EXHIBIT 10.3
U.S. $55,000,000
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
dated as of October 26, 1998,
among
LATEX PETROLEUM CORPORATION,
LATEX/GOC ACQUISITION, INC.,
GERMANY OIL COMPANY,
(formerly known as LRI ACQUISITION, INC.),
ALLIANCE RESOURCES (USA), INC.,
SOURCE PETROLEUM, INC. and
ALLIANCE RESOURCES PLC
as the Borrowers,
CERTAIN FINANCIAL INSTITUTIONS,
as the Lenders
and
BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Agent for the Lenders.
TABLE OF CONTENTS
SECTION PAGE
----
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS......................................... -3-
1.1. Defined Terms...................................................... -3-
1.2. Use of Defined Terms............................................... -31-
1.3. Cross-References................................................... -32-
1.4. Accounting and Financial Determinations............................ -32-
1.5. Interpretational Provisions........................................ -32-
ARTICLE II.
COMMITMENTS, BORROWING PROCEDURES AND NOTE............................... -33-
2.1. Commitments........................................................ -33-
2.1.1. Tranche A Commitment................................... -33-
2.1.2. Tranche B Commitment................................... -33-
2.1.3. Tranche C Commitment................................... -34-
2.1.4. Commitment to Issue Letters of Credit.................. -34-
2.1.5. Lenders Not Required To Make Loans Under Certain
Circumstances.......................................... -34-
2.1.6. Issuer Not Required To Issue Letters of Credit Under
Certain Circumstances.................................. -35-
2.2. Reduction of Commitment Amounts.................................... -35-
2.2.1. Optional............................................... -35-
2.2.2. Mandatory.............................................. -35-
2.3. Borrowing Procedure................................................ -36-
2.4. Continuation and Conversion Elections.............................. -36-
2.5. Loan Accounts and Notes............................................ -37-
2.6. Borrowing Base Redetermination and Collateral Value
Redetermination.................................................... -37-
2.7. Purposes........................................................... -38-
ARTICLE III.
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES............................... -39-
3.1. Repayments and Prepayments and Certain Borrowing Base Matters...... -39-
3.1.1. Repayments and Prepayments............................. -39-
3.1.2. Borrowing Base Deficiencies, Collateral Value
Deficiencies and Asset Sales........................... -41-
-i-
TABLE OF CONTENTS
continued
PAGE
----
3.2. Interest Provisions................................................ -42-
3.2.1. Rate................................................... -43-
3.2.2. Post-Maturity Rates.................................... -43-
3.2.3. Payment Dates.......................................... -43-
3.2.4. Maximum Interest....................................... -44-
3.3. Fees............................................................... -45-
3.3.1. Unused Fee............................................. -45-
3.3.2. Letter of Credit Stated Amount Fee..................... -45-
3.3.3. Letter of Credit Issuance Fee.......................... -46-
3.3.4. Letter of Credit Administrative Fees................... -46-
3.4. Proceeds Account................................................... -46-
3.5. ORRI and Warrants Are Not Collateral Security...................... -46-
ARTICLE IV.
LETTERS OF CREDIT........................................................ -47-
4.1. Issuance Requests.................................................. -47-
4.2. Issuances and Extensions........................................... -48-
4.3. Disbursements...................................................... -49-
4.4. Reimbursement...................................................... -49-
4.5. Deemed Disbursements............................................... -50-
4.6. Nature of Reimbursement Obligations................................ -50-
4.7. Increased Costs; Indemnity......................................... -52-
ARTICLE V.
CERTAIN INTEREST RATE AND OTHER PROVISIONS............................... -53-
5.1. LIBO Rate Lending Unlawful......................................... -53-
5.2. Deposits Unavailable............................................... -53-
5.3. Increased Loan Costs, etc.......................................... -54-
5.4. Funding Losses..................................................... -55-
5.5. Increased Capital Costs............................................ -55-
5.6. Taxes.............................................................. -56-
5.7. Payments, Computations, etc........................................ -56-
5.8. Sharing of Payments................................................ -57-
5.9. Setoff............................................................. -58-
5.10. Use of Proceeds.................................................... -58-
-ii-
TABLE OF CONTENTS
continued
PAGE
----
ARTICLE VI.
CONDITIONS PRECEDENT..................................................... -58-
6.1. Effectiveness of Agreement and Initial Borrowing.................... -58-
6.1.1. Resolutions, etc........................................ -58-
6.1.2. Delivery of Notes....................................... -59-
6.1.3. Environmental Report.................................... -59-
6.1.4. Guaranties.............................................. -59-
6.1.5. Pledge Agreements....................................... -59-
6.1.6. Mortgages............................................... -60-
6.1.7. Security Agreements..................................... -61-
6.1.8. Opinions of Counsel..................................... -61-
6.1.9. UCC-11s................................................. -61-
6.1.10. Evidence of Insurance................................... -62-
6.1.11. Assignment of Overriding Royalty Interest, etc.......... -62-
6.1.12. Warrant Documents....................................... -62-
6.1.13. Engineering Reports..................................... -62-
6.1.14. [Not Used.]............................................. -62-
6.1.15. [Not Used.]............................................. -62-
6.1.16. Closing of Difco Acquisition............................ -62-
6.1.17. Closing under Burlington Agreement...................... -62-
6.1.18. Closing of Subordinated Note Sale, etc.................. -62-
6.1.19. Subordination Agreement................................. -63-
6.1.20. Amended and Restated Security Documents................. -63-
6.1.21. Material Contracts, Difco Consents and Related
Consents................................................ -63-
6.1.22. Title Reports........................................... -63-
6.1.23. Closing Fees, Expenses, etc............................. -63-
6.2. Inclusion of Hydrocarbon Interests in the Borrowing Base and the
Collateral Value................................................. -63-
6.2.1. Environmental Report.................................... -63-
6.2.2. Mortgage................................................ -63-
6.2.3. UCC-11s................................................. -64-
6.2.4. Evidence of Insurance................................... -64-
6.2.5. Engineering Reports..................................... -64-
6.2.6. Material Contracts and Related Consents................. -64-
6.2.7. Guaranties.............................................. -65-
-iii-
TABLE OF CONTENTS
continued
PAGE
----
6.2.8. Additional Stock Pledge................................. -65-
6.2.9. Other Documents......................................... -65-
6.3. All Credit Extensions............................................... -65-
6.3.1. Compliance with Warranties, No Default, etc............. -65-
6.3.2. Borrowing Request, etc.................................. -66-
6.3.3. Satisfactory Legal Form................................. -66-
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES........................................... -66-
7.1. Organization, etc................................................ -66-
7.2. Due Authorization, Non-Contravention, etc........................ -67-
7.3. Government Approval, Regulation, etc............................. -67-
7.4. Investment Company Act........................................... -67-
7.5. Public Utility Holding Company Act............................... -68-
7.6. Validity, etc.................................................... -68-
7.7. Financial Information............................................ -68-
7.8. No Material Adverse Change....................................... -68-
7.9. Litigation, Labor Controversies, etc............................. -68-
7.10. Ownership of Properties.......................................... -69-
7.11. Taxes............................................................ -69-
7.12. Pension and Welfare Plans........................................ -69-
7.13. Compliance with Law.............................................. -69-
7.14. Claims and Liabilities........................................... -69-
7.15. No Prohibition on Perfection of Security Documents............... -70-
7.16. Solvency......................................................... -70-
7.17. Environmental Warranties......................................... -70-
7.18. Year 2000 Compliance............................................. -72-
7.19. Regulations G, U and X........................................... -72-
7.20. Accuracy of Information.......................................... -73-
ARTICLE VIII.
COVENANTS................................................................ -73-
8.1. Affirmative Covenants............................................... -73-
8.1.1. Financial Information, Reports, Notices, etc............. -73-
8.1.2. Compliance with Laws, etc................................ -76-
-iv-
TABLE OF CONTENTS
continued
PAGE
----
8.1.3. Maintenance and Development of Properties................ -76-
8.1.4. Insurance................................................ -78-
8.1.5. Books and Records........................................ -78-
8.1.6. Environmental Covenant................................... -79-
8.1.7. Further Assurances....................................... -79-
8.1.8. Natural Gas and Crude Oil Hedging........................ -81-
8.1.9. Interest Rate Protection................................. -82-
8.1.10. Exchange Rate Protection................................ -82-
8.2. Negative Covenants.................................................. -82-
8.2.1. Business Activities...................................... -82-
8.2.2. Indebtedness............................................. -82-
8.2.3. Liens -84-
8.2.4. Financial Condition...................................... -85-
8.2.5. Investments.............................................. -85-
8.2.6. Restricted Payments, etc................................. -86-
8.2.7. Rental Obligations....................................... -86-
8.2.8. Consolidation, Merger, etc............................... -87-
8.2.9. Asset Dispositions, etc.................................. -87-
8.2.10. Modification of Certain Agreements...................... -87-
8.2.11. Transactions with Affiliates............................ -87-
8.2.12. Negative Pledges, Restrictive Agreements, etc........... -88-
8.2.13. Take or Pay Contracts................................... -88-
ARTICLE IX.
EVENTS OF DEFAULT........................................................ -88-
9.1. Listing of Events of Default........................................ -88-
9.1.1. Non-Payment of Obligations............................... -88-
9.1.2. Breach of Warranty....................................... -88-
9.1.3. Non-Performance of Certain Covenants and Obligations..... -89-
9.1.4. Non-Performance of Other Covenants and Obligations....... -89-
9.1.5. Default on Other Indebtedness............................ -89-
9.1.6. Judgments................................................ -89-
9.1.7. Pension Plans............................................ -90-
9.1.8. Control of the Borrowers................................. -90-
9.1.9. Bankruptcy, Insolvency, etc.............................. -90-
9.1.10. Impairment of Security, etc............................. -91-
9.1.11. Material Adverse Effect................................. -91-
-v-
TABLE OF CONTENTS
continued
PAGE
----
9.2. Action if Bankruptcy............................................. -91-
9.3. Action if Other Event of Default................................. -91-
9.4. Rights Not Exclusive............................................. -91-
ARTICLE X.
THE AGENT................................................................ -92-
10.1. Actions.......................................................... -92-
10.2. Funding Reliance, etc............................................ -92-
10.3. Exculpation...................................................... -93-
10.4. Successor........................................................ -93-
10.5. Loans or Letters of Credit Issued by BankAmerica................. -94-
10.6. Credit Decisions................................................. -94-
10.7. Copies, etc...................................................... -94-
ARTICLE XI.
MISCELLANEOUS PROVISIONS................................................. -94-
11.1. Waivers, Amendments, etc......................................... -94-
11.2. Notices.......................................................... -96-
11.3. Payment of Costs and Expenses.................................... -96-
11.4. Indemnification.................................................. -97-
11.5. Survival......................................................... -98-
11.6. Severability..................................................... -98-
11.7. Headings......................................................... -98-
11.8. Execution in Counterparts, Effectiveness, etc.................... -99-
11.9. Governing Law; Entire Agreement.................................. -99-
11.10. Successors and Assigns........................................... -99-
11.11. Sale and Transfer of Loans and Note; Participations in Loans and
Note............................................................. -99-
11.11.1. Assignments............................................ -99-
11.11.2. Participations......................................... -100-
11.12. Forum Selection and Consent to Jurisdiction...................... -101-
11.13. Waiver of Jury Trial............................................. -102-
11.14. Joint and Several Liability...................................... -102-
11.15. Certain Consents and Waivers..................................... -102-
11.16. Other Transactions............................................... -104-
11.17. Controlling Document............................................. -104-
-vi-
TABLE OF CONTENTS
continued
PAGE
----
11.18. Notice........................................................... -104-
-vii-
SCHEDULE I Disclosure Schedule
SCHEDULE II Subsidiaries
SCHEDULE III Title Properties (East Irish Sea Assets)
SCHEDULE IV Existing Mortgages
SCHEDULE V Form of Approved Development Plan
EXHIBIT A - Form of Note
EXHIBIT B-1 - Borrowing Request
EXHIBIT B-2 - Continuation/Conversion Notice
EXHIBIT C-1 - Form of Security Agreement
EXHIBIT C-2 - Form of Ratification of Security Agreement
EXHIBIT D-1 - Form of Guaranty
EXHIBIT D-2 - Form of Ratification of Guaranty
EXHIBIT E-1 - Forms of U.S. Mortgage and Amendments Thereto
EXHIBIT E-2 - Form of U.K. Mortgage
EXHIBIT F-1 - Form of Pledge Agreement (Stock)
EXHIBIT F-2 - Form of Amended and Restated Pledge Agreement
EXHIBIT F-3 - Form of Ratification of Pledge Agreement
EXHIBIT G - Form of Lender Assignment Notice
EXHIBIT H-1 - Form of Opinions of U.S. Counsel to the Borrowers and
the other Obligors
EXHIBIT H-2 - Form of Opinions of U.K. Counsel to the Borrowers and
the other Obligors
EXHIBIT I - Form of Opinions of Special Title Counsel to the
Borrowers
EXHIBIT J - Form of Issuance Request
EXHIBIT K - Irrevocable Standby Letter of Credit
EXHIBIT L - Form of Consent
EXHIBIT M - Form of Deed of Assignment of Overriding Royalty
Interest
EXHIBIT M-2 - Certificate as to Overriding Royalty Interests
EXHIBIT M-3 - Agreement as to Certain Tax Matters
EXHIBIT N - Form of Subordination Agreement
EXHIBIT O-1 - Form of Registration Rights Agreement
EXHIBIT O-2 - Form of Warrant Agreement
EXHIBIT O-3 - Form of Warrant Instrument
-viii-
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of October 26,
1998, among LATEX PETROLEUM CORPORATION, an Oklahoma corporation ("LPC"),
LATEX/GOC ACQUISITION, INC., a Delaware corporation ("GOCA"), GERMANY OIL
COMPANY, a Delaware corporation, formerly known as LRI Acquisition, Inc. ("New
GOC"), ALLIANCE RESOURCES (USA), INC., a Delaware corporation ("Alliance USA"),
SOURCE PETROLEUM, INC., a Louisiana corporation ("Source"; together with LPC,
GOCA, New GOC and Alliance USA, the "Original Borrowers"); and ALLIANCE
RESOURCES PLC, a public limited company incorporated under the laws of England
and Wales ("Alliance Plc") (the Original Borrowers and Alliance Plc,
collectively, the "Borrowers" and individually, a "Borrower"), the various
financial institutions as are now or may hereafter become parties hereto
(collectively, the "Lenders") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking association ("BankAmerica"), for itself and as
agent for the Lenders (in such capacity, the "Agent"),
W I T N E S S E T H:
WHEREAS, the Borrowers are engaged in the business of oil and gas
exploration and production, and activities related or ancillary thereto; and
WHEREAS, the Original Borrowers and BankAmerica are parties to that certain
Second Amended and Restated Credit Agreement dated as of March 14, 1997 (the
"Prior Agreement") pursuant to which BankAmerica made commitments to make loans
to the Original Borrowers from time to time prior to the applicable commitment
termination date and to issue letters of credit in maximum aggregate principal
amount of Loans at any one time not to exceed in the aggregate the lesser of (x)
the Borrowing Base, or (y) $21,000,000; and
WHEREAS, the Original Borrowers and BankAmerica are also parties to that
certain Amendment No. 1 to Second Amended and Restated Credit Agreement dated as
of September 29, 1997, that certain Amendment No. 2 to Second Amended and
Restated Credit Agreement dated as of October 31, 1997, that certain Amendment
No. 3 to Second Amended and Restated Credit Agreement dated as of March 9, 1998,
that certain Amendment No. 4 to Second Amended and Restated Credit Agreement
dated as of June 4, 1998, that certain Amendment No. 5 to Second Amended and
Restated Credit Agreement dated as of June 10, 1998, that certain Amendment No.
6 to Second Amended and Restated Credit Agreement dated as of July 31, 1998 and
that certain Amendment No. 7 to Second Amended and Restated Credit Agreement
dated as of August 17, 1998, pursuant to which the Prior
-2-
Agreement was amended (the Prior Agreement, as so amended, herein called the
"Existing Agreement"), and
WHEREAS, pursuant to the Commitments in the Existing Agreement, BankAmerica
made loans to the Original Borrowers and issued letters of credit at the request
of the Original Borrowers; and
WHEREAS, the Borrowers have requested that BankAmerica amend the Existing
Agreement and make Commitments to the Borrowers pursuant to which:
(a) Loans will be made to the Borrowers from time to time prior to the
applicable Commitment Termination Date; and
(b) Letters of Credit will be issued by the Issuer for the account of the
Borrowers from time to time prior to the Availability Termination Date;
in maximum aggregate principal amount of Loans and Letter of Credit Outstandings
at any one time not to exceed in the aggregate $55,000,000; and
WHEREAS, BankAmerica and the Lenders and the Issuer are willing, on the
terms and subject to the conditions hereinafter set forth (including Article
VI), to amend the Existing Agreement, to extend such Commitments, to make such
Loans to the Borrowers and to issue such Letters of Credit at the request of the
Borrowers; and
WHEREAS, the proceeds of such Loans have been and will be used
(a) to repay or refinance certain existing indebtedness;
(b) for working capital and general business purposes; and
(c) to finance the acquisition of the East Irish Sea Assets and
Approved Development Activities on the Oil and Gas Properties owned by the
Borrowers and their Subsidiaries; and
WHEREAS, the parties have agreed that it is in their respective best
interests to enter into this Agreement, amending, restating and superseding the
Existing Agreement,
NOW, THEREFORE, the parties hereto agree as follows:
-3-
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 DEFINED TERMS. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power
(a) to vote 10% or more of the securities (on a fully diluted basis)
having ordinary voting power for the election of directors or managing
general partners; or
(b) to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.
"Agent" is defined in the preamble and includes each other Person as shall
have subsequently been appointed as the successor Agent pursuant to Section
10.4.
"Agreement" means, on any date, this Third Amended and Restated Credit
Agreement as originally in effect on the Effective Date and as thereafter from
time to time amended, supplemented, amended and restated, or otherwise modified
and in effect on such date.
"Alliance Group" means Alliance Resources Group, Inc., a Delaware
corporation, a wholly-owned Subsidiary of Alliance Plc and the sole shareholder
of each of the Alliance US Subsidiaries.
"Alliance Plc" is defined in the Preamble and is the sole shareholder of
Alliance Group, Manx LRI and, after the Closing of the Difco Acquisition, will
be the sole shareholder of Difco.
"Alliance USA" is defined in the preamble.
"Alliance US Subsidiaries" means Alliance USA, Source, ARCOL and ARNO, each
a Subsidiary of Alliance Group.
-4-
"Alternate Base Rate" means, on any date and with respect to all Base Rate
Loans, a fluctuating rate of interest per annum equal to the higher of
(a) the rate of interest as announced from time to time by the Agent
as its "reference rate" at its Domestic Office; or
(b) the Federal Funds Rate most recently determined by the Agent plus
1/2%.
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest in connection with extensions of credit. Changes in the rate of
interest on that portion of any Loans maintained as Base Rate Loans will take
effect simultaneously with each change in the Alternate Base Rate. The Agent
will give notice to the Borrowers of changes in the Alternate Base Rate.
"Applicable Law" means with respect to any Person or matter, any federal,
state, regional, tribal or local statute, law, code, rule, treaty, convention,
application, order, decree, consent decree, injunction, directive, determination
or other requirement (whether or not having the force of law) relating to such
Person or matter and, where applicable, any interpretation thereof by an
Governmental Agency having jurisdiction with respect thereto or charged with the
administration or interpretation thereof.
"Applicable Margin" means, with respect to any Credit Extension of any type
and at any time of determination, a margin above the interest rate or fee
applicable to such type of Credit Extension determined as follows:
----------------------------------------------
Base Rate Loans LIBO Rate Loans
----------------------------------------------
Tranche A 0.00% 2.00%
----------------------------------------------
Tranche B 2.00% 4.00%
----------------------------------------------
Tranche C 5.00% 7.00%
----------------------------------------------
Notwithstanding the foregoing,
(a) after any Borrowing Base Deficiency or Collateral Value
Deficiency has existed for sixty (60) consecutive days, the Applicable
Margins set forth above shall increase by 3.00% until such Borrowing Base
Deficiency and/or Collateral Value Deficiency, as the case may be, have
been eliminated;
(b) while any Tranche B Loan is outstanding, the Applicable Margins
set forth above for all Tranche A Loans shall be increased by an additional
0.50%; and
-5-
(c) while any Tranche B Loan is outstanding, the Applicable Margins
set forth above for all Tranche B Loans shall increase by 0.50% semi-
annually on April 26th and on October 26th of each year.
"Approvals" means each and every approval, authorization, license, permit,
consent, variance, land use entitlement, franchise, agreement, filing or
registration by or with any Government Agency or other Person necessary for all
stages of developing, operating, maintaining and abandoning Oil and Gas
Properties.
"Approved Development Activities" means the Borrowers' program of
additional development drilling, workover or recompletion work or any other
Capital Expenditures on the Mortgaged Properties, in each case as the Agent may
approve in the Approved Development Plan.
"Approved Development Plan" means the Borrower's plan, as approved by the
Agent, for conducting Approved Development Activities on the Mortgaged
Properties.
"ARCOL" means ARCOL Inc., a Delaware corporation, and one of the Alliance
US Subsidiaries.
"ARNO" means ARNO Inc., a Delaware corporation, and one of the Alliance US
Subsidiaries.
"Assignee Lender" is defined in Section 11.11.1.
"Assignment" means the Deed of Assignment of Overriding Royalty Interest
from Difco to the Designee, assigning to the Designee, as additional
consideration for the making of the Tranche B Commitments by the Lenders and not
as collateral security for the Loans, overriding royalty interests in certain of
its Hydrocarbon Interests.
"Authorized Officer" means, relative to any Obligor, those of its officers
or other authorized signatories whose signatures and incumbency shall have been
certified to the Agent and the Lenders pursuant to Section 6.1.1.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"Borrower" or "Borrowers" is defined in the preamble.
"Borrowing" means the Loans of the same type and, in the case of LIBO Rate
Loans, having the same Interest Period made by all Lenders on the same Business
Day and pursuant to the same Borrowing Request in accordance with Section 2.1.
-6-
"Borrowing Base" means, as at any date, (a) prior to the initial Borrowing
Base Redetermination described in Section 2.6(c), $18,500,000 and (b)
thereafter, that amount of Indebtedness for borrowed money under the Tranche A
Facility that the Agent determines can be supported by the Proven Reserves
attributable to Hydrocarbon Interests owned directly by the Borrowers or their
Subsidiaries which are a part of the Mortgaged Properties, after an engineering
and economic review of such reserves conducted by the Agent using its normal
procedures for oil and gas facilities of this type, taking into account, among
other things, (x) the value of all those proved developed producing oil and gas
reserves and certain portions of certain other categories of Proven Reserves
attributable to the Mortgaged Properties, and (y) historical averages of lease
operating expenses and workover expenses over the preceding 12 months with
respect to such Properties.
"Borrowing Base Deficiency" means the amount by which (a) the sum of the
aggregate outstanding principal amount of all Tranche A Loans plus Letter of
Credit Outstandings exceeds (b) the then current Borrowing Base.
"Borrowing Base Deficiency Notification Date" means the date on which any
notice of a Borrowing Base Deficiency is received by the Borrower.
"Borrowing Base Redetermination" is defined in Section 2.6.
"Borrowing Request" means a loan request and certificate duly executed by
an Authorized Officer of any Borrower, substantially in the form of Exhibit B-1
hereto.
"Burlington" means Burlington Resources (Irish Sea) Limited.
"Burlington Agreement" means that certain Sale and Purchase Agreement dated
as of June 29, 1998, as amended October 5, 1998, between Difco and Burlington,
pursuant to which Difco will acquire the East Irish Sea Assets.
"Business Day" means
(a) any day which is neither a Saturday or Sunday nor a legal holiday
nor any other day on which banks are authorized or required to be closed in
Chicago, Illinois; and
(b) relative to the making, continuing, prepaying or repaying of any
LIBO Rate Loans, any day on which dealings in Dollars are carried on in the
London interbank market.
"Capital Expenditures" means, for any period, (without duplication) the
aggregate amount of all expenditures of Alliance Plc and its consolidated
Subsidiaries for fixed or capital assets made during such period which, in
accordance with GAAP,
-7-
would be classified as capital expenditures including, with respect to any
period, payments made by Alliance Plc and its consolidated Subsidiaries with
respect to Capitalized Lease Liabilities incurred during such period.
"Capitalization" means, at any time, the sum of (a) the total Debt of
Alliance Plc and its consolidated Subsidiaries plus (b) the total equity of
Alliance Plc and its consolidated Subsidiaries.
"Capitalized Lease Liabilities" means all monetary obligations of Alliance
Plc or any of its consolidated Subsidiaries under any leasing or similar
arrangement which, in accordance with GAAP, would be classified as capitalized
leases, and, for purposes of this Agreement and each other Loan Document, the
amount of such obligations shall be the capitalized amount thereof, determined
in accordance with GAAP.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one year
after the date such investment is made, issued or guaranteed by the United
States Government;
(b) commercial paper, maturing not more than twelve months from the
date of issue, which is issued by
(i) a corporation (other than an Affiliate of any Borrower)
organized under the laws of any state of the United States or of the
District of Columbia and rated at least A-1 by Standard & Poor's
Corporation or P-1 by Xxxxx'x Investors Service, Inc., or
(ii) a Lender;
(c) any certificate of deposit, eurodollar time deposit or bankers
acceptance, maturing not more than one year after such time, which is
issued by
(i) a commercial banking institution that is a member of the
Federal Reserve System, an authorized institution under the Banking
Xxx 0000 or is authorized under the Banking Act (United Kingdom) and
has a combined capital and surplus and undivided profits of not less
than $500,000,000, or
(ii) a Lender; or
(d) any repurchase agreement entered into with a Lender (or other
commercial banking institution of the stature referred to in clause (c))
which
-8-
(i) is secured by a fully perfected security interest in any
obligation of the type described in any of clauses (a) through (c);
and
(ii) has a market value at the time such repurchase agreement
is entered into of not less than 100% of the repurchase obligation of
a Lender (or other commercial banking institution) thereunder.
"Cash Interest Expense" means, at any time of determination, Interest
Expense less the amount of interest on the Subordinated Notes which is accrued
and is not then paid, but is added to principal; provided, that Cash Interest
Expense shall exclude amortization charges and fees and any other non-cash
interest charges which would otherwise be included in Interest Expense according
to GAAP.
"Celtic" means Celtic Basin Oil Exploration Ltd., a company incorporated
under the laws of England and Wales, and a wholly-owned Subsidiary of Manx.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Change in Control" means if (a) any Person or "group" (as defined in the
Securities Exchange Act of 1934) other than (i) Xxxx X. Xxxxxx, (ii) Difco
Holders, (iii) any trust existing solely for the benefit of the above
individuals or the estate or any executor, administrator, conservator, or other
legal representative of any of the above individuals or (iv) EnCap shall own
directly or indirectly greater than 33 1/3% of the issued and outstanding voting
share capital of Alliance Plc, (b) Alliance Plc shall fail beneficially to own
100% of the outstanding shares of the voting capital stock of Alliance Group,
Manx, LRI, or, after the Difco Acquisition, Difco, on a fully-diluted basis, (c)
LRI shall fail beneficially to own 100% of the outstanding shares of the voting
capital stock of LPC, GOCA, New GOC or Enpro, on a fully diluted basis, (d)
Alliance Group shall fail beneficially to own 100% of the outstanding shares of
the voting capital stock of Source, ARNO, ARCOL or Alliance USA, on a fully
diluted basis, or (e) during the period from the date of one annual general
meeting of Alliance Plc to the next annual meeting, beginning with the 1998
annual general meeting (now scheduled for November 1998) individuals who at the
beginning of such period were members of the Board of Directors of Alliance Plc
shall cease for any reason to constitute a majority of the members of the Board
of Directors of Alliance Plc.
"Code" means the U.S. Internal Revenue Code of 1986, as amended, reformed
or otherwise modified from time to time, and the regulations promulgated
thereunder.
-9-
"Collateral Value" shall mean, as at any date, (a) prior to the initial
Collateral Value Redetermination, $50,000,000 and (b) thereafter, the quotient
of (i) the projected net future cash flow, discounted at ten percent (10%) per
annum, from the anticipated production of Hydrocarbons from Proven Reserves
attributable to Hydrocarbon Interests owned directly by the Borrowers or one of
the Borrowers' Subsidiaries which are a part of the Mortgaged Properties, after
an engineering and economic review of such reserves conducted by the Lender
taking into account the value of all those proved developed producing oil and
gas reserves and all other categories of Proven Reserves attributable to the
Mortgaged Properties, divided by (ii) 1.5, for the period commencing with the
Effective Date and ending on December 31, 2001, and 1.65 at all times
thereafter; provided that if additional Oil and Gas Properties are acquired
totally or partly in consideration of the issuance by any Borrower to the
transferror of such Properties of equity interests in such Borrower, then such
amount shall be increased by the Agent to reflect the addition of such
Properties, in no event to exceed 1.65.
"Collateral Value Deficiency" means the amount by which (a) the sum of the
aggregate outstanding principal amount of all Tranche A Loans plus all Tranche B
Loans plus all Letter of Credit Outstandings exceeds (b) the then current
Collateral Value.
"Collateral Value Deficiency Notification Date" shall mean the date on
which any notice of a Collateral Value Deficiency is received by the Borrower.
