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EXHIBIT 10.17
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of April 17, 1998
Among
QUEEN SAND RESOURCES, INC.,
a Delaware corporation,
as Guarantor,
QUEEN SAND RESOURCES, INC.,
a Nevada corporation,
as Borrower,
BANK OF MONTREAL,
as Agent,
and
The Lenders Signatory Hereto
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined in Recitals . . . . . . . . . . . . . . . 1
Section 1.02 Certain Defined Terms . . . . . . . . . . . . . . . . . 1
Section 1.03 Accounting Terms and Determinations . . . . . . . . . . 16
ARTICLE II
COMMITMENTS
Section 2.01 Loans and Letters of Credit . . . . . . . . . . . . . . 16
Section 2.02 Borrowings, Continuations, Conversions and Letters
of Credit . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.03 Changes of Commitments . . . . . . . . . . . . . . . . 19
Section 2.04 Fees . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.05 Several Obligations . . . . . . . . . . . . . . . . . . 20
Section 2.06 Notes . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.07 Prepayments . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.08 Borrowing Base . . . . . . . . . . . . . . . . . . . . 21
Section 2.09 Assumption of Risks . . . . . . . . . . . . . . . . . . 22
Section 2.10 Obligation to Reimburse and to Prepay . . . . . . . . . 23
Section 2.11 Lending Offices . . . . . . . . . . . . . . . . . . . . 24
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans . . . . . . . . . . . . . . . . . . 24
Section 3.02 Interest . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 Payments . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.02 Pro Rata Treatment . . . . . . . . . . . . . . . . . . 26
Section 4.03 Computations . . . . . . . . . . . . . . . . . . . . . 26
Section 4.04 Non-receipt of Funds by the Agent . . . . . . . . . . . 27
Section 4.05 Set-off, Sharing of Payments, Etc. . . . . . . . . . . 27
Section 4.06 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.07 Disposition of Proceeds . . . . . . . . . . . . . . . . 30
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ARTICLE V
YIELD MAINTENANCE; CAPITAL ADEQUACY
Section 5.01 Additional Costs . . . . . . . . . . . . . . . . . . . 31
Section 5.02 Limitation on Eurodollar Loans . . . . . . . . . . . . 32
Section 5.03 Illegality . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02
and 5.03 . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.05 Breakage Compensation . . . . . . . . . . . . . . . . . 33
Section 5.06 Replacement Lenders. . . . . . . . . . . . . . . . . . 33
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Initial Funding . . . . . . . . . . . . . . . . . . . . 35
Section 6.02 Initial and Subsequent Loans . . . . . . . . . . . . . 37
Section 6.03 Conditions Relating to Letters of Credit . . . . . . . 37
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.01 Corporate Existence . . . . . . . . . . . . . . . . . . 37
Section 7.02 Financial Condition . . . . . . . . . . . . . . . . . . 38
Section 7.03 Litigation . . . . . . . . . . . . . . . . . . . . . . 38
Section 7.04 No Breach . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7.05 Authority . . . . . . . . . . . . . . . . . . . . . . . 39
Section 7.06 Approvals . . . . . . . . . . . . . . . . . . . . . . . 39
Section 7.07 Use of Loans . . . . . . . . . . . . . . . . . . . . . 39
Section 7.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 7.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 7.10 Titles, etc. . . . . . . . . . . . . . . . . . . . . . 40
Section 7.11 No Material Misstatements . . . . . . . . . . . . . . . 41
Section 7.12 Investment Company Act . . . . . . . . . . . . . . . . 41
Section 7.13 Public Utility Holding Company Act . . . . . . . . . . 41
Section 7.14 Subsidiaries and Partnerships . . . . . . . . . . . . . 41
Section 7.15 Location of Business and Offices . . . . . . . . . . . 42
Section 7.16 Defaults . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.17 Environmental Matters . . . . . . . . . . . . . . . . . 42
Section 7.18 Compliance with the Law . . . . . . . . . . . . . . . . 43
Section 7.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.20 Risk Management Agreements . . . . . . . . . . . . . . 44
Section 7.21 Restriction on Liens . . . . . . . . . . . . . . . . . 44
Section 7.22 Gas Imbalances . . . . . . . . . . . . . . . . . . . . 44
Section 7.23 Material Agreements . . . . . . . . . . . . . . . . . . 44
Section 7.24 Solvency . . . . . . . . . . . . . . . . . . . . . . . 45
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ARTICLE VIII
AFFIRMATIVE COVENANTS
Section 8.01 Financial Statements . . . . . . . . . . . . . . . . . 45
Section 8.02 Litigation . . . . . . . . . . . . . . . . . . . . . . 47
Section 8.03 Maintenance, Etc. . . . . . . . . . . . . . . . . . . . 47
Section 8.04 Environmental Matters . . . . . . . . . . . . . . . . . 49
Section 8.05 Further Assurances . . . . . . . . . . . . . . . . . . 49
Section 8.06 Performance of Obligations . . . . . . . . . . . . . . 49
Section 8.07 Engineering Reports . . . . . . . . . . . . . . . . . . 50
Section 8.08 Title Information. . . . . . . . . . . . . . . . . . . 51
Section 8.09 Additional Collateral. . . . . . . . . . . . . . . . . 51
Section 8.10 ERISA Information and Compliance . . . . . . . . . . . 52
Section 8.11 Hedging Program. . . . . . . . . . . . . . . . . . . . 52
Section 8.12 Offering. . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE IX
NEGATIVE COVENANTS
Section 9.01 Debt . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.02 Liens . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.03 Investments, Loans and Advances . . . . . . . . . . . . 54
Section 9.04 Dividends, Distributions and Redemptions. . . . . . . . 55
Section 9.05 Sales and Leasebacks . . . . . . . . . . . . . . . . . 55
Section 9.06 Nature of Business . . . . . . . . . . . . . . . . . . 56
Section 9.07 Limitation on Leases . . . . . . . . . . . . . . . . . 56
Section 9.08 Mergers, Etc. . . . . . . . . . . . . . . . . . . . . . 56
Section 9.09 Proceeds of Notes . . . . . . . . . . . . . . . . . . . 56
Section 9.10 ERISA Compliance . . . . . . . . . . . . . . . . . . . 56
Section 9.11 Sale or Discount of Receivables . . . . . . . . . . . . 57
Section 9.12 Current Ratio and Net Worth . . . . . . . . . . . . . . 57
Section 9.13 Accounts Payable. . . . . . . . . . . . . . . . . . . . 58
Section 9.14 Fixed Charge Coverage Ratio . . . . . . . . . . . . . . 58
Section 9.15 Sale of Oil and Gas Properties . . . . . . . . . . . . 59
Section 9.16 Environmental Matters . . . . . . . . . . . . . . . . . 59
Section 9.17 Transactions with Affiliates . . . . . . . . . . . . . 59
Section 9.18 Subsidiaries and Partnerships . . . . . . . . . . . . . 59
Section 9.19 Negative Pledge Agreements . . . . . . . . . . . . . . 59
Section 9.20 Gas Imbalances, Take-or-Pay or Other Prepayments . . . 59
Section 9.21 Material Agreements. . . . . . . . . . . . . . . . . . 60
Section 9.22 Repayment of Other Debt . . . . . . . . . . . . . . . . 60
Section 9.23 Limitations on Capital Expenditures. . . . . . . . . . 61
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ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default . . . . . . . . . . . . . . . . . . 61
Section 10.02 Remedies . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE XI
THE AGENT
Section 11.01 Appointment, Powers and Immunities . . . . . . . . . . 64
Section 11.02 Reliance by Agent . . . . . . . . . . . . . . . . . . 64
Section 11.03 Defaults . . . . . . . . . . . . . . . . . . . . . . . 65
Section 11.04 Rights as a Lender . . . . . . . . . . . . . . . . . . 65
Section 11.05 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . 65
Section 11.06 Non-Reliance on Agent and other Lenders . . . . . . . 66
Section 11.07 Action by Agent . . . . . . . . . . . . . . . . . . . 66
Section 11.08 Resignation or Removal of Agent . . . . . . . . . . . 66
ARTICLE XII
MISCELLANEOUS
Section 12.01 Waiver . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.02 Notices . . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.03 Payment of Expenses, Indemnities, etc . . . . . . . . 67
Section 12.04 Amendments, Etc. . . . . . . . . . . . . . . . . . . . 69
Section 12.05 Successors and Assigns . . . . . . . . . . . . . . . . 69
Section 12.06 Assignments and Participations . . . . . . . . . . . . 69
Section 12.07 Invalidity . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.08 Counterparts . . . . . . . . . . . . . . . . . . . . . 71
Section 12.09 References . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.10 Survival . . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.11 Captions . . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.12 NO ORAL AGREEMENTS . . . . . . . . . . . . . . . . . . 71
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION . . . . . . 71
Section 12.14 Interest . . . . . . . . . . . . . . . . . . . . . . . 72
Section 12.15 Confidentiality . . . . . . . . . . . . . . . . . . . 73
Section 12.16 EXCULPATION PROVISIONS . . . . . . . . . . . . . . . . 74
Section 12.17 Designated Senior Indebtedness . . . . . . . . . . . . 74
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Annex I - List of Maximum Credit Amounts
Exhibit A - Form of Note
Exhibit B - Form of Borrowing, Continuation and Conversion Request
Exhibit C - Form of Compliance Certificate
Exhibit D - List of Security Instruments
Exhibit E - Form of Assignment Agreement
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.10 - Titles, etc.
Schedule 7.14 - Subsidiaries and Partnerships
Schedule 7.17 - Environmental Matters
Schedule 7.19 - Insurance
Schedule 7.20 - Risk Management Agreements
Schedule 7.21 - Restrictions of Liens
Schedule 7.22 - Gas Imbalances
Schedule 7.23 - Material Agreements
Schedule 9.01 - Debt
Schedule 9.02 - Liens
Schedule 9.03 - Investments, Loans and Advances
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THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of April 17, 1998 is
among: QUEEN SAND RESOURCES, INC., a corporation formed under the laws of the
State of Delaware ("QSRD"); QUEEN SAND RESOURCES, INC., a corporation formed
under the laws of the State of Nevada (the "Borrower"); each of the lenders
that is a signatory hereto or which becomes a signatory hereto as provided in
Section 12.06 (individually, together with its successors and assigns, a
"Lender" and, collectively, the "Lenders"); and BANK OF MONTREAL, as agent for
the Lenders (in such capacity, together with its successors in such capacity,
the "Agent").
R E C I T A L S
A. QSRD, the Borrower, certain of the Lenders and the Agent are
parties to that certain Credit Agreement dated as of August 1, 1997, as amended
by that certain First Amendment to Credit Agreement dated as of December 3,
1997, as further amended by that certain Second Amendment to Credit Agreement
dated as of December 29, 1997, as further amended by that certain Third
Amendment to Credit Agreement dated as of February 10, 1998, and as further
amended by that certain Fourth Amendment to Credit Agreement dated as of March
20, 1998 (such credit agreement, as amended, the "Prior Credit Agreement").
B. QSRD and the Borrower have requested that the Agent and the
Lenders amend and restate the Prior Credit Agreement and make credit available
to and on behalf of the Borrower on the terms and conditions stated herein.
C. The Agent and the Lenders, subject to the terms and conditions
stated herein, are willing to amend and restate the Prior Credit Agreement and
to make such credit facilities available.
D. NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined in Recitals. As used in this Agreement, the
terms defined in the Recitals, shall have the meanings indicated in the
Recitals.
Section 1.02 Certain Defined Terms. As used herein, including the
Recitals, the following terms shall have the following meanings (all terms
defined in this Article I or in other provisions of this Agreement in the
singular to have the same meanings when used in the plural and vice versa):
"Acquisition" shall mean the acquisition by the Borrower of the Oil and
Gas Properties described in the Purchase and Sale Agreement from Xxxxxx
Guaranty Trust Company of New York, as Trustee, Investment Royalty Corporation
and Xxxxx Royalty Corporation, as sellers, as contemplated in the Purchase and
Sale Agreement.
"Additional Costs" shall have the meaning assigned such term in Section
5.01(a).
"Affected Loans" shall have the meaning assigned such term in Section
5.04.
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"Affiliate" of any Person shall mean (i) any Person directly or
indirectly controlled by, controlling or under common control with such first
Person, (ii) any director or officer of such first Person or of any Person
referred to in clause (i) above, and (iii) if any Person in clause (i) above is
an individual, any member of the immediate family (including parents, spouse
and children) of such individual and any trust whose principal beneficiary is
such individual or one or more members of such immediate family and any Person
who is controlled by any such member or trust. As used in this definition,
"control" (including, with its correlative meanings, "controlled by" and "under
common control with") shall mean any Person which owns directly or indirectly
10% or more of the securities having ordinary voting power for the election of
directors or other governing body of a corporation or 10% or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such
corporation or other Person.
"Agreement" shall mean this Amended and Restated Credit Agreement, as
amended from time to time.
"Aggregate Commitments" at any time shall equal the amount calculated in
accordance with Section 2.03(a).
"Aggregate Maximum Credit Amounts" at any time shall equal the sum of
the Maximum Credit Amounts of the Lenders, as the same may be reduced pursuant
to Sections 2.03(b).
"Applicable Lending Office" shall mean, for each Lender and for each
Type of Loan, the lending office of such Lender (or an Affiliate of such
Lender) designated for such Type of Loan on the signature pages hereof or such
other offices of such Lender (or of an Affiliate of such Lender) as such Lender
may from time to time specify to the Agent and the Borrower as the office by
which its Loans of such Type are to be made and maintained.
"Applicable Margin" shall mean:
(a) with respect to any Loan outstanding during the Revolving Credit
Period, for each day such Loan is outstanding, the following rate per annum
based upon the Percentage Usage of the available Borrowing Base as is
applicable:
=========================================================================================================
Percentage Usage Applicable Margin for Applicable Margin for
Eurodollar Loans Base Rate Loans
---------------------------------------------------------------------------------------------------------
Greater than 90% 2.25% 0.00%
---------------------------------------------------------------------------------------------------------
Less than or equal to 90% and
greater than 75% 2.00% 0.00%
---------------------------------------------------------------------------------------------------------
Less than or equal to 75% and 1.50% 0.00%
greater than 40%
---------------------------------------------------------------------------------------------------------
Less than or equal to 40% 1.00% 0.00%
=========================================================================================================
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(b) notwithstanding clause (a) of this definition, if on any day any
portion of the Bridge Loans is outstanding (and whether or not such Bridge
Loans have been converted into long term obligations), then the Applicable
Margin for such day shall be (i) 2.50% per annum for Eurodollar Loans and (ii)
0.00% per annum for Base Rate Loans; and
(c) with respect to any Loan outstanding during the Term Loan
Period, for each day such Loan is outstanding, (i) 2.50% per annum for
Eurodollar Loans and (ii) .25% per annum for Base Rate Loans.
"Assignment" shall have the meaning assigned such term in Section
12.06(b).
"Base Rate" shall mean, with respect to any Base Rate Loan, for any day,
the higher of (i) the Federal Funds Rate for any such day plus 1/2 of 1% or
(ii) the Prime Rate for such day. Each change in any interest rate provided
for herein based upon the Base Rate resulting from a change in the Base Rate
shall take effect at the time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based
upon the Base Rate.
"Borrowing Base" shall mean at any time an amount equal to the amount
determined in accordance with Section 2.08.
"Bridge Loan Documents" shall mean, collectively, (i) Equity Bridge Note
Purchase Agreement dated of even date herewith among QSRD, the Borrower and the
initial purchasers named therein, (ii) the $30,000,000 Equity Bridge Notes sold
pursuant to the terms thereof, (iii) Debt Bridge Note Purchase Agreement dated
of even date herewith among QSRD, the Borrower and the initial purchasers named
therein, (iv) the $30,000,000 Debt Bridge Notes sold pursuant to the terms
thereof, and (v) any and all other agreements or instruments now or hereafter
executed and delivered in connection with any of the foregoing or as security
for the payment or performance thereof.
"Bridge Loans" shall mean collectively the Debt Bridge Loan and the
Equity Bridge Loan.
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in Chicago, Illinois and, where such
term is used in the definition of "Quarterly Date" or if such day relates to a
borrowing or continuation of, a payment or prepayment of principal of or
interest on, or a conversion of or into, or the Interest Period for, a
Eurodollar Loan or a notice by the Borrower with respect to any such borrowing
or continuation, payment, prepayment, conversion or Interest Period, any day
which is also a day on which dealings in Dollar deposits are carried out in the
London interbank market.
"Closing Date" shall mean April 17, 1998.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and any successor statute.
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"Commitment" shall mean, for any Lender, its obligation to make Loans up
to the lesser of such Lender's Maximum Credit Amount or the Lender's Percentage
Share of the then effective Borrowing Base and to participate in the Letters of
Credit as provided in Section 2.01(b).
"Commitment Fee Rate" shall mean during the Revolving Credit Period, the
following rate per annum based upon the Percentage Usage of the available
Borrowing Base as is applicable:
======================================================================
Percentage Usage Commitment Fee Rate
----------------------------------------------------------------------
Greater than 75% 0.50%
----------------------------------------------------------------------
Less than or equal to 75% 0.35%
======================================================================
"Consolidated Net Income" shall mean with respect to QSRD and its
Consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of QSRD and its Consolidated Subsidiaries after allowances for taxes for
such period, determined on a consolidated basis in accordance with GAAP;
provided that there shall be excluded from such net income (to the extent
otherwise included therein) the following: (i) the net income of any Person in
which QSRD or any Consolidated Subsidiary has an interest (which interest does
not cause the net income of such other Person to be consolidated with the net
income of QSRD and its Consolidated Subsidiaries in accordance with GAAP),
except to the extent of the amount of dividends or distributions actually paid
in such period by such other Person to QSRD or to a Consolidated Subsidiary, as
the case may be; (ii) the net income (but not loss) of any Consolidated
Subsidiary to the extent that the declaration or payment of dividends or
similar distributions or transfers or loans by that Consolidated Subsidiary is
not at the time permitted by operation of the terms of its charter or any
agreement, instrument or Governmental Requirement applicable to such
Consolidated Subsidiary, or is otherwise restricted or prohibited in each case
determined in accordance with GAAP; (iii) the net income (or loss) of any
Person acquired in a pooling-of-interests transaction for any period prior to
the date of such transaction; (iv) any extraordinary gains or losses, including
gains or losses attributable to Property sales not in the ordinary course of
business; (v) the cumulative effect of a change in accounting principles and
any gains or losses attributable to writeups or writedowns of assets; and (vi)
any writedowns of non-current assets, provided however, that any ceiling
limitation writedowns under SEC guidelines shall be treated as capitalized
costs, as if such writedowns had not occurred.
"Consolidated Tangible Net Worth" shall mean, with respect to QSRD and
its Subsidiaries, the sum of preferred stock (if any), par value of common
stock, capital in excess of par value of common stock and retained earnings,
less treasury stock (if any), less (without duplication) goodwill and cost in
excess of fair value of net assets acquired and less all other assets that are
properly classified as intangible assets (other than unamortized finance costs
and underwriting and other related fees payable in connection with this
Agreement and the Bridge Loans to the extent classified as intangible assets),
but plus the amount of noncash write downs attributable to any period ending on
or before January 1, 1999 if in compliance with GAAP or SEC guidelines, and
plus or minus, as appropriate, foreign currency translation adjustments, all as
determined on a consolidated basis.
"Consolidated Subsidiaries" shall mean each Subsidiary of QSRD or other
Person owned by QSRD, whether now existing or hereafter created or acquired,
which are not Non-Recourse
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Subsidiaries and the financial statements of which shall be (or should have
been) consolidated with the financial statements of QSRD in accordance with
GAAP.
"Debt" shall mean, for any Person the sum of the following (without
duplication): (i) all obligations of such Person for borrowed money or
evidenced by bonds, debentures, notes or other similar instruments (including
principal, interest, fees and charges); (ii) all obligations of such Person
(whether contingent or otherwise) in respect of bankers' acceptances, letters
of credit, surety or other bonds and similar instruments; (iii) all obligations
of such Person to pay the deferred purchase price of Property or services
(other than for borrowed money); (iv) all obligations under leases which shall
have been, or should have been, in accordance with GAAP, recorded as capital
leases in respect of which such Person is liable (whether contingent or
otherwise); (v) all Debt and other obligations of others secured by a Lien on
any asset of such Person, whether or not such Debt is assumed by such Person;
(vi) all Debt and other obligations of others guaranteed by such Person or in
which such Person otherwise assures a creditor against loss of the debtor or
obligations of others; (vii) all obligations or undertakings of such Person to
maintain or cause to be maintained the financial position or covenants of
others or to purchase the Debt or Property of others (other than the purchase
of Property in the ordinary course of business); (viii) the undischarged
balance of any production payment created by such Person or for the creation of
which such Person directly or indirectly received payment; and (ix) the net
xxxx to market value of all obligations of such Person under Risk Management
Agreements.
"Debt Bridge Loan" shall mean the sale by the Borrower of $30,000,000
Variable Rate Senior Second Secured Notes due 2003 pursuant to those certain
Note Purchase Agreements dated of even date herewith among QSRD, the Borrower
and each initial purchaser named therein.
"Default" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"DEM Subordinated Debt" shall mean the Series A DEM 5,000,0000 12% notes
issued by QSRD and being due and payable on July 15, 2000, and any renewals,
extensions or replacements (but not increases in principal amount) thereof.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"EBITDA" shall mean, for any period, the sum, determined (without
duplication) for QSRD and its Consolidated Subsidiaries of (i) Consolidated Net
Income plus (ii) Interest Expense for such period to the extent deducted in the
determination of Consolidated Net Income plus (iii) depreciation, amortization
and other similar non-cash items to the extent deducted in the determination of
Consolidated Net Income plus (iv) all taxes accrued for such period on or
measured by income to the extent deducted in the determination of Consolidated
Net Income.
"ECT Subordinated Debt" shall mean collectively, (i) the Subordinated
Revolving Credit Loan Agreement dated as of December 29, 1997 among the
Borrower, Enron Capital & Trade Resources Corp., as agent for itself and the
other lenders from time to time parties thereto, and such lenders, (ii) the
promissory note(s) in the aggregate principal amount of $10,000,000 issued by
the Borrower thereunder, (iii) all agreements, instruments and documents given
by the Borrower, QSRD
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or any Obligor to secure the obligations of the Borrower under the agreement
and instruments described in clauses (i) and (ii), as the same may be renewed,
extended, amended or modified from time to time to the extent permitted by
Section 9.22(e).
"Engineering Reports" shall have the meaning assigned such term in
Section 2.08(b).
"Environmental Laws" shall mean any and all Governmental Requirements
pertaining to health, safety or the environment in effect in any and all
jurisdictions in which QSRD or any of its Subsidiaries is conducting or at any
time has conducted business, or where any Property of any such Person is
located, including without limitation, the Oil Pollution Act of 1990 ("OPA"),
the Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation
Act, as amended, and other environmental conservation or protection laws. The
term "oil" shall have the meaning specified in OPA, the terms "hazardous
substance" and "release" (or "threatened release") have the meanings specified
in CERCLA, and the terms "solid waste" and "disposal" (or "disposed") have the
meanings specified in RCRA; provided, however, that (i) in the event either
OPA, CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the effective date of
such amendment and (ii) to the extent the laws of the state in which any
Property of QSRD or any of its Subsidiaries is located establish a meaning for
"oil," "hazardous substance," "release," "solid waste" or "disposal" which is
broader than that specified in either OPA, CERCLA or RCRA, such broader meaning
shall apply.
"Equity Bridge Loan" shall mean the sale by the Borrower of $30,000,000
Variable Rate Senior Third Secured Equity Bridge Notes due 2004 pursuant to
those certain Equity Bridge Note Purchase Agreements dated of even date
herewith among QSRD, the Borrower and each initial purchaser named therein.
"Equity Offering" shall mean any sale or issuance for cash of any equity
securities of QSRD or warrants or options with respect thereto (whether done by
a registered public offering or an exempt private placement of such securities)
occurring after the Closing Date; provided the foregoing shall not include any
warrants or options granted in connection with the Equity Bridge Loan or any
extensions relating to the Equity Bridge Loan or relating to any other
warrants, options, rights or class of Preferred Stock or Debt outstanding prior
to the Closing Date or which arise after the date of Closing but are
attributable to agreements in effect prior to the date of Closing.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time and any successor statute.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with QSRD or any of its Affiliates would be deemed
to be a "single employer" within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.
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"ERISA Event" shall mean (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder, (ii) the withdrawal of
QSRD or any ERISA Affiliate from a Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, (iii) the
filing of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under Section 4041 of ERISA, (iv) the institution of
proceedings to terminate a Plan by the PBGC or (v) any other event or condition
which might constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Plan.
"Escrow Agreement" shall mean the Escrow Agreement entered into among
Xxxxxx Guaranty Trust Company of New York, as trustee, the Borrower, and Chase
Bank of Texas, National Association, as escrow agent, pursuant to Section 2.2
of the Purchase and Sale Agreement.
"Eurodollar Loans" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in the definition of "Eurodollar
Rate".
"Eurodollar Rate" shall mean, with respect to any Eurodollar Loan, the
rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%)
quoted by the Agent at approximately 11:00 a.m. London time (or as soon
thereafter as practicable) two (2) Business Days prior to the first day of the
Interest Period for such Loan for the offering by the Agent to leading banks in
the London interbank market of Dollar deposits having a term comparable to such
Interest Period and in an amount comparable to the principal amount of the
Eurodollar Loan to be made by the Agent for such Interest Period.
"Event of Default" shall have the meaning assigned such term in Section
10.01.
"Excepted Liens" shall mean: (i) Liens for taxes, assessments or other
governmental charges or levies not yet due or which are being contested in good
faith by appropriate action and for which appropriate reserves have been
maintained; (ii) Liens in connection with workmen's compensation, unemployment
insurance or other social security, old age pension or public liability
obligations not yet due or which are being contested in good faith by
appropriate action and for which appropriate reserves have been maintained in
accordance with GAAP; (iii) operators', vendors', carriers', warehousemen's,
repairmen's, mechanics', workmen's, materialmen's, construction or other like
Liens arising by operation of law in the ordinary course of business or
incident to the exploration, development, operation and maintenance of Oil and
Gas Properties or statutory landlord's Liens, each of which is in respect of
obligations that have not been outstanding more than 90 days or which are being
contested in good faith by appropriate proceedings and for which appropriate
reserves have been maintained in accordance with GAAP; (iv) any Liens reserved
in leases or farmout agreements for rent or royalties and for compliance with
the terms of the farmout agreements or leases in the case of leasehold estates,
to the extent that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by QSRD or any of its Subsidiaries or materially impair
the value of such Property subject thereto; and (v) encumbrances (other than to
secure the payment of borrowed money or the deferred purchase price of Property
or services), easements, restrictions, servitudes, permits, conditions,
covenants, exceptions or reservations in any rights of way or other Property of
QSRD or any of its Subsidiaries for the purpose of roads, pipelines,
transmission lines, transportation lines, distribution lines for the removal of
gas, oil, coal or other minerals or timber, and other like
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purposes, or for the joint or common use of real estate, rights of way,
facilities and equipment, and defects, irregularities, zoning restrictions and
deficiencies in title of any rights of way or other Property which in the
aggregate do not materially impair the use of such rights of way or other
Property for the purposes of which such rights of way and other Property are
held by any such Person or materially impair the value of such Property subject
thereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and any successor act thereto.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight federal funds transactions with a
member of the Federal Reserve System arranged by federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the date for which such rate is
to be determined is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day, and (ii) if such rate is not
so published for any day, the Federal Funds Rate for such day shall be the
average rate charged to the Agent on such day on such transactions as
determined by the Agent.
