EXECUTION COPY
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CREDIT AGREEMENT
among
TOM BROWN, INC.
The Several Lenders
from Time to Time Parties Hereto
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of April 17, 1998
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TABLE OF CONTENTS
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SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2 Procedure for Revolving Credit Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.4 Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.5 Repayment of Revolving Credits; Evidence of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.6 Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(a) Initial Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Determinations of the Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.7 Optional and Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.8 Conversion and Continuation Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.9 Minimum Amounts and Maximum Number of Tranches . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.10 Interest Rates and Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.11 Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.12 Inability to Determine Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.13 Pro Rata Treatment and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.14 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.15 Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.16 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.17 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.18 Change of Lending Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.1 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.2 No Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.3 Corporate Existence; Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.4 Corporate Power; Authorization; Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . . . 23
3.5 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.6 No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.8 Ownership of Property; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.9 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.10 No Burdensome Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.12 Federal Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.14 Investment Company Act; Public Utility Holding Company Act; Other
Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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3.15 Purpose of Revolving Credit Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.18 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.1 Conditions to Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Effective Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) Corporate Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(d) Incumbency Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(e) Corporate Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(f) Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(g) Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(h) Reserve Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(i) Existing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.2 Conditions to Each Revolving Credit Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(a) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Maintenance of Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(d) No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(e) Borrowing Base Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(f) Additional Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.2 Certificates; Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.3 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.4 Conduct of Business and Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.5 Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.6 Inspection of Property; Books and Records; Discussions . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.8 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.9 Borrowing Base Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.1 Financial Condition Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(a) Maintenance of Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(b) Fixed Charge Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(c) Leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.2 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.3 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.4 Limitation on Guarantee Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.5 Limitation on Fundamental Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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6.6 Limitation on Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.7 Limitation on Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.8 Limitation on Investments, Acquisitions, Loans and Advances . . . . . . . . . . . . . . . . . . . . . . . 35
6.9 Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.10 Limitation on Sales and Leasebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.11 Limitation on Operating Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.12 Limitation on Changes in Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.13 Limitation on Negative Pledge Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.14 Limitation on Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.15 Limitation on Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.4 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.6 Non-Reliance on Agent and Other Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.8 Agent in Its Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.10 Co-Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.4 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.5 Payment of Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.6 Successors and Assigns; Participations and Assignments . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.7 Adjustments; Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.10 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.12 Submission To Jurisdiction; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.13 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.14 WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.15 Limitation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.16 Existing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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Schedule I Commitments and Addresses for Notices
Schedule 3.18 Subsidiaries
EXHIBITS
Exhibit A Form of Revolving Credit Note
Exhibit B Form of Subsidiaries Guarantee
Exhibit C Form of Effective Certificate
Exhibit D Form of Opinion of Lynch, Chappell & Alsup
Exhibit E Form of Borrowing Base Certificate
Exhibit F Form of Assignment and Acceptance
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CREDIT AGREEMENT, dated as of April 17, 1998 (this "Agreement"),
among Tom Brown, Inc., a Delaware corporation (the "Borrower"), the several
banks and other financial institutions from time to time parties to this
Agreement (individually, a "Lender", and collectively, the "Lenders") and The
Chase Manhattan Bank, a New York banking corporation ("Chase"), as
administrative agent for the Lenders hereunder (in such capacity, the "Agent").
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greater of (a) the
Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. For purposes hereof:
"Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by the Agent as its prime rate in effect
at its principal office in New York City (the Prime Rate not being
intended to be the lowest rate of interest charged by Chase in
connection with extensions of credit to debtors); "Federal Funds
Effective Rate" shall mean, for any day, the weighted average of the
rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published
on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for the day of such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by it. Any change in the ABR due to a
change in the Prime Rate or the Federal Funds Effective Rate shall be
effective as of the opening of business on the effective day of such
change in the Prime Rate or the Federal Funds Effective Rate,
respectively.
"ABR Loans": Revolving Credit Loans the rate of interest
applicable to which is based upon the ABR.
"Affiliate": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person. For
purposes of this definition, "control" of a Person means the power,
directly or indirectly, either to (a) vote 10% or more of the
securities having ordinary voting power for the election of directors
of such Person or (b) direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.
"Agent": The Chase Manhattan Bank, as the administrative
agent for the Lenders under this Agreement and the other Loan
Documents.
"Agreement": this Credit Agreement, as amended, supplemented
or otherwise modified from time to time.
"Applicable Margin": on each day when the Utilization
Percentage is less than 50%, 0.625% per annum, on each day when the
Utilization Percentage is equal to or
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greater than 50% but less than or equal to 75%, 0.75% per annum, and
on each day when the Utilization Percentage is greater than 75%, 1.00%
per annum.
"Assignee": as defined in subsection 9.6(c).
"Available Commitment": at any time any amount equal to the
lesser of (i) the aggregate Commitments of the Lenders and (ii) the
Borrowing Base at that time.
"Board": the Board of Governors of the Federal Reserve
System.
"Borrowing Base": at any date, the amount determined pursuant
to subsection 2.6(a) as the amount of credit available to the Borrower
under this Agreement at such date.
"Borrowing Base Assets": the proven reserves of the Borrower
and each Subsidiary Guarantor described in the most recent Reserve
Report submitted by the Borrower to the Agent in accordance with
subsection 2.6(b).
"Borrowing Date": any Business Day specified in a notice
pursuant to subsection 2.2 as a date on which the Borrower requests
the Lenders to make Revolving Credit Loans hereunder.
"Business": as defined in subsection 3.16(b).
"Business Day": a day other than a Saturday, Sunday or any
other day on which commercial banks in New York City are authorized or
required by law to close.
"Capital Stock": any and all shares, interests,
participations or other equivalents (however designated) of capital
stock of a corporation, any and all equivalent ownership interests in
a Person (other than a corporation) and any and all warrants or
options to purchase any of the foregoing.
"Cash Equivalents": (a) securities with maturities of one
year or less from the date of acquisition issued or fully guaranteed
or insured by the United States Government or any agency thereof, (b)
certificates of deposit and eurodollar time deposits with maturities
of one year or less from the date of acquisition and overnight bank
deposits of any Lender or of any commercial bank having capital and
surplus in excess of $500,000,000, (c) repurchase obligations of any
Lender or of any commercial bank satisfying the requirements of clause
(b) of this definition, having a term of not more than 30 days with
respect to securities issued or fully guaranteed or insured by the
United States Government, (d) commercial paper of a domestic issuer
rated at least A-2 by Standard and Poor's Rating Group ("S&P") or P-2
by Moody's Investors Service, Inc. ("Moody's"), (e) securities with
maturities of one year or less from the date of acquisition issued or
fully guaranteed by any state, commonwealth or territory of the United
States, by any political subdivision or taxing authority of any such
state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may
be) are rated at least A by S&P or A by Moody's, (f) securities with
effective maturities of one year or less from the date of acquisition
backed by an Aaa/AAA insurer or standby
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letters of credit issued by any Lender or any commercial bank
satisfying the requirements of clause (b) of this definition, (g)
securities with maturities of six months or less from the date of
acquisition overcollateralized with United States' Government
obligations as collateral or (h) shares of money market mutual or
similar funds which invest exclusively in assets satisfying the
requirements of clauses (a) through (g) of this definition.
"Chase": The Chase Manhattan Bank.
"Co-Agent": NationsBank of Texas, N.A., as co-agent for the
Lenders under this Agreement and the other Loan Documents.
"Code": the Internal Revenue Code of 1986, as amended from
time to time.
"Commitment": as to any Lender, the obligation of such Lender
to make Revolving Credit Loans to the Borrower hereunder in an
aggregate principal amount at any one time outstanding not to exceed
the amount set forth opposite such Lender's name on Schedule I, as
such amount may be reduced from time to time in accordance with the
provisions of this Agreement.
"Commitment Fee Rate": on each day when the Utilization
Percentage is less than 50%, a rate per annum equal to .20% and on
each day when the Utilization Percentage is equal to or greater than
50%, a rate per annum equal to .25%.
"Commitment Percentage": as to any Lender at any time, the
percentage which such Lender's Commitment then constitutes of the
aggregate Commitments (or, at any time after the Commitments shall
have expired or terminated, the percentage which the aggregate
principal amount of such Lender's Revolving Credit Loans then
outstanding constitutes of the aggregate principal amount of the
Revolving Credit Loans then outstanding).