"Collateral Value Redetermination" is defined in Section 2.6.
"Commitment" means, relative to any Lender, such Lender's obligation
pursuant to Section 2.1 to make Tranche A Loans, Tranche B Loans and/or Tranche
C Loans, as applicable, to the Borrower and to issue (in the case of an Issuer)
or participate in (in the case of BankAmerica) Letters of Credit pursuant to
Section 2.1.3.
"Commitment Amount" means, on any date, the Tranche A Commitment Amount
and/or the Tranche B Commitment Amount and/or the Tranche C Commitment Amount,
as the case may be, as such amounts may be reduced from time to time pursuant to
Section 2.2.
"Commitment Availability" means, on any date, the excess of
(a) the then applicable Commitment Amount,
over
(b) the sum of
-10-
(i) the aggregate outstanding principal amount of all
applicable Loans on such date, plus
(ii) all Letter of Credit Outstandings on such date.
"Commitment Termination Date" means the earliest of
(a) the Stated Maturity Date;
(b) the date on which the Tranche A Commitment Amount and/or the
Tranche B Commitment Amount and/or the Tranche C Commitment Amount, as
applicable, is terminated in full or reduced to zero pursuant to Section
2.2; and
(c) the date on which any Commitment Termination Event occurs.
"Commitment Termination Event" means
(a) the occurrence of any Default described in clauses (a) through
(d) of Section 9.1.9 with respect to any Borrower or any Subsidiary; or
(b) the occurrence and continuance of any other Event of Default and
either
(i) the declaration of the Loans and other Obligations to be
due and payable pursuant to Section 9.3, or
(ii) in the absence of such declaration, the giving of notice
by the Agent to any Borrower that the Commitments have been
terminated.
"Consents" means a Consent to Assignment executed and delivered pursuant to
Section 6.1.6 and Section 6.2.6, substantially in the form of Exhibit L, or such
other form as may be appropriate in a jurisdiction other than the U.S. or a
state thereof, and in each case, as amended, supplemented, restated or otherwise
modified from time to time pursuant to which the Borrowers' (or the applicable
Subsidiaries') counterparty to each Material Contract (i) consents to the
assignment of each such Material Contract to the Agent as security for the
Obligations and (ii) provides the Agent an independent right to cure defaults
under such Material Contract.
"Consolidated Net Income" means, with respect to Alliance Plc and its
consolidated Subsidiaries for any period, the consolidated net income (or loss)
of Alliance Plc and its consolidated Subsidiaries for such period determined in
accordance with GAAP.
-11-
"Contingent Liability" means as to any Person, any direct or indirect
liability of that Person, whether or not contingent, with or without recourse,
(a) with respect to any Indebtedness, lease, dividend, letter of credit or other
obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person (i) to purchase, repurchase
or otherwise acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such primary
obligation, or to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof (each, a "Guaranty Obligation"); (b) with respect to any Surety
Instrument issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings or payments; or (c) to purchase
any materials, supplies or other property from, or to obtain the services of,
another Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property, or for
such services, shall be made regardless of whether delivery of such materials,
supplies or other property is ever made or tendered, or such services are ever
performed or tendered.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of any
Borrower, substantially in the form of Exhibit B-2 hereto.
"Controlled Group" means all members of a controlled group of corporations
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with any Borrower, are
treated as a single employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA.
"Convertible Loan Notes (1997)" means the (Pounds)873,281.25 nominal amount
of convertible non-interest bearing, subordinated, unsecured loan notes
1997/2007 of Alliance Plc consisting of 1,078,125 notes of 81p each issued to
the Designee pursuant to the Prior Agreement.
"Core Difco Assets" means the portion of the East Irish Sea Assets, as
shown on Schedule III under the heading "Core Difco Assets" consisting of six
(6) blocks.
"Credit Extension" means and includes:
(a) the advancing of any Loans by the Lenders in connection with a
Borrowing, and
-12-
(b) any issuance by an Issuer or extension of the Stated Expiry Date
by an Issuer of a Letter of Credit.
"Current Ratio" means, as of the end of each Fiscal Quarter, the ratio of
(a) the current assets (including the unused portion of the
Commitment Amount) of Alliance Plc and its consolidated Subsidiaries
to
(b) the current liabilities (minus (i) the current portion of their
long term Debt and (ii) the Old LaTex Payables) of Alliance Plc and its
consolidated Subsidiaries.
"Debt" means the outstanding principal amount of all Indebtedness of
Alliance Plc and its consolidated Subsidiaries, of the nature referred to in
clauses (a) and (b) of the definition of "Indebtedness," but excluding the
Convertible Loan Notes (1997).
"Debt to EBITDA Ratio" means, for any four (4) consecutive Fiscal Quarters,
the ratio of (a) Debt of Alliance Plc and its consolidated Subsidiaries for such
four (4) Fiscal Quarters to (b) EBITDA of Alliance Plc and its consolidated
Subsidiaries for such four (4) Fiscal Quarters.
"Default" means any Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Designee" is defined in Section 3.5.
"Difco" means, Difco Limited, a private limited company incorporated under
the laws of England and Wales. Pursuant to the Burlington Agreement, Difco will
acquire the East Irish Sea Assets. Pursuant to the Difco Agreement, Alliance
Plc will acquire all of the capital stock of Difco.
"Difco Acquisition" means the acquisition of all of the capital stock of
Difco by Alliance Plc pursuant to the Difco Agreement.
"Difco Agreement" means that certain Amended and Restated Sale and Purchase
Agreement dated as of September 23, 1998, between the Difco Holders and Alliance
Plc, pursuant to which Alliance Plc will purchase all of the capital stock of
Difco.
"Difco Consents" means all consents, waivers and approvals required in
order to permit (a) the transfer of the East Irish Sea Assets from Burlington to
Difco; (b) the granting of Liens encumbering the East Irish Sea Assets from
Difco to the Agent; and
-13-
(c) the transfer of the Overriding Royalty Interests to the Designee by the
Assignment.
"Difco Holders" means X. Xxx Xxxxxx, Jr., Lizinka X. Xxxxxx, X. Xxx Xxxxxx
III, Lizinka X. Xxxxxx and Xxxxx X. Xxxxxx, being those parties owning all of
the capital stock of Difco, and who have agreed to sell such stock to Alliance
Plc pursuant to the Difco Agreement.
"Disbursement" means the amount disbursed by the Issuer on a Disbursement
Date.
"Disbursement Date" is defined in Section 4.3.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrowers with the written consent of the Agent.
"Distribution Payments" is defined in Section 8.2.6.
"Dollar" and the sign "$" mean lawful money of the United States.
"Domestic Office" means the office of any Lender designated as such on its
signature page hereto or designated in a Lender Assignment Notice or such other
office of such Lender (or any successor or assign of such Lender) within the
United States as may be designated from time to time by notice from such Lender,
as the case may be, to each other Person party hereto.
"East Irish Sea Assets" means those Oil and Gas Properties and related
assets to be acquired by Difco from Burlington pursuant to the Burlington
Agreement, including an undivided 10% of Burlington's interest in those
Hydrocarbon Interests described in Schedule III.
"EBITDA" means, for any period, the sum, without duplication, of the
following:
(a) Consolidated Net Income for such period, plus
(b) Interest Expense for such period, plus
(c) all depletion, depreciation and amortization of assets (including
goodwill and other intangible assets) of Alliance Plc and its consolidated
Subsidiaries deducted in determining Consolidated Net Income for such period,
plus (minus)
-14-
(d) all federal, state, local and foreign income taxes of Alliance Plc and
its consolidated Subsidiaries deducted (or credits added) in determining
Consolidated Net Income for such period, plus (minus)
(e) other non-cash items deducted or added in determining Consolidated Net
Income for such period.
"Effective Date" means the date this Agreement becomes effective pursuant
to Section 11.8.
"EnCap" means EnCap 1996 and EnCap PLC.
"EnCap 1996" means EnCap Equity 1996 Limited Partnership.
"EnCap Investment" means Energy Capital Investment Company PLC.
"Engineering Report" means one or more reports, in form and substance
satisfactory to the Agent, prepared at the sole cost and expense of the
Borrowers by a petroleum engineer acceptable to the Agent in its reasonable
business judgment, which shall evaluate the Proven Reserves and probable
reserves attributable to the Hydrocarbon Interests owned directly by the
Borrowers and/or their Subsidiaries and constituting part of the Mortgaged
Properties, as of the immediately preceding May 1st or November 1st. Each
Engineering Report shall set forth volumes, a projection of the future rate of
production, Hydrocarbons prices, escalation rates, estimated costs of Remedial
Action, operating expenses, capital expenditures, discount rate assumptions and
the present value of the net proceeds of production, in each case based upon
updated economic assumptions reasonably acceptable to the Agent.
"Enpro" means ENPRO, INC., a Texas corporation and a wholly-owned
subsidiary of LRI.
"Environmental Laws" means all Applicable Laws relating to public health
and safety through protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.
"Event of Default" is defined in Section 9.1.
"Existing Agreement" is defined in the Third Recital.
-15-
"Facility" means the Tranche A Facility and/or the Tranche B Facility
and/or the Tranche C Facility, as the case may be.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor,
"H.15(519)") on the preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so published on any
such preceding Business Day, the rate for such day will be the arithmetic mean
as determined by the Agent of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by
each of three leading brokers of Federal funds transactions in New York City
selected by the Agent.
"Fee Letter" means that certain letter dated October 26, 1998, between
Alliance Plc and the Agent.
"Fiscal Quarter" means any quarter ending on the last day of April, July,
October and January of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive calendar months ending
on April 30; references to a Fiscal Year with a number corresponding to any
calendar year (e.g., "Fiscal Year 1998") refer to the Fiscal Year ending on the
April 30 occurring during such calendar year.
"F.R.S. Board" means the Board of Governors of the Federal Reserve System
or any successor thereto.
"GAAP" is defined in Section 1.4.
"GOC" means Germany Oil Company, a Texas corporation, which has merged with
and into New GOC, which in turn has changed its name to "Germany Oil Company".
"GOCA" is defined in the preamble.
"Government Agency" means any federal, state, regional, tribal or local
government or governmental department or other entity charged with the
administration, interpretation or enforcement of any Applicable Law.
"Guaranties" means the guaranties of the Obligations, executed and
delivered pursuant to Sections 6.1.4 and 6.2.7, substantially in the form of
Exhibit D-2, given by each of LRI, Enpro and Alliance Group, and substantially
in the form of Exhibit D-1, given by Xxxxx.
-00-
"Xxxxxxxxxx" means Alliance Group, LRI, Enpro and Difco.
"Hazardous Material" means:
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource Conservation
and Recovery Act, as amended;
(c) any petroleum, crude oil or fraction thereof;
(d) any hazardous, dangerous or toxic chemical, material, waste or
substance within the meaning of any Environmental Law;
(e) any radioactive material, including any naturally occurring
radioactive material, and any source, special or by-product material as
defined in 42 U.S.C. (S) 2011 et seq., and any amendments or
reauthorizations thereof;
(f) friable asbestos-containing materials; or
(g) polychlorinated biphenyls in concentrations above regulatory
limits.
"Hedging Agreements" means:
(a) interest rate swap agreements, basis swap agreements, interest
rate cap agreements, forward rate agreements, interest rate floor
agreements and interest rate collar agreements, and all other agreements or
arrangements designed to protect such Person against fluctuations in
interest rates or currency exchange rates, and
(b) forward contracts, options, futures contracts, futures options,
commodity swaps, commodity options, commodity collars, commodity caps,
commodity floors and all other agreements or arrangements designed to
protect such Person against fluctuations in the price of commodities.
"Hedging Obligations" means, with respect to any Person, all liabilities
(including but not limited to obligations and liabilities arising in connection
with or as a result of early or premature termination of a Hedging Agreement,
whether or not occurring as a result of a default thereunder) of such Person
under a Hedging Agreement.
"herein", "hereof", "hereto", "hereunder" and similar terms contained in
this Agreement or any other Loan
-17-
Document refer to this Agreement or such other Loan Document, as the case may
be, as a whole and not to any particular Section, paragraph or provision of this
Agreement or such other Loan Document.
"Highest Lawful Rate" is defined in Section 3.2.4.
"Hydrocarbon Interests" means all rights, titles and interests in and to
oil and gas leases; oil, gas and mineral leases; other Hydrocarbon leases;
Hydrocarbon production licenses; mineral interests; mineral servitudes;
overriding royalty interests; royalty interests; net profits interests;
production payment interests; and other similar interests.
"Hydrocarbons" means, collectively, oil, gas, casinghead gas, drip
gasoline, natural gasoline, condensate, distillate and all other liquid or
gaseous hydrocarbons and related minerals and all products therefrom, in each
case whether in a natural or a processed state.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial statement
of any Borrower, any qualification or exception to such opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of matters
relevant to such financial statement;
(c) which relates to the treatment or classification of any item in
such financial statement and which, as a condition to its removal, would
require an adjustment to such item the effect of which would be to cause
any Borrower to be in default of any of its obligations under Section
8.2.4; or
(d) which relates to possible errors generated by financial reporting
and related systems due the Year 2000 Problem.
"including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of ejusdem generis
shall not be applicable to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
-18-
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes (including
the Subordinated Notes) or other similar instruments;
(b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such Person;
(c) all other items which, in accordance with GAAP, would be included
as liabilities on the liability side of the balance sheet of such Person as
of the date at which Indebtedness is to be determined;
(d) net liabilities of such Person under all Hedging Obligations;
(e) all net monetary obligations of such Persons with respect to
Production Payments;
(f) all Capitalized Lease Liabilities;
(g) whether or not so included as liabilities in accordance with
GAAP, all obligations of such Person to pay the deferred purchase price of
property or services, and indebtedness (excluding prepaid interest thereon)
secured by a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or other title
retention agreements), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse; and
(h) all Contingent Liabilities of such Person.
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer , unless such Indebtedness contains non-
recourse provisions acceptable to the Agent set forth in the agreements
regarding such Indebtedness.
"Indemnified Liabilities" is defined in Section 11.4.
"Indemnified Parties" is defined in Section 11.4.
"Interest Coverage Ratio" means, for any four (4) consecutive Fiscal
Quarters (or other period as set forth in Section 8.2.4), the ratio of (a)
EBITDA for such Fiscal Quarters to (b) Cash Interest Expense for such Fiscal
Quarters.
-19-
"Interest Expense" means, for any period, the consolidated interest expense
of Alliance Plc and its consolidated Subsidiaries for such period (including all
imputed interest under Hedging Agreements, but excluding all fees paid under
Section 3.3) including the interest expense associated with any Capitalized
Lease Liabilities of Alliance Plc and its consolidated Subsidiaries.
"Interest Period" means, relative to any LIBO Rate Loan, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or 2.4
and ending on (but excluding) the day which numerically corresponds to such date
one, three or six months thereafter (or, if for a period of less than one month
or if such month has no numerically corresponding day, on the last Business Day
of such month), in each case as the Borrowers may select in its relevant notice
pursuant to Section 2.3 or 2.4; provided, however, that:
(a) no more than five different Interest Periods may be in effect at
any time;
(b) Interest Periods commencing on the same date for Loans comprising
part of the same Borrowing shall be of the same duration;
(c) if such Interest Period would otherwise end on a day which is not
a Business Day, such Interest Period shall end on the next following
Business Day (unless, if such Interest Period applies to LIBO Rate Loans,
such next following Business Day is the first Business Day of another
calendar month, in which case such Interest Period shall end on the
Business Day next preceding such numerically corresponding day);
(d) no Interest Period may end later than the Stated Maturity Date;
and
(e) the Borrowers shall select each Interest Period for a particular
LIBO Rate Loan so as not to require (as reasonably foreseeable as possible)
a prepayment of such LIBO Rate Loan during such Interest Period.
"Investment" means, relative to any Person,
(a) any loan or advance made by such Person to any other Person
(excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business and excluding prepaid
expenses incurred in the ordinary course of business);
(b) any Contingent Liability of such Person; and
-20-
(c) any ownership or similar interest held by such Person in any
other Person; provided, however, that (i) Hedging Obligations and (ii)
Production Payments where a Borrower or its Subsidiary is the grantor or
transferror thereof shall not be considered Investments.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property.
"Issuance Request" means a request for the issuance of a Letter of Credit
and certificate duly executed by the chief executive, accounting or financial
Authorized Officer of the Borrowers, in substantially the form of Exhibit J
attached hereto (with such changes thereto as may be agreed upon from time to
time by the Agent and the Borrowers).
"Issuer" means BankAmerica (or affiliate, unit or agency of BankAmerica),
in its capacity as the issuer of Letters of Credit at the request of Agent.
"Lender Assignment Notice" means a Lender Assignment Notice substantially
in the form of Exhibit G hereto.
"Lenders" is defined in the preamble.
"Letter of Credit" is defined in Section 4.1.
"Letter of Credit Availability" means, at any time, the lesser of:
(a) the excess of
(i) $1,000,000
over
(ii) the then Letter of Credit Outstandings,
or
(b) the Tranche A Commitment Amount at such time less the sum of (i)
any Tranche A Loans then outstanding at such time and (ii) any Letter of
Credit Outstandings at such time.
"Letter of Credit Outstandings" means, at any time, an amount equal to the
sum of:
-21-
(a) the aggregate Stated Amount at such time of all Letters of Credit
then outstanding and undrawn (as such aggregate Stated Amount shall be
adjusted, from time to time, as a result of drawings, the issuance of
Letters of Credit, or otherwise),
plus
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations.
"LIBO Rate" means, with respect to each Interest Period for a LIBO Rate
Loan, the rate of interest equal to the average (rounded upward, if necessary,
to the nearest 1/16th of 1%) of the rates per annum at which Dollar deposits in
immediately available funds are offered to the Agent's LIBOR Office in the
London interbank market as at or about 11:00 a.m. London time two (2) Business
Days prior to the beginning of such Interest Period for Dollar deposits of
amounts comparable to the outstanding principal amount of the LIBO Rate Loan for
which an interest rate is then being determined with maturities comparable to
the Interest Period to be applicable to such LIBO Rate Loan.
"LIBO Rate Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate.
"LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any Interest
Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of
1%) determined pursuant to the following formula:
LIBO Rate = LIBO Rate
-------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate
Loans will be determined by the Agent on the basis of the LIBOR Reserve
Percentage in effect on, and the applicable rates furnished to and received by
the Agent, two Business Days before the first day of such Interest Period.
"LIBOR Office" means, relative to any Lender, the office of such Lender
designated as such on the signature page hereto or designated in a Lender
Assignment Notice or such other office of a Lender (or any successor or assign
of such Lender) as designated from time to time by notice from such Lender to
the Borrowers, whether or not outside the United States, which shall be making
or maintaining LIBO Rate Loans of the Lender hereunder.
-22-
"LIBOR Reserve Percentage" means, relative to any Interest Period for LIBO
Rate Loans, the reserve percentage (expressed as a decimal) equal to the maximum
aggregate reserve requirements (including all basic, emergency, supplemental,
marginal and other reserves and taking into account any transitional adjustments
or other scheduled changes in reserve requirements) specified under regulations
issued from time to time by the F.R.S. Board and then applicable to assets or
liabilities consisting of and including "Eurocurrency Liabilities", as currently
defined in Regulation D of the F.R.S. Board, having a term approximately equal
or comparable to such Interest Period.
"Lien" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or otherwise), charge against or interest in Property to secure (i)
the payment of a debt or (ii) the performance of an obligation or other priority
or preferential arrangement of any kind or nature whatsoever in respect of any
Property (including those created by, arising under or evidenced by any
conditional sale or other title retention agreement, the interest of a lessor
under a capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any financing
statement naming the owner of the asset to which such lien relates as debtor,
under the Uniform Commercial Code or any comparable law) and any contingent or
other agreement to provide any of the foregoing.
"Loan" means each loan made by a Lender to the Borrowers from time to time
pursuant to its Commitment in accordance with Sections 2.1. and 2.3.
"Loan Documents" means this Agreement, the Notes, the Security Documents,
the Warrant Documents, the Assignment, all Letters of Credit, all Hedging
Agreements and all other agreements relating to this Agreement entered into from
time to time between any Borrower (or any Subsidiary or other Affiliate of any
Borrower) and the Agent or any Lender (or any Subsidiary or other Affiliate of
any Lender).
"LPC" is defined in the preamble.
"LRI" means LaTex Resources, Inc., a Delaware corporation and the sole
shareholder of LPC, GOCA, New GOC and Enpro.
"LRI Merger" means the merger of Alliance Resources (Delaware) Inc. with
and into LRI whereby Alliance Plc became the sole shareholder of LRI.
"MMBtu" means one million British Thermal Units.
-23-
"Manx" means Manx Petroleum Plc, a company incorporated under the laws of
England and Wales, and a wholly-owned subsidiary of Alliance Plc.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise), prospects, or results of operations of Alliance Plc
and its Subsidiaries on a consolidated basis, or the value or condition of the
Properties of Alliance Plc and its Subsidiaries on a consolidated basis; or (b)
a material adverse effect upon (i) the legality, validity, binding effect or
enforceability against the Borrowers, their Subsidiaries or any other Obligor of
any Loan Document, or (ii) the perfection or priority of any Lien granted under
any of the Loan Documents to the extent such Lien pertains to any Property
having more than immaterial value.
"Material Contract" means each agreement for the acquisition of Oil and Gas
Properties entered into by an Obligor, Hydrocarbon purchase and sale agreement,
or similar material contract relating to any Hydrocarbon Interests included in
the Mortgaged Properties, including, without limitation, the Burlington
Agreement, in each case pertaining to Hydrocarbon Interests then included in the
calculation of the Borrowing Base or the Collateral Value (or proposed by the
Borrowers for inclusion) and as designated by the Agent to the Borrowers in
writing.
"Material Subsidiary" means at any particular time, any Subsidiary (i) that
has assets included in the Borrowing Base or the Collateral Value; or (ii) that,
together with its Subsidiaries,
(a) accounted for more than 5% of the consolidated revenues of
Alliance Plc and its Subsidiaries for the most recently completed Fiscal
Quarter (computed on a retroactive proforma basis with respect to acquired
Subsidiaries), or
(b) was the owner of more than 5% of the consolidated assets of
Alliance Plc and its Subsidiaries at the end of such Fiscal Quarter or,
with respect to acquired or newly formed Subsidiaries, on the date of
acquisition or formation of such acquired Subsidiary, all as shown in the
case of (a) and (b) on the consolidated financial statements of Alliance
Plc and its Subsidiaries for such Fiscal Quarter or on such acquisition or
formation date; or
(c) that is designated by the Borrowers in writing as a Material
Subsidiary, or
(d) is determined by the Agent in writing to be a Material
Subsidiary.
"Mortgage Consents" means all consents required under existing oil and gas
leases or other agreements and Approvals by Government Agencies to the granting
-24-
of any Mortgage to the Agent, and as reasonably determined by the Agent with
respect to Properties that become Mortgaged Properties on or after the Effective
Date.
"Mortgaged Properties" is defined in Section 6.1.6.
"Mortgages" means the Mortgage, Deed of Trust, Assignment, Security
Agreement and Financing Statement, the Amended and Restated Mortgage, Deed of
Trust, Assignment, Security Agreement and Financing Statement, the First
Supplemental Mortgage, Deed of Trust, Assignment, Security Agreement, Financing
Statement and Fixture Filing, and any similar instruments, executed and
delivered pursuant to Sections 6.1.6 or 6.2.2, substantially in the form(s) of
Exhibit E hereto, together with any similar instruments which are governed by
the laws of a jurisdiction other than the United States or a state thereof, in
each case as amended, supplemented, restated or otherwise modified from time to
time.
"Net Proceeds of Production" means the difference between (a) the sum of
(w) all revenue received by or credited to the account of the Borrowers from the
sale of Hydrocarbons and other minerals in, under or produced after October 1,
1998, from their Oil and Gas Properties, (x) all net proceeds from Hedging
Agreements entered into pursuant to Section 8.1.8, and (y) all amounts received
by the Borrowers or any of them, in their respective capacities as operators of
certain Oil and Gas Properties, from other working interest owners pursuant to
"Article III - Overhead" of the XXXXX form of Accounting Procedure (and similar
agreements or provisions) attached to operating agreements pertaining to such
Properties and (b) the sum of (i) royalties, overriding royalties, net profits
interests and other existing burdens payable out of production, (ii) actual
leasehold operating expenses, (iii) severance, ad valorem, excise and windfall
profit taxes or other government taxes or similar levies or impositions
hereinafter enacted or imposed, (iv) actual workover expenses (but not Capital
Expenditures) for the Mortgaged Properties which are necessary to maintain
production from existing completion intervals or zones in existing xxxxx, and
from xxxxx and intervals or zones which become producing xxxxx, intervals or
zones, as the case may be, as a result of Approved Development Activities and
(v) all net payments made in respect of the Hedging Agreements entered into
pursuant to Section 8.1.8, in each case to the extent such deductions are
properly allocable to the Borrowers' Oil and Gas Properties.
"New GOC" is defined in the preamble.
"Non-Redeemable Stock" means stock issued by Alliance Plc, any other
Borrower or any of their Subsidiaries, provided that such stock is not
considered debt for GAAP, tax law or any other purpose and provided further that
none of Alliance Plc, the other Borrowers nor any of their Subsidiaries has any
obligation to redeem or purchase or pay dividends on such stock or to exchange
such stock for, or convert
-25-
such stock to, any other security, whether such obligation arises pursuant to
the terms of such stock or any other agreement relating thereto or otherwise and
whether or not such obligation exists in all circumstances or only upon the
occurrence of a particular event or condition or upon the passage of time or
otherwise.
"Notes" means the secured promissory note or notes of the Borrowers payable
to the order of a Lender, in the form of Exhibit A hereto (as such promissory
note may be amended, endorsed or otherwise modified from time to time),
evidencing the aggregate Indebtedness of the Borrowers to such Lender resulting
from outstanding Loans, and also means all other promissory notes accepted from
time to time in substitution therefor or renewal thereof.
"Obligations" means all obligations (monetary or otherwise) of the
Borrowers and/or any other Obligor arising under or in connection with this
Agreement, the Notes and each other Loan Document, including without limitation,
all Hedging Obligations arising under Hedging Agreements between any Borrower
(or any Affiliate of any Borrower) and a Lender (or any Affiliate of a Lender).
"Obligor" means the Borrowers, LRI, Alliance Group, Enpro, Difco or any
other Person (other than the Agent, a Lender or any Affiliate of a Lender)
obligated under, or otherwise a party to, any Loan Document.
"Oil and Gas Properties" means Hydrocarbon Interests; the Properties now or
hereafter pooled or unitized with Hydrocarbon Interests; all presently existing
or future unitization, pooling agreements and declarations of pooled units and
the units created thereby (including without limitation all units created under
orders, regulations and rules of any Governmental Agency having jurisdiction)
which may affect all or any portion of the Hydrocarbon Interests; all operating
agreements, joint venture agreements, contracts and other agreements which
relate to any of the Hydrocarbon Interests or the production, sale, purchase,
exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon
Interests; all Hydrocarbons in and under and which may be produced and saved or
attributable to the Hydrocarbon Interests, the lands covered thereby and all oil
in tanks and all rents, issues, profits, proceeds, products, revenues and other
incomes from or attributable to the Hydrocarbon Interests; all tenements,
profits a prendre, hereditaments, appurtenances and Properties in any way
appertaining, belonging, affixed or incidental to the Hydrocarbon Interests,
Properties, rights, titles, interests and estates described or referred to
above, including any and all Property, real or personal, now owned or
hereinafter acquired and situated upon, used, held for use or useful in
connection with the operating, working or development of any of such Hydrocarbon
Interests or Property (excluding drilling rigs, automotive equipment or other
personal property which may be on such premises for the purpose of drilling a
well or for other similar temporary uses) and including any and all oil xxxxx,
gas xxxxx, water xxxxx, injection xxxxx or other xxxxx, buildings, structures,
fuel separators, liquid extraction plants,
-26-
plant compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.
"Old LaTex Payables" means those current accounts payable of the Borrowers
or their consolidated Subsidiaries that meet one or more of the following tests
and have been certified to the Agent by the Borrowers as being an Old LaTex
Payable:
(a) accounts payable the collection of which is barred by the
applicable statute of limitations;
(b) accounts payable the collection of which has been compromised or
forgiven in part, in either case to the extent of the amount that has been
compromised or forgiven; or
(c) accounts payable in respect of which the indebtedness was
incurred prior to the LRI Merger and where each of the following is true:
(i) no payment has been made on an individual amount of indebtedness
payable since the LRI Merger, (ii) no contact has been received by the
applicable Borrower or Subsidiary from the applicable creditor since the
LRI Merger pertaining to such payable due prior to the LRI Merger, or if
such contact has been received such account is being diligently contested
in good faith, (iii) no promise to pay such account has been made by the
applicable Borrower or Subsidiary since the LRI Merger and (iv) no judgment
has been obtained by, or settlement agreement entered into with, such
creditor with respect to such indebtedness.
"Organic Document" means, relative to any corporate Obligor, its
certificate of incorporation, its by-laws, its memorandum or articles of
association or other organizational documents and all shareholder agreements,
voting trusts and similar arrangements applicable to any of its authorized
shares of capital stock, and, relative to any partnership Obligor, its
partnership agreement.
"Original Borrowers" is defined in the preamble.
"Other Difco Assets" means the portion of the East Irish Sea Assets, as
shown on Schedule III under the heading "Other Difco Assets" consisting of seven
(7) blocks.