"Financial Statements" shall mean the financial statement or statements
of QSRD and its Consolidated Subsidiaries described or referred to in Section
7.02(a).
"Fixed Charge Coverage Ratio" shall mean, for any period, the ratio of
EBITDA for such period to the sum of (i) Interest Expense for such period and
(ii) dividends paid in cash on Preferred Stock during such period.
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
"Governmental Authority" shall include the country, the state, county,
city and political subdivisions in which any Person or such Person's Property
is located or which exercises valid jurisdiction over any such Person or such
Person's Property, and any court, agency, department, commission, board, bureau
or instrumentality of any of them including monetary authorities which
exercises valid jurisdiction over any such Person or such Person's Property.
Unless otherwise specified, all references to Governmental Authority herein
shall mean a Governmental Authority having jurisdiction over, where applicable,
QSRD or any of its Subsidiaries or any of their Properties or the Agent, any
Lender or any Applicable Lending Office.
"Governmental Requirement" shall mean any law, statute, code, ordinance,
order, determination, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other directive or
requirement (whether or not having the force of law), including, without
limitation, Environmental Laws, energy regulations and occupational, safety and
health standards or controls, of any Governmental Authority.
"Highest Lawful Rate" shall mean, with respect to the Agent or a Lender,
the maximum nonusurious interest rate, if any, that at any time or from time to
time may be contracted for, taken,
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reserved, charged or received on the Notes or on other Indebtedness under laws
applicable to the Agent or such Lender which are presently in effect or, to the
extent allowed by law, under such applicable laws which may hereafter be in
effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow.
"Hi-Yield Offering" shall mean any sale or issuance of any hi-yield Debt
securities of QSRD (whether done by a registered public offering or an exempt
private placement of such securities) occurring after the Closing Date;
provided the foregoing shall not include any of the Debt Bridge Loan or the
Equity Bridge Loan.
"Hydrocarbon Interests" shall mean all rights, titles, interests and
estates now or hereafter acquired in and to oil and gas leases, oil, gas and
mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee
interests, overriding royalty and royalty interests, net profit interests and
production payment interests, including any reserved or residual interests of
whatever nature.
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all products refined or separated therefrom.
"Indebtedness" shall mean any and all amounts owing or to be owing by
QSRD, the Borrower or any Obligor to the Agent and/or Lenders in connection
with the Loan Documents and any Risk Management Agreements now or hereafter
arising between QSRD or the Borrower and any Lender, and all renewals,
extensions and/or rearrangements of any of the above.
"Indemnified Parties" shall have the meaning assigned such term in
Section 12.03(b).
"Indemnity Matters" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands and
causes of action made or threatened against an Indemnified Party and, in
connection therewith, all losses, liabilities, damages (including, without
limitation, consequential damages) or reasonable costs and expenses of any kind
or nature whatsoever incurred by such Indemnified Party whether caused by the
sole or concurrent negligence of the Indemnified Party seeking indemnification.
"Initial Funding" shall mean the funding of the initial Loans or
issuance of the initial Letters of Credit pursuant to Section 6.01 hereof.
"Initial Reserve Report" shall mean collectively, (i) the report of X.X.
Xxxx & Associates dated March 31, 1998 with respect to the Oil and Gas
Properties set forth therein as of December 31, 1997, (ii) the report of X.X.
Xxxx & Associates dated March 31, 1998 with respect to the Oil and Gas
Properties set forth therein as of December 31, 1997, and (iii) the report of
Xxxxx Xxxxx Company dated March 30, 1998 with respect to the Oil and Gas
Properties set forth therein as of December 31, 1997.
"Interest Expense" shall mean, for any period, the sum (determined
without duplication) of the aggregate amount of interest expense accruing
during such period on Debt of QSRD and its
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Consolidated Subsidiaries, including the interest portion of payments under
capitalized leases and any capitalized interest, but excluding amortization of
debt discount and expense.
"Interest Period" shall mean, with respect to any Eurodollar Loan, the
period commencing on the date such Eurodollar Loan is made and ending on the
numerically corresponding day in the first, second, third or sixth month
thereafter, as the Borrower may select as provided in Section 2.02 (or such
longer period as may be requested by the Borrower and agreed to by the Majority
Lenders), except that each Interest Period which commences on the last Business
Day of a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on
the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) no Interest Period may commence
before and end after the Maturity Date; (ii) no Interest Period for any
Eurodollar Loan may end after any scheduled payment date occurring during the
Term Loan Period to the extent that such Eurodollar Loan would need to be
prepaid prior to the end of such Interest Period in order to give effect to
such payment; (iii) each Interest Period which would otherwise end on a day
which is not a Business Day shall end on the next succeeding Business Day (or,
if such next succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day); and (iv) no Interest Period shall
have a duration of less than one month and, if the Interest Period for any
Eurodollar Loans would otherwise be for a shorter period, such Loans shall not
be available hereunder.
"JEDI" shall mean Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership.
"LC Commitment" at any time shall mean $20,000,000.
"LC Exposure" at any time shall mean the aggregate face amount of all
undrawn and uncancelled Letters of Credit and the aggregate of all amounts
drawn under all Letters of Credit and not yet reimbursed.
"Letter of Credit Agreements" shall mean the written agreements with the
Agent, as issuing bank for any Letter of Credit, executed or hereafter executed
in connection with the issuance by the Agent of the Letters of Credit, such
agreements to be on the Agent's customary form for letters of credit of
comparable amount and purpose as from time to time in effect or as otherwise
agreed to by the Borrower and the Agent.
"Letters of Credit" shall mean the letters of credit issued pursuant to
Section 2.01(b) and all reimbursement obligations pertaining to any such
letters of credit, and "Letter of Credit" shall mean any one of the Letters of
Credit and the reimbursement obligations pertaining thereto.
"Lien" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and whether such
obligation or claim is fixed or contingent, and including but not limited to
(i) the lien or security interest arising from a mortgage, charge, encumbrance,
pledge, lien (statutory or otherwise), security agreement, conditional sale or
trust receipt or a lease, consignment or bailment for security purposes, or
preferential arrangement of any kind or nature
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whatsoever (including, any agreement to give or xxxxx x xxxx), or (ii)
production payments and the like payable out of Oil and Gas Properties. The
term "Lien" shall include reservations, exceptions, encroachments, easements,
rights of way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property. For the purposes of this
Agreement, QSRD or any of its Subsidiaries shall be deemed to be the owner of
any Property which it has acquired or holds subject to a conditional sale
agreement, or leases under a financing lease or other arrangement pursuant to
which title to the Property has been retained by or vested in some other Person
in a transaction intended to create a financing.
"Loan Documents" shall mean this Agreement, the Notes and the Security
Instruments.
"Loans" shall mean the loans as provided for by Section 2.01(a).
"Majority Lenders" shall mean, at any time while no Loans are
outstanding, Lenders having at least sixty-six and two-thirds percent (66-2/3%)
of the Aggregate Commitments and, at any time while Loans are outstanding,
Lenders holding at least sixty-six and two-thirds percent (66-2/3%) of the
outstanding aggregate principal amount of the Loans (without regard to any sale
by a Lender of a participation in any Loan under Section 12.06(c)).
"Material Adverse Effect" shall mean any material and adverse effect on
(i) the assets, liabilities, financial condition, business, operations,
prospects or affairs of QSRD and its Consolidated Subsidiaries taken as a whole
different from those reflected in the financial statements most recently
delivered pursuant to Sections 7.02(a) or 8.01 hereof or from the facts
represented or warranted in this Agreement or any Loan Document, or (ii) the
ability of QSRD and its Consolidated Subsidiaries, taken as a whole, to carry
out its business as at the Closing Date or as proposed as of the Closing Date
to be conducted or meet its obligations under the Loan Documents on a timely
basis.
"Material Agreements" shall mean the Purchase and Sale Agreement and
each of the instruments, contracts or agreements described in Schedule 7.23, as
the same may be amended, modified or replaced from time to time in accordance
with the terms of Section 9.21.
"Maturity Date" shall mean, unless the Aggregate Maximum Credit Amounts
are sooner terminated under Section 2.03(b) or the Notes are sooner accelerated
under Section 10.02 hereof, April 17, 2003.
"Maximum Credit Amount" shall mean, as to each Lender, the amount set
forth opposite such Lender's name on Annex I under the caption "Maximum Credit
Amounts" (as the same may be reduced pursuant to Section 2.03(b) pro rata to
each Lender based on its Percentage Share), as modified from time to time to
reflect any assignments permitted by Section 12.06(b) or amendments to this
Agreement.
"Mortgaged Property" shall mean the Property owned by any Obligor and
which is subject to the Liens existing and to exist under the terms of the
Security Instruments.
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"Multiemployer Plan" shall mean a Plan defined as such in Section 3(37)
or 4001(a)(3) of ERISA.
"Non-Recourse Subsidiary" shall mean any Subsidiary of QSRD organized or
acquired after the Closing Date as to which all of the following conditions
apply: (i) neither such Subsidiary nor any of its Subsidiaries provides credit
support for any of the Indebtedness or any other Debt of QSRD, the Borrower or
any Subsidiary Guarantor; (ii) neither QSRD, the Borrower nor any Subsidiary
Guarantor is liable, directly or indirectly, with respect to any Debt of such
Subsidiary; (iii) no Oil and Gas Properties of such Non-Recourse Subsidiary is
included in the Borrowing Base; and (iv) the Board of Directors of QSRD shall
have designated such Subsidiary to be a Non-Recourse Subsidiary by a written
resolution. Any such designation by the Board of Directors of QSRD shall be
evidenced to the Agent by delivering to it a resolution giving effect to such
designation and an officers' certificate certifying that such designation
complies with the foregoing conditions. The Board of Directors of QSRD may (i)
designate any of its Subsidiaries as a Non-Recourse Subsidiary or (ii)
designate any Non-Recourse Subsidiary to be a Subsidiary Guarantor; provided
that, in either such case, no Default or Event of Default would occur or be
continuing after giving effect to such designation. Any Subsidiary of a Non-
Recourse Subsidiary shall be a Non-Recourse Subsidiary for purposes of this
Agreement.
"Non-Recourse Debt" shall mean Debt of any Non-Recourse Subsidiary (i)
as to which neither QSRD, the Borrower nor any Subsidiary Guarantor is directly
or indirectly liable (by virtue of such Person or any Subsidiary Guarantor
being the primary obligor on, guarantor of, or otherwise liable in any respect
to, such Debt); (ii) which, upon the occurrence of a default with respect
thereto, does not result in, or permit any holder of any Debt of QSRD, the
Borrower or any Subsidiary Guarantor to declare a default on such Debt of such
Person or cause the payment thereof to be accelerated or payable prior to its
stated maturity; and (iii) that is not secured by a Lien upon any Property of
QSRD, the Borrower or any Subsidiary Guarantor (other than stock or other
equity interests of a Non-Recourse Subsidiary).
"Notes" shall mean the Notes provided for by Section 2.06, together with
any and all renewals, extensions for any period, increases, rearrangements,
substitutions or modifications thereof.
"Notice of Termination" shall have the meaning set forth in Section
5.06(a).
"Obligor" shall mean any or all of QSRD, the Borrower or the Subsidiary
Guarantors, as appropriate.
"Oil and Gas Properties" shall mean Hydrocarbon Interests; the
Properties now or hereafter pooled or unitized with Hydrocarbon Interests; all
presently existing or future unitization, pooling agreements and declarations
of pooled units and the units created thereby (including without limitation all
units created under orders, regulations and rules of any Governmental Authori-
ty) which may affect all or any portion of the Hydrocarbon Interests; all
operating agreements, contracts and other agreements which relate to any of the
Hydrocarbon Interests or the production, sale, purchase, exchange or processing
of Hydrocarbons from or attributable to such Hydrocarbon Interests; all
Hydrocarbons in and under and which may be produced and saved or attributable
to
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the Hydrocarbon Interests, including all oil in tanks, the lands covered
thereby and all rents, issues, profits, proceeds, products, revenues and other
incomes from or attributable to the Hydrocarbon Interests; all tenements,
hereditaments, appurtenances and Properties in any manner appertaining, belong-
ing, affixed or incidental to the Hydrocarbon Interests; and all Properties,
rights, titles, interests and estates described or referred to above, including
any and all Property, real or personal, now owned or hereinafter acquired and
situated upon, used, held for use or useful in connection with the operating,
working or development of any of such Hydrocarbon Interests or Property
(excluding drilling rigs, automotive equipment or other personal property which
may be on such premises for the purpose of drilling a well or for other similar
temporary uses) and including any and all oil xxxxx, gas xxxxx, injection xxxxx
or other xxxxx, buildings, structures, fuel separators, liquid extraction
plants, plant compressors, pumps, pumping units, field gathering systems, tanks
and tank batteries, fixtures, valves, fittings, machinery and parts, engines,
boilers, meters, apparatus, equipment, appliances, tools, implements, cables,
wires, towers, casing, tubing and rods, surface leases, rights-of-way,
easements and servitudes together with all additions, substitutions,
replacements, accessions and attachments to any and all of the foregoing.
"Other Taxes" shall have the meaning assigned such term in Section
4.06(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions.
"Percentage Share" shall mean the percentage of the Aggregate
Commitments to be provided by a Lender under this Agreement as indicated on
Annex I hereto, as modified from time to time to reflect any assignments
permitted by Section 12.06(b) or amendments to this Agreement.
"Percentage Usage" shall mean, as of any date of determination, the
quotient (expressed as a percentage) obtained by dividing the balance of all
Loans and the LC Exposure at the close of business on such date by the
available Borrowing Base at the close of business on such date. The Applicable
Margin for a Type of Loan shall change on the same day as any change in the
Percentage Usage to the extent required by the terms of the definition of
Applicable Margin.
"Person" shall mean any individual, corporation, limited liability
company, voluntary association, partnership, joint venture, trust,
unincorporated organization or government or any agency, instrumentality or
political subdivision thereof, or any other form of entity.
"Plan" shall mean any employee pension benefit plan, as defined in
Section 3(2) of ERISA, which (i) is currently or hereafter sponsored,
maintained or contributed to by QSRD or any of its Subsidiaries or an ERISA
Affiliate or (ii) was at any time during the preceding six calendar years
sponsored, maintained or contributed to, by QSRD or any of its ERISA
Affiliates.
"Post-Default Rate" shall mean (i) in the event a Borrowing Base
deficiency is being cured as permitted under Section 2.07(c)(ii), or (ii) in
respect of any principal of any Loan or any other amount payable by any Obligor
under this Agreement, any Note or any Loan Document which is not paid when due
(whether at stated maturity, by acceleration or otherwise), in each case, a
rate per annum during the period commencing on the first day of such deficiency
period or the due date, as applicable, until such Borrowing Base deficiency is
cured or the amount is paid in full or the default
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is cured or waived, as applicable, equal to the sum of .75% per annum, the
Applicable Margin for Base Rate Loans, if any, and the Base Rate; provided that
with respect to all Eurodollar Loans or amounts due in respect of a Eurodollar
Loan, the sum of (A) if clause (a) of the definition of "Applicable Margin" is
applicable, .75% per annum, or (B) if clause (b) or (c) of the definition of
"Applicable Margin" is applicable, .50% per annum, the then Applicable Margin
and the Eurodollar Rate for such Loan, but in no event to exceed the Highest
Lawful Rate.
"Preferred Stock" shall mean (i) QSRD's Series A Participating
Convertible Preferred Stock, par value $0.01 per share; (ii) QSRD's Series B
Participating Convertible Preferred Stock; and (iii) QSRD's Series C
Convertible Preferred Stock issued pursuant to the Certificate of Designation
of Series C Convertible Preferred Stock adopted as of December 23, 1997,
together with any and all amendments and modifications thereto.
"Prime Rate" shall mean the rate of interest from time to time announced
publicly by the Agent at the Principal Office as its prime commercial lending
rate. Such rate is set by the Agent as a general reference rate of interest,
taking into account such factors as the Agent may deem appropriate, it being
understood that many of the Agent's commercial or other loans are priced in
relation to such rate, that it is not necessarily the lowest or best rate
actually charged to any customer and that the Agent may make various commercial
or other loans at rates of interest having no relationship to such rate.
"Principal Office" shall mean the principal office of the Agent,
presently located at 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Proved Reserves" shall mean those Oil and Gas Properties designated as
"proved" (in accordance with the Definitions for Oil and Gas Reserves
established by the Society for Petroleum Engineers from time to time) in the
Reserve Report and used in establishing the Borrowing Base.
"Purchase and Sale Agreement" shall mean that certain Purchase and Sale
Agreement dated as of March 19, 1998 among Xxxxxx Guaranty Trust Company of
New York, as Trustee, Investment Royalty Corporation and Xxxxx Royalty
Corporation, as sellers, and the Borrower, as purchaser.
"Quarterly Dates" shall mean the last day of each March, June, September
and December, in each year, the first of which shall be June 30, 1998;
provided, however, that if any such day is not a Business Day, such Quarterly
Date shall be the next succeeding Business Day.
"Redetermination Date" shall have the meaning assigned such term in
Section 2.08(a).
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
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"Regulatory Change" shall mean, with respect to any Lender, any change
after the Closing Date in any Governmental Requirement (including Regulation D)
or the adoption or making after such date of any interpretations, directives or
requests applying to a class of lenders (including such Lender or its
Applicable Lending Office) of or under any Governmental Requirement (whether or
not having the force of law) by any Governmental Authority charged with the
interpretation or administration thereof.
"Replacement Lender" shall have the meaning set forth in Section
5.06(b).
"Required Lenders" shall mean with respect to any redetermination of the
Borrowing Base: (i) all of the Lenders in the case of any increase in the
Borrowing Base, and (ii) the Majority Lenders in all other cases.
"Required Payment" shall have the meaning assigned such term in Section
4.04.
"Reserve Report" shall mean a report, in form and substance satisfactory
to the Agent, setting forth, as of each June 30 or December 31, as applicable
(or such other date in the event of an unscheduled redetermination): (i) the
oil and gas reserves attributable to the Oil and Gas Properties to comprise the
Borrowing Base together with a projection of the rate of production and future
net income, taxes, operating expenses and capital expenditures with respect
thereto as of such date, based upon the pricing assumptions consistent with SEC
reporting requirements at the time and (ii) such other information as the Agent
may reasonably request. The term "Reserve Report" shall also include the
information to be provided by the Borrower by February 15 of each year pursuant
to Section 8.07(a).
"Responsible Officer" shall mean, as to any Person, the Chief Executive
Officer, the President or any Vice President of such Person and, with respect
to financial matters, the term "Responsible Officer" shall include the Chief
Financial Officer of such Person. Unless otherwise specified, all references
to a Responsible Officer herein shall mean a Responsible Officer of QSRD or the
Borrower, as applicable.
"Revolving Credit Period" shall mean the period commencing on the
Closing Date and ending on the Revolving Credit Termination Date.
"Revolving Credit Termination Date" shall mean, unless the Commitments
are sooner terminated pursuant to Sections 2.03(b) or 10.02 hereof, April 17,
1999.
"Risk Management Agreements" shall mean any commodity, interest rate or
currency swap, rate cap, rate floor, rate collar, forward agreement or other
exchange, price or rate protection agreements or any option with respect to any
such transaction.
"Scheduled Redetermination Date" shall have the meaning assigned such
term in Section 2.08(d).
"SEC" shall mean the Securities and Exchange Commission or any successor
Governmental Authority.
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"SEC Value" shall mean the future net revenues before income taxes from
Proved Reserves, estimated assuming that oil and natural gas prices and
production costs remain constant, then discounted at the rate of 10% per year
to obtain the present value.
"Security Instruments" shall mean the Letters of Credit, the Letter of
Credit Agreements, the agreements or instruments described or referred to in
Exhibit D, and any and all other agreements or instruments now or hereafter
executed and delivered by QSRD, the Borrower, any Obligor or any other Person
(other than Assignments, participation or similar agreements between any Lender
and any other lender or creditor with respect to any Indebtedness pursuant to
this Agreement) in connection with, or as security for the payment or
performance of the Notes, this Agreement or the LC Exposure, as such agreements
may be amended, supplemented or restated from time to time.
"Subordinated Debt" shall mean, collectively, DEM Subordinated Debt, the
Bridge Loans and ECT Subordinated Debt; provided that the characterization of
any such Debt as "Subordinated Debt" for purposes of this Agreement and the
Loan Documents shall not affect the characterization of such Debt for purposes
of any other agreement or instrument or as between the holders of any such Debt
and others; the concept herein expressed being that for purposes of this
Agreement and the Loan Documents, the parties hereto expect all such Debt to be
junior and subordinated to the Indebtedness either contractually or by virtue
of junior Lien positions, but only to the extent such Debt is expressly
contractually subordinated or junior by operation of law.
"Subsidiary" shall mean, for any Person, any Person of which at least a
majority of the outstanding shares of stock or other equity interests having by
the terms thereof ordinary voting power to elect a majority of the board of
directors or manager of such Person (irrespective of whether or not at the time
stock or other interests of any other class or classes of such Person shall
have or might have voting power by reason of the happening of any contingency)
is at the time directly or indirectly owned or controlled by such Person or one
or more of its Subsidiaries or by such Person and one or more of its
Subsidiaries. Unless otherwise indicated, a reference to a Subsidiary in any
Loan Document is to a Subsidiary of QSRD.
"Subsidiary Guarantor" shall mean each of Northland Operating Co., a
Nevada corporation, Corrida Resources, Inc., a Nevada corporation, and all
future Subsidiaries of QSRD executing and delivering a guarantee under Section
9.18 other than the Borrower and the Non-Recourse Subsidiaries.
"Taxes" shall have the meaning assigned such term in Section 4.06(a).
"Term Loan Period" shall mean the period commencing on the day next
succeeding the Revolving Credit Termination Date and ending on the Maturity
Date.
"Terminated Lender" shall have the meaning set forth in Section 5.06(a).
"Termination Date" shall have the meaning set forth in Section 5.06(c).
"Type" shall mean, with respect to any Loan, a Base Rate Loan or a
Eurodollar Loan.
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Section 1.03 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Agent or the Lenders hereunder shall be
prepared, in accordance with GAAP, applied on a basis consistent with the
Financial Statements (except for changes concurred with by QSRD's independent
public accountants).
ARTICLE II
COMMITMENTS
Section 2.01 Loans and Letters of Credit.
(a) Loans. Each Lender severally agrees, on the terms of this
Agreement, to make Loans to the Borrower during the Revolving Credit Period in
an aggregate principal amount at any one time outstanding up to but not
exceeding the amount of such Lender's Commitment as then in effect; provided,
however, that the sum of (i) aggregate principal amount of all Loans by all
Lenders hereunder at any one time outstanding plus (ii) the LC Exposure shall
not exceed the Aggregate Commitments. Subject to the terms of this Agreement,
during the Revolving Credit Period, the Borrower may borrow, repay and reborrow
the amount described in this Section 2.01(a).
(b) Letters of Credit. During the Revolving Credit Period, the
Agent, as issuing bank for the Lenders, agrees to extend credit for the account
of the Borrower at any time and from time to time by issuing renewing,
extending or reissuing Letters of Credit; provided however, the LC Exposure at
any one time outstanding shall not exceed the lesser of (i) the LC Commitment
or (ii) the Aggregate Commitments, as then in effect, minus the aggregate
principal amount of all Loans then outstanding. Each Lender shall participate
in such Letters of Credit according to its Percentage Share.
(c) Limitation on Types of Loans. Subject to the other terms and
provisions of this Agreement, at the option of the Borrower, the Loans may be
Base Rate Loans or Eurodollar Loans; provided that, without the prior written
consent of the Majority Lenders, no more than ten (10) Eurodollar Loans may be
outstanding at any time.
(d) Loans under Prior Credit Agreement. On the Closing Date:
(i) the Borrower shall pay all accrued and unpaid commitment fees
outstanding under the Prior Credit Agreement for the account of each
"Lender" under the Prior Credit Agreement;
(ii) each "Base Rate Loan" under the Prior Credit Agreement shall be
deemed to be repaid with the proceeds of a new Base Rate Loan under this
Agreement; and
(iii) each "Eurodollar Loan" under the Prior Credit Agreement shall be
deemed to be a Eurodollar Loan under this Agreement; and
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(iv) the Prior Credit Agreement and the commitments thereunder shall
be superseded by this Agreement and such commitments shall terminate.
Section 2.02 Borrowings, Continuations, Conversions and Letters of
Credit.
(a) Borrowings. The Borrower shall give the Agent (which shall
promptly notify the Lenders) advance notice as hereinafter provided of each
borrowing hereunder, which shall specify the aggregate amount of such
borrowing, the Type and the date (which shall be a Business Day) of the Loans
to be borrowed and (in the case of Eurodollar Loans) the duration of the
Interest Period therefor.
(b) Minimum Amounts. All Base Rate Loan borrowings shall be in
amounts of at least $500,000 or the remaining balance of the Aggregate
Commitments, if less, or any whole multiple of $500,000 in excess thereof, and
all Eurodollar Loans shall be in amounts of at least $1,000,000 or any whole
multiple of $1,000,000 in excess thereof.
(c) Notices. All borrowings, continuations and conversions shall
require advance written notice to the Agent (which shall promptly notify the
Lenders) in the form of Exhibit B hereto (or telephonic notice promptly
confirmed by such a written notice), which in each case shall be irrevocable,
from the Borrower to be received by the Agent not later than 11:00 a.m. Houston
time on the date (which shall be a Business Day) of each Base Rate Loan
borrowing and at least three Business Days prior to the date of each Eurodollar
Loan borrowing, continuation or conversion. Without in any way limiting the
Borrower's obligation to confirm in writing any telephonic notice, the Agent
may act without liability upon the basis of telephonic notice believed by the
Agent in good faith to be from the Borrower prior to receipt of written
confirmation. In each such case, the Borrower hereby waives the right to
dispute the Agent's record of the terms of such telephonic notice except in the
case of manifest error, gross negligence or willful misconduct by the Agent.
(d) Continuation Options. Subject to the provisions made in this
Section 2.02(d), the Borrower may elect to continue all or any part of any
Eurodollar Loan beyond the expiration of the then current Interest Period
relating thereto by giving advance notice as provided in Section 2.02(c) to the
Agent (which shall promptly notify the Lenders) of such election, specifying
the amount of such Loan to be continued and the Interest Period therefor. In
the absence of such a timely and proper election, the Borrower shall be deemed
to have elected to convert such Eurodollar Loan to a Base Rate Loan pursuant to
Section 2.02(e). All or any part of any Eurodollar Loan may be continued as
provided herein, provided that (i) any continuation of any such Loan shall be
(as to each Loan as continued for an applicable Interest Period) in amounts of
at least $1,000,000 or any whole multiple of $1,000,000 in excess thereof and
(ii) no Default shall have occurred and be continuing. If a Default shall have
occurred and be continuing, each Eurodollar Loan shall be converted to a Base
Rate Loan on the last day of the Interest Period applicable thereto.
