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CREDIT AGREEMENT
among
INLAND PRODUCTION COMPANY
THE BANKS NAMED HEREIN
and
CANADIAN IMPERIAL BANK OF COMMERCE
As Agent
Dated as of June 30, 1997
$50,000,000.00
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION ........................ 1
Section 1.1 Definitions .............................. 1
Section 1.2 Rules of Construction .................... 18
SECTION 2. AMOUNT AND TERMS OF CREDIT FACILITIES ........................ 19
Section 2.1 Loans .................................... 19
Section 2.3 Determination of the Borrowing Base ...... 20
Section 2.3.1 Annual Redetermination of Borrowing Base.. 21
Section 2.3.2 Semi-Annual Scheduled Determination of
the Borrowing Base ...................... 22
Section 2.3.3 Discretionary Determination of the
Borrowing Base .......................... 22
Section 2.3.4 Redetermination of Borrowing Base upon
Sale of Oil and Gas Properties .......... 23
Section 2.4 Notice of Borrowing ...................... 24
Section 2.5 Disbursement of Funds .................... 25
Section 2.6 Notes .................................... 26
Section 2.7 Interest ................................. 26
Section 2.8 Interest Periods ......................... 27
Section 2.9 Minimum Amount of LIBO Rate Loans ........ 29
Section 2.10 Conversion or Continuation ............... 29
Section 2.11 Changes of Commitments ................... 30
Section 2.12 Voluntary Prepayments .................... 30
Section 2.13 Mandatory Prepayments .................... 31
Section 2.14 Mandatory Prepayments and Other Actions
When the Loan Exceeds the Borrowing
Base .................................... 31
Section 2.15 Application of Prepayments ............... 33
Section 2.16 Method and Place of Payment .............. 33
Section 2.17 Fees ..................................... 34
Section 2.18 Interest Rate Unascertainable, Increased
Costs, Illegality ....................... 35
Section 2.19 Funding Losses ........................... 37
Section 2.20 Increased Capital ........................ 38
Section 2.21 Taxes..................................... 39
Section 2.22 Assumption of Risks ...................... 40
Section 2.23 Obligation to Reimburse and to Prepay .... 41
Section 2.24 Additional Costs in Respect of Letters
of Credit ............................... 44
Section 2.25 Use of Proceeds .......................... 44
SECTION 3. CONDITIONS PRECEDENT ......................................... 45
Section 3.1 Conditions Precedent to Initial Loans .... 45
Section 3.2 Conditions Precedent to All Loans and
Letters of Credit ....................... 49
Section 3.3 Conditions Relating to Letters of Credit.. 50
Section 3.4 Acquisitions.............................. 50
2
SECTION 4. REPRESENTATIONS AND WARRANTIES ............................... 51
Section 4.1 Corporate Status ......................... 51
Section 4.2 Corporate Power and Authority ............ 52
Section 4.3 No Violation ............................. 52
Section 4.4 Litigation ............................... 52
Section 4.5 Financial Statements; Financial
Condition; etc........................... 52
Section 4.6 Material Adverse Change .................. 53
Section 4.7 Use of Proceeds; Margin Regulations ...... 53
Section 4.8 Governmental Approvals ................... 53
Section 4.9 Security Interests and Liens ............. 53
Section 4.10 Tax Returns and Payments ................. 54
Section 4.11 ERISA .................................... 54
Section 4.12 Investment Company Act; Public Utility
Holding Company Act ..................... 55
Section 4.13 True and Complete Disclosure ............. 55
Section 4.14 Corporate Structure; Capitalization ...... 55
Section 4.15 Environmental Matters .................... 56
Section 4.16 Patents, Trademarks, etc. ................ 57
Section 4.17 Ownership of Property .................... 57
Section 4.18 No Default ............................... 57
Section 4.19 Licenses, etc. ........................... 57
Section 4.20 Compliance With Law ...................... 58
Section 4.21 No Burdensome Restrictions ............... 58
Section 4.22 Labor Matters ............................ 58
Section 4.23 Subsidiaries and Partnerships ............ 58
Section 4.24 Location of Business and Offices ......... 58
SECTION 5. AFFIRMATIVE COVENANTS ........................................ 58
Section 5.1 Information Covenants .................... 58
Section 5.2 Books, Records and Inspections ........... 63
Section 5.3 Maintenance of Insurance ................. 63
Section 5.4 Taxes .................................... 64
Section 5.5 Corporate Franchises ..................... 64
Section 5.6 Compliance with Law ...................... 64
Section 5.7 Performance of Obligations ............... 65
Section 5.8 Maintenance of Properties ................ 65
Section 5.9 Further Assurances ....................... 66
Section 5.10 Additional Collateral .................... 66
Section 5.11 Hedging Agreements ....................... 67
Section 5.12 List of Purchasers ....................... 67
SECTION 6. NEGATIVE COVENANTS ........................................... 67
Section 6.1 Financial Covenants ...................... 67
Section 6.2 Indebtedness ............................. 68
Section 6.3 Liens .................................... 69
Section 6.4 Restriction on Fundamental Changes ....... 70
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Section 6.5 Sale of Oil and Gas Properties ........... 70
Section 6.6 Contingent Liability ..................... 71
Section 6.7 Dividends ................................ 71
Section 6.8 Advances, Investments and Loans .......... 71
Section 6.9 Transactions with Affiliates ............. 72
Section 6.10 Limitation on Voluntary Payments ......... 72
Section 6.11 Changes in Business ...................... 72
Section 6.12 Certain Restrictions ..................... 72
Section 6.13 Lease Payments ........................... 73
Section 6.14 Sales and Leasebacks ..................... 73
Section 6.15 Plans .................................... 73
Section 6.16 Fiscal Year; Fiscal Quarter .............. 73
SECTION 7. EVENTS OF DEFAULT ............................................ 74
Section 7.1 Events of Default ........................ 74
Section 7.2 Rights and Remedies ...................... 78
SECTION 8. THE AGENT .................................................... 79
Section 8.1 Appointment .............................. 79
Section 8.2 Delegation of Duties ..................... 80
Section 8.3 Exculpatory Provisions ................... 80
Section 8.4 Reliance by Agent ........................ 80
Section 8.5 Notice of Default ........................ 81
Section 8.6 Non-Reliance on Agent and Other Banks .... 81
Section 8.7 Indemnification .......................... 82
Section 8.8 Agent in its Individual Capacity ......... 83
Section 8.9 Successor Agent .......................... 83
SECTION 9. MISCELLANEOUS ................................................ 83
Section 9.1 Payment of Expenses, Indemnity, etc. ..... 83
Section 9.2 Right of Setoff .......................... 85
Section 9.3 Notices .................................. 85
Section 9.4 Successors and Assigns; Participation;
Assignments ............................. 86
Section 9.5 Amendments and Waivers ................... 89
Section 9.6 No Waiver; Remedies Cumulative ........... 89
Section 9.7 Sharing of Payments ...................... 90
Section 9.8 Governing Law; Submission to
Jurisdiction ............................ 90
Section 9.9 Maximum Interest ......................... 91
Section 9.10 Counterparts ............................. 92
Section 9.11 Effectiveness ............................ 93
Section 9.12 Headings Descriptive ..................... 93
Section 9.13 Marshalling; Recapture ................... 93
Section 9.14 Severability ............................. 93
Section 9.15 Survival ................................. 93
Section 9.16 Domicile of Loans ........................ 94
Section 9.17 Limitation of Liability .................. 94
Section 9.18 Calculations; Computations ............... 94
4
Section 9.19 Waiver of Trial by Jury, Punitive
Damages ................................. 94
Section 9.20 No Oral Agreements ....................... 94
Section 9.21 Exculpation Provisions ................... 95
Schedule 1 -- Banks and Commitments
Schedule 3.1(h) -- Outstanding Obligations
Schedule 4.8 -- Government Approvals
Schedule 4.9 -- Security Interest and Liens
Schedule 4.11 -- ERISA
Schedule 4.14 -- Subsidiaries; Capital Stock
Schedule 4.15 -- Environmental Matters
Schedule 4.17 -- Real Property
Schedule 4.22 -- Labor Matters
Schedule 4.23 -- Subsidiaries and Partnerships
Schedule 5.11 -- Hedging Agreements
Schedule 6.2 -- Existing Indebtedness
Schedule 6.3 -- Existing Liens
Schedule 6.6 -- Existing Contingent Liability
Schedule 6.8 -- Investments
Exhibit A -- Form of Note
Exhibit B -- Form of Pledge Agreement
Exhibit C -- Form of Mortgage
Exhibit D -- Form of Guaranty Agreement
Exhibit E -- Form of Legal Opinion of Glast, Xxxxxxxx & Xxxxxx, P.C.
Exhibit F -- Form of Legal Opinion of Ray, Xxxxxxx & Xxxxxxx
Exhibit G -- Form of Legal Opinion of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Exhibit H -- Form of Subordination Provisions
Exhibit I -- Form of Transfer Supplement
5
CREDIT AGREEMENT, dated effective as of June 30, 1997, among Inland
Production Company, a Texas corporation (the "Borrower"), the Banks (as
hereinafter defined) and Canadian Imperial Bank of Commerce, acting in its
capacity as agent (the "Agent") for the Banks.
RECITALS
A. The Borrower has requested that the Banks provide certain loans
to an extensions of credit on behalf of the Borrower; and
B. The Banks have agreed to make such loans and extensions
of credit subject to the terms and conditions of this Agreement.
C. In consideration of the mutual covenants and agreements
herein contained and of the Banks, extensions of credit and commitments
hereinafter referred to, the parties hereto agree as follows:
SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION.
Section 1.1 DEFINITIONS. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise
requires.
"Acquisition Proposal" means a proposal to the Agent from Borrower
describing a proposed acquisition of properties to be acquired with the
proceeds of a Loan. Each Acquisition Proposal must be acceptable to the
Agent in substance, form and detail and must at least set out:
(a) the properties which are to be acquired with the proceeds of
the Loan, the terms of the proposed acquisition, and a timetable for the
closing of the acquisition;
(b) a reserve engineering report, prepared by independent
petroleum engineers acceptable to the Agent concerning the properties to
be acquired with the Loan; and
(c) any such other information that the Agent requests.
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly control-
ling (including but not limited to all directors and officers of such
Person), controlled by, or under direct or indirect common control with
such Person. A Person shall be deemed to control a corporation if such
Person possesses, directly or indirectly, the power to (i) vote 5% or
more of the securities having ordinary voting power for the election of
directors of such corporation or (ii) direct or cause the direction of
the management and policies of such corporation, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" shall mean CIBC acting in its capacity as agent for the
Banks and any successor agent appointed in accordance with Section 8.9.
"Agent's Office" shall mean the office of the Agent located at 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such other office as the
Agent may hereafter designate in writing as such to the other parties
hereto.
"Agreement" shall mean this Credit Agreement as the same may from
time to time hereafter be modified, supplemented or amended.
"Applicable Margin" shall mean, on any day with respect to any
Loan, the applicable per annum percentage set forth at the appropriate
intersection in the table below, based on the amount of Cash Advances as
a percentage of the Borrowing Base:
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Cash Advances
as % of Base Rate Loan LIBO Rate Loan
Borrowing Base Margin Percentage Margin Percentage
--------------------------------------------------------------------------------------
less than or equal to 25% 0% 1%
--------------------------------------------------------------------------------------
greater than 25% less than or equal to 45% 0.375% 1.375%
--------------------------------------------------------------------------------------
greater than 45% less than or equal to 67% 0.625% 1.625%
--------------------------------------------------------------------------------------
greater than 67% 0.875% 1.875%
--------------------------------------------------------------------------------------
"Arranger" shall mean CIBC Wood Gundy Securities Corp.
"Assignee" shall have the meaning provided in Section 9.4(c).
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"Average Daily Unused Commitment" shall mean at any time, an amount
equal to the excess, if any, of (a) the amount of the Maximum Commitment
at such time OVER (b) the sum of (i) the aggregate unpaid principal
amount at such time of all Loans outstanding, and (ii) an amount equal
to the LC Exposure.
"Bankruptcy Code" shall mean Title 11 of the United States Code
entitled "Bankruptcy", as amended from time to time, and any successor
statute or statutes.
"Banks" shall mean the Persons listed on Schedule 1 hereto and the
Persons which from time to time become a party hereto in accordance with
Section 9.4(d).
"Base Rate" shall mean, at any particular date and with respect to
all Base Rate Loans, a fluctuating rate of interest PER ANNUM equal to
the highest of:
(a) the rate of interest most recently established by CIBC at its
New York office as its base rate for Dollar loans in the United States;
and
(b) the Federal Funds Rate most recently determined by the Agent
plus 1%.
Neither the Base Rate nor the base rate described in CLAUSE (a)
above is necessarily intended to be the lowest rate of interest
determined by the Agent in connection with extensions of credit.
"Base Rate Loans" shall mean Loans made and/or being maintained at
a rate of interest based upon the Base Rate.
"Borrower" shall have the meaning provided in the first paragraph
of this Agreement.
"Borrowing" shall mean the incurrence of one Type of Loan from all
the Banks on a given date (or resulting from conversions or
continuations on a given date), having in the case of LIBO Rate Loans
the same Interest Period.
"Borrowing Base" shall have the meaning provided in Section 2.3.1.
3
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday and any
day which shall be a legal holiday in New York City, New York, Atlanta,
Georgia, or Houston, Texas, or a day on which banking institutions are
authorized or required by law or other government actions to close and
(ii) with respect to all notices and determinations in connection with,
and payments of principal and interest on, LIBO Rate Loans, any day
which is a Business Day described in clause (i) and which is also a day
for trading by and between banks for U.S. dollar deposits in the
relevant interbank Eurodollar market.
"Capital Expenditures" shall mean, for any period, the sum of (i)
expenditures (whether paid in cash or accrued as a liability, including
the portion of Capitalized Leases originally incurred during such period
that is capitalized on the consolidated balance sheet of the Borrower
and its Subsidiaries) by the Borrower and its Subsidiaries during such
period that, in conformity with GAAP, are included in "capital
expenditures", "additions to property, plant or equipment" or
comparable items in the consolidated financial statements of the
Borrower and its Subsidiaries, and (ii) to the extent not included in
clause (i), the aggregate of all net noncurrent assets of businesses
acquired by the Borrower and its Subsidiaries during that period,
including all purchase price adjustments.
"Capitalized Lease" shall mean (i) any lease of property, real or
personal, the obligations under which are capitalized on the
consolidated balance sheet of the Borrower and its Subsidiaries, and
(ii) any other such lease to the extent that the then present value of
the minimum rental commitment thereunder should, in accordance with
GAAP, be capitalized on a balance sheet of the lessee.
"Capitalized Lease Obligations" shall mean all obligations of the
Borrower and its Subsidiaries under or in respect of Capitalized Leases.
"Cash Advances" shall mean the amount of Loans outstanding plus the
LC Exposure.
4
"Cash Equivalents" shall mean at any time:
(a) any evidence of indebtedness, maturing not more than one year after
such time, issued or guaranteed by the United States Government;
(b) commercial paper, maturing not more than nine months from the date
of issue, which is issued by:
(i) a corporation (other than an affiliate of any Loan Party)
organized under the laws of any state of the United States or of the
District of Columbia and rated A-1 by Standard & Poor's Corporation or
P-1 by Xxxxx'x Investors Service, Inc., or
(ii) the Agent (or its holding company);
(c) any certificate of deposit or bankers acceptance, maturing not more
than one year after such time, which is issued by either:
(i) a commercial banking institution that is a member of the
Federal Reserve System and has a combined capital and surplus and
undivided profits of not less than $500,000,000, or
(ii) the Agent or any bank affiliate thereof; or
(d) any repurchase agreement entered into with the Agent or any Bank or
a bank affiliate thereof (or other commercial banking institution of the
stature referred to in CLAUSE (c)(i)) which:
(i) is secured by a fully perfected security interest in any
obligation of the type described in any of CLAUSES (a) through (c); and
(ii) has a market value at the time such repurchase agreement is
entered into of not less than 100% of the repurchase obligation of the
Agent or any Bank or such bank affiliate thereof (or other commercial
banking institution) thereunder.
"CIBC" shall mean Canadian Imperial Bank of Commerce, in its individual
capacity.
5
"Closing Date" shall mean the date on which the initial Loans are
advanced hereunder.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any successor statute.
"Collateral" shall mean all property and interests in property now
owned or hereafter acquired in or upon which a Lien has been or is purported
or intended to have been granted to the Agent or any Bank under any of the
Security Documents.
"Commitment" shall mean at any time, for any Bank, the amount set forth
opposite such Bank's name on Annex I hereto under the heading "Loan
Commitment," as such amount may be reduced from time to time pursuant to
Sections 2.11(b) or 9.4(d).
"Contingent Liability" shall mean any agreement, undertaking or
arrangement by which any Person guarantees, endorses or otherwise becomes or
is contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
indebtedness, obligation or any other liability of any other Person (other
than by endorsements of instruments in the course of collection), or
guarantees the payment of dividends or other distributions upon the shares of
any other Person. The amount of any Person's obligation under any Contingent
Liability shall (subject to any limitation set forth therein) be deemed to be
the outstanding principal amount (or maximum principal amount, if larger) of
the debt, obligation or other liability guaranteed thereby.
"Conversion Date" shall mean July 1, 1999, unless extended upon mutual
agreement of the Borrower and the Banks.
"Credit Exposure" shall have the meaning provided in Section 9.4(b).
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
6
"Default Rate" shall have the meaning provided in Section 2.7(c).
"Dollar" and "$" shall mean the lawful money of the United States of
America.
"Dividends" shall have the meaning provided in Section 6.7.
"Domestic Lending Office" shall mean, as to any Bank, the office of such
Bank designated as such on Annex I, or such other office designated by such
Bank from time to time by written notice to the Agent and the Borrower.
"EBITDA" shall mean, for any period for which a determination thereof
is to be made, without duplication, the sum of the amounts for such period of
(i) Net Income, (ii) Interest Expense, (iii) depreciation expense and
depletion expense, (iv) amortization expense, and (v) federal and state taxes
(excluding any production tax), and (vi) any losses arising outside of the
ordinary course of business (including net loss carryforwards) which have
been included in the determination of Net Income; MINUS (vii) any gains
arising outside of the ordinary course of business which have been included
in the determination of Net Income; in each case, of the Borrower and its
Subsidiaries.
"Environmental Affiliate" shall mean, with respect to any Person, any
other Person whose liability for any Environmental Claim such Person has or
may have retained, assumed or otherwise become liable for (contingently or
otherwise), either contractually or by operation of law.
"Environmental Approvals" shall mean any permit, license, approval,
ruling, variance, exemption or other authorization required under applicable
Environmental Laws.
"Environmental Claim" shall mean, with respect to any Person, any
notice, claim, demand or similar communication (written or oral) by any other
Person alleging potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries,
7
fines or penalties arising out of, based on or resulting from (i) the
presence, or release into the environment, of any Materials of Environmental
Concern at any location, whether or not owned by such Person or (ii)
circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law.
"Environmental Laws" shall mean all federal, state and local laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), including without
limitation, laws and regulations relating to emissions, discharges, releases
or threatened releases of Materials of Environmental Concern, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental
Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time. Section references to ERISA are to ERISA, as
in effect at the date of this Agreement and any subsequent provisions of
ERISA, amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Controlled Group" means a group consisting of any ERISA Person
and all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control with such
Person that, together with such Person, are treated as a single employer
under regulations of the PBGC.
"ERISA Person" shall have the meaning set forth in Section 3(9) of ERISA
for the term "person."
"ERISA Plan" means (i) any Plan that (x) is not a Multiemployer Plan and
(y) has Unfunded Benefit Liabilities in excess of $500,000 and (ii) any Plan
that is a Multiemployer Plan.
"Event of Default" shall have the meaning provided in Section 7.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System as constituted from time to time.
8
"Fee Letter" shall mean that certain letter agreement between the
Borrower and CIBC dated of even date with this Agreement concerning certain
fees in connection with this Agreement and any agreements or instruments
executed in connection therewith, as the same may be amended or replaced from
time to time.
"Fees" shall mean all amounts payable pursuant to Section 2.17.
"Final Maturity Date" shall mean July 1, 2002, unless extended by mutual
agreement of the Borrower and the Banks but in no event shall the Final
Maturity Date occur more than three (3) years after the Conversion Date.
"GAAP" shall mean United States generally accepted accounting principles
as in effect on the date hereof and consistent with those utilized in the
preparation of the financial statements referred to in Section 4.5.
"Guarantor" shall collectively mean Inland Resources and the
Subsidiaries of Borrower listed on Schedule 4.23 and any other Person who
executes a Guaranty.
"Guaranty" shall have the meaning provided in Section 3.1(a)(v).
"Hedging Agreement" shall mean (i) any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or similar
agreement designed to protect the Borrower against fluctuations in interest
rates or (ii) any commodity hedge, commodity swap, exchange, forward,
future, collar or cap agreements, fixed price agreements and all other
agreements or arrangements designed to protect the Borrower against
fluctuations in commodity prices.
"Highest Lawful Rate" shall mean, with respect to each Bank, the maximum
nonusurious interest rate, if any, that at any time or from time to time may
be contracted for, taken, reserved, charged or received on the Notes or on
other Indebtedness under laws applicable to such Bank which are presently in
effect or, to the extent allowed by law, under such applicable laws which may
9
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow.
"Hydrocarbon Interests" shall mean all of the Borrower's rights, titles,
interests and estates in and to oil and gas leases, oil, gas and mineral
leases, or other liquid or gaseous hydrocarbon leases, mineral fee interests,
overriding royalty and royalty interests, net profit interest and production
payment interests, including any reserve for residual interest of whatever
nature, in each case located in the United States of America.
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate, liquid hydrocarbons and all
products refined or separated therefrom.
