Exhibit 4.4
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SENIOR TERM SECOND LIEN SECURED CREDIT AGREEMENT
DATED AS OF DECEMBER 22, 2003
AMONG
QUEST CHEROKEE, LLC
AS BORROWER
BLUESTEM PIPELINE, LLC,
AS GUARANTOR
THE LENDERS,
BANK ONE, NA,
AS AGENT
AND
BANK ONE CAPITAL MARKETS, INC.,
AS LEAD ARRANGER AND SOLE BOOK RUNNER
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Table of Contents
ARTICLE I DEFINITIONS.........................................................1
ARTICLE II THE CREDITS........................................................21
2.1. Commitment........................................................21
2.2. Required Payments; Termination....................................21
2.3. Ratable Loans.....................................................21
2.4. Types of Advances.................................................21
2.5. Fee...............................................................21
2.6. Minimum Amount of Each Advance....................................21
2.7. Optional Principal Payments.......................................21
2.8. Method of Selecting Interest Periods for Advances.................22
2.9. Continuation of Outstanding Advances..............................22
2.10. Changes in Interest Rate, etc.....................................23
2.11. Rates Applicable After Default....................................23
2.12. Method of Payment.................................................23
2.13. Noteless Agreement; Evidence of Indebtedness......................23
2.14. Telephonic Notices................................................24
2.15. Interest Payment Dates; Interest and Fee Basis....................24
2.16. Notification of Advances, Interest Rates,
Prepayments and Commitment Reductions.............................24
2.17. Lending Installations.............................................25
2.18. Non-Receipt of Funds by the Agent.................................25
2.19. Replacement of Lender.............................................25
2.20. Limitation of Interest. The Borrower, the Agent and
the Lenders intend to strictly comply with all applicable
laws, including applicable usury laws.............................25
ARTICLE III YIELD PROTECTION; TAXES..........................................26
3.1. Yield Protection..................................................26
3.2. Changes in Capital Adequacy Regulations...........................27
3.3. Availability of Types of Advances.................................27
3.4. Funding Indemnification...........................................28
3.5. Taxes.............................................................28
3.6. Lender Statements; Survival of Indemnity..........................29
ARTICLE IV CONDITIONS PRECEDENT...............................................30
4.1. Initial Advance...................................................30
4.2. Certificate of Effectiveness......................................33
4.3. Post-Closing Deliveries...........................................33
ARTICLE V REPRESENTATIONS AND WARRANTIES.................................... 33
5.1. Existence and Standing............................................33
5.2. Authorization and Validity........................................33
5.3. No Conflict; Government Consent...................................34
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5.4. Financial Statements..............................................34
5.5. Material Adverse Change...........................................34
5.6. Taxes.............................................................34
5.7. Litigation and Contingent Obligations.............................34
5.8. Subsidiaries......................................................34
5.9. ERISA.............................................................35
5.10. Accuracy of Information...........................................35
5.11. Material Agreements...............................................35
5.12. Compliance With Laws..............................................35
5.13. Ownership of Properties...........................................35
5.14. Oil and Gas Properties............................................35
5.15. Plan Assets; Prohibited Transactions..............................36
5.16. Environmental Matters.............................................36
5.17. Investment Company Act............................................36
5.18. Public Utility Holding Company Act................................36
5.19. Post-Retirement Benefits..........................................36
5.20. Insurance.........................................................36
5.21. Solvency..........................................................37
ARTICLE VI COLLATERAL AND GUARANTIES..........................................37
6.1. Security..........................................................37
6.2. Guarantees........................................................38
ARTICLE VII COVENANTS.........................................................38
7.1. Financial and Other Reporting.....................................39
7.2. Use of Proceeds...................................................40
7.3. Notice of Default.................................................40
7.4. Conduct of Business; Fiscal Year..................................40
7.5. Taxes.............................................................41
7.6. Insurance.........................................................41
7.7. Compliance with Laws..............................................41
7.8. Maintenance of Properties.........................................41
7.9. Inspection........................................................41
7.10. Dividends.........................................................41
7.11. Indebtedness......................................................42
7.12. Disqualified Stock................................................42
7.13. Merger............................................................42
7.14. Sale of Assets....................................................42
7.15. Investments and Acquisitions......................................43
7.16. Liens.............................................................44
7.17. Affiliates........................................................45
7.18. Amendments to Certain Agreements and Payment Restrictions.........46
7.19. Sale and Leaseback Transactions and other
Off-Balance Sheet Liabilities.....................................46
7.20. Letters of Credit.................................................46
7.21. Financial Contracts...............................................46
7.22. Financial Covenants...............................................46
7.23. Operation of Oil and Gas Properties...............................47
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7.24. Title Data........................................................48
7.25. Rate Management Transactions......................................48
ARTICLE VIII DEFAULTS.........................................................48
8.1. Representations and Warranties....................................48
8.2. Payments..........................................................48
8.3. Certain Covenants.................................................48
8.4. Other Terms and Provisions........................................48
8.5. Other Material Indebtedness.......................................49
8.6. Insolvency Proceedings............................................49
8.7. Appointment of Receiver...........................................49
8.8. Condemnation and Seizure..........................................49
8.9. Judgments.........................................................49
8.10. Rate Management Obligations.......................................50
8.11. Change of Control.................................................50
8.12. Other Loan Documents..............................................50
8.13. Guaranty..........................................................50
8.14. Unfunded Liabilities..............................................50
8.15. Multiemployer Plan Withdrawal Liability...........................50
8.16. Reorganization or Termination of Multiemployer Plan...............50
8.17. Environmental Laws................................................50
8.18. Subordinate Debt Documents........................................51
8.19. Collateral Documents..............................................51
ARTICLE IX ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES....................51
9.1. Acceleration......................................................51
9.2. Amendments........................................................51
9.3. Preservation of Rights............................................52
ARTICLE X GENERAL PROVISIONS................................................52
10.1. Survival of Representations.......................................52
10.2. Governmental Regulation...........................................52
10.3. Headings..........................................................52
10.4. Entire Agreement..................................................52
10.5. Several Obligations; Benefits of this Agreement...................52
10.6. Expenses; Indemnification.........................................53
10.7. Numbers of Documents..............................................53
10.8. Accounting........................................................53
10.9. Severability of Provisions........................................53
10.10 Nonliability of Lenders...........................................53
10.11 Confidentiality...................................................54
10.12 Nonreliance.......................................................54
10.13 Disclosure........................................................54
10.14 USA PATRIOT ACT NOTIFICATION......................................54
ARTICLE XI THE AGENT..........................................................55
11.1. Appointment; Nature of Relationship...............................55
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11.2. Powers............................................................55
11.3. General Immunity..................................................55
11.4. No Responsibility for Loans, Recitals, etc........................55
11.5. Action on Instructions of Lenders.................................56
11.6. Employment of Agents and Counsel..................................56
11.7. Reliance on Documents; Counsel....................................56
11.8. Agent's Reimbursement and Indemnification.........................56
11.9. Notice of Default.................................................56
11.10 Rights as a Lender................................................57
11.11 Lender Credit Decision............................................57
11.12 Successor Agent...................................................57
11.13 Agent and Arranger Fees...........................................58
11.14 Delegation to Affiliates..........................................58
11.15 Execution of Collateral Documents.................................58
11.16 Collateral Releases...............................................58
ARTICLE XII SETOFF; RATABLE PAYMENTS..........................................58
12.1. Setoff............................................................58
12.2. Ratable Payments..................................................58
ARTICLE XIII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS................58
13.1. Successors and Assigns............................................58
13.2. Participations....................................................59
13.3. Assignments.......................................................60
13.4. Dissemination of Information......................................61
ARTICLE XIV NOTICES...........................................................61
14.1. Notices...........................................................61
14.2. Change of Address.................................................61
ARTICLE XV COUNTERPARTS; CURRENCY INDEMNITY;
NON-MERGER; MAXIMUM INTEREST RATE.......................................62
15.1. Counterparts......................................................62
ARTICLE XVI CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL......62
16.1. CHOICE OF LAW.....................................................62
16.2. CONSENT TO JURISDICTION...........................................62
16.3. WAIVER OF JURY TRIAL..............................................62
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EXHIBITS
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Exhibit A-1 - Form of Borrower's Counsel Opinion
Exhibit A-2 - Form of Collateral Agent's Local Counsel Opinion
Exhibit B - Form of Compliance Certificate
Exhibit C - Form of Assignment and Assumption Agreement
Exhibit D - Form of Money Transfer Instructions
Exhibit E - Form of Note
Exhibit F - Form of Certificate of Effectiveness
Exhibit G - Form of Junior Subordinated Promissory Note
Exhibit H - Form of Borrower Pledge Agreement
Exhibit I - Form of Equityholders Pledge Agreement
Exhibit J - Form of Guaranty
Exhibit K - Form of Subsidiary Pledge Agreement
Exhibit L - Form of Certificate of Ownership Interests
SCHEDULES
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Schedule 1.1-A - Existing Letters of Credit
Schedule 1.1-B - Rate Mangement Transactions
Schedule 5.7 - Material Contingent Obligations
Schedule 5.8 - Subsidiaries
Schedule 5.13 - Indebtedness and Liens
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SENIOR TERM SECOND LIEN SECURED CREDIT AGREEMENT
This Agreement, dated as of December 22, 2003, is among Quest Cherokee,
LLC, a Delaware limited liability company, Bluestem Pipeline, LLC, a Delaware
limited liability company, the Lenders and Bank One, NA, having its principal
office in Chicago, Illinois, as Agent. The parties hereto agree as follows:
ARTICLE III
DEFINITIONS
As used in this Agreement:
"Acquisition" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which Borrower or any of
its Subsidiaries (i) acquires any going business or all or substantially all of
the assets of any firm, corporation or limited liability company, or division
thereof, whether through purchase of assets, merger or otherwise, (ii) acquires
the business, property or fixed assets of or business line or unit of any Person
consisting of Oil and Gas Properties, or (iii) directly or indirectly acquires
(in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the outstanding
ownership interests of a partnership or limited liability company.
"Advance" means the borrowing hereunder made on the Closing Date, and any
subsequent conversions or continuations thereof, (i) made by the Lenders on the
same Borrowing Date, or (ii) converted or continued by the Lenders on the same
date of conversion or continuation, consisting, in either case, of the aggregate
amount of the several Loans of the same Type and, in the case of Eurodollar
Loans, for the same Interest Period.
"Advance Payment Contract" means any contract whereby any Credit Party
either (a) receives or becomes entitled to receive (either directly or
indirectly) any payment (an "Advance Payment") to be applied toward payment of
the purchase price of Hydrocarbons produced or to be produced from Oil and Gas
Properties owned by any Credit Party and which Advance Payment is, or is to be,
paid in advance of actual delivery of such production to or for the account of
the purchaser regardless of such production, or (b) grants an option or right of
refusal to the purchaser to take delivery of such production in lieu of payment,
and, in either of the foregoing instances, the Advance Payment is, or is to be,
applied as payment in full for such production when sold and delivered or is, or
is to be, applied as payment for a portion only of the purchase price thereof or
of a percentage or share of such production; provided that inclusion of the
standard "take or pay" provision in any gas sales or purchase contract or any
other similar contract shall not, in and of itself, constitute such contract as
an Advance Payment Contract for the purposes hereof.
"Affected Lender" is defined in Section 2.19.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the
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controlling Person owns 10% or more of any class of voting securities (or other
ownership interests) of the controlled Person or possesses, directly or
indirectly, the power to direct or cause the direction of the management or
policies of the controlled Person, whether through ownership of stock, by
contract or otherwise.
"Agent" means Bank One in its capacity as contractual representative of the
Lenders pursuant to Article XI, and not in its individual capacity as a Lender,
and any successor Agent appointed pursuant to Article XI.
"Aggregate Commitment" means the aggregate of the Commitments of all the
Lenders, as reduced from time to time pursuant to the terms hereof.
"Agreement" means this credit agreement, as it may be amended or modified
and in effect from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles as in effect in the United States of America from time to time,
applied in a manner consistent with that used in preparing the financial
statements referred to in Section 5.4.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the Prime Rate for such day and (ii) the sum of the
Federal Funds Effective Rate for such day plus one half of one percent (.50%)
per annum.
"Annualized Consolidated EBITDA" means, for purposes of calculating the
financial ratios set forth in Section 7.22 for each Rolling Period ending on or
prior to November 30, 2004, Borrower's actual Consolidated EBITDA for such
Rolling Period multiplied by the factor determined for such Rolling Period in
accordance with the table below:
Rolling Period Ending Factor
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May 31, 2004 2.4
August 31, 2004 1.5
November 30, 2004 1.09
"Applicable Margin" means, with respect to Eurodollar Advances, six percent
(6.00%) per annum, and with respect to Floating Rate Advances, four and
three-quarter percent (4.75%) per annum.
"Approved Counterparty" means, at any time and from time to time, (i) any
Person engaged in the business of writing xxxxxx for commodity, interest rate or
currency risk that is acceptable to the Senior Revolving Agent and has, at the
time Borrower or any Guarantor enters into a Rate Management Transaction with
such Person, a credit rating of BBB or better from S&P and (ii) the Senior
Revolving Agent, any Bank or any Affiliate of the Senior Revolving Agent or any
Bank.
"Approved Fund" means any Fund that is administered or managed by (a) a
Lender, (b) an Affiliate of a Lender or (c) an entity that administers or
manages a Lender.
"Approved Petroleum Engineer" means any reputable firm of independent
petroleum engineers as shall be selected by Borrower and approved by the Agent,
such approval not to be unreasonably withheld.
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"Arranger" means Bank One Capital Markets, Inc., a Delaware corporation,
and its successors, in its capacity as lead arranger and sole book runner.
"Article" means an article of this Agreement unless another document is
specifically referenced.
"Authorized Officer" means, as to any Person, any of its Chief Executive
Officer, its President, its Directors, its Managers (in the case of a limited
liability company), its Chief Financial Officer, its Chief Accounting Officer,
its Vice Presidents, its Treasurer or its corporate Secretary, acting singly.
"Bank" means any financial institution from time to time a party to the
Senior Revolving Credit Agreement as a lender and "Banks" means all Banks.
"Bank One" means Bank One, NA, a national banking association, having its
principal office in Chicago, Illinois, in its individual capacity, and its
successors.
"Bluestem" means Bluestem Pipeline, LLC, a Delaware limited liability
company, and Wholly-Owned Subsidiary of Borrower.
"Borrower" means Quest Cherokee, LLC, a Delaware limited liability company,
and its successors and assigns.
"Borrower Pledge Agreement" means a Pledge Agreement substantially in the
form of Exhibit H attached hereto (with applicable conforming changes) to be
executed by Borrower pursuant to which Borrower shall pledge to Collateral
Agent, for the ratable benefit of Banks and Lenders, all of the issued and
outstanding Capital Stock owned by Borrower of each Subsidiary of Borrower
described therein to secure the Obligations.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.8.
"Business Day" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago, Illinois and New York City, New York
for the conduct of substantially all of their commercial lending activities,
interbank wire transfers can be made on the Fedwire system and dealings in
United States dollars are carried on in the London interbank market and (ii) for
all other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago, Illinois for the conduct of substantially all of
their commercial lending activities and interbank wire transfers can be made on
the Fedwire system.
"Capital Expenditures" means, without duplication, any expenditures for any
purchase or other acquisition of any asset which would be classified as a fixed
or capital asset on a consolidated balance sheet of Borrower and its
Subsidiaries prepared in accordance with Agreement Accounting Principles,
including oil and gas drilling and development expenses, but excluding (i) the
cost of assets acquired with Capitalized Lease Obligations, (ii) the cost to
purchase any Oil and Gas Properties, (ii) expenditures of insurance proceeds to
rebuild or replace any asset after a casualty loss and (iii) leasehold
improvement expenditures on real property (other than Oil and Gas Properties)
for which Borrower or a Subsidiary is reimbursed promptly by the lessor.
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"Capital Lease" means any lease of any property (whether real, personal or
mixed) that, in conformity with Agreement Accounting Principles, should be
accounted for as a capital lease.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation),
including, without limitation, partnership interests and membership interests,
and any and all warrants, rights or options to purchase or other arrangements or
rights to acquire any of the foregoing.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capital Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"Cash Equivalent Investments" means (a) readily marketable direct
obligations of the United States of America (or investments in mutual funds or
similar funds which invest solely in such obligations), (b) fully insured time
deposits and certificates of deposit with maturities of one year or less of any
Lender, any Bank, or any other commercial bank operating in the United States
having capital and surplus in excess of $100,000,000, (c) commercial paper of a
domestic issuer if at the time of purchase such paper is rated in one of the two
highest ratings categories of S&P or Xxxxx'x, and (d) mutual funds either (i)
rated AA or higher by S&P, or (ii) investing only in assets listed in (a)
through (c) above.
"Certificate of Effectiveness" means a Certificate of Effectiveness in the
form of Exhibit F attached hereto to be executed by Borrower and Agent upon the
satisfaction of each of the conditions precedent contained in Article IV hereof.
"Certificate of Ownership Interests" means a Certificate of Ownership
Interests in the form of Exhibit L attached hereto to be executed and delivered
by an Authorized Officer of Borrower pursuant to clause (xviii) of Section
4.1(a).
"Change" is defined in Section 3.2.
"Change of Control" means the occurrence of any of the following, whether
voluntary or involuntary, including by operation of law: (a) any Credit Party
(other than Borrower) shall cease to be a Wholly-Owned Subsidiary of Borrower,
(b) for the period from the Closing Date until December 22, 2006, Cherokee
Partners shall cease, for any reason, to own one hundred percent (100%) of the
Class A membership interests in Borrower, (c) the Quest Group shall cease, for
any reason, to own one-hundred percent (100%) of the issued and outstanding
membership or other Capital Stock (other than the Class A membership interests
described in clause (b) above) in Borrower, or (d) Xxxxx Xxxx shall cease for
any reason to be an executive officer of Borrower, provided that, with respect
to this clause (d), it shall not be a "Change of Control" if Borrower appoints a
successor reasonably acceptable to the Agent within sixty (60) days thereafter.
"Cherokee Partners" means Cherokee Energy Partners LLC, a Delaware limited
liability company and a Wholly-Owned Subsidiary of ArcLight Energy Partners Fund
I, L.P., a Delaware limited partnership.
"Closing Date" means the date upon which all of the conditions precedent
set forth in Article IV have been satisfied, and Borrower and Agent have
executed and delivered the Certificate of Effectiveness; provided, that, in no
event shall such date be later than December 31, 2003.
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"Closing Documents" means the Devon Acquisition Documents, the Senior
Revolving Credit Documents, the Equity Investment Documents, the Subordinate
Debt Documents, the Contribution Documents and all other material documents,
instruments and agreements executed or delivered by any Credit Party in
connection with, or otherwise pertaining to, the Closing Transactions.
"Closing Transactions" means the transactions to occur on the Closing
Date, including, without limitation: (a) the completion of the Devon Acquisition
pursuant to the terms of the Devon Acquisition Documents, (b) the consummation
and closing of the conveyance and contribution by QRC and certain other members
of the Quest Group to Borrower of the Contributed Properties pursuant to the
terms of the Contribution Documents, (c) the completion of the Equity Investment
pursuant to the terms of the Equity Investment Documents, (d) the execution and
delivery of the Subordinate Debt Documents, and the closing and consummation of
the transactions contemplated thereby pursuant to the terms thereof, and the
receipt by Borrower of not less than $51,000,000, net of commitment fees and
expenses deducted from the proceeds of the issuance of the Subordinate Note, and
the application of such proceeds to finance in part the Devon Acquisition and
the costs and expenses associated therewith and with the Subordinate Debt, (e)
the execution and delivery of the Senior Revolver Credit Documents, and the
closing and consummation of the transactions contemplated thereby pursuant to
the terms thereof, and the receipt by Borrower of not more than $57,000,000 from
the issuance of the "Notes" under and as defined in the Senior Revolving Credit
Agreement, and the application of such proceeds to finance in part the Devon
Acquisition and the costs and expenses associated therewith and with such
revolving "Notes" and the Loans, (f) the assignment to, and assumption by,
Borrower of all Rate Management Transactions entered into by Devon and members
of the Quest Group with Bank One (or its Affiliates) prior to the date hereof,
pursuant to that certain Assignment Agreement, dated of even date herewith, by
and among Devon, as Assignor thereunder, and Bank One, as Remaining Party
thereto, (g) repayment by Borrower in full of all obligations, Indebtedness and
liabilities accrued and outstanding under the Existing Credit Agreements as of
the Closing Date, including, without limitation, (i) the entire outstanding
principal balance of the loans and advances made (and as defined) thereunder,
(ii) all accrued but unpaid interest, and (iii) all accrued but unpaid
commitment and other fees, (h) the cancellation of all letters of credit, if
any, outstanding under the Existing Credit Agreements, (i) the termination (or
assignment and assumption of the Rate Management Transactions listed and
described on Part A of Schedule 1.1-B, (pursuant to an agreement in form and
substance satisfactory to Bank One), of all Rate Management Transactions entered
into by QRC pursuant to the terms of the Existing Credit Agreements, (j) the
termination and release of the Existing Mortgages and all other Liens securing
the obligations, Indebtedness and liabilities of any member of the Quest Group
under the Existing Credit Agreements (including, without limitation, the
delivery of UCC-3 releases with respect to all uniform commercial code filings
made under or pursuant to the Existing Credit Agreements), and the delivery to
QRC of all original certificates and stock powers pledged and delivered by QRC
and the other members of the Quest Group pursuant to the terms of the Existing
Credit Agreements as security for QRC's obligations thereunder, (k) the release
of all guarantees of the obligations, Indebtedness and liabilities of any Credit
Party under the Existing Credit Agreements, (l) the termination of the Existing
Credit Agreements, and the delivery to QRC of each original promissory note
issued under the Existing Credit Agreements marked "Terminated and Paid in
Full", (m) the termination, or assignment and assumption (pursuant to an
agreement in form and substance satisfactory to Bank One) of the Rate Management
Transactions listed and described on Part B of Schedule 1.1-B, (n) the
cancellation (or replacement with Letters of Credit issued under the Senior
Revolving Credit Agreement) of the letters of credit listed and described on
Part A of Schedule 1.1-A, which letters of credit secure the Rate Management
Transactions described in clause (m) preceding, and (o) the payment of all fees
and expenses of Agent in connection with the credit facilities provided herein.
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"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Collateral Agency Agreement" means that certain Collateral Agency and
Intercreditor Agreement dated as of the date hereof by and among the Collateral
Agent, the Senior Revolving Agent and Banks party to the Senior Revolving Credit
Agreement, Agent, the Lenders, Borrower and Bluestem as amended, modified,
supplemented or restated from time to time.
"Collateral Agent" means Bank One, NA, in its capacity as collateral agent
under the Collateral Agency Agreement, and any successor Collateral Agent
appointed pursuant to the terms of the Collateral Agency Agreement.
"Collateral Documents" means, collectively, this Agreement, all Mortgages,
Security Agreements, Assignments of Production and Financing Statements, the
Equityholders Pledge Agreement and other collateral documents covering the Oil
and Gas Properties and related personal property, equipment, oil and gas
inventory and proceeds of the foregoing, all Guaranties, all pledge agreements
and all collateral assignments of notes and Liens, all such documents to be in
form and substance reasonably satisfactory to Agent.
"Commitment" means, for each Lender, the obligation of such Lender to make
Loans not exceeding the amount set forth opposite its signature below, as it may
be modified as a result of any assignment that has become effective pursuant to
Section 13.3.2 or as otherwise modified from time to time pursuant to the terms
hereof.
"Consolidated" or "consolidated", when used with reference to any
accounting term, means the amount described by such accounting term, determined
on a consolidated basis in accordance with Agreement Accounting Principles,
after elimination of intercompany items.
