EXHIBIT 4.1
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
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INLAND PRODUCTION COMPANY,
as Borrower,
INLAND RESOURCES INC.,
as Guarantor,
and
FORTIS CAPITAL CORP.
as Agent,
and CERTAIN FINANCIAL INSTITUTIONS,
as Lenders
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$83,500,000
Dated as of November 30, 2001
TABLE OF CONTENTS
ARTICLE I - Definitions and References............................................................................1
Section 1.1. Defined Terms....................................................................................1
Section 1.2. Exhibits and Schedules: Additional Definitions...................................................15
Section 1.3. Amendment of Defined Instruments.................................................................15
Section 1.4. References and Titles............................................................................15
Section 1.5. Calculations and Determinations..................................................................16
ARTICLE II - The Loans...........................................................................................16
Section 2.1. Revolving Loans..................................................................................16
Section 2.2. Requests for New Revolving Loans.................................................................17
Section 2.3. Term Loan........................................................................................18
Section 2.4. Continuations and Conversions of Existing Loans..................................................18
Section 2.5. Use of Proceeds..................................................................................19
Section 2.6. Interest Rates and Fees..........................................................................19
Section 2.7. Optional Prepayments.............................................................................20
Section 2.8. Mandatory Prepayments............................................................................20
Section 2.9. Initial Borrowing Base...........................................................................21
Section 2.10. Subsequent Determinations of Borrowing Base: Reduction of Borrowing Base........................21
Section 2.11. Letters of Credit...............................................................................22
Section 2.12. Requesting Letters of Credit....................................................................23
Section 2.13. Reimbursement and Participations................................................................23
Section 2.14. Letter of Credit Fees...........................................................................24
Section 2.15. No Duty to Inquire..............................................................................25
Section 2.16. LC Collateral...................................................................................26
ARTICLE III - Payments to Lenders................................................................................27
Section 3.1. General Procedures...............................................................................27
Section 3.2. Capital Reimbursement............................................................................28
Section 3.3. Increased Cost of Eurodollar Loans or Letters of Credit..........................................28
Section 3.4. Availability.....................................................................................29
Section 3.5. Funding Losses...................................................................................29
Section 3.6. Reimbursable Taxes...............................................................................29
Section 3.7. Change of Applicable Lending Office..............................................................31
Section 3.8. Replacement of Lenders...........................................................................31
ARTICLE IV - Conditions Precedent................................................................................31
Section 4.1. Conditions to Effectiveness of Agreement.........................................................31
Section 4.2 Conditions to Revolving Loans.....................................................................32
ARTICLE V - Representations and Warranties.......................................................................33
Section 5.1. No Default.......................................................................................33
Section 5.2. Organization and Good Standing...................................................................33
Section 5.3. Authorization....................................................................................33
Section 5.4. No Conflicts or Consents.........................................................................34
Section 5.5. Enforceable Obligations..........................................................................34
Section 5.6. Current Financial Statements.....................................................................34
Section 5.7. Other Obligations and Restrictions...............................................................34
Section 5.8. Full Disclosure..................................................................................35
Section 5.9. Litigation.......................................................................................35
Section 5.10. Labor Disputes and Acts of God..................................................................35
Section 5.11. ERISA Plans and Liabilities.....................................................................35
Section 5.12. Environmental and Other Laws....................................................................35
Section 5.13. Names and Places of Business....................................................................37
Section 5.14. Subsidiaries....................................................................................37
Section 5.15. Licenses........................................................................................38
Section 5.16. Government Regulation...........................................................................38
Section 5.17. Ownership of Borrower...........................................................................38
Section 5.18. Solvency........................................................................................38
Section 5.19. Taxes...........................................................................................38
ARTICLE VI - Affirmative Covenants of Borrower and Parent........................................................38
Section 6.1. Payment and Performance..........................................................................38
Section 6.2. Books Financial Statements and Reports...........................................................39
Section 6.3. Other Information and Inspections................................................................41
Section 6.4. Notice of Material Events and Change of Address..................................................42
Section 6.5. Maintenance of Properties........................................................................42
Section 6.6. Maintenance of Existence and Qualifications......................................................42
Section 6.7. Payment of Taxes, etc............................................................................42
Section 6.8. Bonding and Insurance............................................................................43
Section 6.9. Performance on Borrower's Behalf.................................................................43
Section 6.10. Interest........................................................................................43
Section 6.11. Compliance with Agreements and Law..............................................................44
Section 6.12. Environmental Matters: Environmental Reviews....................................................44
Section 6.13. Evidence of Compliance..........................................................................44
Section 6.14. Agreement to Deliver Security Documents.........................................................44
Section 6.15. Perfection and Protection of Security Interests and Liens.......................................45
Section 6.16. Bank Accounts; Offset...........................................................................45
Section 6.17. Guaranties of Parent's Subsidiaries.............................................................45
Section 6.18. Production Proceeds.............................................................................46
Section 6.19. Completion of Activities........................................................................46
Section 6.20. Reviews.........................................................................................46
Section 6.21. Hedging Contracts...............................................................................46
ARTICLE VII -Negative Covenants of Borrower and Parent...........................................................46
Section 7.1. Restricted Debt..................................................................................47
Section 7.2. Limitation on Liens..............................................................................48
Section 7.3. Hedging Contracts................................................................................48
Section 7.4. No Mergers.......................................................................................49
Section 7.5. Limitation on Sales of Property..................................................................49
Section 7.6. Limitation on Dividends and Redemptions..........................................................50
Section 7.7. Limitation on Investments........................................................................50
Section 7.8. Transactions with Affiliates.....................................................................50
Section 7.9. Certain Contracts Amendments Multiemployer ERISA Plans...........................................50
Section 7.10. Current Ratio...................................................................................50
Section 7.11. Tangible Net Worth..............................................................................51
Section 7.12. EBITDA..........................................................................................51
Section 7.13. Debt to EBITDA Ratio............................................................................51
Section 7.14. Farmout Transactions............................................................................51
ARTICLE VIII - Events of Default and Remedies....................................................................51
Section 8.1. Events of Default................................................................................51
Section 8.2. Acceleration.....................................................................................53
Section 8.3. Remedies.........................................................................................54
ARTICLE IX - Agent...............................................................................................54
Section 9.1. Appointment and Authority........................................................................54
Section 9.2. Exculpation, Agent's Reliance, Etc...............................................................54
Section 9.3. Credit Decisions.................................................................................55
Section 9.4. Indemnification..................................................................................55
Section 9.5. Rights as Lender.................................................................................55
Section 9.6. Sharing of Set-Offs and Other Payments...........................................................56
Section 9.7. Investments......................................................................................56
Section 9.8. Benefit of Article IX............................................................................56
Section 9.9. Resignation......................................................................................56
ARTICLE X - Miscellaneous........................................................................................57
Section 10.1. Waivers and Amendments; Acknowledgements........................................................57
Section 10.2. Survival of Agreements; Cumulative Nature.......................................................58
Section 10.3. Notices.........................................................................................59
Section 10.4. Payment of Expenses; Indemnity..................................................................59
Section 10.5. Joint and Several Liability; Parties in Interest; Assignments...................................60
Section 10.6. Confidentiality.................................................................................62
Section 10.7. Governing Law; Submission to Process............................................................62
Section 10.8. Limitation on Interest..........................................................................63
Section 10.9. Termination: Limited Survival...................................................................64
Section 10.10. Severability...................................................................................64
Section 10.11. Counterparts...................................................................................64
Section 10.12. Waiver of Jury Trial, Punitive Damages, etc....................................................64
Section 10.13. Amendment and Restatement......................................................................65
Section 10.14. Release........................................................................................65
SCHEDULES
Schedule 1 Disclosure Schedule
Schedule 2 Additional Security Documents
Schedule 3 Insurance Schedule
Schedule 4 Lender Schedule
Schedule 5 Liens
EXHIBITS
Exhibit A Promissory Note
Exhibit B Borrowing Notice
Exhibit C Continuation Conversion Notice
Exhibit D Certificate Accompanying Financial Statements
Exhibit E Environmental Compliance Certificate
Exhibit F Legal Opinion for Borrower
Exhibit G Assignment and Assumption Agreement
THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
THIS THIRD AMENDED AND RESTATED
CREDIT AGREEMENT (this "Agreement") is
made as of November 30, 2001, by and among Inland Production Company, a Texas
corporation (herein called "Borrower"),
Inland Resources Inc., a Washington
corporation (herein called "Parent"), Fortis Capital Corp. (herein called
"Agent"), and the Lenders referred to below. In consideration of the mutual
covenants and agreements contained herein the parties hereto agree as follows:
ARTICLE I - Definitions and References
Section 1.1. Defined Terms. As used in this Agreement, each of the
following terms has the meaning given to such term in this Section 1.1 or in the
sections and subsections referred to below:
"Adjusted Base Rate" means the Base Rate plus the Base Rate Margin,
provided that the Adjusted Base Rate charged by any Person shall never exceed
the Highest Lawful Rate.
"Adjusted Eurodollar Rate" means, for any Eurodollar Loan for any
Interest Period therefor, the per annum rate equal to the sum of (a) the
Eurodollar Margin plus (b) the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined by Agent to be equal to the quotient
obtained by dividing (i) the Eurodollar Rate for such Eurodollar Loan for such
Interest Period by (ii) 1 minus the Reserve Requirement for such Eurodollar Loan
for such Interest Period. The Adjusted Eurodollar Rate for any Eurodollar Loan
shall change whenever the Eurodollar Margin or the Reserve Requirement changes.
No Adjusted Eurodollar Rate charged by any Person shall ever exceed the Highest
Lawful Rate.
"Affiliate" means, as to any Person, (a) any Person directly or
indirectly owning, controlling or holding with power to vote 10% or more of the
outstanding voting securities of such Person, (b) any Person 10% or more of
whose outstanding voting securities are directly or indirectly owned, controlled
or held with power to vote by such Person, (c) any Person directly or indirectly
controlling, controlled by or under common control with such Person, and (d) any
officer, director, partner or sanguinal or affinal kin of such Person or any
Person described above in clause (c) of this paragraph.
"Agent" means Fortis Capital Corp. as Agent hereunder, and its
successors in such capacity.
"Agreement" means this Third Amended and Restated
Credit Agreement.
"Applicable Lending Office" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of Base Rate Loans and such
Lender's Eurodollar Lending Office in the case of Eurodollar Loans.
"Base Rate" means the higher of (a) the Reference Rate and (b) the
Federal Funds Rate plus one-half percent (0.5%) per annum. For purposes of this
definition, "Reference Rate" means the rate of interest publicly announced by
The Chase Manhattan Bank, as its prime commercial lending rate (or, if such bank
that does not announce such a rate, such bank's 'base' or other rate
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determined by Agent to be the equivalent rate announced by such bank), except
that, if such bank shall, for any period, cease to announce publicly its prime
commercial lending (or equivalent) rate, Agent shall, during such period,
determine the "Reference Rate" based upon the prime commercial lending (or
equivalent) rates announced publicly by other banks. The Base Rate shall in no
event, however, exceed the Highest Lawful Rate.
"Base Rate Loan" means a Loan which does not bear interest at the
Eurodollar Rate.
"Base Rate Margin" means, on each day, one and one-half percent (1.50%)
per annum.
"Borrower" means Inland Production Company, a Texas corporation.
"Borrowing" means a borrowing of new Loans of a single Type pursuant to
Section 2.2 or a Continuation or Conversion of existing Loans into a single Type
(and, in the case of Eurodollar Loans, with the same Interest Period) pursuant
to Section 2.4.
"Borrowing Base" means, at the particular time in question, either the
amount provided for in Section 2.9 or the amount determined by Agent or
otherwise determined in accordance with the provisions of Section 2.10, but in
no event shall the Borrowing Base exceed the Maximum Credit Amount.
"Borrowing Base Deficiency" has the meaning given to such term in
Section 2.8(b).
"Borrowing Notice" means a written or telephonic request, or a written
confirmation, made by Borrower which meets the requirements of Section 2.2.
"Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in
New York,
New York.
Any Business Day in any way relating to Eurodollar Loans (such as the day on
which an Interest Period begins or ends) must also be a day on which, in the
judgment of Agent, significant transactions in dollars are carried out in the
interbank eurocurrency market.
"Change of Control" means the occurrence of either of the following
events: (a) any Person or two or more Persons acting as a group other than a
▇▇▇▇▇ Party or TCW Party shall acquire beneficial ownership (within the meaning
of Rule 13d-3 of the Securities and Exchange Commission under the Securities Act
of 1934, as amended, and including holding proxies to vote for the election of
directors other than proxies held by Parent's management or their designees to
be voted in favor of Persons nominated by Parent's Board of Directors) of 35% or
more of the outstanding voting securities of Parent, measured by voting power
(including both common stock and any preferred stock or other equity securities
entitling the holders thereof to vote with the holders of common stock in
elections for directors of Parent) or (b) one-half or more of the directors of
Parent shall consist of Persons not nominated by Parent's Board of Directors
(including as Board nominees any directors which the Board is obligated to
nominate pursuant to shareholders agreements, voting trust arrangements or
similar arrangements which are in place as of the date hereof, but not those
which arise after the date hereof unless they deal with the same parties or
their Affiliates and no one else) or a ▇▇▇▇▇ Party or TCW Party
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"Collateral" means all property of any kind which is subject to a Lien
in favor of Lenders (or in favor of Agent for the benefit of Lenders) or which,
under the terms of any Security Document, is purported to be subject to such a
Lien.
"Consolidated" refers to the consolidation of Parent, Borrower or any
other Restricted Person, in accordance with GAAP, with its properly consolidated
subsidiaries. References herein to a Person's Consolidated financial statements,
financial position, financial condition, liabilities, etc. refer to the
consolidated financial statements, financial position, financial condition,
liabilities, etc. of such Person and its properly consolidated subsidiaries.
"Consolidating," when used with reference to the financial statements of Parent,
means the financial statements of Parent and its properly consolidated
subsidiaries, presented in a manner acceptable to Agent which (a) shows the net
intercompany transactions between each of Parent and such subsidiaries and (b)
presents substantially the same information with respect to Borrower which would
be presented on individual financial statements of Borrower.
"Consolidated Senior Debt" shall mean the aggregate principal amount
owed on the Notes from time to time.
"Consolidated Net Income" means, as to any Person or Persons for any
period, the gross revenues of such Person or Persons for such period, plus any
cash dividends or distributions actually received by such Person or Persons from
any other business entity, minus all expenses and other proper charges
(including taxes on income, to the extent imposed upon such Person or Persons
but excluding charges for accrued unpaid dividends on preferred stock of such
Person or Persons for such period), determined on a Consolidated basis after
eliminating earnings or losses attributable to outstanding minority interests,
but excluding the net earnings of any other business entity in which such Person
or Persons has an ownership interest.
"Consolidated Tangible Net Worth" means the remainder of all
Consolidated assets of Parent, other than intangible assets (including as
intangible assets such assets as patents, copyrights, licenses, franchises,
goodwill, trade names, trade secrets and leases other than oil, gas or mineral
leases or leases required to be capitalized under GAAP), minus Parent's
Consolidated liabilities, provided that for purposes of this definition
Subordinated Debt and accrued unpaid interest thereon shall not be included as
liabilities in the calculation of Parent's Consolidated liabilities.
"Continuation" shall refer to the continuation pursuant to Section 2.4
hereof of a Eurodollar Loan as a Eurodollar Loan from one Interest Period to the
next Interest Period.
"Continuation/Conversion Notice" means a written or telephonic request,
or a written confirmation, made by Borrower which meets the requirements of
Section 2.4.
"Conversion" shall refer to a conversion pursuant to Section 2.4 or
Article III of one Type of Loan into another Type of Loan.
"Current Financial Statements" means (i) the audited annual
Consolidated financial statements of Parent dated as of December 31, 2000, and
(ii) the unaudited quarterly Consolidated financial statements of Parent dated
as of September 30, 2001.
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"Debt" means, as to any Person, all indebtedness, liabilities and
obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to GAAP.
"Default" means any Event of Default and any default, event or
condition which would, with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of Default.
"Default Rate" means, at the time in question (a) with respect to any
Base Rate Loan, the rate two percent (2.00%) above the Adjusted Base Rate then
in effect and (b) with respect to any Eurodollar Loan, the rate two percent
(2.00%) above the Adjusted Eurodollar Rate then in effect for such Loan. No
Default Rate charged by any Person shall ever exceed the Highest Lawful Rate.
"Determination Date" has the meaning given to such term in Section
2.10.
"Direct Taxes" means any severance, ad valorem, or other direct taxes
on properties owned by Restricted Persons or the production therefrom or the
proceeds of such production; provided that federal, state, or local income or
franchise taxes shall in no event be considered Direct Taxes.
"Disclosure Report" means either a notice given by Borrower under
Section 6.4 or a certificate given by Borrower's chief financial officer under
Section 6.2(b).
"Disclosure Schedule" means Schedule 1 hereto.
"Distribution" means (a) any dividend or other distribution made by a
Restricted Person on or in respect of any stock, partnership interest, or other
equity interest in such Restricted Person (including any option or warrant to
buy such an equity interest), or (b) any payment made by a Restricted Person to
purchase, redeem, acquire or retire any stock, partnership interest, or other
equity interest in such Restricted Person (including any such option or
warrant).
"Domestic Lending Office" means, with respect to any Lender, the office
of such Lender specified as its "Domestic Lending Office" below its name on its
signature page hereto, or such other office as such Lender may from time to time
specify to Borrower and Agent; with respect to LC Issuer, the office, branch, or
agency through which it issues Letters of Credit; and, with respect to Agent,
the office, branch, or agency through which it administers this Agreement.
"EBITDA" means, for any four Fiscal Quarter period, the sum of (1) the
Consolidated Net Income of Parent during such period, plus (2) all cash interest
paid during such period on Restricted Debt (including amortization of original
issue discount and the interest component of any deferred payment obligations
and capital lease obligations) which was deducted in determining such
Consolidated Net Income, plus (3) all income taxes which were deducted in
determining such Consolidated Net Income, plus (4) all depreciation,
amortization (including amortization of good will and debt issuance costs) and
other non-cash charges (including any provision for the reduction in the
carrying value of assets recorded in accordance with GAAP)
4
which were deducted in determining such Consolidated Net Income, minus (5) all
non-cash items of income which were included in determining such Consolidated
Net Income.
"Effective Date" means the date this Agreement has been executed by
each party hereto and each condition precedent in Article IV hereof has been
satisfied.
"Eligible Mortgaged Properties" means, collectively, those Properties
which (a) are owned by Borrower and mortgaged to secure the Obligations, and (b)
for which Agent has received title opinions and other title information
concerning such Properties in form, substance and authorship satisfactory to
Agent, and (c) are free and clear of all Liens other than Permitted Liens.
"Eligible Transferee" means a Person which either (a) is a Lender or an
Affiliate of a Lender, or (b) is consented to as an Eligible Transferee by Agent
and, so long as no Event of Default is continuing by Borrower, which consents in
each case will not be unreasonably withheld (provided that no Person organized
outside the United States may be an Eligible Transferee if Borrower would be
required to pay withholding taxes on interest or principal owed to such Person).
"Engineering Report" means the Initial Engineering Report and each
engineering report delivered pursuant to Section 6.2.
"Environmental Laws" means any and all Laws relating to the environment
or to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment including ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Affiliate" means Borrower and all members of a controlled group
of corporations and all trades or businesses (whether or not incorporated) under
common control that, together with Borrower, are treated as a single employer
under Section 414 of the Internal Revenue Code.
"ERISA Plan" means any employee pension benefit plan subject to Title
IV of ERISA maintained by any ERISA Affiliate with respect to which any
Restricted Person has a fixed or contingent liability.
"Eurodollar Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" below its
name on its signature page hereto (or, if no such office is specified, its
Domestic Lending Office), or such other office of such Lender as such Lender may
from time to time specify to Borrower and Agent.
"Eurodollar Loan" means a Loan which is properly designated as a
Eurodollar Loan pursuant to Section 2.2 or 2.3.
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"Eurodollar Margin" means, on the following rate per annum as
applicable based on the Senior Debt to EBITDA Ratio in effect from time to time:
Senior Debt to
EBITDA Ratio Eurodollar Margin
------------ -----------------
Greater than 4.00
to 1.00 3.25%
Less than or equal to 4.00 to
1.00 but greater than
or equal to 3.00 to 1.00 2.75%
Less than 3.00 to
1.00 2.25%
with each change in the Eurodollar Margin resulting from a change in
the Senior Debt to EBITDA Ratio taking effect at the time of such
change.
"Eurodollar Rate" means, with respect to each particular Eurodollar
Loan and the related Interest Period, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) reported, on the date two Business Days
prior to the first day of such Interest Period, on Telerate Access Service Page
3750 (British Bankers Association Settlement Rate) as the London Interbank
Offered Rate for dollar deposits having a term comparable to such Interest
Period and in an amount of $1,000,000 or more (or, if such Page shall cease to
be publicly available or if the information contained on such Page, in Agent's
sole judgment, shall cease to accurately reflect such London Interbank Offered
Rate, as reported by any publicly available source of similar market data
selected by Agent that, in Agent's sole judgment, accurately reflects such
London Interbank Offered Rate).
"Event of Default" has the meaning given to such term in Section 8.1.
"Excepted Liens" means (i) Liens for taxes, assessments or other
governmental charges or levies not yet delinquent or which are being contested
as provided in Section 6.7 by appropriate proceedings; (ii) Liens arising 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; (iii) Liens under operating agreements, pooling orders and unitization
agreements, and mechanics' and materialmen's Liens, with respect to obligations
which are not yet due or which are being contested as provided in Section 6.7;
(iv) deposits securing the performance of bids, tenders, statutory or regulatory
obligations, and other Liens of like nature, in each case made in the ordinary
course of business; (v) minor defects and irregularities in title to any
Property, so long as such defects and irregularities neither (A) are Liens which
secure Restricted Debt or obligations nor (B) materially impair the value of
such Property or the use thereof for the purposes for which such Property is
held; (vi) inchoate Liens on pipelines or pipeline facilities that arise by
operation of law which have not attached to the Property subject of such Lien,
(vii) rights of collecting banks having rights of setoff, revocation, refund or
6
chargeback with respect to money or instruments of any Restricted Person or on
deposit with or in the possession of such banks, and (viii) judgment and
attachment Liens not giving rise to an Event of Default or inchoate Liens
created by or existing from any litigation or legal proceedings that are
currently being contested in good faith by appropriate proceedings, promptly
utilized and diligently conducted, and for which adequate reserves have been
made to the extent required by GAAP.
"Existing
Credit Agreement" means that certain Second Amended and
Restated
Credit Agreement dated as of September 15, 1999 among Borrower, Parent,
ING (U.S.) Capital LLC as Agent, and Lenders, as heretofore amended.
"Facility Usage" means, at the time in question, the aggregate
principal amount of outstanding Loans plus the amount of existing LC Obligations
at such time.
"Farmout Agreement" means that certain Farmout Agreement by Inland
Production Company and
Inland Resources Inc. as Farmor, ▇▇▇▇▇ Management LLC as
Farmee, and Inland Production Company as Operator dated as of June 1, 1998.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of one percent) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of
New York on the Business Day
next succeeding such day, provided that (a) if the day 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 (b) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate quoted to Agent on such day on such transactions as determined by Agent.
"Fiscal Quarter" means a three-month period ending on March 31, June
30, September 30 or December 31 of any year.
"Fiscal Year" means a twelve-month period ending on December 31 of any
year.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor) and which, in the case of Parent
and its Consolidated Subsidiaries, are applied for all periods after the date
hereof in a manner consistent with the manner in which such principles and
practices were applied to the audited Initial Financial Statements. If any
change in any accounting principle or practice is required by the Financial
Accounting Standards Board (or any such successor) in order for such principle
or practice to continue as a generally accepted accounting principle or
practice, all reports and financial statements required hereunder with respect
to Parent or with respect to Parent and its Consolidated Subsidiaries may be
prepared in accordance with such change, but all calculations and determinations
to be made hereunder may be made in accordance with such change only after
notice of such change is given to each Lender and Required Lenders agree to such
change insofar as it affects the accounting of Parent or of Parent and its
Consolidated Subsidiaries.
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"Guarantor" means any Person who has guaranteed some or all of the
Obligations pursuant to a guaranty listed on the Security Schedule or any other
Person who has guaranteed some or all of the Obligations and who has been
accepted by Agent as a Guarantor or any Subsidiary of Parent which now or
hereafter executes and delivers a guaranty to Agent pursuant to Section 6.17.
"Hazardous Materials" means any substances regulated under any
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Hedging Contract" means (a) any agreement providing for options,
swaps, floors, caps, collars, forward sales or forward purchases involving
interest rates, commodities or commodity prices, equities, currencies, bonds, or
indexes based on any of the foregoing, (b) any option, futures or forward
contract traded on an exchange, and (c) any other derivative agreement or other
similar agreement or arrangement.
"Highest Lawful Rate" means, with respect to each Lender Party to whom
Obligations are owed, the maximum nonusurious rate of interest that such Lender
Party is permitted under applicable Law to contract for, take, charge, or
receive with respect to such Obligations. All determinations herein of the
Highest Lawful Rate, or of any interest rate determined by reference to the
Highest Lawful Rate, shall be made separately for each Lender Party as
appropriate to assure that the Loan Documents are not construed to obligate any
Person to pay interest to any Lender Party at a rate in excess of the Highest
Lawful Rate applicable to such Lender Party.
"Hydrocarbons" means crude oil, natural gas or other liquid or gaseous
hydrocarbons.
"Insurance Schedule" means Schedule 3 hereto.