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than trade payables on terms of 90 days
or less incurred in the ordinary course of business of such Person), (ii) all
indebtedness of such Person evidenced by a note, bond, debenture or similar
instrument, (iii) the principal component of all Capitalized Lease
Obligations of such Person, (iv) the face amount of all letters of credit
issued for the account of such Person and, without duplication, all
unreimbursed amounts drawn thereunder, (v) all indebtedness of any other
Person secured by any Lien on any property owned by such Person, whether or
not such indebtedness has been assumed, (vi) all Contingent Liability of such
Person, (vii) all obligations of such Person under any synthetic lease
transaction or any other structured finance transaction in connection with
the construction of any refinery, and (viii) all payment obligations of such
Person under Hedging Agreements.
"Initial Borrowing Base" shall have the meaning provided in Section 2.3.
"Inland Resources" shall mean Inland Resources Inc.
"Interest Expense" shall mean, for any period for which a determination
thereof is to be made, the aggregate amount of all interest of the Borrower
and its
10
Subsidiaries on a consolidated basis, whether paid or accrued during such
period and whether capitalized or recognized as an expense, including all
commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing.
"Interest Period" shall have the meaning provided in Section 2.8.
"Investment" shall mean, relative to any Person,
(a) any loan or advance made by such Person to any other Person
(excluding commission, travel and similar advances to officers and employees
made in the ordinary course of business);
(b) any Contingent Liability of such Person; and
(c) any ownership or similar interest held by such Person in any other
Person.
The amount of any Investment shall be the original principal or capital
amount thereof less all returns of principal or equity thereon (and without
adjustment by reason of the financial condition of such other Person) and
shall, if made by the transfer or exchange of property other than cash, be
deemed to have been made in an original principal or capital amount equal to
the fair market value of such property.
"LC Commitment" at any time shall mean $2,000,000.
"LC Exposure" at any time shall mean the difference between (i)
aggregate face amount of all undrawn and uncancelled Letters of Credit and
the aggregate of all amounts drawn under all Letters of Credit and not yet
reimbursed, minus (ii) the aggregate amount of all cash securing outstanding
Letters of Credit pursuant to Section 2.23(b).
"Letter of Credit Agreements" shall mean the written agreements with the
Agent, as issuing lender for any Letter of Credit, executed or hereafter
executed in connection with the issuance by the Agent of the Letters
11
of Credit, such agreements to be on the Agent's customary form for letters of
credit of comparable amount and purpose as from time to time in effect or as
otherwise agreed to by the Borrower and the Agent.
"Letters of Credit" shall mean the letters of credit issued pursuant to
Section 2.2 and all reimbursement obligations pertaining to any such letters
of credit, and "Letter of Credit" shall mean any one of the Letters of
Credit and the reimbursement obligations pertaining thereto.
"LIBO Base Rate" shall mean, with respect to each day during an Interest
Period for LIBO Rate Loans, the rate of interest per annum (rounded upwards
to the nearest whole multiple of one-sixteenth of one percent) at which
deposits in United Stats dollars are offered to the Agent in New York, New
York, by prime banks in the New York City interbank eurodollar market by
11:00 A.M.(New York City time) two (2) Business Days before the first day of
such Interest Period for delivery on the first day of such Interest Period
for a period equal to such Interest Period and in an amount approximately
equal to the LIBO Rate Loan.
"LIBO Lending Office" shall mean, as to any Bank, the office of such Bank
designated as such on Annex I, or such other office designated by such Bank
from time to time by written notice to the Agent and the Borrower.
"LIBO Rate" shall mean with respect to each day during an Interest Period
for LIBO Rate Loans, a rate per annum determined for such day in accordance
with the following formula (rounded upwards to the nearest whole multiple of
1/100th of one percent):
LIBO Base Rate
------------------------------------
1.00 - LIBO Rate Reserve Percentage
"LIBO Rate Loans" shall mean Loans made and/or being maintained at a rate
of interest based upon the LIBO Rate.
"LIBO Rate Reserve Percentage" shall mean, with respect to each day
during an Interest Period for any LIBO Rate Loan is the reserve percentage,
if any, applicable during such Interest Period under regulations
12
issued from time to time by the Board of Governors of the Federal Reserve
System (or if more than one such percentage is so applicable, the daily
average of such percentages for those days in such Interest Period during
which any such percentage shall be so applicable) for determining the maximum
reserve requirement (including any emergency, supplemental, special or other
marginal reserve requirement) specified from time to time under regulations
issued by the Board of Governors of the Federal Reserve System (or any
successor thereto) and applicable to liabilities or assets consisting of or
including "Eurocurrency Liabilities" (as defined in Regulation D) having a
term approximately equal or comparable to such Interest Period.
"Lien" shall mean any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
charge against or interest in property to secure payment of a debt or
performance of any obligation, or preference, priority or other security
agreement of any kind or nature whatsoever, including, without limitation,
any conditional sale or other title retention agreement, any financing lease
having substantially the same effect as any of the foregoing and the filing
of any financing statement or similar instrument under the Uniform Commercial
Code or comparable law of any jurisdiction, domestic or foreign.
"Loans" shall have the meaning provided in Section 2.1.
"Loan Documents" shall mean this Agreement, the Notes, the Guaranty, and
the Security Documents.
"Loan Party" shall mean and include the Borrower and the Guarantor.
"Margin Stock" shall have the meaning provided such term in Regulation U
and Regulation G of the Federal Reserve Board.
"Material Adverse Effect" shall mean a material adverse effect upon (i)
the business, operations, properties, assets, prospects or condition
(financial or otherwise) of the Borrower and its Subsidiaries, taken as a
whole, or (ii) the ability of any Loan Party to perform,
13
or of the Agent or any of the Banks to enforce, any of the Obligations.
"Materials of Environmental Concern" shall mean and include chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum and petroleum
products.
"Maximum Commitment" shall have the meaning provided in Section 2.11(a).
"Mortgage" shall mean the Mortgage, Deed of Trust, Assignment, Security
Agreement and Financing Statement, by and between the Borrower and the Agent
covering the interest described therein, as amended, supplemented, restated
or otherwise modified and in effect from time to time, together with any
other mortgage, deed of trust, assignment, security agreement and financing
statements, in form and substance satisfactory to the Agent in its sole and
absolute discretion, as the Borrower or any Loan Party shall execute and
deliver in order to grant additional collateral acceptable to the Agent for
the payment of the Loans and all other obligations of the Loan Parties under
the Loan Documents.
"Mortgaged Properties" shall mean those properties and interests subject
to a Lien in favor of the Agent pursuant to any Mortgage, including personal
property as more specifically described in the Mortgage, and any other
properties or interests acceptable to the Agent which from time to time are
subject to a valid perfected and first priority Lien in favor of the Agent
pursuant to any additional or supplemental Mortgage.
"Multiemployer Plan" shall mean a Plan which is a "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA.
"Net Income" shall mean, for any period for which a determination
thereof is to be made, the net income or (loss) of the Borrower and its
Subsidiaries on a consolidated basis for such period taken as a single
accounting period.
"Net Sale Proceeds" shall mean all cash proceeds of each sale or other
disposition of assets by the Loan Parties (other than sales of Hydrocarbon in
the ordinary course of business), if such proceeds exceed
14
$100,000 in respect of any transaction or series of related transactions, in
each case net of (i) reasonable expenses incurred or reasonably expected to
be incurred in connection with such sale or disposition, (ii) any income,
franchise, transfer or other tax payable by any Loan Party in connection with
such sale or disposition and (iii) any Indebtedness secured by a Lien on such
property or assets and required to be repaid as a result of such sale or
other disposition.
"Notes" shall have the meaning provided in Section 2.6(a), together with
any and all renewals, extensions for any period, increases, rearrangements,
substitutions or modifications thereof.
"Notice of Borrowing" shall have the meaning provided in Section 2.4.
"Notice of Conversion or Continuation" shall have the meaning provided
in Section 2.10.
"Obligations" shall mean all obligations, liabilities and indebtedness
of every nature of the Borrower and the Guarantor from time to time owing to
the Agent or any Bank under or in connection with this Agreement and any
Hedging Agreement now or hereafter arising between the Borrower and any
Subsidiary and any Bank or any other Loan Document and all renewals,
extensions and/or rearrangements of any of the above.
"Oil and Gas Properties" shall mean Hydrocarbon Interests; any
properties now or hereafter pooled or unitized with Hydrocarbon Interests;
all presently existing or future unitization, pooling agreements and
declarations of pooled units and the units created thereby (including without
limitation all units created under orders, regulations and rules of any
governmental body or agency having jurisdiction) which may affect all or any
portion of the Hydrocarbon Interests; all operating agreements, joint venture
agreements, contracts and other agreements which relate to any of the
Hydrocarbon Interest or the production, sale, purchase, exchange or
processing of hydrocarbons from or attributable to such Hydrocarbon
Interests; all hydrocarbons in and under and which may be produced and saved
or attributable to the Hydrocarbon Interests, the lands covered thereby and
all oil in tanks and all rents, issues, profits, proceeds,
15
products, revenues and other incomes from or attributable to the Hydrocarbon
Interests; all tenements, profits a prendre, hereditaments, appurtenances and
properties in anywise appertaining, belonging, affixed or incidental to the
Hydrocarbon Interests, properties, rights, titles, interests and estates
described or referred to above, including any and all property, real or
personal, now owned or hereinafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of any
of such Hydrocarbon Interests or property (excluding drilling rigs,
automotive equipment or other personal property which may be on such premises
for the purpose of drilling a well or for other similar temporary uses) and
including, without limitation, any and all oil xxxxx, gas xxxxx, water xxxxx,
injection xxxxx or other xxxxx, buildings, structures, fuel separators,
liquid extraction plants, plant compressors, pumps, pumping units, field
gathering systems, tanks and tank batteries, fixtures, valves, fittings,
machinery and parts, engines, boilers, meters, apparatus, equipment,
appliances, tools, implements, cables, wires, towers, casing, tubing and
rods, surface leases, rights-of-way, easements and servitudes together with
all additions, substitutions, replacements, accessions and attachments to any
and all of the foregoing.
"Participant" shall have the meaning provided in Section 9.4(b).
"Payment Date" shall mean the last day of each March, June, September,
and December, in each year; provided, however, that if any such day is not a
Business Day, such Payment Date shall be the next succeeding Business Day.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
under ERISA, or any successor thereto.
"Person" shall mean and include any individual, partnership, joint
venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or agency, department or instrumentality
thereof.
"Plan" means any employee benefit plan covered by Title IV of ERISA, the
funding requirements of which:
16
(i) were the responsibility of the Borrower or a member of its ERISA
Controlled Group at any time within the five years immediately preceding
the date hereof,
(ii) are currently the responsibility of the Borrower or a member of
its ERISA Controlled Group, or
(iii) hereafter become the responsibility of the Borrower or a member
of its ERISA Controlled Group,
including any such plans as may have been, or may hereafter be, terminated
for whatever reason.
"Pledge Agreement" shall have the meaning provided in Section 3.1(a)(iii).
"Pro Rata Share" as to any Bank shall mean a fraction (expressed as a
percentage), the numerator of which shall be the aggregate amount of such
Bank's Commitments and the denominator of which shall be the Total Commitment.
"Purchasing Banks" shall have the meaning provided in Section 9.4(d).
"Regulation D" shall mean Regulation D of the Federal Reserve Board as
from time to time in effect and any successor to all or any portion thereof.
"Reportable Event" has the meaning set forth in Section 4043(b) of ERISA
(other than a Reportable Event as to which the provision of 30 days notice to
the PBGC is waived under applicable regulations), or is the occurrence of any
of the events described in Section 4068(f) or 4063(a) of ERISA.
"Required Banks" shall mean Banks holding more than 66 2/3% of the
principal amount of Loans outstanding or, if no Loans are outstanding, more
than 66 2/3% of the Total Commitments.
"Revolving Credit Period" shall mean the period from the Closing Date to
but not including the Conversion
17
Date.
"Security Documents" shall mean and include the Guaranty, the Letters of
Credit, the Letter of Credit Agreements, the Pledge Agreement, and the
Mortgage.
"Subsidiary" of any Person shall mean and include (i) any corporation 50%
or more of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time owned by such Person
directly or indirectly through Subsidiaries and (ii) any partnership,
association, joint venture or other entity in which such Person, directly or
indirectly through Subsidiaries, is either a general partner or has a 50% or
more equity interest at the time.
"TCW Credit Agreement" shall mean that certain Credit Agreement dated
November 29, 1995, among Inland Production Company, Inland Resources Inc.,
Trust Company of the West, TCW Asset Management Company and The TCW Debt and
Royalty Funds IV.
"Term Loan Period" shall mean the period commencing on the Conversion
Date and ending on the Final Maturity Date.
"Termination Event" shall mean (i) a Reportable Event, or (ii) the
initiation of any action by the Borrower, any member of the Borrower's ERISA
Controlled Group or any ERISA Plan fiduciary to terminate an ERISA Plan or
the treatment of an amendment to an ERISA Plan as a termination under ERISA,
or (iii) the institution of proceedings by the PBGC under Section 4042 of
ERISA to terminate an ERISA Plan or to appoint a trustee to administer any
ERISA Plan.
"Total Commitment" shall mean, at any time, the sum of the Commitments of
all of the Banks at such time.
"Transferee" shall have the meaning provided in Section 9.4(e).
"Transfer Supplement" shall have the meaning
18
provided in Section 9.4(d).
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, I.E., a Base Rate Loan or a LIBO Rate
Loan.
"Unfunded Benefit Liabilities" means with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all benefit
liabilities under such Plan as defined in Section 4001(a)(16) of ERISA,
exceeds (ii) the fair market value of all Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plan (on the basis of assumptions prescribed by the PBGC for the purpose of
Section 4044 of ERISA).
Section 0.1 RULES OF CONSTRUCTION. When used in this Agreement:
(a) the singular includes the plural and the plural includes the
singular;
(b) "or" is not exclusive;
(c) a reference to any law, statute, regulation, order or ruling
includes the same as amended, supplemented or otherwise modified and in
effect from time to time and any replacement thereof;
(d) a reference to a Person includes its permitted successors and
permitted assigns and, in the case of any governmental entity or body, any
Person succeeding to its functions and capacities;
(e) a reference to an agreement, instrument or document shall include
such agreement, instrument or document as the same may be amended, modified,
supplemented, replaced or superseded from time to time in accordance with its
terms and as permitted by the Loan Documents;
(f) the words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall, unless otherwise expressly
specified, refer to this Agreement as a whole and not to any particular
provision of this Agreement and all references to Sections, Articles,
Schedules and Exhibits shall be ref-
19
erences to Sections, Articles, Schedules and Exhibits of this Agreement
unless otherwise expressly specified; and
(g) Except as otherwise expressly provided in this Agreement, references
to documents or certificates "substantially in the form" of Exhibits to
another document shall mean that such documents or certificates are duly
completed in the form of the related Exhibits with substantive changes
subject to the provisions of Section 9.5.
SECTION 1. AMOUNT AND TERMS OF CREDIT FACILITIES.
Section 1.1 LOANS.
(a) Subject to and upon the terms and conditions herein set forth, each
Bank severally and not jointly agrees, at any time and from time to time on
and after the Closing Date and prior to the Conversion Date, to make loans
(collectively, "Loans") to the Borrower, in an aggregate principal amount at
any time outstanding up to but not exceeding the amount of such Bank's
Commitment as then in effect; PROVIDED, HOWEVER, that the aggregate principal
amount of all such Loans by all Banks hereunder at any one time outstanding
together with the LC Commitment shall not exceed the Maximum Commitment. The
sum of the Commitments of all of the Banks (the "Total Commitment") on the
Closing Date shall be Fifty Million Dollars ($50,000,000). The Loans of each
Bank made on the Closing Date shall be initially made as a Base Rate Loan and
may thereafter be maintained at the option of the Borrower as a Base Rate
Loan or a LIBO Rate Loan, in accordance with the provisions hereof. During
the Revolving Credit Period, Loans may be voluntarily prepaid pursuant to
Section 2.12, and, subject to the other provisions of this Agreement, any
amounts so prepaid may be reborrowed.
(b) All Loans outstanding on the Conversion Date shall be converted to
a single loan to the Borrower of a sum equal to the amount of all Loans
outstanding on the Conversion Date. Commencing on the Payment Date
immediately following the Conversion Date and on each Payment Date
thereafter, the aggregate principal amount of the Loans outstanding on the
Conversion Date shall be payable in twelve (12) equal consecutive quarterly
installments, sufficient to amortize the outstanding principal amount over
the Term Loan Period with final payment
20
of the remaining principal balance of the Loans dues on the Final Maturity
Date.
(c) During the Revolving Credit Period, each Borrowing of Loans shall be
in the aggregate minimum amount of $100,000 or any integral multiple of
$50,000 in excess thereof.
Section 1.2 LETTERS OF CREDIT. During the period from and including the
Closing Date up to but excluding two (2) days prior to the Final Maturity
Date, the Agent, as issuing bank for the Banks, agrees to extend credit for
the account of the Borrower or any Subsidiary at any time and from time to
time by issuing, renewing, extending or reissuing Letters of Credit; provided
however, the full amount of all Letters of Credit at any one time outstanding
shall not exceed the lesser of (i) the LC Commitment or (ii) the Maximum
Commitment, as then in effect, minus the aggregate principal amount of all
Loans then outstanding. Upon issuance of any Letters of Credit hereunder,
the Banks shall be irrevocably and automatically deemed to have purchased a
participation in such Letters of Credit according to their respective Pro
Rata Share.
Section 1.3 DETERMINATION OF THE BORROWING BASE. During the period from
the date hereof to the date of the first determination of the Borrowing Base
pursuant to the further provisions of this SECTION 2.3, the amount of the
Borrowing Base shall be Twenty-Six Million Dollars ($26,000,000.00) (the
"Initial Borrowing Base"). The Borrowing Base may be reduced or increased
from time to time pursuant to a redetermination thereof as set forth in this
Section 2.3.
Section 1.3.1 ANNUAL REDETERMINATION OF BORROWING BASE. Promptly after
January 1 of each calendar year, commencing January 1, 1998, and in any event
prior to March 15th of such calendar year, the Borrower shall furnish to the
sAgent a report in form and substance satisfactory to the Agent, audited by an
independent engineer satisfactory to the Agent, which report shall be dated
as of January 1 of such calendar year and shall set forth the proven and
producing oil and gas reserves attributable to Hydrocarbon Interests of the
Borrower, including the Mortgaged Properties and any new Hydrocarbon
Interests of the Borrower acceptable to the Agent,
21
such report to include a projection of the rate of production and net
operating income with respect thereto, as of such date. Within thirty (30)
days after receipt of such report, the Agent shall make a determination of
the principal amount of the Loans to remain available to the Borrower
hereunder (herein as determined and redetermined from time to time and in
effect on any date called the "Borrowing Base") on account of such reserves
as of such January 1; PROVIDED THAT in computing the Borrowing Base, at least
eighty percent (80%) of the net present value of oil and gas reserves
included in the Borrowing Base (such net present value being, determined by
the Agent in its sole discretion) must be attributable to Mortgaged
Properties. Following such determination the Agent shall promptly propose to
the Banks a new Borrowing Base in a timely and complete manner. After having
received notice of such proposal by the Agent, the Required Banks shall have
ten (10) Business Days to agree or disagree with such proposal. If at the
end of the ten (10) Business Days, the Required Banks have not communicated
their approval or disapproval, such silence shall be deemed to be an approval
and the Agent's proposal shall be the new Borrowing Base. If however, the
Required Banks notify Agent within ten (10) Business Days of their
disapproval, the Agent shall, within a reasonable period of time, redetermine
the Borrowing Base. The Agent shall promptly notify the Borrower and the
Banks in writing of the amount of Borrowing Base then in effect, PROVIDED
THAT failure to so notify the Borrower shall not affect the Borrower's
obligations hereunder or subject the Agent to liability. The determination
of the Borrowing Base made by the Agent shall be so made by the Agent in the
exercise of its sole discretion in accordance with the Agent's customary
practices and standards for oil and gas loans.
Section 1.3.2 SEMI-ANNUAL SCHEDULED DETERMINATION OF THE BORROWING BASE.
In addition, within forty-five (45) days after each July 1, commencing July
1, 1998, the Borrower will make available for review by the Agent monthly
production data for each lease or other interest included within the
Hydrocarbon Interests of the Borrower for the six (6) month period preceding
such date (PROVIDED THAT, to the extent such data may not be available,
monthly production data for June of such period may be based on reasonable
estimates of the Borrower) together with the Borrower's projection of the
rate of produc-
22
tion and net operating income for such properties (in the aggregate) during
the next succeeding six (6) month period. Also to be made available are the
reserves, projected rate of income and net operating income on any
Hydrocarbon Interests which were developed by the Borrower subsequent to the
preceding January 1 and which are to be included in the Borrowing Base
subject to the Agent's consent (in its sole discretion) and with respect to
which the Agent shall have received title opinions in form and substance
satisfactory to the Agent. The Agent shall have thirty (30) days after
receipt of this information from the Borrower to propose a new Borrowing Base
as of the preceding July 1 to the Banks. The determination of the Borrowing
Base shall be made in the same manner and be subject to the same approvals as
prescribed in Section 2.3.1.
Section 1.3.3 DISCRETIONARY DETERMINATION OF THE BORROWING BASE.
(a) In addition to the foregoing scheduled annual and semi-annual
determinations of the Borrowing Base, the Agent shall have the right to
redetermine the Borrowing Base at its sole discretion at any time and from
time to time but not more often than once every six calendar months, based on
the latest reports delivered pursuant to Sections 2.3.1 or 2.3.2 and/or upon
such other information as the Agent may request. Each such discretionary
redetermination of the Borrowing Base shall be made in the same manner and in
accordance with the procedures and standards set forth above by adjusting the
Borrowing Base then in effect. If the Agent shall elect to make a
discretionary redetermination of the Borrowing Base pursuant to the
provisions of this Section 2.3.3(a), the Borrower shall within thirty (30)
days of receipt of a request therefor from the Agent deliver to the Agent
such updated engineering, production and operating data as the Agent shall
request, including monthly production data for each lease or interest
included within the Hydrocarbon Interests of the Borrower and the Borrower's
projections of the rate of production and net income for such properties.
The Agent shall have thirty days (30) following receipt of such requested
information to propose a new Borrowing Base as of such date of determination
to the Banks. The determination of the Borrowing Base shall be made in the
same manner and be subject to the same approvals as prescribed in Section
2.3.1.