"Overriding Royalty Interest" means the interests conveyed and assigned by
the Assignment.
-27-
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Participant" is defined in Section 11.11.2.
"Pension Plan" means a "pension plan", as such term is defined in section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer
plan as defined in section 4001(a)(3) of ERISA), and to which any Borrower or
any corporation, trade or business that is, along with any Borrower, a member of
a Controlled Group, may have liability, including any liability by reason of
having been a substantial employer within the meaning of section 4063 of ERISA
at any time during the preceding five years, or by reason of being deemed to be
a contributing sponsor under section 4069 of ERISA.
"Percentage" means, relative to any Lender, the percentage set forth on the
signature pages hereof, as such percentage may be adjusted from time to time
pursuant to Lender Assignment Notice(s) executed by the Lender and its Assignee
Lender(s) and delivered pursuant to Section 11.11.
"Person" means any natural person, corporation, partnership, joint venture,
limited liability company, firm, association, trust, Governmental Agency or any
other entity, whether acting in an individual, fiduciary or other capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Pledge Agreements" means a Pledge Agreement executed and delivered
pursuant to Sections 6.1.5 and 6.2.8, substantially in the form of Exhibit F-3
given by each of LRI and Alliance Group, and substantially in the form of
Exhibit F-2 given by Alliance Plc, or such other form as may be appropriate in a
jurisdiction other than the U.S. or a state thereof, and in each case, as
amended, supplemented, restated or otherwise modified from time to time.
"Prior Agreement" is defined in the Second Recital.
"Proceeds Account" is defined in Section 3.4.
"Production Payments" means a production payment (whether volumetric or
dollar denominated) or similar royalty, overriding royalty, net profits interest
or other similar interest in Oil and Gas Properties, or the right to receive all
or a portion of the production or the proceeds from the sale of production
attributable to such Oil and Gas Properties where the holder of such interest
has recourse solely to such interest and the grantor or transferor thereof has
an express contractual obligation to produce and sell Hydrocarbons from such Oil
and Gas Properties, or to cause such Oil and Gas
-28-
Properties to be so operated and maintained, in each case in a reasonably
prudent manner.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Proven Reserves" means collectively, "proved oil and gas reserves,"
"proved developed producing oil and gas reserves," "proved developed non-
producing oil and gas reserves" (consisting of proved developed behind pipe oil
and gas reserves and proved developed shut-in oil and gas reserves), and "proved
undeveloped oil and gas reserves," as such terms are defined by the U.S.
Securities and Exchange Commission in its standards and guidelines.
"Quarterly Payment Date" means, commencing January, 1999, the last Business
Day of each Fiscal Quarter.
"Registration Rights Agreement" means the Registration Rights Agreement,
substantially in the form of Exhibit O-1, between Alliance Plc and BankAmerica
or the Designee.
"Reimbursement Obligation" is defined in Section 4.4.
"Release" means a "release," as such term is defined in CERCLA.
"Remedial Action" means any action under Environmental Laws required to (a)
clean up, remove, treat, dispose of, xxxxx, or in any other way remediate an
environmental condition involving Hazardous Materials, (b) prevent the Release
or threat of a Release or minimize the further Release of Hazardous Materials,
or (c) investigate and determine if a remedial response is needed to an
environmental condition involving Hazardous Materials and to design such a
response and any post-remedial investigation, monitoring, operation, and
maintenance and care.
"Required Lenders" means, at any time, Lenders having Percentages
aggregating at least 66-2/3%.
"Resource Conservation and Recovery Act" means the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect from time to
time.
"Restricted Payment Tests" means compliance with each of the following
restrictions (both before and immediately after giving effect to the applicable
Distribution Payment):
(a) Tangible Net Worth shall not be less than the sum of (i)
$2,000,000 plus (ii) fifty percent (50%) of Consolidated net Income of
Alliance Plc and its consolidated Subsidiaries (excluding the effects of
-29-
consolidated net losses), for all Fiscal Quarters beginning after the
Effective Date and treated as a single accounting period, plus (iii) one-
hundred percent (100%) of the net proceeds received by Alliance Plc or its
Subsidiaries from the sale of any Non-Redeemable Stock by Alliance Plc or
any of its Subsidiaries at any time after the Effective Date;
(b) the Current Ratio shall be not less than 1.0:1.0;
(c) the Debt to EBITDA Ratio shall not be greater than 4:1;
(d) the Interest Coverage Ratio shall not be less than 3.0:1.0;
(e) there shall exist no Borrowing Base Deficiency; and
(f) there shall exist no Collateral Value Deficiency; and
(g) no Default shall have occurred and be continuing.
"Security Agreement" means a security agreement and any similar instrument
or agreement, executed and delivered pursuant to Sections 6.1.7 and 6.2.6,
substantially in the form of Exhibit C-1 hereto, or such other form as may be
appropriate in a jurisdiction other than the U.S. or a state thereof, and in
each case, as amended, supplemented, restated or otherwise modified from time to
time.
"Security Documents" means, collectively, (a) the Guaranties, (b) the
Pledge Agreements, (c) the Mortgages, (d) the Security Agreements, (e) the
Consents and (f) the Mortgage Consents, together with any exhibits, schedules
and other attachments to such documents and any financing statements related
thereto, as such documents, exhibits, schedules, attachments or financing
statements may be, from time to time, amended, supplemented, restated or
otherwise modified.
"Source" is defined in the preamble.
"Stated Amount" of each Letter of Credit means the face amount or the
"Stated Amount" of such Letter of Credit (as defined therein).
"Stated Expiry Date" is defined in Section 4.1.
"Stated Maturity Date" means (i) with respect to the Tranche A Loans, that
date that is three (3) years after the Tranche A Availability Termination Date;
(ii) with respect to Tranche B Loans, January 31, 2001; and (iii) with respect
to Tranche C Loans, October 30, 2004.
-30-
"Subordinated Notes" means the promissory notes issued pursuant to that
certain Purchase Agreement dated as of October 27, 1998 among Alliance Plc and
EnCap evidencing Subordinated Indebtedness of Alliance Plc to EnCap which has
been subordinated to the Obligations pursuant to the Subordination Agreement.
"Subordinated Indebtedness" means unsecured Indebtedness of Alliance Plc
and/or its consolidated Subsidiaries (including the Subordinated Notes) that is
postponed and subordinated, on terms and conditions satisfactory to the Agent,
to the Obligations, and has covenants and terms of default, repayment,
standstill and acceleration consented to, in each case, by the Agent.
"Subordination Agreement" means that certain Master Subordination Agreement
dated as of a date prior to the initial Credit Extension under this Agreement,
between the Agent and EnCap, substantially in the form of Exhibit N.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which more than 50% of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such Person, (b) any
partnership, limited liability company, joint venture, association, firm or
other business entity in which more than 50% of the equity interest or voting
power is at the time directly or indirectly owned by such Person, by such Person
and one or more other Subsidiaries of such Person, or by one or more other
Subsidiaries of such Person or (c) any partnership in which such Person is a
general partner.
"Surety Instrument" means all letters of credit (including commercial and
standby), banker's acceptances, bank guaranties, shipside bonds, surety bonds
and similar instruments.
"Tangible Net Worth" means the consolidated net worth of Alliance Plc and
its consolidated Subsidiaries after subtracting therefrom the aggregate amount
of any intangible assets of Alliance Plc and its consolidated Subsidiaries,
including goodwill, franchises, licenses, patents, trademarks, trade names,
copyrights, service marks and brand names.
"Taxes" is defined in Section 5.6.
"Tranche A Availability Termination Date" means October 30, 2000.
"Tranche A Commitment" means the Lenders' commitments pursuant to Section
2.1.1 to make Tranche A Loans to the Borrowers, and to issue Letters of Credit,
in accordance with the terms and provisions of this Agreement.
-31-
"Tranche A Commitment Amount" means the lesser of (i) $30,000,000, as
reduced from time to time pursuant to the provisions of Section 2.2, and (ii)
the Borrowing Base.
"Tranche A Facility" means the Facility providing for the Tranche A
Commitment, the Tranche A Loans and the Letters of Credit.
"Tranche A Loan" means each loan made by a Lender to the Borrowers from
time to time pursuant to its Tranche A Commitment in accordance with Sections
2.1.1 and 2.3.
"Tranche B Availability Termination Date" means January 31, 2001.
"Tranche B Commitment" means the Lenders' commitments pursuant to Section
2.1.2 to make Tranche B Loans to the Borrowers in accordance with the terms and
provisions of this Agreement.
"Tranche B Commitment Amount" means $20,000,000, as reduced from time to
time pursuant to the provisions of Section 2.2.
"Tranche B Facility" means the Facility providing for the Tranche B
Commitment and the Tranche B Loans.
"Tranche B Loan" means each loan made by a Lender to the Borrowers from
time to time pursuant to its Tranche B Commitment in accordance with Sections
2.1.2 and 2.3.
"Tranche C Availability Termination Date" means the Business Day
immediately following the Unified Closing Date.
"Tranche C Commitment" means the Lenders' commitments pursuant to Section
2.1.3 to make Tranche C Loans to the Borrowers, in accordance with the terms and
provisions of this Agreement.
"Tranche C Commitment Amount" means $5,000,000, as reduced from time to
time pursuant to the provisions of Section 2.2.
"Tranche C Facility" means the Facility providing for the Tranche C
Commitment and the Tranche C Loans.
"Tranche C Loan" means each loan made by a Lender to the Borrowers from
time to time pursuant to its Tranche C Commitment in accordance with Sections
2.1.3 and 2.3.
-32-
"type" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"Unified Closing Date"means the latest of the following dates: (a) the
Effective Date under this Agreement; (b) the Completion Date under (and as
defined in) the Difco Agreement; (c) the Completion Date under (and as defined
in) the Burlington Agreement, and (d) the sale and funding of the Subordinated
Notes.
"United States" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
"Warrant Documents" means the Warrant Instrument, the Warrants and the
Registration Rights Agreement.
"Warrant Instrument" means the Warrant Instrument, substantially in the
form of Exhibit O-2, between Alliance Plc and BankAmerica or the Designee.
"Warrants" means the warrants, substantially in the form of Exhibit O-3,
from Alliance Plc to BankAmerica or the Designee.
"Welfare Plan" means a "welfare plan", as such term is defined in section
3(1) of ERISA.
"Year 2000 Compliant" is defined in Section 7.18.
"Year 2000 Problem" is defined in Section 7.18.
SECTION 1.2. USE OF DEFINED TERMS. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
each Note, Borrowing Request, Continuation/Conversion Notice, notice and other
communication or other Loan Document delivered from time to time in connection
with this Agreement or any other Loan Document.
SECTION 1.3. CROSS-REFERENCES. Unless otherwise specified, references in
this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in any
Article, Section or definition to any clause are references to such clause of
such Article, Section or definition.
SECTION 1.4. ACCOUNTING AND FINANCIAL DETERMINATIONS. Unless otherwise
specified, all accounting terms used herein or in any other Loan Document shall
be interpreted, all accounting determinations and computations hereunder or
thereunder
-33-
(including under Section 8.2.4) shall be made, and all financial statements
required to be delivered hereunder or thereunder shall be prepared in accordance
with, those United States generally accepted accounting principles ("GAAP")
applied in the preparation of the financial statements referred to in Section
7.7.
SECTION 1.5. INTERPRETATIONAL PROVISIONS.
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) The term "including" is not limiting and means "including
without limitation."
(iii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including";
the words "to" and "until" each mean "to but excluding", and the word
"through" means "to and including."
(iv) The term "property" includes any kind of property or
asset, real, personal or mixed, tangible or intangible.
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments
shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and
(ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting the statute or regulation.
(e) This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters.
All such limitations, tests and measurements are cumulative and shall each
be performed in accordance with their terms. Unless otherwise expressly
provided, any reference to any action of the Lenders or the Agent by way of
-34-
consent, approval or waiver shall be deemed modified by the phrase "in
their sole discretion" or "in its sole discretion," as applicable.
(f) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Lender, the
Borrowers and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lenders or the Agent
merely because of the Lenders' or the Agent's involvement in their
preparation.
ARTICLE II.
COMMITMENTS, BORROWING PROCEDURES AND NOTE
SECTION 2.1. COMMITMENTS. On the terms and subject to the conditions of
this Agreement (including Article V), each Lender agrees to make loans ("Loans")
to the Borrowers equal to the aggregate amount of the Borrowing of Loans
requested by the Borrowers to be made pursuant to the Commitments on such day
described in this Section 2.1. On the terms and subject to the conditions
hereof, the Borrowers may from time to time borrow and prepay Tranche A Loans
and Tranche B Loans but may not reborrow any amounts paid or pre-paid in respect
of Tranche C Loans.
SECTION 2.1.1. TRANCHE A COMMITMENT. From time to time on any Business
Day during the period from and after the Effective Date to the earlier to occur
of (x) Tranche A Availability Termination Date and (y) any Commitment
Termination Date relating to all Commitments or to the Tranche A Commitment,
each Lender will make Tranche A Loans to the Borrowers equal to the amount of
the Tranche A Loan requested by the Borrowers, subject to the limitations in
this Section 2.1, to be made on such day in the applicable Borrowing Request
therefor. The Borrowers acknowledge that, as of October 26, 1998, the aggregate
outstanding principal amount of all Loans (as defined under the Existing
Agreement) is $22,566,762.16.
SECTION 2.1.2. TRANCHE B COMMITMENT. From time to time on any Business
Day during the period from and after the Effective Date to the earlier to occur
of (x) Tranche B Availability Termination Date, and (y) any Commitment
Termination Date relating to all Commitments or to the Tranche B Commitment,
each Lender will make Tranche B Loans to the Borrowers equal to the aggregate
amount of the Tranche B Loan requested by the Borrowers, subject to the
limitations in this Section 2.1, to be made on such day in the applicable
Borrowing Request therefor.
SECTION 2.1.3. TRANCHE C COMMITMENT. From time to time on any Business
Day during the period from and after the Effective Date to the earlier to occur
of (x) Tranche C Availability Termination Date, and (y) any Commitment
Termination Date relating to all Commitments or to the Tranche C Commitment,
each Lender will
-35-
make Tranche C Loans to the Borrowers equal to the aggregate amount of the
Tranche C Loan requested by the Borrowers to be made on such day in the
applicable Borrowing Request therefor. The Borrowers acknowledge that, on the
Unified Closing Date, and subject to the satisfaction of each of the conditions
precedent set forth in Section 6.1, the outstanding principal amount of all
Loans (as defined in the Existing Agreement) set forth in Section 2.1.1 plus
accrued and unpaid interest as well as certain fees and expenses, will be
divided into a single Tranche C Loan in the original principal amount of
$5,000,000.00 and a single Tranche A Loan in the original principal amount not
to exceed $18,500,000, and any excess balance of such existing Loans shall
become a Tranche B Loan.
SECTION 2.1.4. COMMITMENT TO ISSUE LETTERS OF CREDIT. From time to time
on any Business Day, the Issuer will issue Letters of Credit, in accordance with
Article IV. The Borrowers acknowledge that, as of October 26, 1998, the Stated
Amount of all Letters of Credit issued and outstanding under the Existing
Agreement is $100,000.
SECTION 2.1.5. LENDERS NOT REQUIRED TO MAKE LOANS UNDER CERTAIN
CIRCUMSTANCES. No Lender shall be required to make any Loan if, after giving
effect thereto
(a) the aggregate outstanding principal amount of all Tranche A Loans
would exceed the Tranche A Commitment Amount less the Letter of Credit
Outstandings, or
(b) the aggregate outstanding principal amount of all Tranche B Loans
would exceed the Tranche B Commitment Amount, or
(c) the aggregate outstanding principal amount of all Tranche C Loans
would exceed the Tranche C Commitment Amount, or
(d) the aggregate outstanding principal amount of all Loans of such
Lender, together with its Percentage of all Letter of Credit Outstandings,
would exceed such Lender's Percentage of the Commitment Amount, or
(e) a Borrowing Base Deficiency would exist, or
(f) a Collateral Value Deficiency would exist, or
(g) an Event of Default has occurred and is continuing.
SECTION 2.1.6. ISSUER NOT REQUIRED TO ISSUE LETTERS OF CREDIT UNDER
CERTAIN CIRCUMSTANCES. The Issuer shall not be required to issue any Letter of
Credit if, after giving effect thereto
-36-
(a) the aggregate outstanding principal amount of all Tranche A Loans
would exceed the Tranche A Commitment Amount,
(b) a Borrowing Base Deficiency would exist,
(c) a Collateral Value Deficiency would exist,
(d) all Letter of Credit Outstandings would exceed $1,000,000, or
(e) an Event of Default has occurred and is continuing.
SECTION 2.2 REDUCTION OF COMMITMENT AMOUNTS. Any Commitment Amount is
subject to reduction from time to time pursuant to this Section 2.2.
SECTION 2.2.1. OPTIONAL. The Borrowers may, from time to time on any
Business Day, voluntarily reduce the Commitments in the following order: first,
the Tranche B Commitment Amount and, when the Tranche B Commitment has been
reduced to zero, then the Tranche C Commitment Amount and, when the Tranche C
Commitment has been reduced to zero, then the Tranche A Commitment Amount;
provided, however, that all such reductions shall require at least three (3)
Business Days' prior notice to the Agent and be permanent, and any partial
reduction of the Commitment Amount shall be in a minimum amount of $250,000 and
in an integral multiple of $50,000.
SECTION 2.2.2. MANDATORY.
(a) On the Tranche A Availability Termination Date, the unused portion
of the Tranche A Commitment Amount shall, without any further action,
automatically and permanently be canceled.
(b) On the Tranche B Availability Termination Date, the unused portion
of the Tranche B Commitment Amount shall, without any further action,
automatically and permanently be canceled.
(c) On the Tranche C Availability Termination Date, the unused portion
of the Tranche C Commitment Amount shall, without any further action,
automatically and permanently be canceled.
(d) On any Commitment Termination Date, the Commitment Amount of each
Facility shall be reduced to zero.
SECTION 2.3. BORROWING PROCEDURE.
-37-
(a) By delivering a Borrowing Request to the Agent on or before 10:00
a.m. (Chicago time) on a Business Day, the Borrowers may from time to time
irrevocably request, on not less than three (3) nor more than five (5)
Business Days' notice, or, in the case of a Base Rate Borrowing, one (1)
Business Day's notice, that a Borrowing be made in a minimum amount of
$250,000 and an integral multiple of $50,000, or in the unused amount of
the applicable Commitment. On the terms and subject to the conditions of
this Agreement, each Borrowing shall be made on the Business Day specified
in such Borrowing Request. The Lenders shall make such funds available to
the Borrowers by wire transfer to the accounts the Borrowers shall have
specified in their Borrowing Request. On or before 11:00 a.m. (Chicago
time) on such Business Day each Lender shall deposit with the Agent same
day funds in an amount equal to such Lender's Percentage of the requested
Borrowing. Such deposit will be made to an account which the Agent shall
specify from time to time by notice to the Lenders. To the extent funds
are received from the Lenders, the Agent shall make such funds available to
the Borrowers by wire transfer to the accounts the Borrowers shall have
specified in their Borrowing Request. No Lender's obligation to make any
Loan shall be affected by any other Lender's failure to make any Loan.
(b) Each Lender may, if it so elects, fulfill its obligation to make,
continue or convert LIBO Rate Loans hereunder by causing one of its foreign
branches or Affiliates (or an international banking facility created by
such Lender) to make or maintain such LIBO Rate Loan; provided, however,
that such LIBO Rate Loan shall nonetheless be deemed to have been made and
to be held by such Lender, and the obligation of the Borrowers to repay
such LIBO Rate Loan shall nevertheless be to such Lender for the account of
such foreign branch, Affiliate or international banking facility. In
addition, the Borrowers hereby consent and agree that, for purposes of any
determination to be made for purposes of Section 5.1, 5.2, 5.3 or 5.4, it
shall be conclusively assumed that each Lender elected to fund all LIBO
Rate Loans by purchasing Dollar deposits in its LIBO Office's interbank
eurodollar market.
SECTION 2.4. CONTINUATION AND CONVERSION ELECTIONS. By delivering a
Continuation/Conversion Notice to the Agent on or before 10:00 a.m. (Chicago
time) on a Business Day, the Borrowers may from time to time irrevocably elect,
on not less than three (3) nor more than five (5) Business Days' notice that
all, or any portion in an aggregate minimum amount of $250,000 and an integral
multiple of $50,000, of any Loans, in the case of Base Rate Loans, be converted
into LIBO Rate Loans or, in the case of LIBO Rate Loans, be converted into a
Base Rate Loan or continued as a LIBO Rate Loan (in the absence of delivery of a
Continuation/Conversion Notice with respect to any LIBO Rate Loan at least three
(3) Business Days before the last day of the then current Interest Period with
respect thereto, such LIBO Rate Loan shall, on such last day, automatically
convert to a Base Rate Loan); provided, however, that
-38-
no portion of the outstanding principal amount of any LIBO Rate Loan may be
continued as, and no portion of any Base Rate Loan may be converted into, LIBO
Rate Loans when any Default has occurred and is continuing.
SECTION 2.5. LOAN ACCOUNTS AND NOTES.
(a) The Loans made by each Lender shall be evidenced by one or more
loan accounts or records maintained by such Lender in the ordinary course
of business. The loan accounts or records maintained by such Lender shall
be conclusive absent manifest error of the amount of the Loans made by such
Lender to the Borrowers and the interest and payments thereon. Any failure
so to record or any error in doing so shall not, however, limit or
otherwise affect the obligations of the Borrowers hereunder to pay any
amount owing with respect to the Loans.
(b) Each Lender's Loans shall also be evidenced by a Note payable to
the order of such Lender in a maximum principal amount equal to the
Lender's Percentage of the original, aggregate Commitment Amount. The
Borrowers hereby irrevocably authorize each Lender to make (or cause to be
made) appropriate notations on the grid attached to the Note (or on any
continuation of such grid) or in other books and records maintained by such
Lender, which notations, if made, shall evidence, inter alia, the date of,
the outstanding principal of, and the interest rate applicable to the Loans
evidenced thereby (the Borrowers may from time to time reasonably request a
copy of such grid). Such notations shall be conclusive and binding on the
Borrowers absent manifest error; provided, however, that the failure of any
Lender to make any such notations shall not limit or otherwise affect any
Obligations of the Borrowers or any other Obligor.
(c) The Borrowers acknowledge that the Notes delivered to the Lenders
as of the Effective Date amend, restate and renew the promissory notes
given by the Original Borrowers under the Existing Agreement, which
amended, restated, consolidated and renewed certain promissory notes and
other evidence of indebtedness then outstanding.
SECTION 2.6. BORROWING BASE REDETERMINATION AND COLLATERAL VALUE
REDETERMINATION.
(a) Within thirty (30) days after receipt of the Engineering Report
required to be delivered semi-annually, commencing with the interim
Engineering Report described in Section 2.6(c), (and thereafter in
connection with the regular, semi-annual Engineering Report), the Agent
shall notify the Borrowers in writing of the Borrowing Base determined by
the Agent on the basis of such Engineering Report. After July 1, 1999, the
Borrowers or the
-39-
Agent may request, and Agent will consider, one (1) additional
determination of the Borrowing Base at any time during each calendar year,
including 1999. Each such determination is herein called a "Borrowing Base
Redetermination". Contemporaneously with each Borrowing Base
Redetermination that shall occur at any time that any Tranche B Loan is
outstanding, the Agent shall notify the Borrowers in writing of the
Collateral Value determined by the Agent on the basis of such Engineering
Report. Each such determination is herein called a "Collateral Value
Redetermination". Each Borrowing Base Redetermination (and, as applicable,
Collateral Value Redetermination) shall be effective as of July 31st (with
respect to Engineering Reports effective May 1st), January 31st (with
respect to Engineering Reports effective November 1st) or upon notice from
the Agent (with respect to any requested Borrowing Base redetermination)
when the Borrowers are notified of the amount of the redetermined Borrowing
Base (and, as applicable, the amount of the redetermined Collateral Value)
by the Agent.
(b) The Borrowing Base and Collateral Value are also subject to
adjustment as provided for in Section 3.1.2.
(c) In addition to the semi-annual Engineering Reports referred to
above (and in lieu of a November 1 Report for 1998), an interim Reserve and
Economic Report shall be delivered to Agent by March 31, 1999, and shall
consist of independent engineering evaluations on all of Borrower's U.S.
Mortgaged Properties, and the East Irish Sea Assets, if significant changes
have occurred with respect to the East Irish Sea Assets since the Effective
Date. Such evaluation shall be prepared by independent consultants which
are acceptable to the Agent and shall form the basis for the initial
Borrowing Base Redetermination. The Agent shall give notice to the
Borrowers not later than June 1, 1999, of the Borrowing Base and Collateral
Value determined by the Agent, and such Borrowing Base Redetermination and
Collateral Value Redetermination shall be effective as of July 1, 1999.
SECTION 2.7. PURPOSES. The Borrowers shall apply the proceeds of each Loan
only in the following manner:
(a) in the case of Tranche A Loans, to refinance existing
indebtedness, for working capital purposes of the Borrowers and to finance
Approved Development Activities; and
(b) in the case of Tranche B Loans, as follows:
1. A portion of the purchase price of the East Irish Sea Assets,
in an amount not to exceed $8.0 million;
-40-
2. Approved Development Activities in respect of the Mortgaged
Properties (other than the East Irish Sea Assets), in an
amount not to exceed $2.0 million;
3. Fees and expenses incurred in connection with the acquisition
and financing of the East Irish Sea Assets, in an amount not
to exceed in the aggregate $4 million (provided the Borrowers
have furnished to the Agent, along with the Borrowing Request
applicable thereto, a detailed schedule, satisfactory to the
Agent, of such fees and expenses);
4. Approved Development Activities in respect of the East Irish
Sea Assets; and
(c) in the case of Tranche C Loans, for general corporate and working
capital purposes.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. REPAYMENTS AND PREPAYMENTS AND CERTAIN BORROWING BASE MATTERS.
The Borrowers shall repay the unpaid principal amount of the Loans as set forth
in this Section 3.1.
SECTION 3.1.1. REPAYMENTS AND PREPAYMENTS. The Borrower shall repay in full
the unpaid principal amount of each Tranche A Loan, and each Tranche A Loan
shall mature and be due and payable, on the Tranche A Availability Termination
Date; provided, however, that if no Event of Default has occurred and is
continuing, the unpaid principal amount of the Tranche A Loans shall, on the
Tranche A Availability Termination Date and in response to a Borrowing Request
delivered to the Lender, not be due and payable but shall convert to term Loans.
The Borrowers shall repay in full the unpaid principal amount of each Loan upon
the applicable Stated Maturity Date. Prior thereto, the Borrowers
(a) may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount of any
Loans; provided, however, that
(i) any such prepayment shall be made pro rata among Loans of the
same type and tranche;
-41-
(ii) no such prepayment of any LIBO Rate Loan may be made on any
day other than the last day of the Interest Period for such Loan;
(iii) all such voluntary prepayments shall require at least three
(3) but no more than five (5) Business Days' prior written notice to
the Agent (which notice is irrevocable) stating the date and amount of
such prepayment and the type of Loan to be prepaid; and
(iv) all such voluntary partial prepayments shall be in an
aggregate minimum amount of $100,000 and an integral multiple of
$50,000;
(b) shall, on each date when any reduction in any Commitment Amount
shall become effective, including pursuant to Section 2.2, make a mandatory
prepayment (which shall be applied (or held for application, as the case
may be) by each Lender to the payment of the aggregate unpaid principal
amount of those Loans then outstanding and then to the payment of the then
Letter of Credit Outstandings) equal to the excess, if any, of the
aggregate outstanding principal amount of all Loans and Letter of Credit
Outstandings over such Commitment Amount as so reduced;
(c) shall make prepayments as specified in Section 3.1.2;
(d) shall, on each Quarterly Payment Date, make a payment in an amount
not less than the interest payment required pursuant to Section 3.2.3;
(e) shall, on each Quarterly Payment Date beginning January 31, 2001,
make a payment in an amount equal to that necessary to amortize the
principal of all Tranche C Loans equally over the remaining Quarterly
Payment Dates and the applicable Stated Maturity Date;
(f) shall, if Tranche A Loans have been converted to a term Loan
pursuant to the terms and conditions hereof, on each Quarterly Payment Date
after the Tranche A Availability Termination Date, make a payment in an
amount equal to that necessary to amortize the principal of all Tranche A
Loans equally over the remaining Quarterly Payment Dates and the applicable
Stated Maturity Date;
(g) shall, on the Tranche B Availability Termination Date, pay the
entire outstanding principal amount of all Tranche B Loans;
(h) shall, immediately upon any acceleration of the Loans pursuant to
Section 9.2 or Section 9.3, repay all Loans, unless, pursuant to Section
9.3, only a portion of all Loans is so accelerated.
-42-
Each payment or prepayment of any Loans made pursuant to this Section shall be
without premium or penalty, except as may be required by Section 5.4, and shall
be applicable, to the extent of such prepayment, in the inverse order of
maturity. No voluntary prepayment of principal of any Loans or any prepayment
pursuant to the preceding clause (c) shall cause a reduction in any Commitment
Amount.
SECTION 3.1.2. BORROWING BASE DEFICIENCIES, COLLATERAL VALUE DEFICIENCIES
AND ASSET SALES.
