EXHIBIT 4.3
INTERCREDITOR AGREEMENT
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This Intercreditor Agreement (this "Agreement") is made as of
September ____, 1997, by the signatories hereto.
RECITALS:
1. Concurrently herewith Inland Production Company, a Texas
corporation ("Borrower") and Parent (as defined below) are entering into a
Credit Agreement of even date herewith (as from time to time supplemented or
amended in compliance with the terms hereof, the "Bank Agreement") with the
Banks (as defined below), pursuant to which the Banks have agreed to extend
credit to Borrower.
2. Concurrently herewith Borrower and Parent (as defined below) are
also entering into a Credit Agreement of even date herewith (as from time to
time supplemented or amended in compliance with the terms hereof, the "TCW
Agreement") with Trust Company of the West ("Trustco") and TCW Asset Management
Company ("Tamco"), each acting in various capacities, pursuant to which the
Noteholders (as defined below) have agreed to extend credit to Borrower.
3. The execution and delivery of this Agreement are conditions
precedent to the extension of credit under both the Bank Agreement and the TCW
Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to induce the Banks and the Noteholders to extend
credit to Borrower, the parties hereto hereby agree as follows:
Section 1. Definitions and References.
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(a) Specific Definitions. As used herein, the terms "Bank
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Agreement," "Borrower," "Tamco," "TCW Agreement" and "Trustco" have the meanings
indicated above, and the following additional terms have the following meanings:
"100% Dedication Quarter" means any Calculation Quarter during which a
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"Coverage Deficiency" (as defined in the TCW Agreement), a TCW Default or a Bank
Default exists or in which Borrower is unable to make the Scheduled Minimum
Principal Payment (as defined in the TCW Agreement).
"Agent Lender" means ING (U.S.) Capital Corporation, in its capacity
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as Agent under the Bank Agreement, together with its successors in such
capacity.
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"Agent Noteholder" means Tamco, in its capacity as Agent under the TCW
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Agreement, together with its successors in such capacity.
"Allowed Bank Indebtedness" means:
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(i) all principal indebtedness for loans made by, and letters of
credit issued by, the Banks to Borrower under the Bank Documents, provided
that (unless otherwise expressly agreed by the Agent Noteholder) there
shall be excluded from Allowed Bank Indebtedness the portion of any such
loans or letters of credit which, when actually funded during the
applicable period set forth in the following table and added to the loans
outstanding under the Bank Agreement on the date of such funding, exceeds
the amount set out opposite such period in the following table:
Period Amount
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Prior to January 1, 1998 $ 45,000,000
January 1, 1998 through December 31, 1998 $ 65,000,000
January 1, 1999 through March 31, 2000 $ 80,000,000
April 1, 2000 through June 30, 2000 $ 77,500,000
July 1, 2000 through September 30, 2000 $ 75,000,000
October 1, 2000 through December 31, 2000 $ 72,500,000
January 1, 2001 through March 31, 2001 $ 70,000,000
April 1, 2001 through June 30, 2001 $ 66,250,000
July 1, 2001 through September 30, 2001 $ 62,500,000
October 1, 2001 through December 31, 2001 $ 58,750,000
January 1, 2002 through March 31, 2002 $ 55,000,000
April 1, 2002 through June 30, 2002 $ 51,250,000
July 1, 2002 through September 30, 2002 $ 47,500,000
October 1, 2002 through December 31, 2002 $ 43,750,000
January 1, 2003 through March 31, 2003 $ 40,000,000
April 1, 2003 through June 30, 2003 $ 30,000,000
July 1, 2003 through September 30, 2003 $ 20,000,000
October 1, 2003 through December 31, 2003 $ 10,000,000;
it being expressly understood and agreed that (A) any conversion between
loans accruing interest based upon a prime or base rate of interest and
loans accruing interest based upon a eurodollar or interbank offered rate
or between loans with different eurodollar or interbank offered rate
interest periods, shall not be treated as a funding of a new loan and (B)
loans which constitute Allowed Bank Indebtedness and are outstanding on the
date of a decrease in the amount of Allowed Bank Indebtedness in the
foregoing table (as contrasted with a new funding after such date) shall
continue to be Allowed Bank Indebtedness,
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and
(ii) all interest, fees, indemnifications, and expenses owing by
Borrower to any Bank under the Bank Documents, provided that there shall be
excluded from Allowed Bank Indebtedness any interest owing on any loans
which are themselves excluded from Allowed Bank Indebtedness under the
immediately preceding subsection (i) and any fees, indemnifications, and
expenses relating to any such excluded loans or excluded interest,
and
(iii) obligations and liabilities in respect of Permitted Interest
Rate Xxxxxx.
Any allowed claim in an Insolvency Proceeding of Borrower for any of the
foregoing Allowed Bank Indebtedness shall also constitute "Allowed Bank
Indebtedness", but any disallowed claim in such a proceeding shall cease to
constitute "Allowed Bank Indebtedness".
"ANCF" means, with respect to any Calculation Quarter, the remainder
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of:
(a) the sum of (i) all revenues and receipts of Borrower, Parent and
any Subsidiary of Borrower or Parent from any source or activity (excluding
any funds received by Borrower, Parent or any of their Subsidiaries from
Approved Sales or Financings or by Borrower under the TCW Agreement or from
advances under the Bank Agreement or receipts from sales of equity of
Parent) accounted for under GAAP during any Calculation Quarter (and
specifically including, without limiting the generality of the foregoing,
receipts from Permitted Interest Rate Xxxxxx and Permitted Commodity
Xxxxxx), beginning with the Calculation Quarter which starts September 30,
1997 and (ii) after the occurrence of two (2) consecutive 100% Dedication
Quarters, any of Borrower's Working Capital which exceeds the minimum
Working Capital required under the TCW Agreement or under the Bank
Agreement
less,
(b) the sum of all expenses and expenditures, net to Borrower's
interest, accounted for under GAAP during such Calculation Quarter
(excluding any payments financed by funds described in subparagraph (i)
above) for:
(i) Direct Taxes on the Borrower's Properties;
(ii) ANCF XXX;
(iii) ANCF Transportation Costs;
(iv) ANCF Capital Expenditures;
(v) ANCF Overhead Costs; and
(vi) Delay rentals payable with respect to Borrower's Properties.
