
required under this Section 2.10 or under other provisions of the
Letter of Credit), together with interest on the amount disbursed from
and including the date of disbursement until payment in full of such
disbursed amount at a varying rate per annum equal to (i) the then
applicable interest rate for Base Rate Loans through the second
Business Day after notice of such disbursement is received by the
Company and (ii) thereafter to and including the date of repayment in
full of such disbursed amount, the Post-Default Rate for Base Rate
Loans (but in no event to exceed the Highest Lawful Rate). The
obligations of the Company under this Agreement and
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each Letter of Credit shall be absolute, unconditional and irrevocable
and shall be paid or performed strictly in accordance with the terms
of this Agreement under all circumstances whatsoever, including,
without limitation, but only to the fullest extent permitted by
applicable law, the following circumstances: (i) any lack of validity
or enforceability of this Agreement, any Letter of Credit or any other
Loan Document; (ii) any amendment or waiver of (including any
default), or any consent to departure from this Agreement, any Letter
of Credit or any other Loan Document (except to the extent permitted
by any amendment or waiver); (iii) the existence of any claim,
set-off, defense or other rights which the Company may have at any
time against the beneficiary of any Letter of Credit or any transferee
of any Letter of Credit (or any Persons for whom any such beneficiary
or any such transferee may be acting), the Agent, any Bank or any
other Person, whether in connection with this Agreement, any Letter of
Credit, the other Loan Documents, the transactions contemplated
hereby or any unrelated transaction; (iv) any statement, certificate,
draft, notice or any other document presented under any Letter of
Credit proves to have been forged, fraudulent, insufficient or invalid
in any respect or any statement therein proves to have been untrue or
inaccurate in any respect whatsoever; (v) payment by the Agent under
any Letter of Credit against presentation of a draft or certificate
which appears on its face to comply, but does not comply, with the
terms of such Letter of Credit; and (vi) any other circumstance or
happening whatsoever, whether or not similar to any of the foregoing.
Notwithstanding anything in this Agreement to the contrary, the
Company will not be liable for payment or performance that results
from the gross negligence or wilful misconduct of the Agent, except
(i) where the Company or any Subsidiary actually recovers the proceeds
for itself or the Agent of any payment made by the Agent in connection
with such gross negligence or wilful misconduct or (ii) in cases where
the Agent makes payment to the named beneficiary of a Letter of
Credit.
(b) In the event of the occurrence of any Event of
Default, a payment or prepayment pursuant to Sections 2.07(b) and (c)
hereof or the maturity of the Notes, whether by acceleration or
otherwise, an amount equal to the LC Exposure shall be deemed to be
forthright due and owing by the Company to the Agent and the Banks as
of the date of any such occurrence; and the Company's obligation to
pay such amount shall be absolute and unconditional, without regard to
whether any beneficiary of any such Letter of Credit has attempted to
draw down all or a portion of such amount under the terms of a Letter
of Credit, and, to the fullest extent permitted by applicable law,
shall not be subject to any defense or be affected by a right of
set-off, counterclaim or recoupment which the Company may now or
hereafter have against any such beneficiary, the Agent, the Banks or
any other Person for any reason whatsoever. Such payments shall be
held by the Agent on behalf of the Banks as cash collateral securing
the LC Exposure in an account or accounts at the Principal Office; and
the Company hereby grants to and by its deposit with the Agent grants
to the
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<PAGE> 31
Agent a security interest in such cash collateral. Such collateral
payments may be invested, by Agent, in investments that Agent may
choose in its sole discretion, but limited to investments specified in
Sections 9.03(d), (e), (f) and (h). All interest on investments shall
become cash collateral and shall also be reinvested. In the event of
any such payment by the Company of amounts contingently owing under
outstanding Letters of Credit and in the event that thereafter drafts
or other demands for payment complying with the terms of such Letters
of Credit are not made prior to the respective expiration dates
thereof, the Agent agrees, if no Event of Default has occurred and is
continuing or if no other amounts are outstanding under this
Agreement, the Notes or the other Loan Documents, to remit to the
Company amounts for which the contingent obligations evidenced by the
Letters of Credit have ceased, plus accrued interest.
(c) Each Bank severally and unconditionally agrees that
it shall promptly reimburse the Agent an amount equal to such Bank's
Percentage Share of any disbursement made by the Agent under any
Letter of Credit that is not reimbursed according to this Section
2.10.
2.11 Lending Offices. The Loans of each Type made by each
Lender shall be made and maintained at such Lender's Applicable Lending Office
for Loans of such Type.
Section 3. Payments of Principal and Interest.
3.01 Repayment of Loans. The Company will pay to the Agent,
for the account of each Bank, the principal payments required by this Section
3.01. Commencing on the Quarterly Date approximately ninety (90) days
following the Revolving Credit Termination Date, the aggregate principal amount
of the Notes outstanding on the Revolving Credit Termination Date shall be
payable in twelve (12) equal consecutive quarterly installments sufficient to
amortize the outstanding principal amount equally over the Term Loan Period
with the final payment of the remaining principal balance on the Notes due on
the Maturity Date.
3.02 Interest. The Company will pay to the Agent for account
of each Bank interest on the unpaid principal amount of each Loan made by such
Bank for the period commencing on the date such Loan is made to but excluding
the date such Loan shall be paid in full, at the following rates per annum:
(a) if such a Loan is a Base Rate Loan, the Base Rate (as
in effect from time to time) plus the Applicable Margin (as in effect
from time to time), but in no event to exceed the Highest Lawful Rate;
and
(b) if such a Loan is a Eurodollar Loan, for each
Interest Period relating thereto, the Fixed Rate for such Loan plus
the Applicable Margin (as
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in effect from time to time), but in no event to exceed the Highest
Lawful Rate.
Notwithstanding the foregoing, the Company will pay to the Agent for the
account of each Bank interest at the applicable Post-Default Rate on any
principal of any Loan made by such Bank, and (to the fullest extent permitted
by law) on any other amount payable by the Company hereunder or under any Note
held by such Bank to or for account of such Bank, which shall not be paid in
full when due (whether at stated maturity, by acceleration or otherwise), for
the period commencing on the due date thereof until the same is paid in full.
Accrued interest on Base Rate Loans shall be payable on each Quarterly Date
commencing on June 30, 1996 and accrued interest on each Eurodollar Loan shall
be payable on the last day of the Interest Period therefor and, if such
Interest Period is longer than three months at three-month intervals following
the first day of such Interest Period, except that interest payable at the
Post-Default Rate shall be payable from time to time on demand and interest on
any Eurodollar Loan that is converted into a Base Rate Loan (pursuant to
Section 5.04) shall be payable on the date of conversion (but only to the
extent so converted). Promptly after the determination of any interest rate
provided for herein or any change therein, the Agent shall notify the Banks to
which such interest is payable and the Company thereof.
Section 4. Payments; Pro Rata Treatment; Computations; Etc.
4.01 Payments. Except to the extent otherwise provided
herein, all payments of principal, interest and other amounts to be made by the
Company under this Agreement, the Notes and the Letters of Credit shall be made
in Dollars, in immediately available funds, to the Agent at such account as the
Agent shall specify by notice to the Company from time to time, not later than
11:00 a.m. New York time on the date on which such payments shall become due
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding Business Day). Such payments shall be made
without (to the fullest extent permitted by applicable law) defense, set-off or
counterclaim. Each payment received by the Agent under this Agreement or any
Note for account of a Bank shall be paid promptly to such Bank, in immediately
available funds. If the due date of any payment under this Agreement or any
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. At the time of
each payment to the Agent of any principal of or interest on any borrowing, the
Company shall notify the Agent of the Loans to which such payment shall apply.
In the absence of such notice, the Agent may specify the Loans to which such
payment shall apply, but to the extent possible, such payment or prepayment
will be applied first to the Loans comprised of Base Rate Loans.
4.02 Pro Rata Treatment. Except to the extent otherwise
provided herein each Bank agrees that: (a) each borrowing from the Banks under
Section 2.01 shall be made from the Banks pro rata in accordance with their
Percentage Share, each payment of commitment
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fee or other fees under Sections 2.04(a) and 2.04(b) shall be made for account
of the Banks pro rata in accordance with their Percentage Share, and each
termination or reduction of the amount of the Aggregate Maximum Credit Amounts
under Section 2.03(b) shall be applied to the Commitment of each Bank, pro rata
according to the amounts of its respective Commitment, (b) each payment of
principal of Loans by the Company shall be made for account of the Banks pro
rata in accordance with the respective unpaid principal amount of the Loans
held by the Banks, (c) each payment of interest on Loans by the Company shall
be made for account of the Banks pro rata in accordance with the amounts of
interest due and payable to the respective Banks and (d) each reimbursement by
the Company of disbursements under Letters of Credit shall be made for account
of the Banks pro rata in accordance with the amounts of reimbursement
obligations due and payable to each respective Bank.
4.03 Computations. Interest on Eurodollar Loans and the
commitment fees shall be computed on the basis of a year of 360 days and actual
days elapsed (including the first day but excluding the last day) occurring in
the period for which such interest is payable, unless such calculation would
exceed the Highest Lawful Rate, in which case interest shall be calculated on
the per annum basis of a year of 365 or 366 days, as the case may be. Interest
on Base Rate Loans shall be 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) occurring in the period for which such interest is
payable.
4.04 Non-receipt of Funds by the Agent. Unless the Agent
shall have been notified by a Bank or the Company prior to the date on which
such notifying party is scheduled to make payment to the Agent of (in the case
of a Bank) the proceeds of a Loan or a payment under a Letter of Credit to be
made by it hereunder or (in the case of the Company) a payment to the Agent for
account of one or more of the Banks hereunder (such payment being herein called
the "Required Payment"), which notice shall be effective upon receipt, that it
does not intend to make the Required Payment to the Agent, the Agent may assume
that the Required Payment has been made and may, in reliance upon such
assumption (but shall not be required to), make the amount thereof available to
the intended recipient(s) on such date and, if such Bank or the Company (as the
case may be) has not in fact made the Required Payment to the Agent, the
recipient(s) of such payment shall, on demand, repay to the Agent the amount so
made available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the Agent
until but excluding the date the Agent recovers such amount at a rate per annum
which, for any Bank as recipient, will be equal to the Federal Funds Rate and
for the Company as recipient, will be equal to the Base Rate plus the
Applicable Margin.
4.05 Sharing of Payments, Etc.
(a) The Company agrees that, in addition to (and without
limitation of) any right of set-off, bankers' lien or counterclaim a
Bank may otherwise have, each Bank
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shall have the right and be entitled (after consultation with the
Agent), at its option, to offset balances held by it or by any of its
Affiliates for account of the Company at any of its offices, in
Dollars or in any other currency, against any principal of or interest
on any of such Bank's Loans, or any other amount payable to such Bank
hereunder, which is not paid when due (including the expiration of any
applicable grace period) (regardless of whether such balances are then
due to the Company), in which case it shall promptly notify the
Company and the Agent thereof, provided that such Bank's failure to
give such notice shall not affect the validity thereof.
(b) If any Bank shall obtain payment of any principal of
or interest on any Loan made by it to the Company under this Agreement
through the exercise of any right of set-off, banker's lien or
counterclaim or similar right or otherwise, and, as a result of such
payment, such Bank shall have received a greater percentage of the
principal or interest then due hereunder by the Company to such Bank
than the percentage received by any other Banks, it shall promptly (i)
notify the Agent and each other Bank thereof and (ii) purchase from
such other Banks participations in (or, if and to the extent specified
by such Bank, direct interests in) the Loans made by such other Banks
(or in interest due thereon, as the case may be) in such amounts, and
make such other adjustments from time to time as shall be equitable,
to the end that all the Banks shall share the benefit of such excess
payment (net of any expenses which may be incurred by such Bank in
obtaining or preserving such excess payment) pro rata in accordance
with the unpaid principal and/or interest on the Loans held by each of
the Banks. To such end all the Banks shall make appropriate
adjustments among themselves (by the resale of participations sold or
otherwise) if such payment is rescinded or must otherwise be restored.
The Company agrees that any Bank so purchasing a participation (or
direct interest) in the Loans made by other Banks (or in interest due
thereon, as the case may be) may exercise all rights of set-off,
banker's lien, counterclaim or similar rights with respect to such
participation as fully as if such Bank were a direct holder of Loans
in the amount of such participation. Nothing contained herein shall
require any Bank to exercise any such right or shall affect the right
of any Bank to exercise, and retain the benefits of exercising, any
such right with respect to any other indebtedness or obligation of the
Company. If under any applicable bankruptcy, insolvency or other
similar law, any Bank receives a secured claim in lieu of a set-off to
which this Section 4.05 applies, such Bank shall, to the extent
practicable, exercise its rights in respect of such secured claim in a
manner consistent with the rights of the Banks entitled under this
Section 4.05 to share the benefits of any recovery on such secured
claim.
4.06 Taxes.
(a) Payments Free and Clear. Any and all payments by the
Company hereunder shall be made, in accordance with Section 4.01, free
and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions,
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charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Bank and the Agent, taxes imposed on
its income, and franchise or similar taxes imposed on it, by (i) any
jurisdiction (or political subdivision thereof) of which the Agent or
such Bank, as the case may be, is a citizen or resident or in which
such Bank has an Applicable Lending Office, (ii) the jurisdiction (or
any political subdivision thereof) in which the Agent or such Bank is
organized, or (iii) any jurisdiction (or political subdivision
thereof) in which such Bank or the Agent is presently doing business
which taxes are imposed solely as a result of doing business in such
jurisdiction (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Company shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to
the Banks or the Agent (i) the sum payable shall be increased by the
amount necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Section 4.06) such Bank or the Agent (as the case may be) shall
receive an amount equal to the sum it would have received had no such
deductions been made, (ii) the Company shall make such deductions and
(iii) the Company shall pay the full amount deducted to the relevant
taxing authority or other Governmental Authority in accordance with
applicable law.
(b) Other Taxes. In addition, to the fullest extent
permitted by applicable law, the Company agrees to pay any present or
future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies that arise from any payment made
hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any Assignment
(hereinafter referred to as "Other Taxes").