"Interest Payment Date" means (a) with respect to each Base Rate Loan,
the last Business Day of each March, June, September and December, and (b) with
respect to each Eurodollar Loan, the last day of the Interest Period that is
applicable thereto and, if such Interest Period is six months in length, the
date specified by Agent which is approximately three months after such Interest
Period begins; provided that the last Business Day of each calendar month shall
also be an Interest Payment Date for each such Loan so long as any Event of
Default exists under Section 8.1 (a) or (b).
"Internal Revenue Code" means the United States Internal Revenue Code
of 1986, as amended from time to time and any successor statute or statutes,
together with all rules and regulations promulgated with respect thereto.
"Interest Period" means, with respect to each particular Eurodollar
Loan in a Borrowing, a period of 1, 2, 3 or 6 months, as specified in the
Borrowing Notice or Continuation/Conversion Notice applicable thereto, beginning
on and including the date specified in such Borrowing Notice (which must be a
Business Day), and ending on but not including the same day of the month as the
day on which it began (e.g., a period beginning on the third day of one month
shall end on but not include the third day of another month), provided that each
Interest Period which would otherwise end on a day which is not a Business Day
shall end on the next succeeding Business Day (unless such next succeeding
Business Day is the first Business Day of a calendar
8
month, in which case such Interest Period shall end on the immediately preceding
Business Day). No Interest Period may be elected which would extend past the
date on which the associated Note is due and payable in full.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan, guarantee of Debt or other extension of credit or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase or acquisition by such Person of any capital stock, bonds, notes,
debentures or other securities or evidences of Debt issued by, any other Person.
"Law" means any statute, law, regulation, ordinance, rule, treaty,
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental restriction of the United States or any state or political
subdivision thereof or of any foreign country or any department, province or
other political subdivision thereof.
"LC Application" means any application for a Letter of Credit hereafter
made by Borrower to LC Issuer.
"LC Collateral" has the meaning given to such term in Section 2.15(a).
"LC Issuer" means, collectively, Fortis Capital Corp. and U.S. Bank
National Association, or their Affiliates, in their capacity as the issuer or
issuers of Letters of Credit hereunder, and their successors in such capacity.
Agent may, with the consent of Borrower and the Lender in question, appoint any
Lender hereunder as an LC Issuer in place of or in addition to either such LC
Issuer.
"LC Obligations" means, at the time in question, the sum of all Matured
LC Obligations plus the Maximum Drawing Amount.
"Lender Parties" means Agent, LC Issuer, and all Lenders.
"Lender Schedule" means Schedule 4 hereto.
"Lenders" means each signatory hereto (other than Borrower and
Restricted Persons a party hereto), including Fortis Capital Corp. in its
capacity as a Lender hereunder rather than as Agent or LC Issuer, and the
successors of each such party as holder of a Note.
"Letter of Credit" means any letter of credit issued by LC Issuer
hereunder at the application of Borrower.
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure Debt owed to it or any other
arrangement with such creditor which provides for the payment of such Debt out
of such property or assets or which allows such creditor to have such Debt
satisfied out of such property or assets prior to the general creditors of any
owner thereof, including any lien, mortgage, security interest, pledge, deposit,
production payment, rights of a vendor under any title retention or conditional
sale agreement or lease substantially equivalent thereto, tax lien, mechanic's
or materialman's lien, or any other charge or encumbrance for security purposes,
whether arising by Law or agreement or otherwise, but
9
excluding any right of offset which arises without agreement in the ordinary
course of business. "Lien" also means any filed financing statement, any
registration of a pledge (such as with an issuer of uncertificated securities),
or any other arrangement or action which would serve to perfect a Lien described
in the preceding sentence, regardless of whether such financing statement is
filed, such registration is made, or such arrangement or action is undertaken
before or after such Lien exists.
"Loan Documents" means this Agreement, the Notes, the Security
Documents, the Letters of Credit, the LC Applications, and all other agreements,
certificates, documents, instruments and writings at any time delivered in
connection herewith or therewith (exclusive of term sheets, commitment letters,
correspondence and similar documents used in the negotiation hereof, except to
the extent the same contain information about Borrower or its Affiliates,
properties, business or prospects).
"Loans" means the Revolving Loans and the Term Loan.
"Material Adverse Change" means a material and adverse change, from the
state of affairs presented in the Current Financial Statements or in this
Agreement (including the Disclosure Schedule), to (a) Parent's and its
Subsidiaries' Consolidated financial condition, (b) the operations or properties
of Parent and its Subsidiaries, considered as a whole, (c) Borrower's ability to
timely pay the Obligations and perform its other obligations under the Loan
Documents, or (d) the validity and enforceability of the material terms of any
Loan Documents.
"Matured LC Obligations" means all amounts paid by LC Issuer on drafts
or demands for payment drawn or made under or purported to be under any Letter
of Credit and all other amounts due and owing to LC Issuer under any LC
Application for any Letter of Credit, to the extent the same have not been
repaid to LC Issuer (with the proceeds of Loans or otherwise).
"Maximum Credit Amount" means the amount of $83,500,000.
"Maximum Drawing Amount" means at the time in question the sum of the
maximum amounts which LC Issuer might then or thereafter be called upon to
advance under all Letters of Credit which are then outstanding.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc., or its successor.
"Note" has the meaning given to such term in Sections 2.1 and 2.3.
"Obligations" means all Debt from time to time owing by any Restricted
Person to any Lender under or pursuant to any of the Loan Documents, including
all LC Obligations. "Obligation" means any part of the Obligations.
"Optional Redetermination Date" means a date that Required Lenders, at
their option, specify as a date as of which the Borrowing Base is to be
redetermined; provided that such date must be the first or last date of a
current calendar month and that Required Lenders shall be entitled to specify
only one Optional Redetermination Date during the period April 1, 2002 to
September 30, 2002, and during any twelve month period thereafter from October 1
to September 30, beginning October 1, 2002.
10
"Parent" means
Inland Resources Inc., a Washington corporation.
"Parent Guaranty" means that certain Amended and Restated Guaranty of
even date herewith made by Parent in favor of Agent.
"Percentage Share" means, with respect to any Lender (a) when used in
Sections 2.1 or 2.6, in any Borrowing Notice or when no Loans are outstanding
hereunder, the percentage set forth opposite such Lender's name on the Lender
Schedule (as modified from time to time as a result of assignments pursuant to
Section 10.5), and (b) when used otherwise, the percentage obtained by dividing
(i) the sum of the unpaid principal balance of such Lender's Loans at the time
in question plus the Matured LC Obligations which such Lender has funded
pursuant to Section 2.13(c) plus the portion of the Maximum Drawing Amount which
such Lender might be obligated to fund under Section 2.13(c), by (ii) the sum of
the aggregate unpaid principal balance of all Loans at such time plus the
aggregate amount of LC Obligations outstanding at such time.
"Permitted Investments" means Investments:
(a) in open market commercial paper, maturing within 270 days after
acquisition thereof, which is rated at least A-1 by S&P or P-1 by Moody's.
(b) in marketable obligations, maturing within 12 months after
acquisition thereof, issued or unconditionally guaranteed by the United States
of America or an instrumentality or agency thereof and entitled to the full
faith and credit of the United States of America.
(c) in demand deposits, and time deposits (including certificates of
deposit) maturing within 12 months from the date of deposit thereof, with any
office of any national or state bank or trust company which is organized under
the Laws of the United States of America or any state therein, which has
capital, surplus and undivided profits of at least $500,000,000, and whose
certificates of deposit are rated at least Aa3 by S&P or AA- by Moody's.
"Permitted Lien" has the meaning given to such term in Section 7.2.
"Person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint venture,
Tribunal, or any other legally recognizable entity.
"Projected Oil and Gas Production" has the meaning given such term in
Section 7.3.
"Properties" means, collectively, those undivided interests in oil and
gas properties and interests in other real and personal property which are, at
the time in question, owned by any Restricted Person.
"Proved Reserves" means "Proved Reserves" as defined in the Definitions
for Oil and Gas Reserves (in this paragraph, the "Definitions") promulgated by
the Society of Petroleum Engineers (or any generally recognized successor) as in
effect at the time in question. "Proved Developed Producing Reserves" means
Proved Reserves which are categorized as both "Developed" and "Producing" in the
Definitions, "Proved Developed Nonproducing Reserves" means Proved Reserves
which are categorized as both "Developed" and "Non producing" in the
11
Definitions, and "Proved Undeveloped Reserves" means Proved Reserves which are
categorized as "Undeveloped" in the Definitions.
"Rating Agency" means either S & P or Moody's, or their respective
successors.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect.
"Required Lenders" means Agent and the Lenders whose aggregate
Percentage Shares (including the Percentage Share of Agent) equal or exceed
seventy five percent (75%).
"Reserve Requirement" means, on any day with respect to each particular
Eurodollar Loan, the maximum reserve requirement, as determined by Agent
(including without limitation any basic, supplemental, marginal, emergency or
similar reserves), expressed as a percentage and rounded to the next higher 0.01
%, which would then apply under Regulation D with respect o "Eurocurrency
liabilities," as such term is defined in Regulation D, of $1,000,000 or more. If
such reserve requirement shall change after the date hereof, the Reserve
Requirement shall be automatically increased or decreased, as the case may be,
from time to time as of the effective time of each such change in such reserve
requirement.
"Restricted Debt" of any Person means Debt in any of the following
categories:
(a) Debt for borrowed money,
(b) Debt constituting an obligation to pay the deferred purchase price
of property or services,
(c) Debt evidenced by a bond, debenture, note or similar instrument,
(d) Debt which (i) would under GAAP be shown on such Person's balance
sheet as a liability, and (ii) is payable more than one year from the date of
creation thereof (other than reserves for taxes and reserves for contingent
obligations),
(e) Debt arising under Hedging Contracts,
(f) Debt constituting principal under leases capitalized in accordance
with GAAP,
(g) Debt arising under conditional sales or other title retention
agreements,
(h) Debt owing under direct or indirect guaranties of Debt of any other
person or otherwise constituting obligations to purchase or acquire or to
otherwise protect or insure a creditor against loss in respect of Debt of any
other Person (such as obligations under working capital maintenance agreements,
agreements to keep well, or agreements to purchase Debt, assets, goods,
securities or services), but excluding endorsements in the ordinary course of
business of negotiable instruments in the course of collection,
(i) Debt (for example, repurchase agreements, mandatorily redeemable
preferred stock and sale/leaseback agreements) consisting of an obligation to
purchase or redeem securities
12
or other property, if such Debt arises out of or in connection with the sale or
issuance of the same or similar securities or property,
(j) Debt with respect to letters of credit or applications or
reimbursement agreements therefor,
(k) Debt with respect to payments received in consideration of oil,
gas, or other minerals yet to be acquired or produced at the time of payment
(including obligations under "take-or-pay" contracts to deliver gas in return
for payments already received and the undischarged balance of any production
payment created by such Person or for the creation of which such Person directly
or indirectly received payment), or
(l) Debt with respect to other obligations to deliver goods or services
in consideration of advance payments therefor;
provided, however, that the "Restricted Debt" of any Person shall not include
Debt that was incurred by such Person on ordinary trade terms to vendors,
suppliers, or other Persons providing goods and services for use by such Person
in the ordinary course of its business, unless and until such Debt is
outstanding more than 90 days past the incurrence thereof, or if earlier, when
due in accordance with its terms.
"Restricted Person" means any of Borrower, Parent, and each Guarantor.
"Revolving Loan" has the meaning given to such term in Section 2.1.
"Revolving Termination Date" means June 30, 2004.
"S & P" means Standard & Poor's Ratings Group (a division of McGraw
Hill Companies, Inc.), or its successor.
"Security Documents" means the instruments listed in the Security
Schedule and all other security agreements, deeds of trust, mortgages, chattel
mortgages, pledges, guaranties, financing statements, continuation statements,
extension agreements and other agreements or instruments now, heretofore, or
hereafter delivered by any Restricted Person to Agent in connection with this
Agreement or any transaction contemplated hereby to secure or guarantee the
payment of any part of the Obligations or the performance of any Restricted
Person's other duties and obligations under the Loan Documents.
"Security Schedule" means Schedule 2 hereto.
"Senior Debt" means, at any time of determination, the Parent's
Consolidated Senior Debt.
"▇▇▇▇▇ Party" means (a) Hampton Investments LLC, SOLVation Inc., any of
their Affiliates, or any member, fund participant, holder of a beneficial
interest, as of August 2, 2001, in any of the foregoing, or party to an
investment management or similar agreement with any of the foregoing, as of
August 2, 2001, (b) any immediate family member of any Person falling within (a)
above, (c) any direct lineal descendant of any Person falling within (a) or (b)
above,
13
(d) any trust established for the benefit of any Person falling within (a) to
(c) above and (e) any Person controlling, controlled by or under common control
with any Person falling within (a) to (d) above.
"Subordinated Debt" means the indebtedness of the Parent under the
Subordinated Debt Documents.
"Subordinated Debt Documents" means, collectively, the following:
(i) the Junior Subordinated Notes due March 31, 2010
in the original aggregate principal amount of $5,000,000, issued pursuant to the
Junior Subordinated Note Purchase Agreement, dated as of August 2, 2001 by and
among Parent, as issuer, Borrower, as guarantor, and SOLVation Inc., as note
purchaser, together with all interest accrued pursuant thereto; and
(ii) the Senior Subordinated Notes due July 1, 2007,
in the original aggregate principal amount of $5,000,000, issued pursuant to the
Senior Subordinated Note Purchase Agreement, dated as of August 2, 2001, by and
among Parent, as issuer, Borrower, as guarantor, and SOLVation Inc., as note
purchaser, together with all interest accrued pursuant thereto; and
(iii) the unsecured subordinated notes due September
30, 2009, in the original aggregate principal amount of $98,968,964.00, issued
pursuant to the Exchange and Note Issuance Agreement, dated as of August 2,
2001, by and among Parent, as issuer, Borrower, as guarantor, and Inland
Holdings, LLC, as note purchaser, together with all interest accrued pursuant
thereto; and
(iv) Option Agreement, dated as of August 2, 2001, by and
between Inland Holdings, LLC and SOLVation Inc.; and
(v) TCW Subordination Agreement dated as August 2, 2001 by and
among, Inland Resources, Inc., Inland Production Company, SOLVation Inc. and
Inland Holdings, LLC; and
(vi) Junior Sub Note Subordination Agreement dated as of
August 2, 2001 by and among, Inland Resources, Inc., Inland Production Company,
SOLVation Inc. and Inland Holdings, LLC.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, limited liability company, joint venture, or other
business or corporate entity, enterprise or organization which is directly or
indirectly (through one or more intermediaries) controlled by or owned fifty
percent or more by such Person, provided that associations, joint ventures or
other relationships (a) which are established pursuant to a standard form
operating agreement or similar agreement or which are partnerships for purposes
of federal income taxation only, (b) which are not corporations or partnerships
(or subject to the Uniform Partnership Act) under applicable state Law, and (c)
whose businesses are limited to the exploration, development and operation of
oil, gas or mineral properties and interests owned directly by the parties in
such
14
associations, joint ventures or relationships, shall not be deemed to be
"Subsidiaries" of such Person.
"TCW Party" means any of Trust Company of the West, TCW Asset
Management Company, or any of their Affiliates (including but not limited to
Inland Holdings, LLC, a California limited liability company) or any member,
fund participant, holder of a beneficial interest or successor in or to any of
the foregoing, or party to an investment management or similar agreement with
any of the foregoing.
"Term Loan" has the meaning given to such term in Section 2.3.
"Termination Event" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(b)(5) or (6) of ERISA
or (ii) any other reportable event described in Section 4043(b) of ERISA other
than a reportable event not subject to the provision for 30-day notice to the
Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation
under Section 4043(a) of ERISA, or (b) the withdrawal of any ERISA Affiliate
from an ERISA Plan during a plan year in which it was a "substantial employer"
as defined in Section 4001(a)(2) of ERISA, or (c) the filing of a notice of
intent to terminate any ERISA Plan or the treatment of any ERISA Plan amendment
as a termination under Section 4041 of ERISA, or (d) the institution of
proceedings to terminate any ERISA Plan by the Pension Benefit Guaranty
Corporation under Section 4042 of ERISA, or (e) 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 ERISA Plan.
"Tribunal" means any government, any arbitration panel, any court or
any governmental department, commission, board, bureau, agency or
instrumentality of the United States of America or any state, province,
commonwealth, nation, territory, possession, county, parish, town, township,
village or municipality, whether now or hereafter constituted or existing.
"Type" means, with respect to any Loans, the characterization of such
Loans as either Base Rate Loans or Eurodollar Loans.
Section 1.2. Exhibits and Schedules: Additional Definitions. All
Exhibits and Schedules attached to this Agreement are a part hereof for all
purposes. Reference is hereby made to the Security Schedule for the meaning of
certain terms defined therein and used but not defined herein, which definitions
are incorporated herein by reference.
Section 1.3. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in this
Agreement which refer to a particular agreement, instrument or document also
refer to and include all renewals, extensions, modifications, amendments and
restatements of such agreement, instrument or document, provided that nothing
contained in this section shall be construed to authorize any such renewal,
extension, modification, amendment or restatement.
Section 1.4. References and Titles. All references in this Agreement to
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience
15
only and do not constitute any part of such subdivisions and shall be
disregarded in construing the language contained in such subdivisions. The words
"this Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder"
and words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation." Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
Section 1.5. Calculations and Determinations. All calculations under
the Loan Documents of interest chargeable with respect to Eurodollar Loans and
of fees shall be made on the basis of actual days elapsed (including the first
day but excluding the last) and a year of 360 days. All other calculations of
interest made under the Loan Documents shall be made on the basis of actual days
elapsed (including the first day but excluding the last) and a year of 365 or
366 days, as appropriate. Each determination by a Lender Party of amounts to be
paid under Sections 3.2 through 3.6 or any other matters which are to be
determined hereunder by a Lender Party (such as any Eurodollar Rate, Adjusted
Eurodollar Rate, Default Rate, Business Day, Interest Period, or Reserve
Requirement) shall, in the absence of manifest error, be conclusive and binding.
Unless otherwise expressly provided herein or unless Required Lenders otherwise
consent all financial statements and reports furnished to any Lender hereunder
shall be prepared and all financial computations and determinations pursuant
hereto shall be made in accordance with GAAP.
ARTICLE II - The Loans
Section 2.1. Revolving Loans. Subject to the terms and conditions
hereof, each Lender agrees to make loans to Borrower (herein called such
Lender's "Revolving Loans") upon Borrower's request from time to time until the
Revolving Termination Date, provided that (a) subject to Sections 3.3, 3.4 and
3.6, all Lenders are requested to make Revolving Loans of the same Type in
accordance with their respective Percentage Shares and as part of the same
Borrowing, (b) the sum of (i) the aggregate amount of such Lender's Revolving
Loans outstanding at any time plus (ii) the Maximum Drawing Amount for which
such Lender has purchased or is liable to purchase participations under Section
2.12, plus (iii) the Matured LC Obligations which have been funded by such
Lender under such section, does not exceed such Lender's Percentage Share of the
Borrowing Base determined as of the date on which the requested Revolving Loan
is to be made, and (c) after giving effect to such Revolving Loans, the
aggregate amount of all Revolving Loans plus all LC Obligations does not exceed
the Borrowing Base determined as of the date on which the requested Revolving
Loans are to be made. The aggregate amount of all Revolving Loans in any
Borrowing must be greater than or equal to $1,000,000 or must equal the
remaining availability under the Borrowing Base. Borrower may have no more than
six Borrowings of Eurodollar Loans outstanding at any time. The obligation of
Borrower to repay to each Lender the aggregate amount of all Revolving Loans
made by such Lender, together with interest accruing in connection therewith,
shall be evidenced by a single promissory note (herein called such Lender's
"Note") made by Borrower payable to the order of such Lender in the form of
Exhibit A with appropriate insertions. The amount of principal owing on any
Lender's Note at any given time shall be the aggregate amount
16
of all Revolving Loans theretofore made by such Lender minus all payments of
principal theretofore received by such Lender on such Note. Interest on each
Note shall accrue and be due and payable as provided herein and therein, with
Eurodollar Loans bearing interest at the Adjusted Eurodollar Rate and Base Rate
Loans bearing interest at the Adjusted Base Rate (subject to the applicability
of the Default Rate and limited by the provisions of Section 10.8). Subject to
the terms and conditions hereof, until the Revolving Termination Date, Borrower
may borrow, repay, and reborrow hereunder. It is expressly understood that
Lenders' commitment to make Revolving Loans is determined only by reference to
the Borrowing Base from time to time in effect, and the aggregate amount of the
Notes and the amount specified in the Security Documents are specified at a
greater amount only for the convenience of the parties to avoid the necessity of
preparing and recording supplements to the Security Documents.
Section 2.2. Requests for New Revolving Loans. Borrower must give to
Agent written notice (or telephonic notice promptly confirmed in writing) of any
requested Borrowing of new Revolving Loans to be advanced by Lenders. Each such
notice constitutes a "Borrowing Notice" hereunder and must:
(a) specify (i) the aggregate amount of any such Borrowing of new Base
Rate Loans and the date on which such Base Rate Loans are to be advanced, or
(ii) the aggregate amount of any such Borrowing of new Eurodollar Loans, the
date on which such Eurodollar Loans are to be advanced (which shall be the first
day of the Interest Period which is to apply thereto), and the length of the
applicable Interest Period; and
(b) be received by Agent not later than 1:00 p.m.,
New York,
New York
time, on (i) the day on which any such Base Rate Loans are to be made, or (ii)
the third Business Day preceding the day on which any such Eurodollar Loans are
to be made.
Each such written request or confirmation must be made in the form and
substance of the "Borrowing Notice" attached hereto as Exhibit B, duly
completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in such written confirmation. Upon receipt of any such
Borrowing Notice, Agent shall give each Lender prompt notice of the terms
thereof. If all conditions precedent to such new Revolving Loans have been met,
each Lender will on the date requested promptly remit to Agent at Agent's office
in
New York,
New York the amount of such Lender's new Revolving Loan in
immediately available funds, and upon receipt of such funds, unless to its
actual knowledge any conditions precedent to such Revolving Loans have been
neither met nor waived as provided herein, Agent shall promptly make such
Revolving Loans available to Borrower. Unless Agent shall have received prompt
notice from a Lender that such Lender will not make available to Agent such
Lender's new Revolving Loan, Agent may in its discretion assume that such Lender
has made such Revolving Loan available to Agent in accordance with this section
and Agent may if it chooses, in reliance upon such assumption, make such
Revolving Loan available to Borrower. If and to the extent such Lender shall not
so make its new Revolving Loan available to Agent, such Lender and Borrower
severally agree to pay or repay to Agent within three days after demand the
amount of such Revolving Loan together with interest thereon, for each day from
the date such amount was made available to Borrower until the date such amount
is paid or repaid to Agent, with interest at (i) the Federal Funds Rate, if such
Lender is making such payment and (ii) the interest rate applicable at the
17
time to the other new Revolving Loans made on such date, if Borrower is making
such repayment. If neither such Lender nor Borrower pay or repay to Agent such
amount within such three-day period, Agent shall in addition to such amount be
entitled to recover from such Lender and from Borrower, on demand, interest
thereon at the Default Rate applicable to Base Rate Loans, calculated from the
date such amount was made available to Borrower. The failure of any Lender to
make any new Revolving Loan to be made by it hereunder shall not relieve any
other Lender of its obligation hereunder, if any, to make its new Revolving
Loan, but no Lender shall be responsible for the failure of any other Lender to
make any new Revolving Loan to be made by such other Lender.
Section 2.3. Term Loan. On the Revolving Termination Date the aggregate
outstanding principal amount of Revolving Loans shall automatically be converted
into a term loan (the "Term Loan") without further action by a party to this
Agreement. To the extent the aggregate principal amount of Revolving Loans
outstanding on the Revolving Termination Date exceeds the Borrowing Base
applicable on such date, such excess amount must be paid to the Agent for the
benefit of the Lenders on such Date. There will be no advances by the Lenders of
any amounts under the Term Loan. Conversion of the Revolving Loans pursuant to
this Section 2.3 shall not constitute either a prepayment or a borrowing, and
shall not affect the rate of interest applicable to outstanding Loans. On the
Revolving Termination Date, the Borrower shall issue a new Note (in the form of
Exhibit A) to each Lender in the principal amount of each lender's Percentage
Share of the Term Loan in exchange for the Note then held by each such Lender.
The Term Loan shall be repaid by the Borrower, together with accrued interest,
in twelve (12) equal quarterly installments on the last Business Day of each
Fiscal Quarter beginning on September 30, 2004, provided however, that the
aggregate unpaid balance of the Term Loan shall mature and be due and payable on
June 30, 2007.
Section 2.4. Continuations and Conversions of Existing Loans. Borrower
may make the following elections with respect to Loans already outstanding
including Revolving Loans converted to the Term Loan pursuant to Section 2.3: to
convert Base Rate Loans to Eurodollar Loans, to convert Eurodollar Loans to Base
Rate Loans on the last day of the Interest Period applicable thereto, and to
continue Eurodollar Loans beyond the expiration of such Interest Period by
designating a new Interest Period to take effect at the time of such expiration.