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"ANCF Capital Expenditures" means capital expenditures made or to be
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made in cash during the Calculation Quarter by Borrower on the Eligible
Mortgaged Properties to the extent the same have been included in the Plan of
Development as then in effect or approved at the time in question by means of an
Approval Letter, in either case, only if the expenditures are specified in such
Plan of Development or Approval Letter as being payable from ANCF rather than
from advances under the TCW Agreement or the Bank Agreement.
"ANCF Hierarchy" has the meaning given in Section 3(a) hereof.
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"ANCF XXX" means leasehold operating expenses and other field level or
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lease level charges for operations on the Eligible Mortgaged Properties, other
than capital expenditures, to the extent the same have been approved at the time
in question by means of an Approval Letter.
"ANCF Overhead Costs" means general and administrative costs of
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Borrower and Parent, and up front costs of or premium paid for Permitted
Commodity Xxxxxx, to the extent the same have been approved at the time in
question by means of an Approval Letter.
"ANCF Transportation Costs" means (i) the actual costs of gathering,
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processing, transporting and marketing production from the Eligible Mortgaged
Properties from the wellhead to the point of sale, provided that all such costs
are negotiated with, and payable to, third parties in arms' length transactions
on terms which are reasonable in the area of operations at the time such prices
are agreed to, and (ii) any other gathering, processing, transportation or
marketing costs, to the extent the same have been approved at the time in
question by means of an Approval Letter.
"Approval Letter" means, until the end of the Revolver Period and the
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Bank Indebtedness is paid in full, any letter agreement substantially in the
form of Exhibit A hereto which is from time to time entered into by (a) the
Agent Noteholder, acting on behalf of the Noteholders, (b) the Agent Lender,
acting on behalf of the Banks, and (c) Borrower, and after the Bank Indebtedness
has been paid in full, any letter agreement substantially in the form of Exhibit
F to the TCW Agreement which is from time to time entered into by the Agent
Noteholder, acting on behalf of the Noteholders and Borrower . It is
anticipated that ANCF XXX, ANCF Overhead Costs and ANCF Transportation Costs
will be submitted by Borrower and approved in such Approval Letter in a calendar
year budget format (i) for the period from September 30, 1997 through December
31, 1998 and (ii) thereafter for each succeeding calendar year, subject to the
right of Borrower to seek approval for modifications from time to time by means
of another Approval Letter.
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"Approved Sales or Financings" means any sale of Properties or other
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assets owned by Borrower, Parent or any Related Person or any borrowing by
Borrower, Parent or any Related Person (with Noteholders, Banks or a third
party) which is from time to time approved by the Agent Noteholder and the Agent
Lender and which is designated as an "Approved Sale or Financing" in such
approvals.
"Bank Default" means any "Event of Default" under the Bank Agreement
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and any other event which causes or allows the acceleration of the Allowed Bank
Indebtedness.
"Bank Documents" means the Bank Agreement, any Commodity Hedge
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Agreement entered into with a Bank, the Bank Interest Rate Hedge Agreement and
each note, mortgage, security agreement, pledge agreement, guarantee or other
agreement, certificate, document, instrument and writing at any time delivered
in connection therewith or pursuant thereto.
"Bank Interest Rate Hedge Agreement" means an ISDA Master Agreement or
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other agreement and related confirmations providing for swaps, caps, floors or
other xxxxxx of interest rates entered into from time to time between Borrower
and one or more of the Banks.
"Bank Indebtedness" means all Allowed Bank Indebtedness and any Excess
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Bank Indebtedness.
"Banks" means (a) the Agent Lender, and (b) all Persons which now or
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hereafter constitute "Banks" under the Bank Agreement.
"Calculation Quarter" means the three-month period (December through
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February, March through May, June through August, or September through November)
immediately prior to each Payment Date. The initial calculation quarter shall
be the period from September 1, 1997 through November 30, 1997.
"Commodity Hedge Agreement" means an ISDA Master Agreement or other
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agreement and related confirmations providing for swaps, caps, floors or other
xxxxxx of hydrocarbon prices entered into from time to time by Borrower.
"Direct Taxes" means any severance, ad valorem, or other direct taxes
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on the Properties or the production therefrom or the proceeds of such
production; provided that federal, state or local income or franchise taxes
shall in no event be considered to be Direct Taxes.
"Enforcement Action" means any acceleration of any or all of the TCW
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Indebtedness or the Bank Indebtedness, any enforcement or foreclosure of Liens
granted by Borrower, Parent or any Related Person to secure any or all of the
TCW Indebtedness or the Bank Indebtedness, the institution of any Insolvency
Proceeding with respect to Borrower, Parent or any Related Person, or any other
effort of any kind (whether by set-off, by self-help, in court,
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or otherwise) to collect the TCW Indebtedness or the Bank Indebtedness from
Borrower, Parent or any Related Person or from the assets or properties of
Borrower, Parent or any Related Person; provided, however, that none of the
following shall constitute an Enforcement Action: (i) collection of any of the
TCW Indebtedness or any of the Allowed Bank Indebtedness from ANCF in accordance
with Section 3 hereof, (ii) the filing of proofs of claim or other pleadings in
any Insolvency Proceeding (other than an Insolvency Proceeding brought in
contravention hereof by or on behalf of the Person filing such proofs of claim
or other pleadings), (iii) actions to obtain possession of Permitted Junior
Securities in exchange for or on account of TCW Indebtedness, (iv) enforcement
of Liens, guaranties, or other rights granted by Persons other than Borrower,
Parent or any Related Person, or (v) notifying Borrower, Parent or any other
Person of any amounts which are due and owing under the Bank Documents or the
TCW Documents, making demand with respect to any such amounts due and owing, and
giving any other notice or taking other actions in respect to any future remedy
or to preserve any rights or remedies.
"Excess Bank Indebtedness" means all indebtedness and obligations
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owing by Borrower to any Bank other than Allowed Bank Indebtedness.