(c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE COMPANY WILL INDEMNIFY EACH BANK AND THE AGENT FOR
THE FULL AMOUNT OF TAXES AND OTHER TAXES (INCLUDING, BUT NOT LIMITED
TO, ANY TAXES OR OTHER TAXES IMPOSED BY ANY GOVERNMENTAL AUTHORITY ON
AMOUNTS PAYABLE UNDER THIS SECTION 4.06) PAID BY SUCH BANK OR THE
AGENT (ON THEIR BEHALF OR ON BEHALF OF ANY BANK), AS THE CASE MAY BE,
AND ANY LIABILITY (INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING
THEREFROM OR WITH RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER
TAXES WERE CORRECTLY OR LEGALLY ASSERTED UNLESS THE PAYMENT OF SUCH
TAXES WERE NOT CORRECTLY OR LEGALLY ASSERTED AND SUCH BANK'S PAYMENT
OF SUCH TAXES OR OTHER TAXES WAS THE RESULT OF ITS GROSS NEGLIGENCE OR
WILFUL MISCONDUCT. ANY PAYMENT PURSUANT TO SUCH INDEMNIFICATION SHALL
BE MADE WITHIN THIRTY (30) DAYS AFTER THE DATE ANY BANK OR THE AGENT,
AS THE CASE MAY BE, MAKES WRITTEN DEMAND THEREFOR. IF ANY
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<PAGE> 36
BANK OR THE AGENT RECEIVES A REFUND OR CREDIT IN RESPECT OF ANY TAXES
OR OTHER TAXES FOR WHICH SUCH BANK OR THE AGENT HAS RECEIVED PAYMENT
FROM THE COMPANY HEREUNDER IT SHALL PROMPTLY NOTIFY THE COMPANY OF
SUCH REFUND OR CREDIT AND SHALL, IF NO DEFAULT HAS OCCURRED AND IS
CONTINUING, WITHIN THIRTY (30) DAYS AFTER RECEIPT OF A REQUEST BY THE
COMPANY (OR PROMPTLY UPON RECEIPT, IF THE COMPANY HAS REQUESTED
APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT HERETO), PAY AN AMOUNT
EQUAL TO SUCH REFUND OR CREDIT TO THE COMPANY WITHOUT INTEREST (BUT
WITH ANY INTEREST SO REFUNDED OR CREDITED), PROVIDED THAT THE COMPANY,
UPON THE REQUEST OF SUCH BANK OR THE AGENT, AGREES TO RETURN SUCH
REFUND OR CREDIT (PLUS PENALTIES, INTEREST OR OTHER CHARGES) TO SUCH
BANK OR THE AGENT IN THE EVENT SUCH BANK OR THE AGENT IS REQUIRED TO
REPAY SUCH REFUND OR CREDIT.
(d) Banks' Taxes.
(i) Each Bank represents that it is either (i) a
corporation organized under the laws of the United States of
America or any state thereof or (ii) it is entitled to
complete exemption from United States withholding tax imposed
on or with respect to any payments, including fees, to be made
to it pursuant to this Agreement (A) under an applicable
provision of a tax convention to which the United States of
America is a party or (B) because it is acting through a
branch, agency or office in the United States of America and
any payment to be received by it hereunder is effectively
connected with a trade or business in the United States of
America. Each Bank that is not a corporation organized under
the laws of the United States of America or any state thereof
agrees to provide to the Company and the Agent on the Closing
Date, or on the date of its delivery of the Assignment
pursuant to which it becomes a Bank, and at such other times
as required by United States law or as the Company or the
Agent shall reasonably request, two accurate and complete
original signed copies of either (A) Internal Revenue Service
Form 4224 (or successor form) certifying that all payments to
be made to it hereunder will be effectively connected to a
United States trade or business (the "Form 4224
Certification") or (B) Internal Revenue Service Form 1001 (or
successor form) certifying that it is entitled to the benefit
of a provision of a tax convention to which the United States
of America is a party which completely exempts from United
States withholding tax all payments to be made to it hereunder
(the "Form 1001 Certification"). In addition, each Bank
agrees that if it previously filed a Form 4224 Certification,
it will deliver to the Company and the Agent a new Form 4224
Certification prior to the first payment date occurring in
each of its
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subsequent taxable years; and if it previously filed a Form
1001 Certification, it will deliver to the Company and the
Agent a new certification prior to the first payment date
falling in the third year following the previous filing of
such certification. Each Bank also agrees to deliver to the
Company and the Agent such other or supplemental forms as may
at any time be required as a result of changes in applicable
law or regulation in order to confirm or maintain in effect
its entitlement to exemption from United States withholding
tax on any payments hereunder, provided that the circumstances
of such Bank at the relevant time and applicable laws permit
it to do so. If a Bank determines, as a result of any change
in either (i) a Governmental Requirement or (ii) its
circumstances, that it is unable to submit any form or
certificate that it is obligated to submit pursuant to this
Section 4.06, or that it is required to withdraw or cancel any
such form or certificate previously submitted, it shall
promptly notify the Company and the Agent of such fact. If a
Bank is organized under the laws of a jurisdiction outside the
United States of America, unless the Company and the Agent
have received a Form 1001 Certification or Form 4224
Certification satisfactory to them indicating that all
payments to be made to such Bank hereunder are not subject to
United States withholding tax, the Company shall withhold
taxes from such payments at the applicable statutory rate.
Each Bank agrees to indemnify and hold harmless from any
United States taxes, penalties, interest and other expenses,
costs and losses incurred or payable by (i) the Agent as a
result of such Bank's failure to submit any form or
certificate that it is required to provide pursuant to this
Section 4.06 or (ii) the Company or the Agent as a result of
their reliance on any such form or certificate which such Bank
has provided to them pursuant to this Section 4.06.
(ii) For any period with respect to which a Bank
has failed to provide the Company with the form required
pursuant to this Section 4.06, if any, (other than if such
failure is due to a change in a Governmental Requirement
occurring subsequent to the date on which a form originally
was required to be provided), such Bank shall not be entitled
to indemnification under this Section 4.06 with respect to
taxes imposed by the United States which taxes would not have
been imposed but for such failure to provide such forms;
provided, however, that should a Bank, which is otherwise
exempt from or subject to a reduced rate of withholding tax
becomes subject to taxes because of its failure to deliver a
form required hereunder, the Company shall take such steps as
such Bank shall reasonably request to assist such Bank to
recover such taxes.
(iii) Any Bank claiming any additional amounts
payable pursuant to this Section 4.06 shall use reasonable
efforts (consistent with legal and regulatory restrictions) to
file any certificate or document requested by the
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Company or the Agent or to change the jurisdiction of its
Applicable Lending Office or to contest any tax imposed if the
making of such a filing or change or contesting such tax would
avoid the need for or reduce the amount of any such additional
amounts that may thereafter accrue and would not, in the sole
determination of such Bank, be otherwise disadvantageous to
such Bank.
Section 5. Capital Adequacy.
5.01 Additional Costs.
(a) The Company shall pay directly to each Bank from time
to time such amounts as such Bank may determine to be necessary to
compensate such Bank for any costs which it determines are
attributable to its making or maintaining of any Eurodollar Loans or
issuing or participating in Letters of Credit hereunder or its
obligation to make any Eurodollar Loans or issue or participate in any
Letters of Credit hereunder, or any reduction in any amount receivable
by such Bank hereunder in respect of any of such Eurodollar Loans,
Letters of Credit or such obligation (such increases in costs and
reductions in amounts receivable being herein called "Additional
Costs"), resulting from any Regulatory Change which: (i) changes the
basis of taxation of any amounts payable to such Bank under this
Agreement or any Note in respect of any of such Eurodollar Loans or
Letters of Credit (other than taxes imposed on the overall net income
of such Bank or of its Applicable Lending Office for any of such
Eurodollar Loans by the jurisdiction in which such Bank has its
principal office or Applicable Lending Office); or (ii) imposes or
modifies any reserve, special deposit, minimum capital, capital ratio
or similar requirements relating to any extensions of credit or other
assets of, or any deposits with or other liabilities of such Bank
(including any of such Eurodollar Loans or any deposits referred to in
the definition of "Fixed Eurodollar Rate" in Section 1.02 hereof), or
the Commitment of such Bank or the Eurodollar interbank market; or
(iii) imposes any other condition affecting this Agreement or any Note
(or any of such extensions of credit or liabilities) or such Bank's
Commitment. Each Bank will notify the Agent and the Company of any
event occurring after the Closing Date which will entitle such Bank to
compensation pursuant to this Section 5.01(a) as promptly as
practicable after it obtains knowledge thereof and determines to
request such compensation, and will designate a different Applicable
Lending Office for the Loans of such Bank 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 such Bank, be
disadvantageous to such Bank, provided that such Bank shall have no
obligation to so designate an Applicable Lending Office located in the
United States. If any Bank requests compensation from the Company
under this Section 5.01(a), the Company may, by notice to such Bank
suspend the obligation of such Bank to make additional Loans of the
Type with respect to which such compensation is requested until the
Regulatory Change giving rise to such request
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ceases to be in effect (in which case the provisions of Section 5.04
shall be applicable).
(b) Without limiting the effect of the provisions of
Section 5.01(a), in the event that, by reason of any Regulatory Change
or any other circumstances arising after the Closing Date affecting
such Bank, the Eurodollar interbank market or such Bank's position in
such market, any Bank either (i) incurs Additional Costs based on or
measured by the excess above a specified level of the amount of a
category of deposits or other liabilities of such Bank which includes
deposits by reference to which the interest rate on Eurodollar Loans
is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Bank which includes
Eurodollar Loans or (ii) becomes subject to restrictions on the amount
of such a category of liabilities or assets which it may hold, then,
if such Bank so elects by notice to the Company, the obligation of
such Bank to make additional Eurodollar Loans shall be suspended until
such Regulatory Change ceases to be in effect (in which case the
provisions of Section 5.04 shall be applicable).
(c) Without limiting the effect of the foregoing
provisions of this Section 5.01 (but without duplication), the Company
shall pay directly to any Bank from time to time on request such
amounts as such Bank may determine to be necessary to compensate such
Bank or its parent or holding company for any costs which it
determines are attributable to the maintenance by such Bank or its
parent or holding company (or any Applicable Lending Office), pursuant
to any Governmental Requirement following any Regulatory Change, of
capital in respect of its Commitment, its Note, its Loans or any
interest held by it in any Letter of Credit, such compensation to
include, without limitation, an amount equal to any reduction of the
rate of return on assets or equity of such Bank or its parent or
holding company (or any Applicable Lending Office) to a level below
that which such Bank or its parent or holding company (or any
Applicable Lending Office) could have achieved but for such
Governmental Requirement. Such Bank will notify the Company that it
is entitled to compensation pursuant to this Section 5.01(c) as
promptly as practicable after it determines to request such
compensation.
(d) Any Bank notifying the Company of any amounts due
pursuant to Section 5.01 shall in such notice to the Company and the
Agent set forth in reasonable detail the basis and amount of its
request for compensation. Any request for additional compensation
under this Section 5.01 shall be paid by the Company within thirty
(30) Business Days of the receipt of the Company of the notice
described in this Section 5.01(d).
5.02 Limitation on Eurodollar Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any Fixed
Eurodollar Rate for any Interest Period:
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(a) the Agent determines that quotations of interest
rates for the relevant deposits referred to in the definition of
"Fixed Eurodollar Rate" in Section 1.02 are not being provided in the
relevant amounts or for the relevant maturities for purposes of
determining rates of interest for Eurodollar Loans as provided herein;
or
(b) the Agent determines that the relevant rates of
interest referred to in the definition of "Fixed Eurodollar Rate" in
Section 1.02 upon the basis of which the rate of interest for
Eurodollar Loans for such Interest Period is to be determined are not
sufficient to adequately cover the cost to the Banks of making or
maintaining Eurodollar Loans;
then the Agent shall give the Company prompt notice thereof, and so long as
such condition remains in effect, the Banks shall be under no obligation to
make additional Eurodollar Loans.
5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to honor its obligation to make or maintain Eurodollar Loans
hereunder, then such Bank shall promptly notify the Company thereof and such
Bank's obligation to make Eurodollar Loans shall be suspended until such time
as such Bank may again make and maintain Eurodollar Loans (in which case the
provisions of Section 5.04 shall be applicable).
5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and
5.03. If the obligation of any Bank to make Eurodollar Loans shall be
suspended pursuant to Sections 5.01, 5.02 or 5.03 ("Affected Loans"), all
Affected Loans which would otherwise be made by such Bank shall be made instead
as Base Rate Loans (and, if an event referred to in Section 5.01(b) or Section
5.03 has occurred and such Bank so requests by notice to the Company, all
Affected Loans of such Bank then outstanding shall be automatically converted
into Base Rate Loans on the date specified by such Bank in such notice) and, to
the extent that Affected Loans are so made as (or converted into) Base Rate
Loans, all payments of principal which would otherwise be applied to such
Bank's Affected Loans shall be applied instead to its Base Rate Loans.
5.05 Compensation. The Company shall pay to each Bank within
thirty (30) days of receipt of written request of such Bank (which request
shall set forth, in reasonable detail, the basis for requesting such amounts),
such amount or amounts as shall compensate it for any loss, cost, expense or
liability which such Bank determines are attributable to:
(a) any payment, prepayment or conversion of a Eurodollar
Loan properly made by such Bank or the Company for any reason
(including, without limitation, the acceleration of the Loans pursuant
to Section 10.02) on a date other than the last day of the Interest
Period for such Loan; or
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(b) any failure by the Company for any reason (including
but not limited to, the failure of any of the conditions precedent
specified in Section 6 to be satisfied) to borrow, continue or
convert a Eurodollar Loan from such Bank on the date for such
borrowing, continuation or conversion specified in the relevant
notice of borrowing given pursuant to Section 2.02(c).
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which otherwise would have accrued on the principal amount so paid, prepaid or
converted or not borrowed for the period from the date of such payment,
prepayment or conversion or failure to borrow to the last day of the 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 specified for such
borrowing) at the applicable rate of interest for such Loan provided for herein
over (ii) the interest component of the amount such Bank would have bid in the
London interbank market for Dollar deposits of leading banks in amounts
comparable to such principal amount and with maturities comparable to such
period (as reasonably determined by such Bank).
Section 6. Conditions Precedent.
6.01 Initial Funding.
The obligation of the Banks to make the Initial Funding under
this Agreement is subject to the receipt by the Agent and the Banks of all fees
payable pursuant to Section 2.04 on or before the Closing Date or otherwise
under this Agreement and the following documents and satisfaction of the other
conditions provided in this Section 6.01, each of which shall be satisfactory
to the Agent in form and substance:
(a) A certificate of the Secretary or an Assistant
Secretary of the Company setting forth (i) resolutions of its board of
directors with respect to the authorization of the Company to execute
the Loan Documents to which it is a party and to enter into the
transactions contemplated in those documents, (ii) the officers of the
Company (y) who are authorized to sign the Loan Documents to which the
Company is a party and (z) who will, until replaced by another officer
or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving
notices and other communications in connection with this Agreement and
the transactions contemplated hereby, (iii) specimen signatures of the
officers so authorized and (iv) the articles or certificate of
incorporation and bylaws of the Company, certified as being true and
complete. The Agent and the Banks may conclusively rely on such
certificate until the Agent receives notice in writing from the
Company to the contrary.
