RESTATED CREDIT AGREEMENT
AMONG
CONTINENTAL RESOURCES, INC. AND
CONTINENTAL GAS, INC.,
AS BORROWERS
AND
BANK ONE, OKLAHOMA, N.A. AND
THE INSTITUTIONS NAMED HEREIN
AS BANKS
AND
BANK ONE, OKLAHOMA, N.A.,
AS AGENT
MAY 14, 1998
TABLE OF CONTENTS
Page No.
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Commitments of the Bank . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) TERMS OF REVOLVING COMMITMENT. . . . . . . . . . . . . . . . . . . 13
(b) PROCEDURE FOR BORROWING. . . . . . . . . . . . . . . . . . . . . . 14
(c) LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . . . 14
(d) PROCEDURE FOR OBTAINING LETTERS OF CREDIT. . . . . . . . . . . . . 15
(e) VOLUNTARY REDUCTION OF REVOLVING COMMITMENT. . . . . . . . . . . . 16
(f) MANDATORY COMMITMENT REDUCTIONS. . . . . . . . . . . . . . . . . . 16
(g) SEVERAL OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . 16
3. Notes Evidencing Loans. . . . . . . . . . . . . . . . . . . . . . . . . 17
(a) FORM OF REVOLVING NOTES . . . . . . . . . . . . . . . . . . . . . 17
(b) ISSUANCE OF ADDITIONAL NOTES . . . . . . . . . . . . . . . . . . . 17
(c) INTEREST RATE. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(d) PAYMENT OF INTEREST. . . . . . . . . . . . . . . . . . . . . . . . 17
(e) PAYMENT OF PRINCIPAL . . . . . . . . . . . . . . . . . . . . . . . 17
(f) PAYMENT TO BANKS . . . . . . . . . . . . . . . . . . . . . . . . . 18
(g) SHARING OF PAYMENTS, ETC.. . . . . . . . . . . . . . . . . . . . . 18
(h) NON-RECEIPT OF FUNDS BY THE AGENT. . . . . . . . . . . . . . . . . 18
(i) CAPITAL ADEQUACY . . . . . . . . . . . . . . . . . . . . . . . . . 19
4. Interest Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) INTEREST RATE DETERMINATION. . . . . . . . . . . . . . . . . . . . 20
(c) CONVERSION OPTION. . . . . . . . . . . . . . . . . . . . . . . . . 20
(d) RECOUPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5. Change of Circumstances . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) UNAVAILABILITY OF FUNDS OR INADEQUACY OF PRICING . . . . . . . . . 21
(b) CHANGE IN LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(c) INCREASED COST OR REDUCED RETURN . . . . . . . . . . . . . . . . . 22
(d) DISCRETION OF BANK AS TO MANNER OF FUNDING . . . . . . . . . . . . 24
(e) BREAKAGE FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6. Collateral Security . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(a) PLEDGE OF COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . 24
(b) DOCUMENTATION AND TITLE REVIEW . . . . . . . . . . . . . . . . . . 25
-i-
(c) LETTERS IN LIEU OF TRANSFER ORDERS . . . . . . . . . . . . . . . . 25
7. Borrowing Base. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(a) INITIAL BORROWING BASE . . . . . . . . . . . . . . . . . . . . . . 26
(b) SUBSEQUENT DETERMINATIONS OF BORROWING BASE. . . . . . . . . . . . 26
8. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(a) UNUSED COMMITMENT FEE. . . . . . . . . . . . . . . . . . . . . . . 28
(b) THE LETTER OF CREDIT FEE . . . . . . . . . . . . . . . . . . . . . 28
(c) AGENCY FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(d) OTHER FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) VOLUNTARY PREPAYMENTS. . . . . . . . . . . . . . . . . . . . . . . 29
(b) MANDATORY PREPAYMENT FOR BORROWING BASE DEFICIENCY . . . . . . . . 29
10. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . 29
(a) CREATION AND EXISTENCE.. . . . . . . . . . . . . . . . . . . . . . 29
(b) POWER AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . 30
(c) BINDING OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . 30
(d) NO LEGAL BAR OR RESULTANT LIEN . . . . . . . . . . . . . . . . . . 30
(e) NO CONSENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(f) FINANCIAL CONDITION. . . . . . . . . . . . . . . . . . . . . . . . 31
(g) LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(h) LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(i) TAXES; GOVERNMENTAL CHARGES. . . . . . . . . . . . . . . . . . . . 31
(j) TITLES, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(k) DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(l) CASUALTIES; TAKING OF PROPERTIES . . . . . . . . . . . . . . . . . 32
(m) USE OF PROCEEDS; MARGIN STOCK. . . . . . . . . . . . . . . . . . . 32
(n) LOCATION OF BUSINESS AND OFFICES . . . . . . . . . . . . . . . . . 32
(o) COMPLIANCE WITH THE LAW. . . . . . . . . . . . . . . . . . . . . . 32
(p) NO MATERIAL MISSTATEMENTS. . . . . . . . . . . . . . . . . . . . . 33