In making such elections, Borrower may combine existing Loans made pursuant to
separate Borrowings into one new Borrowing or divide existing Loans made
pursuant to one Borrowing into separate new Borrowings, provided that Borrower
may have no more than six Borrowings of Eurodollar Loans outstanding at any
time. To make any such election, Borrower must give to Agent written notice (or
telephonic notice promptly confirmed in writing) of any such Conversion or
Continuation of existing Loans, with a separate notice given for each new
Borrowing. Each such notice constitutes a "Continuation/Conversion Notice"
hereunder and must:
(a) specify the existing Loans which are to be Continued or Converted;
(b) specify (i) the aggregate amount of any Borrowing of Base Rate
Loans into which such existing Loans are to be continued or converted and the
date on which such Continuation or Conversion is to occur, or (ii) the aggregate
amount of any Borrowing of Eurodollar Loans into which such existing Loans are
to be continued or converted, the date on which such Continuation
18
or Conversion is to occur (which shall be the first day of the Interest Period
which is to apply to such Eurodollar Loans), and the length of the applicable
Interest Period; and
(c) be received by Agent not later than 1:00 p.m.,
New York,
New York
time, on (i) the day on which any such Continuation or Conversion to Base Rate
Loans is to occur, or (ii) the third Business Day preceding the day on which any
such Continuation or Conversion to Eurodollar Loans is to occur.
Each such written request or confirmation must be made in the form and substance
of the "Continuation/Conversion Notice" attached hereto as Exhibit C, duly
completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in such written confirmation. Upon receipt of any such
Continuation/Conversion Notice, Agent shall give each Lender prompt notice of
the terms thereof. Each Continuation/Conversion Notice shall be irrevocable and
binding on Borrower. During the continuance of any Default, Borrower may not
make any election to convert existing Loans into Eurodollar Loans or continue
existing Loans as Eurodollar Loans. If (due to the existence of a Default or for
any other reason) Borrower fails to timely and properly give any
Continuation/Conversion Notice with respect to a Borrowing of existing
Eurodollar Loans at least three days prior to the end of the Interest Period
applicable thereto, such Eurodollar Loans shall automatically be converted into
Base Rate Loans at the end of such Interest Period. No new funds shall be repaid
by Borrower or advanced by any Lender in connection with any Continuation or
Conversion of existing Loans pursuant to this section, and no such Continuation
or Conversion shall be deemed to be a new advance of funds for any purpose; such
Continuations and Conversions merely constitute a change in the interest rate
applicable to already outstanding Loans.
Section 2.5. Use of Proceeds. Borrower shall use the proceeds of all
Loans to (i) continue the loans and letters of credit outstanding under the
Existing
Credit Agreement, (ii) finance development and drilling activities with
respect to Proved Reserves of Borrower, (iii) provide working capital for
Borrower's operations, and (iv) refinance its Matured LC Obligations. Borrower
shall use all Letters of Credit for its general corporate purposes. In no event
shall the funds from any Loan or any Letter of Credit be used directly or
indirectly by any Person for personal, family, household or agricultural
purposes or for the purpose, whether immediate, incidental or ultimate, of
purchasing, acquiring or carrying any "margin stock" or any "margin securities"
(as such terms are defined in Regulation promulgated by the Board of Governors
of the Federal Reserve System) or to extend credit to others directly or
indirectly for the purpose of purchasing or carrying any such margin stock or
margin securities. Borrower represents and warrants that Borrower is not engaged
principally, or as one of Borrower's important activities, in the business of
extending credit to others for the purpose of purchasing or carrying such margin
stock or margin securities.
Section 2.6. Interest Rates and Fees.
(a) Interest Rates. Each Base Rate Loan shall bear interest on each day
outstanding at the Adjusted Base Rate in effect on such day. Each Eurodollar
Loan shall bear interest on each day during the related Interest Period at the
related Adjusted Eurodollar Rate in effect on such day. Anything to the contrary
herein notwithstanding, if an Event of Default has occurred and is
19
continuing, all Loans shall bear interest on each day outstanding at the
applicable Default Rate. Past due payments of principal and interest shall bear
interest at the rates and in the manner set forth in the Notes.
(b) Commitment Fees. In consideration of each Lender's commitment to
make Revolving Loans, Borrower will pay to Agent for the account of each Lender
a commitment fee determined on a daily basis by applying a rate of one-half of
one percent (0.5%) per annum to such Lender's Percentage Share of the unused
portion of the Borrowing Base on each day until the Revolving Termination Date,
determined for each such day by deducting from the amount of the Borrowing Base
at the end of such day the sum of (i) the Facility Usage and (ii) the amount of
all LC Obligations outstanding at the end of such day. This commitment fee shall
be due and payable in arrears on the last Business Day after the end of each
Fiscal Quarter and on the Revolving Termination Date.
(c) Agent's Fee. In addition to all other amounts due to Agent under
the Loan Documents, Borrower will pay fees to Agent, for its own account, as
described in that certain letter agreement between Agent and Borrower.
Section 2.7. Optional Prepayments. Borrower may, upon five Business
Days' notice to each Lender, from time to time and without premium or penalty
prepay the Loans, in whole or in part, so long as the aggregate amounts of all
partial prepayments of principal on the Loans equals $1,000,000 or any higher
integral multiple of $1,000,000, so long as Borrower does not prepay any
Eurodollar Loan, and so long as Borrower does not make any prepayments which
would reduce the unpaid principal balance of any Loan to less than $100,000
without first either (a) terminating this Agreement or (b) providing assurance
satisfactory to Agent in its discretion that Lenders' legal rights under the
Loan Documents are in no way affected by such reduction. Each prepayment of
principal under this section shall be accompanied by all interest then accrued
and unpaid on the principal so prepaid plus any amounts due under Section 3.5.
Any principal or interest prepaid pursuant to this section shall be in addition
to, and not in lieu of, all payments otherwise required to be paid under the
Loan Documents at the time of such prepayment. Any such optional prepayment of
the Term Loan shall be applied to installments of the Term Loan in the order of
maturity.
Section 2.8. Mandatory Prepayments.
(a) If at any time the Facility Usage exceeds the Maximum Credit
Amount, Borrower shall immediately upon demand prepay the principal of the Loans
in an amount equal to such excess.
(b) If at any time the Facility Usage is less than the Maximum Credit
Amount but is in excess of the Borrowing Base (such excess being herein called a
"Borrowing Base Deficiency"), Borrower shall, within five Business Days after
Agent gives notice of such fact to Borrower, either:
(i) prepay the principal of the Loans in an aggregate amount at least
equal to such Borrowing Base Deficiency, or
20
(ii) give notice to Agent electing to prepay the principal of the Loans
in up to three monthly installments in an aggregate amount at least equal to
such Borrowing Base Deficiency, with each such installment equal to or in excess
of one-third of such Borrowing Base Deficiency, and with the first such
installment to be paid one month after the giving of such notice and the
subsequent installments to be due and payable at one month intervals thereafter
until such Borrowing Base Deficiency has been eliminated, or
(iii) give notice to Agent that Borrower desires to provide Agent with
deeds of trust, mortgages, chattel mortgages, security agreements, financing
statements and other security documents in form and substance satisfactory to
Agent, granting, confirming, and perfecting first and prior liens or security
interests in collateral acceptable to all Lenders, to the extent needed to allow
all Lenders to increase the Borrowing Base (as they in their reasonable
discretion deem consistent with prudent oil and gas banking industry lending
standards at the time) to an amount which eliminates such Borrowing Base
Deficiency, and then provide such security documents within thirty days after
Agent specifies such collateral to Borrower. If, prior to any such specification
by Agent, Required Lenders determine that the giving of such security documents
will not serve to eliminate such Borrowing Base Deficiency, then, within five
Business Days after receiving notice of such determination, Borrower will elect
to make, and thereafter make, the prepayments specified in either of the
preceding subsections (i) or (ii) of this subsection (b).
(c) Each prepayment of principal under this section shall be
accompanied by all interest then accrued and unpaid on the principal so prepaid.
Any principal or interest prepaid pursuant to this section shall be in addition
to, and not in lieu of, all payments otherwise required to be paid under the
Loan Documents at the time of such prepayment. Any prepayments of the Term Loan
shall be applied to installments of the Term Loan in the inverse order of
maturity.
Section 2.9. Initial Borrowing Base. During the period from the
Effective Date to the first Determination Date thereafter the Borrowing Base
shall be $83,500,000.
Section 2.10. Subsequent Determinations of Borrowing Base: Reduction of
Borrowing Base.
(a) By October 1 and April 1 of each year, beginning April 1, 2002,
dated no earlier than the preceding August 1 and February 1, respectively,
Borrower shall furnish to each Lender all information, reports and data which
Agent has then requested concerning Restricted Persons' businesses and
properties (including their oil and gas properties and interests and the
reserves and production relating thereto), together with the Engineering Report
described in Section 6.2(d). In addition, if the Required Lenders request a
Redetermination of the Borrowing Base, by the Optional Redetermination Date,
Borrower shall furnish to each Lender all information, reports and data which
Agent has then requested concerning Restricted Persons' businesses and
properties (including their oil and gas properties and interests and the
reserves and production relating thereto), together with the Engineering Report
described in Section 6.2(d) prepared as of the sixtieth day before such Optional
Redetermination Date. Within thirty days after receiving such information,
reports and data, Required Lenders shall agree upon an amount for the Borrowing
Base (provided that all Lenders must agree to any increase in the Borrowing
Base) and Agent shall by notice to Borrower designate such amount as the new
Borrowing Base available to Borrower hereunder, which designation shall take
effect immediately on the date
21
such notice is sent (herein called a "Determination Date") and shall remain in
effect until but not including the next date as of which the Borrowing Base is
redetermined. If Borrower does not furnish all such information, reports and
data by the date specified in this Section, Agent may nonetheless designate the
Borrowing Base at any amount which Required Lenders determine and may
redesignate the Borrowing Base from time to time thereafter until each Lender
receives all such information, reports and data, whereupon Required Lenders
shall designate a new Borrowing Base as described above. Required Lenders shall
determine the amount of the Borrowing Base based upon the loan collateral value
which they in their discretion assign to the various proved oil and gas
properties of Restricted Persons at the time in question and based upon such
other credit factors (including without limitation the assets, liabilities, cash
flow, hedged and unhedged exposure to price, foreign exchange rate, and interest
rate changes, business, properties, prospects, management and ownership of
Borrower and its Affiliates) as they in their discretion deem significant. It is
expressly understood that Lenders and Agent have no obligation to agree upon or
designate the Borrowing Base at any particular amount, whether in relation to
the aggregate face amount of the Notes or otherwise, and that Lenders'
commitments to advance funds hereunder is determined by reference to the
Borrowing Base from time to time in effect, which Borrowing Base shall be used
for calculating commitment fees under Section 2.6 and, to the extent permitted
by Law and regulatory authorities, for the purposes of capital adequacy
determination and reimbursements under Section 3.2.
(b) Borrower may at any time by notice to Agent reduce the Borrowing
Base then in effect to any lesser amount. Each such notice shall take effect on
the date specified therein, which may not be earlier than the date on which such
notice is received by Agent, and shall continue in effect until the next date as
of which the Borrowing Base is redetermined.
(c) The Borrowing Base shall be reduced in an amount equal to any
prepayment on the Loans made in accordance with [Section 7.4.] Each such
reduction shall take effect on the date of such prepayment, and shall continue
in effect until the next date as of which the Borrowing Base is redetermined.
Section 2.11. Letters of Credit. Subject to the terms and conditions
hereof, Borrower may until the Revolving Termination Date request either LC
Issuer to issue one or more Letters of Credit, provided that, after taking such
Letter of Credit into account:
(a) the Facility Usage does not exceed the Borrowing Base at such time;
and
(b) the aggregate amount of LC Obligations at such time does not exceed
$4,000,000; and
(c) the expiration date of such Letter of Credit is prior to the
Revolving Termination Date.
and further provided that:
(d) such Letter of Credit is not directly or indirectly used to assure
payment of or otherwise support any Restricted Debt of any Person;
22
(e) the issuance of such Letter of Credit will be in compliance with
all applicable governmental restrictions, policies, and guidelines and will not
subject LC Issuer to any cost which is not reimbursable under Article III;
(f) the form and terms of such Letter of Credit are acceptable to such
LC Issuer in its sole and absolute discretion; and
(g) all other conditions in this Agreement to the issuance of such
Letter of Credit have been satisfied.
LC Issuer will honor any such request if the foregoing conditions (a) through
(h) (in the following Section 2.12 called the "LC Conditions") have been met as
of the date of issuance of such Letter of Credit. LC Issuer may choose to honor
any such request for any other Letter of Credit but has no obligation to do so
and may refuse to issue any other requested Letter of Credit for any reason
which such LC Issuer in its sole discretion deems relevant.
Section 2.12. Requesting Letters of Credit. Borrower must make written
application for any Letter of Credit at least three Business Days before the
date on which Borrower desires such Letter of Credit to be issued, by delivering
such application to Agent. Agent shall promptly deliver such application to LC
Issuer. By making any such written application Borrower shall be deemed to have
represented and warranted to each Lender or LC Issuer that the LC Conditions
described in Section 2.11 will be met as of the date of issuance of such Letter
of Credit. Each such written application for a Letter of Credit must be made in
writing in the form and substance reasonably satisfactory to the LC Issuer, the
terms and provisions of which are hereby incorporated herein by reference (or in
such other form as may mutually be agreed upon by Agent, LC Issuer and
Borrower). Two Business Days after the LC Conditions for a Letter of Credit have
been met as described in Section 2.11 (or if an LC Issuer otherwise desires to
issue such Letter of Credit), LC Issuer will issue such Letter of Credit at LC
Issuer's office, and will provide Agent with a specimen copy of the Letter of
Credit so issued. If any provisions of any LC Application conflict with any
provisions of this Agreement, the provisions of this Agreement shall govern and
control.
Section 2.13. Reimbursement and Participations.
(a) Reimbursement by Borrower. Each Matured LC Obligation shall
constitute a loan by LC Issuer to Borrower. Borrower promises to pay to LC
Issuer, or to LC Issuer's order, on demand, the full amount of each Matured LC
Obligation, together with interest thereon at the Default Rate applicable to
Base Rate Loans.
(b) Letter of Credit Advances. If the beneficiary of any Letter of
Credit makes a draft or other demand for payment thereunder then Borrower may,
during the interval between the making thereof and the honoring thereof by LC
Issuer, request Lenders to make Revolving Loans to Borrower in the amount of
such draft or demand, which Revolving Loans shall be made concurrently with LC
Issuer's payment of such draft or demand and shall be immediately used by LC
Issuer to repay the amount of the resulting Matured LC Obligation. Such a
request by Borrower shall be made in compliance with all of the provisions
hereof, provided that for the
23
purposes of the first sentence of Section 2.1 the amount of such Revolving Loans
shall be considered but the amount of the Matured LC Obligation to be
concurrently paid by such Loans shall not be considered.
(c) Participation by Lenders. Each LC Issuer irrevocably agrees to
grant and hereby grants to each Lender, and to induce each LC Issuer to issue
Letters of Credit hereunder each Lender irrevocably agrees to accept and
purchase and hereby accepts and purchases from such LC Issuer, on the terms and
conditions hereinafter stated and for such Lender's own account and risk, an
undivided interest equal to such Lender's Percentage Share of such LC Issuer's
obligations and rights under each Letter of Credit issued hereunder by such LC
Issuer and the amount of each Matured LC Obligation paid by such LC Issuer
thereunder. Each Lender unconditionally and irrevocably agrees with LC Issuer
that, if a Matured LC Obligation is paid under any Letter of Credit for which
such LC Issuer is not reimbursed in full by Borrower in accordance with the
terms of this Agreement and the related LC Application (including any
reimbursement by means of concurrent Loans or by the application of LC
Collateral), such Lender shall (in all circumstances and without set-off or
counterclaim) pay to such LC Issuer on demand, in immediately available funds at
such LC Issuer's address for notices hereunder, such Lender's Percentage Share
of such Matured LC Obligation (or any portion thereof which has not been
reimbursed by Borrower). Each Lender's obligation to pay an LC Issuer pursuant
to the terms of this subsection is irrevocable and unconditional. If any amount
required to be paid by any Lender to an LC Issuer pursuant to this subsection is
paid by such Lender to an LC Issuer within three Business Days after the date
such payment is due, LC Issuer shall in addition to such amount be entitled to
recover from such Lender, on demand, interest thereon calculated from such due
date at the Federal Funds Rate. If any amount required to be paid by any Lender
to LC Issuer pursuant to this subsection is not paid by such Lender to LC Issuer
within three Business Days after the date such payment is due, LC Issuer shall
in addition to such amount be entitled to recover from such Lender, on demand,
interest thereon calculated from such due date at the Default Rate applicable to
Base Rate Loans.
(d) Distributions to Participants. Whenever an LC Issuer has in
accordance with this Section received from any Lender payment of such Lender's
Percentage Share of any Matured LC Obligation, if such LC Issuer thereafter
receives any payment of such Matured LC Obligation or any payment of interest
thereon (whether directly from Borrower or by application of LC Collateral or
otherwise, and excluding only interest for any period prior to such LC Issuer's
demand that such Lender make such payment of its Percentage Share), such LC
Issuer will distribute to such Lender its Percentage Share of the amounts so
received by such LC Issuer; provided, however, that if any such payment received
by an LC Issuer must thereafter be returned by such LC Issuer, such Lender shall
return to such LC Issuer the portion thereof which such LC Issuer has previously
distributed to it.
(e) Calculations. A written advice setting forth in reasonable detail
the amounts owing under this section, submitted by an LC Issuer to Borrower or
any Lender from time to time, shall be conclusive, absent manifest error, as to
the amounts thereof.
Section 2.14. Letter of Credit Fees. In consideration of LC Issuer's
issuance of any Letter of Credit, Borrower agrees to pay (a) to Agent, for the
account of all Lenders in accordance with their respective Percentage Shares, a
letter of credit fee at a rate equal to two percent (2.00%) per
24
annum of the amount of all Letters of Credit, and (b) to a LC Issuer for its own
account, a letter of credit fronting fee at a rate equal to fifteen
one-hundredths of one percent (0.15%) per annum of each Letter of Credit issued
by such LC Issuer. Each such fee will be calculated on a daily basis, on the
face amount of Letters of Credit outstanding on each day at the above applicable
rate and will be payable quarterly in arrears. In addition, Borrower will pay to
an LC Issuer a. minimum administrative issuance fee of $200 for each Letter of
Credit issued by such LC Issuer and an amendment fee of $65 for each Letter of
Credit, each such fee to be payable upon issuance or amendment, respectively, of
a Letter of Credit.
Section 2.15. No Duty to Inquire.
(a) Drafts and Demands. LC Issuer is authorized and instructed to
accept and pay drafts and demands for payment under any Letter of Credit without
requiring, and without responsibility for, any determination as to the existence
of any event giving rise to said draft, either at the time of acceptance or
payment or thereafter. LC Issuer is under no duty to determine the proper
identity of anyone presenting such a draft or making such a demand (whether by
tested telex or otherwise) as the officer, representative or agent of any
beneficiary under any Letter of Credit, and payment by LC Issuer to any such
beneficiary when requested by any such purported officer, representative or
agent is hereby authorized and approved. Borrower agrees to hold LC Issuer and
each other Lender Party harmless and indemnified against any liability or claim
in connection with or arising out of the subject matter of this Section, WHICH
INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY
OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION
OF ANY KIND BY ANY LENDER PARTY, provided only that no Lender Party shall be
entitled to indemnification for that portion, if any, of any liability or claim
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment.
(b) Extension of Maturity. If the maturity of any Letter of Credit is
extended by its terms or by Law or governmental action, if any extension of the
maturity or time for presentation of drafts or any other modification of the
terms of any Letter of Credit is made at the request of any Restricted Person,
or if the amount of any Letter of Credit is increased at the request of any
Restricted Person, this Agreement shall be binding upon all Restricted Persons
with respect to such Letter of Credit as so extended, increased or otherwise
modified, with respect to drafts and property covered thereby, and with respect
to any action taken by LC Issuer, LC Issuer's correspondents, or any Lender
Party in accordance with such extension, increase or other modification.
(c) Transferees of Letters of Credit. If any Letter of Credit provides
that it is transferable, LC Issuer shall have no duty to determine the proper
identity of anyone appearing as transferee of such Letter of Credit, nor shall
LC Issuer be charged with responsibility of any nature or character for the
validity or correctness of any transfer or successive transfers, and payment by
LC Issuer to any purported transferee or transferees as determined by LC Issuer
is hereby authorized and approved, and Borrower further agrees to hold LC Issuer
and each other Lender Party harmless and indemnified against any liability or
claim in connection with or arising out of the foregoing, WHICH INDEMNITY SHALL
APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY OR TO ANY EXTENT
CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY
LENDER Party, provided only that no Lender Party shall be
25
entitled to indemnification for that portion, if any, of any liability or claim
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment.
Section 2.16. LC Collateral.
(a) LC Obligations in Excess of Borrowing Base. If, after the making of
all mandatory prepayments required under Section 2.8, the outstanding LC
Obligations exceed the Borrowing Base, then in addition to prepayment of the
Borrowing Base Deficiency, Borrower will immediately pay to LC Issuer an amount
equal to such excess. LC Issuer will hold such amount as security for the
remaining LC Obligations (all such amounts held as security for LC Obligations
being herein collectively called "LC Collateral") until such LC Obligations
become Matured LC Obligations, at which time such LC Collateral may be applied
to such Matured LC Obligations. Neither this subsection nor the following
subsection shall, however, limit or impair any rights which LC Issuer may have
under any other document or agreement relating to any Letter of Credit or LC
Obligation, including any LC Application, or any rights which any Lender Party
may have to otherwise apply any payments by Borrower and any LC Collateral under
Section 3.1.
(b) Acceleration of LC Obligations. If the Obligations or any part
thereof become immediately due and payable pursuant to Section 8.2 then, unless
Required Lenders otherwise specifically elect to the contrary (which election
may thereafter be retracted by Required Lenders at any time), all LC Obligations
shall become immediately due and payable without regard to whether or not actual
drawings or payments on the Letters of Credit have occurred, and Borrower shall
be obligated to pay to LC Issuer immediately an amount equal to the aggregate LC
Obligations which are then outstanding. All amounts so paid shall first be
applied to Matured LC Obligations and then held by LC Issuer as LC Collateral
until such LC Obligations become Matured LC Obligations, at which time such LC
Collateral shall be applied to such Matured LC Obligations.
(c) Investment of LC Collateral. Pending application thereof, all LC
Collateral shall be invested by LC Issuer in such investments as LC Issuer may
choose in its sole discretion. All interest on such investments shall be
reinvested or applied to Matured LC Obligations. When all Obligations have been
satisfied in full, including all LC Obligations, all Letters of Credit have
expired or been terminated, and all of Borrower's reimbursement obligations in
connection therewith have been satisfied in full, LC Issuer shall release any
remaining LC Collateral. Borrower hereby assigns and grants to LC Issuer a
continuing security interest in all LC Collateral paid by it to LC Issuer, all
investments purchased with such LC Collateral, and all proceeds thereof to
secure its Matured LC Obligations and its Obligations under this Agreement, each
Note, and the other Loan Documents, and Borrower agrees that such LC Collateral
and investments and proceeds shall be subject to all of the terms and conditions
of the Security Documents. Borrower further agrees that LC Issuer shall have all
of the rights and remedies of a secured party under the Uniform Commercial Code
as adopted in the State of
New York with respect to such security interest and
that an Event of Default under this Agreement shall constitute a default for
purposes of such security interest.
26
(d) Payment of LC Collateral. When Borrower is required to provide LC
Collateral for any reason and fails to do so on the day when required, LC Issuer
may without notice to Borrower or any other Restricted Person provide such LC
Collateral (whether by application of proceeds of other Collateral, by transfers
from other accounts maintained with LC Issuer, or otherwise) using any available
funds of Borrower or any other Person also liable to make such payments. Any
such amounts which are required to be provided as LC Collateral and which are
not provided on the date required shall, for purposes of each Security Document,
be considered past due Obligations owing hereunder, and LC Issuer is hereby
authorized to exercise its respective rights under each Security Document to
obtain such amounts.
ARTICLE III - Payments to Lenders
Section 3.1. General Procedures. Borrower will make each payment which
it owes under the Loan Documents to Agent for the account of the Lender Party to
whom such payment is owed, in lawful money of the United States of America,
without set-off, deduction or counterclaim, and in immediately available funds.
Each such payment must be received by Agent not later than 11:00 a.m., New York,
New York time, on the date such payment becomes due and payable. Any payment
received by Agent after such time will be deemed to have been made on the next
following Business Day. Should any such payment become due and payable on a day
other than a Business Day, the maturity of such payment shall be extended to the
next succeeding Business Day, and, in the case of a payment of principal or past
due interest, interest shall accrue and be payable thereon for the period of
such extension as provided in the Loan Document under which such payment is due.
Each payment under a Loan Document shall be due and payable at the place
provided therein and, if no specific place of payment is provided, shall be due
and payable at the place of payment of Agent's Note. When Agent collects or
receives money on account of the Obligations, Agent shall distribute all money
so collected or received, and each Lender Party shall apply all such money so
distributed, as follows:
(a) first, for the payment of all Obligations which are then due (and
if such money is insufficient to pay all such Obligations, first to any
reimbursements due Agent under Section 6.9 or 10.4 and then to the partial
payment of all other Obligations then due in proportion to the amounts thereof,
or as Lender Parties shall otherwise agree);
(b) then for the prepayment of amounts owing under the Loan Documents
(other than principal on the Notes) if so specified by Borrower;
(c) then for the prepayment of principal on the Notes, together with
accrued and unpaid interest on the principal so prepaid; and
(d) last, for the payment or prepayment of any other Obligations.