"Consolidated EBITDA" means, for any Person for any period, without
duplication: (a) Consolidated Net Income of such Person for such period; plus,
to the extent deducted in the calculation of Consolidated Net Income, (b) the
sum of (i) income or franchise Taxes paid or accrued; (ii) Consolidated Net
Interest Expense; (iii) amortization, depletion and depreciation expense; (iv)
any non-cash losses or charges on any Rate Management Transaction resulting from
the requirements of SFAS 133 for that period; and (v) other non-cash charges
(excluding accruals for cash expenses made in the ordinary course of business);
less, to the extent included in the calculation of Consolidated Net Income, (c)
the sum of (i) the income of any Person (other than wholly-owned Subsidiaries of
such Person) unless such income is received by such Person in a cash
distribution; (ii) gains or losses from sales or other dispositions of assets
(other than Hydrocarbons produced in the normal course of business); (iii) any
non-cash gains on any Rate Management Transaction resulting from the
requirements of SFAS 133 for that period; and (iv) extraordinary or
non-recurring gains or non-recurring losses. Notwithstanding anything to the
contrary contained herein, all calculations of Consolidated EBITDA shall be for
any applicable period of determination during which Borrower has consummated an
acquisition or disposition (to the extent permitted hereunder) of properties or
assets, calculated and determined on a pro forma basis (such calculation to be
acceptable to, and approved by, Agent) as if such acquisition or disposition was
consummated on the first day of such applicable period.
"Consolidated Funded Debt" means, as of any date, without duplication and
with respect to any Person, (i) all obligations for borrowed money, (ii) all
obligations evidenced by bonds, debentures, notes, or other similar instruments,
(iii) all other indebtedness (including obligations under Capital Leases, other
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than usual and customary oil, gas and mineral leases) on which interest charges
are customarily paid or accrued, (iv) all guarantees of indebtedness, including
reimbursement obligations with respect to letters of credit, (v) the unfunded or
unreimbursed portion of all letters of credit issued for the account of such
Person, (vi) any amount owed by such Person representing the deferred purchase
price of property or services other than accounts payable incurred in the
ordinary course of business and in accordance with customary trade terms and
which are not more than 120 days past the invoice date, and (vii) all liability
as a general partner of a partnership for obligations of that partnership of the
nature described in (i) through (vi) preceding, but excluding, Subordinate Debt.
"Consolidated Net Income" means, for any Person for any period, the net
income (or loss) of such Person and its Consolidated Subsidiaries for such
period. "Consolidated Net Interest Expense" means, for any Person for any
period, the remainder of the following for such Person and its Consolidated
Subsidiaries for such period: (a) interest expense, minus (b) interest income.
"Consolidated Subsidiary" or "Consolidated Subsidiaries" means, for any
Person, any Subsidiary or other entity the accounts of which would be
consolidated with those of such Person in its consolidated financial statements.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract or the obligations of any such Person as general
partner of a partnership with respect to the liabilities of the partnership.
"Contributed Properties" means, collectively, all Oil and Gas Properties
and related assets contributed and conveyed to Borrower by members of the Quest
Group on or prior to the Closing Date, which properties and assets are described
on Annex I of Exhibit A to the Certificate of Ownership Interests (as defined in
the Senior Revolving Credit Agreement).
"Contribution Agreement" means that certain Contribution, Conveyance,
Assignment and Assumption Agreement, dated of even date herewith, by and among
Borrower, Bluestem and each member of the Quest Group (other than QRC).
"Contribution Documents" means, collectively, the Contribution Agreement
and such agreements, assignments, deeds, conveyances, certificates and other
documents and instruments, in form and substance satisfactory to Agent, executed
and/or delivered by, between and among certain members of the Quest Group,
Borrower, and Bluestem pursuant to which certain members of the Quest Group
contribute and convey to Borrower the Contributed Properties.
"Credit Parties" means, collectively, Borrower and each Guarantor, and
"Credit Party" means any one of the foregoing.
"Controlled Group" means all members of a controlled group of corporations
or other business entities and all trades or businesses (whether or not
incorporated) under common control which, together with Borrower or any of its
Subsidiaries, are treated as a single employer under Section 414 of the Code.
7
"Conversion/Continuation Notice" is defined in Section 2.9.
"Crude Oil" means all crude oil and condensate.
"Current Financials" means (a) the annual audited consolidated balance
sheet of QRC and the related consolidated statements of operations and cash
flows for the Fiscal Year ended May 31, 2003, and (b) the quarterly unaudited
consolidated balance sheet of QRC for the Fiscal Quarter ended August 31, 2003,
and the related unaudited consolidated statements of operations and cash flows
for the portion of QRC's Fiscal Year ended August 31, 2003.
"Default" means an event described in Article VIII.
"Devon" means Devon Energy Production Company, L.P., an Oklahoma limited
partnership.
"Devon Acquisition" means the purchase by Borrower of the Devon Properties
pursuant to the Devon Acquisition Agreement.
"Devon Acquisition Agreement" means that certain Purchase and Sale
Agreement dated as of December 10, 2003, by and between Devon and TGGS, as
seller thereunder, and QRC, as buyer thereunder. The rights of QRC under such
Purchase and Sale Agreement have been assigned to Borrower pursuant to the Devon
Acquisition Agreement Assignment.
"Devon Acquisition Agreement Assignment" means that certain Assignment
dated as of December 22, 2003, by and between QRC, as assignor, and Borrower, as
assignee (and acknowledged by Devon and TGGS), pursuant to which (a) the rights
of QRC under the Devon Acquisition Agreement have been assigned to Borrower, and
(b) Devon and TGGS consent to the assignment by Borrower to Collateral Agent of
all of Borrower's rights and interest under the Devon Acquisition Agreement.
"Devon Acquisition Documents" means the Devon Acquisition Agreement, the
Devon Acquisition Agreement Assignment, the Devon Hold Back Agreement and the
Devon Hold Back Assignments (each as defined in the Senior Revolving Credit
Agreement) and all assignments, deeds, conveyances, certificates and other
documents and instruments now or hereafter executed and delivered by, between or
among QRC, Borrower, Devon, TGGS and/or any of their Affiliates pursuant to the
Devon Acquisition Agreement or in connection with the Devon Acquisition.
"Devon Properties" means, collectively, the "Properties" as such term is
defined in the Devon Acquisition Agreement.
"Devon Reserve Report" means the engineering and economic analysis of the
Devon Properties prepared as of September 1, 2003 by Xxxxxx, Xxxxxxxxx &
Associates.
"Disqualified Stock" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the sole option of the holder thereof, in whole or in part, on or prior to
the Facility Termination Date.
"Dollar", "Dollars" and the sign "$" mean lawful money of the United States
of America.
8
"Domestic Subsidiary" means, with respect to any Person, a Subsidiary of
such Person that is incorporated or formed under the laws of the United States
of America or the District of Columbia.
"Environmental Laws" means any and all federal, state, provincial, local
and foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
(i) the protection of the environment, (ii) the effect of the environment on
human health, (iii) emissions, discharges or releases of pollutants,
contaminants, hazardous substances or wastes into surface water, ground water or
land, or (iv) the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, hazardous
substances or wastes or the clean-up or other remediation thereof.
"Equity Investment" means the contribution to the Capital Stock of Borrower
by Cherokee Partners in accordance with, and pursuant to, the Equity Investment
Documents.
"Equity Investment Documents" means the Operating Agreement, the Equity
Purchase Agreement and all other material documents, instruments and agreements
executed and/or delivered by Borrower, Cherokee Partners or the Quest Group in
connection with, or otherwise pertaining to, the Equity Investment.
"Equityholders Pledge Agreements" means one or more Pledge Agreements
substantially in the form of Exhibit I attached hereto (with applicable
conforming changes) to be executed by Cherokee Partners and each member of the
Quest Group (other than QRC) pursuant to which such Person shall pledge to
Collateral Agent, for the ratable benefit of Banks and the Lenders, all of the
issued and outstanding Capital Stock owned by such Person of Borrower and each
Subsidiary of such Person described therein to secure the Obligations.
"Equity Purchase Agreement" means that certain Membership Interest Purchase
Agreement, dated as of the date hereof, by and among Borrower, each member of
the Quest Group (other than QRC) and Cherokee Partners.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"Eurodollar Advance" means an Advance which, except as otherwise provided
in Section 2.11, bears interest at the applicable Eurodollar Rate.
"Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the applicable British Bankers' Association LIBOR rate
for deposits in Dollars as reported by any generally recognized financial
information service as of 11:00 a.m. (London time) two Business Days prior to
the first day of such Interest Period, and having a maturity equal to such
Interest Period, provided that, if no such British Bankers' Association LIBOR
rate is available to the Agent, the applicable Eurodollar Base Rate for the
relevant Interest Period shall instead be the rate determined by the Agent to be
the rate at which Bank One or one of its Affiliate banks offers to place
deposits in Dollars with first-class banks in the interbank market at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period, in the approximate amount of Bank One's relevant
Eurodollar Loan and having a maturity equal to such Interest Period.
"Eurodollar Loan" means a Loan which, except as otherwise provided in
Section 2.11, bears
9
interest at the applicable Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period a per annum rate of interest (based on a year of 360
days) equal to, the sum of (i) the quotient of (a) the Eurodollar Base Rate
applicable to such Interest Period, divided by (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such Interest Period, plus
(ii) the Applicable Margin.
"Excluded Taxes" means, in the case of each Lender or applicable Lending
Installation and the Agent, taxes imposed on its overall net income, and
franchise taxes imposed on it, by (i) the jurisdiction under the laws of which
such Lender or the Agent is incorporated or organized or (ii) the jurisdiction
in which the Agent's or such Lender's principal executive office or such
Lender's applicable Lending Installation is located.
"Exhibit" refers to an exhibit attached to this Agreement, unless another
document is specifically referenced.
"Existing Credit Agreements" means, collectively, that certain (i) Credit
Agreement dated as of November 7, 2002, by and among Xxxxx Fargo Bank, N.A.
(successor-in-interest to Xxxxx Fargo Bank Texas, N.A.), as administrative
agent, the lenders a party thereto, QRC, as borrower thereunder, and Quest Oil &
Gas, Ponderosa, and STP Cherokee, as guarantors thereunder; and (ii) Credit
Agreement dated as of November 7, 2002, by and among Xxxxx Fargo Energy Capital,
Inc., QRC, as borrower thereunder, and Quest Oil & Gas, Ponderosa, and STP
Cherokee, as guarantors thereunder, as each may have been amended or modified
prior to the date hereof.
"Existing Letter of Credit" means the letters of credit issued for the
account of Borrower and outstanding on the date hereof and described on Part A
of Schedule 1.1-A hereof.
"Existing Mortgages" means the mortgages, deeds of trust, security
agreements, assignments, pledges and other documents, instruments and
agreements, which establish Liens on certain of the members of the Quest Group's
Oil and Gas Properties to secure QRC's obligations under the Existing Credit
Agreements.
"Existing Reserve Report" means an engineering and economic analysis of the
Contributed Properties prepared as of July 1, 2003 by Xxxxxx, Xxxxxxxxx &
Associates.
"Facility Termination Date" means December 22, 2008.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"Financial Contract" of a Person means (i) any exchange-traded or
over-the-counter futures, forward, swap or option contract or other financial
instrument with similar characteristics, or (ii) any Rate Management
Transaction.
10
"Fiscal Quarter" means the three (3) month periods ending on August 31,
November 30, February 28 (or 29, as applicable) and May 31 of each Fiscal Year.
"Fiscal Year" means a twelve (12) month period ending May 31.
"Floating Rate" means, for any day, a rate per annum equal to (i) the
Alternate Base Rate for such day plus (ii) the Applicable Margin, in each case
changing when and as the Alternate Base Rate changes.
"Floating Rate Advance" means an Advance which, except as otherwise
provided in Section 2.11, bears interest at the Floating Rate.
"Floating Rate Loan" means a Loan which, except as otherwise provided in
Section 2.11, bears interest at the Floating Rate.
"Fund" means any Person (other than a natural person) that is (or will be)
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.
"Gas Balancing Agreement" means any agreement or arrangement whereby any
Credit Party, or any other party having an interest in any Hydrocarbons to be
produced from Oil and Gas Properties in which any Credit Party owns an interest,
has a right to take more than its proportionate share of production therefrom.
"Guarantor" means Bluestem and after the date hereof, each Domestic
Subsidiary of Borrower, that hereafter executes and delivers to the Agent and
the Lenders, a Guaranty.
"Guaranty" means a Guaranty, substantially in the form of Exhibit J to be
executed by each Subsidiary of Borrower in favor of the Agent and the Lenders,
pursuant to which such Subsidiary guaranties payment and performance in full of
the Obligations as it may be amended or modified and in effect from time to
time.
"Highest Lawful Rate" shall mean, on any day, the maximum nonusurious rate
of interest permitted for that day by whichever of applicable federal or Texas
law permits the higher interest rate, stated as a rate per annum. On each day,
if any, that Chapter 303 of the Texas Finance Code, as amended (formerly Tex.
Rev. Civ. Stat. Xxx. Art. 5069-1D.003) establishes the Highest Lawful Rate, such
rate shall be the "indicated (weekly) rate ceiling" (as defined in Chapter 303
of the Texas Finance Code, as amended) for that day.
"Hydrocarbons" means all Crude Oil and Natural Gas produced from or
attributable to the Oil and Gas Properties of Borrower and its Subsidiaries.
"Immaterial Title Deficiencies" means, with respect to the Oil and Gas
Properties of Borrower and its Subsidiaries, defects or clouds on title,
discrepancies in reported net revenue and working interest ownership percentages
and other Liens, defects, discrepancies and similar matters which do not,
individually or in the aggregate, affect the greater of (i) Oil and Gas
Properties with a Recognized Value (as defined in the Senior Revolving Credit
Agreement) greater than four percent (4%) of such Recognized Value of all such
Oil and Gas Properties and (ii) Oil and Gas Properties with a Recognized Value
greater than three percent (3%) of the Recognized Value of all of such Oil and
Gas Properties.
11
"Indebtedness" of a Person means such Person's (i) obligations for borrowed
money, (ii) obligations representing the deferred purchase price of Property or
services (other than accounts payable arising in the ordinary course of such
Person's business payable on terms customary in the trade and which are not
outstanding more than one hundred twenty (120) days past the invoice date),
(iii) obligations, whether or not assumed, secured by Liens or payable out of
the proceeds or production from Property now or hereafter owned or acquired by
such Person, (iv) obligations which are evidenced by notes, acceptances, or
other instruments, (v) obligations of such Person to purchase securities or
other Property arising out of or in connection with the sale of the same or
substantially similar securities or Property, (vi) Contingent Obligations, (vii)
Capitalized Lease Obligations, (viii) Letters of Credit, (xi) Rate Management
Obligations and (x) any other obligation for borrowed money or other similar
financial accommodation which in accordance with Agreement Accounting Principles
would be shown as a liability on the consolidated balance sheet of such Person.
"Initial Title Required Reserve Value" means Oil and Gas Properties having
a Proved Reserves that have a Recognized Value of not less than forty percent
(40%) of the Recognized Value of all Proved Reserves of Borrower and its
Subsidiaries.
"Interest Period" means, with respect to a Eurodollar Advance, a period of
one, two, three or, if available, six months commencing on a Business Day
selected by the Borrower pursuant to this Agreement. Such Interest Period shall
end on the day which corresponds numerically to such date one, two, three or six
months thereafter, provided, however, that if there is no such numerically
corresponding day in such next, second, third or sixth succeeding month, such
Interest Period shall end on the last Business Day of such next, second, third
or sixth succeeding month. If an Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day, provided, however, that if said next succeeding
Business Day falls in a new calendar month, such Interest Period shall end on
the immediately preceding Business Day.
"Investment" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable arising
in the ordinary course of business on terms customary in the trade) or
contribution of capital by such Person; stocks, bonds, mutual funds, partnership
interests, notes, debentures or other securities owned by such Person; any
deposit accounts and certificate of deposit owned by such Person; and structured
notes, derivative financial instruments and other similar instruments or
contracts owned by such Person.
"Investor" means each of Cherokee Partners and each member of the Quest
Group (other than QRC), and "Investors" means Cherokee Partners and each member
of the Quest Group (other than QRC), collectively.
"X-X Gas" means X-X Gas Gathering, L.L.C., a Kansas limited liability
company, which is a Wholly Owned Subsidiary of PSI.
"Lenders" means the lending institutions listed on the signature pages of
this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the Agent, the
office, branch, Subsidiary or Affiliate of such Lender or the Agent listed on
the signature pages hereof or otherwise selected by such Lender or the Agent
pursuant to Section 2.17.
12
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"Lien" means any lien (statutory or other), mortgage, charge, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capital Lease or other title retention
agreement).
"Loan" means, with respect to a Lender, such Lender's loan made pursuant to
Article II (or any conversion or continuation thereof).
"Loan Documents" means, collectively, this Agreement, the Collateral Agency
Agreement, any Notes issued pursuant to Section 2.13, the Collateral Documents
and the Guaranty.
"March 2004 Operating Statement" has the meaning given such term in clause
(viii) of Section 7.1
"Material Adverse Change" means any circumstance or event that has or would
reasonably be expected to have a Material Adverse Effect.
"Material Adverse Effect" means a material adverse effect on (a) the
assets, liabilities, financial condition, results of operations or prospects of
Borrower, individually, or the Credit Parties taken as a whole, (b) the right or
ability of any Credit Party to fully, completely and timely perform its
obligations under Loan Documents, or (c) the validity or enforceability of any
Loan Document against any Credit Party which is a party thereto or the rights
and remedies of the Agent, the Collateral Agent or the Lenders thereunder.
"Material Gas Imbalance" means, with respect to all Gas Balancing
Agreements to which any Credit Party is a party or by which any Oil and Gas
Properties owned by any Credit Party is bound, a net gas imbalance to any Credit
Party in excess of $750,000.
"Material Indebtedness" means Indebtedness, other than indebtedness with
respect to Rate Management Obligations or the Subordinate Debt Documents, in an
outstanding principal amount of $1,500,000 or more in the aggregate (or the
equivalent thereof in any currency other than Dollars).
"Material Indebtedness Agreement" means any agreement under which any
Material Indebtedness was created or is governed or which provides for the
incurrence of Indebtedness in an amount which would constitute Material
Indebtedness (whether or not an amount of Indebtedness constituting Material
Indebtedness is outstanding thereunder).
"Moody's" means Xxxxx'x Investors Service, Inc.
"Mortgages" means all mortgages, deeds of trust, amendments to mortgages,
security agreements, assignments of production, pledge agreements, collateral
mortgages, collateral chattel mortgages, collateral assignments, financing
statements and other documents, instruments and agreements evidencing, creating,
perfecting or otherwise establishing the Liens required by Section 6.1. All
Mortgages shall be in form and substance satisfactory to Agent in its sole
discretion.
13
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which Borrower or any member of
the Controlled Group is a party to which more than one employer is obligated to
make contributions.
"Natural Gas" means all natural gas, distillate or sulphur, natural gas
liquids and all products recovered in the processing of natural gas (other than
condensate) including, without limitation, natural gasoline, coalbed methane
gas, casinghead gas, iso-butane, normal butane, propane and ethane (including
such methane allowable in commercial ethane).
"Non-Consenting Lender" is defined in Section 2.19.
"Non-U.S. Lenders" is defined in Section 3.5(iv).
"Note" is defined in Section 2.13.
"Obligations" means all unpaid principal of and accrued and unpaid interest
on the Loans, all accrued and unpaid fees and all expenses, reimbursements,
indemnities and other obligations of the Borrower to the Lenders or to any
Lender, the Agent or any indemnified party arising under the Loan Documents
including reasonable attorneys' fees.
"Off-Balance Sheet Liability" of a Person means (i) any repurchase
obligation or liability of such Person with respect to accounts or notes
receivable sold by such Person, (ii) any liability under any Sale and Leaseback
Transaction which is not a Capital Lease, (iii) any liability under any
so-called "synthetic lease" transaction entered into by such Person, (iv) any
Material Gas Imbalance, (v) any Advance Payment Contract, or (vi) any obligation
arising with respect to any other transaction which is the functional equivalent
of or takes the place of borrowing but which does not constitute a liability on
the balance sheets of such Person, but excluding from the foregoing clauses
(iii) through (vi) Operating Leases and usual and customary oil, gas and mineral
leases.
"Oil and Gas Properties" means oil, gas and mineral properties and
interests and related personal properties including interests in oil, gas and
mineral leases, working interests, royalty interests and overriding royalty
interests.
"Operating Agreement" means that certain Amended and Restated Limited
Liability Company Agreement of Quest Cherokee, LLC, dated as of December 22,
2003, by and among the members of the Quest Group (other than QRC) and Cherokee
Partners, as the same may be amended or modified (to the extent permitted
hereunder), which agreement amended and restated in its entirety that certain
Operating Agreement for Quest Cherokee, LLC, dated as of December 12, 2003, by
and among the members of the Quest Group (other than QRC) and Borrower.
"Operating Lease" of a Person means any lease of Property (other than a
Capital Lease or an oil, gas or mineral lease) by such Person as lessee which
has an original term (including any required renewals and any renewals effective
at the option of the lessor) of one year or more.
"Other Taxes" is defined in Section 3.5(ii).
"Participants" is defined in Section 13.2.1.
14
"Payment Date" means the last day of each calendar month in the case of
Floating Rate Loans and, in the case of Eurodollar Loans, the last day of the
applicable Interest Period, and if such Interest Period is longer than three (3)
months, at three (3) month intervals following the first day of such Interest
Periods.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Permitted Contributed Property Defects" means, collectively, "Defects" as
defined in the Operating Agreement and with respect to which Cherokee Partners
has notified Borrower in accordance with Section 5.10(c) of such Operating
Agreement.
"Permitted Devon Title Defects" means, collectively, "Defects" as defined
in the Devon Acquisition Agreement with respect to which Borrower has the right
to (i) reassign Devon Properties (or any interest therein) (as defined in the
Senior Revolving Credit Agreement as of the Closing Date) to Devon or TGGS
pursuant to Section 13 of the Devon Acquisition Agreement, or (ii) obtain a Sale
Price (as defined in the Devon Acquisition Agreement) adjustment in accordance
with Section 13 of the Devon Acquisition Agreement.
"Person" means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"Plan" means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which Borrower or any member of the Controlled Group may have any
liability.
"Pledge Agreement" means any Equityholders Pledge Agreement, Borrower
Pledge Agreement or Subsidiary Pledge Agreement, and "Pledge Agreements" means
all of such Pledge Agreements.
"Ponderosa" means Ponderosa Gas Pipeline Company, Inc., a
Kansas corporation, which is a Wholly-Owned Subsidiary of QRC.
"Prime Rate" means a rate per annum equal to the prime rate of interest
announced from time to time by Bank One or its parent (which is not necessarily
the lowest rate charged to any customer), changing when and as said prime rate
changes.
"Property" of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person including any Oil and Gas Properties.
"Proved Developed Non-Producing Present Value" or "PDNP Present Value"
means, with respect to any Oil and Gas Properties, including Target Properties,
the present value discounted at ten percent (10%) of future net revenues
attributable to all PDNP Reserves from such Oil and Gas Properties calculated
based on a Qualified Reserve Report.
"Proved Developed Producing Present Value" or "PDP Present Value" means,
with respect to any Oil and Gas Properties, including Target Properties, the
present value discounted at ten percent (10%) of future net revenues
attributable to all PDP Reserves from such Oil and Gas Properties calculated
based on a Qualified Reserve Report.
15
"Proved Reserves" has the meaning given that term in the definitions
promulgated by the Society of Petroleum Evaluation Engineers and the World
Petroleum Congress as in effect at the time in question; "Proved Developed
Producing Reserves" or "PDP Reserves" means Proved Reserves which are
categorized as both "Developed" and "Producing" in such definitions; "Proved
Developed Non-Producing Reserves" or "PDNP Reserves" means Proved Reserves which
are categorized as both "Developed" and "Non-Producing" in such definitions; and
"Proved Undeveloped Reserves" or "PUD Reserves" means Proved Reserves which are
categorized as "Undeveloped" in such definitions.
"Proved Reserves Present Value" means, with respect to any Oil and Gas
Properties, including Target Properties, the sum of the PDP Present Value, the
PDNP Present Value and the PUD Present Value of such Oil and Gas Properties
based on a Qualified Reserve Report; provided, however, in the event the
quotient of (i) the PDP Present Value divided by (ii) the sum of the PDP Present
Value, the PDNP Present Value and PUD Present Value is less than 0.60, then the
Proved Reserves Present Value shall be an amount determined by dividing the PDP
Present Value by 0.60.
"Proved Undeveloped Present Value" or "PUD Present Value" means, with
respect to any Oil and Gas Properties, including Target Properties, the present
value discounted at ten percent (10%) of future net revenues attributable to all
PUD Reserves from such Oil and Gas Properties calculated based on a Qualified
Reserve Report.