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(b) Certificates of the appropriate state agencies with
respect to the existence and good standing of the Company.
(c) A compliance certificate which shall be substantially
in the form of Exhibit C, duly and properly executed by a Responsible
Officer, and dated as of the date of the Initial Funding.
(d) The Note or Notes, duly completed and executed.
(e) An opinion of Vinson & Elkins L.L.P., legal counsel
to the Agent substantially in the form of Exhibit D hereto.
(f) A certificate of the insurance coverage of the
Company evidencing that the Company is carrying insurance in
accordance with Section 7.20 hereof.
(g) The Fee Letter shall have been executed and delivered
by the Company.
(h) Debt under the Prior Credit Agreement shall have been
paid in full, including interest and other amounts owing thereunder,
and the Prior Credit Agreement shall have been terminated.
(i) Such other documents as the Agent or any Bank or
special counsel to the Agent may reasonably request.
6.02 Initial and Subsequent Loans and Letters of Credit.
The obligation of the Banks to make Loans to the Company upon the occasion of
each borrowing hereunder and to issue, renew, extend or reissue Letters of
Credit for the account of the Company (including the Initial Funding) is
subject to the further conditions precedent that, as of the date of such Loans
and after giving effect thereto: (i) no Default shall have occurred and be
continuing; (ii) no Material Adverse Effect shall have occurred since the date
of the Financial Statements; and (iii) the representations and warranties made
by the Company in Section 7 shall be true on and as of the date of the making
of such Loans or issuance, renewal, extension or reissuance of a Letter of
Credit with the same force and effect as if made on and as of such date and
following such new borrowing, except as such representations and warranties are
modified to give effect to transactions expressly permitted hereby or in the
case of Section 7.15 changes of which the Agent has been notified. Each
request for a borrowing or issuance, renewal, extension or reissuance of a
Letter of Credit by the Company hereunder shall constitute a certification by
the Company to the effect set forth in the preceding sentence (both as of the
date of such notice and, unless the Company otherwise notifies the Agent prior
to the date of and immediately following such borrowing or issuance, renewal,
extension or reissuance of a Letter of Credit as of the date thereof).
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6.03 Conditions Relating to Letters of Credit. In addition to
the satisfaction of all other conditions precedent set forth in this Section 6,
the issuance, renewal, extension or reissuance of the Letters of Credit
referred to in Section 2.01 hereof is subject to the following conditions
precedent:
(a) At least three (3) Business Days prior to the date of
the issuance and at least three (3) Business Days (or such longer
notice as may be required by the Agent to allow the Agent to comply
with the notice requirement for extension embodied in the Letter of
Credit) prior to the date of the renewal, extension or reissuance of
each Letter of Credit, the Agent shall have received a written request
for a Letter of Credit or renewal, extension or reissuance.
(b) Each of the Letters of Credit shall (i) be issued by
the Agent, (ii) contain such terms and provisions as are reasonably
required by the Agent, (iii) be for the account of the Company, and
(iv) expire not later than two (2) days before the Revolving Credit
Termination Date.
(c) The Company shall have duly and validly executed and
delivered to the Agent a Letter of Credit Agreement pertaining to the
Letter of Credit.
(d) All other conditions shall have been satisfied as set
forth in Section 2.01.
Section 7. Representations and Warranties. The Company
represents and warrants to the Banks that (each representation and warranty
herein is given as of the date of this Agreement and shall be deemed repeated
and reaffirmed as provided in Section 6.02):
7.01 Corporate Existence. Each of the Company and the
Subsidiaries: (a) is a corporation duly organized, legally existing and in good
standing under the laws of the jurisdiction of its incorporation; (b) has all
requisite corporate power, and has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry on
its business as now being or as proposed to be conducted; and (c) is qualified
to do business in all jurisdictions in which the nature of the business
conducted by it makes such qualification necessary and where failure so to
qualify would have a Material Adverse Effect.
7.02 Financial Condition. The audited consolidated balance
sheet of the Company and its Consolidated Subsidiaries as at December 31, 1995
and the related consolidated statement of income, stockholders' equity and cash
flows of the Company and its Consolidated Subsidiaries for the fiscal year
ended on said date, with the opinion thereon of Coopers & Lybrand heretofore
furnished to each of the Banks and the unaudited consolidated balance sheet of
the Company and its Consolidated Subsidiaries as at March 31, 1996 and their
related consolidated statements of income, stockholders' equity and cash flows
of the Company and its Consolidated Subsidiaries for the three-month period
ended on such
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date heretofore furnished to the Agent, are complete and correct and fairly
present the consolidated financial condition of the Company and its
Consolidated Subsidiaries as at said dates and the results of its operations
for the fiscal year and the three-month period on said dates, all in accordance
with GAAP, as applied on a consistent basis (subject, in the case of the
interim financial statements, to normal year-end adjustments). Neither the
Company nor any Subsidiary has on the Closing Date any material Debt,
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in the
Financial Statements or in Schedule 7.02. Since December 31, 1995, there has
been no change or event having a Material Adverse Effect. Since the date of
the Financial Statements, neither the business nor the Properties of the
Company or any Subsidiary have been materially and 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 or of any public
enemy.
7.03 Litigation. Except as disclosed to the Banks in
Schedule 7.03 hereto, at the Closing Date there is no litigation, legal,
administrative or arbitral proceeding, investigation or other action of any
nature pending or, to the knowledge of the Company threatened against or
affecting the Company or any Subsidiary which involves the possibility of any
judgment or liability against the Company or any Subsidiary not fully covered
by insurance (except for normal deductibles), and which would have a Material
Adverse Effect.
7.04 No Breach. Neither the execution and delivery of the
Loan Documents, nor compliance with the terms and provisions hereof will
conflict with or result in a breach of, or require any consent, which has not
been obtained as of the Closing Date, under the respective charter or by-laws
of the Company, or any Governmental Requirement, or any agreement or instrument
to which the Company is a party or by which it is bound or to which it is
subject, or constitute a default under any such agreement or instrument, or
result in the creation or imposition of any Lien upon any of the revenues or
assets of the Company pursuant to the terms of any such agreement or
instrument.
7.05 Corporate Action. The Company has all necessary
corporate power and authority to execute, deliver and perform its obligations
under the Loan Documents to which it is a party; and the execution, delivery
and performance by the Company of the Loan Documents to which it is a party,
have been duly authorized by all necessary corporate action on its part; and
the Loan Documents constitute the legal, valid and binding obligations of the
Company, enforceable in accordance with their terms.
7.06 Approvals. No authorizations, approvals or consents of,
and no filings or registrations with, any Governmental Authority are necessary
for the execution, delivery or performance by the Company of the Loan Documents
or for the validity or enforceability thereof.
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7.07 Use of Loans. The proceeds of the Loans shall be used
for general corporate and working capital purposes which shall include the
acquisition, exploration and development of Oil and Gas Properties. The
Company is not engaged principally, or as one of its important activities, in
the business of extending credit for the purpose, whether immediate, incidental
or ultimate, of buying or carrying margin stock (within the meaning of
Regulation U or X of the Board of Governors of the Federal Reserve System) and
no part of the proceeds of any Loan hereunder will be used to buy or carry any
margin stock. Neither the Company nor any Person acting on behalf of the
Company has taken or will take any action which might cause the Notes or any of
the Loan Documents, including this Agreement, to violate Regulation U or X or
any other regulation of the Board of Governors of the Federal Reserve System or
to violate Section 7 of the SEC or any rule or regulation thereunder, in each
case as now in effect or as the same may hereinafter be in effect.
7.08 ERISA.
(a) The Company, each Subsidiary and each ERISA Affiliate
have complied in all material respects with ERISA and, where
applicable, the Code regarding each Plan.
(b) Each Plan is, and has been, maintained in substantial
compliance with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which
could result in imposition on the Company, any Subsidiary or any ERISA
Affiliate (whether directly or indirectly) of (i) either a civil
penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a
tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii)
breach of fiduciary duty liability damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution plan) or
any trust created under any such Plan has been terminated since
September 2, 1974. No liability to the PBGC (other than for the
payment of current premiums which are not past due) by the Company,
any Subsidiary or any ERISA Affiliate has been or is expected by the
Company, any Subsidiary or any ERISA Affiliate to be incurred with
respect to any Plan. No ERISA Event with respect to any Plan has
occurred.
(e) Full payment when due has been made of all amounts
which the Company, any Subsidiary or any ERISA Affiliate is required
under the terms of each Plan or applicable law to have paid as
contributions to such Plan, and no accumulated funding deficiency (as
defined in section 302 of ERISA and section 412 of the Code), whether
or not waived, exists with respect to any Plan.
(f) The actuarial present value of the benefit
liabilities under each Plan which is subject to Title IV of ERISA does
not, as of the end of the Company's most
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recently ended fiscal year, exceed the current value of the assets
(computed on a plan termination basis in accordance with Title IV of
ERISA) of such Plan allocable to such benefit liabilities. The term
"actuarial present value of the benefit liabilities" shall have the
meaning specified in section 4041 of ERISA.
(g) None of the Company, any Subsidiary or any ERISA
Affiliate sponsors, maintains, or contributes to an employee welfare
benefit plan, as defined in section 3(1) of ERISA, including, without
limitation, any such plan maintained to provide benefits to former
employees of such entities, that may not be terminated by the Company,
a Subsidiary or any ERISA Affiliate in its sole discretion at any time
without any material liability.
(h) None of the Company, any Subsidiary or any ERISA
Affiliate sponsors, maintains or contributes to, or has at any time in
the preceding six calendar years sponsored, maintained or contributed
to, any Multiemployer Plan.
(i) None of the Company, any Subsidiary or any ERISA
Affiliate is required to provide security under section 401(a)(29) of
the Code due to a Plan amendment that results in an increase in
current liability for the Plan.
7.09 Taxes. Except as set out in Schedule 7.09, each of the
Company and the Subsidiaries has filed all United States Federal income tax
returns and all other material tax returns which are required to be filed by it
and has paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Company. The charges, accruals and reserves on the
books of the Company and each Subsidiary in respect of taxes and other
governmental charges are, in the opinion of the Company, adequate. No tax lien
has been filed and, to the knowledge of the Company, no claim is being asserted
with respect to any such tax, fee or other charge.
7.10 Titles, etc.
(a) Except as set out in Schedule 7.10, each of the
Company and the Subsidiaries has good and defensible title to its
material (individually or in the aggregate) Properties, free and clear
of all Liens except Liens permitted by Section 9.02. As used in this
Agreement, "good and defensible title" to Oil and Gas Properties of
the Company located in federal waters of the Gulf of Mexico shall be
based on the standard that a prudent Person engaged in the business of
ownership, development and operation of Oil and Gas Properties located
in federal waters of the Gulf of Mexico with knowledge of all of the
facts and their legal bearing would be willing to accept as good and
defensible title. Except as set forth in Schedule 7.10, after giving
full effect to the Excepted Liens, the Company owns the net interests
in production attributable to the Hydrocarbon Interests reflected in
the most recently delivered Reserve Report and the ownership of such
Properties shall not in any material respect
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obligate the Company to bear the costs and expenses relating to the
maintenance, development and operations of each such Property in an
amount in excess of the working interest of each Property set forth in
the most recently delivered Reserve Report. All information contained
in the most recently delivered Reserve Report is true and correct in
all material respects as of the Closing Date.
(b) All leases and agreements necessary for the conduct
of the respective business of the Company and its Subsidiaries are, to
the best knowledge of the Company and its Subsidiaries, valid and
subsisting, in full force and effect and, to the best knowledge of the
Company and its Subsidiaries, there exists no default or event or
circumstance which with the giving of notice or the passage of time or
both would give rise to a default under any such lease or leases,
which would in the aggregate have a material adverse effect.
(c) The rights, properties and other assets presently
owned, leased or licensed by the Company and its Subsidiaries
including, without limitation, all easements and rights of way,
include all rights, Properties and other assets necessary to permit
the Company and its Subsidiaries to conduct their business in all
reasonably material respects in the same manner as their business has
been conducted prior to the Closing Date.
(d) All of the assets and Properties of the Company and
its Subsidiaries which are reasonably necessary for the operation of
their business are in good working condition and are maintained in
accordance with prudent business standards.
7.11 No Material Misstatements. To the best of the
information and belief of management of the Company after due inquiry no
written information, statement, exhibit, certificate, document or report
furnished to the Agent and the Banks (or any of them) by the Company in
connection with the negotiation of this Agreement contained any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statement contained therein not materially misleading in the light
of the circumstances in which made and with respect to the Company and the
Subsidiaries taken as a whole. To the best of the information and belief of
management of the Company after due inquiry there is no fact peculiar to the
Company or any of its Subsidiaries which constitutes a Material Adverse Effect
or in the future is reasonably likely to have (so far as management of the
Company can now foresee) a Material Adverse Effect and which has not been set
forth in this Agreement or the other documents, certificates and statements
furnished to the Agent by or on behalf of the Company prior to, or on, the
Closing Date in connection with the transactions contemplated hereby.
7.12 Investment Company Act. The Company is not an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
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7.13 Public Utility Holding Company Act. The Company is not
a "holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," or a "public utility" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
7.14 Subsidiaries and Partnerships. Except (i) as set forth
on Schedule 7.14 and (ii) for participation agreements existing or entered into
in the ordinary course of business of the Company with respect to the drilling,
development or acquisition of Oil and Gas Properties with participants under
arrangements which do not constitute state law partnerships, the Company has no
Subsidiaries and no interest in any partnerships.
7.15 Location of Business and Offices. The Company's
principal place of business and chief executive offices are located at the
address stated on the signature page of this Agreement.
7.16 Rate Filings. To the best of the Company's knowledge,
the Company has not violated and the Company is not in violation of any
provisions of The Natural Gas Act or The Natural Gas Policy Act of 1978 or any
other Federal or State law or any of the regulations thereunder (including
those of the respective Conservation Commissions and Land Offices of the
various jurisdictions having authority over the Company's Oil and Gas
Properties) with respect to its Oil and Gas Properties which would have a
Material Adverse Effect, and the Company has or will have made in the regular
course of business all necessary rate filings, certificate applications, well
category filings, interim collection filings and notices, and any other filings
or certifications, and has or will have received all necessary regulatory
authorizations (including without limitation necessary authorizations, if any,
with respect to any processing arrangements conducted by it or others
respecting its Oil and Gas Properties or production therefrom) required under
said laws and regulations with respect to all of the Company's Oil and Gas
Properties or production therefrom so as not to have a Material Adverse Effect.
To the best of the Company's knowledge, said material rate filings, certificate
applications, well category filings, interim collection filings and notices,
and other filings and certifications contain no untrue statements of material
facts nor do they omit any statements of material facts necessary in said
filings.