(q) ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(r) PUBLIC UTILITY HOLDING COMPANY ACT . . . . . . . . . . . . . . . . 33
(s) SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(t) ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . 33
(u) LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(v) GAS CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(w) YEAR 2000 COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . 34
(x) DELHI OAKDALE LATERAL SYSTEM . . . . . . . . . . . . . . . . . . . 34
(y) ▇▇▇▇▇ GATHERING SYSTEM . . . . . . . . . . . . . . . . . . . . . . 34
-ii-
11. Conditions of Lending . . . . . . . . . . . . . . . . . . . . . . . . . 35
12. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 37
(a) FINANCIAL STATEMENTS AND REPORTS . . . . . . . . . . . . . . . . . 37
(b) CERTIFICATES OF COMPLIANCE . . . . . . . . . . . . . . . . . . . . 38
(c) ACCOUNTANTS' CERTIFICATE . . . . . . . . . . . . . . . . . . . . . 39
(d) TAXES AND OTHER LIENS. . . . . . . . . . . . . . . . . . . . . . . 39
(e) COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . 39
(f) FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . 39
(g) PERFORMANCE OF OBLIGATIONS . . . . . . . . . . . . . . . . . . . . 40
(h) INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(i) ACCOUNTS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . 40
(j) RIGHT OF INSPECTION. . . . . . . . . . . . . . . . . . . . . . . . 40
(k) NOTICE OF CERTAIN EVENTS . . . . . . . . . . . . . . . . . . . . . 41
(l) ERISA INFORMATION AND COMPLIANCE . . . . . . . . . . . . . . . . . 41
(m) ENVIRONMENTAL REPORTS AND NOTICES. . . . . . . . . . . . . . . . . 41
(n) COMPLIANCE AND MAINTENANCE . . . . . . . . . . . . . . . . . . . . 42
(o) OPERATION OF PROPERTIES. . . . . . . . . . . . . . . . . . . . . . 42
(p) COMPLIANCE WITH LEASES AND OTHER INSTRUMENTS . . . . . . . . . . . 43
(q) CERTAIN ADDITIONAL ASSURANCES REGARDING MAINTENANCE AND
OPERATIONS OF PROPERTIES . . . . . . . . . . . . . . . . . . . . . 43
(r) SALE OF CERTAIN ASSETS/PREPAYMENT OF PROCEEDS. . . . . . . . . . . 43
(s) TITLE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(t) CURATIVE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . 44
(u) CHANGE OF PRINCIPAL PLACE OF BUSINESS. . . . . . . . . . . . . . . 44
(v) OPERATING ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . 44
(w) YEAR 2000 COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . 45
(x) ADDITIONAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . 45
(y) ▇▇▇▇▇ GATHERING SYSTEM . . . . . . . . . . . . . . . . . . . . . . 45
(z) LETTERS IN LIEU OF TRANSFER ORDERS . . . . . . . . . . . . . . . . 45
(aa) DIVISION ORDERS. . . . . . . . . . . . . . . . . . . . . . . . . . 45
(ab) TAKE OR PAY AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . 46
13. Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(a) NEGATIVE PLEDGE. . . . . . . . . . . . . . . . . . . . . . . . . . 46
(b) CURRENT RATIO. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(c) RATIO OF DEBT TO MINIMUM TANGIBLE NET WORTH. . . . . . . . . . . . 46
(d) MINIMUM DEBT SERVICE COVERAGE RATIO. . . . . . . . . . . . . . . . 47
(e) CONSOLIDATIONS AND MERGERS . . . . . . . . . . . . . . . . . . . . 47
(f) DEBTS, GUARANTIES AND OTHER OBLIGATIONS. . . . . . . . . . . . . . 47
(g) DIVIDENDS OR DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . 48
(h) LOANS AND ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . 48
-iii-
(i) SALE OR DISCOUNT OF RECEIVABLES. . . . . . . . . . . . . . . . . . 49
(j) NATURE OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . 49
(k) TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . . . . . . 49
(l) HEDGING TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 49
(m) INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(n) AMENDMENT TO ARTICLES OF INCORPORATION OR BYLAWS . . . . . . . . . 50
14. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15. The Agent and the Banks . . . . . . . . . . . . . . . . . . . . . . . . 53
(a) APPOINTMENT AND AUTHORIZATION. . . . . . . . . . . . . . . . . . . 53
(b) NOTE HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(c) CONSULTATION WITH COUNSEL. . . . . . . . . . . . . . . . . . . . . 54
(d) DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(e) RESIGNATION OR REMOVAL OF AGENT. . . . . . . . . . . . . . . . . . 54
(f) RESPONSIBILITY OF AGENT. . . . . . . . . . . . . . . . . . . . . . 55