"PSI" means Producers Service Incorporated, a Kansas corporation, which is
a Wholly-Owned Subsidiary of Ponderosa.
"Purchasers" is defined in Section 13.3.1.
"QES" means Quest Energy Service, Inc., a Kansas
corporation, which is a Wholly-Owned Subsidiary of QRC.
"QES Management Agreement" means that certain Operating and Management
Services Agreement dated as of December 22, 2003, by and between Borrower and
QES, pursuant to which QES agreed to perform certain general and administrative
services necessary for the operation of Borrower.
"QRC" means Quest Resource Corporation, a Nevada corporation.
"Qualified Reserve Report" means, with respect to any Oil and Gas
Properties, including Target Properties, a Reserve Report prepared in accordance
with the guidelines established from time to time by the United States
Securities and Exchange Commission and acceptable to the Agent, except that, (i)
for all Natural Gas and Crude Oil to be sold from such Oil and Gas Properties
other than Natural Gas and Crude Oil described in the following clause (ii), the
sales price for the first five years after the effective date of such report
shall be the equivalent "strip price" for five year swaps for Natural Gas and
Crude Oil as reflected in the New York Mercantile Exchange as of the settlement
of the last trading day for the contract month coincident with the effective
date of the Reserve Report and thereafter the purchase price shall be fixed at
the sales price in effect at the end of such five year period (in each case as
adjusted for appropriate quality, transportation and location differentials
approved by the Required Lenders); (ii) for all Natural Gas and Crude Oil to be
sold from such Target Properties on a fixed price basis pursuant to any bona
fide contract or with respect to which the price has been hedged pursuant to any
New York Mercantile Exchange contract or bona fide price swap, cap, floor or
collar agreement or any other hedge or derivative arrangement, the sales price
will be the fixed price (as adjusted for appropriate quality, transportation and
location differentials approved by the Required Lenders) for the volumes
indicated in
16
the contract, agreement or arrangement; and (iii) projected operating expenses
will be adjusted to reflect an increase at the rate of 3% per annum beginning on
the first anniversary of the effective date of the Reserve Report. Each
Qualified Reserve Report required to be delivered by August 31 of each year
pursuant to clause (iii) of Section 7.1 shall be prepared by the Approved
Petroleum Engineer. Each other Reserve Report shall be prepared by either (i)
the Approved Petroleum Engineer, or (ii) Borrower's in-house staff. Until
superseded, the Existing Reserve Report and the Devon Reserve Report (each as
adjusted to the extent required under the definition of "Qualified Reserve
Report") shall be considered a Qualified Reserve Report.
"Quest Group" means, collectively, QRC, Ponderosa, PSI, Quest Oil & Gas,
QES, STP Cherokee, X-X Gas and their respective Subsidiaries other than Borrower
and Bluestem.
"Quest Oil & Gas" means Quest Oil & Gas Corporation, a Kansas corporation,
which is a Wholly-Owned Subsidiary of QRC.
"Rate Management Transaction" means any transaction (including an
agreement with respect thereto) now existing or hereafter entered by the
Borrower or any subsidiary which is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
forward transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction (including any
option with respect to any of these transactions) or any combination thereof,
whether linked to one or more interest rates, foreign currencies, commodity
prices, equity prices or other financial measures.
"Rate Management Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all Rate
Management Transactions, and (ii) any and all cancellations, buy backs,
reversals, terminations or assignments of any Rate Management Transactions.
"Recognized Value" means, with respect to Oil and Gas Properties, the
Proved Reserves Present Value attributed to such Oil and Gas Properties based
upon the most recent Qualified Reserve Report.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.
"Recognized Value Properties" means all Oil and Gas Properties evaluated
in the Qualified Reserve Report for the purpose of establishing the Recognized
Value; provided that the Recognized Value Properties as of the Closing Date are
described in the legal descriptions of Oil and Gas Properties attached to the
Certificate of Ownership Interests, and constitute all of the Contributed
Properties, the Devon Properties and the other Oil and Gas Properties described
in the Existing Reserve Report and the Devon Reserve Report.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
17
"Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"Reports" is defined in Section 10.6.
"Required Lenders" means at any time that there are less than three (3)
Lenders, all Lenders and, at all other times, Lenders in the aggregate having at
least sixty-six and two-thirds percent (66 2/3%) of the Aggregate Commitment or,
if the Aggregate Commitment has been terminated, Lenders in the aggregate
holding at least sixty-six and two-thirds percent (66 2/3%) of the aggregate
unpaid principal amount of the outstanding Advances.
"Required Reserve Value" means Proved Reserves of Borrower and its
Subsidiaries that have a Recognized Value of not less than sixty-five percent
(65%) of the Recognized Value of all Proved Reserves held by Borrower and its
Subsidiaries.
"Reserve Report" means an engineering analysis of Oil and Gas Properties
owned or to be acquired by Borrower, in form and substance reasonably acceptable
to the Agent, prepared in accordance with customary and prudent practices in the
petroleum engineering industry and Financial Account Standards Board Statement
69.
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on eurocurrency
liabilities.
"Risk-Based Capital Guidelines" is defined in Section 3.2.
"Rolling Period" means (a) for (i) the five (5) month period ending on May
31, 2004, (ii) the eight (8) month period ending on August 31, 2004, and (iii)
the eleven (11) month period ending on November 30, 2004, the period commencing
on January 1, 2004 and ending on the last day of such applicable period, and (b)
thereafter, any period of four (4) consecutive Fiscal Quarters.
"S&P" means Standard and Poor's Ratings Services, a division of The McGraw
Hill Companies, Inc.
"Sale and Leaseback Transaction" means any sale or other transfer of
Property by any Person with the intent to lease such Property as lessee.
"Schedule" refers to a specific schedule to this Agreement, unless another
document is specifically referenced.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
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"Senior Revolving Agent" means Bank One, NA, in its capacity as
administrative agent for Banks under the Senior Revolving Credit Agreement or
any permitted successor thereto in such capacity.
"Senior Revolving Credit Agreement" means that certain Senior Revolving
Credit Agreement dated as of December 22, 2003 among Borrower, Senior Revolving
Agent and Banks pursuant to which Banks therein agree to make a $200,000,000
revolving loan available to Borrower, as amended, modified, supplemented or
restated as permitted hereunder.
"Senior Revolving Credit Documents" means, collectively, the Senior
Revolving Credit Agreement, and any other agreements, documents, instruments or
certificates executed and delivered from time to time in connection therewith.
"Senior Revolving Notes" means notes issued pursuant to the Senior
Revolving Credit Agreement, as amended, modified, supplemented or restated from
time to time in compliance herewith.
"Single Employer Plan" means a Plan maintained by Borrower or any member
of the Controlled Group for employees of Borrower or any member of the
Controlled Group.
"Stated Rate" is defined in Section 2.20.
"STP Cherokee" means STP Cherokee, Inc., an Oklahoma corporation, which is
a Wholly-Owned Subsidiary of QRC.
"Subordinate Debt" means any and all Indebtedness of Borrower owing under
the Subordinate Debt Documents and evidenced by the Subordinate Note, including
all renewals and extensions thereof to the extent permitted hereunder, which
Indebtedness shall be on terms and conditions acceptable to Agent and each
Lender in their sole discretion; provided, that, the principal amount of the
Subordinate Debt shall not, at any time, exceed $51,000,000 (plus the amount of
any interest paid in kind which may be added to the principal of such
Indebtedness).
"Subordinate Debt Documents" means, collectively, the Subordinate Note
Purchase Agreement, the Subordinate Note and all other agreements, promissory
notes or other instruments evidencing the Subordinate Debt, which Subordinate
Debt Documents shall, in all respects, be in form and substance acceptable to
Agent and each Lender in their sole discretion.
"Subordinate Note" means one or more Junior Subordinated Promissory Notes
in the form of Exhibit G attached hereto to be executed by Borrower and payable
to the order of the Holders, in an original aggregate principal amount of
$51,000,000, as amended, modified, supplemented or restated from time to time in
compliance herewith.
"Subordinate Note Purchase Agreement" means that certain Note Purchase
Agreement dated of even date herewith, by and among Borrower and the Holders, as
amended, modified, supplemented or restated from time to time in compliance
herewith.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the
19
time be so owned or controlled. Unless otherwise expressly provided, all
references herein to a "Subsidiary" shall mean a Subsidiary of Borrower.
"Subsidiary Pledge Agreement" means a Pledge Agreement substantially in
the form of Exhibit K attached hereto (with applicable conforming changes) to be
executed by each existing and/or future Subsidiary of Borrower to the extent
such Subsidiary owns any outstanding Capital Stock of any other Subsidiary of
Borrower (for purposes of this definition and Section 6.1(d) hereof, such
Subsidiary is referred to herein and therein as an "Indirect Subsidiary"),
pursuant to which such Subsidiary shall pledge to Collateral Agent, for the
ratable benefit of Lenders, all of the issued and outstanding Capital Stock
owned by such Subsidiary of each Indirect Subsidiary described therein to secure
the Obligations.
"Substantial Portion" means, with respect to the Property of the Borrower
and its Subsidiaries, Property which represents more than 10% of the
consolidated assets of the Borrower and its Subsidiaries or property which is
responsible for more than 10% of the consolidated net sales, in each case, as
would be shown in the consolidated financial statements of the Borrower and its
Subsidiaries as at the beginning of the twelve-month period ending with the
month in which such determination is made (or if financial statements have not
been delivered hereunder for that month which begins the twelve-month period,
then the financial statements delivered hereunder for the quarter ending
immediately prior to that month).
"Target Properties" means any Oil and Gas Properties that Borrower or any
of its Subsidiaries proposes to acquire pursuant to clause (iii) of Section
7.15.
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and any and all liabilities with
respect to the foregoing, but excluding Excluded Taxes and Other Taxes.
"Terminated Lender" is defined in Section 2.19.
"TGGS" means Tall Grass Gas Services, LLC, an Oklahoma limited liability
company.
"Transferee" is defined in Section 13.4.
"Type" means, with respect to any Advance, its nature as a Floating Rate
Advance or a Eurodollar Advance and with respect to any Loan, its nature as a
Floating Rate Loan or a Eurodollar Loan.
"Unfunded Liabilities" means the amount (if any) by which the present
value of all vested and unvested accrued benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer plan terminations.
"Unmatured Default" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the
outstanding voting securities of which shall at the time be owned or controlled,
directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries
of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of
such Person, or (ii) any partnership, limited liability company, association,
joint venture or similar business organization 100% of the ownership interests
having ordinary voting power of which
20
shall at the time be so owned or controlled.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
ARTICLE II.
THE CREDITS
2.1. Commitment. Each Lender severally agrees, on the terms and conditions
set forth in this Agreement, to make, on the date of this Agreement, Loans to
the Borrower in an amount equal to the amount of its Commitment. The Borrower
may make only one borrowing under the Commitments which shall be on the date of
the initial Advance. Any amount borrowed under the Commitments and subsequently
repaid or prepaid may not be reborrowed. Subject to Section 2.7, clause (ii) of
Section 7.14, and Section 9.1 all amounts owed hereunder with respect to the
Loans shall be paid in full on the Facility Termination Date. Each Lender's
Commitment shall terminate immediately and without further action on the date of
the initial Advance after giving effect to the funding of such Lender's
Commitment on such date.
2.2. Required Payments; Termination. In addition to any payments required
under clause (ii) of Section 7.14 and Section 9.1, any outstanding Advances and
all other unpaid Obligations shall be paid in full by the Borrower on the
Facility Termination Date.
2.3. Ratable Loans. Each Advance hereunder shall consist of Loans made from
the several Lenders ratably in proportion to the ratio that their respective
Commitments bear to the Aggregate Commitment.
2.4. Types of Advances. Except for the initial Advance, unless a Default
has occurred and is continuing or the Borrower is subject to liability under
Sections 3.1 or 3.2 as a result of Advances being Eurodollar Advances or the
Agent suspends the availability of Eurodollar Advances pursuant to Section 3.3,
all Advances shall be Eurodollar Advances selected by the Borrower in accordance
with Sections 2.8 and 2.9. The initial Advance shall be a Floating Rate Advance,
provided that on the date of the initial Advance, Borrower delivers to Agent a
Conversion/Continuation Notice requesting that, no later than three (3) Business
Days after the delivery of such notice, such Advance be converted to a
Eurodollar Advance with an Interest Period of one (1) month.
2.5. Fee. On the date hereof, the Borrower agrees to pay to the Agent, to
the Arranger and to each Lender the closing and other fees in the amounts agreed
upon among QRC, the Agent, the Arranger and the Lenders.
2.6. Minimum Amount of Each Advance. The initial Advance shall be in the
amount of the aggregate Commitment and thereafter shall be in the aggregate
amount of all Eurodollar Loans of all Lenders.
2.7. Optional Principal Payments. The Borrower may from time to time pay,
subject to the payment of any funding indemnification amounts required by
Section 3.4 and the premium set forth in the following sentence, all of the
outstanding Advances, or, in a minimum aggregate amount of $1,000,000 or any
integral multiple of $100,000 in excess thereof, any portion of the Advances,
upon three (3) Business Days' prior notice to the Agent. The Borrower shall pay
to Agent (in addition to the accrued interest on the principal amount being
prepaid), for the benefit of the Lenders, as liquidated damages for the loss of
21
the bargain and not as a penalty (i) an amount equal to two percent (2%) of the
amount of any outstanding Advances prepaid during the period from the date
hereof until June 22, 2004 and (ii) an amount equal to one percent (1%) of the
amount of any outstanding Advances in excess of $17,500,000 prepaid during the
period from June 23, 2004 to and including December 22, 2004. Notwithstanding
the foregoing, no premium amount shall be payable with respect to any prepayment
of outstanding Advances after December 22, 2004.
2.8. Method of Selecting Interest Periods for Advances. The Borrower shall
select the Interest Period applicable to each Eurodollar Advance from time to
time; provided, that the Borrower shall not be permitted to have outstanding at
any one time Eurodollar Advances with more than two (2) different Interest
Periods and during the first sixty (60) days after the Closing Date each
Interest Period shall be a one month Interest Period. The Borrower shall give
the Agent irrevocable notice (a "Borrowing Notice") not later than 10:00 a.m.
(Chicago, Illinois time) at least three (3) Business Days before the Borrowing
Date for each Eurodollar Advance (except that, in respect of the initial
Advance, may not be later than 10:00 a.m. on the Closing Date), specifying:
(i) the Borrowing Date, which shall be a Business Day, of such
Advance,
(ii) the aggregate amount of such Advance,
(iii) the Type of Advance selected, and
(iv) in the case of each Eurodollar Advance, the Interest Period
applicable thereto.
Not later than noon (Chicago, Illinois time) on the initial Borrowing Date, each
Lender shall make available its Loan or Loans in funds immediately available in
Chicago, Illinois to the Agent at its address specified pursuant to Article XIV.
The Agent will make the funds so received from the Lenders available to the
Borrower at the Agent's aforesaid address.
2.9. Continuation of Outstanding Advances. Each Eurodollar Advance shall
continue as a Eurodollar Advance until the end of the then applicable Interest
Period therefor, at which time such Eurodollar Advance shall be automatically
converted into a Floating Rate Advance unless (x) such Eurodollar Advance is or
was repaid in accordance with Section 2.7 or (y) the Borrower shall have given
the Agent a Conversion/Continuation Notice requesting that, at the end of such
Interest Period, such Eurodollar Advance continue as a Eurodollar Advance for
the same or another Interest Period; provided, that the Borrower shall not be
permitted to have outstanding at any one time Eurodollar Advances with more than
two (2) different Interest Periods. The Borrower shall give the Agent
irrevocable notice (a "Conversion/Continuation Notice") of each continuation of
a Eurodollar Advance not later than 10:00 a.m. (Chicago, Illinois time) at least
three (3) Business Days prior to the date of the requested continuation,
specifying:
(i) the requested date, which shall be a Business Day, of such
conversion or continuation,
(ii) the aggregate amount and Type of the Advance which is to be
converted or continued, and
(iii) the amount of such Advance which is to be converted into or
continued as a Eurodollar Advance and the duration of the Interest Period
applicable thereto.
22
2.10. Changes in Interest Rate, etc. Each Floating Rate Advance shall bear
interest on the outstanding principal balance thereof, for each day from and
including the date of such Advance is made or is automatically converted from a
Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.9 hereof,
at a rate per annum equal to the Floating Rate for such day. Changes in the rate
of interest on that portion of any Advance maintained as a Floating Rate Advance
will take effect immediately with each change in the Alternate Base Rate. Each
Eurodollar Advance shall bear interest on the outstanding principal amount
thereof from and including the first day of the Interest Period applicable
thereto to (but not including) the last day of such Interest Period at the
interest rate determined by the Agent as applicable to such Eurodollar Advance
based upon the Borrower's selections under Sections 2.8 and 2.9 and otherwise in
accordance with the terms hereof. No Interest Period may end after the Facility
Termination Date.
2.11. Rates Applicable After Default. Notwithstanding anything to the
contrary contained in Section 2.8, 2.9 or 2.10, during the continuance of a
Default the Required Lenders may, at their option, by notice to the Borrower
(which notice may be revoked at the option of the Required Lenders
notwithstanding any provision of Section 9.2 requiring unanimous consent of the
Lenders to changes in interest rates), declare that (i) no Advance may be
continued as a Eurodollar Advance with an Interest Period greater than one month
or (ii) all Eurodollar Advances shall convert to Floating Rate Advances. During
the continuance of a Default the Required Lenders may, at their option, by
notice to the Borrower (which notice may be revoked at the option of the
Required Lenders notwithstanding any provision of Section 9.2 requiring
unanimous consent of the Lenders to changes in interest rates), declare that, to
the extent permitted by law, (i) each Eurodollar Advance shall bear interest for
the remainder of the applicable Interest Period at the rate otherwise applicable
to such Interest Period plus 2% per annum and (ii) each Floating Rate Advance
shall bear interest at a rate per annum equal to the Floating Rate in effect
from time to time plus 2% per annum, provided that, during the continuance of a
Default under Section 8.6 or 8.7, the interest rates set forth in clauses (i)
and (ii) above shall be applicable to all Advances without any election or
action on the part of the Agent or any Lender.
2.12. Method of Payment. All payments of the Obligations hereunder shall be
made, without setoff, deduction (except to the extent required by applicable law
or with respect to Taxes, but always subject to the obligations of the Borrower
under Section 3.5 hereof), or counterclaim, in immediately available funds to
the Agent at the Agent's address specified pursuant to Article XIV, or at any
other Lending Installation of the Agent specified in writing by the Agent to the
Borrower, by noon (Chicago, Illinois time) on the date when due and shall be
applied ratably by the Agent among the Lenders. Each payment delivered to the
Agent for the account of any Lender shall be delivered promptly by the Agent to
such Lender in the same type of funds that the Agent received at its address
specified pursuant to Article XIV or at any Lending Installation specified in a
notice received by the Agent from such Lender.
2.13. Noteless Agreement; Evidence of Indebtedness. (i) Each Lender shall
maintain in accordance with its usual practice an account or accounts evidencing
the indebtedness of the Borrower to such Lender resulting from each Loan made by
such Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time hereunder.
(ii) The Agent shall also maintain accounts in which it will record
(a) the amount of each Loan made hereunder, the Type thereof and the
Interest Period with respect thereto, (b) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to
each Lender hereunder and (c) the amount of any sum received by the Agent
hereunder from the Borrower and each Lender's share thereof.
23
(iii) The entries maintained in the accounts maintained pursuant to
paragraphs (i) and (ii) above shall be prima facie evidence of the
existence and amounts of the Obligations therein recorded; provided,
however, that the failure of the Agent or any Lender to maintain such
accounts or any error therein shall not in any manner affect the obligation
of the Borrower to repay the Obligations in accordance with their terms.
(iv) Any Lender may request that its Loans be evidenced by a
promissory note in substantially the form of Exhibit E (a "Note"). In such
event, the Agent shall prepare, and the Borrower shall execute and deliver
to such Lender such Note payable to the order of such Lender. Thereafter,
the Loans evidenced by such Note and interest thereon shall at all times
(prior to any assignment pursuant to Section 13.3) be represented by one or
more Notes payable to the order of the payee named therein, except to the
extent that any such Lender subsequently returns any such Note for
cancellation and requests that such Loans once again be evidenced as
described in paragraphs (i) and (ii) above.
2.14. Telephonic Notices. The Borrower hereby authorizes the Lenders and
the Agent to extend, convert or continue Advances and to transfer funds based on
telephonic notices made by any person or persons the Agent or any Lender in good
faith believes to be acting on behalf of the Borrower, it being understood that
the foregoing authorization is specifically intended to allow
Conversion/Continuation Notices to be given telephonically. The Borrower agrees
to deliver promptly to the Agent a written confirmation, if such confirmation is
requested by the Agent or any Lender, of each telephonic notice signed by an
Authorized Officer. If the written confirmation differs in any material respect
from the action taken by the Agent and the Lenders, the records of the Agent and
the Lenders shall govern absent manifest error.
2.15. Interest Payment Dates; Interest and Fee Basis. Interest accrued on
each Eurodollar Advance shall be payable on each Payment Date, on any date on
which the Eurodollar Advance is prepaid, whether by acceleration or otherwise,
and at maturity. In the event the Agent has suspended the availability of
Eurodollar Advances pursuant to Section 3.3 or the Borrower is subject to
liability under Section 3.1 or 3.2 as a result of Advances being Eurodollar
Advances or the Obligations become immediately due and payable in accordance
with Section 9.1, interest accrued on each Floating Rate Advance shall be
payable on each Payment Date, commencing with the first such date to occur after
the date of such suspension, liability or acceleration, on any date on which the
Floating Rate Advance is prepaid, whether due to acceleration or otherwise, and
at maturity. Interest accrued on that portion of the outstanding principal
amount of any Floating Rate Advance converted into a Eurodollar Advance on a day
other than a Payment Date shall be payable on the date of conversion. Interest
on Eurodollar Advances shall be calculated for actual days elapsed on the basis
of a 360-day year and on Floating Rate Advances on the basis of a 365 or 366 day
year, as applicable. Interest shall be payable for the day an Advance is made
but not for the day of any payment on the amount paid if payment is received
prior to noon (Chicago, Illinois time) at the place of payment. If any payment
of principal of or interest on an Advance shall become due on a day which is not
a Business Day, such payment shall be made on the next succeeding Business Day
and, in the case of a principal payment, such extension of time shall be
included in computing interest in connection with such payment.
2.16. Notification of Advances, Interest Rates, Prepayments and Commitment
Reductions. Promptly after receipt thereof, the Agent will notify each Lender of
the contents of each Conversion/Continuation Notice, and repayment notice
received by it hereunder. The Agent will notify each Lender of the interest rate
applicable to each Eurodollar Advance promptly upon determination of such
interest rate and at any time a Floating Rate Advance is outstanding, will give
each Lender prompt notice of each change in the Alternate Base Rate.
24
2.17. Lending Installations. Subject to Section 3.6, each Lender may book
its Loans at any Lending Installation selected by such Lender and may change its
Lending Installation from time to time. All terms of this Agreement shall apply
to any such Lending Installation and the Loans and any Notes issued hereunder
shall be deemed held by each Lender for the benefit of any such Lending
Installation. Each Lender may, by written notice to the Agent and the Borrower
in accordance with Article XIV, designate replacement or additional Lending
Installations through which Loans will be made by it and for whose account Loan
payments are to be made.
2.18. Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender,
as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of the Lenders, that it does not
intend to make such payment, the Agent may assume that such payment has been
made. The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption. If
such Lender or the Borrower, as the case may be, has not in fact made such
payment to the Agent, the recipient of such payment shall, on demand by the
Agent, repay to the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to (x) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day for the first three days and,
thereafter, the interest rate applicable to the relevant Loan or (y) in the case
of payment by the Borrower, the interest rate applicable to the relevant Loan.