All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest in compliance with Sections
2.7 and 2.8. All distributions of amounts described in any of subsections (b),
(c), or (d) above shall be made by Agent pro rata to Agent and each Lender Party
then owed Obligations described in such subsection in proportion to all amounts
owed all Lender Parties which are described in such subsection; provided that if
any
27
Lender then owes payments to Agent for the purchase of a participation under
Section 2.13(c) hereof, any amounts otherwise distributable under this section
to such Lender shall be deemed to belong to LC Issuer, or Agent, respectively,
to the extent of such unpaid payments, and Agent shall apply such amounts to
make such unpaid payments rather than distribute such amounts to such Lender.
Section 3.2. Capital Reimbursement. If either (a) the introduction or
implementation of or the compliance with or any change in or in the
interpretation of any Law, or (b) the introduction or implementation of or the
compliance with any request, directive or guideline from any central bank or
other governmental authority (whether or not having the force of Law) affects or
would affect the amount of capital required or expected to be maintained by any
Lender Party or any corporation controlling any Lender Party, then, upon demand
by such Lender Party, Borrower will pay to Agent for the benefit of such Lender
Party, from time to time as specified by such Lender Party, such additional
amount or amounts which such Lender Party shall determine to be appropriate to
compensate such Lender Party or any corporation controlling such Lender Party in
light of such circumstances, to the extent that such Lender Party reasonably
determines that the amount of any such capital would be increased or the rate of
return on any such capital would be reduced by or in whole or in part based on
the existence of the face amount of such Lender's Loans, commitments, or the
provisions concerning the issuance of Letters of Credit under this Agreement.
Section 3.3. Increased Cost of Eurodollar Loans or Letters of Credit.
If any applicable Law (whether now in effect or hereinafter enacted or
promulgated, including Regulation D) or any interpretation or administration
thereof by any governmental authority charged with the interpretation or
administration thereof (whether or not having the force of Law):
(a) shall change the basis of taxation of payments to any Lender Party
of any principal, interest, or other amounts attributable to any Eurodollar Loan
or otherwise due under this Agreement in respect of any Eurodollar Loan or
Letter of Credit (other than taxes imposed on the overall net income of such
Lender Party or any lending office of such Lender Party by any jurisdiction in
which such Lender Party or any such lending office is located); or
(b) shall change, impose, modify, apply or deem applicable any reserve,
special deposit or similar requirements in respect of any Eurodollar Loan or
Letter of Credit (excluding those for which such Lender Party is fully
compensated pursuant to adjustments made in the definition of Eurodollar Rate)
or against assets of, deposits with or for the account of, or credit extended
by, such Lender Party; or
(c) shall impose on any Lender Party or the interbank eurocurrency
deposit market any other condition affecting any Eurodollar Loan or Letter of
Credit, the result of which is to increase the cost to any Lender Party of
funding or maintaining any Eurodollar Loan or of issuing any Letter of Credit or
to reduce the amount of any sum receivable by any Lender Party in respect of any
Eurodollar Loan or Letter of Credit by an amount deemed by such Lender Party to
be material, then such Lender Party shall promptly notify Agent and Borrower in
writing of the happening of such event and of the amount required to compensate
such Lender Party for such event (on an after-tax basis, taking into account any
taxes on such compensation), whereupon (i) Borrower shall pay such amount to
Agent for the account of such Lender Party
28
and (ii) Borrower may elect, by giving to Agent and such Lender Party not less
than three Business Days' notice, to convert all (but not less than all) of any
such Eurodollar Loans into Base Rate Loans.
Section 3.4. Availability. If (a) any change in applicable Laws, or in
the interpretation or administration thereof of or in any jurisdiction
whatsoever, domestic or foreign, shall make it unlawful or impracticable for any
Lender Party to fund or maintain Eurodollar Loans, or shall materially restrict
the authority of any Lender Party to purchase or take offshore deposits of
dollars (i.e., "eurodollars") or to issue Letters of Credit, (b) any Lender
Party determines that matching deposits appropriate to fund or maintain any
Eurodollar Loan are not available to it, or (c) any Lender Party determines that
the formula for calculating the Eurodollar Rate does not fairly reflect the cost
to such Lender Party of making or maintaining loans based on such rate, then,
upon notice by such Lender Party to Borrower and Agent, Borrower's right to
elect Eurodollar Loans or to apply for Letters of Credit from such Lender Party
shall be suspended to the extent and for the duration of such illegality,
impracticability or restriction and all Eurodollar Loans of such Lender Party
which are then outstanding or are then the subject of any Borrowing Notice and
which cannot lawfully or practicably be maintained or funded shall immediately
become or remain, or shall be funded as, Base Rate Loans of such Lender Party.
Borrower agrees to indemnify each Lender Party and hold it harmless against all
costs, expenses, claims, penalties, liabilities and damages which may result
from any such change in Law, interpretation or administration (other than taxes
imposed on the overall net income of such Lender Party or any lending office of
such Lender Party). Such indemnification shall be on an after tax basis, taking
into account any taxes imposed on the amounts paid as indemnity.
Section 3.5. Funding Losses. In addition to its other obligations
hereunder, Borrower will indemnify each Lender Party against, and reimburse each
Lender Party on demand for, any loss or expense incurred or sustained by such
Lender Party (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by a Lender
Party to fund or maintain Eurodollar Loans), as a result of (a) any payment or
prepayment (whether authorized or required hereunder or otherwise) of all or a
portion of a Eurodollar Loan on a day other than the day on which the applicable
Interest Period ends, (b) any payment or prepayment, whether required hereunder
or otherwise, of a Loan made after the delivery, but before the effective date,
of a Continuation/Conversion Notice, if such payment or prepayment prevents such
Continuation/Conversion Notice from becoming fully effective, (c) the failure of
any Loan to be made or of any Continuation/Conversion Notice to become effective
due to any condition precedent not being satisfied or due to any other action or
inaction of any Restricted Person, or (d) any Conversion (whether authorized or
required hereunder or otherwise) of all or any portion of any Eurodollar Loan
into a Base Rate Loan or into a different Eurodollar Loan on a day other than
the day on which the applicable Interest Period ends. Such indemnification shall
be on an after-tax basis, taking into account any taxes imposed on the amounts
paid as indemnity.
Section 3.6. Reimbursable Taxes. Borrower covenants and agrees that:
(a) Borrower will indemnify each Lender Party against and reimburse
each Lender Party for all present and future income, stamp and other taxes,
levies, costs and charges whatsoever imposed, assessed, levied or collected on
or in respect of this Agreement or any Eurodollar Loans or Letters of Credit
(whether or not legally or correctly imposed, assessed,
29
levied or collected), excluding, however, any taxes imposed on or measured by
the overall net income of Agent or such Lender Party or any lending office of
such Lender Party by any jurisdiction in which such Lender Party or any such
lending office is located (all such non-excluded taxes, levies, costs and
charges being collectively called "Reimbursable Taxes" in this section). Such
indemnification shall be on an after-tax basis, taking into account any taxes
imposed on the amounts paid as indemnity.
(b) All payments on account of the principal of, and interest on, each
Lender Party's Loans and Note, and all other amounts payable by Borrower to any
Lender Party hereunder, shall be made in full without set-off or counterclaim
and shall be made free and clear of and without deductions or withholdings of
any nature by reason of any Reimbursable Taxes, all of which will be for the
account of Borrower. In the event of Borrower being compelled by Law to make any
such deduction or withholding from any payment to any Lender Party, Borrower
shall pay on the due date of such payment, by way of additional interest, such
additional amounts as are needed to cause the amount receivable by such Lender
Party after such deduction or withholding to equal the amount which would have
been receivable in the absence of such deduction or withholding. If Borrower
should make any deduction or withholding as aforesaid, Borrower shall within 60
days thereafter forward to such Lender Party an official receipt or other
official document evidencing payment of such deduction or withholding.
(c) If Borrower is ever required to pay any Reimbursable Tax with
respect to any Eurodollar Loan, Borrower may elect, by giving to Agent and such
Lender Party not less than three Business Days' notice, to convert all (but not
less than all) of any such Eurodollar Loan into a Base Rate Loan, but such
election shall not diminish Borrower's obligation to pay all Reimbursable Taxes.
(d) Notwithstanding the foregoing provisions of this Section, Borrower
shall be entitled, to the extent it is required to do so by Law, to deduct or
withhold (and not to make any indemnification or reimbursement for) income or
other similar taxes imposed by the United States of America (other than any
portion thereof attributable to a change in federal income tax Laws effected
after the date hereof) from interest, fees or other amounts payable hereunder
for the account of any Lender Party, other than a Lender Party (i) who is a U.S.
person for Federal income tax purposes or (ii) who has the Prescribed Forms on
file with Agent (with copies provided to Borrower) for the applicable year to
the extent deduction or withholding of such taxes is not required as a result of
the filing of such Prescribed Forms, provided that if Borrower shall so deduct
or withhold any such taxes, it shall provide a statement to Agent and such
Lender Party, setting forth the amount of such taxes so deducted or withheld,
the applicable rate and any other information or documentation which such Lender
Party may reasonably request for assisting such Lender Party to obtain any
allowable credits or deductions for the taxes so deducted or withheld in the
jurisdiction or jurisdictions in which such Lender Party is subject to tax. As
used in this section, "Prescribed Forms" means such duly executed forms or
statements, and in such number of copies, which may, from time to time, be
prescribed by Law and which, pursuant to applicable provisions of (x) an income
tax treaty between the United States and the country of residence of the Lender
party providing the forms or statements, or (y) the Internal Revenue Code,
permit Borrower to make payments hereunder for the account of such Lender Party
free of such deduction or withholding of income or similar taxes.
30
Section 3.7. Change of Applicable Lending Office. Each Lender Party
agrees that, upon the occurrence of any event giving rise to the operation of
Sections 3.2 through 3.6 with respect to such Lender Party, it will, if
requested by Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender Party) to designate another Applicable Lending
Office, provided that such designation is made on such terms that such Lender
Party and its Lending Office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding the consequence of the event giving
rise to the operation of any such section. Nothing in this section shall affect
or postpone any of the obligations of Borrower or the rights of any Lender Party
provided in Sections 3.2 through 3.6.
Section 3.8. Replacement of Lenders. If any Lender Party seeks
reimbursement for increased costs under Sections 3.2 through 3.6, then within
ninety days thereafter provided no Event of Default then exists Borrower shall
have the right (unless such Lender Party withdraws its request for additional
compensation) to replace such Lender Party by requiring such Lender Party to
assign its Loans and Notes and its commitments hereunder to an Eligible
Transferee reasonably acceptable to Agent and to Borrower, provided that: (a)
all Obligations of Borrower owing to such Lender Party being replaced (including
such increased costs, but excluding principal and accrued interest on the Notes
being assigned) shall be paid in full to such Lender Party concurrently with
such assignment, and (b) the replacement Eligible Transferee shall purchase the
Note being assigned by paying to such Lender Party a price equal to the
principal amount thereof plus accrued and unpaid interest thereon. In connection
with any such assignment Borrower, Agent, such Lender Party and the replacement
Eligible Transferee shall otherwise comply with Section 10.5. Notwithstanding
the foregoing rights of Borrower under this section, however, Borrower may not
replace any Lender Party which seeks reimbursement for increased costs under
Section 3.2 through 3.6 unless Borrower is at the same time replacing all Lender
Parties which are then seeking such compensation.
ARTICLE IV - Conditions Precedent
Section 4.1. Conditions to Effectiveness of Agreement. Agreement shall
not become effective until Agent shall have received all of the following, at
Agent's office in Dallas, Texas, duly executed and delivered and in form,
substance and date satisfactory to Agent:
(a) This Agreement and any other documents that Lenders are to execute
in connection herewith.
(b) Each Note.
(c) Each additional Security Document listed on Schedule 2.
(d) Certain certificates of Borrower including:
(i) An "Omnibus Certificate" of the Secretary and of the
Chairman of the Board or President of Borrower, which shall contain the
names and signatures of the officers of Borrower authorized to execute
Loan Documents and which shall certify to the truth, correctness and
completeness of the following exhibits attached thereto: (1) a copy of
resolutions duly adopted by the Board of Directors of Borrower and in
full force and effect at the time this Agreement is entered into,
authorizing the execution of this
31
Agreement and the other Loan Documents delivered or to be delivered in
connection herewith and the consummation of the transactions
contemplated herein and therein, (2) a copy of the charter documents of
Borrower and all amendments thereto, certified by the appropriate
official of Borrower's state of organization, and (3) a copy of any
bylaws of Borrower; and
(ii) A "Compliance Certificate" of the Chairman of the Board
or President and of the chief financial officer of Borrower, of even
date with such Loan, in which such officers certify to the satisfaction
of the conditions set out in subsections (a), (b), (c) and (d) of
Section 4.2.
(e) A certificate (or certificates) of the due formation, valid
existence and good standing of Borrower in its state of organization, issued by
the appropriate authorities of such jurisdiction, and certificates of Borrower's
good standing and due qualification to do business, issued by appropriate
officials in any states in which Borrower owns property subject to Security
Documents.
(f) Documents similar to those specified in subsections (d)(i) and (e)
of this section with respect to each Guarantor and the execution by it of the
Loan Documents to which it is a party.
(g) A legal opinion of Glast, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel for Restricted
Persons, containing the opinions set forth in Exhibit F.
(h) Payment of all commitment, agency, legal and other fees required to
be paid to any Lender pursuant to any Loan Documents or any commitment agreement
heretofore entered into.
(i) The unaudited quarterly Consolidated financial statements of Parent
dated as of September 30, 2001.
Section 4.2. Conditions to Revolving Loans. No Lender has any
obligation to make any Revolving Loan or issue any Letter of Credit, unless the
following conditions precedent have been satisfied on the date of such Revolving
Loan or the date of issuance of such Letter of Credit:
(a) All representations and warranties made by any Restricted Person in
any Loan Document shall be true on and as of the date of such Revolving Loan or
such Letter of Credit (except to the extent that the facts upon which such
representations are based have been changed by the extension of credit hereunder
or to the extent that such representations and warranties are expressly limited
to an earlier date) as if such representations and warranties had been made as
of the date of such Loan or Letter of Credit.
(b) No Default shall exist at the date of such Loan or Letter of
Credit.
(c) No Material Adverse Change shall have occurred to, and no event or
circumstance shall have occurred that could reasonably be expected to cause a
Material Adverse
32
Change to, Borrower's Consolidated financial condition or businesses since the
date of this Agreement.
(d) Each Restricted Person shall have performed and complied with all
agreements and conditions required in the Loan Documents to be performed or
complied with by it on or prior to the date of such Loan or Letter of Credit.
(e) The making of such Revolving Loan or the issuance of such Letter of
Credit shall not be prohibited by any Law and shall not subject any Lender or LC
Issuer to any penalty or other onerous condition under or pursuant to any such
Law.
(f) Agent shall have received all documents and instruments which Agent
has then requested, in addition to those described in Section 4.1 (including
opinions of legal counsel for Restricted Persons and Agent; corporate documents
and records; documents evidencing governmental authorizations, consents,
approvals, licenses and exemptions; and certificates of public officials and of
officers and representatives of Borrower and other Persons), as to (i) the
accuracy and validity of or compliance with all representations, warranties and
covenants made by any Restricted Person in this Agreement and the other Loan
Documents, (ii) the satisfaction of all conditions contained herein or therein,
and (iii) all other matters pertaining hereto and thereto. All such additional
documents and instruments shall be satisfactory to Agent in form, substance and
date.
ARTICLE V - Representations and Warranties
To confirm each Lender's understanding concerning Restricted Persons
and Restricted Persons' businesses, properties and obligations and to induce
each Lender to enter into this Agreement and to extend credit hereunder,
Borrower and Parent each represent and warrant to each Lender that each of the
following statements is true and correct in all respects.
Section 5.1. No Default. No Restricted Person is in default in the
performance of any of the covenants and agreements contained in any Loan
Document. No event has occurred and is continuing which constitutes a Default.
Section 5.2. Organization and Good Standing. Each Restricted Person is
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, having all powers required to carry on its
business and enter into and carry out the transactions contemplated hereby. Each
Restricted Person is duly qualified, in good standing, and authorized to do
business in all other jurisdictions within the United States wherein the
character of the properties owned or held by it or the nature of the business
transacted by it makes such qualification necessary. Each Restricted Person has
taken all actions and procedures customarily taken in order to enter, for the
purpose of conducting business or owning property, each jurisdiction outside the
United States, if any, wherein the character of the properties owned or held by
it or the nature of the business transacted by it makes such actions and
procedures desirable.
Section 5.3. Authorization. Each Restricted Person has duly taken all
action necessary to authorize the execution and delivery by it of the Loan
Documents to which it is a party and to
33
authorize the consummation of the transactions contemplated thereby and the
performance of its obligations thereunder. Borrower is duly authorized to borrow
funds hereunder.
Section 5.4. No Conflicts or Consents. The execution and delivery by
the various Restricted Persons of the Loan Documents to which each is a party,
the performance by each of its obligations under such Loan Documents, and the
consummation of the transactions contemplated by the various Loan Documents, do
not and will not (a) conflict with any provision of (i) any Law, (ii) the
organizational documents of any Restricted Person, or (iii) any agreement,
judgment, license, order or permit applicable to or binding upon any Restricted
Person, (b) result in the acceleration of any Restricted Debt owed by any
Restricted Person, or (c) result in or require the creation of any Lien upon any
assets or properties of any Restricted Person except as expressly contemplated
in the Loan Documents. Except as expressly contemplated in the Loan Documents no
consent, approval, authorization or order of, and no notice to or filing with,
any Tribunal or third party is required in connection with the execution,
delivery or performance by any Restricted Person of any Loan Document or to
consummate any transactions contemplated by the Loan Documents.
Section 5.5. Enforceable Obligations. This Agreement is, and the other
Loan Documents when duly executed and delivered will be, legal, valid and
binding obligations of each Restricted Person which is a party hereto or
thereto, enforceable in accordance with their terms except as such enforcement
may be limited by bankruptcy, insolvency or similar Laws of general application
relating to the enforcement of creditors' rights.
Section 5.6. Current Financial Statements. Borrower has heretofore
delivered to each Lender true, correct and complete copies of the Current
Financial Statements. The Current Financial Statements fairly present each of
Inland Refining's and Parent's Consolidated financial position at the respective
dates thereof, the results of Inland Refining's operations and Inland Refining's
cash flows for the respective periods thereof, and the Consolidated results of
Parent's operations and Parent's Consolidated cash flows for the respective
periods the eof. Since the date of the annual Current Financial Statements no
Material Adverse Change has occurred, except as reflected in the Disclosure
Schedule or a Disclosure Report. All Current Financial Statements were prepared
in accordance with GAAP.
Section 5.7. Other Obligations and Restrictions. As of the date hereof,
no Restricted Person has any outstanding Debt of any kind (including obligations
under farm-in agreements, other obligations to make capital expenditures,
contingent obligations, tax assessments, and unusual forward or long-term
commitments) which is, in the aggregate, material to Borrower or material with
respect to Parent's Consolidated financial condition and not shown in the
Current Financial Statements or disclosed in the Disclosure Schedule or a
Disclosure Report. All obligations of any Restricted Person to make capital
expenditures to drill or otherwise develop any oil, gas or mineral properties
are specified in a Disclosure Schedule or Disclosure Report (by well or project,
describing the dollar amount of each such obligation). Except as shown in the
Current Financial Statements or disclosed in the Disclosure Schedule or a
Disclosure Report, no Restricted Person is subject to or restricted by any
franchise, contract, deed, charter restriction, or other instrument or
restriction which is materially likely to cause a Material Adverse Change.
34
Section 5.8. Full Disclosure. As of the date of delivery, no
certificate, statement or other information delivered herewith or heretofore by
any Restricted Person to any Lender in connection with the negotiation of this
Agreement or in connection with any transaction contemplated hereby contains any
untrue statement of a material fact or omits to state any material fact known to
any Restricted Person (other than industry-wide risks normally associated with
the types of businesses conducted by Restricted Persons) necessary to make the
statements contained herein or therein not misleading as of the date made or
deemed made. There is no fact known to any Restricted Person (other than
industry-wide risks normally associated with the types of businesses conducted
by Restricted Persons) that has not been disclosed to each Lender in writing
which is materially likely to cause a Material Adverse Change. There are no
statements or conclusions in any Engineering Report which are based upon or
include misleading information or fail to take into account material information
regarding the matters reported therein, it being understood that each
Engineering Report is necessarily based upon professional opinions, estimates
and projections and that Borrower does not warrant that such opinions, estimates
and projections will ultimately prove to have been accurate. Borrower has
heretofore delivered to each Lender true, correct and complete copies of the
Initial Engineering Report.
Section 5.9. Litigation. Except as disclosed in the Current Financial
Statements or in the Disclosure Schedule: (a) there are no actions, suits or
legal, equitable, arbitrative or administrative proceedings pending, or to the
knowledge of any Restricted Person threatened, against any Restricted Person
before any Tribunal which could cause a Material Adverse Change, and (b) there
are no outstanding judgments, injunctions, writs, rulings or orders by any such
Tribunal against any Restricted Person or any Restricted Person's stockholders,
partners, directors or officers which could cause a Material Adverse Change.
Section 5.10. Labor Disputes and Acts of God. Except as disclosed in
the Disclosure Schedule or a Disclosure Report, neither the business nor the
properties of any Restricted Person has been affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought; storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance), which could cause a Material Adverse
Change.
Section 5.11. ERISA Plans and Liabilities. All currently existing ERISA
Plans are listed in the Disclosure Schedule or a Disclosure Report. Except as
disclosed in the Current Financial Statements or in the Disclosure Schedule or a
Disclosure Report, no Termination Event has occurred with respect to any ERISA
Plan and all ERISA Affiliates are in compliance with ERISA in all material
respects. No ERISA Affiliate is required to contribute to, or has any other
absolute or contingent liability in respect of, any "multiemployer plan" as
defined in Section 4001 of ERISA. Except as set forth in the Disclosure Schedule
or a Disclosure Report: (a) no "accumulated funding deficiency" (as defined in
Section 412(a) of the Internal Revenue Code) exists with respect to any ERISA
Plan, whether or not waived by the Secretary of the Treasury or his delegate,
and (b) the current value of each ERISA Plan's benefits does not exceed the
current value of such ERISA Plan's assets available for the payment of such
benefits by more than $500,000.
Section 5.12. Environmental and Other Laws. As used in this section:
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, "CERCLIS" means the Comprehensive
Environmental Response, Compensation and
35
Liability Information System List of the Environmental Protection Agency, and
"Release" has the meaning given such term in 42 U.S.C. Section 9601(22). Except
as set forth in the Disclosure Schedule or a Disclosure Report:
(a) Restricted Persons are conducting their businesses in compliance
with all applicable Laws, including Environmental Laws, and have all permits,
licenses and authorizations required in connection with the conduct of their
businesses, except to the extent failure to have any such permit, license or
authorization could not cause a Material Adverse Change. Each Restricted Person
is in compliance with the terms and conditions of all such permits, licenses and
authorizations, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Environmental Law or in any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, except to the extent
failure to comply could not cause a Material Adverse Change.
(b) No notice, notification, demand, request for information, citation,
summons or order has been issued, no complaint has been filed, no penalty has
been assessed, and no investigation or review is pending or threatened by any
Tribunal or any other Person with respect to (i) any alleged generation,
treatment, storage, recycling, transportation, disposal, or Release of any
Hazardous Materials, either by any Restricted Person or on any property owned by
any Restricted Person, (ii) any material remedial action which might be needed
to respond to any such alleged generation, treatment, storage, recycling,
transportation, disposal, or Release, or (iii) any alleged failure by any
Restricted Person to have any permit, license or authorization required in
connection with the conduct of its business or with respect to any such
generation, treatment, storage, recycling, transportation, disposal, or Release.
(c) No Restricted Person otherwise has any known material contingent
liability in connection with any alleged generation, treatment, storage,
recycling, transportation, disposal, or Release of any Hazardous Materials.
(d) No Restricted Person has handled any Hazardous Materials, other
than as a generator, on any properties now or previously owned or leased by any
Restricted Person to an extent that such handling has caused, or could cause, a
Material Adverse Change; and
(i) no PCBs are or have been present at any properties now or
previously owned or leased by any Restricted Person;
(ii) no asbestos is or has been present at any properties now
or previously owned or leased by any Restricted Person;
(iii) there are no underground storage tanks for Hazardous
Materials, active or abandoned, at any properties now or previously
owned or leased by any Restricted Person;
(iv) no Hazardous Materials have been Released, in a
reportable quantity, where such a quantity has been established by
statute, ordinance, rule, regulation or
36
order, at, on or under any properties now or previously owned or leased
by any Restricted Person;
(v) no Hazardous Materials have been otherwise Released at, on
or under any properties now or previously owned or leased by any
Restricted Person to an extent that such release has caused, or could
cause, a Material Adverse Change.
(e) No Restricted Person has transported or arranged for the
transportation of any Hazardous Material to any location which is listed on the
National Priorities List under CERCLA, listed for possible inclusion on the
National Priorities List by the Environmental Protection Agency in CERCLIS, or
listed on any similar state list or which is the subject of federal, state or
local enforcement actions or other investigations which may lead to claims
against any Restricted Person for clean-up costs, remedial work, damages to
natural resources or for personal injury claims, including, but not limited to,
claims under CERCLA.
(f) No Hazardous Material generated by any Restricted Person has been
recycled, treated, stored, disposed of or released by any Restricted Person at
any location other than those listed in Disclosure Schedule.
(g) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of any Restricted Person (and to the
best knowledge of Borrower, no such notification has been filed with respect to
any Restricted Person by any other Person), and no property now or previously
owned or leased by any Restricted Person is listed or proposed for listing on
the National Priority list promulgated pursuant to CERCLA, in CERCLIS, or on any
similar state list of sites requiring investigation or clean-up.
