SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): December 9, 1997
COMSTOCK RESOURCES, INC.
(Exact name of registrant as specified in its charter)
NEVADA 0-16741 94-1667468
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification Number)
5005 LBJ Freeway, Suite 1000, Dallas, Texas 75244
(Address of principal executive offices)
(972) 701 - 2000
(Registrant's Telephone No.)
1
Item 2. Acquisition or Disposition of Assets
On December 9, 1997, Comstock Resources, Inc. (the "Company"), through a
newly formed wholly owned subsidiary, Comstock Offshore, LLC, acquired working
interests in certain producing offshore Louisiana oil and gas properties as well
as interests in undeveloped offshore oil and gas leases for total cash
consideration of approximately $203.4 million from Bois d'Arc Resources ("Bois
d' Arc") and certain affiliates and working interest partners of Bois d' Arc.
The Company acquired interests in 38 wells (24.0 net wells) and eight
separate production complexes located in the Gulf of Mexico offshore of
Plaquemines and Terrebonne Parishes, Louisiana. The acquisition included
interests in the Louisiana State and Federal offshore areas of Main Pass Blocks
21 and 25, Ship Shoal Blocks 66, 67, 68 and 69 and South Pelto Block 1. The
Company also acquired interests in six undrilled prospects which have been
delineated by 3-D seismic. Approximately $30 million of the purchase price was
attributed to the undrilled prospects.
The acquisition was financed under a new five year $290.0 million revolving
credit facility. The Company financed the acquisition and refinanced $77.0
million of outstanding indebtedness under its existing revolving credit facility
with borrowings under the new credit facility.
Item 7. Financial Statements and Exhibits
Page in
This Report
(a) Financial Statements.
Bois d' Arc Acquisition:
Report of Independent Public Accountants .............................F-1
Statements of Revenues and Direct Operating Expenses
for the Years ended December 31, 1994, 1995 and 1996
and Nine Months Ended September 30, 1996 and 1997................F-2
Notes to Statements of Revenues and Direct Operating Expenses.........F-3
(b) Pro Forma Financial Information (Unaudited)
Comstock Resources, Inc.:
Pro Forma Consolidated Financial Statements ..........................P-1
Pro Forma Consolidated Balance Sheet as of September 30, 1997.........P-2
Pro Forma Consolidated Statement of Operations
for the Year Ended December 31, 1996.............................P-3
Pro Forma Consolidated Statement of Operations
for the Nine Months Ended September 30, 1997.....................P-4
Notes to Pro Forma Consolidated Financial Statements..................P-5
2
(c) Exhibits.
2 Agreement For Purchase and Sale - Bois d' Arc Resources et.al.
as Seller and Comstock Oil & Gas - Louisiana, Inc.as Buyer.
10 Credit Agreement dated as of December 9, 1997 between Comstock
Resources, Inc., Comstock Oil & Gas, Inc., Comstock Oil & Gas --
Louisiana, Inc., Comstock Offshore, LLC, the Banks named therein
and The First National Bank of Chicago, as Agent and Bank One,
Texas, N.A., as Documentation Agent.
3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Comstock Resources, Inc.:
We have audited the accompanying statements of revenues and direct
operating expenses of the Bois d' Arc Acquisition (see Note 1) for the years
ended December 31, 1994, 1995 and 1996. These financial statements are the
responsibility of the management of Comstock Resources, Inc. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such statements present fairly, in all material respects,
the revenues and direct operating expenses of the Bois 'd Arc Acquisition
described in Note 1 for the years ended December 31, 1994, 1995 and 1996 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
December 9, 1997
F-1
BOIS d' ARC ACQUISITION
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
For the Years Ended December 31, 1994, 1995 and
1996 and for the Nine Months Ended September 30,
1996 and 1997
(In thousands)
Nine Months
Year Ended December 31, Ended September 30,
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
REVENUES (Unaudited)
Oil and gas sales $ 10,785 $ 14,884 $ 41,002 $ 27,406 $ 44,311
DIRECT OPERATING EXPENSES
Oil and gas operating 2,211 3,348 5,680 3,933 6,539
-------- ------- ------- ------- --------
EXCESS OF REVENUES OVER
DIRECT OPERATING EXPENSES $ 8,574 $ 11,536 $ 35,322 $ 23,473 $ 37,772
======== ======== ======== ======== ========
See Notes to Statements of Revenues and Direct Operating Expenses.
F-2
BOIS d' ARC ACQUISITION
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES (Continued)
BOIS d' ARC ACQUISITION
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
(1) BASIS OF PRESENTATION -
On December 9, 1997, Comstock Resources, Inc. (the "Company"), through a
newly formed wholly owned subsidiary, Comstock Offshore, LLC, acquired working
interests in certain producing offshore Louisiana oil and gas properties as well
as interests in undeveloped offshore oil and gas leases for total cash
consideration of approximately $203.4 million from Bois d'Arc Resources ("Bois
d' Arc") and certain affiliates and working interest partners of Bois d' Arc
(the "Bois d' Arc Acquisition").
The Company acquired interests in 38 wells (24.0 net wells) and eight
separate production complexes located in the Gulf of Mexico offshore of
Plaquemines and Terrebonne Parishes, Louisiana. The acquisition included
interests in the Louisiana State and Federal offshore areas of Main Pass Blocks
21 and 25, Ship Shoal Blocks 66, 67, 68 and 69 and South Pelto Block 1. The
Company also acquired interests in six undrilled prospects which have been
delineated by 3-D seismic. Approximately $30 million of the purchase price was
attributed to the undrilled prospects.
The acquisition was financed under a new five year $290.0 million revolving
credit facility. The Company financed the acquisition and refinanced $77.0
million of outstanding indebtness under its existing revolving credit facility
with borrowings under the new credit facility.
The accompanying statements of revenues and direct operating expenses do
not include general and administrative expense, interest income or expense, a
provision for depreciation, depletion and amortization or any provision for
income taxes because the property interests acquired represent only a portion of
a business and the costs incurred by the sellers of the properties are not
necessarily indicative of the costs to be incurred by the Company.
Historical financial information reflecting financial position, results of
operations and cash flows of the Bois d' Arc Acquisition is not presented
because all of the acquisition cost was assigned to the oil and gas property
interests. Accordingly, the historical statements of revenues and direct
operating expenses have been presented in lieu of the financial statements
required under Rule 3-05 of Securities and Exchange Commission Regulation S-X.
F-3
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The accompanying Pro Forma Consolidated Financial Statements have been
prepared by recording pro forma adjustments to the historical consolidated
financial statements of Comstock Resources, Inc. and subsidiaries (the
"Company"). The Pro Forma Consolidated Balance Sheet as of September 30, 1997
has been prepared as if the Bois d' Arc Acquisition was consummated on September
30, 1997. The Pro Forma Consolidated Statements of Operations for the year ended
December 31, 1996 and for the nine months ended September 30, 1997 have been
prepared as if the Bois d' Arc Acquisition and the Other 1996 and 1997
Acquisitions, as described in Note 1, were consummated immediately prior to
January 1, 1996 and January 1, 1997, respectively.
The Pro Forma Consolidated Financial Statements are not necessarily
indicative of the financial position or results of operations that would have
occurred had the transactions been effected on the assumed dates. Additionally,
future results may vary significantly from the results reflected in the Pro
Forma Consolidated Statements of Operations due to normal production declines,
changes in oil and gas prices, future transactions and other factors. These
statements should be read in conjunction with the Company's audited consolidated
financial statements and the related notes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 and the Company's
consolidated financial statements and the related notes included in the
Company's quarterly report on Form 10-Q for the nine months ended September 30,
1997.
P-1
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (Unaudited)
SEPTEMBER 30, 1997
(In thousands)
ASSETS
Pro Forma
Adjustments
(Note 2)
Bois d' Arc
Historical Acquisition(a) Pro Forma
---------- -------------- ---------
Cash and Cash Equivalents $ 6,342 $ - $ 6,342
Accounts Receivable:
Oil and gas sales 12,260 5,000 17,260
Joint interest operations 3,641 - 3,641
Other Assets 390 - 390
--------- ---------- --------
Total current assets 22,633 5,000 27,633
--------- ---------- --------
Property and Equipment:
Unevaluated oil and gas leases - 30,000 30,000
Oil and gas properties 275,411 172,986 448,397
Other 548 1,000 1,548
Accumulated depreciation,
depletion and amortization (68,015) - (68,015)
--------- ---------- ----------
Net property and equipment 207,944 203,986 411,930
--------- ---------- ---------
Other Assets 115 - 115
--------- ---------- ---------
$ 230,692 $ 208,986 $ 439,678
========= ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Portion of Long-term Debt $ 9 $ - $ 9
Accounts Payable and Accrued Expenses 19,385 - 19,385
--------- ---------- ---------
Total current liabilities 19,394 - 19,394
--------- ---------- ---------
Long-term Debt, less Current Portion 83,000 204,442 287,442
Deferred Taxes Payable 8,796 - 8,796
Other Noncurrent Liabilities 905 4,544 5,449
Stockholders' Equity:
Common stock - $.50 par,
24,204,785 shares outstanding 12,102 - 12,102
Additional paid-in capital 110,099 - 110,099
Retained deficit (3,585) - (3,585)
Less: Deferred compensation -
restricted stock (19) - (19)
--------- --------- ----------
Total stockholders' equity 118,597 - 118,597
--------- --------- ----------
$ 230,692 $ 208,986 $ 439,678
========= ========= =========
See Notes to Pro Forma Consolidated Financial Statements.
P-2
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the Year Ended December 31, 1996
(In thousands except for per share amounts)
Pro Forma Adjustments (Note 2)
Other
Bois d' Arc 1996 and 1997
Historical Acquisition Acquisitions Other Pro Forma
---------- ----------- ------------ ----- ---------
Revenues:
Oil and gas sales $ 68,915 $ 41,002(b) $ 14,940(c) $ - $ 124,857
Gain on sales of property 1,447 - - - 1,447
Other income 593 - - - 593
--------- --------- --------- --------- ---------
Total revenues 70,955 41,002 14,940 - 126,897
--------- --------- --------- --------- ---------
Expenses:
Oil and gas operating 13,838 5,680(b) 1,531(c) - 21,049
Exploration 436 - - - 436
Depreciation, depletion
and amortization 18,269 - - 22,381 (d) 40,650
General and administrative, net 2,239 - - (286)(e) 1,953
Interest 10,086 - - 15,628 (f) 25,714
--------- --------- --------- --------- ---------
Total expenses 44,868 5,680 1,531 37,723 89,802
--------- --------- --------- --------- ---------
Income from continuing operations
before income taxes 26,087 35,322 13,409 (37,723) 37,095
Provision for income taxes - - - 3,853 (g) 3,853
--------- --------- --------- --------- ---------
Income from continuing operations 26,087 35,322 13,409 (41,576) 33,242
Preferred stock dividends (2,021) - - - (2,021)
Net income from continuing operations
attributable to common stock 24,066 35,322 13,409 (41,576) 31,221
Income from discontinued operations 1,866 - - - 1,866
Net income attributable to
common stock $ 25,932 $ 35,322 $ 13,409 $ (41,576) $ 33,087
========= ========= ========= ========= =========
Net income per share:
Primary $ 1.58 $ 2.02
========== =========
Fully diluted $ 1.31 $ 1.64
========== =========
Weighted average common shares
outstanding:
Primary 16,370 16,370
========== =========
Fully diluted 21,408 21,408
========== =========
See Notes to Pro Forma Consolidated Financial Statements.
P-3
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the Nine Months Ended September 30, 1997
(In thousands, except per share amounts)
Pro Forma Adjustments (Note 2)
Other
Bois d' Arc 1996 and 1997
Historical Acquisition Acquisitions Other Pro Forma
---------- ----------- ------------ ---------- ---------
Revenues:
Oil and gas sales $ 59,610 $ 44,311 (b) $ 1,338(c) $ - $ 105,259
Gain on sales of property 85 - - - 85
Other income 597 - - - 597
--------- ---------- --------- ---------- --------
Total revenues 60,292 44,311 1,338 - 105,941
--------- ---------- --------- ---------- --------
Expenses:
Oil and gas operating 12,849 6,539 (b) 124(c) - 19,512
Exploration 280 - - - 280
Depreciation, depletion
and amortization 16,335 - - 23,223 (d) 39,558
General and administrative, net 1,811 - - (242)(e) 1,569
Interest 3,884 - - 9,710 (f) 13,594
--------- --------- --------- ---------- --------
Total expenses 35,159 6,539 124 32,691 74,513
--------- --------- --------- ---------- --------
Income before income taxes 25,133 37,772 1,214 (32,691) 31,428
Provision for income taxes 8,796 - - 2,203 (g) 10,999
--------- --------- --------- ---------- --------
Income 16,337 37,772 1,214 (34,894) 20,429
Preferred stock dividends (410) - - - (410)
--------- --------- --------- ---------- --------
Net income attributable
to common stock $ 15,927 $ 37,772 $ 1,214 $ (34,894) $ 20,019
========= ========= ========= ========== ========
Net income per share:
Primary $ .63 $ .80
========= ========
Fully diluted $ .62 $ .78
========= ========
Weighted average common
shares outstanding
Primary 25,114 25,114
========= ========
Fully diluted 26,306 26,306
========= ========
See Notes to Pro Forma Consolidated Financial Statements.
P-4
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(1) BASIS OF PRESENTATION -
On December 9, 1997, Comstock Resources, Inc. (the "Company") through a
newly formed wholly owned subsidiary, Comstock Offshore, LLC, acquired working
interests in certain producing offshore Louisiana oil and gas properties as well
as interests in undeveloped offshore oil and gas leases for total cash
consideration of approximately $203.4 million from Bois d'Arc Resources ("Bois
d' Arc") and certain affiliates and working interest partners of Bois d' Arc.
The Company acquired interests in 38 wells (24.0 net wells) and eight
separate production complexes located in the Gulf of Mexico offshore of
Plaquemines and Terrebonne Parishes, Louisiana. The acquisition included
interests in the Louisiana State and Federal offshore areas of Main Pass Blocks
21 and 25, Ship Shoal Blocks 66, 67, 68 and 69 and South Pelto Block 1. The
Company also acquired interests in six undrilled prospects which have been
delineated by 3-D seismic. Approximately $30 million of the purchase price was
attributed to the undrilled prospects.
In May 1996, the Company purchased working interests in the Double A Wells
field in Polk County, Texas for a net purchase price of $100.4 million. The
Company acquired 100% of the capital stock of Black Stone Oil Company, the
operator of the field, together with additional interests held by other working
interest owners in 19 producing oil and gas properties as well as interests in
adjacent undeveloped oil and gas leases. In May 1997, the Company purchased
certain producing oil and gas properties located in the Lisbon field in
Claiborne Parish, Louisiana for a net purchase price of $20.1 million. The
acquisition included interests in 13 wells (7.1 net wells) and approximately
6,400 gross acres. The acquisition closed in 1996 and the acquisition closed in
May 1997 are hereafter referred to as the "Other 1996 and 1997 Acquisitions."
The accompanying Pro Forma Consolidated Balance Sheet at September 30, 1997
and the Pro Forma Consolidated Statements of Operations for the year ended
December 31, 1996 and the nine months ended September 30, 1997, have been
prepared assuming the Company consummated, immediately prior to each of the
periods presented, the Bois d' Arc Acquisition and the Other 1996 and 1997
Acquisitions, funded by borrowings under the Company's bank credit facility.
The Pro Forma Consolidated Statements of Operations are not necessarily
indicative of the results of operations had the above described transactions
occurred on the assumed dates.
(2) PRO FORMA ADJUSTMENTS -
Pro forma adjustments necessary to adjust the Consolidated Balance Sheet
and Statements of Operations are as follows:
(a) To record the assets acquired with the Bois d' Arc Acquisition funded
by borrowings under the Company's new bank credit facility.
P-5
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Continued)
(b) To record revenue and direct operating expenses of the Bois d'
Acquisition, based on the statements of revenue and direct operating
expenses for the year ended December 31, 1996 and for the nine months
ended September 30, 1997.
(c) To record revenue and direct operating expenses of the Other 1996 and
1997 Acquisitions.
(d) To record estimated depreciation and depletion expense attributable to
the Bois d' Arc Acquisition and Other 1996 and 1997 Acquisitions using
the unit-of-production method applied to the net cost of the
properties acquired.
(e) To record the operating fee income attributable to Bois d' Arc and the
Other 1996 and 1997 Acquisitions, which is netted against general and
administrative expense.
(f) To record interest expense attributable to the increase in debt to
finance the purchase of the Bois d' Arc Acquisition and the Other 1996
and 1997 Acquisitions. Interest expense is based upon the weighted
average interest rate incurred by the Company under its bank credit
facility in assuming the entire cost of the acquisitions had been
funded with bank borrowings at January 1 of each period and is net of
capitalized interest of $2,048,000 and $1,569,000 for the year ended
December 31, 1996 and the nine months ended September 30, 1997,
respectively.
(g) To record income tax expense attributable to the Bois d' Arc
Acquisition and the Other 1996 and 1997 Acquisitions.
(3) OIL AND GAS RESERVE INFORMATION (Unaudited)
The estimates of proved oil and gas reserves were estimated by independent
petroleum engineers in accordance with guidelines established by the Securities
and Exchange Commission and the Financial Accounting Standards Board, which
require that reserve reports be prepared under existing economic and operating
conditions with no provision for price and cost escalation except by contractual
agreement.
The following table sets forth proved oil and gas reserves after the Bois
d' Arc Acquisition at November 1, 1997, the effective date of the acquisition:
OIL GAS
(barrels) (mcf)
------------- -------------
Proved Developed Reserves 11,539,000 22,733,000
Proved Undeveloped Reserves 3,089,000 7,851,000
------------- -------------
Total Proved Reserves 14,628,000 30,584,000
============= =============
P-6
The following table set forth the standardized measure of discounted future
net cash flows, excluding future income taxes, relating to proved reserves of
the Bois d' Arc Acquisition at November 1, 1997:
Future Cash Flows $ 357,760,000
Future Cost
Production (68,343,000)
Development (24,192,000)
--------------
Future Net Cash Flows 265,225,000
10% Discount Factor (70,444,000)
--------------
Standardized Measure of
Discounted future Net Cash Flows $ 194,781,000
==============
Future cash flows were based on September 1997 price for future oil and gas
sales.
P-7
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Continued)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COMSTOCK RESOURCES, INC.
Dated: December 12, 1997 By:/s/ROLAND O. BURNS
------------------
Roland O. Burns
Senior Vice President, Chief Financial Officer,
Secretary, and Treasurer (Principal Financial and
Accounting Officer)
P-8
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (hereinafter referred to as the
"Agreement") is made and entered into as of the 31st day of October, 1997, by
and among BOIS D'ARC RESOURCES, a Louisiana partnership of Wayne L. Laufer and
Gary W. Blackie ("Bois D'Arc"), and the other persons identified on the
signature pages hereto as a Seller (individually a "Seller" and collectively,
"Sellers") and COMSTOCK OIL & GAS -- LOUISIANA, INC., a Nevada corporation
("Purchaser").
RECITALS
WHEREAS, Sellers are owners of or represent various interests in and to the
real and personal property described below:
(1) The undivided interests in and to the depths and formations depicted on
the Exhibit "A" attached hereto, in and to (i) the oil, gas and mineral
properties and interests described on Exhibit "A", including but not limited to,
leasehold, fee and mineral interests necessary to deliver the net revenue
described in Exhibit "A", and payments out of or measured by Production
(hereinafter defined) (said undivided interests being herein referred to as the
"Leases"); (ii) the units, pooled acreage, spacing, or proration units or other
allocation of acreage, and all rights associated therewith, which are applicable
to the Leases and have been established by, or in accordance with, (A)
applicable contractual provisions regarding unitization, communitization,
pooling, spacing or proration, or (B) applicable state or federal law;
(2) The undivided interests set forth on Exhibit "A" in and to all oil,
gas, casinghead gas, condensate, distillate and other liquid or gaseous
hydrocarbons and other minerals which are in, under, upon, and produced from or
allocable (or to be produced from or allocable) to the Leases (such hydrocarbons
and minerals being hereinafter referred to as "Production"), including "pipeline
fill" and inventory attributable to the interests described in Exhibit "A", or
the proceeds from the sale of such Production;
(3) All personal property of every kind and character located on the Leases
or used in the operation thereof including, without limitation, wells (whether
productive or non-productive, active or inactive) (the "Wells"), well equipment,
casing, tanks, machinery, gathering lines and systems, treatment facilities,
pipelines, boats, barges, platforms and other appurtenances, and any other
personal property situated thereon, but specifically excluding those items
listed on Schedule 1 hereto (herein individually and collectively called "Wells
and Equipment");
(4) All rights, privileges, benefits, permissions and authorizations
(including, without limitation, permits, licenses, servitudes, easements, and
rights-of-way) in respect of the use and occupation of the surface of such
Leases, and the subsurface depths under the land and premises covered by and
benefiting such Leases, but excluding any security bonds or deposits relating to
the operation of the Leases (herein called individually and collectively
"Rights-of-Way and Permits");
1
(5) All of the orders, gas purchase and sale contracts (wherein Sellers are
a selling party), crude purchase and sale agreements (wherein Sellers are a
selling party), surface leases, farmin agreements, farmout agreements, bottom
hole agreements, acreage contribution agreements, operating agreements, unit
agreements, processing agreements, options, leases of equipment or facilities
and other contracts, agreements and rights which are owned by Sellers, in whole
or in part and are (i) appurtenant to the Leases or (ii) used or held for use in
connection with the ownership or operation of the Leases or with the Production,
treatment on the Leases, sale or disposal of water, hydrocarbons or associated
substances (herein called individually and collectively the "Contracts"); and
(6) All of the files, records and data relating to the items described in
subsections (1), (2), (3), (4) and (5) above (the "Records"), including, without
limitation, lease files, title records (including abstracts of title, title
opinions and title curative documents), contracts, correspondence, geological,
geophysical and seismic records, data and information, and production records,
electric logs, core data, pressure data and decline curves and graphical
production curves and all related matters, to the extent Sellers have the
authority to release such Records.
The Leases, Production, Wells and Equipment, the Rights-of-Way and Permits,
the Contracts and the Records referred to in 1 through 6 above are hereinafter
sometimes referred to individually and collectively in the singular as
"Property."
WHEREAS, Sellers desire to sell and convey, and Purchaser desires to
purchase and receive Sellers' interests as set forth in Exhibit "A" in and to
the Property which is described herein, upon and subject to the terms and
conditions set forth herein.
NOW, THEREFORE, for and in consideration of the mutual agreements herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confessed, Sellers and
Purchaser hereby agree as follows:
1. Sale and Purchase. Sellers agree to sell and convey to Purchaser and
Purchaser agrees to purchase and pay for all of Sellers' right, title and
interest, as described in Exhibit "A", in and to the Property as hereinafter
provided.
2. Purchase Price. The purchase price for the Property shall be Two Hundred
Five Million Dollars ($205,000,000) (the "Purchase Price"), and shall be payable
by Purchaser to Sellers in immediately available funds at the Closing
(hereinafter defined). However, the Purchase Price shall be subject to
adjustment as hereinafter provided. Set forth on Schedule 2 is Purchaser's
allocation of the Purchase Price among the properties comprising the Property
and Purchaser's allocation of the Purchase Price to each individual Seller based
on each such Seller's interest in the Property.
3. Closing and Effective Date.
(a) The closing of the sale and purchase of the Property shall take
place on or before December 15, 1997 (the "Closing"), at the offices of
Purchaser, or at such other time, place or manner as may be mutually agreeable
to the parties. The sale of the Property shall be effective as
2
of 7:00 a.m. Central Standard Time, on November 1, 1997 (the "Effective Date").
It is the intent of the parties that Purchaser shall be responsible for all
costs associated with operating the Property after the Effective Date and shall
be entitled to all revenues attributed by the purchaser of production to the
month of November 1997, and thereafter.
(b) At the Closing, the Property shall be conveyed and transferred by
Sellers to Purchaser by the execution and delivery of an Assignment and Bill of
Sale (the "Assignment") in substantially the form of Assignment and Bill of Sale
attached hereto as Exhibit "B", and such other instruments of conveyance as may
be requested by Purchaser. Purchaser shall be entitled to all of Sellers' rights
as described in Exhibit "A" (including, without limitation, the rights to all
Production and proceeds of Production) appurtenant and attributable to the
Property and shall be subject to the duties and obligations attendant with
ownership of the Property for the period from and after the Effective Date.
Sellers shall be entitled to all of the rights (including, without limitation,
the rights to all Production and proceeds of Production) appurtenant and
attributable to the Property and shall be subject to the duties and obligations
attendant with ownership of the Property, for the period prior to the Effective
Date.
4. Adjustments to Purchase Price. The Purchase Price shall be adjusted at
the Closing in accordance with the "Interim Settlement Statement" (hereinafter
defined) and in accordance with the "Final Settlement Statement" (hereinafter
defined) as follows:
(a) The Purchase Price shall be increased by the following:
(1) the value of all merchantable allowable oil or other liquid
hydrocarbons in storage owned by Sellers in the tanks or above the pipeline
connection or not otherwise accounted for by Purchaser (to be based on the
October 1997 prices received by Sellers) at the Effective Date, and not
previously sold by Sellers, that is credited to the Property valued at the
contract price thereto, or if none, the market price in effect as of the
Effective Date, less taxes or gravity adjustments deducted by the purchaser of
such oil or other liquid hydrocarbons;
(2) the amount of all reasonable expenditures made in connection
with the ownership, operation and maintenance of the Property (including
royalties and rentals) and in accordance with generally accepted accounting
principles ("GAAP") and prudent operations, attributable solely to the period
from and after the Effective Date and which are paid by or on behalf of Sellers
after the Effective Date. Notwithstanding anything in this Agreement, Sellers
shall be solely responsible for all tangible and intangible capital costs
relative to the drilling, completion and placing on production of the Wells
incurred prior to Closing, including but not limited to, seismic acquisition,
surface damages, pipeline rights-of-way, and surface restorations (hereinafter
referred to as "Capital Expenditures"); provided however, that the Purchase
Price will be increased by an amount equal to all lease acquisition costs
relating to prospects that are incurred by Sellers, to the extent such
acquisitions are approved in advance in writing by Purchaser;
(3) an amount equal to all prepaid expenses attributable to the
ownership, operation and maintenance of the Property that are paid by or on
behalf of Sellers after the Effective Date and prior to the Closing Date and
that are, in accordance with GAAP attributable solely to the period from and
after the Effective Date; and
3
(4) to the extent the agreements affecting same are acceptable to
Purchaser, any other amount agreed upon by Purchaser and Sellers.
(b) The Purchase Price shall be decreased by the following:
(1) the amount of any proceeds from the sale of Production
attributable to the period on or after the Effective Date (net of production,
severance and similar taxes and assessments measured by or payable out of
production) actually received or accrued by or on behalf of Sellers;
(2) an amount equal to all unpaid ad valorem, property,
production, profit, severance and similar taxes and assessments based upon or
measured by the ownership of the Property or the production of oil, gas or other
minerals therefrom or the receipt of proceeds attributable thereto, which accrue
to or are chargeable against the Property (in accordance with GAAP) and which
are attributable to the period prior to the Effective Date;
(3) any amounts received by Sellers (whether prior to or
subsequent to the Effective Date) pursuant to "take-or-pay," advance payment or
similar provisions of any production sales contract, any gas balancing
agreement, or any other agreement, to the extent any purchaser has the right to
apply any such amounts to Production delivered after the Effective Date;
(4) any reduction in the value of the Property resulting from the
existence of a Defect (as defined herein) which is not cured or waived prior to
Closing; and
(5) any other amount agreed upon by Purchaser and Sellers.