(g) INDEPENDENT INVESTIGATION. . . . . . . . . . . . . . . . . . . . . 56
(h) INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 57
(i) BENEFIT OF SECTION 15. . . . . . . . . . . . . . . . . . . . . . . 57
(j) PRO RATA TREATMENT . . . . . . . . . . . . . . . . . . . . . . . . 57
(k) ASSUMPTION AS TO PAYMENTS. . . . . . . . . . . . . . . . . . . . . 58
(l) OTHER FINANCINGS . . . . . . . . . . . . . . . . . . . . . . . . . 58
(m) INTERESTS OF BANKS . . . . . . . . . . . . . . . . . . . . . . . . 58
(n) INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
16. Exercise of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
17. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
18. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
19. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
20. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
21. Invalid Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
22. Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . 61
23. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
24. Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 62
-iv-
25. Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
26. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
27. Parties Bound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
28. Assignments and Participations. . . . . . . . . . . . . . . . . . . . . 62
29. Choice of Forum: Consent to Service of Process and
Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
30. Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . . . 65
31. Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
32. Financial Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
-v-
EXHIBITS
--------
Exhibit "A" - Notice of Borrowing
Exhibit "B" - Revolving Note
Exhibit "C" - Certificate of Compliance
Exhibit "D" - Form of Assignment and Acceptance Agreement
Exhibit "E" - Form of Subordination Agreement
SCHEDULES
Schedule 1 - Liens
Schedule 2 - Financial Condition
Schedule 3 - Liabilities
Schedule 4 - Litigation
Schedule 5 - Subsidiaries
Schedule 6 - Environmental Matters
Schedule 7 - Gas Contract
Schedule 8 - Title Matters
Schedule 9 - Curative Matters
-vi-
RESTATED CREDIT AGREEMENT
THIS RESTATED CREDIT AGREEMENT (hereinafter referred to as the
"Agreement") executed as of the 14th day of May, 1998, by and among
CONTINENTAL RESOURCES, INC., an Oklahoma corporation ("Resources") and
CONTINENTAL GAS, INC., an Oklahoma corporation ("Gas") (Resources and Gas are
hereinafter collectively referred to as "Borrowers" and individually as a
"Borrower") and BANK ONE, OKLAHOMA, N.A., a national banking association
("Bank One-Oklahoma"), and each of the financial institutions which is a
party hereto (as evidenced by the signature pages to this Agreement) or which
may from time to time become a party hereto pursuant to the provisions of
Section 28 hereof or any successor or assignee thereof (hereinafter
collectively referred to as "Banks", and individually, "Bank") and Bank
One-Oklahoma, as Agent.
W I T N E S S E T H:
WHEREAS, Borrowers and Bank One-Oklahoma (formerly named Liberty Bank
and Trust Company of Oklahoma City, N.A.) entered into a Credit Agreement
dated as of November 29, 1995 (the "Original Credit Agreement") under the
terms of which Bank One-Oklahoma agreed, subject to the satisfaction of
certain conditions precedent set forth therein, to provide Borrowers with a
revolving loan facility in amounts of up to $75,000,000; and
WHEREAS, the Credit Agreement was amended pursuant to a First Amendment
to Credit Agreement dated as of December 23, 1996, a Second Amendment to
Credit Agreement dated as of July 21, 1997, a Third Amendment to Credit
Agreement by virtue of a letter dated as of September 30, 1997, a Fourth
Amendment to Credit Agreement dated as of December 31, 1997 and a Fifth
Amendment to Credit Agreement dated as of May 8, 1998; and
WHEREAS, the Borrowers and Bank One-Oklahoma have agreed to restate the
Credit Agreement to increase the amount of the revolving loan facility
available thereunder and to make certain other changes thereto.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereby agree to restate the Credit Agreement as
follows:
1. DEFINITIONS. When used herein the terms "Agent", "Agreement",
"Bank", "Banks", "Bank One-Oklahoma", "Borrower", "Borrowers", "Gas" and
"Resources" shall have the meanings indicated above. When used herein the
following terms shall have the following meanings:
"ADVANCE OR ADVANCES" shall mean a loan or loans hereunder.