23
(b) In addition, the Borrower shall also have the right to request a
redetermination of the Borrowing Base at any time and from time to time but
not more often than once every six calendar months, based on the latest
reports delivered pursuant to Sections 2.3.1 or 2.3.2 and/or upon such other
information as provided by the Borrower. Each such discretionary
redetermination of the Borrowing Base shall be made in the same manner and in
accordance with the procedures and standards set forth above by adjusting the
Borrowing Base then in effect. If the Borrower shall elect to request a
discretionary redetermination of the Borrowing Base pursuant to the
provisions of this Section 2.3.3 (b), the Borrower shall within thirty (30)
days of such request therefor deliver to the Agent updated engineering,
production and operating data, including monthly production data for each
lease or interest included within the Hydrocarbon Interests of the Borrower
and the Borrower's projections of the rate of production and net income for
such properties. The Agent shall have thirty days (30) following receipt of
such information to propose a new Borrowing Base as of such date of
determination to the Banks. The determination of the Borrowing Base shall be
made in the same manner and be subject to the same approvals as prescribed in
Section 2.3.1.
Section 1.3.4 REDETERMINATION OF BORROWING BASE UPON SALE OF OIL AND
GAS PROPERTIES. The Agent will redetermine the Borrowing Base upon any
proposed sale, transfer or conveyance of any Oil and Gas Property of the
Borrower as permitted by Section 6.5 hereof by adjusting the Borrowing Base
then in effect by an amount equal to the value attributed to the Oil and Gas
Properties to be conveyed, as determined by the Agent in its sole discretion
in accordance with its customary practices and standards. Nothing herein
shall be construed to permit the sale, transfer or other conveyance (i) of
any Oil and Gas Properties of the Borrower except in compliance with Section
6.5 or (ii) of any Mortgaged Property.
Section 1.4 NOTICE OF BORROWING.
(a) Whenever the Borrower desires to borrow Loans hereunder, it shall
give the Agent at the Agent's Office prior to 10:00 A.M., New York City time,
on the day of such Borrowing, telex, telecopy or telephonic no-
24
xxxx (promptly confirmed in writing) of each Base Rate Loan, and at least
three (3) Business Days' prior telex, telecopy or telephonic notice (promptly
confirmed in writing) of each LIBO Rate Loan to be made hereunder. Each such
notice (a "Notice of Borrowing") shall be irrevocable and shall specify (i)
the aggregate principal amount of the requested Loans, (ii) the date of
Borrowing (which shall be a Business Day), and (iii) whether such Loans shall
consist of Base Rate Loans or LIBO Rate Loans and, if LIBO Rate Loans, the
initial Interest Period to be applicable thereto (provided, that no LIBO Rate
Loans may be requested or made when any Default or Event of Default has
occurred and is continuing).
(b) The Borrower shall give the Agent at the Agent's Office prior to
10:00 A.M., New York City time, at least three (3) Business Days prior telex,
telecopy or telephonic notice (promptly confirmed in writing) of each request
for the issuance and at least ten (10) Business Days prior telex, telecopy or
telephonic notice (promptly confirmed in writing) of the renewal or extension
of a Letter of Credit hereunder which request shall specify the amount of
such Letter of Credit, the date (which shall be a Business Day) such Letter
of Credit is to be issued, renewed or extended, the duration thereof, the
name and address of the beneficiary thereof, the form of the Letter of
Credit, the number of the Letter of Credit if such Letter of Credit is to be
renewed or extended, and such other information as the Agent may reasonably
request all of which shall be reasonably satisfactory to the Agent. Subject
to the terms and conditions of this Agreement, on the date specified for the
issuance, renewal or extension of a Letter of Credit, the Agent shall issue
such Letter of Credit to the beneficiary thereof. No stated expiration date
of any Letter of Credit shall extend beyond the date that is the earlier of
(i) one (1) year after the date of issuance of the Letter of Credit or (ii)
two (2) days before the Final Maturity Date.
In conjunction with the issuance of each Letter of Credit, the Borrower
and the Subsidiary, if the account party, shall execute a Letter of Credit
Agreement. In the event of any conflict between any provision of a Letter of
Credit Agreement and this Agreement, the Borrower, the Agent and the Banks
hereby agree that the provisions of this Agreement shall govern.
25
The Agent will send to the Borrower, immediately upon issuance of any
Letter of Credit, or an amendment thereto, a true and complete copy of such
Letter of Credit, or such amendment thereto.
(c) Promptly after receipt of a Notice of Borrowing, the Agent shall
inform each Bank as to its Pro Rata Share of the Loans or the Letter of
Credit requested thereunder.
Section 1.5 DISBURSEMENT OF FUNDS.
(a) No later than 1:00 P.M., New York City time, on the date specified
in each Notice of Borrowing, each Bank will make available its Pro Rata Share
of the Loans requested to be made on such date, in U.S. dollars and
immediately available funds, at the Agent's Office. After the Agent's
receipt of the proceeds of such Loans, the Agent will make available to the
Borrower by depositing in the Borrower's account at the Agent's Office the
aggregate of the amounts so made available in the type of funds actually
received.
(b) Unless the Agent shall have been notified by any Bank prior to the
date of a Borrowing that such Bank does not intend to make available to the
Agent its portion of the Loans to be made on such date, the Agent may assume
that such Bank has made such amount available to the Agent on such date and
the Agent in its sole discretion may, in reliance upon such assumption, make
available to the Borrower a corresponding amount. If such corresponding
amount is not in fact made available to the Agent by such Bank and the Agent
has made such amount available to the Borrower, the Agent shall be entitled
to recover such corresponding amount on demand from such Bank. If such Bank
does not pay such corresponding amount forthwith upon the Agent's demand
therefor, the Agent shall promptly notify the Borrower and the Borrower
shall immediately repay such corresponding amount to the Agent. The Agent
shall also be entitled to recover from such Bank or the Borrower, as the case
may be, interest on such corresponding amount in respect of each day from the
date such corresponding amount was made available by the Agent to the
Borrower to the date such corresponding amount is recovered by the Agent, at
a rate per annum equal to the then applicable rate of interest, calculated in
accordance with Section 2.7, for the re-
26
spective Loans. Nothing herein shall be deemed to relieve any Bank from its
obligation to fulfill its commitments hereunder or to prejudice any rights
which the Borrower may have against any Bank as a result of any default by
such Bank hereunder. Notwithstanding anything contained herein or in any
other Loan Document to the contrary, the Agent may apply all funds and
proceeds of Collateral available for the payment of any Obligations first to
repay any amount owing by any Bank to the Agent as a result of such Bank's
failure to fund its Loans hereunder.
Section 1.6 NOTES.
(a) The Borrower's obligation to pay the principal of, and interest on,
each Bank's Loans shall be evidenced by in the case of such Bank's Loans, a
promissory note (a "Note") duly executed and delivered by the Borrower
substantially in the form of Exhibit A hereto in a principal amount equal to
such Bank's Commitment, with blanks appropriately completed in conformity
herewith. Each Note issued to a Bank shall (x) be payable to the order of
such Bank, (y) be dated the Closing Date, and (z) mature on the Final
Maturity Date.
(b) Each Bank is hereby authorized, at its option, either (i) to
endorse on the schedule attached to its Note (or on a continuation of such
schedule attached to such Note and made a part thereof) an appropriate
notation evidencing the date and amount of each Loan evidenced thereby and
the date and amount of each principal and interest payment in respect
thereof, or (ii) to record such Loans and such payments in its books and
records. Such schedule or such books and records, as the case may be, shall
constitute prima facie evidence of the accuracy of the information contained
therein.
Section 1.7 INTEREST.
(a) The Borrower agrees to pay interest in respect of the unpaid
principal amount of each Base Rate Loan from the date of the making of such
Loan until such Loan shall be paid in full at a rate per annum which shall be
equal to the Base Rate in effect from time to time plus the Applicable
Margin, but in no event to exceed the Highest Lawful Rate, such rate to
change as and when the Base Rate changes, such interest to be
27
computed on the basis of a 365 or 366 day year.
(b) The Borrower agrees to pay interest in respect of the unpaid
principal amount of each LIBO Rate Loan from the date of the making of such
Loan until such Loan shall be paid in full at a rate per annum which shall be
equal to the sum of the relevant LIBO Rate plus the Applicable Margin, but in
no event to exceed the Highest Lawful Rate, such interest to be computed on
the basis of a 360-day year.
(c) In the event that, and for so long as, any Event of Default shall
have occurred and be continuing, the outstanding principal amount of all
Loans and, to the extent permitted by law, overdue interest in respect of all
Loans, shall bear interest at a rate per annum (the "Default Rate") equal to
the sum of two percent (2%) plus the interest rate otherwise applicable
hereunder to such principal amount in effect from time to time.
(d) Interest on each Loan shall accrue from and including the date of
the Borrowing thereof to but excluding the date of any repayment thereof
(provided that any Loan borrowed and repaid on the same day shall accrue one
day's interest) and shall be payable (i) in respect of each Base Rate Loan,
quarterly in arrears on each Payment Date, (ii) in respect of each LIBO Rate
Loan, on the last day of each Interest Period applicable to such Loan and, if
such Interest Period is longer than three months, at three-month intervals
following the first day of such Interest Period, and (iii) in the case of all
Loans, on any prepayment or conversion (on the amount prepaid or converted),
at maturity (whether by acceleration or otherwise) and, after such maturity,
on demand.
(e) The Agent shall, upon determining the LIBO Rate for any Interest
Period, promptly notify the Borrower and the Banks thereof.
Section 1.8 INTEREST PERIODS.
(a) The Borrower shall, in each Notice of Borrowing or Notice of
Conversion or Continuation in respect of the making of, conversion into or
continuation of a LIBO Rate Loan, select the amount and the interest period
(each an "Interest Period") applicable to such
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LIBO Rate Loan, which Interest Period shall, at the option of the Borrower,
be either a one-month, two-month, three-month, six-month period, nine-month
period or (if available to all of the banks) twelve-month period provided
that:
(i) the initial Interest Period for any LIBO Rate Loan shall
commence on the date of the making of such Loan (including the date of
any con-version from a Base Rate Loan) and each Interest Period
occurring thereafter in respect of such Loan shall commence on the date
on which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day, PROVIDED, HOWEVER, that if any Interest
Period would otherwise expire on a day which is not a Business Day but
is a day of the month after which no further Business Day occurs in
such month, such Interest Period shall expire on the next preceding
Business Day;
(iii) if any Interest Period begins on a day for which there is
no numerically corresponding day in the calendar month at the end of
such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month;
(iv) no Interest Period in respect of any Loan shall extend
beyond the Final Maturity Date, as the case may be; and
(v) no Interest Period in respect of a Loan during the Term Loan
Period shall extend beyond any date upon which a repayment of the Loans
is required to be made pursuant to Section 2.1 unless the aggregate
principal amount of Loans which are Base Rate Loans or which have
Interest Periods which will expire on or before such date is equal to
or in excess of the amount of the Loan repayment required to be made on
such date.
(b) If by the time specified in Section 2.10(b), upon the expiration
of any Interest Period, the Borrower has failed to elect a new Interest
Period to be
29
applicable to the respective LIBO Rate Loan as provided above, the Borrower
shall be deemed to have elected to convert such LIBO Rate Loans into Base
Rate Loans effective as of the expiration date of such current Interest
Period.
Section 1.9 MINIMUM AMOUNT OF LIBO RATE LOANS. All borrowings,
conversions, continuations, payments, prepayments and selection of Interest
Periods hereunder shall be made or selected so that, after giving effect
thereto, (i) the aggregate principal amount of any Borrowing comprised of
LIBO Rate Loans shall not be less than $100,000 or an integral multiple of
$50,000 in excess thereof, and (ii) there shall be no more than five (5)
Borrowings comprised of LIBO Rate Loans outstanding at any time.
Section 1.10 CONVERSION OR CONTINUATION.
(a) Subject to the other provisions hereof, the Borrower shall have the
option (i) to convert at any time all or any part of outstanding Base Rate
Loans which comprise part of the same Borrowing to LIBO Rate Loans, (ii) to
convert all or any part of outstanding LIBO Rate Loans which comprise part of
the same Borrowing to Base Rate Loans, on the expiration date of the Interest
Period applicable thereto, or (iii) to continue all or any part of
outstanding LIBO Rate Loans which comprise part of the same Borrowing as LIBO
Rate Loans for an additional Interest Period, on the expiration of the
Interest Period applicable thereto; PROVIDED that (A) no Base Rate Loan may
be converted into a LIBO Rate Loan at any time during the first two days
after the Closing Date and (B) no Loan may be continued as, or converted
into, a LIBO Rate Loan when any Default or Event of Default has occurred and
is continuing.
(b) In order to elect to convert or continue a Loan under this Section
2.10, the Borrower shall deliver an irrevocable notice thereof (a "Notice of
Conversion or Continuation") to the Agent no later than 10:00 A.M., New York
City time, (i) at least three (3) Business Days in advance of the proposed
conversion date in the case of a conversion to a Base Rate Loan and (ii) at
least three (3) Business Days in advance of the proposed conversion or
continuation date in the case of a conversion to, or a continuation of, a
LIBO Rate Loan. A Notice of Conver-
30
sion or Continuation shall specify (w) the requested conversion or
continuation date (which shall be a Business Day), (x) the amount and the
Loan to be converted or continued, (y) whether a conversion or continuation
is requested, and (z) in the case of a conversion to, or a continuation of, a
LIBO Rate Loan, the requested Interest Period. Promptly after receipt of a
Notice of Conversion or Continuation under this Section 2.10(b), the Agent
shall provide each Bank notice thereof.
Section 1.11 CHANGES OF COMMITMENTS.
(a) The Maximum Commitment shall at all times be equal to the lesser of
(i) the Total Commitment after adjustments resulting from reductions pursuant
to Section 2.11(b) hereof or (ii) the Borrowing Base as determined from time
to time.
(b) Upon at least three Business Day's prior irrevocable written notice
(or telephonic notice promptly confirmed in writing) to the Agent (which
notice the Agent shall promptly transmit to each of the Banks), the Borrower
shall have the right, without premium or penalty, to permanently reduce each
Bank's Pro Rata Share of all or part of the Total Commitment, provided that
(i) any such partial reduction shall be in the minimum aggregate amount of
$100,000 or any integral multiple of $50,000 in excess thereof, and (ii) the
Borrower shall not have the right to reduce the Total Commitment below any
amount equal to the LC Exposure unless the Borrower provides cash collateral
in an amount equal to the LC Exposure.
Section 1.12 VOLUNTARY PREPAYMENTS. The Borrower shall have the right
to prepay the Loans in whole or in part from time to time on the following
terms and conditions: (i) the Borrower shall give the Agent written notice
(or telephonic notice promptly confirmed in writing), which notice shall be
irrevocable, of its intent to prepay the Loans, at least three (3) Business
Days prior to a prepayment of LIBO Rate Loans and on the same day of a
prepayment of Base Rate Loans, which notice shall specify the amount of such
prepayment and what Types of Loans and which Facilities are to be prepaid
and, in the case of LIBO Rate Loans, the specific Borrowing(s) pursuant to
which made, and which notice the Agent shall promptly transmit to each of the
Banks, (ii) each
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prepayment shall be in an aggregate principal amount of $100,000 or any
integral multiple of $50,000 in excess thereof, (iii) prepayments of LIBO
Rate Loans made pursuant to this Section shall be in an amount no less than
(A) $1,000,000 and in integral multiples of $100,000 in excess thereof, or
(B) the remaining aggregate principal balance of such LIBO Rate Loan, and
shall be subject to the terms of Section 2.19, and (iv) partial prepayments
of the Loans during the Term Loan Period shall be applied to the scheduled
installments of principal thereof in the inverse order of maturity.
Section 1.13 MANDATORY PREPAYMENTS.
(a) On each date after the Closing Date on which the Borrower or any of
its Subsidiaries receives any Net Sale Proceeds, the Borrower shall prepay
the outstanding Loans in an amount equal to 100% of the amount of such Net
Sale Proceeds, in accordance with the provisions of Section 2.15.
(b) On each date after the Closing Date on which the Borrower or any of
its Subsidiaries receives proceeds of any insurance payment or condemnation
award in respect of any of its assets, if all such proceeds relating to such
awards or payments exceed $50,000 individually or $100,000 in the aggregate,
the Borrower shall prepay the outstanding Loans in an amount equal to 100% of
such proceeds, in accordance with the provisions of Section 2.15.
(c) On each day on which the Total Commitment is reduced pursuant to
Section 2.11(b), the Borrower shall prepay the Loans to the extent, if any,
that the outstanding aggregate principal amount of the Loans plus the LC
Commitment exceeds such reduced Total Commitment.
Section 1.14 MANDATORY PREPAYMENTS AND OTHER ACTIONS WHEN THE LOAN
EXCEEDS THE BORROWING BASE. In the event the unpaid principal amount of the
Loans plus the LC Exposure shall, at the time of any determination of the
Borrowing Base pursuant to the terms of SECTION 2.3 hereof, be in excess of
the Borrowing Base at such time, the Agent shall so notify the Borrower in
the report of the Agent's determination delivered to the Borrower and the
Borrower shall, within fifteen (15) days after notice of any such
determination, notify the Agent that it
32
intends either (i) to subject to a perfected, first priority lien in favor of
the Agent pursuant to a Mortgage, within 30 days of any such determination,
by instruments in form and substance satisfactory to the Agent, additional
Collateral not previously included in the Borrowing Base of a type and with
value in amounts satisfactory to the Agent in order to increase the Borrowing
Base and the Mortgaged Properties by an amount at least equal to such excess,
or (ii) to accelerate the Conversion Date if such event occurs during the
Revolving Credit Period, or (iii) to make mandatory prepayments of principal
on account of the Notes together with accrued interest thereon and/or provide
cash collateral for the Letters of Credit, within 30 days of such
determination in amounts necessary to eliminate the excess of principal
amount of the Loans plus the LC Exposure over the Borrowing Base; PROVIDED
THAT the existence of any excess of principal amount of the Loans plus the LC
Exposure over the Borrowing Base then in effect on the 31st day after such
determination shall constitute an Event of Default pursuant to Section 7.1(a)
or (iv) with the consent of the Agent in its sole and absolute discretion, to
make mandatory payments of principal on account of the Notes together with
accrued interest thereon on a schedule agreed to in writing by the Bank and
satisfactory to the Agent in its sole discretion; provided, however, such
repayment period shall not exceed a six (6) month period commencing on the
day Borrower notifies Agent of his election under this Section 2.14, which
mandatory prepayments of principal shall be in addition to and not in lieu
of any scheduled repayments of principal; and failure by the Borrower to
make any such mandatory prepayments when due shall constitute an Event of
Default hereunder; PROVIDED, HOWEVER, if a Borrowing Base deficiency remains
after prepaying all of the Loans because of outstanding LC Exposure, the
Borrower shall pay to the Agent on behalf of the Banks an amount equal to
such Borrowing Base deficiency to be held as cash collateral as provided in
Section 2.23(b) hereof.
In addition to the above, if the unpaid principal amount of the Loans
plus the LC Exposure shall at any time exceed the Borrowing Base or any Event
of Default or any event or condition which, with the passage of time or
giving of notice or both, would constitute an Event of Default has occurred
and is continuing, the Agent may, in the exercise of its sole and absolute
discretion, from
33
time to time request the Borrower to grant to the Agent a Lien with respect
to any or all Oil and Gas Properties included in the calculation of the
Borrowing Base but not included in the Mortgaged Properties and the Borrower
shall, within thirty (30) days of the date of any such request, grant to the
Agent as security for the obligations of the Borrower pursuant to the Loan
Documents, a Lien pursuant to collateral documents and other instruments in
form and substance satisfactory to the Agent in and to additional Oil and Gas
Properties which together with the Mortgaged Properties theretofore subject
to a Lien in favor of the Agent, constitute Liens on Oil and Gas Properties
having a net present value at least equal to 100% of the then net present
value of the oil and gas reserves included in the Borrowing Base then in
effect (such net present value being determined by the Agent in the exercise
of its sole and absolute discretion in accordance with the Agent's customary
practices for oil and gas loans). Concurrently therewith and with any
Mortgage delivered pursuant to CLAUSE (i) of the preceding paragraph, the
Borrower shall execute and deliver or cause to be executed and delivered any
board resolutions, legal opinions, title opinions, or insurance or other
evidence or guaranty of title and other instruments and documents (including
environmental assessments and appraisals) as the Agent shall require in its
sole and absolute discretion and in form and substance satisfactory to the
Agent.
Section 1.15 APPLICATION OF PREPAYMENTS. All prepayments of the Loans
required by Sections 2.13 and 2.14 shall be applied FIRST, to prepay the Base
Rate Loans until such Base Rate Loans shall have been repaid in full,
together with accrued and unpaid interest thereon, SECOND, to prepay the
LIBO Rate Loans until such LIBO Rate Loans shall have been repaid in full,
together with accrued and unpaid interest thereon, and THIRD, to all other
outstanding Obligations. Simultaneously with any prepayment of the principal
amount of the Loans pursuant to Section 2.13, each Bank's Commitment shall be
permanently reduced by such Bank's Pro Rata Share of such prepayment;
PROVIDED, that no Bank's Commitment shall be reduced to an amount that is
less than such Bank's LC Exposure unless the Borrower provides cash
collateral in an amount equal to such LC Exposure. All prepayments of the
Loans during the Term Loan Period shall be applied to the scheduled
installments of principal thereof in the
34
inverse order of maturity.
Section 1.16 METHOD AND PLACE OF PAYMENT.
(a) Except as otherwise specifically provided herein, all payments and
prepayments under this Agreement, the Notes and the Letters of Credit shall
be made to the Agent for the account of the Banks entitled thereto not later
than 2:00 P.M., New York City time, on the date when due and shall be made in
lawful money of the United States of America in immediately available funds
at the Agent's Office, and any funds received by the Agent after such time
shall, for all purposes hereof (including the following sentence), be deemed
to have been paid on the next succeeding Business Day. Except as otherwise
specifically provided herein, the Agent shall thereafter cause to be
distributed on the date of receipt thereof to each Bank in like funds its Pro
Rata Share of payments so received.