(c) All monies received by either party hereto which, under the terms
of this Agreement or otherwise, belong to the other party, shall be received in
trust by the party receiving such funds, and shall monthly, upon receipt, be
paid over to the other party. The parties agree, in this regard, to cooperate
fully and to execute, endorse and deliver as expeditiously as practicable such
papers, checks and documents as are needed promptly to complete the transfer of
such payments;
(d) After the Closing, if an invoice or other evidence of an
obligation relating to the Property is received which is applicable to periods
both prior to and after the Effective Date, and is partly the obligation of
Sellers and partly the obligation of Purchaser, then each party shall pay its
respective portion of such obligation to the obligee, prorated between the
parties as of the Effective Date;
(e) At and after the Closing, Purchaser and Sellers will cooperate
fully in notifying all applicable third parties (including the execution by
Sellers of such transfer orders, letters in lieu, change of operator, etc., as
may be requested by Purchaser) so that notices, proceeds and invoices from such
third parties may take into account the fact that Purchaser has acquired the
Property as of the Effective Date;
(f) The provisions of this Section 4 shall survive the Closing hereof.
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5. Property Conditions, Title Review, Property Information and Casualty
Losses.
(a) Property Conditions. Sellers agree that for a period of time
commencing upon the date of this Agreement and continuing until 5 business days
before Closing (the "Review Period"), Purchaser, personally or through its
authorized agents or representatives, shall have the right to make any and all
physical inspections of the Property which Purchaser may desire to make or to
have made and to make all such other inspections, surveys, tests or other
studies (including, but not limited to, environmental assessments and
evaluations) as Purchaser deems necessary or desirable. Purchaser, and its
authorized agents and representatives, with prior notice to Sellers, may enter
upon the Property for the purpose of conducting those inspections, surveys,
tests, and studies. If Purchaser shall determine that the condition of the
Property is not in compliance with any governmental regulations (including
environmental regulations), then upon discovery Purchaser must promptly give
written notice to Sellers (but in no event later than the last day of the Review
Period) of such condition. Upon receipt of such notice, Sellers shall have the
option, but not the obligation, to (a) cure or remedy such condition to the
satisfaction of Purchaser (if current remediation of such condition is required
by a governmental agency, Sellers agree that the condition shall be remedied in
accordance with and to the satisfaction of the appropriate agency's
requirements); or (b) agree with Purchaser on a reduction to the Purchase Price,
which reduction shall reflect Purchaser's cost to remedy such condition. If the
condition cannot be cured or remedied to Purchaser's satisfaction and if
agreement cannot be reached on reduction to the Purchase Price, then the
affected Property may be excluded by Purchaser from the Property to be acquired
by Purchaser hereunder and the Purchase Price shall be reduced according to the
value of the affected Property (or that portion of such Property so affected) as
determined by the allocated value shown on Schedule 2. In the event the parties
fail to agree upon the implementation of either subclause (a) or (b) prior to
Closing, and if a reduction of more than 20% in the Purchase Price results from
the exclusion by Purchaser of the affected Property, Purchaser may terminate
this Agreement by delivery of written notice so indicating to Sellers, in which
event this Agreement shall terminate, and the parties hereto shall have no
further rights or obligations under this Agreement. Notwithstanding the
foregoing, Purchaser shall not be entitled to exclude Main Pass Block 25
pursuant to a Defect unless Purchaser also excludes Main Pass Block 21 from the
purchase hereunder.
(b) Defects. During the Review Period, Sellers shall provide
Purchaser, personally or through its authorized agents or representatives, full
access during normal business hours to the Selling Group Representative's (as
defined herein) office and premises to review and inspect all Records,
including, but not limited to, all abstracts of title, lease files, unit files,
production and marketing files, title opinions, title files, title records and
other files or information in any Seller's possession or to which any such
Seller has access which relate to the Property and the status of Sellers' title
thereto, and Purchaser shall have the right to make and retain copies of any of
such Records.
(c) Notice of Defect. If during the Review Period, Purchaser
determines that the Property is subject to a Defect, Purchaser must give written
notice to Sellers of such Defect, the nature of the Defect and furnish Sellers
Purchaser's basis for the assertion of such Defect. As soon as practical after
such written notice, but no later than (3) business days after the Review
Period, Sellers and Purchaser shall meet and use a good faith effort to agree on
the Purchase Price adjustment for such Defect. If Sellers and Purchaser cannot
agree in good faith on the amount of such a
5
Purchase Price adjustment, such amount shall be determined in accordance with
the following guidelines:
(1) If the Defect is that a Seller's Net Revenue Interest ("NRI")
for any Property is less than the NRI for such Property as set forth in Exhibit
"A", then the portion of the Purchase Price for such Property, as determined by
Schedule 2, shall be adjusted in the same proportion that the actual NRI bears
to the NRI shown in Exhibit "A";
(2) If the Defect is a lien, encumbrance or other charge upon the
Property which is liquidated in amount, then the adjustment shall be the sum
necessary to be paid to the obligee to remove the Defect from the Property;
(3) If the Defect is curable and Sellers desire to attempt to
cure such Defect, the Purchase Price paid at Closing will be reduced as set
forth herein; however, Sellers shall have a period of 60 days from and after
Closing in which to cure such Defect. If Sellers are able to cure such Defect to
the satisfaction of Purchaser within the 60 day period, Purchaser shall pay to
Sellers a sum equal to the amount deducted from the Purchase Price for such
Defect; and
(4) If the Purchase Price adjustment for any such Defect cannot
be determined pursuant to clauses (1), (2) or (3) above, and Sellers and
Purchaser cannot otherwise agree in good faith on the amount of the adjustment
to the Purchase Price, Purchaser may (1) waive the Defect and proceed with
Closing or (2) exclude the affected Property and reduce the Purchase Price based
upon the value of the affected Property as set forth in Schedule 2. In the event
exclusion of the affected Property or adjustment due to Defect results in a
reduction of more than 20% of the Purchase Price, Purchaser may terminate this
Agreement by delivery of written notice so indicating to Sellers, in which event
this Agreement shall terminate, and the parties hereto shall have no further
rights or obligations under this Agreement. Notwithstanding anything to the
contrary herein, failure by Sellers to deliver the Consents (hereinafter
defined) shall not be considered in the calculation of the 20% threshold set
forth above.
(d) Defect Definition. For the purpose of this Agreement, a "Defect"
shall be defined as:
(1) Any encumbrance, lien, mortgage, breach of representation or
warranty, production payment, pledge, claim, charge, call on production,
default, defect, unleased mineral interest, preferential right or requirement
for consent to assignment affecting the Property, except for Consents which are
not to be unreasonably withheld or are normally obtained after Closing; or
(2) A Seller's NRI in any Property is less than the NRI for such
Property which is set forth in Exhibit "A", or a Seller's gross working interest
("GWI") in any Property is greater than the working interest shown in Exhibit
"A" without a corresponding increase in the NRI in such Property.
(e) Other Property Information. If, based upon Purchaser's examination
of the Records pursuant to Section 5(b) above, Purchaser shall determine that
any information, statement
6
or data contained in any information, reports, statement or data furnished to
Purchaser or used in its economic analysis of the Property is not true or
correct in any material respect, upon discovery of any incorrect information
Purchaser may give written notice to Sellers of such inaccuracy or misstatement.
Any such notice must be provided during the Review Period or it will be deemed
to be waived. Such notice shall provide a summary of such inaccuracy or
misstatement. Upon receipt of such notice, Sellers shall have the option, but
not the obligation, to (a) cure or remedy such inaccuracy or misstatement to the
satisfaction of Purchaser; or (b) agree with Purchaser on a reduction to the
Purchase Price which reduction shall reflect Purchaser's cost to remedy such
inaccuracy or misstatement. If the inaccuracy or misstatement cannot be cured or
remedied to Purchaser's satisfaction and if agreement cannot be reached on
reduction to the Purchase Price, then the affected Property shall be excluded
from the Property to be acquired by Purchaser hereunder and the Purchase Price
shall be reduced according to the value of the affected Property (or that
portion of such Property so affected) as set forth in Schedule 2. In the event
the parties fail to agree upon the implementation of either subclause (a) or (b)
prior to Closing, and if a reduction of more than 20% in the Purchase Price
results from the exclusion by Purchaser of the affected Property, Purchaser may
terminate this Agreement by delivery of written notice so indicating to Sellers,
in which event this Agreement shall terminate, and the parties hereto shall have
no further rights or obligations under this Agreement.
(f) Casualty Loss. If prior to Closing, any Property is substantially
damaged or destroyed by fire or other casualty ("Casualty Defect"), Sellers
shall notify Purchaser promptly after Sellers learn of such event. Sellers shall
have the right, but not the obligation, to cure any such Casualty Defect by
repairing such damage or, in the case of personal property or fixtures,
replacing the property affected thereby with equivalent items, no later than the
date of Closing. If any Casualty Defects exist at Closing, Purchaser may proceed
to purchase the Property affected thereby, and the Purchase Price shall be
reduced by the aggregate reduction in the value of such Property on account of
such Casualty Defects, as determined by the mutual agreement of the parties, or
if the parties are unable to agree on such amount prior to Closing, then such
determination shall be made by an appraiser chosen by the parties (acting in
good faith) and knowledgeable in the field to determine such value.
Notwithstanding anything to the contrary contained herein, Sellers shall be
entitled to retain all insurance proceeds and claims against other parties in
respect of any such Casualty Defect which occurs prior to Closing unless no
reduction is made in the Purchase Price as a result of such Casualty Defect, in
which event Purchaser shall be entitled to the insurance proceeds and claims
against other parties arising from such Casualty Defect; provided, however, if
in the sole opinion of Purchaser, any Casualty Defect materially and adversely
affects the value of the Assets as a whole, then Purchaser may terminate this
Agreement.
6. Sellers' Representations, Warranties and Covenants. Sellers jointly
and severally represent, warrant and covenant to Purchaser that:
(a) Each of the named Sellers (i) is a person, partnership or other
entity duly organized, validly existing and in good standing under the laws of
the state of its organization (to the extent applicable); (ii) is duly qualified
to transact business in each jurisdiction where the nature and extent of its
business and properties require the same in order for it to perform its
obligations under this Agreement; and (iii) possesses all requisite authority,
power, licenses, permits and franchises to conduct its business and execute,
deliver and comply with the terms and provisions of this Agreement
7
and any other document, instrument or agreement provided for herein, including
the Assignment, all of which have been duly authorized and approved by all
necessary corporate or other organizational action and for which no further
approval or consent is required;
(b) This Agreement has been duly executed and delivered on behalf of
Seller, and is binding and enforceable against each Seller in accordance with
its terms. All documents and instruments required hereunder to be executed and
delivered by each Seller shall have been duly executed and delivered at Closing,
and the execution, delivery and performance of this Agreement by such Seller and
the consummation of transactions contemplated hereby will not constitute a
breach of, an event of default under, a violation of, or a conflict with any
agreement or other instrument to which such Seller is a party (except to the
extent such instrument may be released at the Closing), nor will the same cause
such Seller to be in violation of its Articles of Incorporation or Bylaws, as
the case may be, or any applicable laws or regulations or any order of any court
or governmental agency having jurisdiction;
(c) The Wells (other than Ship Shoal 69) are currently operated by
Bois D'Arc Operating Corporation, a Louisiana corporation ("BOC"), and, after
Closing will be operated by Purchaser. BOC shall operate such Wells from the
date of this Agreement until Closing in a prudent, good and workmanlike manner
and in accordance with all valid laws, regulations and orders of governmental
authorities having jurisdiction and in accordance with existing arrangements for
such operations;
(d) All ad valorem, property, production, severance, excise and
similar taxes and assessments based on or measured by the ownership of the
Property or the Production or the receipt of proceeds therefrom, which have
become due and payable prior to the date hereof with respect to the Property
have been properly paid, and Sellers' allocable share of such taxes and
assessments which become due and payable prior to the Closing shall be properly
paid by Sellers;
(e) No Seller has incurred any liability, contingent or otherwise, for
brokers' or finders' fees in respect of this transaction for which Purchaser
shall have any responsibility whatsoever;
(f) Prior to the Closing, Sellers will pay or cause to be paid all
costs and expenses incurred in connection with the Property and will comply with
all contracts or other agreements relating to the Property incurred while owned
by Sellers;
(g) To the best of each Seller's information and belief, all laws,
regulations and orders of all governmental agencies having jurisdiction over the
Property have been and shall continue to be complied with until the Closing;
(h) There are no first rights of refusal, consents, authorizations,
preferential rights, options, or claims of a similar nature affecting the
Property, other than those listed on Exhibit "C" (the "Consents");
8
(i) Sellers shall, upon request, subrogate Purchaser to any claim
which Sellers may have against any third party, prior owner, vendor or assignor
with respect to the Property, or the title thereto for periods after the
Effective Date;
(j) Except as set forth in Exhibit "D", there are no "imbalances"
which allow any other party to make up production at any time after the
Effective Date, under any operating agreement, gas balancing agreement and
storage agreement, gas transportation agreement, gas processing or dehydration
agreement, or other similar agreement relating to the Property;
(k) Except as listed on Exhibit "E" hereto, no Seller has directly or
indirectly reserved or retained any recorded or unrecorded interest or rights in
any of the Property, and no Seller shall reserve any recorded or unrecorded
executory interest or rights relating to the Property;
(l) The Assignment to Purchaser shall contain a special warranty (by,
through and under Seller, but not otherwise) by Sellers that Sellers have
marketable title to the Property;
(m) Except as set forth on Exhibit "F" hereto, the Property is not
subject to any restriction, reservation, reversionary interest, drilling or
development obligation, or other material obligation or burden on the operation
or the disposition of Production attributable to the Property;
(n) No part of any of the Property is affected by any prepayment
arrangement under any contract for the sale of oil or gas, or by any production
payment or any other arrangement for delivery of oil or gas produced from any of
the Property at some future time without Purchaser then or thereafter receiving
full payment therefor, and no third party now has or at Closing will have any
right to take makeup gas for which it has already paid. As of the Effective
Date, there are no volumes of makeup gas owing or accumulated transportation
credits due to gas purchasers on account of any "take or pay" or other
provisions of any contract and Sellers have not produced or sold more than its
pro-rata share of the gas from any wells included in the Property;
(o) There are no gas purchase or sale agreements, and no gas gathering
or transportation agreements affecting the Property, which are subject to a term
longer than thirty (30) days, except as set forth on Exhibit "G" attached
hereto;
(p) Without the prior written consent of Purchaser, Sellers (i) shall
not enter into any new agreements or commitments affecting the Property which
extend beyond the Closing (other than a formal agreement among BOC, Bayou City
Pipeline, Inc. and Gulfmark Energy, Inc., which contains the terms substantially
as set forth on Exhibit "H", and (ii) will not modify or terminate any
agreements affecting any of the Property, including, without limitation, any oil
and gas leases, unitization or pooling agreements, operating agreements,
pipeline agreements, processing agreements and hydrocarbon sales contracts, and
(iii) will not further encumber, sell, mortgage, release, abandon or otherwise
dispose of any of the Property or any interests therein;
(q) There is not any suit, action or other proceeding pending or
threatened which affects or relates to the Property, or seeks to restrain or
prohibit any Seller from selling or conveying the Property to Purchaser. Sellers
shall promptly notify Purchaser of any such proceedings which may arise or be
threatened prior to Closing;
9
(r) There are no operating agreements with third parties affecting the
Property except those set forth on Exhibit "I" hereto;
(s) No Seller has knowledge and has not received any notice of any
claimed default (or any event which, with the giving of notice or the passage of
time, or both, would constitute a default) under (i) the Leases, (ii) any order,
writ, injunction or decree of any court, commission or administrative agency
affecting the Property or (iii) any other agreement affecting the Property.
Sellers shall promptly notify Purchaser of any such notice hereafter received by
any Seller and the occurrence of any such event of which any Seller becomes
aware prior to Closing;
(t) There are no tax partnerships affecting any of the Property;
(u) No Production from any well on the Property has occurred in excess
of that permitted by law, orders or regulations;
(v) There will be no material injury or damage to any of the Property
which has not been fully repaired, replaced or rebuilt;
(w) There has been no substantial change in condition of the Property
between the date hereof and Closing;
(x) All easements, rights-of-way, permits, crossing agreements, and
surface rights included in the Property are in full force and effect and are
valid and subsisting, and freely assignable, and all rentals and other payments
due thereunder have been properly and timely paid and all conditions necessary
to keep them in force have been duly performed;
(y) Each of the Leases to be conveyed is valid and in full force and
effect, and Sellers have performed all obligations required to be performed
under such Leases, or any other instruments and agreements relating to the
Properties, and is not in default thereunder;
(z) There is attributable to the interests conveyed not less than the
fractional NRI for each Property on Exhibit "A" hereto, and the expense-bearing
interest to be conveyed does not exceed the fractional interest specified under
"working interest" for each Property on Exhibit "A" hereto;
(aa) All rentals, bonuses and royalties on Production, and any other
interests payable out of Production, have been timely and fully paid and
discharged, and all conditions necessary to keep the Leases in full force have
been performed and no proceeds from the sale of Production attributable to the
Property are currently being held in suspense by any purchaser thereof;
(bb) Sellers have not collected any proceeds from the sale of
Production attributable to the Property for any period prior to the Effective
Date which are subject to refund, or if so, that any such refund, if not
otherwise accounted for under this Agreement, shall be the sole responsibility
of Sellers;
10
(cc) Except as set forth on Exhibit "J", there are no wells located on
the Property that Sellers are obligated by law or contract to plug and abandon,
that Sellers will be obligated by law or contract to plug and abandon with the
lapse of time or notice, or both, because the well is not currently capable of
producing production in commercial quantities, or that are subject to exceptions
to a requirement to plug and abandon issued by a regulatory authority having
jurisdiction over the Property;
(dd) To the best of each Seller's information and belief, there are no
presently existing environmental conditions (as defined by existing federal or
state regulations) affecting the Property, which might give rise to a cause of
action on behalf of any governmental agency or third party, against either
Purchaser or any Seller; and
(ff) All capital expenditures have been fully paid.
All the information, statistics, summaries and other data furnished by
Sellers in connection with the transactions contemplated hereby (the
"Information") are furnished or will be furnished for Purchaser's use at
Purchaser's sole risk. All Information has been compiled or prepared by Sellers
based on their files and records and the Information is believed to be correct,
but except as otherwise provided herein, Sellers make no representation, express
or implied, as to the accuracy, correctness, completeness or the adequacy of the
Information and do not warrant or guarantee the Information in any way.
Purchaser shall be responsible for making such independent investigation and
evaluation of the Properties as Purchaser shall deem appropriate, realizing that
Sellers assume no liability to Purchaser or any other party for any reliance
which may be placed on the Information or any statements made herein.
Notwithstanding the foregoing, Sellers acknowledge that Purchaser shall be
entitled to seek adjustment to the Purchase Price for any inaccuracies or
omissions relating to the Information that Purchaser discovers during the Review
Period.
Sellers will convey the Property with full substitution and
subrogation in and to all rights and actions of warranty that Sellers have or
may have against all preceding owners and sellers of the Property. Sellers make
no representation or warranty as to the quality, marketability or environmental
condition of the wells, fixtures, facilities, equipment, lines and materials
located on the Properties, and the same are to be sold on an "as is, where is"
basis and condition. SELLERS MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE
MERCHANTABILITY OR FITNESS FOR USE OF SUCH EQUIPMENT AND OTHER PERSONAL PROPERTY
LOCATED ON OR INCLUDED IN THE PROPERTIES.
The provisions of this Section 6 shall survive Closing for a period of two
(2) years following Closing.
7. Purchaser's Representations. Purchaser represents to Sellers that:
(a) Purchaser (i) is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada; (ii) is duly
qualified to transact business in each jurisdiction where the nature and extent
of its business and properties require the same in order for it to perform its
obligations under this Agreement; and (iii) possesses all requisite authority,
power, licenses, permits and franchises to conduct its business and execute,
deliver and comply with the
11
terms and provisions of this Agreement and any other document, instrument or
agreement provided for herein, all of which have been duly authorized and
approved by all necessary corporate action and for which no further approval or
consent is required;
(b) The consummation of the transactions contemplated by this
Agreement will not violate, or be in conflict with (i) any agreement or
instrument to which Purchaser is a party; or (ii) any judgment or decree
applicable to Purchaser as a party in interest with respect thereto; and
(c) This Agreement has been duly executed and delivered on behalf of
Purchaser, and at the Closing, all documents and instruments required hereunder
to be executed and delivered by Purchaser (or its assignees) shall have been
duly executed and delivered.
The provisions of this Section 7 shall survive Closing for a period of two
(2) years following Closing.
8. Conditions to Obligations of Purchaser. The obligations of Purchaser to
consummate the transaction provided for herein are subject, at the option of
Purchaser, to the fulfillment on or prior to Closing, of each of the following
conditions:
(a) Representations. The representations and warranties of each Seller
herein contained shall be true and correct in all material respects at Closing
as though made on and as of such date (unless appropriate adjustments or
remediation has been made in accordance with Section 5 hereof).
(b) Performance. Sellers shall have performed all obligations,
covenants and agreements hereunder and shall have complied with all covenants
and conditions contained in this Agreement to be performed or complied with by
it at or prior to the Closing.
(c) Pending Matters. No suit, action or other proceedings shall be
pending or threatened (a) against any Seller before any court or governmental
agency which might result in impairment or loss of value as to such Seller's
title to any part of the Property (other than normally encountered title
disputes which are not, as to the Property involved, material and which do not
represent serious threats to the loss of title); or (b) which seeks to restrain;
enjoin or otherwise prohibit the consummation of the transactions contemplated
by this Agreement.
(d) Liability. No liability which affects, in a materially adverse
manner, the Property or Purchaser's ability to receive the economic benefits
therefrom has been or is threatened to be asserted with respect to the Property
relating to pricing, violations of laws, rules or regulations administered by
the Department of Energy, the Federal Energy Regulatory Commission, or any other
governmental agency or department.
(e) Defects. No Defects shall be present, which are not cured by
Sellers, waived by Purchaser or for which no adjustment has been made to the
Purchase Price as provided herein.
(f) Records and Access. Sellers shall have afforded Purchaser and its
officers, employees and representatives timely access to the Records.
12
(g) Purchaser named Operator. Purchaser shall be named operator of the
Properties that are presently operated by BOC.
It is understood by the parties that the assignment of the State of
Louisiana Leases must be approved by the State Mineral Board, and the assignment
of the Federal Leases must be approved by the Minerals Management Service, but
such administrative procedures shall not delay in any manner the delivery of the
Assignments by Sellers or the payment by Purchaser of the Purchase Price.
9. Sellers' Obligation at Closing. At the Closing, Sellers shall deliver to
Purchaser the following items (except that the Interim Settlement Statement
shall be delivered five (5) days prior to the date of Closing):
(a) The Assignments, duly executed and acknowledged by each Seller;
(b) Duly executed and acknowledged releases of all liens and burdens
on the Property or on Production therefrom or attributable thereto;
(c) Executed transfer orders (or letters in lieu thereof) or amended
Division Orders addressed to all purchasers of production from the Property;
(d) Any other executed documents or instruments which may be required
to consummate the transactions contemplated herein and to fully vest Purchaser
with title to the Property as contemplated hereby;
(e) The Interim Settlement Statement, which shall set forth the
Purchase Price and adjustments thereto provided for in this Agreement which are
or may be determined at or prior to the Closing, such Interim Settlement
Statement to be subject to later adjustment pursuant to Section 14 hereof; and
(f) All of the Records, including any proprietary and seismic data;
provided that Sellers shall have the right, at their expense to make copies
thereof. To the extent Sellers are unable to transfer or assign any proprietary
data or licenses, Sellers will use their best efforts in assisting Purchaser to
obtain all licenses necessary to operate the Property.
10. Purchaser's Obligations at Closing. At the Closing, Purchaser shall:
(a) Deliver to Seller the Purchase Price, with adjustments and
credits, in cash or other immediately available funds (and subject to a
subsequent adjustment pursuant to Section 14); and
(b) Execute any other documents or instruments which may be required
to consummate the transactions contemplated herein.
11. Notices. All notices, demands and requests which may be given or which
are required to be given by either party to the other shall be in writing. Any
notice, demand or communication required or permitted hereunder shall be deemed
to be delivered on actual receipt or three (3) days
13
after being sent by Federal Express or Certified Mail to Sellers or Purchaser,
which ever occurs first, respectively, as follows:
SELLER: PURCHASER:
c/o Bois d'Arc Operating Corporation Comstock Oil & Gas -- Louisiana, Inc.
3330 Monte Villa Parkway, 5005 LBJ Frwy., Suite 1000
Suite 130 Dallas, TX 75244
Bothell, WA 98021 Attn: Mr. M. Jay Allison
Attn: Mr. Wayne L. Laufer President and Chief Executive Officer
President Telephone: (972) 701-2000
Telephone: (206) 481-8498 Fax: (972) 701-2111
Fax: (206) 481-9413
or such other address as Purchaser or Sellers may, from time to time, designate
pursuant to the terms hereof. A facsimile transmission shall be considered an
original document for purposes of providing notice under this section.
12. Furnishing Data and Information. Sellers also agree to promptly
cooperate in providing all Records necessary for Purchaser to conduct its due
diligence under the terms of this Agreement. For a period of five (5) years
following the Closing, Purchaser shall allow Sellers access to the Records
during normal business hours of Purchaser, and Sellers shall have the right, at
their own expense, to make copies thereof. In addition, for a period of three
(3) years following the Closing, Purchaser shall provide Sellers access to well
data for new wells drilled by Purchaser on the Leases.
13. Post-Closing Adjustments. As soon as practicable after the Closing and
in any event within 60 days after Closing, Sellers shall prepare and deliver to
Purchaser, in accordance with this Agreement and GAAP, a statement (the "Final
Settlement Statement") setting forth each adjustment or payment pursuant to
Section 4 hereof that was not finally determined as of the Closing ("Post-
Closing Adjustments") and showing the calculation of such Post-Closing
Adjustments and the aggregate amount thereof. Within ten business days after
receipt of the Final Settlement Statement, Purchaser shall deliver to Sellers a
written report containing any changes that Purchaser proposes be made to the
Final Settlement Statement. The parties undertake to agree with respect to the
amounts of such Post-Closing Adjustments no later than 90 days after the Closing
Date. The date upon which such agreement is reached or upon which the aggregate
amount of the adjustments are finally established shall be herein called the
"Final Settlement Date". Sellers shall pay to Purchaser, or Purchaser shall pay
to Sellers, as the case may be, within five (5) business days after the Final
Settlement Date the amount of such adjustments (as finally established), by
means of wire transfer in immediately available funds or by means of bank check.
14. Failure To Perform. If Sellers should fail to fully and timely perform
any of their obligations hereunder, or should fail to consummate the sale of the
Property, except due to the Purchaser's default, Purchaser may, at its option,
enforce specific performance of this Agreement, bring suit for damages against
the Sellers, or terminate this Agreement. If Purchaser should fail to fully and
timely perform any of its obligations hereunder, and fail to consummate the
purchase of the
14
Property, except due to any Seller's default or other provisions in this
Agreement that permit Purchaser to terminate this Agreement, Sellers may, at
their option, enforce specific performance of this Agreement, bring suit for
damages against Purchaser, or terminate this Agreement.