(a) Upon the occurrence of a Borrowing Base Deficiency and/or a
Collateral Value Deficiency, the Agent may notify the Borrowers of such
Borrowing Base Deficiency and/or such Collateral Value Deficiency, as
applicable. Within ten (10) Business Days from and after the Borrowing
Base Deficiency Notification Date and/or such Collateral Value Deficiency
Notification Date, as applicable, the Borrowers shall notify the Agent and
the Lenders that they shall take one of the following actions:
(i) execute and deliver to the Agent supplemental or additional
Security Documents, in form and substance reasonably satisfactory to
the Agent and its counsel, securing payment of the Notes and the other
Obligations and covering additional Oil and Gas Properties directly
owned by the Borrowers or one or more of the Borrowers' Subsidiaries
which are not then covered by any Loan Document and which are of a
type and nature satisfactory to the Agent, and having a value, in
addition to other Oil and Gas Properties already subject to a Mortgage
(determined by the Lender using customary standards for oil and gas
lending), sufficient to eliminate the Borrowing Base Deficiency and/or
the Collateral Value Deficiency, as applicable, all as more
particularly described in Section 8.1.7(a) and (b); or
(ii) make a payment with respect to the Obligations (which shall
be applied (or held for application, as the case may be) by the
Lenders to the payment of the aggregate unpaid principal amount of
those Loans then outstanding and then to the payment of the then
Letter of Credit Outstandings) in an aggregate principal amount
sufficient to eliminate such Borrowing Base Deficiency and/or
Collateral Value Deficiency, as applicable, within sixty (60) days
after the Borrowing Base Deficiency Notification Date or Collateral
Value Deficiency Notification Date, as applicable.
If the Borrowers shall elect to execute and deliver (or cause one or more
of the Borrowers' Subsidiaries to execute and deliver) supplemental or
additional Security Documents to the Agent pursuant to clause (i), they
shall provide the Agent with descriptions of the additional assets to be
collaterally assigned
-43-
(together with current valuations, Engineering Reports, Security Documents
described in clause (i) and title evidence applicable thereto, each of
which shall be in form and substance reasonably satisfactory to the Agent)
within sixty (60) days after the Borrowing Base Deficiency Notification
Date or Collateral Value Deficiency Notification Date, as applicable. Such
supplemental or additional Security Documents shall be subject to the terms
of Section 8.1.7. If the Borrowers fail to take any of the actions
described in clauses (i) or (ii) above within such ten (10) Business Day
period, then without any necessity for notice to the Borrowers or any other
person, the Borrowers shall become obligated immediately to pay Obligations
in an aggregate principal amount equal to the applicable Borrowing Base
Deficiency and/or Collateral Value Deficiency.
(b) If the Borrowers or any of their Subsidiaries sells, transfers or
otherwise disposes of Oil and Gas Properties included in the most recent
determination of the Borrowing Base and the Collateral Value and that have
a fair market value in the aggregate for the Borrowers and such
Subsidiaries in excess of $250,000 during the period from the effective
date of the most recent Borrowing Base Redetermination until the effective
date of the next Borrowing Base Redetermination, the Borrowing Base and the
Collateral Value shall be immediately reduced, until the effective date of
the next Borrowing Base Redetermination and Collateral Value
Redetermination, by an amount as reasonably determined by the Agent, or if
the value of the applicable Oil and Gas Properties cannot be readily
determined by the Agent, by the net sales proceeds realized from the sale,
transfer or other disposition of such assets.
If such reduction shall result in a Borrowing Base Deficiency and/or
Collateral Value Deficiency, then in lieu of the provisions of clause (a)
of Section 3.1.2, the Borrowers shall immediately make a payment with
respect to the Obligations in an amount equal to the greater of such
Borrowing Base Deficiency or such Collateral Value Deficiency. In addition
to and cumulative of the foregoing, if a Borrowing Base Deficiency and/or
Collateral Value Deficiency exists prior to such sale, transfer or other
disposition of assets, then in lieu of the provisions of clause (a) of
Section 3.1.2, the Borrower shall, with the written consent of the Agent,
immediately make a payment with respect to the Obligations (which shall be
applied (or held for application, as the case may be) by the Lenders first
to the payment of the aggregate unpaid principal amount of those Loans then
outstanding, and then to the payment of the then Letter of Credit
Outstandings) in an aggregate principal amount equal to the lesser of (i)
the greater of the amount of the Collateral Value Deficiency or the amount
of the Borrowing Base Deficiency (after giving effect to the applicable
sale, transfer or other disposition) or (ii) 100% of the net sales proceeds
realized from the applicable sale, transfer or other disposition.
-44-
(c) In addition, if the Borrowers or any of their Subsidiaries raises
capital through the issuance of any type of equity or issues any
subordinated debt or senior unsecured debt, the proceeds of such issuance
will first be applied to cure any Borrowing Base Deficiency and/or
Collateral Value Deficiency, then as a prepayment of Tranche B Loans and a
permanent reduction of the Tranche B Commitment, and finally as a
prepayment of Tranche C Loans and a permanent reduction of the Tranche C
Commitment.
SECTION 3.2. INTEREST PROVISIONS. Interest on the outstanding principal
amount of Loans shall accrue and be payable in accordance with this Section 3.2.
SECTION 3.2.1. RATE. Pursuant to an appropriately delivered Borrowing
Request or Continuation/Conversion Notice, the Borrowers may elect that Loans
accrue interest at a rate per annum:
(a) on that portion maintained from time to time as a Base Rate Loan,
equal to the Alternate Base Rate plus the Applicable Margin from time to
time in effect; and
(b) on that portion maintained as a LIBO Rate Loan, during each
Interest Period applicable thereto, equal to the sum of the LIBO Rate
(Reserve Adjusted) for such Interest Period plus the Applicable Margin.
All LIBO Rate Loans shall bear interest from and including the first day of the
applicable Interest Period to (but not including) the last day of such Interest
Period at the interest rate determined as applicable to such LIBO Rate Loan.
SECTION 3.2.2. POST-MATURITY RATES. After (w) the date any principal amount
of any Loan shall have become due and payable (whether on the Stated Maturity
Date, upon acceleration or otherwise), (x) the date any other monetary
Obligation of the Borrowers shall have become due and payable, (y) the date any
other Event of Default shall have occurred (and so long as such Event of Default
shall be continuing), and (z) the date that is sixty (60) days after a Borrowing
Base Deficiency Notification Date or a Collateral Value Deficiency Notification
Date, if the applicable Borrowing Base Deficiency or Collateral Value Deficiency
has not been cured, the Borrowers shall pay, but only to the extent permitted by
Applicable Law, interest (after as well as before judgment) on all Obligations
at a rate per annum equal to
(a) with respect to LIBO Rate Loans for the period from the date such
Loan becomes due and payable to the end of the then current Interest
Period, the higher of (i) the sum of the LIBO Rate (Reserve Adjusted) for
such Interest Period plus the Applicable Margin plus a margin of 3%, or (ii
the sum of the Alternate Base Rate plus the Applicable Margin plus a margin
of 3%; or
-45-
(b) in all other cases, the sum of the Alternate Base Rate plus the
Applicable Margin plus a margin of 3%.
SECTION 3.2.3. PAYMENT DATES. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date;
(b) on the date of any optional or required payment or prepayment, in
whole or in part, of principal outstanding on such Loan and on that portion
of such Loan so paid or prepaid;
(c) with respect to Base Rate Loans, on each Quarterly Payment Date
occurring after the Effective Date;
(d) with respect to LIBO Rate Loans, on the last day of each
applicable Interest Period (and, if such Interest Period shall exceed three
months, on the 90th day of such Interest Period); and
(e) on that portion of any Loans which is accelerated pursuant to
Section 9.2 or Section 9.3, immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount shall have
become due and payable (whether on the Stated Maturity Date, upon acceleration
or otherwise) shall be payable upon demand.
SECTION 3.2.4. MAXIMUM INTEREST. It is the intention of the parties hereto
to conform strictly to applicable usury laws and, anything herein to the
contrary notwithstanding, the Obligations of the Borrowers to the Lenders under
this Agreement shall be subject to the limitation that payments of interest
shall not be required to the extent that receipt thereof would be contrary to
provisions of Applicable Law applicable to the Lenders limiting rates of
interest which may be charged or collected by the Lenders. Accordingly, if the
transactions contemplated hereby would be usurious under Applicable Law with
respect to the Lenders then, in that event, notwithstanding anything to the
contrary in this Agreement, it is agreed as follows:
(a) the provisions of this Section 3.2.4 shall govern and control;
(b) the aggregate of all consideration which constitutes interest
under Applicable Law that is contracted for, charged or received under this
Agreement, or under any of the other aforesaid agreements or otherwise in
connection with this Agreement by the Lenders shall under no circumstances
-46-
exceed the maximum amount of interest allowed by Applicable Law (such
maximum lawful interest rate, if any, with respect to the Lenders herein
called the "Highest Lawful Rate"), and any excess shall be credited to the
Borrowers by the Lenders (or, if such consideration shall have been paid in
full, such excess refunded to the Borrowers);
(c) all sums paid, or agreed to be paid, to the Lenders for the use,
forbearance and detention of the indebtedness of the Borrowers to the
Lenders hereunder shall, to the extent permitted by Applicable Law, be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full so that the actual rate of interest is
uniform throughout the full term thereof; and
(d) if at any time the interest provided pursuant to Sections 3.2.1
and 3.2.2 together with any other fees payable pursuant to this Agreement
and deemed interest under Applicable Law, exceeds that amount which would
have accrued at the Highest Lawful Rate, the amount of interest and any
such fees to accrue to the Lenders pursuant to this Agreement shall be
limited, notwithstanding anything to the contrary in this Agreement, to
that amount which would have accrued at the Highest Lawful Rate, but any
subsequent reductions, as applicable, shall not reduce the interest to
accrue to such Lender pursuant to this Agreement below the Highest Lawful
Rate until the total amount of interest accrued pursuant to this Agreement
and such fees deemed to be interest equals the amount of interest which
would have accrued to such Lender if a varying rate per annum equal to the
interest provided pursuant to Sections 3.2.1 and 3.2.2 had at all times
been in effect, plus the amount of fees which would have been received but
for the effect of this Section 3.2.4.
SECTION 3.3. FEES. The Borrowers agree to pay the fees set forth in this
Section 3.3 and in the Fee Letter. All such fees shall be non-refundable.
SECTION 3.3.1. UNUSED FEE. The Borrowers shall pay to the Agent for the
account of the Lenders an unused fee, for the period from and including the
Effective Date to, but not including the earlier to occur of (x) the Tranche A
Availability Termination Date, and (y) the Commitment Termination Date, equal to
0.50 of 1% per annum of the average of the actual daily amount during the prior
Fiscal Quarter of (a) $55,000,000 minus (b) the sum of the aggregate outstanding
principal amount of all Loans and all Letter of Credit Outstandings, based on a
year comprised of three hundred sixty (360) days. Accrued unused fees shall be
payable in arrears on each Quarterly Payment Date and on the earlier of the
Commitment Termination Date or the Tranche A Availability Termination Date.
SECTION 3.3.2. LETTER OF CREDIT STATED AMOUNT FEE. The Borrowers agree to
pay to the Agent, for the account of the Issuer, a fee for each Letter of Credit
for the
-47-
period from and including the date of the issuance of such Letter of
Credit to (but not including) the date upon which such Letter of Credit expires,
at a rate per annum equal to the Applicable Margin for Tranche A Loans
maintained as LIBO Rate Loans on the Stated Amount of such Letter of Credit,
based on a year comprised of three hundred and sixty (360) days. A prorated
portion of such fee shall be payable by the Borrowers in arrears on each
Quarterly Payment Date, and on the earlier of the Tranche A Availability
Termination Date and the Tranche A Commitment Termination Date for any period
then ending for which such fee shall not theretofore have been paid, commencing
on the first such date after the issuance of such Letter of Credit. After any
Borrowing Base Deficiency and/or Collateral Value Deficiency has or have existed
for sixty (60) consecutive days, the Stated Amount Fee on all Letters of Credit
shall increase by 3.00% until such Borrowing Base Deficiency and/or Collateral
Value Deficiency has or have been eliminated.
SECTION 3.3.3. LETTER OF CREDIT ISSUANCE FEE. The Borrowers agree to pay to
the Agent, for the account of the Issuer, an issuance fee for each Letter of
Credit issued by the Issuer for the period from and including the date of
issuance of such Letter of Credit to (but not including) the date upon which
such Letter of Credit expires, of the greater of 0.25 of 1% of the Stated Amount
of such Letter of Credit or $300.00. Such fee shall be payable on the date of
issuance of such Letter of Credit.
SECTION 3.3.4. LETTER OF CREDIT ADMINISTRATIVE FEES. The Borrowers agree to
pay to the Agent, for the account of the Issuer, all reasonable administrative
expenses of the Issuer in connection with the maintenance, modification (if any)
and administration of each Letter of Credit issued by the Issuer upon demand
from time to time pursuant to the Issuer's schedule of charges then in effect.
SECTION 3.4. PROCEEDS ACCOUNT. The Security Documents contain an assignment
to the Agent by the Borrowers and/or their Subsidiaries, as applicable, of all
production of Hydrocarbons and all proceeds attributable thereto properly
allocable to the Mortgaged Properties. Notwithstanding such assignment of
production, the Borrowers may, until the Agent shall give notice to the
contrary, which notice shall not be unreasonably given, receive such proceeds.
Thereafter, all such proceeds from the sale of such production shall be paid
directly into an account of the Borrowers maintained with the Agent (the
"Proceeds Account"). The Borrowers hereby grant to the Agent, subject to the
prior assignment in favor of the Agent of such production and its proceeds, a
security interest in the Proceeds Account and all proceeds thereof.
SECTION 3.5. ORRI AND WARRANTS ARE NOT COLLATERAL SECURITY.
(a) In addition to interest paid on the Loans, Alliance Plc shall
issue the Warrants and Difco shall grant the Overriding Royalty Interest to
the
-48-
Agent's designee ("Designee"), as additional consideration payable to
the Agent to be retained in perpetuity and not as additional collateral
security for the Obligations.
(b) If all Tranche B Loans are paid in full and the Tranche B
Commitment is terminated on or before March 26, 2000, then the Borrowers
may purchase the Overriding Royalty Interest in consideration of the
payment of a mutually satisfactory purchase price. Such conveyance shall
be without recourse, representation or warranty of any kind, except that
the Designee shall warrant against liens created by, through or under the
Designee.
(c) The Overriding Royalty Interest described in the foregoing
subsections (a) and (b) shall not affect in any way the overriding royalty
interests previously acquired by the Designee pursuant to the Prior
Agreement (which was subsequently exchanged for warrants and other
obligations in respect of Alliance Plc). Similarly, the Warrants to be
issued pursuant to this Agreement shall not affect in any way the warrants
issued to the Designee pursuant to the Prior Agreement.
ARTICLE IV.
LETTERS OF CREDIT
SECTION 4.1. ISSUANCE REQUESTS. By delivering to the Agent an Issuance
Request on or before 12:00 noon (Chicago time), the Borrowers may request, from
time to time prior to the earlier to occur of (x) the Tranche A Availability
Termination Date and (y) any Commitment Termination Date relating to all
Commitments or to the Tranche A Commitment, and on not less than three (3) nor
more than ten (10) Business Days' notice, that the Issuer issue an irrevocable
standby letter of credit in substantially the form of Exhibit K hereto, or in
such other form as may be mutually agreed by the Borrowers and the Issuer (each
a "Letter of Credit"), in support of financial obligations of the Borrowers
incurred in the Borrowers' ordinary course of business and which are described
in such Issuance Request. Upon receipt of an Issuance Request, the Agent shall
promptly notify the Lenders and the Issuer thereof. Each Letter of Credit shall
by its terms:
(a) be issued in a Stated Amount which
(i) is at least $10,000;
(ii) does not exceed (or would not exceed) the then Letter of
Credit Availability;
-49-
(b) be stated to expire on a date (its "Stated Expiry Date") no later
than the earlier of (i) one (1) year after its date of issuance and (ii the
Commitment Termination Date; and
(c) on or prior to its Stated Expiry Date
(i) terminate immediately upon notice to the Issuer from the
beneficiary thereunder that all obligations covered thereby have been
terminated, paid, or otherwise satisfied in full,
(ii) reduce in part immediately and to the extent the
beneficiary thereunder has notified the Issuer that the obligations
covered thereby have been paid or otherwise satisfied in part, or
(iii) terminate thirty (30) Business Days after notice to the
beneficiary thereunder from the Agent that an Event of Default has
occurred and is continuing.
So long as no Default has occurred and is continuing, by delivery to the Agent
and the Issuer of an Issuance Request at least three (3) but not more than ten
(10) Business Days prior to the Stated Expiry Date of any Letter of Credit, the
Borrowers may request the Issuer to extend the Stated Expiry Date of such Letter
of Credit for an additional period not to exceed the earlier of one (1) year
from its date of extension, the Availability Termination Date or the Commitment
Termination Date.
SECTION 4.2. ISSUANCES AND EXTENSIONS. On the terms and subject to the
conditions of this Agreement (including Article VI), the Issuer shall issue
Letters of Credit, and extend the Stated Expiry Dates of outstanding Letters of
Credit, in accordance with the Issuance Requests made therefor. The Issuer will
make available the original of each Letter of Credit which it issues in
accordance with the Issuance Request therefor to the beneficiary thereof (and
will promptly provide the Agent and each of the Lenders with a copy of such
Letter of Credit) and will notify the beneficiary under any Letter of Credit of
any extension of the Stated Expiry Date thereof.
The Issuer is under no obligation to issue any Letter of Credit if:
(i) any order, judgment or decree of any Governmental Agency or
arbitrator shall by its terms purport to enjoin or restrain the Issuer from
issuing such Letter of Credit, or any requirement of Applicable Law or any
request or directive (whether or not having the force of law) from any
Governmental Agency with jurisdiction over the Issuer shall prohibit, or
request that the Issuer refrain from, the issuance of letters of credit
generally or such Letter of Credit in particular or shall impose upon the
Issuer or the Lenders with respect
-50-
to such Letter of Credit any restriction, reserve or capital requirement
(for which the Issuer is not otherwise compensated hereunder) not in effect
on the Effective Date, or shall impose upon the Issuer any unreimbursed
loss, cost or expense which was not applicable on the Effective Date and
which the Issuer in good xxxxx xxxxx material to it;
(ii) one or more of the applicable conditions contained in Article VI
is not then satisfied;
(iii) the expiry date of any requested Letter of Credit is prior to
the maturity date of any financial obligation to be supported by the
requested Letter of Credit;
(iv) any requested Letter of Credit does not provide for drafts, or
is not otherwise in form and substance acceptable to the Issuer, or the
issuance of a Letter of Credit shall violate any applicable policies of the
Issuer;
(v) any standby Letter of Credit is for the purpose of supporting
the issuance of any letter of credit by any other Person; or
(vi) such Letter of Credit is in a face amount denominated in a
currency other than Dollars.
The Uniform Customs and Practice for Documentary Credits as published by the
International Chamber of Commerce most recently at the time of issuance of any
Letter of Credit shall (unless otherwise expressly provided in the Letters of
Credit) apply to the Letters of Credit.
SECTION 4.3. DISBURSEMENTS. The Issuer will notify the Borrowers promptly
of the presentment for payment of any Letter of Credit, together with notice of
the date (the "Disbursement Date") such payment shall be made. Subject to the
terms and provisions of such Letter of Credit, the Issuer shall make such
payment to the beneficiary (or its designee) of such Letter of Credit. In paying
any drawing under a Letter of Credit, the Issuer shall not have any
responsibility to obtain any document (other than any sight draft and
certificates expressly required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person executing or delivering any such document. Prior to 12:00 noon
(Chicago time) on the Disbursement Date, the Borrowers will reimburse the Issuer
for all amounts which it has disbursed under the Letter of Credit. To the extent
the Issuer is not reimbursed in full in accordance with the preceding sentence,
the Borrowers' Reimbursement Obligation shall accrue interest at a fluctuating
rate equal to the lesser of (i) the Highest Lawful Rate or (ii) the Alternate
Base Rate, plus the Applicable Margin plus a margin of 2% per annum, payable on
demand. In the event the Issuer is not reimbursed by the Borrowers on the
Disbursement Date, or if Issuer
-51-
must for any reason return or disgorge such reimbursement, BankAmerica shall, on
the terms and subject to the conditions of this Agreement, fund the
Reimbursement Obligation therefor by making, on the next Business Day, Tranche A
Loans which are Base Rate Loans as provided in Section 2.1.2 (the Borrowers
being deemed to have given a timely Borrowing Request therefor for such amount);
provided, however, for the purpose of determining the availability of the
Commitments to make Loans immediately prior to giving effect to the application
of the proceeds of such Loans, such Reimbursement Obligation shall be deemed not
to be outstanding at such time.
SECTION 4.4. REIMBURSEMENT. The Borrowers' obligation (a "Reimbursement
Obligation") under Section 4.3 to reimburse the Issuer with respect to each
Disbursement (including interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim, or
defense to payment which the Borrowers may have or have had against the Lenders,
the Issuer or any beneficiary of a Letter of Credit, including any defense based
upon the occurrence of any Default, any draft, demand or certificate or other
document presented under a Letter of Credit proving to be forged, fraudulent,
invalid or insufficient, the failure of any Disbursement to conform to the terms
of the applicable Letter of Credit (if, in the Issuer's good faith opinion, such
Disbursement is determined to be appropriate) or any non-application or
misapplication by the beneficiary of the proceeds of such Disbursement, or the
legality, validity, form, regularity, or enforceability of such Letter of
Credit; provided, however, that nothing herein shall adversely affect the right
of the Borrowers to commence any proceeding against the Issuer for any wrongful
Disbursement made by the Issuer under a Letter of Credit as a result of acts or
omissions constituting gross negligence or wilful misconduct on the part of the
Issuer.
SECTION 4.5. DEEMED DISBURSEMENTS. Upon the occurrence and during the
continuation of any Event of Default or the occurrence of the Commitment
Termination Date, an amount equal to that portion of Letter of Credit
Outstandings attributable to outstanding and undrawn Letters of Credit shall, at
the election of the Issuer, acting on instructions from the Required Lenders,
and without demand upon or notice to the Borrowers, be deemed to have been paid
or disbursed by the Issuer under such Letters of Credit (notwithstanding that
such amount may not in fact have been so paid or disbursed), and, upon
notification by the Issuer to the Agent and to the Borrowers of its obligations
under this Section, the Borrowers shall be immediately obligated to reimburse
the Issuer the amount deemed to have been so paid or disbursed by the Issuer.
Any amounts so received by the Issuer from the Borrowers pursuant to this
Section shall be held as collateral security for the repayment of the Borrowers'
obligations in connection with the Letters of Credit issued by the Issuer. At
any time when such Letters of Credit shall terminate and all Obligations to the
Issuer are either terminated or paid or reimbursed to the Issuer in full, the
Obligations of the Borrowers under this Section shall be reduced accordingly
(subject, however, to reinstatement in the event any payment in respect of such
-52-
Letters of Credit is recovered in any manner from the Issuer), and the Issuer
will return to the Borrowers the excess, if any, of
(a) the aggregate amount deposited by the Borrowers with the Issuer
and not theretofore applied by the Issuer to any Reimbursement Obligation
over
(b) the aggregate amount of all Reimbursement Obligations to the
Issuer pursuant to this Section, as so adjusted.
At such time when all Events of Default shall have been cured or waived, the
Issuer shall return to the Borrowers all amounts then on deposit with the Issuer
pursuant to this Section. All amounts on deposit pursuant to this Section
shall, until their application to any Reimbursement Obligation or their return
to the Borrowers, as the case may be, bear interest at the daily average Federal
Funds Rate from time to time in effect (net of the costs of any reserve
requirements, in respect of amounts on deposit pursuant to this Section,
pursuant to F.R.S. Board Regulation D), which interest shall be held by the
Issuer as additional collateral security for the repayment of the Borrowers'
Obligations in connection with the Letters of Credit issued by the Issuer.
SECTION 4.6. NATURE OF REIMBURSEMENT OBLIGATIONS. The Borrowers shall
assume all risks of the acts, omissions, or misuse of any Letter of Credit by
the beneficiary thereof. Neither the Lenders nor the Issuer (except to the
extent of its own gross negligence or wilful misconduct) shall be responsible
for:
(a) the form, validity, sufficiency, accuracy, genuineness, or legal
effect of any Letter of Credit or any document submitted by any party in
connection with the application for and issuance of a Letter of Credit,
even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent, or forged;
(b) the form, validity, sufficiency, accuracy, genuineness, or legal
effect of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder
or proceeds thereof in whole or in part, which may prove to be invalid or
ineffective for any reason;
(c) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
-53-
(d) errors, omissions, interruptions, or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex, facsimile or
otherwise; or
(e) any loss or delay in the transmission or otherwise of any document
or draft required in order to make a Disbursement under a Letter of Credit
or of the proceeds thereof;
(f) any change in the time, manner or place of payment of, or in any
other term of, all or any of the obligations of the Borrowers in respect of
any Letter of Credit;
(g) the existence of any claim, set-off, defense or other right that
the Borrowers may have at any time against any beneficiary or any
transferee of any Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), the Issuer, the Lenders
or any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the Letters of Credit or any
unrelated transaction;
(h) any payment by the Issuer, or the Lenders under any Letter of
Credit against presentation of a draft or certificate that does not
strictly comply with the terms of any Letter of Credit; or any payment made
by the Issuer, or the Lenders under any Letter of Credit to any Person
purporting to be a trustee in bankruptcy, debtor-in-possession, assignee
for the benefit of creditors, liquidator, receiver or other representative
of or successor to any beneficiary or any transferee of any Letter of
Credit, including any arising in connection with any insolvency proceeding;
and
(i) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that
might otherwise constitute a defense available to, or a discharge of, the
Borrowers or a guarantor.
None of the foregoing shall affect, impair, or prevent the vesting of any of the
rights or powers granted the Lenders or the Issuer hereunder. In furtherance
and extension, and not in limitation or derogation, of any of the foregoing, any
action taken or omitted to be taken by the Lenders or the Issuer in good faith
shall be binding upon the Borrowers and shall not put the Lenders or the Issuer
under any resulting liability to the Borrowers.
SECTION 4.7. INCREASED COSTS; INDEMNITY. If by reason of
(a) any change in Applicable Law or any change in the interpretation
or application by any judicial or regulatory authority of any Applicable
Law, or
-54-
(b) compliance by the Agent, the Issuer or any Lender with any
direction, request or requirement (whether or not having the force of law)
of any Governmental Agency, including Regulation D of the F.R.S. Board:
(i) the Agent, the Issuer or Lender shall be subject to any tax
(other than taxes on net income and franchises), levy, charge or
withholding of any nature or to any variation thereof or to any
penalty with respect to the maintenance or fulfillment of its
obligations under this Article IV, whether directly or by such being
imposed on or suffered by the Agent, the Issuer or any Lender;
(ii) any reserve, deposit or similar requirement is or shall be
applicable, increased, imposed or modified in respect of any Letters
of Credit issued by any Issuer; or
(iii) there shall be imposed on a Lender any other condition
regarding this Article IV or any Letter of Credit,
and the result of the foregoing is directly or indirectly to increase the cost
to the Agent, the Issuer or any Lender of issuing or maintaining any Letter of
Credit or to reduce any amount receivable in respect thereof by the Agent, the
Issuer or any Lender, then and in any such case may, at any time after the
additional cost is incurred or the amount received is reduced, notify the
Borrowers thereof, and the Borrowers shall pay on demand such amounts as the
Agent, the Issuer or any Lender may specify to be necessary to compensate the
Agent, the Issuer or any Lender for such additional cost or reduced receipt,
together with interest on such amount from the date demanded until payment in
full thereof at a rate equal at all times to the Alternate Base Rate plus the
Applicable Margin plus 2% per annum. The determination by the Agent, the Issuer
or any Lender, as the case may be, of any amount due pursuant to this Section,
as set forth in a statement setting forth the calculation thereof in reasonable
detail, shall, in the absence of manifest error, be final and conclusive and
binding on all of the parties hereto.
In addition to amounts payable as elsewhere provided in this Article IV,
the Borrowers hereby indemnify, exonerate and hold the Agent, the Issuer or any
Lender harmless from and against any and all actions, causes of action, suits,
losses, costs, liabilities and damages, and expenses incurred in connection
therewith (irrespective of whether the Agent, the Issuer or any Lender is a
party to the action for which indemnification is sought), including reasonable
attorneys' fees and disbursements, which the Agent, the Issuer or any Lender may
incur or be subject to as a consequence, direct or indirect, of
-55-
(c) the issuance of the Letters of Credit, other than as a result of
the gross negligence or wilful misconduct of the Issuer as determined by a
court of competent jurisdiction, or
(d) the failure of the Issuer to honor a drawing under any Letter of
Credit as a result of any act or omission, whether rightful or wrongful, of
any present or future de jure or de facto government or governmental
authority.
ARTICLE V.
CERTAIN INTEREST RATE AND OTHER PROVISIONS
SECTION 5.1. LIBO RATE LENDING UNLAWFUL. If any Lender shall determine
(which determination shall, upon notice thereof to the Borrowers, be conclusive
and binding on the Borrowers) that the introduction of or any change in or in
the interpretation of any Applicable Law makes it unlawful, or any central bank
or other Governmental Agency asserts that it is unlawful, for such Lender to
make, continue or maintain any Loan as, or to convert any Loan into, a LIBO Rate
Loan, the obligation of the Lender to make, continue, maintain or convert into
any such LIBO Rate Loans shall, upon such determination, forthwith be suspended
until such Lender shall notify the Agent and the Borrowers that the
circumstances causing such suspension no longer exist, and all LIBO Rate Loans
shall automatically convert into Base Rate Loans at the end of the then current
Interest Periods with respect thereto or sooner, if required by such law or
assertion.