(h) There are no Liens arising under or pursuant to any Environmental
Laws on any of the real properties or properties owned or leases' by any
Restricted Person, and no government actions have been taken or are in process
which could subject any of such properties to such Liens; nor would any
Restricted Person be required to place any notice or restriction relating to the
presence of Hazardous Materials at any properties owned by it in any deed to
such properties.
(i) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by or which are in the possession of
any Restricted Person in relation to any properties or facility now or
previously owned or leased by any Restricted Person which have not been made
available to Agent.
Section 5.13. Names and Places of Business. No Restricted Person has,
during the preceding five years, had, been known by, or used any other trade or
fictitious name, except as disclosed in the Disclosure Schedule. Except as
otherwise indicated in the Disclosure Schedule or a Disclosure Report, the chief
executive office and principal place of business of each Restricted Person are
(and for the preceding five years have been) located at the address of Borrower
set out on the signature pages hereto. Except as indicated in the Disclosure
Schedule or a Disclosure Report, no Restricted Person has any other office or
place of business.
Section 5.14. Subsidiaries. Neither Borrower nor Parent presently has
any Subsidiary or owns any stock in any corporation or association except those
listed in the Disclosure Schedule or a Disclosure Report. Neither Borrower nor
any Restricted Person is a member of any general
37
or limited partnership, joint venture or association of any type whatsoever
except those listed in the Disclosure Schedule or a Disclosure Report. Except as
otherwise revealed in a Disclosure Report, Parent owns, directly or indirectly,
the equity interest in each of its Subsidiaries which is indicated in the
Disclosure Schedule.
Section 5.15. Licenses. Each Restricted Person possesses all licenses,
permits, franchises, patents, copyrights, trademarks and trade names, and other
intellectual property (or otherwise possesses the right to use such intellectual
property without violation of the rights of any other Person) which are
necessary to carry out its business as presently conducted and as presently
proposed to be conducted hereafter, and no Restricted Person is in violation in
any material respect of the terms under which it possesses such intellectual
property or the right to use such intellectual property.
Section 5.16. Government Regulation. Neither Borrower nor any other
Restricted Person owing Obligations is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Investment
Company Act of 1940 (as any of the preceding acts have been amended) or any
other Law which regulates the incurring by such Person of Restricted Debt,
including Laws relating to common contract carriers or the sale of electricity,
gas, steam, water or other public utility services.
Section 5.17. Ownership of Borrower. All of the outstanding shares of
capital stock of Borrower are owned and shall at all times be owned by Parent.
Section 5.18. Solvency. Upon giving effect to the issuance of the
Notes, the execution of the Loan Documents by Borrower and the consummation of
the transactions contemplated hereby and thereby, Borrower will be solvent (as
such term is used in applicable bankruptcy, liquidation, receivership,
insolvency or similar Laws).
Section 5.19. Taxes. Each Restricted Person has filed all United States
Federal income tax returns and all other material tax returns that are required
to be filed by it and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by any Restricted Person and all other
penalties or charges. The charges, accruals and revenues on the books of
each-Restricted Person in respect of taxes and other governmental charges are,
in the opinion of Parent, adequate. No Restricted Person has not given or been
requested to give a waiver of the statute of limitations relating to the payment
of any federal or other taxes, except as listed in the Disclosure Schedule or a
Disclosure Report.
ARTICLE VI - Affirmative Covenants of Borrower and Parent
To conform with the terms and conditions under which each Lender is
willing to have credit outstanding to Borrower, and to induce each Lender to
enter into this Agreement and extend credit hereunder, Parent and Borrower each
warrant, covenant and agree that until the full and final payment of the
Obligations and the termination of this Agreement, unless Required Lenders have
previously agreed otherwise:
Section 6.1. Payment and Performance. Borrower will pay all amounts due
under the Loan Documents in accordance with the terms thereof and will observe,
perform and comply with every covenant, term and condition expressed or implied
in the Loan Documents. Borrower
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and Parent will cause each other Restricted Person to observe, perform and
comply With every such term, covenant and condition in any Loan Document.
Section 6.2. Books Financial Statements and Reports. Parent, acting
through or on behalf of the Restricted Persons, will at all times maintain full
and accurate books of account and records and a standard system of accounting,
will maintain its Fiscal Year, and will furnish the following statements and
reports to each Lender Party at Parent's expense:
(a) As soon as available, and in any event within ninety (90) days
after the end of each Fiscal Year, complete Consolidated and Consolidating
financial statements of Parent together with all notes thereto, prepared in
reasonable detail in accordance with GAAP, together with an unqualified opinion,
based on an audit using generally accepted auditing standards, by ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, L.L.P., or other independent certified public accountants selected by
Parent and acceptable to Required Lenders, stating that such Consolidated
financial statements have been so prepared. These financial statements shall
contain a Consolidated and Consolidating balance sheet as of the end of such
Fiscal Year and Consolidated and Consolidating statements of earnings, of cash
flows, and of changes in owners' equity for such Fiscal Year, each setting forth
in comparative form the corresponding figures for the preceding Fiscal Year. In
addition, within ninety (90) days after the end of each Fiscal Year Parent will
furnish a report signed by such accountants (i) stating that they have read this
Agreement, (ii) containing calculations showing compliance (or non-compliance)
at the end of such Fiscal Year with the requirements of Sections 7.10 - 7.13,
inclusive, and (iii) further stating that in making their examination and
reporting on the Consolidated financial statements described above they did not
conclude that any Default existed at the end of such Fiscal Year or at the time
of their report, or, if they did conclude that a Default existed, specifying its
nature and period of existence.
(b) As soon as available, and in any event within fifty (50) days after
the end of each Fiscal Quarter, Parent's Consolidated and Consolidating balance
sheet as of the end of such Fiscal Quarter and Consolidated and Consolidating
statements of earnings and cash flows for the period from the beginning of the
then current Fiscal Year to the end of such Fiscal Quarter, all in reasonable
detail and prepared in accordance with GAAP, subject to changes resulting from
normal year-end adjustments. In addition, Parent will, together with each such
set of financial statements and each set of financial statements furnished under
subsection (a) of this section, furnish a certificate in the form of Exhibit D
signed by the chief financial officer of Parent stating that such financial
statements are accurate and complete (subject to normal year-end adjustments),
stating that he has reviewed the Loan Documents, containing calculations showing
compliance (or non-compliance) at the end of such Fiscal Quarter with the
requirements of Sections 7.10 - 7.13, inclusive, and stating that no Default
exists at the end of such Fiscal Quarter or at the time of such certificate or
specifying the nature and period of existence of any such Default.
(c) Promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent by any Restricted Person
to its stockholders and all registration statements, periodic reports and other
statements and schedules filed by any Restricted Person with any securities
exchange, the Securities and Exchange Commission or any similar governmental
authority.
39
(d) By October 1 and April 1 of each year, beginning April 1, 2002, an
engineering report prepared as of the preceding August 1 and February 1,
respectively by ▇▇▇▇▇ ▇▇▇▇▇ Company or other independent petroleum engineers
chosen by Borrower and acceptable to Required Lenders, concerning the
Properties. The report (1) shall separately report on Proved Producing Reserves,
Proved Developed Nonproducing Reserves, Proved Undeveloped Reserves and probable
reserves and separately calculate the present value of future net reserves of
each such category of Proved Reserves (and the similar net present value of such
probable reserves), (2) shall contain sufficient information to meet the
reporting requirements concerning oil and gas reserves contained in Regulations
S-K and S-X promulgated by the Securities and Exchange Commission, (3) shall
take into account Borrower's actual experiences with leasehold operating
expenses and other costs in determining projected leasehold operating expenses
and other costs, (4) shall identify and take into account any "over-produced" or
"under-produced" status under gas balancing arrangements, and (5) shall
otherwise be in form and substance satisfactory to Required Lenders. The report
shall distinguish (or shall be delivered together with a certificate from an
appropriate officer of Borrower which distinguishes) those Properties treated in
the report which are Eligible Mortgaged Properties from those properties treated
in the report which are not Eligible Mortgaged Properties.
(e) To the extent requested from time to time but in no event more than
one time during any Fiscal Quarter, a report in detail acceptable to Required
Lenders with respect to the Properties during the Fiscal Quarter immediately
prior thereto:
(i) describing by well and field the net quantities of oil,
gas, natural gas liquids, and water produced (and the quantities of
water injected) during such Fiscal Quarter;
(ii) describing by well and field the quantities of oil, gas
and natural gas liquids sold during such Fiscal Quarter out of
production from the Properties and calculating the average sales prices
of such oil, natural gas, and natural gas liquids;
(iii) specifying any leasehold operating expenses, overhead
charges, gathering costs, transportation costs, and other costs with
respect to the Properties of the kind chargeable as direct charges or
overhead under an Onshore ▇▇▇▇▇ Accounting Procedure for Joint
Operations (1984 form published by the Council of Petroleum Accountants
Societies);
(iv) setting forth the amount of Direct Taxes on the
Properties during such Fiscal Quarter and the amount of royalties paid
with respect to the Properties during such Fiscal Quarter;
(v) describing all activities carried out during such Fiscal
Quarter in furtherance of the Parent's annual business plan, all other
capital expenditures during such Fiscal Quarter, and all projections of
capital expenditures projected to be made on any of the Eligible
Mortgaged Properties; and
(vi) describing all workover work and drilling during such
Fiscal Quarter, including the cost and status of each well drilled or
worked over during such Fiscal
40
Quarter, test reports for each well tested during such Fiscal Quarter,
reports on prices and volumes received for such Fiscal Quarter, reports
for each well completed during such Fiscal Quarter, and accompanying
authorizations for expenditures.
(f) As soon as available, and in any event within forty-five
(45) days after the end of each Fiscal Quarter, a report describing
aggregate volume of production and sales attributable to production
during such Fiscal Quarter from the properties of Borrower and
describing the related severance taxes, leasehold operating expenses
and capital costs attributable thereto and incurred during such Fiscal
Quarter.
(g) As soon as available, and in any event within thirty (30)
days after the end of each Fiscal Year, Borrower shall deliver to Agent
an environmental compliance certificate signed by the president or
chief executive officer of Borrower in the form attached hereto as
Exhibit E. Further, if requested by Agent, Borrower shall permit and
cooperate with an environmental and safety review made in connection
with the operations of Borrower's oil and gas properties one time
during each Fiscal Year, by Pilko & Associates, Inc. or other
consultants selected by Agent which review shall, if requested by
Agent, be arranged and supervised by environmental legal counsel for
Agent, all at Borrower's cost and expense. The consultant shall render
a verbal or written report, as specified by Agent, based upon such
review at Borrower's cost and expense.
(h) Concurrently with the annual renewal of the Borrower's
insurance policies, Borrower shall, if requested by Agent in writing,
cause a certificate or report to be issued by Agent's professional
insurance consultants or other insurance consultants satisfactory to
Agent certifying that Borrower's insurance for the next succeeding year
after such renewal (or for such longer period for which such insurance
is in effect) complies with the provisions of this Agreement and the
Security Documents.
(i) By December 1 of each year, a proposed business plan for
the Parent and its Consolidated Subsidiaries, including proposed
budgets and plans of development of oil and gas properties, in form and
detail reasonably satisfactory to Required Lenders for the next
succeeding year.
Section 6.3. Other Information and Inspections. Each Restricted Person
will furnish to each Lender any information which Agent may from time to time
request in writing concerning any covenant, provision or condition of the Loan
Documents or any matter in connection with Restricted Persons' businesses and
operations. Each Restricted Person will permit representatives appointed by
Agent (including independent accountants, auditors, agents, attorneys,
appraisers and any other Persons) to visit and inspect during normal business
hours any of such Restricted Person's property, including its books of account,
other books and records, and any facilities or other business assets, and to
make extra copies therefrom and photocopies and photographs thereof, and to
write down and record any information such representatives obtain, and each
Restricted Person shall permit Agent or its representatives to investigate and
verify the accuracy of the information furnished to Agent or any Lender in
connection with the Loan Documents and to discuss all such matters with its
officers, employees and representatives.
41
Section 6.4. Notice of Material Events and Change of Address. Borrower
and Parent will promptly notify each Lender in writing, stating that such notice
is being given pursuant to this Agreement, of:
(a) the occurrence of any Material Adverse Change,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any Restricted Debt owed by any
Restricted Person or of any default by any Restricted Person under any
indenture, mortgage, agreement, contract or other instrument to which any of
them is a party or by which any of them or any of their properties is bound, if
such acceleration or default could cause Material Adverse Change,
(d) the occurrence of any Termination Event,
(e) any claim of $50,000 or more, any notice of potential liability
under any Environmental Laws which might exceed such amount, or any other
material adverse claim asserted against any Restricted Person or with respect to
any Restricted Person's properties, and
(f) the filing of any suit or proceeding against any Restricted Person
in which an adverse decision could cause a Material Adverse Change.
Upon the occurrence of any of the foregoing Restricted Persons will
take all necessary or appropriate steps to remedy promptly any such Material
Adverse Change, Default, acceleration, default or Termination Event, to protect
against any such adverse claim, to defend any such suit or proceeding, and to
resolve all controversies on account of any of the foregoing. Borrower will also
notify Agent and Agent's counsel in writing at least twenty Business Days prior
to the date that any Restricted Person changes its name or the location of its
chief executive office or principal place of business or the place where it
keeps its books and records concerning the Collateral, furnishing with such
notice any necessary financing statement amendments or requesting Agent and its
counsel to prepare the same.
Section 6.5. Maintenance of Properties. Each Restricted Person will
maintain, preserve, protect, and keep all Collateral and all other property used
or useful in the conduct of its business in good condition and in compliance
with all applicable Laws, and will from time to time make all repairs, renewals
and replacements needed to enable the business and operations carried on in
connection therewith to be conducted at all times consistent with prudent
industry practices.
Section 6.6. Maintenance of Existence and Qualifications. Each
Restricted Person will maintain and preserve its existence and its rights and
franchises in full force and effect and will qualify to do business in all
states or jurisdictions (a) where Collateral is located and (b) where required
by applicable Law, except where the failure so to qualify will not cause a
Material Adverse Change.
Section 6.7. Payment of Taxes, etc. Each Restricted Person will (a)
timely file all required tax returns; (b) timely pay all taxes, assessments, and
other governmental charges or levies imposed upon it or upon its income, profits
or property; (c) within 90 days past the original invoice or billing date
thereof, or, if earlier, when due in accordance with its terms, pay
42
and discharge all Debt owed by it on ordinary trade terms to vendors, suppliers
and other Persons providing goods and services used by it in the ordinary course
of its business; (d) pay and discharge when due all other Debt now or hereafter
owed by it; and (e) maintain appropriate accruals and reserves for all of the
foregoing in accordance with GAAP. Each Restricted Person may, however, delay
paying or discharging any of the foregoing so long as it is in good faith
contesting the validity thereof by appropriate proceedings and has set aside on
its books adequate reserves therefor.
Section 6.8. Bonding and Insurance: The Restricted Persons will
maintain all bonds and letters of credit in lieu of bonds which they are
required to maintain (by law, lease terms, or consistent with prudent industry
practices) in order to carry out development and production operations on, the
Properties. Each Restricted Person will keep or cause to be kept adequately
insured by financially sound and reputable insurers its and its Subsidiaries'
vehicles and all other property in accordance with Schedule 3. Any insurance
policies covering Collateral shall be endorsed (a) to provide for payment of
losses to Agent, on behalf of Lenders, as their interests may appear, pursuant
to a mortgage clause (without contribution) of standard form made part of the
applicable policy, (b) to provide that such policies may not be canceled,
reduced or adversely affected in any manner for any reason without fifteen days
prior notice to Agent, (c) to provide for any other matters specified in any
applicable Security Document or which Agent may reasonably require; and (d) to
provide for insurance against fire, casualty and any other hazards normally
insured against, in the amount of the full value (less a reasonable deductible
not to exceed amounts customary in the industry for similarly situated
businesses and properties) of the property insured. (To the extent-that the
Mortgages or any other Security Document contains other additional requirements
for such endorsement, each Restricted Person shall also comply with such
additional requirements.) Each Restricted Person shall at all times maintain
adequate insurance against its liability for injury to persons or property,
which insurance shall be by financially sound and reputable insurers and shall
without limitation provide the following coverages: comprehensive general
liability (including coverage for damage to underground resources and equipment,
damage caused by blowouts or cratering, damage caused by explosion, damage to
underground minerals or resources caused by saline substances, broad form
property damage coverage, broad form coverage for contractually assumed
liabilities and broad form coverage for acts of independent contractors),
worker's compensation and automobile liability. Each Restricted Person shall at
all times maintain cost of control of well insurance with respect to all ▇▇▇▇▇
being drilled or deepened, which shall insure against the following costs: cost
of control of well; fires, blowouts, etc.; redrilling expense; and seepage and
pollution expense.
Section 6.9. Performance on Borrower's Behalf. If any Restricted Person
fails to pay any taxes, insurance premiums, expenses, attorneys' fees or other
amounts it is required to pay under any Loan Document, Agent may pay the same.
Borrower shall immediately reimburse Agent for any such payments and each amount
paid by Agent shall constitute an Obligation owed hereunder which is due and
payable on the date such amount is paid by Agent.
Section 6.10. Interest. Borrower hereby promises to each Lender Party
to pay interest at the Default Rate applicable to Base Rate Loans on all
Obligations (excluding Loans bearing interest at the Adjusted Eurodollar Rate
but including Obligations to pay fees or to reimburse or indemnify any Lender)
which Borrower has in this Agreement promised to pay to such Lender
43
Party and which are not paid when due. Such interest shall accrue from the date
such Obligations become due until they are paid.
Section 6.11. Compliance with Agreements and Law. Each Restricted
Person will perform all material obligations it is required to perform under the
terms of each indenture, mortgage, deed of trust, security agreement, lease,
franchise, agreement, contract or other instrument or obligation to which it is
a party or by which it or any of its properties is bound. Each Restricted Person
will conduct its business and affairs in compliance with all Laws applicable
thereto.
Section 6.12. Environmental Matters: Environmental Reviews.
(a) Each Restricted Person will comply in all material respects with
all Environmental Laws now or hereafter applicable to such Restricted Person and
shall obtain, at or prior to the time required by applicable Environmental Laws,
all environmental, health and safety permits, licenses and other authorizations
necessary for its operations and will maintain such authorizations in full force
and effect.
(b) Borrower will promptly furnish to Agent all written notices of
violation, orders, claims, citations, complaints, penalty assessments, suits or
other proceedings received by Borrower, or of which it has notice, pending or
threatened against Borrower, by any governmental authority with respect to any
alleged violation of or non-compliance with any Environmental Laws or any
permits, licenses or authorizations in connection with its ownership or use of
its properties or the operation of its business.
(c) Borrower will promptly furnish to Agent all requests for
information, notices of claim, demand letters, and other notifications, received
by Borrower in connection with its ownership or use of its properties or the
conduct of its business, relating to potential responsibility with respect to
any investigation or clean-up of Hazardous Material at any location.
Section 6.13. Evidence of Compliance. Each Restricted Person will
furnish to each Lender at such Restricted Person's or Borrower's expense all
evidence which Agent from time to time reasonably requests in writing as to the
accuracy and validity of or compliance with all representations, warranties and
covenants made by any Restricted Person in the Loan Documents, the satisfaction
of all conditions contained therein, and all other matters pertaining thereto.
Section 6.14. Agreement to Deliver Security Documents. Parent and
Borrower agree to have any Subsidiary formed after the date hereof execute a
Guaranty for the benefit of the Lenders in form substantially similar to the
Parent Guaranty. In addition, Parent and Borrower each agree to deliver and to
cause each other Restricted Person to deliver, to further secure the Obligations
whenever requested by Agent in its sole and absolute discretion, deeds of trust,
mortgages, chattel mortgages, security agreements, financing statements and
other Security Documents in form and substance satisfactory to Agent for the
purpose of granting, confirming, and perfecting first and prior liens or
security interests in any real or personal property now owned or hereafter
acquired by any Restricted Person. Furthermore, Parent and Borrower each
44
agree to deliver and to cause each other Restricted Person to deliver whenever
requested by Agent in its sole and absolute discretion, an intercompany
subordination agreement in form and substance satisfactory to Agent. Borrower
also agrees to deliver, whenever requested by Agent in its sole and absolute
discretion, favorable title opinions from legal counsel acceptable to Agent with
respect to any Restricted Person's properties and interests designated by Agent,
based upon abstract or record examinations to dates acceptable to Agent and (a)
stating that such Restricted Person has good and defensible title to such
properties and interests, free and clear of all Liens other than Permitted
Liens, (b) confirming that such properties and interests are subject to Security
Documents securing the Obligations that constitute and create legal, valid and
duly perfected first deed of trust or mortgage liens in such properties and
interests and first priority assignments of and security interests in the oil
and gas attributable to such properties and interests and the proceeds thereof,
and (c) covering such other matters as Agent may request.
Section 6.15. Perfection and Protection of Security Interests and
Liens. Borrower and Parent will from time to time deliver, and will cause each
other Restricted Person from time to time to deliver, to Agent any financing
statements, continuation statements, extension agreements and other documents,
properly completed and executed (and acknowledged when required) by Restricted
Persons in form and substance satisfactory to Agent, which Agent requests for
the purpose of perfecting, confirming, or protecting any Liens or other rights
in Collateral securing any Obligations.
Section 6.16. Bank Accounts; Offset. To secure the repayment of the
Obligations Borrower and Parent each hereby grant to each Lender a security
interest, a lien, and a right of offset, each of which shall be in addition to
all other interests, liens, and rights of any Lender at common Law, under the
Loan Documents, or otherwise, and each of which shall be upon and against (a)
any and all moneys, securities or other property (and the proceeds therefrom) of
Borrower or Parent now or hereafter held or received by or in transit to any
Lender from or for the account of Borrower or Parent, whether for safekeeping,
custody, pledge, transmission, collection or otherwise, (b) any and all deposits
(general or special, time or demand, provisional or final) of Borrower or Parent
with any Lender, and (c) any other credits and claims of Borrower or Parent at
any time existing against any Lender, including claims under certificates of
deposit. At any time and from time to time after the occurrence of any Default,
each Lender is hereby authorized to foreclose upon, or to offset against the
Obligations then due and payable (in either case without notice to Borrower or
Parent), any and all items hereinabove referred to. The remedies of foreclosure
and offset are separate and cumulative, and either may be exercised
independently of the other without regard to procedures or restrictions
applicable to the other.
Section 6.17. Guaranties of Parent's Subsidiaries. Each Subsidiary of
Parent now existing or created, acquired or coming into existence after the date
hereof shall, promptly upon request by Agent, execute and deliver to Agent an
absolute and unconditional guaranty of the timely repayment of the Obligations
and the due and punctual performance of the obligations of Parent hereunder,
which guaranty shall be satisfactory to Agent in form and substance. Each.
Subsidiary of Parent existing on the date hereof shall duly execute and deliver
such a guaranty prior to the making of any Loan hereunder. Parent will cause
each of its Subsidiaries to deliver to Agent, simultaneously with its delivery
of such a guaranty, written evidence satisfactory to Agent and its counsel that
such Subsidiary has taken all corporate or partnership action necessary to duly
45
approve and authorize its execution, delivery and performance of such guaranty
and any other documents which it is required to execute.
Section 6.18. Production Proceeds. Notwithstanding that, by the terms
of the various Security Documents, Restricted Persons are and will be assigning
to Agent and Lenders all of the "Production Proceeds" (as defined therein)
accruing to the property covered thereby, so long as no Default has occurred
Restricted Persons may continue to receive from the purchasers of production all
such Production Proceeds, subject, however, to the Liens created under the
Security Documents, which Liens are hereby affirmed and ratified. Upon the
occurrence of a Default, Agent and Lenders may exercise all rights and remedies
granted under the Security Documents, including the right to obtain possession
of all Production Proceeds then held by Restricted Persons or to receive
directly from the purchasers of production all other Production Proceeds,
subject to the rights of the Farmee (as such term is defined in the Farmout
Agreement) with respect to proceeds of production from Earned ▇▇▇▇▇ (as such
term is defined in the Farmout Agreement) under the Farmout Agreement. In no
case shall any failure, whether proposed or inadvertent, by Agent or Lenders to
collect directly any such Production Proceeds constitute in any way a waiver,
remission or release of any of their rights under the Security Documents, nor
shall any release of any Production Proceeds by Agent or Lenders to Restricted
Persons constitute a waiver, remission, or release of any other Production
Proceeds or of any rights of Agent or Lenders to collect other Production
Proceeds thereafter.
Section 6.19. Completion of Activities. Borrower will (1) timely
develop the Properties in accordance with Borrower's business plan, and (2)
except to the extent regulatory approval has not yet been obtained, have each
producing and injection well which is hereafter completed put. into normal
operation. Borrower will make capital expenditures for the drilling and
development of the Properties in accordance with Borrower's business plan.
Section 6.20. Reviews. Borrower will meet with Agent from time to time
as reasonably requested by Agent or Required Lenders, at the offices of Agent or
at such other location as Agent and Borrower may agree, to review all
operational activities of Borrower with respect to the Eligible Mortgaged
Properties and all financial reports of the Restricted Persons since the date of
the prior review. Each review shall be in scope satisfactory to Agent, but will
include at a minimum, an update by Borrower on the development activities made
pursuant to Borrower's business plan, any requests by Borrower that changes be
made to Borrower's business plan, any cost or expense overruns or underruns, any
mechanical problems incurred, and any differences in reserves or production
estimates.