15. Termination.
(a) This Agreement may be terminated at any time at or prior to the
Closing:
(1) by mutual written consent of Purchaser and the Selling Group
Representative;
(2) by Purchaser on the date of Closing if the conditions set
forth in Section 8 have not been satisfied in all respects by Sellers or waived
by Purchaser in writing by the Closing;
(3) by Purchaser or the Selling Group Representative if the
Closing shall not have occurred on or before December 22, 1997; provided,
however, that no party hereto can so terminate this Agreement if such party is
at such time in material breach of any provision of this Agreement;
(4) by any party if any governmental authority shall have issued
an order, judgment or decree or taken any other action challenging, delaying,
restraining, enjoining, prohibiting or invalidating the consummation of any of
the transactions contemplated herein; and
(5) by Purchaser if the aggregate amount of all adjustments to
the Purchase Price for Defects exceeds 20% of the Purchase Price.
(b) In the event that Closing does not occur as a result of any party
exercising its right to terminate pursuant to Section 15(a), then this Agreement
shall be null and void and no party shall have any rights or obligations under
this Agreement, except that nothing herein shall relieve any party from any
liability for any breach hereof.
16. Indemnification by Sellers.
(a) Sellers agree to jointly and severally indemnify and save and hold
harmless Purchaser against and from, any loss, damage or expense sustained by
Purchaser arising out of or resulting from any breach of any of any Seller's
representations and warranties made hereunder and not waived by Purchaser.
(b) Sellers agree to jointly and severally indemnify and save and hold
harmless Purchaser against all claims, liabilities, costs, expenses, windfall
profit taxes and liability, arising out of the ownership or operation of the
Property, and based upon the occurrence of events or the accrual of obligations
or liabilities prior to Closing.
(c) If any claims for brokerage fees are asserted against Purchaser in
connection with this transaction based upon alleged commitments made by Seller,
Seller shall indemnify
15
Purchaser against all such claims and reimburse Purchaser for all reasonable
expenses incurred in responding to such claims, including reasonable attorney's
fees.
(d) Notwithstanding anything to the contrary contained herein, Sellers
shall not be required to indemnify Purchaser for matters resulting from
Purchaser's own gross negligence or willful misconduct.
(e) The provisions of this Section 16 shall survive Closing.
17. Indemnification by Purchaser.
(a) Purchaser agrees to indemnify and save and hold harmless Sellers
against and from, any loss, damage or expense sustained by Sellers arising out
of or resulting from any breach of any of Purchaser's representations and
warranties made hereunder and not waived by Sellers.
(b) Purchaser shall assume and hereby agrees to pay, honor, discharge
and perform fully and timely, the obligations and liabilities directly
associated with each Seller's interest in the Property, which are attributable
to the period of time from and after the Closing.
(c) Purchaser agrees to indemnify and save and hold harmless Sellers
against all claims, costs, expenses, windfall profits taxes and liabilities
arising out of the ownership or operation of the Property and based upon the
occurrence of events, the accrual of obligations or liabilities or the existence
of conditions on and subsequent to the Closing (but not including those incurred
with respect to the purchase of each Seller's interest in the Property or the
negotiations leading to such purchase).
(d) If any claims for brokerage fees are asserted against Sellers in
connection with this transaction based upon alleged commitments made by
Purchaser, Purchaser shall indemnify Seller against all such claims and
reimburse Sellers for all reasonable expenses incurred in responding to such
claims, including reasonable attorney's fees.
(e) Purchaser agrees to indemify and save and hold harmless Sellers
for any losses they may incur resulting from Purchaser's operation of the
Properties after the date of Closing, notwithstanding that Purchaser is not the
operator of record.
(f) Notwithstanding anything to the contrary contained herein,
Purchaser shall not be required to indemnify Sellers for matters resulting from
a Seller's own gross negligence or willful misconduct.
(g) The provisions of this Section 17 shall survive Closing.
18. Environmental Matters. The Properties have been used for exploring,
developing and producing oil and gas. Spills of wastes, crude oil, produced
water, hazardous substances, and other materials may have occurred in the past
on the lease or in connection with the Properties. There is a possibility that
there are currently unknown, abandoned wells, plugged wells, pipelines and other
equipment on or underneath the Properties. It is the intent of Purchaser and
Sellers that all
16
liability associated with the above matters, as well as any liability to plug or
replug such wells in accordance with the applicable rules, regulations and
requirements of governmental agencies be passed to Purchaser at Closing and that
Purchaser shall assume all liability for such matters and all claims related
thereto, except in all instances for matters resulting from a Seller's own gross
negligence or willful misconduct. Additionally, the Properties may contain
asbestos, hazardous substances, or Naturally Occurring Radioactive Material
("NORM"). NORM may affix or attach itself to the inside of wells, materials, and
equipment as scale or in other forms; wells, materials and equipment located on
the lease or included in the Properties may contain NORM; and NORM containing
material may have been buried or otherwise disposed of on the Leases. Special
procedures may be required for remediating, removing, transporting and disposing
of asbestos, NORM, hazardous substances and other materials from the Properties,
and Purchaser assumes all liability for any assessment, remediation, removal,
transportation, and disposal of these materials and associated activities in
accordance with the applicable rules, regulations and requirements of
governmental agencies. Notwithstanding the foregoing, Sellers acknowledge that
Purchaser shall be entitled to seek adjustment to the Purchase Price for any
environmental matters, including NORM, that could result in liability to
Purchaser that Purchaser discovers during the Review Period.
19. Like-Kind Exchange. Each Seller shall have the right to designate the
sale of any of its respective interest in the Properties as a non-simultaneous
like-kind exchange under Section 1031 of the Internal Revenue Code of 1986, as
amended. Each Seller reserve the right to assign its rights under this Agreement
to a qualified intermediary in order to effect a like-kind exchange. Purchaser
agrees to cooperate in the transfer of funds to effect this exchange; provided,
however, that Sellers hereby agree to indemnify and hold Purchaser harmless from
any and all liabilities, costs, claims or damages resulting from the exchange
and each Seller acknowledges that any assignment of its rights pursuant to this
Section 19 shall not relieve it of any of its obligations to Purchaser under
this Agreement. Sellers acknowledge that Purchaser makes no representation as to
the tax consequences of such like-kind exchange and that such Seller has
consulted its own tax counsel regarding the same.
20. Seller Utilization of Production Facilities. Sellers reserve the right,
upon mutual agreement with Purchaser, to have access to and utilize certain
existing platform space, pipeline capacity and processing equipment (the
"Production Facilities") which Sellers are conveying to Purchaser hereunder. If
Sellers and Purchaser cannot mutually agree, the parties agree to allow a
facilities design engineer who is familiar with the Production Facilities from
Eagle Consulting, LLC of Gibson, Louisiana to determine if Sellers' request to
utilize the Production Facilities can be accommodated by Purchaser without undue
adverse impact upon Purchaser's operations. Said utilization of Production
Facilities will be charged at Purchase's cost to Sellers. Purchaser will not
charge Sellers any platform boarding, space utilization, throughput, processing,
tariffs or any other fees or costs. Sellers will be responsible for all
construction costs, equipment costs and Production Facility tie-in costs.
Purchaser also agrees to provide lease operating (pumping) services at its cost
for Sellers' wells which may be utilizing the Production Facilities. Sellers
anticipate that they may utilize the Production Facilities at Sellers' platform
located in South Pelto Block 1 and may need to utilize the Caillou Boca central
facility water handling facilities and tie-in to a gas sales pipeline connecting
to Texas Gas Transmission metering platform station No. 0667M. Sellers agree to
indemnify Purchaser for all losses and liabilities Purchaser may incur pursuant
to Sellers' utilization of the Production Facilities.
17
21. Selling Group Representative. Each Seller hereby authorizes Bois D'Arc
(the "Selling Group Representative") to make and receive payments hereunder on
behalf of such Seller, to give and receive notices on behalf of such Seller
hereunder (and promptly send copies of any notice to each affected Seller), to
agree upon any adjustments to the Purchase Price hereunder consistent with the
terms of this Agreement on behalf of such Seller, to agree to any extensions of
the Closing Date on behalf of such Seller and to otherwise take such other
actions on behalf of such Seller as may be necessary or desirable to effect the
transactions contemplated hereby. Purchaser may rely upon any instrument
executed or other action taken by the Seller Group Representative on behalf of
Sellers pursuant to this Section 19 to the same extent as if such instrument had
been executed or action had been taken by each Seller.
22. Miscellaneous.
(a) If any term or provision of this Agreement is held to be illegal,
invalid or unenforceable, the legality, validity and enforceability of the
remaining terms and provisions of this Agreement shall not be affected thereby,
and in lieu of each such illegal, invalid or unenforceable term or provision
there shall be added automatically to this Agreement a legal, valid and
enforceable term or provision as similar as possible to the term or provision
declared illegal, invalid or unenforceable.
(b) Either Sellers or Purchaser shall have the right to waive any
requirement contained in this Agreement, which is intended for the waiving
party's benefit, but except as otherwise specifically provided herein, such
waiver shall be effective only if in writing and executed by the party for whose
benefit such requirement is intended; provided, however, that any such waiver
shall not be construed as a waiver of any other benefit accruing to the waiving
party hereunder.
(c) The captions used in connection with this Agreement are for
convenience only and shall not be deemed to expand or limit the meaning of the
language of this Agreement.
(d) Words of any gender used in this Agreement shall be held and
construed to include any other gender, and words in the singular shall be held
to include the plural, unless the context otherwise requires.
(e) Any proposed press releases pertaining to the transactions
contemplated hereby shall be approved by both parties prior to the publication
of such press release; however, such approval shall not be unreasonably withheld
by either of the parties. Notwithstanding the foregoing, either party shall be
permitted to make such public disclosures pertaining to this matter as may be
required, in the reasonable opinion of counsel for such party, to comply with
applicable state and federal securities laws.
(f) Sellers agree that, on or before the Closing, they will not carry
on any negotiations with any third party, for the sale or transfer of the
Property, without the prior written consent of Purchaser.
(g) This Agreement and all of the transactions contemplated herein
shall be governed by and construed in accordance with the laws of the State of
Louisiana.
18
(h) This Agreement embodies the entire agreement between Sellers and
Purchaser with respect to the subject matter hereof and supersedes all prior
agreements, whether written or oral.
(i) Except as otherwise specifically provided herein, this Agreement
may not be amended except by an agreement in writing executed by Sellers and
Purchaser.
(j) This Agreement shall be binding upon and inure to the benefit of
Sellers and Purchaser and their respective legal representatives, successors and
assigns. It is expressly understood and agreed that Purchaser's rights hereunder
are freely assignable, and the term "Purchaser" as used in this Agreement shall
mean and include Purchaser's successors and assigns.
(k) This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, and all of which shall be deemed to
be one and the same instrument.
(l) In addition to the acts and deeds recited herein and contemplated
to be performed, Sellers and Purchaser hereby agree to perform, execute and/or
deliver at and after Closing any and all such further acts, deeds and assurances
as may be reasonably required to consummate the transactions contemplated by
this Agreement.
(m) This Agreement may be executed in counterpart by each of the
parties hereto as if each had executed the same copy hereof, and each
counterpart, when fully executed, shall constitute an original for all purposes.
(n) It is understood and agreed that in the event any of the working
interest owners of the Properties do not join in the sale of the Properties
pursuant to this Agreement, but such working interest owners within four (4)
months following the date of Closing sell or contractually agree to sell (and
such sale is thereafter consummated) to Purchaser their interest in the
Properties for a greater price than paid to Sellers hereunder, Purchaser agrees
to pay Sellers hereunder the difference between the price paid to Sellers
hereunder and the price paid to such working interest owners subsequently.
(o) In the event Purchaser charges a third party a tariff, charge or
other fee ("Transportation Fees") for use of the La Cuisine pipeline, La Cuisine
shall be entitled to 45% of all Transportation Fees received by Purchaser.
19
EXECUTED as of the date first above written.
PURCHASER:
COMSTOCK OIL & GAS -- LOUISIANA, INC.
By:/s/M. JAY ALLISON
--------------------
M. Jay Allison
President and Chief
Executive Officer
SELLERS:
BOIS D'ARC RESOURCES
By:/s/WAYNE L. LAUFER
-----------------------
Wayne L. Laufer
Partner
By:/s/GARY W. BLACKIE
----------------------
Gary W. Blackie
Partner
BOIS D'ARC OFFSHORE, LLC
By:/s/WAYNE L. LAUFER
-----------------------
Title: Manager
GARY W. AND SALLY L. BLACKIE,
Husband and Wife
/s/GARY W. BLACKIE
--------------------
/s/SALLY L. BLACKIE
--------------------
20
/s/WAYNE L. LAUFER, D.P.D.A.
---------------------------
SALLY LAUFER BRADY
/s/DR. B CHANDRASEKHAR
--------------------
DR. B. CHANDRASEKHAR
/s/NEAL CLEMENT
---------------------
NEAL CLEMENT
/s/JOHN T. COOK
---------------------
JOHN T. COOK
DALLAS PETROLEUM PARTNERS
By:----------------------
Title:-------------------
ELIM CORPORATION
By:/s/NEAL CLEMENT
-------------------------
Title:Partner
-------------------------
PAIGE PRICE FRANKLIN
GRINER OIL & GAS
By:/s/CHARLES H. GRINER, JR.
----------------------------
Title:Secretary
LESTER HADDOX, INC.
By:/s/LESTER HADDOX
---------------------------
Title:President
21
/s/D. M. HARRIS
-----------------------------
D. MICHAEL HARRIS, Husband of
KAROL KAYE HARRIS
HAP HEDERMAN OIL & GAS
By:/s/HAP HEDERMAN
------------------------
Partner
CARL HERRIN OIL & GAS
By:/s/CARL HERRIN
-------------------------
Title:Partner
LATTA PRICE HERRING
-------------------------
JIMX INC.
By:-----------------------
Title:
JAY PETROLEUM INVESTMENTS,
A PARTNERSHIP
By:/s/WILLIAM LANGFORD
--------------------------
Title:Managing Partner
LA CUISINE PIPELINE
By:/s/WAYNE LAUFER
--------------------------
Title:President
22
WAYNE L. AND GAYLE LAUFER,
Husband and Wife
/s/WAYNE L. LAUFER
--------------------------
/s/GAYLE M. LAUFER
--------------------------
LAVA EXPLORATION, INC.
By:/s/STEPHEN L. HUGHEY
--------------------------
Title:President
MARATHON ENERGY
By:-----------------------
Title:
METROW ENERGY, LLC
By:/s/
--------------------------
Title:
/s/ARTHUR J. PASMAS
--------------------------
ARTHUR J. PASMAS
/s/RICHARD PRICE
--------------------------
RICHARD PRICE
PROBE RESOURCES
By:/s/B.R.EUBANKS
--------------------------
Title:President
23
RETLAW OIL & GAS, INC.
By:/s/BARBARA B. SULLIVAN
---------------------------
Title:President
SAGE OIL
By:/s/
--------------------------
Title:
HOWARD E. STOVER
STOVER PROPERTIES, LP
By:/s/HOWARD E. STOVER
--------------------------
Title:General Partner
TENKAY RESOURCES, INC.
Subject to the attached addendum A
By:/s/D. KEITH CREWS
--------------------------
Title:VICE PRESIDENT
WING & ASSOCIATES
By:/s/R.WING
--------------------------
Title:Owner
24
CREDIT AGREEMENT
dated as of December 9, 1997
COMSTOCK RESOURCES, INC.,
COMSTOCK OIL & GAS, INC.,
COMSTOCK OIL & GAS - LOUISIANA, INC.,
COMSTOCK OFFSHORE, LLC,
THE BANKS PARTY HERETO,
THE FIRST NATIONAL BANK OF CHICAGO, AS AGENT
AND
BANK ONE, TEXAS, N.A., AS DOCUMENTATION AGENT
TABLE OF CONTENTS
SECTION 1. Definitions 1
1.1 Certain Definitions..................................................1
1.2 Other Definitions; Rules of Construction.............................9
SECTION 2. The Commitments....................................................9
2.1 Advances.............................................................9
SECTION 3. The Advances.......................................................10
3.1 Disbursement of Advances.............................................10
3.2 Conditions of Advances...............................................12
3.3 Letter of Credit Reimbursement Payments..............................13
3.4. Withholding Tax Exemption...........................................15
SECTION 4. Payment and Prepayment; Fees; Change in Circumstances..............15
4.1 Principal Payments...................................................15
4.2 Interest Payment.....................................................16
4.3 Fees.................................................................17
4.4 Payment Method.......................................................17
4.5 No Setoff or Deduction...............................................17
4.6 Payment on Non-Business Day; Payment Computations....................17
4.7. Yield Protection....................................................18
4.8. Changes in Capital Adequacy Regulations.............................18
4.9. Availability of Types of Advances...................................18
4.10. Funding Indemnification............................................19
4.11. Bank Statements; Survival of Indemnity.............................19
SECTION 5. Security...........................................................19
5.1 Security Documents...................................................19
5.2 Guaranty.............................................................33
5.3 Additional Security Documents........................................20
SECTION 6. Representations and Warranties.....................................20
6.1 Corporate Existence and Power........................................20
6.2 Corporate Authority..................................................20
6.3 Binding Effect.......................................................20
6.4 Subsidiaries.........................................................20
6.5 Liens................................................................21
6.6 Litigation...........................................................21
6.7 Financial Condition..................................................21
6.8 Use of Advances......................................................21
6.9 Security Documents...................................................21
6.10 Consents, Etc.......................................................21
6.11 Taxes...............................................................21
6.12 Title to Properties.................................................22
6.13 ERISA...............................................................22
6.14 Environmental and Safety Matters....................................22
6.15 Direct Benefit......................................................23
CREDIT AGREEMENT Page ii
6.16 Solvency............................................................23
6.17 Disclosure..........................................................23
SECTION 7. Covenants..........................................................23
7.1 Affirmative Covenants................................................23
(a) Preservation of Corporate Existence, Etc........................23
(b) Compliance with Laws, Etc.......................................23
(c) Maintenance of Properties; Insurance............................24
(d) Reporting Requirements..........................................24
(e) Access to Records, Books, Etc...................................25
7.2 Negative Covenants...................................................26
(a) Current Ratio...................................................26
(b) Tangible Net Worth..............................................26
(c) Interest Coverage Ratio.........................................26
(d) Indebtedness....................................................26
(e) Liens...........................................................26
(f) Merger; Acquisitions; Etc.......................................27
(g) Disposition of Assets; Etc......................................27
(h) Nature of Business..............................................28
(i) Investments and Advances........................................28
(j) Dividends.......................................................28
(k) Transactions with Affiliates....................................28
(l) Additional Covenants............................................38
(m) FinancialContracts..............................................28
SECTION 8. Default............................................................29
8.1 Events of Default....................................................29
8.2 Remedies.............................................................30
8.3 Distribution of Proceeds.............................................31
8.4 Letter of Credit Liabilities.........................................32
SECTION 9. The Agent, the Co-Agent and the Banks..............................32
9.1 Appointment; Nature of Relationship..................................32
9.2 Powers...............................................................32
9.3 General Immunity.....................................................33
9.4 No Responsibility for Loans, Recitals, etc...........................33
9.5 Action on Instructions of Banks......................................33
9.6 Employment of Agents and Counsel.....................................33
9.7 Reliance on Documents; Counsel.......................................33
9.8 Agent's Reimbursement and Indemnification............................33
9.9 Notice of Default....................................................34
9.10 Rights as a Bank....................................................34
9.11 Bank Credit Decision................................................34
9.12 Successor Agent.....................................................34
9.13 Pro Rata Sharing by Banks...........................................35
9.14 Determination of Borrowing Base, Etc................................35
SECTION 10. Miscellaneous.....................................................36
10.1 Amendments; Etc.....................................................36
10.2 Notices.............................................................36
10.3 Conduct No Waiver; Remedies Cumulative..............................36
CREDIT AGREEMENT Page iii
10.4 Reliance on and Survival of Various Provisions......................37
10.5 Expenses; Indemnification...........................................37
10.6 Successors and Assigns..............................................38
10.7 Subsidiaries as Borrowers...........................................38
10.8 CHOICE OF LAW.......................................................41
10.9 Table of Contents and Headings......................................41
10.10 Construction of Certain Provisions.................................41
10.11 Integration and Severability.......................................41
10.12 Interest Rate Limitation...........................................41
10.13 Counterparts.......................................................42
10.14 Independence of Covenants..........................................42
10.15 Consent to Jurisdiction............................................42
10.16 JURY TRIAL WAIVER..................................................42
10.17 Joint and Several Obligations; Contribution Rights; Savings Clause.42
10.18 Consents to Renewals, Modifications and Other Actions and Events...44
10.19 Waivers, Etc.......................................................44
10.20 Confidentiality....................................................45
EXHIBITS
A...................Consent and Amendment of Security Documents
B...................Note
C...................Request for Loan
D...................Assignment and Acceptance
SCHEDULES
6.4.................Subsidiaries
CREDIT AGREEMENT
THIS AGREEMENT, dated as of December 9, 1997, is among COMSTOCK RESOURCES,
INC. a Nevada corporation ("CRI"), COMSTOCK OIL & GAS, INC., a Nevada
corporation ("COG"), COMSTOCK OIL & GAS - LOUISIANA, INC., a Nevada corporation
("COGL"), COMSTOCK OFFSHORE, LLC, a Nevada limited liability company
("Offshore") (CRI, COG, COGL and Offshore may hereinafter collectively be
referred to as the "Borrowers"), the lenders party hereto from time to time
(collectively, the "Banks" and individually, a "Bank"), BANK ONE, TEXAS, N.A.,
as documentation agent for the Banks (in such capacity, the "Documentation
Agent") and THE FIRST NATIONAL BANK OF CHICAGO, as agent for the Banks (in such
capacity, the "Agent").
RECITALS
A. CRI, COG, COGL, Comstock Offshore Energy, Inc.(now merged into COG),
Comstock Natural Gas, Inc. (now merged into COG) and Black Stone Oil Company
(now merged into COG), as borrowers, the banks party thereto, Bank One, Texas,
N.A., as co-agent for such banks and The First National Bank of Chicago, as
agent for such banks, executed a Credit Agreement dated as of August 13, 1996,
as amended (the "Existing Credit Agreement"), which amended and restated a
Credit Agreement dated as of May 1, 1996, which in turn amended and restated a
Credit Agreement dated as of July 31, 1995, which in turn amended and restated a
Credit Agreement dated as of September 30, 1994, as amended, and which in turn
amended and restated a Credit Agreement dated as of November 15, 1993, as
amended.
B. The Borrowers have requested that the Banks amend and restate the
Existing Credit Agreement as herein provided, replacing and refinancing the
indebtedness thereunder with a five year secured revolving credit facility
providing for revolving credit loans in the aggregate principal amount of
$290,000,000, including a $5,000,000 letter of credit subfacility participated
in by all the Banks, and the Banks are willing to establish such a credit
facility in favor of the Borrowers and amend and restate the Existing Credit
Agreement on the terms and conditions herein set forth.
AGREEMENT
In consideration of the premises and of the mutual agreements herein
contained, the parties hereto agree that the Existing Credit Agreement shall be
amended and restated as follows:
SECTION 1. Definitions
1.1. Certain Definitions. As used herein, the following terms shall have
the following respective meanings:
"Advances" shall mean any Loan or any Letter of Credit Advance.
"Advance Date" shall mean each date for the making, continuation or
conversion of an Advance as specified in the notice delivered by the Borrowers,
or any of them, permitted by this Agreement.
"Affiliate", when used with respect to any Person shall mean any other
Person which, directly or indirectly, controls or is controlled by or is under
common control with such Person or any other Person which is owned 5% or more by
such Person or any Subsidiary or other Affiliate of such Person. For purposes of
this definition "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), with respect to any Person,
CREDIT AGREEMENT Page 1
shall mean possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities or otherwise.
"Applicable Margin" shall mean, with respect to any Eurodollar Loan,
Floating Rate Loan and Commitment Fee, as the case may be, the applicable
percentage set forth in the table below based upon a fraction, expressed as a
percentage, determined as of the last day of each calendar month of CRI, the
numerator of which is the daily average of the Advances outstanding during such
calendar month and the denominator of which is the daily average of the
Borrowing Base during such calendar month (the "Utilization Percentage"):
================================================================================
Utilization Percentage Eurodollar Floating Commitment
"UP" Rate Loan and Letter Rate Loan Fee under
of Credit Fee Section 4.3(a)
- --------------------------------------------------------------------------------
UP greater than or
equal to 95% 1.50% 0.50% .375%
- --------------------------------------------------------------------------------
UP greater than or
equal to 90% less
than 95% 1.375% 0.375% .25%
- --------------------------------------------------------------------------------
UP greater than or
equal to 75% less
than 90% 1.125% 0.125% .25%
- --------------------------------------------------------------------------------
UP less than 55% and
greater than 75% 0.875% 0.00% .225%
- --------------------------------------------------------------------------------
UP greater than 55% 0.625% 0.00% .20%
================================================================================
The Utilization Percentage shall be determined by the Agent at the end of each
calendar month and shall remain in effect for the following calendar month of
CRI, and the Agent shall adjust the Applicable Margin upon such determination,
provided that (a) the Agent shall also determine the Utilization Percentage
promptly after any public offering of common stock or offering under Rule 144A
pursuant to the Securities Act of 1933 of subordinated debt (if allowed
hereunder) of CRI and adjust the Applicable Margin upon such determination, and
(b) as of the Effective Date and until the first time the Applicable Margin is
to be adjusted, the Applicable Margin will be based on a Utilization Percentage
of greater 90% and less 95%. Notwithstanding the above or anything else in this
Agreement, upon and during the continuance of any Event of Default, the
Applicable Margin shall be based on the highest possible Applicable Margin
described in the table above, regardless of the Utilization Percentage.
"Bank Obligations" shall mean all indebtedness, obligations and
liabilities, whether now or hereafter arising, of the Borrowers to the Agent or
any Bank pursuant to any of the Loan Documents.
"Borrowing Base" shall mean an amount equal to the value of the Collateral
determined by the Documentation Agent and the Agent (or by each of the Banks as
described in Section 9.14) in their sole discretion, based on the Documentation
Agent's, the Agent's or each Bank's, as the case may be, customary and standard
practices in lending to oil and gas companies generally, including without
limitation their standard engineering criteria and oil and gas lending criteria
(and it is acknowledged and agreed that such customary and standard practices,
including without limitation such engineering criteria and oil and gas lending
criteria, shall be determined by the Documentation Agent, the Agent and each
Bank, as the case may be, in their sole discretion, and such determination shall
be conclusive and binding).
"Borrowing Base Deficiency" is defined in Section 4.1(c).
"Business Day" shall mean (i) with respect to any borrowing, payment or
rate selection of Eurodollar Loans, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago and New York for the conduct of
CREDIT AGREEMENT Page 2
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market and (ii)
for all other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago for the conduct of substantially all of their
commercial lending activities.
"Change in Control" shall mean the acquisition by any Person, or two or
more Persons acting in concert, of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of more than 50% of the outstanding shares of voting stock
of CRI.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the regulations thereunder.
"Collateral" shall have the meaning ascribed thereto in Section 5.1(a)
hereof.
"Commitments" shall mean, with respect to each Bank, the commitment of each
such Bank to make Loans and assume a risk participation in Letter of Credit
Advances pursuant to Sections 2.1(a) and (b), in amounts not exceeding in
aggregate principal amount outstanding at any time the respective Commitment
amount for each Bank set forth next to the name of each such Bank on the
signature pages hereof or established pursuant to Section 10.6, as the case may
be, as such amount may be reduced from time to time.
"Consent and Amendment of Security Documents" shall mean the consent and
amendment of security documents entered into by the Borrowers and the Agent
pursuant to this Agreement in substantially the form of Exhibit A, as amended or
modified from time to time.
"Consolidated" or "consolidated" shall mean, when used with reference to
any financial term in this Agreement, the aggregate for two or more Persons of
the amount signified by such term for all such Persons determined on a
consolidated basis and in accordance with GAAP.