"AFFILIATE" shall mean any Person which, directly or indirectly,
controls, is controlled by or is under common control with the
relevant Person. For the
-1-
purposes of this definition, "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with"),
as used with respect to any Person, shall mean a member of the board of
directors, a partner or an officer of such Person, or any other Person
with possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, through the
ownership (of record, as trustee, or by proxy) of voting shares,
partnership interests or voting rights, through a management contract or
otherwise. Any Person owning or controlling directly or indirectly
ten percent or more of the voting shares, partnership interests or
voting rights, or other equity interest of another Person shall be
deemed to be an Affiliate of such Person.
"▇▇▇▇▇ GATHERING SYSTEM" shall mean that System located in the
State of Oklahoma and described in the Security Instruments.
"ASSIGNMENT AND ACCEPTANCE" shall mean a document substantially
in the form of Exhibit "D" hereto.
"BORROWING BASE" shall mean the value assigned by the Banks from
time to time to the Oil and Gas Properties pursuant to Section 7
hereof. Until the next determination of the Borrowing Base pursuant
to Section 7(b) hereof, the Borrowing Base shall be $175,000,000.00.
"BORROWING DATE" shall mean the date elected by Borrowers
pursuant to Section 2(b) hereof for an Advance on the Revolving Loan.
"BUSINESS DAY" shall mean the normal banking hours during any
day (other than Saturdays or Sundays) that banks are legally open for
business in Oklahoma City, Oklahoma.
"CHANGE OF MANAGEMENT" shall occur if there is any material
change in the ownership and/or management personnel of either
Borrower. Notwithstanding the foregoing, as long as (i) ▇▇▇▇▇▇ ▇▇▇▇
owns a controlling beneficial interest or ownership in Resources;
(ii) ▇▇▇▇▇▇ ▇▇▇▇ continues to act as CEO of Resources; and (iii)
Resources owns 100% of all of the issued and outstanding shares of
common stock of Gas, Borrowers shall be entitled to make changes in
their ownership and management. For the purposes hereof, "controlling
interest" is defined as beneficial ownership of 50% of all issued and
outstanding shares of common stock plus one additional share thereof.
"CURRENT ASSETS" shall mean the total of the Borrowers'
consolidated current assets determined in accordance with GAAP, plus,
as of any date, the current unused availability on the Revolving
Commitment.
-2-
"CURRENT LIABILITIES" shall mean the total of Borrowers'
consolidated current obligations as determined in accordance with
GAAP, excluding therefrom current maturities due on the Revolving
Loan.
"DEBT" shall mean, with respect to any Person, all obligations
and liabilities of such Person to any other Person including, without
limitation, all debts, claims, overdrafts, contingent liabilities and
indebtedness heretofore, now and/or from time to time hereafter owing,
due or payable, however, evidenced, created, incurred, acquired or
owing and however arising, whether under written or oral agreement,
operation of law or otherwise as shown in Borrowers' Financial
Statements.
"DEBT SERVICE COVERAGE RATIO" shall mean the sum of (i) quarterly
Net Income for the immediately preceding four (4) fiscal quarters
including the quarter then ended, adjusted for any nonrecurring or
extraordinary items, minus any dividends, plus (ii) depreciation,
depletion and amortization, lease impairment, interest expense,
deferred income tax expense and uncapitalized, discretionary
exploration expenses, all as determined in accordance with GAAP for
such period, DIVIDED BY (i) 1/6th of the principal balance outstanding
as of such date on the Revolving Loans plus (ii) total interest
expense for the immediately preceding four (4) fiscal quarters
including the quarter then ended, plus (iii) any other current
maturities of long-term debt.
"DEFAULT" shall mean any Event of Default and the occurrence of
an event or condition which would with the giving of any requisite
notice and/or passage of time or both constitute an Event of Default.