7.17 Environmental Matters. Except (i) as provided in
Schedule 7.17 or (ii) as would not have a Material Adverse Effect (or with
respect to (c), (d) and (e) below, where the failure to take such actions would
not have a Material Adverse Effect):
(a) Neither any Property of the Borrower or any
Subsidiary nor the operations conducted thereon violate any order or
requirement of any court or Governmental Authority or any
Environmental Laws;
(b) Without limitation of clause (a) above, no Property
of the Borrower or any Subsidiary nor the operations currently
conducted thereon or, to the best
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knowledge of the Borrower, by any prior owner or operator of such
Property or operation, are in violation of or subject to any existing,
pending or threatened action, suit, investigation, inquiry or
proceeding by or before any court or Governmental Authority or to any
remedial obligations under Environmental Laws;
(c) All notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed in connection
with the operation or use of any and all Property of the Borrower and
each Subsidiary, including without limitation, past or present
treatment, storage, disposal or release of a hazardous substance or
solid waste into the environment, have been duly obtained or filed,
and the Borrower and each Subsidiary is in compliance with the terms
and conditions of all such notices, permits, licenses and similar
authorizations;
(d) All hazardous substances, solid waste, and oil and
gas exploration and production wastes, if any, generated at any and
all Property of the Borrower have in the past been transported,
treated and disposed of in accordance with Environmental Laws and so
as not to pose an imminent and substantial endangerment to public
health or welfare or the environment, and, to the best knowledge of
the Borrower, all such transport carriers and treatment and disposal
facilities have been and are operating in compliance with
Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment, and are
not the subject of any existing, pending or threatened action,
investigation or inquiry by any Governmental Authority in connection
with any Environmental Laws;
(e) The Borrower has taken all steps reasonably necessary
to determine and has determined that no hazardous substances, solid
waste, or oil and gas exploration and production wastes, have been
disposed of or otherwise released and there has been no threatened
release of any hazardous substances on or to any Property of the
Borrower and each Subsidiary except in compliance with Environmental
Laws and so as not to pose an imminent and substantial endangerment to
public health or welfare or the environment;
(f) To the extent applicable, all Property of the
Borrower and each Subsidiary currently satisfies all design,
operation, and equipment requirements imposed by the OPA or scheduled
as of the Closing Date to be imposed by OPA during the term of this
Agreement, and the Borrower does not have any reason to believe that
such Property, to the extent subject to OPA, will not be able to
maintain compliance with the OPA requirements during the term of this
Agreement; and
(g) Neither the Borrower nor any Subsidiary has any known
contingent liability in connection with any release or threatened
release of any oil, hazardous substance or solid waste into the
environment.
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7.18 Defaults. Neither the Company nor any Subsidiary is in
default nor has any event or circumstance occurred which, but for the
expiration of any applicable grace period or the giving of notice, or both,
would constitute a default under any material agreement or instrument to which
the Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound which default would have a Material Adverse Effect. No
Default hereunder has occurred and is continuing.
7.19 Compliance with the Law. Neither the Company nor any
Subsidiary has violated any Governmental Requirement or failed to obtain any
license, permit, franchise or other governmental authorization necessary for
the ownership of any of its Properties or the conduct of its business, which
violation or failure would have (in the event such violation or failure were
asserted by any Person through appropriate action) a Material Adverse Effect.
7.20 Insurance. Schedule 7.20 attached hereto contains an
accurate and complete description of all material policies of fire, liability,
workmen's compensation and other forms of insurance owned or held by the
Company and each Subsidiary. All such policies are in full force and effect,
all premiums with respect thereto covering all periods up to and including the
date of the closing have been paid, and no notice of cancellation or
termination has been received with respect to any such policy. Such policies
are valid, outstanding and enforceable policies; provide adequate insurance
coverage in at least such amounts and against at least such risks (but
including in any event public liability) as are usually insured against in the
same general area by companies engaged in the same or a similar business for
the assets and operations of the Company and each Subsidiary; will remain in
full force and effect through the respective dates set forth in Schedule 7.20
without the payment of additional premiums; and will not in any way be affected
by, or terminate or lapse by reason of, the transactions contemplated by this
Agreement. Schedule 7.20 identifies all material risks, if any, which the
Company and its Subsidiaries and their respective Board of Directors or
officers have designated as being self insured. Neither the Company nor any
Subsidiary has been refused any insurance with respect to its assets or
operations, nor has its coverage been limited below usual and customary policy
limits, by an insurance carrier to which it has applied for any such insurance
or with which it has carried insurance during the last three years.
Section 8. Affirmative Covenants. The Company covenants and
agrees that, so long as any of the Commitments are in effect and until payment
in full of all Indebtedness hereunder, all interest thereon and all other
amounts payable by the Company hereunder:
8.01 Financial Statements. The Company shall deliver, or
shall cause to be delivered, to the Agent with sufficient copies of each for
the Banks:
(a) As soon as available and in any event within 90 days
after the end of each fiscal year of the Company, the audited
consolidated and unaudited consolidating statements of income,
stockholders' equity, and cash flows of the Company and its
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Consolidated Subsidiaries for such fiscal year, and the related
consolidated and consolidating balance sheets of the Company and its
Consolidated Subsidiaries as at the end of such fiscal year, and
setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year, and accompanied by the related
opinion of independent public accountants of recognized national
standing acceptable to the Agent which opinion shall state that said
financial statements fairly present the consolidated and consolidating
financial condition and results of operations of the Company and its
Consolidated Subsidiaries as at the end of, and for, such fiscal year
and that such financial statements have been prepared in accordance
with GAAP except for such changes in such principles with which the
independent public accountants shall have concurred and such opinion
shall not contain a "going concern" or like qualification or
exception; and in the case of the consolidating financial statements,
certified by a Responsible Officer as being fairly stated in all
material respects when considered in relation to the consolidated
financial statements of the Company and its Consolidated Subsidiaries.
(b) As soon as available and in any event within 45 days
after the end of each the first three fiscal quarterly periods of
each fiscal year of the Company, consolidated and consolidating
statements of income, stockholders' equity, and cash flows of the
Company and its Consolidated Subsidiaries, for such period and for the
period from the beginning of the respective fiscal year to the end of
such period, and the related consolidated and consolidating balance
sheets as at the end of such period, and setting forth in each case in
comparative form the corresponding figures for the corresponding
period in the preceding fiscal year, accompanied by the certificate of
a Responsible Officer, which certificate shall state that said
consolidated financial statements fairly present the consolidated
financial condition and results of operations of the Company and its
Subsidiaries in accordance with GAAP, as at the end of, and for, such
period (subject to normal year-end audit adjustments) and the
consolidating financial statements are fairly stated in all material
respects when considered in relation to the consolidated financial
statements of the Company and its Consolidated Subsidiaries.
(c) Promptly after the Company knows that any Default or
any Material Adverse Effect has occurred, a notice of such Default or
Material Adverse Effect, describing the same in reasonable detail and
the action the Company proposes to take with respect thereto.
(d) Promptly upon receipt thereof, a copy of each other
report or letter submitted to the Company or any Subsidiary by
independent accountants in connection with any annual, interim or
special audit made by them of the books of the Company and its
Subsidiaries, and a copy of any response by the Company or any
Subsidiary of the Company, or the Board of Directors of the Company or
any Subsidiary of the Company, to such letter or report.
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(e) Promptly upon their becoming available, each
financial statement, report, notice or proxy statement sent by the
Company to stockholders generally and each regular or periodic report
and any registration statement, prospectus or written communication
(other than transmittal letters) in respect thereof filed by the
Company with or received by the Company in connection therewith from
any securities exchange or the SEC.
(f) Promptly after the furnishing thereof, copies of any
statement, report or notice furnished to any Person pursuant to the
terms of any indenture, loan or credit or other similar agreement,
other than this Agreement and not otherwise required to be furnished
to the Banks pursuant to any other provision of this Section 8.01.
(g) Prompt notice of receipt by the Company or any of its
Subsidiaries of any claim for taxes (except claims for ad valorem
taxes received in the ordinary course of business) against the Company
or any Subsidiary if the amount involved is more than $500,000.
(h) Prompt notice of any transaction between the Company
or any of its Subsidiaries and any affiliate or employee other than
the payment of normal salaries, bonuses and benefits and reimbursement
of expenses in the ordinary course of business and transactions
permitted under Section 9.17 hereof.
(i) From time to time such other information regarding
the business, affairs or financial condition of the Company
(including, without limitation, any Plan or Multiemployer Plan and any
reports or other information required to be filed under ERISA) as any
Bank or the Agent may reasonably request.
The Company will furnish to the Agent, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate
substantially in the form of Exhibit C hereto executed by a Responsible Officer
(i) certifying as to the matters set forth therein and stating that no Default
has occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail) and (ii) setting forth in
reasonable detail the computations necessary to determine whether the Company
is in compliance with Sections 9.12 and 9.13 as of the end of the respective
fiscal quarter or fiscal year.
8.02 Litigation. The Company shall promptly give to each
Bank notice of all legal or arbitral proceedings, and of all proceedings before
any Governmental Authority affecting the Company or any Subsidiary, except
proceedings which, if adversely determined, would not have a Material Adverse
Effect. The Company will, and will cause each of its Subsidiaries to, promptly
notify the Agent and each of the Banks of any claim, judgment, Lien or other
encumbrance affecting any Property of the Company or any Subsidiary if the
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value of the claim, judgment, Lien or other encumbrance affecting such Property
shall exceed $1,000,000.
8.03 Maintenance, Etc.
(a) The Company shall and shall cause each Subsidiary to:
preserve and maintain its corporate existence and all of its material
rights, privileges and franchises except for such as are released,
surrendered or disposed of in the ordinary course of business and by
such release, surrender or disposal does not cause a Material Adverse
Effect; keep books of record and account in which full, true and
correct entries will be made of all dealings or transactions in
relation to its business and activities; comply with all Governmental
Requirements if failure to comply with such requirements will have a
Material Adverse Effect; pay and discharge all taxes, assessments and
governmental charges or levies imposed on it or on its income or
profits or on any of its Property prior to the date on which penalties
attach thereto, except for any such tax, assessment, charge or levy
the payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained
in accordance with GAAP; upon reasonable notice, permit
representatives of the Agent or any Bank, during normal business
hours, to examine, copy and make extracts from its books and records,
to inspect its Properties, and to discuss its business and affairs
with its officers, all to the extent reasonably requested by such Bank
or the Agent (as the case may be); and keep insured by financially
sound and reputable insurers all Property of a character usually
insured by Persons engaged in the same or similar business similarly
situated against loss or damage of the kinds and in the amounts
customarily insured against by such Persons and carry such other
insurance as is usually carried by such Persons including, without
limitation, environmental risk insurance to the extent reasonably
available.
(b) Contemporaneously with the delivery of the financial
statements required by Section 8.01(a) to be delivered for each year,
the Company will furnish or cause to be furnished to the Agent and the
Banks a certificate of insurance coverage from the insurer in form and
substance satisfactory to the Agent and, if requested, will make
available to the Agent and the Banks copies of the applicable policies
at offices of the Company.
(c) The Company will operate its Oil and Gas Properties
or cause such Oil and Gas Properties to be operated in a careful and
efficient manner in accordance with the practices of the industry and
in compliance with all applicable contracts and agreements and in
compliance in all material respects with all Governmental
Requirements.
(d) The Company will and will cause each Subsidiary to,
at its own expense, do or cause to be done all things reasonably
necessary to preserve and keep in good
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repair, working order and efficiency all of its Oil and Gas Properties
and other material Properties including, without limitation, all
equipment, machinery and facilities, and from time to time will make
all the reasonably necessary repairs, renewals and replacements so
that at all times the state and condition of its Oil and Gas
Properties and other material Properties will be fully preserved and
maintained, except to the extent a portion of such Properties is no
longer capable of producing Hydrocarbons in economically reasonable
amounts. In a manner consistent with the prudent operator standard,
the Company will and will cause each Subsidiary to promptly: (i) pay
and discharge, or make reasonable and customary efforts to cause to be
paid and discharged, all delay rentals, royalties, expenses and
indebtedness accruing under the leases or other agreements affecting
or pertaining to its Oil and Gas Properties, (ii) perform or make
reasonable and customary efforts to cause to be performed, in
accordance with industry standards, the obligations required by each
and all of the assignments, deeds, leases, sub-leases, contracts and
agreements affecting its interests in its Oil and Gas Properties and
other material Properties, (iii) will and will cause each Subsidiary
to do all other things necessary to keep unimpaired, except for Liens
described in Section 9.02, its rights with respect thereto and prevent
any forfeiture thereof or a default thereunder, except to the extent a
portion of such Properties is no longer capable of producing
Hydrocarbons in economically reasonable amounts and except for
dispositions permitted by Section 9.15 hereof.
8.04 Engineering Reports.
(a) At least 60 days prior to each Scheduled
Redetermination Date commencing with the Scheduled Redetermination
Date to occur on November 1, 1996, the Company shall furnish to the
Banks a Reserve Report. The December 31 Reserve Report of each year
to be delivered for the May 1 Scheduled Redetermination Date shall be
prepared by Ryder-Scott Company, Petroleum Engineers ("Ryder Scott")
or other certified independent engineer satisfactory to the Agent and
the June 30 Reserve Report of each year to be delivered for the
November 1 Scheduled Redetermination Date shall be prepared by or
under the supervision of the chief engineer of the Company who shall
certify such Reserve Report to be true and accurate and to have been
prepared in accordance with the procedures used in the immediately
preceding December 31 Reserve Report. The Company may elect to use
the December 31 Reserve Report instead of preparing the June 30
Reserve Report, in which case reserve run-off with no replacement will
be assumed. Further, the Company will be required to provide a review
of the Oil and Gas Properties which shall include a comparison of
actual and projected production volumes.
(b) For each unscheduled redetermination, the Company
shall furnish to the Banks, a Reserve Report prepared by or under the
supervision of the chief engineer of the Company who shall certify
such Reserve Report to be true and accurate and to have been prepared
in accordance with the procedures used in the immediately
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preceding December 31 Reserve Report. For any unscheduled
redetermination requested by the Majority Banks pursuant to Section
2.08(d), the Company shall provide such Reserve Report as soon as
possible, but in any event no later than 30 days following the receipt
of the request by the Majority Banks.
(c) Concurrently with the delivery of each Reserve
Report, the Company shall provide the Banks production reports
covering in the aggregate, the Company's net production of oil and
gas, which reports shall include quantities or volumes of production,
realized product prices, operating expenses, taxes, capital
expenditures and such other information as the Agent may reasonably
request and covering the six month period ending on the "as of" date
of the Reserve Report being delivered with such production report.