(b) Whenever any payment to be made hereunder or under any Note shall be
stated to be due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest shall be payable at the applicable rate
during such extension.
(c) All payments made by the Borrower hereunder and under the other
Loan Document shall be made irrespective of, and without any reduction for,
any setoff or counterclaims.
Section 1.17 FEES.
(a) The Borrower agrees to pay the fees in the amounts and on the dates
specified in the Fee Letter.
(b) The Borrower agrees to pay to the Agent for the account of each Bank
a commitment fee, computed at the per annum rate of .375% on the Average
Daily Unused Portion of the Maximum Commitment on the basis of a 365 or 366
day year, from and including the Closing Date to the Conversion Date, payable
quarterly in arrears on each Payment Date and on the Conversion Date or such
earlier date, if any, on which the Commitment shall terminate in accordance
with the terms hereof.
35
(c) The Borrower agrees to pay the Agent $5,000 for any unscheduled
determinations of the Borrowing Base requested by the Borrower.
(d) The Borrower agrees to pay the Agent, for the account of each Bank,
commissions for issuing the Letters of Credit on the daily average
outstanding of the maximum liability of the Bank existing from time to time
under such Letter of Credit (calculated separately for each Letter of Credit)
at a rate equal to the Applicable Margin for LIBO Rate Loans per annum on the
basis of a 365 or 366 day year, provided that each Letter of Credit shall
bear a minimum commission of $500 and that each Letter of Credit shall be
deemed to be outstanding up to the full face amount of the Letter of Credit
until the Agent has received the cancelled Letter of Credit or a written
cancellation of the Letter of Credit from the beneficiary of such Letter of
Credit in form and substance acceptable to the Agent, or for any reductions
in the amount of the Letter of Credit (other than from a drawing), written
notification from the Borrower. Such commissions are payable quarterly in
arrears on each Payment Date.
(e) The Borrower agrees to pay to the Agent, for its own account, an
issuing fee of % of the face value of the Letter of Credit payable quarterly
in arrears on each Payment Date for the actual number of days elapsed on a
basis of a 365 or 366 day year.
Section 1.18 INTEREST RATE UNASCERTAINABLE, INCREASED COSTS, ILLEGALITY.
(a) In the event that the Agent, in the case of clause (i) below, or any
Bank, in the case of clauses (ii) and (iii) below, shall have determined
(which determination shall, absent manifest error, be final and conclusive
and binding upon all parties hereto):
(i) on any date for determining the LIBO Rate for any Interest
Period, that by reason of any changes arising after the date of this
Agreement affecting the interbank Eurodollar market, adequate and fair
means do not exist for ascertaining the applicable interest rate on the
basis provided for in the definition of the LIBO Rate; or
36
(ii) at any time, that the relevant LIBO Rate applicable to any of
its Loans shall not represent the effective pricing to such Bank for
funding or maintaining a LIBO Rate Loan, or such Bank shall incur
increased costs or reductions in the amounts received or receivable
hereunder in respect of any LIBO Rate Loan, in any such case because of
(x) any change since the date of this Agreement in any applicable law or
governmental rule, regulation, guideline or order or any interpretation
thereof and including the introduction of any new law or governmental
rule, regulation, guideline or order (such as for example but not
limited to a change in official reserve requirements, but, in all
events, excluding reserves required under Regulation D of the Federal
Reserve Board to the extent included in the computation of the LIBO
Rate), whether or not having the force of law and whether or not failure
to comply therewith would be unlawful, and/or (y) other circumstances
affecting such Bank or the interbank Eurodollar market or the position
of such Bank in such market; or
(iii) at any time, that the making or continuance by it of any LIBO
Rate Loan has become unlawful by compliance by such Bank in good faith
with any law or governmental rule, regulation, guideline or order
(whether or not having the force of law and whether or not failure to
comply therewith would be unlawful) or has become impracticable as a
result of a contingency occurring after the date of this Agreement which
materially and adversely affects the interbank Eurodollar market;
then, and in any such event, the Agent or such Bank shall, promptly after
making such determination, give notice (by telephone promptly confirmed in
writing) to the Borrower and (if applicable) the Agent of such determination
(which notice the Agent shall promptly transmit to each of the other Banks).
Thereafter (x) in the case of clause (i) above, the Borrower's right to
request LIBO Rate Loans shall be suspended, and any Notice of Borrowing or
Notice of Conversion or Continuation given by the Borrower with respect to
any Borrowing of LIBO Rate Loans which has not yet been made shall be deemed
cancelled and rescinded by the Borrower, (y) in the case of clause (ii)
37
above, the Borrower shall pay to such Bank, upon such Bank's delivery,
written demand therefor to the Borrower with a copy to the Agent, such
additional amounts (in the form of an increased rate of interest, or a
different method of calculating interest, or otherwise, as such Bank in its
sole discretion shall determine) as shall be required to compensate such Bank
for such increased costs or reduction in amounts received or receivable
hereunder and (z) in the case of clause (iii) above, the Borrower shall take
one of the actions specified in clause (b) below as promptly as possible and,
in any event, within the time period required by law. The written demand
provided for in clause (y) shall demonstrate in reasonable detail the
calculation of the amounts demanded and shall, absent manifest error, be
final and conclusive and binding upon all of the parties hereto.
(b) In the case of any LIBO Rate Loan or requested LIBO Rate Loan
affected by the circumstances described in clause (a)(ii) above, the Borrower
may, and in the case of any LIBO Rate Loan affected by the circumstances
described in clause (a)(iii) above the Borrower shall, either (i) if any such
LIBO Rate Loan has not yet been made but is then the subject of a Notice of
Borrowing or a Notice of Conversion or Continuation, be deemed to have
cancelled and rescinded such notice, or (ii) if any such LIBO Rate Loan is
then outstanding, require the affected Bank to convert each such LIBO Rate
Loan into a Base Rate Loan at the end of the applicable Interest Period or
such earlier time as may be required by law, in each case by giving the Agent
notice (by telephone promptly confirmed in writing) thereof on the Business
Day that the Borrower was notified by the Bank pursuant to clause (a) above;
PROVIDED, HOWEVER, that all Banks whose LIBO Rate Loans are affected by the
circumstances described in clause (a) above shall be treated in the same
manner under this clause (b).
(c) In the event that the Agent determines at any time following its
giving of notice based on the conditions described in clause (a)(i) above
that none of such conditions exist, the Agent shall promptly give notice
thereof to the Borrower and the Banks, whereupon the Borrower's right to
request LIBO Rate Loans from the Banks and the Banks' obligation to make LIBO
Rate Loans shall be restored.
38
(d) In the event that a Bank determines at any time following its giving
of a notice based on the conditions described in clause (a)(iii) above that
none of such conditions exist, such Bank shall promptly give notice thereof
to the Borrower and the Agent, whereupon the Borrower's right to request LIBO
Rate Loans from such Bank and such Bank's obligation to make LIBO Rate Loans
shall be restored.
Section 1.19 FUNDING LOSSES. The Borrower shall compensate each Bank,
upon such Bank's delivery of a written demand therefor to the Borrower, with
a copy to the Agent (which demand shall set forth the basis for requesting
such amounts and shall, absent manifest error, be final and conclusive and
binding upon all of the parties hereto), for all reasonable losses, expenses
and liabilities (including, without limitation, any loss, expense or
liability incurred by such Bank in connection with the liquidation or
reemployment of deposits or funds required by it to make or carry its LIBO
Rate Loans), that such Bank sustains:
(i) if for any reason (other than a default by such Bank) a
Borrowing of, or conversion from or into, or a continuation of, LIBO
Rate Loans does not occur on a date specified therefor in a Notice of
Borrowing or Notice of Conversion or Continuation (whether or not
rescinded, cancelled or withdrawn or deemed rescinded, cancelled or
withdrawn, pursuant to Section 2.18(a) or 2.18(b) or otherwise);
(ii) if any repayment (including, without limitation, payment after
acceleration) or conversion of any of its LIBO Rate Loans occurs on a
date which is not the last day of the Interest Period applicable thereto;
(iii) if any prepayment of any of its LIBO Rate Loans is not made
on any date specified in a notice of prepayment given by the Borrower;
or
(iv) as a consequence of any default by the Borrower in repaying
its LIBO Rate Loans or any other amounts owing hereunder in respect of
its LIBO Rate Loans when required by the terms of this Agreement.
Calculation of all amounts payable to a Bank
39
under this Section 2.19 shall be made on the assumption that such Bank
has funded its relevant LIBO Rate Loan through the purchase of a
Eurodollar deposit bearing interest at the LIBO Rate in an amount equal
to the amount of such LIBO Rate Loan with a maturity equivalent to the
Interest Period applicable to such LIBO Rate Loan, and through the
transfer of such Eurodollar deposit from an offshore office of such Bank
to a domestic office of such Bank in the United States of America,
provided that each Bank may fund its LIBO Rate Loans in any manner that
it in its sole discretion chooses and the foregoing assumption shall
only be made in order to calculate amounts payable under this Section
2.19.
Section 1.20 INCREASED CAPITAL. If any Bank shall have determined that
compliance with any applicable law, rule, regulation, guideline, request or
directive (whether or not having the force of law) of any governmental
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on the capital or assets of such Bank or any
Person controlling such Bank as a consequence of its Commitments or
obligations hereunder, then from time to time, upon such Bank's delivering a
written demand therefor to the Agent and the Borrower (with a copy to the
Agent), the Borrower shall pay to such Bank such additional amount or amounts
as will compensate such Bank or Person for such reduction.
Section 1.21 TAXES.
(a) All payments made by the Borrower under this Agreement shall be made
free and clear of, and without reduction or withholding for or on account of,
any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any governmental authority excluding, in
the case of the Agent and each Bank, net income and franchise taxes imposed
on the Agent or such Bank by the jurisdiction under the laws of which the
Agent or such Bank is organized or any political subdivision or taxing
authority thereof or therein, or by any jurisdiction in which such Bank's
Domestic Lending Office or LIBO Lending Office, as the case may be, is
located or any political subdivision or taxing authority thereof or
40
therein (all such non-excluded taxes, levies, imposts, deductions, charges or
withholdings being hereinafter called "Taxes"). If any Taxes are required to
be withheld from any amounts payable to the Agent or any Bank hereunder or
under the Notes, the amounts so payable to the Agent or such Bank shall be
increased to the extent necessary to yield to the Agent or such Bank (after
payment of all Taxes) interest or any such other amounts payable hereunder at
the rates or in the amounts specified in this Agreement and the Notes.
Whenever any Taxes are payable by the Borrower, as promptly as possible
thereafter, the Borrower shall send to the Agent for its own account or for
the account of such Bank, as the case may be, a certified copy of an original
official receipt received by the Borrower showing payment thereof. If the
Borrower fails to pay any Taxes when due to the appropriate taxing authority
or fails to remit to the Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Agent and the Banks
for any incremental taxes, interest or penalties that may become payable by
the Agent or any Bank as a result of any such failure. The agreements in
this Section 2.21 shall survive the termination of this Agreement and the
payment of the Notes and all other Obligations.
(b) Each Bank that is not incorporated under the laws of the United
States of America or a state thereof (including each Purchasing Bank that
becomes a party to this Agreement pursuant to Section 9.4) agrees that, prior
to the first date on which any payment is due to it hereunder, it will
deliver to the Borrower and the Agent (i) two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224 or successor applicable
form, as the case may be, certifying in each case that such Bank is entitled
to receive payments under this Agreement and the Notes payable to it, without
deduction or withholding of any United States federal income taxes, and (ii)
an Internal Revenue Service Form W-8 or W-9 or successor applicable form, as
the case may be, to establish an exemption from United States backup
withholding tax. Each Bank which delivers to the Borrower and the Agent a
Form 1001 or 4224 and Form W-8 or W-9 pursuant to the preceding sentence
further undertakes to deliver to the Borrower and the Agent two further
copies of the said letter and Form 1001 or 4224 and Form W-8 or W-9, or
successor applicable forms, or other manner of certification, as the case may
be, on or before the date
41
that any such letter or form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent letter and form
previously delivered by it to the Borrower, and such extensions or renewals
thereof as may reasonably be requested by the Borrower, certifying in the
case of a Form 1001 or 4224 that such Bank is entitled to receive payments
under this Agreement without deduction or withholding of any United States
federal income taxes, unless in any such case an event (including, without
limitation, any change in treaty, law or regulation) has occurred prior to
the date on which any such delivery would otherwise be required which renders
all such forms inapplicable or which would prevent such Bank from duly
completing and delivering any such letter or form with respect to it and such
Bank advises the Borrower that it is not capable of receiving payments
without any deduction or withholding of United States federal income tax, and
in the case of a Form W-8 or W-9, establishing an exemption from United
States backup withholding tax.
Section 1.22 ASSUMPTION OF RISKS. The Borrower assumes all risks of
the acts or omissions of any beneficiary of any Letter of Credit or any
transferee thereof with respect to its use of such Letter of Credit. Neither
the Agent (except in the case of willful misconduct or bad faith on the part
of the Agent or any of its employees), its correspondents nor any Bank shall
be responsible for the validity, sufficiency or genuineness of certificates
or other documents or any endorsements thereon, even if such certificates or
other documents should in fact prove to be invalid, insufficient, fraudulent
or forged; for errors, omissions, interruptions or delays in transmissions or
delivery of any messages by mail, telex, or otherwise, whether or not they be
in code; for errors in translation or for errors in interpretation of
technical terms; the validity or sufficiency of any instrument transferring
or assigning or purporting to transfer or assign any Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason; the failure of any
beneficiary or any transferee of any Letter of Credit to comply fully with
conditions required in order to draw upon any Letter of Credit; or for any
other consequences arising from causes beyond the Agent's control or the
control of the Agent's correspondents. In addition, neither the Agent nor
any
42
Bank shall be responsible for any error, neglect, or default of any of the
Agent's correspondents; and none of the above shall affect, impair or prevent
the vesting of any of the Agent's or any Bank's rights or powers hereunder or
under the Letter of Credit Agreements, all of which rights shall be
cumulative. The Agent and its correspondents may accept certificates or
other documents that appear on their face to be in order, without
responsibility for further investigation of any matter contained therein
regardless of any notice or information to the contrary. In furtherance and
not in limitation of the foregoing provisions, the Borrower agrees that any
action, inaction or omission taken or not taken by the Agent or by any
correspondent for the Agent in good faith in connection with any Letter of
Credit, or any related drafts, certificates, documents or instruments, shall
be binding on the Borrower and shall not put the Agent or its correspondents
under any resulting liability to the Borrower.
Section 1.23 OBLIGATION TO REIMBURSE AND TO PREPAY.
(a) If a disbursement by the Agent is made under any Letter of Credit,
the Borrower shall pay to the Agent within two (2) Business Days after notice
of any such disbursement is received by the Borrower, the amount of each such
disbursement made by the Agent under the Letter of Credit (if such payment is
not sooner effected as may be required under this Section 2.23 or under other
provisions of the Letter of Credit), together with interest on the amount
disbursed from and including the date of disbursement until payment in full
of such disbursed amount at a varying rate per annum equal to (i) the then
applicable interest rate for Base Rate Loans to but not including the second
Business Day after notice of such disbursement is received by the Borrower
and (ii) thereafter, the Default Rate for Base Rate Loans (but in no event
to exceed the Highest Lawful Rate) for the period from and including the
second Business Day following the date of such disbursement to and including
the date of repayment in full of such disbursed amount. The obligations of
the Borrower under this Agreement with respect to each Letter of Credit shall
be absolute, unconditional and irrevocable and shall be paid or performed
strictly in accordance with the terms of this Agreement under all
circumstances whatsoever, including, without limitation,
43
but only to the fullest extent permitted by applicable law, the following
circumstances: (i) any lack of validity or enforceability of this Agreement,
any Letter of Credit or any of the Security Documents; (ii) any amendment or
waiver of (including any default), or any consent to departure from this
Agreement (except to the extent permitted by any amendment or waiver), any
Letter of Credit or any of the Security Documents; (iii) the existence of
any claim, setoff, defense or other rights which the Borrower may have at any
time against the beneficiary of any Letter of Credit or any transferee of any
Letter of Credit (or any Persons for whom any such beneficiary or any such
transferee may be acting), the Agent, any Bank or any other Person, whether
in connection with this Agreement, any Letter of Credit, the Security
Documents, the transactions contemplated hereby or any unrelated
transaction; (iv) any statement, certificate, draft, notice or any other
document presented under any Letter of Credit proves to have been forged,
fraudulent, insufficient or invalid in any respect or any statement therein
proves to have been untrue or inaccurate in any respect whatsoever; (v)
payment by the Agent under any Letter of Credit against presentation of a
draft or certificate which appears on its face to comply, but does not
comply, with the terms of such Letter of Credit; and (vi) any other
circumstance or happening whatsoever, whether or not similar to any of the
foregoing.
Notwithstanding anything in this Agreement to the contrary, the Borrower
will not be liable for payment or performance that results from the gross
negligence or willful misconduct of the Agent, except (i) where the Borrower
or any Subsidiary actually recovers the proceeds for itself or the Agent of
any payment made by the Agent in connection with such gross negligence or
willful misconduct or (ii) in cases where the Agent makes payment to the
named beneficiary of a Letter of Credit.
(b) In the event of the occurrence of any Event of Default, a payment or
prepayment pursuant to Sections 2.12, 2.13 and 2.14 hereof or the maturity of
the Notes, whether by acceleration or otherwise, an amount equal to the LC
Exposure (or the excess in the case of Sections 2.13 and 2.14) shall be
deemed to be forthwith due and owing by the Borrower to the Agent and the
Banks as of the date of any such occurrence; and the Borrower's obligation to
pay such amount shall be abso-
44
lute and unconditional, without regard to whether any beneficiary of any such
Letter of Credit has attempted to draw down all or a portion of such amount
under the terms of a Letter of Credit, and, to the fullest extent permitted
by applicable law, shall not be subject to any defense or be affected by a
right of set-off, counterclaim or recoupment which the Borrower may now or
hereafter have against any such beneficiary, the Agent, the Banks or any
other Person for any reason whatsoever. Such payments shall be held by the
Agent on behalf of the Banks as cash collateral securing the LC Exposure in
an account or accounts at the Agent's Office; and the Borrower hereby grants
to and by its deposit with the Agent grants to the Agent a security interest
in such cash collateral. In the event of any such payment by the Borrower
of amounts contingently owing under outstanding Letters of Credit and in the
event that thereafter drafts or other demands for payment complying with the
terms of such Letters of Credit are not made prior to the respective
expiration dates thereof, the Agent agrees, if no Event of Default has
occurred and is continuing or if no other amounts are outstanding under this
Agreement, the Notes or the Security Documents, to remit to the Borrower
amounts for which the contingent obligations evidenced by the Letters of
Credit have ceased.
(c) Each Bank severally and unconditionally agrees that upon the
issuance of any Letter of Credit it shall irrevocably be deemed to have
acquired a participation interest in such Letter of Credit in any amount
equal to such Bank's Pro Rata Share of the face amount of such Letter of
Credit, and it shall promptly reimburse the Agent an amount equal to such
Bank's Pro Rata Share of any disbursement made by the Agent under any Letter
of Credit that is not reimbursed according to this Section 2.23.
Section 1.24 ADDITIONAL COSTS IN RESPECT OF LETTERS OF CREDIT. Without
limiting the obligations of the Borrower under any other Section contained
herein (but without duplication), if as a result of any change since the
Closing Date in any applicable law dealing with any risk-based capital
guideline or other requirement heretofore or hereafter issued by any
government authority implementing at the national level the "Basle Accord"
there shall be imposed, modified or deemed applicable any tax, reserve,
special deposit, capital adequacy or simi-
45
lar requirement against or with respect to or measured by reference to
Letters of Credit issued or to be issued hereunder and the result shall be to
increase the cost to any Bank of issuing (or acquiring participations in) or
maintaining its obligation hereunder to issue (or acquire participations in)
any Letter of Credit hereunder or reduce any amount receivable by any Bank
hereunder in respect of any Letter of Credit (which increases in cost, or
reductions in amount receivable, shall be the result of such Bank's
reasonable allocation of the aggregate of such increases or reductions
resulting from such event), then, upon demand by such Bank (through the
Agent), the Borrower shall pay immediately to such Bank, from time to time as
specified by such Bank (through the Agent), such additional amounts as shall
be sufficient to compensate such Bank (through the Agent) for such increased
costs or reductions in amount. A statement as to such increased costs or
reductions in amount incurred by any such Bank, submitted by such Bank to the
Borrower, shall be conclusive in the absence of manifest error as to the
amount thereof.
Section 1.25 USE OF PROCEEDS. The proceeds of the Loans made on the
Closing Date shall be used solely to refinance certain obligations of the
Borrower to Trust Company of the West outstanding under the TCW Credit
Agreement on the Closing Date, to fund the repurchase of the overriding
royalty interest granted in connection with the TCW Credit Agreement, and to
pay certain costs relating to execution of this Agreement approved by the
Agent, and the remainder will be working capital for Borrower. The proceeds
of the Loans made after the Closing Date shall be used solely for the
Borrower's working capital, for the purchase of proven Oil and Gas
Properties, and for general corporate purposes. Letters of Credit shall be
used for general corporate purposes.
SECTION 2. CONDITIONS PRECEDENT.
Section 2.1 CONDITIONS PRECEDENT TO INITIAL LOANS. The obligation of
each Bank to make its initial Loans and to issue, renew, extend or reissue
Letters of Credit for the accounts of Borrower is subject to the satisfaction
on the Closing Date of the following conditions precedent:
46
(a) LOAN DOCUMENTS.
(i) CREDIT AGREEMENT. The Borrower and the Agent shall have
executed and delivered this Agreement to the Agent.
(ii) NOTES. The Borrower shall have executed and delivered to
each of the Banks the appropriate Notes in the amount, maturity and as
otherwise provided herein.
(iii) PLEDGE AGREEMENT. Inland Resources and the Agent shall
have executed and delivered to the Agent a pledge agreement substantially
in the form set forth as Exhibit B hereto (as amended, modified or
supplemented from time to time, the "Pledge Agreement").