SECTION 5.2. DEPOSITS UNAVAILABLE. If the Agent shall have determined that:
(a) Dollar deposits in the relevant amount are not available to the
Agent in its relevant market; or
(b) by reason of circumstances affecting the Agent's relevant market,
adequate means do not exist for ascertaining the interest rate applicable
hereunder to LIBO Rate Loans,
then, upon notice from the Agent to the Borrowers and the Lenders, the
obligations of all Lenders under Section 2.3 to make any Loans shall forthwith
be suspended until the Agent shall notify the Borrowers and the Lenders that the
circumstances causing such suspension no longer exist.
SECTION 5.3. INCREASED LOAN COSTS, ETC. If by reason of
(a) any change in Applicable Law or any change in the interpretation
or application by any judicial or regulatory authority of any Applicable
Law, or
-56-
(b) compliance by any Lender with any direction, request or
requirement (whether or not having the force of law) of any Governmental
Agency, including Regulation D of the F.R.S. Board:
(i) any Lender shall be subject to any tax (other than taxes on
net income and franchises), levy, charge or withholding of any nature
or to any variation thereof or to any penalty with respect to any
payment due under any LIBO Rate Loan or other amounts due under this
Agreement, whether directly or by such being imposed on or suffered by
such Lender;
(ii) any reserve, deposit or similar requirement is or shall be
applicable, increased, imposed or modified in respect of any
extensions of credit or other assets of, or any deposits with or other
liabilities of, any Lender or Loans made by such Lender, or against
any other funds, obligations or other property owned or held by such
Lender and such Lender actually incurs such additional costs; or
(iii) there shall be imposed on any Lender any other condition
affecting this Agreement (or any of such extensions of credit or
liabilities),
and the result of the foregoing is directly or indirectly to increase the cost
to such Lender of making, continuing or maintaining (or of its obligation to
make, continue or maintain) any Loans as, or of converting (or of its obligation
to convert) any Loans into, LIBO Rate Loans, or to reduce any amount receivable
in respect thereof by such Lender, then and in any such case such Lender may, at
any time after the additional cost is incurred or the amount received is
reduced, notify the Borrowers thereof, and the Borrowers shall pay on demand
such amounts as such Lender may specify to be necessary to compensate such
Lender for such additional cost or reduced receipt, together with interest on
such amount from the date demanded until payment in full thereof at a rate equal
at all times to the Alternate Base Rate plus the Applicable Margin, plus 3% per
annum. The determination by such Lender of any amount due pursuant to this
Section, as set forth in a statement setting forth the calculation thereof in
reasonable detail, shall, in the absence of manifest error, be final and
conclusive and binding on all of the parties hereto.
SECTION 5.4. FUNDING LOSSES. In the event any Lender shall incur any loss
or expense (including any loss or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such Lender to make,
continue or maintain any portion of the principal amount of any Loan as, or to
convert any portion of the principal amount of any Loan into, a LIBO Rate Loan)
as a result of
-57-
(a) any conversion or repayment or prepayment of the principal amount
of any LIBO Rate Loans on a date other than the scheduled last day of the
Interest Period applicable thereto, whether pursuant to Section 3.1 or
otherwise;
(b) any Loans not being made as LIBO Rate Loans in accordance with the
Borrowing Request therefor by reason of any act or omission by the
Borrowers or failure of a condition precedent to be satisfied;
(c) any Loans not being continued as, or converted into, LIBO Rate
Loans in accordance with the Continuation/ Conversion Notice therefor by
reason of any act or omission by the Borrowers; or
(d) any repayment or prepayment of the principal amount of any Loans
on a date other than the scheduled Monthly Payment Dates;
then, upon the written notice of such Lender to the Borrowers (with a copy to
the Agent), the Borrowers shall, within five (5) days of its receipt thereof,
pay to such Lender such amount as will (in the reasonable determination of such
Lender) reimburse such Lender for such loss or expense. Such written notice
(which shall include calculations in reasonable detail) shall, in the absence of
manifest error, be conclusive and binding on the Borrowers.
SECTION 5.5. INCREASED CAPITAL COSTS. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any Applicable Law of any Governmental Agency affects or would
affect the amount of capital required or expected to be maintained by any Lender
or any Person controlling such Lender, and such Lender determines (in its sole
and absolute discretion) that the rate of return on its or such controlling
Person's capital as a consequence of its Commitments, issuance of Letters of
Credit or the Loans made by such Lender is reduced to a level below that which
such Lender or such controlling Person could have achieved but for the
occurrence of any such circumstance, then, in any such case upon notice from
time to time by such Lender to the Borrowers, the Borrowers shall immediately
pay directly to such Lender additional amounts sufficient to compensate such
Lender or such controlling Person for such reduction in rate of return. A
statement of such Lender as to any such additional amount or amounts (including
calculations thereof in reasonable detail) shall, in the absence of manifest
error, be conclusive and binding on the Borrowers. In determining such amount,
such Lender may use any method of averaging and attribution that it (in its
reasonable discretion) shall deem applicable.
SECTION 5.6. TAXES. All payments by the Borrowers of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future income,
excise, stamp
-58-
or franchise taxes and other taxes, levies, assessments, imposts, deductions,
fees, duties, withholdings or other charges of any nature whatsoever imposed by
any taxing authority, but excluding franchise taxes and taxes imposed on or
measured by any Lender's net income or receipts (such non-excluded items being
called "Taxes"). In the event that any withholding or deduction from any payment
to be made by the Borrowers hereunder is required in respect of any Taxes
pursuant to any Applicable Law, then the Borrowers will
(a) pay directly to the relevant authority the full amount required to
be so withheld or deducted;
(b) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
(c) pay to the Agent for the account of the Lenders such additional
amount or amounts as is necessary to ensure that the net amount actually
received by the Lenders will equal the full amount the Lenders would have
received and retained had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against any Lender with respect to
any payment received by such Lender hereunder, such Lender may pay such Taxes
and the Borrowers will promptly pay such additional amounts (including any
penalties, interest or expenses) as is necessary in order that the net amount
received by such person after the payment of such Taxes (including any Taxes on
such additional amount) shall equal the amount such person would have received
had not such Taxes been asserted.
If the Borrowers fail to pay any Taxes when due to the appropriate taxing
authority or fail to remit to any Lender the required receipts or other required
documentary evidence, the Borrowers shall indemnify such Lender for any
incremental Taxes, interest or penalties that may become payable by such Lender
as a result of any such failure.
SECTION 5.7. PAYMENTS, COMPUTATIONS, ETC. Unless otherwise expressly
provided, all payments by the Borrowers pursuant to this Agreement, the Notes or
any other Loan Document shall be made by the Borrowers to the Agent for the pro
rata account of the Lenders entitled to receive such payment. All such payments
shall be made without setoff, deduction or counterclaim, not later than 11:00
a.m. (Chicago time) on the date due, in same day or immediately available funds,
to such account with the Agent in Chicago, Illinois as the Agent shall specify
from time to time by notice to the Borrowers. Funds received after that time
shall be deemed to have been received by the Agent on the next succeeding
Business Day and any applicable interest or fee shall continue to accrue. The
Agent shall promptly remit in
-59-
same day funds to each Lender its share, if any, of such payments received by
the Agent for the account of such Lender. All interest shall be computed on the
basis of the actual number of days (including the first day but excluding the
last day) occurring during the period for which such interest is payable over a
year comprised of 360 days (or, in the case of interest on a Base Rate Loan
(other than when calculated with respect to the Federal Funds Rate), 365 days
or, if appropriate, 366 days). Whenever any payment to be made shall otherwise
be due on a day which is not a Business Day, such payment shall (except as
otherwise required by clause (c) of the definition of the term "Interest Period"
with respect to LIBO Rate Loans) be made on the next succeeding Business Day and
such extension of time shall be included in computing interest and fees, if any,
in connection with such payment. Notwithstanding any prepayment of a Base Rate
Loan or any conversion of a Base Rate Loan to a LIBO Rate Loan, the Agent will
calculate and invoice the Borrowers for accrued interest thereon through the
date of such prepayment only at the next Quarterly Payment Date.
SECTION 5.8. SHARING OF PAYMENTS. If any Lender shall obtain any payment or
other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Loan (other than pursuant to the terms of Sections
5.3, 5.4 and 5.5) in excess of its pro rata share of payments then or therewith
obtained by all Lenders, such Lender shall purchase from the other Lenders such
participations in Loans made by them and/or Letters of Credit as shall be
necessary to cause such purchasing Lender to share the excess payment or other
recovery ratably with each of them; provided, however, that if all or any
portion of the excess payment or other recovery is thereafter recovered from
such purchasing Lender, the purchase shall be rescinded and each Lender which
has sold a participation to the purchasing Lender shall repay to the purchasing
Lender the purchase price to the ratable extent of such recovery together with
an amount equal to such selling Lender's ratable share (according to the
proportion of
(a) the amount of such selling Lender's required repayment to the
purchasing Lender
to
(b) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid by the purchasing Lender in respect of the
total amount so recovered. The Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section may, to the fullest
extent permitted by law, exercise all its rights of payment (including pursuant
to Section 5.9) with respect to such participation as fully as if such Lender
were the direct creditor of the Borrower in the amount of such participation.
If under any applicable bankruptcy, insolvency or other similar law, any Lender
receives a secured claim in
-60-
lieu of a setoff to which this Section applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders entitled under this Section to share
in the benefits of any recovery on such secured claim.
SECTION 5.9. SETOFF. Each Lender shall, upon the occurrence of any Default
described in clauses (a) through (d) of Section 9.1.9 or upon the occurrence of
any other Event of Default, have the right to appropriate and apply to the
payment of the Obligations owing to it (whether or not then due), and (as
security for such Obligations) the Borrowers hereby grant to the Agent and the
Lenders a continuing security interest in, any and all balances, credits,
deposits, accounts or moneys of the Borrowers then or thereafter maintained with
or otherwise held by the Lender, including without limitation, the Proceeds
Account. The Agent and the Lenders agree promptly to notify the Borrowers after
any such setoff and application made by the Lender; provided, however, that the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of the Agent and each Lender under this Section 5.9 are
in addition to other rights and remedies (including other rights of setoff under
Applicable Law or otherwise) which the Agent and the Lenders may have.
SECTION 5.10. USE OF PROCEEDS. The Borrowers shall apply the proceeds of
each Borrowing in accordance with Section 2.7; without limiting the foregoing,
no proceeds of any Loan will be used to acquire any equity security of a class
which is registered pursuant to Section 12 of the Securities Exchange Act of
1934 or any "margin stock", as defined in F.R.S. Board Regulation U, X or G.
ARTICLE VI.
CONDITIONS PRECEDENT
SECTION 6.1. EFFECTIVENESS OF AGREEMENT AND INITIAL BORROWING. All loans
outstanding under the Existing Agreement will, on the Unified Closing Date and
upon the satisfaction of all of the conditions set forth in this Section 6.1,
be consolidated into a new Tranche A Loan and a new Tranche C Loan, and as
applicable, Tranche B Loan. The obligation of the Lenders to (i) consolidate
all outstanding loans into a new Tranche A Loan and a new Tranche C Loan, and,
as applicable, Tranche B Loan; (ii) make any new Credit Extension and (iii) to
amend and restate the Existing Agreement shall be subject to the prior or
concurrent satisfaction of each of the conditions precedent set forth in this
Section 6.1.
SECTION 6.1.1. RESOLUTIONS, ETC. The Agent shall have received from each
Borrower, LRI, Alliance Group, Alliance Plc, ENPRO, Difco and any other Obligor
a
-61-
certificate, dated as of a date not later than the initial Credit Extension,
of the Secretary or Assistant Secretary of such Obligor as to
(a) resolutions of the Board of Directors of such Obligor then in full
force and effect authorizing the execution, delivery and performance of
this Agreement, the Notes and each other Loan Document, as applicable, to
be executed by it;
(b) the incumbency and signatures of those of its officers or Persons
authorized to act with respect to this Agreement, the Notes and each other
Loan Document, as applicable, executed by it;
(c) the Organic Documents of such Obligor; and
(d) evidence that such Obligor is in good standing under the
Applicable Laws of the jurisdiction of its organization (as to Obligors
organized under the laws of the U.S.) and, as to each Obligor under a
Mortgage, each of the jurisdictions where its Mortgaged Properties are
located,
upon which certificate the Agent may conclusively rely until it shall have
received a further certificate of the Secretary of such Obligor canceling or
amending such prior certificate.
SECTION 6.1.2. DELIVERY OF NOTES. The Agent shall have received, for the
account of each Lender, a Note duly executed and delivered by the Borrowers.
SECTION 6.1.3. ENVIRONMENTAL REPORT. The Agent shall have received the
environmental assessments, acceptable in all respects to the Agent, prepared by
Southern Environmental Company with respect to the Mortgaged Properties owned by
Alliance USA and Source, a completed environmental questionnaire and such other
information with respect to the ownership and past use of all of the Mortgaged
Properties (including the East Irish Sea Assets) as the Agent may reasonably
request, all of which shall be satisfactory in form, substance and scope to the
Agent.
SECTION 6.1.4. GUARANTIES. The Agent shall have received executed
counterparts of the Guaranties, or ratifications of Guaranties previously
delivered under the Existing Agreement, dated as of a date not later than the
Unified Closing Date, duly executed by each of Alliance Group, LRI, Enpro and
Difco.
SECTION 6.1.5. PLEDGE AGREEMENTS. The Agent shall have received executed
counterparts of Pledge Agreements or ratifications of Pledge Agreements
previously delivered under the Existing Agreement, dated as of a date not later
than the Unified Closing Date, duly executed by (i) LRI pledging its interests
in the capital stock in each of LPC, GOCA, New GOC and Enpro, (ii) Alliance Plc
pledging its interest in the
-62-
capital stock of Alliance Group, Manx, LRI and Difco, and (iii) Alliance Group
pledging its interest in the capital stock of Alliance USA, ARNO, ARCOL and
Source, together with the certificates, evidencing all of the issued and
outstanding shares of capital stock pledged pursuant to the Pledge Agreements
(other than certificates evidencing the capital stock of Difco, which shall be
delivered pursuant to Section 8.1.7(d)), which certificates shall in each case
be accompanied by undated stock powers duly executed in blank, and or, if any
securities pledged pursuant to the Pledge Agreements are uncertificated
securities, confirmation and evidence satisfactory to the Agent that the
security interest in such uncertificated securities has been transferred to and
perfected by the Agent in accordance with Section 8-313 and Section 8-321 of the
Uniform Commercial Code, as in effect in the State of Illinois, and, as
applicable, with the evidence of completion (or satisfactory arrangement for the
completion) of all filings and recordings of the Pledge Agreements as may be
necessary, or in the reasonable opinion of the Agent, desirable, effectively to
create a valid, perfected first priority lien against and security interest in
the collateral covered thereby.
SECTION 6.1.6. MORTGAGES. The Agent shall have received counterparts of the
Mortgages, or amendments to Mortgages previously delivered under the Existing
Agreement, dated as of a date not later than the Unified Closing Date, duly
executed by Alliance USA, Source, LPC, New GOC and Difco, together with
(a) evidence of the completion (or satisfactory arrangements for the
completion) of all recordings and filings of the Mortgages as may be
necessary or, in the reasonable opinion of the Agent, desirable effectively
to create a valid, perfected first priority Lien against the Properties
purported to be covered thereby, which Properties shall include Proven
Reserves comprising not less than 90% of the Oil and Gas Properties
included in the initial determination of the Borrowing Base;
(b) favorable mortgagee's title opinions in favor of the Agent (in
form and substance and issued by title counsel satisfactory to the Agent),
with respect to the Property purporting to be covered by the Mortgages (or
such portion of such Properties as shall be acceptable to the Agent),
setting forth the working interest and net revenue interest of the
applicable mortgagor in such Properties and opining that the applicable
mortgagor's title to such property is good and defensible and valid and
that the interests created by the Mortgages constitute valid first Liens
thereon free and clear of all defects and encumbrances other than as
approved by the Agent;
(c) such Consents, Mortgage Consents, and such other approvals,
opinions, or documents as the Agent may reasonably request; and
-63-
(d) evidence of the delivery of notices of assignment to Difco's
counterparty to each Material Contract, including the Hydrocarbon Interests
comprising the Core Difco Assets.
The Hydrocarbon Interests, Properties and interests described in and
secured by the Mortgages and in any other mortgages or supplemental mortgages
given pursuant to this Agreement, as such Properties and interests are from time
to time constituted, are herein collectively called the "Mortgaged Properties."
SECTION 6.1.7. SECURITY AGREEMENTS. The Agent shall have received from the
Borrowers, Alliance Group, LRI, Enpro and Difco duly executed, original
counterpart of Security Agreements, or ratifications of Security Agreements
previously delivered under the Existing Agreement, dated as of a date not later
than the Unified Closing Date, together with
(a) executed copies of Uniform Commercial Code financing statements
(Form UCC-1), in proper form for filing, naming the Borrowers (or their
Subsidiaries, as applicable) as the debtor and the Agent as the secured
party, or other similar instruments or documents, filed (or satisfactory
arrangements for the completion of all filings and recordings) under the
Uniform Commercial Code in all jurisdictions as may be necessary or, in the
opinion of the Agent, desirable, effectively to create valid, perfected
first priority liens against and security interests in the collateral
covered thereby; and
(b) executed copies of proper Uniform Commercial Code Form UCC-3
termination statements, if any, necessary to release all Liens and other
rights of any Person in any collateral described in such Security Agreement
previously granted by any Person together with such other Uniform
Commercial Code Form UCC-3 termination statements as the Lender may
reasonably request from the Borrower.
SECTION 6.1.8. OPINIONS OF COUNSEL. The Agent shall have received opinions
addressed to the Agent and the Lenders, from U.S. and U.K. counsel to the
Borrowers and Guarantors acceptable to the Agent, substantially in the form of
Exhibits H-1 and H-2 hereto, respectively, and dated as of a date not later than
the Unified Closing Date.
SECTION 6.1.9. UCC-11S. The Agent shall have received certified copies of
Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or a
similar search report certified by a party acceptable to the Agent, dated a date
reasonably near to the Effective Date, listing all effective financing
statements which name the Borrowers, LRI, Alliance Plc, Alliance Group and
Enpro, (under their present names and any previous names) as the debtor and
which are filed in the jurisdictions in the following states: (1) Oklahoma and
Texas with respect to LRI, Enpro, New
-64-
GOC and GOCA, (2) Alabama, Arkansas, Kansas, Louisiana, Michigan, Mississippi,
North Dakota, Oklahoma, Texas and Wyoming with respect to LPC, and (3)
Louisiana, Oklahoma and Delaware, with respect to Alliance Plc, Alliance Group,
Source and Alliance USA, in which jurisdictions filings are to be made pursuant
to clause (a) of Section 6.1.6, together with copies of such financing
statements (none of which shall cover any collateral described in the
Mortgages).
SECTION 6.1.10. EVIDENCE OF INSURANCE. The Agent shall have received
certificates of insurance satisfactory to it evidencing the existence of all
insurance required to be maintained by the Borrowers by this Agreement and the
other Loan Documents.
SECTION 6.1.11. ASSIGNMENT OF OVERRIDING ROYALTY INTEREST, ETC. BankAmerica
shall have received executed and acknowledged original counterparts of the
Assignment in favor of the Designee, as well as the Certificate as to Overriding
Royalty Interests, substantially in the forms of Exhibit M-1 (or such other form
of such instrument as is acceptable to the Agent) and Exhibit M-2, and Agreement
as to Certain Tax Matters, substantially in the form of Exhibit M-3.
SECTION 6.1.12. WARRANT DOCUMENTS. The Agent shall have received the
Warrant Documents, in each case executed and delivered by Alliance Plc.
SECTION 6.1.13. ENGINEERING REPORTS. The Agent shall have received (i)
Engineering Report, from Xxx Xxxxxxx & Associates, Inc. effective as of April
30, 1998, as to the Mortgaged Properties owned by LPC, New GOC, Source and
Alliance USA and (ii) an Engineering Report from Xxxxxxx, Xxxxx & Associates,
Inc., effective as of January 1, 1998, as to the East Irish Sea Assets.
SECTION 6.1.14. [NOT USED.]
SECTION 6.1.15. [NOT USED.]
SECTION 6.1.16. CLOSING OF DIFCO ACQUISITION. The Agent shall have received
and approved a true, correct and complete copy of the fully executed Difco
Agreement, including all amendments and supplements thereto, and the closing
under the Difco Agreement shall have occurred such that Alliance Plc shall have
acquired all of the capital stock of Difco as contemplated by the Difco
Agreement.
SECTION 6.1.17. CLOSING UNDER BURLINGTON AGREEMENT. The Agent shall have
received and approved a true, correct and complete copy of the fully executed
Burlington Agreement, including all exhibits, schedules, amendments and
supplements thereto and all joint operating agreements pertaining to the East
Irish Sea Assets, the assignments and related conveyance and closing instruments
(as described in Section 6 of the Burlington Agreement) from Burlington to Difco
shall have been executed and
-65-
delivered by Burlington to Difco, filed with the Department of Trade and
Industry to the extent required by Applicable Law, and the closing under the
Burlington Agreement shall have occurred such that Difco shall have acquired all
of the East Irish Sea Assets as contemplated by the Burlington Agreement.
SECTION 6.1.18. CLOSING OF SUBORDINATED NOTE SALE, ETC. The Agent shall
have received evidence of the closing and funding of the sale of the
Subordinated Notes, such that EnCap has transferred not less than $10,000,000 to
the Borrowers, in form, scope and detail reasonably satisfactory to the Agent.
SECTION 6.1.19. SUBORDINATION AGREEMENT . The Agent shall have received
from EnCap executed, original counterparts of the Subordination Agreement.
SECTION 6.1.20. AMENDED AND RESTATED SECURITY DOCUMENTS. The documents,
instruments and agreements comprising or evidencing the collateral security for
the Existing Agreement shall each have been ratified or amended and restated to
provide that such documents, instruments and agreements secure the Obligations,
in each case pursuant to instruments in form and substance satisfactory to the
Agent and its counsel.
SECTION 6.1.21. MATERIAL CONTRACTS, DIFCO CONSENTS AND RELATED CONSENTS.
The Lender shall have received true and correct copies, certified by the
Borrowers, and approved the form and substance of, each Material Contract, a
Consent and, as applicable, a Mortgage Consent, for each such Material Contract,
dated as of a recent date, and the Difco Consents pertaining to the Core Difco
Assets.
SECTION 6.1.22. TITLE REPORTS. The Agent shall have received title reports
with respect to the East Irish Sea Assets in form, scope and detail reasonably
satisfactory to the Agent, including, without limitation, a report supplementing
the "Project Antelope" Due Diligence Report dated June 29, 1998, confirming that
Burlington owns the East Irish Sea Assets.
SECTION 6.1.23. CLOSING FEES, EXPENSES, ETC. The Agent shall have received
all reasonable costs and expenses due and payable pursuant to Sections 3.3 and
10.3, if then invoiced.
SECTION 6.2. INCLUSION OF HYDROCARBON INTERESTS IN THE BORROWING BASE AND
THE COLLATERAL VALUE. The inclusion of any additional Hydrocarbon Interests in
the Borrowing Base and the Collateral Value is subject to the following
conditions having been satisfied and receipt by the Agent of the following
documents, in each case with respect to each Hydrocarbon Interest and related
Oil and Gas Properties which the Borrowers request be included in the Borrowing
Base and the Collateral Value and each of which conditions and documents shall
be satisfactory to the Agent in form and substance:
-66-
SECTION 6.2.1. ENVIRONMENTAL REPORT. The Agent shall have received Phase I
environmental assessments as of a recent date prepared by an environmental
consulting firm as shall be acceptable to the Agent, a completed environmental
disclosure questionnaire and such other information with respect to the
ownership and past use of the Mortgaged Properties relating to such Hydrocarbon
Interests as the Agent may reasonably request, and such reports and
questionnaire shall be satisfactory in form, substance and scope to the Agent.
SECTION 6.2.2. MORTGAGE. The Agent shall have received counterparts of a
Mortgage relating to such Hydrocarbon Interests and related Oil and Gas
Properties, dated as of a recent date, duly executed by the Borrowers and/or
their Subsidiaries, as applicable, together with
(a) evidence of the completion (or satisfactory arrangements for the
completion) of all recordings and filings of the Mortgage as may be
necessary or, in the reasonable opinion of the Agent, desirable effectively
to create a valid, perfected first priority Lien against the Properties
purported to be covered thereby;
(b) favorable mortgagee's title opinions in favor of the Agent (in
form and substance and issued by title counsel reasonably satisfactory to
the Agent, substantially in the form of Exhibit I hereto), with respect to
the Property purporting to be covered by the Mortgage setting forth the
working interest and net revenue interest of a Borrower or its Subsidiaries
in such Properties and opining that the Borrower's or such Subsidiary's
title to such property is good and marketable and valid and that the
interests created by the Mortgage constitute valid first Liens thereon free
and clear of all defects and encumbrances other than as approved by the
Agent; and
(c) such other approvals, opinions, or documents as the Agent may
reasonably request.
SECTION 6.2.3. UCC-11S. The Agent shall have received certified copies of
Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or a
similar search report certified by a party acceptable to the Agent, dated as of
a recent date, listing all effective financing statements which name the
Borrowers or their Subsidiaries (under their present names and any previous
names) as the debtor and which are filed in the jurisdictions in the State of
Oklahoma or the state in which such Oil and Gas Properties are located and in
which the Mortgage referenced in Section 6.2.2. is to be filed, together with
copies of such financing statements (none of which shall cover any collateral
described in any such Mortgage).
SECTION 6.2.4. EVIDENCE OF INSURANCE. The Agent shall have received
certificates of insurance satisfactory to it evidencing the existence of all
insurance
-67-
required to be maintained by the Borrowers by this Agreement and the other Loan
Documents with respect to the Hydrocarbon Interests and related Oil and Gas
Properties being added to the Borrowing Base and the Collateral Value.
SECTION 6.2.5. ENGINEERING REPORTS. The Agent shall have received an
Engineering Report, dated as of a recent date from a petroleum engineer
reasonably acceptable to the Agent, as to the Hydrocarbon Interests being added
to the Borrowing Base and the Collateral Value.
SECTION 6.2.6. MATERIAL CONTRACTS AND RELATED CONSENTS. The Agent shall
have received true and correct copies, certified by the Borrowers, and approved
the form and substance of, each Material Contract related to the Hydrocarbon
Interests being added to the Borrowing Base and the Collateral Value. In
addition, the Agent shall have received duly executed counterparts of a Security
Agreement or, if applicable, amendments to an existing Security Agreement which
add any such Material Contract to the Collateral (as defined in the Security
Agreement), a Consent and, as applicable, a Mortgage Consent, for each such
Material Contract, dated as of a recent date.
SECTION 6.2.7. GUARANTIES. The Agent shall have received duly executed
counterparts of a Guaranty from any Subsidiary of a Borrower which is adding
Hydrocarbon Interests to the Borrowing Base and the Collateral Value, unless
such a Guaranty has already been delivered to the Agent in connection with a
previous addition to the Borrowing Base or on the Effective Date.
SECTION 6.2.8. ADDITIONAL STOCK PLEDGE. The Agent shall have received
executed counterparts of the Pledge Agreement (Stock), dated not later than the
date of such Loan, duly executed by the applicable Guarantor or Borrower
pledging its interest in the capital stock of any Subsidiary which is adding
Hydrocarbon Interests to the Borrowing Base and the Collateral Value, unless
such Pledge Agreement has already been delivered to the Agent, accompanied by
the original share certificate evidencing such capital stock and executed stock
powers (in blank) and the evidence of satisfactory arrangement for the
completion of all filings and recordings of the Pledge Agreement (Stock) as may
be necessary or, in the reasonable opinion of the Agent, desirable, effectively
to create a valid, perfected first priority lien against and security interest
in the collateral covered thereby.
SECTION 6.2.9. OTHER DOCUMENTS. The Agent shall have received such other
documents as it may reasonably request.
SECTION 6.3. ALL CREDIT EXTENSIONS. The obligation of the Agent to make any
Credit Extension shall be subject to the satisfaction of each of the conditions
precedent set forth in this Section 6.3.
-68-
SECTION 6.3.1. COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. Both before and
after giving effect to any Credit Extension (but, if any Default of the nature
referred to in Section 9.1.5 shall have occurred with respect to any other
Indebtedness, without giving effect to the application, directly or indirectly,
of the proceeds of any Borrowing) the following statements shall be true and
correct
(a) the representations and warranties set forth in Article VII
(excluding, however, those contained in Section 7.9) shall be true and
correct with the same effect as if then made (unless stated to relate
solely to an earlier date, in which case such representations and
warranties shall be true and correct as of such earlier date);
(b) except as disclosed by the Borrowers to the Agent pursuant to
Section 7.9
(i) no labor controversy, litigation, arbitration or
governmental investigation or proceeding shall be pending or, to the
knowledge of the Borrowers, threatened against the Borrowers or any of
their Subsidiaries which has or might reasonably be expected to have a
Material Adverse Effect; and
(ii) no development shall have occurred in any labor controversy,
litigation, arbitration or governmental investigation or proceeding
disclosed pursuant to Section 7.9 which has or might reasonably be
expected to have a Material Adverse Effect; and
(c) no Default shall have then occurred and be continuing, and neither
the Borrowers nor any other Obligor are in material violation of any
Applicable Law or governmental regulation or court order or decree if such
violation has or might reasonably be expected to have a Material Adverse
Effect.