"Commitment Period": the period from and including the
Effective Date to but not including the Termination Date or such
earlier date on which the Commitments shall terminate as provided
herein.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within
the meaning of Section 4001 of ERISA or is part of a group which
includes the Borrower and which is treated as a single employer under
Section 414 of the Code.
"Consolidated Debt": as of the date of determination, of any
Person at such date, (a) all indebtedness of such Person for borrowed
money or for the deferred purchase price of property or services
(other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b)
any other indebtedness of such Person which is evidenced by a note,
bond, debenture or similar instrument, (c) all obligations of such
Person under Financing Leases, (d) all obligations of such Person in
respect of acceptances issued or created for the account of such
Person and (e) all Guarantee Obligations of such Person in respect of
obligations described in (a), (b), (c) and (d).
<PAGE> 9
4
"Consolidated EBITDA": for any period, the revenues of the
Borrower and its Subsidiaries for such period from continuing
operations, minus associated costs (generally excluding Consolidated
Interest Expense, income taxes, unallocated depreciation, depletion,
and amortization and other non-cash expenses), determined in each case
on a consolidated basis in accordance with GAAP.
"Consolidated Fixed Charges": for any period, the sum
(without duplication) of (i) Consolidated Interest Expense for such
period, (ii) provision for cash income taxes made by the Borrower or
any of its Subsidiaries on a consolidated basis in respect of such
period and (iii) scheduled payments made during such period on account
of principal of Indebtedness of the Borrower or any of its
Subsidiaries.
"Consolidated Interest Expense:" for any period, the amount
of interest expense, both expensed and capitalized, of the Borrower
and its Subsidiaries determined on a consolidated basis in accordance
with GAAP, for such period on the aggregate principal amount of their
Indebtedness, determined on a consolidated basis in accordance with
GAAP.
"Consolidated Net Income": for any period, the consolidated
net income (or loss) of the Borrower and its Subsidiaries determined
on a consolidated basis in accordance with GAAP.
"Consolidated Net Worth": as of the date of determination,
all items which in conformity with GAAP would be included under
shareholders' equity on a consolidated balance sheet of the Borrower
and its Subsidiaries at such date.
"Consolidated Tangible Net Worth": as of the date of
determination, Consolidated Net Worth after deducting therefrom the
following:
(a) any surplus resulting from the write-up of
assets subsequent to December 31, 1997;
(b) goodwill, including any amounts (however
designated on the balance sheet) representing the cost of
acquisitions of Subsidiaries in excess of underlying tangible
assets;
(c) patents, trademarks, copyrights;
(d) leasehold improvements not recoverable at the
expiration of a lease; and
(e) deferred charges (including, but not limited
to, unamortized debt discount and expense, organization
expenses and experimental and development expenses, but
excluding prepaid expenses and expensed general and
administrative and geological and geophysical expenses).
"Consolidated Total Capitalization": as of the date of
determination, the sum of Consolidated Tangible Net Worth and
Consolidated Debt.
<PAGE> 10
5
"Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or
any of its property is bound.
"Convertible Preferred Stock": the $1.75 Convertible
Preferred Stock, Series A, of the Borrower.
"Default": any of the events specified in Section 7, whether
or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
"Effective Date": the date on which the conditions precedent
set forth in subsection 4.1 shall be satisfied.
"Environmental Laws": any and all foreign, Federal, state,
local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental Authority
or other Requirements of Law (including common law) regulating,
relating to or imposing liability or standards of conduct concerning
protection of human health or the environment, as now or may at any
time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied
to a Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal
and emergency reserves under any regulations of the Board of Governors
of the Federal Reserve System or other Governmental Authority having
jurisdiction with respect thereto) dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) maintained
by a member bank of such System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
equal to the rate at which Chase is offered Dollar deposits at or
about 10:00 A.M., New York City time, two Business Days prior to the
beginning of such Interest Period in the interbank eurodollar market
where the eurodollar and foreign currency and exchange operations in
respect of its Eurodollar Loans are then being conducted for delivery
on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of its
Eurodollar Loan to be outstanding during such Interest Period.
"Eurodollar Loans": Revolving Credit Loans the rate of
interest applicable to which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum
determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
<PAGE> 11
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"Eurodollar Tranche": with reference to Eurodollar Loans, the
then current Interest Periods with respect to all of which begin on
the same date and end on the same later date (whether or not such
Loans shall originally have been made on the same day).
"Event of Default": any of the events specified in Section 7;
provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Existing Agreement": the Credit Agreement, dated as of
December 23, 1996, as amended, supplemented or otherwise modified
through the Effective Date, among the Borrower, the several banks and
financial institutions parties thereto and The Chase Manhattan Bank,
as Agent.
"Fee Letter": the fee letter, dated April 10, 1998, between
Chase, Chase Securities Inc. and the Borrower.
"Financing Lease": any lease of property, real or personal,
the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the
lessee.
"GAAP": generally accepted accounting principles in the
United States of America in effect from time to time.
"Governmental Authority": any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has
issued a reimbursement, counterindemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations (the "primary obligations") of
any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation
of the guaranteeing person, whether or not contingent, (i) to purchase
any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for
the purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary
obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of
any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include
indorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation of any
<PAGE> 12
7
guaranteeing person shall be deemed to be the lower of (a) an amount
equal to the stated or determinable amount of the primary obligation
in respect of which such Guarantee Obligation is made and (b) the
maximum amount for which such guaranteeing person may be liable
pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for
which such guaranteeing person may be liable are not stated or
determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated
liability in respect thereof as determined by the Borrower in good
faith.
"Indebtedness": of any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices), (b) any other indebtedness of
such Person which is evidenced by a note, bond, debenture or similar
instrument, (c) all obligations of such Person under Financing Leases,
(d) all obligations of such Person in respect of acceptances issued or
created for the account of such Person and (e) all liabilities secured
by any Lien on any property owned by such Person even though such
Person has not assumed or otherwise become liable for the payment
thereof.
"Independent Engineer": Williamson Petroleum Consultants,
Inc., and/or such other independent petroleum engineering company as
the Borrower may designate that is acceptable to the Agent and the
Co-Agent.
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section
4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": as defined in subsection 3.9.
"Interest Payment Date": (a) as to any ABR Loan, the last day
of each calendar month to occur while such ABR Loan is outstanding and
the Termination Date, (b) as to any Eurodollar Loan having an Interest
Period of one, two or three months, the last day of such Interest
Period, and (c) as to any Eurodollar Loan having an Interest Period of
six months, each day which is three months after the first day of such
Interest Period and the last day of such Interest Period.
"Interest Period": with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing
or conversion date, as the case may be, with respect to such
Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in its notice of
borrowing or notice of conversion, as the case may be, given
with respect thereto; and
(ii) thereafter, each period commencing on the last
day of the next preceding Interest Period applicable to such
Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower by irrevocable notice
<PAGE> 13
8
to the Agent not less than three Business Days prior to the
last day of the then current Interest Period with respect
thereto;
provided that, all of the foregoing provisions relating to Interest
Periods are subject to the following:
(1) if any Interest Period pertaining to a
Eurodollar Loan would otherwise end on a day that is not a
Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such
extension would be to carry such Interest Period into another
calendar month in which event such Interest Period shall end
on the immediately preceding Business Day;
(2) any Interest Period that would otherwise extend
beyond the Termination Date shall end on the Termination Date;
and
(3) any Interest Period pertaining to a Eurodollar
Loan that begins on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of a calendar month.
"Interest Rate Protection Agreement": any interest rate
protection agreement, interest rate futures contract, interest rate
option, interest rate cap, interest rate swap or other interest rate
hedge arrangement, to or under which the Borrower or any of its
Subsidiaries is a party or a beneficiary on the date hereof or becomes
a party or a beneficiary after the date hereof.
"KNE": K N Energy, Inc., a Kansas corporation.
"Lien": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or
other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any Financing Lease having substantially the
same economic effect as any of the foregoing).
"Loan Documents": this Agreement, the Subsidiaries Guarantee
and any Notes.
"Majority Lenders": at any time, Lenders the Commitment
Percentages of which aggregate more than 50%.