(d) With the delivery of each Reserve Report, the Company
shall provide to the Banks, a certificate from the Responsible Officer
of the Company that, to the best of his knowledge and in all material
respects, (a) the information contained in the Reserve Report and
Engineering Report is true and correct, (b) the Company owns good and
defensible title to the Oil and Gas Properties evaluated in such
Reserve Report free of all Liens except for Excepted Liens, (c) except
as set forth on an exhibit to the certificate, on a net basis there
are no gas imbalances, take or pay or other prepayments with respect
to the Oil and Gas Properties evaluated in such Reserve Report which
would require the Company to deliver Hydrocarbons produced from such
Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor, (d) no Oil and Gas Properties have
been sold since the date of the last Borrowing Base determination
except as consented to in writing by the Majority Banks or as
permitted by the terms of this Agreement, (e) attached to the
certificate is a list of the Oil and Gas Properties added to and
deleted from the immediately prior Reserve Report, and (f) attached to
the certificate are statements of the Company's outstanding Swap
Contracts, which statements shall include for each such Swap Contract
(A) the termination date, (B) the notional amounts or volumes and the
periods covered by such volumes; and (C) the price to be paid or the
basis for calculating the price to be paid by the Company and the
other Person under each Swap Contract for each of the future periods
covered by each Swap Contract.
8.05 Further Assurances. The Company will cure promptly any
defects in the creation and issuance of the Notes and the execution and
delivery of the other Loan Documents. The Company at its expense will promptly
execute and deliver to the Agent upon request all such other and further
documents, agreements and instruments in compliance with or accomplishment of
the covenants and agreements of the Company in the Loan Documents.
8.06 Performance of Obligations. The Company will pay the
Notes according to the reading, tenor and effect thereof; and the Company will
do and perform every act and
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discharge all of the obligations provided to be performed and discharged by the
Company under the Loan Documents at the time or times and in the manner
specified.
8.07 ERISA Information and Compliance. The Company will
promptly furnish and will cause the Subsidiaries and any ERISA Affiliate to
promptly furnish to the Agent with sufficient copies for each of the Banks (i)
promptly after the filing thereof with the United States Secretary of Labor,
the Internal Revenue Service or the PBGC, copies of each annual and other
report with respect to each Plan or any trust created thereunder, (ii)
immediately upon becoming aware of the occurrence of any ERISA Event or of any
"prohibited transaction," as described in section 406 of ERISA or in section
4975 of the Code, in connection with any Plan or any trust created thereunder,
a written notice signed by a Responsible Officer specifying the nature thereof,
what action the Company, the Subsidiary or the ERISA Affiliate is taking or
proposes to take with respect thereto, and, when known, any action taken or
proposed by the Internal Revenue Service, the Department of Labor or the PBGC
with respect thereto, and (iii) immediately upon receipt thereof, copies of any
notice of the PBGC's intention to terminate or to have a trustee appointed to
administer any Plan. With respect to each Plan (other than a Multiemployer
Plan), the Company will, and will cause each Subsidiary and ERISA Affiliate to,
(i) satisfy in full and in a timely manner, without incurring any late payment
or underpayment charge or penalty and without giving rise to any lien, all of
the contribution and funding requirements of section 412 of the Code
(determined without regard to subsections (d), (e), (f) and (k) thereof) and of
section 302 of ERISA (determined without regard to sections 303, 304 and 306 of
ERISA), and (ii) pay, or cause to be paid, to the PBGC in a timely manner,
without incurring any late payment or underpayment charge or penalty, all
premiums required pursuant to sections 4006 and 4007 of ERISA.
8.08 Environmental Matters.
(a) The Borrower will and will cause each Subsidiary to
establish and implement such procedures as may be reasonably necessary
to continuously determine and assure that any failure of the following
does not have a Material Adverse Effect: (i) all Property of the
Borrower and its Subsidiaries and the operations conducted thereon are
in compliance with and do not violate the requirements of any
Environmental Laws, (ii) no oil, hazardous substances or solid wastes
are disposed of or otherwise released on or to any Property owned by
any such party except in compliance with Environmental Laws, (iii) no
hazardous substance will be released on or to any such Property in a
quantity equal to or exceeding that quantity which requires reporting
pursuant to Section 103 of CERCLA, and (iv) no oil, oil and gas
exploration and production wastes, or hazardous substance is released
on or to any such Property so as to pose an imminent and substantial
endangerment to public health or welfare or the environment.
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(b) The Borrower will promptly notify the Bank in writing
of any threatened action, investigation or inquiry by any Governmental
Authority of which the Borrower has knowledge in connection with any
Environmental Laws, excluding routine testing and corrective action.
(c) The Borrower will and will cause each Subsidiary to
provide environmental audits and tests in accordance with ASTM
standards as reasonably requested by the Bank or as otherwise required
to be obtained by the Bank by any Governmental Authority in connection
with any future acquisitions of Oil and Gas Properties or other
material Properties.
Section 9. Negative Covenants. The Company covenants and
agrees that, so long as any of the Commitments are in effect and until payment
in full of all Indebtedness hereunder, all interest thereon and all other
amounts payable by the Company hereunder:
9.01 Debt. Neither the Company nor any Subsidiary will
incur, create, assume or suffer to exist any Debt, except:
(a) the Notes or other Indebtedness;
(b) Debt of the Company existing on the Closing Date
which is reflected in the Financial Statements or is disclosed in
Schedule 9.01 (but excluding under the Prior Credit Agreement), and
any renewals or extensions (but not increases) thereof;
(c) accounts payable (for the deferred purchase price of
Property or services) from time to time incurred in the ordinary
course of business which, if greater than 90 days past the invoice or
billing date, are being contested in good faith by appropriate
proceedings if reserves adequate under GAAP shall have been
established therefor;
(d) Debt under capital leases (as required to be reported
on the financial statements of the Company pursuant to GAAP) not to
exceed $5,000,000; and
(e) Debt associated with bonds or surety obligations
required by Governmental Requirements in connection with the operation
of the Company's Oil and Gas Properties; and
(f) obligations to establish or pay into escrow accounts
or other reserves amounts necessary to cover costs of abandonment of
oil and gas wells and/or drilling sites.
(g) Swap Contracts; provided, however, that (i) such Swap
Contracts related to oil production shall not, either individually or
in the aggregate, cover more than
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seventy-five percent (75%) of the Company's estimates for the
production of oil for each individual period covered by the Swap
Contracts, and (ii) such Swap Contracts related to natural gas
production shall, not either individually or in the aggregate, cover,
more than seventy-five percent (75%) of the Company's estimates for
the production of natural gas for each individual period covered by
the Swap Contracts; and
(h) Debt incurred by Special Purpose Subsidiaries, if and
only if, such Debt is evidenced by a document or instrument containing
language, in form and substance satisfactory to the Agent, by which
the lender or lenders acknowledge that the Debt advanced by them to
the Special Purpose Subsidiary to be non-recourse to the Company and
all other Subsidiaries.
9.02 Liens. Neither the Company nor any Subsidiary will
create, incur, assume or permit to exist any Lien on any of its Properties (now
owned or hereafter acquired), except:
(a) Liens securing the Prior Credit Agreement, provided
that the Company promptly causes such Liens to be released;
(b) Excepted Liens;
(c) Liens securing leases allowed by Section 9.01(d), but
only on the Property under lease;
(d) Liens on cash or securities securing the Debt
described in Section 9.01(e);
(e) Liens on cash or securities securing the Debt
described in Section 9.01(f); and
(f) Liens on Property of the Special Purchase Subsidiary
securing the Debt described in Section 9.01(h).
9.03 Investments, Loans and Advances. Neither the Company
nor any Subsidiary will make or permit to remain outstanding any loans or
advances to or investments in any Person, except that the foregoing restriction
shall not apply to:
(a) investments, loans or advances reflected in the
Financial Statements or which are disclosed to the Banks in Schedule
9.03;
(b) investments in additional Oil and Gas Properties and
gas gathering systems related thereto;
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(c) accounts receivable arising out of the sale of
Hydrocarbons, other assets or services in the ordinary course of
business;
(d) direct obligations of the United States or any agency
thereof, or obligations guaranteed by the United States or any agency
thereof, in each case maturing within one year from the date of
creation thereof;
(e) commercial paper maturing within one year from the
date of creation thereof rated A2 or higher by Standard & Poors
Corporation or P2 or higher by Moody's Investors Service, Inc.;
(f) deposits maturing within one year from the date of
creation thereof with, including certificates of deposit issued by,
any Bank or any office located in the United States of any other bank
or trust company which is organized under the laws of the United
States or any state thereof and has capital, surplus and undivided
profits aggregating at least $100,000,000.00 (as of the date of such
Bank's or bank or trust company's most recent financial reports) and
has a short term deposit rating of no lower than A2 or P2, as such
rating is set forth from time to time by Standard & Poors Corporation
or Moody's Investors Service, Inc., respectively;
(g) advances to operators under operating agreements
entered into by the Company in the ordinary course of business;
(h) repurchase agreements of any commercial banks in the
United States and Canada, if the commercial paper of such bank or of
the bank holding company of which such bank is a wholly-owned
subsidiary is rated in the highest rating categories of Standard &
Poors Corporation, Moody's Investors Service, Inc., or any other
rating agency satisfactory to the Majority Banks, that are fully
secured by securities described in Section 9.03(d);
(i) eurodollar investments maturing within one (1) year
with financial institutions meeting the qualifications established in
Section 9.03(f);
(j) equity investments in the aggregate not to exceed
$10,000,000 in Special Purpose Subsidiaries.
(k) investments in loan participations purchased from a
bank with which deposits may be made under Section 9.03(f), provided
that the remaining term of any such participation at the time such
participation is bought must be 90 days or less and that the borrower
obligated to pay such loan must then have a credit rating of A2 or
higher from Standard & Poor's Corporation or of P2 or higher from
Moody's Investors Service, Inc. on such borrower's short term
obligations;
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(l) in remarketed certificates of participation sold in
private placements, representing undivided interests in the assets of
a trust or similar entity owning debt instruments, provided that such
certificates of participation have received a credit rating of A2 or
higher from Standard & Poor's Corporation or of P2 or higher from
Moody's Investors Service, Inc. and are payable in full within 90 days
after purchase;
(m) in money market funds which can be liquidated on a
daily basis, provided that at the time in question such money market
funds have been specifically approved by the Agent and such approval
has not been withdrawn;
(n) asset backed securities with an average life of 24
months or less and rated in one of the top two rating categories of
Moody's Investors Service, Inc. or Standard & Poors Corporation;
(o) corporate notes or bonds rated A3 or better by
Moody's Investors Service, Inc. or A- or better by Standard & Poors
Corporation maturing within one year;
(p) at such time when no Loans and LC Exposure are
outstanding, the investments permitted by Sections 9.03(d), (e), (f),
(i), (n) or (o) may have maturities of two years or less; and
(q) other investments approved in writing by the Majority
Lenders.
9.04 Dividends, Distributions and Redemptions. The Company
will not declare or pay any dividend, purchase, redeem or otherwise acquire for
value any of its stock now or hereafter outstanding, return any capital to its
stockholders, or make any distribution of its assets to its stockholders,
except that the Company may pay dividends on and redeem its common and
preferred stock provided that (a) the dollar amount of the dividends and
redemption in any four quarters does not exceed 50% of consolidated net income
for such four quarter period, (b) the Company maintains a Fixed Charge Coverage
Ratio (as defined in Section 9.13 hereof) of 2.0 to 1.0 in such fiscal quarter
that the dividend is made and (c) no Default has occurred and is continuing and
such payment shall not cause a Default.
9.05 Sales and Leasebacks. The Company will not enter into
any arrangement, directly or indirectly, with any Person whereby the Company
shall sell or transfer any Property, whether now owned or hereafter acquired,
and whereby the Company shall then or thereafter rent or lease as lessee such
Property or any part thereof or other Property which the Company intends to use
for substantially the same purpose or purposes as the Property sold or
transferred.
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9.06 Nature of Business. The Company will not allow any
material change to be made in the character of its business as an independent,
oil and gas exploration and production company.
9.07 Limitation on Leases. The Company will not create,
incur, assume or suffer to exist any obligation for the payment of rent or hire
of Property of any kind whatsoever (real or personal including capital leases
but excluding leases of Hydrocarbon Interests), under leases or lease
agreements which would cause the aggregate amount of all payments made by the
Company pursuant to such leases or lease agreements to exceed $1,000,000 in any
period of twelve consecutive calendar months during the life of such leases.
9.08 Mergers, Etc. Neither the Company nor any Subsidiary
will merge into or with or consolidate with any other Person, or sell, lease or
otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its Property or assets that are not
Oil and Gas Properties to any other Person.
9.09 Proceeds of Notes. The Company will not permit the
proceeds of the Notes to be used for any purpose other than those permitted by
Section 7.07.
9.10 ERISA Compliance. The Company will not at any time:
(a) Engage in, or permit any Subsidiary or ERISA
Affiliate to engage in, any transaction in connection with which the
Company, any Subsidiary or any ERISA Affiliate could be subjected to
either a civil penalty assessed pursuant to section 502(c), (i) or (l)
of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code;
(b) Terminate, or permit any Subsidiary or ERISA
Affiliate to terminate, any Plan in a manner, or take any other action
with respect to any Plan, which could result in any liability to the
Company, any Subsidiary or any ERISA Affiliate to the PBGC;
(c) Fail to make, or permit any Subsidiary or ERISA
Affiliate to fail to make, full payment when due of all amounts which,
under the provisions of any Plan, agreement relating thereto or
applicable law, the Company, a Subsidiary or any ERISA Affiliate is
required to pay as contributions thereto;
(d) Permit to exist, or allow any Subsidiary or ERISA
Affiliate to permit to exist, any accumulated funding deficiency
within the meaning of Section 302 of ERISA or section 412 of the Code,
whether or not waived, with respect to any Plan;
(e) Permit, or allow any Subsidiary or ERISA Affiliate to
permit, the actuarial present value of the benefit liabilities under
any Plan maintained by the Company, any Subsidiary or any ERISA
Affiliate which is regulated under Title
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IV of ERISA to exceed the current value of the assets (computed on a
plan termination basis in accordance with Title IV of ERISA) of such
Plan allocable to such benefit liabilities. The term "actuarial
present value of the benefit liabilities" shall have the meaning
specified in section 4041 of ERISA;
(f) Contribute to or assume an obligation to contribute
to, or permit any Subsidiary or ERISA Affiliate to contribute to or
assume an obligation to contribute to, any Multiemployer Plan;
(g) Acquire, or permit any Subsidiary or ERISA Affiliate
to acquire, an interest in any Person that causes such Person to
become an ERISA Affiliate with respect to the Company, any Subsidiary
or any ERISA Affiliate if such Person sponsors, maintains or
contributes to, or at any time in the six-year period preceding such
acquisition has sponsored, maintained, or contributed to, (1) any
Multiemployer Plan, or (2) any other Plan that is subject to Title IV
of ERISA under which the actuarial present value of the benefit
liabilities under such Plan exceeds the current value of the assets
(computed on a plan termination basis in accordance with Title IV of
ERISA) of such Plan allocable to such benefit liabilities;
(h) Incur, or permit any Subsidiary or ERISA Affiliate to
incur, a liability to or on account of a Plan under sections 515,
4062, 4063, 4064, 4201 or 4204 of ERISA;
(i) Contribute to or assume an obligation to contribute
to, or permit any Subsidiary or ERISA Affiliate to contribute to or
assume an obligation to contribute to, any employee welfare benefit
plan, as defined in section 3(1) of ERISA, including, without
limitation, any such plan maintained to provide benefits to former
employees of such entities, that may not be terminated by such
entities in their sole discretion at any time without any material
liability; or
(j) Amend or permit any Subsidiary or ERISA Affiliate to
amend, a Plan resulting in an increase in current liability such that
the Company, any Subsidiary or any ERISA Affiliate is required to
provide security to such Plan under section 401(a)(29) of the Code.