(iv) MORTGAGE. The Borrower and the Agent shall have executed
and delivered to the Agent the Mortgages, substantially in the form set
forth as Exhibit C hereto and upon the filing thereof the Agent shall
have, for the benefit of the Banks, a Lien on at least 80% of the value
of the Oil and Gas Properties.
(v) GUARANTY. The Guarantor and the Agent shall have executed
and delivered to the Agent a guaranty substantially in the form set forth
as Exhibit D hereto (as amended, modified or supplemented from time to
time, the "Guaranty").
(b) OPINIONS OF COUNSEL.
(i) The Agent shall have received a legal opinion, dated the
Closing Date, from Glast, Xxxxxxxx & Xxxxxx, P.C., counsel to the Loan
Parties, substantially in the form set forth as Exhibit E hereto.
(ii) The Agent shall have received a legal opinion, dated the
Closing Date, from Ray, Xxxxxxx & Xxxxxxx, special Utah Counsel to the
Loan Parties, substantially in the form set forth as Exhibit F hereto.
47
(iii) The Agent shall have received a legal opinion, dated the
Closing Date, from Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP,
substantially in the form set forth as Exhibit G hereto.
(c) CORPORATE DOCUMENTS. The Agent shall have received the Certificate
of Incorporation of each of the Loan Parties as amended, modified or
supplemented to the Closing Date, certified to be true, correct and complete
by the appropriate Secretary of State as of a date not more than ten days
prior to the Closing Date, together with a certificate from such Secretary of
State as to good standing and charter documents filed by such Loan Party (or
the equivalent thereof) of each other State in which each of them is required
to be qualified to transact business, each to be dated a date not more than
ten days prior to the Closing Date.
(d) CERTIFIED RESOLUTIONS, ETC. The Agent shall have received a
certificate of the Secretary or Assistant Secretary of each of the Loan
Parties and dated the Closing Date certifying (i) the names and true
signatures of the incumbent officers of such Person authorized to sign the
applicable Loan Documents, (ii) the By-Laws of such Person as in effect on
the Closing Date, (iii) the resolutions of such Person's Board of Directors
approving and authorizing the execution, delivery and performance of all Loan
Documents executed by such Person, and (iv) that there have been no changes
in the Certificate of Incorporation of such Person since the date of the most
recent certification thereof by the appropriate Secretary of State and such
resolutions remain in full force and effect and no other resolutions have
been approved by such Board of Directors relating to the transactions
contemplated in the Loan Documents.
(e) INSURANCE. The Agent shall have received a certificate of insurance
demonstrating insurance coverage in respect of each of the Loan Parties of
types, in amounts, with insurers and with other terms satisfactory to the
Banks, which certificate shall indicate that the Agent and the Banks are
named additional insureds as their interests may appear and shall contain a
lenders loss payee endorsement in favor of the Agent in form and substance
satisfactory to the Agent.
(f) LIEN SEARCH REPORTS. The Agent shall have
48
received satisfactory reports of UCC, tax lien, judgment and litigation
searches conducted by a search firm acceptable to the Agent and the Banks
with respect to the Borrower, the Guarantor and the Subsidiaries in each of
the locations requested by the Agent.
(g) UCC-1 FINANCING STATEMENTS. Uniform Commercial Code financing
statements (Form UCC-1), duly executed by the Borrower or the Guarantor, as
the case may be, naming the Borrower as the debtor and the Agent as the
secured party, prepared for filing under the Uniform Commercial Code of all
jurisdictions as may be necessary or, in the opinion of the Agent, desirable
to perfect the security interest of the Agent pursuant to the Mortgage and
the Pledge Agreement.
(h) RELEASES. The Agent shall have received executed copies of proper
Uniform Commercial Code Form UCC-3 termination statements and other releases
of liens, if any, necessary to release all Liens and other rights of any
Person in any collateral described in the Pledge Agreement or Mortgage
previously granted by any Person, including but not limited to a release and
termination of all obligations (except for those obligations listed on
Schedule 3.1(h)) under the TCW Credit Agreement and all related documents,
together with such other Uniform Commercial Code Form UCC-3 termination
statements and releases of liens as the Agent may reasonably request from
any Loan Party.
(i) PLEDGED STOCK. The Agent shall have received the original stock
certificates evidencing the stock pledged pursuant to the Pledge Agreement,
together with undated stock powers duly executed in blank in connection
therewith.
(j) TITLE OPINIONS. The Agent shall have received favorable title
opinions from counsel acceptable to the Agent setting forth the status of
title to at least 80% of the value of the Oil and Gas Properties included in
the reserve report received by the Agent.
(k) LETTERS IN LIEU. Letters in lieu executed by the Borrower or any
Subsidiary, as applicable to each of the purchasers of the Hydrocarbons of
the Borrower or any Subsidiary produced from the Borrower's and any of its
Subsidiaries' Oil and Gas Properties.
49
(l) FINANCIAL STATEMENTS. The Agent shall have received the audited
financial statements of the Company for the fiscal year ending December 31,
1996, and the unaudited financial statements of the Company for the fiscal
period ending on March 31, 1997.
(m) ENVIRONMENTAL MATTERS. The Agent shall (i) be satisfied that
neither the Company, any of its Subsidiaries nor any Loan Party is subject to
any present or contingent environmental liability which could have a Material
Adverse Effect and (ii) have received a copy of an environmental report in
form and substance satisfactory to the Agent and the Banks with respect to
the properties and business of the Company, each of its Subsidiaries, the
Loan Parties (if applicable) and each of their Environmental Affiliates.
(n) FEES AND EXPENSES. The Agent shall have received, for its account
and for the account of each Bank, as applicable, all Fees and other fees and
expenses due and payable hereunder on or before the Closing Date, including,
without limitation, the fees and expenses accrued through the Closing Date,
of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP and any other counsel retained by
the Agent.
(o) PROCESS AGENT. Each Loan Party shall have appointed an agent
satisfactory to the Banks for service of process in connection with any
action or proceeding arising under or relating to the Loan Documents, and
such agent shall have accepted such appointment in writing.
(p) ENGINEERING REPORTS. The Agent shall have received annual and
interim engineering reports covering Borrower's Oil and Gas Properties
prepared or reviewed by an independent consultant acceptable to the Agent.
(q) RECONVEYANCES. Reconveyances of overriding royalty interest
granted in connection with the TCW Credit Agreement duly executed by TCW DR
IV Royalty Partnership, L.P., prepared for filing in all jurisdictions as
may be necessary or, in the opinion of the Agent desirable.
(r) PURCHASERS. The Agent shall have received a current list of
purchasers of Hydrocarbons, together
50
with the addresses of such purchasers.
(s) ADDITIONAL MATTERS. The Agent shall have received such other
certificates, opinions, documents and instruments as the Agent or any Bank
may reasonably request.
Section 2.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTERS OF CREDIT.
The obligation of each Bank to make any Loan and to issue, renew, extend or
reissue Letters of Credit for the account of Borrower (including the initial
Loans made on the Closing Date) is subject to the satisfaction on the date
such Loan is made of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained herein and in the other Loan Documents (other than representations
and warranties which expressly speak only as of a different date) shall be
true and correct in all material respects on such date both before and after
giving effect to the making of such Loans or issuance, renewal, extension, or
reissuance of a Letter of Credit.
(b) NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default
shall have occurred and be continuing on such date either before or after
giving effect to the making of such Loans or issuance, renewal, extension, or
reissuance of a Letter of Credit.
(c) NO INJUNCTION. No law or regulation shall have been adopted, no
order, judgment or decree of any governmental authority shall have been
issued, and no litigation shall be pending or threatened, which in the
judgment of the Banks would enjoin, prohibit or restrain, or impose or result
in the imposition of any material adverse condition upon, the making or
repayment of the Loans or issuance, renewal, extension, or reissuance of a
Letter of Credit.
(d) NO MATERIAL ADVERSE CHANGE. No event, act or condition shall have
occurred after March 31, 1997, which, in the judgment of the Required Banks,
has had or could have a Material Adverse Effect.
(e) NOTICE OF BORROWING. The Agent shall have received a fully executed
Notice of Borrowing in respect
51
of the Loans to be made on such date.
Section 2.3 CONDITIONS RELATING TO LETTERS OF CREDIT. In addition to the
satisfaction of all other conditions precedent set forth in this Section 3,
the issuance, renewal, extension or reissuance of the Letters of Credit
referred to in Section 2.3 hereof is subject to the following conditions
precedent:
(a) At least three (3) Business Days prior to the date of the issuance
and at least ten (10) Business Days prior to the date of the renewal,
extension or reissuance of each Letter of Credit, the Agent shall have
received a written request for a Letter of Credit.
(b) Each of the Letters of Credit shall (i) be issued by the Agent, (ii)
contain such terms and provisions as are reasonably required by the Agent,
(iii) be for the account of the Borrower or a Subsidiary and (iv) expire not
later than two (2) days before the Final Maturity Date.
(c) The Borrower shall have duly and validly executed and delivered to
the Agent a Letter of Credit Agreement pertaining to the Letter of Credit.
Section 2.4 ACQUISITIONS. The Agent does not anticipate making any Loan
for the acquisition of properties unless the Agent shall have received all of
the following (in addition to any other documents or information it may deem
appropriate), duly executed and delivered and in form, substance and date
satisfactory to the Agent:
(a) An Acquisition Proposal.
(b) A Mortgage covering the properties to be acquired with such Loan.
(c) Title opinions and other title information concerning the properties
to be acquired with such Loan in form, substance and authorship satisfactory
to the Agent.
(d) A favorable legal opinion, satisfactory to the Agent, if any
property to be acquired in such acquisition is located outside the State of
Utah.
52
If the Agent is to make Loans for any acquisition of properties, such
Acquisition Proposal must be submitted to and approved by the Agent during
the Revolving Credit Period and such Loans must be funded during the
Revolving Credit Period, all in accordance with the terms and conditions of
this Agreement. It is understood and agreed that the Agent has no obligation
to make any Loans hereunder for any such acquisition and that the Agent shall
approve or disapprove each Acquisition Proposal in its sole and absolute
discretion.
The acceptance of the proceeds of each Loan or the issuance of any
Letters of Credit shall constitute a representation and warranty by the
Borrower to each of the Banks that all of the conditions required to be
satisfied under this Section 3 in connection with the making of such Loan or
the issuance of such Letter of Credit have been satisfied.
All of the Notes, certificates, agreements, legal opinions and other
documents and papers referred to in this Section 3, unless otherwise
specified, shall be delivered to the Agent for the account of each of the
Banks and, except for the Notes, in sufficient counterparts for each of the
Banks, and, unless otherwise specified, shall be satisfactory in form and
substance to each Bank in its sole discretion.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
In order to induce the Banks to enter into this Agreement, to make the
Loans and to issue, renew, extend or reissue a Letter of Credit, the Borrower
makes the following representations and warranties, which shall survive the
execution and delivery of this Agreement and the Notes and Letters of Credit
and the making of the Loans and the issuance, renewal, extension or
reissuance of a Letter of Credit:
Section 3.1 CORPORATE STATUS. Each Loan Party (i) is a duly organized
and validly existing corporation in good standing under the laws of the
jurisdiction of its incorporation, (ii) has the corporate power and
authority to own its property and assets and to transact the business in
which it is engaged or presently proposes to engage and (iii) has duly
qualified and is
53
authorized to do business and is in good standing as a foreign corporation in
every jurisdiction in which it owns or leases real property or in which the
nature of its business requires it to be so qualified, except where the
failure to so qualify, individually or in the aggregate, could not have a
Material Adverse Effect.
Section 3.2 CORPORATE POWER AND AUTHORITY. Each Loan Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of each of the Loan Documents to which it is a party and has taken
all necessary corporate action to authorize the execution, delivery and
performance by it of such Loan Documents. Each Loan Party has duly executed
and delivered each such Loan Document, and each such Loan Document
constitutes its legal, valid and binding obligation, enforceable in
accordance with its terms.
Section 3.3 NO VIOLATION. Neither the execution, delivery or
performance by any Loan Party of the Loan Documents to which it is a party,
nor compliance by it with the terms and provisions thereof nor the
consummation of the transactions contemplated in those documents, (i) will
contravene any applicable provision of any law, statute, rule, regulation,
order, writ, injunction or decree of any court or governmental
instrumentality or (ii) will conflict or be inconsistent with or result in
any breach of, any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or
the obligation to create or impose) any Lien (except pursuant to the Security
Documents) upon any of the property or assets of any Loan Party pursuant to
the terms of any indenture, mortgage, deed of trust, agreement or other
instrument to which such Loan Party is a party or by which it or any of its
property or assets is bound or to which it may be subject, or (iii) will
violate any provision of the Certificate of Incorporation or By-Laws of any
Loan Party.
Section 3.4 LITIGATION. There are no actions, suits or proceedings
pending or threatened (i) with respect to any of the Loan Documents or (ii)
that could, individually or in the aggregate, result in a Material Adverse
Effect.
Section 3.5 FINANCIAL STATEMENTS; FINANCIAL
54
CONDITION; ETC. Each of the financial statements delivered pursuant to
Section 3.1(l) were prepared in accordance with GAAP consistently applied
and fairly present the financial condition and the results of operations of
the entities covered thereby on the dates and for the periods covered
thereby, except as disclosed in the notes thereto and, with respect to
interim financial statements, subject to normally recurring year-end
adjustments. No Loan Party has any material liability (contingent or
otherwise) not reflected in such financial statements or in the notes
thereto.
Section 3.6 MATERIAL ADVERSE CHANGE. Since March 31, 1997, there has
occurred no event, act or condition which has had, or could have, a Material
Adverse Effect.
Section 3.7 USE OF PROCEEDS; MARGIN REGULATIONS. All proceeds of each
Loan will be used by the Borrower only in accordance with the provisions of
Section 2.25. No part of the proceeds of any Loan will be used by the
Borrower to purchase or carry any Margin Stock or to extend credit to others
for the purpose of purchasing or carrying any Margin Stock. Neither the
making of any Loan nor the use of the proceeds thereof will violate or be
inconsistent with the provisions of Regulations G, T, U or X of the Federal
Reserve Board.
Section 3.8 GOVERNMENTAL APPROVALS. No order, consent, approval,
license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any governmental or public body or
authority, or any subdivision thereof, is required to authorize, or is
required in connection with (i) the execution, delivery and performance of
any Loan Document or the consummation of any of the transactions
contemplated in those documents or (ii) the legality, validity, binding
effect or enforceability of any Loan Document, except those listed on
Schedule 4.8 that have already been duly made or obtained and remain in full
force and effect.
Section 3.9 SECURITY INTERESTS AND LIENS. The Security Documents
create, as security for the Obligations, valid and enforceable security
interests in and Liens on all of the Collateral, in favor of the Agent for
the ratable benefit of the Banks, and subject to no other
55
Liens. Upon the satisfaction of the conditions precedent described in
Sections 3.1(g) and 3.1(i), such security interests in and Liens on the
Collateral shall be superior to and prior to the rights of all third parties
(except as disclosed on Schedule 4.9), and no further recordings or filings
are or will be required in connection with the creation, perfection or
enforcement of such security interests and Liens, other than the filing of
continuation statements in accordance with applicable law.
Section 3.10 TAX RETURNS AND PAYMENTS. Each Loan Party has filed all tax
returns required to be filed by it and has paid all taxes and assessments
payable by it which have become due, other than those not yet delinquent or
those that are reserved against in accordance with GAAP which are being
diligently contested in good faith by appropriate proceedings.
Section 3.11 ERISA. The Borrower has no Plans other than those listed
on Schedule 4.11. No accumulated funding deficiency (as defined in Section
412 of the Code or Section 302 of ERISA) or Reportable Event has occurred
with respect to any Plan. There are no Unfunded Benefit Liabilities under
any Plan. The Borrower and each member of its ERISA Controlled Group have
complied with the requirements of Section 515 of ERISA with respect to each
Multiemployer Plan and is not in "default" (as defined in Section 4219(c)(5)
of ERISA) with respect to payments to a Multiemployer Plan. The aggregate
potential total withdrawal liability, and the aggregate potential annual
withdrawal liability payments of the Borrower and the members of its ERISA
Controlled Group as determined in accordance with Title IV of ERISA as if the
Borrower and the members of its ERISA Controlled Group had completely
withdrawn from all Multiemployer Plans is not greater than $500,000 and
$100,000, respectively. To the best knowledge of the Borrower and each
member of its ERISA Controlled Group, no Multiemployer Plan is or is likely
to be in reorganization (as defined in Section 4241 of ERISA or Section 418
of the Code) or is insolvent (as defined in Section 4245 of ERISA). No
material liability to the PBGC (other than required premium payments), the
Internal Revenue Service, any Plan or any trust established under Title IV of
ERISA has been, or is expected by the Borrower or any member of its ERISA
Controlled Group to be, incurred by the Borrower or any
56
member of its ERISA Controlled Group. Except as otherwise disclosed on
Schedule 4.11 hereto, neither the Borrower nor any member of its ERISA
Controlled Group has any contingent liability with respect to any
post-retirement benefit under any "welfare plan" (as defined in Section 3(1)
of ERISA), other than liability for continuation coverage under Part 6 of
Title I of ERISA. No lien under Section 412(n) of the Code or 302(f) of
ERISA or requirement to provide security under Section 401(a)(29) of the Code
or Section 307 of ERISA has been or is reasonably expected by the Borrower or
any member of its ERISA Controlled Group to be imposed on the assets of the
Borrower or any member of its ERISA Controlled Group.
Section 3.12 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT.
No Loan Party is (x) an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of
1940, as amended, (y) a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of either a "holding company" or a
"subsidiary company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended, or (z) subject to any other federal or state law or
regulation which purports to restrict or regulate its ability to borrow money.
Section 3.13 TRUE AND COMPLETE DISCLOSURE. All factual information
(taken as a whole) furnished by or on behalf of any Loan Party in writing to
the Agent or any Bank on or prior to the Closing Date, for purposes of or in
connection with this Agreement or any of the transactions contemplated in
the Agreement is, and all other such factual information (taken as a whole)
hereafter furnished by or on behalf of any Loan Party in writing to the Agent
or any Bank will be, true and accurate in all material respects on the date
as of which such information is dated or furnished and not incomplete by
omitting to state any material fact necessary to make such information
(taken as a whole) not misleading at such time. As of the Closing Date,
there are no facts, events or conditions known to the Borrower which,
individually or in the aggregate, have or could be expected to have a
Material Adverse Effect.
Section 3.14 CORPORATE STRUCTURE; CAPITALIZA-
57
TION. Schedule 4.14 hereto sets forth the number of authorized and issued
shares of capital stock of the Borrower and each of its Subsidiaries and of
each Loan Party and each Subsidiary of each Loan Party, the par value thereof
and the registered owner(s) thereof, except with regard to Guarantor, which
Schedule 4.14 shall reflect only the registered owners of 5% or more of any
class of stock of Guarantor. All of such stock has been duly and validly
issued and is fully paid and non-assessable. Except as set forth on Schedule
4.14, neither any Loan Party nor any such Subsidiary has outstanding any
securities convertible into or exchangeable for its capital stock nor does
any Loan Party or any such Subsidiary have outstanding any rights to
subscribe for or to purchase, or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its capital stock.
Section 3.15 ENVIRONMENTAL MATTERS.
(a) Except as set forth in Schedule 4.15, (i) each of the Loan Parties
and their Environmental Affiliates are in material compliance with all
applicable Environmental Laws, (ii) each of the Loan Parties and their
Environmental Affiliates have all Environmental Approvals required to operate
their businesses as presently conducted or as reasonably anticipated to be
conducted, (iii) none of the Loan Parties nor any of their Environmental
Affiliates has received any communication (written or oral), whether from a
governmental authority, citizens group, employee or otherwise, that alleges
that such Loan Party or Environmental Affiliate is not in full compliance
with all Environmental Laws, and (iv) to the Borrower's best knowledge after
due inquiry, there are no circumstances that may prevent or interfere with
such full compliance in the future.
(b) Except as set forth in Schedule 4.15, there is no Environmental
Claim pending or threatened against any Loan Party or its Environmental
Affiliate.
(c) Except as set forth in Schedule 4.15, there are no past or present
actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge or disposal
of any Material of Environmental Concern, that
58
could form the basis of any Environmental Claims against any of the Loan
Parties or any of their Environmental Affiliates.
(d) Without in any way limiting the generality of the foregoing, except
as disclosed in Schedule 4.15, (i) there are no on-site or off-site locations
in which any Loan Party or its Environmental Affiliate has stored, disposed
or arranged for the disposal of Materials of Environmental Concern, (ii)
there are no underground storage tanks located on property owned or leased by
any Loan Party or its Environmental Affiliate, (iii) there is no asbestos
contained in or forming part of any building, building component, structure
or office space owned or, to the knowledge of any Loan Party, leased by any
Loan Party or its Environmental Affiliate, and (iv) no polychlorinated
biphenyls (PCB's) are used or stored at any property owned or, to the
knowledge of any Loan Party, leased by any Loan Party or its Environmental
Affiliate.
Section 3.16 PATENTS, TRADEMARKS, ETC. Each of the Loan Parties have
obtained and hold in full force and effect all patents, trademarks,
servicemarks, trade names, copyrights and other such rights, free from
burdensome restrictions, which are necessary for the operation of its
business as presently conducted. No material product, process, method,
substance, part or other material presently sold by or employed by any Loan
Party in connection with such business infringes any patent, trademark,
service xxxx, trade name, copyright, license or other right owned by any
other Person. There is not pending or overtly threatened any claim or
litigation against or affecting any Loan Party contesting its right to sell
or use any such product, process, method, substance, part or other material.
Section 3.17 OWNERSHIP OF PROPERTY. Schedule 4.17 sets forth all the
real property owned or leased by the Loan Parties and identifies the current
owner (and current record owner, if different) and whether such property is
leased or owned. The Loan Parties have good and marketable fee simple title
to or valid leasehold interests in all of such real property and good title
to all of their personal property subject to no Lien of any kind except Liens
permitted hereby. The Loan Parties enjoy peaceful and undisturbed possession
under all of
59
their respective leases.