2.19. Replacement of Lender. In the event that (i) the Borrower is required
pursuant to Section 3.1, 3.2 or 3.5 to make any additional payment to any Lender
or if any Lender's obligation to make or continue Eurodollar Advances shall be
suspended pursuant to Section 3.3 (any Lender so affected an "Affected Lender"),
and, if such amounts continue to be charged or such suspension is still
effective, or (ii) in connection with any proposed amendment, modification,
termination, waiver or consent with respect to any of the provisions of this
Agreement or any other Loan Document as contemplated by Section 9.2, the consent
of Required Lenders (or the consent of Bank One, as a Lender, at any time that
there are less than three (3) Lenders) shall have been obtained but the consent
of one or more of such other Lenders (each a "Non-Consenting Lender") whose
consent is required has not been obtained; then, the Borrower may elect to
replace such Affected Lender or Non-Consenting Lender (a "Terminated Lender") as
a Lender party to this Agreement, provided that, with respect to the replacement
of an Affected Lender, no Default or Unmatured Default shall have occurred and
be continuing at the time of such replacement, and provided further that,
concurrently with the replacement of any Terminated Lender, (x) another bank or
other entity which is reasonably satisfactory to the Agent shall agree, as of
such date, to purchase for cash the Advances and other Obligations due to the
Terminated Lender pursuant to an assignment substantially in the form of Exhibit
C and to become a Lender for all purposes under this Agreement and to assume all
obligations of the Terminated Lender to be terminated as of such date and to
comply with the requirements of Section 13.3 applicable to assignments, and (y)
the Borrower shall pay to such Terminated Lender in same day funds on the day of
such replacement (A) all amounts that are due to such Terminated Lender pursuant
to Sections 3.1, 3.2 and 3.5, and (B) an amount, if any, equal to the payment
which would have been due to such Lender on the day of such replacement under
Section 3.4 had the Loans of such Terminated Lender been prepaid on such date
rather than sold to the replacement Lender. The Lenders agree that a Terminated
Lender will not be entitled to receive liquidated damages pursuant to Section
2.7 as a result of its assignment under this Section 2.19.
2.20. Limitation of Interest. The Borrower, the Agent and the Lenders
intend to strictly comply with all applicable laws, including applicable usury
laws. Accordingly, the provisions of this Section 2.20 shall govern and control
over every other provision of this Agreement or any other Loan
25
Document which conflicts or is inconsistent with this Section 2.20, even if such
provision declares that it controls. As used in this Section 2.20, the term
"interest" includes the aggregate of all charges, fees, benefits or other
compensation which constitute interest under applicable law, provided that, to
the maximum extent permitted by applicable law, (a) any non-principal payment
shall be characterized as an expense or as compensation for something other than
the use, forbearance or detention of money and not as interest, and (b) all
interest at any time contracted for, reserved, charged or received shall be
amortized, prorated, allocated and spread, in equal parts during the full term
of the Obligations. In no event shall the Borrower or any other Person be
obligated to pay, or any Lender have any right or privilege to reserve, receive
or retain, (a) any interest in excess of the maximum amount of nonusurious
interest permitted under the laws of the State of Texas or the applicable laws
(if any) of the United States or of any other applicable state, or (b) total
interest in excess of the amount which such Lender could lawfully have
contracted for, reserved, received, retained or charged had the interest been
calculated for the full term of the Obligations at the Highest Lawful Rate. On
each day, if any, that the interest rate (the "Stated Rate") called for under
this Agreement or any other Loan Document exceeds the Highest Lawful Rate, the
rate at which interest shall accrue shall automatically be fixed by operation of
this sentence at the Highest Lawful Rate for that day, and shall remain fixed at
the Highest Lawful Rate for each day thereafter until the total amount of
interest accrued equals the total amount of interest which would have accrued if
there were no such ceiling rate as is imposed by this sentence. Thereafter,
interest shall accrue at the Stated Rate unless and until the Stated Rate again
exceeds the Highest Lawful Rate when the provisions of the immediately preceding
sentence shall again automatically operate to limit the interest accrual rate.
The daily interest rates to be used in calculating interest at the Highest
Lawful Rate shall be determined by dividing the applicable Highest Lawful Rate
per annum by the number of days in the calendar year for which such calculation
is being made. None of the terms and provisions contained in this Agreement or
in any other Loan Document which directly or indirectly relate to interest shall
ever be construed without reference to this Section 2.20, or be construed to
create a contract to pay for the use, forbearance or detention of money at an
interest rate in excess of the Highest Lawful Rate. If the term of any
Obligation is shortened by reason of acceleration of maturity as a result of any
Default or by any other cause, or by reason of any required or permitted
prepayment, and if for that (or any other) reason any Lender at any time,
including but not limited to, the stated maturity, is owed or received (and/or
has received) interest in excess of interest calculated at the Highest Lawful
Rate, then and in any such event all of any such excess interest shall be
canceled automatically as of the date of such acceleration, prepayment or other
event which produces the excess, and, if such excess interest has been paid to
such Lender, it shall be credited pro tanto against the then-outstanding
principal balance of the Borrower's obligations to such Lender, effective as of
the date or dates when the event occurs which causes it to be excess interest,
until such excess is exhausted or all of such principal has been fully paid and
satisfied, whichever occurs first, and any remaining balance of such excess
shall be promptly refunded to its payor. Chapter 346 of the Texas Finance Code
(which regulates certain revolving credit accounts (formerly Tex. Rev. Civ.
Stat. Xxx. Art. 0000, Xx. 15)) shall not apply to this Agreement or to any Loan,
nor shall this Agreement or any Loan be governed by or be subject to the
provisions of such Chapter 346 in any manner whatsoever.
ARTICLE III
YIELD PROTECTION; TAXES
3.1. Yield Protection. If, on or after the date of this Agreement, the
adoption of any law or any governmental or quasi-governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law), or any
change in the interpretation or administration thereof by any governmental or
quasi-governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender or
applicable Lending Installation
26
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency:
(i) subjects any Lender or any applicable Lending Installation to any
Taxes, or changes the basis of taxation of payments (other than with
respect to Excluded Taxes) to any Lender in respect of its Loans, or
(ii) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Lender or
any applicable Lending Installation (other than reserves and assessments
taken into account in determining the interest rate applicable to
Eurodollar Advances), or
(iii) imposes any other condition the result of which is to increase
the cost to any Lender or any applicable Lending Installation of making,
funding or maintaining its Loans or reduces any amount receivable by any
Lender or any applicable Lending Installation in connection with its Loans,
or requires any Lender or any applicable Lending Installation to make any
payment calculated by reference to the amount of Loans held or interest
received by it, by an amount deemed material by such Lender,
and the result of any of the foregoing is to increase the cost to such Lender or
applicable Lending Installation of making or maintaining its Loans or Commitment
or to reduce the return received by such Lender or applicable Lending
Installation in connection with such Eurodollar Loans or Commitment, then,
within 15 days of demand by such Lender provided such demand is made within
ninety (90) days of the incurrence of such increased cost, the Borrower shall
pay such Lender such additional amount or amounts as will compensate such Lender
for such increased cost or reduction in amount received.
3.2. Changes in Capital Adequacy Regulations. If a Lender determines the
amount of capital required or expected to be maintained by such Lender, any
Lending Installation of such Lender or any corporation controlling such Lender
is increased as a result of a Change, then, within 15 days of demand by such
Lender, the Borrower shall pay such Lender the amount necessary to compensate
for any shortfall in the rate of return on the portion of such increased capital
which such Lender determines is attributable to this Agreement, its Loans or its
Commitment to make Loans hereunder (after taking into account such Lender's
policies as to capital adequacy). "Change" means (i) any change after the date
of this Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of
or change in any other law, governmental or quasi-governmental rule, regulation,
policy, guideline, interpretation, or directive (whether or not having the force
of law) after the date of this Agreement which affects the amount of capital
required or expected to be maintained by any Lender or any Lending Installation
or any corporation controlling any Lender. "Risk-Based Capital Guidelines" means
(i) the risk-based capital guidelines in effect in the United States on the date
of this Agreement, including transition rules, and (ii) the corresponding
capital regulations promulgated by regulatory authorities outside the United
States implementing the July 1988 report of the Basle Committee on Banking
Regulation and Supervisory Practices Entitled "International Convergence of
Capital Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.
3.3. Availability of Types of Advances. If any Lender determines that
maintenance of its Eurodollar Loans at a suitable Lending Installation would
violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or if the Required Lenders determine that (i) deposits
of a type and maturity appropriate to match fund Eurodollar Advances are not
available or (ii) the interest rate applicable to Eurodollar Advances does not
accurately reflect the cost of making or maintaining
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Eurodollar Advances, then the Agent shall suspend the availability of Eurodollar
Advances and require any affected Eurodollar Advances to be repaid or converted
to Floating Rate Advances, subject to the payment of any funding indemnification
amounts required by Section 3.4.
3.4. Funding Indemnification. If any payment of a Eurodollar Advance occurs
on a date which is not the last day of the applicable Interest Period, whether
because of acceleration, prepayment or otherwise, or a Eurodollar Advance is not
made on the date specified by the Borrower for any reason other than default by
the Lenders, the Borrower will indemnify each Lender for any loss or cost
incurred by it resulting therefrom, including, without limitation, any loss or
cost in liquidating or employing deposits acquired to fund or maintain such
Eurodollar Advance.
3.5. Taxes. (i) All payments by the Borrower to or for the account of any
Lender or the Agent hereunder or under any Note shall be made free and clear of
and without deduction for any and all Taxes. If the Borrower shall be required
by law to deduct any Taxes from or in respect of any sum payable hereunder to
any Lender or the Agent, (a) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section 3.5) such Lender or the Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (b) the Borrower shall make such deductions, (c) the
Borrower shall pay the full amount deducted to the relevant authority in
accordance with applicable law and (d) the Borrower shall furnish to the Agent
the original copy of a receipt evidencing payment thereof within 30 days after
such payment is made.
(ii) In addition, the Borrower hereby agrees to pay any present or
future stamp or documentary taxes and any other excise or property taxes,
charges or similar levies which arise from any payment made hereunder or
under any Note or from the execution or delivery of, or otherwise with
respect to, this Agreement or any Note ("Other Taxes").
(iii) The Borrower hereby agrees to indemnify the Agent and each
Lender for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed on amounts payable under this
Section 3.5) paid by the Agent or such Lender as a result of its
Commitment, any Loans made by it hereunder, or otherwise in connection with
its participation in this Agreement and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto. Payments
due under this indemnification shall be made within 30 days of the date the
Agent or such Lender makes demand therefor pursuant to Section 3.6.
(iv) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof (each a "Non-U.S. Lender") agrees that
it will, not more than ten Business Days after the date of this Agreement,
(i) deliver to the Agent two duly completed copies of United States
Internal Revenue Service Form W-8BEN or W-8ECI, certifying in either case
that such Lender is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes,
and (ii) deliver to the Agent a United States Internal Revenue Form W-8 or
W-9, as the case may be, and certify that it is entitled to an exemption
from United States backup withholding tax. Each Non-U.S. Lender further
undertakes to deliver to each of the Borrower and the Agent (x) renewals or
additional copies of such form (or any successor form) on or before the
date that such form expires or becomes obsolete, and (y) after the
occurrence of any event requiring a change in the most recent forms so
delivered by it, such additional forms or amendments thereto as may be
reasonably requested by the Borrower or the Agent. All forms or amendments
described in the preceding sentence shall certify that such Lender is
entitled to receive payments under this Agreement without deduction or
withholding of
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any United States federal income taxes, unless an event (including without
limitation any change in treaty, law or regulation) has occurred prior to
the date on which any such delivery would otherwise be required which
renders all such forms inapplicable or which would prevent such Lender from
duly completing and delivering any such form or amendment with respect to
it and such Lender advises the Borrower and the Agent that it is not
capable of receiving payments without any deduction or withholding of
United States federal income tax.
(v) For any period during which a Non-U.S. Lender has failed to
provide the Borrower with an appropriate form pursuant to clause (iv),
above (unless such failure is due to a change in treaty, law or regulation,
or any change in the interpretation or administration thereof by any
governmental authority, occurring subsequent to the date on which a form
originally was required to be provided), such Non-U.S. Lender shall not be
entitled to indemnification under this Section 3.5 with respect to Taxes
imposed by the United States; provided that, should a Non-U.S. Lender which
is otherwise exempt from or subject to a reduced rate of withholding tax
become subject to Taxes because of its failure to deliver a form required
under clause (iv), above, the Borrower shall take such steps as such
Non-U.S. Lender shall reasonably request to assist such Non-U.S. Lender to
recover such Taxes.
(vi) Any Lender that is entitled to an exemption from or reduction of
withholding tax with respect to payments under this Agreement or any Note
pursuant to the law of any relevant jurisdiction or any treaty shall
deliver to the Borrower (with a copy to the Agent), at the time or times
prescribed by applicable law, such properly completed and executed
documentation prescribed by applicable law as will permit such payments to
be made without withholding or at a reduced rate.
(vii) If the U.S. Internal Revenue Service or any other governmental
authority of the United States or any other country or any political
subdivision thereof asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because
the appropriate form was not delivered or properly completed, because such
Lender failed to notify the Agent of a change in circumstances which
rendered its exemption from withholding ineffective, or for any other
reason), such Lender shall indemnify the Agent fully for all amounts paid,
directly or indirectly, by the Agent as tax, withholding therefor, or
otherwise, including penalties and interest, and including taxes imposed by
any jurisdiction on amounts payable to the Agent under this subsection,
together with all costs and expenses related thereto (including attorneys
fees and time charges of attorneys for the Agent, which attorneys may be
employees of the Agent). The obligations of the Lenders under this Section
3.5(vii) shall survive the payment of the Obligations and termination of
this Agreement.
3.6. Lender Statements; Survival of Indemnity. To the extent reasonably
possible, each Lender shall designate an alternate Lending Installation with
respect to its Loans to reduce any liability of the Borrower to such Lender
under Sections 3.1 and 3.2 or to avoid the unavailability of Eurodollar Advances
under Section 3.3, so long as such designation is not, in the judgment of such
Lender, disadvantageous to such Lender. Each Lender shall deliver a written
statement of such Lender to the Borrower (with a copy to the Agent) as to the
amount due, if any, under Section 3.1, 3.2, or 3.4. Such written statement shall
set forth in reasonable detail the calculations upon which such Lender
determined such amount and shall be final, conclusive and binding on the
Borrower in the absence of manifest error. Determination of amounts payable
under such Sections in connection with a Eurodollar Loan shall be calculated as
though each Lender funded its Eurodollar Loan through the purchase of a deposit
of the type and maturity corresponding to the deposit used as a reference in
determining the Eurodollar Rate applicable to such Loan, whether in fact that is
the case or not. Unless otherwise provided herein, the
29
amount specified in the written statement of any Lender shall be payable on
demand after receipt by the Borrower of such written statement. The obligations
of the Borrower under Sections 3.1, 3.2, and 3.4 shall survive payment of the
Obligations and termination of this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Initial Advance. The Lenders shall not be required to make the initial
Advance hereunder unless the Borrower has satisfied each of the following
conditions:
(a) Closing Deliveries. The Borrower shall have furnished to the Agent with
sufficient copies for the Lenders:
(i) Copies of the articles or certificate of incorporation or
organization of the Borrower, each Guarantor and Cherokee Partners,
together with all amendments, and a certificate of good standing, each
certified by the appropriate governmental officer in its jurisdiction of
incorporation as well as any other information required by Section 326 of
the USA PATRIOT ACT or necessary for the Agent or any Lender to verify the
identity of Borrower or any Guarantor as required by Section 326 of the USA
PATRIOT ACT.
(ii) Copies, certified by the Secretary or other Authorized Officer of
the Borrower, each Guarantor and Cherokee Partners, of its Operating
Agreement, by-laws and of its Board of Directors' resolutions and of
resolutions or actions of any other body authorizing the execution of the
Loan Documents to which the Borrower or each Guarantor or Cherokee Partners
is a party.
(iii) An incumbency certificate, executed by the Secretary or other
Authorized Officer of the Borrower, each Guarantor and Cherokee Partners,
which shall identify by name and title and bear the signatures of the
Authorized Officers and any other officers of the Borrower, each Guarantor
and Cherokee Partners authorized to sign the Loan Documents to which the
Borrower, such Guarantor or Cherokee Partners is a party, upon which
certificate the Agent and the Lenders shall be entitled to rely until
informed of any change in writing by the Borrower, such Guarantor or
Cherokee Partners.
(iv) A certificate, signed by the Chief Financial Officer of the
Borrower, stating that on the date of the initial Advance no Default or
Unmatured Default has occurred and is continuing.
(v) A written opinion of the Borrower's counsel, addressed to the
Agent and Lenders in substantially the form of Exhibit A-1, and written
opinions of the Collateral Agent's local counsel, addressed to the
Collateral Agent in substantially the form of Exhibit A-2.
(vi) Any Notes requested by a Lender pursuant to Section 2.13 payable
to the order of each such requesting Lender.
(vii) The Mortgages to be executed on the Closing Date pursuant to
Section 5.1(a) of the Senior Revolving Credit Agreement, duly executed and
delivered by Borrower, together with such other assignments, conveyances,
amendments, agreements and
30
other writings, including, without limitation, UCC-1 financing statements, tax
affidavits and applicable department of revenue documentation, creating first
and prior Liens in the Required Reserves Value.
(viii) the Equityholders Pledge Agreement duly executed and delivered
by (1) Cherokee Partners, and (2) each member of the Quest Group (other
than QRC), together with (a) all certificates (or other evidence acceptable
to Agent) evidencing one hundred percent (100%) of the issued and
outstanding Capital Stock of Borrower of every class, which certificates
shall be duly endorsed or accompanied by appropriate stock powers (as
applicable) executed in blank, and (b) such other agreements and writings,
including, without limitation, UCC-1 financing statements as reasonably
requested by Agent
(ix) Reserved.
(x) The Borrower Pledge Agreement duly executed and delivered by
Borrower, together with (a) all certificates (or other evidence acceptable
to Agent) evidencing one hundred percent (100%) of the issued and
outstanding Capital Stock of Bluestem of every class, which certificates
shall be duly endorsed or accompanied by appropriate stock powers (as
applicable) executed in blank, and (b) such other agreements and writings,
including, without limitation, UCC-1 financing statements, as reasonably
requested by Agent.
(xi) A Guaranty duly executed and delivered by Bluestem.
(xii) Such financing statements (including, without limitation, the
financing statements referenced in subclauses (vii), (viii), and (x) above)
as Agent shall specify to fully evidence and perfect all Liens contemplated
by the Loan Documents, all of which shall be filed of record in such
jurisdictions as Agent shall require in its sole discretion.
(xiii) Written money transfer instructions, in substantially the form
of Exhibit D, addressed to the Agent and signed by an Authorized Officer,
together with such other related money transfer authorizations as the Agent
may have reasonably requested.
(xiv) A report or reports in form, scope and detail acceptable to
Agent from environmental engineering firms acceptable to Agent setting
forth the results of a review of each Credit Party's Oil and Gas Properties
and operations (after giving effect to the Closing Transactions), which
report(s) shall not reflect the existence of facts or circumstances which
would constitute a material violation of any Environmental Laws or which
are likely to result in a material liability to any Credit Party.
(xv) A copy of (A) each Closing Document and all other material
documents, instruments and agreements executed and/or delivered by Cherokee
Partners, any member of the Quest Group and/or any Credit Party in
connection with the Closing Transactions, and (B) the QES Management
Agreement, together with a certificate from an Authorized Officer of
Borrower certifying that such copies are accurate and complete and
represent the complete understanding and agreement of the parties with
respect to the subject matter thereof.
(xvi) A letter executed by Devon consenting to the assignment by
Borrower to Collateral Agent of all of Borrower's rights and interests
under the Devon Acquisition Agreement.
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(xvii) A Certificate of Ownership Interests signed by an Authorized
Officer of Borrower in the form of Exhibit L attached hereto.
(xviii) The insurance certificate described in Section 5.20.
(xix) Executed originals (in recordable form) of all Devon Hold Back
Assignments (as defined in the Senior Revolving Credit Agreement) to be
delivered to Collateral Agent pursuant to the terms of the Devon Hold Back
Agreement (as defined in the Senior Revolving Credit Agreement).
(xx) Such other documents as any Lender or its counsel may have
reasonably requested.
(b) Title Review. Agent or its counsel shall have completed a review of
title to the Initial Title Required Reserve Value of the Oil and Gas Properties,
and such review shall not have revealed any condition or circumstance which
would reflect that the representations and warranties contained in Section 5.14
hereof are inaccurate in any material respect.
(c) Closing Transactions. Subject only to the disbursement and application
of the initial Advance, the Closing Transactions shall have occurred and been
consummated on the terms set forth in the Closing Documents (or Agent shall be
satisfied that such transactions will occur and be consummated simultaneously
with the Closing Date).
(d) No Legal Prohibition. The transactions contemplated by this Agreement
shall be permitted by applicable Law and regulation and shall not subject Agent
or any Lender to any material adverse change in its assets, liabilities,
financial condition, operations or prospects or subject any Credit Party to a
Material Adverse Change.
(e) No Litigation. No litigation, arbitration or similar proceeding shall
be pending or, to the knowledge of Borrower, threatened which calls into
question the validity or enforceability of this Agreement, the other Loan
Documents, the Closing Transactions or the transactions contemplated hereby or
thereby.
(f) Closing and Other Fees. Borrower shall have paid (1) to Agent for the
ratable benefit of each Lender, and shall have paid to Agent and its Affiliates
(for their own account), the fees to be paid on the Closing Date pursuant to
Section 2.5, and (2) all fees, expenses and disbursements of counsel for Agent
to the extent invoiced on or prior to the Closing Date, together with such
additional amounts as shall constitute such counsel's reasonable estimate of
fees, expenses and disbursements incurred by such counsel through the Closing
Date; provided, that, such estimate shall not thereafter preclude further
settling of accounts between Borrower and Agent.
(g) Organizational Structure. Each Lender shall be satisfied in its sole
judgment with the organizational, capital, legal and management structure and
tax liabilities of each Credit Party.
(h) Rate Management Transactions. Borrower shall have entered into, or been
assigned by a member of the Quest Group or Devon, Rate Management Transactions
with Approved Counterparties, and on terms and conditions acceptable to Required
Lenders, with respect to not less than eighty-five percent (85%) of Agent's
forecasted production from the Credit Parties' PDP Reserves for a period of
three (3) years, and which shall provide Borrower with a minimum NYMEX weighted
average price of $4.70 per MMBTU.
32
(i) Representations and Warranties. The representations and warranties of
Borrower and each Guarantor under this Agreement and the other Loan Documents
shall be true and correct in all material respects as of such date, as if then
made (except to the extent that such representations and warranties related
solely to an earlier date).
(j) No Unmatured Default or Default; No Material Adverse Change. No
Unmatured Default or Default shall have occurred and be continuing. In the sole
discretion of the Lenders, no Material Adverse Change has occurred since May 31,
2003.
(k) Other Matters. All matters related to this Agreement, the other Loan
Documents, the Credit Parties, the Closing Documents and the Closing
Transactions shall be reasonably acceptable to each Lender, and each Credit
Party shall have delivered to Agent and each Lender such evidence as they shall
request to substantiate any matters related to this Agreement, the other Loan
Documents, the Credit Parties, the Closing Documents and the Closing
Transactions as Agent or any Lender shall reasonably request.
4.2. Certificate of Effectiveness. Upon satisfaction or waiver in writing
by Agent and each Lender of each of the conditions set forth in this Article IV,
Borrower and Agent shall execute the Certificate of Effectiveness. Each Lender
hereby authorizes Agent to execute the Certificate of Effectiveness on its
behalf and acknowledges and agrees that the execution of the Certificate of
Effectiveness by Agent shall be binding on each such Lender.
4.3. Post-Closing Deliveries. Borrower shall deliver, or cause to be
delivered, to Agent and its counsel, on or before May 31, 2004, opinions of
title or other evidence of title in form and substance reasonably acceptable to
Agent and its counsel regarding that portion of the Oil and Gas Properties
which, together with all such evidence of title previously received, results in
satisfactory title evidence having been delivered covering not less than the
Required Reserve Value.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower and each Guarantor represents and warrants to the Lenders that
on the date hereof (and after giving effect to the Closing Transactions):
5.1. Existence and Standing. Each of the Borrower and its Subsidiaries is a
corporation, partnership or limited liability company duly and properly
incorporated or organized, as the case may be, validly existing and (to the
extent such concept applies to such entity) in good standing under the laws of
its jurisdiction of incorporation or organization and has all requisite
authority to conduct its business in each jurisdiction wherein failure to have
such authorization may result in a Material Adverse Effect.