"Material Adverse Effect": a material adverse effect on (a)
the business, operations, property, condition (financial or
otherwise), results of operations, assets, liabilities or prospects of
the Borrower and its Subsidiaries taken as a whole, (b) the ability of
the Borrower to perform any of its obligations under the Loan
Documents or (c) the validity or enforceability of this or any of the
other Loan Documents or the rights or remedies of the Agent or the
Lenders hereunder or thereunder.
"Material Environmental Amount": an amount not otherwise
covered by insurance payable by the Borrower and/or its Subsidiaries
in excess of $5,000,000 for
<PAGE> 14
9
remedial costs, compliance costs, compensatory damages, punitive
damages, fines, penalties or any combination thereof.
"Materials of Environmental Concern": any hazardous or toxic
substances, materials or wastes, defined or regulated as such in or
under any Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.
"Maximum Loan Amount": $75,000,000, or such lesser amount to
which the aggregate Commitments may be reduced pursuant to subsection
2.4 hereof.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": means, with respect to any sale or other
disposition of securities, the cash proceeds (including cash
equivalents and any cash payments received by way of deferred payment
of principal pursuant to a note or installment receivable or purchase
price adjustment receivable or otherwise, but only as and when
received) of such sale or other disposition received by the Borrower
or any of its Subsidiaries, net of all attorneys' fees, accountants'
fees, investment banking fees and other customary fees actually
incurred by the Borrower or any of its Subsidiaries and documented in
connection therewith and net of taxes paid or reasonably expected to
be payable by the Borrower or any of its Subsidiaries as a result
thereof.
"Non-Excluded Taxes": as defined in subsection 2.16.
"Notes": the Revolving Credit Notes.
"Optional Reserve Report": as defined in subsection
2.6(b)(ii).
"Participant": as defined in subsection 9.6(b).
"Partnership": Wind River - Pavillion, Ltd., a Texas limited
partnership.
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Person": an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
"Petroleum": oil, gas and other liquid or gaseous
hydrocarbons, including, without limitation, all liquefiable
hydrocarbons and other products which may be extracted from gas and
gas condensate by the processing thereof in a gas processing plant.
"Petroleum Price Hedge Agreement": any hedge arrangement,
commodity swap agreement, commodity futures, forwards, options, and
other similar agreements relating to Petroleum.
<PAGE> 15
10
"Plan": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Properties": as defined in subsection 3.16(a).
"Register": as defined in subsection 9.6(d).
"Regulation U": Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty day
notice period is waived under subsections .13, .14, .16, .18, .19 or
.20 of PBGC Reg. ' 2615.
"Required Lenders": at any time, Lenders the Commitment
Percentages of which aggregate at least 66-2/3%.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject.
"Reserve Report": as defined in subsection 2.6(b).
"Responsible Officer": the Chairman of the Board of
Directors, President or Executive Vice-President of the Borrower or,
with respect to financial matters, the Chief Financial Officer or the
principal accounting or financial officer of the Borrower.
"Retex": Retex Gathering Company, Inc., a Wyoming
corporation.
"Revolving Credit Loans": as defined in subsection 2.1.
"Revolving Credit Note": as defined in subsection 2.5(e).
"Single Employer Plan": any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"Subsidiary": as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the
time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more
<PAGE> 16
11
intermediaries, or both, by such Person. Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.
"Subsidiary Guarantor": each of TBI Production Company, TBI
Exploration Inc. and TBI West Virginia Inc.
"Subsidiaries Guarantee": the Subsidiaries Guarantee, to be
entered into by each Subsidiary Guarantor, substantially in the form
of Exhibit B attached hereto as the same may be amended, supplemented
or otherwise modified from time to time.
"Termination Date": the third anniversary of the Effective
Date.
"Transferee": as defined in subsection 9.6(f).
"Type": as to any Revolving Credit Loan, its nature as an ABR
Loan or a Eurodollar Loan.
"Utilization Percentage": on any day, the aggregate
outstanding principal amount of the Revolving Credit Loans outstanding
on such date divided by the Borrowing Base on such date.
"Wildhorse": Wildhorse Energy Partners, LLC, a Delaware
limited liability company.
"Wildhorse Limited Liability Company Agreement": the Limited
Liability Company Agreement between KNE and the Borrower for the
formation of Wildhorse, dated January 31, 1996 and delivered by the
Borrower to the Lenders.
"Wind River Joint Venture": the joint venture between Retex
and K N Gas Gathering, Inc., pursuant to the Wind River Joint Venture
Agreement.
"Wind River Joint Venture Agreement": the Amended and
Restated Joint Venture Agreement, dated June 1, 1993, between Retex
and K N Gas Gathering, Inc., a Colorado corporation.
1.2 Other Definitional Provisions. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in any Notes or any certificate or other document made or
delivered pursuant hereto.
(b) As used herein and in any Notes, and any certificate or
other document made or delivered pursuant hereto, accounting terms relating to
the Borrower and its Subsidiaries not defined in subsection 1.1 and accounting
terms partly defined in subsection 1.1, to the extent not defined, shall have
the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
<PAGE> 17
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(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Commitments. (a) Subject to the terms and conditions
hereof (including, without limitation, Section 4.2(c)), each Lender severally
agrees to make revolving credit loans ("Revolving Credit Loans") to the
Borrower from time to time during the Commitment Period in an aggregate
principal amount at any one time outstanding not to exceed the amount of such
Lender's Commitment Percentage of the Available Commitment. During the
Commitment Period the Borrower may use the Commitments by borrowing, prepaying
the Revolving Credit Loans in whole or in part, and reborrowing, all in
accordance with the terms and conditions hereof.
(b) The Revolving Credit Loans may from time to time be
(i) Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as
determined by the Borrower and notified to the Agent in accordance with
subsections 2.2 and 2.8; provided that no Revolving Credit Loan shall be made
as a Eurodollar Loan after the day that is one month prior to the Termination
Date.
2.2 Procedure for Revolving Credit Borrowing. The Borrower
may borrow under the Commitments during the Commitment Period on any Business
Day; provided that the Borrower shall give the Agent irrevocable notice (which
notice must be received by the Agent prior to 10:00 A.M., New York City time,
(a) three Business Days prior to the requested Borrowing Date, if all or any
part of the requested Revolving Credit Loans are to be initially Eurodollar
Loans, or (b) one Business Day prior to the requested Borrowing Date,
otherwise), specifying (i) the amount to be borrowed, (ii) the requested
Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR
Loans, or a combination thereof and (iv) if the borrowing is to be entirely or
partly of Eurodollar Loans, the respective amounts of each such Type of
Revolving Credit Loan and the respective lengths of the initial Interest
Periods therefor. Each borrowing under the Commitments shall be in an amount
equal to (x) in the case of ABR Loans, $500,000 or a whole multiple thereof and
(y) in the case of Eurodollar Loans, $1,000,000 or a whole multiple of $100,000
in excess thereof. Upon receipt of any such notice from the Borrower, the
Agent shall promptly notify each Lender thereof. Each Lender will make the
amount of its pro rata share of each borrowing available to the Agent for the
account of the Borrower at the office of the Agent specified in subsection 9.2
prior to 11:00 A.M., New York City time, on the Borrowing Date requested by the
Borrower in funds immediately available to the Agent. Such borrowing will then
be made available to the Borrower by the Agent crediting the account of the
Borrower on the books of such office with the aggregate of the amounts made
available to the Agent by the Lenders and in like funds as received by the
Agent.
2.3 Fees. The Borrower agrees to pay to the Agent for the
account of the Lenders a commitment fee for the period from and including the
first day of the Commitment Period to the Termination Date, computed at the
Commitment Fee Rate on the average daily amount of the unutilized part of the
Available Commitment of such Lender during the period for which payment is
made, payable quarterly in arrears on the last day of each March, June,
September and December and on the Termination Date or such earlier date as the
Commitments shall terminate as provided herein, commencing on the first of such
dates to occur after the date hereof.
<PAGE> 18
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2.4 Termination or Reduction of Commitments. The Borrower
shall have the right, upon not less than five Business Days' notice to the
Agent, to terminate the Commitments or, from time to time, to reduce the amount
of the Commitments. Any such reduction shall be in an amount equal to
$1,000,000 or a whole multiple thereof and shall reduce permanently the
Commitments then in effect.