SECTION 6.3.2. BORROWING REQUEST, ETC. The Agent shall have received a
Borrowing Request or Issuance Request, as the case may be, for such Credit
Extension. Each of the delivery of a Borrowing Request or an Issuance Request
and the acceptance by the Borrowers of the proceeds of the Borrowing or the
issuance of the Letter of Credit as applicable, shall constitute a
representation and warranty by the Borrowers that on the date of such Borrowing
(both immediately before and after giving effect to such Borrowing and the
application of the proceeds thereof) or the issuance of the Letter of Credit, as
applicable, the statements made in Section 6.3.1 are true and correct.
SECTION 6.3.3. SATISFACTORY LEGAL FORM. All documents executed or submitted
pursuant hereto by or on behalf of the Borrowers or any of their Subsidiaries
shall be reasonably satisfactory in form and substance to the Agent and
-69-
its counsel; the Agent and its counsel shall have received all information,
approvals, opinions, documents or instruments as the Agent or its counsel may
reasonably request.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and each Lender to enter into this Agreement
and to make Loans and to issue Letters of Credit hereunder, the Borrowers
represent and warrant, as of the Unified Closing Date, unto the Agent and each
Lender as set forth in this Article VII.
SECTION 7.1. ORGANIZATION, ETC. LPC is an Oklahoma corporation, GOCA is a
Delaware corporation, New GOC is a Delaware corporation, GOC was a Texas
corporation, Alliance USA is a Delaware corporation, Source is a Louisiana
corporation, Alliance Group is a Delaware corporation, LRI is a Delaware
corporation and Alliance Plc is a public limited company incorporated under the
laws of England and Wales, and Difco is a private limited company incorporated
under the laws of England and Wales and each is validly incorporated and
existing and (as to the Obligors organized in the U.S.) in good standing under
the Applicable Laws of the jurisdiction of its organization, is duly qualified
to do business and is in good standing as a foreign corporation in each
jurisdiction where the nature of its business requires such qualification, and
has full power and authority and holds all requisite governmental licenses,
permits and other approvals to enter into and perform its Obligations under this
Agreement, the Note and each other Loan Document to which it is a party and to
own and hold under lease its property and to conduct its business substantially
as currently conducted by it. Except as set forth on Schedule II, the Borrowers
have no Subsidiaries.
SECTION 7.2. DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The execution,
delivery and performance by the Borrowers and each other Obligor of this
Agreement, the Note and each other Loan Document executed or to be executed by
it or them are within each Borrower's and each such Obligor's respective
corporate powers, have been duly authorized by all necessary corporate action,
and do not
(a) contravene such Borrower's or such other Obligor's Organic
Documents;
(b) contravene or result in any violation of or default under any
Applicable Law or any material contractual restriction, court decree or
order, in each case binding on or affecting any Borrower or any other
Obligor or any Properties, businesses, assets or revenues of any Borrower;
-70-
(c) result in, or require the creation or imposition of, any Lien on
(except for the Liens of the Loan Documents) any of the Borrowers' or any
other Obligor's Properties, businesses, assets or revenues.
SECTION 7.3. GOVERNMENT APPROVAL, REGULATION, ETC. No authorization or
approval or other action by, and no notice to or filing with, any Governmental
Agency or other Person is required for the due execution, delivery or
performance by the Borrowers or any other Obligor of this Agreement, the Note or
any other Loan Document to which they are a party, except for Approvals, if any,
by the lessor under any government-issued oil and gas lease of the granting the
Mortgage, which Difco, Alliance USA, Source, LPC and New GOC expect to obtain in
the ordinary course of business and the Consents, each of which shall have been
obtained on or before the Unified Closing Date.
SECTION 7.4. INVESTMENT COMPANY ACT. None of the Borrowers or any of their
Affiliates is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
SECTION 7.5. PUBLIC UTILITY HOLDING COMPANY ACT. None of the Borrowers or
any of their Subsidiaries 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.
SECTION 7.6. VALIDITY, ETC. This Agreement constitutes, and the Note and
each other Loan Document executed by the Borrowers or any of their Subsidiaries
will, on the due execution and delivery thereof, constitute, the legal, valid
and binding obligations of the Borrowers or such Subsidiaries, as applicable or
enforceable in accordance with their respective terms, and each Loan Document
executed pursuant hereto by each other Obligor will, on the due execution and
delivery thereof by such, Obligor, be the legal valid and binding obligation of
such Obligor enforceable in accordance with its terms, in each case subject to
the effect of any applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally.
SECTION 7.7. FINANCIAL INFORMATION.
(a) The audited consolidated balance sheet of Alliance Plc as at April
30, 1998 and the related audited statements of operations and cash flow of
Alliance Plc, copies of which have been furnished to the Agent, have been
prepared in accordance with GAAP consistently applied, and present fairly
the consolidated financial condition of the corporations covered thereby as
at the date thereof and the results of their audited operations for the
period then ended.
-71-
(b) The audited consolidated balance sheets of Alliance Plc as at
April 30, 1998, and the related audited statements of operations and cash
flow of Alliance Plc, copies of which have been furnished to the Agent,
have been prepared in accordance with United Kingdom GAAP consistently
applied, and present fairly the consolidated financial condition of the
corporations covered thereby as at the date thereof and the results of
their audited operations for the period then ended.
SECTION 7.8. NO MATERIAL ADVERSE CHANGE. Since the date of the audited
financial statements described in Section 7.7, there has been no change in the
financial condition, operations, assets, business, Properties or prospects of
Alliance Plc or any of its consolidated Subsidiaries that has or might
reasonably be expected to have a Material Adverse Effect, except as disclosed in
Item 7.8 of the Disclosure Schedule.
SECTION 7.9. LITIGATION, LABOR CONTROVERSIES, ETC. There is no pending
or, to the knowledge of the Borrowers, threatened litigation, action,
proceeding, or labor controversy affecting the Borrowers, or any of their
Subsidiaries, or any of their respective Properties, businesses, assets or
revenues, which has or might reasonably be expected to have a Material Adverse
Effect, except as disclosed in Item 7.9 ("Litigation") of the Disclosure
Schedule.
SECTION 7.10. OWNERSHIP OF PROPERTIES. Each of the Borrowers and its
Subsidiaries has good and defensible title to their Properties (including,
without limitation, all Hydrocarbon Interests), free and clear of all Liens
except (a) those referred to in the financial statements referred to in Section
7.7, (b) as disclosed to the Agent in the Disclosure Schedule or (c) as
permitted by Section 8.2.3. After giving full effect to all Liens permitted
under Section 8.2.3, each of the Borrowers or their Subsidiaries owns the net
interests in Hydrocarbons produced from the Oil and Gas Properties as reflected
in the most recent Engineering Report, and none of the Borrowers or their
Subsidiaries are obligated to bear costs or expenses in respect of the Oil and
Gas Properties in excess of their respective working interest percentage as
reflected in the most recent Engineering Report.
SECTION 7.11. TAXES. Each of the Borrowers and its Subsidiaries has filed
all Federal and other tax returns and reports required by Applicable Law to have
been filed by it and has paid all taxes, assessments, fees and other
governmental charges thereby shown to be owing, except as disclosed in Item 7.11
of the Disclosure Schedule and except any such taxes or charges which are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books.
SECTION 7.12. PENSION AND WELFARE PLANS. During the twelve-consecutive-
month period prior to the Effective Date and prior to the date of any Borrowing
-72-
hereunder, no steps have been taken to terminate any Pension Plan in a distress
termination under Section 4041(c) of ERISA, and no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which might result in the incurrence
by the Borrowers or any member of the Controlled Group of any material
liability, fine or penalty. Except as disclosed in Item 7.12 ("Employee Benefit
Plans") of the Disclosure Schedule, neither the Borrowers nor any member of the
Controlled Group has any contingent liability with respect to any post-
retirement benefit under a Welfare Plan, other than liability for continuation
coverage described in Part 6 of Title I of ERISA.
SECTION 7.13. COMPLIANCE WITH LAW. None of the Borrowers nor any of their
Subsidiaries (a) is in violation of any Applicable Law of, or the terms of any
Approval, license or permit issued by, any Governmental Agency; or (b) has
failed to obtain any Approval necessary to ownership of any of its properties or
the conduct of its business (including without limitation any such authorization
from the Federal Energy Regulatory Commission or any state conservation
commission or similar body); which violation or failure could reasonably be
expected to have a Material Adverse Effect.
SECTION 7.14. CLAIMS AND LIABILITIES. Except as disclosed to the Lenders in
Item 7.14 ("Claims and Liabilities") in the Disclosure Schedule, none of the
Borrowers nor any of their Subsidiaries has accrued any liabilities under gas
purchase contracts for gas not taken, but for which it is liable to pay if not
made up and which, if not paid, would have a Material Adverse Effect. Except as
disclosed to the Lenders in Item 7.14 of the Disclosure Schedule, no claims
exist against the Borrowers or any of their Subsidiaries for gas imbalances
which claims if adversely determined would have a Material Adverse Effect. No
purchaser of product supplied by the Borrowers or any of their Subsidiaries has
any claim against the Borrowers or any of their Subsidiaries for product paid
for, but for which delivery was not taken as and when paid for, which claim if
adversely determined would have a Material Adverse Effect.
SECTION 7.15. NO PROHIBITION ON PERFECTION OF SECURITY DOCUMENTS. None of
the terms or provisions of any indenture, mortgage, deed of trust, agreement or
other instrument to which any Borrower or any of its Subsidiaries is a party or
by which any Borrower or any of its Subsidiaries or the property of any Borrower
or any of its Subsidiaries is bound prohibit the filing or recordation of any of
the Loan Documents or any other action which is necessary or appropriate in
connection with the perfection of the Liens evidenced and created by any of the
Loan Documents.
SECTION 7.16. SOLVENCY. None of the Borrowers nor any of their Subsidiaries
is "insolvent", as such term is used and defined in the United States Bankruptcy
Code, 11 U.S.C. (S) 101, et seq.
-73-
SECTION 7.17. ENVIRONMENTAL WARRANTIES. As a reasonable and prudent
operator of oil and gas producing properties, in the ordinary course of their
business, the Borrowers have conducted, with respect to their existing Oil and
Gas Properties, and, on an ongoing basis, conducts a review of the effect of
Environmental Laws on the business, operations and Properties of each Borrower
and its Subsidiaries, in the course of which they identify and evaluate
associated liabilities and costs (including any capital or operating
expenditures required for Remedial Action or other clean-up or closure of
Properties presently owned or operated, any capital or operating expenditures
required for Remedial Action or otherwise to achieve or maintain compliance with
environmental protection standards imposed by any Environmental Law or as a
condition of any Approval, license, permit or contract, any related constraints
on operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat and any actual or potential liabilities to third parties,
including employees, and any related costs and expenses). On the basis of this
review, the Borrowers have reasonably concluded that, except as disclosed in
Item 7.17 ("Environmental Matters") of the Disclosure Schedule:
(a) all facilities and Property (including underlying groundwater)
owned, leased or operated by the Borrowers or any of their Subsidiaries
have been, and continue to be, owned, leased or operated by the Borrowers
or any of their Subsidiaries in material compliance with all Environmental
Laws;
(b) there have been no past, and there are no pending or threatened
(i) claims, complaints, notices or inquiries to, or requests for
information received by, the Borrowers or any of their Subsidiaries
with respect to any alleged violation of any Environmental Law, that,
singly or in the aggregate, have or may reasonably be expected to have
a Material Adverse Effect, or
(ii) claims, complaints, notices or inquiries to, or requests for
information received by, the Borrowers or any of their Subsidiaries
regarding potential liability under any Environmental Law or under any
common law theories relating to operations or the condition of any
facilities or Property (including underlying groundwater) owned,
leased or operated by the Borrowers or any of their Subsidiaries that,
singly or in the aggregate, have, or may reasonably be expected to
have a Material Adverse Effect;
(c) there have been no Releases of Hazardous Materials at, on or under
any Property now or, to the Borrowers' or a Subsidiary of the Borrowers'
knowledge, previously owned or leased by the Borrowers or their
Subsidiaries
-74-
that, singly or in the aggregate, have, or may reasonably be expected to
have, a Material Adverse Effect;
(d) the Borrowers and their Subsidiaries have been issued and are in
material compliance with all permits, certificates, approvals, licenses and
other authorizations required under Environmental Laws and necessary for
its business;
(e) no Property now or, to the Borrowers' or a Subsidiary of the
Borrowers' knowledge, previously owned, leased or operated by the Borrowers
or their Subsidiaries is listed or proposed for listing on the National
Priorities List pursuant to CERCLA, or, to the extent that such listing
may, singly or in the aggregate, have, or may reasonably be expected to
have a Material Adverse Effect, on the CERCLIS or on any other published
federal or state list of sites requiring investigation or clean-up pursuant
to Environmental Laws;
(f) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any Property now or, to the
Borrowers' or a Subsidiary of the Borrowers' knowledge, previously owned,
leased or operated by the Borrowers or their Subsidiaries that, singly or
in the aggregate, have, or may reasonably be expected to have, a Material
Adverse Effect;
(g) none of the Borrowers or any of their Subsidiaries has directly
transported or directly arranged for the transportation of any Hazardous
Material to any location which is listed or proposed for listing on the
National Priorities List pursuant to CERCLA, or, to the extent that such
listing may, singly or in the aggregate, have, or may reasonably be
expected to have a Material Adverse Effect, on the CERCLIS or on any
published federal or state list of sites requiring investigation or clean-
up pursuant to Environmental Laws or which is the subject of federal, state
or local enforcement actions or other investigations which would reasonably
be expected to lead to claims against the Borrowers or any of their
Subsidiaries which would have a Material Adverse Effect for any remedial
work, damage to natural resources or personal injury, including claims
under CERCLA;
(h) there are no polychlorinated biphenyls, radioactive materials or
friable asbestos present at any Property now or, to the Borrowers' or a
Subsidiary of the Borrowers' knowledge, previously owned or leased by the
Borrowers or any of their Subsidiaries that, singly or in the aggregate,
have, or may reasonably be expected to have, a Material Adverse Effect; and
(i) no condition exists at, on or under any property now or, to the
Borrowers' or a Subsidiary of the Borrowers' knowledge, previously owned or
-75-
leased by the Borrowers or any of their Subsidiaries which, with the
passage of time, or the giving of notice or both, would give rise to
material liability under any Environmental Law that, singly or in the
aggregate have, or may reasonably be expected to have a Material Adverse
Effect.
SECTION 7.18. YEAR 2000 COMPLIANCE.
(a) The Borrowers are: (i) developing a review and assessment program of
all areas with their and each of their Subsidiaries' businesses and operations
(including those affected by suppliers and vendors) that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that computer
applications (as well as imbedded microchips) used by the Borrowers or any of
their Subsidiaries (or any of their suppliers and vendors) may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999); (ii) developing a plan and a
timetable for addressing the Year 2000 Problem on a timely basis; and (iii) to
date, implementing that plan in accordance with that timetable.
(b) The Borrowers reasonably believe that all computer applications
(including those of their suppliers and vendors) that are material to their or
their Subsidiaries' businesses and operations will, on a timely basis, be able
to perform properly date-sensitive functions for all dates before and after
January 1, 2000, (that is, be "Year 2000 Compliant"), except to the extent that
a failure to do so could not reasonably be expected to have a Material Adverse
Effect.
SECTION 7.19. REGULATIONS G, U AND X. None of the Borrowers or any of their
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock, and no proceeds of any Loans will be used
for a purpose which violates, or would be inconsistent with, F.R.S. Board
Regulation G, U or X. Terms for which meanings are provided in F.R.S. Board
Regulation G, U or X or any regulations substituted therefor, as from time to
time in effect, are used in this Section with such meanings.
SECTION 7.20. ACCURACY OF INFORMATION. All factual information heretofore
or contemporaneously furnished by or on behalf of the Borrowers or any of their
Subsidiaries in writing to the Agent or the Lenders for purposes of or in
connection with this Agreement or any transaction contemplated hereby (including
without limitation each Engineering Report) is, and all other such factual
information hereafter furnished by or on behalf of the Borrowers or any of their
Subsidiaries to the Agent or Lenders will be, true and accurate in every
material respect on the date as of which such information is dated or certified
and as of the date of execution and delivery of this Agreement by the Lenders,
and such information is not, or shall not be, as the case may be, incomplete by
omitting to state any material fact necessary to make such information not
misleading.
-76-
ARTICLE VII
COVENANTS
SECTION 8.1. AFFIRMATIVE COVENANTS. The Borrowers agree with the Agent and
each Lender that, until all Commitments have terminated and all Obligations have
been paid and performed in full, the Borrowers and each of their Subsidiaries
will perform the obligations set forth in this Section 8.1.
SECTION 8.1.1. FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. The Borrowers
will furnish, or will cause to be furnished, to the Agent and each Lender copies
of the following financial statements, reports, notices and information:
(a) as soon as available and in any event within sixty (60) days after
the end of each of the first three Fiscal Quarters of each Fiscal Year of
Alliance Plc, balance sheets of Alliance Plc and its consolidated
Subsidiaries as of the end of such Fiscal Quarter and statements of
operations and cash flow of Alliance Plc and its consolidated Subsidiaries
for such Fiscal Quarter and for the period commencing at the end of the
previous Fiscal Year and ending with the end of such Fiscal Quarter,
certified by the chief financial Authorized Officer of Alliance Plc;
(b) as soon as available and in any event within one-hundred and
twenty (120) days after the end of each Fiscal Year of Alliance Plc, a copy
of the annual audit report for such Fiscal Year for Alliance Plc and its
consolidated Subsidiaries, including therein the balance sheet of Alliance
Plc and its consolidated Subsidiaries as of the end of such Fiscal Year and
statements of operations and cash flow of Alliance Plc and its consolidated
Subsidiaries for such Fiscal Year, in each case certified (without any
Impermissible Qualification) in a manner reasonably acceptable to the Agent
by an independent public accountant acceptable to the Agent, together with
a report from such accountants containing a computation of, and showing
compliance with, each of the financial ratios and restrictions contained in
Section 8.2.4 and to the effect that, in making the examination necessary
for the signing of such annual report by such accountants, they have not
become aware of any Default that has occurred and is continuing, or, if
they have become aware of such Default, describing such Default and the
steps, if any, being taken to cure it;
(c) concurrently with the delivery of the financial statements
referred to is clauses (a) and (b), a certificate, executed by the chief
financial Authorized Officer of Alliance Plc, showing (in reasonable detail
and with appropriate calculations and computations in all respects
reasonably
-77-
satisfactory to the Agent) compliance with the financial covenants set
forth in Section 8.2.4, showing, among other things, a comparison between
the actual results and the minimum requirements of this Agreement and also
certifying to such Authorized Officer's best knowledge, that no Default or
Event of Default has occurred and is then outstanding;
(d) on or prior to thirty (30) days before the beginning of each
Fiscal Year, a budget for Alliance Plc and its consolidated Subsidiaries
for the following Fiscal Year, in form, scope and detail reasonably
satisfactory to the Agent, showing, among other things, Approved
Development Activities for such period, which budget shall, each Fiscal
Quarter be updated and revised to cover the 12 month period following such
Fiscal Quarter;
(e) as soon as possible and in any event within three (3) days after
the occurrence of each Default and any event which has or is reasonably
likely to have a Material Adverse Effect, a statement of the chief
financial Authorized Officer of the Borrowers setting forth details of such
Default or event and the action which Alliance Plc and the Borrowers have
taken and propose to take with respect thereto;
(f) as soon as possible and in any event within three (3) days after
(x) the occurrence of any adverse development with respect to any
litigation, action, proceeding or labor controversy described in Section
7.9 or (y) the commencement of any litigation, action, proceeding or labor
controversy of the type described in Section 7.9, notice thereof and copies
of all documentation relating thereto;
(g) as soon as possible and in any event within ten (10) days after
any responsible officer of Alliance Plc or any Borrower has actual
knowledge thereof, notice of
(i) any claim by any Person against any Borrower or any of its
Subsidiaries of nonpayment of, or
(ii) any attempt by any Person to collect upon or enforce
any accounts payable of Alliance Plc or any of its consolidated
Subsidiaries, in the case of any single account payable in excess of
$100,000, or in the case of all accounts payable at any time outstanding in
excess of $250,000;
(h) as soon as available and in any event within sixty (60) days after
each of May 1st of each calendar year, an Engineering Report, from an
independent petroleum engineering firm acceptable to the Agent in its
reasonable judgment, and as soon as available and in any event within sixty
-78-
(60) days after November 1st of each calendar year, an Engineering Report
from the Borrowers' internal reserve engineers, unless the Agent, at least
sixty (60) days before the required delivery date of such Engineering
Report, has requested that it be prepared by an independent petroleum
engineering firm reasonably acceptable to the Agent;
(i) promptly after (i) the sending or filing thereof, copies of all
reports which Alliance Plc, Alliance Group or the Borrowers send to any of
their security holders, (ii the sending or filing thereof, all reports and
registration statements which Alliance Plc, Alliance Group or the Borrowers
file with the Securities and Exchange Commission or any national securities
exchange, (ii the filing thereof, copies of all tariff and rate cases and
other material reports filed with any regulatory authority (other than
routine operating reports), and (iv receipt thereof, copies of all notices
received from any regulatory authority concerning noncompliance by any
Borrower with any Applicable Law;
(j) immediately upon becoming aware of the institution of any steps by
any Borrower or any other Person to terminate any Pension Plan, or the
failure to make a required contribution to any Pension Plan if such failure
is sufficient to give rise to a Lien under section 302(f) of ERISA, or the
taking of any action with respect to a Pension Plan which could result in
the requirement that such Borrower furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any event with respect to
any Pension Plan which could result in the incurrence by such Borrower of
any material liability, fine or penalty, or any material increase in the
contingent liability of such Borrower with respect to any post-retirement
Welfare Plan benefit, notice thereof and copies of all documentation
relating thereto;
(k) upon, but in no event later than ten (10) days after, becoming
aware of (i) any and all enforcement, cleanup, removal or other
governmental or regulatory actions instituted, completed or threatened
against the Borrowers or any of their Properties pursuant to any applicable
Environmental Laws, (ii) all other environmental claims, and (iii) any
environmental or similar condition on any real property adjoining or in the
vicinity of the property of the Borrowers that could reasonably be
anticipated to cause such Property or any part thereof to be subject to any
restrictions on the ownership, occupancy, transferability or use of such
property under any Environmental Laws;
(l) a monthly summary of production volumes, revenues, operating
costs, Net Proceeds of Production, general and administrative expenses,
Capital Expenditures, drilling and completion reports and well-test data;
-79-
(m) such other information respecting the condition or operations,
financial or otherwise of Alliance Plc or any of its consolidated
Subsidiaries as the Agent may from time to time reasonably request; and
(n) promptly after any Borrower discovers or determines that any
computer application (including those of their suppliers or vendors) that
is material to the businesses or operations of the Borrowers and their
Subsidiaries taken as a whole will not be Year 2000 Compliant on a timely
basis, notice thereof and a copy of the Borrowers' plan for dealing with
such problem except to the extent such failure could not reasonably be
expected to have a Material Adverse Effect.
SECTION 8.1.2. COMPLIANCE WITH LAWS, ETC. The Borrowers will, and will
cause each of their Subsidiaries to, comply in all material respects with all
Applicable Laws, such compliance to include (without limitation):
(a) the maintenance and preservation of their corporate existence and
qualification as a foreign corporation; and
(b) the payment, before the same become delinquent, of all taxes,
assessments and governmental charges imposed upon it or upon its property
except to the extent being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books.
SECTION 8.1.3. MAINTENANCE AND DEVELOPMENT OF PROPERTIES.
(a) The Borrowers will, and will cause each of their Subsidiaries to,
maintain, preserve, protect and keep their Properties in good repair,
working order and condition (ordinary wear and tear excepted), and make
necessary and proper repairs, renewals and replacements so that their
business carried on in connection therewith may be properly conducted at
all times in accordance with standard industry practices. In particular,
the Borrowers will, and will cause each of their Subsidiaries to, operate
or cause to be operated their Oil and Gas Properties as reasonable and
prudent operators.
(b) The Borrowers will, and will cause each of their Subsidiaries to,
use their reasonable best efforts promptly to develop and bring into
production all developed non-producing Proven Reserves identified in the
Approved Development Plan and, after the period covered in the initial
Approved Development Plan, those reserves used in the calculation of
Borrowing Base and Collateral Value.
-80-
(c) The Borrowers shall ensure that at all times they have available
to them, either through its employees or through independent contractors,
petroleum engineers with appropriate experience and expertise in the proper
operation and development of properties similar to the Mortgaged
Properties.
(d) From time-to-time, but not less than once each Fiscal Quarter
during the time any Tranche B Loan is outstanding, the Borrowers shall
propose to the Agent revisions to the Approved Development Plan then in
effect, showing, among other things, revised projections of Capital
Expenditures for the eighteen (18) month period following such revision,
which revisions shall in all respects satisfactory to the Agent. Once
approved in writing by the Agent, the then existing Approved Development
Plan shall be amended and shall thereafter replace and supersede the prior
Approved Development Plan.
(e) Promptly after the drilling and completion of each well drilled on
the Oil and Gas Properties that have been considered by the Agent in the
determination or redetermination of the Borrowing Base or the Collateral
Value, the applicable Borrower shall promptly request assignments of any
interests earned by virtue of such drilling and, within fifteen (15) days
after the earlier to occur of the receipt of such assignments or sixty (60)
days after first production from such well, shall deliver to the Agent:
(i) true and correct copies of any such assignments of record title
of the applicable Oil and Gas Properties into such Borrower or its
Subsidiary, as applicable,
(ii) true and correct copies of all required Consents, Mortgage
Consents and Approvals applicable to such assignments,
(iii) original, executed and acknowledged counterparts of a
supplemental Mortgage and related amendments to financing statements
and
(iv) a favorable mortgagee's title opinion showing that such Borrower
or its Subsidiary, as applicable, is vested with good and marketable
title to interests in the applicable Mortgaged Property consistent
with the working interests and net revenue interest for such property
shown in the most recent Engineering Report and showing that the
interests created by such supplemental Mortgage constitute valid first
Liens thereon, free and clear of all defects and encumbrances other
than as approved by the Lender,
in each case in form and substance reasonably satisfactory to the Agent.
-81-
SECTION 8.1.4. INSURANCE. The Borrowers will, and will cause each of
their Subsidiaries to, maintain or cause to be maintained with responsible
insurance companies insurance with respect to their properties and business
against such casualties and contingencies and of such types and in such amounts
as is customary in the case of similar businesses (including, where appropriate,
well control, operator's extra expense and remediation insurance) and will
furnish to the Agent on or before March 1st each year a certificate of
Authorized Officers of the Borrowers and their Subsidiaries setting forth the
nature and extent of all insurance maintained by the Borrowers and their
Subsidiaries in accordance with this Section. The following shall apply to the
insurance required by this Section 8.1.4:
(a) Each policy for property insurance covering the Mortgaged Property
shall show the Agent as loss payee;
(b) Each policy for liability insurance covering the Mortgaged
Property shall show the Agent and the Lenders as additional insureds;
(c) Each insurance policy covering the Mortgaged Property shall
provide that at least thirty (30) days prior written notice of
cancellation, reduction in amount or other change in coverage, or of lapse
shall be given to the Agent by the insurer; and
(d) The Borrowers shall, if so requested by the Agent, deliver to the
Agent the original or a certified copy of each insurance policy covering
the Mortgaged Property.
SECTION 8.1.5. BOOKS AND RECORDS. The Borrowers will, and will cause
each of their Subsidiaries to, keep books and records which accurately reflect
all of their material business affairs and transactions and permit the Agent or
any of its respective representatives, at reasonable times (but in any event,
within three (3) Business Days after notice from the Agent and during all normal
business hours) and at reasonable intervals, to visit all of their offices, to
discuss their financial matters with their officers, directors and independent
public accountant (and each Borrower hereby authorizes such independent public
accountant to discuss such Borrower's financial matters with the Agent or its
representatives whether or not any representative of such Borrower is present)
and to examine (and, at the expense of such Borrower, photocopy extracts from)
any of its books or other corporate records. The Borrowers shall pay any
reasonable fees of such independent public accountant incurred in connection
with the Agent's exercise of its rights pursuant to this Section. Furthermore,
the Borrowers will permit the Agent, or its agents, at the cost and expense of
the Borrowers, to enter upon the Mortgaged Properties and all parts thereof, for
the purpose of investigating and inspecting the condition and operation thereof,
and shall permit reasonable access to the field offices and other offices,
-82-
including the principal place of business, of the Borrower to inspect and
examine the Mortgaged Properties.