5.2. Authorization and Validity. The Borrower and each Subsidiary has the
power and authority and legal right to execute and deliver the Loan Documents to
which it is a party and to perform its obligations thereunder. The execution and
delivery by the Borrower and each Subsidiary of the Loan Documents to which it
is a party and the performance of its obligations thereunder have been duly
authorized by proper corporate or limited liability company proceedings, and the
Loan Documents to which the Borrower and each Subsidiary is a party constitute
legal, valid and binding obligations of the Borrower and such Subsidiary
enforceable against the Borrower and such Subsidiary in accordance with
33
their terms in all material respects, except as enforceability may be limited by
general principles of equity and bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
5.3. No Conflict; Government Consent. Neither the execution and delivery by
the Borrower or any Subsidiary of the Loan Documents to which it is a party, nor
the consummation of the transactions therein contemplated, nor compliance with
the provisions thereof will violate (i) any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on the Borrower or any Subsidiary
or (ii) the Borrower's or any Subsidiary's articles or certificate of
incorporation, partnership agreement, certificate of partnership, articles or
certificate of organization, by-laws, or operating or other management
agreement, as the case may be, or (iii) the provisions of any indenture,
instrument or agreement to which the Borrower or any Subsidiary is a party or is
subject, or by which it, or its Property, is bound, or conflict with or
constitute a default thereunder, or result in, or require, the creation or
imposition of any Lien in, of or on the Property of the Borrower or a Subsidiary
pursuant to the terms of any such indenture, instrument or agreement. No order,
consent, adjudication, approval, license, authorization, or validation of, or
filing, recording or registration with, or exemption by, or other action in
respect of any governmental or public body or authority, or any subdivision
thereof, which has not been obtained by the Borrower or such Subsidiary, is
required to be obtained by the Borrower or such Subsidiary in connection with
the execution and delivery of the Loan Documents, the borrowings under this
Agreement, the payment and performance by the Borrower of the Obligations or the
legality, validity, binding effect or enforceability of any of the Loan
Documents.
5.4. Financial Statements. The Current Financials heretofore delivered to
the Lenders were prepared in accordance with Agreement Accounting Principles in
effect on the date such statements were prepared and fairly present, in all
material respects, the consolidated financial condition and operations of QRC
and its Subsidiaries at such date and the consolidated results of their
operations for the period then ended.
5.5. Reserved.
5.6. Taxes. Borrower and each Subsidiary have filed all United States, as
applicable, federal tax returns and all other tax returns which are required to
be filed and have paid all taxes due pursuant to said returns or pursuant to any
assessment received by Borrower or any Subsidiary, except such taxes, if any, as
are being contested in good faith and as to which adequate reserves have been
provided in accordance with Agreement Accounting Principles and as to which no
Lien exists. No tax liens have been filed and no claims are being asserted with
respect to any such taxes. The charges, accruals and reserves on the books of
Borrower and each Subsidiary in respect of any taxes or other governmental
charges are adequate. If Borrower or any Subsidiary is a limited liability
company, each such limited liability company qualifies for partnership tax
treatment under United States federal tax law.
5.7. Litigation and Contingent Obligations. There is no litigation,
arbitration, governmental investigation, proceeding or inquiry pending or, to
the knowledge of any of their officers, threatened against or affecting Borrower
or any of its Subsidiaries which could reasonably be expected to have a Material
Adverse Effect or which seeks to prevent, enjoin or delay the making of any
Loans. Other than any liability incident to any litigation, arbitration or
proceeding which could not reasonably be expected to have a Material Adverse
Effect, neither Borrower nor any Subsidiary has any material Contingent
Obligations not permitted under this Agreement or provided for or disclosed in
Schedule 5.7.
5.8. Subsidiaries. Schedule 5.8 contains an accurate list of all
Subsidiaries of Borrower as of the date of this Agreement, setting forth their
respective jurisdictions of organization and the percentage of their respective
Capital Stock or other ownership interests owned by the Borrower or other
34
Subsidiaries. All of the issued and outstanding shares of Capital Stock or other
ownership interests of Borrower and such Subsidiaries have been (to the extent
such concepts are relevant with respect to such ownership interests) duly
authorized and issued and are fully paid and non-assessable.
5.9. ERISA. The Unfunded Liabilities of all Single Employer Plans do not in
the aggregate exceed $1,500,000. Neither Borrower nor any other member of the
Controlled Group has incurred, or is reasonably expected to incur, any
withdrawal liability to Multiemployer Plans in excess of $1,500,000 in the
aggregate. Each Plan complies in all material respects with all applicable
requirements of law and regulations, no Reportable Event has occurred with
respect to any Plan, neither Borrower nor any other member of the Controlled
Group has withdrawn from any Plan or initiated steps to do so, and no steps have
been taken to reorganize or terminate any Plan.
5.10. Accuracy of Information. No information, exhibit or report furnished
by Borrower or any Subsidiary to the Agent or to any Lender in writing in
connection with the negotiation of, or compliance with, the Loan Documents
contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statements contained therein not misleading as
of the date it was furnished. No representation is made as to the projections
other than that the projections are based on information that QRC or a Credit
Party, as applicable, believed to be accurate and were calculated in a manner
QRC, or a Credit Party, as applicable, believed to be accurate.
5.11. Material Agreements. Neither Borrower nor any Subsidiary is in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in (i) any agreement to which it is a party,
which default could reasonably be expected to have a Material Adverse Effect or
(ii) any agreement or instrument evidencing or governing Material Indebtedness.
5.12. Compliance With Laws. Borrower and each Subsidiary have complied with
all applicable statutes, rules, regulations, orders and restrictions of any
domestic or foreign government or any instrumentality or agency thereof having
jurisdiction over the conduct of their respective businesses or the ownership of
their respective Property except for any failure to comply with any of the
foregoing which could not reasonably be expected to have a Material Adverse
Effect.
5.13. Ownership of Properties. Except as set forth on Schedule 5.13, on the
date of this Agreement, Borrower and each Subsidiary will have good title, free
of all Liens other than those permitted by Section 7.16, to all of the material
Property and assets conveyed to Borrower and its Subsidiaries pursuant to the
Closing Transactions.
5.14. Oil and Gas Properties. Each Credit Party has good and defensible
title to all Oil and Gas Properties described in the most recent Reserve Report
provided to Agent, free and clear of all Liens except Liens permitted under
Section 7.16 and Immaterial Title Deficiencies. With the exception of Immaterial
Title Deficiencies, all such Oil and Gas Properties are valid, subsisting, and
in full force and effect, and all rentals, royalties, and other amounts due and
payable in respect thereof have been duly paid. Without regard to any consent or
non-consent provisions of any joint operating agreement covering any Credit
Party's Proved Reserves, and with the exception of Immaterial Title
Deficiencies, such Credit Party's share of (i) the costs for each Proved
Reserves described in the Reserve Report is not greater than the decimal
fraction set forth in the Reserve Report, before and after payout, as the case
may be, and described therein by the respective designations "working
interests," "WI," "gross working interest," "GWI," or similar terms, and (ii)
production from, allocated to, or attributed to each such Proved Reserves is not
less than the decimal fraction set forth in the Reserve Report, before and after
payout, as the case may be, and described therein by the designations "net
revenue interest," "NRI," or similar terms. Each well drilled in respect of the
Oil and Gas Properties including each PDP Reserves described in the
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Reserve Report (y) is capable of, and is presently, either producing
Hydrocarbons in commercially profitable quantities or in the process of being
worked over or enhanced, and Borrower is currently receiving payments for its
share of production, with no funds in respect of any thereof being presently
held in suspense, other than any such funds being held in suspense pending
delivery of appropriate division orders, and (z) has been drilled, bottomed,
completed, and operated in compliance with all applicable Laws, in each case,
except where any failure to comply would not have a Material Adverse Effect, and
no such well which is currently producing Hydrocarbons is subject to any penalty
in production by reason of such well having produced in excess of its allowable
production.
5.15. Plan Assets; Prohibited Transactions. Borrower is not an entity
deemed to hold "plan assets" within the meaning of 29 C.F.R. ss. 2510.3-101 of
an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject
to Title I of ERISA or any plan (within the meaning of Section 4975 of the
Code), and neither the execution of this Agreement nor the making of Loans
hereunder gives rise to a prohibited transaction within the meaning of Section
406 of ERISA or Section 4975 of the Code.
5.16. Environmental Matters. In the ordinary course of its business, the
officers of Borrower and each Subsidiary consider the effect of Environmental
Laws on the business of Borrower and its Subsidiaries, in the course of which
they identify and evaluate potential risks and liabilities accruing to Borrower
or any Subsidiary due to Environmental Laws. On the basis of this consideration,
the Borrower has concluded that Environmental Laws cannot reasonably be expected
to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary has
received any notice to the effect that its operations are not in material
compliance with any of the requirements of applicable Environmental Laws or are
the subject of any federal or state investigation evaluating whether any
remedial action is needed to respond to a release of any toxic or hazardous
waste or substance into the environment, which non-compliance or remedial action
could reasonably be expected to have a Material Adverse Effect.
5.17. Investment Company Act. Neither Borrower nor any Subsidiary is an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
5.18. Public Utility Holding Company Act. Neither Borrower nor any
Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
5.19. Post-Retirement Benefits. The present value of the expected cost of
post-retirement medical and insurance benefits payable by Borrower and its
Subsidiaries to its employees and former employees, as estimated by Borrower in
accordance with procedures and assumptions deemed reasonable by the Required
Lenders, does not exceed $1,500,000.
5.20. Insurance. The certificate signed by the President or Chief Financial
Officer of Borrower, that attests to the existence and adequacy of, and
summarizes, the property and casualty insurance program carried by Borrower and
its Subsidiaries with respect to itself and its Subsidiaries and that has been
furnished by the Borrower to the Agent and the Lenders, is complete and
accurate. This summary includes the insurer's or insurers' name(s), policy
number(s), expiration date(s), amount(s) of coverage, type(s) of coverage,
exclusion(s), and deductibles. This summary also includes similar information,
and describes any reserves, relating to any self-insurance program that is in
effect.
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5.21. Solvency.
(i) Immediately after the consummation of the transactions to occur on
the date hereof and immediately following the making of each Loan, if any,
made on the date hereof and after giving effect to the application of the
proceeds of such Loans, (a) the fair value of the assets of the Borrower
and its Subsidiaries on a consolidated basis, at a fair valuation, will
exceed the debts and liabilities, subordinated, contingent or otherwise, of
the Borrower and its Subsidiaries on a consolidated basis; (b) the present
fair saleable value of the Property of the Borrower and its Subsidiaries on
a consolidated basis will be greater than the amount that will be required
to pay the probable liability of the Borrower and its Subsidiaries on a
consolidated basis on their debts and other liabilities, subordinated,
contingent or otherwise, as such debts and other liabilities become
absolute and matured; (c) the Borrower and its Subsidiaries on a
consolidated basis will be able to pay their debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (d) the Borrower and its Subsidiaries on a
consolidated basis will not have unreasonably small capital with which to
conduct the businesses in which they are engaged as such businesses are now
conducted and are proposed to be conducted after the date hereof.
(ii) The Borrower does not intend to, or to permit any Subsidiary to,
and does not believe that it or any Subsidiary will, incur debts beyond its
ability to pay such debts as they mature, taking into account the timing of
and amounts of cash to be received by it or any such Subsidiary and the
timing of the amounts of cash to be payable on or in respect of its
Indebtedness or the Indebtedness of any such Subsidiary.
ARTICLE VI
COLLATERAL AND GUARANTIES
6.1. Security.
(a) The Obligations shall be secured by first and prior Liens (subject
only to the Liens permitted under Section 7.16) covering and encumbering
(i) one hundred percent (100%) of the Recognized Value Properties, and (ii)
all of the issued and outstanding Capital Stock owned by Cherokee Partners
and each member of the Quest Group (other than QRC), Borrower and each
Guarantor in Borrower and each Guarantor. On the Closing Date, Borrower
shall deliver to Collateral Agent for the ratable benefit of each Lender,
the Mortgages in form and substance acceptable to Agent and duly executed
by Borrower, together with such other assignments, conveyances, amendments,
agreements and other writings, including, without limitation, UCC-1
financing statements (each duly authorized and executed, as applicable) as
Agent shall deem necessary or appropriate to grant, evidence and perfect
first and prior Liens (subject only to the Liens permitted under Section
7.16) in the Recognized Value Properties and other interests of each Credit
Party required by this Section 6.1(a). Borrower hereby authorizes
Collateral Agent, and its agents, successors and assigns, to file any and
all necessary financing statements under the Uniform Commercial Code,
assignments or continuation statements as necessary from time to time (in
Agent's discretion) to perfect (or continue perfection of) the Liens
granted pursuant to the Loan Documents.
(b) From time to time after the Closing Date and at such times as
Agent or Required Lenders shall request (including, without limitation, in
connection with any title and curative
37
review and work performed after the Closing Date in connection with the Closing
Transactions), Borrower and each Guarantor shall execute and deliver to
Collateral Agent, for the ratable benefit of each Lender, Mortgages in form and
substance acceptable to Agent and duly executed by Borrower and any such
Guarantor (as applicable) together with such other assignments, conveyances,
amendments, agreements and other writings, including, without limitation, UCC-1
financing statements (each duly authorized and executed, as applicable) as Agent
shall deem necessary or appropriate to grant, evidence and perfect the Liens
required by Section 6.1(a) preceding with respect to any Oil and Gas Properties
acquired by Borrower and each Guarantor subsequent to the last date on which
Borrower or any such Guarantor was required to execute and deliver Mortgages
pursuant to this Section 6.1(b) or which, for any other reason are not the
subject of valid, enforceable, perfected first priority Liens (subject only to
Liens permitted under Section 7.16) in favor of Collateral Agent for the ratable
benefit of Lenders.
(c) At any time Borrower or any of its Subsidiaries are required to
execute and deliver Mortgages to Collateral Agent pursuant to this Section
6.1 (other than Mortgages to be delivered on the Closing Date, which shall
only require evidence of title to verify Borrower's title to the Initial
Title Required Reserve Value of the Proved Reserves which are subject to
such Mortgages to be delivered on the Closing Date), Borrower shall also
deliver to Agent such opinions of counsel (including, if so requested,
title opinions, and in each case addressed to Agent) and other evidence of
title as Agent shall deem necessary or appropriate to verify (i) Borrower's
or such Guarantor's title to the Required Reserve Value of the PDP Reserves
of Borrower and each Guarantor which are subject to such Mortgages, and
(ii) the validity, perfection and priority of the Liens created by such
Mortgages and such other matters regarding such Mortgages as Agent shall
reasonably request.
(d) To the extent required or contemplated by the terms of Section
6.1(a)(ii) or Section 7.15, Borrower shall, and shall cause Cherokee
Partners and each member of the Quest Group (other than QRC) or any
Indirect Subsidiary (as applicable), to execute and deliver to Collateral
Agent a Pledge Agreement, together with (i) all certificates (or other
evidence acceptable to Agent) evidencing the issued and outstanding Capital
Stock of Borrower and any such Guarantor of every class owned by Cherokee
Partners and each such member of the Quest Group (other than QRC), or
Borrower or such Indirect Subsidiary (as applicable) which shall be duly
endorsed or accompanied by stock powers executed in blank (as applicable),
and (ii) such UCC-1 financing statements as Agent shall deem necessary or
appropriate to grant, evidence and perfect the Liens required by Section
6.1(a) in the issued and outstanding Capital of Borrower and each such
Guarantor.
6.2. Guarantees. Payment and performance of the Obligations shall be fully
guaranteed by each Subsidiary pursuant to a Guaranty, and Borrower shall cause
any such Subsidiary to execute and deliver to Agent and Lenders such Guaranty.
ARTICLE VII
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
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7.1. Financial and Other Reporting. Borrower will maintain, for itself and
cause each Subsidiary to maintain for itself, a system of accounting established
and administered in accordance with Agreement Accounting Principles, and furnish
to the Agent:
(i) Within 90 days after the close of each of its Fiscal Years, an
unqualified (except for qualifications relating to changes in accounting
principles or practices reflecting changes in Agreement Accounting
Principles and required or approved by Borrower's independent certified
public accountants) audit report certified by independent certified public
accountants acceptable to the Agent, prepared in accordance with Agreement
Accounting Principles on a consolidated basis for Borrower and its
Subsidiaries, including a consolidated balance sheet as of the end of such
period, related profit and loss and reconciliation of surplus statements,
and a statement of cash flows and beginning with Fiscal Year 2005 setting
forth in each case in comparative form the figures for the previous Fiscal
Year, accompanied by any management letter prepared by said accountants.
(ii) Within 45 days after the close of each of the first three (3)
Fiscal Quarters of each Fiscal Year of Borrower, for Borrower and its
Subsidiaries, consolidated unaudited balance sheets as at the close of each
such period and consolidated profit and loss and reconciliation of surplus
statements and a statement of cash flows for such Fiscal Quarter and for
the period from the beginning of such Fiscal Year to the end of such Fiscal
Quarter, all certified by its Chief Financial Officer, and beginning with
Fiscal Year 2005 setting forth in each case in comparative form the figures
for the previous Fiscal Year, except for footnotes and year-end
adjustments.
(iii) As soon as delivered, copies of any Reserve Report delivered to
the Senior Revolving Agent or Banks pursuant to the terms of the Senior
Revolving Credit Agreement. As soon as available and in any event on or
before February 15 and August 31 of each calendar year, beginning August
31, 2004, a Qualified Reserve Report with respect to the Oil and Gas
Properties of Borrower and its Subsidiaries prepared as of the immediately
preceding November 30 and May 31, respectively, and on the dates and times
as required under Section 7.22.2 with respect to any proposed acquisition
under clause (iii) of Section 7.15 or with respect to any proposed
disposition under clause (ii) of Section 7.14.
(iv) Together with the financial statements required under clauses (i)
and (ii) of Section 7.1, and on October 1 and April 1 of each year (other
than April 1, 2004) with respect to the financial covenant set forth in
Section 7.22.2, a compliance certificate in substantially the form of
Exhibit B signed by an Authorized Officer of Borrower showing the
calculations necessary to determine compliance with this Agreement (other
than the financial covenant set forth in Section 7.22.2 which compliance is
determined on October 1, and April 1 of each year (other than April 1,
2004)) and stating that, to the knowledge of the Authorized Officers, no
Default or Unmatured Default exists, or if any Default or Unmatured Default
exists, stating the nature and status thereof.
(v) As soon as possible and in any event within 10 days after receipt
by the Borrower or any Subsidiary, a copy of (a) any notice or claim to the
effect that Borrower or any Subsidiary is or may be liable to any Person as
a result of the release by Borrower, any Subsidiary, or any other Person of
any toxic or hazardous waste or substance into the environment, and (b) any
notice alleging any violation of any national, provincial or local
environmental, health or safety law or regulation by Borrower or any
Subsidiary, which, in either case, could reasonably be expected to have a
Material Adverse Effect.
39
(vi) Within 270 days after the close of each Fiscal Year, a statement
of the Unfunded Liabilities of each Single Employer Plan (if any),
certified as correct by an actuary enrolled under ERISA.
(vii) As soon as possible and in any event within 10 days after
Borrower knows that any Reportable Event has occurred with respect to any
Plan, a statement, signed by the chief financial officer of Borrower,
describing said Reportable Event and the action which Borrower proposes to
take with respect thereto.
(viii) No later than sixty (60) days after the end of each month,
commencing with January, 2004, (a) lease operating statements setting forth
production volumes, revenues, expenses, and cash flow and product prices
for all oil and gas properties owned by Borrower for such month, each such
statement to be accompanied by a management discussion and analysis of
major variances from the preceding monthly report delivered hereunder, and
(b) drilling reports setting forth (1) a list of new xxxxx drilled during
such month, (2) a list of xxxxx requiring pipeline connections, and the
status of such connections, and (3) gas and water production on a per diem
basis from each well, provided, that, with respect to the initial
statements and reports for the month of March 2004 (the "March Operating
Statement"), in addition to the information set forth in clauses (a) and
(b) of this clause (ix) of Section 7.1, the March Operating Statement shall
include a summary of recent drilling activity with respect to the PDP
Reserves and such other information as Agent or any Lender may reasonably
request.
(ix) At Agent's request, copies of any financial or other report or
notice delivered to the Senior Revolving Agent or the Banks pursuant to the
Senior Revolving Credit Agreement not otherwise delivered to the Lenders
pursuant to this Section 7.1.
(x) Promptly notify the Agent of the remediation of any defects in the
Contributed Properties, including obtaining any consents not obtained as of
the Closing Date.
(xi) Such other information (including non-financial information) as
the Agent may from time to time reasonably request.
If any information which is required to be furnished to the Agent under
this Section 7.1 is required by law or regulation to be filed with a government
body on an earlier date, then the information required hereunder shall be
furnished to the Agent at such earlier date.
7.2. Use of Proceeds. The Borrower will use the proceeds of the initial
Advances for (i) refinancing certain indebtedness of QRC assumed by Borrower or
secured by Property contributed to Borrower, including the Existing
Indebtedness, (ii) funding the Devon Acquisition and (iii) working capital and
other general corporate purposes.
7.3. Notice of Default. Immediately upon any Authorized Officer of any
Credit Party becoming aware of such Default or Unmatured Default or any such
development, the Borrower and each Guarantor will give prompt notice in writing
to the Agent and Lenders of the occurrence of any Default or Unmatured Default
and of any other development, financial or otherwise, which could reasonably be
expected to have a Material Adverse Effect.
7.4. Conduct of Business; Fiscal Year. Borrower will, and will cause each
Subsidiary to, carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as it is presently
conducted and do all things necessary to remain duly incorporated or
40
organized, validly existing and (to the extent such concept applies to such
entity) in good standing as a domestic corporation, partnership or limited
liability company in its jurisdiction of incorporation or organization, as the
case may be, and maintain all requisite authority to conduct its business in
each jurisdiction in which its business is conducted except wherein failure to
maintain such authority would not reasonably be expected to have a Material
Adverse Effect. Borrower shall not, nor shall it permit any of its Subsidiaries
to change its Fiscal Year-end from May 31.
7.5. Taxes. Borrower will, and will cause each Subsidiary to, timely file
complete and correct national and applicable foreign, provincial, state and
local tax returns required by law and pay when due all taxes, assessments and
governmental charges and levies upon it or its income, profits or Property,
except wherein failure to pay such taxes, assessments and governmental charges
could not reasonably be expected to cause a Material Adverse Effect, those which
are being contested in good faith by appropriate proceedings and with respect to
which adequate reserves have been set aside in accordance with Agreement
Accounting Principles.
7.6. Insurance. Borrower will, and will cause each other Credit Party to,
at all times maintain or cause to be maintained insurance covering such risks as
are customarily carried by business similarly situated, including, without
limitation, the following: (a) workmen's compensation insurance (to the extent
required and applicable); (b) employer's liability insurance (to the extent
required and applicable); (c) comprehensive general public liability and
property damage insurance (d) insurance against losses customarily insured and
(e) comprehensive automobile liability insurance.
7.7. Compliance with Laws. Borrower will, and will cause each Subsidiary
to, comply with all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject including, without
limitation, all Environmental Laws except wherein failure to comply with such
Environmental Laws could not reasonably be expected to have a Material Adverse
Effect.
7.8. Maintenance of Properties. Borrower will, and will cause each
Subsidiary to, do all things necessary to maintain, preserve, protect and keep
its Property in good repair, working order and condition, and make all necessary
and proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times. In addition,
Borrower will and will cause each Subsidiary to (i) take or cause to be taken
whatever actions are necessary or desirable to prevent an event or condition of
default by Borrower or any Guarantor under the provisions of any gas purchase or
sales contract or any other contract, agreement or lease comprising a part of
the Oil and Gas Properties of such Borrower or Guarantor which default could
reasonably be expected to result in a Material Adverse Effect; and (ii) furnish
Agent upon request evidence reasonably satisfactory to Agent that there are no
Liens, claims or encumbrances on the Oil and Gas Properties of Borrower or any
Guarantor, except Liens permitted under Section 7.16.
7.9. Inspection. Borrower will, and will cause each Subsidiary to, permit
the Agent and the Lenders, by their respective representatives and agents, to
inspect any of the Property, books and financial records of Borrower and each
Subsidiary, to examine and make copies of the books of accounts and other
financial records of Borrower and each Subsidiary, and to discuss the affairs,
finances and accounts of Borrower and each Subsidiary with, and to be advised as
to the same by, their respective officers upon advance notice at such reasonable
times and intervals as the Agent or any Lender may reasonably designate.