(e) Conversion Options. The Borrower may elect to convert all or any
part (subject to the minimum amount requirements set forth in Section 2.02(b))
of any Eurodollar Loan on the last day of the then current Interest Period
relating thereto to a Base Rate Loan by giving advance notice to the Agent
(which shall promptly notify the Lenders) of such election. Subject to the
provisions made in this Section 2.02(e), the Borrower may elect to convert all
or any part of any Base Rate
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Loan at any time and from time to time to a Eurodollar Loan by giving advance
notice as provided in Section 2.02(c) to the Agent (which shall promptly notify
the Lenders) of such election. All or any part of any outstanding Loan may be
converted as provided herein, provided that (i) any conversion of any Base Rate
Loan into a Eurodollar Loan shall be (as to each such Loan into which there is
a conversion for an applicable Interest Period) in amounts of at least
$1,000,000 or any whole multiple of $1,000,000 in excess thereof and (ii) no
Default shall have occurred and be continuing. If a Default shall have oc-
curred and be continuing, no Base Rate Loan may be converted into a Eurodollar
Loan.
(f) Advances. Not later than 1:00 p.m. Houston time on the date
specified for each borrowing hereunder, each Lender shall make available the
amount of the Loan to be made by it on such date to the Agent, to an account
which the Agent shall specify, in immediately available funds, for the account
of the Borrower. The amounts so received by the Agent shall, subject to the
terms and conditions of this Agreement, be made available to the Borrower by
depositing the same, in immediately available funds, in an account of the
Borrower, designated by the Borrower and maintained at the Principal Office.
(g) Letters of Credit. The Borrower shall give the Agent (which
shall promptly notify the Lenders of such request and their Percentage Share of
such Letter of Credit) advance notice to be received by the Agent not later
than 11:00 a.m. Houston time not less than three (3) Business Days prior
thereto of each request for the issuance, the renewal or extension of a Letter
of Credit hereunder which request shall specify the amount of such Letter of
Credit, the date (which shall be a Business Day) such Letter of Credit is to be
issued, renewed or extended, the duration thereof, the name and address of the
beneficiary thereof, the form of the Letter of Credit and such other
information as the Agent may reasonably request all of which shall be reason-
ably satisfactory to the Agent. Subject to the terms and conditions of this
Agreement, on the date specified for the issuance, renewal or extension of a
Letter of Credit, the Agent shall issue such Letter of Credit to the
beneficiary thereof.
In conjunction with the issuance of each Letter of Credit, the Borrower,
shall execute a Letter of Credit Agreement. In the event of any conflict
between any provision of a Letter of Credit Agreement and this Agreement, QSRD,
the Borrower, the Agent and the Lenders hereby agree that the provisions of
this Agreement shall govern.
The Agent will send to the Borrower and each Lender, immediately upon
issuance of any Letter of Credit, or an amendment thereto, a true and complete
copy of such Letter of Credit, or such amendment thereto.
Section 2.03 Changes of Commitments.
(a) The Aggregate Commitments shall at all times be equal to the
lesser of (i) the Aggregate Maximum Credit Amounts, after adjustments resulting
from reductions pursuant to Sections 2.03(b), or (ii) the Borrowing Base as
determined from time to time.
(b) The Borrower shall have the right to terminate or to reduce the
amount of the Aggregate Maximum Credit Amounts at any time or from time to time
upon not less than three (3)
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Business Days' prior notice to the Agent (which shall promptly notify the
Lenders) of each such termination or reduction, which notice shall specify the
effective date thereof and the amount of any such reduction (which shall not be
less than $5,000,000 or any whole multiple of $1,000,000 in excess thereof) and
shall be irrevocable and effective only upon receipt by the Agent.
(c) The Aggregate Maximum Credit Amounts once terminated or reduced
may not be reinstated.
Section 2.04 Fees.
(a) The Borrower shall pay to the Agent for the account of each
Lender a commitment fee on the daily average unused amount of the Aggregate
Commitments during the Revolving Credit Period at a rate per annum equal to the
then applicable Commitment Fee Rate. Accrued commitment fees shall be payable
quarterly on each Quarterly Date in arrears and on the earlier of the date the
Aggregate Commitments are terminated or the Revolving Credit Termination Date.
(b) The Borrower agrees to pay the Agent, for the account of each
Lender, commissions for issuing the Letters of Credit on the daily average
outstanding of the maximum liability of the Agent existing from time to time
under such Letter of Credit (calculated separately for each Letter of Credit)
at the rate per annum equal to the then Applicable Margin for Eurodollar Loans,
provided that each Letter of Credit shall bear a minimum commission of $300.00
and that each Letter of Credit shall be deemed to be outstanding in the full
face amount of the Letter of Credit until the earlier of the expiry date
thereof or the date the Agent has received the canceled Letter of Credit or a
written cancellation of the Letter of Credit from the beneficiary of such
Letter of Credit in form and substance acceptable to the Agent, or for any
reductions in the amount of the Letter of Credit (other than from a drawing),
written notification from the Borrower. Such commissions are payable quarterly
on each Quarterly Date in arrears and on the earlier of the date the Aggregate
Commitments are terminated or the Revolving Credit Termination Date.
(c) In addition to the above commission, the Borrower agrees to pay
the Agent for its own account 0.10% on the face amount of each Letter of Credit
issued hereunder payable on the day such Letter of Credit is issued as an
issuing fee.
(d) Upon each transfer of any Letter of Credit to a successor
beneficiary in accordance with its terms, the Borrower shall pay the sum of
$500 to the Agent for its own account.
(e) Upon each amendment of any Letter of Credit, the Borrower shall
pay the sum of $500 to the Agent for its own account.
(f) The Borrower shall pay such other amounts as are set forth in
that certain letter agreement of even date herewith between the Borrower and
Bank of Montreal.
Section 2.05 Several Obligations. The failure of any Lender to make
any Loan to be made by it or to provide funds for disbursements or
reimbursements under Letters of Credit on the date specified therefor shall not
relieve any other Lender of its obligation to make its Loan or provide
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funds on such date, but no Lender shall be responsible for the failure of any
other Lender to make a Loan to be made by such other Lender or to provide funds
to be provided by such other Lender.
Section 2.06 Notes. The Loans made by each Lender shall be evidenced
by a single promissory note of the Borrower in substantially the form of
Exhibit A hereto, dated (i) the Closing Date or (ii) the effective date of an
Assignment pursuant to Section 12.06(b), payable to the order of such Lender in
a principal amount equal to its Maximum Credit Amount as originally in effect
and otherwise duly completed. The date, amount, Type, interest rate and
Interest Period of each Loan made by each Lender, and all payments made on
account of the principal thereof, shall be recorded by such Lender on its books
for its Note, and, prior to any transfer, endorsed by such Lender on the
schedule attached to such Note or any continuation thereof. Such records shall
be presumed correct; provided that the failure of any Lender to make any such
notation on its Note shall not affect the Borrower's obligations in respect of
its Loan from such Lender.
Section 2.07 Prepayments.
(a) Generally. The Borrower may prepay (i) Base Rate Loans upon not
less than one (1) Business Day's prior notice and (ii) Eurodollar Loans upon
not less than three (3) Business Day's prior notice, to the Agent (which shall
promptly notify the Lenders), which notice shall specify the prepayment date
(which shall be a Business Day) and the amount of the prepayment (which shall
be at least $1,000,000 in the case of a Eurodollar Loan or $500,000 in the case
of a Base Rate Loan or the remaining aggregate principal balance outstanding of
the Base Rate Loans, if less) and shall be irrevocable and effective only upon
receipt by the Agent, provided that interest on the principal prepaid, accrued
to the prepayment date, shall be paid on the prepayment date. Prepayments of
Eurodollar Loans shall be subject to the terms of Section 5.05.
(b) Following Reduction of Credit Amounts. If, after giving effect
to any termination or reduction of the Aggregate Maximum Credit Amounts
pursuant to Sections 2.03(b), the outstanding aggregate principal amount of the
Loans plus the LC Exposure exceeds the Aggregate Maximum Credit Amounts, the
Borrower shall (i) prepay the Loans on the date of such termination or
reduction in an aggregate principal amount equal to the excess, together with
interest on the principal amount paid accrued to the date of such prepayment
and (ii) if any excess remains after prepaying all of the Loans, pay to the
Agent on behalf of the Lenders an amount equal to the remaining excess to be
held as cash collateral as provided in Section 2.10(b).
(c) Following Redetermination. Upon any redetermination or
adjustment of the amount of the Borrowing Base in accordance with Section 2.08
or adjustment in accordance with Sections 2.08(c), 8.08(b) or 9.15, if the
redetermined or adjusted Borrowing Base is less than the sum of the aggregate
outstanding principal amount of the Loans and the LC Exposure, then the
Borrower shall within thirty (30) days of receipt of written notice thereof:
either (i) prepay the Loans (and/or provide cash collateral) in an aggregate
principal amount equal to such excess, together with interest on the principal
amount paid accrued to the date of such prepayment or (ii) notify the Agent of
its election to eliminate such Borrowing Base deficiency by making six (6)
consecutive monthly payments equal to such excess divided by six (6), the first
of such payments being due and payable immediately and each subsequent payment
being due at thirty (30) day intervals thereafter. Any scheduled payments of
principal made during such deficiency period shall be applied to such
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deficiency payments in direct order of maturity; provided that in the event of
an acceleration of the maturity of the Notes pursuant to Section 10.02, such
acceleration shall also accelerate the maturity of the monthly deficiency
payments.
(d) During Term Loan Period. Any prepayments made during the Term
Loan Period shall be applied to reduce pro rata the remaining scheduled
payments.
(e) No Premium; Penalty. Prepayments permitted or required under
this Section 2.07 shall be without premium or penalty, except as required under
Section 5.05 for prepayment of Eurodollar Loans. Any prepayment may be
reborrowed during the Revolving Credit Period subject to the then effective
Aggregate Commitments.
Section 2.08 Borrowing Base.
(a) The Borrowing Base shall be determined in accordance with Section
2.08(b) by the Agent with the concurrence of the Required Lenders and is
subject to redetermination in accordance with Section 2.08(d). Upon any
redetermination of the Borrowing Base, such redetermination shall remain in
effect until the next successive Redetermination Date. "Redetermination Date"
shall mean the date that the redetermined Borrowing Base becomes effective
subject to the notice requirements specified in Section 2.08(e) both for
scheduled redeterminations and unscheduled redeterminations. So long as any of
the Commitments are in effect or any LC Exposure or Loans are outstanding
hereunder, this Agreement shall be governed by the then effective Borrowing
Base. During the period from and after the Closing Date until the first
Redetermination Date to occur after the Closing Date, unless redetermined
pursuant to Section 2.08(d) or adjusted pursuant to Sections 2.08(c), 8.08(b)
or 9.15, the amount of the Borrowing Base shall be $96,000,000.
(b) Upon receipt of the reports required by Section 8.07 and such
other reports, data and supplemental information as may from time to time be
reasonably requested by the Agent (the "Engineering Reports"), the Agent will
propose a redetermined the Borrowing Base. Such proposal will be in accordance
with the Agent's normal and customary procedures for evaluating oil and gas
reserves and other related assets as such exist at that particular time,
including assessing the effect of any Risk Management Agreements or fixed price
sales contracts with investment grade counterparties or purchasers and
assessing the amount of outstanding Debt and interest expense associated with
the Subordinated Debt as well as the level of fixed charges, including
mandatory cash dividend payments on Preferred Stock. The Agent may make
adjustments to the rates, volumes and prices and other assumptions set forth
therein in accordance with its normal and customary procedures for evaluating
oil and gas reserves and other related assets as such exist at that particular
time. The Agent shall propose to the Lenders a new Borrowing Base by no later
than the earlier of (i) 30 days following receipt by the Agent of the
Engineering Reports or (ii) 10 days prior to the next Scheduled Redetermination
Date, in each case assuming its receipt of the Engineering Reports in a timely
and complete manner. After having received notice of such proposal by the
Agent, each Lender shall have 10 days to agree or disagree with such proposal.
If at the end of the 10 days, any Lender has not communicated its approval or
disapproval, such silence shall be deemed to be an approval. If however, the
Required Lenders have not approved the Agent's proposal within 10 days, the
Borrowing Base shall be set at the lower of the Agent's proposal or the amount
of the then current Borrowing Base; and the Borrowing Base shall remain at such
level until the Agent has
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proposed and Required Lenders have agreed on a new Borrowing Base, which the
Agent and each Lender agree to do within a reasonable period of time.
(c) The Agent may exclude any Oil and Gas Property or portion of
production therefrom or any income from any other Property from the Borrowing
Base, at any time, because title information is not reasonably satisfactory or
such Property is not Mortgaged Property. Without limitation of the forgoing,
if the Escrow Agreement is terminated and the Property subject thereof is not
vested with the Borrower, then the Borrowing Base shall be reduced by an amount
equal to the value assigned such Property in the most recently determined
Borrowing Base.
(d) So long as any of the Commitments are in effect and until payment
in full of all Loans hereunder, on or around the 15th Business Day of each
March and September, commencing September 15, 1998 (each being a "Scheduled
Redetermination Date"), the amount of the Borrowing Base shall be determined in
accordance with Section 2.08(b). Without limitation of the foregoing, the
Majority Lenders may initiate an unscheduled redetermination of the Borrowing
Base in connection with any Hi-Yield Offering and may initiate two (2)
unscheduled redeterminations of the Borrowing Base during any consecutive
twelve (12) month period by specifying in writing to the Borrower the date on
which the Borrower is to furnish a Reserve Report in accordance with Section
8.07(b) and the date on which such redetermination is to occur. The Borrower
may also request one unscheduled redetermination during any consecutive twelve
(12) month period.
(e) The Agent shall promptly notify in writing QSRD, the Borrower and
the Lenders of the new Borrowing Base. Any redetermination of the Borrowing
Base shall not be in effect until written notice is received by the Borrower.
Section 2.09 Assumption of Risks. The Borrower assumes all risks of
the acts or omissions of any beneficiary of any Letter of Credit or any
transferee thereof with respect to its use of such Letter of Credit. Neither
the Agent (except in the case of gross negligence, willful misconduct or bad
faith on the part of the Agent or any of its employees), its correspondents nor
any Lender shall be responsible (i) for the validity, sufficiency or
genuineness of certificates or other documents or any endorsements thereon,
even if such certificates or other documents should in fact prove to be
invalid, insufficient, fraudulent or forged; (ii) for errors, omissions,
interruptions or delays in transmissions or delivery of any messages by mail,
telex, or otherwise, whether or not they be in code; (iii) for errors in
translation or errors in interpretation of technical terms; (iv) for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (v) for the failure of any beneficiary
or any transferee of any Letter of Credit to comply fully with conditions
required in order to draw upon any Letter of Credit; or (vi) for any other
consequences arising from causes beyond the Agent's control or the control of
the Agent's correspondents. In addition, neither the Agent nor any Lender
shall be responsible for any error, neglect, or default of any of the Agent's
correspondents; and none of the above shall affect, impair or prevent the
vesting of any of the Agent's or any Lender's rights or powers hereunder or
under the Letter of Credit Agreements, all of which rights shall be cumulative.
The Agent and its correspondents may accept certificates or other documents
that appear on their face to be in order, without responsibility for further
investigation of any matter contained therein regardless of any notice or
information to the contrary. In furtherance and not in limitation of the
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foregoing provisions, the Borrower agrees that any action, inaction or omission
taken or not taken by the Agent or by any correspondent for the Agent in good
faith in connection with any Letter of Credit or any related drafts,
certificates, documents or instruments shall be binding on the Borrower and
shall not put the Agent or its correspondents under any resulting liability to
the Borrower (except in the case of gross negligence, willful misconduct or bad
faith on the part of the Agent or any of its employees).
Section 2.10 Obligation to Reimburse and to Prepay.
(a) If a disbursement by the Agent is made under any Letter of
Credit, and no Default under this Agreement shall have occurred and be
continuing, the Borrower may elect to have the amount of such disbursement,
subject to the then available Aggregate Commitment and the other terms and
conditions set forth in this Agreement (including the provisions relating to
minimum amounts), treated as a Base Rate Loan to the Borrower as provided in
Section 2.01(a) hereof. With respect to any disbursement under a Letter of
Credit for which no election is made or permitted, or after and during the
continuance of a Default, the Borrower shall pay to the Agent within two (2)
Business Days after notice of any such disbursement is received by the Borrow-
er, the amount of such disbursement made by the Agent under the Letter of
Credit (if such payment is not sooner effected as may be required under this
Section 2.10 or under other provisions of the Letter of Credit), together with
interest on the amount disbursed from and including the date of disbursement
until payment in full of such disbursed amount at a varying rate per annum
equal to (i) the Base Rate plus the Applicable Margin for Base Rate Loans
through the second Business Day after notice of such disbursement is received
by the Borrower and (ii) thereafter, the Post-Default Rate for Base Rate Loans
(but in no event to exceed the Highest Lawful Rate) for the period from and
including the third Business Day following the date of such disbursement to and
including the date of repayment in full of such disbursed amount. The
obligations of the Borrower under this Agreement and each Letter of Credit
shall be absolute, unconditional and irrevocable and shall be paid or performed
strictly in accordance with the terms of this Agreement under all circumstances
whatsoever, including, without limitation, but only to the fullest extent
permitted by applicable law, the following circumstances: (i) any lack of
validity or enforceability of this Agreement, any Letter of Credit or any of
the Security Instruments; (ii) any amendment or waiver of (including any
default), or any consent to departure from this Agreement (except to the extent
permitted by any amendment or waiver), any Letter of Credit or any of the
Security Instruments; (iii) the existence of any claim, set-off, defense or
other rights which the Borrower may have at any time against the beneficiary of
any Letter of Credit or any transferee of any Letter of Credit (or any Persons
for whom any such beneficiary or any such transferee may be acting), the Agent,
any Lender or any other Person, whether in connection with this Agreement, any
Letter of Credit, the Security Instruments, the transactions contemplated
hereby or any unrelated transaction; provided however, the foregoing shall not
constitute a waiver, release or estoppel with respect to any such claim,
setoff, defense or other rights which the Borrower may have at any time against
the beneficiary of such Letter of Credit or any transferee of such Letter of
Credit (or any Persons for whom any such beneficiary or any such transferee may
be acting), the Agent, any Lender or any other Person, whether in connection
with this Agreement, any Letter of Credit, the Security Instruments, the
transactions contemplated hereby or any unrelated transaction; (iv) any
statement, certificate, draft, notice or any other document presented under any
Letter of Credit proves to have been forged, fraudulent, insufficient or
invalid in any respect or any statement therein proves to have been untrue or
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inaccurate in any respect whatsoever; and (v) payment by the Agent under any
Letter of Credit against presentation of a draft or certificate which appears
on its face to comply, but does not comply, with the terms of such Letter of
Credit.
Notwithstanding anything in this Agreement to the contrary, the Borrower
will not be liable for payment or performance that results from the gross
negligence or willful misconduct of the Agent, except where the Borrower or any
of its Subsidiaries actually recovers the proceeds for itself or the Agent of
any payment made by the Agent in connection with such gross negligence or
willful misconduct.
(b) In the event (i) of the occurrence of any Event of Default, (ii)
of the maturity of the Notes, whether by acceleration or otherwise, or (iii)
any Letter of Credit remains outstanding after the Revolving Credit Termination
Date, an amount equal to the LC Exposure shall be deemed to be forthwith due
and owing by the Borrower to the Agent and the Lenders as of the date of any
such occurrence; and the Borrower's obligation to pay such amount shall be
absolute and unconditional, without regard to whether any beneficiary of any
such Letter of Credit has attempted to draw down all or a portion of such
amount under the terms of a Letter of Credit, and, to the fullest extent
permitted by applicable law, shall not be subject to any defense or be affected
by a right of set-off, counterclaim or recoupment which the Borrower may now or
hereafter have against any such beneficiary, the Agent, the Lenders or any
other Person for any reason whatsoever. Such payments (together with all
interest accruing thereon) shall be held by the Agent on behalf of the Lenders
as cash collateral securing the LC Exposure in an interest bearing account or
accounts at the Principal Office; and the Borrower hereby grants to the Agent a
security interest in such cash collateral. In the event of any such payment by
the Borrower of amounts contingently owing under outstanding Letters of Credit
and in the event that thereafter drafts or other demands for payment complying
with the terms of such Letters of Credit are not made prior to the respective
expiration dates thereof, the Agent agrees, if no Event of Default has occurred
and is continuing or if no other amounts are outstanding under this Agreement,
the Notes or the Loan Documents, to remit to the Borrower amounts for which the
contingent obligations evidenced by the Letters of Credit have ceased.
(c) Each Lender severally and unconditionally agrees that it shall
promptly reimburse the Agent an amount equal to such Lender's Percentage Share
of any disbursement made by the Agent under any Letter of Credit that is not
reimbursed according to this Section 2.10.
Section 2.11 Lending Offices. The Loans of each Type made by each
Lender shall be made and maintained at such Lender's Applicable Lending Office
for Loans of such Type.
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans. The Borrower will pay to the Agent,
for the account of each Lender, the principal payments required by this Section
3.01. Commencing on the last day of the calendar month immediately following
the Revolving Credit Termination Date, the aggregate principal amount of the
Notes outstanding on the Revolving Credit Termination Date shall be payable in
forty-eight (48) equal consecutive monthly installments sufficient to amortize
the
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outstanding principal amount equally over the Term Loan Period with final
payment of the remaining principal balance on the Notes due on the Maturity
Date.
Section 3.02 Interest.
(a) The Borrower will pay to the Agent, for account of each Lender,
interest on the unpaid principal amount of each Loan made by such Lender for
the period commencing on the date such Loan is made to but excluding the date
such Loan shall be paid in full, at the following rates per annum:
(i) if such a Loan is a Base Rate Loan, the Base Rate (as in effect
from time to time) plus the Applicable Margin, but in no event to exceed
the Highest Lawful Rate; and
(ii) if such a Loan is a Eurodollar Loan, for each Interest Period
relating thereto, the Eurodollar Rate for such Loan plus the Applicable
Margin, but in no event to exceed the Highest Lawful Rate.
(b) Notwithstanding the foregoing, (i) during any curative period for
a Borrowing Base deficiency under Section 2.07(c)(ii), the Borrower will pay to
the Agent, for the account of each Lender interest at the applicable Post-
Default Rate on any principal of each Loan made by such Lender; and (ii) in all
other cases, the Borrower will pay to the Agent, for the account of each Lender
interest at the applicable Post-Default Rate on the unpaid principal of each
Loan made by such Lender, and (to the fullest extent permitted by law) on each
other amount payable by the Borrower hereunder or under any other Loan Document
to or for account of such Lender, which shall not be paid in full when due
(whether at stated maturity, by acceleration or otherwise), for the period
commencing on the due date thereof until the same is paid in full.
(c) Accrued interest on Base Rate Loans shall be payable on each
Quarterly Date, commencing on June 30, 1998, and on the Maturity Date; and
accrued interest on each Eurodollar Loan shall be payable on the last day of
the Interest Period therefor and, if such Interest Period is longer than three
months at three-month intervals following the first day of such Interest
Period. Interest payable at the Post-Default Rate shall be payable: (i) during
any curative period for a Borrowing Base deficiency under Section 2.07(c)(ii),
on the same day any deficiency payments are made under Section 2.07(c)(ii); and
(ii) in all other case, from time to time on demand. Interest on any
Eurodollar Loan that is converted into a Base Rate Loan (pursuant to Section
5.04) shall be payable on the date of conversion (but only to the extent so
converted).
(d) Upon any change during the Revolving Credit Period in the amount
of the Indebtedness (including the LC Exposure) outstanding hereunder or the
Borrowing Base, the Agent shall promptly redetermine the Percentage Usage; and
in the event such circumstances result in a change in the Applicable Margin or
the Commitment Fee Rate, the Agent shall notify the Lenders and the Borrower
thereof. Each determination by the Agent of an interest rate or fee hereunder
shall, except in cases of manifest error, be final, conclusive and binding on
the parties.
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ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 Payments. Except to the extent otherwise provided herein,
all payments of principal, interest and other amounts to be made by the
Borrower under this Agreement, the Notes, the Letter of Credit Agreements and
any other Loan Document shall be made in Dollars, in immediately available
funds, to the Agent at such account as the Agent shall specify by notice to the
Borrower from time to time, not later than 1:00 p.m. Houston time on the date
on which such payments shall become due (each such payment made after such time
on such due date to be deemed to have been made on the next succeeding Business
Day). Such payments shall be made without (to the fullest extent permitted by
applicable law) defense, set-off or counterclaim, but shall not constitute a
waiver, release or estoppel with respect to any such defense, set-off or
counterclaim. Each payment to be made to the Agent under this Agreement, any
Note or any other Loan Document for account of a Lender shall be paid promptly
to such Lender in immediately available funds. Except as provided in the
definition of "Interest Period", if the due date of any payment under this
Agreement, any Note or any other Loan Document would otherwise fall on a day
which is not a Business Day such date shall be extended to the next succeeding
Business Day and interest shall be payable for any principal so extended for
the period of such extension. At the time of each payment to the Agent of any
principal of or interest on any borrowing, the Borrower shall notify the Agent
of the Loans to which such payment shall apply. In the absence of such notice,
the Agent may specify the Loans to which such payment shall apply, but to the
extent possible such payment or prepayment will be applied first to the Loans
comprised of Base Rate Loans.
Section 4.02 Pro Rata Treatment. Except to the extent otherwise
provided herein each Lender agrees that: (i) each borrowing from the Lenders
under Section 2.01 shall be made from each Lender pro rata in accordance with
its Percentage Share, each payment of commitment fee or other fees under Sec-
tions 2.04(a) and (b) shall be made for account of each Lender pro rata in
accordance with its Percentage Share, and each termination or reduction of the
amount of the Aggregate Maximum Credit Amounts under Section 2.03(b) shall be
applied to the Commitment of each Lender, pro rata in accordance with its
Percentage Share; (ii) each payment of principal of Loans by the Borrower shall
be made for account of the Lenders pro rata in accordance with the respective
unpaid principal amount of the Loans held by the Lenders; (iii) each payment of
interest on Loans by the Borrower shall be made for account of the Lenders pro
rata in accordance with the amounts of interest due and payable to the
respective Lenders; and (iv) each reimbursement by the Borrower of
disbursements under Letters of Credit shall be made for account of the Agent
or, if funded by the Lenders, pro rata for the account of the Lenders in
accordance with the amounts of reimbursement obligations due and payable to
each respective Lender.
Section 4.03 Computations. Interest on Eurodollar Loans and fees shall
be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period
for which such interest is payable, unless such calculation would exceed the
Highest Lawful Rate, in which case interest shall be calculated on the per
annum basis of a year of 365 or 366 days, as the case may be. Interest on Base
Rate Loans shall be computed on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed (including the first day but excluding the
last day) occurring in the period for which such interest is payable.
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Section 4.04 Non-receipt of Funds by the Agent. Unless the Agent shall
have been notified by a Lender or the Borrower prior to the date on which such
notifying party is scheduled to make payment to the Agent (in the case of a
Lender) of the proceeds of a Loan or a payment under a Letter of Credit to be
made by it hereunder or (in the case of the Borrower) a payment to the Agent
for account of one or more of the Lenders hereunder (such payment being herein
called the "Required Payment"), which notice shall be effective upon receipt,
that it does not intend to make the Required Payment to the Agent, the Agent
may assume that the Required Payment has been made and may, in reliance upon
such assumption (but shall not be required to), make the amount thereof
available to the intended recipient(s) on such date; and, if such Lender or the
Borrower (as the case may be) has not in fact made the Required Payment to the
Agent, the recipient(s) of such payment shall, on demand, repay to the Agent
the amount so made available together with interest thereon in respect of each
day during the period commencing on the date such amount was so made available
by the Agent until but excluding the date the Agent recovers such amount at a
rate per annum which, for any Lender as recipient, will be equal to the Federal
Funds Rate, and for the Borrower as recipient, will be equal to the Base Rate
plus the Applicable Margin.