2.5 Repayment of Revolving Credits; Evidence of Debt. (a)
The Borrower hereby unconditionally promises to pay to the Agent for the
account of each Lender the then unpaid principal amount of each Revolving
Credit Loan of such Lender in full on the Termination Date (or such earlier
date on which the Revolving Credit Loans become due and payable pursuant to
Section 7). The Borrower hereby further agrees to pay interest on the unpaid
principal amount of the Revolving Credit Loans from time to time outstanding
from the date hereof until payment in full thereof at the rates per annum, and
on the dates, set forth in subsection 2.10.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the Borrower to such
Lender resulting from each Revolving Credit Loan of such Lender from time to
time, including the amounts of principal and interest payable and paid to such
Lender from time to time under this Agreement.
(c) The Agent shall maintain the Register pursuant to
subsection 9.6(d), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Revolving Credit Loan made hereunder, the Type
thereof and each Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) both the amount of any sum received
by the Agent hereunder from the Borrower and each Lender's share thereof.
(d) The entries made in the Register and the accounts of each
Lender maintained pursuant to subsection 2.5(b) shall, to the extent permitted
by applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of any Lender or the Agent to maintain the Register or any such
account, or any error therein, shall not in any manner affect the obligation of
the Borrower to repay (with applicable interest) the Revolving Credit Loans
made to such Borrower by such Lender in accordance with the terms of this
Agreement.
(e) The Borrower agrees that the Borrower will execute and
deliver to each Lender a promissory note of the Borrower evidencing the
Revolving Credit Loans of such Lender, substantially in the form of Exhibit A
with appropriate insertions as to date and principal amount (a "Revolving
Credit Note").
2.6 Borrowing Base. The Borrowing Base shall be determined
as follows:
(a) Initial Borrowing Base. The amount of the Borrowing Base
shall be $130,000,000 during the period from the Effective Date to the date on
which the Borrower receives notice of the first determination of the Borrowing
Base by the Agent and the Co-Agent pursuant to subsection 2.6(b) and thereafter
the amount of the Borrowing Base shall be the Borrowing Base most recently
determined pursuant to subsection 2.6(b).
<PAGE> 19
14
(b) Determinations of the Borrowing Base. (i) No later than
45 days after June 30 and December 31 of each calendar year, commencing June
30, 1998, the Borrower shall, at its own expense, furnish to the Agent, the
Co-Agent and the Lenders a report ("Reserve Report"), in a form and substance
reasonably satisfactory to the Agent and the Co-Agent which report shall be
dated as of such June 30 or December 31 and shall set forth the Borrower's and
its Subsidiary Guarantors' interest (broken down by category) in all Borrowing
Base Assets and, in the case of the December 31 report only, a projection of
the rate of production and net operating income with respect thereto as of such
date. Each June 30 Reserve Report shall be prepared by the Borrower and each
December 31 Reserve Report shall be prepared or audited by the Independent
Engineer. Each June 30 Reserve Report may be prepared in summary form and
shall include a review of any material production variances, if any, from the
immediately preceding December 31 Reserve Report.
(ii) At any date the Borrower may at its expense
furnish additional Reserve Reports to the Agent and the Co-Agent ("Optional
Reserve Reports"), which Optional Reserve Reports need not be prepared or
audited by an independent petroleum engineer (unless the Agent or the Co-Agent
so requests), each dated a date other than June 30 or December 31.
(iii) Notwithstanding the provisions of subsection
2.6(b)(i), upon the Borrower's written request, and upon submission of an
Optional Reserve Report, the Agent and the Co-Agent shall review the Borrowing
Base and make any adjustments thereto they deem appropriate under the
circumstances; provided that in no event shall the Agent and the Co-Agent be
required to make more than two such unscheduled Borrowing Base determinations
during any calendar year.
(iv) Within forty-five days after they both
receive each Reserve Report or Optional Reserve Report, the Agent and the
Co-Agent shall make a determination of the Borrowing Base provided that such
determination shall be approved by the Required Lenders, and shall notify the
Borrower of the new Borrowing Base, if any.
(v) Within forty-five days after the Borrower has
notified the Agent and the Co-Agent pursuant to subsection 2.7(c) that it or
any Subsidiary Guarantor has determined to sell or otherwise dispose of any of
the Borrowing Base Assets (other than sales permitted by subsections 6.6(a),
(b), (c), (d) and (e)), the Agent and the Co-Agent shall make a redetermination
of the Borrowing Base, and shall notify the Borrower of the new Borrowing Base,
if any; provided that such redetermination and notification shall occur only if
the aggregate amount of consideration paid for Borrowing Base Assets disposed
of since the last determination of the Borrowing Base exceeds $5,000,000.
(vi) The Borrower agrees to pay or reimburse the
Agent and the Co-Agent for all reasonable out-of-pocket costs and expenses
incurred in connection with (a) the examination of each Optional Reserve Report
furnished to the Agent and the Co-Agent by the Borrower, (b) the determination
of the Borrowing Base pursuant to such Reserve Report or Optional Reserve
Report, (c) the redetermination of the Borrowing Base pursuant to subsection
2.6(b)(v) and (d) the notification of the Borrower of such Borrowing Base.
(vii) Each determination of the Borrowing Base
shall be made by the Agent and the Co-Agent in the exercise of their sole
discretion in accordance with the then current standards and practices of the
Agent and the Co-Agent for similar oil and gas loans,
<PAGE> 20
15
taking into account such factors as the Agent and the Co-Agent may deem
appropriate, including, without limitation the nature and extent of the
Borrower's interest in the Borrowing Base Assets and the anticipated timing and
extent of net operating income therefrom; provided that each such determination
shall be approved by the Required Lenders. The Agent and the Co-Agent may in
their sole discretion discount the value of any Borrowing Base Asset set forth
in a Reserve Report or an Optional Reserve Report by the same factors utilized
by it in discounting the value of comparable borrowing base assets in
comparable transactions.
(viii) Each delivery by the Borrower to the Agent and
the Co-Agent of a Reserve Report or an Optional Reserve Report shall be deemed
to constitute a representation and warranty by the Borrower to the Agent and the
Co-Agent that the Borrower or the Subsidiary Guarantors, to the extent of the
interest specified in such report (and subject to exceptions disclosed in
writing to the Agent and the Co-Agent by the Borrower), has good and marketable
title to the Borrowing Base Assets and any other property rights or interests
described in such report, and that none of such Borrowing Base Assets or other
property rights or interests is subject to any Lien other than as permitted by
subsection 6.3.
2.7 Optional and Mandatory Prepayments. (a) The Borrower
may at any time and from time to time prepay the Revolving Credit Loans, in
whole or in part, without premium or penalty (subject to subsection 2.17), upon
at least four Business Days' irrevocable notice to the Agent, specifying the
date and amount of prepayment and whether the prepayment is of Eurodollar
Loans, ABR Loans or a combination thereof, and, if of a combination thereof,
the amount allocable to each. Upon receipt of any such notice the Agent shall
promptly notify each Lender thereof. If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified
therein, together with any amounts payable pursuant to subsection 2.17.
Partial prepayments shall be in an aggregate principal amount of $1,000,000 or
a whole multiple thereof.
(b) In the event the aggregate unpaid principal amount of the
Revolving Credit Loans shall at any time be in excess of the Borrowing Base at
such time, the Agent shall so notify the Borrower, and the Borrower shall,
within 30 days after such notification, either (i) prepay the principal of the
Revolving Credit Loans, in an aggregate amount at least equal to such excess,
together with accrued interest on the amount prepaid to the date of such
prepayment or (ii) take such actions as may be approved by the Agent and the
Co-Agent in their sole discretion to increase the Borrowing Base by the amount
of such excess in a manner satisfactory to the Agent and the Co-Agent.