SECTION 8.1.6. ENVIRONMENTAL COVENANT. The Borrowers will, and will
cause each of their Subsidiaries to,
(a) use, operate and maintain all of their facilities and Properties
in material compliance with all Environmental Laws, keep all necessary
permits, approvals, certificates, licenses and other authorizations
relating to environmental matters in effect and remain in material
compliance therewith, and handle all Hazardous Materials in material
compliance with all applicable Environmental Laws;
(b) (i) immediately notify the Agent and provide copies upon receipt
of all written claims, complaints, notices or inquiries relating to the
condition of their facilities and Properties or compliance with
Environmental Laws to the extent that the same have, or could reasonably be
expected to have, a Material Adverse Effect, (ii) use all reasonable
efforts within a reasonable time to have dismissed with prejudice any
actions or proceedings relating to compliance with Environmental Laws which
would or could in the reasonable opinion of the Agent have a Material
Adverse Effect, and (iii) diligently pursue cure of any material underlying
environmental condition which forms the basis of any such claim, complaint,
notice or inquiry; and
(c) provide such information and certifications which the Agent may
reasonably request from time to time to evidence compliance with this
Section 8.1.6.
SECTION 8.1.7. FURTHER ASSURANCES.
(a) The Borrowers will, and will cause each of their subsidiaries to,
upon the request of the Agent, take such actions and execute and deliver
such documents and instruments as the Agent shall require to ensure that
the Agent shall, at all times, have received currently effective duly
executed Loan Documents encumbering Oil and Gas Properties of the Borrowers
and their Subsidiaries not included within the Mortgaged Properties
constituting at least 90% of the Proven Reserves of the Borrowers and their
Subsidiaries to which value is given in the determination of the then
current Borrowing Base and Collateral Value (with accompanying letters in
lieu of transfer orders) and satisfactory title evidence in form and
substance reasonably acceptable to the Agent in its reasonable business
judgment as to ownership of such Oil and Gas Properties; provided, that
upon thirty (30) days notice to the Borrowers, the Agent may require, and
the Borrowers and/or their Subsidiaries, as applicable, shall execute,
acknowledge and deliver to the Agent, Mortgages effectively
-83-
encumbering 100% of the Oil and Gas Properties of the Borrowers and their
Subsidiaries to which value is given in the determination of the then
current Borrowing Base and Collateral Value.
(b) If the Agent shall determine that, as of the date of any Borrowing
Base Redetermination or Collateral Value Redetermination, the Borrowers or
any of their Subsidiaries shall have failed to comply with the preceding
sentence, the Agent may notify the Borrowers in writing of such failure
and, within thirty (30) days from and after receipt of such written notice
by the Borrowers, the Borrowers or any of their Subsidiaries shall execute
and deliver to the Agent supplemental or additional Loan Documents, in form
and substance satisfactory to the Agent and its counsel, securing payment
of the Note and the other Obligations and covering additional assets not
then encumbered by any Loan Documents (together with current valuations,
Engineering Reports, and title evidence applicable to the additional assets
collaterally assigned, each of which shall be in form and substance
satisfactory to the Agent) such that the Agent shall have received
currently effective duly executed Loan Documents encumbering Oil and Gas
Properties constituting at least 90% (or, as provided in Section 8.1.7(a),
100%) of the Proven Reserves of the Borrowers and their Subsidiaries to
which value is given in the determination of the then current Borrowing
Base and Collateral Value (with accompanying letters in lieu of transfer
orders) and satisfactory title evidence in form and substance acceptable to
the Agent in its reasonable business judgment as to ownership of such Oil
and Gas Properties.
(c) Promptly upon the determination that any Subsidiary has become a
Material Subsidiary, the Borrowers will cause such Material Subsidiary to
execute and deliver to the Agent a Guaranty and a Security Agreement and
(if such Material Subsidiary has Oil and Gas Properties included in the
Borrowing Base and Collateral Value) a Mortgage, and the Borrowers will
enter into such amendments to the applicable Pledge Agreement as are
necessary to cause the stock of such Material Subsidiary to become subject
to such Pledge Agreement.
(d) Within forty-five (45) days after the Unified Closing Date, the
Borrowers shall deliver to the Agent (i) to the extent not previously
delivered, Mortgages and the Difco Consents in respect of the Other Difco
Assets; (ii) a title report from counsel to the Borrowers confirming that
Difco has received good and marketable title to the East Irish Sea Assets
and confirming that the Agent has a first in priority, perfected Lien
thereon, subject only to such encumbrances as are permitted under Section
8.2.3; (iii) the share certificate representing the all of the capital
stock of Difco, together with evidence of the registration of Alliance Plc
as the sole shareholder of Difco; (iv) the initial Approved Development
Plan, in form, scope and detail reasonably satisfactory
-84-
to the Agent; (v) the initial budget for the Borrowers and their
Subsidiaries for the twelve (12) months immediately following the Unified
Closing Date in form, scope and detail reasonably satisfactory to the
Agent.
(e) The Borrowers shall ensure that all written information, exhibits
and reports furnished by or on behalf of the Borrowers or any of their
Subsidiaries to the Agent do not and will not contain any untrue statement
of a material fact and do not and will not omit to state any material fact
or any fact necessary to make the statements contained therein not
misleading in light of the circumstances in which made, and will promptly
disclose to the Agent and correct any defect or error that may be
discovered therein or in any Loan Document or in the execution,
acknowledgment or recordation thereof.
SECTION 8.1.8. NATURAL GAS AND CRUDE OIL HEDGING.
(a) On or before February 28, 1999, LPC (or another Borrower as
approved by the Agent) will enter into Hydrocarbon Hedging Agreements
reasonably acceptable to the Agent that will enable Alliance USA, Source,
LPC, New GOC and Difco to obtain net realized prices with respect to
Mortgaged Properties located in the United States, during the time any
Tranche B Loan is outstanding of not less than (i) an agreed upon amount
per MMBtu of natural gas produced from its Hydrocarbon Interests on not
less than 50% nor more than 70% of the aggregate volumes projected to be
produced from proved developed producing reserves included in the Mortgaged
Properties as of the Effective Date, and (ii) an agreed upon amount per
barrel of crude oil produced from its Hydrocarbon Interests on not less
than 50% nor more than 70% of the aggregate volumes projected to be
produced from proved developed producing reserves included in the Mortgaged
Properties as of the Effective Date;
(b) On or before the date which is 120 days after the date on which
the Department of Trade and Industry approves the development plan for each
field in the East Irish Sea Assets, LPC (or another Borrower as approved by
the Agent) will enter into Hydrocarbon Hedging Agreements reasonably
acceptable to the Agent that will enable Alliance USA, Source, LPC, New GOC
and Difco to obtain net realized prices with respect to such portion of the
East Irish Sea Assets, during the time any Tranche B Loan is outstanding,
of not less than an agreed upon amount per MMBtu of natural gas produced
from such Hydrocarbon Interests on not less than 50% nor more than 70% of
the aggregate volumes projected to be produced from Proven Reserves
included in such portion of the East Irish Sea Assets. As an alternative
to such Hydrocarbon Hedging Agreements in respect of production from the
East Irish Sea Assets, Difco may enter into gas sales contracts for the
sale of production from the East Irish Sea Assets with price terms
acceptable to the Agent.
-85-
Alliance USA, Source, GOCA, New GOC and Difco hereby acknowledge that LPC (or
such other Borrower) is entering into such Hydrocarbon Hedging Agreements not
only for its own benefit, but also for the benefit of Alliance USA, Source,
GOCA, New GOC and Difco. Alliance USA, Source, GOCA, New GOC and Difco further
acknowledge that LPC's (or such other Borrower's) Obligations under the Hedging
Agreements are Obligations of all the Borrowers as if they were parties
signatory thereto.
SECTION 8.1.9. INTEREST RATE PROTECTION. On or before February 28, 1999,
LPC (or another Borrower as approved by the Agent) shall enter into Hedging
Agreements, in form and substance satisfactory to the Agent, designed to ensure
a maximum interest rate of 8.5% on the notional amount projected by the Agent to
be outstanding as Tranche A Loans, 10.0% on the notional amount projected to be
outstanding as Tranche B Loans for a period not earlier than the Stated Maturity
Date for Tranche B Loans, and 12% on the notional amount projected to be
outstanding as Tranche C Loans for a period not less than the Stated Maturity
Date. Alliance USA, Source, GOCA, New GOC and Difco hereby acknowledge that LPC
(or such other Borrower) is entering into such Hedging Agreements not only for
its own benefit, but also for the benefit of Alliance USA, Source, GOCA, New GOC
and Difco. Alliance USA, Source, GOCA, New GOC and Difco further acknowledge
that LPC's (or such other Borrower's) Obligations under the Hedging Agreements
are Obligations of all the Borrowers as if they were parties signatory thereto.
SECTION 8.1.10. EXCHANGE RATE PROTECTION. On or before February 28, 1999,
LPC (or another Borrower as approved by the Agent) will enter exchange rate risk
management contracts or similar Hedging Agreements in respect of committed UK
Capital Expenditures included in the Approved Development Plan which will ensure
that at least 75% of the Sterling Capital Expenditures are covered by
Sterling/Dollar foreign exchange contracts to ensure that the Dollar Borrowings
are converted to Sterling within a band of $1.60/(Pounds)1.00 to
$1.80/(Pounds)1.00. In addition, the Borrowers will, within 30 days prior to the
start of each calendar quarter, ensure that, for all periods when any Tranche B
Loan is outstanding and unpaid, there are exchange rate risk management
contracts in place to ensure that the projected Dollar Loan repayments for that
forthcoming four calendar quarters are covered by the requisite proportion of
projected Sterling net revenues. Alliance USA, Source, GOCA, New GOC and Difco
hereby acknowledge that LPC (or such other Borrower) is entering into such
Hedging Agreements not only for its own benefit, but also for the benefit of
Alliance USA, Source, GOCA, New GOC and Difco. Alliance USA, Source, GOCA, New
GOC and Difco further acknowledge that LPC's (or such other Borrower's)
Obligations under the Hedging Agreements are Obligations of all the Borrowers as
if they were parties signatory thereto.
SECTION 8.2. NEGATIVE COVENANTS. The Borrowers agree with the Agent and
each Lender that, until all Commitments have terminated and all Obligations
have
-86-
been paid and performed in full, the Borrowers will perform the obligations set
forth in this Section 8.2.
SECTION 8.2.1. BUSINESS ACTIVITIES. The Borrowers will not, and will not
permit any of their Subsidiaries to, engage in any business activity, except
those described in the first recital and such activities as may be incidental or
related thereto.
SECTION 8.2.2. INDEBTEDNESS. The Borrowers will not, and will not permit
any of their Subsidiaries to, create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any Indebtedness, other than,
without duplication, the following:
(a) Indebtedness in respect of the Loans and other Obligations;
(b) Indebtedness in an aggregate principal amount not to exceed
$500,000 at any time outstanding which is incurred by the Borrowers or any
of their Subsidiaries to a vendor of any assets to finance its or their
acquisition of such assets;
(c) unsecured Indebtedness incurred in the ordinary course of business
(including (i) open accounts extended by suppliers on normal trade terms in
connection with purchases of goods and services, and (ii) gas balancing,
but excluding Indebtedness incurred through the borrowing of money or
Contingent Liabilities);
(d) Hedging Obligations incurred pursuant to the Hedging Agreements
approved by the Agent pursuant to Sections 8.1.8, 8.1.9 and 8.1.10; and
(e) Contingent Obligations incurred to satisfy bonding requirements
imposed by any Governmental Agency not to exceed, in the aggregate,
$500,000;
(f) Subordinated Indebtedness under the Subordinated Notes;
(g) the indebtedness of their Subsidiaries existing as of the
Effective Date which is identified in Item 8.2.2(h) of the Disclosure
Schedule;
(h) Indebtedness in respect of Capitalized Lease Obligations in an
amount not to exceed $500,000 at any time outstanding;
(i) any indebtedness owed by any Borrower to any of the Subsidiaries
or by any Subsidiary of any Borrower to any Borrower or any Subsidiary;
-87-
(j) endorsements of negotiable instruments for collection in the
ordinary course of business;
(k) Indebtedness of the Borrower and its Subsidiaries which are
Investments to the extent permitted by Section 8.2.5(b); and
(l) Old LaTex Payables;
provided, however, that no Indebtedness otherwise permitted by clause (b) shall
be permitted if, after giving effect to the incurrence thereof, any Default
shall have occurred and be continuing.
SECTION 8.2.3. LIENS. The Borrowers will not, and will not permit any of
their Subsidiaries to, create, incur, assume or suffer to exist any Lien upon
any of their Property, revenues or assets, whether now owned or hereafter
acquired, except:
(a) Liens securing payment of the Obligations, granted pursuant to any
Loan Document;
(b) Liens granted to secure payment of Indebtedness of the type
permitted and described in clause (b) of Section 8.2.2 and covering only
those assets acquired with the proceeds of such Indebtedness;
(c) Hydrocarbon production sales contracts;
(d) Liens for taxes, assessments or other governmental charges or
levies not at the time delinquent or thereafter payable without penalty or
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside
on its books; provided, that at no time shall such sums exceed in the
aggregate $250,000;
(e) Liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums not overdue
or being diligently contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with GAAP shall have been set
aside on its books; provided, that at no time shall such sums exceed in the
aggregate $100,000;
(f) Liens incurred in the ordinary course of business in connection
with worker's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other than for borrowed money)
-88-
entered into in the ordinary course of business or to secure obligations on
surety or appeal bonds;
(g) covenants, restrictions, easements, servitudes, permits,
conditions, exceptions, reservations, minor rights, minor encumbrances,
minor irregularities in title or conventional rights of reassignment prior
to abandonment which do not materially interfere with the occupation, use
and enjoyment by the Borrowers of their assets in the ordinary course of
business as presently conducted, or materially impair the value thereof for
the purpose of such business;
(h) judgment Liens in existence less than thirty (30) days after the
entry thereof or with respect to which execution has been stayed or the
payment of which is covered in full (subject to a customary deductible) by
insurance maintained with responsible insurance companies; and
(i) Liens in favor of operators and non-operators under joint
operating agreements or similar contractual arrangements arising in the
ordinary course of the business of the Borrowers to secure amounts owing,
which amounts are not yet due or are being contested in good faith by
appropriate proceedings, if such reserve as may be required by GAAP shall
have been made therefor.
SECTION 8.2.4. FINANCIAL CONDITION. The Borrowers will not permit:
(a) the Current Ratio at any time to be less than 1.0:1.0; or
(b) the Debt to EBITDA Ratio at any time to be greater than 4:1 on, or
at any time after, April 30, 2001; or
(c) the Interest Coverage Ratio to be less than (i) 0.25:1.0 at April
30, 1999 (as to the Fiscal Quarter then ending); (ii) 0.25:1.0 at any time
after April 30, 1999, through and including July 31, 1999 (as to the two
Fiscal Quarters immediately preceding such date); (iii) 0.40:1.0 at any
time after July 31, 1999, through and including October 31, 1999 (as to the
three Fiscal Quarters immediately preceding such date); (iv) 0.80:1.0 at
any time after October 31, 1999, through and including January 31, 2000;
(v) 1.25:1.0 at any time after January 31, 2000, through and including
April 30, 2000; (vi) 1.50:1.0 at any time after April 30, 2000, through and
including July 31, 2000; (vii) 1.75:1.0 at any time after July 31, 2000,
through and including January 31, 2001; (viii) 2.0:1.0 at any time after
January 31, 2001, through and including April 30, 2001; (ix) 2.5:1.0 at any
time after April 30, 2001, through and including October 31, 2001; and (x)
3.0:1.0 at any time after October 31, 2001.
-89-
The Borrowers will not, and will not permit any of their Subsidiaries to, make
any significant change in accounting treatment or reporting practices, except as
required by GAAP, or change the Fiscal Year of any Borrower or any of their
Subsidiaries.
SECTION 8.2.5. INVESTMENTS. The Borrowers will not, and will not permit
any of their Subsidiaries to, make, incur, assume or suffer to exist any
Investment in any other Person, except:
(a) Cash Equivalent Investments;
(b) without duplication, Investments permitted as Indebtedness
pursuant to Section 8.2.2; and
(c) without duplication, Investments in the nature of Capital
Expenditures;
provided, however, that
(d) any Investment which when made complies with the requirements of
the definition of the term "Cash Equivalent Investment" may continue to be
held notwithstanding that such Investment if made thereafter would not
comply with such requirements; and
(e) no Investment otherwise permitted by clause (b) or (c) shall be
permitted to be made if, immediately before or after giving effect thereto,
any Default shall have occurred and be continuing.
SECTION 8.2.6. RESTRICTED PAYMENTS, ETC. On and at all times after the
Effective Date:
(a) the Borrowers will not, and will not permit any of their
Subsidiaries (other than a wholly-owned Subsidiary) to, declare, pay or
make any dividend or distribution (in cash, property or obligations) on any
class of equity (now or hereafter outstanding) of the Borrowers or on any
options or other rights with respect to any interest of any class of equity
(now or hereafter outstanding) of the Borrowers or apply any of its funds,
property or assets to the purchase, redemption, sinking fund or other
retirement of, any class of equity (now or hereafter outstanding) of the
Borrowers, or options or other rights with respect to any interest of or in
any class of equity (now or hereafter outstanding) of the Borrowers (such
dividends, distributions or applications being called "Distribution
Payments") other than Distribution Payments which do not cause the
Borrowers to be in violation of the Restricted Payment Tests; and
-90-
(b) the Borrowers will not, and will not permit any of their
Subsidiaries to, make any Distribution Payments other than to a Borrower;
and
(c) the Borrowers will not, and will not permit any of their
Subsidiaries (other than a wholly-owned Subsidiary) to, make any deposit
for any of the foregoing purposes.
SECTION 8.2.7. RENTAL OBLIGATIONS. The Borrowers will not, and will not
permit any of their Subsidiaries to, enter into at any time any arrangement
(excluding oil and gas leases entered into in the ordinary course of business)
which involves the leasing by the Borrowers or any of their Subsidiaries from
any lessor of any real or personal property (or any interest therein), except
arrangements which, together with all other such arrangements which shall then
be in effect, will not require the payment of an aggregate amount of rentals by
the Borrowers or any of their Subsidiaries in excess of (excluding escalations
resulting from a rise in the consumer price or similar index) $750,000 for any
Fiscal Year or $1,500,000 during the full remaining term of such arrangements;
provided, however, that any calculation made for purposes of this Section shall
exclude (i) any amounts required to be expended for maintenance and repairs,
insurance, taxes, assessments, and other similar charges (ii) any amounts
relating to Capitalized Lease Obligations.
SECTION 8.2.8. CONSOLIDATION, MERGER, ETC. The Borrowers will not, and
will not permit any of their Subsidiaries to, liquidate or dissolve, consolidate
with, or merge into or with, any other partnership or corporation, or purchase
or otherwise acquire all or substantially all of the assets of any Person (or of
any division thereof). The Borrowers will not, and will not permit any of their
Subsidiaries to, create any Subsidiary except with the prior written consent of
the Agent.
SECTION 8.2.9. ASSET DISPOSITIONS, ETC. The Borrowers will not, and will
not permit any of their Subsidiaries to, sell, transfer, lease, contribute or
otherwise convey, or grant options, warrants or other rights with respect to,
all or substantially all of the assets of the Borrowers or any of their
Subsidiaries in any one transaction or in any series of transactions, whether or
not related; and the Borrowers will not, and will not permit any of their
Subsidiaries to, sell, transfer, lease, contribute or otherwise convey, or grant
options, warrants or other rights with respect to, less than all or any
substantial part of its assets (including accounts receivable) to any Person
other than
(a) farmouts under standard industry terms of Properties not holding
Proven Reserves,
(b) abandonment of Properties not capable of producing Hydrocarbons in
paying quantities after the expiration of their primary terms
-91-
(c) as permitted by Section 2.7 of the Mortgages and
(d) if such assets are in the Borrowing Base and the Collateral Value,
the Borrowers comply with the terms of Section 3.1.2 and such sale,
transfer, lease, contribution or conveyance is for cash in an amount at
least equal to the fair market value of such assets.
SECTION 8.2.10. MODIFICATION OF CERTAIN AGREEMENTS. The Borrowers will
not, and will not permit any of their Subsidiaries to, consent to any amendment,
supplement or other modification of any of the terms or provisions contained in,
or applicable to, any Material Contracts, including the Burlington Agreement,
nor will Alliance Plc or Difco consent to any amendment, supplement or other
modification of any of the terms or provisions contained in, or applicable to,
the Difco Agreement.
SECTION 8.2.11. TRANSACTIONS WITH AFFILIATES. The Borrowers will not,
and will not permit any of their Subsidiaries to, enter into, or cause, suffer
or permit to exist any arrangement or contract with any of its or their other
Affiliates (other than an arrangement or contract with a Borrower) unless such
arrangement or contract is fair and equitable to such Borrower or such
Subsidiary and is an arrangement or contract of the kind which would be entered
into by a prudent Person in the position of such Borrower or such Subsidiary
with a Person which is not one of its Affiliates.
SECTION 8.2.12. NEGATIVE PLEDGES, RESTRICTIVE AGREEMENTS, ETC. The
Borrowers will not, and will not permit any of their Subsidiaries to, enter into
any agreement (excluding this Agreement, any other Loan Document and any
agreement governing any Indebtedness permitted by clause (b) of Section 8.2.2 as
in effect on the Effective Date as to the assets financed with the proceeds of
such Indebtedness) prohibiting
(a) the creation or assumption of any Lien upon its properties,
revenues or assets, whether now owned or hereafter acquired, or the ability
of such Borrower or any other Obligor to amend or otherwise modify this
Agreement or any other Loan Document; or
(b) the ability of any Subsidiary to make any payments, directly or
indirectly, to the Borrowers by way of dividends, advances, repayments of
loans or advances, reimbursements of management and other intercompany
charges, expenses and accruals or other returns on investments, or any
other agreement or arrangement which restricts the ability of any such
Subsidiary to make any payment, directly or indirectly, to the Borrowers.
SECTION 8.2.13. TAKE OR PAY CONTRACTS. No Borrower will enter into or be
a party to any arrangement for the purchase of materials, supplies, other
property (including without limitation Hydrocarbons), or services if such
arrangement requires
-92-
that payment be made by such Borrower regardless of whether such materials,
supplies, other property, or services are delivered or furnished to it.
ARTICLE IX.
EVENTS OF DEFAULT
SECTION 9.1 LISTING OF EVENTS OF DEFAULT. Each of the following events
or occurrences described in this Section 9.1 shall constitute an "Event of
Default".
SECTION 9.1.1. NON-PAYMENT OF OBLIGATIONS. Any Borrower shall default in
the payment or prepayment when due of any principal of any Loan; any Borrower
shall default in the payment when due of any Reimbursement Obligation or Hedging
Obligation under a Hedging Agreement in effect between a Borrower and a Lender
or an Affiliate of a Lender; or any Borrower shall default (and such default
shall continue unremedied for a period of five (5) days) in the payment when due
of any interest on any Loan or any fee or of any other Obligation.
SECTION 9.1.2. BREACH OF WARRANTY. Any representation or warranty of the
Borrowers or any other Obligor made or deemed to be made hereunder or in any
other Loan Document executed by it or any other writing or certificate furnished
by or on behalf of the Borrowers or any other Obligor to the Agent, the Issuer
or any Lender for the purposes of or in connection with this Agreement or any
such other Loan Document (including any certificates delivered pursuant to
Article VI) is or shall be incorrect when made in any material respect.
SECTION 9.1.3. NON-PERFORMANCE OF CERTAIN COVENANTS AND OBLIGATIONS. Any
Borrower shall default in the due performance and observance of any of its
obligations under Section 8.1 or 8.2.
SECTION 9.1.4. NON-PERFORMANCE OF OTHER COVENANTS AND OBLIGATIONS. Any
Borrower or any other Obligor shall default in the due performance and
observance of any other agreement contained herein or in any other Loan Document
executed by it, and such default shall continue unremedied for a period of
fifteen (15) days after notice thereof shall have been given to the Borrowers by
the Agent.
SECTION 9.1.5. DEFAULT ON OTHER INDEBTEDNESS.
(a) A default shall occur in the payment when due (subject to any
applicable grace period), whether by acceleration or otherwise, of any
Indebtedness (including any Hedging Agreements in effect between the
Borrowers and the Agent, but excluding (x) Old LaTex Payables, and (y)
Indebtedness described in Section 9.1.1) of the Borrowers or any other
Obligor
-93-
having a principal amount, individually or in the aggregate, in excess of
$250,000, or a default shall occur in the performance or observance of any
obligation or condition with respect to such Indebtedness if the effect of
such default is to accelerate the maturity of any such Indebtedness or such
default shall continue unremedied for any applicable period of time
sufficient to permit any holder of such Indebtedness, or any trustee or
agent for such holders, to cause such Indebtedness to become due and
payable prior to its expressed maturity; or
(b) A default shall occur in the payment when due of any royalty,
overriding royalty or similar interest burdening the Oil and Gas Properties
(other than the Old LaTex Payables) of any Borrower or any of its
Subsidiaries (including the Assignment) individually or in the aggregate,
in excess of $100,000.
SECTION 9.1.6. JUDGMENTS. Any judgment decree, arbitration award or
order for the payment of money in excess of $250,000 shall be rendered against
any Borrower or any other Obligor and either
(a) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order; or
(b) there shall be any period of ten (10) consecutive days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect.
SECTION 9.1.7. PENSION PLANS. Any of the following events shall occur
with respect to any Pension Plan
(a) the institution of any steps by any Borrower, any member of its
Controlled Group or any other Person to terminate a Pension Plan if, as a
result of such termination, such Borrower or any such member could be
required to make a contribution to such Pension Plan, or could reasonably
expect to incur a liability or obligation to such Pension Plan; or
(b) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA.
SECTION 9.1.8. CONTROL OF THE BORROWERS. Any Change in Control shall
occur.
-94-
SECTION 9.1.9. BANKRUPTCY, INSOLVENCY, ETC. Any Borrower or any other
Obligor shall
(a) become insolvent or generally fail to pay, or admit in writing its
inability or unwillingness to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of a
trustee, receiver, sequestrator or other custodian for such Borrower or any
other Obligor or any property of any thereof, or make a general assignment
for the benefit of creditors;
(c) in the absence of such application, consent or acquiescence,
permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for such Borrower or any other Obligor or
for a substantial part of the property of any thereof, and such trustee,
receiver, sequestrator or other custodian shall not be discharged within
sixty (60) days, provided that the Borrowers and each other Obligor hereby
expressly authorizes the Agent and the Lenders to appear in any court
conducting any relevant proceeding during such 60-day period to preserve,
protect and defend its rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of any Borrower or any other Obligor, and, if any
such case or proceeding is not commenced by such Borrower or such other
Obligor, such case or proceeding shall be consented to or acquiesced in by
such Borrower or such other Obligor or shall result in the entry of an
order for relief or shall remain for sixty (60) days undismissed, provided
that such Borrower and each other Obligor hereby expressly authorizes the
Agent and the Lenders to appear in any court conducting any such case or
proceeding during such 60-day period to preserve, protect and defend its
rights under the Loan Documents; or
(e) take any action authorizing, or in furtherance of, any of the
foregoing.
SECTION 9.1.10. IMPAIRMENT OF SECURITY, ETC. Any Loan Document, or any
Lien granted thereunder, shall (except in accordance with its terms), in whole
or in part, terminate, cease to be effective or cease to be the legally valid,
binding and enforceable obligation of any Obligor party thereto; any Borrower,
any other Obligor or any other party shall, directly or indirectly, contest in
any manner such effectiveness, validity, binding nature or enforceability; or
any Lien (pertaining to any Property having more than immaterial value) securing
any Obligation shall, in whole
-95-
or in part, cease to be a perfected first priority Lien, subject only to those
exceptions expressly permitted by such Loan Document.
SECTION 9.1.11. MATERIAL ADVERSE EFFECT. Any Material Adverse Effect
shall occur.
SECTION 9.2. ACTION IF BANKRUPTCY. If any Event of Default described in
clauses (a) through (d) of Section 9.1.9 shall occur with respect to any
Borrower or any other Obligor, the Commitments (if not theretofore terminated)
shall automatically terminate and the outstanding principal amount of all
outstanding Loans and all other Obligations shall automatically be and become
immediately due and payable, without notice or demand.
SECTION 9.3. ACTION IF OTHER EVENT OF DEFAULT. If any Event of Default
(other than any Event of Default described in clauses (a) through (d) of
Section 9.1.9 with respect to any Borrower or any other Obligor) shall occur for
any reason, whether voluntary or involuntary, and be continuing, the Agent, may
by notice to the Borrowers declare all or any portion of the outstanding
principal amount of the Loans and other Obligations to be due and payable and/or
the Commitments (if not theretofore terminated) to be terminated, whereupon the
full unpaid amount of such Loans and other Obligations which shall be so
declared due and payable shall be and become immediately due and payable,
without further notice, demand or presentment, and/or, as the case may be, the
Commitments shall terminate.
SECTION 9.4. RIGHTS NOT EXCLUSIVE. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other rights, powers, privileges or remedies provided by Applicable Law or
in equity, or under any other instrument, document or agreement now existing or
hereafter arising.