"Initial TCW Amortization Date" means the earliest to occur of the
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following: (i) the Payment Date in December, 2003, (ii) the first date on which
all Allowed Bank Indebtedness has been paid (and if paid in full before the end
of the Revolver Period, all commitments to extend credit under the Bank
Documents have been terminated), (iii) the date of any acceleration of any
Allowed Bank Indebtedness, and (iv) the date of any acceleration of TCW
Indebtedness which is made in accordance herewith.
"Insolvency Proceeding" means any voluntary or involuntary
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liquidation, dissolution, sale of all or substantially all assets, marshaling of
assets or liabilities, receivership, conservatorship, general assignment for the
benefit of creditors, insolvency, bankruptcy, reorganization, arrangement or
composition of Borrower, Parent or any Related Person which is either a
guarantor of any obligation of Borrower to the Noteholders or the Banks or a
mortgagor or encumbrancer of any property to secure any such obligation.
"Lien" means, with respect to any property or assets, any right or
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interest therein of a creditor to secure indebtedness owed to him or any other
arrangement with such creditor which provides for the payment of such
indebtedness out of such property or assets or which allows him to have such
indebtedness satisfied out of such property or assets prior to the general
creditors of any owner thereof, including any lien, mortgage, security interest,
pledge, deposit, production payment, rights of a vendor under any title
retention or conditional sale agreement or lease substantially equivalent
thereto, tax lien, mechanic's or materialman's lien, or any other charge or
encumbrance for security purposes, whether arising by law or agreement or
otherwise, but excluding any right of offset which arises without agreement in
the ordinary course of business. "Lien" also means any filed financing
statement, any registration of a pledge (such as with an issuer of
uncertificated securities), or any other arrangement or action which would serve
to perfect a Lien described in the preceding sentence, regardless of whether
such financing
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statement is filed, such registration is made, or such arrangement or action is
undertaken before or after such Lien exists.
"Noteholders" means (a) the Agent Noteholder, and (b) all Persons
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which now or hereafter constitute "Noteholder" under the TCW Agreement. Trustco,
acting as Sub-Custodian for Mellon Bank for the benefit of Account No. CPFF 873-
3032, is initially the only Noteholders, but the parties hereto recognize and
agree that future assignees and successors thereof will also be "Noteholders"
hereunder.
"Parent" means Inland Resources, Inc., a Washington corporation, which
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owns 100% of the outstanding shares of common stock of Borrower.
"Quarterly Payment Date" means the second to last business day of each
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March, June, September and December, beginning with December 29, 1997.
"Permitted Commodity Xxxxxx" means any transaction under a Commodity
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Hedge Agreement except to the extent prohibited by the TCW Agreement and not
otherwise approved by the Agent Noteholder or prohibited by the Bank Agreement
and not otherwise approved by the Agent Lender.
"Permitted Interest Rate Xxxxxx" means any transaction under a Bank
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Interest Rate Hedge Agreement.
"Permitted Junior Securities" means any equity securities or
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subordinated debt securities of Borrower or any successor obligor with respect
to the TCW Indebtedness provided for by a plan of reorganization or readjustment
that, in the case of any such subordinated debt securities, are subordinated in
right of payment to all Allowed Bank Indebtedness that may at the time be
outstanding to the same degree as, or to a greater extent than, the TCW
Indebtedness is so subordinated under this Agreement.
"Person" means an individual, corporation, partnership, limited
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liability company, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint venture, court
or governmental unit or any agency or subdivision thereof, or any other legally
recognizable entity.
"Properties" means, collectively, those undivided interests in oil
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and gas properties and interests in other real and personal property which are,
at the time in question, owned by Borrower, Parent or any Related Person.
"Related Person" means any of Parent, Borrower or any Subsidiary of
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Parent, whether now existing or hereafter formed or acquired.
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"Revolver Period" means the period from the date hereof until March
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31, 1999 or such earlier date on which the commitment of the Banks to make
revolving credit available to the Borrower is terminated pursuant to the Bank
Agreement.
"Scheduled Bank Payments" has the meaning given to such term in
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Section 3 hereof.
"Subsidiary" means, with respect to any Person, any corporation,
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association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such Person,
provided that associations, joint ventures or other relationships (a) which are
established pursuant to a standard form operating agreement or similar agreement
or which are partnerships for purposes of federal income taxation only, (b)
which are not corporations or partnerships (or subject to the Uniform
Partnership Act) under applicable state law, and (c) whose businesses are
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limited to the exploration, development and operation of oil, gas or mineral
properties and interests owned directly by the parties in such associations,
joint ventures or relationships, shall not be deemed to be "Subsidiaries" of
such Person.
"TCW Default" means any "Event of Default" under the TCW Agreement and
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any other event which causes or allows the acceleration of the TCW Indebtedness.
"TCW Documents" means the TCW Agreement and each note, mortgage,
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security agreement, pledge agreement, guarantee, or other agreement,
certificate, document instrument and writing at any time delivered in connection
therewith or pursuant thereto.
"TCW Indebtedness" means any and all indebtedness (whether for
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principal, interest, fees, indemnifications, expenses, or otherwise) owing by
Borrower to any Noteholder under any TCW Document, provided that (unless
otherwise expressly agreed by the Agent Lender) there shall be excluded from TCW
Indebtedness (i) any loans made by the Noteholders to Borrower on or after the
date hereof which in the aggregate exceed $75,000,000 and (ii) all interest
owing on any loans which are themselves excluded from TCW Indebtedness and any
fees, indemnifications, and expenses relating to any such excluded loans or
excluded interest.
(b) References and Headings. Unless the context otherwise requires
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or unless otherwise provided herein, references in this Agreement to a
particular agreement, instrument or document (including references to promissory
notes, loan agreements, guaranties and security documents) also refer to and
include all renewals, extensions, amendments, modifications, supplements or
restatements of any such agreement, instrument or document which are made in
writing by the parties thereto, provided that nothing contained in this Section
shall be construed to authorize any party hereto to execute or enter into any
such renewal, extension, amendment, modification, supplement or restatement.