(c) In the event the Borrower or any Subsidiary Guarantor
determines to sell or otherwise dispose of any of the Borrowing Base Assets
(other than sales permitted by subsections 6.6 (a), (b), (c), (d) and (e)), the
Borrower shall immediately notify the Agent and the Co-Agent (but in no event
later than five Business Days prior to the date of such sale or disposition)
and, no later than three Business Days following the consummation of such sale
or disposition, the Borrower shall prepay the Revolving Credit Loans in an
aggregate amount equal to the net proceeds of such sale or disposition;
provided that no later than three Business Days following the redetermination
of the Borrowing Base by the Agent and the Co-Agent to reflect such sale or
disposition to the extent required by subsection 2.6(b)(v), the Borrower shall
additionally prepay the Revolving Credit Loans in an aggregate amount equal to
the excess, if any, of (i) the aggregate principal amount of outstanding
Revolving Credit Loans after reflecting payment of the net proceeds of such
asset sale or disposition over (ii) the Borrowing Base as
<PAGE> 21
16
redetermined by the Agent and the Co-Agent to reflect such sale or disposition.
(d) In the event that both ABR Loans and Eurodollar Loans are
outstanding on the date of any such mandatory prepayment made in accordance
with the terms of paragraph (b) or (c) of this Section 2.7, the Borrower shall
apply such mandatory prepayment first to prepay any or all of such outstanding
ABR Loans and next to prepay any or all of such outstanding Eurodollar Loans;
provided that in the event the Borrower shall apply such mandatory prepayment
to prepay a Eurodollar Loan on a date other than the last day of an Interest
Period with respect thereto, any losses or costs incurred by the Lenders shall
be indemnified by the Borrower in accordance with the provisions of Section
2.17.
2.8 Conversion and Continuation Options. (a) The Borrower
may elect from time to time to convert Eurodollar Loans to ABR Loans by giving
the Agent at least two Business Days' prior irrevocable notice of such
election; provided that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Agent at least three Business Days' prior irrevocable notice of such
election. Any such notice of conversion to Eurodollar Loans shall specify the
length of the initial Interest Period or Interest Periods therefor. Upon
receipt of any such notice the Agent shall promptly notify each Lender thereof.
All or any part of outstanding Eurodollar Loans and ABR Loans may be converted
as provided herein; provided that (i) no Revolving Credit Loan may be converted
into a Eurodollar Loan when any Event of Default has occurred and is continuing
and the Agent has or the Required Lenders have determined that such a
conversion is not appropriate and (ii) no Revolving Credit Loan may be
converted into a Eurodollar Loan after the date that is one month prior to the
Termination Date.
(b) Any Eurodollar Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving notice to the Agent, in accordance with the applicable
provisions of the term "Interest Period" set forth in subsection 1.1, of the
length of the next Interest Period to be applicable to such Revolving Credit
Loans; provided that no Eurodollar Loan may be continued as such (i) when any
Event of Default has occurred and is continuing and the Agent has or the
Required Lenders have determined that such a continuation is not appropriate or
(ii) after the date that is one month prior to the Termination Date; and
provided, further, that if the Borrower shall fail to give such notice or if
such continuation is not permitted such Revolving Credit Loans shall be
automatically converted to ABR Loans on the last day of such then expiring
Interest Period.
2.9 Minimum Amounts and Maximum Number of Tranches. All
borrowings, conversions and continuations of Revolving Credit Loans hereunder
and all selections of Interest Periods hereunder shall be in such amounts and
be made pursuant to such elections so that, after giving effect thereto, the
aggregate principal amount of the Revolving Credit Loans comprising each
Eurodollar Tranche shall be equal to $1,000,000 or a whole multiple of $100,000
in excess thereof. In no event shall there be more than eight Eurodollar
Tranches outstanding at any time.
2.10 Interest Rates and Payment Dates. (a) Each Eurodollar
Loan shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such
day plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum
equal to the ABR.
<PAGE> 22
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(c) If all or a portion of (i) any principal of any Revolving
Credit Loan, (ii) any interest payable thereon, (iii) any commitment fee or
(iv) any other amount payable hereunder shall not be paid when due (whether at
the stated maturity, by acceleration or otherwise), the principal of the
Revolving Credit Loans and any such overdue interest, commitment fee or other
amount shall bear interest at a rate per annum which is (x) in the case of
principal, the rate that would otherwise be applicable thereto pursuant to the
foregoing provisions of this subsection plus 2% or (y) in the case of any such
overdue interest, commitment fee or other amount, the rate described in
paragraph (b) of this subsection plus 2%, in each case from the date of such
non-payment until such overdue principal, interest, commitment fee or other
amount is paid in full (as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest
Payment Date; provided that interest accruing pursuant to paragraph (c) of this
subsection shall be payable from time to time on demand.
2.11 Computation of Interest and Fees. (a) Commitment fees
and, whenever it is calculated on the basis of the Prime Rate, interest shall
be calculated on the basis of a 365-(or 366-, as the case may be) day year for
the actual days elapsed; and, otherwise, interest shall be calculated on the
basis of a 360-day year for the actual days elapsed. The Agent shall as soon
as practicable notify the Borrower and the Lenders of each determination of a
Eurodollar Rate. Any change in the interest rate on a Revolving Credit Loan
resulting from a change in the ABR or the Eurocurrency Reserve Requirements
shall become effective as of the opening of business on the day on which such
change becomes effective. The Agent shall as soon as practicable notify the
Borrower and the Lenders of the effective date and the amount of each such
change in interest rate.
(b) Each determination of an interest rate by the Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error. The Agent
shall, at the request of the Borrower, deliver to the Borrower a statement
showing the quotations used by the Agent in determining any interest rate
pursuant to subsection 2.10(a).
2.12 Inability to Determine Interest Rate. If prior to the
first day of any Interest Period:
(a) the Agent shall have determined (which determination
shall be conclusive and binding upon the Borrower) that, by reason of
circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such
Interest Period, or
(b) the Agent shall have received notice from the Majority
Lenders that the Eurodollar Rate to be determined for such Interest
Period will not adequately and fairly reflect the cost to such Lenders
(as conclusively certified by such Lenders) of making or maintaining
their affected Revolving Credit Loans during such Interest Period,
the Agent shall give telecopy or telephonic notice thereof to the Borrower and
the Lenders as soon as practicable thereafter. If such notice is given (x) any
Eurodollar Loans requested to be made on the first day of such Interest Period
shall be made as ABR Loans, (y) any Revolving
<PAGE> 23
18
Credit Loans that were to have been converted on the first day of such Interest
Period to Eurodollar Loans shall be converted to or continued as ABR Loans and
(z) any outstanding Eurodollar Loans shall be converted, on the first day of
such Interest Period, to ABR Loans. Until such notice has been withdrawn by
the Agent, no further Eurodollar Loans shall be made or continued as such, nor
shall the Borrower have the right to convert Revolving Credit Loans to
Eurodollar Loans.
2.13 Pro Rata Treatment and Payments. (a) Each borrowing by
the Borrower from the Lenders hereunder, each payment by the Borrower on
account of any commitment fee hereunder and any reduction of the Commitments of
the Lenders shall be made pro rata according to the respective Commitment
Percentages of the Lenders. Each payment (including each prepayment) by the
Borrower on account of principal of and interest on the Revolving Credit Loans
shall be made to the Agent and allocated to the Lenders pro rata according to
the respective outstanding principal amounts of the Revolving Credit Loans then
held by the Lenders. All payments (including prepayments) to be made by the
Borrower hereunder, whether on account of principal, interest, fees or
otherwise, shall be made without set off or counterclaim and shall be made
prior to 12:00 Noon, New York City time, on the due date thereof to the Agent,
for the account of the Lenders, at the Agent's office specified in subsection
9.2, in Dollars and in immediately available funds. The Agent shall distribute
such payments to the Lenders promptly upon receipt in like funds as received.
If any payment hereunder becomes due and payable on a day other than a Business
Day, such payment shall be extended to the next succeeding Business Day, and,
with respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension.
(b) Unless the Agent shall have been notified in writing by
any Lender prior to a borrowing that such Lender will not make the amount that
would constitute its Commitment Percentage of such borrowing available to the
Agent, the Agent may assume that such Lender is making such amount available to
the Agent, and the Agent may, in reliance upon such assumption, make available
to the Borrower a corresponding amount. If such amount is not made available
to the Agent by the required time on the Borrowing Date therefor, such Lender
shall pay to the Agent, on demand, such amount with interest thereon at a rate
equal to the daily average Federal Funds Effective Rate for the period until
such Lender makes such amount immediately available to the Agent. A
certificate of the Agent submitted to any Lender with respect to any amounts
owing under this subsection shall be conclusive in the absence of manifest
error. If such Lender's Commitment Percentage of such borrowing is not made
available to the Agent by such Lender within three Business Days of such
Borrowing Date, the Agent shall also be entitled to recover such amount with
interest thereon at the rate per annum applicable to ABR Loans hereunder, on
demand, from the Borrower.