7.10. Dividends. Borrower will not, nor will it permit any Subsidiary to,
declare or pay any dividends or make any distributions on its Capital Stock
(other than dividends payable in its own common
00
xxxxx)xx xxxxxx, xxxxxxxxxx or otherwise acquire or retire any of its Capital
Stock at any time outstanding, except,
(i) any Subsidiary of the Borrower may declare and pay dividends or
make distributions to the Borrower or to a Wholly-Owned Subsidiary of the
Borrower; and
(ii) so long as Borrower is a limited liability company for tax
purposes, it may make cash tax distributions, to be designated as such, to
its members, no more frequently than quarterly and within twenty (20) days
of each quarterly estimated payment date for individuals or shortly
thereafter if computations are not complete at or near the quarterly
estimated payment dates, that are used by such Persons to pay federal,
state and local income taxes (or estimates thereof) then due and owing with
respect to the net income of Borrower (calculated using the highest
federal, state and local effective marginal income tax rates applicable to
an individual) and taking into account losses of Borrower from prior
periods; provided no Default or Unmatured Default exists at the time of any
such dividend or distribution or would occur as a result thereof.
7.11. Indebtedness. Borrower will not, nor will it permit any Subsidiary
to, create, incur or suffer to exist any Indebtedness, except:
(i) The Loans and the Guaranties.
(ii) Indebtedness existing on the date hereof and described in
Schedule 5.14.
(iii) Indebtedness arising under Rate Management Transactions
permitted under clause (v) of Section 7.15.
(iv) Indebtedness of Borrower and any Guarantor arising under the
Senior Revolving Credit Documents.
(v) Indebtedness of Borrower and any of its Subsidiaries arising under
the Subordinate Debt Documents.
(vi) Other unsecured Indebtedness of Borrower and its Subsidiaries
that together with the Indebtedness permitted under clause (ii) of this
Section 7.11 does not exceed $2,500,000 in outstanding principal amount in
the aggregate at any time.
(vii) Indebtedness arising under renewals or extensions of (but not
increases in the principal amount) of the Indebtedness described in any of
the foregoing clauses (iv) through (vi).
7.12. Disqualified Stock. The Borrower will not, nor will it permit any
Subsidiary to, issue any Disqualified Stock.
7.13. Merger. Borrower will not, nor will it permit any Subsidiary of
Borrower to merge or consolidate with or into any other Person, except that so
long as no Default or Unmatured Default has occurred and is continuing or would
be caused thereby, any Subsidiary may merge into the Borrower or a Wholly-Owned
Subsidiary.
7.14. Sale of Assets. Borrower will not, nor will it permit any Subsidiary
to, lease, sell or otherwise dispose of its Property to any other Person,
except:
42
(i) Sales of Hydrocarbons in the ordinary course of business.
(ii) Provided no Default or Unmatured Default exists or would result
therefrom, the sale, lease, transfer, abandonment, exchange or other
disposition of other assets; provided, that (1) Borrower shall provide
Agent with not less than ten (10) Business Days notice of such sale, lease,
transfer, abandonment, exchange or other disposition pursuant to this
clause (ii), and (2) the aggregate value (which, in the case of assets
consisting of Oil and Gas Properties, shall be the Recognized Value of such
Oil and Gas Properties, and in the case of any exchange, shall be the net
Recognized Value realized or resulting from such exchange) of all assets
sold, leased, transferred, abandoned, exchanged, reassigned or otherwise
disposed of pursuant to this clause (ii) in any period between the dates
for the delivery of the Qualified Reserve Report required under clause
(iii) of Section 7.1 on February 15 and August 31 of each calendar year
shall not exceed five percent (5%) of the Recognized Value then in effect
provided, further that upon the consummation of such lease, sale or other
disposition, Borrower or such Subsidiary applies the entire net proceeds,
promptly upon the receipt thereof, to the payment of the Indebtedness
evidenced by the Senior Revolving Credit Agreement as a permanent reduction
of such Indebtedness if such net proceeds are required to be applied to
term loan Indebtedness pursuant to the terms of the Senior Revolving Credit
Agreement or to Lenders to repay the Loans if all of the Indebtedness
evidenced by the Senior Revolving Credit Agreement has been paid in full
and all financing commitments thereunder have been terminated. In no event
will Borrower or any other Credit Party sell, transfer or dispose of any
Capital Stock in any Guarantor nor will any Credit Party issue or sell any
Capital Stock or any option, warrant or other right to acquire such Capital
Stock or security convertible into such Capital Stock to any Person other
than the Credit Party which is the direct parent of such issuer on the
Closing Date or in the case of a Subsidiary created or acquired after the
Closing Date in accordance with this Agreement any issuance of Capital
Stock on the date of, and in connection with, its acquisition or creation.
(iii) Dispositions of Oil and Gas Properties permitted under Section
7.23 and equipment and related items that are obsolete or no longer useful
in the Credit Parties' business.
7.15. Investments and Acquisitions. Borrower will not, nor will it permit
any Subsidiary to, make or suffer to exist any Investments (including without
limitation, loans and advances to, and other Investments in, Subsidiaries), or
commitments therefor, or to create any Subsidiary or to become or remain a
partner in any partnership or joint venture, or to make any Acquisition, except:
(i) Cash Equivalent Investments.
(ii) Existing Investments in Bluestem (including the Investments
contemplated by the Closing Transactions) and other Investments in
existence on the date hereof and described in Schedule 5.8.
(iii) So long as no Default or Unmatured Default has occurred and is
continuing or would be caused thereby, Investments consisting of the
Acquisition of Oil and Gas Properties; provided that not less than ten (10)
Business Days prior to the date of any such Acquisition or series of
Acquisitions in which the aggregate purchase price exceeds $5,000,000,
Borrower delivers to Agent (a) a certificate executed by the Chief
Executive Officer or the Chief Financial Officer of Borrower demonstrating,
in reasonable detail, that after giving effect to such Acquisition or
series of Acquisitions, Borrower will be in compliance with Section 7.22.2
as of the date of such Acquisition or series of Acquisitions and (b) a
Qualified Reserve Report with respect to the Target Properties.
43
(iv) Investments by any Credit Party in a Wholly-Owned Subsidiary of
Borrower that (a) has provided a Guaranty, (b) has complied with Section
6.1 with respect to any Oil and Gas Properties of such Subsidiary (or to be
contributed, transferred or conveyed to such Subsidiary) and (c) the
Capital Stock of which has been pledged to Collateral Agent pursuant to a
pledge agreement containing terms and conditions satisfactory to the Agent
and Required Lenders.
(v) Investments consisting of the Rate Management Transactions
required pursuant to clause (h) of Section 4.1 and other Rate Management
Transactions entered into with Approved Counterparties in the ordinary
course of business and not for speculative purposes; provided that such
other Rate Management Transactions (a) would not cause the amount of
Hydrocarbons which are the subject of Rate Management Transactions in
existence at such time to exceed seventy-five percent (75%) of Borrower's
"forecasted production from Proved Reserves" (as defined below) during any
applicable calendar year, as measured from the current date (a "measurement
date"), which Rate Management ------------------ Transactions shall not
have a tenor of greater than four (4) years, (b) together with any other
Rate Management Transactions then in effect for the purpose of hedging
Borrower's interest rate exposure would cause the notional amount of all
such Rate Management Transactions then in effect for such purpose to exceed
one hundred percent (100%) of the total Consolidated Funded Debt of
Borrower projected to be outstanding for any period covered by such Rate
Management Transaction, or (c) is for the purpose of hedging the foreign
currency risk associated with the Credit Parties' operations, if any. As
used in this clause (v) of Section 7.15, "forecasted production from Proved
Reserves" means the forecasted production for oil and gas for the
applicable calendar year as reflected in the most recent Qualified Reserve
Report delivered to Agent pursuant to clause (iii) of Section 7.1, after
giving effect to any pro forma adjustments for the consummation of any
acquisitions or dispositions between the effective date of such Qualified
Reserve Report and the measurement date.
(vi) Investments with Persons not an Affiliate of a Credit Party that
are (a) customary in the oil and gas business, (b) made in the ordinary
course of such Credit Party's business, and (c) made in the form of or
pursuant to operating agreements, farm-in agreements, farm-out agreements,
development agreements, unitization agreements, joint bidding agreements,
services contracts and other similar agreements.
(vii) Investments consisting of demand deposit accounts at commercial
banks established and maintained in the ordinary course of business.
(viii)Other Investments not otherwise described in clauses (i) through
(vii) above; provided that, the aggregate amount of all other Investments
made pursuant to this clause (v) outstanding at any time shall not exceed
$1,500,000 (measured on a cost basis).
7.16. Liens. Borrower will not, nor will it permit any Subsidiary to,
create, incur, or suffer to exist any Lien in, of or on the Property of Borrower
or any Subsidiary, except:
(i) Liens for taxes, assessments or governmental charges or levies on
its Property if the same shall not at the time be delinquent or thereafter
can be paid without penalty, or are being contested in good faith and by
appropriate proceedings and for which adequate reserves in accordance with
Agreement Accounting Principles shall have been set aside on its books.
(ii) Liens imposed by law, such as carriers', warehousemen's,
mechanics' and landlords' liens and other similar liens arising in the
ordinary course of business which secure payment of obligations not more
than 60 days past due or which are being contested in good faith
44
by appropriate proceedings and for which adequate reserves shall have been
set aside on its books.
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation.
(iv) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do not
in any material way affect the marketability of the same or interfere with
the use thereof in the business of the Borrower or any Guarantor.
(v) Liens existing on the date hereof and described in Schedule 5.14.
(vi) Minor defects in title which do not secure the payment of money
and otherwise have no material adverse effect on the value or the operation
of the subject property, and for the purposes of this Agreement, a minor
defect in title shall include, but not be limited to, easements,
rights-of-way, servitudes, permits, surface leases and other similar rights
in respect of surface operations, and easements for pipelines, streets,
alleys, highways, telephone lines, power lines, railways and other
easements and rights-of-way, on, over or in respect of any of the
properties of any Credit Party that are customarily granted in the oil and
gas industry.
(vii) Inchoate statutory or operators' Liens securing obligations for
labor, services, materials and supplies furnished to Mineral Interests
which are not delinquent (except to the extent permitted by Section 8.6 of
the Senior Revolving Credit Agreement.
(viii) Lease burdens payable to third parties which are deducted in
the calculation of discounted present value in the Reserve Reports
including, without limitation, any royalty, overriding royalty, net profits
interest, production payment, carried interest or reversionary working
interests.
(ix) Liens, charges and encumbrances upon Borrower's assets, other
than Oil and Gas Properties included in its Proved Reserves, which in the
aggregate, do not have a value in excess of $500,000.
(x) Liens securing the Indebtedness permitted under clause (i) of
Section 7.11.
(xi) Liens securing the Indebtedness permitted under clause (ii) of
Section 7.11.
(xii) Liens securing the Indebtedness permitted under clause (iv) of
Section 7.11.
(xiii) Liens securing the Obligations.
(xiv) Until May 31, 2004, (a) Permitted Devon Title Defects and (b)
Permitted Contributed Property Defects.
7.17. Affiliates. Borrower will not, and will not permit any Subsidiary to,
enter into any transaction (including, without limitation, the purchase or sale
of any Property or service) with, or make any payment or transfer to, any
Affiliate except in the ordinary course of business and pursuant to the
reasonable requirements of Borrower's or such Subsidiary's business and upon
fair and reasonable terms
45
no less favorable to Borrower or such Subsidiary than Borrower or such
Subsidiary would obtain in a comparable arms-length transaction. Notwithstanding
the foregoing, Borrower may (a) make payments to QES pursuant to the QES
Management Agreement to pay or reimburse QES for general and administrative
services provided thereunder; provided that in no event will such payments for
any Fiscal Year exceed, in the aggregate, the sum of (i) $3,500,000, plus (ii)
QES's actual costs associated with field and shop employees and their first line
superiors that perform services under the QES Management Agreement, to the
extent such costs are accounted for as lease operating expenses and (b) enter
into the Subordinate Debt Documents.
7.18. Amendments to Certain Agreements and Payment Restrictions. Borrower
will not, and will not permit any Subsidiary to terminate the Senior Revolving
Credit Agreement or to amend the Senior Revolving Credit Agreement if the effect
of any such amendment is to (i) increase the maximum principal amount of the
commitments under the Senior Revolving Credit Agreement to an amount in excess
of $200,000,000, or (ii) increase the applicable margin with respect to the
interest rate on any of the Indebtedness evidenced by the Senior Revolving
Credit Agreement by more than 2.00% per annum (excluding any increase resulting
from the application of any default rate of interest). The Borrower will not
make any amendment or modification to the QES Management Agreement or its
Operating Agreement (other than minor modifications to reflect day-to-day
personnel and operational requirements). The Borrower will not, and will not
permit any Subsidiary to, make any amendment or modification to any of the
Subordinate Debt Documents, or, except for interest paid-in-kind in accordance
with the terms of the Subordinate Notes, directly or indirectly voluntarily pay,
prepay, defease or in substance pay, prepay, defease, purchase, redeem, retire
or otherwise acquire, any Indebtedness evidenced by the Subordinate Debt
Documents.
7.19. Sale and Leaseback Transactions and other Off-Balance Sheet
Liabilities. Borrower will not, nor will it permit any Subsidiary to, enter into
or suffer to exist any (i) Sale and Leaseback Transaction or (ii) any other
transaction pursuant to which it incurs or has incurred Off-Balance Sheet
Liabilities, except for Rate Management Transactions permitted under the terms
of Section 7.11 and Advance Payment Contracts; provided, that the aggregate
amount of all Advance Payments received by any Credit Party that have not been
satisfied by delivery of production at any time does not exceed, in the
aggregate $750,000.
7.20. Letters of Credit. Borrower will not, nor will it permit any
Subsidiary to, apply for or become liable upon or in respect of any Letter of
Credit, except Letters of Credit issued pursuant to the Senior Revolving Credit
Agreement in an aggregate face amount outstanding at any time not to exceed
$5,000,000.
7.21. Financial Contracts. Borrower will not, nor will it permit any
Subsidiary to, enter into or remain liable upon any Financial Contract, except
Rate Management Transactions permitted under Section 7.11.
7.22. Financial Covenants.
7.22.1. Leverage Ratio. Borrower will not permit its ratio, determined
as of the end of each of Borrower's Fiscal Quarters beginning with the
Fiscal Quarter ending on May 31, 2004, of (i) Consolidated Funded Debt (for
each Rolling Period ending on such date) to (ii) Consolidated EBITDA (for
each Rolling Period ending on such date, or Annualized Consolidated EBITDA
for such Rolling Period in the case of a Rolling Period ending on or prior
to November 30, 2004) to be greater than 4.0 to 1.0 for each Fiscal Quarter
ending on or prior to August 31, 2004, and 3.5 to 1.0 for each Fiscal
Quarter ending thereafter.
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7.22.2. Proved Reserve Present Value Ratio. Borrower will not permit
its ratio, determined on October 1 and April 1 of each calendar year, but
as of the immediately preceding May 31 and November 30, respectively
(beginning October 1, 2004) and on the dates required under clause (ii) of
Section 7.14 and clause (iii) of Section 7.15, of (i) Proved Reserves
Present Value to (ii) Consolidated Funded Debt to be less than 1.50 to
1.00. Borrower's compliance with the forgoing ratio on October 1 and April
1 of each calendar year but as of the immediately preceding May 31 and
November 30, respectively, shall be determined based on the Qualified
Reserve Report required to be delivered to Agent pursuant to clause (iii)
of Section 7.1 and prepared as of such dates and Borrower's Consolidated
Funded Debt as set forth in the financial statements required to be
delivered pursuant to clauses (i) and (ii) of Section 7.1 with respect to
the Fiscal Year or Fiscal Quarters ending as of such dates, respectively
(it being acknowledged that Borrower shall not be required to demonstrate
compliance with the foregoing ratio as of May 31 and November 30 of each
year with the delivery of the financial statements for the Fiscal Year and
Fiscal Quarter ending as of such date, respectively, but rather with the
delivery of a compliance certificate on October 1 and April 1 of each
year(other than April 1, 2004)). At all other times Borrower's compliance
with the foregoing ratio shall be determined based on the most recent
Qualified Reserve Report delivered to Agent pursuant to clause (iii) of
Section 7.1 and the Qualified Reserve Report delivered by Borrower to Agent
with respect to the Target Properties to be acquired pursuant to clause
(iii) of Section 7.15 or the Oil and Gas Properties to be sold, leased,
transferred, abandoned, exchanged or otherwise disposed of pursuant to
clause (ii) of Section 7.14, as the case may be, and Consolidated Funded
Debt as set forth in the most recent financial statement delivered to Agent
pursuant to clause (i) or (ii) of Section 7.1 as adjusted on a pro forma
basis (such calculation to be acceptable to, and approved by, Agent) to
give effect to such proposed acquisition or disposition.
7.23. Operation of Oil and Gas Properties.
(a) Borrower will, and will cause each other Credit Party to,
maintain, develop and operate its Oil & Gas Properties in a good and
workmanlike manner, and observe and comply with all of the terms and
provisions, express or implied, of all oil and gas leases relating to such
Oil & Gas Properties so long as such Oil & Gas Properties are capable of
producing Hydrocarbons and accompanying elements in paying quantities,
except where such failure to comply could not reasonably be expected to
have a Material Adverse Effect.
(b) Borrower will, and will cause each other Credit Party to, comply
in all respects with all contracts and agreements applicable to or relating
to its Oil & Gas Properties or the production and sale of Hydrocarbons and
accompanying elements therefrom, except to the extent a failure to so
comply could not reasonably be expected to have a Material Adverse Effect.
(c) Borrower will, and will cause each other Credit Party to, at all times
maintain, preserve and keep all operating equipment used with respect to its Oil
& Gas Properties in proper repair, working order and condition, and make all
necessary or appropriate repairs, renewals, replacements, additions and
improvements thereto so that the efficiency of such operating equipment shall at
all times be properly preserved and maintained, except where such failure to
comply could not reasonably be expected to have a Material Adverse Effect;
provided, further that, no item of operating equipment need be so repaired,
renewed, replaced, added to or improved, if Borrower shall in good faith
determine that such action is not necessary or desirable for the continued
efficient and profitable operation of the business of such Credit Party.
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7.24. Title Data. In addition to the title information required by Section
4.1(b) and Section 4.3, Borrower shall, upon the request of Required Lenders,
cause to be delivered to Agent such title opinions and other information
regarding title to the Oil and Gas Properties owned by Borrower or any other
Credit Party as are appropriate to determine the status thereof; provided,
however, that, Lenders may not require Borrower to furnish title opinions
(except pursuant to Section 4.1(b) and Section 4.3) unless i) a Default shall
have occurred and be continuing, or ii) Required Lenders have reason to believe
that there is a defect in or encumbrance upon Borrower's title to such Oil and
Gas Properties that is not a permitted under Section 7.16 or an Immaterial Title
Deficiencies.
7.25. Rate Management Transactions. Once confirmed, no Rate Management
Transaction may be amended or modified, or cancelled without the prior written
consent of Required Lenders. Borrower shall collaterally assign all of its
right, title and interest in each agreement or contract evidencing a Rate
Management Transaction to the Collateral Agent and shall, if requested by the
Agent or the Required Lenders, cause each such agreement or contract (1) to
expressly permit such assignment and (2) upon the occurrence of any default or
event of default under such agreement or contract, (a) to permit the Lenders to
cure such default or event of default and assume the obligations of Borrower
under such agreement or contract and (b) to prohibit the termination of such
agreement or contract by the counterparty thereto if the Lenders assume the
obligations of Borrower under such agreement or contract and the Lenders take
the actions required with the foregoing clause (a). On or about April 1 or
October 1 of each year, Borrower shall provide to Agent and each Lender copies
of all agreements, documents and instruments evidencing the Rate Management
Transactions not previously delivered to the Agent and Lenders, certified as
true and correct by an executive officer of Borrower, and such other information
regarding such Rate Management Transactions as the Agent and Lenders may
reasonably request and the officers and employees of Borrower responsible for
managing the Rate Management Transactions shall be made available to the Agent
and Lenders to discuss, analyze, review and evaluate such Rate Management
Transactions.
ARTICLE VIII
DEFAULTS
The occurrence of any one or more of the following events shall constitute
a Default:
8.1. Representations and Warranties. Any representation or warranty made or
deemed made by or on behalf of Borrower or any of its Subsidiaries to the
Lenders or the Agent under or in connection with this Agreement, any Loan, or
any certificate or information delivered in connection with this Agreement or
any other Loan Document shall be materially false, incorrect or misleading on
the date as of which made.
8.2. Payments. Nonpayment of principal of any Loan when due, or nonpayment
of interest upon any Loan or of any commitment fee or other obligations under
any of the Loan Documents within three (3) Business Days after the same becomes
due.
8.3. Certain Covenants. The breach by Borrower or any of its Subsidiaries
of any of the terms or provisions of Section 7.2, 7.6, 7.9, 7.10, 7.11, 7.12,
7.13, 7.14, 7.15, 7.16, 7.17, 7.18, 7.19, 7.20, 7.21, 7.22, 7.24 or 7.25.
8.4. Other Terms and Provisions. The breach by Borrower or any of its
Subsidiaries (other than a breach which constitutes a Default under another
Section of this Article VIII) of any of the terms or
48
provisions of this Agreement which is not remedied within thirty (30) days after
written notice from the Agent or any Lender.
8.5. Other Material Indebtedness. Failure of Borrower or any of its
Subsidiaries to pay when due any Material Indebtedness; or the default by
Borrower or any of its Subsidiaries in the performance (beyond the applicable
grace period with respect thereto, if any) of any term, provision or condition
contained in any Material Indebtedness Agreement, or any other event shall occur
or condition exist, the effect of which default, event or condition is to cause,
or to permit the holder(s) of such Material Indebtedness or the lender(s) under
any Material Indebtedness Agreement to cause, such Material Indebtedness to
become due prior to its stated maturity or any commitment to lend under any
Material Indebtedness Agreement to be terminated prior to its stated expiration
date; or any Material Indebtedness of Borrower or any Subsidiary shall be
declared to be due and payable or required to be prepaid or repurchased (other
than by a regularly scheduled payment) prior to the stated maturity thereof; or
Borrower or any Subsidiary shall not pay, or admit in writing its inability to
pay, its debts generally as they become due; provided that, with respect to any
Default arising under this Section 8.5 solely as a result of a default by
Borrower or any Subsidiary in the payment or performance of any obligation,
term, provision or condition under the Senior Revolving Credit Agreement, such
Default shall be deemed waived in the event such default under the Senior
Revolving Credit Agreement is waived in accordance with the terms thereof.
8.6. Insolvency Proceedings. Borrower or any Subsidiary shall (i) have an
order for relief or a receiving order entered with respect to it under the
bankruptcy laws as now or hereafter in effect in the United States, as
applicable, (ii) make an assignment for the benefit of creditors, (iii) apply
for, seek, consent to, or acquiesce in, the appointment of a receiver,
custodian, trustee, examiner, liquidator or similar official for it or any
Substantial Portion of its Property, (iv) institute any proceeding seeking an
order for relief under the bankruptcy laws as now or hereafter in effect in the
United States, as applicable, or seeking to adjudicate it a bankrupt or
insolvent, or seeking dissolution, winding up, liquidation, reorganization,
arrangement, adjustment or composition of it or its debts under any law relating
to bankruptcy, insolvency or reorganization or relief of debtors or fail to file
an answer or other pleading denying the material allegations of any such
proceeding filed against it, (v) take any corporate or partnership action to
authorize or effect any of the foregoing actions set forth in this Section 8.6
or (vi) fail to contest in good faith any appointment or proceeding described in
Section 8.7.
8.7. Appointment of Receiver. Without the application, approval or consent
of Borrower or any Subsidiary, a receiver, trustee, examiner, liquidator or
similar official shall be appointed for Borrower or any Subsidiary or any
Substantial Portion of its Property, or a proceeding described in Section
8.6(iv) shall be instituted against Borrower or any Subsidiary and such
appointment continues undischarged or such proceeding continues undismissed or
unstayed for a period of sixty (60) consecutive days.
8.8. Condemnation and Seizure. Any court, government or governmental agency
shall condemn, seize or otherwise appropriate, or take custody or control of,
all or any portion of the Property of Borrower or any Subsidiary which, when
taken together with all other Property of Borrower and the Subsidiaries so
condemned, seized, appropriated, or taken custody or control of, during the
twelve-month period ending with the month in which any such action occurs, could
reasonably be expected to have a Material Adverse Effect.