9.11 Sale or Discount of Receivables. Neither the Company
nor any Subsidiary will discount or sell (with or without recourse) any of its
notes receivable or accounts receivable unless the Company determines in its
reasonable judgment that such course of action is the only means of collection
with respect to any such note receivable or account receivable and provided
that it does not constitute a material portion of the Company's notes
receivable or accounts receivable outstanding at such time.
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9.12 Working Capital Ratio. The Company, together with all
Consolidated Subsidiaries (except for Special Purpose Subsidiaries) on a
consolidated basis, will not allow its Working Capital Ratio (calculated
quarterly and included in the quarterly financial report provided pursuant to
Section 8.01(b)) to fall below at any time 1.1 to 1.0. For the purposes of
this section, Working Capital Ratio shall mean the ratio of (i) current assets
as determined in accordance with GAAP plus unused availability under the
Aggregate Commitments to (ii) current liabilities as determined in accordance
with GAAP less current portions of the Indebtedness.
9.13 Fixed Charge Coverage Ratio. The Company, together with
all Consolidated Subsidiaries (except for Special Purpose Subsidiaries) on a
consolidated basis, will not allow its Fixed Charge Coverage Ratio (calculated
quarterly and included in the financial statements provided pursuant to Section
8.01(b)) to fall below 1.5 to 1.0 for any fiscal quarter. For the purposes of
this section, Fixed Charge Coverage Ratio shall mean the ratio of (i) net
income as determined in accordance with GAAP plus non-cash charges less
non-cash revenues plus interest expense plus lease expense plus, to the extent
not already included by GAAP, the positive difference, if any, between the
aggregate payments made by the Company and the aggregate payments received by
the Company under all Swap Contracts to (ii) interest expense plus scheduled
amortization of all of the Company's Debt plus lease expense plus, to the
extent not already included by GAAP, the positive difference, if any, between
the aggregate payments made by the Company and the aggregate payments received
by the Company under all Swap Contracts.
9.14 Net Worth. The Company will not permit its net worth
(determined in accordance with GAAP) at any time to be less than $150,000,000
plus 50% of the positive consolidated net income for any quarter commencing
with the quarter beginning January 1, 1996.
9.15 Sale of Oil and Gas Properties. Except for Hydrocarbons
sold in the ordinary course of business as and when produced, the Company will
not sell, assign, transfer, farm-out or convey ("Transfer") any interest in any
of its Oil and Gas Properties in any Borrowing Base Period in excess of
$5,000,000 in the aggregate as such value is determined by the most recent
December 31, Reserve Report, using a 10% discount rate and giving effect to
production prior to the effective date of the Transfer, without the prior
written consent of Majority Banks, which consent will not be unreasonably
withheld.
9.16 Environmental Matters. Neither the Borrower nor any
Subsidiary will cause or permit any of its Property to be in violation of, or
do anything or permit anything to be done which will subject any such Property
to any remedial obligations under any Environmental Laws, assuming disclosure
to the applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to such Property where such violation or
remedial obligations would have a Material Adverse Effect.
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9.17 Transactions with Affiliates. The Company shall not
enter into any transaction, including, without limitation, any purchase, sale,
lease or exchange of property or the rendering of any service, with any
Affiliate unless such transactions are otherwise permitted under this
Agreement, are in the ordinary course of the Company's business and are upon
fair and reasonable terms no less favorable to the Company than it would obtain
in a comparable arm's length transaction with a Person not an Affiliate.
9.18 Subsidiaries and Partnerships. Neither the Company nor
any Subsidiary shall create any additional Subsidiaries or partnerships other
than those listed in Schedule 7.14, except for (i) tax law partnerships which
are not partnerships under state law and (ii) Special Purpose Subsidiaries.
The Company covenants to give the Agent, for the benefit of the Banks, prompt
notice of the creation of any Special Purpose Subsidiary.
9.19 Hydrocarbon Sales Contract. The Company will not enter
into any contracts for the sale of Hydrocarbons produced from any of its Oil
and Gas Properties in which the Company warrants quantities of Hydrocarbons to
be delivered thereunder.
9.20 Negative Pledge Agreements. The Company will not
create, incur, assume or suffer to exist any contract, agreement or
understanding (other than this Agreement) which in any way prohibits or
restrict the granting, conveying, creation or imposition of any Lien on any of
its Property or restricts any Subsidiary from paying dividends to the Company
or which requires the consent of or notice to other Persons in connection
therewith.
Section 10. Events of Default; Remedies.
10.01 Events of Default. If one or more of the following
events (herein called "Events of Default") shall occur and be continuing:
(a) The Company shall default in the payment or
prepayment when due of any principal of or interest on any Loan, or
any reimbursement obligation for a disbursement made under any Letter
of Credit or any fees or other amount payable by it hereunder or under
any other Loan Document and such default shall continued unremedied
for a period of three (3) Business Days; or
(b) The Company shall default in the payment when due of
any principal of or interest on any of its other Debt in an amount in
excess of $100,000.00; or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such Debt
shall occur if the effect of such event is to cause, or (with the
giving of any notice or the lapse of time or both) to permit the
holder or holders of such Debt (or a trustee or agent on behalf of
such holder or holders) to cause, such Debt to become due prior to its
stated maturity; or
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(c) Any representation, warranty or certification made or
deemed made herein or in any other Loan Document by the Company, or
any certificate furnished to any Bank or the Agent pursuant to the
provisions hereof or any other Loan Document, shall prove to have been
false or misleading as of the time made or furnished in any material
respect; or
(d) The Company shall default in the performance of any
of its obligations under Section 9 or any other Section of this
Agreement other than under Section 8; or the Company shall default in
the performance of any of its obligations under Section 8 or any Loan
Document (other than payment of amounts due which shall be governed by
Section 10.01(a)) and such default shall continue unremedied for a
period of 30 days after the earlier to occur of (i) notice thereof to
the Company by the Agent or any Bank (through the Agent) or (ii) the
Company otherwise becoming aware of such default; or
(e) The Company shall admit in writing its inability to,
or be generally unable to, pay its debts as such debts become due; or
(f) The Company shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Federal
Bankruptcy Code (as now or hereafter in effect), (iv) file a petition
seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or readjustment
of debts, (v) fail to controvert in a timely and appropriate manner,
or acquiesce in writing to, any petition filed against it in an
involuntary case under the Federal Bankruptcy Code, or (vi) take any
corporate action for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the
application or consent of the Company, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution
or winding-up, or the composition or readjustment of its debts, (ii)
the appointment of a trustee, receiver, custodian, liquidator or the
like of the Company or of all or any substantial part of its assets,
or (iii) similar relief in respect of the Company under any law
relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, and such proceeding or case shall
continue undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed
and in effect, for a period of 60 days; or an order for relief against
the Company shall be entered in an involuntary case under the Federal
Bankruptcy Code; or
(h) A judgment or judgments for the payment of money in
excess of $500,000.00 in the aggregate shall be rendered by a court or
courts against the
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Company and the same shall not be discharged (or provision shall not
be made for such discharge) or a stay of execution thereof shall not
be procured, within 30 days from the date of entry thereof and the
Company shall not, within said period of 30 days, or such longer
period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during
such appeal; or
(i) Any Subsidiary takes, suffers or permits to exist as
to such Subsidiary any of the events or conditions referred to in
Sections 10(b), (e), (f), (g) or (h); or
(j) If any Letter of Credit becomes the subject matter of
any order, judgment, injunction or any other such determination, or if
the Company or any other Person shall petition or apply for or obtain
any order restricting payment by the Agent under any Letter of Credit
or extending the Banks' liability under any Letter of Credit beyond
the expiration date stated therein or otherwise agreed to by the
Agent.
10.02 Remedies.
(a) In the case of an Event of Default other than one
referred to in clauses (e), (f) or (g) of Section 10.01 or in clause
(i) to the extent it relates to clauses (e), (f) or (g), the Agent may
and, upon request of the Majority Banks, shall, by notice to the
Company, cancel the Commitments and/or declare the principal amount
then outstanding of, and the accrued interest on the Loans and all
other amounts payable by the Company hereunder and under the Notes
(including without limitation the payment of cash collateral to secure
the LC Exposure as provided in Section 2.07(b) hereof) to be forthwith
due and payable, whereupon such amounts shall be immediately due and
payable without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other formalities of any kind,
all of which are hereby expressly waived by the Company.
(b) In the case of the occurrence of an Event of Default
referred to in clauses (e), (f) or (g) of Section 10.01 or in clause
(i) to the extent it relates to clauses (e), (f) or (g), the
Commitments shall be automatically cancelled and the principal amount
then outstanding of, and the accrued interest on, the Loans and all
other amounts payable by the Company hereunder and under the Notes
(including without limitation the payment of cash collateral to secure
the LC Exposure as provided in Section 2.07(b) hereof) shall become
automatically immediately due and payable without presentment, demand,
protest, notice of intent to accelerate, notice of acceleration or
other formalities of any kind, all of which are hereby expressly
waived by the Company.
(c) All proceeds received after maturity of the Notes,
whether by acceleration or otherwise shall be applied first to
reimbursement of expenses and
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indemnities provided for in this Agreement and the other Loan
Documents; second to accrued interest on the Notes; third to fees;
fourth pro rata to principal outstanding on the Notes and other
Indebtedness; fifth to serve as cash collateral to be held by the
Agent to secure the LC Exposure; and any excess shall be paid to the
Company or as otherwise required by any Governmental Requirement.
Section 11. The Agent.
11.01 Appointment, Powers and Immunities. Each Bank hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder
with such powers as are specifically delegated to the Agent by the terms of
this Agreement and the Loan Documents, together with such other powers as are
reasonably incidental thereto. The Agent (which term as used in this sentence
and in Section 11.05 and the first sentence of Section 11.06 shall include
reference to its Affiliates and its Affiliates' officers, directors, employees,
attorneys, accountants, experts and agents): (a) shall have no duties or
responsibilities except those expressly set forth in the Loan Documents, and
shall not by reason of the Loan Documents be a trustee or fiduciary for any
Bank; (b) makes no representation or warranty to any Bank and shall not be
responsible to the Banks for any recitals, statements, representations or
warranties contained in this Agreement, or in any certificate or other document
referred to or provided for in, or received by any of them under, this
Agreement, or for the value, validity, effectiveness, genuineness, execution,
legality, enforceability or sufficiency of this Agreement, any Note or any
other document referred to or provided for herein or for any failure by the
Company or any other Person (other than the Agent) to perform any of its
obligations hereunder or thereunder or for the existence, value, perfection or
priority of any collateral security or the financial or other condition of the
Company, its Subsidiaries or any other obligor; (c) except pursuant to Section
11.07 shall not be required to initiate or conduct any litigation or collection
proceedings hereunder; and (d) shall not be responsible for any action taken or
omitted to be taken by it hereunder or under any other document or instrument
referred to or provided for herein or in connection herewith including its own
ordinary negligence, except for its own gross negligence or wilful misconduct.
The Agent may employ agents, accountants, attorneys and experts and shall not
be responsible for the negligence or misconduct of any such agents,
accountants, attorneys or experts selected by it in good faith or any action
taken or omitted to be taken in good faith by it in accordance with the advice
of such agents, accountants, attorneys or experts. The Agent may deem and
treat the payee of any Note as the holder thereof for all purposes hereof
unless and until a written notice of the assignment or transfer thereof
permitted hereunder shall have been filed with the Agent.
11.02 Reliance by Agent. The Agent shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telex, telecopier, telegram or cable) believed by it to be genuine
and correct and to have been signed or sent by or on behalf of the proper
Person or Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Agent.
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11.03 Defaults. The Agent shall not be deemed to have
knowledge of the occurrence of a Default (other than the non-payment of
principal of or interest on Loans or of fees or failure to reimburse for Letter
of Credit drawings) unless the Agent has received notice from a Bank or the
Company specifying such Default and stating that such notice is a "Notice of
Default." In the event that the Agent receives such a notice of the occurrence
of a Default, the Agent shall give prompt notice thereof to the Banks.
11.04 Rights as a Bank. With respect to its Commitments and
the Loans made by it and its participation in the issuance of Letters of
Credit, The Chase Manhattan Bank, N.A. (and any successor acting as Agent) in
its capacity as a Bank hereunder shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not
acting as the Agent, and the term "Bank" or "Banks" shall, unless the context
otherwise indicates, include the Agent in its individual capacity. The Chase
Manhattan Bank, N.A. (and any successor acting as Agent) and its Affiliates may
(without having to account therefor to any Bank) accept deposits from, lend
money to and generally engage in any kind of banking, trust or other business
with the Company (and any of its Affiliates) as if it were not acting as the
Agent, and The Chase Manhattan Bank, N.A. and its Affiliates may accept fees
and other consideration from the Company for services in connection with this
Agreement or otherwise without having to account for the same to the Banks.
11.05 INDEMNIFICATION. THE BANKS AGREE TO INDEMNIFY THE
AGENT RATABLY IN ACCORDANCE WITH THEIR PERCENTAGE SHARES FOR THE INDEMNITY
MATTERS AS DESCRIBED IN SECTION 12.03 TO THE EXTENT NOT INDEMNIFIED OR
REIMBURSED BY THE COMPANY UNDER SECTION 12.03, BUT WITHOUT LIMITING THE
OBLIGATIONS OF THE COMPANY UNDER SAID SECTION 12.03 AND FOR ANY AND ALL OTHER
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER WHICH
MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT IN ANY WAY
RELATING TO OR ARISING OUT OF: (A) THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR
ANY OTHER DOCUMENTS CONTEMPLATED BY OR REFERRED TO HEREIN OR THE TRANSACTIONS
CONTEMPLATED HEREBY, BUT EXCLUDING, UNLESS A DEFAULT HAS OCCURRED AND IS
CONTINUING, NORMAL ADMINISTRATIVE COSTS AND EXPENSES INCIDENT TO THE
PERFORMANCE OF ITS AGENCY DUTIES HEREUNDER OR (B) THE ENFORCEMENT OF ANY OF THE
TERMS OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT; WHETHER OR NOT ANY OF THE
FOREGOING SPECIFIED IN THIS SECTION 11.05 ARISES FROM THE SOLE OR CONCURRENT
NEGLIGENCE OF THE AGENT, PROVIDED THAT NO BANK SHALL BE LIABLE FOR ANY OF THE
FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILFUL
MISCONDUCT OF THE AGENT.