The headings used herein are for purposes of convenience only and shall not be
used in construing the provisions hereof. The words "this Agreement," "this
instrument," "herein," "hereof," "hereby" and words of similar import refer to
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this Agreement as a whole and not to any particular subdivision unless expressly
so limited. The word "or" is not exclusive, and the word "including" (in its
various forms) means "including without limitation". Pronouns in masculine,
feminine and neuter genders shall be construed to include any other gender, and
words in the singular form shall be construed to include the plural and vice
versa, unless the context otherwise requires. Use of the terms "Bank" is for
ease of reference only, it being understood that ING (U.S.) Capital Corporation
is not a commercial bank and the other "Banks" under the Bank Agreement may or
may not be commercial banks.
Section 2. Subordination of Liens.
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All Liens granted by Borrower, Parent or any Related Person which at
any time secure any TCW Indebtedness are hereby made -- and will at all times
prior to the full payment or discharge of all Allowed Bank Indebtedness be --
subject and subordinate to all Liens at any time granted by Borrower to secure
Allowed Bank Indebtedness (but only to the extent that such Liens granted to or
for the benefit of the Banks secure Allowed Bank Indebtedness). All Liens
granted by Borrower, Parent or any Related Person which at any time secure any
Excess Bank Indebtedness are hereby made -- and will at all times prior to the
full payment or discharge of all TCW Indebtedness be -- subject and subordinate
to all Liens granted by Borrower, Parent or any Related Person which at any time
secure any TCW Indebtedness (but only to the extent that such Liens granted to
or for the benefit of the Banks secure Excess Bank Indebtedness and such Liens
granted to or for the benefit of TCW secure TCW Indebtedness). The foregoing
subordinations shall be to the same extent as if (i) all such Liens securing
Allowed Bank Indebtedness had been properly recorded, filed and otherwise
perfected prior to all such Liens securing TCW Indebtedness and (ii) all such
Liens securing TCW Indebtedness had been properly recorded, filed and otherwise
perfected prior to all such Liens securing Excess Bank Indebtedness, all
regardless of the relative priority of any such Liens as determined without
regard to this Agreement.
Section 3. Required Payments from ANCF; Limitations on Indebtedness.
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(a) Schedule 1 attached hereto sets forth the amounts and dates for
payment of all principal payments of Allowed Bank Indebtedness which are
required under the Bank Documents (herein called the "Scheduled Bank Payments").
All parties hereto acknowledge and agree that on or before the Payment Date
following each Calculation Quarter, all ANCF with respect to such Calculation
Quarter (and any proceeds from Approved Sales or Financings, proceeds from sales
of equity of Parent and any other sources of funds received by Borrower, Parent
or any other Related Person, in each case to the extent used to pay, redeem,
purchase or discharge Bank Indebtedness or TCW Indebtedness) shall be applied in
the following order (the "ANCF Hierarchy"):
(i) first, to any Scheduled Bank Payments, payments in respect of
Permitted Interest Rate Xxxxxx and any interest or fees on, or other non-
principal items of, Allowed Bank Indebtedness, to the extent such Scheduled
Bank Payments, payments in respect of Permitted Interest Rate Xxxxxx,
interest, fees or other non-principal items are due on or before such
Payment Date,
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(ii) second, to any Allowed Bank Indebtedness which has been
accelerated and become due in accordance with the terms of both this
Agreement and the Bank Documents,
(iii) third, to any interest or fees on, or other non-principal items
of, TCW Indebtedness, to the extent such interest, fees or other items are
due (whether due to acceleration thereof or otherwise) on or before such
Payment Date,
(iv) fourth, to any payments of principal (other than those described
in subsections (i) and (ii) above) which are due on the Allowed Bank
Indebtedness on or before such Payment Date,
(v) fifth (but only on or after the Initial TCW Amortization Date),
to any payments of principal which are due on the TCW Indebtedness (whether
due to acceleration thereof or otherwise) on or before such Payment Date,
(vi) sixth, except during any 100% Dedication Quarter, up to ten
percent (10%) of the ANCF for such Calculation Quarter may be retained by
Borrower and used in Borrower's business,
(vii) seventh, (x) if made during the Revolver Period to prepay
Allowed Bank Indebtedness, subject to the Borrower's ability to obtain
subsequent advance pursuant to the terms of the Bank Documents or the TCW
Documents or (y) if made after the Revolver Period to prepay any Scheduled
Bank Payments (other than those described in subsection (i), (ii) or (iv)
above), in inverse order of maturity,
(viii) eighth, after all Scheduled Bank Payments and other Allowed
Bank Indebtedness have been paid (or if the Banks elect not to accept any
prepayments under the preceding subsection (vii)), to prepay or repay any
TCW Indebtedness,
(ix) ninth, after all TCW Indebtedness has been paid (or if the
Noteholders elect, in their sole and absolute discretion not to accept any
prepayments under the preceding section (viii)), to repay any Excess Bank
Indebtedness, to the extent Excess Bank Indebtedness is due (whether due to
acceleration or otherwise), and
(x) tenth, the remainder may be retained by Borrower and used in
Borrower's business.
This Section 3(a) is intended only to create an obligation of Borrower to pay
and apply ANCF and other amounts described therein in the order and the
respective amounts set forth therein, and
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to create an obligation on the Banks and the Noteholders to turnover funds
improperly received or collected as more particularly set forth in Section 9. No
failure of Borrower to make payment or application of ANCF or any other amount
to the Indebtedness in the manner provided in Section 3(a), and no failure of
the Banks or Agent Lender to enforce such payment or application nor any other
act or omission by Borrower or Banks or Agent Lender shall cause any Allowed
Bank Indebtedness to be deemed to have been paid nor to otherwise no longer be
entitled to the priority of payment set forth in this Section 3(a) nor affect
any other right or privilege of the Banks or the Agent Lender. No failure of
Borrower to make payment or application of ANCF or any other amount to the
Indebtedness in the manner provided in Section 3(a), and no failure of the
Noteholders or the Agent Noteholder to enforce such payment or application nor
any other act or omission by Borrower or the Noteholders or the Agent Noteholder
shall cause any TCW Indebtedness to be deemed paid nor to otherwise no longer be
entitled to the priority of payment set forth in this Section 3(a) nor affect
any other right or privilege of the Noteholders or the Agent Noteholder.