"Consolidated Interest Expense" shall mean, for any period, total interest
and related expense (including, without limitation, that portion of any
capitalized lease obligation attributable to interest expense in conformity with
GAAP, amortization of debt discount, all capitalized interest, the interest
portion of any deferred payment obligations, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers
acceptance financing, the net costs and net payments under any interest rate
hedging, cap or similar agreement or arrangement, prepayment charges, agency
fees, administrative fees, commitment fees and capitalized transaction costs
allocated to interest expense) paid, payable or accrued during such period,
without duplication for any period, with respect to all outstanding Indebtedness
of CRI and its Subsidiaries, all as determined for CRI and its Subsidiaries on a
consolidated basis for such period in accordance with GAAP.
"Consolidated Net Income" shall mean, for any period, the net income of CRI
and its Subsidiaries for such period, determined in accordance with GAAP.
"Contingent Liabilities" of any Person shall mean, as of any date, all
obligations of such Person or of others for which such Person is contingently
liable, as obligor, guarantor, surety or in any other capacity, or in respect of
which obligations such Person assures a creditor against loss or agrees to take
any action to prevent any such loss (other than endorsements of negotiable
instruments for collection in the ordinary course of business and
indemnifications typical and customary in the ordinary course of such Person's
oil and gas business in connection with operating agreements and other
agreements executed in the ordinary course of such Person's oil and gas
business), including without limitation all reimbursement obligations of such
CREDIT AGREEMENT Page 3
Person in respect of any letters of credit, surety bonds or similar obligations
and all obligations of such Person to advance funds to, or to purchase assets,
property or services from, any other Person in order to maintain the financial
condition of such other Person.
"Continuing Directors" of any Person shall mean the directors of such
Person on the Effective Date and each other director of such Person if such
other director's nomination for election to the Board of Directors of such
Person is recommended by a majority of the then Continuing Directors of such
Board of Directors.
"Current Assets" and "Current Liabilities" shall mean all assets or
liabilities of CRI and its Subsidiaries, on a consolidated basis respectively,
which should be classified as current assets and current liabilities in
accordance with GAAP; provided that the calculation of Current Assets shall not
include receivables of the Borrowers owing by any Affiliate in excess of 120
days or subject to any dispute or offset or otherwise unacceptable, advances by
the Borrowers to any Affiliate or any asset classified as a Current Asset solely
because it is held for sale, and Current Liabilities shall not include the
current maturities of any Indebtedness of any Borrower for borrowed money which
by its terms has a final maturity more than one year from the date of any
calculation of Current Liabilities.
"Default" shall mean any Event of Default or any event or condition which
might become an Event of Default with notice or lapse of time or both.
"Dollars" and "$" shall mean the lawful money of the United States of
America.
"EBITDA" shall mean, for any period, the Consolidated Net Income for such
period taken as a single accounting period, plus, to the extent deducted in
determining such Consolidated Net Income, all depreciation, amortization and
depletion expense, and other non cash charges, Consolidated Interest Expense and
income taxes, provided that in determining Consolidated Net Income as used in
this definition the following shall be excluded, without duplication: (a) the
income of any Person accrued prior to the date such Person is merged into or
consolidated with a Borrower or such Person's assets are acquired by a Borrower,
(b) the proceeds of any insurance policy, (c) gains or losses from the sale,
exchange, transfer or other disposition of property or assets of any Borrower or
any of their Subsidiaries and related tax effects in accordance with GAAP and
(d) any extraordinary or non-recurring gains of any Borrower or any of their
Subsidiaries, and related tax effects in accordance with GAAP.
"Effective Date" shall mean the effective date specified in the final
paragraph of this Agreement.
"Environmental Laws" at any date shall mean all provisions of law, statute,
ordinances, rules, regulations, judgments, writs, injunctions, decrees, orders,
awards and standards promulgated by the government of the United States of
America or any foreign government or by any state, province, municipality or
other political subdivision thereof or therein or by any court, agency,
instrumentality, regulatory authority or commission of any of the foregoing
concerning the protection of, or regulating the discharge of substances into,
the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with any successor statute thereto and the
regulations thereunder.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) which (i) together with the Borrowers or any Subsidiary, would be
treated as a single employer under Section 414(b) or (c) of the Code or (ii) for
purposes of liability under Section 412(C)(11) of the Code, the lien created
under Section 412(n) of the Code or for a tax imposed for failure to meet
CREDIT AGREEMENT Page 4
minimum funding standards under Section 4971 of the Code, a member of the same
affiliated service group (within the meaning of Section 401(m) of the Code) as
the Borrowers or any Subsidiary, or any other trade or business described in
clause (i) above.
"Eurodollar Base Rate" shall mean, with respect to a Eurodollar Loan for
the relevant Eurodollar Interest Period, the rate determined by the Agent to be
the rate at which First Chicago offers to place deposits in Dollars with
first-class banks in the London interbank market at approximately 11 a.m.
(London time) two Business Days prior to the first day of such Eurodollar
Interest Period, in the approximate amount of First Chicago's relevant
Eurodollar Loan and having a maturity approximately equal to such Eurodollar
Interest Period.
"Eurodollar Interest Period" or "Interest Period" shall mean, with respect
to a Eurodollar Loan, a period of one, two, three or six months commencing on a
Business Day selected by the Borrowers pursuant to this Agreement. Such
Eurodollar Interest Period shall end on the day which corresponds numerically to
such date one, two, three or six months thereafter, provided, however, that if
there is no such numerically corresponding day in such next, second, third or
sixth succeeding month, such Eurodollar Interest Period shall end on the last
Business Day of such next, second, third or sixth succeeding month. If a
Eurodollar Interest Period would otherwise end on a day which is not a Business
Day, such Eurodollar Interest Period shall end on the next succeeding Business
Day, provided, however, that if said next succeeding Business Day falls in a new
calendar month, such Eurodollar Interest Period shall end on the immediately
preceding Business Day.
"Eurodollar Loan" shall mean a Loan which bears interest at a Eurodollar
Rate.
"Eurodollar Rate" shall mean, with respect to a Eurodollar Loan for the
relevant Eurodollar Interest Period, the sum of (i) the quotient of (a) the
Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided by
(b) one minus the Reserve Requirement (expressed as a decimal) applicable to
such Eurodollar Interest Period, plus (ii) the Applicable Margin.
"Event of Default" shall mean any of the events or conditions described in
Section 8.1.
"Federal Funds Rate" shall mean, for any day, an interest rate per annum
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding 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 at approximately 10 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"First Chicago" shall mean The First National Bank of Chicago, a national
banking association, as a Bank under this Agreement.
"Floating Rate" shall mean the per annum rate equal to the sum of (a) with
respect to Loans and any other amounts owing hereunder, the Applicable Margin,
plus (b) the greater of (i) the per annum rate announced by the Agent from time
to time as its "corporate base rate", and (ii) the sum of one-half percent
(1/2%) per annum plus the Federal Funds Rate, such Floating Rate to change
simultaneously with any change in such "corporate base rate" or Federal Funds
Rate, as the case may be;
all as conclusively determined in good faith by the Agent, such sum to be
rounded up, if necessary, to the nearest whole multiple of 1/16 of 1%.
"Floating Rate Loan" shall mean any Loan bearing interest at the
Floating Rate.
CREDIT AGREEMENT Page 5
"GAAP" shall mean generally accepted accounting principles applied on a
basis consistent with that reflected in the financial statements referred to in
Section 6.7 hereof.
"Hydrocarbons" shall mean oil, gas casinghead, gas, drip gasoline, natural
gas and condensates and all other liquid or gaseous hydrocarbons.
"Indebtedness" of any Person shall mean, as of any date, (a) all
obligations of such Person for borrowed money, (b) all obligations which are
secured by any lien or encumbrance existing on property owned by such Person
whether or not the obligation secured thereby shall have been assumed by such
Person, other than those obligations which are incurred in the ordinary course
of business and are not required to be shown as a liability on a balance sheet
in accordance with GAAP, (c) all obligations as lessee under any lease which, in
accordance with GAAP, is or should be capitalized on the books of the lessee,
(d) the deferred purchase price for goods, property or services acquired by such
Person, and all obligations of such Person to purchase such goods, property or
services where payment therefor is required regardless of whether or not
delivery of such goods or property or the performance of such services is ever
made or tendered, other than unsecured trade payables incurred in the ordinary
course of business, (e) all obligations of such Person to advance funds to, or
to purchase property or services from, any other Person in order to maintain the
financial condition of such Person, (f) all obligations of such Person in
respect of any interest rate or currency swap, rate cap or other similar
transaction (valued in an amount equal to the highest termination payment, if
any, that would be payable by such Person upon termination for any reason on the
date of termination), and (g) all obligations of such Person or of others for
which such Person is contingently liable, as guarantor, surety or in any other
similar capacity, or in respect of which obligations such Person assures a
creditor against loss or agrees to take any action to prevent any such loss
(other than endorsements of negotiable instruments for collection in the
ordinary course of business), including without limitation all reimbursement
obligations of such Person in respect of any letters of credit, surety bonds or
similar obligas of such Person to advance funds to, or to purchase assets,
property or services from, any other Person in order to maintain the condition,
financial or otherwise, of such other Person.
"Interest Payment Date" shall mean (a) with respect to each Eurodollar
Loan, the last day of each Eurodollar Interest Period with respect to such
Eurodollar Loan and, in the case of any Eurodollar Interest Period exceeding
three months, those days that occurred during such Eurodollar Interest Period at
intervals of three months after the first day of such Eurodollar Interest
Period, (b) in all other cases, the last Business Day of each month, commencing
with the first such day after the Effective Date, and (c) the Termination Date
with respect to Loans.
"Lending Installation" shall mean, with respect to a Bank or the Agent, any
office, branch, subsidiary or affiliate of such Bank or the Agent.
"Letter of Credit" shall mean a standby letter of credit having a stated
expiry date not later than twelve months after the date of issuance and not
later than the fifth Business Day before the Termination Date, issued by the
Agent on behalf of the Banks for the account of any Borrower under an
application and related documentation acceptable to the Agent requiring, among
other things, immediate reimbursement by the Borrowers to the Agent in respect
of all drafts or other demand for payment honored thereunder and all expenses
paid or incurred by the Agent relative thereto. Standby letters of credit which
are automatically renewed annually unless revoked shall be considered standby
letters of credit which have a stated expiry date not later than twelve months
after their date of issuance for purposes of this definition.
"Letter of Credit Advance" shall mean any issuance of a Letter of Credit
under Section 3.1 made pursuant to Section 2.1 in which each Bank acquires a
risk participation equal to its Pro Rata Share.
CREDIT AGREEMENT Page 6
"Letter of Credit Documents" shall have the meaning ascribed thereto in
Section 3.3(b)(i).
"Lien" shall mean any pledge, assignment, hypothecation, mortgage, security
interest, deposit arrangement, option, conditional sale or title retaining
contract, sale and leaseback transaction, financing statement filing, lessor's
or lessee's interest under any lease, subordination of any claim or right, or
any other type of lien, charge, encumbrance, preferential arrangement or other
claim or right.
"Loan" means any loan under Section 3.1 evidenced by the Notes and made
pursuant to Section 2.1(a).
"Loan Documents" shall mean this Agreement, the Notes, the Security
Documents, the environmental certificate and any other agreement, instrument or
document executed at any time pursuant to, in connection with, or otherwise
relating to this Agreement.
"Material Adverse Effect" shall mean a material adverse effect on or change
in (a) the business, property (including without limitation the Collateral),
operations or condition, financial or otherwise, of the Borrowers on a
consolidated basis, (b) the ability of any Borrower to perform its obligations
under any Loan Document or (c) the validity or enforceability or the rights and
remedies of the Agent or any Bank under any Loan Document.
"Mortgages" shall have the meaning ascribed thereto in Section 5.1.
"Multiemployer Plan" shall mean any "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA or Section 414(f) of the Code.
"Note" shall mean any promissory note of the Borrowers evidencing the
Loans, in substantially the form annexed hereto as Exhibit B, as amended or
modified from time to time and together with any promissory note or notes issued
in exchange or replacement therefor.
"Oil and Gas Interests" shall mean all leasehold interests, mineral fee
interest, overriding royalty and royalty interests, net revenue and net working
interest and all other rights and interests relating to Hydrocarbons, including
without limitation any reserves thereof.
"Overdue Rate" shall mean (a) in respect of principal of Floating Rate
Loans, a rate per annum that is equal to the sum of three percent (3%) per annum
plus the Floating Rate, (b) in respect of principal of Eurodollar Loans, a rate
per annum that is equal to the sum of three percent (3%) per annum plus the per
annum rate in effect thereon until the end of the then current Eurodollar
Interest Period for such Loan and, thereafter, a rate per annum that is equal to
the sum of three percent (3%) per annum plus the Floating Rate, and (c) in
respect of other amounts payable by the Borrowers hereunder (other than
interest), a per annum rate that is equal to the sum of three percent (3%) per
annum plus the Floating Rate.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" shall mean the Liens permitted by Section 7.2(e) hereof.
"Person" shall include an individual, a corporation, an association, a
partnership, a trust or estate, a joint stock company, an unincorporated
organization, a joint venture, a government (foreign or domestic), and any
agency or political subdivision thereof, or any other entity.
CREDIT AGREEMENT Page 7
"Plan" shall mean, with respect to any Person, any employee benefit or
other plan (other than a Multiemployer Plan) maintained by such Person for its
employees and covered by Title IV of ERISA or to which Section 412 of the Code
applies.
"Pro Rata Share" shall mean, as to obligations of the Banks, the loan
percentage set forth opposite its name on the signature pages hereof or
otherwise established pursuant to Section 10.6, and as to obligations owing to
the Banks, shall mean: (a) in the case of payments of principal and interest on
the Loans, an amount with respect to each Bank equal to the product of such
amount received multiplied by the ratio which the outstanding principal balance
of its Note bears to the outstanding principal balance of all Notes, and (b) in
the case of all other amounts payable hereunder (other than as otherwise noted
with respect to fees) and other amounts, an amount with respect to each Bank
equal to the product of such amount received multiplied by the ratio which the
Commitment of such Bank bears to the Commitments of all Banks.
"Proved Developed Reserves" shall mean all Oil and Gas Interests which, to
the satisfaction of the Agent, are estimated, with reasonable certainty, and as
demonstrated by geological and engineering data acceptable to the Agent, to be
economically recoverable from existing wells requiring no more than minor
workover operations from existing completion intervals open for production and
which are producing, and have proven reserves of, Hydrocarbons.
"Purchase Documents" shall mean all purchase and sale agreements dated
October 31, 1997 and all other agreements and documents between COGL, as
purchaser, and the sellers party thereto for the purchase by COGL of the Bois
D'Arc and other properties described therein (to be assigned to Offshore),
together with all other agreements and documents delivered pursuant to Section
3.2(a)(xi).
"Purchased Bois D'Arc Assets" shall mean all oil and gas interests and all
other assets being purchased pursuant to the Purchase Documents.
"Reportable Event" shall mean a reportable event as described in Section
4043(b) of ERISA including those events as to which the thirty (30) day notice
period is waived under Part 2615 of the regulations promulgated by the PBGC
under ERISA.
"Required Banks" shall mean Banks holding not less than 66-2/3% of the
aggregate principal amount of the Advances then outstanding (or 66-2/3% of the
Commitments if no Advances are then outstanding).
"Reserve Requirement" means, with respect to a Eurodollar Interest Period,
the maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.
"Security Agreements" shall have the meaning ascribed thereto in Section
5.1.
"Security Documents" shall have the meaning ascribed thereto in Section
5.1.
"Subsidiary" of any Person shall mean any other Person (whether now
existing or hereafter organized or acquired) in which (other than directors
qualifying shares required by law)at least a majority of the securities or other
ownership interests of each class having ordinary voting power or analogous
right (other than securities or other ownership interests which have such power
or right only by reason of the happening of a contingency), at the time as of
which any determination is being made, are owned, beneficially and of record, by
such Person or by one or more of the other Subsidiaries of such Person or by any
combination thereof. Unless otherwise specified, reference to "Subsidiary" shall
mean a Subsidiary of CRI.
CREDIT AGREEMENT Page 8
"Swap Agreement" shall mean any interest rate or oil and gas commodity swap
agreement, interest cap or collar agreement or other financial agreement or
arrangement designed to protect the Borrowers against fluctuations in interest
rates or oil and gas prices.
"Tangible Net Worth" of any Person shall mean, as of any date, (a) the
amount of any capital stock or similar ownership liability plus (or minus in the
case of a deficit) the capital surplus and retained earnings of such Person and
the amount of any foreign currency translation adjustment account shown as a
capital account of such Person, less (b) the net book value of all items of the
following character which are included in the assets of such Person: (i)
goodwill, including without limitation, the excess of cost over book value of
any asset, (ii) organization or experimental expenses, (iii) unamortized debt
discount and expense, (iv) stock discount and expense, (v) patents, trademarks,
trade names and copyrights, (vi) treasury stock, (vii) deferred taxes and
deferred charges, (viii) franchises, licenses and permits, and (ix) all other
assets which are deemed intangible assets under GAAP; provided, that such
calculation of Tangible Net Worth under this definition shall not include
receivables of such Person which are owing by any Affiliate or advances by such
Person to any Affiliate.
"Termination Date" shall mean the earlier to occur of (a) the fifth
anniversary of the Effective Date and (b) the date on which the Commitments
shall be terminated pursuant to Section 2.1(c) or 8.2.
"Total Liabilities" of any Person shall mean, as of any date, all
obligations which, in accordance with GAAP, are or should be classified as
liabilities on a balance sheet of such Person.
"Type" shall mean, with respect to any Advance, its nature as a Floating
Rate Loan, Eurodollar Loan or Letter of Credit Advance.
1.2 Other Definitions; Rules of Construction. As used herein, the terms
"Agent", "Banks", "CRI", "COG", "COGL", "Borrowers" and "this Agreement" shall
have the respective meanings ascribed thereto in the introductory paragraph of
this Agreement. Such terms, together with the other terms defined in Section
1.1, shall include both the singular and the plural forms thereof and shall be
construed accordingly. All computations required hereunder and all financial
terms used herein shall be made or construed in accordance with GAAP unless such
principles are inconsistent with the express requirements of this Agreement.
SECTION 2. The Commitments.
2.1 Advances. (a) Each Bank agrees, for itself only, to lend and to relend,
and to participate in Letter of Credit Advances pursuant to Section 3.1, in each
case subject to the terms and conditions of this Agreement, to the Borrowers at
any time and from time to time from the Effective Date until the Termination
Date amounts equal to such Bank's Pro Rata Share of such aggregate Advances as
any Borrower may from time to time request, provided that no Advances may be
made if the aggregate outstanding amount of all Advances to all Borrowers would
exceed the lesser of the Commitments or the Borrowing Base; provided, however,
that the aggregate principal amount of Letters of Credit outstanding at any time
shall not exceed $5,000,000. Each Loan made hereunder shall be evidenced by the
Notes, which shall mature and bear interest as set forth in Section 4 hereof and
in such Notes. On the Effective Date, the Borrowers shall issue and deliver to
each Bank a Note in the principal amount of such Banks' Commitment for the
period beginning on the Effective Date. Each Loan which is a Floating Rate Loan
shall be in a minimum amount of $500,000 and in integral multiples of $100,000
and each Loan which is a Eurodollar Loan shall be in a minimum amount of
$3,000,000 and in integral multiples of $1,000,000. No more than ten Eurodollar
Interest Periods shall be permitted to exist at any one time. Subject to the
terms and conditions of this Agreement, the Borrowers may borrow, prepay
pursuant to Section 4.1(b) and reborrow under this Section 2.1(a).
CREDIT AGREEMENT Page 9
(b) For purposes of this Agreement, a Letter of Credit Advance (i)
shall be deemed outstanding in an amount equal to the sum of the maximum amount
available to be drawn under the related Letter of Credit on or after the date of
determination and on or before the stated expiry date thereof plus the amount of
any draws under such Letter of Credit that have not been reimbursed as provided
in Section 3.3 and (ii) shall be deemed outstanding at all times on and before
such stated expiry date or such earlier date on which all amounts available to
be drawn under such Letter of Credit have been fully drawn, and thereafter until
all related reimbursement obligations have been paid pursuant to Section 3.3. As
provided in Section 3.3, upon each payment made by the Agent in respect of any
draft or other demand for payment under any Letter of Credit, the amount of any
Letter of Credit Advance outstanding immediately prior to such payment shall be
automatically reduced by the amount of each Loan deemed advanced in respect of
the related reimbursement obligation of the Borrowers.
(c) The Borrowers shall have the right to terminate or reduce the
Commitments at any time and from time to time, provided that (i) the Borrowers
shall give notice of such termination or reduction to the Agent specifying the
amount and effective date thereof,(ii) each partial reduction of the Commitments
shall be in a minimum amount of $1,000,000 and in integral multiples of
$1,000,000 and shall reduce the Commitments of all of the Banks proportionally
in accordance with the respective Commitment amounts of each such Bank, (iii) no
such termination or reduction, either in whole or part and including without
limitation any termination, shall be permitted with respect to any portion of
the Commitments as to which a request for Advances is then pending, and (iv) the
Commitments may not be terminated if any Advances are then outstanding and may
not be reduced below the principal amount of Advances then outstanding. The
Commitments or any portion thereof so terminated or reduced may not be
reinstated. Any Borrower may request Advances without the consent of any other
Borrower, and each Borrower consents to and approves any Advances requested by
any other Borrower. The Advances hereunder replace the revolving credit loans
and letters of credit outstanding pursuant to Section 2.1(a) of the Existing
Credit Agreement and provide additional credit as described above.
SECTION 3. The Advances.
3.1 Disbursement of Advances. (a) Borrowers shall give notice to the Agent
of each requested Advance in substantially the form of Exhibit C hereto, which
notice given shall be received by the Agent not later than 10:00 a.m. (Chicago
time), (i) three Business Days prior to the date such Advance is requested to be
made if such Advance is to be made as a Eurodollar Loan, (ii) one Business Day
prior to the date such Advance is requested to be made if such Advance is to be
made as a Floating Rate Loan and (iii) three Business Days prior to the date
such Advance is to be made if such Advance is to be made as a Letter of Credit
Advance. Each such notice given shall be irrevocable and binding on the
Borrowers, any such notice must specify the Advance Date, which shall be a
Business Day, the aggregate amount of such Advance, the Type of Advance
selected, in the case of any Eurodollar Loan, the Eurodollar Interest Period
applicable thereto, and in the case of any Letter of Credit Advance such other
information and documents with respect thereto as may be required by the Agent.
The Agent shall provide notice of such requested Advance to each Bank on the
same Business Day such notice is received from the Borrowers. Subject to the
terms and conditions of this Agreement, the Agent shall, on the date any Letter
of Credit Advance is requested to be made, issue the related Letter of Credit on
behalf of the Banks for the account of the designated Borrower. Notwithstanding
anything herein to the contrary, the Agent may decline to issue any requested
Letter of Credit on the basis that the beneficiary, the purpose of issuance or
the terms or the conditions of drawing are illegal or contrary to a policy of
the Agent.
(b) Floating Rate Loans shall continue as Floating Rate Loans unless
and until such Floating Rate Loans are converted into Eurodollar Loans. Each
Eurodollar Loan of any Type shall continue as a Eurodollar Loan of such Type
until the end of the then applicable
CREDIT AGREEMENT Page 10
Interest Period therefor, at which time such Eurodollar Loan shall be
automatically converted into a Floating Rate Loan unless the Borrower shall have
given the Agent a Conversion/Continuation Notice requesting that, at the end of
such Interest Period, such Eurodollar Loan either continue as a Eurodollar Loan
of such Type for the same or another Interest Period or be converted into a Loan
of another Type. Subject to the terms of Section 2.1, the Borrower may elect
from time to time to convert all or any part of a Loan of any Type into any
other Type or Types of a Loan; provided that any conversion of any Eurodollar
Loan shall be made on, and only on, the last day of the Interest Period
applicable thereto. The Borrowers shall give the Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of a Loan or continuation
of a Eurodollar Loan not later than 10:00 a.m. (Chicago time) at least one
Business Day, in the case of a conversion into a Floating Rate Loan, or three
Business Days, in the case of a conversion into or continuation of a Eurodollar
Loan, prior to the date of the requested conversion or continuation, specifying:
(i) the requested date, which shall be a Business Day, of such
conversion or continuation,
(ii) the aggregate amount and Type of the Loan which is to be
converted or continued, and
(iii) the amount and Type(s) of Loan(s) into which such Loan is
to be converted or continued and, in the case of a conversion into or
continuation of a Eurodollar Loan, the duration of the Interest Period
applicable thereto.
(c) Subject to the terms and conditions of this Agreement, the
proceeds of such requested Loan shall be made available to the Borrowers by
depositing the proceeds thereof, in immediately available funds, on the Advance
Date for such Loan in an account maintained and designated by the Borrowers at
the principal office of the Agent. Each Bank, on the Advance Date of each such
Loan shall make its Pro Rata Share of such Loan available in immediately
available funds at the principal office of the Agent for disbursement to the
Borrowers. Unless the Agent shall have received notice from any Bank prior to
the date of any requested Loan under this Section 3.1 that such Bank will not
make available to the Agent such Bank's Pro Rata Share, the Agent may assume
that such Bank has made such share available to the Agent on the Advance Date of
such Loan in accordance with this Section 3.1(b). If and to the extent such Bank
shall not have so made such Pro Rata Share available to the Agent, the Agent may
(but shall not be obligated to) make such amount available to the Borrowers on
the relevant Advance Date, and such Bank agrees to pay to the Agent forthwith on
demand such amount together with interest thereon, for each day from the date
such amount is made available to the Borrowers by the Agent until the date such
amount is paid to the Agent, at the Federal Funds Rate. If such Bank shall pay
to the Agent such amount, such amount so paid shall constitute a Loan by such
Bank as a part of such borrowing for purposes of this Agreement. The failure of
any Bank to make its Pro Rata Share of any such Loan available to the Agent
shall not relieve any other Bank of its obligations to make available its Pro
Rata Share of such Loan on the Advance Date of such Loan, but no Bank shall be
responsible for failure of any other Bank to make such Pro Rata Share available
to the Agent on the Advance Date of any such Loan.
(d) Each Bank may book its Loans at any Lending Installation selected
by such Bank and may change its Lending Installation from time to time. All
terms of this Agreement shall apply to any such Lending Installation and the
Notes shall be deemed held by each Bank for the benefit of such Lending
Installation. Each Bank may, by written or telex notice to the Agent and the
Borrowers, designate a Lending Installation through which Loans will be made by
it and for whose account Loan payments are to be made.
(e) Nothing in this Agreement shall be construed to require or
authorize any Bank to issue any Letter of Credit, it being recognized that the
CREDIT AGREEMENT Page 11
Agent has the sole obligation under this Agreement to issue Letters of Credit on
behalf of the Banks, and the Commitment of each Lender with respect to Letter of
Credit Advances is expressly conditioned upon the Agent's performance of such
obligations. Upon such issuance by the Agent, each Bank shall automatically and
unconditionally acquire a risk participation interest to the extent of its Pro
Rata Share in such Letter of Credit Advance based on its respective Commitment.