8.9. Judgments. Borrower or any Subsidiary shall fail within 30 days to
pay, bond or otherwise discharge one or more (i) judgments or orders for the
payment of money in excess of $1,500,000 (or the equivalent thereof in
currencies other than Dollars) in the aggregate, or (ii) nonmonetary judgments
or orders which, individually or in the aggregate, could reasonably be
49
expected to have a Material Adverse Effect, which judgment(s), in any such case,
is/are not stayed on appeal or otherwise being appropriately contested in good
faith.
8.10. Rate Management Obligations. Nonpayment by Borrower or any Subsidiary
of any Rate Management Obligation when due or the breach by Borrower or any
Subsidiary of any term, provision or condition contained in any Rate Management
Transaction or any transaction of the type described in the definition of "Rate
Management Transactions," whether or not any Lender or Affiliate of a Lender is
a party thereto.
8.11. Change of Control. Any Change in Control shall occur.
8.12. Other Loan Documents. The occurrence of any "default", as defined in
any Loan Document (other than this Agreement) or the breach of any of the terms
or provisions of any Loan Document (other than this Agreement), which default or
breach continues beyond any period of grace therein provided and such default or
breach continues for a period of thirty (30) days after the earlier of (i) the
date any Authorized Officer of any Credit Party acquires knowledge of such
failure, or (ii) written notice of such failure has been given to any Credit
Party by Agent or any Lender.
8.13. Guaranty. Any Guaranty shall fail to remain in full force or effect
or any action shall be taken to discontinue or to assert the invalidity or
unenforceability of any Guaranty, or any Guarantor shall fail to comply with any
of the terms or provisions of any Guaranty to which it is a party, or any
Guarantor shall deny that it has any further liability under any Guaranty to
which it is a party, or shall give notice to such effect.
8.14. Unfunded Liabilities. The Unfunded Liabilities of all Single Employer
Plans shall exceed in the aggregate $1,500,000 or any Reportable Event shall
occur in connection with any Plan.
8.15. Multiemployer Plan Withdrawal Liability. Borrower or any other member
of the Controlled Group shall have been notified by the sponsor of a
Multiemployer Plan that it has incurred withdrawal liability to such
Multiemployer Plan in an amount which, when aggregated with all other amounts
required to be paid to Multiemployer Plans by Borrower or any other member of
the Controlled Group as withdrawal liability (determined as of the date of such
notification), exceeds $750,000 or requires payments exceeding $1,500,000 per
annum.
8.16. Reorganization or Termination of Multiemployer Plan. Borrower or any
other member of the Controlled Group shall have been notified by the sponsor of
a Multiemployer Plan that such Multiemployer Plan is in reorganization or is
being terminated, within the meaning of Title IV of ERISA, if as a result of
such reorganization or termination the aggregate annual contributions of
Borrower and the other members of the Controlled Group (taken as a whole) to all
Multiemployer Plans which are then in reorganization or being terminated have
been or will be increased over the amounts contributed to such Multiemployer
Plans for the respective plan years of each such Multiemployer Plan immediately
preceding the plan year in which the reorganization or termination occurs by an
amount exceeding $1,500,000.
8.17. Environmental Laws. The Borrower or any of its Subsidiaries shall (i)
be the subject of any proceeding or investigation pertaining to the release by
the Borrower, any of its Subsidiaries or any other Person of any toxic or
hazardous waste or substance into the environment, or (ii) violate any
Environmental Law, which, in the case of an event described in clause (i) or
clause (ii), could reasonably be expected to have a Material Adverse Effect.
50
8.18. Subordinate Debt Documents. Any Credit Party or any holder shall
repudiate or contest the subordination provisions of the Subordinate Debt
Documents, or otherwise assert in writing that such subordination provisions are
not valid, binding and enforceable against any such party.
8.19. Collateral Documents. Any Collateral Document shall for any reason
fail to create a valid and perfected security interest second in priority only
to the "Agent" and "Lenders" under the Senior Revolving Credit Agreement in any
collateral purported to be covered thereby, except as permitted by the terms of
any Collateral Document, or any Collateral Document shall fail to remain in full
force or effect or any action shall be taken to discontinue or to assert the
invalidity or unenforceability of any Collateral Document, or the Borrower or
any Guarantor shall fail to comply with any of the terms or provisions of any
Collateral Document.
ARTICLE IX
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
9.1. Acceleration. If any Default described in Section 8.6 or 8.7 occurs
with respect to the Borrower, the obligations of the Lenders to make Loans
hereunder shall automatically terminate and the Obligations shall immediately
become due and payable without any election or action on the part of the Agent
or any Lender. If any other Default occurs, the Required Lenders (or the Agent
with the consent of the Required Lenders) may terminate or suspend the
obligations of the Lenders to make Loans hereunder, or declare the Obligations
to be due and payable, or both, whereupon the Obligations shall become
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which the Borrower hereby expressly waives.
If, within thirty (30) days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans
hereunder as a result of any Default (other than any Default as described in
Section 8.6 or 8.7 with respect to the Borrower) and before any judgment or
decree for the payment of the Obligations due shall have been obtained or
entered, the Required Lenders (in their sole discretion) shall so direct, then
the Agent shall, by notice to the Borrower, rescind and annul such acceleration
and/or termination.
9.2. Amendments. Subject to the provisions of this Section 9.2, the
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrower hereunder or waiving any
Default hereunder; provided, however, that no such supplemental agreement shall,
without the consent of all of the Lenders:
(i) Extend the final maturity of any Loan or forgive all or any
portion of the principal amount thereof, or reduce the rate or extend the
time of payment of interest or fees thereon.
(ii) Reduce the percentage specified in the definition of Required
Lenders.
(iii) Extend the Facility Termination Date, or reduce the amount or
extend the payment date for, the mandatory payments required under clause
(ii) of Section 7.14, or increase the amount of the Aggregate Commitment or
of the Commitment of any Lender hereunder, or permit the Borrower to assign
its rights under this Agreement.
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(iv) Amend this Section 9.2.
(v) Release any guarantor of any Advance.
No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent. The Agent may waive payment
of the fee required under Section 13.3.2 without obtaining the consent of any
other party to this Agreement.
9.3. Preservation of Rights. No delay or omission of the Lenders or the
Agent to exercise any right under the Loan Documents shall impair such right or
be construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
the Borrower to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 9.2, and then only
to the extent in such writing specifically set forth. All remedies contained in
the Loan Documents or afforded by law shall be cumulative and all shall be
available to the Agent and the Lenders until the Obligations have been paid in
full.
ARTICLE X
GENERAL PROVISIONS
10.1. Survival of Representations. All representations and warranties of
the Borrower and each Guarantor contained in this Agreement shall survive the
making of the Loans herein contemplated.
10.2. Governmental Regulation. Anything contained in this Agreement to the
contrary notwithstanding, no Lender shall be obligated to extend credit to the
Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
10.3. Headings. Section headings in the Loan Documents are for convenience
of reference only, and shall not govern the interpretation of any of the
provisions of the Loan Documents.
10.4. Entire Agreement. The Loan Documents embody the entire agreement and
understanding among the Borrower, the Agent and the Lenders and supersede all
prior agreements and understandings among the Borrower, the Agent and the
Lenders relating to the subject matter thereof other than those contained in the
fee letter described in Section 11.13 which shall survive and remain in full
force and effect during the term of this Agreement.
10.5. Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any of
its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement and
their respective successors and assigns, provided, however, that the parties
hereto expressly agree that the Arranger shall enjoy the benefits of the
provisions of Sections 10.6, 10.10 and 11.11 to the extent specifically set
forth therein and shall have the right to enforce such provisions on its own
behalf and in its own name to the same extent as if it were a party to this
Agreement.
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10.6. Expenses; Indemnification. (i) The Borrower shall reimburse the Agent
and the Arranger for any costs, internal charges and out-of-pocket expenses
(including attorneys' fees and time charges of attorneys for the Agent, which
attorneys may be employees of the Agent) paid or incurred by the Agent or the
Arranger in connection with the investigation, preparation, negotiation,
execution, delivery, syndication, distribution (including, without limitation,
via the internet), review, amendment, modification, and administration of the
Loan Documents. The Borrower also agrees to reimburse the Agent, the Arranger
and the Lenders for any costs, internal charges and out-of-pocket expenses
(including attorneys' fees and time charges of attorneys for the Agent, the
Arranger and the Lenders, which attorneys may be employees of the Agent, the
Arranger or the Lenders) paid or incurred by the Agent, the Arranger or any
Lender in connection with the collection and enforcement of the Loan Documents.
Expenses being reimbursed by the Borrower under this Section include, without
limitation, costs and expenses incurred in connection with the Reports described
in the following sentence. The Borrower acknowledges that from time to time Bank
One may prepare and may distribute to the Lenders (but shall have no obligation
or duty to prepare or to distribute to the Lenders) certain audit reports or
Reserve Reports (the "Reports") pertaining to the Borrower's assets for internal
use by Bank One from information furnished to it by or on behalf of the
Borrower.
(ii) The Borrower hereby further agrees to indemnify the Agent, the
Arranger, each Lender, their respective Affiliates, and each of their
directors, officers and employees against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without
limitation, all expenses of litigation or preparation therefor whether or
not the Agent, the Arranger, any Lender or any Affiliate is a party
thereto) which any of them may pay or incur arising out of or relating to
this Agreement, the other Loan Documents, the transactions contemplated
hereby or the direct or indirect application or proposed application of the
proceeds of any Loan hereunder except to the extent that they are
determined in a final non-appealable judgment by a court of competent
jurisdiction to have resulted from the gross negligence or willful
misconduct of the party seeking indemnification. The obligations of the
Borrower under this Section 10.6 shall survive the termination of this
Agreement.
10.7. Numbers of Documents. All statements, notices, closing documents, and
requests hereunder shall be furnished to the Agent with sufficient counterparts
so that the Agent may furnish one to each of the Lenders.
10.8. Accounting. Except as provided to the contrary herein, all accounting
terms used herein shall be interpreted and all accounting determinations
hereunder shall be made in accordance with Agreement Accounting Principles.
10.9. Severability of Provisions. Any provision in any Loan Document that
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
10.10. Nonliability of Lenders. The relationship between the Borrower on
the one hand and the Lenders and the Agent on the other hand shall be solely
that of borrower and lender. Neither the Agent, the Arranger nor any Lender
shall have any fiduciary responsibilities to the Borrower. Neither the Agent,
the Arranger nor any Lender undertakes any responsibility to the Borrower to
review or inform the Borrower of any matter in connection with any phase of the
Borrower's business or operations. The Borrower agrees that neither the Agent,
the Arranger nor any Lender shall have liability to the Borrower (whether
sounding in tort, contract or otherwise) for losses suffered by the Borrower in
connection with, arising out of, or in any way related to, the transactions
contemplated and the relationship established by
53
the Loan Documents, or any act, omission or event occurring in connection
therewith, unless it is determined in a final non-appealable judgment by a court
of competent jurisdiction that such losses resulted from the gross negligence or
willful misconduct of the party from which recovery is sought. Neither the
Agent, the Arranger nor any Lender shall have any liability with respect to, and
the Borrower hereby waives, releases and agrees not to xxx for, any special,
indirect, consequential or punitive damages suffered by the Borrower in
connection with, arising out of, or in any way related to the Loan Documents or
the transactions contemplated thereby.
10.11. Confidentiality. Each Lender agrees to hold any confidential
information which it may receive from the Borrower pursuant to this Agreement in
confidence, except for disclosure (i) to its Affiliates and to other Lenders and
their respective Affiliates, (ii) to legal counsel, accountants, and other
professional advisors to such Lender or to a Transferee, (iii) to regulatory
officials, (iv) to any Person as requested pursuant to or as required by law,
regulation, or legal process, (v) to any Person in connection with any legal
proceeding to which such Lender is a party, (vi) to such Lender's direct or
indirect contractual counterparties in swap agreements or to legal counsel,
accountants and other professional advisors to such counterparties, (vii)
permitted by Section 13.4 and (viii) to rating agencies if requested or required
by such agencies in connection with a rating relating to the Advances hereunder.
Notwithstanding anything herein to the contrary, confidential information shall
not include, and each Lender (and each employee, representative or other agent
of any Lender) may disclose to any and all Persons, without limitation of any
kind, the "tax treatment" and "tax structure" (in each case, within the meaning
of Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby
and all materials of any kind (including opinions or other tax analyses) that
are or have been provided to such Lender relating to such tax treatment or tax
structure; provided that with respect to any document or similar item that in
either case contains information concerning such tax treatment or tax structure
of the transactions contemplated hereby as well as other information, this
sentence shall only apply to such portions of the document or similar item that
relate to such tax treatment or tax structure.
10.12. Nonreliance. Each Lender hereby represents that it is not relying on
or looking to any margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) for the repayment of the Loans provided
for herein.
10.13. Disclosure. The Borrower and each Lender hereby acknowledge and
agree that Bank One and/or its Affiliates from time to time may hold investments
in, make other loans to or have other relationships with the Borrower and its
Affiliates.
10.14. USA PATRIOT ACT NOTIFICATION. The following notification is provided
to Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C.
Section 5318:
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the
government fight the funding of terrorism and money laundering activities,
Federal law requires all financial institutions to obtain, verify, and record
information that identifies each person or entity that opens an account,
including any deposit account, treasury management account, loan, other
extension of credit, or other financial services product. What this means for
Borrower: When Borrower opens an account, if Borrower is an individual, Agent
and the Lenders will ask for Borrower's name, residential address, tax
identification number, date of birth, and other information that will allow
Agent and the Lenders to identify Borrower, and, if Borrower is not an
individual, Agent and the Lenders will ask for Borrower's name, tax
identification number, business address, and other information that will allow
Agent and the Lenders to identify Borrower. Agent and the Lenders may also ask
if Borrower is an individual, to see Borrower's driver's license or other
identifying documents, and, if Borrower is not an individual, to see Borrower's
legal organizational documents or other identifying documents.
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ARTICLE XI
THE AGENT
11.1. Appointment; Nature of Relationship. Bank One, NA is hereby appointed
by each of the Lenders as its contractual representative (herein referred to as
the "Agent") hereunder and under each other Loan Document, and each of the
Lenders irrevocably authorizes the Agent to act as the contractual
representative of such Lender with the rights and duties expressly set forth
herein and in the other Loan Documents. The Agent agrees to act as such
contractual representative upon the express conditions contained in this Article
XI. Notwithstanding the use of the defined term "Agent," it is expressly
understood and agreed that the Agent shall not have any fiduciary
responsibilities to any Lender by reason of this Agreement or any other Loan
Document and that the Agent is merely acting as the contractual representative
of the Lenders with only those duties as are expressly set forth in this
Agreement and the other Loan Documents. In its capacity as the Lenders'
contractual representative, the Agent (i) does not hereby assume any fiduciary
duties to any of the Lenders, (ii) is a "representative" of the Lenders within
the meaning of the term "Secured Party" as defined in the Texas Uniform
Commercial Code, and (iii) is acting as an independent contractor, the rights
and duties of which are limited to those expressly set forth in this Agreement
and the other Loan Documents. Each of the Lenders hereby agrees to assert no
claim against the Agent on any agency theory or any other theory of liability
for breach of fiduciary duty, all of which claims each Lender hereby waives.
11.2. Powers. The Agent shall have and may exercise such powers under the
Loan Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder except any action specifically provided by
the Loan Documents to be taken by the Agent.
11.3. General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Lenders or
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Loan Document or in connection herewith or therewith except
to the extent such action or inaction is determined in a final non-appealable
judgment by a court of competent jurisdiction to have arisen from the gross
negligence or willful misconduct of such Person.
11.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor any
of its directors, officers, agents or employees shall be responsible for or have
any duty to ascertain, inquire into, or verify (a) any statement, warranty or
representation made in connection with any Loan Document or any borrowing
hereunder; (b) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (c) the satisfaction of any condition specified in Article IV, except
receipt of items required to be delivered solely to the Agent; (d) the existence
or possible existence of any Default or Unmatured Default; (e) the validity,
enforceability, effectiveness, sufficiency or genuineness of any Loan Document
or any other instrument or writing furnished in connection therewith; (f) the
value, sufficiency, creation, perfection or priority of any Lien in any
collateral security; or (g) the financial condition of the Borrower or any
guarantor of any of the Obligations or of any of the Borrower's or any such
guarantor's respective Subsidiaries. The Agent shall have no duty to disclose to
the Lenders information that is not required to be furnished by the Borrower to
the Agent at such time, but is voluntarily furnished by the Borrower to the
Agent (either in its capacity as Agent or in its individual capacity).
55
11.5. Action on Instructions of Lenders. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under any
other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders. The Lenders hereby
acknowledge that the Agent shall be under no duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this Agreement
or any other Loan Document unless it shall be requested in writing to do so by
the Required Lenders. The Agent shall be fully justified in failing or refusing
to take any action hereunder and under any other Loan Document unless it shall
first be indemnified to its satisfaction by the Lenders pro rata against any and
all liability, cost and expense that it may incur by reason of taking or
continuing to take any such action.
11.6. Employment of Agents and Counsel. The Agent may execute any of its
duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the Lenders
and all matters pertaining to the Agent's duties hereunder and under any other
Loan Document.
11.7. Reliance on Documents; Counsel. The Agent shall be entitled to rely
upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
11.8. Agent's Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (or, if the Commitments have been terminated, in proportion to their
Commitments immediately prior to such termination) (i) for any amounts not
reimbursed by the Borrower for which the Agent is entitled to reimbursement by
the Borrower under the Loan Documents, (ii) for any other expenses incurred by
the Agent on behalf of the Lenders, in connection with the preparation,
execution, delivery, administration and enforcement of the Loan Documents
(including, without limitation, for any expenses incurred by the Agent in
connection with any dispute between the Agent and any Lender or between two or
more of the Lenders) and (iii) for any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of the Loan
Documents or any other document delivered in connection therewith or the
transactions contemplated thereby (including, without limitation, for any such
amounts incurred by or asserted against the Agent in connection with any dispute
between the Agent and any Lender or between two or more of the Lenders), or the
enforcement of any of the terms of the Loan Documents or of any such other
documents, provided that no Lender shall be liable for any of the foregoing to
the extent any of the foregoing is found in a final non-appealable judgment by a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of the Agent. The obligations of the Lenders under this
Section 11.8 shall survive payment of the Obligations and termination of this
Agreement.
11.9. Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Unmatured Default hereunder unless
the Agent has received written notice from a Lender or the Borrower referring to
this Agreement describing such Default or Unmatured Default and stating that
such notice is a "notice of default". In the event that the Agent receives such
a notice, the Agent shall give prompt notice thereof to the Lenders.
56
11.10. Rights as a Lender. In the event the Agent is a Lender, the Agent
shall have the same rights and powers hereunder and under any other Loan
Document with respect to its Commitment and its Loans as any Lender and may
exercise the same as though it were not the Agent, and the term "Lender" or
"Lenders" shall, at any time when the Agent is a Lender, unless the context
otherwise indicates, include the Agent in its individual capacity. The Agent and
its Affiliates may accept deposits from, lend money to, and generally engage in
any kind of trust, debt, equity or other transaction, in addition to those
contemplated by this Agreement or any other Loan Document, with the Borrower,
the Guarantors or any of its Subsidiaries in which the Borrower, such Guarantor
or such Subsidiary is not restricted hereby from engaging with any other Person.
The Agent, in its individual capacity, is not obligated to remain a Lender.
11.11. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent, the Arranger or any other
Lender and based on the financial statements prepared by the Borrower and the
Guarantors and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement and the other Loan Documents. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent, the Arranger or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and the other Loan Documents.
11.12. Successor Agent. The Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrower, such resignation to be effective
upon the appointment of a successor Agent or, if no successor Agent has been
appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. The Agent may be removed at any time with or without cause
by written notice received by the Agent from the Required Lenders, such removal
to be effective on the date specified by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint, on
behalf of the Borrower and the Lenders, a successor Agent which shall be
approved by Borrower, such approval not to be unreasonably withheld; provided
that Borrower shall not have the right to approve any successor Agent appointed
during the continuance of any Default.. If no successor Agent shall have been so
appointed by the Required Lenders within thirty days after the resigning Agent's
giving notice of its intention to resign, then the resigning Agent may appoint,
on behalf of the Borrower and the Lenders, a successor Agent. Notwithstanding
the previous sentence, the Agent may at any time without the consent of the
Borrower or any Lender, appoint any of its Affiliates which is a commercial bank
as a successor Agent hereunder. If the Agent has resigned or been removed and no
successor Agent has been appointed, the Lenders may perform all the duties of
the Agent hereunder and the Borrower shall make all payments in respect of the
Obligations to the applicable Lender and for all other purposes shall deal
directly with the Lenders. No successor Agent shall be deemed to be appointed
hereunder until such successor Agent has accepted the appointment. Any such
successor Agent shall be a commercial bank having capital and retained earnings
of at least $100,000,000. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
resigning or removed Agent. Upon the effectiveness of the resignation or removal
of the Agent, the resigning or removed Agent shall be discharged from its duties
and obligations hereunder and under the Loan Documents. After the effectiveness
of the resignation or removal of an Agent, the provisions of this Article XI
shall continue in effect for the benefit of such Agent in respect of any actions
taken or omitted to be taken by it while it was acting as the Agent hereunder
and under the other Loan Documents. In the event that there is a successor to
the Agent by merger, or the Agent assigns its duties and obligations to an
Affiliate pursuant to this Section 11.12, then the term "Prime Rate" as used in
this Agreement shall mean the prime rate, base rate or other analogous rate of
the new Agent.
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11.13. Agent and Arranger Fees. The Borrower agrees to pay to the Agent and
the Arranger, for their respective accounts, the fees agreed to by the Borrower,
the Agent and the Arranger pursuant to that certain letter agreement dated
December 12, 2003, or as otherwise agreed from time to time.
11.14. Delegation to Affiliates. The Borrower and the Lenders agree that
the Agent may delegate any of its duties under this Agreement to any of its
Affiliates. Any such Affiliate (and such Affiliate's directors, officers, agents
and employees) which performs duties in connection with this Agreement shall be
entitled to the same benefits of the indemnification, waiver and other
protective provisions to which the Agent is entitled under Articles X and XI.
11.15. Execution of Collateral Documents. The Lenders hereby empower and
authorize the Agent to execute and deliver to the Borrower on their behalf the
Collateral Documents and all related financing statements and any financing
statements, agreements, documents or instruments as shall be necessary or
appropriate to effect the purposes of the Collateral Documents.
11.16. Collateral Releases. The Lenders hereby empower and authorize the
Agent to execute and deliver to the Borrower on their behalf any agreements,
documents or instruments as shall be necessary or appropriate to effect any
releases of Collateral which shall be permitted by the terms hereof or of any
other Loan Document or which shall otherwise have been approved by the Required
Lenders in writing.
ARTICLE XII
SETOFF; RATABLE PAYMENTS
12.1. Setoff. In addition to, and without limitation of, any rights of the
Lenders under applicable law, if the Borrower becomes insolvent, however
evidenced, or any Default occurs, any and all deposits (including all account
balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness at any time held or owing by any Lender or
any Affiliate of any Lender to or for the credit or account of the Borrower may
be offset and applied toward the payment of the Obligations owing to such
Lender, whether or not the Obligations, or any part thereof, shall then be due.
12.2. Ratable Payments. If any Lender, whether by setoff or otherwise, has
payment made to it upon its Loans (other than payments received pursuant to
Section 3.1, 3.2, or 3.4) in a greater proportion than that received by any
other Lender, such Lender agrees, promptly upon demand, to purchase a portion of
the Loans held by the other Lenders so that after such purchase each Lender will
hold its ratable proportion of Loans. If any Lender, whether in connection with
setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligations or such amounts which may be
subject to setoff, such Lender agrees, promptly upon demand, to take such action
necessary such that all Lenders share in the benefits of such collateral ratably
in proportion to their Loans. In case any such payment is disturbed by legal
process, or otherwise, appropriate further adjustments shall be made.