(b) As further provided in Sections 5 and 6, (i) neither the amount
nor the date for payment of any Scheduled Bank Payment may be modified and no
provision of the Bank Documents may be amended or modified to increase the rate
or the manner of determining interest, fees, expenses or other non-principal
items due on the Allowed Bank Indebtedness, without the prior consent of the
Agent Noteholder, and (ii) the scheduled dates for payment of the principal of
the TCW Indebtedness shall not be modified to occur prior to the Initial TCW
Amortization Date and no provision of the TCW Documents may be amended or
modified to increase the rate or the manner of determining interest, fees,
expenses or other non-principal items due on the TCW Indebtedness, without the
consent of the Agent Lender, if either the Revolver Period has not ended or
there is any outstanding Allowed Bank Indebtedness. No Excess Bank
Indebtedness shall be lent to or incurred by Borrower, Parent or any Related
Person without the consent of the Agent Noteholder until all TCW Indebtedness
has been paid in full, and no loans in excess of $75,000,000 shall be made to
Borrower, Parent or any Related Person or borrowed by Borrower under the TCW
Documents without the consent of the Agent Lender until all Allowed Bank
Indebtedness has been paid in full.
(c) Interest on each Eurodollar Loan, as defined and provided for
under the Bank Agreement, is payable on the last day of the Interest Period for
such Eurodollar Loan and, in the case of any Interest Period in excess of 90
days, on the 90th day of such Interest Period. Payments on Permitted Interest
Rate Xxxxxx may come due on a day other than a Quarterly Payment Date.
Notwithstanding Section 3(a), such Interest on each Eurodollar Loan shall be
paid when due under the Bank Agreement and payments on Permitted Interest Rate
Xxxxxx shall be paid when due under the Bank Interest Rate Hedge Agreement and
each shall, for purposes of the ANCF Hierarchy, be accounted for out of ANCF as
if paid on the next succeeding Quarterly Payment Date.
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Section 4. Rights to Cure Defaults.
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(a) Within two Business days after determining that any Bank Default
has occurred, the Borrower will give notice of such Bank Default to the Agent
Noteholder. Agent Lender may, but is not obligated to, give notice of any Bank
Default to the Agent Noteholder. Although no Noteholder has any obligation to
cure any Bank Default, Borrower hereby authorizes each Noteholder to make any
such cure, if any Noteholder so elects, and the Banks hereby agree that they
will allow such Noteholder to make any such cure on behalf of Borrower, provided
such cure is in compliance with the Bank Agreement and does not otherwise cause
a Bank Default. The Banks further agree that without the consent of the Agent
Noteholder no Bank shall commence or continue any Enforcement Action with
respect to any Bank Default until the earlier to occur of (i) the ninetieth
(90th) day after the date upon which the Agent Lender receives notice of such
Bank Default from the Borrower or the Agent Noteholder (and then only if such
Bank Default remains uncured and otherwise continues to exist) and (ii) any
acceleration of the TCW Indebtedness or any enforcement by any Noteholder of any
Lien upon assets of Borrower in compliance with the terms hereof.
(b) Within two Business days after determining that any TCW Default
has occurred, the Borrower will give notice of such TCW Default to the Agent
Lender. Agent Noteholder may, but is not obligated to, give notice of any TCW
Default to the Agent Lender. Although no Bank has any obligation to cure any TCW
Default, Borrower hereby authorizes each Bank to make any such cure, if any Bank
so elects, and the Noteholders hereby agree that they will allow such Bank to
make any such cure on behalf of Borrower, provided such cure is in compliance
with the TCW Agreement and does not otherwise cause a TCW Default. The
Noteholders further agree that without the consent of the Agent Lender, no
Noteholder shall commence or continue any TCW Enforcement Action with respect to
any TCW Default until the earlier to occur of (i) the ninetieth (90th) day
after the date upon which the Agent Noteholder receives notice of such TCW
Default from the Borrower or the Agent Lender (and then only if such TCW Default
remains uncured and otherwise continues to exist) and (ii) any acceleration of
the Bank Indebtedness or any enforcement by any Bank of any Lien upon assets of
Borrower in compliance with the terms hereof.
Section 5. Amendments to Bank Documents. No provision of the Bank
----------------------------
Documents shall, without the prior written consent of the Agent Noteholder, be
amended, supplemented, modified or waived if the effect of such amendment,
supplement, modification or wavier would be to (a) increase the rate of interest
or the manner of determining prepayment charges, fees, expenses or other amounts
payable with respect to (or constituting items of) the Allowed Bank Indebtedness
(provided that the foregoing shall not prevent the interest rate applicable to
any past due Allowed Bank Indebtedness from increasing by up to two percent per
annum as presently provided in the Bank Agreement), (b) change the date on which
any Scheduled Bank Payment becomes due or change the amount thereof, (c) change
the scheduled payment date of any other Allowed Bank Indebtedness, (d) add new
covenants or events of default, (e) extend the Commitment Period or allow a loan
under the Bank Documents after the
12
March 31, 1999, or (f) otherwise change the terms of the Bank Documents in any
way which is more onerous to Borrower, Parent or any Related Person or causes,
or increases the likelihood of, the occurrence of a Bank Default The parties
recognize that the Bank Agreement is a revolving credit agreement until March
31, 1999, with floating interest rate options, and neither (i) the borrowing of
loans under such revolving credit feature (provided the aggregate outstanding
amounts thereof do not exceed the limits set forth above in the definition of
"Allowed Bank Indebtedness") nor (ii) any fluctuations in the underlying
eurodollar rate or prime rate on which are based the interest rate provisions of
the Bank Agreement, nor (iii) the occurrence of any event triggering Eurodollar
Rate costs or a late payment rate, shall be deemed to be a violation of this
Section 5.