If the Agent shall honor a draft or other demand for payment presented or made
under any Letter of Credit, the Agent shall provide notice thereof to each Bank
on the date such draft or demand is honored unless the Borrowers shall have
satisfied their reimbursement obligation under Section 3.3 by payment to the
Agent on such date. Each Bank, not later than the Business Day after the Agent
shall have given the notice specified in the previous sentence, shall make its
Pro Rata Share of the amount paid by the Agent available in immediately
available funds at the principal office of the Agent for the account of the
Agent. If and to the extent such Bank shall not have made any required Pro Rata
Share amount available to the Agent or made its portion of Loan available
pursuant to Section 3.3(a)(i), such Bank and the Borrowers severally agree to
pay to the Agent forthwith on demand such amount together with interest thereon,
for each day from the date such amount was paid by the Agent until such amount
is so made available to the Agent at (i) the interest rate then applicable to
Floating Rate Loans for such day in the case of the Borrowers and (ii) the rate
per annum equal to the Federal Funds Rate for the first five days, and
thereafter at the interest rate applicable to Floating Rate Loans, in the case
of any Bank. If such Bank shall pay such amount to the Agent tso paid shall
constitute a Loan by such Bank as part of the Loans disbursed in respect of the
reimbursement obligation of the Borrowers under Section 3.3 for purposes of this
Agreement. The failure of any Bank to make its Pro Rata Share of any such amount
paid by the Agent available to the Agent shall not relieve any other Bank of its
obligation to make available its Pro Rata Share of such amount, but no Bank
shall be responsible for failure of any other Bank to make such Pro Rata Share
available to the Agent.
3.2 Conditions of Advances. The Banks and the Agent shall not be obligated
to make any Advance hereunder at any time unless:
(a) Prior to or simultaneously with the first Advance hereunder, there
shall have been delivered to each Bank the following documents, in form and
substance satisfactory to the Agent and the following additional conditions
shall have been satisfied:
(i) The favorable opinion of such counsel for the Borrowers as
shall be approved by the Required Banks, with respect to the matters as
requested by the Banks, all in form and substance satisfactory to the Required
Banks;
(ii) certified copies of such corporate documents of each
Borrower, including each Borrower's articles of incorporation, by-laws and a
good standing certificate, and such documents evidencing necessary corporate
action with respect to this Agreement, the Loans, the Notes and the Security
Documents, and certifying to the incumbency of, and attesting to the genuineness
of the signatures of, those officers authorized to act on behalf of each
Borrower, as the Banks shall request;
(iii) the Security Documents required as of the Effective Date
under Section 5.1 duly executed on behalf of the Borrowers, together with
evidence of the recordation, filing and other action in such jurisdictions as
the Banks may deem necessary or appropriate with respect to the Security
Documents and evidence of the first-priority of the Banks' liens and security
interests under the Security Documents, subject only to Permitted Liens,
including without limitation such additional mortgages, security agreements,
pledge agreements, other documents and opinions of counsel required by the Banks
and original stock certificates and assignments separate from certificate of
each Person whose stock is required to be pledged;
CREDIT AGREEMENT Page 12
(iv) the Notes duly executed on behalf of the Borrowers, and it
is acknowledged and agreed that the Notes: (A) are issued in exchange and
replacement for the promissory notes issued pursuant to the Existing Credit
Agreement, (B) shall not be deemed a novation or to have satisfied such
promissory notes and (C) evidence the same indebtedness evidenced by such
promissory notes plus additional indebtedness;
(v) the Consent and Amendment of Security Documents duly executed
by the Borrowers;
(vi) Payment of such fees agreed to among the Borrowers and the
Agent;
(vii) the execution by the Borrowers of the Agent's standard
environmental certificate;
(viii) the Banks shall have determined that the Loans to be made
are equal to or less than the Borrowing Base;
(ix) copies of all agreements relating to any material
Indebtedness for borrowed money, any outstanding preferred stock, any joint
ventures or partnerships or any other material documents requested by the Banks;
(x) the originals of all promissory notes payable to any
Borrower, other than promissory notes in an aggregate amount less than
$1,000,000; and
(xi) such other agreements, documents, conditions and
certificates as reasonably requested by the Banks, including without limitation,
releases and terminations of all other Liens which are not permitted hereunder,
amendments of existing Security Documents, all Purchase Documents and other
agreements and documents related to the Borrowers' acquisition of additional oil
and gas properties and other assets described therein, all in form and substance
satisfactory to the Banks.
(b) The aggregate outstanding principal amount of all Advances after
giving effect to the proposed Advance, does not exceed the lesser of the
Commitments or the Borrowing Base.
(c) On and as of the date of each such Advance, the representations
and warranties contained in Section 6 hereof shall be true and correct in all
material respects as if made on such date; provided, however, that for purposes
of this Section 3.2(c) the representations and warranties contained in Section
6.7 hereof shall be deemed made with respect to both the financial statements
referred to therein and the most recent financial statements delivered pursuant
to Section 7.1(d)(ii) and (iii).
(d) No Default or event or condition which could cause a Material
Adverse Effect has occurred and is continuing or will exist upon the
disbursement of such Advance. Acceptance of the proceeds of any Advance
hereunder by the Borrowers shall be deemed to be a certification by the
Borrowers at such time with respect to the matters set forth in subparagraphs
(b), (c) and (d) of this Section 3.2.
3.3 Letter of Credit Reimbursement Payments. (a)(i) The Borrowers agree to
pay to the Agent, on the day on which the Agent shall honor a draft or other
demand for payment presented or made under any Letter of Credit, an amount equal
to the amount paid by the Agent in respect of such draft or other demand under
CREDIT AGREEMENT Page 13
such Letter of Credit and all expenses paid or incurred by the Agent relative
thereto. Unless the Borrowers shall have made such payment to the Agent on such
day, upon each such payment by the Agent, the Agent shall be deemed to have
disbursed to the Borrowers, and the Borrowers shall be deemed to have elected to
satisfy the reimbursement obligation by borrowing, a Loan bearing interest at
the Floating Rate for the account of the Banks in an amount equal to the amount
so paid by the Agent in respect of such draft or other demand under such Letter
of Credit. Such Loan shall be disbursed, and each Bank shall advance its Pro
Rata Share thereof, notwithstanding any failure to satisfy any conditions for
disbursement of any Loan set forth in Article III or any other condition and, to
the extent of the Loan so disbursed, the reimbursement obligation of the
Borrowers under this Section 3.3 shall be deemed satisfied; provided, however,
that such disbursement shall not be deemed to be a waiver of any Event of
Default or Default, if any.
(ii) If for any reason (including without limitation as a result
of the occurrence of an Event of Default pursuant to Section 6.1(h)), Floating
Rate Loans may not be made by the Banks as described in Section 3.3(a)(i), then
(A) the Borrowers agree that each reimbursement amount not paid pursuant to the
first sentence of Section 3.3(a)(i) shall bear interest, payable on demand by
the Agent, at the interest rate then applicable to Floating Rate Loans, and (B)
effective on the date each such Floating Rate Loan would otherwise have been
made, each Bank severally agrees that it shall unconditionally and irrevocably,
without regard to the occurrence of any Default or Event of Default, in lieu of
a deemed disbursement of Loans, to the extent of such Bank's Pro Rata Share,
purchase a participating interest in each reimbursement amount. Each Bank will
immediately transfer to the Agent, in same day funds, the amount of its
participation. Each Bank shall share in accordance with its Pro Rata Share
(calculated by reference to the Commitments) in any interest which accrues
thereon and in all repayments thereof. If and to the extent that any Bank shall
not have so made the amount of such participating interest available to the
Agent, such Bank and the Borrowers agree to pay to the Agent forthwith on demand
such amount together with interest thereon, for each day from the date of demand
by the Agent until the date such amount is paid to the Agent, at (x) in the case
of the Borrowers, the interest rate then applicable to Floating Rate Loans and
(y) in the case of such Bank, the Federal Funds Rate for the first five days,
and thereafter the interest rate applicable to Floating Rate Loans.
(b) The reimbursement obligations of the Borrowers under this Section
3.3 shall be absolute, unconditional and irrevocable and shall remain in full
force and effect until all obligations of the Borrowers to the Agent and the
Banks hereunder shall have been satisfied, and such obligations of the Borrowers
shall not be affected, modified or impaired upon the happening of any event,
including without limitation, any of the following, whether or not with notice
to, or the consent of, the Borrowers:
(i) Any lack of validity or enforceability of any Letter of
Credit or any documentation relating to any Letter of Credit or to any
transaction related in any way to such Letter of Credit (the "Letter of Credit
Documents");
(ii) Any amendment, modification, waiver or consent, or any
substitution, exchange or release of or failure to perfect any interest in
collateral or security, with respect to any of the Letter of Credit Documents.
(iii) The existence of any claim, setoff, defense or other right
which the Borrowers may have at any time against any beneficiary or any
transferee of any Letter of Credit (or any persons or entities for whom any such
beneficiary or any such transferee may be acting), the Agent or any Bank or any
other person or entity, whether in connection with any of the Letter of Credit
Documents, the transactions contemplated herein or therein or any unrelated
transactions;
CREDIT AGREEMENT Page 14
(iv) Any draft or other statement or document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
(v) Payment by the Agent to the beneficiary under any Letter of
Credit against presentation of documents which do not comply with the terms of
the Letter of Credit, including failure of any documents to bear any reference
or adequate reference to such Letter of Credit;
(vi) Any failure, omission, delay or lack on the part of the
Agent or any Bank or any party to any of the Letter of Credit Documents to
enforce, assert or exercise any right, power or remedy conferred upon the Agent,
any Bank or any such party under this Agreement or any of the Letter of Credit
Documents, or any other acts or omissions on the part of the Agent, any Bank or
any such party; or
(vii) Any other event or circumstance that would, in the absence
of this clause, result in the release or discharge by operation of law or
otherwise the Borrowers from the performance or observance of any obligation,
covenant or agreement contained in this Section 3.3. No setoff, counterclaim,
reduction or diminution of any obligation or any defense of any kind or nature
which the Borrowers have or may have against the beneficiary of any Letter of
Credit shall be available hereunder to the Borrowers against the Agent or any
Bank. Nothing in this Section 3.3 shall limit the liability, if any, of the
Borrowers to the Banks pursuant to Section 10.5(b).
3.4. Withholding Tax Exemption. At least five Business Days prior to the
first date on which interest or fees are payable hereunder for the account of
any Bank, each Bank that is not incorporated under the laws of the United States
of America, or a state thereof, agrees that it will deliver to each of the
Borrowers and the Agent two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224, certifying in either case that such Bank is
entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes. Each Bank
which so delivers a Form 1001 or 4224 further undertakes to deliver to each of
the Borrowers and the Agent two additional copies of such form (or a successor
form) on or before the date that such form expires (currently, three successive
calendar years for Form 1001 and one calendar year for Form 4224) or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent forms so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by the Borrowers or the Agent,
in each case certifying that such Bank is entitled to receive payments under
this Agreement and the Notes without deduction or withholding of any United
States federal income taxes, unless 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 Bank from duly completing and
delivering any such form with respect to it and such Bank advises the Borrowers
and the Agent that it is not capable of receiving payments without any deduction
or withholding of United States federal income tax.
SECTION 4. Payment and Prepayment; Fees; Change in Circumstances.
4.1 Principal Payments.
(a) Unless earlier payment is required under this Agreement, the
Borrowers shall pay the entire outstanding principal amount of the Revolving
Credit Advances on the Termination Date.
(b) The Borrowers may from time to time prepay all or a portion of the
Advances without premium or penalty, provided, however, that (i) the Borrowers
CREDIT AGREEMENT Page 15
shall have given not less than one Business Day's prior written notice thereof
to the Agent, (ii) other than mandatory payments, each such prepayment, in the
case of prepayment of Floating Rate Loans, shall be in the minimum amount of
$500,000 and in integral multiples of $100,000 and, in the case of prepayment of
Eurodollar Loans, shall be in the minimum amount of $1,000,000 and in integral
multiples thereof, (iii) any prepayment of any Eurodollar Loan shall be
accompanied by any amount required pursuant to Section 4.10.
(c) If it should be determined by the Agent at any time and from time
to time that the principal amount of the Advances exceed the lesser of the then
Borrowing Base or the Commitments (such condition defined herein as a "Borrowing
Base Deficiency"), the Borrowers shall promptly do one of the following:
(i) In addition to all other payments of principal and interest
required to be paid on the Advances, prepay upon demand and without premium or
penalty the Advances in an amount by which, in the determination of the Agent,
such aggregate principal amount outstanding exceeds the lesser of the then
Borrowing Base or the Commitments, provided that such prepayment shall be made
first on the Loans and if the Loans are paid in full and such excess still
exists, the Borrowers shall provide cash collateral for any outstanding Letters
of Credit to the extent of such remaining excess; or
(ii) Grant a lien and security interest to the Agent, for the
benefit of the Banks, in form and substance satisfactory to the Required Banks,
in additional interests in Proved Developed Reserves of the Borrowers which, in
the determination of the Required Banks, will increase the Borrowing Base by an
amount such that the then aggregate principal amount of the Loans does not
exceed the lesser of the then Borrowing Base or the Commitments; or
(iii) Any combination of the foregoing acceptable to the Required
Banks.
(d) In addition to all other payments required hereunder, upon any
sale or other disposition of any assets when a Default exists, or if such sale
or other disposition would cause a Default, the Borrowers shall prepay the
Advances by an amount equal to 100% of the net proceeds (net only of reasonable
and customary costs of such sale or other disposition) of such sale or
disposition, which prepayment is due upon receipt of such net proceeds.
(e) In addition to all other payments required hereunder, upon any
sale or other disposition of any assets when a Borrowing Base Deficiency exists,
or if such sale or other disposition would cause a Borrowing Base Deficiency,
the Borrower shall prepay the Advances by the amount of the Borrowing Base
Deficiency from the net proceeds (net only of any reasonable and customary costs
of such sale or other disposition) of such sale or disposition, which prepayment
is due upon receipt of such net proceeds.
All determinations made pursuant to this Section 4.1 shall be made by the
Agent or the Required Banks, as the case may be, and shall be conclusively
binding on the parties absent manifest error.
4.2 Interest Payment. (a) The Borrowers shall pay interest to the Banks on
the unpaid principal amount of each Loan for the period commencing on the date
such Loan is made until such Loan is paid in full, on each Interest Payment Date
and at maturity (whether at stated maturity, by acceleration or otherwise), and
thereafter on demand, at the following rates per annum: (i) during such periods
that such Loan is a Floating Rate Loan, the Floating Rate, and (ii) during such
periods that such Loan is a Eurodollar Loan, the Eurodollar Rate applicable to
such Loan for each related Eurodollar Interest Period.
CREDIT AGREEMENT Page 16
(b) Notwithstanding the foregoing paragraph (a), the Borrowers hereby
agree, if requested by the Required Banks, to pay interest on demand at the
Overdue Rate on the outstanding principal amount of any Loan and any other
amount payable by the Borrowers hereunder (other than interest) upon and during
the continuance of any Default.
4.3 Fees. (a) The Borrowers agree to pay to the Agent, for the pro rata
account of the Banks in accordance with their Pro Rata Shares, a commitment fee
computed at the per annum rate equal to the Applicable Margin on the amount by
which the Commitments exceed the aggregate outstanding principal amount of the
Advances, for the period from the Effective Date until the Termination Date.
Such fees shall be paid quarterly in arrears, on the last Business Day of each
March, June, September and December, commencing on the first such date after the
Effective Date, and on the Termination Date.
(b) The Borrowers agree (i) to pay to the Agent, for the benefit of
the Banks, a fee computed at the Applicable Margin on the maximum amount
available to be drawn under each Letter of Credit at the time such fee is to be
paid for the period from and including the date of issuance of such Letter of
Credit to and including the stated expiry date of such Letter of Credit, and
(ii) to pay an additional fee to the Agent for its own account computed at the
rate of 0.25% per annum on such maximum amount for such period. Such fees shall
be payable each month in advance, payable on the date of the issuance of any
Letter of Credit and each month thereafter. Such fees are nonrefundable and the
Borrowers shall not be entitled to any rebate of any portion thereof if such
Letter of Credit does not remain outstanding through the date for which such
fees have been paid. The Borrowers further agree to pay to the Agent, on demand,
such other customary administrative fees, charges and expenses of the Agent in
respect of the issuance, negotiation, acceptance, amendment, transfer and
payment of each Letter of Credit or otherwise payable pursuant to the
application and related documentation under which such Letter of Credit is
issued.
(c) The Borrowers agree to pay to the Agent agency and servicing fees
for its services under this Agreement in such amounts as it may from time to
time be agreed upon between the Borrowers and the Agent, which fee shall be
retained solely by the Agent.
4.4 Payment Method. All payments to be made by the Borrowers hereunder will
be made in Dollars and in immediately available funds to the Agent at its
address set forth in Section 10.2 not later than 11:00 a.m. Chicago time on the
date on which such payment shall become due. Payments received after 11:00 a.m.
Chicago time shall be deemed to be payments made prior to 11:00 a.m. Chicago
time on the next succeeding Business Day. At the time of making each such
payment, the Borrowers shall specify to the Agent that obligation of the
Borrowers hereunder to which such payment is to be applied, or, in the event
that the Borrowers fail to so specify or if an Event of Default shall have
occurred and be continuing, the Agent may apply such payments as it may
determine in its sole discretion. On the day such payments are received, the
Agent shall remit to the Banks their respective Pro Rata Shares of such
payments, in immediately available funds.
4.5 No Setoff or Deduction. All payments of principal of and interest on
the Advances and other amounts payable by the Borrowers hereunder shall be made
by the Borrowers without setoff or counterclaim, and free and clear of, and
without deduction or withholding for, or on account of, any present or future
taxes, levies, imposts, duties, fees, assessments, or other charges of whatever
nature, imposed by any governmental authority, or by any department, agency or
other political subdivision or taxing authority.
4.6 Payment on Non-Business Day; Payment Computations. Except as otherwise
provided in this Agreement to the contrary, whenever any installment of
principal of, or interest on, any Advances outstanding hereunder or any other
amount due hereunder, becomes due and payable on a day which is not a Business
Day, the maturity thereof shall be extended to the next succeeding Business Day
CREDIT AGREEMENT Page 17
and, in the case of any installment of principal, interest shall be payable
thereon at the rate per annum determined in accordance with this Agreement
during such extension. Computations of interest and other amounts due under this
Agreement shall be made on the basis of a year of 360 days for the actual number
of days elapsed, including the first day but excluding the last day of the
relevant period.
4.7. Yield Protection. If any law or any governmental or quasi-governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law), or any interpretation thereof, or the compliance of any Bank
therewith,
(i) subjects any Bank or any applicable Lending Installation to
any tax, duty, charge or withholding on or from payments due from the Borrowers
(excluding federal taxation of the overall net income of any Bank or applicable
Lending Installation), or changes the basis of taxation of payments to any Bank
in respect of its Loans or other amounts due it hereunder, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, any Bank
or any applicable Lending Installation (other than reserves and assessments
taken into account in determining the interest rate applicable to Eurodollar
Loans), or
(iii) imposes any other condition the result of which is to
increase the cost to any Bank or any applicable Lending Installation of making,
funding or maintaining loans or reduces any amount receivable by any Bank or any
applicable Lending Installation in connection with loans, or requires any Bank
or any applicable Lending Installation to make any payment calculated by
reference to the amount of loans held or interest received by it, by an amount
deemed material by such Bank,
then, within 30 days of demand by such Bank, the Borrowers shall pay such Bank
that portion of such increased expense incurred or reduction in an amount
received which such Bank determines is attributable to making, funding and
maintaining its Loans and its Commitment.
4.8. Changes in Capital Adequacy Regulations. If a Bank determines the
amount of capital required or expected to be maintained by such Bank, any
Lending Installation of such Bank or any corporation controlling such Bank is
increased as a result of a Change, then, within 15 days of demand by such Bank,
the Borrowers shall pay such Bank the amount necessary to compensate for any
shortfall in the rate of return on the portion of such increased capital which
such Bank determines is attributable to this Agreement, its Advances or its
Commitment (after taking into account such Bank's policies as to capital
adequacy). "Change" means (i) any change after the date of this Agreement in the
Risk-Based Capital Guidelines or (ii) any adoption of or change in any other
law, governmental or quasi-governmental rule, regulation, policy, guideline,
interpretation, or directive (whether or not having the force of law) after the
date of this Agreement which affects the amount of capital required or expected
to be maintained by any Bank or any Lending Installation or any corporation
controlling any Bank. "Risk-Based Capital Guidelines" means (i) the risk-based
capital guidelines in effect in the United States on the date of this Agreement,
including transition rules, and (ii) the corresponding capital regulations
promulgated by regulatory authorities outside the United States implementing the
July 1988 report of the Basle Committee on Banking Regulation and Supervisory
Practices Entitled "International Convergence of Capital Measurements and
Capital Standards," including transition rules, and any amendments to such
regulations adopted prior to the date of this Agreement.
4.9. Availability of Types of Advances. If any Bank determines that
maintenance of its Eurodollar Loans at a suitable Lending Installation would
violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or if the Required Banks determine that (i) deposits of
CREDIT AGREEMENT Page 18
a type and maturity appropriate to match fund Eurodollar Loans are not available
or (ii) the interest rate applicable to a Type of Advance does not accurately
reflect the cost of making or maintaining such Advance, then the Agent shall
suspend the availability of the affected Type of Advance and require any
Eurodollar Loans of the affected Type to be repaid.
4.10. Funding Indemnification. If any payment of a Eurodollar Loan occurs
on a date which is not the last day of the applicable Interest Period, whether
because of acceleration, prepayment or otherwise, or a Eurodollar Loan is not
made on the date specified by the Borrowers for any reason other than default by
the Banks, the Borrowers will indemnify each Bank for any loss or cost incurred
by it resulting therefrom, including, without limitation, any loss or cost in
liquidating or employing deposits acquired to fund or maintain the Eurodollar
Loan.
4.11. Bank Statements; Survival of Indemnity. To the extent reasonably
possible, each Bank shall designate an alternate Lending Installation with
respect to its Eurodollar Loans to reduce any liability of the Borrowers to such
Bank under Sections 4.7 and 4.8 or to avoid the unavailability of a Type of
Advance under Section 4.9, so long as such designation is not disadvantageous to
such Bank. Each Bank shall deliver a written statement of such Bank to the
Borrowers (with a copy to the Agent) as to the amount due, if any, under
Sections 4.7, 4.8 or 4.10. Such written statement shall set forth in reasonable
detail the calculations upon which such Bank determined such amount and shall be
final, conclusive and binding on the Borrowers in the absence of manifest error.
Determination of amounts payable under such Sections in connection with a
Eurodollar Loan shall be calculated as though each Bank funded its Eurodollar
Loan through the purchase of a deposit of the type and maturity corresponding to
the deposit used as a reference in determining the Eurodollar Rate applicable to
such Loan, whether in fact that is the case or not. Unless otherwise provided
herein, the amount specified in the written statement of any Bank shall be
payable on demand after receipt by the Borrowers of such written statement. The
obligations of the Borrowers under Sections 4.7, 4.8 and 4.10 shall survive
payment of the Bank Obligations and termination of this Agreement.
SECTION 5. Security
5.1 Security Documents. To secure all indebtedness, obligations and
liabilities under this Agreement, the Notes, the Security Documents, the
Advances, any Swap Agreements among any Borrower and any Lender and to secure
all other Indebtedness and obligations of the Borrowers to the Agent and the
Banks pursuant thereto, whether direct or indirect, absolute or contingent, due
or to become due, now existing or hereafter arising, the Borrowers shall:
(a) Execute and deliver to the Agent, promptly upon the request of the
Agent or the Required Banks, such indentures of mortgage, deeds of trust,
security agreements, financing statements and assignment of production and other
agreements, including without limitation any amendments to any such documents
previously executed and delivered in favor of the Agent or any Bank (as amended
or modified from time to time, the "Mortgages" and together with the Security
Agreements, and all agreements and documents described in this Section 5.1(a) or
in 5.1(b) or 5.2 and all other agreements and documents securing any of the Bank
Obligations at any time or otherwise executed by any Borrower with or in favor
of the Agent and the Banks, and including without limitation the Letter of
Credit Documents, as amended or modified from time to time, the "Security
Documents"), in form and substance satisfactory to the Required Banks, granting
the Agent, for the benefit of the Banks, a first-priority, perfected and
enforceable lien and security interest, subject only to the Permitted Liens, in
the following (collectively, with all other assets described in Section 5.1(b),
the "Collateral"): all oil, gas and mineral properties and all other assets of
the Borrowers as requested at any time by the Required Banks, including without
limitation all leasehold and royalty interests and all other rights in
connection therewith, and all interests in machinery, equipment, materials,
improvements, hereditaments, appurtenances and other property, real, Personal
and/or mixed, now or hereafter a part of or obtained in or used in connection
CREDIT AGREEMENT Page 19
with such properties and all interests in and to any and all oil, gas and other
minerals now in storage or now or hereafter located in, under, on or produced
from, such properties and an assignment of production from such properties to
the Agent;
(b) Execute and deliver to the Agent, on or before the Effective Date,
such security agreements, pledge agreements, financing statements and other
agreements, including without limitation the Consent and Amendment of Security
Documents confirming the continuing effectiveness of Security Documents
previously executed and delivered to the Agent or any Bank (as amended or
modified from time to time, the "Security Agreements"), in form and substance
satisfactory to the Required Banks, granting to the Agent, for the benefit of
the Banks, a first- priority, perfected and enforceable lien and security
interest, subject only to the Permitted Liens, in all other assets, whether
real, personal or mixed, and whether now owned or hereafter existing and
wherever located, of the Borrowers.
5.2 Additional Security Documents. If at any time requested by the
Agent or the Required Banks, the Borrowers shall execute and deliver such
additional documents, and shall take such other action, as the Agent or the
Required Banks may reasonably consider necessary or proper to evidence or
perfect the liens and security interests described in Section 5.1 hereof.
SECTION 6. Representations and Warranties.
Each of the Borrowers represents and warrants that:
6.1 Corporate Existence and Power. It is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and is duly qualified to do business and in good standing in each
additional jurisdiction where failure to so qualify would have a Material
Adverse Effect. It has all requisite corporate power to own its properties and
to carry on its business as now being conducted and as proposed to be conducted,
and to execute and deliver this Agreement, the Notes and the Security Documents
and to engage in the transactions contemplated by this Agreement, the Notes and
the Security Documents.
6.2 Corporate Authority. The execution, delivery and performance by it
of this Agreement, the Notes and the Security Documents are within its corporate
powers, have been duly authorized by all necessary corporate action and are not
in contravention of any law, rule or regulation, or any judgment, decree, writ,
injunction, order or award of any arbitrator, court or governmental authority,
or of the terms of its charter or by-laws, or of any contract or undertaking to
which it is a party or by which it or its property may be bound or affected.
6.3 Binding Effect. This Agreement is, and the Notes and the Security
Documents to which it is a party when delivered hereunder will be, legal, valid
and binding obligations of each Borrower, enforceable against each in accordance
with their respective terms.
6.4 Subsidiaries. All Subsidiaries of CRI are duly organized, validly
existing and in good standing under the laws of their jurisdictions of
organization and are duly qualified to do business in each jurisdiction where
failure to so qualify would have a Material Adverse Effect. All outstanding
shares of capital stock of each class of each Subsidiary of CRI have been and
will be validly issued and are and will be fully paid and nonassessable and are
and will be owned, beneficially and of record, by CRI, free and clear of any
Liens. Schedule 6.4 is a complete list of all Subsidiaries of CRI. COG is and
will remain a wholly owned subsidiary of CRI and COGL is and will remain a
wholly owned subsidiary of COG, and Offshore is and will remain a wholly owned
subsidiary of COGL. Comstock Management Corporation, a Nevada corporation, does
not have material assets and the Borrowers agree that it will not have any
material assets at any time.
CREDIT AGREEMENT Page 20
6.5 Liens. The properties of each Borrower and each Subsidiary of any
Borrower (including without limitation the Collateral) are not subject to any
Lien except Permitted Liens.
6.6 Litigation. There is no action, suit or proceeding pending or, to the
best of its knowledge, threatened against or affecting it before or by any
court, governmental authority, or arbitrator which would be reasonably likely to
result in, either individually or collectively, a Material Adverse Effect and,
to the best of the Borrowers' knowledge, there is no basis for any such action,
suit or proceeding.