Section 4.05 Set-off, Sharing of Payments, Etc.
(a) The Borrower agrees that, in addition to (and without limitation
of) any right of set-off, bankers' lien or counterclaim a Lender may otherwise
have, after the occurrence and during the continuation of an Event of Default,
each Lender shall have the right and be entitled (after consultation with the
Agent), at its option, to offset balances held by it or by any of its
Affiliates for account of any Obligor at any of its offices, in Dollars or in
any other currency, against any principal of or interest on any of such
Lender's Loans, or any other amount payable to such Lender hereunder, which is
not paid when due (regardless of whether such balances are then due to such
Obligor), in which case it shall promptly notify such Obligor and the Agent
thereof, provided that such Lender's failure to give such notice shall not
affect the validity thereof.
(b) If any Lender shall obtain payment of any principal of or
interest on any Loan made by it to any Obligor under this Agreement or any
other Loan Document through the exercise of any right of set-off, banker's lien
or counterclaim or similar right or otherwise, and, as a result of such
payment, such Lender shall have received a greater percentage of the principal
or interest then due hereunder by the Borrower to such Lender than the
percentage received by any other Lenders, it shall promptly (i) notify the
Agent and each other Lender thereof and (ii) purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Loans made by such other Lenders (or in interest due thereon,
as the case may be) in such amounts, and make such other adjustments from time
to time as shall be equitable, to the end that all the Lenders shall share the
benefit of such excess payment (net of any expenses which may be incurred by
such Lender in obtaining or preserving such excess payment) pro rata in
accordance with the unpaid principal and/or interest on the Loans held by each
of the Lenders. To such end all the Lenders shall make appropriate adjustments
among themselves (by the resale of participations sold or otherwise) if such
payment is rescinded or must otherwise be restored. QSRD and the Borrower
agree that any Lender so purchasing a participation (or direct interest) in the
Loans made by other Lenders (or in interest due thereon, as the case may be)
may exercise all rights of set-off, banker's lien, counterclaim or similar
rights with respect to such participation as fully as if such Lender were a
direct holder of Loans in the amount of such participation. Nothing contained
herein shall require
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any Lender to exercise any such right or shall affect the right of any Lender
to exercise, and retain the benefits of exercising, any such right with respect
to any other indebtedness or obligation of such Obligor. If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a set-off to which this Section 4.05 applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders entitled
under this Section 4.05 to share the benefits of any recovery on such secured
claim.
Section 4.06 Taxes.
(a) Payments Free and Clear. Any and all payments by any Obligor
hereunder or under any other Loan Document shall be made, in accordance with
Section 4.01, free and clear of and without deduction for any and all present
or future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender and the
Agent, taxes imposed on its income, and franchise or similar taxes imposed on
it, by (i) any jurisdiction (or political subdivision thereof) of which the
Agent or such Lender, as the case may be, is a citizen or resident or in which
such Lender has an Applicable Lending Office, (ii) the jurisdiction (or any
political subdivision thereof) in which the Agent or such Lender is organized,
or (iii) any jurisdiction (or political subdivision thereof) in which such
Lender or the Agent is presently doing business which taxes are imposed solely
as a result of doing business in such jurisdiction (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If such Obligor shall be required by law
to deduct any Taxes from or in respect of any sum payable hereunder to the
Lenders or the Agent: (i) the sum payable shall be increased by the amount
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 4.06) such Lender or
the Agent (as the case may be) shall receive an amount equal to the sum it
would have received had no such deductions been made, (ii) such Obligor shall
make such deductions and (iii) such Obligor shall pay the full amount deducted
to the relevant taxing authority or other Governmental Authority in accordance
with applicable law.
(b) Other Taxes. In addition, to the fullest extent permitted by
applicable law, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, any
Assignment or any other Loan Document (hereinafter referred to as "Other
Taxes").
(c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, THE BORROWER WILL INDEMNIFY EACH LENDER AND THE AGENT FOR THE FULL AMOUNT
OF TAXES AND OTHER TAXES (INCLUDING, BUT NOT LIMITED TO, ANY TAXES OR OTHER
TAXES IMPOSED BY ANY GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE UNDER THIS
SECTION 4.06) PAID BY SUCH LENDER OR THE AGENT (ON THEIR BEHALF OR ON BEHALF OF
ANY LENDER), AS THE CASE MAY BE, AND ANY LIABILITY (INCLUDING PENALTIES,
INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO, WHETHER OR
NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED UNLESS THE
PAYMENT OF SUCH TAXES WAS NOT CORRECTLY OR LEGALLY ASSERTED AND SUCH LENDER'S
PAYMENT OF SUCH TAXES OR
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OTHER TAXES WAS THE RESULT OF ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ANY
PAYMENT PURSUANT TO SUCH INDEMNIFICATION SHALL BE MADE WITHIN THIRTY (30) DAYS
AFTER THE DATE ANY LENDER OR THE AGENT, AS THE CASE MAY BE, MAKES WRITTEN
DEMAND THEREFOR. IF ANY LENDER OR THE AGENT RECEIVES A REFUND OR CREDIT IN
RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH SUCH LENDER OR THE AGENT HAS
RECEIVED PAYMENT FROM THE BORROWER IT SHALL PROMPTLY NOTIFY THE BORROWER OF
SUCH REFUND OR CREDIT AND SHALL, IF NO DEFAULT HAS OCCURRED AND IS CONTINUING,
WITHIN THIRTY (30) DAYS AFTER RECEIPT OF A REQUEST BY THE BORROWER (OR PROMPTLY
UPON RECEIPT, IF THE BORROWER HAS REQUESTED APPLICATION FOR SUCH REFUND OR
CREDIT PURSUANT HERETO), PAY AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT TO THE
BORROWER WITHOUT INTEREST (BUT WITH ANY INTEREST SO REFUNDED OR CREDITED),
PROVIDED THAT THE BORROWER, UPON THE REQUEST OF SUCH LENDER OR THE AGENT,
AGREES TO RETURN SUCH REFUND OR CREDIT (PLUS PENALTIES, INTEREST OR OTHER
CHARGES) TO SUCH LENDER OR THE AGENT IN THE EVENT SUCH LENDER OR THE AGENT IS
REQUIRED TO REPAY SUCH REFUND OR CREDIT.
(d) Lender Representations.
(i) Each Lender represents that it is either (i) a corporation
organized under the laws of the United States of America or any state
thereof or (ii) it is entitled to complete exemption from United States
withholding tax imposed on or with respect to any payments, including
fees, to be made to it pursuant to this Agreement and the other Loan
Documents (A) under an applicable provision of a tax convention to which
the United States of America is a party or (B) because it is acting
through a branch, agency or office in the United States of America and
any payment to be received by it hereunder is effectively connected with
a trade or business in the United States of America. Each Lender that
is not a corporation organized under the laws of the United States of
America or any state thereof agrees to provide to the Borrower and the
Agent on the Closing Date, or on the date of its delivery of the
Assignment pursuant to which it becomes a Lender, and at such other
times as required by United States law or as the Borrower or the Agent
shall reasonably request, two accurate and complete original signed
copies of either (A) Internal Revenue Service Form 4224 (or successor
form) certifying that all payments to be made to it hereunder will be
effectively connected to a United States trade or business (the "Form
4224 Certification") or (B) Internal Revenue Service Form 1001 (or
successor form) certifying that it is entitled to the benefit of a
provision of a tax convention to which the United States of America is a
party which completely exempts from United States withholding tax all
payments to be made to it hereunder (the "Form 1001 Certification"). In
addition, each Lender agrees that if it previously filed a Form 4224
Certification, it will deliver to the Borrower and the Agent a new Form
4224 Certification prior to the first payment date occurring in each of
its subsequent taxable years; and if it previously filed a Form 1001
Certification, it will deliver to the Borrower and the Agent a new
certification prior to the first payment date falling in the third year
following the previous filing of such certification. Each Lender also
agrees to deliver to the Borrower and the Agent such other or
supplemental forms as may at any time be required as a result of changes
in applicable law or regulation in order to confirm or maintain in
effect its entitlement to exemption from United States withholding tax
on any payments hereunder, provided that the circumstances of such
Lender at the relevant time and
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applicable laws permit it to do so. If a Lender determines, as a result
of any change in either (i) a Governmental Requirement or (ii) its
circumstances, that it is unable to submit any form or certificate that
it is obligated to submit pursuant to this Section 4.06, or that it is
required to withdraw or cancel any such form or certificate previously
submitted, it shall promptly notify the Borrower and the Agent of such
fact. If a Lender is organized under the laws of a jurisdiction outside
the United States of America, unless the Borrower and the Agent have
received a Form 1001 Certification or Form 4224 Certification
satisfactory to them indicating that all payments to be made to such
Lender hereunder are not subject to United States withholding tax, the
Agent (in consultation with the Borrower) shall withhold taxes from such
payments at the applicable statutory rate. Each Lender agrees to
indemnify and hold harmless from any United States taxes, penalties,
interest and other expenses, costs and losses incurred or payable by (i)
the Borrower or the Agent as a result of such Lender's failure to submit
any form or certificate that it is required to provide pursuant to this
Section 4.06 or (ii) the Borrower or the Agent as a result of their
reliance on any such form or certificate which such Lender has provided
to them pursuant to this Section 4.06.
(ii) For any period with respect to which a Lender has failed to
provide the Borrower with the form required pursuant to this Section
4.06, if any (other than if such failure is due to a change in a
Governmental Requirement occurring subsequent to the date on which a
form originally was required to be provided), such Lender shall not be
entitled to indemnification under Section 4.06 with respect to taxes
imposed by the United States which taxes would not have been imposed but
for such failure to provide such forms; provided, however, that should a
Lender, which is otherwise exempt from or subject to a reduced rate of
withholding tax becomes subject to taxes because of its failure to
deliver a form required hereunder, the Borrower shall take such steps as
such Lender shall reasonably request to assist such Lender to recover
such taxes.
(iii) Any Lender claiming any additional amounts payable pursuant to
this Section 4.06 shall use reasonable efforts (consistent with legal
and regulatory restrictions) to file any certificate or document
requested by the Borrower or the Agent or to change the jurisdiction of
its Applicable Lending Office or to contest any tax imposed if the
making of such a filing or change or contesting such tax would avoid the
need for or reduce the amount of any such additional amounts that may
thereafter accrue and would not, in the sole determination of such
Lender, be otherwise disadvantageous to such Lender.
Section 4.07 Disposition of Proceeds. The Security Instruments contain
an assignment unto and in favor of the Agent for the benefit of the Lenders of
all production and all proceeds attributable thereto which may be produced from
or allocated to the Mortgaged Property, and the Security Instruments further
provide in general for the application of such proceeds to the satisfaction of
the Indebtedness and other obligations described therein and secured thereby.
Notwithstanding the assignment contained in such Security Instruments, until
the occurrence of an Event of Default, the Lenders agree that they will neither
notify the purchaser or purchasers of such production nor take any other action
to cause such proceeds to be remitted to the Lenders, but the Lenders will
instead permit such proceeds to be paid to QSRD and its Subsidiaries. In
addition, until the occurrence of an Event of Default, the Lenders will, upon
written request of the Borrower given to the Agent, execute and deliver, at the
Borrower's expense, such transfer orders and other
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instruments reasonably necessary to allow payment of production proceeds
directly to QSRD and its Subsidiaries.
ARTICLE V
YIELD MAINTENANCE; CAPITAL ADEQUACY
Section 5.01 Additional Costs.
(a) Eurodollar Regulations, etc. The Borrower shall pay directly to
each Lender from time to time such amounts as such Lender may determine to be
necessary to compensate such Lender for any costs which it determines are
attributable to its making or maintaining of any Eurodollar Loans hereunder or
its obligation to make any Eurodollar Loans hereunder, or any reduction in any
amount receivable by such Lender hereunder in respect of any of such Eurodollar
Loans or such obligation (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting from any
Regulatory Change which: (i) changes the basis of taxation of any amounts
payable to such Lender under this Agreement or any Note in respect of any of
such Eurodollar Loans (other than taxes imposed on the overall net income of
such Lender or of its Applicable Lending Office for any of such Eurodollar
Loans by the jurisdiction in which such Lender has its principal office or
Applicable Lending Office); or (ii) imposes or modifies any reserve, special
deposit, minimum capital, capital ratio or similar requirements relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of such Lender (including any of such Eurodollar Loans or any
deposits referred to in the definition of "Eurodollar Rate" in Section 1.02
hereof), or the Commitment of such Lender or the Eurodollar interbank market;
or (iii) imposes any other condition affecting this Agreement or any Note (or
any of such extensions of credit or liabilities) or such Lender's Commitment.
Each Lender will notify the Agent and the Borrower of any event occurring after
the Closing Date which will entitle such Lender to compensation pursuant to
this Section 5.01(a) as promptly as practicable after it obtains knowledge
thereof and determines to request such compensation, and will designate a
different Applicable Lending Office for the Loans of such Lender affected by
such event if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender, provided that such Lender shall have no
obligation to so designate an Applicable Lending Office located outside of the
United States. If any Lender requests compensation from the Borrower under
this Section 5.01(a), the Borrower may, by notice to such Lender, suspend the
obligation of such Lender to make additional Loans of the Type with respect to
which such compensation is requested until the Regulatory Change giving rise to
such request ceases to be in effect (in which case the provisions of Section
5.04 shall be applicable).
(b) Regulatory Change. Without limiting the effect of the provisions
of Section 5.01(a), in the event that, by reason of any Regulatory Change or
any other circumstances arising after the Closing Date affecting such Lender,
the Eurodollar interbank market or such Lender's position in such market, any
Lender either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of such Lender which includes deposits by reference to which the
interest rate on Eurodollar Loans is determined as provided in this Agreement
or a category of extensions of credit or other assets of such Lender which
includes Eurodollar Loans or (ii) becomes subject to restrictions on the amount
of such a category of liabilities or assets which it may hold, then, if such
Lender so elects by notice to the
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Borrower, the obligation of such Lender to make additional Eurodollar Loans
shall be suspended until such Regulatory Change or other circumstances ceases
to be in effect (in which case the provisions of Section 5.04 shall be
applicable).
(c) Capital Adequacy. Without limiting the effect of the foregoing
provisions of this Section 5.01 (but without duplication), the Borrower shall
pay directly to any Lender from time to time on request such amounts as such
Lender may reasonably determine to be necessary to compensate such Lender or
its parent or holding company for any costs which it determines are attrib-
utable to the maintenance by such Lender or its parent or holding company (or
any Applicable Lending Office), pursuant to any Governmental Requirement
following any Regulatory Change, of capital in respect of its Commitment, its
Note, its Loans or any interest held by it in any Letter of Credit, such
compensation to include, without limitation, an amount equal to any reduction
of the rate of return on assets or equity of such Lender or its parent or
holding company (or any Applicable Lending Office) to a level below that which
such Lender or its parent or holding company (or any Applicable Lending Office)
could have achieved but for such Governmental Requirement. Such Lender will
notify the Borrower that it is entitled to compensation pursuant to this
Section 5.01(c) as promptly as practicable after it determines to request such
compensation.
(d) Compensation Procedure. Any Lender notifying the Borrower of the
incurrence of additional costs under this Section 5.01 shall in such notice to
the Borrower and the Agent set forth in reasonable detail the basis and amount
of its request for compensation. Determinations and allocations by each Lender
for purposes of this Section 5.01 of the effect of any Regulatory Change
pursuant to Section 5.01(a) or (b), or of the effect of capital maintained
pursuant to Section 5.01(c), on its costs or rate of return of maintaining
Loans or its obligation to make Loans or issue or participate in Letters of
Credit, or on amounts receivable by it in respect of Loans or Letters of
Credit, and of the amounts required to compensate such Lender under this Sec-
tion 5.01, shall be conclusive and binding for all purposes, provided that such
determinations and allocations are made on a reasonable basis. Any request for
additional compensation under this Section 5.01 shall be paid by the Borrower
within thirty (30) days of the receipt by the Borrower of the notice described
in this Section 5.01(d).
Section 5.02 Limitation on Eurodollar Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any
Eurodollar Rate for any Interest Period:
(i) the Agent determines (which determination shall be conclusive,
absent manifest error) that quotations of interest rates for the
relevant deposits referred to in the definition of "Eurodollar Rate" in
Section 1.02 are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining rates of interest for
Eurodollar Loans as provided herein; or
(ii) the Agent determines (which determination shall be conclusive,
absent manifest error) that the relevant rates of interest referred to
in the definition of "Eurodollar Rate" in Section 1.02 upon the basis of
which the rate of interest for Eurodollar Loans for such Interest Period
is to be determined are not sufficient to adequately cover the cost to
the Lenders of making or maintaining Eurodollar Loans;
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then the Agent shall give the Borrower prompt notice thereof, and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make additional Eurodollar Loans.
Section 5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain
Eurodollar Loans hereunder, then such Lender shall promptly notify the Borrower
and the Agent thereof and such Lender's obligation to make Eurodollar Loans
shall be suspended until such time as such Lender may again make and maintain
Eurodollar Loans (in which case the provisions of Section 5.04 shall be
applicable).
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03.
If the obligation of any Lender to make Eurodollar Loans shall be suspended
pursuant to Sections 5.01, 5.02 or 5.03 ("Affected Loans"), all Affected Loans
which would otherwise be made by such Lender shall be made instead as Base Rate
Loans (and, if an event referred to in Section 5.01(b) or Section 5.03 has
occurred and such Lender so requests by notice to the Borrower, all Affected
Loans of such Lender then outstanding shall be automatically converted into
Base Rate Loans on the date specified by such Lender in such notice) and, to
the extent that Affected Loans are so made as (or converted into) Base Rate
Loans, all payments of principal which would otherwise be applied to such
Lender's Affected Loans shall be applied instead to its Base Rate Loans.
Section 5.05 Breakage Compensation. The Borrower shall pay to each
Lender within thirty (30) days of receipt of written request of such Lender
(which request shall set forth, in reasonable detail, the basis for requesting
such amounts and which shall be conclusive and binding for all purposes
provided that such determinations are made on a reasonable basis), such amount
or amounts as shall compensate it for any loss, cost, expense or liability
which such Lender determines are attributable to:
(i) any payment, prepayment or conversion of a Eurodollar Loan
properly made by such Lender or the Borrower for any reason (including,
without limitation, the acceleration of the Loans pursuant to Section
10.02) on a date other than the last day of the Interest Period for such
Loan; or
(ii) any failure by the Borrower for any reason (including but not
limited to, the failure of any of the conditions precedent specified in
Article VI to be satisfied) to borrow, continue or convert a Eurodollar
Loan from such Lender on the date for such borrowing, continuation or
conversion specified in the relevant notice given pursuant to Sec- tion
2.02(c).
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the principal amount so paid, prepaid or converted
or not borrowed for the period from the date of such payment, prepayment or
conversion or failure to borrow to the last day of the Interest Period for such
Loan (or, in the case of a failure to borrow, the Interest Period for such Loan
which would have commenced on the date specified for such borrowing) at the
applicable rate of interest for such Loan provided for herein over (ii) the
interest component of the amount such Lender would have bid in the London
interbank market for Dollar deposits of leading banks in amounts comparable to
such
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principal amount and with maturities comparable to such period (as reasonably
determined by such Lender).
Section 5.06 Replacement Lenders.
(a) If any Lender has (i) notified the Borrower that it has or will
incur Additional Costs or request compensation under Section 5.01, (ii)
notified the Borrower that the making or maintaining of Eurodollar Loans is or
will be illegal under Section 5.03, or (iii) required the Borrower to make
payments for Taxes under Section 4.06, then the Borrower may, unless such
Lender has notified the Borrower that the circumstances giving rise to such
notice no longer apply, terminate, in whole but not in part, the Commitment of
such Lender (other than the Agent) (the "Terminated Lender") at any time upon
five (5) Business Days' prior written notice to the Terminated Lender and the
Agent (such notice referred to herein as a "Notice of Termination").
(b) In order to effect the termination of the Commitment of the
Terminated Lender, the Borrower shall: (i) obtain an agreement with one or more
Lenders to increase their Commitment or Commitments and/or (ii) request any one
or more other banking institutions to become parties to this Agreement in place
and instead of such Terminated Lender and agree to accept a Commitment or
Commitments; provided, however, that such one or more other banking
institutions are reasonably acceptable to the Agent and become parties by
executing an Assignment (the Lenders or other banking institutions that agree
to accept in whole or in part the Commitment of the Terminated Lender being
referred to herein as the "Replacement Lenders"), such that the aggregate
increased and/or accepted Commitments of the Replacement Lenders under clauses
(i) and (ii) above equal the Commitment of the Terminated Lender.
(c) The Notice of Termination shall include the name of the
Terminated Lender, the date the termination will occur (the "Termination
Date"), and the Replacement Lender or Replacement Lenders to which the
Terminated Lender will assign its Commitment and, if there will be more than
one Replacement Lender, the portion of the Terminated Lender's Commitment to be
assigned to each Replacement Lender.
(d) On the Termination Date, (i) the Terminated Lender shall by
execution and delivery of an Assignment assign its Commitment to the
Replacement Lender or Replacement Lenders (unless otherwise agreed, pro rata,
if there is more than one Replacement Lender, in proportion to the portion of
the Terminated Lender's Commitment to be assigned to each Replacement Lender)
indicated in the Notice of Termination and shall assign to the Replacement
Lender or Replacement Lenders each of its Loans (if any) then outstanding and
participation interests in Letters of Credit (if any) then outstanding pro rata
as aforesaid), (ii) the Borrower will pay the Terminated Lender the Additional
Costs, compensation or Taxes accrued and owing prior to the Termination Date,
(iii) the Terminated Lender shall endorse its Note, payable without recourse,
representation or warranty to the order of the Replacement Lender or
Replacement Lenders (as aforesaid), (iv) the Replacement Lender or Replacement
Lenders shall purchase the Note held by the Terminated Lender (as aforesaid) at
a price equal to the unpaid principal amount thereof plus interest and fees
accrued and unpaid to the Termination Date, and (v) the Replacement Lender or
Replacement Lenders will thereupon (pro rata as aforesaid) succeed to and be
substituted in all respects for the Terminated Lender with like effect as if
becoming a Lender pursuant to the terms of Section 12.06(b), and the
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Terminated Lender will have the rights and benefits of an assignor under
Section 12.06(b). To the extent not in conflict, the terms of Section 12.06(b)
shall supplement the provisions of this Section 5.06(d).
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Initial Funding. The obligation of the Lenders to
make the Initial Funding is subject to: (i) the receipt by the Agent of all
fees payable pursuant to Section 2.04(f) on or before the Closing Date or
otherwise payable under this Agreement, (ii) the receipt by each Lender or any
of its Affiliates of any structuring or other fees payable pursuant to any fee
agreements between QSRD, the Borrower and/or such Lender or Affiliate, and
(iii) the receipt by the Agent of the following documents and satisfaction of
the other conditions provided in this Section 6.01, each of which shall be
satisfactory to the Agent in form and substance:
(a) A certificate of the Secretary or an Assistant Secretary of the
Borrower setting forth (i) resolutions of its board of directors with respect
to the authorization of the Borrower to execute and deliver the Loan Documents
to which it is a party and to enter into the transactions contemplated in the
Loan Documents, (ii) the officers of the Borrower (y) who are authorized to
sign the Loan Documents to which Borrower is a party and (z) who will, until
replaced by another officer or officers duly authorized for that purpose, act
as its representative for the purposes of signing Loan Documents and giving
notices and other communications in connection with this Agreement, the other
Loan Documents and the transactions contemplated hereby, (iii) specimen
signatures of the authorized officers, and (iv) the articles or certificate of
incorporation and bylaws of the Borrower, certified as being true and complete.
The Agent and the Lenders may conclusively rely on such certificate until the
Agent receives notice in writing from the Borrower to the contrary.
(b) A certificate of the Secretary or an Assistant Secretary of QSRD
and each Subsidiary Guarantor setting forth (i) resolutions of its board of
directors with respect to the authorization of such Person to execute and
deliver the Loan Documents to which it is a party and to enter into the
transactions contemplated in the Loan Documents, (ii) its officers (y) who are
authorized to sign the Loan Documents to which it is a party and (z) who will,
until replaced by another officer or officers duly authorized for that purpose,
act as its representative for the purposes of signing Loan Documents and giving
notices and other communications in connection with this Agreement, the other
Loan Documents and the transactions contemplated hereby, (iii) specimen
signatures of the authorized officers, and (iv) the articles or certificate of
incorporation and bylaws of such Person, certified as being true and complete.
The Agent and the Lenders may conclusively rely on such certificate until the
Agent receives notice in writing from the Borrower to the contrary.
(c) Certificates of the appropriate state agencies with respect to
the existence, qualification and good standing of QSRD, the Borrower and each
Subsidiary Guarantor.
(d) A compliance certificate which shall be substantially in the form
of Exhibit C, duly and properly executed by a Responsible Officer and dated as
of the date of the Initial Funding.
(e) The Notes, duly completed and executed.
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(f) The Security Instruments described on Exhibit D duly completed
and executed in sufficient number of counterparts for recording, if necessary.
(g) The following opinions:
(i) an opinion of Xxxxxx and Xxxxx, L.L.P., special counsel to the
Borrower, in form and substance reasonably satisfactory to the Agent.
(ii) an opinion of local counsel in each of the following
jurisdictions: Louisiana, Oklahoma, Mississippi, Kansas and Wyoming, in
each case in form and substance satisfactory to the Agent.
(h) A certificate of insurance coverage of QSRD evidencing that QSRD
and its Subsidiaries are carrying insurance in accordance with Section 7.19
hereof.
(i) The Agent and the Lenders shall be reasonably satisfied with the
status of title and the environmental condition of the Properties of the
Borrower and the Subsidiary Guarantors being acquired pursuant to the Purchase
and Sale Agreement.
(j) Multiple originals of the Security Instruments and accompanying
financing statements covering the Mortgaged Property for filing and recordation
in the appropriate offices to establish and perfect the Liens created thereby;
and the Agent shall be reasonably satisfied that, upon such filing and
recordation, the Security Instruments create valid and perfected, first
priority Liens on not less than 95% of each of proved producing and the total
proved SEC Value of the Oil and Gas Properties included in the Initial Reserve
Report.
(k) The Agent shall have been furnished with appropriate UCC search
certificates reflecting no prior Liens except those contemplated by Section
9.02.
(l) The Initial Reserve Reports.
(m) All holders of the ECT Subordinated Debt shall have executed and
delivered to the Agent a consent, (i) which consents to the increase in the
amount of Indebtedness contemplated hereby over the Prior Credit Agreement,
(ii) which agrees to subordinate the Liens securing the ECT Subordinated Debt
to the Liens securing the full amount of the Indebtedness contemplated hereby,
(iii) which consents to the full amount of the Bridge Loans, and (iv) which
addresses such other issues as the Agent may reasonably request.