Nothing to the contrary contained in this Agreement shall (i)
restrict, prohibit or regulate the determinations which may be made from time to
time by the Banks or the Agent Lender under the Bank Agreement, including
specifically, but without limitation, the right of the Banks and/or Agent Lender
to determine the Borrowing Base from time to time in accordance with the
provisions of the Bank Agreement. Any amount required to be repaid under the
Bank Agreement as a result of a Borrowing Base determination shall be paid
pursuant to clause (iv) of Section 3(a) of this Agreement. Such required
payment shall not be considered a modification within the meaning of Section
3(b). Borrower acknowledges and agrees that the Scheduled Bank Payments are
based upon the Borrowing Base currently in existence under the Bank Agreement
and the Banks will not increase the Borrowing Base under the Bank Agreement (i)
without an amendment to such Scheduled Bank Payments as determined by the Banks
in connection with such Borrowing Base increase and (ii) the consent of the
Agent Noteholder to such amendment to such Scheduled Bank Payments.
Section 6. Amendments to TCW Documents. No provision of the TCW
---------------------------
Documents shall, without the prior written consent of the Agent Lender, be
amended, supplemented, modified or waived if the effect of such amendment,
supplement, modification or wavier would be to (a) increase the rate of
interest, prepayment charges, fees, expenses or other amounts payable with
respect to (or constituting items of) the TCW Indebtedness (provided that the
foregoing shall not prevent the interest rate applicable to any past due TCW
Indebtedness from increasing to twelve percent per annum as presently provided
in the TCW Agreement), (b) provide for scheduled principal payments on the TCW
Indebtedness prior to the Initial TCW Amortization Date, (c) change the
scheduled payment date of any non-principal items of TCW Indebtedness, (d) add
new covenants or events of default, or (e) otherwise change the terms of the TCW
Documents in any way which causes, or increases the likelihood of, the
occurrence of a TCW Default. The parties further recognize that, pursuant to
the TCW Agreement, Parent and Warrantholder entered into that certain Warrant
Agreement and Parent issued to Warrantholder certain Warrants as described in
the Warrant Agreement and that any exercise by Warrantholder of such Warrants or
any rights under the TCW Warrant Documents or any enforcement thereof shall not
be deemed to be a violation of this Section 6.
13
Section 7. Insolvency Proceedings. Upon any distribution of
----------------------
properties or assets of Borrower in any Insolvency Proceeding, or upon any
payment on behalf of Borrower in any Insolvency Proceeding:
(a) The Banks shall be entitled to receive payment in full in cash of
the Allowed Bank Indebtedness, or provision must be made for immediate payment
in full in cash of the Allowed Bank Indebtedness, before the Noteholders are
entitled to receive any direct or indirect payment or distribution of properties
or assets of Borrower of any kind or character (whether in cash, property or
securities and by set-off or otherwise), other than Permitted Junior Securities,
on account of the TCW Indebtedness.
(b) Any direct or indirect payment or distribution of properties or
assets of Borrower of any kind or character, other than a payment or
distribution in the form of Permitted Junior Securities, to which the
Noteholders would be entitled but for the provisions of this Agreement shall be
paid by Borrower or by any liquidating trustee or agent or other Person making
such payment or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the Banks or their representative
or representatives, ratably according to the aggregate unpaid amounts of Allowed
Bank Indebtedness held or represented by each, to the extent necessary to make
payment in full of all Allowed Bank Indebtedness after giving effect to any
concurrent payment or distribution to the Banks.
(c) If, notwithstanding the foregoing provisions of this Section 7,
any Noteholder shall receive any payment or distribution of properties or assets
of Borrower of any kind or character, other than a payment or distribution in
the form of Permitted Junior Securities, on account of the TCW Indebtedness
before all Allowed Bank Indebtedness is paid or provided for in full, then such
payment or distribution shall be received and held in trust for and shall be
paid over or delivered forthwith to the Banks remaining unpaid or their
representatives, to the extent necessary to pay all Allowed Bank Indebtedness in
full, after giving effect to any concurrent payment or distribution to or for
the Banks.
(d) Except as provided in subsections (a), (b) and (c) of this Section
7, the Banks and the Noteholders will be entitled to freely exercise all rights
and remedies available to them in any Insolvency Proceeding. Furthermore,
nothing in this Section 7 or any other provision of this Agreement shall be
deemed or construed to constitute a waiver by Agent Noteholder or any Noteholder
of any right to vote for or against or to propose any plan of reorganization in
any Insolvency Proceeding, all of which are expressly reserved and retained by
Agent Noteholder and the Noteholders.
Section 8. Notice of Acceleration; Right to Purchase Indebtedness.
------------------------------------------------------
(a) Within one business day after any acceleration of the maturity of
any Allowed Bank Indebtedness, the Agent Lender will give notice thereof to the
Agent Noteholder. Within
14
one business day after any acceleration of the maturity of any TCW Indebtedness,
the Agent Noteholder will give notice thereof to the Agent Lender.
(b) The Banks will at any time during the continuance of any Bank
Default or Insolvency Proceeding, upon request by the Agent Noteholder, assign
all of the Allowed Bank Indebtedness and all appurtenant Liens, rights,
documents and instruments to the Noteholders for a price equal to 100% of the
Allowed Bank Indebtedness.
(c) Before any Noteholder sells any TCW Indebtedness, it shall first
give written offer to the Agent Lender to sell such TCW Indebtedness, specifying
the amount of TCW Indebtedness to be sold and all material terms of such sale.
The Banks shall have the right to purchase such TCW Indebtedness on such offered
terms for a period of 45 days ("Offer Period") after receipt by the Agent Lender
of such notice. If the Banks do not purchase such TCW Indebtedness during such
Offer Period, the Noteholder may sell the TCW Indebtedness to any third party on
the same terms which were offered to the Banks for a period of 180 days
following the end of such Offer Period. Such Noteholder must again provide the
Banks an offer to sell TCW Indebtedness as a condition to (i) any sale of TCW
Indebtedness after such 180 day period or (ii) any sale of TCW Indebtedness on
terms more favorable to the proposed purchaser than the terms offered the Banks;
provided that such offer on more favorable terms to a proposed purchaser within
such 180 day period shall be limited to an Offer Period of 15 days after receipt
by Agent Lender of notice of such offer. The provisions of this Section 8(c)
does not apply to any sale by a Noteholder to an Affiliate or to any transfer by
a Noteholder to any party having a beneficial interest in such Noteholder or in
any Note or to any custodian, sub-custodian, investment manager or designee of
such beneficial owner.