6.7 Financial Condition. The consolidated balance sheet of CRI and its
Subsidiaries and the consolidated statements of income and cash flow of CRI and
its Subsidiaries for the fiscal year ended December 31, 1996 and reported on by
Arthur Andersen, LLP, and the interim consolidated balance sheet of CRI and its
Subsidiaries and the interim consolidated statements of income and cash flow of
CRI and its Subsidiaries for the fiscal quarter of CRI ended September 30, 1997,
copies of which have been furnished to the Banks, fairly present, and the
financial statements of CRI and its Subsidiaries to be delivered pursuant to
Section 7.1(d) will fairly present, the consolidated financial position of CRI
and its Subsidiaries as of the respective dates thereof, and the consolidated
results of operations of CRI and its Subsidiaries for their respective periods
indicated, all in accordance with generally accepted accounting principles
consistently applied. There has been no event or development which has had or
would be reasonably likely to have a Material Adverse Effect since December 31,
1996. There is no material Contingent Liability of CRI or any of its
Subsidiaries that is not reflected in such financial statements or in the notes
thereto.
6.8 Use of Advances. The Advances will be used for working capital and
general corporate purposes, including acquisitions. No Borrower extends or
maintains, in the ordinary course of business, credit for the purpose, whether
immediate, incidental, or ultimate, of buying or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of each Advance will be used for the
purpose, whether immediate, incidental, or ultimate, of buying or carrying any
such margin stock or maintaining or extending credit to others for such purpose.
After applying the proceeds of the Advances, such margin stock will not
constitute more than 25% of the value of the assets that are subject to any
provisions of this Agreement or any Security Document that may cause the
Advances to be secured, directly or indirectly by margin stock.
6.9 Security Documents. The Security Documents create a valid and
enforceable first-priority lien on and perfected security interest in all right,
title and interest of each Borrower in and to the Collateral described therein,
securing all amounts intended to be secured thereby (including without
limitation all principal of and interest on the Notes) subject only to the
Permitted Liens. The respective net revenue interests of each Borrower in and to
the Oil and Gas Interests as set forth in the Security Documents are true and
correct and accurately reflect the interests to which each Borrower is legally
entitled, subject only to the Permitted Liens.
6.10 Consents, Etc. No consent, approval or authorization of or
declaration, registration or filing with any governmental authority or any
nongovernmental Person or entity, including without limitation any creditor or
stockholder of it, is required on the part of it in connection with the
execution, delivery and performance of this Agreement, the Notes, the Security
Documents or the transactions contemplated hereby or as a condition to the
legality, validity or enforceability of this Agreement, the Notes or any of the
Security Documents.
6.11 Taxes. It has filed all tax returns (federal, state and local)
required to be filed and has paid all taxes shown thereon to be due, including
interest and penalties, or has established adequate financial reserves on its
books and records for payment thereof, except where the failure to do so would
not have a Material Adverse Effect.
CREDIT AGREEMENT Page 21
6.12 Title to Properties. It has good and defensible title to, and a valid
indefeasible ownership interest in, all of its properties and assets (including,
without limitation, the Collateral subject to the Security Documents) free and
clear of any Lien except the Permitted Liens, and it is the owner of all the
Collateral described in the Security Documents to which it is a party. All wells
on any of the mortgaged premises have been drilled, operated, shut-in, abandoned
or suspended in accordance with good oil and gas field practices and in
compliance with all applicable laws, permits, statutes, orders, licenses, rules
and regulations. All leases with respect to any Oil and Gas Interests owned by
any Borrower are in good standing and are in full force and effect, all
royalties, rents, taxes, assessments and other payments thereunder or with
respect thereto have been properly and timely paid and all conditions necessary
to keep such leases in full force have been fully performed, including without
limitation any condition to maintain continuous production or other activity
with respect thereto. The Borrowers have delivered to the Agent title opinions
with respect to at least 80% of the value of the assets included in the
Borrowing Base. All transactions contemplated pursuant to the Purchase Documents
have been completed, including without limitation the acquisition by COGL (to be
assigned to Offshore) of the Purchased Bois D'Arc Assets (other than certain
assets not substantial in amount in the aggregate which will be transferred to
Offshore in January, 1998) and have been completed in accordance with all
applicable laws and regulations. Offshore owns the Purchased Bois D'Arc Assets
free and clear of all Liens other than under the Security Documents, and the
Security Documents delivered on the Effective Date create a first priority,
perfected and enforceable lien and security interest in favor of the Agent for
the benefit of the Banks on all Purchased Bois D'Arc Assets owned by any of the
Borrowers.
6.13 ERISA. CRI and its Subsidiaries and their Plans are in compliance in
all material respects with those provisions of ERISA and of the Code which are
applicable with respect to any Plan. No prohibited transaction (as defined in
Section 406 of ERISA and Section 9975 of the Code) and no reportable event (as
defined in ERISA) has occurred with respect to any Plan. Neither CRI, any of its
Subsidiaries nor any of its ERISA Affiliates is an employer with respect to any
multiemployer plan (as defined in Section 4001(a)(3) of ERISA). CRI, its
Subsidiaries and the ERISA Affiliates have met the minimum funding requirements
under ERISA and the Code with respect to each of the respective Plans, if any,
and have not incurred any liability to the PBGC or any Plan. There is no
unfunded benefit liability with respect to any Plan.
6.14 Environmental and Safety Matters. It is in compliance in all material
respects with all federal, state and local laws, ordinances and regulations
relating to safety and industrial hygiene or to the environmental condition,
including without limitation all Environmental Laws in jurisdictions in which it
owns any interest in or operates, a well, a facility or site, or arranges for
disposal or treatment of hazardous substances, solid waste, or other wastes,
accepts for transporting any hazardous substances, solid waste, or other wastes,
or holds any interest in real property or otherwise, except where any such
noncompliance would not have a Material Adverse Effect. No demand, claim,
notice, suit, suit in equity, action, administrative action, investigation or
inquiry whether brought by any governmental authority, private Person or entity
or otherwise, arising under, relating to or in connection with any Environmental
Laws is pending or, to the best of any Borrower's knowledge, threatened against
it, any real property in which it holds or has held an interest or any past or
present operation of it. It (a) does not know of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release of any toxic substances, radioactive materials, hazardous wastes or
related materials into the environment, (b) has not received any notice of any
toxic substances, radioactive materials, hazardous waste or related materials
in, or upon any of its properties in violation of any Environmental Laws, and
(c) does not know of any basis for any such investigation, notice or violation.
No material release, threatened release or disposal of hazardous waste, solid
waste or other wastes is occurring or has occurred on, under or to any real
property in which it holds any interest or performs any of its operations, in
violation of any Environmental Law which would have a Material Adverse Effect.
CREDIT AGREEMENT Page 22
6.15 Direct Benefit. The initial Advances hereunder and all additional
Advances are for the direct benefit of each of the Borrowers, and the initial
Advances hereunder are used to refinance and replace indebtedness owing,
directly or indirectly, by the Borrowers to the Banks under the Existing Credit
Agreement. The Borrowers are engaged as an integrated group in the business of
oil and gas exploration and related fields, and any benefits to any Borrower is
a benefit to all of them, both directly or indirectly, inasmuch as the
successful operation and condition of the Borrowers is dependent upon the
continued successful performance of the functions of the integrated group as a
whole.
6.16 Solvency. Each of the following is true for each Borrower and the
Borrowers on a consolidated basis: (a) the fair saleable value of its property
is (i) greater than the total amount of its liabilities (including contingent
liabilities), and (ii) greater than the amount that would be required to pay its
probable aggregate liability on its then existing debts as they become absolute
and matured; (b) its property is not unreasonable in relation to its business or
any contemplated or undertaken transaction; and (c) it does not intend to incur,
or believe that it will incur, debts beyond its ability to pay such debts as
they become due.
6.17 Disclosure. This Agreement and all other documents, certificates,
reports or statements or other information furnished to any Bank or the Agent in
writing by or on behalf of any Borrower in connection with the negotiation or
administration of this Agreement or any transactions contemplated hereby when
read together do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained herein
and therein not misleading. There is no fact known to any Borrower which has
caused, or which likely would in the future in the reasonable judgment of the
Borrowers cause, a Material Adverse Effect (except for any economic conditions
which affect generally the industry in which the Borrowers and their
Subsidiaries conduct business), which has not been set forth in this Agreement
or in the other documents, certificates, statements, reports and other
information furnished in writing to the Banks by or on behalf of any Borrower in
connection with the transactions contemplated hereby.
SECTION 7. Covenants.
7.1 Affirmative Covenants. Each Borrower covenants and agrees that, until
the payment in full of the principal of and accrued interest on the Notes, the
expiration of this Agreement and all Letters of Credit and the payment and
performance of all other obligations of the Borrowers under this Agreement, the
Notes and the Security Documents, unless the Required Banks shall otherwise
consent in writing, each of the Borrowers shall:
(a) Preservation of Corporate Existence, Etc. Preserve and maintain
its corporate existence, rights and privileges and its material licenses,
franchises and permits, and qualify and remain qualified as a validly existing
corporation in good standing in each jurisdiction in which such qualification is
necessary under applicable law.
(b) Compliance with Laws, Etc. Comply in all material respects with
all applicable laws, rules, regulations and orders of any governmental
authority, whether federal,state, local or foreign (including without limitation
ERISA, the Code and Environmental Laws), in effect from time to time; and pay
and discharge promptly when due all taxes, assessments and governmental charges
or levies imposed upon it or upon its income, revenues or property, before the
same shall become delinquent or in default, as well as all lawful claims for
labor, materials and supplies or otherwise, which, if unpaid, might give rise to
Liens upon such properties or any portion thereof, except to the extent that
payment of any of the foregoing is then being contested in good faith by
appropriate legal proceedings and with respect to which adequate financial
reserves have been established on its books and records.
CREDIT AGREEMENT Page 23
(c) Maintenance of Properties; Insurance. Maintain, preserve and
protect all property that is material to the conduct of its business and keep
such property in good repair, working order and condition and from time to time
make, or cause to be made, all needful and proper repairs, renewals, additions,
improvements and replacements thereto necessary in order that the business
carried on in connection therewith may be properly conducted at all times in
accordance with customary and prudent business practices for similar businesses;
comply with all applicable permits, statutes, laws, orders, licenses, rules and
regulations relating to the Oil and Gas Interests owned by it, unless any non
compliance would not cause a Material Adverse Effect, and ensure that all wells
and other properties operated by it, either in its own name or as a partner, are
operated in accordance with prudent oil and gas field practices; comply with all
of its duties and obligations under, and take all actions to maintain,
consistent with prudent oil and gas practices, all leases and other rights in
full force and effect; and, in addition to that insurance required under the
Security Documents, maintain in full force and effect insurance with responsible
and reputable insurance companies or associations in such amounts, on such terms
and covering such risks, including fire and other risks insured against by
extended coverage, as is usually carried by companies engaged in similar
businesses and owning similar properties similarly situated and maintain in full
force and effect public liability insurance, insurance against claims for
personal injury or death or property damage occurring in connection with any of
its activities or any of any properties owned, occupied or controlled by it, in
such amount as it shall reasonably deem necessary, and maintain such other
insurance as may be required by law or as may be reasonably requested by the
Banks for purposes of assuring compliance with this Section 7.1(c).
(d) Reporting Requirements. Furnish to each Bank, in form and
substance satisfactory to the Required Banks, the following:
(i) Promptly and in any event within three calendar days after
becoming aware of the occurrence of (A) any Default, (B) the commencement of any
material litigation against, by or affecting the Borrowers and, upon request by
any Bank, any material developments therein, or (C) any development in the
business or affairs of the Borrowers which has resulted in, or which is likely
in the reasonable judgment of the Borrowers to result in (including without
limitation the entering into of any material contract and/or undertaking by the
Borrowers) a Material Adverse Effect or (D) any "reportable event" (as defined
in ERISA) under, or the institution of steps by the Borrowers or any Subsidiary
to withdraw from, or the institution of any steps to terminate, any Plan, a
statement of the chief financial officer of the Borrowers setting forth details
of such Default or such event or condition or such litigation and the action
which CRI or any Subsidiary has taken and proposes to take with respect thereto;
(ii) As soon as available and in any event within 45 days after
the end of each fiscal quarter of CRI, the consolidated balance sheets of CRI
and its Subsidiaries as of the end of such quarter, and the related consolidated
statements of income and cash flow for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter, setting forth in
each case in comparative form the corresponding figures for the corresponding
date or period of the preceding fiscal year, all in reasonable detail and duly
certified (subject to year-end audit adjustments) by an appropriate officer of
the Borrowers as having been prepared in accordance with generally accepted
accounting principles, together with a certificate of an appropriate officer of
the Borrowers with a computation in reasonable detail calculating the covenants
contained in Sections 7.2(a), (b), (c), (i) and (j);
(iii) As soon as available and in any event within 120 days after
the end of each fiscal year, a copy of the consolidated balance sheet of CRI and
its Subsidiaries for such fiscal year and related statements of income and cash
flow with a customary audit report thereon by Arthur Andersen LLP or other
independent certified public accountants selected by CRI and acceptable to the
Banks, without qualifications unacceptable to the Banks, together with a
CREDIT AGREEMENT Page 24
certificate of such accountants stating that they have reviewed this Agreement
and stating further that in making their review in accordance with generally
accepted accounting principles nothing came to their attention that made them
believe that any Default exists, or if their examination has disclosed the
existence of any Default, specifying the nature, period of existence and status
thereof, together with a certificate of an appropriate officer of the Borrowers
with a computation in reasonable detail calculating the covenants contained in
Sections 7.2(a), (b), (c), (i) and (j) hereof;
(iv) Upon the request of the Required Banks or the Agent, a
schedule of all oil, gas, and other mineral production attributable to all
material Oil and Gas Interests of the Borrowers, and in any event all such Oil
and Gas Interests included in the Borrowing Base;
(v) Promptly, all title or other information received after the
Effective Date by any Borrower which discloses any material defect in the title
to any material asset included in the Borrowing Base;
(vi) As soon as practicable and in any event within 30 days after
the sending or filing thereof, copies of all such financial statements and
reports as it shall send to its security holders and of all final prospectuses
under the Securities Act of 1933 (other than Form S-8), reports on Forms 10-Q,
10-K and 8-K and all similar regular and periodic reports filed by it (i) with
any federal department, bureau, commission or agency from time to time having
jurisdiction with respect to the sale of securities or (ii) with any securities
exchange;
(vii) (A) As soon as available and in any event within 90 days
after each January 1, commencing with January 1, 1998, an annual reserve report
as of each such January 1 with respect to all Hydrocarbon reserves of the
Borrowers prepared by an independent engineering firm of recognized standing
acceptable to the Required Banks in accordance with accepted industry practices
and otherwise acceptable and in form and substance satisfactory to the Required
Banks, and including without limitation all assets included in the Borrowing
Base, and (B) within 90 days after each July 1 thereafter, a reserve report as
of such July 1, with respect to all Hydrocarbon reserves of the Borrowers
prepared by the Borrowers in accordance with accepted industry practices and
otherwise acceptable and in form and substance satisfactory to the Required
Banks, and including without limitation all assets included in the Borrowing
Base;
(viii) On or within 30 days after the request of the Agent or the
Required Banks, in connection with a redetermination of the Borrowing Base
permitted under Section 9.14 an updated reserve report with respect to all
Hydrocarbon reserves of the Borrowers prepared by an independent engineering
firm of recognized standing acceptable to the Required Banks in accordance with
accepted industry practices and otherwise acceptable and in form and substance
satisfactory to the Required Banks, and including without limitation all assets
included in the Borrowing Base;
(ix) Promptly, any management letter from the auditors for any
Borrower and all other information respecting the business, properties or the
condition or operations, financial or otherwise, including, without limitation,
geological and engineering data of any Borrower and any title work with respect
to any Oil and Gas Interests of any Borrower as any Bank may from time to time
reasonably request;
(x) At all times after the date ninety (90) days after the
Effective Date, if requested by the Required Banks, title opinions and other
opinions of counsel, in each case in form and substance acceptable to the
Required Banks, with respect to at least eighty (80%) percent of the value of
the assets included in the Borrowing Base; and
(e) Access to Records, Books, Etc. At any reasonable time and from
time to time, permit any Bank or any agents or representatives thereof, at the
Borrowers' own expense,
CREDIT AGREEMENT Page 25
to examine and make copies of and abstracts from the records and books of
account of, and visit the properties of, the Borrowers, and to discuss the
affairs, finances and accounts of the Borrowers with their respective officers
and employees. Without limiting the foregoing, the Borrowers agree that at any
reasonable time and from time to time, the Borrowers will permit any Bank or any
agents or representatives thereof to inspect, at the office of the Borrowers
listed on its signature page hereto, all opinions with respect to title and
other material work received by the Borrowers with respect to any asset included
in the Borrowing Base.
7.2 Negative Covenants. Until payment in full of the principal of and
accrued interest on the Notes, the expiration of this Agreement and all Letters
of Credit and the payment and performance of all other obligations of the
Borrowers and each Guarantor under this Agreement, the Notes and the Security
Documents, each Borrower agrees that, unless the Required Banks shall otherwise
consent in writing, none of them shall:
(a) Current Ratio. Permit or suffer the ratio of (i) the sum of
Current Assets plus the unused availability under the revolving credit facility
established by Section 2.1(a), to (ii) Current Liabilities at any time to be
less than 1.0 to 1.0.
(b) Tangible Net Worth. Permit or suffer Consolidated Tangible Net
Worth of CRI and its Subsidiaries, at any time, to be less than the sum of (i)
$95,000,000, plus (ii) 50% of Consolidated Net Income for the fiscal quarter
ending December 31, 1997 and for each fiscal year, commencing with the fiscal
year ending December 31, 1998, and to be added as of the last day of such fiscal
quarter and each such fiscal year, provided that if such Consolidated Net Income
is negative in such fiscal quarter or in any fiscal year, the amount added
pursuant to this clause (ii) shall be zero and shall not reduce the amount added
pursuant to this clause (ii) for any other fiscal year, plus (iii) 75% of the
net cash proceeds of any equity offering or other sale of equity of CRI or any
of its Subsidiaries.
(c) Interest Coverage Ratio. Permit or suffer, as of the last day of
any fiscal quarter of CRI, the ratio of (i) EBITDA, as calculated for the four
fiscal quarters then ending, to (ii) Consolidated Interest Expense, as
calculated for the four fiscal quarters then ending, to be less than 2.5 to 1.0.
(d) Indebtedness. Create, incur, assume, guaranty or in any manner
become liable in respect of, or suffer to exist, any Indebtedness other than:
(i) The Advances;
(ii) Other Indebtedness in aggregate outstanding amount not to
exceed $5,000,000;
(iii) Unsecured insurance premium financing incurred in the
ordinary course of business;
(iv) Indebtedness pursuant to any Swap Agreement with any Bank,
any Person with an investment grade debt rating acceptable to the Agent and any
other Person acceptable to the Agent; and
(v) Indebtedness permitted pursuant to Section 7.2(i).
(e) Liens. Create, incur or suffer to exist, any Lien to exist on any
assets, rights, revenues or property, real, personal or mixed, tangible or
intangible, other than:
CREDIT AGREEMENT Page 26
(i) Liens for taxes not delinquent or for taxes being contested
in good faith by appropriate proceedings and as to which adequate financial
reserves have been established on its books and records;
(ii) Liens (other than any Lien imposed by ERISA) created and
maintained in the ordinary course of business which are not material in the
aggregate, and which would not have a Material Adverse Effect and which
constitute (A) pledges or deposits under worker's compensation laws,
unemployment insurance laws or similar legislation, (B) good faith deposits in
connection with bids, tenders, contracts or leases to which any Borrower is a
party for a purpose other than borrowing money or obtaining credit, including
rent security deposits, (C) liens imposed by law, such as those of carriers,
warehousemen, operators and mechanics, if payment of the obligation secured
thereby is not yet due, (D) Liens securing taxes, assessments or other
governmental charges or levies not yet subject to penalties for nonpayment, and
(E) pledges or deposits to secure public or statutory obligations of any
Borrower, or surety, customs or appeal bonds to which such Borrower is a party;
(iii) Liens created pursuant to the Security Documents and Liens
expressly permitted by the Security Documents, including without limitation
liens securing any reimbursement and other obligations pursuant to any Letters
of Credit issued by any Bank for the account of any Borrower, and it is
acknowledged and agreed that, without limiting the indebtedness secured by the
Security Documents, each Security Document secures all reimbursement and other
obligations incurred at any time by any Borrower pursuant to any Letter of
Credit issued by any Bank for the account of any Borrower;
(iv) Liens securing Indebtedness permitted pursuant to Section
7.2(d)(iii) created to secure payment of a portion of the purchase price of, or
existing at the time of acquisition of, any tangible fixed asset acquired by any
Borrower if the outstanding principal amount of the Indebtedness secured by such
Lien does not at any time exceed the purchase price paid by such Borrower for
such assets, provided that such Lien does not encumber any other asset at any
time owned by such Borrower.
(f) Merger; Acquisitions; Etc. Purchase or otherwise acquire, whether
in one or a series of transactions, unless the Required Banks shall otherwise
consent in writing, all or any substantial portion of the business assets,
rights, revenues or property, real, personal or mixed, tangible or intangible,
of any Person, or all or any substantial portion of the capital stock of or
other ownership interest in any other Person, nor merge or consolidate or
amalgamate with any other Person or take any other action having a similar
effect, unless in each of the foregoing cases, each of the following conditions
is satisfied: (i) no Default or Event of Default exists either before or after
such acquisition, merger, consolidation, amalgamation or other action have a
similar effect, (ii) if such transaction is a merger, consolidation,
amalgamation or other action having a similar effect, a Borrower is the
surviving entity and (iii) in the case of any take-over bid or offer to acquire
all or substantially all of the outstanding voting or equity securities of a
corporation or an acquisition of all or substantially all of the assets of any
Person, the board of directors of the target corporation or management of the
target Person(if the target is not a corporation) has recommended acceptance of
such bid or offer.
(g) Disposition of Assets; Etc. Without the prior written consent of
the Required Banks, sell, lease, license, transfer, assign or otherwise dispose
of any Collateral or any of its other business, assets, rights, revenues or
property, real, personal or mixed, tangible or intangible, whether in one or a
series of transactions, other than (i) inventory sold in the ordinary course of
business upon customary credit terms, and (ii) if no Default has occurred and is
continuing or would be caused thereby, other sales of assets in aggregate amount
not to exceed $15,000,000 in any twelve-month period, provided that in
connection with any such sales in excess of $5,000,000 in aggregate amount since
CREDIT AGREEMENT Page 27
the date of the most recent redetermination of the Borrowing Base all the net
proceeds (net only of reasonable and customary fees actually incurred in
connection with such sales and of taxes paid or reasonably estimated to be
payable as a result thereof), will simultaneously reduce the Borrowing Base by a
like amount.
(h) Nature of Business. Make any substantial change in the nature of
its business from that engaged in on the date of this Agreement or engage in any
other businesses other than those in which it is engaged on the date of this
Agreement.
(i) Investments and Advances. Purchase or otherwise acquire any
capital stock of or other ownership interest in, or debt securities of or other
evidences of Indebtedness of, any other Person; nor make any loan or advance of
any of its funds or property or make any other extension of credit to, or make
any investment or acquire any interest whatsoever in, any other Person, except
(i) loans and advances to officers of the Borrowers, provided that the aggregate
amount of all such loans and advances does not exceed $25,000, (ii) loans and
advances among the Borrowers or any Subsidiary of any Borrower guaranteeing all
indebtedness, obligations and liabilities of the Borrowers to the Banks and the
Agent pursuant to a guaranty and other agreements satisfactory to the Agent, and
(iii) other loans and advances, provided that the aggregate amount of all such
loans and advances, together with Indebtedness allowed under Section
7.2(d)(iii), shall not exceed $5,000,000.
(j) Dividends. With respect to CRI only, make, pay, declare or
authorize any dividend, payment or other distribution in respect of any class of
its capital stock or any dividend, payment or distribution in connection with
the redemption, repurchase, defeasance, conversion, retirement or other
acquisition, directly or indirectly, of any shares of its capital stock, (all of
the foregoing defined herein as "Restricted Payments"), except (i) Restricted
Payments payable solely in shares of capital stock of CRI, and (ii) cash
dividends (exclusive of those described in (i) above) paid on, and redemptions
or repurchases of capital stock of, CRI, provided that the aggregate amount paid
for all such dividends, redemptions or repurchases after the Effective Date
shall not exceed 25% of Consolidated Net Income of CRI and its Subsidiaries for
the fiscal year ended immediately prior to such payments, and provided further,
that both before each such dividend, redemption or repurchase and after giving
effect to the payment in connection with each such dividend, redemption or
repurchase (A) no Default or Event of Default shall have occurred and be
continuing and (B) all representations and warranties contained in Section 6
hereof (including without limitation Section 6.8) shall be true and correct in
all material respects as if made at such times. For purposes of this Agreement,
"capital stock" shall include capital stock (preferred, common or other) and any
securities exchangeable for or convertible into capital stock and any warrants,
rights or other options to purchase or otherwise acquire capital stock or such
securities.
(k) Transactions with Affiliates. Enter into or be a party to any
transaction or arrangement with any Affiliate (including, without limitation,
the purchase from, sale to or exchange of property with, or the rendering of any
service by or for, any Affiliate), except in the ordinary course of and pursuant
to the reasonable requirements of the Borrowers' business and upon fair and
reasonable terms no less favorable to such Borrower than would be obtained in a
comparable arms-length transaction with a Person other than an Affiliate and
except the loans and advances described in Section 7.2(i).
(l) Additional Covenants. If at any time any Borrower shall enter into
or be a party to any instrument or agreement, including all such instruments or
agreements in existence as of the date hereof and all such instruments or
agreements entered into after the date hereof, relating to or amending any terms
or conditions applicable to any of its Indebtedness which includes covenants,
terms, conditions or defaults not substantially provided for in this Agreement
CREDIT AGREEMENT Page 28
or more favorable to the lender or lenders thereunder than those provided for in
this Agreement, then the Borrowers shall promptly so advise the Agent and the
Banks. Thereupon, if the Agent shall request, upon notice to the Borrowers, the
Agent and the Banks shall enter into an amendment to this Agreement or an
additional agreement (as the Agent may request), providing for substantially the
same covenants, terms, conditions and defaults as those provided for in such
instrument or agreement to the extent required and as may be selected by the
Agent. In addition to the foregoing, any covenants, terms, conditions or
defaults in any existing agreements or other documents evidencing or relating to
any Indebtedness of any Borrower not substantially provided for in this
Agreement or more favorable to the holders of such Indebtedness, are hereby
incorporated by reference into this Agreement to the same extent as if set forth
fully herein, and no subsequent amendment, waiver or modification thereof shall
effect any such covenants, terms, conditions or defaults as incorporated herein.
(m) Financial Contracts. Enter into any Swap Agreement (or any other
agreement, device or arrangement providing for payments relating to fluctuations
of interest rates, exchange rates or commodity prices) for purposes of financial
speculation or otherwise not in the ordinary course of business of the
Borrowers, and any Swap Agreement with respect to fluctuations in interest rates
shall be entered into by the Borrowers only with respect to Indebtedness for
borrowed money of the Borrowers.