Section 6.21. Hedging Contracts. Borrower shall have entered into and
at all times shall maintain Hedging Contracts which comply with Section 7.3 and
have the purpose and effect of fixing prices on the aggregate monthly production
equal to or greater than fifty percent (50%) of Borrower's aggregate Projected
Oil and Gas Production through September 30, 2003. Commencing October 1, 2003,
Borrower shall enter into and at all times thereafter shall maintain Hedging
Contracts relating to Projected Oil and Gas Production as agreed upon with
Agent.
ARTICLE VII - Negative Covenants of Borrower and Parent
46
To conform with the terms and conditions under which each Lender is
willing to have credit outstanding to Borrower, and to induce each Lender to
enter into this Agreement and extend credit hereunder, Parent and Borrower each
warrant, covenant and agree that until the full and final payment of the
Obligations and the termination of this Agreement, unless Required Lenders have
previously agreed otherwise:
Section 7.1. Restricted Debt. No Restricted Person will in any manner
owe or be liable for Restricted Debt except:
(a) the Obligations.
(b) Hedging transactions permitted under Section 7.3.
(c) any Restricted Debt assumed or incurred by any Restricted Person
after the date hereof to finance all or any part of the purchase price of
property acquired by such Restricted Person, provided that:
(i) such Restricted Debt shall be secured only by the property
so acquired and the improvements thereon,
(ii) each Lien securing such Restricted Debt shall attach or
be existing at the time of acquisition,
(iii) only the Restricted Person that acquired such property
shall be liable on such Restricted Debt,
(iv) the principal amount of such Restricted Debt in respect
of such. property shall not exceed the lower of the acquisition price
of or market value of the property at the time of acquisition thereof
by such Restricted Person,
(v) the aggregate outstanding principal amount of such
Restricted Debt of the Restricted Persons incurred for the purchase of
trucks or automobiles does not at any time exceed $250,000, and the
aggregate principal amount of such Restricted Debt which is incurred
for such purpose in any Fiscal Year does not exceed $100,000, and
(vi) the aggregate outstanding principal amount of such
Restricted Debt of the Restricted Persons incurred for purposes other
than the purchase of trucks or automobiles, does not at any time exceed
$200,000, and the aggregate principal amount of such Restricted Debt
which is incurred for such other purposes in any Fiscal Year does not
exceed $50,000.
(d) the Restricted Debt described in Section 7.1 of the Disclosure
Schedule.
(e) Debt issued pursuant to the Subordinated Debt Documents.
(f) unsecured intercompany Debt among Parent and Borrower.
47
(g) miscellaneous items of Restricted Debt not described in subsections
(a) through (f) which do not in the aggregate (taking into account all such
Restricted Debt of all Restricted Persons) exceed $150,000 at any one time
outstanding.
Section 7.2. Limitation on Liens. No Restricted Person will create,
assume or permit to exist any Lien upon any of the properties or assets which it
now owns or hereafter acquires, except, to the extent not otherwise forbidden by
the Security Documents the following ("Permitted Liens").
(a) Liens which secure Obligations only.
(b) Liens securing the Restricted Debt permitted by Section 7.1 (c) and
Liens described in Section 7.1 of the Disclosure Schedule securing Restricted
Debt permitted by Section 7.1(d).
(c) Liens described on Schedule 5.
(d) Excepted Liens.
Section 7.3. Hedging Contracts. No Restricted Person will be a party to
or in any manner be liable on any Hedging Contract except:
(a) contracts entered into with the purpose and effect of fixing prices
on oil or gas expected to be produced by Borrower, provided that at all times:
(i) no such contract fixes a price for a term of more than thirty six (36)
months; (ii) the aggregate monthly production covered by all such contracts
(determined, in the case of contracts that are not settled on a monthly basis,
by a monthly proration acceptable to Agent) for any single month shall not in
the aggregate exceed eighty percent (80%) at any time of Borrower's aggregate
Projected Oil and Gas Production anticipated to be sold in the ordinary course
of Restricted Persons' businesses for such month, (iii) no such contract
requires any Restricted Person to put up money, assets, letters of credit or
other security against the event of its nonperformance prior to actual default
by such Restricted Person in performing its obligations thereunder, and (iv)
each such contract is with a counterparty or has a guarantor of the obligation
of the counterparty who (unless such counterparty is a Lender or one of its
Affiliates) at the time the contract is rated at least BBB- by S & P or Baa3 by
▇▇▇▇▇'▇. As used in this subsection, the term "Projected Oil and Gas Production"
means the projected production of oil or gas (measured by volume unit or BTU
equivalent, not sales price) for the term of the contracts or a particular
month, as applicable, from properties and interests owned by any Restricted
Person which are located in or offshore of the United States and which have
attributable to them proved oil or gas reserves, as such production is projected
in the most recent report delivered pursuant to Section 6.2(d), after deducting
projected production from any properties or interests sold or under contract for
sale that had been included in such report and after adding projected production
from any properties or interests that had not been reflected in such report but
that are reflected in a separate or supplemental reports meeting the
requirements of such Section 6.2(d) above and otherwise are satisfactory to
Agent; and
(b) contracts entered into by a Restricted Person with the purpose and
effect of fixing interest rates on a principal amount of indebtedness of such
Restricted Person that is accruing
48
interest at a variable rate, provided that (i) the aggregate notional amount of
such contracts never exceeds eighty percent (80%) of the anticipated outstanding
principal balance of the indebtedness to be hedged by such contracts or an
average of such principal balances calculated using a generally accepted method
of matching interest swap contracts to declining principal balances, (ii) the
floating rate index of each such contract generally matches the index used to
determine the floating rates of interest on the corresponding indebtedness to be
hedged by such contract and (iii) each such contract is with a counterparty or
have a guarantor of the obligation of the counterparty who (unless such
counterparty is a Lender or one of its Affiliates) at. the time the contract is
made is rated at least BBB- by S & P or Baa3 by ▇▇▇▇▇'▇.
Section 7.4. No Mergers. No Restricted Person will merge or consolidate
with or into any other business entity. No Restricted Person will issue any
additional shares of its capital stock or other securities or any options,
warrants or other rights to acquire such additional shares or other securities
except to Parent or another wholly-owned Subsidiary of Parent; provided, however
that Parent may issue such additional shares or other securities (other than
securities constituting Debt) so long as eighty percent (80%) of the net
proceeds of any such issuance are applied immediately upon receipt thereof by
Parent to the prepayment of the Loans in the manner provided for under Section
2.7. No Subsidiary of Parent which is a partnership will allow any diminution of
Parent's interest (direct or indirect) therein. No Restricted Person shall
create or own any Subsidiary other than those listed in the Disclosure Schedule.
Section 7.5. Limitation on Sales of Property. No Restricted Person will
sell, transfer, lease, exchange, alienate or dispose of any of its material
assets or properties or any material interest therein except, to the extent not
otherwise forbidden under the Security Documents:
(a) equipment which is worthless or obsolete or not used or usable
which is replaced by equipment of equal suitability and value.
(b) personal property inventory (including oil and gas sold as produced
and seismic data) which is sold in the ordinary course of business on ordinary
trade terms.
(c) specific properties not subject to the Mortgages (or specific
portions thereof), provided the same are abandoned and not otherwise disposed of
and further provided that no well situated on the property to be abandoned, or
located on any unit containing all or any part thereof, is capable (or is
subject to being made capable through commercially feasible operations) of
producing oil, gas or other hydrocarbons or minerals in paying quantities (with
such determination of paying quantities being made taking into account the
prudent operation of any unit in which such property is located).
(d) farmouts on terms and conditions reasonably acceptable to Required
Lenders.
Neither Parent nor any of Parent's Subsidiaries will sell, transfer or
otherwise dispose of capital stock of any of Parent's Subsidiaries except that
any Subsidiary of Parent may sell or issue its own capital stock to the extent
not otherwise prohibited hereunder. No Restricted Person will discount, sell,
pledge or assign any notes payable to it, accounts receivable or future income
except to the extent expressly permitted under the Loan Documents.
49
Section 7.6. Limitation on Dividends and Redemptions. No Restricted
Person will make any Distribution in respect of any class of its capital stock
or any partnership or other interest in it, nor will any Restricted Person
directly or indirectly make any Distribution in respect of any shares of the
capital stock of or partnership interests in any Restricted Person (whether such
interests are now or hereafter issued, outstanding or created), or cause or
permit any reduction or retirement of the capital stock of any Restricted
Person. Borrower shall not issue any capital stock other than common stock.
Section 7.7. Limitation on Investments. No Restricted Person will make
any Investment other than (a) Permitted Investments, (b) Investments in oil and
gas properties, (c) Investments of Parent in Borrower from time to time, (d)
normal and prudent extensions of credit to customers buying goods and services
in the ordinary course of business, which extensions shall not be for longer
periods than those extended by similar businesses operated in a normal and
prudent manner, (e) Hedging Obligations permitted under Section 7.3, and (f)
endorsements of negotiable instruments in the ordinary course of business.
Section 7.8. Transactions with Affiliates. No Restricted Person will
engage in any material transaction with any of its Affiliates other than (i) for
customary director compensation paid to such Affiliates, (ii) for issuances of
equity to Affiliates for fair value, provided that such issuances are permitted
by Section 7.6, (iii) transactions between Borrower or any Guarantor and any
Affiliate, the terms of which are no less favorable than those which would have
been obtainable at the time in arm's-length dealings with Persons other than an
Affiliate, and (iv) the Farmout Agreement.
Section 7.9. Certain Contracts Amendments Multiemployer ERISA Plans.
Except as expressly provided for in the Loan Documents, no Restricted Person
will, directly or indirectly, enter into, create, or otherwise allow to exist
any contract or other consensual restriction on the ability of any Subsidiary of
Borrower to: (i) make Distributions to Borrower, (ii) to redeem equity interests
held in it by Borrower, (iii) to repay loans and other indebtedness owing by it
to Borrower, or (iv) to transfer any of its assets to Borrower. No Restricted
Person will enter into any "take-or-pay" contract or other contract or
arrangement for the purchase of goods or services which obligates it to pay for
such goods or service regardless of whether they are delivered or furnished to
it. No Restricted Person will amend or permit any amendment to any contract or
lease which releases, qualifies, limits, makes contingent or otherwise
detrimentally affects the rights and benefits of any Lender under or acquired
pursuant to any Security Documents. No ERISA Affiliate will incur any obligation
to contribute to any "multiemployer plan" as defined in Section 4001 of ERISA.
Section 7.10. Current Ratio. The ratio of Parent's Consolidated Current
Assets to Parent's Consolidated Current Liabilities will never be less than 1.0
to 1.0. For purposes of this Section 7.10, Consolidated Current Assets and
Consolidated Current Liabilities shall be determined in accordance with GAAP,
except that (a) Consolidated Current Assets and Consolidated Current Liabilities
will be calculated without including any amounts resulting from the application
of FASB Statement 133, (b) Consolidated Current Liabilities will be calculated
without including any amounts relating to the Subordinated Debt, and (c) the
unused portion of the commitment under this Agreement shall be treated as a
Consolidated Current Asset.
50
Section 7.11. Tangible Net Worth. Parent's Consolidated Tangible Net
Worth will never be less than the sum of (a) $70,000,000, plus (b) fifty percent
(50%) of Consolidated Net Income reported for each Fiscal Quarter of Parent in
which Consolidated Net Income is a positive amount commencing with the fiscal
quarter beginning March 31, 2001, plus (c) seventy-five percent (75%) of each
increase in Consolidated Tangible Net Worth from the issuance of equity
beginning after the date of this Agreement.
Section 7.12. EBITDA. At the end of any Fiscal Quarter, beginning with
the Fiscal Quarter ending September 30, 2001, the ratio of (i) Parent's EBITDA
to (ii) required cash interest payments on Parent's Consolidated Debt, for the
four-Fiscal Quarter period ending with such Fiscal Quarter will not be less than
(a) 2.50 to 1.0 for the Fiscal Quarter ending on September 30, 2001, and (b) 3.0
to 1.0 for any Fiscal Quarter thereafter.
Section 7.13. Debt to EBITDA Ratio. At the end of any Fiscal Quarter,
beginning with the Fiscal Quarter ending September 30, 2001, the ratio of (i)
Parent's Consolidated Senior Debt to (ii) Parent's EBITDA, for the four-Fiscal
Quarter period ending with such Fiscal Quarter will be equal to or less than (a)
4.1 to 1.00 for the Fiscal Quarters ending September 30, 2001, and December 31,
2001, and (b) 3.75 to 1.00 for any Fiscal Quarter ending thereafter.
Section 7.14. Farmout Transactions. Parent (i) shall not amend or
modify the Farmout Agreement and (ii) will give prompt notice to Agent of any
breach by any Restricted Person or by Farmee (as such term is defined in the
Farmout Agreement) under the Farmout Agreement.
ARTICLE VIII - Events of Default and Remedies
Section 8.1. Events of Default. Each of the following events
constitutes an Event of Default under this Agreement:
(a) Any Restricted Person fails to pay the principal component of any
Obligation when due and payable, whether at a date for the payment of a fixed
installment or as a contingent or other payment becomes due and payable or as a
result of acceleration or otherwise, and such failure is not remedied in full
within one (1) Business Day thereafter;
(b) Any Restricted Person fails to pay any Obligation (other than the
Obligations in Section (a) above) when due and payable, whether at a date for
the payment of a fixed installment or as a contingent or other payment becomes
due and payable or as a result of acceleration or otherwise, within one (1)
Business Day after the same becomes due in the case of interest or fifteen (15)
days thereafter in the case of any other Obligation;
(c) Any "default" or "event of default" occurs under any Loan Document
which defines either such term, and the same is not remedied within the
applicable period of grace (if any) provided in such Loan Document;
(d) Any Restricted Person fails to duly observe, perform or comply with
any covenant, agreement or provision of Section 6.4 or Article VII;
(e) Any Restricted Person fails (other than as referred to in
subsections (a), (b), (c) or (d) above) to duly observe, perform or comply with
any covenant, agreement, condition or
51
provision of any Loan Document, and such failure remains unremedied for a period
of thirty (30) days after notice of such failure is given by Agent to Borrower;
(f) Any representation or warranty previously, presently or hereafter
made in writing by or on behalf of any Restricted Person in connection with any
Loan Document shall prove to have been false or incorrect in any material
respect on any date on or as of which made, or any Loan Document at any time
ceases to be valid, binding and enforceable as warranted in Section 5.5 for any
reason other than its release or subordination by Agent;
(g) Any Restricted Person fails to duly observe, perform or comply with
any agreement with any Person or any term or condition of any instrument, if
such agreement or instrument is materially significant to Borrower or to Parent
and its Subsidiaries on a Consolidated basis or materially significant to any
Guarantor, and such failure is not remedied within the applicable period of
grace (if any) provided in such agreement or instrument;
(h) Any Restricted Person (i) fails to pay any portion, when such
portion is due, of any of its Restricted Debt in excess of $100,000 (other than
the Obligations and Debt described in Section 6.7 which is not required to be
paid so long as the Restricted Person is in good faith contesting the validity
thereof by appropriate proceedings), or (ii) breaches or defaults in the
performance of any agreement or instrument by which any such Restricted Debt is
issued, evidenced, governed, or secured, and any such failure, breach or default
continues beyond any applicable period of grace provided therefor;
(i) Either (i) any "accumulated funding deficiency" (as defined in
Section 412(a) of the Internal Revenue Code) in excess of $100,000 exists with
respect to any ERISA Plan, whether or not waived by the Secretary of the
Treasury or his delegate, or (ii) any Termination Event occurs with respect to
any ERISA Plan and the then current value of such ERISA Plan's benefit
liabilities exceeds the then current value of such ERISA Plan's assets available
for the payment of such benefit liabilities by more than $100,000 (or in the
case of a Termination Event involving the withdrawal of a substantial employer,
the withdrawing employer's proportionate share of such excess exceeds such
amount);
(j) Any Restricted Person:
(i) suffers the entry against it of a judgment, decree or
order for relief by a Tribunal of competent jurisdiction in an
involuntary proceeding commenced under any applicable bankruptcy,
insolvency or other similar Law of any jurisdiction now or hereafter in
effect, including the federal Bankruptcy Code, as from time to time
amended, or has any such proceeding commenced against it which remains
undismissed for a period of sixty days; or
(ii) commences a voluntary case under any applicable
bankruptcy, insolvency or similar Law now or hereafter in effect,
including the federal Bankruptcy Code, as from time to time amended; or
applies for or consents to the entry of an order for relief in an
involuntary case under any such Law; or makes a general assignment for
the benefit of creditors; or fails generally to pay (or admits in
writing its inability to pay) its debts as
52
such debts become due; or takes corporate or other action to authorize
any of the foregoing; or
(iii) suffers the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of all or a substantial part of its assets or of any
part of the Collateral in a proceeding brought against or initiated by
it, and such appointment or taking possession is neither made
ineffective nor discharged within thirty days after the making thereof,
or such appointment or taking possession is at any time consented to,
requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for the
payment of money in excess of $100,000 (not covered by insurance
satisfactory to Agent in its discretion), unless the same is discharged
within thirty days after the date of entry thereof or an appeal or
appropriate proceeding for review thereof is taken within such period
and a stay of execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or any similar
process to be issued by any Tribunal against all or any substantial
part of its assets or any part of the Collateral, and such writ or
warrant of attachment or any similar process is not stayed or released
within thirty days after the entry or levy thereof or after any stay is
vacated or set aside; or
(k) Any Change of Control occurs; or
(l) Parent or Borrower shall default in their obligations under the
Subordination Agreement dated as of August 2, 2001 with the Agent and the
Subordinated Lenders as defined therein.
Section 8.2. Acceleration. Upon the occurrence of an Event of Default
described in subsection (j)(i), (j)(ii) or (j)(iii) of this section with respect
to Borrower, all of the Obligations shall thereupon be immediately due and
payable, without demand, presentment, notice of demand or of dishonor and
nonpayment, protest, notice of protest, notice of intention to accelerate,
declaration or notice of acceleration, or any other notice or declaration of any
kind, all of which are hereby expressly waived by Borrower and each Restricted
Person who at any time ratifies or approves this Agreement. Upon any such
acceleration, any obligation of any Lender and any obligation of LC Issuer to
issue Letters of Credit hereunder to make any further Loans shall be permanently
terminated. During the continuance of any other Event of Default, Agent at any
time and from time to time may (and upon written instructions from Required
Lenders, Agent shall), without notice to Borrower or any other Restricted
Person, do either or both of the following: (1) terminate any obligation of
Lenders to make Loans hereunder and any obligation of LC Issuer to issue Letters
of Credit hereunder, and (2) declare any or all of the Obligations immediately
due and payable, and all such Obligations shall thereupon be immediately due and
payable, without demand, presentment, notice of demand or of dishonor and
nonpayment, protest, notice of protest, notice of intention to accelerate,
declaration or notice of acceleration, or any other notice or declaration of any
kind, all of which are hereby expressly waived by Borrower and each Restricted
Person who at any time RATIFIES or approves this Agreement.
53
Section 8.3. Remedies. If any Default shall occur and be continuing,
each Lender Party may protect and enforce its rights under the Loan Documents by
any appropriate proceedings, including proceedings for specific performance of
any covenant or agreement contained in any Loan Document, and each Lender Party
may enforce the payment of any Obligations due it or enforce any other legal or
equitable right which it may have. All rights, remedies and powers conferred
upon Lender Parties under the Loan Documents shall be deemed cumulative and not
exclusive of any other rights, remedies or powers available under the Loan
Documents or at Law or in equity.
ARTICLE IX - Agent
Section 9.1. Appointment and Authority. Each Lender Party hereby
irrevocably authorizes Agent, and Agent hereby undertakes, to receive payments
of principal, interest and other amounts due hereunder as specified herein and
to take all other actions and to exercise such powers under the Loan Documents
as are specifically delegated to Agent by the terms hereof or thereof, together
with all other powers reasonably incidental thereto. The relationship of Agent
to the other Lender Parties is only that of one commercial lender acting as
administrative agent for others, and nothing in the Loan Documents shall be
construed to Constitute Agent a trustee or other fiduciary for any Lender Party
or any holder of any of the Notes or of any participation therein nor to impose
on Agent duties and obligations other than those expressly provided for in the
Loan Documents. With respect to any matters not expressly provided for in the
Loan Documents and any matters which the Loan Documents place within the
discretion of Agent, Agent shall not be required to exercise any discretion or
take any action, and it may request instructions from Lenders with respect to
any such matter, in which case it shall be required to act or to refrain from
acting (and shall be fully protected and free from liability to all Lender
Parties in so acting or refraining from acting) upon the instructions of
Required Lenders (including itself), provided, however, that Agent shall not be
required to take any action which exposes it to a risk of personal liability
that it considers unreasonable or which is contrary to the Loan Documents or to
applicable Law. Upon receipt by Agent from Borrower of any communication calling
for action on the part of Lenders or upon notice from any other Lender to Agent
of any Default or Event of Default, Agent shall promptly notify each other
Lender thereof.
Section 9.2. Exculpation, Agent's Reliance, Etc. Neither Agent nor any
of its directors, officers, agents, attorneys, or employees shall be liable for
any action taken or omitted to be taken by any of them under or in connection
with the Loan Documents, including their negligence of any kind, except that
each shall be liable for its own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, Agent (a) may treat the payee of any
Note as the holder thereof until Agent receives written notice of the assignment
or transfer thereof in accordance with this Agreement, signed by such payee and
in form satisfactory to Agent; (b) may consult with legal counsel (including
counsel for Borrower), independent public accountants and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants or
experts; (c) makes no warranty or representation to any other Lender and shall
not be responsible to any other Lender Party for any statements, warranties or
representations made in or in connection with the Loan Documents; (d) shall not
have any duty. to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of the Loan Documents on the part of
any Restricted Person or to inspect the property (including the books
54
and records) of any Restricted Person; (e) shall not be responsible to any other
Lender for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of any Loan Document or any instrument or document
furnished in connection therewith; (f) may rely upon the representations and
warranties of each Restricted Person or Lender Party in exercising its powers
hereunder; and (g) shall incur no liability under or in respect of the Loan
Documents by acting upon any notice, consent, certificate or other instrument or
writing (including any telecopy, telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper Person or Persons.
Section 9.3. Credit Decisions. Each Lender Party acknowledges that it
has, independently and without reliance upon any other Lender Party, made its
own analysis of Borrower and the transactions contemplated hereby and its own
independent decision to enter into this Agreement and the other Loan Documents.
Each Lender Party also acknowledges that it will, independently and without
reliance upon any other Lender Party and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Loan Documents.
Section 9.4. Indemnification. Each Lender agrees to indemnify Agent (to
the extent not reimbursed by Borrower within ten (10) days after demand) from
and against such Lender's Percentage Share of any and all liabilities,
obligations, claims, losses, damages, penalties, fines, actions, judgments,
suits, settlements, costs, expenses or disbursements (including reasonable fees
of attorneys, accountants, experts and advisors) of any kind or nature
whatsoever (in this section collectively called "liabilities and costs") which
to any extent (in whole or in part) may be imposed on, incurred by, or asserted
against Agent growing out of, resulting from or in any other way associated with
any of the Collateral, the Loan Documents and the transactions and events
(including the enforcement thereof) at any time associated therewith or
contemplated therein (including any violation or noncompliance with any
Environmental Laws by any Person or any liabilities or duties of any Person with
respect to Hazardous Materials found in or released into the environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY AGENT, provided only that no Lender
shall be obligated under this section to indemnify Agent for that portion, if
any, of any liabilities and costs which is proximately caused by Agent's own
individual gross negligence or willful misconduct, as determined in a final
judgment. Cumulative of the foregoing, each Lender agrees to reimburse Agent
promptly upon demand for such Lender's Percentage Share.-of any costs and
expenses to be paid to Agent by Borrower under Section 10.4(a) to the extent
that Agent is not timely reimbursed for such expenses by Borrower as provided in
such section. As used in this section the term "Agent" shall refer not only to
the w Person designated as such in Section 1.1 but also to each director,
officer, agent, attorney, employee, representative and Affiliate of such Person.
Section 9.5. Rights as Lender. In its capacity as a Lender, Agent shall
have the same rights and obligations as any Lender and may exercise such rights
as though it were not Agent. Agent may accept deposits from, lend money to, act
as trustee under indentures of, and generally
55
engage in any kind of business with any Restricted Person or their Affiliates,
all as if it were not Agent hereunder and without any duty to account therefor
to any other Lender.
Section 9.6. Sharing of Set-Offs and Other Payments. Each Lender Party
agrees that if it shall, whether through the exercise of rights under Security
Documents or rights of banker's lien, set off, or counterclaim against Borrower
or otherwise, obtain payment of a portion of the aggregate Obligations owed to
it which, taking into account all distributions made by Agent under Section 3.1,
causes such Lender Party to have received more than it would have received had
such payment been received by Agent and distributed pursuant to Section 3.1,
then (a) it shall be deemed to have simultaneously purchased and shall be
obligated to purchase interests in the Obligations as necessary to cause all
Lender Parties to share all payments as provided for in Section 3.1, and (b)
such other adjustments shall be made from time to time as shall be equitable to
ensure that Agent and all Lender Parties share all payments of Obligations as
provided in Section 3.1; provided, however, that nothing herein contained shall
in any way affect the right of any Lender Party to obtain payment (whether by
exercise of rights of banker's lien, set-off or counterclaim or otherwise) of
indebtedness other than the Obligations. Borrower expressly consents to the
foregoing arrangements and agrees that any holder of any such interest or other
participation in the Obligations, whether or not acquired pursuant to the
foregoing arrangements, may to the fullest extent permitted by Law exercise any
and all rights of banker's lien, set-off, or counterclaim as fully as if such
holder were a holder of the Obligations in the amount of such interest or other
participation. If all or any part of any funds transferred pursuant to this
section is thereafter recovered from the seller under this section which
received the same, the purchase provided for in this section shall be deemed to
have been rescinded to the extent of such recovery, together with interest, if
any, if interest is required pursuant to Tribunal order to be paid on account of
the possession of such funds prior to such recovery.