Section 9. Turnover of Payments Wrongly Received. If Borrower shall
-------------------------------------
make any payment to a Noteholder which is prohibited hereby or any Noteholder
shall collect any payment as a result of an Enforcement Action which is
prohibited hereby, then such payment shall be paid over and delivered forthwith
by such Noteholder to the Agent Lender. If Borrower shall make any payment to a
Bank which is prohibited hereby or any Bank shall collect any payment as a
result of an Enforcement Action which is prohibited hereby, then such payment
shall be paid over and delivered by such Bank to the Agent Noteholder.
Section 10. Payments and Enforcement Actions Otherwise Permitted.
----------------------------------------------------
Except as expressly provided herein, nothing shall prevent Borrower from making,
or any Noteholder or Bank from receiving, any payments on the TCW Indebtedness
or Allowed Bank Indebtedness, as applicable, or limit the rights of the Banks or
the Noteholders to take Enforcement Actions.
Section 11. Subrogation to Rights of Banks. After the payment in
------------------------------
full of all Allowed Bank Indebtedness, the Noteholders shall be subrogated to
the rights of the Banks to receive payments and distributions of cash, property
and securities applicable to Allowed Bank Indebtedness and the Liens securing
the Allowed Bank Indebtedness until all amounts owing on the TCW Indebtedness
shall be paid in full. For purposes of such subrogation, no payments or
15
distributions to the holders of Allowed Bank Indebtedness by or on behalf of
Borrower or by or on behalf of the Noteholders by virtue of this Agreement which
otherwise would have been made to the Noteholders shall, as between Borrower,
its creditors other than the Banks, and the Noteholders, be deemed to be a
payment or distribution by Borrower to or on account of the Allowed Bank
Indebtedness.
Section 12. Provisions Solely to Define Relative Rights. The
-------------------------------------------
provisions of this Agreement are, and are intended solely, for the purpose of
defining the relative rights of the Noteholders on the one hand and of the Banks
on the other hand. Nothing contained in this Agreement is intended to or shall
(a) impair, as between Borrower and the Noteholders, the obligation of Borrower,
which is absolute and unconditional, to pay all TCW Indebtedness as and when the
same shall become due and payable in accordance with its terms; (b) affect the
relative rights against Borrower of the Noteholders and any creditors of
Borrower other than the Banks; or (c) prevent the Noteholders from exercising
all remedies otherwise permitted by applicable law upon default under the TCW
Agreement, subject to the rights of the Banks, if applicable, under this
Agreement. Nothing contained in this Agreement is intended to or shall (a)
impair, as between Borrower and the Banks, the obligation of Borrower, which is
absolute and unconditional, to pay all Bank Indebtedness as and when the same
shall become due and payable in accordance with its terms; (b) affect the
relative rights against Borrower of the Banks and any creditors of Borrower
other than the Noteholders; or (c) prevent the Banks from exercising all
remedies otherwise permitted by applicable law upon default under the Bank
Agreement, subject to the rights of the Noteholders, if applicable, under this
Agreement. Without the consent of the Borrower, the provisions of this Agreement
defining the relative rights of the Noteholders and the Banks may be modified by
the Noteholders and the Banks without modifying the rights of the Borrower,
provided that Agent Noteholder and Agent Lender shall give notice thereof to the
Borrower.
Section 13. Possession of Stock. ING acknowledges that it holds the
-------------------
stock of Borrower pursuant to the Pledge Agreements by Parent, for ING, as
Agent for the Banks, and for the Collateral Agent as defined under the TCW
Agreement, as agent for the Noteholders, to perfect the security interest
granted in such Pledge Agreements by Parent . ING shall have no obligation or
duty to such Collateral Agent or Noteholders as a result thereof; provided that
upon payment in full of the Allowed Bank Indebtedness and the end of the
Revolving Period, ING shall not surrender the stock to the Parent but shall
deliver the same to the Collateral Agent.
Section 14. No Waiver. No right of any Bank or Noteholder to enforce
---------
its rights as herein provided shall at any time or in any way be prejudiced or
impaired by any act or failure to act on the part of any other party hereto or
by any non-compliance by any other party with the terms of this Agreement,
regardless of any knowledge thereof which any such Bank or Noteholder may have
or otherwise be charged with (provided that in all events the Noteholders may
conclusively rely on the authority of the Agent Lender to act for the Banks and
that the Banks may conclusively rely on the authority of the Agent Noteholder to
act for the Noteholders). The rights and duties of the parties hereto shall
continue in effect and apply to the
16
Bank Indebtedness and the TCW Indebtedness and to the Bank Documents and the TCW
Documents, as each is from time to time amended or modified or waived, subject
to the provisions of Sections 3, 5 and 6.
Section 15. No Oral Change. No amendment of any provision of this
--------------
Agreement shall be effective unless it is in writing and signed by Borrower, the
Agent Noteholder and the Agent Lender. No waiver of any provision of this
Agreement, and no consent to any departure by Borrower, any Noteholder or any
Bank therefrom, shall be effective unless it is in writing and signed by both
the Agent Noteholder and the Agent Lender, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
Section 16. Governing Law. This Agreement shall be deemed a contract
-------------
and instrument made under the laws of the State of New York and shall be
construed and enforced in accordance with and governed by the laws of such state
and the laws of the United States of America, without regard to principles of
conflicts of law.
Section 17. Invalidity of Particular Provisions. If any term or
-----------------------------------
provision of this Agreement shall be determined to be illegal or unenforceable,
all other terms and provisions hereof shall nevertheless remain effective and
shall be enforced to the fullest extent permitted by applicable law.