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11.06 Non-Reliance on Agent and other Banks. Each Bank
acknowledges and agrees that it has, independently and without reliance on the
Agent or any other Bank, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Company and decision to
enter into this Agreement and that it will, independently and without reliance
upon the Agent or any other Bank, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement. The Agent shall
not be required to keep itself informed as to the performance or observance by
the Company of the Loan Documents or any other document referred to or provided
for herein or to inspect the properties or books of the Company. Except for
notices, reports and other documents and information expressly required to be
furnished to the Banks by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of the Company (or any
of its Affiliates) which may come into the possession of the Agent or any of
its affiliates. In this regard, each Bank acknowledges Vinson & Elkins L.L.P.
is acting in this transaction as special counsel to the Agent only, except to
the extent otherwise expressly stated in any legal opinion or any Loan
Document. Each Bank will consult with its own legal counsel to the extent that
it deems necessary in connection with the Loan Documents and the matters
contemplated therein.
11.07 Action by Agent. Except for action or other matters
expressly required of the Agent hereunder the Agent shall in all cases be fully
justified in failing or refusing to act hereunder unless it shall (i) receive
written instructions from the Majority Banks specifying the action to be taken
and (ii) be indemnified to its satisfaction by the Banks against any and all
liability and expenses which may be incurred by it by reason of taking or
continuing to take any such action. The instructions of the Majority Banks and
any action taken or failure to act pursuant thereto by the Agent shall be
binding on all of the Banks. If a Default has occurred and is continuing, the
Agent shall take such action with respect to such Default as shall be directed
by the Majority Banks in the written instructions (with indemnities) described
in this Section 11.07, provided that, unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default
as it shall deem advisable in the best interests of the Banks. In no event,
however, shall the Agent be required to take any action which exposes the Agent
to personal liability or which is contrary to this Agreement and the other Loan
Documents or applicable law.
11.08 Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent
may resign at any time by giving notice thereof to the Banks and the Company
and the Agent may be removed at any time with or without cause by the Majority
Banks. Upon any such resignation or removal, the Majority Banks shall have the
right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Majority Banks and shall have accepted such appointment within
30 days after the retiring Agent's giving of notice of resignation or the
Majority
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Banks' removal of the retiring Agent, then the retiring Agent may, on behalf of
the Banks, appoint a successor Agent. Upon the acceptance of such appointment
as Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations hereunder. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Section 11 and Section 12.03
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Agent.
Section 12. Miscellaneous.
12.01 Waiver. No failure on the part of the Agent or any
Bank to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement, any Note or any
other Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under this Agreement, any
Note or any other Loan Document preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
12.02 Notices. All notices and other communications provided
for herein and in the other Loan Documents (including, without limitation, any
modifications of, or waivers or consents under, this Agreement or the other
Loan Documents) shall be given or made by telex, telecopy, telegraph, cable,
courier or U.S. Mail or in writing and telexed, telecopied, telegraphed,
cabled, mailed or delivered to the intended recipient at the "Address for
Notices" specified below its name on the signature pages hereof or in the other
Loan Documents; or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement or in the other Loan Documents, all such
communications shall be deemed to have been duly given when transmitted by
telex or telecopier, delivered to the telegraph or cable office or personally
delivered or, in the case of a mailed notice, three (3) Business Days after the
date deposited in the mails, postage prepaid, in each case given or addressed
as aforesaid.
12.03 Payment of Expenses, Indemnities, etc. The Company
agrees to:
(a) whether or not the transactions hereby contemplated
are consummated, pay all reasonable expenses of the Agent in the
administration (both before and after the execution hereof and
including advice of counsel as to the rights and duties of the Agent
and the Banks with respect thereto) of, and in connection with the
negotiation, syndication, investigation, preparation, execution and
delivery of, recording or filing of, preservation of rights under,
enforcement of, and refinancing, renegotiation or restructuring of,
this Agreement, the Notes and the other Loan Documents and any
amendment, waiver or consent relating thereto (including, without
limitation, travel, photocopy, mailing, courier, telephone and other
similar expenses of the Agent, the
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cost of environmental audits, surveys and appraisals at reasonable
intervals, the reasonable fees and disbursements of counsel for the
Agent and in the case of enforcement for any of the Banks); and
promptly reimburse the Agent for all amounts expended, advanced or
incurred by the Agent or the Banks to satisfy any obligation of the
Company under this Agreement or any Loan Document;
(B) TO INDEMNIFY THE AGENT AND EACH BANK AND EACH OF
THEIR AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES, AGENTS, ATTORNEYS, ACCOUNTANTS AND EXPERTS
("INDEMNIFIED PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND
PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY
MATTERS WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF
THEM (WHETHER OR NOT ANY OF THEM IS DESIGNATED A PARTY THERETO) AS A
RESULT OF, ARISING OUT OF OR IN ANY WAY RELATED TO (I) ANY ACTUAL OR
PROPOSED USE BY THE COMPANY OF THE PROCEEDS OF ANY OF THE LOANS, (II)
THE EXECUTION, DELIVERY AND PERFORMANCE OF THE LOAN DOCUMENTS, (III)
THE OPERATIONS OF THE BUSINESS OF THE COMPANY AND ITS SUBSIDIARIES,
(IV) THE FAILURE OF THE COMPANY OR ANY SUBSIDIARY TO COMPLY WITH THE
TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY
GOVERNMENTAL REQUIREMENT, (V) ANY INACCURACY OF ANY REPRESENTATION OR
ANY BREACH OF ANY WARRANTY OF THE COMPANY SET FORTH IN THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS, (VI) THE ISSUANCE, EXECUTION AND DELIVERY
OR TRANSFER OF OR PAYMENT OR FAILURE TO PAY UNDER ANY LETTER OF
CREDIT, (VII) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF CREDIT
NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER
PRESENTATION OF THE MANUALLY EXECUTED DRAFT(S) AND CERTIFICATION(S),
(VIII) ANY ASSERTION THAT THE BANKS WERE NOT ENTITLED TO RECEIVE THE
PROCEEDS RECEIVED PURSUANT TO THE LOAN DOCUMENTS, OR (IX) ANY OTHER
ASPECT OF THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE
REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AND ALL OTHER EXPENSES
INCURRED IN CONNECTION WITH INVESTIGATING, DEFENDING OR PREPARING TO
DEFEND ANY SUCH ACTION, SUIT, PROCEEDING (INCLUDING ANY
INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM AND INCLUDING ALL
INDEMNITY MATTERS ARISING BY REASON OF THE ORDINARY NEGLIGENCE OF ANY
INDEMNIFIED PARTY, BUT EXCLUDING ALL INDEMNITY MATTERS ARISING SOLELY
BY REASON OF CLAIMS BETWEEN THE BANKS OR ANY BANK AND THE AGENT OR A
BANK'S
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SHAREHOLDERS AGAINST THE AGENT OR BANK OR BY REASON OF THE GROSS
NEGLIGENCE OR WILFUL MISCONDUCT ON THE PART OF THE INDEMNIFIED PARTY;
AND
(C) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE
INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST
RECOVERY ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND
LIABILITIES TO WHICH ANY SUCH PERSON MAY BECOME SUBJECT (I) UNDER ANY
ENVIRONMENTAL LAW APPLICABLE TO THE COMPANY OR ANY SUBSIDIARY OR ANY
OF THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, THE TREATMENT OR
DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (II) AS A
RESULT OF THE BREACH OR NON-COMPLIANCE BY THE COMPANY OR ANY
SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE COMPANY OR ANY
SUBSIDIARY, (III) DUE TO PAST OWNERSHIP BY THE COMPANY OR ANY
SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY THEIR
PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME,
COULD RESULT IN PRESENT LIABILITY, (IV) THE PRESENCE, USE, RELEASE,
STORAGE, TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON OR AT ANY OF
THE PROPERTIES OWNED OR OPERATED BY THE COMPANY OR ANY SUBSIDIARY, OR
(V) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION
WITH ANY OF THE LOAN DOCUMENTS, PROVIDED, HOWEVER, NO INDEMNITY SHALL
BE AFFORDED UNDER THIS SECTION 12.03 (C) IN RESPECT OF ANY PROPERTY
FOR ANY OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS OF THE AGENT OR
ANY BANK DURING THE PERIOD AFTER WHICH SUCH PERSON, ITS SUCCESSORS OR
ASSIGNS SHALL HAVE OBTAINED POSSESSION OF SUCH PROPERTY (WHETHER BY
FORECLOSURE OR DEED IN LIEU OF FORECLOSURE, AS MORTGAGEE-IN-POSSESSION
OR OTHERWISE).
(d) No Indemnified Party may settle any claim to be
indemnified without the consent of the indemnitor, such consent not to
be unreasonably withheld; provided, that the indemnitor may not
reasonably withhold consent to any settlement that an Indemnified
Party proposes, if the indemnitor does not have the financial ability
to pay all its obligations outstanding and asserted against the
indemnitor at that time, including the maximum potential claims
against the Indemnified Party to be indemnified pursuant to this
Section 12.03.
(e) In the case of any indemnification hereunder, the
Agent or any Bank, as appropriate, shall give notice to the Company of
any such claim or demand being
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made against the Indemnified Party and the Company shall have the
non-exclusive right to join in the defense against any such claim or
demand provided that if the Company provides a defense, the
Indemnified Party shall bear its own cost of defense unless there is a
conflict between the Company and such Indemnified Party.
(F) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE
INDEMNIFIED PARTIES NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE
OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE,
WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT
LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE
RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNIFIED
PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY
ONE OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN
INDEMNIFIED PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS
NEGLIGENCE OR WILFUL MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF
INDEMNIFICATION SHALL CONTINUE BUT SHALL ONLY EXTEND TO THE PORTION OF
THE CLAIM THAT IS DEEMED TO HAVE OCCURRED BY REASON OF EVENTS OTHER
THAN THE GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF THE INDEMNIFIED
PARTY.
(g) The Company's obligations under this Section 12.03
shall survive any termination of this Agreement and the payment of the
Notes and shall continue thereafter in full force and effect.
(h) The Company shall pay any amounts due under this
Section 12.03 within thirty (30) days of the receipt by the Company of
notice of the amount due.
12.04 Amendments, Etc. Any provision of this Agreement or
any other Loan Document, may be amended, modified or waived with the Company's
and the Majority Banks' prior written consent; provided that (a) no amendment,
modification or waiver which extends the Revolving Credit Termination Date, the
maturity of the Loans, increases the Aggregate Maximum Credit Amounts, releases
all or substantially all of the collateral, reduces the interest rate or fees
applicable to the Loans or the fees payable to the Banks generally, affects
Sections 2.03(a), this Section 12.04 or Section 12.06(a) or modifies the
definition of "Majority Banks" shall be effective without consent of all Banks;
(b) no amendment, modification or waiver which increases the Maximum Credit
Amount of any Bank shall be effective without the consent of such Bank; and (c)
no amendment, modification or waiver which modifies the rights, duties or
obligations of the Agent shall be effective without the consent of the Agent.
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12.05 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
12.06 Assignments and Participations.
(a) The Company may not assign its rights or obligations
hereunder or under the Notes or any Letters of Credit without the
prior consent of all of the Banks and the Agent.
(b) Any Bank may, upon the written consent of the Agent
and the Company (which consent will not be unreasonably withheld),
assign to one or more assignees all or a portion of its rights and
obligations under this Agreement pursuant to an Assignment Agreement
substantially in the form of Exhibit D (an "Assignment") provided,
however, that (i) any such assignment shall be in the amount of at
least $10,000,000 or such lesser amount to which the Company has
consented and (ii) the assignee shall pay to the Agent a processing
and recordation fee of $2,500 for each assignment. Any such
assignment will become effective upon the execution and delivery to
the Agent of the Assignment and the consent of the Agent. Promptly
after receipt of an executed Assignment, the Agent shall send to the
Company a copy of such executed Assignment. Upon receipt of such
executed Assignment, the Company, will, at its own expense, execute
and deliver new Notes to the assignor and/or assignee, as appropriate,
in accordance with their respective interests as they appear. Upon
the effectiveness of any assignment pursuant to this Section 12.06(b),
the assignee will become a "Bank," if not already a "Bank," for all
purposes of this Agreement and the other Loan Documents. The assignor
shall be relieved of its obligations hereunder to the extent of such
assignment (and if the assigning Bank no longer holds any rights or
obligations under this Agreement, such assigning Bank shall cease to
be a "Bank" hereunder except that its rights under Sections 4.06,
5.01, 5.05 and 12.03 shall not be affected). The Agent will prepare
on the last Business Day of each month during which an assignment has
become effective pursuant to this Section 12.06(b), a new Annex I
giving effect to all such assignments effected during such month, and
will promptly provide the same to the Company and each of the Banks.
(c) Each Bank may transfer, grant or assign
participations in all or any part of such Bank's interests hereunder
pursuant to this Section 12.06(c) to any Person, provided that: (i)
such Bank shall remain a "Bank" for all purposes of this Agreement and
the transferee of such participation shall not constitute a "Bank"
hereunder; and (ii) no participant under any such participation shall
have rights to approve any amendment to or waiver of any of the Loan
Documents, except to the extent such amendment or waiver would (x)
extend the Revolving Credit Termination Date, (y) reduce the interest
rate (other than as a result of waiving the applicability of any
post-default increases in interest rates) or fees applicable to any of
the Commitments
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or Loans or Letters of Credit in which such participant is
participating, or postpone the payment of any thereof, or (z) release
all or substantially all of the collateral (except as provided in the
Loan Documents) supporting any of the Commitments or Loans or Letters
of Credit in which such participant is participating. In the case of
any such participation, the participant shall not have any rights
under this Agreement or any of the Loan Documents (the participant's
rights against the granting Bank in respect of such participation to
be those set forth in the agreement with such Bank creating such
participation), and all amounts payable by the Company hereunder shall
be determined as if such Bank had not sold such participation,
provided that such participant shall be entitled to receive additional
amounts under Article V on the same basis as if it were a Bank and be
indemnified under Section 12.03 as if it were a Bank. In addition,
each agreement creating any participation must include an agreement by
the participant to be bound by the provisions of Section 12.15.