Section 3.18 NO DEFAULT. No Loan Party is in default under or with
respect to any Loan Document or any other agreement, instrument or
undertaking to which it is a party or by which it or any of its property is
bound in any respect which could result in a Material Adverse Effect. No
Default or Event of Default exists.
Section 3.19 LICENSES, ETC. The Loan Parties have obtained and hold in
full force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditations, easements, rights of way and
other rights, consents and approvals which are necessary for the operation of
their respective businesses as presently conducted.
Section 3.20 COMPLIANCE WITH LAW. Each Loan Party is in material
compliance with all laws, rules, regulations, orders, judgments, writs and
decrees.
Section 3.21 NO BURDENSOME RESTRICTIONS. No Loan Party is a party to
any agreement or instrument or subject to any other obligation or any charter
or corporate restriction or any provision of any applicable law, rule or
regulation which, individually or in the aggregate, could have a Material
Adverse Effect.
Section 3.22 LABOR MATTERS. Except as set forth on Schedule 4.22,
there are no collective bargaining agreements or Multiemployer Plans
covering the employees of the Company, any of its Subsidiaries or any of the
Loan Parties, and none of such Persons has suffered any strikes, walkouts,
work stoppages or other material labor difficulty within the last five years.
Section 3.23 SUBSIDIARIES AND PARTNERSHIPS. Except as set forth on
Schedule 4.23, the Borrower has no Subsidiaries and no interest in any
Partnerships.
Section 3.24 LOCATION OF BUSINESS AND OFFICES. The Borrower's principal
place of business and chief executive offices are located at the address
stated on the signature page of this Agreement. The principal place of
business and chief executive office of each Subsidiary are located at the
addresses stated on Schedule 4.23.
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SECTION 4. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that on and after the Closing Date and
until the Total Commitment has terminated, the Obligations are paid in full
and the Letters of Credit have been cancelled or terminated:
Section 4.1 INFORMATION COVENANTS. The Borrower will furnish to each
Bank:
(a) QUARTERLY FINANCIAL STATEMENTS. Within 45 days after the close of
each quarterly accounting period in each fiscal year of the Borrower, the
consolidated and consolidating balance sheet of the Loan Parties and their
Subsidiaries as at the end of such quarterly period and the related
consolidated and consolidating statements of income, cash flow and retained
earnings for such quarterly period and for the elapsed portion of the fiscal
year ended with the last day of such quarterly period, and in each case
setting forth comparative figures for the related periods in the prior fiscal
year.
(b) ANNUAL FINANCIAL STATEMENTS. Within 90 days after the close of each
fiscal year of the Borrower, the consolidated and consolidating balance sheet
of the Loan Parties and their Subsidiaries as at the end of such fiscal year
and the related consolidated and consolidating statements of income, cash
flow and retained earnings for such fiscal year, setting forth comparative
figures for the preceding fiscal year and, with respect to the consolidated
financial statements of the Guarantor and the Borrower, certified without
qualification by Xxxxxx Xxxxxxxx LLP or other independent certified public
accountants of recognized national standing reasonably acceptable to the
Required Banks, in each case together with a report of such accounting firm
stating that in the course of its regular audit of the consolidated financial
statements of the Guarantor and the Borrower, which audit was conducted in
accordance with generally accepted auditing standards, such accounting firm
has obtained no knowledge of any Default or Event of Default, or if in the
opinion of such accounting firm such a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof.
(c) MANAGEMENT LETTERS. Promptly after any
61
Loan Party's receipt thereof, a copy of any "management letter" or other
material report received by the Borrower from its certified public
accountants.
(d) BUDGETS. Within 60 days after the first day of each fiscal year of
the Borrower, a budget and financial forecast of results of operations and
sources and uses of cash (in form satisfactory to the Required Banks)
prepared by the Borrower for such fiscal year, accompanied by a written
statement of the assumptions used in connection therewith, together with a
certificate of the chief financial officer of the Borrower to the effect that
such budget and financial forecast and assumptions are reasonable and
represent the Borrower's good faith estimate of its future financial
requirements and performance. The financial statements required to be
delivered pursuant to clauses (a) and (b) above, shall be accompanied by a
comparison of the actual financial results set forth in such financial
statements to those contained in the forecasts delivered pursuant to this
clause (d) together with an explanation of any material variations from the
results anticipated in such forecasts.
(e) OFFICER'S CERTIFICATES. At the time of the delivery of the financial
statements under clauses (a) and (b) above, a certificate of the chief
financial officer of the Borrower which certifies (x) that such financial
statements fairly present the financial condition and the results of
operations of the Borrower and its Subsidiaries on the dates and for the
periods indicated, subject, in the case of interim financial statements, to
normally recurring year-end adjustments and (y) that such officer has
reviewed the terms of the Loan Documents and has made, or caused to be made
under his or her supervision, a review in reasonable detail of the business
and condition of the Borrower and its Subsidiaries during the accounting
period covered by such financial statements, and that as a result of such
review such officer has concluded that no Default or Event of Default has
occurred during the period commencing at the beginning of the accounting
period covered by the financial statements accompanied by such certificate
and ending on the date of such certificate or, if any Default or Event of
Default has occurred, specifying the nature and extent thereof and, if
continuing, the action the Borrower proposes to take in respect thereof.
Such certificate
62
shall set forth the calculations required to establish whether the Borrower
was in compliance with the provisions of Section 6.1 during and as at the
end of the accounting period covered by the financial statements accompanied
by such certificate.
(f) NOTICE OF DEFAULT OR LITIGATION. Promptly and in any event within
three (3) Business Day after any Loan Party obtains knowledge thereof, notice
of (i) the occurrence of any Default or Event of Default, (ii) any litigation
or governmental proceeding pending or threatened against any Loan Party
which could result in a Material Adverse Effect and (iii) any other event,
act or condition which could result in a Material Adverse Effect.
(g) ERISA.
(i) As soon as possible and in any event within 10 days after the
Borrower or any member of its ERISA Controlled Group knows, or has reason
to know, that:
(A) any Termination Event with respect to a Plan has occurred or
will occur, or
(B) any condition exists with respect to a Plan which
presents a material risk of termination of the Plan or imposition
of an excise tax or other liability on the Borrower or any member
of its ERISA Controlled Group, or
(C) the Borrower or any member of its ERISA Controlled Group has
applied for a waiver of the minimum funding standard under
Section 412 of the Code or Section 302 of ERISA, or
(D) the Borrower or any member of its ERISA Controlled Group
has engaged in a "prohibited transaction," as defined in Section
4975 of the Code or as described in Section 406 of ERISA, that is
not exempt under Section 4975 of the Code and Section 408 of
ERISA, or
(E) the aggregate present value of the Unfunded Benefit
Liabilities under all
63
Plans has in any year increased by $100,000 or to an amount in
excess of $500,000, or
(F) any condition exists with respect to a Multiemployer
Plan which presents a material risk of a partial or complete
withdrawal (as described in Section 4203 or 4205 of ERISA) by
the Borrower or any member of its ERISA Controlled Group from a
Multiemployer Plan, or
(G) the Borrower or any member of its ERISA Controlled Group
is in "default" (as defined in Section 4219(c)(5) of ERISA) with
respect to payments to a Multiemployer Plan, or
(H) a Multiemployer Plan is in "reorganization" (as
defined in Section 418 of the Code or Section 4241 of ERISA) or
is "insolvent" (as defined in Section 4245 of ERISA), or
(I) the potential withdrawal liability (as determined in
accordance with Title IV of ERISA) of the Borrower and the
members of its ERISA Controlled Group with respect to all
Multiemployer Plans has in any year increased by $100,000 or to
an amount in excess of $500,000, or
(J) there is an action brought against the Borrower or any
member of its ERISA Controlled Group under Section 502 of ERISA
with respect to its failure to comply with Section 515 of ERISA,
a certificate of the president or chief financial officer of the Borrower
setting forth the details of each of the events described in clauses (A)
through (J) above as applicable and the action which the Borrower or the
applicable member of its ERISA Controlled Group proposes to take with respect
thereto, together with a copy of any notice or filing from the PBGC or which
may be required by the PBGC or other agency of the United States government
with respect to each of the events described in clauses (A) through (J)
above, as applicable.
(ii) As soon as possible and in any event
64
within two Business Days after the receipt by the Borrower or any member of
its ERISA Controlled Group of a demand letter from the PBGC notifying the
Borrower or such member of its ERISA Controlled Group of its final decision
finding liability and the date by which such liability must be paid, a copy
of such letter, together with a certificate of the president or chief
financial officer of the Borrower setting forth the action which the
Borrower or such member of its ERISA Controlled Group proposes to take
with respect thereto.
(h) SEC FILINGS. Promptly upon transmission thereof, copies of all
regular and periodic financial information, proxy materials and other
information and reports, if any, which any Loan Party shall file with the
Securities and Exchange Commission or any governmental agencies substituted
therefore or which any Loan Party shall send to its stockholders.
(i) ENVIRONMENTAL. Promptly and in any event within two (2) Business
Days after the existence of any of the following conditions, a certificate of
the chief executive officer or chief financial officer of the Borrower
specifying in detail the nature of such condition and the applicable Loan
Party's or, upon any Loan Party's knowledge thereof, its Environmental
Affiliate's proposed response thereto: (i) the receipt by any Loan Party or,
upon any Loan Party's knowledge thereof, any of its Environmental Affiliates
of any communication (written or oral), whether from a governmental
authority, citizens group, employee or otherwise, that alleges that such Loan
Party or, upon any Loan Party's knowledge thereof, an Environmental Affiliate
is not in compliance with applicable Environmental Laws, (ii) any Loan Party
or any of its Environmental Affiliates shall obtain actual knowledge that
there exists any Environmental Claim pending or threatened against such Loan
Party or an Environmental Affiliate, or (iii) any release, emission,
discharge or disposal of any Material of Environmental Concern that could
form the basis of any Environmental Claim against any Loan Party or any of
their Environmental Affiliates.
(j) OTHER INFORMATION. From time to time, such other information or
documents (financial or otherwise) as any Bank may reasonably request.
65
Section 4.2 BOOKS, RECORDS AND INSPECTIONS. The Borrower shall, and
shall cause each of its Subsidiaries to, keep proper books of record and
account in which full, true and correct entries in conformity with GAAP and
all requirements of law shall be made of all dealings and transactions in
relation to its business and activities. The Borrower shall, and shall cause
each of its Subsidiaries to, permit officers and designated representatives
of any Bank to visit and inspect any of the properties of the Borrower or any
of its Subsidiaries, and to examine the books of record and account of the
Borrower or any of its Subsidiaries, and discuss the affairs, finances and
accounts of the Borrower or any of its Subsidiaries with, and be advised as
to the same by, its and their officers and independent accountants, all upon
reasonable notice and at such reasonable times as such Bank may desire.
Section 4.3 MAINTENANCE OF INSURANCE. The Borrower shall, and shall
cause each of its Subsidiaries to, (a) maintain with financially sound and
reputable insurance companies insurance on itself and its properties in at
least such amounts and against at least such risks as are customarily insured
against in the same general area by companies engaged in the same or a
similar business, which insurance shall in any event not provide for
materially less coverage than the insurance in effect on the Closing Date,
(b) maintain the Agent and the Banks as named additional insureds and loss
payees in respect of such insurance at least to the extent the Agent and the
Banks are so named on the Closing Date, and (c) furnish to the Agent annually
upon renewal of the policies under which such insurance is issued,
certificates of insurance and such other information relating to such
insurance as the Agent may request.
Section 4.4 TAXES.
(a) The Borrower shall pay or cause to be paid, and shall cause each of
its Subsidiaries to pay or cause to be paid, when due, all taxes, charges and
assessments and all other lawful claims required to be paid by the Borrower
or such Subsidiaries, except as contested in good faith and by appropriate
proceedings diligently conducted, if adequate reserves have been established
with respect thereto in accordance with GAAP.
66
(b) The Borrower shall not, and shall not permit any of its
Subsidiaries to, file or consent to the filing of any consolidated tax return
with any Person (other than the Guarantor, Borrower and their Subsidiaries).
Section 4.5 CORPORATE FRANCHISES. The Borrower shall, and shall cause
each of its Subsidiaries to, do or cause to be done, all things necessary to
preserve and keep in full force and effect its existence and its patents,
trademarks, servicemarks, tradenames, copyrights, franchises, licenses,
permits, certificates, authorizations, qualifications, accreditations,
easements, rights of way and other rights, consents and approvals.
Section 4.6 COMPLIANCE WITH LAW. The Borrower shall, and shall cause
each of its Subsidiaries to, comply with all applicable laws, rules,
statutes, regulations, decrees and orders of, and all applicable
restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of their business and the ownership of their property,
including, without limitation, all Environmental Laws.
Section 4.7 PERFORMANCE OF OBLIGATIONS. The Borrower shall, and shall
cause each of its Subsidiaries to, perform all of its obligations under the
terms of each mortgage, indenture, security agreement, debt instrument,
lease, undertaking and contract by which it or any of its properties is bound
or to which it is a party.
Section 4.8 MAINTENANCE OF PROPERTIES.
(a) The Borrower shall, and shall cause each of its Subsidiaries to,
ensure that its properties used or useful in its business are kept in good
repair, working order and condition, normal wear and tear excepted.
(b) The Borrower shall, and shall cause each of its Subsidiaries to do
or cause to be done all things reasonably necessary to preserve and keep in
good repair, working order and efficiency all of its Oil and Gas Properties
and other material properties including, without limitation, all equipment,
machinery and facilities, and from time to time will make all the reasonably
68
necessary repairs, renewals and replacements so that at all times the state
and condition of its Oil and Gas Properties and other material properties
will be fully preserved and maintained, except to the extent a portion of
such properties is no longer capable of producing Hydrocarbons in
economically reasonable amounts. The Borrower will and will cause each
Subsidiary to promptly: (i) pay and discharge, or make reasonable and
customary efforts to cause to be paid and discharged, all delay rentals,
royalties, expenses and indebtedness accruing under the leases or other
agreements affecting or pertaining to its Oil and Gas Properties, (ii)
perform or make reasonable and customary efforts to cause to be performed, in
accordance with industry standards, the obligations required by each and all
of the assignments, deeds, leases, subleases, contracts and agreements
affecting its interests in its Oil and Gas Properties and other material
properties, (iii) will and will cause each Subsidiary to do all other things
necessary to keep unimpaired, except for Liens described in Section 6.3, its
rights with respect thereto and prevent any forfeiture thereof or a default
thereunder, except to the extent a portion of such properties is no longer
capable of producing Hydrocarbons in economically reasonable amounts and
except for dispositions permitted by Section 6.5 hereof. The Borrower will
and will cause each Subsidiary to operate its Oil and Gas Properties and
other material properties or cause or make reasonable and customary efforts
to cause such Oil and Gas Properties and other material properties to be
operated in a careful and efficient manner in accordance with the practices
of the industry and in compliance with all applicable contracts and
agreements and in compliance in all material respects with all governmental
requirements.
Section 4.9 FURTHER ASSURANCES. The Borrower shall, and shall cause
each of its Subsidiaries to cure promptly any defects in the creation and
issuance of the Notes and the execution and delivery of the Security
Documents and this Agreement. The Borrower at its expense shall, and shall
cause each Subsidiary to promptly execute and deliver to the Agent upon
request all such other documents, agreements and instruments to comply with
or accomplish the covenants and agreements of the Borrower or any Subsidiary,
as the case may be, in the Security Documents and this Agreement, or to
further evidence and more fully describe the collateral intended
68
as security for the Notes, or to correct any omissions in the Security
Documents, or to state more fully the security obligations set out herein or
in any of the Security Documents, or to create perfect, protect or preserve
any Liens as first priority Liens created pursuant to any of the Security
Documents, or to make any recordings, to file any notices or obtain any
consents, all as may be necessary or appropriate in connection therewith.
Section 4.10 ADDITIONAL COLLATERAL.
(a) Should the Borrower acquire any additional Oil and Gas Properties,
the Borrower will grant to the Agent as security for the Indebtedness a
first-priority Lien interest (subject only to Excepted Liens) on the
Borrower's interest in any Oil and Gas Properties not already subject to a
Lien of the Security Documents, which Lien will be created and perfected by
and in accordance with the provisions of deeds of trust, security agreements
and financing statements, or other Security Documents, all in form and
substance satisfactory to the Agent in its sole discretion and in sufficient
executed (and acknowledged where necessary or appropriate) counterparts for
recording purposes.
(b) Concurrently with the granting of the Lien or other action referred
to in Section 5.10(a) above, the Borrower will provide to the Agent title
information in form and substance satisfactory to the Agent in its sole
discretion with respect to the Borrower's interests in such Oil and Gas
Properties.
(c) Also, promptly after the filing of any new Security Document in any
state, upon the reasonable request of the Agent, the Borrower will provide to
the Agent an opinion addressed to the Agent for the benefit of the Banks in
form and substance satisfactory to the Agent in its sole discretion from
counsel acceptable to Agent, stating that the Security Document is valid,
binding and enforceable in accordance with its terms and in legally
sufficient form for such jurisdiction.
Section 4.11 HEDGING AGREEMENTS. On the Closing Date, Borrower will
enter into and maintain one or more oil and natural gas Hedging Agreements on
terms and conditions acceptable to the Agent with one or more Banks as a
counterparty or with such other Persons as
69
approved by the Required Banks. Banks hereby approve the Hedging Agreements
listed on Schedule 5.11.
Section 4.12 LIST OF PURCHASERS. Within thirty (30) days after the
close of each fiscal year of the Borrower, Borrower will furnish to the Agent
a list of current Purchasers of Hydrocarbons together with the address of
such purchasers.
SECTION 5. NEGATIVE COVENANTS.
The Borrower covenants and agrees that on and after the Closing Date
until the Total Commitment has terminated, and the Obligations are paid in
full:
Section 5.1 FINANCIAL COVENANTS.
(a) WORKING CAPITAL RATIO. The Borrower shall not permit the ratio of
consolidated current assets to consolidated current liabilities to be less
than 1:00 to 1:00.
The term "consolidated" shall include the current assets or current
liabilities, as applicable, of the Guarantor. Consolidated current
liabilities shall include the portion of the indebtedness evidenced by the
Note due and payable on the next Payment Date and the current portion of any
other indebtedness maturing more than one year after the date of its creation.
(b) NET WORTH. The Borrower shall not permit the excess of
consolidated total assets over consolidated total liabilities to be less than
$30,000,000 (as such amount shall be deemed increased from time to time by
any amount equal to 50% of the Borrower's Net Income (only if positive) for
each fiscal quarter of the Borrower beginning with the fiscal quarter ending
on June 30, 1997, plus 100% of the net proceeds of any new issuance of
capital stock or other equity securities of the Borrower or Guarantor).
The term "consolidated" shall include the total assets or total liabilities,
as applicable, of the Guarantor.
(c) INTEREST COVERAGE RATIO. The Borrower shall not permit the ratio of
EBITDA to Interest Expense determined for any fiscal quarter as of the last
day
70
thereof to be less than 3.0 to 1.0.
Section 5.2 INDEBTEDNESS. The Borrower shall not, and shall not permit
any of its Subsidiaries to, create, incur, assume, suffer to exist or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, other than:
(a) Indebtedness hereunder and under the other Loan Documents;
(b) Indebtedness outstanding on the Closing Date and set forth on
Schedule 6.2 hereto;
(c) Indebtedness permitted under Section 6.6;
(d) Subordinated Indebtedness of the Borrower in an amount not to
exceed $20,000,000 in the aggregate pursuant to documentation and otherwise
on terms and conditions acceptable to the Agent and the Required Banks (which
may include second and subordinated liens on the Collateral) and containing
subordination provisions in the form of Exhibit H;
(e) Indebtedness with respect to Capital Leases and other purchase
money Indebtedness, not in excess of $500,000 in the aggregate at any one
time outstanding; provided that any such Indebtedness shall not exceed 90% of
the lesser of the purchase price or the fair market value of the asset so
financed; and
(f) Other Indebtedness created, incurred or assumed after the date
hereof not enumerated in clauses (a) through (e) above, provided that the
aggregate outstanding principal amount of such Indebtedness shall not exceed
$500,000 at any one time outstanding.
Section 5.3 LIENS. The Borrower shall not, and shall not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist, directly or
indirectly, any Lien on any of its property now owned or hereafter acquired,
other than:
(a) Liens existing on the Closing Date and set forth on Schedule 6.3
hereto;
(b) Liens for taxes not yet due or which are
71
being contested in good faith by appropriate proceedings diligently conducted
and with respect to which adequate reserves are being maintained in
accordance with GAAP;
(c) Statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other Liens imposed by Law (other than any Lien
imposed by ERISA or pursuant to any Environmental Law) created in the
ordinary course of business for amounts not yet due or which are being
contested in good faith by appropriate proceedings diligently conducted and
with respect to which adequate bonds have been posted;
(d) Liens (other than any Lien imposed by ERISA or pursuant to any
Environmental Law) incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(e) Easements, rights-of-way, zoning and similar restrictions and other
similar charges or encumbrances not interfering with the ordinary conduct of
the business of the Borrower or any of its Subsidiaries and which do not
detract materially from the value of the property to which they attach or
impair materially the use thereof by the Borrower or any of its Subsidiaries
or materially adversely affect the security interests of the Agent or the
Banks therein;
(f) Liens granted to the Agent for the benefit of the Banks pursuant to
the Security Documents securing the Obligations; and
(g) Liens created pursuant to Capital Leases and to secure other
purchase-money Indebtedness permitted pursuant to Section 6.2(e), provided
that such Liens are only in respect of the property or assets subject to, and
secure only, the respective Capital Lease or other purchase-money
Indebtedness.
Section 5.4 RESTRICTION ON FUNDAMENTAL CHANGES.
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(a) The Borrower shall not, and shall not permit any of its Subsidiaries
to, enter into any merger or consolidation, or liquidate, wind-up or dissolve
(or suffer any liquidation or dissolution), discontinue its business or
convey, lease, sell, transfer or otherwise dispose of, in one transaction or
series of transactions, all or any substantial part of its business or
property, whether now or hereafter acquired, except (i) as otherwise
permitted under Section 6.5 and (ii) any wholly-owned Subsidiary of the
Borrower may merge into or convey, sell, lease or transfer all or
substantially all of its assets to, the Borrower or any other wholly-owned
Subsidiary of the Borrower.