SECTION 8. Default
8.1 Events of Default. The occurrence of any one of the following events or
conditions shall be deemed an "Event of Default" hereunder unless waived by the
Required Banks pursuant to Section 10.1:
(a) Any Borrower shall fail to pay within 2 Business Days of when due
any principal of or interest on the Notes (whether pursuant to Section 4.1 or
otherwise), any fees or any other amount payable hereunder or under any Security
Document; or
(b) Any representation or warranty made by any Borrower in Section 6
hereof, in any Security Document or in any other document or certificate
furnished by or on behalf of any Borrower in connection with this Agreement,
shall prove to have been incorrect in any material respect when made; or
(c) (i) Any Borrower shall fail to perform or observe any term,
covenant or agreement contained in Sections 7.1(b), 7.1(c) (other than the
agreement to maintain continuous insurance coverage), 7.1(d), 7.2(a), 7.2(b) or
7.2(c) hereof or in any Security Document, any other Loan Document or any other
agreement among the Borrowers, the Banks and the Agent, or any of them, and such
failure shall remain unremedied for 30 calendar days after the earlier of the
date notice thereof shall have been given to Borrowers by the Agent or any Bank
or any Borrower knows of such failure, or (ii) any Borrower shall fail to
perform or observe any other term, covenant, or agreement contained in this
Agreement; or
(d) Any Borrower shall fail to pay any part of the principal of, the
premium, if any, or the interest on, or any other payment of money due under any
of its Indebtedness (other than Indebtedness hereunder), beyond any period of
grace provided with respect thereto, which individually or together with other
such Indebtedness as to which any such failure exists has an aggregate
outstanding principal amount in excess of $10,000,000; or if any Borrower fails
to perform or observe any other term, covenant or agreement contained in any
agreement, document or instrument evidencing or securing any such Indebtedness,
or under which any such Indebtedness was issued or created, beyond any period of
grace, if any, provided with respect thereto if the effect of such failure is
CREDIT AGREEMENT Page 29
either (i) to cause, or permit the holders of such Indebtedness (or a trustee on
behalf of such holders) to cause, any payment in respect of such Indebtedness to
become due prior to its due date or (ii) to permit the holders of such
Indebtedness (or a trustee on behalf of such holder) to elect a majority of the
board of directors of any Borrower; or
(e) A judgment or order for the payment of money, which together with
other such judgments or orders exceeds the aggregate amount of $10,000,000,
shall be rendered against any Borrower and either (i) enforcement proceedings
shall have been commenced by any creditor upon such judgment or order and such
judgment or order shall have remained unsatisfied and such proceedings shall
have remained unstayed for a period of 30 consecutive days, or (ii) for a period
of 30 consecutive days, such judgment or order shall have remained unsatisfied
and a stay of enforcement thereof, by reason of pending appeal or otherwise,
shall not have been in effect; or
(f) The occurrence or existence with respect to any Borrower or any
Guarantor or any of their ERISA Affiliates of any of the following: (i) any
"prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) involving any Plan, (ii) any Reportable Event shall occur with respect
to any Plan, (iii) the filing under ERISA of a notice of intent to terminate any
Plan or the termination of any Plan, (iv) any event or circumstance exists which
might constitute grounds entitling the PBGC to institute proceedings under ERISA
for the termination of, or the appointment of a trustee to administer, any Plan,
or the institution of the PBGC of any such proceedings, or (v) complete or
partial withdrawal under ERISA from any Multiemployer Plan or the
reorganization, insolvency, or termination of any Multiemployer Plan, and in
each of the foregoing cases, such event or condition, together with all other
events or conditions, if any, could in the opinion of the Banks subject any
Borrower to any tax, penalty, or other liability to a Plan, the PBGC, or
otherwise (or any combination thereof); or
(g) Any Borrower shall generally not pay its debts as they become due,
or shall admit in writing its inability to pay its debts generally, or shall
make a general assignment for the benefit of creditors, or shall institute, or
there shall be instituted against any Borrower, any proceeding or case seeking
to adjudicate it a bankrupt or insolvent or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief or protection of debtors or seeking the entry of an order for relief
or the appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property, and, if such proceeding is
instituted against any Borrower and is being contested by such Borrower in good
faith by appropriate proceedings, such proceedings shall remain undismissed or
unstayed for a period of 30 days; or any Borrower shall take any action
(corporate or other) to authorize or further any of the actions described above
in this subsection; or
(h) Any event of default described in any Security Document shall have
occurred and be continuing, or any material provision of any Security Document
shall at any time for any reason cease to be valid and binding and enforceable
against any obligor thereunder, or the validity, binding effect or
enforceability thereof shall be contested or repudiated by any Person, or any
obligor, shall deny that it has any or further liability or obligation
thereunder, or any Security Document shall be terminated, invalidated or set
aside, or be declared ineffective or inoperative or in any way cease to give or
provide to the Agent and the Banks the benefits purported to be created thereby;
or
(i) (A) COG shall fail to be a wholly-owned Subsidiary of CRI, (B)
COGL shall fail to be a wholly-owned subsidiary of COG or (C) the Board of
Directors of CRI shall not consist of a majority of the Continuing Directors of
CRI; or
(j) Any Change in Control shall occur.
8.2 Remedies.
CREDIT AGREEMENT Page 30
(a) Upon the occurrence and during the continuance of any Event of
Default, the Agent may, and upon being directed to do so by the Required Banks,
shall, by notice to the Borrowers terminate the Commitments or declare the
outstanding principal of, and accrued interest on, the Notes and all other
amounts due under this Agreement and all other Loan Documents, to be immediately
due and payable, or demand immediate delivery of cash collateral, and the
Borrowers agree to deliver such cash collateral upon such demand, in an amount
equal to the maximum amount that may be available to be drawn at any time prior
to the stated expiry of all outstanding Letters of Credit, or all of the above,
whereupon the Commitments shall terminate forthwith and all such amounts shall
become immediately due and payable, or both, as the case may be, provided that
in the case of any event or condition described in Section 8.1(g), the
Commitments shall automatically terminate forthwith and all such amounts shall
automatically become immediately due and payable without notice; in each case
without demand, presentment, protest, diligence, notice of dishonor or other
formality, all of which are hereby expressly waived.
(b) Upon the occurrence and during the continuance of such Event of
Default, the Agent may, and upon being directed to do so by the Required Banks,
shall, in addition to the remedies provided in Section 8.2(a), enforce its
rights either by suit in equity, or by action at law, or by other appropriate
proceedings, whether for the specific performance (to the extent permitted by
law) of any covenant or agreement contained in this Agreement or in any then
outstanding Note or any Security Document or in aid of the exercise of any power
granted in this Agreement, any then outstanding Notes or any Security Document,
and may enforce the payment of any then outstanding Notes and any of the other
rights of the Agent and the Banks in any other agreement or available at law or
in equity.
(c) Upon the occurrence and during the continuance of any Event of
Default hereunder, each Bank may at any time and from time to time, without
notice to the Borrowers (any requirement for such notice being expressly waived
by the Borrowers) set off and apply against any and all of the obligations of
any Borrower now or hereafter existing under this Agreement, any of the Notes or
the Security Documents, any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Bank to or for the credit or the account of any Borrower and
any property of any Borrower from time to time in possession of such Bank,
irrespective of whether or not any Bank shall have made any demand hereunder and
although such obligations may be contingent and unmatured. The rights of the
Banks under this Section 8.2(c) are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which the Banks may
have.
8.3 Distribution of Proceeds. All proceeds of any realization on the
Collateral received by the Agent pursuant to the Security Documents or any
payments on any of the liabilities secured by the Security Documents received by
the Agent or any Bank upon and during the continuance of any Event of Default
shall be allocated and distributed as follows:
(a) First, to the payment of all costs and expenses, including without
limitation all attorneys' fees, of the Agent in connection with the enforcement
of the Security Documents and otherwise administering this Agreement;
(b) Second, to the payment of all costs, expenses and fees, including
without limitation, commitment fees and attorneys' fees, owing to the Banks
pursuant to the Bank Obligations on a pro rata basis in accordance with the Bank
Obligations consisting of fees, costs and expenses owing to the Banks under the
Bank Obligations for application to payment of such liabilities;
(c) Third, to the Banks on a pro rata basis in accordance with the
Bank Obligations consisting of interest and principal owing to the Banks under
the Bank Obligations, with any obligations owing to any Bank pursuant to any
Swap Agreement to which it is a party (whether pursuant to a termination thereof
CREDIT AGREEMENT Page 31
or otherwise) and with any reimbursement obligations or other liabilities owing
to any Bank pursuant to any Letter of Credit, for application to payment of such
liabilities;
(c) Fourth, to the payment of any and all other amounts owing to the
Banks on a pro rata basis in accordance with the total amount of such
Indebtedness owing to each of the Banks, for application to payment of such
liabilities; and
(d) Fifth, to the Borrowers or such other Person as may be legally
entitled thereto.
8.4 Letter of Credit Liabilities. For the purposes of payments and
distributions under Section 8.3, the full amount of Bank Obligations on account
of any Letter of Credit then outstanding but not drawn upon shall be deemed to
be then due and owing. Amounts distributable to the any of the Banks on account
of such Bank Obligations under such Letter of Credit shall be deposited in a
separate interest bearing collateral account in the name of and under the
control of the Agent and held by the Agent first as security for such Letter of
Credit Bank Obligations and then as security for all other Bank Obligations and
the amount so deposited shall be applied to the Letter of Credit Bank
Obligations at such times and to the extent that such Letter of Credit Bank
Obligations become absolute liabilities. If and to the extent that the Letter of
Credit Bank Obligations fail to become absolute Bank Obligations because of the
expiration or termination of the underlying Letters of Credit without being
drawn upon, then such amounts shall be applied to the remaining Bank Obligations
in the order provided in Section 8.3. Each Borrower hereby grants to the Agent,
for the benefit of the Banks, a lien and security interest in all such funds
deposited in such separate interest bearing collateral account, as security for
all the Bank Obligations as set forth above. The Borrowers acknowledge and agree
that all reimbursement and other obligations and liabilities pursuant to any
Letters of Credit issued by the Agent for the account of any Borrower are
secured by all Collateral and the Security Documents.
SECTION 9. The Agent, the Documentation Agent and the Banks.
9.1 Appointment; Nature of Relationship. The First National Bank of Chicago
is hereby appointed by the Banks as the Agent hereunder and under each other
Loan Document, and each of the Banks irrevocably authorizes the Agent to act as
the contractual representative of such Bank with the rights and duties expressly
set forth herein and in the other Loan Documents. The Agent agrees to act as
such contractual representative upon the express conditions contained in this
Section 9. Notwithstanding the use of the defined term "Agent," it is expressly
understood and agreed that the Agent shall not have any fiduciary
responsibilities to any Bank by reason of this Agreement or any other Loan
Document and that the Agent is merely acting as the representative of the Banks
with only those duties as are expressly set forth in this Agreement and the
other Loan Documents. In its capacity as the Banks' contractual representative,
the Agent (i) does not hereby assume any fiduciary duties to any of the Banks,
(ii) is a "representative" of the Banks within the meaning of Section 9-105 of
the Uniform Commercial Code and (iii) is acting as an independent contractor,
the rights and duties of which are limited to those expressly set forth in this
Agreement and the other Loan Documents. Each of the Banks hereby agrees to
assert no claim against the Agent on any agency theory or any other theory of
liability for breach of fiduciary duty, all of which claims each Bank hereby
waives.
9.2 Powers. The Agent shall have and may exercise such powers under the
Loan Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties to the Banks, or any obligation to the Banks
to take any action thereunder except any action specifically provided by the
Loan Documents to be taken by the Agent.
CREDIT AGREEMENT Page 32
9.3 General Immunity. Neither the Agent nor any of its directors, officers,
agents or employees shall be liable to the Borrowers, any Borrower, the Banks or
any Bank for any action taken or omitted to be taken by it or them hereunder or
under any other Loan Document or in connection herewith or therewith except for
its or their own gross negligence or willful misconduct.
9.4 No Responsibility for Loans, Recitals, etc. Neither the Agent nor any
of its directors, officers, agents or employees shall be responsible for or have
any duty to ascertain, inquire into, or verify (i) any statement, warranty or
representation made in connection with any Loan Document or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Bank; (iii) the satisfaction of any condition specified in Section 3.2 or
otherwise hereunder; (iv) the validity, enforceability, effectiveness,
sufficiency or genuineness of any Loan Document or any other instrument or
writing furnished in connection therewith; or (v) the value, sufficiency,
creation, perfection or priority of any interest in any collateral security. The
Agent shall have no duty to disclose to the Banks information that is not
required to be furnished by the Borrowers to the Agent at such time, but is
voluntarily furnished by the Borrowers to the Agent (either in its capacity as
Agent or in its individual capacity).
9.5 Action on Instructions of Banks. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder and under any other
Loan Document in accordance with written instructions signed by the Required
Banks, and such instructions and any action taken or failure to act pursuant
thereto shall be binding on all of the Banks and on all holders of Notes. The
Banks hereby acknowledge that the Agent shall be under no duty to take any
discretionary action permitted to be taken by it pursuant to the provisions of
this Agreement or any other Loan Document unless it shall be requested in
writing to do so by the Required Banks. The Agent shall be fully justified in
failing or refusing to take any action hereunder and under any other Loan
Document unless it shall first be indemnified to its satisfaction by the Banks
pro rata against any and all liability, cost and expense that it may incur by
reason of taking or continuing to take any such action.
9.6 Employment of Agents and Counsel. The Agent may execute any of its
duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Banks, except as to money or securities received by it or its authorized agents,
for the default or misconduct of any such agents or attorneys-in-fact selected
by it with reasonable care. The Agent shall be entitled to advice of counsel
concerning all matters pertaining to the agency hereby created and its duties
hereunder and under any other Loan Document.
9.7 Reliance on Documents; Counsel. The Agent shall be entitled to rely
upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper Person or Persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
9.8 Agent's Reimbursement and Indemnification. The Banks agree to reimburse
and indemnify the Agent ratably in proportion to their respective Commitments
(or, if the Commitments have been terminated, in proportion to their Commitments
immediately prior to such termination) (i) for any amounts not reimbursed by the
Borrowers for which the Agent is entitled to reimbursement by the Borrowers
under the Loan Documents, (ii) for any other expenses incurred by the Agent on
behalf of the Banks, in connection with the preparation, execution, delivery,
administration and enforcement of the Loan Documents and (iii) for any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
CREDIT AGREEMENT Page 33
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of the Loan Documents or any other document delivered in connection
therewith or the transactions contemplated thereby, or the enforcement of any of
the terms thereof or of any such other documents, provided that no Bank shall be
liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the Agent. The obligations of the Banks
under this Section 9.8 shall survive payment of the Bank Obligations and
termination of this Agreement.
9.9 Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless the
Agent has received written notice from a Bank or a Borrower referring to this
Agreement describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Agent receives such a
notice, the Agent shall give prompt notice thereof to the Banks.
9.10 Rights as a Bank. In the event the Agent is a Bank, the Agent shall
have the same rights and powers hereunder and under any other Loan Document as
any Bank and may exercise the same as though it were not the Agent, and the term
"Bank" or "Banks" shall, at any time when the Agent is a Bank, unless the
context otherwise indicates, include the Agent in its individual capacity. The
Agent may accept deposits from, lend money to, and generally engage in any kind
of trust, debt, equity or other transaction, in addition to those contemplated
by this Agreement or any other Loan Document, with any Borrower or any of their
respective Subsidiaries in which any Borrower or such Subsidiary is not
restricted hereby from engaging with any other Person. The Agent, in its
individual capacity, is not obligated to remain a Bank.
9.11 Bank Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank and based on
the financial statements prepared by the Borrowers and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and the other Loan Documents. Each Bank
also acknowledges that it will, independently and without reliance upon the
Agent or any other Bank and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents.
9.12 Successor Agent. The Agent may resign at any time by giving written
notice thereof to the Banks and the Borrowers, such resignation to be effective
upon the appointment of a successor Agent or, if no successor Agent has been
appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. Upon any such resignation, the Required Banks shall have
the right to appoint, on behalf of the Borrowers and the Banks, a successor
Agent. If no successor Agent shall have been so appointed by the Required Banks
within thirty days after the resigning Agent's giving notice of its intention to
resign, then the resigning Agent may appoint, on behalf of the Borrowers, and
the Banks, a successor Agent. If the Agent has resigned and no successor Agent
has been appointed, the Banks may perform all the duties of the Agent hereunder
and the Borrowers shall make all payments in respect of the Bank Obligations to
the applicable Bank and for all other purposes shall deal directly with the
Banks. No successor Agent shall be deemed to be appointed hereunder until such
successor Agent has accepted the appointment. Any such successor Agent shall be
a commercial bank having capital and retained earnings of at least $50,000,000.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the resigning Agent. Upon the
effectiveness of the resignation of the Agent, the resigning Agent shall be
discharged from its duties and obligations hereunder and under the Loan
Documents. After the effectiveness of the resignation of an Agent, the
provisions of this Section 9 shall continue in effect for the benefit of such
Agent in respect of any actions taken or omitted to be taken by it while it was
acting as the Agent hereunder and under the other Loan Documents.
CREDIT AGREEMENT Page 34
9.13 Pro Rata Sharing by Banks. Each Bank agrees with every other Bank
that, in the event that it shall receive and retain any payment on account of
the Borrower's obligations under this Agreement, the Notes or the Security
Documents in a greater proportion than that received by any other Bank, whether
such payment be voluntary, involuntary or by operation of law, by application of
set-off of any indebtedness or otherwise, then such Bank shall promptly purchase
a participation interest from the other Banks, without recourse, for cash and at
face value, ratably in accordance with its Pro Rata Share, in such an amount
that each Bank shall have received payment in respect of such obligations in
accordance with its Pro Rata Share; provided, that if any such purchase be made
by any Bank and if any such excess payment relating thereto or any part thereof
is thereafter recovered from such Bank, appropriate adjustment in the related
purchase from the other Banks shall be made by rescission and restoration of the
purchase price as to the portion of such excess payment so recovered. It is
further agreed that, to the extent there is then owing by the Borrowers to any
Bank indebtedness other than that evidenced by this Agreement, the Notes and the
Security Documents to which such Bank may apply any involuntary payments of
indebtedness by the Borrowers, including those resulting from exercise of rights
of set-off or similar rights, such Bank shall apply all such involuntary
payments first to obligations of the Borrowers to the Banks hereunder and under
the Notes and the Security Documents and then to such other indebtedness owed to
it by the Borrowers. In addition, it is further agreed that any and all proceeds
resulting from a sale or other disposition of any collateral which may be
hereafter granted for the benefit of the Banks to secure the obligations of the
Borrowers hereunder, shall be applied first to obligations of the Borrowers to
the Banks hereunder and under the Notes and the Security Documents, and then
ratably to any other indebtedness owed by the Borrowers to the Banks which is
secured by such collateral.
9.14 Determination of Borrowing Base, Etc. Any redetermination of the
Borrowing Base shall be made mutually by the Agent and the Documentation Agent
and submitted to the Banks. The redetermined Borrowing Base shall then be
effective when approved by the Required Banks, provided that if such
redetermined Borrowing Base is not approved by the Required Banks within 10 days
after it is submitted to the Banks, each Bank shall submit to the Agent, on or
within 10 days after the Agent notifies the Banks that the Required Banks have
not approved such redetermined Borrowing Base, its determination of the
Borrowing Base, and the redetermined Borrowing Base will be based on the
weighted average of the redetermined Borrowing Base of each Bank which properly
submits such redetermination to the Agent, weighted according to each Bank's
Commitment. The Borrowing Base may be redetermined from time to time as
requested by the Required Banks, and will be redetermined upon the request of
the Borrowers (provided that the Borrowers cannot request a redetermination of
the Borrowing Base more than once between the mandatory redeterminations
hereinafter provided for), and, in addition, at least twice each year as
follows: upon receipt of the reserve reports referred to in Section 7.1(d)(vii)
hereof (and in connection with such twice per year redeterminations of the
Borrowing Base, the Agent and the Documentation Agent shall submit the
redetermined Borrowing Base as required under the first sentence of this Section
9.14 on or prior to 30 days after the receipt of each (a) reserve report
referred to in Section 7.1(d)(vii) (A) hereof and (b) reserve report referred to
in Section 7.1(d)(vii)(B). Except for the scheduled redeterminations of the
Borrowing Base, each Bank requesting a redetermination of the Borrowing Base
agrees to give notice to the Agent, the Documentation Agent and the Borrowers of
such request. All parties hereto acknowledge that as of the Effective Date the
Borrowing Base is equal to $275,000,000; provided that the Borrowing (i)
$10,000,000 when the Borrowers complete (as determined by the Agent) the
acquisition of the Purchased Bois D'Arc Assets to be sold by Richard Price
pursuant to the Purchase Documents, (ii) $2,000,000 when the Borrowers complete
(as determined by the Agent) the acquisition of the Purchased Bois D'Arc Assets
to be sold by Sage Oil, Inc. pursuant to the Purchase Documents, and (iii)
$3,000,000 when the Borrowers complete (as determined by the Agent) the
acquisition of the Purchased Bois D'Arc Assets to be sold by Metrow Energy, LLC
pursuant to the Purchase Documents.
CREDIT AGREEMENT Page 35
9.15 Documentation Agent. Other than as specified in Section 9.14, Bank
One, Texas, N.A., as Documentation Agent hereunder, shall have no duties or
liabilities.
SECTION 10. Miscellaneous.
10.1 Amendments; Etc. (a) This Agreement and any term or provision hereof
may be amended, waived or terminated by an instrument in writing executed by the
Borrowers and the Required Banks, and (i) to the extent any rights or duties of
the Agent may be affected thereby, the Agent, and (ii) to the extent any of the
rights or duties of the Documentation Agent may be affected thereby, the
Documentation Agent, provided, that, notwithstanding anything in this Agreement
to the contrary, except by an instrument in writing executed by the Borrowers
and all of the Banks, no such amendment, waiver or termination shall authorize
or permit the extension of the time or times of payment of the principal of, or
interest on, the Notes or the reduction in principal amount thereof or the rate
of interest thereon, or any fees payable hereunder, or increase or extend the
respective Commitments of any Bank, or release any Borrower from any of its
obligations hereunder or under any other Loan Document, or release any material
amount of the Collateral from the Liens granted pursuant hereto, or amend this
Section 10.1.
(b) Any such amendment, waiver or termination shall be effective only
in the specific instance and for the specific purpose for which given.
(c) Notwithstanding anything herein to the contrary, any Bank that has
failed to fund any Advance or other amount required to be funded by such Bank
hereunder shall not be entitled to vote (whether to consent or to withhold its
consent) with respect to any amendment, modification, termination or waiver of
any provision of any Loan Document or a departure therefrom or any direction
from the Banks to the Agent and, for purposes of determining the Required Banks,
the Commitments and Advances of such Bank shall be disregarded.
10.2 Notices. (a) Except as otherwise provided in Section 10.2(c) hereof,
all notices, requests, consents and other communications hereunder shall be in
writing and shall be delivered or sent to the Borrowers, the Banks and the Agent
at the respective addresses for notices set forth on the signature pages hereof,
or to such other address as may be designated by the Borrowers, the Agent or any
Bank by notice to the other parties hereto. All notices shall be deemed to have
been given at the time of actual delivery thereof to such address, or if sent by
the Agent or any Bank to the Borrowers by certified or registered mail, postage
prepaid, to such address, on the fifth day after the date of mailing.
(b) Notices by the Borrowers to the Agent with respect to requests for
Advances pursuant to Section 3.1 and notices of prepayment pursuant to Section
4.1(c) shall be irrevocable and binding on the Borrowers.
(c) Any notice to be given by the Borrowers to the Agent pursuant to
Section 4.1(c) or Section 3.1 and any notice to be given by the Agent or any
Bank hereunder, may be given by telephone, by telex or by facsimile transmission
and must be immediately confirmed in writing in the manner provided in Section
10.2(a). Any such notice given by telephone, telex or facsimile transmission
shall be deemed effective upon receipt thereof by the party to whom such notice
is given.
10.3 Conduct No Waiver; Remedies Cumulative. No course of dealing on the
part of the Agent or the Banks, nor any delay or failure on the part of the
Agent or any Bank in exercising any right, power or privilege hereunder shall
operate as a waiver of such right, power or privilege or otherwise prejudice the
Agent's or the Banks' rights and remedies hereunder; nor shall any single or
CREDIT AGREEMENT Page 36
partial exercise thereof preclude any further exercise thereof or the exercise
of any other right, power or privilege. No right or remedy conferred upon or
reserved to the Agent or the Banks under this Agreement is intended to be
exclusive of any other right or remedy, and every right and remedy shall be
cumulative and in addition to every other right or remedy given hereunder or now
or hereafter existing under any applicable law. Every right and remedy given by
this Agreement or by applicable law to the Agent or the Banks may be exercised
from time to time and as often as may be deemed expedient by them.
10.4 Reliance on and Survival of Various Provisions. All terms, covenants,
agreements, representations and warranties of the Borrowers made herein or in
any certificate or other document delivered pursuant hereto shall be deemed to
be material and to have been relied upon by the Banks, notwithstanding any
investigation heretofore or hereafter made by any Bank or on any Bank's behalf,
and those covenants and agreements of the Borrowers set forth in Section 10.5
hereof shall survive the repayment in full of the Advances and other obligations
of the Borrowers hereunder and under Security Documents and the termination of
the Commitments.
10.5 Expenses; Indemnification. (a) The Borrowers agree to pay and save the
Agent harmless from liability for the payment of the reasonable fees and
expenses of any counsel the Agent shall employ, in connection with the
preparation, execution and delivery of this Agreement, the Notes and the
Security Documents and the consummation of the transactions contemplated hereby
and in connection with any amendments, waivers or consents and other matters in
connection therewith, and all reasonable costs and expenses of the Agent and the
Banks (including reasonable fees and expenses of counsel) in connection with any
enforcement of this Agreement, the Notes or the Security Documents.
(b) Each of the Borrowers hereby indemnifies and agrees to hold
harmless the Banks and the Agent, and their respective officers, directors,
employees and agents, from and against any and all claims, damages, losses,
liabilities, costs or expenses of any kind or nature whatsoever which the Banks
or the Agent or any such Person may incur or which may be claimed against any of
them by reason of or in connection with any Letter of Credit, and neither any
Bank nor the Agent or any of their respective officers, directors, employees or
agents shall be liable or responsible for: (i) the use which may be made of any
Letter of Credit or for any acts or omissions of any beneficiary in connection
therewith; (ii) the validity, sufficiency or genuineness of documents or of any
endorsement thereon, even if such documents should in fact prove to be in any or
all respects invalid, insufficient, fraudulent or forged; (iii) payment by the
Agent to the beneficiary under any Letter of Credit against presentation of
documents which do not comply with the terms of any Letter of Credit, including
failure of any documents to bear any reference or adequate reference to such
Letter of Credit; (iv) any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit; or (v) any other event or
circumstance whatsoever arising in connection with any Letter of Credit;
provided, however, that the Borrowers shall not be required to indemnify the
Agent and such other Persons, and the Agent shall be liable to the Borrowers to
the extent, but only to the extent, of any direct, as opposed to consequential
or incidental, damages suffered by any Borrower which were caused by (A) the
Agent's wrongful dishonor of any Letter of Credit after the presentation to it
by the beneficiary thereunder of a draft or other demand for payment and other
documentation strictly complying with the terms and conditions of such Letter of
Credent to the beneficiary under any Letter of Credit against presentation of
documents which do not comply with the terms of the Letter of Credit to the
extent, but only to the extent, that such payment constitutes gross negligence
or wilful misconduct of the Agent. It is understood that in making any payment
under a Letter of Credit the Agent will rely on documents presented to it under
such Letter of Credit as to any and all matters set forth therein without
further investigation and regardless of any notice or information to the
contrary, and such reliance and payment against documents presented under a
Letter of Credit substantially complying with the terms thereof shall not be
deemed gross negligence or wilful misconduct of the Agent in connection with
CREDIT AGREEMENT Page 37
such payment. It is further acknowledged and agreed that a Borrower may have
rights against the beneficiary or others in connection with any Letter of Credit
with respect to which the Agent is alleged to be liable and it shall be a
precondition of the assertion of any liability of the Agent under this Section
that such Borrower shall first have taken reasonable steps to enforce remedies
in respect of the alleged loss against such beneficiary and any other parties
obligated or liable in connection with such Letter of Credit and any related
transactions.