(n) A certificate of a Responsible Officer certifying and
representing (i) that the Borrower is consummating the Acquisition and that all
conditions precedent to the closing of the transactions contemplated thereby
have been either satisfied or waived as of the Closing Date, and (ii) that
attached thereto are true and complete copies of all material documentation
relating to the Acquisition, including the Purchase and Sale Agreement, the
Preliminary Closing Statement referred to in Section 2.3(c) thereof and notices
of title defect; and the Agent shall be reasonably satisfied with the form and
substance of such documents.
(o) A certificate of a Responsible Officer certifying and
representing that QSRD and the Borrower has executed and delivered the Bridge
Loan Documents and that all conditions precedent
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to the closing of the transactions contemplated thereby have been either
satisfied or waived as of the Closing Date.
(p) A proposal outlining the proposed capitalization of QSRD prior,
and after giving effect, to the currently contemplated Hi-Yield Offering and
Equity Offering, and such proposed capital structure shall be reasonably
satisfactory to the Agent.
(q) Such other documents as the Agent or any Lender or special
counsel to the Agent may reasonably request.
Section 6.02 Initial and Subsequent Loans. The obligation of the
Lenders to make Loans to the Borrower upon the occasion of each borrowing
hereunder and to issue, renew, extend or reissue Letters of Credit for the
account of the Borrower (including the Initial Funding) is subject to the
further conditions precedent that, as of the date of such Loans and after
giving effect thereto: (a) no Default shall have occurred and be continuing;
(b) no Material Adverse Effect shall have occurred; and (c) the representations
and warranties made by QSRD and its Subsidiaries in Article VII and in the Loan
Documents shall be true on and as of the date of the making of such Loans or
issuance, renewal, extension or reissuance of a Letter of Credit with the same
force and effect as if made on and as of such date and following such new
borrowing or issuance, renewal, extension or reissuance, except to the extent
such representations and warranties are expressly limited to an earlier date or
the Majority Lenders may expressly consent in writing to the contrary.
Section 6.03 Conditions Relating to Letters of Credit. In addition to
the satisfaction of all other conditions precedent set forth in this Article
VI, the issuance, renewal, extension or reissuance of the Letters of Credit
referred to in Section 2.01(b) hereof is subject to the following conditions
precedent:
(a) At least three (3) Business Days prior to the date of the
issuance, renewal, extension or reissuance of each Letter of Credit, the Agent
shall have received a written request for a Letter of Credit.
(b) Each of the Letters of Credit shall (i) be issued by the Agent,
(ii) contain such terms and provisions as are reasonably required by the Agent,
(iii) be for the account of the Borrower and (iv) expire not later than the
earlier of one (1) year from the date of the issuance or renewal thereof or the
Revolving Credit Termination Date.
(c) The Borrower shall have duly and validly executed and delivered
to the Agent a Letter of Credit Agreement pertaining to the Letter of Credit.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
QSRD and the Borrower represent and warrant to the Agent and the Lenders
that (each representation and warranty herein is given as of the Closing Date
and shall be deemed repeated and reaffirmed on the dates of each borrowing and
issuance, renewal, extension or reissuance of a Letter of Credit as provided in
Section 6.02, except that the representations contained in Section 7.02 shall
be deemed to be made with respect to the most recent financial statements
delivered to the Agent pursuant to Section 8.01):
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Section 7.01 Corporate Existence. Each of QSRD, the Borrower and its
Subsidiaries: (i) is a corporation duly organized, legally existing and in good
standing under the laws of the jurisdiction of its incorporation; (ii) has all
requisite corporate power, and has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry on
its business as now being or as proposed to be conducted; and (iii) is
qualified to do business in all jurisdictions in which the nature of the
business conducted by it makes such qualification necessary and where failure
so to qualify would have a Material Adverse Effect.
Section 7.02 Financial Condition.
(a) The audited consolidated balance sheet of QSRD and its
Consolidated Subsidiaries, as at June 30, 1997 and the related consolidated
statement of operations, stockholders' equity and cash flow of QSRD and its
Consolidated Subsidiaries, for the fiscal year ended on said date, with the
audit report thereon of Ernst & Young L.L.P. heretofore furnished to each of
the Lenders, and the unaudited consolidated balance sheet of QSRD and its
Consolidated Subsidiaries as at December 31, 1997 and their related
consolidated statements of operations, stockholders' equity and cash flow of
QSRD and its Consolidated Subsidiaries for the 6-month period ended on such
date heretofore furnished to the Lenders are complete and correct in all
material respects and fairly present the consolidated financial condition of
QSRD and its Consolidated Subsidiaries as at said dates and the results of its
operations for the fiscal year and the 6-month period ending on said dates, all
in accordance with GAAP, as applied on a consistent basis (subject, in the case
of the interim financial statements, to normal year-end adjustments).
(b) Neither QSRD nor any of its Subsidiaries has on the Closing Date
any material Debt, contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
the Financial Statements or in Schedule 7.02 which could reasonably be expected
to have a Material Adverse Effect. Since June 30, 1997, there has been no
change or event having a Material Adverse Effect. Since June 30, 1997, neither
the business nor the Properties of QSRD or any of its Subsidiaries have been
materially and adversely affected as a result of any fire, explosion,
earthquake, flood, drought, windstorm, accident, strike or other labor
disturbance, embargo, requisition or taking of Property or cancellation of
contracts, permits or concessions by any Governmental Authority, riot,
activities of armed forces or acts of God or of any public enemy.
Section 7.03 Litigation. Except as disclosed to the Lenders in
Schedule 7.03 hereto, at the Closing Date there is no litigation, legal,
administrative or arbitral proceeding, investigation or other action of any
nature pending or, to the knowledge of QSRD and the Borrower threatened against
or affecting QSRD or any of its Subsidiaries which involves the possibility of
any judgment or liability against QSRD or any of its Subsidiaries not fully
covered by insurance (except for normal deductibles), and which would have a
Material Adverse Effect.
Section 7.04 No Breach. Neither the execution and delivery of the Loan
Documents nor compliance with the terms and provisions hereof will conflict
with or result in a breach of, or require any consent which has not been
obtained as of the Closing Date or which if not obtained would have a Material
Adverse Effect under, the respective charter or by-laws of QSRD or any of its
Subsidiaries, including the Borrower, or any material Governmental Requirement,
agreement or instrument to which QSRD or any of its Subsidiaries, including the
Borrower, is a party or by which it is bound or to which it or its Properties
are subject, or constitute a default under any such
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agreement or instrument, or result in the creation or imposition of any Lien
upon any of the revenues or assets of QSRD or any of its Subsidiaries,
including the Borrower, pursuant to the terms of any such agreement or
instrument other than the Liens created by the Loan Documents.
Section 7.05 Authority. QSRD and each of its Subsidiaries, including
the Borrower, have all necessary corporate power and authority to execute,
deliver and perform its obligations under the Loan Documents to which it is a
party; and the execution, delivery and performance by QSRD and each of its
Subsidiaries, including the Borrower, of the Loan Documents to which it is a
party have been duly authorized by all necessary corporate action on its part;
and the Loan Documents constitute the legal, valid and binding obligations of
each such Person, enforceable against it in accordance with its terms, subject
to applicable bankruptcy, insolvency or similar laws and general principles of
equity.
Section 7.06 Approvals. No authorizations, approvals or consents of,
and no filings or registrations with, any Governmental Authority are necessary
for the execution, delivery or performance by QSRD or any of its Subsidiaries,
including the Borrower, of the Loan Documents or for the validity or enforce-
ability thereof, except for the recording and filing of the Security
Instruments as required by this Agreement.
Section 7.07 Use of Loans. The proceeds of the Loans shall be used for
refinancing certain existing Debt, general working capital purposes, including
the Acquisition, and the further acquisition and development of Oil and Gas
Properties and the making of intercompany loans, investments and dividends to
the extent permitted by this Agreement. The Borrower is not engaged
principally, or as one of its important activities, in the business of
extending credit for the purpose, whether immediate, incidental or ultimate, of
buying or carrying margin stock (within the meaning of Regulation G, T, U or X
of the Board of Governors of the Federal Reserve System) and no part of the
proceeds of any Loan or Letter of Credit hereunder will be used to buy or carry
any margin stock.
Section 7.08 ERISA.
(a) QSRD and its ERISA Affiliates have complied in all material
respects with ERISA and, where applicable, the Code regarding each Plan.
(b) Each Plan is, and has been, maintained in substantial compliance
with ERISA and, where applicable, the Code.
(c) To the best knowledge of QSRD, no act, omission or transaction
has occurred which could result in imposition on QSRD or any of its ERISA
Affiliates (whether directly or indirectly) of (i) either a civil penalty
assessed pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary
duty liability damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution plan) or any trust
created under any such Plan has been terminated since September 2, 1974. No
liability to the PBGC (other than for the payment of current premiums which are
not past due) by QSRD or any of its ERISA Affiliates has been or is expected by
QSRD to be incurred with respect to any Plan. No ERISA Event with respect to
any Plan has occurred.
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(e) Full payment when due has been made of all amounts which QSRD
and/or its ERISA Affiliates is required under the terms of each Plan or
applicable law to have paid as contributions to such Plan, and no accumulated
funding deficiency (as defined in section 302 of ERISA and section 412 of the
Code), whether or not waived, exists with respect to any Plan.
(f) The actuarial present value of the benefit liabilities under each
Plan which is subject to Title IV of ERISA does not, as of the end of QSRD's
most recently ended fiscal year, exceed the current value of the assets
(computed on a plan termination basis in accordance with Title IV of ERISA) of
such Plan allocable to such benefit liabilities. The term "actuarial present
value of the benefit liabilities" shall have the meaning specified in section
4041 of ERISA.
(g) None of QSRD or its ERISA Affiliates sponsors, maintains, or
contributes to an employee welfare benefit plan, as defined in section 3(1) of
ERISA, including, without limitation, any such plan maintained to provide
benefits to former employees of such entities, that may not be terminated by
QSRD or any of its ERISA Affiliates in its sole discretion at any time without
any material liability.
(h) None of QSRD or its ERISA Affiliates sponsors, maintains or
contributes to, or has at any time in the preceding six calendar years,
sponsored, maintained or contributed to, any Multiemployer Plan.
(i) None of QSRD or its ERISA Affiliates is required to provide
security under section 401(a)(29) of the Code due to a Plan amendment that
results in an increase in current liability for the Plan.
Section 7.09 Taxes. Each of QSRD and its Subsidiaries, including the
Borrower, has filed all required United States Federal income tax returns that
are currently due and, to the best of QSRD's knowledge, all other tax returns
which are required to be filed by them and have paid all material taxes due
pursuant to such returns or pursuant to any assessment received by QSRD or any
of its Subsidiaries, including the Borrower, except for those being contested
in good faith by appropriate proceedings and for which adequate reserves have
been provided in accordance with GAAP. The charges, accruals and reserves on
the books of QSRD and its Subsidiaries in respect of taxes and other
governmental charges are, in the opinion of QSRD, adequate. No tax Lien has
been filed and, to the knowledge of QSRD, no claim is being asserted with
respect to any such tax, fee or other charge which could reasonably be expected
to have a Material Adverse Effect.
Section 7.10 Titles, etc.
(a) Except as set out in Schedule 7.10, each of QSRD and its
Subsidiaries has good and defensible title to its material (individually or in
the aggregate) Properties, free and clear of all Liens except Liens permitted
by Section 9.02. Except as set forth in Schedule 7.10, after giving full effect
to the Excepted Liens, QSRD and its Subsidiaries, as applicable, owns the net
interests in production attributable to the lands and leases reflected in the
most recently delivered Reserve Report and the ownership of such Properties
shall not in any material respect obligate such Person to bear the costs and
expenses relating to the maintenance, development and operations of each such
Property in an amount in excess of the working interest of each Property set
forth in the most recently delivered Reserve Report. All information contained
in the most recently delivered Reserve Report is true and correct in all
material respects as of the date thereof.
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(b) All material leases and agreements necessary for the conduct of
the business of QSRD and its Subsidiaries are valid and subsisting and are in
full force and effect. There exists no default or event or circumstance which
with the giving of notice or the passage of time or both would give rise to a
default under any such lease or leases which would affect in any material
respect the conduct of the business of QSRD and its Subsidiaries taken as a
whole or which would have a Material Adverse Effect.
(c) The rights, properties and other assets presently owned, leased
or licensed by QSRD and its Subsidiaries including, without limitation, all
easements and rights of way, include all rights, Properties and other assets
reasonably necessary to permit QSRD and its Subsidiaries to conduct their
business in all material respects in the same manner as its business has been
conducted prior to the Closing Date.
(d) All of the assets and Properties of QSRD and its Subsidiaries
which are reasonably necessary for the operation of its business are in good
working condition and are maintained in accordance with prudent business
standards.
Section 7.11 No Material Misstatements. No written information,
statement, exhibit, certificate, document or report furnished to the Agent and
the Lenders (or any of them) by QSRD or any of its Subsidiaries in connection
with the negotiation of this Agreement contained any material misstatement of
fact or omitted to state a material fact or any fact necessary to make the
statement contained therein not materially misleading in the light of the
circumstances in which made. There is no fact known to QSRD which has a
Material Adverse Effect or in the future is reasonably likely to have (so far
as QSRD can now foresee) a Material Adverse Effect and which has not been set
forth in this Agreement or the other documents, certificates and statements
furnished to the Agent by or on behalf of QSRD or any of its Subsidiaries prior
to, or on, the Closing Date in connection with the transactions contemplated
hereby.
Section 7.12 Investment Company Act. Neither QSRD nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Section 7.13 Public Utility Holding Company Act. QSRD and its
Subsidiaries are not subject to regulation, or are exempt from regulation, as a
"holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," or a "public utility" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
Section 7.14 Subsidiaries and Partnerships. Except as set forth on
Schedule 7.14, QSRD has no Subsidiaries and has no interest in any
partnerships; and the Borrower has no Subsidiaries and has no interest in any
partnerships. Schedule 7.14 sets forth the principal place of business of each
such Subsidiary and the ownership interest of QSRD and the Borrower in such
Subsidiary.
Section 7.15 Location of Business and Offices. Each of QSRD and the
Borrower's principal place of business and chief executive offices are located
at the address stated on the signature page of this Agreement. The principal
place of business and chief executive office of each Subsidiary are located at
the addresses stated on Schedule 7.14.
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Section 7.16 Defaults. Neither QSRD nor any of its Subsidiaries is in
default nor has any event or circumstance occurred which, but for the
expiration of any applicable grace period or the giving of notice, or both,
would constitute a default under any Material Agreement to which any such
Person is a party or by which any such Person is bound which default would have
a Material Adverse Effect. No Default hereunder has occurred and is
continuing.
Section 7.17 Environmental Matters. Except (i) as provided in Schedule
7.17 or (ii) as would not have a Material Adverse Effect (or with respect to
(c), (d) and (e) below, where the failure to take such actions would not have a
Material Adverse Effect):
(a) Neither any Property of QSRD or any of its Subsidiaries nor the
operations conducted thereon violate any order or requirement of any court or
Governmental Authority or any Environmental Laws.
(b) Without limitation of clause (a) above, no Property of QSRD or
any of its Subsidiaries nor the operations currently conducted thereon or, to
the best knowledge of QSRD, by any prior owner or operator of such Property or
operation, are in violation of or subject to any existing, pending or (to the
knowledge of QSRD) threatened action, suit, investigation, inquiry or proceed-
ing by or before any court or Governmental Authority or to any remedial
obligations under Environmental Laws.
(c) All notices, permits, licenses or similar authorizations, if any,
required to be obtained or filed in connection with the operation or use of any
and all Property of QSRD and each of its Subsidiaries, including without
limitation past or present treatment, storage, disposal or release of a
hazardous substance or solid waste into the environment, have been duly
obtained or filed, and QSRD and each of its Subsidiaries are in compliance with
the terms and conditions of all such notices, permits, licenses and similar
authorizations.
(d) All hazardous substances, solid waste, and oil and gas
exploration and production wastes, if any, generated at any and all Property of
QSRD or any of its Subsidiaries have in the past been transported, treated and
disposed of in accordance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment, and, to the best knowledge of QSRD, all such transport carriers
and treatment and disposal facilities have been and are operating in compliance
with Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment, and are not the
subject of any existing, pending or (to the knowledge of QSRD) threatened
action, investigation or inquiry by any Governmental Authority in connection
with any Environmental Laws.
(e) QSRD has taken all steps reasonably necessary to determine and
has determined that no hazardous substances, solid waste, or oil and gas
exploration and production wastes, have been disposed of or otherwise released
and there has been no threatened release of any hazardous substances on or to
any Property of QSRD or any of its Subsidiaries except in compliance with
Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment.
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(f) To the extent applicable, all Property of QSRD and each of its
Subsidiaries currently satisfies all design, operation, and equipment
requirements imposed by OPA or scheduled as of the Closing Date to be imposed
by OPA during the term of this Agreement, and QSRD does not have any reason to
believe that such Property, to the extent subject to OPA, will not be able to
maintain compliance with the OPA requirements during the term of this
Agreement.
(g) Neither QSRD nor any of its Subsidiaries has any known contingent
liability in connection with any release or threatened release of any oil,
hazardous substance or solid waste into the environment.
Section 7.18 Compliance with the Law. Neither QSRD nor any of its
Subsidiaries has violated any Governmental Requirement or failed to obtain any
license, permit, franchise or other governmental authorization necessary for
the ownership of any of its Properties or the conduct of its business, which
violation or failure would have (in the event such violation or failure were
asserted by any Person through appropriate action) a Material Adverse Effect.
Except for such acts or failures to act as would not have a Material Adverse
Effect, the Oil and Gas Properties (and Properties unitized therewith) have
been maintained, operated and developed in a good and workmanlike manner and in
substantial conformity with all applicable laws and all rules, regulations and
orders of all duly constituted authorities having jurisdiction and in
substantial conformity with the provisions of all leases, subleases or other
contracts comprising a part of the Hydrocarbon Interests and other contracts
and agreements forming a part of the Oil and Gas Properties; specifically in
this connection, (i) after the Closing Date, no Oil and Gas Property is subject
to having allowable production reduced below the full and regular allowable
(including the maximum permissible tolerance) because of any overproduction
(whether or not the same was permissible at the time) prior to the Closing Date
and (ii) none of the xxxxx comprising a part of the Oil and Gas Properties (or
properties unitized therewith) are deviated from the vertical more than the
maximum permitted by applicable laws, regulations, rules and orders, and such
xxxxx are, in fact, bottomed under and are producing from, and the well bores
are wholly within, the Oil and Gas Properties (or in the case of xxxxx located
on Properties unitized therewith, such unitized Properties).
Section 7.19 Insurance. Schedule 7.19 attached hereto contains an
accurate and complete description of all material policies of fire, liability,
workmen's compensation and other forms of insurance owned or held by QSRD and
each of its Subsidiaries. All such policies are in full force and effect, all
premiums with respect thereto covering all periods up to and including the
Closing Date have been paid, and no notice of cancellation or termination has
been received with respect to any such policy. Such policies are sufficient
for substantial compliance with all requirements of law and of all agreements
to which QSRD or any of its Subsidiaries is a party; are valid, outstanding and
enforceable policies; provide adequate insurance coverage in at least such
amounts and against at least such risks (but including in any event public
liability) as are usually insured against in the same general area by similarly
situated companies engaged in the same or a similar business for the assets and
operations of QSRD and each of its Subsidiaries; will remain in full force and
effect through the respective dates set forth in Schedule 7.19 without the
payment of additional premiums; and will not in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated by this Agree-
ment. Schedule 7.19 identifies all material risks, if any, which QSRD and its
Subsidiaries and their respective Board of Directors or officers have
designated as being self insured. Neither QSRD nor any of its Subsidiaries has
been refused any insurance with respect to its assets or operations, nor has
its coverage been limited below usual and customary policy limits, by an
insurance carrier
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to which it has applied for any such insurance or with which it has carried
insurance during the last three years.
Section 7.20 Risk Management Agreements. Schedule 7.20 sets forth, as
of the Closing Date, a true and complete list of all Risk Management Agreements
(including commodity price swap agreements, forward agreements or contracts of
sale which provide for prepayment for deferred shipment or delivery of oil, gas
or other commodities) of QSRD and each of its Subsidiaries, the material terms
thereof (including the type, term, effective date, termination date and
notional amounts or volumes), the net xxxx to market value thereof, all credit
support agreements relating thereto (including any margin required or
supplied), and the counterparty to each such agreement.
Section 7.21 Restriction on Liens. Except as set forth on Schedule
7.21, neither QSRD nor any of its Subsidiaries (other than Non-Recourse
Subsidiaries) is a party to any agreement or arrangement or subject to any
order, judgment, writ or decree, which either restricts or purports to restrict
its ability to grant Liens to other Persons on or in respect of their
respective assets or Properties; provided that such restrictions do not impair
the ability of QSRD or any of its Subsidiaries (other than Non-Recourse
Subsidiaries) to grant Liens to the Agent and the Lenders.
Section 7.22 Gas Imbalances. As of the Closing Date, except as set
forth on Schedule 7.22 or on the most recent certificate delivered pursuant to
Section 8.07(c), on a net basis there are no gas imbalances, take or pay or
other prepayments with respect to QSRD and its Subsidiaries' Oil and Gas
Properties which would require such Person to either make cash settlements for
such production or deliver Hydrocarbons produced from such Oil and Gas
Properties at some future time without then or thereafter receiving full
payment therefor exceeding five percent (5%) of the then current monthly
production of gas from the Oil and Gas Properties of QSRD and its Subsidiaries
in the aggregate.
Section 7.23 Material Agreements.
(a) Set forth on Schedule 7.23 hereto is a complete and correct list
of all Material Agreements in effect or to be in effect as of the Closing Date
(other than Risk Management Agreements) providing for, evidencing, securing or
otherwise relating to any Debt of QSRD or any of its Subsidiaries, and such
list correctly sets forth the names of the debtor or lessee and creditor or
lessor with respect to the Debt or lease obligations outstanding or to be
outstanding and the Property subject to any Lien securing such Debt or lease
obligation. Also set forth on Schedule 7.23 hereto is a complete and correct
list of all material agreements and other instruments of QSRD and its Subsid-
iaries relating to the purchase, transportation by pipeline, gas processing,
marketing, sale and supply of natural gas and other Hydrocarbons, but in any
event, any such agreement or other instrument that will account for more than
20% of the sales of QSRD and its Subsidiaries during QSRD's current fiscal
year.
(b) QSRD has delivered to the Agent true and complete copies of each
of the agreements evidencing the Subordinated Debt and each Material Agreement,
as each may have been amended. QSRD has heretofore delivered to the Agent a
complete and correct copy of the Purchase and Sale Agreement and all other
relevant documents for the Acquisition, including any modifications or supple-
ments thereto, as in effect on the Closing Date. The Borrower is not, and to
the best of the Borrower's knowledge, no other party to the Purchase and Sale
Agreement is, in material default of the terms thereof and such agreement is in
full force and effect. The representations and warranties of the Borrower
contained therein are true and correct in all material respects. The Borrower
has
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delivered to the Agent a copy of each notice of title defect referred to in
Section 3.3 of the Purchase and Sale Agreement, with a description of what
action it proposes to take with respect thereto, if any.
Section 7.24 Solvency. QSRD and its Consolidated Subsidiaries, taken
as a whole, (i) are not insolvent as of the date hereof and will not be
rendered insolvent as a result of the transactions contemplated by this
Agreement and the other Loan Documents, (ii) are not engaged in business or a
transaction, or about to engage in a business or a transaction, for which any
Property or assets remaining with QSRD and its Consolidated Subsidiaries
constitutes unreasonably small capital, and (iii) do not intend to incur, or
believe any of them will incur, debts that will be beyond their ability to pay
as such debts mature.
ARTICLE VIII
AFFIRMATIVE COVENANTS
QSRD and the Borrower covenant and agree that, so long as any of the
Commitments are in effect and until payment in full of all Loans hereunder, all
interest thereon and all other amounts payable by the Borrower hereunder and
any Obligor under any Loan Document:
Section 8.01 Financial Statements. QSRD shall deliver, or shall cause
to be delivered, to the Agent with sufficient copies of each for the Lenders:
(a) As soon as available and in any event within 120 days after the
end of each fiscal year of QSRD, the audited consolidated statements of
operations, stockholders' equity, changes in financial position and cash flow
of QSRD and its Consolidated Subsidiaries for such fiscal year, and the related
consolidated and consolidating balance sheets of QSRD and its Consolidated
Subsidiaries as at the end of such fiscal year, and setting forth in each case
in comparative form the corresponding figures for the preceding fiscal year,
and accompanied by the related audit report of independent public accountants
of recognized national standing acceptable to the Agent which audit report
shall state that said financial statements fairly present, in all material
respects, the consolidated financial condition and results of operations of
QSRD and its Consolidated Subsidiaries as at the end of, and for, such fiscal
year and that such financial statements have been prepared in accordance with
GAAP except for such changes in such principles with which the independent
public accountants shall have concurred and such audit report shall be
consistent with the standard audit report format promulgated by the relevant
regulatory authorities governing such reports and shall not contain a "going
concern" or like qualification or exception.
(b) As soon as available and in any event within 60 days after the
end of each of the first three fiscal quarterly periods of each fiscal year of
QSRD, consolidated statements of operations, stockholders' equity, changes in
financial position and cash flow of QSRD and its Consolidated Subsidiaries for
such period and for the period from the beginning of the respective fiscal year
to the end of such period, and the related consolidated balance sheets as at
the end of such period, and setting forth in each case in comparative form the
corresponding figures for the corresponding period in the preceding fiscal
year, accompanied by the certificate of a Responsible Officer, which
certificate shall state that said financial statements fairly present the
consolidated financial condition and results of operations of QSRD and its
Consolidated Subsidiaries in accordance with GAAP, as at the end of, and for,
such period (subject to normal year-end audit adjustments).
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(c) Promptly after QSRD or the Borrower knows that any Default or
Material Adverse Effect has occurred, a notice of such Default or Material
Adverse Effect, describing the same in reasonable detail and the action QSRD or
the Borrower proposes to take with respect thereto.
(d) Promptly upon receipt thereof, a copy of each other material
report or letter submitted to QSRD by its independent accountants in connection
with any annual, interim or special audit made by them of the books of QSRD and
its Consolidated Subsidiaries and a copy of any response by QSRD or its Board
of Directors to such letter or report.
(e) Promptly upon its becoming available, each financial statement,
report, notice or proxy statement sent by QSRD to stockholders generally and
each regular or periodic report and any registration statement, prospectus or
written communication (other than transmittal letters) in respect thereof filed
by QSRD with or received by QSRD in connection therewith from any securities
exchange or the SEC.
(f) From time to time such other information regarding the business,
affairs or financial condition of QSRD or any of its Subsidiaries, including
the Borrower (including, without limitation, any Plan or Multiemployer Plan and
any reports or other information required to be filed under ERISA), as any
Lender or the Agent may reasonably request.
(g) As soon as available and in any event within ten (10) Business
Days after each Quarterly Date, a report, in form and substance satisfactory to
the Agent, setting forth as of the last Business Day of such Quarterly Date, a
summary of its hedging positions under all Risk Management Agreements
(including commodity price swap agreements, forward agreements or contracts of
sale which provide for prepayment for deferred shipment or delivery of oil, gas
or other commodities) of QSRD and each of its Subsidiaries, including the type,
term, effective date, termination date and notional principal amounts or
volumes, the hedged price(s), interest rate(s) or exchange rates(s), as
applicable, and any new credit support agreements relating thereto.