2.14 Illegality. Notwithstanding any other provision herein,
if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the
commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall
forthwith be cancelled and (b) such Lender's Revolving Credit Loans then
outstanding as Eurodollar Loans, if any, shall be converted automatically to
ABR Loans on the respective last days of the then current Interest Periods with
respect to such Revolving Credit Loans or within such earlier period as
required by law. If any such conversion of a Eurodollar Loan occurs on a day
which is not the last day of the then current Interest Period with respect
thereto, the Borrower shall pay to such
<PAGE> 24
19
Lender such amounts, if any, as may be required pursuant to subsection 2.17.
2.15 Requirements of Law. (a) If the adoption of or any
change in any Requirement of Law or in the interpretation or application
thereof or compliance by any Lender with any request or directive (whether or
not having the force of law) from any central bank or other Governmental
Authority made subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Note or any Eurodollar
Loan, or change the basis of taxation of payments to such Lender in
respect thereof (except for Non-Excluded Taxes covered by subsection
2.16 and changes in the rate of tax on the overall net income of such
Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting
into, continuing or maintaining Eurodollar Loans or to reduce any amount
receivable hereunder in respect thereof, then, in any such case, the Borrower
shall promptly pay such Lender such additional amount or amounts as will
compensate such Lender for such increased cost or reduced amount receivable.
(b) If any Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which such
Lender or such corporation could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's or such corporation's
policies with respect to capital adequacy) by an amount deemed by such Lender
to be material, then from time to time, the Borrower shall promptly pay to such
Lender such additional amount or amounts as will compensate such Lender for
such reduction.
(c) If any Lender becomes entitled to claim any
additional amounts pursuant to this subsection, it shall promptly notify the
Borrower (with a copy to the Agent) of the event by reason of which it has
become so entitled. A certificate as to any additional amounts payable
pursuant to this subsection submitted by such Lender to the Borrower (with a
copy to the Agent) shall be conclusive in the absence of manifest error. The
agreements in this subsection shall survive the termination of this Agreement
and the payment of the Revolving Credit Loans and all other amounts payable
hereunder.
2.16 Taxes. (a) All payments made by the Borrower under
this Agreement and any Notes shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future income,
stamp or other taxes, levies, imposts, duties, charges,
<PAGE> 25
20
fees, deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority, excluding net income taxes
and franchise taxes (imposed in lieu of net income taxes) imposed on the Agent
or any Lender as a result of a present or former connection between the Agent
or such Lender and the jurisdiction of the Governmental Authority imposing such
tax or any political subdivision or taxing authority thereof or therein (other
than any such connection arising solely from the Agent or such Lender having
executed, delivered or performed its obligations or received a payment under,
or enforced, this Agreement or any Note). If any such non-excluded taxes,
levies, imposts, duties, charges, fees, deductions or withholdings
("Non-Excluded Taxes") are required to be withheld from any amounts payable to
the Agent or any Lender hereunder or under any Note, the amounts so payable to
the Agent or such Lender shall be increased to the extent necessary to yield to
the Agent or such Lender (after payment of all Non-Excluded Taxes) interest or
any such other amounts payable hereunder at the rates or in the amounts
specified in this Agreement; provided, however, that the Borrower shall not be
required to increase any such amounts payable to any Lender that is not
organized under the laws of the United States of America or a state thereof if
such Lender fails to comply with the requirements of paragraph (b) of this
subsection. Whenever any Non-Excluded Taxes are payable by the Borrower, as
promptly as possible thereafter the Borrower shall send to the Agent for its
own account or for the account of such Lender, as the case may be, a certified
copy of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the required
receipts or other required documentary evidence, the Borrower shall indemnify
the Agent and the Lenders for any incremental taxes, interest or penalties that
may become payable by the Agent or any Lender as a result of any such failure.
The agreements in this subsection shall survive the termination of this
Agreement and the payment of the Revolving Credit Loans and all other amounts
payable hereunder.
(b) Each Lender that is not incorporated under the laws of
the United States of America or a state thereof shall:
(i) deliver to the Borrower and the Agent (A) two duly
completed copies of United States Internal Revenue Service Form 1001
or 4224, or successor applicable form, as the case may be, and (B) an
Internal Revenue Service Form W-8 or W-9, or successor applicable
form, as the case may be;
(ii) deliver to the Borrower and the Agent two further copies
of any such form or certification on or before the date that any such
form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the
Borrower or the Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrower and the Agent.
Such Lender shall certify (i) in the case of a Form 1001 or 4224, that it is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes and (ii) in the case of a
Form W-8 or W-9, that it is entitled to
<PAGE> 26
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an exemption from United States backup withholding tax. Each Person that shall
become a Lender or a Participant pursuant to subsection 9.6 shall, upon the
effectiveness of the related transfer, be required to provide all of the forms
and statements required pursuant to this subsection; provided that in the case
of a Participant such Participant shall furnish all such required forms and
statements to the Lender from which the related participation shall have been
purchased.
2.17 Indemnity. The Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss or expense which such Lender may
sustain or incur as a consequence of (a) default by the Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Loans after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment after the Borrower has given a notice thereof in accordance with the
provisions of this Agreement or (c) the making of a prepayment of Eurodollar
Loans on a day which is not the last day of an Interest Period with respect
thereto. Such indemnification may include an amount equal to the excess, if
any, of (i) the amount of interest which would have accrued on the amount so
prepaid, or not so borrowed, converted or continued, for the period from the
date of such prepayment or of such failure to borrow, convert or continue to
the last day of such Interest Period (or, in the case of a failure to borrow,
convert or continue, the Interest Period that would have commenced on the date
of such failure) in each case at the applicable rate of interest for such
Revolving Credit Loans provided for herein (excluding, however, the Applicable
Margin included therein, if any) over (ii) the amount of interest (as
reasonably determined by such Lender) which would have accrued to such Lender
on such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market. This covenant shall survive
the termination of this Agreement and the payment of the Revolving Credit Loans
and all other amounts payable hereunder.
2.18 Change of Lending Office. Each Lender agrees that if it
makes any demand for payment under subsection 2.15 or 2.16(a), or if any
adoption or change of the type described in subsection 2.14 shall occur with
respect to it, it will use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions and so long as such efforts would
not be disadvantageous to it, as determined in its sole discretion) to
designate a different lending office if the making of such a designation would
reduce or obviate the need for the Borrower to make payments under subsection
2.15 or 2.16(a), or would eliminate or reduce the effect of any adoption or
change described in subsection 2.14.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this
Agreement and to make the Revolving Credit Loans, the Borrower hereby
represents and warrants to the Agent and each Lender that:
3.1 Financial Condition. The consolidated balance sheet of
the Borrower and its consolidated Subsidiaries as at December 31, 1997 and the
related consolidated statements of income and of cash flows for the fiscal year
ended on such date, reported on by Arthur Andersen LLP, copies of which have
heretofore been furnished to each Lender, are complete and correct and present
fairly the consolidated financial condition of the Borrower and its
consolidated Subsidiaries as at such date, and the consolidated results of
their operations and their consolidated cash flows for the fiscal year then
ended. All such financial statements, including
<PAGE> 27
22
the related schedules and notes thereto, have been prepared in accordance with
GAAP applied consistently throughout the periods involved (except as approved
by such accountants or Responsible Officer, as the case may be, and as
disclosed therein). Neither the Borrower nor any of its consolidated
Subsidiaries had, at the date of the balance sheet referred to above, any
material Guarantee Obligation, contingent liability or liability for taxes, or
any long-term lease or unusual forward or long-term commitment, including,
without limitation, any interest rate or foreign currency swap or exchange
transaction, which is not reflected in the foregoing statements or in the notes
thereto. During the period from December 31, 1997 to and including the date
hereof there has been no sale, transfer or other disposition by the Borrower or
any of its consolidated Subsidiaries of any material part of its business or
property and no purchase or other acquisition of any business or property
(including any capital stock of any other Person) material in relation to the
consolidated financial condition of the Borrower and its consolidated
Subsidiaries at December 31, 1997.