(d) The Banks may furnish any information concerning the
Company in the possession of the Banks from time to time to assignees
and participants (including prospective assignees and participants);
provided that, such Persons agree to be bound by the provisions of
Section 12.15 hereof.
(e) Notwithstanding anything in this Section 12.06 to the
contrary, any Bank may assign and pledge all or any of its Notes to
any Federal Reserve Bank or the United States Treasury as collateral
security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such
Federal Reserve System and/or such Federal Reserve Bank. No such
assignment and/or pledge shall release the assigning and/or pledging
Bank from its obligations hereunder.
(f) Notwithstanding any other provisions of this Section
12.06, no transfer or assignment of the interests or obligations of
any Bank or any grant of participations therein shall be permitted if
such transfer, assignment or grant would require the Company to file a
registration statement with the SEC or to qualify the Loans under the
"Blue Sky" laws of any state.
12.07 Invalidity. In the event that any one or more of the
provisions contained in any of the Loan Documents shall, for any reason, be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of the any
other Loan Document.
12.08 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
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12.09 References. The words "herein," "hereof," "hereunder"
and other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular article, section or subsection.
Any reference herein to a Subsection or Section shall be deemed to refer to the
applicable Section or Subsection of this Agreement unless otherwise stated
herein. Any reference herein to an exhibit or schedule shall be deemed to
refer to the applicable exhibit or schedule attached hereto unless otherwise
stated herein.
12.10 Survival. The obligations of the parties under Sections
5, 12.03, and 12.15 shall survive the repayment of the Loans and the
termination of the Commitments. To the extent that any payments on the
Indebtedness or proceeds of any collateral are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid
to a trustee, debtor in possession, receiver or other Person under any
bankruptcy law, common law or equitable cause, then to such extent, the
Indebtedness so satisfied shall be revived and continue as if such payment or
proceeds had not been received and the Agent's and the Banks' Liens, security
interests, rights, powers and remedies under this Agreement and each Loan
Document shall continue in full force and effect. In such event, each Loan
Document shall be automatically reinstated and the Company shall take such
action as may be reasonably requested by the Agent and the Banks to effect such
reinstatement.
12.11 Captions. Captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
12.12 NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE
NOTES REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT AND THE NOTES (INCLUDING, BUT NOT
LIMITED TO, THE VALIDITY AND ENFORCEABILITY HEREOF AND THEREOF) SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, OTHER THAN THE CONFLICT OF LAWS RULES THEREOF.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR
THE SOUTHERN DISTRICT OF NEW
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YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY
HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. THE COMPANY HEREBY IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS,
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION
OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO
JURISDICTION IS NONEXCLUSIVE AND DOES NOT PRECLUDE THE AGENT OR ANY
BANK FROM OBTAINING JURISDICTION OVER THE COMPANY IN ANY COURT
OTHERWISE HAVING JURISDICTION.
(c) THE COMPANY HEREBY IRREVOCABLY DESIGNATES
PRENTICE-HALL CORPORATION SYSTEMS, INC. LOCATED AT 15 COLUMBUS CIRCLE,
NEW YORK, NEW YORK 10023-7773, AS THE DESIGNEE, APPOINTEE AND AGENT OF
THE COMPANY TO RECEIVE, FOR AND ON BEHALF OF THE COMPANY, SERVICE OF
PROCESS IN SUCH RESPECTIVE JURISDICTIONS IN ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE NOTES. IT IS
UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT WILL BE
PROMPTLY FORWARDED BY OVERNIGHT COURIER TO THE COMPANY AT ITS ADDRESS
SET FORTH OPPOSITE ITS SIGNATURE BELOW, BUT THE FAILURE OF THE COMPANY
TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH
PROCESS. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE COMPANY AT ITS SAID ADDRESS,
SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR
ANY BANK OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
(e) EACH OF THE COMPANY AND EACH BANK HEREBY (A)
IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED
BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN; (B) IRREVOCABLY
-72-
<PAGE> 78
WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY
HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN,
OR IN ADDITION TO, ACTUAL DAMAGES; (C) CERTIFY THAT NO PARTY HERETO
NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS, AND (D) ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.
12.14 Interest. It is the intention of the parties hereto
that each Bank shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to
any Bank under laws applicable to it (including the laws of the United States
of America and the State of New York or any other jurisdiction whose laws may
be mandatorily applicable to such Bank notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in the Notes, this Agreement or in any other Loan Document or agreement entered
into in connection with or as security for the Notes, it is agreed as follows:
(i) the aggregate of all consideration which constitutes interest under law
applicable to any Bank that is contracted for, taken, reserved, charged or
received by such Bank under the Notes, this Agreement or under any of the other
aforesaid Loan Documents or agreements or otherwise in connection with the
Notes shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be cancelled automatically and if
theretofore paid shall be credited by such Bank on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by such Bank to the
Company); and (ii) in the event that the maturity of the Notes is accelerated
by reason of an election of the holder thereof resulting from any Event of
Default under this Agreement or otherwise, or in the event of any required or
permitted prepayment, then such consideration that constitutes interest under
law applicable to any Bank may never include more than the maximum amount
allowed by such applicable law, and excess interest, if any, provided for in
this Agreement or otherwise shall be cancelled automatically by such Bank as of
the date of such acceleration or prepayment and, if theretofore paid, shall be
credited by such Bank on the principal amount of the Indebtedness (or, to the
extent that the principal amount of the Indebtedness shall have been or would
thereby be paid in full, refunded by such Bank to the Company). All sums paid
or agreed to be paid to any Bank for the use, forbearance or detention of sums
due hereunder shall, to the extent permitted by law applicable to such Bank, be
amortized, prorated, allocated and spread in equal parts throughout the full
term of the Loans evidenced by the Notes until payment in full so that the rate
or amount of interest on account of any Loans hereunder does not exceed the
maximum amount allowed by such
-73-
<PAGE> 79
applicable law. If at any time and from time to time (i) the amount of
interest payable to any Bank on any date shall be computed at the Highest
Lawful Rate applicable to such Bank pursuant to this Section 12.14 and (ii) in
respect of any subsequent interest computation period the amount of interest
otherwise payable to such Bank would be less than the amount of interest
payable to such Bank computed at the Highest Lawful Rate applicable to such
Bank, then the amount of interest payable to such Bank in respect of such
subsequent interest computation period shall continue to be computed at the
Highest Lawful Rate applicable to such Bank until the total amount of interest
payable to such Bank shall equal the total amount of interest which would have
been payable to such Bank if the total amount of interest had been computed
without giving effect to this Section.
12.15 Confidentiality. In the event that the Company
provides to the Agent or the Banks written confidential information belonging
to the Company, if the Company shall denominate such information in writing as
"confidential", the Agent and the Banks shall thereafter maintain such
information in confidence in accordance with the standards of care and
diligence that each utilizes in maintaining its own confidential information.
This obligation of confidence shall not apply to such portions of the
information which (i) are in the public domain, (ii) hereafter become part of
the public domain without the Agent or the Banks breaching their obligation of
confidence to the Company, (iii) are previously known by the Agent or the Banks
from some source other than the Company, (iv) are hereafter developed by the
Agent or the Banks without using the Company's information, (v) are hereafter
obtained by or available to the Agent or the Banks from a third party who owes
no obligation of confidence to the Company with respect to such information or
through any other means other than through disclosure by the Company, (vi) are
disclosed with the Company's consent, (vii) must be disclosed either pursuant
to any Governmental Requirement or to persons regulating the activities of the
Agent or the Banks or (viii) as may be required by law or regulation or order
of any Governmental Authority in any judicial, arbitration or governmental
proceeding. Further, the Agent or a Bank may disclose any such information to
any other Bank, any independent petroleum engineers or consultants, any
independent certified public accountants, any legal counsel employed by such
Person in connection with this Agreement or any Loan Document, including
without limitation, the enforcement or exercise of all rights and remedies
thereunder, or any assignee or participant (including prospective assignees and
participants) in the Loans; provided, however, that the Agent or Bank imposes
on the Person to whom such information is disclosed the same obligation to
maintain the confidentiality of such information as is imposed upon it
hereunder. Notwithstanding anything to the contrary provided herein, this
obligation of confidence shall cease three (3) years from the date the
information was furnished, unless the Company requests in writing at least
thirty (30) days prior to the expiration of such three year period, to maintain
the confidentiality of such information for an additional three year period.
The Company waives any and all other rights it may have to confidentiality as
against the Agent and the Banks arising by contract, agreement, statute or law
except as expressly stated in this Section 12.15.
-74-
<PAGE> 80
12.16 Copies. When the Company is to provide a copy of any
report or notice to the Agent under this Agreement or any Loan Document, it
shall also provide enough copies of such report or notice to the Agent for the
Agent to provide a copy to each Bank.
[SIGNATURES BEGIN NEXT PAGE]
-75-
<PAGE> 81
The parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
NEWFIELD EXPLORATION COMPANY
By:
--------------------------------
Name: Terry W. Rathert
Title: Vice President
Address for Notices:
363 N. Sam Houston Parkway
Suite 2020
Houston, Texas 77060
Telecopier No.: (713) 847-6006
Telephone No.: (713) 847-6000
Attention: Terry W. Rathert
-1-
<PAGE> 82
THE CHASE MANHATTAN BANK, N.A.,
individually and as Agent
By:
--------------------------------
Name: Bettylou J. Robert
Title: Vice President
Lending Office for Base Rate
Loans and Eurodollar Loans:
The Chase Manhattan Bank, N.A.
270 Park Avenue
New York, NY 10017
Address for Notices:
The Chase Manhattan Bank, N.A.
4 Chase Metrotech Center, 13th Floor
Brooklyn, NY 11245
Telecopier No.: (718) 242-6910
Telephone No.: (718) 242-7969
Attention: NYAO
With a Copy to:
CHASE SECURITIES INC.
707 Travis Street - 5N86
Houston, TX 77002
Telecopier No.: (713) 216-8870
Telephone No.: (713) 216-8869
Attention: Peter Licalzi
-2-
<PAGE> 83
THE FIRST NATIONAL BANK OF BOSTON
By:
--------------------------------
Name: Carol Holley
Title: Vice President
Lending Office for Base Rate
Loans and Eurodollar Loans:
100 Federal Street
Mail Stop 01-08-02
Boston, MA 02110
-3-
<PAGE> 84
BANK OF MONTREAL
By:
------------------------------------
Name: Robert L. Roberts
Title: Director, US Corporate Banking
Lending Office for Base Rate Loans and
Eurodollar Loans:
Bank of Montreal
700 Louisiana, Suite 4400
Houston, TX 77002
Telecopier No.: (713) 225-1845
Telephone No.: (713) 546-9744
Attention: Jane Wiley
Address for Notices:
Bank of Montreal
700 Louisiana, Suite 4400
Houston, TX 77002
Telecopier No.: (713) 223-4007
Telephone No.: (713) 546-9754
Attention: Robert L. Roberts
-4-
<PAGE> 85
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By:
--------------------------------------
Name: Michael J. Kolosowsky
Title: Vice President
Lending Office for Base Rate Loans and
Eurodollar Loans:
First Union National Bank of North
Carolina
301 South College Street
Charlotte, NC 28288
Address for Notices:
First Union Corporation of North Carolina
1001 Fannin Street, Suite 2255
Houston, TX 77002
Telecopier No.: (713) 650-6354
Telephone No.: (713) 650-3716
Attention: Paul N. Riddle
-5-
<PAGE> 86
SOCIETE GENERALE
By:
-----------------------------------
Name: Richard Erbert
Title: Vice President
Lending Office for Base Rate Loans and
Eurodollar Loans:
2001 Ross Avenue, Suite 4800
Dallas, Texas 75201
Address for Notices:
2001 Ross Avenue, Suite 4800
Dallas, Texas 75201
Telecopier No.: (214) 754-0171
Telephone No.: (214) 979-2767
Attention: Tequlla English
With a Copy to:
1111 Bagby Street, #2020
Houston, Texas 77002
Telecopier No.: (713) 650-0824
Telephone No.: (713) 759-6318
Attention: Richard Erbert
-6-
<PAGE> 87
FIRST NATIONAL BANK OF COMMERCE
By:
-----------------------------------
Name: David R. Reid
Title: Senior Vice President
Lending Office for Base Rate Loans and
Eurodollar Loans:
First National Bank of Commerce
210 Baronne Street
New Orleans, LA 70112
Address for Notices:
First National Bank of Commerce
210 Baronne Street
New Orleans, LA 70112
Telecopier No.: (504) 561-1316
Telephone No.: (504) 561-1634
Attention: Cheryl Drollinger
With a Copy to:
First National Bank of Commerce
P. O. Box 90-F
Lafayette, LA 70509-7001
-7-
<PAGE> 1
Exhibit 11.1
NEWFIELD EXPLORATION COMPANY
COMPUTATION OF EARNINGS PER COMMON SHARE
(In thousands of dollars, except share and per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income for earnings
per share $ 7,949 $ 4,417 $ 15,878 $ 7,820
========= ========= ========= =========
Earnings per share $ 0.43 $ 0.24 $ 0.86 $ 0.44
========= ========= ========= =========
Calculation of weighted
average shares
outstanding:
Common stock,
weighted average 17,422,523 16,913,650 17,341,308 16,795,591
Common stock
equivalents 1,239,000 1,185,511 1,161,852 1,115,450
----------- ----------- ----------- ------------
Total common stock
and equivalents
outstanding for
earnings per share 18,661,523 18,099,161 18,503,160 17,911,041
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NEWFIELD
EXPLORATION COMPANY'S BALANCE SHEET AT JUNE 30, 1996 AND STATEMENT OF INCOME FOR
THE SIX MONTHS ENDED JUNE 30, 1996, THAT ARE CONTAINED IN ITS FORM 10-Q FOR THE
QUARTERLY PERIOD ENDED JUNE 30, 1996. THE SCHEDULE IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 19,352
<SECURITIES> 0
<RECEIVABLES> 25,013
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 46,744
<PP&E> 421,675
<DEPRECIATION> 164,491
<TOTAL-ASSETS> 309,512
<CURRENT-LIABILITIES> 37,115
<BONDS> 24,052
<COMMON> 144,257
0
0
<OTHER-SE> 68,720
<TOTAL-LIABILITY-AND-EQUITY> 309,512
<SALES> 65,975
<TOTAL-REVENUES> 65,975
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 36,744
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 144
<INCOME-PRETAX> 24,424
<INCOME-TAX> 8,546
<INCOME-CONTINUING> 15,878
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,878
<EPS-PRIMARY> 0.86
<EPS-DILUTED> 0
</TABLE>