(c) In consideration of the execution and delivery of this Agreement
by each Bank and the extension of the Commitments, the Borrowers hereby
indemnify, exonerate and hold the Agent, each Bank and each of their respective
officers, directors, employees and agents (collectively, the "Indemnified
Parties") free and harmless from and against any and all actions, causes of
action, suits, losses, costs, liabilities and damages, and expenses incurred in
connection therewith (irrespective of whether any such Indemnified Party is a
party to the action for which indemnification hereunder is sought), including
reasonable attorneys' fees and disbursements (collectively, the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any of them as a result
of, or arising out of, or relating to:
(i) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Advance;
(ii) the entering into and performance of this Agreement and any
other agreement or instrument executed in connection herewith by any of the
Indemnified Parties (including any action brought by or on behalf of the
Borrowers as the result of any determination by the Required Banks not to fund
any Advance in compliance with this Agreement);
(iii) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Borrowers or any of their
Subsidiaries of any portion of the stock or assets of any Person, whether or not
the Agent or such Bank is party thereto;
(iv) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to any release
by the Borrowers or any of their Subsidiaries of any hazardous material or any
violations of Environmental Laws; or
(v) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real property
owned or operated by the Borrowers or any Subsidiary thereof of any Hazardous
Material (including any losses, liabilities, damages, injuries, costs, expenses
or claims asserted or arising under any Environmental Law), regardless of
whether caused by, or within the control of, the Borrowers or such Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the activities of the Indemnified
Party on the property of the Borrowers conducted subsequent to a foreclosure on
such property by the Banks or by reason of the relevant Indemnified Party's
gross negligence or wilful misconduct or breach of this Agreement, and if and to
the extent that the foregoing undertaking may be unenforceable for any reason,
the Borrowers hereby agree to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. The Borrowers shall be obligated to indemnify the Indemnified
Parties for all Indemnified Liabilities subject to and pursuant to the foregoing
provisions, regardless of whether the Borrowers or any of their Subsidiaries had
knowledge of the facts and circumstances giving rise to such Indemnified
Liability.
10.6 Successors and Assigns. (a) This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, provided that the Borrowers may not, without the prior consent of the
Banks, assign their rights or obligations hereunder or under the Notes and the
Banks shall not be obligated to make any Advance hereunder to any entity other
than the Borrowers.
CREDIT AGREEMENT Page 38
(b) Any Bank may sell a participation interest to any financial
institution or institutions, and such financial institution or institutions may
further sell, a participation interest (undivided or divided) in, the Advances
and such Bank's rights and benefits under this Agreement, the Notes and the
Security Documents and to the extent of that participation, such participant or
participants shall have the same rights and benefits against the Borrowers under
Section 6.2(c) as it or they would have had if participation of such participant
or participants were the Bank making the Advances to the Borrowers hereunder,
provided, however, that (i) such Bank's obligations under this Agreement shall
remain unmodified and fully effective and enforceable against such Bank, (ii)
such Bank shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) such Bank shall remain the holder of its
Note for all purposes of this Agreement, (iv) the Borrowers, the Agent and the
other Banks shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement, and (v)
such Bank shall not grant to its participant any rights to consent or withhold
consent to any action taken by such Bank or the Agent under this Agreement other
than action requiring the consent of all of the Banks hereunder. The Agent from
time to time in its sole discretion may appoint agents for the purpose of
servicing and administering this Agreement and the transactions contemplated
hereby and enforcing or exercising any rights or remedies of the Agent provided
under this Agreement, the Notes, or otherwise. In furtherance of such agency,
the Agent may from time to time direct that the Borrowers provide notices,
reports and other documents contemplated by this Agreement (or duplicates
thereof) to such agent. The Borrowers hereby consent to the appointment of such
agent and agree to provide all such notices, reports and other documents and to
otherwise deal with such agent acting on behalf of the Agent in the same manner
as would be required if dealing with the Agent itself.
(c) Each Bank may, with the prior consent of the Borrowers (which
consent shall not be unreasonably withheld and may not be withheld upon the
occurrence and during the continuance of any Event of Default which is not cured
or waived within 30 days after the occurrence of such Event of Default) and the
Agent, assign to one or more banks or other entities all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment, the Advances owing to it and the Note or Notes
and the Security Documents held by it); provided, however, that (i) each such
assignment shall be of a uniform, and not a varying, percentage of all rights
and obligations, (ii) except in the case of an assignment of all of a Bank's
rights and obligations under this Agreement, (A) the amount of the Commitment of
the assigning Bank being assigned pursuant to each such assignment (determined
as of the date of the Assignment and Acceptance with respect to such assignment)
shall in no event be less than $5,000,000, and in integral multiples of
$1,000,000 thereafter, or such lesser amount as the Borrowers and the Agent may
consent to and (B) after giving effect to each such assignment, the amount of
the Commitment of the assigning Bank shall in no event be less than $5,000,000,
and (iii) the parties to each such assignment shall execute and deliver to the
Agent, for its acceptance and recording in the Register, an Assignment and
Acceptance in the form of Exhibit D hereto (an "Assignment and Acceptance"),
together with any Note or Notes subject to such assignment and a processing and
recordation fee of $3,500. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in such Assignment and
Acceptance, (x) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, have the rights and obligations of a Bank
hereunder and (y) the Bank assignor thereunder shall, to the extent that rights
and obligations hereunder have been assigned by it pursuant to such Assignment
and Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance covering all of
the remaining portion of an assigning Bank's rights and obligations under this
Agreement, such Bank shall cease to be a party hereto).
(d) By executing and delivering an Assignment and Acceptance, the Bank
assignor thereunder and the assignee thereunder confirm to and agree with each
CREDIT AGREEMENT Page 39
other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Bank makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Borrowers or the performance or observance by the Borrowers of any of
their obligations under this Agreement or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Section 6.7 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance on the Agent, such assigning Bank or any other Bank and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers and discretion under
this Agreement as are delegated to the Agent by the terms hereof, together with
such powers and discretion as are reasonably incidental thereto; and (vi) such
assignee agrees that it will perform in accordance with their terms all of the
obligations that by the terms of this Agreement are required to be performed by
it as a Bank.
(e) The Agent shall maintain at its address designated on the
signature pages hereof a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Banks and the Commitment of, and principal amount of the Advances owing to,
each Bank from time to time (the "Register"). The entries in the Register shall
be conclusive and binding for all purposes, absent manifest error, and the
Borrowers, the Agent and the Banks may treat each Person whose name is recorded
in the Register as a Bank hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrowers or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee, together with any Note or Notes subject to such
assignment, the Agent shall, if such Assignment and Acceptance has been
completed, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Borrowers. Within five Business Days after its receipt of such
notice, the Borrowers, at their own expense, shall execute and deliver to the
Agent in exchange for the surrendered Note or Notes a new Note to the order of
such assignee in an amount equal to the Commitment assumed by it pursuant to
such Assignment and Acceptance and, if the assigning Bank has retained a
Commitment hereunder, a new Note to the order of the assigning Bank in an amount
equal to the Commitment retained by it hereunder. Such new Note or Notes shall
be in an aggregate principal amount equal to the aggregate principal amount of
such surrendered Note or Notes, shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be in substantially the form of
Exhibit B hereto.
(g) The Banks may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 10.6, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to the Borrowers, provided that such proposed assignee or
participant has agreed to hold such information confidential under the terms
described in Section 10.20.
(h) Notwithstanding any other provisions set forth in this Agreement,
any Bank may at any time create a security interest in, or assign, all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
CREDIT AGREEMENT Page 40
Federal Reserve System; provided that such creation of a security interest or
assignment shall not release such Bank from its obligations under this
Agreement.
10.7 Subsidiaries as Borrowers. In the event that CRI, COG, COGL or
Offshore shall create or acquire a Subsidiary, such Subsidiary shall execute a
joinder agreement in form and substance satisfactory to the Agent, together with
such Security Documents, other documents and opinions as the Agent may
reasonably require, and shall become a Borrower hereunder.
10.8 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
10.9 Table of Contents and Headings. The table of contents and the headings
of the various subdivisions hereof are for the convenience of reference only and
shall in no way modify any of the terms or provisions hereof.
10.10 Construction of Certain Provisions. All computations required
hereunder and all financial terms used herein shall be made or construed in
accordance with GAAP unless such principles are inconsistent with the express
requirements of this Agreement. If any provision of this Agreement refers to any
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person, whether or not expressly specified in such
provision.
10.11 Integration and Severability. This Agreement embodies the entire
agreement and understanding between the Borrowers and the Banks, and supersedes
all prior agreements and understandings, relating to the subject matter hereof.
In case any one or more of the obligations of the Borrowers under this
Agreement, the Notes or any Security Documents shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining obligations of the Borrowers shall not in any way be affected or
impaired thereby, and such invalidity, illegality or unenforceability in one
jurisdiction shall not affect the validity, legality or enforceability of the
obligations of the Borrowers under this Agreement, the Notes or any Security
Documents in any other jurisdiction.
10.12 Interest Rate Limitation. Notwithstanding any provisions of this
Agreement, the Notes or any Security Documents, in no event shall the amount of
interest paid or agreed to be paid by the Borrowers exceed an amount computed at
the highest rate of interest permissible under applicable law. If, from any
circumstances whatsoever, fulfillment of any provision of this Agreement, the
Notes or any Security Documents at the time performance of such provision shall
be due, shall involve exceeding the interest rate limitation validly prescribed
by law which a court of competent jurisdiction may deem applicable hereto, then,
ipso facto, the obligations to be fulfilled shall be reduced to an amount
computed at the highest rate of interest permissible under applicable law, and
if for any reason whatsoever the Banks shall ever receive as interest an amount
which would be deemed unlawful under such applicable law such interest shall be
automatically applied to the payment of principal of the Advances outstanding
and other obligations of the Borrowers hereunder (whether or not then due and
payable) and not to the payment of interest, or shall be refunded to the
Borrowers if such principal has been paid in full. Anything herein to the
contrary notwithstanding, the obligations of the Borrowers under this Agreement
shall be subject to the limitation that payments of interest shall not be
required to the extent that receipt of any such payment by the Banks would be
contrary to provisions of law applicable to the Banks which limits the maximum
rate of interest which may be charged or collected by the Banks.
CREDIT AGREEMENT Page 41
10.13 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
10.14 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any such covenant, the fact that it would be permitted by an exception to, or
would be otherwise within the limitations of, another covenant shall not avoid
the occurrence of an Event of Default or any event or condition which with
notice or lapse of time, or both, could become such an Event of Default if such
action is taken or such condition exists.
10.15 Consent to Jurisdiction. Notwithstanding the place where any
liability originates or arises, or is to be repaid, any suit, action or
proceeding arising out of or relating to this Agreement, any Security Documents,
or the Notes may be instituted in any court of competent jurisdiction in the
State of Illinois, each Borrower hereby irrevocably waives any objection which
it may have or hereafter has to the laying of such venue of any such suit,
action or proceeding and any claim that any such suit, action or proceeding has
been brought in an inconvenient forum, and each Borrower hereby irrevocably
submits its Person and property to the jurisdiction of any such court in any
such suit, action or proceedings. Nothing in this Section 10.15 shall affect the
right of the Bank to bring proceedings against the Borrowers or any of their
property in the courts of any other court of competent jurisdiction.
10.16 JURY TRIAL WAIVER. THE AGENT, THE BANKS AND EACH BORROWER, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY
JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE NOTES,
THE SECURITY DOCUMENTS, OR ANY RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE NOTES OR THE SECURITY DOCUMENTS
OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF ANY OF THEM. NEITHER THE AGENT, THE BANKS NOR ANY BORROWER SHALL SEEK
TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH A JURY
TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR
HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED
IN ANY RESPECT OR RELINQUISHED BY EITHER THE AGENT AND THE BANKS OR THE
BORROWERS EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
10.17 Joint and Several Obligations; Contribution Rights; Savings Clause.
(a) Notwithstanding anything to the contrary set forth herein or in any Note or
in any other Loan Document, the obligations of the Borrowers hereunder and under
the Notes and the other Loan Documents are joint and several.
(b) If any Borrower makes a payment in respect of the Bank
Obligations, it shall have the rights of contribution set forth below against
the other Borrowers; provided that such Borrower shall not exercise its right of
contribution until all the Bank Obligations shall have been finally paid in full
in cash. If any Borrower makes a payment in respect of the Bank Obligations that
is smaller in proportion to its Payment Share (as hereinafter defined) than such
payments made by the other Borrowers are in proportion to the amounts of their
respective Payment Shares, the Borrower making such proportionately smaller
CREDIT AGREEMENT Page 42
payment shall, when permitted by the preceding sentence, pay to the other
Borrowers an amount such that the net payments made by the Borrower in respect
of the Bank Obligations shall be shared among the Borrowers pro rata in
proportion to their respective Payment Shares. If any Borrower receives any
payment that is greater in proportion to the amount of its Payment Shares than
the payments received by the other Borrowers are in proportion to the amounts of
their respective Payment Shares, the Borrower receiving such proportionately
greater payment shall, when permitted by the second preceding sentence, pay to
the other Borrowers an amount such that the payments received by the Borrowers
shall be shared among the Borrowers pro rata in proportion to their respective
Payment Shares. Notwithstanding anything to the contrary contained in this
paragraph or in this Agreement, no liability or obligation of any Borrower that
shall accrue pursuant to this paragraph shall be paid nor shall it be deemed
owed pursuant to this paragraph until all of the Bank Obligations shall be
finally paid in full in cash.
For purposes hereof, the "Payment Share" of each Borrower shall be the sum
of (a) the aggregate proceeds of the Bank Obligations received by such Borrower
plus (b) the product of (i) the aggregate Bank Obligations remaining unpaid on
the date such Bank Obligations become due and payable in full, whether by stated
maturity, acceleration, or otherwise (the "Determination Date") reduced by the
amount of such Bank Obligations attributed to all or such Borrowers pursuant to
clause (a) above, times (ii) a fraction, the numerator of which is such
Borrower's net worth on the effective date of this Agreement (determined as of
the end of the immediately preceding fiscal reporting period of such Borrower),
and the denominator of which is the aggregate net worth of all Borrowers on such
effective date.
(c) It is the intent of each Borrower, the Agent and the Banks that
each Borrower's maximum Bank Obligations shall be in, but not in excess of:
(i) in a case or proceeding commenced by or against such Borrower
under the Bankruptcy Code on or within one year from the date on which any of
the Bank Obligations are incurred, the maximum amount that would not otherwise
cause the Bank Obligations (or any other obligations of such Borrower to the
Agent and the Banks) to be avoidable or unenforceable against such Borrower
under (A) Section 548 of the Bankruptcy Code or (B) any state fraudulent
transfer or fraudulent conveyance act or statute applied in such case or
proceeding by virtue of Section 544 of the Bankruptcy Code; or
(ii) in a case or proceeding commenced by or against such
Borrower under the Bankruptcy Code subsequent to one year from the date on which
any of the Bank Obligations are incurred, the maximum amount that would not
otherwise cause the Bank Obligations (or any other obligations of such Borrower
to the Agent and the Banks) to be avoidable or unenforceable against such
Borrower under any state fraudulent transfer or fraudulent conveyance act or
statute applied in any such case or proceeding by virtue of Section 544 of the
Bankruptcy Code; or
(iii) in a case or proceeding commenced by or against such
Borrower under any law, statute or regulation other than the Bankruptcy Code
(including, without limitation, any other bankruptcy, reorganization,
arrangement, moratorium, readjustment of debt, dissolution, liquidation or
similar debtor relief laws), the maximum amount that would not otherwise cause
the Bank Obligations (or any other obligations of such Borrower to the Agent and
the Banks) to be avoidable or unenforceable against such Borrower under such
law, statute or regulation including, without limitation, any state fraudulent
transfer or fraudulent conveyance act or statute applied in any such case or
proceeding.
(d) The Borrowers acknowledge and agree that they have requested that the
Banks make credit available to the Borrowers with each Borrower expecting to
derive benefit, directly and indirectly, from the Advances and other credit
extended by the Banks to the Borrowers.
CREDIT AGREEMENT Page 43
10.18 Consents to Renewals, Modifications and Other Actions and Events.
This Agreement and all of the obligations of the Borrowers hereunder shall
remain in full force and effect without regard to and shall not be released,
affected or impaired by: (a) any amendment, assignment, transfer, modification
of or addition or supplement to the Bank Obligations, this Agreement, any Note
or any other Loan Document; (b) any extension, indulgence, increase in the Bank
Obligations or other action or inaction in respect of any of the Loan Documents
or otherwise with respect to the Bank Obligations, or any acceptance of security
for, or guaranties of, any of the Bank Obligations or Loan Documents, or any
surrender, release, exchange, impairment or alteration of any such security or
guaranties including without limitation the failing to perfect a security
interest in any such security or abstaining from taking advantage or of
realizing upon any guaranties or upon any security interest in any such
security; (c) any default by any Borrower under, or any lack of due execution,
invalidity or unenforceability of, or any irregularity or other defect in, any
of the Loan Documents; (d) any waiver by the Banks or any other Person of any
required performance or otherwise of any condition precedent or waiver of any
requirement imposed by any of the Loan Documents, any guaranties or otherwise
with respect to the Bank Obligations; (e) any exercise or non-exercise of any
right, remedy, power or privilege in respect of this Agreement or any of the
other Loan Documents; (f) any sale, lease, transfer or other disposition of the
assets of any Borrower or any consolidation or merger of any Borrower with or
into any other Person, corporation, or entity, or any transfer or other
disposition by any Borrower or any other holder of any shares of capital stock
of any Borrower; (g) any bankruptcy, insolvency, reorganization or similar
proceedings involving or affecting any Borrower; (h) the release or discharge of
any Borrower from the performance or observance of any agreement, covenant, term
or condition under any of the Bank Obligations or contained in any of the Loan
Documents by operation of law; or (i) any other cause whether similar or
dissimilar to the foregoing which, in the absence of this provision, would
release, affect or impair the obligations, covenants, agreements and duties of
any Borrower hereunder, including without limitation any act or omission by the
Agent, or the Bank or any other any Person which increases the scope of such
Borrower's risk; and in each case described in this paragraph whether or not any
Borrower shall have notice or knowledge of any of the foregoing, each of which
is specifically waived by each Borrower. Each Borrower warrants to the Agent and
the Banks that it has adequate means to obtain from each other Borrower on a
continuing basis information concerning the financial condition and other
matters with respect to the Borrowers and that it is not relying on the Agent or
the Banks to provide such information either now or in the future.
10.19 Waivers, Etc. Each Borrower unconditionally waives: (a) notice of any
of the matters referred to in Section 10.18 above; (b) all notices which may be
required by statute, rule or law or otherwise to preserve any rights of the
Agent or the Banks including, without limitation, presentment to and demand of
payment or performance from the other Borrowers and protect for non-payment or
dishonor; (c) any right to the exercise by the Agent or the Banks of any right,
remedy, power or privilege in connection with any of the Loan Documents; (d) any
requirement that the Agent or the Banks in the event of any default by any
Borrower, first make demand upon or seek to enforce remedies against, such
Borrower or any other Borrower before demanding payment under or seeking to
enforce this Agreement against any other Borrower; (f) any right to notice of
the disposition of any security which the Agent or the Banks may hold from any
Borrower or otherwise and any right to object to the commercial reasonableness
of the disposition of any such security; and (g) all errors and omissions in
connection with the Agent's or any Bank's administration of any of the Bank
Obligations, any of the Loan Documents, or any other act or omission of the
Agent or any Bank which changes the scope of the Borrower's risk, except as a
result of the gross negligence or willful misconduct of the Agent or any Bank.
The obligations of each Borrower hereunder shall be complete and binding
forthwith upon the execution of this Agreement and subject to no condition
whatsoever, precedent or otherwise, and notice of acceptance hereof or action in
reliance hereon shall not be required.
CREDIT AGREEMENT Page 44
10.20 Confidentiality. The Banks and the Agent shall hold all confidential
information obtained pursuant to the requirements of this Agreement which has
been identified as such by any Borrower in accordance with their customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure to its examiners, affiliates, outside auditors, counsel and other
professional advisors in connection with this Agreement or as reasonably
required by any bona fide transferee or participant in connection with the
contemplated transfer of any Note or participation therein or as required or
requested by any governmental agency or representative thereof or pursuant to
legal process. Without limiting the foregoing, it is expressly understood that
such confidential information shall not include information which, at the time
of disclosure is in the public domain or, which after disclosure, becomes part
of the public domain or information which any Bank or the Agent had obtained
prior to the time of disclosure and identification by any Borrower under this
Section 10.20, or information received by any Bank or the Agent from a third
party. Nothing in this Section 10.20 or otherwise shall prohibit any Bank or the
Agent from disclosing any confidential information to the other Banks or the
Agent or render any of them liable in connection with any such disclosure.
CREDIT AGREEMENT Page 45
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of this 9th day of December, 1997, which shall be
the Effective Date of this Agreement.
Address for Notices:
COMSTOCK RESOURCES, INC.
5005 LBJ Frwy., Suite 1000 By: /s/M. JAY ALLISON
Dallas, Texas 75244 ------------------------------
Attention: M. Jay Allison M. Jay Allison, its Chairman,
Telephone: (972) 701-2000 President and Chief Executive Officer
Telecopy: (972) 701-2111
Address for Notices
COMSTOCK OIL & GAS, INC.
5005 LBJ Frwy., Suite 1000 By: /s/M. JAY ALLISON
Dallas, Texas 75244 ------------------------------
Attention: M. Jay Allison M. Jay Allison, its Chairman,
Telephone: (972) 701-2000 President and Chief Executive Officer
Telecopy: (972) 701-2111
Address for Notices
COMSTOCK OIL & GAS, LOUISIANA, INC.
5005 LBJ Frwy., Suite 1000 By: /s/M. JAY ALLISON
Dallas, Texas 75244 ------------------------------
Attention: M. Jay Allison M. Jay Allison, its Chairman,
Telephone: (972) 701-2000 President and Chief Executive Officer
Telecopy: (972) 701-2111
Address for Notices
COMSTOCK OFFSHORE, LLC
5005 LBJ Frwy., Suite 1000 By: /s/M. JAY ALLISON
Dallas, Texas 75244 ------------------------------
Attention: M. Jay Allison M. Jay Allison, its Chairman,
Telephone: (972) 701-2000 President and Chief Executive Officer
Telecopy: (972) 701-2111
CREDIT AGREEMENT Page 46
One First National Plaza THE FIRST NATIONAL BANK OFCHICAGO,
Suite 0362 as a Bank and as Agent
Chicago, Illinois 60670
Attention: Carl Skoog By: /s/GEORGE SCHANZ
Telephone No: (312) 732-8011 -------------------------
Facsimile No: (312) 732-3055 Its: Vice President
Commitment Amount: $40,000,000
Pro Rata Share: 13.793103%
1717 Main Street BANK ONE, TEXAS, NA,
Dallas, Texas 75201 as a Bank and as Documentation Agent
Attention: Mark Cranmer
Telephone No: (214) 290-2212 By:/s/WM. MARK CRAMER
Facsimile No: (214) 290-2627 ----------------------------
Commitment Amount: $40,000,000 Its: Vice President
Pro Rata Share: 13.793103%
1200 Smith Street, Ste. 3100 BANQUE PARIBAS
Houston, Texas 77002
Attention: Mike Fiuzat By:/s/MARIAN LIVINGSTON
Telephone No: (713) 659-4811 -----------------------------
Facsimile No: (713) 659-6915 Its: Group Vice President
Commitment Amount: $35,000,000
Pro Rata Share: 12.068966%
By:/s/MIKE FIUZAT
-----------------------------
Its: Vice President
909 Fannin Street, Ste. 1700 TORONTO DOMINION (TEXAS), INC.
Houston, Texas 77010
Attention: Manager, Credit Administration By: /s/DARLENE RIEDER
Telephone No: (713) 653-8200 ------------------------------
Facsimile No: (713) 652-2647 Its: Vice President
Commitment Amount: $35,000,000
Pro Rata Share: 12.068966%
ABN-AMRO BANK N.V.
Three Riverway, Suite 1770 By: ABN AMRO NORTH
Houston, Texas 77056 AMERICA INC., as agent
Attention: Chuck Randall
Telephone No. (713) 953-9305 By: /s/BRIAN CHAPMAN
Facsimile No: (713) 629-7533 ------------------------------
Commitment Amount: $25,000,000 Its: Group Vice President
Pro Rata Share: 8.620690%
And: /s/GENE SHIELS
------------------------------
Its: Vice President
100 Federal Street BANKBOSTON, N.A.
Boston, MA 02110
Attention: Allison Rossi By:/s//s/ALLISON ROSSI
Telephone No: (617) 434-4067 ------------------------------
Facsimile No: (617) 434-3652 Its: Director
Commitment Amount: $25,000,000
Pro Rata Share: 8.620690%
CREDIT AGREEMENT 47
11 West 42nd Street, 7th Floor CHRISTIANIA BANK OG KREDITKASSE, ASA
New York, New York 10036
Attention: Steve Phillips By: /s/WILLIAM S. PHILLIPS
Telephone No: (212) 827-4836 ------------------------------
Facsimile No: (212) 827-4888 Its: First Vice President
Commitment Amount: $25,000,000
Pro Rata Share: 8.620690% By: /s/CARL-PETER SVENDSEN
------------------------------
Its: First Vice President
1000 Louisiana Street, Ste. 5360 CREDIT LYONNAIS NEW YORK BRANCH
Houston, Texas 77002
Attention: Christine Smith Byerley By:/s/CHRISTINE SMITH BYERLEY
Telephone No: (713) 751-0500 ------------------------------
Facsimile No: (713) 751-0307 Its: Senior Vice President
Commitment Amount: $25,000,000
Pro Rata Share: 8.620690%
Commitment Amount: $25,000,000 MEESPIERSON CAPITAL CORP.
Pro Rata Share: 8.620690%
By:/s/KAREL LOUMAN
------------------------------
Its: Vice President
By:/s/DIERDRE SNVOR
------------------------------
Its: Assistant Vice President
Address for Operational Notices:
MeesPierson Capital Corp.
300 Crescent Court, Suite 1750
Dallas, Texas 75201
Yolanda Dittmar
Telephone: (214) 754-0009
Telefax: (214) 754-5981
ADDRESSES FOR OTHER NOTICES:
MeesPierson Capital Corp.
300 Crescent Court, Suite 1750
Dallas, Texas 75201
Attn: Karel Louman
Telephone: (214) 754-0009
Telefax: (214) 754-5981
2121 San Jacinto, Ste. 1850 NATIONAL BANK OF CANADA
Dallas, Texas 75201
Attention: Doug Clark By: /s/LARRY L. SEARS
Telephone No: (214) 871-1265 -----------------------------
Facsimile No: (214) 871-2015 Its: Group Vice President
Commitment Amount: $15,000,000
Pro Rata Share: 5.172414% By:/s/DOUG CLARK
-----------------------------
Its: Vice President
Lending Office for Floating Rate Loans
125 West 55th Street, 23rd Floor
New York, New York 10019
Facsimile No: (212) 632-8736
Lending Office for Eurodollar Loans
125 West 55th Street, 23rd Floor
New York, New York 10019
Facsimile No: (212) 632-8736
CREDIT AGREEMENT Page 48