(b) The Borrower shall not, and shall not permit any of its Subsidiaries
to, (i) acquire by purchase or otherwise any property or assets of, or stock
or other evidence of beneficial ownership of, any Person, except purchases of
inventory, equipment, materials and supplies in the ordinary course of
Borrower's or such Subsidiary's business, (ii) create any Subsidiary, or
(iii) enter into any partnership or joint venture.
(c) Borrower shall not and shall not permit any of its Subsidiaries to,
amend its certificate of incorporation or by-laws.
Section 5.5 SALE OF OIL AND GAS PROPERTIES. The Borrower shall not, and
shall not permit any of its Subsidiaries to, sell, assign, lease, farmout,
convey or otherwise transfer any Oil and Gas Property or any interest in any
Oil and Gas Property except for (i) the sale of Hydrocarbons in the ordinary
course of business; (ii) farmouts of undeveloped acreage and assignments in
connection with such farmouts; (iii) the sale or transfer of equipment that
is no longer necessary for the business of the Borrower or such Subsidiary or
is replaced by equipment of at least comparable value and use and (iv)
during any consecutive 12 month period, sales in the ordinary course of
business of Oil and Gas Properties which shall not exceed $500,000 in the
aggregate in any fiscal year.
Section 5.6 CONTINGENT LIABILITY. The Borrower shall not, and shall
not permit any of its Subsidiaries to, create or become or be liable with
respect to any Contingent Liability, except:
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(a) pursuant to the Guaranty or the Security Documents; and
(b) Contingent Liability which are in existence on the Closing Date and
which are set forth on Schedule 6.6.
Section 5.7 DIVIDENDS. The Borrower shall not, and shall not permit any
of its Subsidiaries to, declare or pay any dividends (other than dividends
payable solely in common stock), or return any capital to, its stockholders
or authorize or make any other distribution, payment or delivery of property
or cash to its stockholders as such, or redeem, retire, purchase or otherwise
acquire, directly or indirectly, any shares of any class of its capital stock
now or hereafter outstanding (or any options or warrants issued with respect
to its capital stock), or set aside any funds for any of the foregoing
purposes (all the foregoing "Dividends"); provided, however so long as (i) no
Event of Default has occurred and is continuing hereunder or would as a
consequence thereof, (ii) no Borrowing Base deficiency has occurred, and
(iii) the Borrower is in compliance with the terms of Section 6.1 hereof, the
Borrower may declare and pay dividends on its stock.
Section 5.8 ADVANCES, INVESTMENTS AND LOANS. The Borrower shall not,
and shall not permit any of its Subsidiaries to, lend money or credit or make
advances to any Person, or directly or indirectly purchase or acquire any
stock, obligations or securities of, or any other interest in, or make any
capital contribution to any Person, except that the following shall be
permitted:
(a) accounts receivable owned by the Borrower and its Subsidiaries, if
created in the ordinary course of the business of the Borrower and its
Subsidiaries and payable or dischargeable in accordance with customary trade
terms;
(b) loans and advances to the Borrower by any of its Subsidiaries not to
exceed $500,000 in the aggregate in any fiscal year;
(c) loans and advances by the Borrower and its Subsidiaries to their
employees in the ordinary course of
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its business not exceeding $250,000 in the aggregate at any one time
outstanding;
(d) Investments existing on the Closing Date and identified on Schedule
6.8; and
(e) the Borrower and its Subsidiaries may acquire and hold Cash
Equivalents.
Section 5.9 TRANSACTIONS WITH AFFILIATES. The Borrower shall not, and
shall not permit any of its Subsidiaries to, enter into any transaction or
series of related transactions, whether or not in the ordinary course of
business, with any Affiliate, other than on terms and conditions
substantially as favorable to the Borrower or such Subsidiary as would be
obtainable at the time in a comparable arm's-length transaction with a Person
other than an Affiliate.
Section 5.10 LIMITATION ON VOLUNTARY PAYMENTS. The Borrower shall not,
and shall not permit any of its Subsidiaries to make any sinking fund payment
or voluntary or optional payment or prepayment on or redemption or
acquisition for value of (including, without limitation, by way of depositing
with the trustee with respect thereto money or securities before due for the
purpose of paying when due) or exchange of any Indebtedness other than the
Indebtedness hereunder and under the other Loan Documents.
Section 5.11 CHANGES IN BUSINESS. The Borrower shall not, and shall
not permit any of its Subsidiaries to, enter into any business which is
substantially different from that conducted by the Borrower or such Loan
Party, as the case may be, on the Closing Date.
Section 5.12 CERTAIN RESTRICTIONS. The Borrower shall not, and shall
not permit any of its Subsidiaries or any Person controlling the Borrower
to, enter into any agreement which restricts the ability of the Borrower or
any of its Subsidiaries to (a) enter into amendments, modifications or
waivers of the Loan Documents, (b) sell, transfer or otherwise dispose of
its assets, (c) create, incur, assume or suffer to exist any Lien upon any of
its property, (d) create, incur, assume, suffer to exist or otherwise become
liable with respect to any Indebtedness, or (e) pay any Dividend, provided
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that Capital Leases or agreements governing purchase money Indebtedness which
contain restrictions of the types referred to in clauses (b) or (c) with
respect to the property covered thereby shall be permitted.
Section 5.13 LEASE PAYMENTS. The Borrower shall not, and shall not
permit any of its Subsidiaries to, incur, assume or suffer to exist, any
obligation for payments under Capital Leases and operating leases (other than
leases which compromise Hydrocarbon Interests) whether for real or personal
or mixed property (including, without limitation, rental payments and
payments of taxes thereunder), except that the Borrower and its Subsidiaries
may incur rental payment obligations not to exceed $500,000 in the aggregate
during each fiscal year.
Section 5.14 SALES AND LEASEBACKS. The Borrower shall not, and shall
not permit any of its Subsidiaries to, become liable, directly or
indirectly, with respect to any lease, whether an operating lease or a
Capital Lease, of any property (whether real or personal or mixed) whether
now owned or hereafter acquired, (i) which the Borrower or such Subsidiary
has sold or transferred or is to sell or transfer to any other Person, or
(ii) which the Borrower or such Subsidiary intends to use for substantially
the same purposes as any other property which has been or is to be sold or
transferred by the Borrower or such Subsidiary to any other Person in
connection with such Lease.
Section 5.15 PLANS. The Borrower shall not, nor shall it permit any
member of its ERISA Controlled Group to, take any action which would increase
the aggregate present value of the Unfunded Benefit Liabilities under all
Plans to an amount in excess of $500,000.
Section 5.16 FISCAL YEAR; FISCAL QUARTER. The Borrower shall not, and
shall not permit any of its Subsidiaries to, change its fiscal year or any of
its fiscal quarters.
Section 5.17 HEDGING CONTRACT. No Loan Party will be a party to or in
any manner be liable on any Hedging Contract unless approved by the Agent.
Section 5.18 CERTAIN CONTRACTS; AMENDMENTS. No Loan Party will enter
into any "take-or-pay" contract
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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 Loan Party will amend or permit any change
to any contract or lease which releases, qualifies, limits, makes contingent
or otherwise detrimentally affects the rights and benefits of the Agents and
the Banks under or acquired pursuant to any Security Document.
SECTION 6. EVENTS OF DEFAULT
Section 6.1 EVENTS OF DEFAULT. Each of the following events, acts,
occurrences or conditions shall constitute an Event of Default under this
Agreement, regardless of whether such event, act, occurrence or condition is
voluntary or involuntary or results from the operation of law or pursuant to
or as a result of compliance by any Person with any judgment, decree, order,
rule or regulation of any court or administrative or governmental body:
(a) FAILURE TO MAKE PAYMENTS. The Borrower shall (i) default in the
payment when due of any principal of the Loans or any reimbursement
obligation for a disbursement made under any Letter of Credit or (ii)
default, and such default shall continue unremedied for five (5) or more
Business Days, in the payment when due of any interest on the Loans or in the
payment when due of any Fees or any other amounts owing hereunder.
(b) BREACH OF REPRESENTATION OR WARRANTY. Any representation or
warranty made by any Loan Party herein or in any other Loan Document or in
any certificate or statement delivered pursuant hereto or thereto shall prove
to be false or misleading in any material respect on the date as of which
made or deemed made.
(c) BREACH OF COVENANTS.
(i) The Borrower shall fail to perform or observe any agreement,
covenant or obligation arising under Sections 6 or any other Section of
this Agreement other than Section 5.
(ii) The Borrower shall fail to perform or observe any agreement,
covenant or obligation aris-
77
ing under Section 5 of this Agreement (except those described in
subsections (a), (b) and (c)(i) above), and such failure shall continue
for thirty (30) days after the earlier to occur of (i) notice thereof to
the Borrower by the Agent or any Bank (through the Agent), or (ii) the
Borrower otherwise becoming aware of such default.
(iii) Any Loan Party shall fail to perform or observe any
agreement, covenant or obligation arising under any provision of the
Loan Documents other than this Agreement, which failure shall continue
after the end of the applicable grace period, if any, provided therein.
(d) DEFAULT UNDER OTHER AGREEMENTS. Any Loan Party shall default in the
payment when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) of any amount owing in respect of any
Indebtedness (other than the Obligations) in the aggregate principal amount
of $500,000 or more; or any Loan Party shall default in the performance or
observance of any obligation or condition with respect to any such
Indebtedness or any other event shall occur or condition exist, if the effect
of such default, event or condition is to accelerate the maturity of any such
Indebtedness or to permit (without regard to any required notice or lapse of
time) the holder or holders thereof, or any trustee or agent for such
holders, to accelerate the maturity of any such Indebtedness, or any such
Indebtedness shall become or be declared to be due and payable prior to its
stated maturity other than as a result of a regularly scheduled payment.
(e) BANKRUPTCY, ETC. (i) Any Loan Party shall commence a voluntary case
concerning itself under the Bankruptcy Code; or (ii) an involuntary case is
commenced against any Loan Party and the petition is not controverted within
10 days, or is not dismissed within 30 days, after commencement of the case;
or (iii) a custodian (as defined in the Bankruptcy Code) is appointed for,
or takes charge of, all or substantially all of the property of any Loan
Party or any Loan Party commences any other proceedings under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to any
78
Loan Party or there is commenced against any Loan Party any such proceeding
which remains undismissed for a period of 30 days; or (iv) any order of
relief or other order approving any such case or proceeding is entered; or
(v) any Loan Party is adjudicated insolvent or bankrupt; or (vi) any Loan
Party suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or unstayed for a
period of 30 days; or (vii) any Loan Party makes a general assignment for the
benefit of creditors; or (viii) any Loan Party shall fail to pay, or shall
state that it is unable to pay, or shall be unable to pay, its debts
generally as they become due; or (ix) any Loan Party shall call a meeting of
its creditors with a view to arranging a composition or adjustment of its
debts; or (x) any Loan Party shall by any act or failure to act consent to,
approve of or acquiesce in any of the foregoing; or (xi) any corporate
action is taken by any Loan Party for the purpose of effecting any of the
foregoing.
(f) ERISA. (i) Any Termination Event shall occur, or (ii) any Plan
shall incur an "accumulated funding deficiency" (as defined in Section 412 of
the Code or Section 302 of ERISA), whether or not waived or (iii) the
Borrower or a member of its ERISA Controlled Group shall have engaged in a
transaction which is prohibited under Section 4975 of the Code or Section 406
of ERISA which could result in the imposition of liability in excess of
$100,000 on the Borrower or any member of its ERISA Controlled Group, or (iv)
the Borrower or any member of its ERISA Controlled Group shall fail to pay
when due an amount which it shall have become liable to pay to the PBGC, any
Plan or a trust established under Title IV of ERISA, or (v) a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that an ERISA Plan must be terminated or have a trustee
appointed to administer any ERISA Plan, or (vi) the Borrower or a member of
its ERISA Controlled Group suffers a partial or complete withdrawal from a
Multiemployer Plan or is in "default" (as defined in Section 4219(c)(5) of
ERISA) with respect to payments to a Multiemployer Plan, or (vii) a
proceeding shall be instituted against the Borrower or any member of its
ERISA Controlled Group to enforce Section 515 of ERISA, or (viii) any other
event or condition shall occur or exist with respect to any Plan which could
subject the Borrower or any member of its ERISA Controlled Group to
79
any tax, penalty or other liability in excess of $100,000.
(g) SECURITY DOCUMENTS. Any of the Security Documents shall for any
reason cease to be in full force and effect, or shall cease to give the Agent
the Liens, rights, powers and privileges purported to be created thereby
including, without limitation, a perfected first priority security interest
in, and Lien on, all of the Collateral in accordance with the terms thereof.
(h) GUARANTY. The Guaranty or any provision thereof shall cease to be
in full force and effect, or the Guarantor or any Person acting by or on
behalf of the Guarantor shall deny or disaffirm all or any portion of the
Guarantor's obligations under such Guaranty.
(i) CHANGE OF CONTROL. Inland Resources shall cease to beneficially own
and control at least 66_% of the issued and outstanding shares of each class
of capital stock of the Borrower entitled (without regard to the occurrence
of any contingency) to vote for the election of members of the board of
directors of the Borrower.
(j) JUDGMENTS. One or more judgments or decrees in an aggregate amount
of $500,000 or more shall be entered by a court or courts of competent
jurisdiction against the Loan Parties (other than any judgment as to which,
and only to the extent, a reputable insurance company has acknowledged
coverage of such claim in writing) and (i) any such judgments or decrees
shall not be stayed, discharged, paid, bonded or vacated within 30 days or
(ii) enforcement proceedings shall be commenced by any creditor on any such
judgments or decrees.
(k) ENVIRONMENTAL MATTERS. (i) Any Environmental Claim shall have
been asserted against any Loan Party or any Environmental Affiliate thereof
which, if determined adversely, could have a Material Adverse Effect, (ii)
any release, emission, discharge or disposal of any Material of Environmental
Concern shall have occurred, and such event could form the basis of an
Environmental Claim against any Loan Party or any Environmental Affiliate
thereof which, if determined adversely, could have a Material Adverse
Effect, or (iii) any Loan Party or its Environmental Affiliate shall have
failed to obtain any Environmental Approval Necessary for
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the management, use, control, ownership, or operation of its business,
property or assets or any such Environmental Approval shall be revoked,
terminated, or otherwise cease to be in full force and effect, in each case,
if the existence of such condition could have a Material Adverse Effect.
(l) LETTERS OF CREDIT. Any Letter of Credit becomes the subject matter
of any order, judgment, injunction or any other such determination, or if
the Borrower or any other Person shall petition or apply for or obtain any
order restricting payment by the Agent under any Letter of Credit or
extending the Banks' liability under any Letter of Credit beyond the
expiration date stated therein or otherwise agreed to by the Agent.
(m) INLAND RESOURCES. Inland Resources takes, suffers or permits to
exist any of the events or conditions referred to in paragraphs (e) or (j)
hereof.
(n) SUBSIDIARY. Any Subsidiary takes, suffers or permits to exist any
of the events or conditions referred to in paragraphs (e) or (j) hereof.
(o) MATERIAL ADVERSE EFFECT. An event or events shall occur having a
Material Adverse Effect.
Section 6.2 RIGHTS AND REMEDIES.
(a) Upon the occurrence of any Event of Default described Section
7.1(e), the Commitments shall automatically and immediately terminate and the
unpaid principal amount of and any and all accrued interest on the Loans and
any and all accrued Fees and other Obligations (including without limitation
the payment of cash collateral to secure the LC Exposure as provided in
Section 2.23 hereof) shall automatically become immediately due and payable,
with all additional interest from time to time accrued thereon and without
presentation, demand, or protest or other requirements of any kind
(including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and notice of
acceleration), all of which are hereby expressly waived by Borrower, and the
obligation of each Bank to make any Loan hereunder shall thereupon
terminate; and upon the occurrence and during the continuance of any other
Event of Default, the Agent
81
shall at the request, or may with the consent, of the Required Banks, by
written notice to Borrower, (i) declare that the Commitments are terminated,
whereupon the Commitments and the obligation of each Bank to make any Loan
hereunder shall immediately terminate, and (ii) declare the unpaid principal
amount of and any and all accrued and unpaid interest on the Loans and any
and all accrued Fees and other Obligations (including without limitation the
payment of cash collateral to secure the LC Exposure as provided in Section
2.23 hereof) to be, and the same shall thereupon be, immediately due and
payable with all additional interest from time to time accrued thereon and
without presentation, demand, or protest or other requirements of any kind
(including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and notice of
acceleration), all of which are hereby expressly waived by Borrower.
(b) All proceeds received after maturity of the Notes, whether by
acceleration or otherwise shall be applied first to reimbursement of expenses
and indemnities provided for in this Agreement; second to accrued interest
on the Notes; third to fees; fourth pro rata to principal outstanding on the
Notes and other Obligations; fifth to serve as cash collateral to be held by
the Agent to secure the LC Exposure; and any excess shall be paid to Borrower
or as otherwise required by any governmental requirement.
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SECTION 7. THE AGENT
Section 7.1 APPOINTMENT. Each Bank hereby irrevocably designates and
appoints CIBC as the Agent of such Bank under this Agreement and each other
Loan Document, and each such Bank irrevocably authorizes CIBC as the Agent
for such Bank, to take such action on its behalf under the provisions of this
Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to the Agent by the terms of
this Agreement and each other Loan Document, together with such other powers
as are reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the
Agent shall be read into this Agreement or otherwise exist against the Agent.
The provisions of this Section 8 are solely for the benefit of the Agent and
the Banks and no Loan Party shall have any rights as a third party
beneficiary or otherwise under any of the provisions hereof. In performing
its functions and duties hereunder and under the other Loan Documents, the
Agent shall act solely as the agent of the Banks and does not assume nor
shall be deemed to have assumed any obligation or relationship of trust or
agency with or for any Loan Party or any of their respective successors and
assigns.
Section 7.2 DELEGATION OF DUTIES. The Agent may execute any of its
duties under this Agreement or the other Loan Documents by or through agents
or attorneys-in-fact and shall be entitled to advice of counsel concerning
all matters pertaining to such duties. The Agent shall not be responsible
for the negligence or misconduct or any agents or attorneys-in-fact selected
by it with reasonable care.
Section 7.3 EXCULPATORY PROVISIONS. The Agent shall not be (i) liable
for any action lawfully taken or omitted to be taken by it or any Person
described in Section 8.2 under or in connection with this Agreement or any
other Loan Document (except for its or such Person's own gross negligence or
willful miscon-
83
duct), or (ii) responsible in any manner to any of the Banks for any
recitals, statements, representations or warranties made by any Loan Party
contained in this Agreement or any other Loan Document or in any certificate,
report, statement or other document referred to or provided for in, or
received under or in connection with, this Agreement or any other Loan
Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any other Loan Document
or for any failure of any Loan Party to perform their obligations hereunder
or thereunder. The Agent shall not be under any obligation to any Bank to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Loan Party.
This Section is intended solely to govern the relationship between the Agent,
on the one hand, and the Banks, on the other.
Section 7.4 RELIANCE BY AGENT. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any Note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to any
Loan Party), independent accountants and other experts selected by the Agent.
The Agent may deem and treat the payee of any Note as the owner thereof for
all purposes unless the Agent shall have received an executed Transfer
Supplement in respect thereof. The Agent shall be fully justified in failing
or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Required Banks as it deems appropriate or it shall first be indemnified to
its satisfaction by the Banks against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such
action. The Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other Loan Documents in
accordance with a request of the Required Banks, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Banks and all
84
future holders of the Notes.
Section 7.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
unless the Agent has received notice from a Bank or the Borrower referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default". In the event that the Agent receives
such a notice, the Agent shall promptly give notice thereof to the Banks.
The Agent shall take such action with respect to such Default or Event of
Default as shall be directed by the Required Banks; PROVIDED that unless and
until the Agent shall have received such directions, the Agent may (but shall
not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as the Agent shall deem
advisable and in the best interests of the Banks.
Section 7.6 NON-RELIANCE ON AGENT AND OTHER BANKS. Each Bank expressly
acknowledges that neither the Agent, nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by the Agent hereafter
taken, including, without limitation, any review of the affairs of any Loan
Party, shall be deemed to constitute any representation or warranty by the
Agent. Each Bank represents and warrants to the Agent that it has,
independently and without reliance upon the Agent or any other Bank and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
prospects, financial and other conditions and creditworthiness of the Loan
Parties and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Bank also represents that it will, independently and
without reliance upon the Agent or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own credit analysis, appraisals and decisions in taking or not
taking action under this Agreement, and to make such investigation as it
deems necessary to inform itself as to the business, operations, property,
prospects, financial and other condition and creditworthiness of the Loan
Parties. Except for notices, reports and other documents expressly required
under the Loan Documents to be furnished to the Banks by
85
the Agent, the Agent shall not have any duty or responsibility to provide any
Bank with any credit or other information concerning the business,
operations, property, prospects, financial and other condition or
creditworthiness of the Loan Parties which may come into the possession of
the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
Section 7.7 INDEMNIFICATION. The Banks agree to indemnify the Agent
and its officers, directors, employees, representatives and agents (to the
extent not reimbursed by the Loan Parties and without limiting the obligation
of the Loan Parties to do so), ratably according to their Pro Rata Shares,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever (including, without limitation, the fees and
disbursements of counsel for the Agent or such Person in connection with any
investigative, administrative or judicial proceeding commenced or
threatened, whether or not the Agent or such Person shall be designated a
party thereto) that may at any time (including, without limitation, at any
time following the payment of the Obligations) be imposed on, incurred by or
asserted against the Agent or such Person as a result of, or arising out of,
or in any way related to or by reason of, the execution, delivery or
performance of any Loan Document (but excluding any such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the gross negligence or
willful misconduct of the Agent or such Person as finally determined by a
court of competent jurisdiction).