ARTICLE XIII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
13.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower,
Guarantors, and the Lenders and their respective successors and assigns
permitted hereby, except that (i) the Borrower and the Guarantors shall not have
58
the right to assign any of their rights or obligations under the Loan Documents
without the prior written consent of each Lender, (ii) any assignment by any
Lender must be made in compliance with Section 13.3, and (iii) any transfer by
Participation must be made in compliance with Section 13.2. Any attempted
assignment or transfer by any party not made in compliance with this Section
13.1 shall be null and void, unless such attempted assignment or transfer is
treated as a participation in accordance with Section 13.3.2. The parties to
this Agreement acknowledge that clause (ii) of this Section 13.1 relates only to
absolute assignments and this Section 13.1 does not prohibit assignments
creating security interests, including, without limitation, (x) any pledge or
assignment by any Lender of all or any portion of its rights under this
Agreement and any Note to a Federal Reserve Bank or (y) in the case of a Lender
which is a Fund, any pledge or assignment of all or any portion of its rights
under this Agreement and any Note to its trustee in support of its obligations
to its trustee; provided, however, that no such pledge or assignment creating a
security interest shall release the transferor Lender from its obligations
hereunder unless and until the parties thereto have complied with the provisions
of Section 13.3. The Agent may treat the Person which made any Loan or which
holds any Note as the owner thereof for all purposes hereof unless and until
such Person complies with Section 13.3; provided, however, that the Agent may in
its discretion (but shall not be required to) follow instructions from the
Person which made any Loan or which holds any Note to direct payments relating
to such Loan or Note to another Person. Any assignee of the rights to any Loan
or any Note agrees by acceptance of such assignment to be bound by all the terms
and provisions of the Loan Documents. Any request, authority or consent of any
Person, who at the time of making such request or giving such authority or
consent is the owner of the rights to any Loan (whether or not a Note has been
issued in evidence thereof), shall be conclusive and binding on any subsequent
holder or assignee of the rights to such Loan.
13.2. Participations.
13.2.1. Permitted Participants; Effect. Any Lender may at any time
sell to one or more banks or other entities ("Participants") participating
interests in any Loan owing to such Lender, any Note held by such Lender,
any Commitment of such Lender or any other interest of such Lender under
the Loan Documents. In the event of any such sale by a Lender of
participating interests to a Participant, such Lender's obligations under
the Loan Documents shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, such Lender shall remain the owner of its Loans and the holder
of any Note issued to it in evidence thereof for all purposes under the
Loan Documents, all amounts payable by the Borrower under this Agreement
shall be determined as if such Lender had not sold such participating
interests, and the Borrower and the Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under the Loan Documents.
13.2.2. Voting Rights. Each Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other than
any amendment, modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which would require
consent of all of the Lenders pursuant to the terms of Section 9.2 or of
any other Loan Document.
13.2.3. Benefit of Certain Provisions. The Borrower agrees that each
Participant shall be deemed to have the right of setoff provided in Section
12.1 in respect of its participating interest in amounts owing under the
Loan Documents to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under the Loan Documents,
provided that each Lender shall retain the right of setoff provided in
Section 12.1 with respect to the amount of participating interests sold to
each Participant. The Lenders agree to share with each
59
Participant, and each Participant, by exercising the right of setoff provided in
Section 12.1, agrees to share with each Lender, any amount received pursuant to
the exercise of its right of setoff, such amounts to be shared in accordance
with Section 12.2 as if each Participant were a Lender. The Borrower further
agrees that each Participant shall be entitled to the benefits of Sections 3.1,
3.2, 3.4 and 3.5 to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to Section 13.3, provided that (i) a Participant
shall not be entitled to receive any greater payment under Section 3.1 or 3.2
than the Lender who sold the participating interest to such Participant would
have received had it retained such interest for its own account, unless the sale
of such interest to such Participant is made with the prior written consent of
the Borrower, and (ii) any Participant not incorporated under the laws of the
United States of America or any State thereof, agrees to comply with the
provisions of Section 3.6 to the same extent as if it were a Lender.
13.3. Assignments.
13.3.1. Permitted Assignments. Any Lender may at any time assign to
one or more banks or other entities ("Purchasers") all or any part of its
rights and obligations under the Loan Documents. Such assignment shall be
substantially in the form of Exhibit C or in such other form as may be
agreed to by the parties thereto. Each such assignment with respect to a
Purchaser which is not a Lender or an Affiliate of a Lender or an Approved
Fund shall either be in an amount equal to the entire applicable Commitment
and Loans of the assigning Lender or (unless each of the Borrower and the
Agent otherwise consents) be in an aggregate amount not less than
$1,000,000. The amount of the assignment shall be based on the Commitment
or outstanding Loans (if the Commitment has been terminated) subject to the
assignment, determined as of the date of such assignment or as of the
"Trade Date," if the "Trade Date" is specified in the assignment.
13.3.2. Consents. The consent of the Borrower shall be required prior
to an assignment becoming effective unless the Purchaser is a Lender, an
Affiliate of a Lender or an Approved Fund; provided that the consent of the
Borrower shall not be required if a Default has occurred and is continuing.
The consent of the Agent shall be required prior to an assignment becoming
effective unless the Purchaser is a Lender, an Affiliate of a Lender or an
Approved Fund. Any consent required under this Section 13.3.2 shall not be
unreasonably withheld or delayed.
13.3.3. Effect; Effective Date. Upon (i) delivery to the Agent of an
assignment, together with any consents required by Sections 13.3.1 and
13.3.2, and (ii) payment of a $3,500 fee by the assigning Lender or
Purchaser to the Agent for processing such assignment (unless such fee is
waived by the Agent), such assignment shall become effective on the
effective date specified in such assignment. The assignment shall contain a
representation by the Purchaser to the effect that none of the
consideration used to make the purchase of the Commitment and Loans under
the applicable assignment agreement constitutes "plan assets" as defined
under ERISA and that the rights and interests of the Purchaser in and under
the Loan Documents will not be "plan assets" under ERISA. On and after the
effective date of such assignment, such Purchaser shall for all purposes be
a Lender party to this Agreement and any other Loan Document executed by or
on behalf of the Lenders and shall have all the rights and obligations of a
Lender under the Loan Documents, to the same extent as if it were an
original party thereto, and the transferor Lender shall be released with
respect to the Commitment and Loans assigned to such Purchaser without any
further consent or action by the Borrower, the Lenders or the Agent. In the
case of an assignment covering all of the assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be a Lender
hereunder but shall continue to be entitled to the benefits
60
of, and subject to, those provisions of this Agreement and the other Loan
Documents which survive payment of the Obligations and termination of the
applicable agreement. Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this Section
13.3 shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
Section 13.2. Upon the consummation of any assignment to a Purchaser
pursuant to this Section 13.3.3, the transferor Lender, the Agent and the
Borrower shall, if the transferor Lender or the Purchaser desires that its
Loans be evidenced by Notes, make appropriate arrangements so that new
Notes or, as appropriate, replacement Notes are issued to such transferor
Lender and new Notes or, as appropriate, replacement Notes, are issued to
such Purchaser, in each case in principal amounts reflecting their
respective Commitments, as adjusted pursuant to such assignment.
13.3.4. Register. The Agent, acting solely for this purpose as an
agent of the Borrower, shall maintain at one of its offices in Chicago,
Illinois, a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Lenders, and
the Commitments of, and principal amounts of the Loans owing to, each
Lender pursuant to the terms hereof from time to time (the "Register"). The
entries in the Register shall be conclusive, and the Borrower, the Agent
and the Lenders may treat each Person whose name is recorded in the
Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrower at any
reasonable time and from time to time upon reasonable prior notice.
13.4. Dissemination of Information. The Borrower authorizes each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Borrower and its Subsidiaries, including
without limitation any information contained in any Report; provided that each
Transferee and prospective Transferee agrees to be bound by Section 10.11 of
this Agreement.
ARTICLE XIV
NOTICES
14.1. Notices. Except as otherwise permitted by Section 2.14 with respect
to borrowing notices, all notices, requests and other communications to any
party hereunder shall be in writing (including electronic transmission,
facsimile transmission or similar writing) and shall be given to such party: (x)
in the case of the Borrower or the Agent, at its address or facsimile number set
forth on the signature pages hereof, (y) in the case of any Lender, at its
address or facsimile number set forth below its signature hereto or (z) in the
case of any party, at such other address or facsimile number as such party may
hereafter specify for the purpose by notice to the Agent and the Borrower in
accordance with the provisions of this Section 14.1. Each such notice, request
or other communication shall be effective (i) if given by facsimile
transmission, when transmitted to the facsimile number specified in this Section
and confirmation of receipt is received, (ii) if given by mail, 72 hours after
such communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid, or (iii) if given by any other means, when delivered
(or, in the case of electronic transmission, received) at the address specified
in this Section; provided that notices to the Agent under Article II shall not
be effective until received.
14.2. Change of Address. The Borrower, the Agent and any Lender may each
change the address for service of notice upon it by a notice in writing to the
other parties hereto.
61
ARTICLE XV
COUNTERPARTS
15.1. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart. This Agreement shall be effective when it has been executed by the
Borrower, the Agent and the Lenders and each party has notified the Agent by
facsimile transmission or telephone that it has taken such action.
ARTICLE XVI
CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
16.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, BUT OTHERWISE WITHOUT REGARD
TO THE CONFLICT OF LAW PROVISIONS) OF THE STATE OF TEXAS, BUT GIVING EFFECT TO
FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
16.2. CONSENT TO JURISDICTION. THE BORROWER AND EACH GUARANTOR HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF ANY
UNITED STATES FEDERAL OR TEXAS STATE COURT SITTING IN DALLAS, TEXAS, IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS (OTHER
THAN THOSE CONTAINING AN EXPRESS CONSENT TO ANOTHER JURISDICTION) AND THE
BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES
ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY
LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER OR ANY GUARANTOR IN THE COURTS
OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER OR ANY
GUARANTOR AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY
LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT
IN DALLAS, TEXAS.
16.3. WAIVER OF JURY TRIAL. THE BORROWER, EACH GUARANTOR, THE AGENT AND
EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
62
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BORROWER:
QUEST CHEROKEE, LLC
By: /s/ XXXXX XXXX
--------------------------------
Name: Xxxxx X. Xxxx
--------------------------------
Title:Manager
--------------------------------
c/o Quest Resources Corporation
0000 X. Xxxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxx
Chairman and Co-Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
GUARANTOR:
BLUESTEM PIPELINE, LLC
By: /s/ XXXXX XXXX
----------------------------------
Name: Xxxxx X. Xxxx
----------------------------------
Title:Manager
----------------------------------
c/o Quest Resources Corporation
0000 X. Xxxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxx
Chairman and Co-Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Commitments
-----------
$35,000,000 BANK ONE, NA,
Individually and as Agent
By: /s/ J. XXXXX XXXXXX
-------------------------------
Name: J. Xxxxx Xxxxxx
-------------------------------
Title:Director, Capital Markets
-------------------------------
Bank One, NA
Mail Code IL1-0634
1 Bank Xxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Bank One, NA
0000 Xxxx Xxxxxx
Xxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Attention: J. Xxxxx Xxxxxx, Director
Capital Markets
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
EXHIBIT A-1
FORM OF BORROWER'S COUNSEL OPINION
[Attached]
EXHIBIT A-2
FORM OF COLLATERAL AGENT'S OPINION
[Attached]
EXHIBIT B
COMPLIANCE CERTIFICATE
To: The Lenders parties to the
Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to that certain Senior
Term Second Lien Secured Credit Agreement dated as of December 22, 2003 (as
amended, modified, renewed or extended from time to time, the "Agreement") among
Quest Cherokee, LLC, a Delaware limited liability company (the "Borrower"),
Bluestem Pipeline, LLC, a Delaware limited liability company, a Guarantor, the
lenders party thereto and Bank One, NA, as Agent for the Lenders. Unless
otherwise defined herein, capitalized terms used in this Compliance Certificate
have the meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected of Borrower;
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of Borrower and its Subsidiaries during the accounting period
covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or event which constitutes a
Default or Unmatured Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data and computations
evidencing Borrower's compliance with certain covenants of the Agreement, all of
which data and computations are true, complete and correct.
5. Schedule II attached hereto sets forth the various reports and
deliveries which are required at this time under the Agreement and the other
Loan Documents and the status of compliance.
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower and its Subsidiaries have taken, is
taking, or proposes to take with respect to each such condition or event:
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered this day of , .
______________________________________
SCHEDULE I TO COMPLIANCE CERTIFICATE
Compliance as of _________, ____ with
Provisions of 7.22.1 and 7.22.2 of
the Agreement
SCHEDULE II TO COMPLIANCE CERTIFICATE
Reports and Deliveries Currently Due
EXHIBIT C
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption (the "Assignment and Assumption") is dated
as of the Effective Date set forth below and is entered into by and between
[Insert name of Assignor] (the "Assignor") and [Insert name of Assignee] (the
"Assignee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Senior Term Second Lien Secured Credit Agreement
identified below (as amended, the "Credit Agreement"), receipt of a copy of
which is hereby acknowledged by the Assignee. The Terms and Conditions set forth
in Annex 1 attached hereto are hereby agreed to and incorporated herein by
reference and made a part of this Assignment and Assumption as if set forth
herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and
assigns to the Assignee, and the Assignee hereby irrevocably purchases and
assumes from the Assignor, subject to and in accordance with the Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by the
Agent as contemplated below, the interest in and to all of the Assignor's rights
and obligations in its capacity as a Lender under the Credit Agreement and any
other documents or instruments delivered pursuant thereto that represents the
amount and percentage interest identified below of all of the Assignor's
outstanding rights and obligations under the respective facilities identified
below (including, without limitation and to the extent permitted to be assigned
under applicable law, all claims (including without limitation contract claims,
tort claims, malpractice claims, statutory claims and all other claims at law or
in equity), suits, causes of action and any other right of the Assignor against
any Person whether known or unknown arising under or in connection with the
Credit Agreement, any other documents or instruments delivered pursuant thereto
or the loan transactions governed thereby) (the "Assigned Interest"). Such sale
and assignment is without recourse to the Assignor and, except as expressly
provided in this Assignment and Assumption, without representation or warranty
by the Assignor.
1. Assignor: _____________________________________________
2. Assignee: _____________________________________________ [and is an
Affiliate/Approved Fund of [identify Lender]]1
3. Borrower(s): __________________________________________
4. Agent: ________________________________________________, as the agent
under the Credit Agreement.
5. Credit Agreement: The $35,000,000 Senior Term Second Lien Secured Credit
Agreement dated as of _______________ among Quest Cherokee,
LLC ("Borrower"), Bluestem Pipeline, LLC, the Lenders party
thereto, Bank One, NA, , as Agent, and the other agents
party thereto.
1 Select as applicable.
6. Assigned Interest:
Aggregate Amount of Amount of Percentage Assigned of
Loans for all Lenders* Loans Assigned* Loans2
$ $ _______%
$ $ _______%
$ $ _______%
7. Trade Date: ________________________________4
Effective Date: ____________________, 20__ [TO BE INSERTED BY AGENT AND
WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER BY THE AGENT.]
The terms set forth in this Assignment and Assumption are hereby agreed to:
ASSIGNOR
[NAME OF ASSIGNOR]
By:_________________________________________
Title:______________________________________
ASSIGNEE
[NAME OF ASSIGNEE]
By:_________________________________________
Title:______________________________________
[Consented to and]5 Accepted:
BANK ONE, NA,
as Agent
By:________________________________
Title:
*Amount to be adjusted by the counterparties to take into account any payments
or prepayments made between the Trade Date and the Effective Date.
2 Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of
all Lenders thereunder. 3 Fill in the appropriate terminology for the types of
facilities under the Credit Agreement that are being assigned under this
Assignment (e.g. "Term Loan Commitment,", etc.) 4 Insert if satisfaction of
minimum amounts is to be determined as of the Trade Date.
5 To be added only if the consent of the Agent is required by the terms of the
Credit Agreement.
ANNEX I
TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
1. Representations and Warranties.
1.1 Assignor. The Assignor represents and warrants that (i) it is the
legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest
is free and clear of any lien, encumbrance or other adverse claim and (iii) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby. Neither the Assignor nor any of its officers, directors,
employees, agents or attorneys shall be responsible for (i) any statements,
warranties or representations made in or in connection with the Credit Agreement
or any other Loan Document, (ii) the execution, legality, validity,
enforceability, genuineness, sufficiency, perfection, priority, collectibility,
or value of the Loan Documents or any collateral thereunder, (iii) the financial
condition of the Guarantors, the Borrower, any of its Subsidiaries or Affiliates
or any other Person obligated in respect of any Loan Document, (iv) the
performance or observance by the Guarantors, the Borrower, any of its
Subsidiaries or Affiliates or any other Person of any of their respective
obligations under any Loan Documents, (v) inspecting any of the property, books
or records of the Borrower, or any Guarantor, or (vi) any mistake, error of
judgment, or action taken or omitted to be taken in connection with the Loans or
the Loan Documents.
1.2. Assignee. The Assignee (a) represents and warrants that (i) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby and to become a Lender under the Credit Agreement, (ii) from
and after the Effective Date, it shall be bound by the provisions of the Credit
Agreement as a Lender thereunder and, to the extent of the Assigned Interest,
shall have the obligations of a Lender thereunder, (iii) agrees that its payment
instructions and notice instructions are as set forth in Schedule 1 to this
Assignment and Assumption, (iv) confirms that none of the funds, monies, assets
or other consideration being used to make the purchase and assumption hereunder
are "plan assets" as defined under ERISA and that its rights, benefits and
interests in and under the Loan Documents will not be "plan assets" under ERISA,
(v) agrees to indemnify and hold the Assignor harmless against all losses, costs
and expenses (including, without limitation, reasonable attorneys' fees) and
liabilities incurred by the Assignor in connection with or arising in any manner
from the Assignee's non-performance of the obligations assumed under this
Assignment and Assumption, (vi) it has received a copy of the Credit Agreement,
together with copies of financial statements and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Assumption and to purchase the
Assigned Interest on the basis of which it has made such analysis and decision
independently and without reliance on the Agent or any other Lender, and (vii)
attached as Schedule 1 to this Assignment and Assumption is any documentation
required to be delivered by the Assignee with respect to its tax status pursuant
to the terms of the Credit Agreement, duly completed and executed by the
Assignee and (b) agrees that (i) it will, independently and without reliance on
the Agent, the Assignor or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Loan Documents, and
(ii) it will perform in accordance with their terms all of the obligations which
by the terms of the Loan Documents are required to be performed by it as a
Lender.
2. Payments. The Assignee shall pay the Assignor, on the Effective Date,
the amount agreed to by the Assignor and the Assignee. From and after the
Effective Date, the Agent shall make all
payments in respect of the Assigned Interest (including payments of principal,
interest, fees and other amounts) to the Assignor for amounts which have accrued
to but excluding the Effective Date and to the Assignee for amounts which have
accrued from and after the Effective Date.
3. General Provisions. This Assignment and Assumption shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns. This Assignment and Assumption may be executed in any
number of counterparts, which together shall constitute one instrument. Delivery
of an executed counterpart of a signature page of this Assignment and Assumption
by telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption. This Assignment and Assumption shall be governed
by, and construed in accordance with, the law of the State of Texas.
ADMINISTRATIVE QUESTIONNAIRE
(Schedule to be supplied by Closing Unit or Trading Documentation Unit)
(For Forms for Primary Syndication call Xxxxxxxx Xxxxxxx at 312-732-8844)
(For Forms after Primary Syndication call Xxx Xxxxx at 000-000-0000)
US AND NON-US TAX INFORMATION REPORTING REQUIREMENTS
(Schedule to be supplied by Closing Unit or Trading Documentation Unit)
(For Forms for Primary Syndication call Xxxxxxxx Xxxxxxx at 312-732-8844)
(For Forms after Primary Syndication call Xxx Xxxxx at 000-000-0000)
EXHIBIT D
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To Bank One, NA,
as Agent (the "Agent") under the Credit Agreement
Described Below.
Re: Senior Term Second Lien Secured Credit Agreement, dated December 22, 2003
(as the same may be amended or modified, the "Credit Agreement"), among
Quest Cherokee, LLC (the "Borrower"), Bluestem Pipeline, LLC, a Guarantor,
the Lenders named therein and the Agent. Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned thereto in
the Credit Agreement.
The Agent is specifically authorized and directed to act upon the following
money transfer instructions with respect to the proceeds of the initial Advance.
Facility Identification Number(s)_______________________________________________
Customer/Account Name___________________________________________________________
Transfer Funds To_______________________________________________________________
_______________________________________________________________
For Account No._________________________________________________________________
Reference/Attention To _________________________________________________________
Authorized Officer (Customer Representative) Date______________________________
_______________________________________ __________________________________
(Please Print) Signature
Bank Officer Name Date______________________________
_______________________________________ __________________________________
(Please Print) Signature
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
EXHIBIT E
NOTE
[Date]
Quest Cherokee, LLC, a Delaware limited liability company (the "Borrower"),
promises to pay to the order of ____________________________________ (the
"Lender") the aggregate unpaid principal amount of all Loans made by the Lender
to the Borrower pursuant to Article II of the Agreement (as hereinafter
defined), in immediately available U.S. Dollars at the main office of Bank One,
NA, in Chicago, Illinois, as Agent, together with interest on the unpaid
principal amount hereof at the rates and on the dates set forth in the
Agreement. The Borrower shall pay the principal of and accrued and unpaid
interest on the Loans in full on the Facility Termination Date and shall make
such mandatory payments as are required to be made under the terms of Article II
of the Agreement.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.
This Note is one of the Notes issued pursuant to, and is entitled to the
benefits of, the Senior Term Second Lien Secured Credit Agreement dated as of
_______________,______ (which, as it may be amended or modified and in effect
from time to time, is herein called the "Agreement"), among the Borrower, the
lenders party thereto, including the Lender, and Bank One, NA, as Agent, to
which Agreement reference is hereby made for a statement of the terms and
conditions governing this Note, including the terms and conditions under which
this Note may be prepaid or its maturity date accelerated. This Note is secured
pursuant to the Collateral Documents and is guaranteed pursuant to the Guaranty
as more specifically described in the Agreement, and reference is made thereto
for a statement of the terms and provisions thereof. Capitalized terms used
herein and not otherwise defined herein are used with the meanings attributed to
them in the Agreement.
QUEST CHEROKEE, LLC
By:______________________________________________
Print Name:______________________________________
Title:___________________________________________
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF ___________________,
DATED ____________________,
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
--------------------------------------------------------------------------------
EXHIBIT F
CERTIFICATE OF EFFECTIVENESS
[Attached]
EXHIBIT G
FORM OF SUBORDINATE NOTE
[Attached]
SCHEDULE 1.1-A
EXISTING LETTERS OF CREDIT
SCHEDULE 1.1-B
RATE MANGEMENT TRANSACTIONS
SCHEDULE 5.7
MATERIAL CONTINGENT LIABILITIES
None.
SCHEDULE 5.8
SUBSIDIARIES AND OTHER INVESTMENTS
(See Sections 5.8 and 7.15)
Investment Jurisdiction of Owned Amount of Percent
In Organization By Investment Ownership
--------------------------------------------------------------------------------
Bluestem Delaware Borrower $25,329,234.08 100%
SCHEDULE 5.13
INDEBTEDNESS AND LIENS
(See Sections 5.13 and 7.15)
Amount
Indebtedness Indebtedness Property of
Incurred By Owed To Encumbered (If Any) Maturity Indebtedness
--------------------------------------------------------------------------------
Borrower Xxxxx Center Inventory 11/04/04 $67,332.54
Branch Bank
Borrower Xxxxx Center Equipment 02/19/08 $417,799.76
Branch Bank
Borrower Bank of Building - Chanute 10/15/13 $49,661.24
Commerce 125 & 127 W. Main
Borrower Caterpillar Equipment 01/06, 03/06, $171,949.39
Financial 08/05, 10/06,
11/07
Borrower Case Credit Equipment 08/18/04 $2,245.94
Borrower DC Financial Equipment 07/25/05, $34,983.78
Services 12/27/05
Borrower Ford Motor Trucks 03/24/06, $141,935.07
Credit 01/14/06,
01/18/05,
04/08/07,
07/23/07,
11/23/07
Borrower Xxxxxxx Xxxx Trucks None $8,725.00
Borrower Chrysler Trucks 06/23/05, $60,885.44
Financial 07/13/05,
07/22/07
Borrower BEC of Kansas None None $43,316.85
(entity owned
by Xxxx Xxxx)
Total $998,835.01