3.2 No Change. (a) Since December 31, 1997 there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect and (b) during the period from December 31, 1997 to and
including the date hereof, except for dividends paid on the Convertible
Preferred Stock, no dividends or other distributions have been declared, paid
or made upon the Capital Stock of the Borrower nor has any of the Capital Stock
of the Borrower been redeemed, retired, purchased or otherwise acquired for
value by the Borrower or any of its Subsidiaries.
3.3 Corporate Existence; Compliance with Law. Each of the
Borrower and its Subsidiaries (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
the corporate power and authority, and the legal right, to own and operate its
property (including, without limitation, the Borrowing Base Assets), to lease
the property it operates as lessee and to conduct the business in which it is
currently engaged, (c) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification and (d) is in compliance with all Requirements of Law except to
the extent that the failure to comply therewith could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
3.4 Corporate Power; Authorization; Enforceable Obligations.
The Borrower has the corporate power and authority, and the legal right, to
make, deliver and perform the Loan Documents to which it is a party and to
borrow hereunder and has taken all necessary corporate action to authorize the
borrowings on the terms and conditions of this Agreement and any Notes and to
authorize the execution, delivery and performance of the Loan Documents to
which it is a party. No consent or authorization of, filing with, notice to or
other act by or in respect of, any Governmental Authority or any other Person
is required in connection with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of the Loan Documents to
which the Borrower is a party. This Agreement has been, and each other Loan
Document to which it is a party will be, duly executed and delivered on behalf
of the Borrower. This Agreement constitutes, and each other Loan Document to
which it is a party when executed and delivered will constitute, a legal, valid
and binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
<PAGE> 28
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3.5 No Legal Bar. The execution, delivery and performance of
the Loan Documents to which the Borrower is a party, the borrowings hereunder
and the use of the proceeds thereof will not violate any Requirement of Law or
Contractual Obligation of the Borrower or of any of its Subsidiaries and will
not result in, or require, the creation or imposition of any Lien on any of its
or their respective properties or revenues pursuant to any such Requirement of
Law or Contractual Obligation.
3.6 No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Borrower, threatened by or against the Borrower or any
of its Subsidiaries or against any of its or their respective properties or
revenues (a) with respect to any of the Loan Documents or any of the
transactions contemplated hereby or thereby, or (b) which could reasonably be
expected to have a Material Adverse Effect.
3.7 No Default. Neither the Borrower nor any of its
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which could have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
3.8 Ownership of Property; Liens. Each of the Borrower and
its Subsidiaries has good record and marketable title in fee simple to, or a
valid leasehold interest in, all its real property (including, without
limitation, the Borrowing Base Assets), and good title to, or a valid leasehold
interest in, all its other property, and none of such property is subject to
any Lien except as permitted by subsection 6.3.
3.9 Intellectual Property. The Borrower and each of its
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and processes necessary for the conduct of its
business as currently conducted except for those the failure to own or license
which could not reasonably be expected to have a Material Adverse Effect (the
"Intellectual Property"). No claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, nor does the
Borrower know of any valid basis for any such claim. The use of such
Intellectual Property by the Borrower and its Subsidiaries does not infringe on
the rights of any Person, except for such claims and infringements that, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
3.10 No Burdensome Restrictions. No Requirement of Law or
Contractual Obligation of the Borrower or any of its Subsidiaries could
reasonably be expected to have a Material Adverse Effect.
3.11 Taxes. Each of the Borrower and its Subsidiaries has
filed or caused to be filed all tax returns which, to the knowledge of the
Borrower, are required to be filed and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority (other than any the amount or validity
of which are currently being contested in good faith by appropriate proceedings
and with respect to which reserves in conformity with GAAP have been provided
on the books of the Borrower or its Subsidiaries, as the case may be); no tax
Lien has been filed, and, to the knowledge of the Borrower, no claim is being
asserted, with respect to any such tax, fee or other charge.
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3.12 Federal Regulations. No part of the proceeds of any
Revolving Credit Loans will be used for "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. If requested by any Lender or the
Agent, the Borrower will furnish to the Agent and each Lender a statement to
the foregoing effect in conformity with the requirements of Regulation U.
3.13 ERISA. Neither a Reportable Event nor an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or Section
302 of ERISA) has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Plan, and
each Plan has complied in all material respects with the applicable provisions
of ERISA and the Code. No termination of a Single Employer Plan has occurred,
and no Lien in favor of the PBGC or a Plan has arisen, during such five-year
period. The present value of all accrued benefits under each Single Employer
Plan (based on those assumptions used to fund such Plans) did not, as of the
last annual valuation date prior to the date on which this representation is
made or deemed made, exceed the value of the assets of such Plan allocable to
such accrued benefits. Neither the Borrower nor any Commonly Controlled Entity
has had a complete or partial withdrawal from any Multiemployer Plan, and
neither the Borrower nor any Commonly Controlled Entity would become subject to
any liability under ERISA if the Borrower or any such Commonly Controlled
Entity were to withdraw completely from all Multiemployer Plans as of the
valuation date most closely preceding the date on which this representation is
made or deemed made. No such Multiemployer Plan is in Reorganization or
Insolvent.
3.14 Investment Company Act; Public Utility Holding Company
Act; Other Regulations. The Borrower is not (a) an "investment company", or a
company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended or (b) a "holding company" as
defined in, or otherwise subject to regulation under, the Public Utility
Holding Company Act of 1935. The Borrower is not subject to regulation under
any Federal or State statute or regulation (other than Regulation X of the
Board of Governors of the Federal Reserve System) which limits its ability to
incur Indebtedness.
3.15 Purpose of Revolving Credit Loans. The proceeds of the
Revolving Credit Loans shall be used by the Borrower to refinance the loans
outstanding under the Existing Agreement and for general corporate purposes in
the ordinary course of business.
3.16 Environmental Matters. Except for environmental matters
which in the aggregate, could not reasonably be expected to either (a) result
in the existence of an unsatisfied liability in excess of a Material
Environmental Amount or (b) have a Material Adverse Effect:
(a) To the best of the Borrower's knowledge, the facilities
and properties owned, leased or operated by the Borrower or any of its
Subsidiaries (the "Properties") do not contain, and have not
previously contained, any Materials of Environmental Concern in
amounts or concentrations which (i) constitute or constituted a
violation of, or (ii) could give rise to liability under, any
Environmental Law.
(b) To the best of the Borrower's knowledge, the Properties
and all operations at the Properties are in compliance, and have in
the last five years been in compliance, with
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25
all applicable Environmental Laws, and there is no contamination at,
under or about the Properties or violation of any Environmental Law
with respect to the Properties or the business operated by the
Borrower or any of its Subsidiaries (the "Business").
(c) Neither the Borrower nor any of its Subsidiaries has
received any notice of violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of the
Properties or the Business, nor does the Borrower have knowledge or
reason to believe that any such notice will be received or is being
threatened.
(d) To the best of the Borrower's knowledge, materials of
Environmental Concern have not been transported, or disposed of, from
the Properties in violation of, or in a manner or to a location which
could reasonably be expected to give rise to liability under, any
Environmental Law, nor have any Materials of Environmental Concern
been generated, treated, stored or disposed of at, on or under any of
the Properties in violation of, or in a manner that could reasonably
be expected to give rise to liability under, any applicable
Environmental Law.
(e) No judicial proceeding or governmental or administrative
action is pending or, to the knowledge of the Borrower, threatened,
under any Environmental Law to which the Borrower or any Subsidiary is
or will be named as a party with respect to the Properties or the
Business, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental Law with
respect to the Properties or the Business.
(f) To the best of the Borrower's knowledge, there has been
no release or threat of release of Materials of Environmental Concern
at or from the Properties, or arising from or related to the
operations of the Borrower or any Subsidiary in connection with the
Properties or otherwise in connection with the Business, in violation
of or in amounts or in a manner that could reasonably be expected to
give rise to liability under Environmental Laws.