ARTICLE X
THE AGENT
SECTION 10.1. ACTIONS. Each Lender hereby appoints BankAmerica as its
Agent under and for purposes of this Agreement, the Notes and each other Loan
Document, and BankAmerica hereby accepts such appointment. Each Lender
authorizes the Agent to act on behalf of such Lender under this Agreement, the
Notes and each other Loan Document and, in the absence of other written
instructions from the Required Lenders received from time to time by the Agent
(with respect to which the Agent agrees that it will comply, except as otherwise
provided in this Section and to the extent such instructions may reasonably be
expected to comply with applicable law), to exercise such powers and to perform
such duties hereunder and thereunder as are specifically delegated to or
required of the Agent by the terms hereof and
-96-
thereof, together with such powers as may be reasonably incidental thereto;
provided, however, that the Agent shall not take any action that requires the
consent of any Lender unless it receives such consent. Each Lender hereby
indemnifies (which indemnity shall survive any termination of this Agreement)
the Agent, pro rata according to such Lender's Percentage, from and against any
and all liabilities, obligations, losses, damages, claims, costs or expenses of
any kind or nature whatsoever which may at any time be imposed on, incurred by,
or asserted against, the Agent in any way relating to or arising out of this
Agreement, the Notes and any other Loan Document, including reasonable
attorneys' fees, and as to which the Agent is not reimbursed by the Borrowers;
provided, however, that no Lender shall be liable for the payment of any portion
of such liabilities, obligations, losses, damages, claims, costs or expenses
which are determined by a court of competent jurisdiction in a final proceeding
to have resulted solely from the Agent's gross negligence or wilful misconduct.
The Agent shall not be required to take any action hereunder, under the Notes or
under any other Loan Document, or to prosecute or defend any suit in respect of
this Agreement, the Notes or any other Loan Document, unless it is indemnified
hereunder to its satisfaction. If any indemnity in favor of the Agent shall be
or become, in the Agent's determination, inadequate, the Agent may call for
additional indemnification from the Lenders and cease to do the acts indemnified
against hereunder until such additional indemnity is given.
SECTION 10.2. FUNDING RELIANCE, ETC. Unless the Agent shall have been
notified by telephone, confirmed in writing, by any Lender by 5:00 p.m. (Chicago
time) on the day prior to a Borrowing that such Lender will not make available
the amount which would constitute its Percentage of such Borrowing on the date
specified therefor, the Agent may assume that such Lender has made such amount
available to the Agent and, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If and to the extent that such Lender
shall not have made such amount available to the Agent, such Lender and the
Borrower severally agree to repay the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
the Agent made such amount available to the Borrowers to the date such amount is
repaid to the Agent, at the interest rate applicable at the time to Loans
comprising such Borrowing.
SECTION 10.3. EXCULPATION. Neither the Agent nor any of its directors,
officers, employees or agents shall be liable to any Lender for any action taken
or omitted to be taken by it under this Agreement or any other Loan Document, or
in connection herewith or therewith, except for its own wilful misconduct or
gross negligence, nor responsible for any recitals or warranties herein or
therein, nor for the effectiveness, enforceability, validity or due execution of
this Agreement or any other Loan Document, nor for the creation, perfection or
priority of any Liens purported to be created by any of the Loan Documents, or
the validity, genuineness, enforceability, existence, value or sufficiency of
any collateral security, nor to make any inquiry respecting the performance by
the Borrowers of their obligations hereunder or under
-97-
any other Loan Document. Any such inquiry which may be made by the Agent shall
not obligate it to make any further inquiry or to take any action. The Agent
shall be entitled to rely upon advice of counsel concerning legal matters and
upon any notice, consent, certificate, statement or writing which the Agent
believes to be genuine and to have been presented by a proper Person.
SECTION 10.4. SUCCESSOR. The Agent may resign as such at any time upon
at least thirty (30) days' prior notice to the Borrowers and all Lenders, and
the Agent may be removed with or without cause as such by the Required Lenders
upon at least thirty (30) days' prior notice to the Agent and the Borrowers. If
the Agent at any time shall resign or be removed, the Required Lenders may
appoint another Lender as a successor Agent with the consent of the Borrowers
(which consent shall not be unreasonably withheld) which shall Lender thereupon
become the Agent hereunder. If no successor Agent shall have been so appointed
by the Required Lenders, and shall have accepted such appointment, within thirty
(30) days after the giving of notice of resignation or removal, then the
retiring or removed Agent may with the consent of the Borrowers (which consent
shall not be unreasonably withheld), on behalf of the Lenders, appoint a
successor Agent, which shall be one of the Lenders and, if no Lender accepts
such appointment, a commercial banking institution organized under the laws of
the United States (or any State thereof) or a United States branch or agency of
a commercial banking institution, and having a combined capital and surplus of
at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder
by a successor Agent, such successor Agent shall be entitled to receive from the
retiring or removed Agent such documents of transfer and assignment as such
successor Agent may reasonably request, and shall thereupon succeed to and
become vested with all rights, powers, privileges and duties of the retiring or
removed Agent, and the retiring or removed Agent shall be discharged from its
duties and obligations under this Agreement. After any retiring or removed
Agent's resignation or removal hereunder as the Agent, the provisions of
(a) this Article X shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was the Agent under this Agreement;
and
(b) Section 11.3 and Section 11.4 shall continue to inure to its
benefit.
SECTION 10.5. LOANS OR LETTERS OF CREDIT ISSUED BY BANKAMERICA.
BankAmerica shall have the same rights and powers with respect to (x) the Loans
made by it or any of its Affiliates, (y) the Notes held by it or any of its
Affiliates, and (z) its participating interests in the Letters of Credit as any
other Lender and may exercise the same as if it were not the Agent. BankAmerica
and its Affiliates and each of the Lenders and their respective Affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with the Borrowers or any Subsidiary or Affiliate of the Borrowers as
if BankAmerica were not the Agent
-98-
hereunder and in the case of each Lender, as if such Lender were not a Lender
hereunder.
SECTION 10.6. CREDIT DECISIONS. Each Lender acknowledges that it has,
independently of the Agent and each other Lender, and based on such Lender's
review of the financial information of the Borrowers, this Agreement, the other
Loan Documents (the terms and provisions of which being satisfactory to such
Lender) and such other documents, information and investigations as such Lender
has deemed appropriate, made its own credit decision to extend its Commitments.
Each Lender also acknowledges that it will, independently of the Agent and each
other Lender, and based on such other documents, information and investigations
as it shall deem appropriate at any time, continue to make its own credit
decisions as to exercising or not exercising from time to time any rights and
privileges available to it under this Agreement or any other Loan Document.
SECTION 10.7. COPIES, ETC. The Agent shall give prompt notice to each
Lender of each notice or request required or permitted to be given to the Agent
by the Borrowers pursuant to the terms of this Agreement (unless concurrently
delivered to the Lenders by the Borrowers). The Agent will distribute promptly
to each Lender each document or instrument received for its account and copies
of all other communications received by the Agent from the Borrowers for
distribution to the Lenders by the Agent in accordance with the terms of this
Agreement.
ARTICLE XI.
MISCELLANEOUS PROVISIONS
SECTION 11.1. WAIVERS, AMENDMENTS, ETC.
(a) The provisions of this Agreement and of each other Loan Document
may from time to time be amended, modified or waived, if such amendment,
modification or waiver is in writing and consented to by the Borrowers and
the Agent; provided, however, that no such amendment, modification or
waiver which would:
(i) modify any requirement hereunder that any particular action
be taken by all the Lenders or by the Required Lenders shall be
effective unless consented to by each Lender;
(ii) modify this Section 11.1, change the definitions of
"Required Lenders" or "Commitment Amount", increase the Percentage of
any Lender, reduce any fees described in Article III, change the
amortization schedule provided for in Section 3.1.1(e), (f) or (g),
release
-99-
all or substantially all collateral security, except as otherwise
specifically provided in any Loan Document, or extend the Tranche A
Availability Termination Date, the Tranche B Availability Termination
Date, any Stated Maturity Date or the Commitment Termination Date,
shall be made without the consent of each Lender;
(iii) extend the due date for, or reduce the amount of, any
scheduled or mandatory repayment or prepayment of principal of or
interest on any Loan (or reduce the principal amount of or rate of
interest on any Loan) shall be made without the consent of each
Lender;
(iv) affect adversely the interests, rights or obligations of an
Issuer in its capacity as Issuer shall be made without the consent of
such Issuer; or
(v) affect adversely the interests, rights or obligations of
the Agent in its capacity as the Agent shall be made without consent
of the Agent.
No failure or delay on the part of the Agent or the Lenders in exercising
any power or right under this Agreement or any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of
any such power or right preclude any other or further exercise thereof or
the exercise of any other power or right. No notice to or demand on the
Borrowers in any case shall entitle it to any notice or demand in similar
or other circumstances. No waiver or approval by the Agent under this
Agreement or any other Loan Document shall, except as may be otherwise
stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
(b) This Agreement is an amendment and restatement of, and replaces
and supersedes the Existing Agreement; provided, however, that no right,
interest, claim or cause of action of any kind of the Agent or any Lender
which may have existed under the Existing Agreement shall in any way be
released, modified, compromised or waived by virtue of this Existing
Agreement superseding and replacing the Existing Agreement.
SECTION 11.2. NOTICES.
(a) All notices, requests, consents, approvals, waivers and other
communications shall be in writing (including, unless the context expressly
otherwise provides, by facsimile transmission, provided that any matter
transmitted by the Borrowers by facsimile (i) shall be immediately
confirmed by
-100-
a telephone call to the recipient at the number specified on the signature
pages, and (ii) shall be followed promptly by delivery of a hard copy
original thereof) and mailed, faxed or delivered, to the address or
facsimile number specified for notices on the signature pages hereof; or,
as directed to the Borrowers or the Lenders, to such other address as shall
be designated by such party in a written notice to the other parties, and
as directed to any other party, at such other address as shall be
designated by such party in a written notice to the Borrowers and the
Lenders.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when
delivered for overnight (next-day) delivery, or transmitted in legible form
by facsimile machine, respectively, or if mailed, upon the third Business
Day after the date deposited into the U.S. mail, or if delivered, upon
delivery.
(c) Any agreement of the Lenders herein to receive certain notices by
telephone or facsimile is solely for the convenience and at the request of
the Borrowers. The Agent and the Lenders shall be entitled to rely on the
authority of any Person purporting to be a Person authorized by the
Borrowers to give such notice and the Agent and the Lenders shall not have
any liability to the Borrowers or other Person on account of any action
taken or not taken by the Agent and the Lenders in reliance upon such
telephonic or facsimile notice. The obligation of the Borrowers to repay
the Loans shall not be affected in any way or to any extent by any failure
by a Lender to receive written confirmation of any telephonic or facsimile
notice or the receipt by the Agent and the Lenders of a confirmation which
is at variance with the terms understood by the Agent and the Lenders to be
contained in the telephonic or facsimile notice.
SECTION 11.3. PAYMENT OF COSTS AND EXPENSES. The Borrowers agree to pay
on demand all reasonable expenses of the Agent and each Lender (including the
fees and out-of-pocket expenses of internal and external counsel to the Agent
and each Lender and of local counsel, if any, who may be retained by counsel to
the Agent) in connection with
(a) the negotiation, preparation, execution and delivery of this
Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from time
to time hereafter be required, whether or not the transactions contemplated
hereby are consummated,
(b) the filing, recording, refiling or rerecording of the Mortgages,
the Security Agreements, the Pledge Agreements and/or any Uniform
Commercial Code financing statements relating thereto and all amendments,
supplements,
-101-
and modifications to, and all releases and terminations of, any thereof and
any and all other documents or instruments of further assurance required to
be filed or recorded or refiled or rerecorded by the terms hereof or of the
Mortgages, the Security Agreements and the Pledge Agreements, and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Borrowers further agree to pay, and to save the Agent and each Lender
harmless from all liability for, any stamp or other taxes which may be payable
in connection with the execution or delivery of this Agreement, the borrowings
hereunder, the issuance of the Notes, the issuance of the Letters of Credit, or
any other Loan Documents. The Borrowers also agree to reimburse the Agent and
each Lender upon demand for all reasonable out-of-pocket expenses (including
attorneys' fees and legal expenses of internal and external attorneys) incurred
by the Agent and each Lender in connection with (x) the negotiation of any
restructuring or "work-out", whether or not consummated, of any Obligations and
(y) the enforcement of any Obligations.
SECTION 11.4. INDEMNIFICATION. In consideration of the execution and
delivery of this Agreement by the Agent and each Lender and the extension of the
Commitments, the Borrowers hereby indemnify, exonerate and hold the Agent and
each Lender and each of its officers, directors, employees and agents
(collectively, the "Indemnified Parties") free and harmless from and against any
and all actions, causes of action, suits, losses, costs, liabilities and
damages, and expenses incurred in connection therewith (irrespective of whether
any such Indemnified Party is a party to the action for which indemnification
hereunder is sought), including reasonable attorneys' fees and disbursements
(collectively, the "Indemnified Liabilities"), incurred by the Indemnified
Parties or any of them as a result of, or arising out of, or relating to
(a) This Agreement, any Loan Document or any document contemplated
hereby or referred to herein;
(b) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Loan, including the
transactions contemplated by the Difco Agreement and the Burlington
Agreement, any Approved Development Activities, or the use of any Letter of
Credit;
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by any Borrower or any of their
Subsidiaries of all or any portion of the stock or assets of any Person,
whether or not the Agent and each Lender is party thereto;
-102-
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to any
Environmental Law or the condition of any facility or Property owned,
leased or operated by any Borrower or any of their Subsidiaries;
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any facility
or Property owned, leased or operated by any Borrower or any of their
Subsidiaries thereof of any Hazardous Material (including any losses,
liabilities, damages, injuries, costs, expenses or claims asserted or
arising under any Environmental Law), regardless of whether caused by, or
within the control of, such Borrower or any of their Subsidiaries; or
(f) any misrepresentation, inaccuracy or breach in or of Section 7.17
or Section 8.1.6,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or wilful misconduct. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrowers hereby agree to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under Applicable Law. The
obligations in this Section 11.4 shall survive payment of all other Obligations.
At the election of any Indemnified Party, the Borrowers shall defend such
Indemnified Party using legal counsel satisfactory to such Indemnified Party in
such Person's sole discretion, at the sole cost and expense of the Borrowers.
All amounts owing under this Section 11.4 shall be paid within thirty (30) days
after demand.
SECTION 11.5. SURVIVAL. The obligations of the Borrowers under Sections
5.3, 5.4, 5.5, 5.6, 11.3 and 11.4 shall in each case survive any termination of
this Agreement, the payment in full of all Obligations and the termination of
all Commitments. The representations and warranties made by each Obligor in
this Agreement and in each other Loan Document shall survive the execution and
delivery of this Agreement and each such other Loan Document.
SECTION 11.6. SEVERABILITY. Any provision of this Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall, as
to such provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or such Loan Document or affecting the validity or enforceability
of such provision in any other jurisdiction.
SECTION 11.7. HEADINGS. The various headings of this Agreement and of
each other Loan Document are inserted for convenience only and shall not affect
-103-
the meaning or interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.
SECTION 11.8. EXECUTION IN COUNTERPARTS, EFFECTIVENESS, ETC. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be executed by the Agent, the Borrowers and the Lenders and be
deemed to be an original and all of which shall constitute together but one and
the same agreement. This Agreement shall become effective when counterparts
hereof are executed on behalf of the Agent, the Borrowers and the Lenders. This
Agreement is made and entered into for the sole protection and legal benefit of
the Agent, the Borrowers and the Lenders and Persons indemnified hereunder, and
their permitted successors and assigns, and no other Person shall be a direct or
indirect legal beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Agreement or any of the other Loan Documents.
SECTION 11.9. GOVERNING LAW; ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTE
AND EACH OTHER LOAN DOCUMENT (OTHER THAN THE MORTGAGES OR AS EXPRESSLY PROVIDED
IN ANY SUCH DOCUMENT) SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS. This Agreement, the
Note and the other Loan Documents constitute the entire understanding among the
parties hereto with respect to the subject matter hereof and supersede any prior
agreements, written or oral, with respect thereto.
SECTION 11.10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that:
(a) the Borrowers may not assign or transfer their rights or
obligations hereunder without the prior written consent of the Agent and
all Lenders; and
(b) the rights of sale, assignment and transfer of the Lenders are
subject to Section 11.11.
SECTION 11.11. SALE AND TRANSFER OF LOANS AND NOTE; PARTICIPATIONS IN
LOANS AND NOTE. Each Lender may assign, or sell participations in, its Loans
and Commitments to one or more other Persons in accordance with this Section
11.11.
SECTION 11.11.1. ASSIGNMENTS. A Lender may at any time assign and
delegate to one or more Persons, including without limitation, banks or other
financial institutions (each Person to whom such assignment and delegation is to
be made, being hereinafter referred to as an "Assignee Lender"), all or any
fraction of such Lender's total Loans and Commitments (which assignment and
delegation shall be of a constant, and not a varying, percentage of all such
Lender's Loans and Commitments) in a minimum aggregate amount of $1,000,000 (or
the entire remaining amount of such Lender's Loans and
-104-
Commitments); provided, however, that such Lender is required at all times to
maintain Loans, Letter of Credit Outstandings and Commitments hereunder in an
aggregate amount of $1,000,000 (unless such Lender shall have reduced its Loans,
Letter of Credit Outstandings and Commitments to zero); provided, further,
however, that the Borrowers and each other Obligor shall be entitled to continue
to deal solely and directly with such Lender in connection with the interests so
assigned and delegated to an Assignee Lender until
(a) written notice of such assignment and delegation, together with
payment instructions, addresses and related information with respect to
such Assignee Lender, shall have been given to the Borrowers by such Lender
and such Assignee Lender,
(b) such Assignee Lender shall have executed and delivered to the
Borrowers the Agent and such Lender a Lender Assignment Notice, accepted by
such Lender and the Agent, and
(c) the processing fees described below shall have been paid.
From and after the date that the Assignee Lender delivers such Lender Assignment
Notice, (x) the Assignee Lender thereunder shall be deemed automatically to have
become a party hereto and to the extent that rights and obligations hereunder
have been assigned and delegated to such Assignee Lender in connection with such
Lender Assignment Notice, shall have the rights and obligations of a Lender
hereunder and under the other Loan Documents, and (y) the assignor Lender, to
the extent that rights and obligations hereunder have been assigned and
delegated by it in connection with such Lender Assignment Notice, shall be
released from its obligations hereunder and under the other Loan Documents.
Within five (5) Business Days after its receipt of notice that the Lender has
received an executed Lender Assignment Notice, the Borrowers shall execute and
deliver to the relevant Assignee Lender a new Note evidencing such Assignee
Lender's assigned Loans and Commitments and, if the assignor Lender has retained
Loans and Commitments hereunder, a replacement Note in the principal amount of
the Loans and Commitments retained by the assignor Lender hereunder (each such
Note to be in exchange for, but not in payment of, the corresponding Note then
held by such assignor Lender). The assignor Lender shall xxxx the predecessor
Note "exchanged" and deliver it to the Borrowers. Accrued interest on that part
of the predecessor Note evidenced by the new Notes, and accrued fees, shall be
paid as provided in the Lender Assignment Notice. Accrued interest on that part
of the predecessor Note evidenced by the replacement Notes shall be paid to the
assignor Lender. Accrued interest and accrued fees shall be paid at the same
time or times provided in the predecessor Notes and in this Agreement. Such
assignor Lender or such Assignee Lender must also pay a processing fee to the
Lender upon delivery of any Lender Assignment Notice in the amount of $2,500.
Any
-105-
attempted assignment and delegation not made in accordance with this Section
11.11.1 shall be null and void. Nothing contained in this Agreement shall
prohibit any Lender from pledging or assigning any Note to any Federal Reserve
Bank in accordance with Applicable Law.
SECTION 11.11.2. PARTICIPATIONS. A Lender may at any time sell to one or
more Persons, including without limitation, commercial banks or other Persons
(each of such commercial banks and other Persons being herein called a
"Participant") participating interests in any of the Loans, Commitments, or
other interests of such Lender hereunder; provided, however, that
(a) no participation contemplated in this Section 11.11 shall relieve
such Lender from its Commitments or its other obligations hereunder or
under any other Loan Document,
(b) such Lender shall remain solely responsible for the performance of
its Commitments and such other obligations,
(c) the Borrowers and each other Obligor shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and each of the other Loan Documents, and
(d) the Borrowers shall not be required to pay any amount under
Section 4.6 that is greater than the amount which it would have been
required to pay had no participating interest been sold.
The Borrowers acknowledge and agree that each Participant, for purposes of
Sections 5.3, 5.4, 5.5 and 5.6 (except as provided in Section 11.11.2(d)), 5.8,
11.3 and 11.4, shall be considered a Lender.
SECTION 11.12. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE LENDERS, THE
AGENT OR THE BORROWERS SHALL BE BROUGHT AND MAINTAINED IN THE COURTS OF THE
STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT'S OPTION,
IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. THE BORROWERS HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE JURISDICTION
OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS
SET
-106-
FORTH ABOVE AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH SUCH LITIGATION. THE BORROWERS FURTHER IRREVOCABLY CONSENT
TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE BORROWERS HEREBY EXPRESSLY
AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH THEY MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH
LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY
SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT
THE BORROWERS HAVE OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF
ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH
RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWERS HEREBY IRREVOCABLY WAIVE SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
SECTION 11.13. WAIVER OF JURY TRIAL. THE AGENT, THE LENDERS AND THE
BORROWERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF THE LENDERS, THE AGENT OR THE BORROWERS. THE
BORROWERS ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN
DOCUMENT TO WHICH THEY ARE A PARTY) AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN
DOCUMENT.
SECTION 11.14. JOINT AND SEVERAL LIABILITY. Each Borrower has determined
that it is in its best interest and in pursuit of its legitimate business
purposes to induce the Lenders to extend credit to the Borrowers pursuant to
this Agreement. Each Borrower acknowledges and represents that its business is
integrally related to the business of the other Borrowers, that the availability
of the Commitments to all of the Borrowers benefits each Borrower individually
and that the Loans made will be for and inure to the benefit of all of the
Borrowers individually and as a group. Accordingly, each Borrower shall be
jointly and severally liable (as a principal and not as a surety, guarantor or
other accommodation party) for each and every representation, warranty, covenant
and obligation to be performed by the Borrowers under this Agreement, the Notes
and the other Loan Documents, and each Borrower acknowledges that in extending
the credit provided herein the Lenders are relying upon the fact that the
obligations of each Borrower hereunder are the joint and several obligations of
a principal. The invalidity, unenforceability or illegality of this
-107-
Agreement, the Note or any other Loan Document as to one Borrower or the release
by the Agent or any Lender of a Borrower hereunder or thereunder shall not
affect the obligations of the other Borrowers under this Agreement, the Note or
other Loan Documents, all of which shall otherwise remain valid and legally
binding obligations of the other Borrowers.
SECTION 11.15. CERTAIN CONSENTS AND WAIVERS.
(a) The Agent or any Lender may, at any time and from time to time,
without the consent of or notice to the Borrowers, except such notice as
may be required by applicable statute which cannot be waived, without
incurring responsibility to the Borrowers, and without impairing or
releasing the obligations of the Borrowers in whole or in part, (i)
exercise or refrain from exercising any rights against any Borrower, (ii)
sell, exchange, release, surrender, realize upon or otherwise deal with in
any manner or in any order any property pledged or mortgaged to secure or
in any manner securing the Obligations, (iii) take and hold any additional
security for any or all of the Obligations, (iv) apply any sums by
whomsoever paid or howsoever realized to any Obligations of the Borrowers
to the Lenders regardless of what Obligations remain unpaid.
(b) No invalidity, irregularity or unenforceability of the Obligations
of a Borrower under this Agreement or any other Loan Document shall affect,
impair or be a defense to the other Borrowers' Obligations. Each Borrower
hereby waives, to the extent permitted under Applicable Law, any and all
benefits and defenses under any statute, regulation, judicial decision or
other law which purports to exonerate or reduce the liability of a co-
borrower as a result of any disability or absence of liability of the other
co-borrower or any defense to liability or enforcement which the other co-
borrower may have and agrees that, by so doing, such Borrower's obligations
hereunder shall continue even if the other Borrowers had no liability at
the time of execution of this Agreement or thereafter ceased or cease to be
liable. Each Borrower also waives, to the extent permitted under
Applicable Law, any and all benefits and defenses under any statute,
regulation, judicial decision or other law which purports to limit the
liability of a co-borrower to that of the other co-borrower or to reduce
the liability of a co-borrower in proportion to any reduction in the
liability of the other co-borrower and agrees that, by so doing, such
Borrower's obligations hereunder may be more burdensome than that of the
other Borrowers.
(c) Each Borrower, to the extent permitted under Applicable Law,
hereby waives any right, whether arising under any statute, regulation,
judicial decision or otherwise, to require the Agent or any Lender to (i)
proceed against the other Borrowers, (ii) proceed against or exhaust any
security received from
-108-
the other Borrowers, or (iii) pursue any other right or remedy in the
Agent's or any Lender's power whatsoever.
(d) Each Borrower further waives, to the extent permitted under
Applicable Law: (i) any defense resulting from the absence, impairment or
loss of any right of reimbursement, subrogation, contribution or other
right or remedy of such Borrower against the other Borrowers or any
security, whether resulting from an election by the Agent or any Lender to
foreclose upon security by judicial or nonjudicial sale or otherwise; (ii)
any setoff or counterclaim of such Borrower or any defense of any kind
(including defenses resulting from any disability) or the cessation or stay
of enforcement from any cause whatsoever of the liability of such Borrower
(including without limitation the lack of validity or enforceability of
this Agreement or any other Loan Document); (iii) any right to exoneration,
in whole or in part, of co-borrowers which would otherwise be applicable;
(iv) any benefits and defenses under Applicable Law, including without
limitation any right of subrogation or reimbursement, any right of
contribution, any right to enforce any remedy which any Lender now has or
may hereafter have against the other Borrowers, and any benefit of, and any
right to participate in, any security now or hereafter held or received by
any Lender; and (v) all valuation, appraisal, extension or redemption laws
now or hereafter in effect. Without limiting the generality of the
preceding clause (iv), each Borrower hereby waives any right to be
reimbursed by the other Borrowers for any payment of such obligations made
directly or indirectly by such Borrower or from any property of such
Borrower, whether arising by way of any statutory, contractual or other
right of subrogation, contribution, indemnification or otherwise.
(e) Each Borrower acknowledges that it has the ability, and hereby
assumes the obligation and responsibility, to keep informed of the
financial condition of the other Borrowers and of other matters or
circumstances affecting the ability of the other Borrowers to pay or
perform their obligations hereunder or the risk of nonpayment and
nonperformance. Each Borrower hereby waives, to extent permitted under
Applicable Law, any obligation on the part of the Lenders to inform such
Borrower of the financial condition, or any changes in financial condition,
of the other Borrowers or of any other matter or circumstance which might
affect the ability of the other Borrowers to pay and perform under this
Agreement or any other Loan Document, or the risk of nonpayment or
nonperformance.
SECTION 11.16. OTHER TRANSACTIONS. Nothing contained herein shall
preclude the Agent or any other Lender or any of their respective Affiliates
from engaging in any transaction, in addition to those contemplated by this
Agreement or any other Loan Document, with the Borrower or any of its Affiliates
in which the Borrower or such Affiliate is not restricted hereby from engaging
with any other Person.
-109-
SECTION 11.17. CONTROLLING DOCUMENT. In the event of actual conflict
in the terms and provisions of this Agreement, the Notes and the other Loan
Documents, the terms and provisions of this Agreement will control.
SECTION 11.18. NOTICE. THIS WRITTEN AGREEMENT TOGETHER WITH THE OTHER
LOAN DOCUMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
-110-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
Borrowers:
LATEX PETROLEUM CORPORATION,
an Oklahoma corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Address: 0000 X. Xxxxxx Xxxxx
Xxxxx 0000
Xxxxx, XX 00000
Attn: President
Fax: (000) 000-0000
LATEX/GOC ACQUISITION, INC.,
a Delaware corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Address: 0000 X. Xxxxxx Xxxxx
Xxxxx 0000
Xxxxx, XX 00000
Attn: President
Fax: (000) 000-0000
-111-
GERMANY OIL COMPANY, a Delaware
corporation, formerly known as LRI
ACQUISITION, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Address: 0000 X. Xxxxxx Xxxxx
Xxxxx 0000
Xxxxx, XX 00000
Attn: President
Fax: (000) 000-0000
ALLIANCE RESOURCES (USA), INC.,
a Delaware corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Address: 0000 X. Xxxxxx Xxxxx
Xxxxx 0000
Xxxxx, XX 00000
Attn: President
Fax: (000) 000-0000
SOURCE PETROLEUM, INC., a Louisiana
corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Address: 0000 X. Xxxxxx Xxxxx
Xxxxx 0000
Xxxxx, XX 00000
Attn: President
Fax: (000) 000-0000
-112-
ALLIANCE RESOURCES PLC, a
public limited company incorporated under
the laws of England and Wales
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Address: 0000 X. Xxxxxx Xxxxx
Xxxxx 0000
Xxxxx, XX 00000
Attn: Managing Director
Fax: (000) 000-0000
Agent:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent for the
Lenders
By:
--------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
Address: 000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Energy and
Minerals Dept.
Oil & Gas Group
Fax: (000) 000-0000
-113-
Percentage: Lenders:
Tranche A - 100% BANK OF AMERICA NATIONAL TRUST
Tranche B - 100% AND SAVINGS ASSOCIATION
Tranche C - 100%
By:
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
Address: 000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Energy and
Minerals Dept.
Oil & Gas Group
Fax: (000) 000-0000
LIBOR OFFICE:
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Energy and
Minerals Dept.
Oil & Gas Group
Fax: (000) 000-0000
DOMESTIC OFFICE:
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Energy and
Minerals Dept.
Oil & Gas Group
Fax: (000) 000-0000
-114-