Section 18. Notices. All notices, requests, consents, demands and
-------
other communications to Borrower, any Noteholder or any Bank which are required
or permitted under this Agreement shall be in writing and shall be deemed
sufficiently given or furnished if delivered by personal delivery, by telecopy,
by delivery service with proof of delivery, or by registered or certified United
States mail, postage prepaid, at the addresses listed below (unless changed by
similar notice in writing given by the particular Person whose address is to be
changed). Any such notice or communication shall be deemed to have been given
(a) in the case of personal delivery or delivery service, as of the date of
first attempted delivery at the address and in the manner provided herein, (b)
in the case of telecopy, upon receipt, or (c) in the case of registered or
certified United States mail, three days after deposit in the mail. Any such
notice to any Noteholder may be delivered in care of the Agent Noteholder, and
any such notice to any Bank may be delivered in care of the Agent Lender.
Borrower's Address:
Inland Production Company
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx
Attention: Xxxx Xxxxxx
Telecopy: 000-000-0000
17
Agent Noteholder's Addresses:
TCW Asset Management Company
000 Xxxxx Xxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telecopy: 213/244-0604
with a copy to:
TCW Asset Management Company
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx Xxxxxxxxxx
Telecopy: 713/615-7460
Agent Lender's Address:
ING (U.S.) Capital Corporation
000 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxxxxxx X. Xxxxxx
Telecopy: (000) 000-0000
Section 19. Successors and Assigns. This Agreement shall pass to and
----------------------
be fully binding upon and inure to the benefit of the successors and assigns of
each party hereto.
Section 20. Agent Lender and Agent Noteholder Consents. References
------------------------------------------
to consent by Agent Lender means such consent with such approval or concurrence
of the Banks except as otherwise provided in the Bank Agreement. References to
consent by Agent Noteholder means such consent with such approval or concurrence
of the Noteholders as may be required or permitted from time to time under the
TCW Agreement.
Section 21. Counterparts. This Agreement may be separately executed
------------
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
18
IN WITNESS WHEREOF, this Agreement is executed as of the date first
above written.
Borrower: INLAND PRODUCTION COMPANY
By:
--------------------------
Xxxx X. Xxxxxxxxxx
Chief Financial Officer
Parent: INLAND RESOURCES, INC.
By:
--------------------------
Xxxx X. Xxxxxxxxxx
Chief Financial Officer
Agent Noteholder: TCW ASSET MANAGEMENT COMPANY, a California
corporation, as Investment Manager under that
certain Agreement dated as of June 13, 1994,
between TCW Asset Management and Xxxxxx Xxxxxxx
Group, Inc.
By:
--------------------------
Xxxxxx X. Xxxxxxx
Managing Director
By:
--------------------------
Xxxx XxxXxxxx
Senior Vice President
19
Noteholders: TRUST COMPANY OF THE WEST, acting in its capacity
as sub-custodian for Mellon Bank for the benefit
of Account No. CPFF873-3032
By:
--------------------------
Xxxxxx X. Xxxxxxx
Managing Director
By:
--------------------------
Xxxx XxxXxxxx
Senior Vice President
Agent Lender: ING (U.S.) Capital Corporation, in its capacity as
Agent
By:
--------------------------
Xxxxxxxxxxx X. Xxxxxx
Banks: ING (U.S.) Capital Corporation
By:
--------------------------
Xxxxxxxxxxx X. Xxxxxx
20
SCHEDULE 1
SCHEDULED BANK PAYMENTS
-----------------------
Month In Which
Payment Date Occurs Amount of Payment
------------------- -----------------
29-Mar-99 $ 0
28-Jun-99 $4,000,000
28-Sep-99 $4,000,000
29-Dec-99 $4,000,000
29-Mar-00 $3,000,000
28-Jun-00 $3,000,000
28-Sep-00 $3,000,000
29-Dec-00 $3,000,000
29-Mar-01 $2,500,000
28-Jun-01 $2,500,000
28-Sep-01 $2,500,000
29-Dec-01 $2,500,000
29-Mar-02 $2,250,000
28-Jun-02 $2,250,000
28-Sep-02 $2,250,000
29-Dec-02 $2,250,000
29-Mar-03 $2,000,000
21
EXHIBIT A
APPROVAL LETTER
---------------
[Date]
Inland Production Company
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention:________________________
Gentlemen:
Reference is made to the Intercreditor Agreement dated September
_____, 1997, among Inland Production Company, Inland Resources, Inc., Trust
Company of the West, as Noteholder, TCW Asset Management Company, as Agent and
Collateral Agent and ING (US) Capital Corporation, as Agent and initial Lender.
(Such Intercreditor Agreement, as from time to time amended, is herein called
the "Intercreditor Agreement"). Reference is hereby made to the Intercreditor
Agreement for all purposes, and terms defined therein shall have the same
meanings when used herein.
The Intercreditor Agreement contemplates that certain Approval Letters
may be given from time to time in connection therewith in order to specify
certain ANCF Capital Expenditures, ANCF XXX, ANCF Overhead Costs, or ANCF
Transportation Costs. This letter is such an Approval Letter and is given by
the undersigned in order so to approve the ANCF _____________ which are
specified in the schedule attached hereto.
This letter [is in addition to/supersedes] all previous Approval
Letters dealing with ANCF ____________.
This letter is a Loan Document under the TCW Agreement and the Bank
Agreement., and all provisions of the TCW Agreement and the Bank Agreement which
apply to Loan Documents shall apply hereto.
This letter may be separately executed in any number of counterparts
and by the different parties hereto in separate counterparts, each of which when
so executed shall be deemed to constitute one and the same Approval Letter.
1
Please execute a counterpart of this letter in the place provided
below to evidence your agreement to the foregoing and your continuing
ratification of the TCW Agreement and the Bank Agreement and the other TCW
Documents and Bank Documents in consideration of the approval herein contained.
Yours truly,
TCW ASSET MANAGEMENT COMPANY, as Agent under the
TCW Agreement
By:
-------------------------------------
Name:
Title:
ING (US) CAPITAL CORPORATION, as Agent under the
Bank Agreement
By:
-------------------------------------
Name:
Title:
Accepted and agreed to as
of the date first written
above
INLAND PRODUCTION COMPANY
By:
----------------------------------
Name:
Title:
2