3.17 Insurance. The Borrower and each of its Subsidiaries
maintain with financially sound and reputable insurance companies insurance 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 and such insurance is
otherwise in compliance with the Loan Documents.
3.18 Subsidiaries. On the Effective Date, the Subsidiaries
of the Borrower, and its respective direct or indirect ownership interest in
each thereof, shall be as set forth in Schedule 3.18 hereto.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Effectiveness. This Agreement shall become
effective upon, and the agreement of each Lender to make the initial Revolving
Credit Loan requested to be made by it is subject to, the satisfaction no later
than May 15, 1998 of the following conditions precedent:
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26
(a) Loan Documents. The Agent shall have received (i) this
Agreement, executed and delivered by a duly authorized officer of the
Borrower, with a counterpart for each Lender, (ii) the Subsidiaries
Guarantee, executed and delivered by a duly authorized officer of each
Subsidiary Guarantor, with a counterpart for each Lender, and (iii)
for the account of each Lender, a Revolving Credit Note in form and
substance reasonably acceptable to the Agent and the Agent's counsel
executed and delivered by a duly authorized officer of the Borrower.
(b) Effective Certificate. The Agent shall have received,
with a counterpart for each Lender, a certificate of the Borrower and
each Subsidiary Guarantor, dated the Effective Date, substantially in
the form of Exhibit C, with appropriate insertions and attachments,
satisfactory in form and substance to the Agent, executed by the
Chairman of the Board of Directors, President, any Vice President or
the Secretary or any Assistant Secretary of the Borrower and each
Subsidiary Guarantor.
(c) Corporate Proceedings. The Agent shall have received,
with a counterpart for each Lender, a copy of the resolutions, in form
and substance satisfactory to the Agent, of the Board of Directors of
the Borrower and each Subsidiary Guarantor authorizing (i) the
execution, delivery and performance of the Loan Documents to which it
is a party and (ii) in the case of the Borrower, the borrowings
contemplated hereunder, certified by the Secretary or an Assistant
Secretary of the Borrower and of each such Subsidiary Guarantor, as
the case may be, as of the Effective Date, which certificate shall be
in form and substance satisfactory to the Agent and the Agent's
counsel and shall state that the resolutions thereby certified have
not been amended, modified, revoked or rescinded.
(d) Incumbency Certificates. The Agent shall have received,
with a counterpart for each Lender, a Certificate of the Borrower and
each Subsidiary Guarantor, dated the Effective Date, as to the
incumbency and signature of the officers of the Borrower and the
Subsidiary Guarantors executing any Loan Document satisfactory in form
and substance to the Agent, executed by the Chairman of the Board of
Directors, President or any Vice President and the Secretary or any
Assistant Secretary of the Borrower and each Subsidiary Guarantor.
(e) Corporate Documents. The Agent shall have received, with
a counterpart for each Lender, true and complete copies of the
certificate of incorporation and by-laws of the Borrower certified as
of the Effective Date as complete and correct copies thereof by the
Secretary or an Assistant Secretary of the Borrower.
(f) Fees. The Agent shall have received any fees and
expenses required to be received by it on the Effective Date pursuant
to the Loan Documents and the Fee Letter.
(g) Legal Opinion. The Agent shall have received, with a
counterpart for each Lender, the executed legal opinion of Lynch,
Chappell & Alsup, a professional corporation, counsel to the Borrower
and each Subsidiary Guarantor, substantially in the form of Exhibit D;
such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Agent and the
Agent's counsel may reasonably require.
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(h) Reserve Report. Notwithstanding the provisions of
subsection 2.6(b), the Agent and the Co-Agent shall have received,
with a counterpart for each Lender, a Reserve Report with respect to
the Borrower and its Subsidiaries dated as of December 31, 1997
complying in all other respects with the provisions of subsection
2.6(b) and such other reserve information as may be requested by the
Agent and the Co-Agent, all of which shall be satisfactory in form and
substance to the Agent and the Co-Agent.
(i) Existing Agreement. All amounts owed with respect to the
Existing Agreement shall have been paid in full and the Existing
Agreement and all commitments thereunder shall have been terminated.
4.2 Conditions to Each Revolving Credit Loan. The agreement
of each Lender to make any Revolving Credit Loan requested to be made by it on
any date (including, without limitation, its initial Revolving Credit Loan) is
subject to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by the Borrower and the Subsidiary
Guarantors in or pursuant to the Loan Documents shall be true and
correct in all material respects on and as of such date as if made on
and as of such date.
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
Revolving Credit Loans requested to be made on such date.
(c) Maintenance of Borrowing Base. Notwithstanding
subsection 2.7(b), after giving effect to the Revolving Credit Loans
requested to be made on any date, the aggregate amount of the
Revolving Credit Loans then outstanding shall not exceed the Borrowing
Base then in effect.
(d) No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority shall
be pending or, to the knowledge of the Borrower, threatened by or
against the Borrower or any of its Subsidiaries or against any of its
or their respective properties or revenues (a) with respect to any of
the Loan Documents or any of the transactions contemplated hereby or
thereby, or (b) which could reasonably be expected to have a Material
Adverse Effect.
(e) Borrowing Base Certificate. The Agent shall have
received, with a counterpart for each Lender, a Borrowing Base
certificate substantially in the form of Exhibit E, with appropriate
insertions.
(f) Additional Matters. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection
with the transactions contemplated by this Agreement and the other
Loan Documents shall be satisfactory in form and substance to the
Agent, and the Agent shall have received such other documents and
legal opinions in respect of any aspect or consequence of the
transactions contemplated hereby or thereby as it shall reasonably
request.
Each borrowing by the Borrower hereunder shall constitute a representation and
warranty by the
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Borrower as of the date thereof that the conditions contained in this subsection
have been satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments
remain in effect or any amount is owing to any Lender or the Agent hereunder or
under any other Loan Document, the Borrower shall and (except in the case of
delivery of financial information, reports and notices) shall cause each of its
Subsidiaries to:
5.1 Financial Statements. Furnish to each Lender:
(a) as soon as available, but in any event within 90 days
after the end of each fiscal year of the Borrower, a copy of the
consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such year and the related consolidated
statements of income and retained earnings and of cash flows for such
year, setting forth in each case in comparative form the figures for
the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope
of the audit, by Arthur Andersen LLP or other independent certified
public accountants of nationally recognized standing; and
(b) as soon as available, but in any event not later than 45
days after the end of each of the first three quarterly periods of
each fiscal year of the Borrower, the unaudited consolidated balance
sheet of the Borrower and its consolidated Subsidiaries as at the end
of such quarter and the related unaudited consolidated statements of
income and retained earnings and of cash flows of the Borrower and its
consolidated Subsidiaries for such quarter and the portion of the
fiscal year through the end of such quarter, setting forth in each
case in comparative form the figures for the previous year, certified
by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
5.2 Certificates; Other Information. Furnish to each Lender:
(a) concurrently with the delivery of the financial
statements referred to in subsection 5.1(a), a certificate of the
independent certified public accountants reporting on such financial
statements stating that in making the examination necessary therefor
no knowledge was obtained of any Default or Event of Default, except
as specified in such certificate;
(b) concurrently with the delivery of the financial
statements referred to in subsections 5.1(a) and (b), a certificate of
a Responsible Officer stating that, to the best of such officer's
knowledge, the Borrower during such period has observed or performed
all of its covenants and other agreements, and satisfied every
condition, contained in this Agreement and the other Loan Documents to
be observed, performed or satisfied by it,
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and that such officer has obtained no knowledge of any Default or
Event of Default except as specified in such certificate, which
certificate shall include the detailed calculations of such
Responsible Officer demonstrating the Borrower's compliance with the
financial covenants set forth in subsection 6.1;
(c) not later than sixty days after the end of each fiscal
year of the Borrower, a copy of the projections by the Borrower of the
operating budget and cash flow budget (including capital expenditures)
of the Borrower and its consolidated Subsidiaries for the succeeding
fiscal year, such projections to be accompanied by a certificate of a
Responsible Officer to the effect that such projections have been
prepared on the basis of sound financial planning practice and that
such Officer has no reason to believe they are incorrect or misleading
in any material respect;
(d) within five Business Days after the same are sent, copies
of all financial statements and reports which the Borrower sends to
its stockholders