(h) Within two (2) Business Days following receipt by QSRD or the
Borrower, a copy of the notice from JEDI of its intent to sell, or otherwise
dispose of, to any Person its interests in the Series A Preferred Stock of QSRD
if such sale or disposition reduces the aggregate remaining shares of such
class of Preferred Stock owned by JEDI or its Affiliates below 75% of the total
shares of such class of Preferred Stock owned by JEDI as of the Closing Date.
(i) Within forty-five (45) days following the end of each calendar
month, a summary of the operating and financial results of QSRD and its
Subsidiaries (other than Non-Recourse Subsidiaries) for such preceding calendar
month, together with management's discussion and analysis of such results, all
of which shall be in form and substance reasonably satisfactory to the Agent.
(j) Promptly after QSRD knows that any "mandatory redemption event"
in respect of any class of Preferred Stock has occurred, a notice thereof,
describing the same in reasonable detail and the action QSRD proposes to take
with respect thereto; and if any mandatory redemption notices are given or
received in respect of any class of Preferred Stock, a copy thereof.
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(k) If the event described in Section 2.5(a)(ii) of the Subordinated
Revolving Credit Loan Agreement described in clause (i) of the definition of
ECT Subordinated Debt shall occur, the Borrower shall promptly give the Agent
written notice thereof.
(l) Within five (5) Business Days following its receipt, any material
notices or other material communications either delivered or received pursuant
to the Purchase and Sale Agreement, including, without limitation, the Final
Closing Statement referred to in Section 2.5 thereof.
(m) With the delivery of the June 30th Reserve Report, the Borrower
shall also provide projections and budgets of QSRD and its Subsidiaries for the
forthcoming fiscal year, which shall include, on a monthly basis for the
forthcoming fiscal year, an operating and capital budget, income and cash flow
statements and balance sheets, in each case together with the analysis and
discussion of management of such projections, all certified by a Responsible
Officer of the Borrower as being prepared based on the assumptions and
assessments believed by the Borrower to be reasonable and appropriate both as
of the date of such projections and as of the date of submission thereof to the
Agent.
QSRD and the Borrower will furnish to the Agent, at the time QSRD
furnishes each set of financial statements pursuant to paragraph (a) or (b)
above, a certificate substantially in the form of Exhibit C hereto executed by
a Responsible Officer (i) certifying as to the matters set forth therein and
stating that no Default has occurred and is continuing (or, if any Default has
occurred and is continuing, describing the same in reasonable detail), and (ii)
setting forth in reasonable detail the computations necessary to determine
whether QSRD and the Borrower are in compliance with Sections 9.12, 9.13 and
9.14 as of the end of the respective fiscal quarter or fiscal year.
Section 8.02 Litigation. QSRD shall promptly give to the Agent notice
of all legal or arbitral proceedings, and of all proceedings before any
Governmental Authority affecting QSRD or any of its Subsidiaries, including the
Borrower, except proceedings which, if adversely determined, could not
reasonably be expected to have a Material Adverse Effect. QSRD will, and will
cause each of its Subsidiaries to, promptly notify the Agent and each of the
Lenders of any claim, judgment, Lien or other encumbrance affecting any
Property of QSRD or any of its Subsidiaries if the value of the claim,
judgment, Lien or other encumbrance affecting such Property shall exceed
$250,000.
Section 8.03 Maintenance, Etc.
(a) The Borrower and QSRD shall, and QSRD shall cause each of its
Subsidiaries to: preserve and maintain its corporate existence and all of its
material rights, privileges and franchises (except for mergers or dissolutions
upon transfer of all or substantially all assets permitted pursuant to Section
9.08); keep books of record and account in which full, true and correct entries
will be made of all dealings or transactions in relation to its business and
activities in accordance with GAAP; comply with all Governmental Requirements
if failure to comply with such requirements will have a Material Adverse
Effect; pay and discharge all taxes, assessments and governmental charges or
levies imposed on it or on its income or profits or on any of its Property
prior to the date on which penalties attach thereto, except for any such tax,
assessment, charge or levy the payment of which is being contested in good
faith and by proper proceedings and against which adequate reserves are being
maintained; upon reasonable notice, permit representatives of the Agent or any
Lender, during normal business hours, to examine, copy and make extracts from
its books and
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records, to inspect its Properties, and to discuss its business and affairs
with its officers, all to the extent reasonably requested by such Lender or the
Agent (as the case may be); and keep, or cause to be kept, insured by
financially sound and reputable insurers all Property of a character usually
insured by Persons engaged in the same or similar business similarly situated
against loss or damage of the kinds and in the amounts customarily insured
against by such Persons and carry such other insurance as is usually carried by
such Persons including, without limitation, environmental risk insurance to the
extent reasonably available.
(b) Contemporaneously with the delivery of the financial statements
required by Section 8.01(a) to be delivered for each year, QSRD will furnish or
cause to be furnished to the Agent and the Lenders a certificate of insurance
coverage from its insurer(s) in form and substance satisfactory to the Agent
and, if requested, will furnish the Agent and the Lenders copies of the
applicable policies.
(c) The Borrower and QSRD shall, and shall cause each of its
Subsidiaries to, operate its Properties or cause such Properties to be operated
in a careful and efficient manner in accordance with the usual and customary
practices of the industry and in substantial compliance with all applicable
contracts and agreements and in compliance in all material respects with all
Governmental Requirements.
(d) The Borrower and QSRD shall, and shall cause each of its
Subsidiaries to, at its own expense, do or cause to be done all things
reasonably necessary to preserve and keep in good repair, working order and
efficiency all of its Oil and Gas Properties and other material Properties
including, without limitation, all equipment, machinery and facilities, and
from time to time will make all the reasonably necessary repairs, renewals and
replacements so that at all times the state and condition of its Oil and Gas
Properties and other material Properties will be fully preserved and
maintained, except to the extent a portion of such Properties is no longer
capable of producing Hydrocarbons in economically reasonable amounts. The
Borrower and QSRD, shall and QSRD shall cause each of its Subsidiaries to,
promptly: (i) pay and discharge, or make reasonable and customary efforts to
cause to be paid and discharged, all delay rentals, royalties, expenses and
indebtedness accruing under the leases or other agreements affecting or
pertaining to its Oil and Gas Properties, (ii) perform or make reasonable and
customary efforts to cause to be performed, in accordance with usual and
customary industry standards, the obligations required by each and all of the
assignments, deeds, leases, sub-leases, contracts and agreements affecting its
interests in its Oil and Gas Properties and other material Properties, (iii)
will and will cause each of its Subsidiaries to do all other things necessary
to keep unimpaired, except for Liens described in Section 9.02, its rights with
respect thereto and prevent any forfeiture thereof or a default thereunder,
except to the extent a portion of such Properties is no longer capable of
producing Hydrocarbons in economically reasonable amounts. The Borrower and
QSRD shall, and QSRD shall, cause each of its Subsidiaries to, operate its Oil
and Gas Properties and other material Properties or cause or make reasonable
and customary efforts to cause such Oil and Gas Properties and other material
Properties to be operated in a careful and efficient manner in accordance with
the usual and customary practices of the industry and in substantial compliance
with all applicable contracts and agreements and in compliance in all material
respects with all Governmental Requirements.
(e) In the event that all or any portion of any Oil and Gas Property
owned by QSRD and its Subsidiaries is comprised of interests in the Hydrocarbon
Property which are not working interests or which are operated by a Person or
Persons other than QSRD or one of its Subsidiaries,
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then, with respect to such interests and Properties, QSRD shall, and shall
cause such Subsidiary to, use reasonable efforts consistent with usual and
customary industry practice to obtain compliance with the foregoing covenants
contained in this Section 8.03 by the working interest owners or the operator
or operators of such interests or Properties.
Section 8.04 Environmental Matters.
(a) QSRD will, and will cause each of its Subsidiaries to, establish
and implement such procedures as may be reasonably necessary, consistent with
its ownership interests, to continuously determine and assure that any failure
of the following does not have a Material Adverse Effect: (i) all Property of
such Persons and the operations conducted thereon are in compliance with and do
not violate the requirements of any Environmental Laws, (ii) no oil, hazardous
substances or solid wastes are disposed of or otherwise released on or to any
Property owned by any such party except in compliance with Environmental Laws,
(iii) no hazardous substance will be released on or to any such Property in a
quantity equal to or exceeding that quantity which requires reporting pursuant
to Section 103 of CERCLA, and (iv) no oil, oil and gas exploration and
production wastes or hazardous substance is released on or to any such Property
so as to pose an imminent and substantial endangerment to public health or
welfare or the environment.
(b) QSRD will promptly notify the Agent and the Lenders in writing of
any threatened action, investigation or inquiry by any Governmental Authority
of which QSRD has knowledge in connection with any Environmental Laws,
excluding routine testing and corrective action.
(c) QSRD will, and will cause each of its Subsidiaries to, provide
environmental audits and tests in accordance with American Society of Testing
and Mechanics standards as reasonably requested by the Agent and the Lenders or
as otherwise required to be obtained by the Agent or the Lenders by any
Governmental Authority in connection with any future acquisitions of Oil and
Gas Properties or other material Properties.
Section 8.05 Further Assurances. QSRD and the Borrower will and will
cause each of its respective Subsidiaries to cure promptly any defects in the
creation and issuance of the Notes and the execution and delivery of the Loan
Documents and this Agreement. QSRD at its expense will, and will cause each of
its Subsidiaries to, promptly execute and deliver to the Agent upon request all
such other documents, agreements and instruments to comply with or accomplish
the covenants and agreements of QSRD or any of its Subsidiaries, as the case
may be, in the Loan Documents and this Agreement, or to further evidence and
more fully describe the collateral intended as security for the Notes, or to
correct any omissions in the Security Instruments, or to state more fully the
security obligations set out herein or in any of the Security Instruments, or
to perfect, protect or preserve any Liens created pursuant to any of the
Security Instruments, or to make any recordings, to file any notices or obtain
any consents, all as may be reasonably necessary or appropriate in connection
therewith.
Section 8.06 Performance of Obligations. The Borrower will pay the
Notes according to the reading, tenor and effect thereof; and QSRD will and
will cause each of its Subsidiaries, including the Borrower, to do and perform
every act and discharge all of the obligations to be performed and discharged
by them under the Loan Documents, at the time or times and in the manner
specified.
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Section 8.07 Engineering Reports.
(a) No later than 30 days prior to each Scheduled Redetermination
Date, commencing with the Scheduled Redetermination Date to occur on September
15, 1998, the Borrower shall furnish to the Agent and the Lenders a Reserve
Report. The June 30 Reserve Report of each year shall be prepared by certified
independent petroleum engineers or other independent petroleum consultant(s)
acceptable to the Agent and the December 31 Reserve Report of each year shall
be prepared by or under the supervision of the chief engineer of the Borrower
who shall certify such Reserve Report to be true and accurate and to have been
prepared in accordance with the procedures used in the immediately proceeding
June 30 Reserve Report.
(b) In the event of an unscheduled redetermination, the Borrower
shall, at the Agent's request, furnish to the Agent and the Lenders a Reserve
Report prepared by or under the supervision of the chief engineer of the
Borrower who shall certify such Reserve Report to be true and accurate and to
have been prepared in accordance with the procedures used in the immediately
preceding Reserve Report. For any unscheduled redetermination requested by the
Agent (or as requested by the Lenders pursuant to Section 2.08(d)), the
Borrower shall provide such Reserve Report with an "as of" date as required by
the Majority Lenders as soon as possible, but in any event no later than 45
days following the receipt of the request by the Agent.
(c) With the delivery of each Reserve Report, the Borrower shall
provide to the Agent and the Lenders, a certificate from a Responsible Officer
certifying that, to the best of his knowledge and in all material respects: (i)
the information contained in the Reserve Report and any other information
delivered in connection therewith is true and correct, (ii) the Borrower or a
Subsidiary Guarantor, as applicable, owns good and defensible title to its Oil
and Gas Properties evaluated in such Reserve Report and such Properties are
free of all Liens except for Liens permitted by Section 9.02, (iii) except as
set forth on an exhibit to the certificate, on a net basis there are no gas
imbalances, take or pay or other prepayments with respect to its Oil and Gas
Properties evaluated in such Reserve Report which would require the Borrower or
a Subsidiary to deliver Hydrocarbons produced from such Oil and Gas Properties
at some future time without then or thereafter receiving full payment therefor,
(iv) none of its Oil and Gas Properties have been sold since the date of the
last Borrowing Base determination except as set forth on an exhibit to the
certificate, which certificate shall list all of its Oil and Gas Properties
sold and in such detail as reasonably required by the Majority Lenders, (v)
attached to the certificate is a list of its Oil and Gas Properties added to
and deleted from the immediately prior Reserve Report and a list of all Persons
disbursing proceeds to the Borrower or a Subsidiary Guarantor, as applicable,
from its Oil and Gas Properties, (vi) except as set forth on a schedule
attached to the certificate all of the Oil and Gas Properties evaluated by such
Reserve Report are Mortgaged Property and (vii) any change in working interest
or net revenue interest in its Oil and Gas Properties occurring and the reason
for such change.
(d) As soon as available and in any event within 45 days after the
end of fiscal quarter, the Borrower shall provide (i) a production report, in
the form currently prepared internally by the Borrower and which has been
approved by the Agent, and (ii) a summary of all general and administrative
costs of QSRD and its Consolidated Subsidiaries for such quarter which are not
reflected in the Consolidated Net Income for such quarter for its Oil and Gas
Properties, which reports shall include quantities or volume of production,
revenue, realized product prices, operating expenses, taxes, capital
expenditures and lease operating costs which have accrued to the account
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of QSRD, the Borrower or any Subsidiary (other than Non-Recourse Subsidiaries)
in such period, and such other information with respect thereto as the Agent or
any Lender may reasonably require.
Section 8.08 Title Information.
(a) On or before the delivery to the Agent and the Lenders of each
Reserve Report required by Section 8.07(a), the Borrower will deliver title
information in form and substance reasonably satisfactory to the Agent covering
the Oil and Gas Properties evaluated by such Reserve Report and included in the
Borrowing Base that were not included in the immediately preceding Borrowing
Base evaluation, so that the Agent shall have received together with title
information previously delivered to the Agent, satisfactory title information
on at least 85% of the SEC Value of the Oil and Gas Properties evaluated by
such Reserve Report and included in the Borrowing Base. The Borrower shall cure
any title defects or exceptions which are not Excepted Liens raised by the
title information within 60 days after a request by the Agent or the Lenders to
cure such defects or exceptions.
(b) If the Borrower is unable to cure any title defect requested by
the Agent or the Lenders to be cured within the 60 day period, such default
shall not be a Default or an Event of Default, but instead the Agent and the
Lenders shall have the right to exercise the following remedy in their sole
discretion from time to time, and any failure to so exercise this remedy at any
time shall not be a waiver as to future exercise of the remedy by the Agent or
the Lenders. To the extent that the Agent or the Lenders are not satisfied
with title to any Oil and Gas Property after the time period in Section 8.08(a)
has elapsed, such unacceptable Oil and Gas Property shall not count towards the
85% requirement, and the Agent may send a notice to the Borrower and the
Lenders that the then outstanding Borrowing Base shall be reduced by an amount
as determined by all of the Lenders to cause the Borrower to be in compliance
with the requirement to provide acceptable title information on 85% of the SEC
Value of the Oil and Gas Properties included in the Borrowing Base. This new
Borrowing Base shall become effective immediately after receipt of such notice.
Section 8.09 Additional Collateral.
(a) QSRD and the Borrower will, and will cause each Subsidiary
Guarantor to, grant to the Agent as security for the Indebtedness a
first-priority Lien (subject only to Excepted Liens and to the extent
applicable, Liens permitted by Section 9.02) on such Person's interest in any
Oil and Gas Properties not already subject to a Lien of the Security
Instruments such that the Mortgaged Property shall include at least 85% (and
will use reasonable efforts to maintain 95%) of its and such Subsidiaries' SEC
Value of each of proved producing and the total Proved Reserves at all times,
which Lien will be created and perfected by and in accordance with the
provisions of deeds of trust, security agreements and financing statements, or
other Security Instruments, all in form and substance satisfactory to the Agent
in its sole discretion and in sufficient executed (and acknowledged where
necessary or appropriate) counterparts for recording purposes. If the Agent so
requests in writing, QSRD and the Borrower will, and will cause each Subsidiary
Guarantor to, within 25 days following such request (and in any event prior to
the granting of any Liens in favor of the holder(s) of the ECT Subordinated
Debt), grant to the Agent as security for the Indebtedness a first-priority
Lien interest (subject only to Excepted Liens and to the extent applicable,
Liens permitted by Section 9.02) on such Person's interest in any Oil and Gas
Properties not already subject to a Lien of the Security Instruments such that
the Mortgaged Property shall include a
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percentage requested by the Agent (not to exceed 95%) of its and such
Subsidiaries' SEC Value of each of proved producing and the total Proved
Reserves at all times.
(b) Concurrently with the granting of the Lien or other action
referred to in Section 8.09(a) above, the Borrower will (i) provide to the
Agent title information in form and substance satisfactory to the Agent in its
sole discretion with respect to the relevant Obligor's interests in such Oil
and Gas Properties; and (ii) promptly after the filing of any new Security
Instrument in any state, upon the reasonable request of the Agent, provide to
the Agent an opinion addressed to the Agent for the benefit of the Lenders in
form and substance satisfactory to the Agent in its sole discretion from
counsel acceptable to Agent, stating that the Security Instrument is valid,
binding and enforceable in accordance with its terms and in legally sufficient
form for such jurisdiction.
Section 8.10 ERISA Information and Compliance. QSRD will promptly
furnish and will cause its ERISA Affiliates to promptly furnish to the Agent
with sufficient copies to the Lenders (i) promptly after the filing thereof
with the United States Secretary of Labor, the Internal Revenue Service or the
PBGC, copies of each annual and other report with respect to each Plan or any
trust created thereunder, (ii) immediately upon becoming aware of the
occurrence of any ERISA Event or of any "prohibited transaction," as described
in section 406 of ERISA or in section 4975 of the Code, in connection with any
Plan or any trust created thereunder, a written notice signed by a Responsible
Officer specifying the nature thereof, what action QSRD or any ERISA Affiliate
is taking or proposes to take with respect thereto, and, when known, any action
taken or proposed by the Internal Revenue Service, the Department of Labor or
the PBGC with respect thereto, and (iii) immediately upon receipt thereof,
copies of any notice of the PBGC's intention to terminate or to have a trustee
appointed to administer any Plan. With respect to each Plan (other than a
Multiemployer Plan), QSRD will, and will cause each of its ERISA Affiliates to,
(i) satisfy in full and in a timely manner, without incurring any late payment
or underpayment charge or penalty and without giving rise to any Lien, all of
the contribution and funding requirements of section 412 of the Code
(determined without regard to subsections (d), (e), (f) and (k) thereof) and of
section 302 of ERISA (determined without regard to sections 303, 304 and 306 of
ERISA), and (ii) pay, or cause to be paid, to the PBGC in a timely manner,
without incurring any late payment or underpayment charge or penalty, all
premiums required pursuant to sections 4006 and 4007 of ERISA.
Section 8.11 Hedging Program. On or before the expiration of the Risk
Management Agreements contained in part II of Schedule 7.20, the Borrower shall
enter into one or more Risk Management Agreements with one or more Lenders or
Affiliates of Lenders (or with any other investment grade counterparties, rated
BBB+ or better or the equivalent) the effective term of such Risk Management
Agreements expire no earlier than December 31, 2002, and the aggregate notional
volumes of Hydrocarbons subject of such Risk Management Agreements constitute,
at all times during the term thereof not less than eighty percent (80%) of the
Obligors' forecasted production for such period from Oil and Gas Properties
classified as proved, developed, producing as of the date the Acquisition is
consummated.
Section 8.12 Offering. QSRD will use commercially reasonable efforts
to consummate a Hi-Yield Offering and/or an Equity Offering in an aggregate
combined principal amount of not less than $150,000,000 on or before September
30, 1998.
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ARTICLE IX
NEGATIVE COVENANTS
QSRD and the Borrower covenant and agree that, so long as any of the
Commitments are in effect and until payment in full of Loans hereunder, all
interest thereon and all other amounts payable by the Borrower hereunder or any
Obligor under any Loan Document, without the prior written consent of the
Majority Lenders:
Section 9.01 Debt. Neither QSRD nor any of its Subsidiaries, including
the Borrower, will incur, create, assume or suffer to exist any Debt, except:
(a) the Notes or other Indebtedness or any guaranty of or suretyship
arrangement for the Notes or other Indebtedness;
(b) the Debt of any Obligor existing on and not repaid on the Closing
Date which is disclosed in Schedule 9.01, and any renewals or extensions (but
not increases) thereof;
(c) accounts payable (for the deferred purchase price of Property or
services) from time to time incurred in the ordinary course of business which,
if greater than 90 days past the invoice or billing date, are being contested
in good faith by appropriate proceedings if reserves adequate under GAAP shall
have been established therefor;
(d) Debt under capital leases (as required to be reported on the
financial statements of QSRD pursuant to GAAP) and other Debt of QSRD and the
Borrower not otherwise permitted under this Section 9.01 in an aggregate
principal amount not to exceed $500,000 at any one time outstanding;
(e) Debt of the Borrower under Risk Management Agreements with either
any Lender, investment grade counterparties or as disclosed in Section 7.20;
(f) Debt associated with bonds or surety obligations required by
Governmental Requirements in connection with the operation of the Oil and Gas
Properties;
(g) the Subordinated Debt; provided, without the prior written
consent of the Agent, no such Debt (other than the DEM Subordinated Debt) shall
be denominated in any currency other than U.S. Dollars;
(h) intercompany Debt to the extent permitted by Section 9.03;
(i) Debt arising from or related to any of the Liens described in
clauses (iii) to (v) of the definition of "Excepted Liens";
(j) Non-Recourse Debt of any Non-Recourse Subsidiary; and
(k) Debt of QSRD and its Subsidiaries, including the Borrower,
incurred pursuant to any Hi-Yield Offering; provided that (i) such Debt that is
issued on terms reasonably satisfactory to the Majority Lenders with respect to
principal amount, maturity, interest rate, covenants and, if
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applicable, subordination language, and (ii) in connection with the issuance of
any such Debt under this Section 9.01(k), the Lenders may cause the Borrowing
Base to be redetermined.
Section 9.02 Liens. Neither QSRD nor any of its Subsidiaries,
including the Borrower, will create, incur, assume or permit to exist any Lien
on any of its Properties (now owned or hereafter acquired), except:
(a) Liens securing the payment of any Indebtedness;
(b) Excepted Liens;
(c) Liens securing capital leases (but not other Debt) allowed under
Section 9.01(d) but only on the Property under lease;
(d) Liens disclosed on Schedule 9.02;
(e) Liens on cash or securities of the Borrower securing the Debt
described in Section 9.01(f);
(f) Liens on Property of a Non-Recourse Subsidiary to secure Debt
permitted by Section 9.01(j) and Liens on stock or other equity interests of
any Non-Recourse Subsidiary; and
(g) Liens to secure the ECT Subordinated Debt and the Bridge Loans;
provided that such Liens are subordinated to the Liens in favor of the Agent
and the Lenders on terms reasonably satisfactory to the Majority Lenders.
Section 9.03 Investments, Loans and Advances. Neither QSRD nor any of
its Subsidiaries, including the Borrower, will make or permit to remain
outstanding any loans or advances to or investments in any Person, except that
the foregoing restriction shall not apply to:
(a) investments, loans or advances reflected in the Financial
Statements or which are disclosed to the Lenders in Schedule 9.03;
(b) accounts receivable arising in the ordinary course of business;
(c) direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, in each case
maturing within one year from the date of creation thereof;
(d) commercial paper maturing within 180 days from the date of
creation thereof rated in the highest grade by Standard & Poor's Ratings
Service or Xxxxx'x Investors Service, Inc.;
(e) deposits maturing within one year from the date of creation
thereof with, including certificates of deposit issued by, any Lender or any
office located in the United States or any other bank or trust company which is
organized under the laws of the United States or any state thereof, has
capital, surplus and undivided profits aggregating at least $100,000,000.00 (as
of the date of such Lender's or bank or trust company's most recent financial
reports) and has a short term deposit
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rating of no lower than A2 or P2, as such rating is set forth from time to
time, by Standard & Poor's Rating Service or Xxxxx'x Investors Service, Inc.,
respectively;
(f) deposits in money market funds investing exclusively in
investments described in Section 9.03(c), 9.03(d) or 9.03(e);
(g) investments, loans or advances made by (i) QSRD in or to the
Borrower or any Subsidiary Guarantor, (ii) the Borrower in or to QSRD or any
Subsidiary Guarantor, and (iii) any Subsidiary of QSRD in or to any Subsidiary
Guarantor, QSRD or the Borrower;
(h) investments by the Borrower or any Subsidiary Guarantor related
to its direct ownership interests in additional Oil and Gas Properties in an
amount not to exceed 10% of the amount of the Borrowing Base at the time of
such investment;
(i) advances to operators under operating agreements entered into by
QSRD or any of its Subsidiaries in the ordinary course of business;
(j) investments, loans or advances made by (i) the Borrower or any
Subsidiary Guarantor to any Non-Recourse Subsidiary not to exceed at any one
time outstanding $100,000 in the aggregate, or (ii) a Non-Recourse Subsidiary
to any other Non-Recourse Subsidiary; provided that QSRD may make loans,
advances or investments to Queen Sand Resources (Canada), Inc. to satisfy its
obligations under any employment agreements to which it is a party and for (A)
fixtures, furniture and equipment, provided that the aggregate amount spent
under this clause (A) shall not exceed $150,000 in the aggregate during any
twelve-month period and (B) normal general and administrative expenses incurred
in the ordinary course of its business and for which Queen Sand Resources
(Canada), Inc. is ultimately entitled to reimbursement from QSRD and/or its
Subsidiaries; and
(k) loans or advances to officers and employees of QSRD or any
Subsidiary in the ordinary course of business not to exceed (i) while the
Bridge Loans are outstanding (and whether or not all or any of the Bridge Loans
have been extended to be long-term obligations) $100,000 in the aggregate
outstanding at any time, and (ii) after repayment in full of the Bridge Loans,
$250,000 in the aggregate outstanding at any time.
Section 9.04 Dividends, Distributions and Redemptions. QSRD shall not
declare or pay any dividend, purchase, redeem or otherwise acquire for value
any of its capital stock now or hereafter outstanding, return any capital to
its stockholders or make any distribution of its assets to its stockholders,
except for (i) dividends or distributions payable solely in capital stock of
QSRD; and (ii) the repurchase or redemption of any shares of the Series C
Preferred Stock with the aggregate net cash proceeds in excess of $50,000,000
of any Equity Offering(s) occurring after the Closing Date, provided that (A)
no Default or Event of Default has occurred at the time such shares are repur-
chased or redeemed or would result from such repurchase or redemption and (B)
the Percentage Usage is less than eighty percent (80%) prior and after giving
effect to such repurchase or redemption.