Section 9.7. Investments. Whenever Agent in good faith determines that
it is uncertain about how to distribute to Lender Parties any funds which it has
received, or whenever Agent in good faith determines that there is any dispute
among Lender Parties about how such funds should be distributed, Agent may
choose to defer distribution of the funds which are the subject of such
uncertainty or dispute. If Agent in good faith believes that the uncertainty or
dispute will not be promptly resolved, or if Agent is otherwise required to
invest funds pending distribution to Lender Parties, Agent shall invest such
funds pending distribution; all interest on any such Investment shall be
distributed upon the distribution of such Investment and in the same proportion
and to the same Persons as such Investment. All moneys received by Agent for
distribution to Lender Parties (other than to the Person who is Agent in its
separate capacity as a Lender Party) shall be held by Agent pending such
distribution solely as Agent for such Lender Parties, and Agent shall have no
equitable title to any portion thereof.
Section 9.8. Benefit of Article IX. The provisions of this Article
(other than the following Section 9.9) are intended solely for the benefit of
Lender Parties, and no Restricted Person shall be entitled to rely on any such
provision or assert any such provision in a claim or defense against any Lender.
Lender Parties may waive or amend such provisions as they desire without any
notice to or consent of Borrower or any Restricted Person.
Section 9.9. Resignation. Agent may resign at any time by giving
written notice thereof to Lenders and Borrower. Each such notice shall set forth
the date of such resignation. Upon any
56
such resignation, Required Lenders shall have the right to appoint a successor
Agent. A successor must be appointed for any retiring Agent, and such Agent's
resignation shall become effective when such successor accepts such appointment.
If, within thirty days after the date of the retiring Agent's resignation, no
successor Agent has been appointed and has accepted. such appointment, then the
retiring Agent may appoint a successor Agent, which shall be a commercial bank
organized or licensed to conduct a banking or trust business under the Laws of
the United States of America or of any state thereof. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, the retiring Agent shall be
discharged from its duties and obligations under this Agreement and the other
Loan Documents. After any retiring Agent's resignation hereunder the provisions
of this Article IX shall continue to inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under the Loan Documents.
ARTICLE X - Miscellaneous
Section 10.1. Waivers and Amendments; Acknowledgements.
(a) Waivers and Amendments. No failure or delay (whether by course of
conduct or otherwise) by any Lender in exercising any right, power or remedy
which such Lender Party may have under any of the Loan Documents shall operate
as a waiver thereof or of any other right, power or remedy, nor shall any single
or partial exercise by any Lender Party of any such right, power or remedy
preclude any other or further exercise thereof or of any other right, power or
remedy. No waiver of any provision of any Loan Document and no consent to any
departure therefrom shall ever be effective unless it is in writing and signed
as provided below in this section, and then such waiver or consent shall be
effective only in the specific instances and for the purposes for which given
and to the extent specified in such writing. No notice to or demand on any
Restricted Person shall in any case of itself entitle any Restricted Person to
any other or further notice or demand in similar or other circumstances. This
Agreement and the other Loan Documents set forth the entire understanding
between the parties hereto with respect to the transactions contemplated herein
and therein and supersede all prior discussions and understandings with respect
to the subject matter hereof and thereof, and no waiver, consent, release,
modification or amendment of or supplement to this Agreement or the other Loan
Documents shall be valid or effective against any party hereto unless the same
is in writing and signed by (i) if such party is Borrower, by Borrower, (ii) if
such party is Agent, by such party, and (iii) if such party is a Lender, by such
Lender or by Agent on behalf of Lenders with the written consent of Required
Lenders (which consent has already been given as to the termination of the Loan
Documents as provided in Section 10.9). Notwithstanding the foregoing or
anything to the contrary herein, Agent shall not, without the prior consent of
each individual Lender, execute and deliver on behalf of such Lender any waiver
or amendment which would: (1) waive any of the conditions specified in Article
IV (provided that Agent may in its discretion withdraw any request it has made
under Section 4.3(f)), (2) reduce any fees payable to such Lender hereunder, or
the principal of, or interest on, such Lender's Note, (3) postpone any date
fixed for any payment of any such fees, principal or interest, (4) amend the
definition herein of "Required Lenders" or otherwise change the aggregate amount
of Percentage Shares which is required for Agent, Lenders or any of them to take
any particular action under the Loan. Documents, (5) release Borrower from its
obligation to pay such Lender's Note or any Guarantor from its guaranty of such
payment.
57
(b) Acknowledgements and Admissions. Borrower hereby represents,
warrants, acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii) it has made an independent decision to enter into this Agreement and
the other Loan Documents to which it is a party, without reliance on any
representation, warranty, covenant or undertaking by Agent or any Lender,
whether written, oral or implicit, other than as expressly set out in this
Agreement or in another Loan Document delivered on or after the date hereof,
(iii) there are no representations, warranties, covenants, undertakings or
agreements by any Lender as to the Loan Documents except as expressly set out in
this Agreement or in another Loan Document delivered on or after the date
hereof, (iv) no Lender has any fiduciary obligation toward Borrower with
respect. to any Loan Document or the transactions contemplated thereby, (v) the
relationship pursuant to the Loan Documents between Borrower and the other
Restricted Persons, on one hand, and each Lender, on the other hand, is and
shall be solely that of debtor and creditor, respectively, (vi) no partnership
or joint venture exists with respect to the Loan Documents between any
Restricted Person and any Lender, (vii) Agent is not Borrower's Agent, but Agent
for Lenders, (viii) should an Event of Default or Default occur or exist, each
Lender will determine in its sole discretion and for its own reasons what
remedies and actions it will or will not exercise or take at that time, (ix)
without limiting any of the foregoing, Borrower is not relying upon any
representation or covenant by any Lender, or any representative thereof, and no
such representation or covenant has been made, that any Lender will, at the time
of an Event of Default or Default, or at any other time, waive, negotiate,
discuss, or take or refrain from taking any action permitted under the Loan
Documents with respect to any such Event of Default or Default or any other
provision of the Loan Documents, and (x) all Lenders have relied upon the
truthfulness of the acknowledgements in this section in deciding to execute and
deliver this Agreement and to become obligated hereunder.
(c) Representation by Lenders. Each Lender hereby represents that it
will acquire its Note for its own account in the ordinary course of its
commercial lending business; however, the disposition of such Lender's property
shall at all times be and remain within its control and, in particular and
without limitation, such Lender may sell or otherwise transfer its Note, any
participation interest or other interest in its Note, or any of its other rights
and obligations under the Loan Documents.
(d) JOINT ACKNOWLEDGMENT. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
Section 10.2. Survival of Agreements; Cumulative Nature. All of
Restricted Persons' various representations, warranties, covenants and
agreements in the Loan Documents shall survive the execution and delivery of
this Agreement and the other Loan Documents and the performance hereof and
thereof, including the making or granting of the Loans and the delivery of the
Notes and the other Loan Documents, and shall further survive until all of the
Obligations are paid in full to each Lender Party and all of Lender Parties'
obligations to Borrower are terminated. All statements and agreements contained
in any certificate or other instrument delivered by any Restricted Person to any
Lender Party under any Loan Document shall be deemed representations and
warranties by Borrower or agreements and covenants of Borrower
58
under this Agreement. The representations, warranties, indemnities, and
covenants made by Restricted Persons in the Loan Documents, and the rights,
powers, and privileges granted to Lender Parties in the Loan Documents, are
cumulative, and, except for expressly specified. waivers and consents, no Loan
Document shall be construed in the context of another to diminish, nullify, or
otherwise reduce the benefit to any Lender Party of any such representation,
warranty, indemnity, covenant, right, power or privilege. In particular and
without limitation, no exception set out in this Agreement to any
representation, warranty, indemnity, or covenant herein contained shall apply to
any similar representation, warranty, indemnity, or covenant contained in any
other Loan Document, and each such similar representation, warranty, indemnity,
or covenant shall be subject only to those exceptions which are expressly made
applicable to it by the terms of the various Loan Documents.
Section 10.3. Notices. All notices, requests, consents, demands and
other communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that Agent may give telephonic notices to the other Lender Parties), and shall
be deemed sufficiently given or furnished if delivered by personal delivery, by
telecopy or telex, by delivery service with proof of delivery, or by registered
or certified United States mail, postage prepaid, to Borrower and Restricted
Persons at the address of Borrower specified on the signature pages hereto and
to each Lender Party at its address specified on the signature pages hereto
(unless changed by similar notice in writing given by the particular Person
whose address is to be changed). Any such notice or communication shall be
deemed to have been given (a) in the case of personal delivery or delivery
service, as of the date of first attempted delivery during normal business hours
at the address provided herein, (b) in the case of telecopy or telex, upon
receipt, or (c) in the case of registered or certified United States mail, three
days after deposit in the mail; provided, however, that no Borrowing Notice
shall become effective until actually received by Agent.
Section 10.4. Payment of Expenses; Indemnity.
(a) Payment of Expenses. Whether or not the transactions contemplated
by this Agreement are consummated, Borrower will promptly (and in any event,
within 30 days after any invoice or other statement or notice) pay: (i) all
transfer, stamp, mortgage, documentary or other similar taxes, assessments or
charges levied by any governmental or revenue authority in respect of this
Agreement or any of the other Loan Documents or any other document referred to
herein or therein, (ii) all reasonable costs and expenses incurred by or on
behalf of Agent (including attorneys' fees, consultants' fees and engineering
fees, travel costs and miscellaneous expenses) in connection with (1) the
negotiation, preparation, execution and delivery of the Loan Documents, and any
and all consents, waivers or other documents or instruments relating thereto,
(2) the filing, recording, refiling and re-recording of any Loan Documents and
any other documents or instruments or further assurances required to be filed or
recorded or refiled or re-recorded by the terms of any Loan Document, (3) the
borrowings hereunder and other action reasonably required in the course of
administration hereof, (4) monitoring or confirming (or preparation or
negotiation of any document related to) Borrower's compliance with any covenants
or conditions contained in this Agreement or in any Loan Document, and (iii) all
reasonable costs and expenses incurred by or on behalf of any Lender Party
(including attorneys' fees, consultants' fees and accounting fees) in connection
with the defense or enforcement of any of the Loan Documents (including this
Section) or the defense of any Lender Party's exercise of
59
its rights thereunder. In addition to the foregoing, until and all Obligations
have been paid in full, Borrower will also pay or reimburse Agent for all
reasonable. out-of-pocket costs and expenses of Agent or its agents or employees
in connection with the continuing administration of the Loans and the related
due diligence of Agent, including travel and miscellaneous expenses and fees and
expenses of Agent's outside counsel, reserve engineers and consultants engaged
in connection with the Loan Documents.
(b) Indemnity. Borrower and Parent each agree to indemnify each Lender
Party, upon demand, from and against any and all liabilities, obligations,
claims, losses, damages, penalties, fines, actions, judgments, suits,
settlements, costs, expenses or disbursements (including reasonable fees of
attorneys, accountants, experts and advisors) of any kind or nature whatsoever
(in this section collectively called "liabilities and costs") which to any
extent (in whole or in part) may be imposed on, incurred by, or asserted against
such Lender Party growing out of, resulting from or in any other way associated
with any of the Collateral, the Loan Documents and the transactions and events
(including the enforcement or defense thereof) at any time associated therewith
or contemplated therein (including any violation or noncompliance with any
Environmental Laws by any Restricted Person or any liabilities or duties of any
Restricted Person or any Lender with respect to Hazardous Materials found in or
released into the environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH
LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART,
UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN
PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY LENDER PARTY, provided
only that no Lender Party shall be entitled under this section to receive
indemnification for that portion, if any, of any liabilities and costs which is
proximately caused by its own individual gross negligence or willful misconduct,
as determined in a final judgment. If any Person (including Borrower or any of
its Affiliates) ever alleges such gross negligence or willful misconduct by any
Lender, the indemnification provided for in this section shall nonetheless be
paid upon demand, subject to later adjustment or reimbursement, until such time
as a court of competent jurisdiction enters a final judgment as to the extent
and effect of the alleged gross negligence or willful misconduct. As used in
this section the term "Lender Party" shall refer not only to each Person
designated as such in Section 1.1 but also to each director, officer, agent,
attorney, employee, representative and Affiliate of such Person.
Section 10.5. Joint and Several Liability; Parties in Interest;
Assignments.
(a) All Obligations which are incurred by two or more Restricted
Persons shall be their joint and several obligations and liabilities. All
grants, covenants and agreements contained in the Loan Documents shall bind and
inure to the benefit of the parties thereto and their respective successors and
assigns; provided, however, that no Restricted Person may assign or transfer any
of its rights or delegate any of its duties or obligations under any Loan
Document without the prior consent of Required Lenders. Neither Borrower nor any
Affiliates of Borrower shall directly or indirectly purchase or otherwise retire
any Obligations owed to any Lender nor will any Lender accept any offer to do
so, unless each Lender shall have received w li - substantially the same offer
with respect to the same Percentage Share of the Obligations owed to it. If
Borrower or any Affiliate of Borrower at any time purchases some but less than
all of the Obligations owed to all Lender Parties, such purchaser shall not be
entitled to any rights of any
60
Lender under the Loan Documents unless and until Borrower or its Affiliates have
purchased all of the Obligations.
(b) No Lender shall sell any participation interest in its commitment
hereunder or any of its rights under its Loans or under the Loan Documents to
any Person other than an Eligible. Transferee, and then only if the agreement
between such Lender and such participant at all times provides: (i) that such
participation exists only as a result of the agreement between such participant
and such Lender and that such transfer does not give such participant any right
to vote as a Lender or any other direct claims or rights against any Person
other than such Lender, (ii) that such participant is not entitled to payment
from any Restricted Person under Sections 3.2 through 3.6 of amounts in excess
of those payable to such Lender under such sections (determined without regard
to the sale of such participation), and (iii) unless such participant is an
Affiliate of such Lender, that such participant shall not be entitled to require
such Lender to take any action under any Loan Document or to obtain the consent
of such participant prior to taking any action under any Loan Document, except
for actions which would require the consent of all Lenders under subsection (a)
of Section 10.1. No Lender selling such a participation shall, as between the
other parties hereto and such Lender, be relieved of any of its obligations
hereunder as a result of the sale of such participation. Each Lender which sells
any such participation to any Person (other than an Affiliate of such Lender)
shall give prompt notice thereof to Agent and Borrower.
(c) Except for sales of participations under the immediately preceding
subsection (b), no Lender shall make any assignment or transfer of any kind of
its commitments or any of its rights under its Loans or under the Loan
Documents, except for assignments to an Eligible Transferee, and then only if
such assignment is made in accordance with the following requirements:
(i) Each such assignment shall apply to all Obligations owing
to the. assignor Lender hereunder and to the unused portion of the
assignor Lender's commitments, so that after such assignment is made
the assignor Lender shall have a fixed (and not a varying) Percentage
Share in its Loans and Note and be committed to make that Percentage
Share of all future Loans, the assignee shall have a fixed Percentage
Share in such Loans and Note and be committed to make that Percentage
Share of all future Loans, and the Percentage Share of the Borrowing
Base of both the assignor and the assignee shall equal or exceed
$5,000,000.
(ii) The parties to each such assignment shall execute and
deliver to Agent, for its acceptance and recording in the "Register"
(as defined below in this section), an Assignment and Assumption in the
form of Exhibit G, appropriately completed, together with the Note
subject to such assignment and a processing fee payable to Agent of
$2,500. Upon such execution, delivery, and payment and upon the
satisfaction of the conditions set out in such Assignment and
Assumption, then (i) Borrower shall issue new Notes to such assignor
and assignee upon return of the old Notes to Borrower, and (ii) as of
the "Settlement Date" specified in such Assignment and Assumption the
assignee thereunder shall be a party hereto and a Lender hereunder and
Agent shall thereupon deliver to Borrower and each Lender a schedule
showing the revised Percentage Shares
61
of such assignor Lender and such assignee Lender and the Percentage
Shares of all other Lenders.
(iii) Each assignee Lender which is not a United States person
(as such term is defined in Section 7701(a)(30) of the Internal Revenue
Code) for Federal income tax purposes, shall (to the extent it has not
already done so) provide Agent and Borrower. with the "Prescribed
Forms" referred to in Section 3.6(d).
(d) Nothing contained in this section shall prevent or prohibit any
Lender from assigning for pledging all or any portion of its Loans and Note to
any Federal Reserve Bank 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 Bank; provided that no such assignment or pledge
shall relieve such Lender from its obligations hereunder.
(e) By executing and delivering an Assignment and Assumption, each
assignee Lender thereunder will be confirming to and agreeing with Borrower,
Agents and each other Lender Party hereunder that such assignee understands and
agrees to the terms hereof, including Article IX hereof.
(f) Agent shall maintain a copy of each Assignment and Assumption and a
register for the recordation of the names and addresses of Lenders and the
Percentage Shares of, and principal amount of the Loans owing to, each Lender
from time to time (in this section called the "Register"). The entries in the
Register shall be conclusive, in the absence of manifest error, and Borrower and
each Lender Party may treat each Person whose name is recorded in the Register
as a Lender hereunder for all purposes. The Register shall be available for
inspection by Borrower or any Lender Party at any reasonable time and from time
to time upon reasonable prior notice.
Section 10.6. Confidentiality. Each Lender Party agrees that it will
take all reasonable steps to keep confidential any proprietary information given
to it by any Restricted Person, provided, however, that this restriction shall
not apply to information which (a) has at the time in question entered the
public domain, (b) is required to be disclosed by Law (whether valid or invalid)
of any Tribunal, (c) is disclosed to any Lender Party's Affiliates, auditors,
attorneys, or agents (provided such Persons are obligated to hold such
information in confidence on the terms provided in this section), (d) is
furnished to any other Lender Party or to any purchaser or prospective purchaser
of participations or other interests in any Loan or Loan Document (provided each
such purchaser or prospective purchaser first agrees to hold such information in
confidence on the terms provided in this section), or (e) is disclosed in the
course of enforcing its rights and remedies during the existence of an Event of
Default.
Section 10.7. Governing Law; Submission to Process. Except to the
extent that the Law of another jurisdiction is expressly elected in a Loan
Document, the Loan Documents shall be deemed contracts and instruments made
under the Laws of the State of New York and shall be construed and enforced in
accordance with and governed by the Laws of the State of New York and the Laws
of the United States of America, without regard to principles of conflicts of
law. Borrower and Parent Each hereby agree that any legal action or proceeding
against Borrower or Parent with respect to this Agreement, the Notes or any of
the Loan Documents may be brought
62
in the courts of the State of New York or of the United States of America for
the Southern District of New York as Lender Parties may elect, and, by execution
and delivery hereof, Each of Borrower and Parent accepts and consents for itself
and in respect to its property, generally and unconditionally, the jurisdiction
of the aforesaid courts, and further agrees to a transfer of any such proceeding
to a federal court sitting in the State of New York to the extent that it has
subject matter jurisdiction, and otherwise to a state court in New York, New
York, and agrees that such jurisdiction shall be exclusive, unless waived by
Lenders in writing, with respect to any action or proceeding brought by it
against Lender. Parties and any questions relating to usury. Each of parent and
Borrower agrees that Sections 5-1401 and 5-1402 of the General Obligations Law
of the State of New York shall apply to the Loan Documents and waives any right
to stay or to dismiss any action or proceeding brought before said courts on the
basis of forum non conveniens. In furtherance of the foregoing, Each of Parent
and Borrower hereby irrevocably designates and appoints CT Corporation System,
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, as Agent of Borrower and Parent to receive
service of all process brought against Borrower or Parent with respect to any
such proceeding in any such court in New York, such service being hereby
acknowledged by Borrower and Parent to be effective and binding service in every
respect. Copies of any such process so served shall also, if permitted by Law,
be sent by registered mail to Borrower at its address set forth below, but the
failure of Borrower to receive such copies shall not affect in any way the
service of such process as aforesaid. Borrower shall furnish to Lender Parties a
consent of CT Corporation System agreeing to act hereunder prior to the
effective date of this agreement. Nothing herein shall affect the right of
Lender Parties to serve process in any other manner permitted by Law or shall
limit the right of Lender Parties to bring proceedings against Borrower or
Parent in the courts of any other jurisdiction. If for any reason CT Corporation
System shall resign or otherwise cease to act as Borrower's or Parent's agent,
Borrower and Parent hereby irrevocably agree to (a) immediately designate and
appoint a new agent acceptable to Agent to serve in such capacity and, in such
event, such new agent shall be deemed to be substituted for CT Corporation
System for all purposes hereof and (b) promptly deliver to Lenders the written
consent (in form and substance satisfactory to Agent) of such new agent agreeing
to serve in such capacity.
Section 10.8. Limitation on Interest. Lender Parties, Restricted
Persons and any other parties to the Loan Documents intend to contract in strict
compliance with applicable usury Law from time to time in effect. In furtherance
thereof such Persons stipulate and agree that none of the terms and provisions
contained in the Loan Documents shall ever be construed to create a contract to
pay, for the use, forbearance or detention of money, interest in excess of the
maximum amount of interest permitted to be charged by applicable Law from time
to time in effect. Neither any Restricted Person nor any present or future
guarantors, endorsers, or other Persons hereafter becoming liable for payment of
any Obligation shall ever be liable for unearned interest thereon or shall ever
be required to pay interest thereon in excess of the maximum amount that may be
lawfully contracted for, charged, or received under applicable Law from time to
time in effect, and the provisions of this section shall control over all other
provisions of the Loan Documents which may be in conflict or apparent conflict
herewith. Lender Parties expressly disavow any intention to contract for,
charge, or collect excessive unearned interest or finance charges in the event
the maturity of any Obligation is accelerated. If (a) the maturity of any
Obligation is accelerated for any reason, (b) any Obligation is prepaid and as a
result any amounts held to constitute interest are determined to be in excess of
the legal maximum, or (c) any Lender or any other holder of any or all of the
Obligations shall otherwise
63
collect-moneys which are determined to constitute interest which would otherwise
increase the interest on any or all of the Obligations to an amount in excess of
that permitted to _ . be Charged by applicable Law then in effect, then all sums
determined to constitute interest in excess of such legal limit shall, without
penalty, be promptly applied to reduce the then outstanding principal of the
related Obligations or, at such Lender's or holder's option, promptly returned
to Borrower or the other payor thereof upon such determination. In determining
whether or not the interest paid or payable, under any specific circumstance,
exceeds the maximum amount permitted under applicable Law, Lender Parties and
Restricted Persons (and any other payors thereof) shall to the greatest extent
permitted under applicable Law, (i) characterize any non-principal payment as an
expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and
spread the total amount of interest throughout the entire contemplated term of
the instruments evidencing the Obligations in accordance with the amounts
outstanding from time to time thereunder and the maximum legal rate of interest
from time to time in effect under applicable Law in order to lawfully contract
for, charge,- or receive the maximum amount of interest permitted under
applicable Law. As used in this section the term "applicable Law" means the Laws
of the State of New York or the Laws of the United States of America, whichever
Laws allow the greater interest, as such Laws now exist or may be changed or
amended or come into effect in the future.
Section 10.9. Termination: Limited Survival. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
written notice delivered to Agent to terminate this Agreement. Upon receipt by
Agent of such a notice, if no Obligations are then owing this Agreement and all
other Loan Documents shall thereupon be terminated and the parties thereto
released from all prospective obligations thereunder. Notwithstanding the
foregoing or anything herein to the contrary, any waivers or admissions made by
any Restricted Person in any Loan Document, any Obligations under Sections 3.2
through 3.6, and any obligations which any Person may have to indemnify or
compensate any Lender Party shall survive any termination of this Agreement or
any other Loan Document. At the request and expense of Borrower, Agent shall
prepare and execute all necessary instruments to reflect and effect such
termination of the Loan Documents. Agent is hereby authorized to execute all
such instruments on behalf of all Lenders, without the joinder of or further
action by any Lender.
Section 10.10. Severability. If any term or provision of any Loan
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable Law.
Section 10.11. Counterparts. This Agreement may be separately executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
Section 10.12. Waiver of Jury Trial, Punitive Damages, etc. To the
extent permitted by Law, Lender Parties, Parent and Borrower hereby knowingly,
voluntarily, and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or directly or indirectly arising out
of, under, or in connection with, this Agreement or any other Loan Document, or
any course of conduct, course of dealing, statements (whether verbal or written)
or actions of such Persons, Parent or Borrower. This provision is a material
inducement
64
for Lender Parties' entering into this Agreement and the other Loan Documents.
Parent, Borrower and each Lender Party hereby further w (a) irrevocably waives,
to the maximum extent not prohibited by Law, any right it may have to claim or
recover in any such litigation any "Special Damages", as defined below, (b)
certifies 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 (c) acknowledges that it has been induced to enter into this
Agreement, the other Loan Documents and the transactions contemplated hereby and
thereby by, among other things, the mutual waivers and certifications contained
in this section. As used in this section, "Special Damages" includes all
special, consequential, exemplary, or punitive damages (regardless of how
named), but does not include any payments or funds which any party hereto has
expressly promised to pay or deliver to any other party hereto.
Section 10.13. Amendment and Restatement. As of the Effective Date,
this Agreement amends and restates in its entirety the Existing
Credit
Agreement. Borrower and Parent hereby represent and warrant that as of the
Effective Date all conditions under Section 4.1 of this Agreement have been met.