Section 7.8 AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its
affiliates may make loans to, accept deposits from and generally engage in
any kind of business with the Loan Parties as though the Agent were not the
Agent hereunder. With respect to Loans made or renewed by it and any Note
issued to it, the Agent shall have the same rights and powers under this
Agreement as any Bank and may exercise the same as though it were not the
Agent, and the terms "Bank" and "Banks" shall include the Agent in its
individual capacity.
Section 7.9 SUCCESSOR AGENT. The Agent may
86
resign as Agent upon 30 days' notice to the Borrower and the Banks. If the
Agent shall resign as Agent under this Agreement, then the Required Banks
during such 30-day period shall appoint from among the Banks a successor
agent, whereupon such successor agent shall succeed to the rights, powers and
duties of the Agent and the term "Agent" shall mean such successor agent,
effective upon its appointment, and the former Agent's rights, powers and
duties as Agent shall be terminated, without any other or further act or deed
on the part of such former Agent or any of the parties to this Agreement or
any holders of the Notes. After any retiring Agent's resignation hereunder
as Agent, the provisions of this Section 8 and Section 9.1 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
SECTION 8. MISCELLANEOUS
Section 8.1 PAYMENT OF EXPENSES, INDEMNITY, ETC. The Borrower shall:
(a) whether or not the transactions hereby contemplated are
consummated, pay all reasonable out-of-pocket costs and expenses of the Agent
and the Arranger in connection with the negotiation, preparation, execution
and delivery of the Loan Documents and the documents and instruments referred
to therein, the creation, perfection or protection of the Agent's Liens in
the Collateral (including, without limitation, fees and expenses for title
and lien searches and filing and recording fees), and any amendment, waiver
or consent relating to any of the Loan Documents (including, without
limitation, as to each of the foregoing, the reasonable fees and
disbursements of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, special counsel to
the Agent and any other attorneys retained by the Agent and allocated costs
of internal counsel) and of the Agent and each Bank in connection with the
preservation of rights under, and enforcement of, the Loan Documents and the
documents and instruments referred to therein or in connection with any
restructuring or rescheduling of the Obligations (including, without
limitation, the reasonable fees and disbursements of counsel for the Agent
and for each of the Banks);
(b) pay, and hold the Arranger, the Agent and
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each of the Banks harmless from and against, any and all present and future
stamp, excise and other similar taxes with respect to the foregoing matters
and hold the Agent and each Bank harmless from and against any and all
liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Bank) to pay such taxes; and
(c) indemnify the Arranger, the Agent and each Bank, its officers,
directors, employees, representatives and agents (each an "Indemnitee") from,
and hold each of them harmless against, any and all losses, liabilities,
claims, damages, expenses, obligations, penalties, actions, judgments,
suits, costs or disbursements of any kind or nature whatsoever (including,
without limitation, the fees and disbursements of counsel for such Indemnitee
in connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto) that may at any time (including, without limitation, at any
time following the payment of the Obligations) be imposed on, asserted
against or incurred by any Indemnitee as a result of, or arising out of, or
in any way related to or by reason of, (i) the execution, delivery or
performance of any Loan Document or any transaction contemplated in those
documents, (ii) any violation by any Loan Party or its Environmental
Affiliate of any applicable Environmental Law, (iii) any Environmental Claim
arising out of the management, use, control, ownership or operation of
property or assets by any of the Loan Parties or any of their Environmental
Affiliates, including, without limitation, all on-site and off-site
activities involving Materials of Environmental Concern, (iv) the breach of
any environmental representation or warranty set forth in Section 4.15, (v)
the grant to the Agent and the Banks of any Lien in any property or assets of
any of the Loan Parties or any stock or other equity interest in any of the
Loan Parties, and (vi) the exercise by the Agent and the Banks of their
rights and remedies (including, without limitation, foreclosure) under any
agreements creating any such Lien (but excluding, as to any Indemnitee, any
such losses, liabilities, claims, damages, expenses, obligations, penalties,
actions, judgments, suits, costs or disbursements incurred solely by reason
of the gross negligence or willful misconduct of such Indemnitee as finally
determined by a court of competent jurisdiction). The Borrower's obligations
88
under this Section shall survive the termination of this Agreement and the
payment of the Obligations.
Section 8.2 RIGHT OF SETOFF. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance
of any Event of Default, each Bank is hereby authorized at any time or from
time to time, without presentment, demand, protest or other notice of any
kind to any Loan Party or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and apply any and all
deposits (general or special, time or demand, provisional or final) and any
other indebtedness at any time held or owing by such Bank (including,
without limitation, by branches and agencies of such Bank wherever located)
to or for the credit or the account of any Loan Party against and on account
of the Obligations of the Loan Parties to such Bank under this Agreement or
under any of the other Loan Documents, including, without limitation, all
interests in Obligations purchased by such Bank pursuant to Section 9.7, and
all other claims of any nature or description arising out of or connected
with this Agreement or any other Loan Document, irrespective of whether or
not such Bank shall have made any demand hereunder and although said
Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
Section 8.3 NOTICES. Except as otherwise expressly provided herein,
all notices, requests and demands to or upon the respective parties hereto to
be effective shall be in writing (including by telecopy, telex, or cable
communication), and shall be deemed to have been duly given or made when
delivered by hand, or five days after being deposited in the United States
mail, postage prepaid, or, in the case of telex notice, when sent, answerback
received, or, in the case of telecopy notice, when sent, or, in the case of a
nationally recognized overnight courier service, one Business Day after
delivery to such courier service, addressed, in the case of each party
hereto, at its address specified opposite its signature below or on the
appropriate Transfer Supplement, or to such other address as may be
designated by any party in a written notice to the other parties hereto,
provided that notices and communications to the Agent shall not be effective
until received by the
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Agent.
Section 8.4 SUCCESSORS AND ASSIGNS; PARTICIPATION; ASSIGNMENTS.
(a) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Borrower, the Banks, the Agent, all future
holders of the Notes and the Letters of Credit and their respective
successors and assigns, except that the Borrower may not assign or transfer
any of its rights or obligations under this Agreement without the prior
written consent of each Bank. No Bank may participate, assign or sell any of
its Credit Exposure (as defined in clause (b) below) except as required by
operation of law, in connection with the merger, consolidation or dissolution
of any Bank or as provided in this Section 9.4.
(b) PARTICIPATION. Any Bank may at any time sell to one or more
Persons (each a "Participant") participating interests in any Loan owing to
such Bank, any Note held by such Bank, any Letter of Credit in which such
Bank is participating, any Commitment of such Bank and or any other interest
of such Bank hereunder (in respect of any such Bank, its "Credit Exposure").
Notwithstanding any such sale by a Bank of participating interests to a
Participant, such Bank's rights and obligations under this Agreement shall
remain unchanged, such Bank shall remain solely responsible for the
performance thereof, such Bank shall remain the holder of any such Note for
all purposes under this Agreement (except as expressly provided below), and
the Borrower and the Agent shall continue to deal solely and directly with
such Bank in connection with such Bank's rights and obligations under this
Agreement. The Borrower agrees that if any Obligations are due and unpaid,
or shall have been declared or shall have become due and payable upon the
occurrence and during the continuance of an Event of Default, each
Participant shall be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement and any Note or
Letter of Credit to the same extent as if the amount of its participating
interest were owing directly to it as a Bank under this Agreement or any Note
or Letter of Credit, provided that such right of setoff shall be subject to
the obligations of such Participant to share with the Banks, and the Banks
agree to share with such Partici-
90
pant, as provided in subsection 9.6. The Borrower also agrees that each
Participant shall be entitled to the benefits of Sections 2.18, 2.19 and
2.20, PROVIDED that no Participant shall be entitled to receive any greater
amount pursuant to such sections than the transferor Bank would have been
entitled to receive in respect of the amount of the participating interest
transferred by such transferor Bank to such Participant had no such transfer
occurred. Each Bank agrees that any agreement between such Bank and any such
Participant in respect of such participating interest shall not restrict such
Bank's right to agree to any amendment, supplement, waiver or modification to
this Agreement or any other Loan Document, except where the result of any of
the foregoing would be to extend the final maturity of any Obligation or any
regularly scheduled installment thereof or reduce the rate or extend the time
of payment of interest thereon or reduce the principal amount thereof or
release all or substantially all of the Collateral (except as expressly
provided in the Loan Documents).
(c) ASSIGNMENTS. Any Bank may, in the ordinary course of its business
and in accordance with applicable law, at any time assign to any Bank or any
affiliate thereof or, with the consent of the Borrower and the Agent which
consent shall not be unreasonably withheld, to any other Person (each an
"Assignee") all or any part of its Credit Exposure. The Borrower, the Agent
and the Banks agree that to the extent of any assignment the Assignee shall
be deemed to have the same rights and benefits under the Loan Documents and
the same rights of setoff and obligation to share pursuant to Section 9.7 as
it would have had if it were a Bank hereunder; provided that the Borrower,
the Collateral Agent and the Agent shall be entitled to continue to deal
solely and directly with the assignor Bank in connection with the interests
so assigned to the Assignee unless and until such Assignee becomes a
Purchasing Bank pursuant to clause (d) below.
(d) ASSIGNMENTS TO PURCHASING BANKS. Any Bank may at any time and from
time to time assign, with the consent of the Borrower and the Agent which
consent shall not be unreasonably withheld, to one or more Persons
("Purchasing Banks") all or any part of its Credit Exposure pursuant to a
supplement to this Agreement, substantially in the form of Exhibit I hereto
(a "Transfer Sup-
91
plement"), executed by such Purchasing Bank, such transferor Bank and the
Agent; provided, however, that (i) any such assignment shall be in an amount
of at least $5,000,000 and (ii) the assignee or assignor shall pay to the
Agent a processing and recordation fee of $3,000 for each assignment. Any
such partial assignment shall be an assignment of an identical percentage of
the transferor Bank's Loans, Letters of Credit and Commitments. Upon (i)
such execution of such Transfer Supplement, (ii) delivery of an executed copy
thereof to the Borrower and the Agent and (iii) payment by such Purchasing
Bank to such transferor Bank of an amount equal to the purchase price agreed
between such transferor Bank and such Purchasing Bank, such transferor Bank
shall be released from its obligations hereunder to the extent of such
assignment and such Purchasing Bank shall for all purposes be a Bank party
to this Agreement and shall have all the rights and obligations of a Bank
under this Agreement to the same extent as if it were an original party
hereto, and no further consent or action by the Borrower, the Banks or the
Agent shall be required. Such Transfer Supplement shall be deemed to amend
this Agreement to the extent, and only to the extent, necessary to reflect
the addition of such Purchasing Bank as a Bank and the resulting adjustment
of the Commitments, if any, arising from the purchase by such Purchasing Bank
of all or a portion of the Credit Exposure of such transferor Bank. Promptly
after the consummation of any transfer to a Purchasing Bank pursuant hereto,
the transferor Bank, the Agent and the Borrower shall make appropriate
arrangements so that a replacement Note is issued to such transferor Bank
and a new Note is issued to such Purchasing Bank, in each case in principal
amounts reflecting such transfer.
(e) DISCLOSURE OF INFORMATION. The Borrower authorizes each Bank to
disclose to any Participant, Assignee or Purchasing Bank (each, a
"Transferee") and any prospective Transferee any and all financial and other
information in such Bank's possession concerning the Borrower which has been
delivered to such Bank by the Borrower pursuant to this Agreement or which
has been delivered to such Bank by the Borrower in connection with such
Bank's credit evaluation of the Borrower prior to entering into this
Agreement.
Section 8.5 AMENDMENTS AND WAIVERS. Neither
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this Agreement, any Note, any other Loan Document to which the Borrower is a
party nor any terms hereof or thereof may be amended, supplemented, modified
or waived except in accordance with the provisions of this Section 9.5. The
Required Banks and the Borrower may, from time to time, enter into written
amendments, supplements, modifications or waivers for the purpose of adding,
deleting, changing or waiving any provisions to this Agreement, the Notes, or
the other Loan Documents to which the Borrower is a party, PROVIDED, that no
such amendment, supplement, modification or waiver shall (a) extend either
the Final Maturity Date or any installment or required prepayment of any
Obligations or reduce the rate or extend the time of payment of interest on
any Obligations, or reduce the principal amount of any Obligations or reduce
any fee payable to the Banks hereunder, or release all or substantially all
of the Collateral (except as expressly contemplated by the Loan Documents) or
change the amount of any Commitment of any Bank, or amend, modify or waive
any provision of this Section 9.5 or the definition of Required Banks, or
consent to or permit the assignment or transfer by the Borrower of any of its
rights and obligations under this Agreement or any other Loan Document, in
each case without the written consent of all the Banks, or (b) amend, modify
or waive any provision of Section 8 or any other provision of any Loan
Document if the effect thereof is to affect the rights or duties of the
Agent, without the written consent of the then Agent. Any such amendment,
supplement, modification or waiver shall apply to each of the Banks equally
and shall be binding upon the Borrower, the Banks, the Agent and all future
holders of the Notes. In the case of any waiver, the Borrower, the Banks and
the Agent shall be restored to their former position and rights hereunder and
under the outstanding Notes, and any Default or Event of Default waived shall
be deemed to be cured and not continuing, but no such waiver shall extend to
any subsequent or other Default or Event of Default, or impair any right
consequent thereon.
Section 8.6 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the
part of the Agent or any Bank or any holder of a Note in exercising any
right, power or privilege hereunder or under any other Loan Document and no
course of dealing between any Loan Party and the Agent or any Bank or the
holder of any Note shall operate as a waiver thereof; nor shall any single or
partial exercise
93
of any right, power or privilege hereunder or under any other Loan Document
preclude any other or further exercise thereof of the exercise of any other
right, power or privilege hereunder or thereunder. The rights and remedies
herein expressly provided are cumulative and not exclusive of any rights or
remedies which the Agent or any Bank or the holder of any Note would
otherwise have. No notice to or demand on any Loan Party in any case shall
entitle any Loan Party to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Agent, the
Banks or the holder of any Note to any other or further action in any
circumstances without notice or demand.
Section 8.7 SHARING OF PAYMENTS. Each of the Banks agrees that if it
should receive any amount hereunder (whether by voluntary payment, by
realization upon security, by the exercise of the right of setoff or banker's
lien, by counterclaim or cross action, by the enforcement of any right under
the Loan Documents, or otherwise) which is applicable to the payment of any
Obligations, of a sum which with respect to the related sum or sums received
by other Banks is in a greater proportion than the total of such Obligation
then owed and due to such Bank bears to the total of such Obligation then
owed and due to all of the Banks immediately prior to such receipt, then such
Bank receiving such excess payment shall purchase for cash without recourse
or warranty from the other Banks an interest in such Obligations owing to
such Banks in such amount as shall result in a proportional participation by
all of the Banks in such amount; provided that if all or any portion of such
excess amount is thereafter recovered from such Bank, such purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest.
Section 8.8 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(A) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW EXCEPT
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
94
(B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT AND ANY ACTION FOR ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND APPELLATE COURTS FROM
ANY THEREOF. THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT
OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
THE BORROWER AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW. THE
BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT
ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT,
ANY BANK OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE BORROWER IN ANY OTHER JURISDICTION.
Section 8.9 MAXIMUM INTEREST. It is the intention of the parties hereto
that each Bank shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to
any Bank under laws applicable to it (including the laws of the United States
of America and the State of Texas or any other jurisdiction whose laws may be
mandatorily applicable to such Bank notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the
contrary in any of the Loan Documents or any agreement entered into in
connection with or as security for the Notes, it is agreed as follows: (i)
the aggregate of all consideration which constitutes interest under law
applicable to any Bank that is contracted for, taken, reserved, charged or
received by such Bank under any of the Loan Documents or agreements or
otherwise in connection with the Notes shall under no circumstances exceed
the maximum amount allowed by such applicable law, and any excess shall be
cancelled automatically and if theretofore paid shall be credited by such
Bank on the principal amount of the Obligations (or, to the extent that the
principal amount of the Obligations shall have been or would thereby be paid
in full, refunded by such Bank to the Borrower); and
95
(ii) in the event that the maturity of the Notes is accelerated by reason of
an election of the holder thereof resulting from any Event of Default under
this Agreement or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under law
applicable to any Bank may never include more than the maximum amount allowed
by such applicable law, and excess interest, if any, provided for in this
Agreement or otherwise shall be cancelled automatically by such Bank as of
the date of such acceleration or prepayment and, if theretofore paid, shall
be credited by such Bank on the principal amount of the Obligations (or, to
the extent that the principal amount of the Obligations shall have been or
would thereby be paid in full, refunded by such Bank to the Borrower). All
sums paid or agreed to be paid to any Bank for the use, forbearance or
detention of sums due hereunder shall, to the extent permitted by law
applicable to such Bank, be amortized, prorated, allocated and spread
throughout the full term of the Loans evidenced by the Notes until payment in
full so that the rate or amount of interest on account of any Loans hereunder
does not exceed the maximum amount allowed by such applicable law. If at any
time and from time to time (i) the amount of interest payable to any Bank on
any date shall be computed at the Highest Lawful Rate applicable to such
Bank pursuant to this Section 9.9 and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to such
Bank would be less than the amount of interest payable to such Bank computed
at the Highest Lawful Rate applicable to such Bank, then the amount of
interest payable to such Bank in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Bank until the total amount of interest payable to such
Bank shall equal the total amount of interest which would have been payable
to such Bank if the total amount of interest had been computed without giving
effect to this Section 9.9. To the extent that Article 5069-1.04 of the
Texas Revised Civil Statutes is relevant for the purpose of determining the
Highest Lawful Rate, such Bank elects to determine the applicable rate
ceiling under such Article by the indicated weekly rate ceiling from time to
time in effect.
Section 8.10 COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the
96
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
Section 8.11 EFFECTIVENESS. This Agreement shall become effective on
the date on which all of the parties hereto shall have signed a counterpart
hereof and shall have delivered the same to the Agent which delivery, in the
case of the Banks, may be given to the Agent by telecopy (with the originals
delivered promptly to the Agent via overnight courier service).
Section 8.12 HEADINGS DESCRIPTIVE. The headings of the several
Sections and subsections of this Agreement are inserted for convenience only
and shall not in any way affect the meaning or construction of any provision
of this Agreement.
Section 8.13 MARSHALLING; RECAPTURE. Neither the Agent nor any Bank
shall be under any obligation to xxxxxxxx any assets in favor of any Loan
Party or any other party or against or in payment of any or all of the
Obligations. To the extent any Bank receives any payment by or on behalf of
any Loan Party, which payment or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
to be repaid to such Loan Party or its estate, trustee, receiver, custodian
or any other party under any bankruptcy law, state or federal law, common law
or equitable cause, then to the extent of such payment or repayment, the
obligation or part thereof which has been paid, reduced or satisfied by the
amount so repaid shall be reinstated by the amount so repaid and shall be
included within the liabilities of such Loan Party to such Bank as of the
date such initial payment, reduction or satisfaction occurred.
Section 8.14 SEVERABILITY. In case any provision in or obligation under
this Agreement or the Notes or the other Loan Documents shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
97
Section 8.15 SURVIVAL. All indemnities set forth herein including,
without limitation, in Sections 2.18, 2.19, 2.20, 2.21, 8.7 and 9.1 shall
survive the execution and delivery of this Agreement and the Notes and the
making and repayment of the Loans hereunder.
Section 8.16 DOMICILE OF LOANS. Each Bank may transfer and carry its
Loans at, to or for the account of any branch office, subsidiary or
affiliate of such Bank.
Section 8.17 LIMITATION OF LIABILITY. No claim may be made by any Loan
Party or any other Person against the Agent or any Bank or the Affiliates,
directors, officers, employees, attorneys or agent of any of them for any
special, indirect, consequential or punitive damages in respect of any claim
for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement, or any act,
omission or event occurring in connection therewith; and each Loan Party
hereby waives, releases and agrees not to xxx upon any claim for any such
damages, whether or not accrued and whether or not known or suspected to
exist in its favor.
Section 8.18 CALCULATIONS; COMPUTATIONS. The financial statements to be
furnished to the Agent and the Banks pursuant hereto shall be made and
prepared in accordance with GAAP consistently applied throughout the periods
involved and consistent with GAAP as used in the preparation of the financial
statements referred to in Section 4.5, and, except as otherwise specifically
provided herein, all computations determining compliance with Section 6.1
hereof shall utilize GAAP.
Section 8.19 WAIVER OF TRIAL BY JURY, PUNITIVE DAMAGES. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, EACH OF THE BORROWER, THE ARRANGER, THE AGENT
AND THE BANKS HEREBY (A) IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY MATTER ARISING HEREUNDER OR
THEREUNDER; (B) IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER
IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.
Section 8.20 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND
98
SUPERSEDE ALL OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES
RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 8.21 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE
SECURITY DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF
THE TERMS OF THIS AGREEMENT AND THE SECURITY DOCUMENTS; THAT IT HAS IN FACT
READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE
OF THE TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN
REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE
NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS AGREEMENT AND THE SECURITY
DOCUMENTS; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS
AGREEMENT AND THE SECURITY DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF
THE TERMS OF THIS AGREEMENT AND THE SECURITY DOCUMENTS RESULT IN ONE PARTY
ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND
RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY. EACH
PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR
ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND THE
SECURITY DOCUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF
SUCH PROVISION OR THAT THE PROVISION IS NOT "CONSPICUOUS."
99
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Agreement as of the date first above
written.
INLAND PRODUCTION COMPANY
By: /s/ Xxxx X. Xxxxxxxxxx
-------------------------------
Xxxx X. Xxxxxxxxxx
Chief Financial Officer
Notice Address:
000 Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: President or Chief
Financial Officer
100
CANADIAN IMPERIAL BANK OF COM-
MERCE, as Agent
By: /s/ Xxxxxxxx Xxxx
-----------------------------------
Xxxxxxxx Xxxx
Authorized Signatory
Notice Address:
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: Agency Services
with copies to:
CIBC Wood Gundy Securities Corp.
000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxx Xxxxxx
101
CIBC, Inc., as a Bank
By:
Xxxxxxxx Xxxx
--------------------
Authorized Signatory
Notice Address:
Two Paces West
0000 Xxxxx Xxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Corporate Services
102