Section 9.05 Sales and Leasebacks. Neither QSRD nor any of its
Subsidiaries will enter into any arrangement, directly or indirectly, with any
Person whereby QSRD or any of its Subsidiaries shall sell or transfer any of
its Property, whether now owned or hereafter acquired, and whereby QSRD or any
of its Subsidiaries shall then or thereafter rent or lease as lessee such
Property or any
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part thereof or other Property which QSRD or any of its Subsidiaries intends to
use for substantially the same purpose or purposes as the Property sold or
transferred.
Section 9.06 Nature of Business. Neither QSRD, nor any of its
Subsidiaries will allow any material change to be made in the character of its
business as an independent oil and gas exploration and production company.
Section 9.07 Limitation on Leases. Neither QSRD nor any of its
Subsidiaries will create, incur, assume or suffer to exist any obligation for
the payment of rent or hire of Property of any kind whatsoever (real or
personal, including capital leases but excluding leases of Hydrocarbon
Interests and leases directly related to oil and gas field operations), under
leases or lease agreements which would cause the aggregate amount of all
payments made by such Persons pursuant to such leases or lease agreements to
exceed $500,000 in any period of twelve consecutive calendar months in the
aggregate. Neither QSRD nor any of its Subsidiaries will create, incur, assume
or suffer to exist any obligation for the payment of rent or hire of Property
of any kind whatsoever (real or personal, including capital leases but
excluding royalty payments under leases of Hydrocarbon Interests), for oil and
gas field operations under leases or lease agreements (other than leases for
any drilling, workover or other rig related activities) which would cause the
aggregate amount of all payments made by such Persons pursuant to such leases
or lease agreements to exceed $8,000,000 in any period of twelve consecutive
calendar months.
Section 9.08 Mergers, Etc. Neither QSRD nor any of its Subsidiaries
will merge into or with or consolidate with any other Person, or sell, lease or
otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its Property or assets to any other
Person; provided that (i) any Subsidiary Guarantor may merge with any other
Subsidiary Guarantor or may merge with the Borrower so long as the Borrower is
the surviving entity, (ii) the Borrower or any Subsidiary Guarantor may merge
with QSRD so long as QSRD is the surviving entity, and (iii) any Non-Recourse
Subsidiary may merge with any Person; provided that if such Non-Recourse
Subsidiary merges with QSRD, the Borrower or any Subsidiary Guarantor, no
Default or Event of Default would occur or be continuing after giving effect to
such merger and QSRD, the Borrower or such Subsidiary Guarantor, as the case
may be, shall be the surviving entity.
Section 9.09 Proceeds of Notes. The Borrower will not permit the
proceeds of the Notes or the Letters of Credit to be used for any purpose other
than those permitted by Section 7.07. Neither the Borrower nor any Person
acting on behalf of the Borrower has taken or will take any action which might
cause any of the Loan Documents to violate Regulation G, T, U or X or any other
regulation of the Board of Governors of the Federal Reserve System or to
violate Section 7 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect.
Section 9.10 ERISA Compliance. QSRD will not at any time:
(a) Engage in, or permit any of its ERISA Affiliates to engage in,
any transaction in connection with which QSRD or any of its ERISA Affiliates
could be subjected to either a civil penalty assessed pursuant to section
502(c), (i) or (l) of ERISA or a tax imposed by Chapter 43 of Subtitle D of the
Code;
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(b) Terminate, or permit any of its ERISA Affiliates to terminate,
any Plan in a manner, or take any other action with respect to any Plan, which
could reasonably be expected result in any liability to QSRD or any of its
ERISA Affiliates to the PBGC in excess of $100,000;
(c) Fail to make, or permit any of its ERISA Affiliates to fail to
make, full payment when due of all amounts which, under the provisions of any
Plan, agreement relating thereto or applicable law, QSRD or any of its ERISA
Affiliates is required to pay as contributions thereto;
(d) Permit to exist, or allow any of its ERISA Affiliates to permit
to exist, any accumulated funding deficiency within the meaning of Section 302
of ERISA or section 412 of the Code in excess of $100,000, whether or not
waived, with respect to any Plan;
(e) Permit, or allow any of its ERISA Affiliates to permit, the
actuarial present value of the benefit liabilities under any Plan maintained by
QSRD of its ERISA Affiliates which is regulated under Title IV of ERISA to
exceed the current value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such benefit
liabilities in an amount which exceeds $100,000; and for purposes of this
Agreement, the term "actuarial present value of the benefit liabilities" shall
have the meaning specified in section 4041 of ERISA;
(f) Contribute to or assume an obligation to contribute to, or permit
any of its ERISA Affiliates to contribute to or assume an obligation to
contribute to, any Multiemployer Plan;
(g) Acquire, or permit any of its ERISA Affiliates to acquire, an
interest in any Person that causes such Person to become an ERISA Affiliate
with respect to QSRD or any of its ERISA Affiliates if such Person sponsors,
maintains or contributes to, or at any time in the six-year period preceding
such acquisition has sponsored, maintained, or contributed to, (1) any
Multiemployer Plan, or (2) any other Plan that is subject to Title IV of ERISA
under which the actuarial present value of the benefit liabilities under such
Plan exceeds the current value of the assets (computed on a plan termination
basis in accordance with Title IV of ERISA) of such Plan allocable to such
benefit liabilities in an amount which exceeds $100,000;
(h) Incur, or permit any of its ERISA Affiliates to incur, a
liability to or on account of a Plan under sections 515, 4062, 4063, 4064, 4201
or 4204 of ERISA in an amount which exceeds $100,000;
(i) Contribute to or assume an obligation to contribute to, or permit
any of its ERISA Affiliates to contribute to or assume an obligation to
contribute to, any employee welfare benefit plan, as defined in section 3(1) of
ERISA, including, without limitation, any such plan maintained to provide
benefits to former employees of such entities, that may not be terminated by
such entities in their sole discretion at any time without any material
liability; or
(j) Amend or permit any of its ERISA Affiliates to amend, a Plan
resulting in an increase in current liability such that QSRD or any of its
ERISA Affiliates is required to provide security to such Plan under section
401(a)(29) of the Code.
Section 9.11 Sale or Discount of Receivables. Neither QSRD nor any of
its Subsidiaries will discount or sell (with or without recourse) any of its
notes receivable or accounts receivable.
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Section 9.12 Current Ratio and Net Worth.
(a) Consolidated Current Ratio. QSRD's ratio of (i) consolidated
current assets plus unused availability under the Aggregate Commitments to (ii)
consolidated current liabilities (excluding (A) current maturities of the
Notes, (B) the Bridge Loans unless the Bridge Loans have been extended to be a
long-term obligation as contemplated by the terms of the Bridge Loan Documents
and (C) the ECT Subordinated Debt so long as the ECT Subordinated Debt does not
mature within one (1) year of the date of determination) shall not be less
than 1.0 to 1.0 at any time.
(b) Consolidated Tangible Net Worth. On and after the Closing Date
and after giving effect to the transactions contemplated herein, QSRD will not
permit its Consolidated Tangible Net Worth to be less than $18,500,000 plus the
amount equal to seventy-five percent (75%) of the net proceeds of any Equity
Offering by QSRD at any time after the Closing Date.
Section 9.13 Accounts Payable. QSRD will, and will cause its
Subsidiaries to, pay their respective trade account payables when due in
accordance with their terms and usual and customary industry practices (which
shall not, in any event exceed 90 days from the date of invoice), except for
such payable which are being contested in good faith by appropriate proceedings
diligently pursued and for which adequate reserves under GAAP are being
maintained. QSRD and its Subsidiaries will not permit the weighted average
maturity of their trade accounts payables (excluding payables being contested
pursuant to the foregoing sentence) to exceed 75 days (measured quarterly as of
the last day of each fiscal quarter).
Section 9.14 Fixed Charge Coverage Ratio.
(a) QSRD's Fixed Charge Coverage Ratio shall be at not less than 1.5
to 1.0 for the three-month period ending June 30, 1998.
(b) If the aggregate net cash proceeds to QSRD from Hi-Yield
Offerings are greater than $75,000,000, QSRD's Fixed Charge Coverage Ratio as
of the end of any full fiscal quarter occurring after the completion of the
first such Hi-Yield Offering shall not be less than the following for the
period then applicable:
(i) for the six month period ending on September 30, 1998, 1.5 to 1.0;
(ii) for the nine month period ending on December 31, 1998, 1.5 to 1.0;
(iii) for each rolling period on of four fiscal quarters thereafter, 1.5
to 1.0.
(c) If no Hi-Yield Offering has been completed or the aggregate net
cash proceeds to QSRD from Hi-Yield Offerings are less than or equal to
$75,000,000, QSRD's Fixed Charge Coverage Ratio as of the end of any fiscal
quarter shall not be less than the following for the period then applicable:
(i) for the six month period ending on September 30, 1998, 1.75 to
1.0;
(ii) for the nine month period ending on December 31, 1998, 2.0 to 1.0;
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(iii) for each rolling period on of four fiscal quarters thereafter, 2.2
to 1.0.
Section 9.15 Sale of Oil and Gas Properties. QSRD and the Borrower
will not, and will not permit any Subsidiary to, sell, assign, farm-out, convey
or otherwise transfer any Oil and Gas Property or any interest in any Oil and
Gas Property except for (i) sales of Hydrocarbons in the ordinary course of
business, (ii) sales of assets which are worn-out or obsolete and are not
material to the continuation of its business, (iii) intercompany sales or other
dispositions by any Obligor to the Borrower or by any Subsidiary Guarantor to
another Subsidiary Guarantor, provided the foregoing shall not permit
dispositions to Non-Recourse Subsidiaries, except to the extent permitted by
Section 9.03(j), (iv) dispositions of equipment when substantially similar
equipment has been or will be acquired, and (v) sales or other dispositions of
Oil and Gas Properties or other assets which shall not exceed $2,500,000 in the
aggregate in any fiscal year; provided that, while the Bridge Loans are
outstanding, the Borrowing Base shall be adjusted by an amount equal to the
value, if any, assigned such Property or asset in the most recently determined
Borrowing Base.
Section 9.16 Environmental Matters. Neither QSRD nor any of its
Subsidiaries will cause or permit any of its Property to be in violation of, or
do anything or permit anything to be done which will subject any such Property
to any remedial obligations under any Environmental Laws, assuming disclosure
to the applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to such Property where such violations or
remedial obligations would have a Material Adverse Effect.
Section 9.17 Transactions with Affiliates. Neither QSRD nor any
Subsidiary will enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of Property or the rendering of any service,
with any Affiliate (other than QSRD, the Borrower or any Subsidiary Guarantor)
unless such transactions are in the ordinary course of its business and are
upon fair and reasonable terms no less favorable to it than it would obtain in
a comparable arm's length transaction with a Person not an Affiliate.
Section 9.18 Subsidiaries and Partnerships. Without the prior written
consent of the Agent, QSRD and the Borrower shall not, and shall not permit any
of its respective Subsidiaries to, create any additional Subsidiaries or
partnerships, unless such Subsidiary or partnership becomes a Subsidiary
Guarantor hereunder or is designated by QSRD to be Non-Recourse Subsidiary.
QSRD shall not and shall not permit any of its Subsidiaries to sell or issue
any shares of stock of any class of one of its Subsidiaries or any interest in
a partnership except to QSRD or any of its Subsidiaries (other than Non-
Recourse Subsidiaries).
Section 9.19 Negative Pledge Agreements. Neither QSRD nor any of its
Subsidiaries will create, incur, assume or suffer to exist any contract,
agreement or understanding (other than this Agreement, the Security Instruments
and the documents and agreements listed on Scheduled 7.23) which in any way
prohibits or restricts the granting, conveying, creation or imposition of any
Lien on any of its Property or restricts any of its Subsidiaries from paying
dividends to QSRD or the Borrower, or which requires the consent of other
Persons in connection therewith.
Section 9.20 Gas Imbalances, Take-or-Pay or Other Prepayments. QSRD
and the Borrower will not, and will not permit any Subsidiary Guarantor to,
enter into any contracts or agreements which warrant production of Hydrocarbons
(other than Risk Management Agreements otherwise permitted hereunder) and will
not hereafter allow gas imbalances, take-or-pay or other prepayments
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with respect to their Oil and Gas Properties which would require such Person to
deliver Hydrocarbons produced on Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor to exceed, during
any monthly period, five percent (5%) of the current aggregate monthly gas
production for such monthly period from the Mortgaged Properties.
Section 9.21 Material Agreements. QSRD and the Borrower shall not, and
shall not permit any Subsidiary to, amend or modify in any material respect or
terminate any of the Material Agreements. Without limitation of the generality
of the foregoing, the Borrower will not amend, modify or supplement in any
material respect the Purchase and Sale Agreement or the Escrow Agreement
referred to therein; and neither QSRD nor the Borrower will waive any condition
precedent or requirement associated with the release of funds held in escrow
pursuant to the terms of the Escrow Agreement. QSRD and the Borrower will, and
will cause each of their Subsidiaries to, perform and comply in all material
respects with all of their obligations under each Material Agreement in such a
manner as to at all times not be in default of any material provisions
thereunder.
Section 9.22 Repayment of Other Debt.
(a) QSRD and the Borrower shall not, and shall not permit any
Subsidiary to, amend, supplement or modify any Bridge Loan Document or repay
the principal of, or make any other payment in relation to, either Bridge Loan,
except as contemplated by Sections 9.22(b) and (c); provided, so long as no
Default or Event of Default has occurred and is continuing, the foregoing shall
not prohibit the payment of interest on the Bridge Loans before and after
extension of all or any portion of the Bridge Loans, the payment of the
extension fees required under the Bridge Loan Documents or the repayment of the
Bridge Loans with the proceeds of any refinancing thereof (provided that such
refinancing Debt is subordinated on terms substantially similar to the Bridge
Loans and the Agent has approved in writing the terms thereof).
(b) QSRD and the Borrower agree to use the net cash proceeds of any
Hi-Yield Offering to (i) eliminate a Borrowing Base deficiency which then
exists under Section 2.07(c), if any, (ii) thereafter to repay in cash the Debt
Bridge Loan to the extent of such net cash proceeds, and (iii) thereafter use
any excess remaining to repay in cash the Equity Bridge Loans to the extent of
such excess proceeds.
(c) QSRD and the Borrower agree to use the net cash proceeds of any
Equity Offering to (i) eliminate a Borrowing Base deficiency which then exists
under Section 2.07(c), if any, (ii) thereafter to repay in cash the Equity
Bridge Loan to the extent of such net cash proceeds, and (iii) thereafter use
any excess remaining to repay in cash the Debt Bridge Loans to the extent of
such excess proceeds.
(d) QSRD and the Borrower shall not, and shall not permit any
Subsidiary to, amend, supplement, modify or prepay the DEM Subordinated Debt in
any material respect, except that all or any part of the DEM Subordinated Debt
may be prepaid with any excess proceeds from any Hi-Yield Offering or Equity
Offering so long as (i) the Percentage Usage is less than eighty (80%) prior
and after giving effect to such payment and (ii) the Bridge Loans have been
paid in full.
(e) QSRD and the Borrower shall not, and shall not permit any
Subsidiary to: (i) amend, supplement, modify, repay or prepay the ECT
Subordinated Debt without the prior written consent
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of the Majority Lenders, except for amendments or modifications to and payments
of the ECT Subordinated Debt outstanding on the Closing Date and other
amendments or modifications to and payments of the ECT Subordinated Debt as
permitted by that certain Subordination Agreement (herein so called) dated as
of December 29, 1997 by the holder(s) of the ECT Subordinated Debt in favor of
the Agent and the Lenders; (ii) borrow or permit to be outstanding any ECT
Subordinated Debt until such time as the Bridge Loans and any extensions
thereof have been repaid in full; or (iii) make any payment or repayment of
interest, principal or fees on the ECT Subordinated Debt if a Default or Event
of Default pursuant to Section 10.01(a) has occurred and is continuing or if a
Borrowing Base deficiency then exists under Section 2.07(c) except as otherwise
may be expressly permitted in the Subordination Agreement.
(f) If the amounts deposited in the Escrow Agreement under the
Purchase Agreement are to be returned to the Borrower as contemplated in
Section 2.02(g) of the Purchase and Sale Agreement, then, to the extent that
any such amounts have not been applied to repay the Indebtedness after giving
effect to Section 2.08(c) and Section 2.07(c), the Borrower shall immediately
prepay the Debt Bridge Loan in an amount equal to such excess.
Section 9.23 Limitations on Capital Expenditures. While the Bridge
Loans are outstanding or have been extended as permitted by the Bridge Loan
Documents, QSRD and the Borrower shall not, and shall not permit any
Subsidiaries to, make or pay any capital expenditures (other than maintenance
capital expenditures and emergency capital expenditures) if, after giving
effect thereto, the aggregate of all such expenditures would exceed (i)
$10,000,000 during the period from the Closing Date until the following clause
(ii) is applicable, and (ii) during any fiscal year for which a budget has been
supplied under Section 8.07, a level approved in writing by the Majority
Lenders based on QSRD's budget provided to the Lenders in connection with the
Reserve Reports supplied under Section 8.07.
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default. One or more of the following events
shall constitute an "Event of Default":
(a) the Borrower or any Obligor shall default in the payment or
prepayment when due of any principal of or interest on any Loan, or any
reimbursement obligation for a disbursement made under any Letter of Credit; or
the Borrower or any Obligor shall default in the payment of any fees or other
amount payable by it hereunder or under any Loan Document and such default
shall continue unremedied for a period of three (3) Business Days; or
(b) QSRD, the Borrower or any Subsidiary Guarantor shall default in
the payment when due of any principal of or interest on any of its Debt
(including the Subordinated Debt) aggregating $500,000 or more, or any event
specified in any note, agreement, indenture or other document evidencing or
relating to any such Debt shall occur if the effect of such event is to cause,
or (with the giving of any notice or the lapse of time or both) to permit the
holder or holders of such Debt (or a trustee or agent on behalf of such holder
or holders) to cause, such Debt to become due prior to its stated maturity; or
QSRD shall become obligated to mandatorily redeem any of the Preferred Stock or
a "mandatory redemption event" shall occur under the Certificate of Designation
for any class of Preferred Stock; or
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(c) any representation, warranty or certification made or deemed made
herein or in any Security Instrument by QSRD, the Borrower or any Subsidiary
Guarantor, or any certificate furnished to any Lender or the Agent pursuant to
the provisions hereof or any Loan Document, shall prove to have been false or
misleading as of the time made or furnished in any material respect; or
(d) QSRD or the Borrower shall default in the performance of any of
its obligations or any requirement shall not be complied with under Article IX;
or QSRD, the Borrower or any Subsidiary Guarantor shall default in the
performance of any of its obligations under Article VIII, under any other
Article of this Agreement other than under Article IX or any Loan Document
(other than the payment of amounts due which shall be governed by Section
10.01(a)) and such default shall continue unremedied for a period of thirty
(30) days after the earlier to occur of (i) notice thereof to the Borrower by
the Agent or any Lender (through the Agent), or (ii) the Borrower or such
Obligor otherwise becoming aware of such default; or
(e) QSRD or the Borrower shall admit in writing its inability to, or
be generally unable to, pay its debts as such debts become due; or
(f) QSRD or the Borrower shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its Property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence a
voluntary case under the Federal Bankruptcy Code (as now or hereafter in ef-
fect), (iv) file a petition seeking to take advantage of any other law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition or
readjustment of debts, (v) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under the Federal Bankruptcy Code, or (vi) take any corporate
action for the purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without the application
or consent of QSRD or the Borrower, in any court of competent jurisdiction,
seeking (i) its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of either QSRD or the Borrower of
all or any substantial part of its assets, or (iii) similar relief in respect
of such Person under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or decree
approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 60 days; or (iv) an order for relief
against either QSRD or the Borrower shall be entered in an involuntary case
under the Federal Bankruptcy Code; or
(h) a judgment or judgments for the payment of money in excess of
$100,000 in the aggregate shall be rendered by a court against QSRD, the
Borrower or any Subsidiary Guarantor and the same shall not be discharged (or
provision shall not be made for such discharge), or a stay of execution thereof
shall not be procured, within thirty (30) days from the date of entry thereof
and QSRD, the Borrower or such Subsidiary shall not, within said period of 30
days, or such longer period during which execution of the same shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed during
such appeal; or
(i) the Security Instruments after delivery thereof shall for any
reason, except to the extent permitted by the terms thereof, cease to be in
full force and effect and valid, binding and
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enforceable in accordance with their terms, or cease to create a valid and
perfected Lien of the priority required thereby on any of the collateral
purported to be covered thereby, except to the extent permitted by the terms of
this Agreement, or QSRD, the Borrower, any Subsidiary Guarantor or any Person
on their behalf shall so state in writing; or
(j) any Subsidiary Guarantor takes, suffers or permits to exist any
of the events or conditions referred to in paragraphs (e), (f) or (g) hereof;
or
(k) QSRD or the Borrower discontinues its usual business; or after
the Closing Date, any Person or two or more Persons (other than JEDI, Enron
Corp. or its Affiliates or the controlling persons thereof) acting as a group
(as defined in Section 13(d)(3) of the Securities Exchange Act of 1934) shall
have acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934)
of 30% or more of the outstanding shares of voting stock of QSRD; or
individuals who, as of the date hereof, constitute the Board of Directors of
QSRD (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board of Directors of QSRD; provided, however, that any
individual becoming a director of QSRD subsequent to the Closing Date whose
election, or nomination for election by QSRD's shareholders, was approved by a
vote of at least a majority of the directors then comprising the Incumbent
Board, shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Securities Exchange Act of 1934) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board of Directors of QSRD; or QSRD shall cease to
directly or indirectly own 100% of each class of stock of the Borrower and each
Subsidiary Guarantor (except directors' qualifying shares).
Section 10.02 Remedies. If any Event of Default shall have occurred
and be continuing, then:
(a) in the case of an Event of Default other than one referred to in
clauses (e), (f) or (g) of Section 10.01 or in clause (j) to the extent it
relates to clauses (e), (f) or (g), the Agent may and, upon request of the
Majority Lenders, shall, by notice to the Borrower, cancel the Commitments
and/or declare the principal amount then outstanding of, and the accrued inter-
est on, the Loans and all other amounts payable by the Borrower hereunder and
under the Notes (including without limitation the payment of cash collateral to
secure the LC Exposure as provided in Section 2.10(b) hereof) to be forthwith
due and payable, whereupon such amounts shall be immediately due and payable
without presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other formalities of any kind, all of which are hereby
expressly waived by the Borrower.
(b) in the case of the occurrence of an Event of Default referred to
in clauses (e), (f) or (g) of Section 10.01 or in clause (j) to the extent it
relates to clauses (e), (f) or (g), the Commitments shall be automatically
canceled and the principal amount then outstanding of, and the accrued interest
on, the Loans and all other amounts payable by the Borrower hereunder and under
the Notes (including without limitation the payment of cash collateral to
secure the LC Exposure as provided in Section 2.10(b) hereof) shall become
automatically immediately due and payable without presentment, demand, protest,
notice of intent to accelerate, notice of acceleration or other formalities of
any kind, all of which are hereby expressly waived by the Borrower.
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(c) All proceeds received after maturity of the Notes, whether by
acceleration or otherwise shall be applied first to reimbursement of expenses
and indemnities provided for in this Agreement and the Loan Document; second to
accrued interest on the Notes; third to fees; fourth pro rata to principal
outstanding on the Notes and other Indebtedness; fifth to serve as cash
collateral to be held by the Agent to secure the LC Exposure; and any excess
shall be paid to the Borrower or as otherwise required by any Governmental
Requirement.
ARTICLE XI
THE AGENT
Section 11.01 Appointment, Powers and Immunities. Each Lender hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under the Loan Document with such powers as are specifically delegated to the
Agent by the terms of this Agreement and the Loan Document, together with such
other powers as are reasonably incidental thereto. The Agent (which term as
used in this sentence and in Section 11.05 and the first sentence of Section
11.06 shall include reference to its Affiliates and its and its Affiliates'
officers, directors, employees, attorneys, accountants, experts and agents):
(i) shall have no duties or responsibilities except those expressly set forth
in this Agreement, and shall not by reason of this Agreement be a trustee or
fiduciary for any Lender; (ii) makes no representation or warranty to any
Lender and shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement, or in
any certificate or other document referred to or provided for in, or received
by any of them under, this Agreement, or for the value, validity, effec-
tiveness, genuineness, execution, effectiveness, legality, enforceability or
sufficiency of this Agreement, any Note or any other document referred to or
provided for herein or for any failure by any Obligor or any other Person
(other than the Agent) to perform any of its obligations hereunder or
thereunder or for the existence, value, perfection or priority of any
collateral security or the financial or other condition of any Obligor; (iii)
except pursuant to Section 11.07 shall not be required to initiate or conduct
any litigation or collection proceedings hereunder; and (iv) shall not be
responsible for any action taken or omitted to be taken by it hereunder or
under any other document or instrument referred to or provided for herein or in
connection herewith including its own ordinary negligence, except for its own
gross negligence or willful misconduct. The Agent may employ agents,
accountants, attorneys and experts and shall not be responsible for the
negligence or misconduct of any such agents, accountants, attorneys or experts
selected by it in good faith or any action taken or omitted to be taken in good
faith by it in accordance with the advice of such agents, accountants,
attorneys or experts. The Agent may deem and treat the payee of any Note as
the holder thereof for all purposes hereof unless and until a written notice of
the assignment or transfer thereof permitted hereunder shall have been filed
with the Agent.
Section 11.02 Reliance by Agent. The Agent shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telex, telecopier, telegram or cable) believed by it to be genuine
and correct and to have been signed or sent by or on behalf of the proper
Person or Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Agent.
Section 11.03 Defaults. The Agent shall not be deemed to have
knowledge of the occurrence of a Default (other than the non-payment of
principal of or interest on Loans or of fees or failure to reimburse for Letter
of Credit drawings) unless the Agent has received notice from a Lender or an
Obligor specifying such Default and stating that such notice is a "Notice of
Default."
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In the event that the Agent receives such a notice of the occurrence of a
Default, the Agent shall give prompt notice thereof to the Lenders. In the
event of a payment Default, the Agent shall give each Lender prompt notice of
each such payment Default.
Section 11.04 Rights as a Lender. With respect to its Commitments and
the Loans made by it and its participation in the issuance of Letters of
Credit, Bank of Montreal (and any successor acting as Agent) in its capacity as
a Lender hereunder shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting as the Agent, and
the term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include the Agent in its individual capacity. Bank of Montreal (and any
successor acting as Agent) and its Affiliates may (without having to account
therefor to any Lender) accept deposits from, lend money to and generally
engage in any kind of banking, trust or other business with the Borrower (any
and of its Affiliates) as if it were not acting as the Agent, and Bank of
Montreal and its Affiliates may accept fees and other consideration from the
Borrower for services in connection with this Agreement or otherwise without
having to account for the same to the Lenders.