Borrower and Parent hereby agree that (i) the Loans outstanding under the
Existing
Credit Agreement and all accrued and unpaid interest thereon, (ii) all
Letters of Credit issued and outstanding under the Existing
Credit Agreement,
and (iii) all accrued and unpaid fees under the Existing Credit Agreement shall
be deemed to be outstanding under and payable by this Agreement. The Percentage
Shares and Commitments of the Lenders under this Agreement are the same as under
the Existing Credit Agreement as of the date hereof.
Section 10.14. Release. As further consideration and to induce Agent
and each Lender to enter into this Agreement, each of Borrower and Parent hereby
compromises, releases and discharges each Lender, Agent, and their respective
directors, members, managers, officers, shareholders, agents, employees,
representatives, attorneys, and their respective heirs, legal representatives,
successors and assigns (collectively, the "Lending Parties") from any and all
claims, demands, causes of action, remedies, suits, judgments, damages, expenses
and liabilities (collectively, "Claims") of any nature whatsoever, whether now
know, suspected or claimed, whether arising under common law, in equity, or
under statute, which Borrower or Parent has against the Lending Parties which
may have arisen at any time on or prior to the Effective Date in connection
with, arising out of or related to the Loans, the Existing Credit Agreement, and
all instruments, documents, and agreements executed in connection therewith, or
the enforcement or attempted enforcement by Lending Parties of any of their
rights, remedies, or recourse related thereto.
65
IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
INLAND PRODUCTION COMPANY
Borrower
By:
---------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Chief Financial Officer
Address:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
--------------------
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇ ▇▇▇-▇▇▇▇
INLAND RESOURCES INC.
Parent
By
----------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Chief Financial Officer
Address:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
--------------------
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇ ▇▇▇-▇▇▇▇
FORTIS CAPITAL CORP.
As Agent and Lender
By:
---------------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
By:
---------------------------------------------
Name:
------------------------------------------
Title:
------------------------------------------
66
Address for notices, Domestic Lending Office, and
Eurodollar Lending Office:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention for Notices: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Attention for Funding Requests: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
OTHER LENDERS
U. S. BANK NATIONAL ASSOCIATION
By:
---------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President
Address for notices, Domestic Lending Office,
and Eurodollar Lending Office:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
67
SCHEDULE 1
DISCLOSURE SCHEDULE
To supplement the following sections of the Agreement of which this Schedule is
a part, Parent and Borrower hereby make the following disclosures:
1. Section 5.6 Current Financial Statements
2. Section 5.7 Other Obligations and Restrictions
3. Section 5.9 Litigation
4. Section 5.10 Labor Disputes and Acts of God
5. Section 5.11 ERISA Plans and Liabilities
6. Section 5.12 Environmental and Other Laws
7. Section 5.13 Names and Places of Business
8. Section 5.14 Subsidiaries
9. Section 7.1 Restricted Debt
68
SCHEDULE 2
ADDITIONAL SECURITY DOCUMENTS
1. Amended and Restated Security Agreement by Borrower of even date herewith
2. Amended and Restated Guaranty by Parent of even date herewith
3. Amended and Restated Pledge Agreement by Parent of even date herewith
69
SCHEDULE 3
INSURANCE SCHEDULE
70
SCHEDULE 4
LENDER SCHEDULE
Lender Percentage Share Note Amount
------ ---------------- -----------
Fortis Capital Corp. 68.2656116% $57,001,785.71
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ 75201
U.S. Bank National Association 31.7343884% $26,498,214.29
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
71
SCHEDULE 5
LIENS
as of November 30, 2001
Restricted Person Lien Amount
Remaining
---------
72
GRAND TOTAL $
============
73
EXHIBIT A
PROMISSORY NOTE
$ __________ NEW YORK, NEW YORK [DATE]
FOR VALUE RECEIVED, the undersigned, Inland Production Company, a Texas
corporation (herein called "Borrower"), hereby promises to pay to the order of
____________________________ (herein called "Lender"), the principal sum of
___________________________________ Dollars ($ ____________), or, if greater or
less, the aggregate unpaid principal amount of the Loans made under this Note by
Lender to Borrower pursuant to the terms of the Credit Agreement (as hereinafter
defined), together with interest on the unpaid principal balance thereof as
hereinafter set forth, both principal and interest payable as herein provided in
lawful money of the United States of America at the offices of the Agent under
the Credit Agreement, ____________________________or at such other place in New
York as from time to time may be designated by the holder of this Note.
This Note (a) is issued and delivered under that certain Third Amended
and Restated Credit Agreement of even date herewith among Borrower,
Inland
Resources Inc., Fortis Capital Corp., as Agent, and the Lenders (including
Lender) referred to therein (herein, as from time to time supplemented, amended
or restated, called the "Credit Agreement"), and is a "Note" as defined therein,
(b) is subject to the terms and provisions of the Credit Agreement, which
contains provisions for payments and prepayments hereunder and acceleration of
the maturity hereof upon the happening of certain stated events, and (c) is
secured by and entitled to the benefits of certain Security Documents (as
identified and defined in the Credit Agreement). Payments on this Note shall be
made and applied as provided herein and in the Credit Agreement. Reference is
hereby made to the Credit Agreement for a description of certain rights,
limitations of rights, obligations and duties of the parties hereto and for the
meanings assigned to terms used and not defined herein and to the Security
Documents for a description of the nature and extent of the security thereby
provided and the rights of the parties thereto.
Payments of the principal of this Note shall be due and payable as set
forth in the Credit Agreement. The entire principal balance of this Note,
together with all interest accrued hereon, shall be due and payable in full on
June 30, 2007.
So long as no Event of Default has occurred and is continuing, all Base
Rate Loans (exclusive of any past due principal or interest) from time to time
outstanding shall bear interest on each day outstanding at the Adjusted Base
Rate in effect on such day. If an Event of Default has occurred and is
continuing, all Base Rate Loans (exclusive of any past due principal or
interest) from time to time outstanding shall bear interest on each day
outstanding at the applicable Default Rate in effect on such day. On each
Interest Payment Date Borrower shall pay to the holder hereof all unpaid
interest which has accrued on the Base Rate Loans to but not including
such-interest Payment Date. So long as no Event of Default has occurred and is
continuing, each Eurodollar Loan (exclusive of any past due principal or
interest) shall bear interest on each day during the related Interest Period at
the related Adjusted Eurodollar Rate in
74
effect on such day. If an Event of Default has occurred and is continuing, all
Eurodollar Loans (exclusive of any past due principal or interest) from time to
time outstanding shall bear interest on each day outstanding at the applicable
Default Rate in effect on such day. On each Interest Payment Date relating to
such Eurodollar Loan, Borrower shall pay to the holder hereof all unpaid
interest which has accrued on such Eurodollar Loan to but not including such
Interest Payment Date. All past due principal of and past due interest on the
Loans shall bear interest on each day outstanding at the applicable Default Rate
in effect on such day, and such interest shall be due and payable daily as it
accrues. Notwithstanding the foregoing provisions of this paragraph: (a) this
Note shall never bear interest in excess of the Highest Lawful Rate, and (b) if
at any time the rate at which interest is payable on this Note is limited by the
Highest Lawful Rate (by the foregoing subsection (a) or by reference to the
Highest Lawful Rate in the definitions of Adjusted Base Rate collected in any
court or in any bankruptcy, receivership, debtor relief, probate or other court
proceedings, Borrower and all endorsers, sureties and guarantors of this Note
jointly and severally agree to pay reasonable attorneys' fees and collection
costs to the holder hereof in addition to the principal and interest payable
hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
This Note is in renewal and extension, but not in extinguishment or
novation, of that certain promissory note dated as of September 15, 1999, made
by Borrower payable to the order of Lender in the original principal amount of
$__________________________________.
This Note and the rights and duties of the parties hereto shall be
governed by the Laws of the State of New York, (without regard to principles of
conflicts of law), except to the extent the same are governed in effect on such
day. If an Event of Default has occurred and is continuing, all Eurodollar Loans
(exclusive of any past due principal or interest) from time to time outstanding
shall bear interest on each day outstanding at the applicable Default Rate in
effect on such day. On each Interest Payment Date relating to such Eurodollar
Loan, Borrower shall pay to the holder hereof all unpaid interest which has
accrued on such Eurodollar Loan to but not including such Interest Payment Date.
All past due principal of and past due interest on the Loans shall bear interest
on each day outstanding at the applicable Default Rate in effect on such day,
and such interest shall be due and payable daily as it accrues. Notwithstanding
the foregoing provisions of this paragraph: (a) this Note shall never bear
interest in excess of the Highest Lawful Rate, and (b) if at any time the rate
at which interest is payable on this Note is limited by the Highest Lawful Rate
(by the foregoing subsection (a) or by reference to the Highest Lawful Rate in
the definitions of Adjusted Base Rate, Adjusted Eurodollar Rate, and Default
Rate), this Note shall bear interest at the Highest Lawful Rate and shall
continue to bear interest at the Highest Lawful Rate until such time as the
total amount of interest accrued hereon equals (but does not exceed) the total
amount of interest which would have accrued hereon had there been no Highest
Lawful Rate applicable hereto.
75
Notwithstanding the foregoing paragraph and all other provisions of
this Note, in no event shall the interest payable hereon, whether before or
after maturity, exceed the maximum amount of interest which, under applicable
Law, may be contracted for, charged, or received on this Note, and this Note is
expressly made subject to the provisions of the Credit Agreement which more
fully set out the limitations on how interest accrues hereon.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, Borrower and all endorsers, sureties
and guarantors of this Note jointly and severally agree to pay reasonable
attorneys' fees and collection costs to the holder hereof in addition to the
principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
This Note and the rights and duties of the parties hereto shall be
governed by the Laws of the State of New York, (without regard to principles of
conflicts of law), except to the extent the same are governed by applicable
federal Law.
INLAND PRODUCTION COMPANY
-------------------------------------------
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
76
BORROWING NOTICE
Reference is made to that certain Second Amended and Restated Credit
Agreement dated as of November ___, 2001 (as from time to time amended, the
"Agreement"), by and among Inland Production Company, as Borrower,
Inland
Resources Inc., Fortis Capital Corp., as Agent, and certain financial
institutions, as Lenders. Terms which are defined in the Agreement are used
herein with the meanings given them in the Agreement.
Borrower hereby requests a Borrowing of new Loans to be advanced
pursuant to Section 2.2 of the Agreement as follows:
Aggregate amount of Borrowing: $
----------------
Type of Loans in Borrowing:
----------------
Date on which Loans are to be advanced:
----------------
Length of Interest Period for Eurodollar
Loans (1, 2, 3, or 6 months): months
--------
Borrower hereby represents, warrants, acknowledges, and agrees to and
with each Lender that:
(a) The officer of Borrower signing this instrument is the
duly elected, qualified and acting officer of Borrower as indicated
below such officer's signature hereto having all necessary authority to
act for Borrower in making the request herein contained.
(b) The representations and warranties of Borrower set forth
in the Agreement and the other Loan Documents are true and correct on
and as of the date hereof (except to the extent that the facts on which
such representations and warranties are based have been changed by the
extension of credit under the Agreement and except for representations
and warranties that are expressly limited to an earlier date), with the
same effect as though such representations and warranties had been made
on and as of the date hereof.
(c) There does not exist on the date hereof any condition or
event which constitutes a Default which has not been waived in writing
as provided in Section 10.1 (a) of the Agreement; nor will any such
Default exist upon Borrower's receipt and application of the Loans
requested hereby. Borrower will use the Loans hereby requested in
compliance with Section 2.5 of the Agreement.
(d) Except to the extent waived in writing as provided in
Section 10.1 (a) of the Agreement, Borrower has performed and complied
with all agreements and conditions in the Agreement required to be
performed or complied with by Borrower on or prior to the date hereof,
and each of the conditions precedent to Loans contained in the
Agreement remains satisfied.
1
(e) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any course
of dealing, or by any other means not provided for in Section 10.1(a) of
the Agreement. The Agreement and the other Loan Documents are hereby
ratified, approved, and confirmed in all respects.
The officer of Borrower signing this instrument hereby certifies in his
capacity as an officer of Borrower and in the name and on behalf of Borrower,
that to the best of his knowledge after due inquiry, the above representations,
warranties, acknowledgements, and agreements of Borrower are true, correct and
complete.
IN WITNESS WHEREOF, this instrument is executed as of ________ , 200___.
INLAND PRODUCTION COMPANY
-------------------------------------------
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
2
EXHIBIT C
CONTINUATION/CONVERSION NOTICE
Reference is made to that certain Second Amended and Restated Credit
Agreement dated as of November ___, 2001 (as from time to time amended, the
"Agreement"), by and among Inland Production Company, as Borrower,
Inland
Resources Inc., Fortis Capital Corp., as Agent, and certain financial
institutions, as Lenders. Terms which are defined in the Agreement are used
herein with the meanings given them in the Agreement.
Borrower hereby requests a conversion or continuation of existing Loans
into a new Borrowing pursuant to Section 2.4 of the Agreement as follows:
Existing Borrowing(s) to be continued or converted:
$ of Eurodollar Loans with Interest Period ending
-------------
$ of Base Rate Loans
-------------
Aggregate amount of Borrowing: $
----------------
Type of Loans in Borrowing:
----------------
Date on which Loans are to be advanced:
----------------
Length of Interest Period for Eurodollar
Loans (1, 2, 3, or 6 months): months
--------
Borrower hereby represents, warrants, acknowledges, and agrees to and
with each Lender that:
(a) The officer of Borrower signing this instrument is the
duly elected, qualified and acting officer of Borrower as indicated
below such officer's signature hereto having all necessary authority to
act for Borrower in making the request herein contained.
(b) There does not exist on the date hereof any condition or
event which constitutes a Default which has not been waived in writing
as provided in Section 10.1 (a) of the Agreement; nor will any such
Default exist upon Borrower's receipt and application of the Loans
requested hereby.
(c) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any
course of dealing, or by any other means not provided for in Section
10.1 (a) of the Agreement. The Agreement and the other Loan Documents
are hereby ratified, approved, and confirmed in all respects.
3
The officer of Borrower signing this instrument hereby certifies in his
capacity as an officer of Borrower and in the name and on behalf of Borrower,
that to the best of his knowledge after due inquiry, the above representations,
warranties, acknowledgements, and agreements of Borrower are true, correct and
complete.
IN WITNESS WHEREOF, this instrument is executed as of ________ , 200__.
INLAND PRODUCTION COMPANY
-------------------------------------------
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
4
EXHIBIT D
CERTIFICATE ACCOMPANYING
FINANCIAL STATEMENTS
Reference is made to that certain Second Amended and Restated Credit
Agreement dated as of November ___, 2001 (as from time to time amended, the
"Agreement"), by and among Inland Production Company ("Borrower"),
Inland
Resources Inc., Fortis Capital Corp., as Agent, and certain financial
institutions ("Lenders"), which Agreement is in full force and effect on the
date hereof. Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement.
This Certificate is furnished pursuant to Section 6.2(b) of the
Agreement. Together ***herewith Borrower is furnishing to Agent and
each Lender Parent's "[audited/unaudited]
financial statements (the "Financial Statements") as at (the "Reporting Date").
Borrower hereby represents, warrants, and acknowledges to Agent and each Lender
that:
(a) the officer of Parent signing this instrument is the duly
elected, qualified and acting of Parent and as such is Parent's chief
financial officer;
(b) the Financial Statements are accurate and complete and
satisfy the requirements of the Agreement;
(c) attached hereto is a schedule of calculations showing
Parent's compliance as of the Reporting Date with the requirements of
Sections 7.11 and 7.12 of the Agreement *[and Parent's non-compliance
as of such date with the requirements of Section(s) of the Agreement];
(d) on the Reporting Date Parent and Borrower were, and on the
date hereof Parent and Borrower are, in full compliance with the
disclosure requirements of Section 6.4 of Annex C of the Agreement, and
no Default otherwise existed on the Reporting Date or otherwise exists
on the date of this instrument *[except for Default(s) under Section(s)
of the Agreement, which *[is/are] more fully described on a schedule
attached hereto].
(e) *[Unless otherwise disclosed on a schedule attached
hereto,] The representations and warranties of Borrower and Parent set
forth in the Agreement and the other Loan Documents are true and
correct on and as of the date hereof (except to the extent that the
facts on which such representations and warranties are based have been
changed by the extension of credit under the Agreement and except for
representations and warranties that are expressly limited to an earlier
date), with the same effect as though such representations and
warranties had been made on and as of the date hereof.
The officer of Parent signing this instrument hereby certifies in his
capacity as an officer of Borrower and in the name and on behalf of Borrower,
that he has reviewed the Loan Documents and the Financial Statements and has
otherwise undertaken such inquiry as is in his opinion
5
necessary to enable him to express an informed opinion with respect to the above
representations, warranties and acknowledgments of Parent and, to the best of
his knowledge, such representations, warranties, and acknowledgments are true,
correct and complete.
IN WITNESS WHEREOF, this instrument is executed as of ________ , 2001
INLAND RESOURCES INC.
-------------------------------------------
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
6
EXHIBIT E
ENVIRONMENTAL COMPLIANCE CERTIFICATE
Reference is made to that certain Second Amended and Restated Credit
Agreement dated as of November __, 2001 (as from time to time amended, the
"Agreement"), by and among Inland Production Company ("Borrower"), Inland
Resources Inc., Fortis Capital Corp., as Agent, and certain financial
institutions. Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement. The undersigned, being the
*[President/Chief Executive Officer] of Borrower, hereby certifies to Agent and
Lenders as follows:
1. For the Fiscal Year ending immediately prior to the date
hereof, Borrower has complied and is complying with Section 6.12 of the
Credit Agreement *[except as set forth in Schedule I attached hereto];
2. To the best knowledge of the undersigned after due inquiry,
Borrower is on the date hereof in compliance with all applicable
Environmental Laws, noncompliance with which could cause a Material
Adverse Change;
3. Borrower has taken (and continues to take) steps to
minimize the generation of potentially harmful effluents;
4. Borrower has established an ongoing program of conducting
an internal audit of each operating facility of Borrower to identify
actual or potential environmental liabilities which could cause a
Material Adverse Change; and
5. Borrower has established an ongoing program of training its
employees in issues of environmental, health and safety compliance,
and Borrower presently has one or more individuals in charge of
implementing such training program.
The officer of Borrower signing this instrument hereby certifies in
his capacity as an officer of Borrower and in the name and on behalf of
Borrower, that to the best of his knowledge after due inquiry and consultation
with the operating officers of Borrower, the above representations, warranties,
acknowledgements, and agreements of Borrower are true, correct and complete.
IN WITNESS WHEREOF, this instrument is executed as of ________, 200_
INLAND PRODUCTION COMPANY
-------------------------------------------
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
7
EXHIBIT F
LEGAL OPINION
for Borrower
1. Borrower is duly incorporated and validly existing as a corporation
under the laws of the State of Texas, with full corporate power and authority
under such laws to (i) own, administer, maintain, occupy and operate its
business as currently conducted; (ii) execute and deliver the Loan Documents to
which it is a party; and (iii) perform its obligations under, and carry out and
consummate all other transactions to be consummated by it as described in each
of the Loan Documents to which it is a party. Borrower has complied with all
provisions of Texas and federal applicable law in all matters relating to the
loan transactions contemplated by the Loan Documents which are required to be
complied with as of the date hereof.
2. The Loan Documents to which Borrower is a party have been duly
authorized, executed and delivered by Borrower, and, assuming the due
authorization, execution and delivery of such instruments by the other parties
thereto, the Loan Documents to which Borrower is a party constitute legal, valid
and binding obligations of Borrower, enforceable against Borrower in accordance
with their respective terms.
3. Borrower's execution and delivery of the Loan Documents to which it
is a party, and the authorization, execution and delivery by Borrower of any
other agreements, certificates, and documents described in the Loan Documents,
did not at the time of the authorization, execution, delivery and distribution,
conflict with or constitute a default under, any provisions of the certificate
of incorporation or by-laws of Borrower or any existing constitution, laws,
court or administrative rule or regulations, or, to the best of our knowledge,
any decree, order or judgment to which Borrower is currently subject.
Same Legal Opinion for Guarantor
8
EXHIBIT G
ASSIGNMENT AND ASSUMPTION AGREEMENT
Date: _____________, 2001
Reference is made to that certain Second Amended and Restated Credit
Agreement dated as of November ___, 2001 (as from time to time amended, the
"Agreement"), by and among by and among Inland Production Company, as Borrower,
Inland Resources Inc., Fortis Capital Corp., as Agent, and certain financial
institutions, as Lenders, which Agreement is in full force and effect on the
date hereof. Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement.
("Assignor") and ("Assignee")
hereby
agree as follows:
1. Assignor hereby sells and assigns to Assignee without recourse and
without representation or warranty (other than as expressly provided herein),
and Assignee hereby purchases and assumes from Assignor, that interest in and to
all of Assignor's rights and duties under the Agreement as of the date hereof
which represents the percentage interest specified in Item 3 of Annex I hereto
(the "Assigned Share") of all of the outstanding rights and obligations of all
Lenders under the Agreement, including, without limitation, all rights and
obligations with respect to the Assigned Share in Assignor's Loans and Note.
After giving effect to such sale and assignment, Assignee's Percentage Share
(and Assignor's remaining Percentage Share) will be as set forth in Item 3 of
Annex I hereto.
2. Assignor: (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Agreement, the
other Loan Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Agreement, the other Loan Documents or
any other instrument or document furnished pursuant thereto; and (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Borrower, any other Restricted Person or the performance
or observance by any of them of any of their respective obligations under the
Agreement, the other Loan Documents, or any other instrument or document
furnished pursuant thereto.
3. Assignee: (i) confirms that it has received a copy of the Agreement,
together with copies of the financial statements most recently delivered
thereunder and such other Loan Documents and other documents and information as
it has deemed appropriate to make its own analysis of Borrower and the
transactions contemplated by the Agreement and its own independent decision to
enter into this Assignment and Assumption Agreement; (ii) agrees that it will,
independently and without reliance upon Assignor or any other Lender and based
on such
9
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the
Agreement; (iii) confirms that it is a an Eligible Transferee under the
Agreement; (iv) appoints and authorizes Agent to take such action as agent on
its behalf and to exercise such powers under the Agreement and the other Loan
Documents as are specifically delegated to them, together with all other powers
reasonably incidental thereto; and (v) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Agreement are
required to be performed by it as a Lender (including the obligation to make
future Loans). [; and (vi) attaches the "Prescribed Forms" described in Section
3.6(d) of the Agreement.]
4. Following the execution of this Assignment and Assumption Agreement
by Assignor and Assignee, an executed original hereof (together with all
attachments) will be delivered to Agent. The effective date of this Assignment
and Assumption Agreement (the "Settlement Date") shall be the date specified in
Item 4 of Annex I hereto; provided that this Assignment and Assumption Agreement
shall not be deemed to have taken effect unless (i) the consent hereto of Agent
and Borrower has been obtained (to the extent required in the Agreement), (ii)
Agent has received a fully executed original hereof, and (iii) Agent has
received the processing fee referred to in Section 10.5(c)(ii) of the Agreement.
5. Upon the satisfaction of the foregoing conditions, then as of the
Settlement Date: (i) Assignee shall be a party to the Agreement and, to the
extent provided in this Assignment and Assumption Agreement, have the rights and
obligations of a Lender thereunder and under the other Loan Documents and (ii)
Assignor shall, to the extent provided in this Assignment and Assumption
Agreement, relinquish its rights and be released from its duties under the
Agreement and the other Loan Documents.
6. All interest, fees and other amounts that would otherwise accrue
pursuant to the Agreement and Assignor's Note for the account of Assignor from
and after the Settlement Date shall, instead accrue for the account of, and be
payable to, Assignor and Assignee, as the case may be, in accordance with their
respective interests as reflected in Item 3 to Annex I hereto. All payments of
principal that would otherwise be payable from and after the Settlement Date to
or for the account of Assignor pursuant to the Agreement and Assignor's Note
shall, instead, be payable to or for the account of Assignor and Assignee, as
the case may be, in accordance with their respective interests as reflected in
Item 3 to Annex I hereto. On the Settlement Date, Assignee shall pay to Assignor
an amount specified by Assignor in writing which represents the portion of
Assignor's Loans which is being assigned and which is outstanding on the
Settlement Date, net of any closing costs. Assignor and Assignee shall make all
appropriate adjustments in payments under the Agreement for periods prior to the
Settlement Date directly between themselves on the Settlement Date.
7. Each of the parties to this Assignment and Assumption Agreement
agrees that at any time and from time to time upon the written request of any
other party, it will execute and deliver such further documents and do such
further acts and things as such other party may reasonably request in order to
effect the purposes of this Assignment and Assumption Agreement.
10
8. This Assignment and Assumption Agreement shall be governed by, and
construed in accordance with, the Laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Assignment and Assumption
Agreement, as of the date first above written, such execution also being made on
Annex I hereto.
[NAME OF ASSIGNOR] as Assignor
By:
----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
[NAME OF ASSIGNEE]
By:
----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
CONSENTED TO AND ACKNOWLEDGED:
FORTIS CAPITAL CORP., As Agent
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
11
ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT
ANNEX I
1. Borrower: Inland Production Company
2. Date of Assignment Agreement:
------------------------------------------
3. Amounts (as of date of item #2 above):
Assignor Assignee
(as Revised) New
------------ ------------
a. Percentage Share*
------------ ------------
b. Percentage Share of
Borrowing Base: $ $
------------ ------------
4. Settlement Date:
--------------------------
5. Notices:
ASSIGNEE:
--------------------------------------------
--------------------------------------------
--------------------------------------------
Attention:
--------------------------------
Telephone:
----------------------------------
Telecopy:
---------------------------------
6 Wiring Instructions:
Address:
-----------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
*Percentage taken to 12 decimal places.
12