Section 11.05 INDEMNIFICATION. EACH LENDER AGREES TO INDEMNIFY THE
AGENT RATABLY IN ACCORDANCE WITH ITS PERCENTAGE SHARE FOR THE INDEMNITY MATTERS
AS DESCRIBED IN SECTION 12.03 TO THE EXTENT NOT INDEMNIFIED OR REIMBURSED BY
THE BORROWER UNDER SECTION 12.03, BUT WITHOUT LIMITING THE OBLIGATIONS OF THE
BORROWER UNDER SAID SECTION 12.03 AND FOR ANY AND ALL OTHER LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER WHICH MAY BE
IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT IN ANY WAY RELATING TO OR
ARISING OUT OF: (I) THIS AGREEMENT, THE LOAN DOCUMENT OR ANY OTHER DOCUMENTS
CONTEMPLATED BY OR REFERRED TO HEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY,
BUT EXCLUDING, UNLESS A DEFAULT HAS OCCURRED AND IS CONTINUING, NORMAL
ADMINISTRATIVE COSTS AND EXPENSES INCIDENT TO THE PERFORMANCE OF ITS AGENCY
DUTIES HEREUNDER OR (II) THE ENFORCEMENT OF ANY OF THE TERMS OF THIS AGREEMENT,
ANY LOAN DOCUMENT OR OF ANY SUCH OTHER DOCUMENTS; WHETHER OR NOT ANY OF THE
FOREGOING SPECIFIED IN THIS SECTION 11.05 ARISES FROM THE SOLE OR CONCURRENT
NEGLIGENCE OF THE AGENT, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY OF THE
FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE AGENT. THE FOREGOING INDEMNITIES SHALL EXTEND TO THE AGENT
NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER
WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN
OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF THE AGENT OR BY REASON OF
STRICT LIABILITY IMPOSED WITHOUT FAULT ON THE AGENT. TO THE EXTENT THAT THE
AGENT IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILLFUL MISCON-
DUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL CONTINUE BUT SHALL
ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED TO HAVE OCCURRED BY
REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
AGENT.
Section 11.06 Non-Reliance on Agent and other Lenders. Each Lender
acknowledges and agrees that it has, independently and without reliance on the
Agent or any other Lender, and based on such documents and information as it
has deemed appropriate, made its own credit analysis of QSRD and its
Subsidiaries, including the Borrower, and its decision to enter into this
Agreement,
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and that it will, independently and without reliance upon the Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement. The Agent shall not be
required to keep itself informed as to the performance or observance by any
Obligor of this Agreement, the Notes, the other Loan Documents or any other
document referred to or provided for herein or to inspect the properties or
books of any Obligor. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of any Obligor (or any of its Affiliates) which may come
into the possession of the Agent or any of its Affiliates.
Section 11.07 Action by Agent. Except for action or other matters
expressly required of the Agent hereunder, the Agent shall in all cases be
fully justified in failing or refusing to act hereunder unless it shall (i)
receive written instructions from the Majority Lenders specifying the action to
be taken, and (ii) be indemnified to its satisfaction by the Lenders against
any and all liability and expenses which may be incurred by it by reason of
taking, not taking or continuing to take any such action. The instructions of
the Majority Lenders and any action taken or failure to act pursuant thereto by
the Agent shall be binding on all of the Lenders. If a Default has occurred
and is continuing, the Agent shall take such action with respect to such
Default as shall be directed by the Majority Lenders in the written
instructions (with indemnities) described in this Section 11.07, provided that,
unless and until the Agent shall have received such directions, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default as it shall deem advisable in the best
interests of the Lenders. In no event, however, shall the Agent be required to
take any action which exposes the Agent to personal liability or which is
contrary to this Agreement and the Loan Documents or applicable law.
Section 11.08 Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent
may resign at any time by giving notice thereof to the Lenders and the
Borrower, and the Agent may be removed at any time with or without cause by the
Majority Lenders. Upon any such resignation or removal, the Majority Lenders
shall have the right to appoint a successor Agent. If no successor Agent shall
have been so appointed by the Majority Lenders and approved by the Borrower and
shall have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation or the Majority Lenders' removal of the
retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint
a successor Agent (which successor Agent must be approved by the Borrower, such
approval not to be unreasonably withheld or delayed). Upon the acceptance of
such appointment hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this Article XI
and Section 12.03 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Agent.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Waiver. No failure on the part of the Agent or any
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under any
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of the Loan Documents shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, power or privilege under any of the Loan
Documents preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
Section 12.02 Notices. All notices and other communications provided
for herein and in the Loan Documents (including, without limitation, any
modifications of, or waivers or consents under, this Agreement or the Loan
Documents) shall be given or made by telecopy, courier or U.S. Mail or in
writing and telecopied, mailed or delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof or
in the Loan Documents or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement or in the Loan Documents, all such communications
shall be deemed to have been duly given when transmitted by telecopier,
delivered to the telegraph or cable office or personally delivered or, in the
case of a mailed notice, three (3) Business Days after the date deposited in
the mails, postage prepaid, or in the case of overnight courier, one (1)
Business Day after the date deposited with such courier, in each case given or
addressed as aforesaid.
Section 12.03 Payment of Expenses, Indemnities, etc. The Borrower
agrees:
(a) whether or not the transactions hereby contemplated are
consummated, to pay all reasonable expenses of the Agent (both before and after
the execution hereof and including reasonable attorneys' fees in connection
with the negotiation, syndication, investigation, preparation, execution and
delivery of, recording or filing of, enforcement of, and refinancing,
renegotiation or restructuring of, the Loan Documents and any amendment, waiver
or consent relating thereto (including, without limitation, travel, photocopy,
mailing, courier, telephone and other similar expenses of the Agent, allocated
internal collateral examination and monitoring charges, cost of environmental
audits, the reasonable fees and disbursements of counsel for the Agent and in
the case of enforcement for any of the Lenders); and promptly reimburse the
Agent for all amounts expended, advanced or incurred by the Agent or the
Lenders to satisfy any obligation of any Obligor under this Agreement or any
Security Instrument;
(b) TO INDEMNIFY THE AGENT AND EACH LENDER AND EACH OF THEIR
AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES
AND AGENTS ("INDEMNIFIED PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND
PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY MATTERS
WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF THEM (WHETHER OR
NOT ANY OF THEM IS DESIGNATED A PARTY THERETO) AS A RESULT OF, ARISING OUT OF
OR IN ANY WAY RELATED TO (I) ANY ACTUAL OR PROPOSED USE BY THE BORROWER OF THE
PROCEEDS OF ANY OF THE LOANS, (II) THE EXECUTION, DELIVERY AND PERFORMANCE OF
THE LOAN DOCUMENTS, (III) THE OPERATIONS OF THE BUSINESS OF QSRD AND ITS
SUBSIDIARIES, (IV) THE FAILURE OF QSRD OR ANY OF ITS SUBSIDIARIES TO COMPLY
WITH THE TERMS OF ANY LOAN DOCUMENT, THIS AGREEMENT OR WITH ANY GOVERNMENTAL
REQUIREMENT, (V) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY
WARRANTY OF ANY OBLIGOR SET FORTH IN ANY OF THE LOAN DOCUMENTS, (VI) THE
ISSUANCE, EXECUTION AND DELIVERY OR TRANSFER OF OR PAYMENT OR FAILURE TO PAY
UNDER ANY LETTER OF CREDIT, OR (VII) THE PAYMENT OF A DRAWING UNDER ANY LETTER
OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER
PRESENTATION OF THE MANUALLY EXECUTED DRAFT(S) AND
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CERTIFICATION(S), (VIII) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO
RECEIVE ANY AMOUNTS RECEIVED PURSUANT TO THE LOAN DOCUMENTS OR (IX) ANY OTHER
ASPECT OF THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE REASONABLE
FEES AND DISBURSEMENTS OF COUNSEL AND ALL OTHER EXPENSES INCURRED IN CONNECTION
WITH INVESTIGATING, DEFENDING OR PREPARING TO DEFEND ANY SUCH ACTION, SUIT,
PROCEEDING (INCLUDING ANY INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM AND
INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE ORDINARY NEGLIGENCE OF
ANY INDEMNIFIED PARTY, BUT EXCLUDING ALL INDEMNITY MATTERS ARISING SOLELY BY
REASON OF CLAIMS BETWEEN THE LENDERS OR ANY LENDER AND THE AGENT OR A LENDER'S
SHAREHOLDERS AGAINST THE AGENT OR LENDER OR BY REASON OF THE GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT ON THE PART OF THE INDEMNIFIED PARTY; AND
(c) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE INDEMNIFIED
PARTY FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST RECOVERY ACTIONS,
ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND LIABILITIES TO WHICH ANY SUCH
PERSON MAY BECOME SUBJECT (I) UNDER ANY ENVIRONMENTAL LAW APPLICABLE TO QSRD OR
ANY OF ITS SUBSIDIARIES OR ANY OF THEIR PROPERTIES, INCLUDING WITHOUT
LIMITATION, THE TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF THEIR
PROPERTIES, (II) AS A RESULT OF THE BREACH OR NON-COMPLIANCE BY QSRD OR ANY OF
ITS SUBSIDIARIES WITH ANY ENVIRONMENTAL LAW APPLICABLE TO QSRD OR ANY OF ITS
SUBSIDIARIES, (III) DUE TO PAST OWNERSHIP BY QSRD OR ANY OF ITS SUBSIDIARIES OF
ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH,
THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT
LIABILITY, (IV) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT OR DISPOSAL OF
HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY QSRD
OR ANY OF ITS SUBSIDIARIES, OR (V) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY
CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, PROVIDED, HOWEVER, NO
INDEMNITY SHALL BE AFFORDED UNDER THIS SECTION 12.03(C) IN RESPECT OF ANY
PROPERTY FOR ANY OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS OF THE AGENT OR
ANY LENDER DURING THE PERIOD AFTER WHICH SUCH PERSON, ITS SUCCESSORS OR ASSIGNS
SHALL HAVE OBTAINED POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED
IN LIEU OF FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE).
(d) No Indemnified Party may settle any claim to be indemnified
without the consent of the indemnitor, such consent not to be unreasonably
withheld; provided, that the indemnitor may not reasonably withhold consent to
any settlement that an Indemnified Party proposes, if the indemnitor does not
have the financial ability to pay all its obligations outstanding and asserted
against the indemnitor at that time, including the maximum potential claims
against the Indemnified Party to be indemnified pursuant to this Section 12.03.
(e) In the case of any indemnification hereunder, the Agent or
Lender, as appropriate, shall give notice to the Borrower of any such claim or
demand being made against the Indemnified Party and the Borrower shall have the
non-exclusive right to join in the defense against any such claim or demand
provided that if the Borrower provides a defense, the Indemnified Party shall
bear its own cost of defense unless there is a conflict between the Borrower
and such Indemnified Party.
(f) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES
NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER
WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN
OMISSION,
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INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE
RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNIFIED PARTIES OR BY
REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE
INDEMNIFIED PARTIES. TO THE EXTENT THAT AN INDEMNIFIED PARTY IS FOUND TO HAVE
COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, THIS CONTRACTUAL
OBLIGATION OF INDEMNIFICATION SHALL CONTINUE BUT SHALL ONLY EXTEND TO THE
PORTION OF THE CLAIM THAT IS DEEMED TO HAVE OCCURRED BY REASON OF EVENTS OTHER
THAN THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY.
(g) The Borrower's obligations under this Section 12.03 shall survive
any termination of this Agreement and the payment of the Notes and shall
continue thereafter in full force and effect.
(h) The Borrower shall pay any amounts due under this Section 12.03
within thirty (30) days of the receipt by the Borrower of notice of the amount
due.
Section 12.04 Amendments, Etc. Any provision of this Agreement or any
Security Instrument may be amended, modified or waived with QSRD's, the
Borrower's and the Majority Lenders' prior written consent; provided that (i)
no amendment, modification or waiver which extends the maturity of the Loans,
increases the Aggregate Maximum Credit Amounts, modifies any term herein
providing for the determination of the Borrowing Base, forgives any
Indebtedness outstanding under this Agreement, releases any Obligor or
collateral the aggregate SEC Value of which exceeds $2,500,000 during any
fiscal year, reduces the interest rate applicable to the Loans or the fees
payable to the Lenders generally, affects Section 2.03(a), this Section 12.04
or Section 12.06(a) or modifies the definition of "Majority Lenders" or
"Required Lenders" shall be effective without consent of all Lenders; (ii) no
amendment, modification or waiver which increases the Maximum Credit Amount of
any Lender shall be effective without the consent of such Lender; and (iii) no
amendment, modification or waiver which modifies the rights, duties or
obligations of the Agent shall be effective without the consent of the Agent.
Section 12.05 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
Section 12.06 Assignments and Participations.
(a) No Obligor, including the Borrower, may assign its rights or
obligations hereunder, under the Notes, any Letter of Credit or any other Loan
Documents without the prior consent of all of the Lenders and the Agent.
(b) Any Lender may, upon the written consent of the Agent and the
Borrower (which consent will not be unreasonably withheld), assign to one or
more assignees all or a portion of its rights and obligations under this
Agreement pursuant to an Assignment Agreement substantially in the form of
Exhibit E (an "Assignment") provided, however, that (i) any such assignment
shall be in the amount of at least $10,000,000 or such lesser amount to which
the Borrower has consented and (ii) the assignee shall pay to the Agent a
processing and recordation fee of $2,000 for each assignment. Any such
assignment will become effective upon the execution and delivery to the Agent
of the Assignment and the consent of the Agent. Promptly after receipt of an
executed Assignment, the Agent shall send to the Borrower a copy of such
executed Assignment. Upon receipt of such executed Assignment, the Borrower,
will, at its own expense, execute and deliver
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new Notes to the assignor and/or assignee, as appropriate, in accordance with
their respective interests as they appear. Upon the effectiveness of any
assignment pursuant to this Section 12.06(b), the assignee will become a
"Lender," if not already a "Lender," for all purposes of this Agreement and the
Security Instruments. The assignor shall be relieved of its obligations
hereunder to the extent of such assignment (and if the assigning Lender no
longer holds any rights or obligations under this Agreement, such assigning
Lender shall cease to be a "Lender" hereunder except that its rights under
Sections 4.06, 5.01, 5.05 and 12.03 shall not be affected). The Agent will
prepare on the last Business Day of each month during which an assignment has
become effective pursuant to this Section 12.06(b), a new Annex I giving effect
to all such assignments effected during such month, and will promptly provide
the same to the Borrower and each of the Lenders.
(c) Each Lender may transfer, grant or assign participations in all
or any part of such Lender's interests hereunder pursuant to this Section
12.06(c) to any Person, provided that: (i) such Lender shall remain a "Lender"
for all purposes of this Agreement and the transferee of such participation
shall not constitute a "Lender" hereunder; and (ii) no participant under any
such participation shall have rights to approve any amendment to or waiver of
any of the Loan Documents except to the extent such amendment or waiver would
(w) forgive or reduce the amount of principal due hereunder or under any Note,
(x) extend the Revolving Credit Termination Date or the Maturity Date, (y)
reduce the interest rate (other than as a result of waiving the applicability
of any post-default increases in interest rates) or fees applicable to any of
the Commitments or Loans or Letters of Credit in which such participant is
participating, or postpone the payment of any thereof, or (z) release all or
substantially all of the collateral or any guarantor (except as expressly
provided herein or in any Loan Document) supporting any of the Commitments or
Loans or Letters of Credit in which such participant is participating. In the
case of any such participation, the participant shall not have any rights under
this Agreement or any of the Loan Documents (the participant's rights against
the granting Lender in respect of such participation to be those set forth in
the agreement with such Lender creating such participation), and all amounts
payable by the Borrower hereunder shall be determined as if such Lender had not
sold such participation, provided that such participant shall be entitled to
receive additional amounts under Article V on the same basis as if it were a
Lender and be indemnified under Section 12.03 as if it were a Lender. In
addition, each agreement creating any participation must include an agreement
by the participant to be bound by the provisions of Section 12.15.
(d) The Lenders may furnish any information concerning the Obligors
in the possession of the Lenders from time to time to assignees and
participants (including prospective assignees and participants); provided that,
such Persons agree to be bound by the provisions of Section 12.15 hereof.
(e) Notwithstanding anything in this Section 12.06 to the contrary,
any Lender may assign and pledge its Note to any Federal Reserve Bank or the
United States Treasury as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any operating circular
issued by such Federal Reserve System and/or such Federal Reserve Bank. No
such assignment and/or pledge shall release the assigning and/or pledging
Lender from its obligations hereunder.
(f) Notwithstanding any other provisions of this Section 12.06, no
transfer or assignment of the interests or obligations of any Lender or any
grant of participations therein shall be permitted
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if such transfer, assignment or grant would require QSRD or the Borrower to
file a registration statement with the SEC or to qualify the Loans under the
"Blue Sky" laws of any state.
Section 12.07 Invalidity. In the event that any one or more of the
provisions contained in any of the Loan Documents or the Letters of Credit, the
Letter of Credit Agreements shall, for any reason, be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of the Notes, this Agreement or any other
Loan Document.
Section 12.08 Counterparts. Each Loan Document 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.
Section 12.09 References. The words "herein," "hereof," "hereunder"
and other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular article, section or subsection.
Any reference herein to a Section shall be deemed to refer to the applicable
Section of this Agreement unless otherwise stated herein. Any reference herein
to an exhibit or schedule shall be deemed to refer to the applicable exhibit or
schedule attached hereto unless otherwise stated herein.
Section 12.10 Survival. The obligations of the parties under Section
4.06, Article V, and Sections 11.05 and 12.03 shall survive the repayment of
the Loans and the termination of the Commitments. To the extent that any
payments on the Indebtedness or proceeds of any collateral are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
to be repaid to a trustee, debtor in possession, receiver or other Person under
any bankruptcy law, common law or equitable cause, then to such extent, the
Indebtedness so satisfied shall be revived and continue as if such payment or
proceeds had not been received and the Agent's and the Lenders' Liens, security
interests, rights, powers and remedies under this Agreement and each Loan
Document shall continue in full force and effect. In such event, each Loan
Document shall be automatically reinstated and QSRD and the Borrower shall take
and shall cause each Subsidiary Guarantor to take, such action as may be
reasonably requested by the Agent and the Lenders to effect such reinstatement.
Section 12.11 Captions. Captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
Section 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER
AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEM-
PORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
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Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT AND THE NOTES (INCLUDING, BUT NOT LIMITED TO, THE
VALIDITY AND ENFORCEABILITY HEREOF AND THEREOF) SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. TEX. REV. CIV.
STAT. XXX. ART. 0000, XX. 15 (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN
ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR
THE NOTES.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS
SHALL BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, HOUSTON DIVISION, AND, BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND (TO
THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING
IN SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-
EXCLUSIVE AND DOES NOT PRECLUDE THE PARTIES FROM OBTAINING JURISDICTION OVER
OTHER PARTIES IN ANY COURT OTHERWISE HAVING JURISDICTION.
(c) QSRD AND THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY
THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
TO QSRD OR THE BORROWER, AS APPROPRIATE, AT ITS SAID ADDRESS, SUCH SERVICE TO
BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY LENDER
OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST QSRD OR THE
BORROWER IN ANY OTHER JURISDICTION.
(e) EACH OF QSRD, THE BORROWER AND EACH LENDER HEREBY (I) IRREVOCABLY
AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY
SECURITY INSTRUMENT AND FOR ANY COUNTERCLAIM THEREIN; (II) IRREVOCABLY WAIVE,
TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES; (III) CERTIFY THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR
COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR
IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVERS, AND (IV) ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT, THE SECURITY INSTRUMENTS AND THE TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS SECTION 12.13.
Section 12.14 Interest. It is the intention of the parties hereto that
the Agent or each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated
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hereby, by the Notes or any other Loan Document would be usurious as to the
Agent or any Lender under laws applicable to it (including the laws of the
United States of America and the State of Texas or any other jurisdiction whose
laws may be mandatorily applicable to such Lender notwithstanding the other
provisions of this Agreement), then, in that event, notwithstanding anything to
the contrary in any of the Loan Documents or any agreement entered into in
connection with or as security for the Notes, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under law applicable
to the Agent or any Lender that is contracted for, taken, reserved, charged or
received by the Agent or such Lender under any of the Loan Documents or
agreements or otherwise in connection with the Notes shall under no
circumstances exceed the maximum amount allowed by such applicable law, and any
excess shall be canceled automatically and if theretofore paid shall be
credited by the Agent or such Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by the Agent or such
Lender to the Borrower); and (ii) in the event that the maturity of the Notes
is accelerated by reason of an election of the holder thereof resulting from
any Event of Default under this Agreement or otherwise, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest under law applicable to the Agent or any Lender may never include more
than the maximum amount allowed by such applicable law, and excess interest, if
any, provided for in this Agreement or otherwise shall be canceled
automatically by the Agent or such Lender as of the date of such acceleration
or prepayment and, if theretofore paid, shall be credited by the Agent or such
Lender on the principal amount of the Indebtedness (or, to the extent that the
principal amount of the Indebtedness shall have been or would thereby be paid
in full, refunded by the Agent or such Lender to the Borrower). All sums paid
or agreed to be paid to the Agent or any Lender for the use, forbearance or
detention of sums due hereunder shall, to the extent permitted by law
applicable to the Agent or such Lender, be amortized, prorated, allocated and
spread throughout the full term of the Loans evidenced by the Notes until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law.
If at any time and from time to time (i) the amount of interest payable to the
Agent or any Lender on any date shall be computed at the Highest Lawful Rate
applicable to the Agent or such Lender pursuant to this Section 12.14 and (ii)
in respect of any subsequent interest computation period the amount of interest
otherwise payable to the Agent or such Lender would be less than the amount of
interest payable to the Agent or such Lender computed at the Highest Lawful
Rate applicable to the Agent or such Lender, then the amount of interest
payable to the Agent or such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to the Agent or such Lender until the total amount of interest
payable to the Agent or such Lender shall equal the total amount of interest
which would have been payable to the Agent or such Lender if the total amount
of interest had been computed without giving effect to this Section 12.14.
To the extent that the Texas Credit Title is relevant to any Agent or
Lender for the purpose of determining the Highest Lawful Rate, each such Agent
and Lender hereby elects to determine the applicable rate ceiling under the
Texas Credit Title by the weekly rate ceiling from time to time in effect.
Section 12.15 Confidentiality. In the event that the Borrower
provides to the Agent or the Lenders written confidential information belonging
to the Borrower, if the Borrower shall denominate such information in writing
as "confidential", the Agent and the Lenders shall thereafter maintain such
information in confidence in accordance with the standards of care and
diligence that each utilizes in maintaining its own confidential information.
This obligation of confidence shall
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not apply to such portions of the information which (i) are in the public
domain, (ii) hereafter become part of the public domain without the Agent or
the Lenders breaching their obligation of confidence to the Borrower, (iii) are
previously known by the Agent or the Lenders from some source other than the
Borrower (which disclosing source did not, to the knowledge of such disclosing
Person, breach any confidentiality agreement with the Borrower), (iv) are
hereafter developed by the Agent or the Lenders without using the Borrower's
information, (v) are hereafter obtained by or available to the Agent or the
Lenders from a third party who owes no obligation of confidence to the Borrower
with respect to such information or through any other means other than through
disclosure by the Borrower, (vi) are disclosed with the Borrower's consent,
(vii) must be disclosed either pursuant to any Governmental Requirement or to
Persons regulating the activities of the Agent or the Lenders, or (viii) as may
be required by law or regulation or order of any Governmental Authority in any
judicial, arbitration or governmental proceeding. Further, the Agent or a
Lender may disclose any such information to any other Lender, any independent
petroleum engineers or consultants, any independent certified public
accountants or any legal counsel employed by such Person in connection with
this Agreement or any Security Instrument, including without limitation, the
enforcement or exercise of all rights and remedies thereunder, or any assignee
or participant (including prospective assignees and participants) in the Loans;
provided, however, that the Agent or Lender imposes on the Person to whom such
information is disclosed the same obligation to maintain the confidentiality of
such information as is imposed upon it hereunder. Notwithstanding anything to
the contrary provided herein, this obligation of confidence shall cease three
(3) years from the date the information was furnished, unless the Borrower
requests in writing at least thirty (30) days prior to the expiration of such
three year period, to maintain the confidentiality of such information for an
additional three year period. The Borrower waives any and all other rights it
may have to confidentiality as against the Agent and the Lenders arising by
contract, agreement, statute or law except as expressly stated in this Section
12.15.
Section 12.16 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE
TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ
THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE
TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED
BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS
PRECEDING ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS
RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE
LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER
PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND
COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCUL-
PATORY PROVISION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS
THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE
PROVISION IS NOT "CONSPICUOUS."
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Section 12.17 Designated Senior Indebtedness. QSRD and the Borrower
hereby designate all Indebtedness outstanding under this Agreement, the Notes
and the other Loan Documents to be "Designated Senior Indebtedness" (as defined
in the Offering Memorandum dated July 15, 1995 relating to the DEM Subordinated
Debt) for purposes of the DEM Subordinated Debt and to be "guarantor senior
indebtedness", "designated guarantor senior indebtedness" or any other similar
or equivalent classification under any debt instrument or agreement to which
either QSRD or the Borrower is now or hereafter a party.
Section 12.18 Amendments to Prior Loan Documents. The loan documents
executed and delivered in connection with the Prior Credit Agreement are being
amended and restated contemporaneously with this Agreement. Each Lender hereby
consents to such action.
The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.
[SIGNATURES BEGIN ON THE NEXT PAGE]
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QUEEN SAND RESOURCES, INC., a Delaware
corporation
By: /s/ XXXXXX X. XXXXXXX
---------------------------------
Xxxxxx X. Xxxxxxx
Chief Operating Officer
By: /s/ XXXXXX X. XXXXXX
---------------------------------
Xxxxxx X. Xxxxxx
President
QUEEN SAND RESOURCES, INC., a Nevada
corporation
By: /s/ XXXXXX X. XXXXXXX
---------------------------------
Xxxxxx X. Xxxxxxx
Vice President
By: /s/ XXXXXX X. XXXXXX
---------------------------------
Xxxxxx X. Xxxxxx
President
Address for Notices for QSRD and the
Borrower:
Queen Sand Resources, Inc.
0000 Xxx Xxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with copy to:
Queen Sand Resources, Inc.
00 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxx X0X 0X0
Attention: Xx. Xxxxxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Xxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Attention: Xx. Xxxxxxx X. Boeing
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
84
AGENT: BANK OF MONTREAL, as Agent
By: /s/ XXXXXX X. XXXXXXX
---------------------------------
Xxxxxx X. Xxxxxxx
Director, U.S. Corporate
Banking
Address for Notices:
000 Xxxxx XxXxxxx Xx.
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copy to:
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopier No. (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Client Services Group
85
LENDER: BANK OF MONTREAL
By: /s/ XXXXXX X. XXXXXXX
---------------------------------
Xxxxxx X. Xxxxxxx
Director, U.S. Corporate
Banking
Applicable Lending Office for Base
Rate and Eurodollar Loans
000 Xxxxx XxXxxxx Xx.
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Address for Notices:
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Client Services Group
86
LENDER: ENRON CAPITAL & TRADE RESOURCES CORP.
By: /s/ XXXXXX X. XXXXXXX
---------------------------------
Xxxxxx X. Xxxxxxx
Agent and Attorney-in-fact
Address and Applicable Lending Office
for Base Rate and Eurodollar Loans:
0000 Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
87
LENDER: JOINT ENERGY DEVELOPMENT INVESTMENTS II
LIMITED PARTNERSHIP
By: Enron Capital Management II Limited
Partnership, its sole general partner
By: Enron Capital II Corp., its sole
general partner
By: /s/ XXXXXX X. XXXXXXX
---------------------------------
Xxxxxx X. Xxxxxxx
Agent and Attorney-in-fact
Address and Applicable Lending Office
for Base Rate and Eurodollar Loans:
0000 Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