"DEFAULT RATE" shall mean a per annum variable rate of interest
equal to the Prime Rate as then in effect plus five percent (5%),
calculated on the basis of a year of 360 days and actual number of
days elapsed (including the first day but excluding the last day), but
in no event exceeding the Maximum Rate.
"DEFAULTING BANK" shall mean the term "Defaulting Bank" is used
herein as defined in Section 3(g) hereof.
"DELHI LEASE" shall mean that pipeline lease and any and all
extensions and renewals thereof from Delhi Gas Pipeline Corporation to
Gas covering the Delhi Oakdale Lateral System.
"DELHI OAKDALE LATERAL SYSTEM" shall mean that portion of the
▇▇▇▇▇ Gathering System leased from Delhi Gas Pipeline Corporation.
"DELTA TRUST" shall mean the ▇▇▇▇▇▇ ▇▇▇▇ Delta Trust, ▇▇▇▇▇▇
▇▇▇▇, Grantor, dated December 31, 1996.
-3-
"EFFECTIVE DATE" shall mean the date of this Agreement.
"ELIGIBLE ASSIGNEE" shall mean any of (i) a Bank or any Affiliate
of a Bank; (ii) a commercial bank organized under the laws of the
United States, or any state thereof, and having a combined capital and
surplus of at least $100,000,000; (iii) a commercial bank organized
under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development, or a political
subdivision of any such country, and having a combined capital and
surplus of at least $100,000,000.00, provided that such bank is acting
through a branch or agency located in the United States; (iv) a Person
that is primarily engaged in the business of commercial banking and
that (A) is a subsidiary of a Bank, (B) a subsidiary of a Person of
which a Bank is a subsidiary, or (C) a Person of which a Bank is a
subsidiary; (v) any other entity (other than a natural person) which
is an "accredited investor" (as defined in Regulation D under the
Securities Act) which extends credit or buys loans as one of its
businesses, including, but not limited to, insurance companies, mutual
funds, investments funds and lease financing companies; and (vi) with
respect to any Bank that is a fund that invests in loans, any other
fund that invests in loans and is managed by the same investment
advisor of such Bank or by an Affiliate of such investment advisor
(and treating all such funds so managed as a single Eligible
Assignee); provided, however, that no Affiliate of either Borrower
shall be an Eligible Assignee.
"ENVIRONMENTAL LAWS" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the
Super Fund Amendments and Reauthorization Act of 1986, 42 U.S.C.A.
Section 9601, ET SEQ., the Resource Conservation and Recovery Act, as
amended by the Hazardous Solid Waste Amendment of 1984, 42 U.S.C.A.
Section 6901, ET SEQ., the Clean Air Act, 42 U.S.C.A. Section 1251, ET
SEQ., the Toxic Substances Control Act, 15 U.S.C.A. Section 2601, ET
SEQ., The Oil Pollution Act of 1990, 33 U.S.G. Section 2701, ET SEQ.,
and all other laws, statutes, codes, acts, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, order and
restrictions of any federal, state, county, municipal and other
governments, departments, commissions, boards, agencies, courts,
authorities, officials and officers, domestic or foreign, relating to
air pollution, water pollution, noise control and/or the handling,
discharge, disposal or recovery of on-site or off-site asbestos or
"hazardous substances" as defined by 42 U.S.C. Section 9601, ET SEQ.,
as amended, as each of the foregoing may be amended from time to time.
"ENVIRONMENTAL LIABILITY" shall mean any claim, demand,
obligation, cause of action, order, violation, damage, injury,
judgment, penalty or fine, cost of enforcement, cost of remedial
action or any other costs or expense whatsoever, including reasonable
attorneys' fees and disbursements, resulting from the violation or
alleged violation of any Environmental Law or the imposition of any
-4-
Environmental Lien (as hereinafter defined) which could reasonably be
expected to individually or in the aggregate have a Material Adverse
Effect.
"ENVIRONMENTAL LIEN" shall mean a Lien in favor of any court,
governmental agency or instrumentality or any other Person (i) for any
Environmental Liability or (ii) for damages arising from or cost
incurred by such court or governmental agency or instrumentality or
other person in response to a release or threatened release of
asbestos or "hazardous substance" into the environment, the imposition
of which Lien could reasonably be expected to have a Material Adverse
Effect.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"FINANCIAL STATEMENTS" shall mean balance sheets, income
statements, statements of cash flow and appropriate footnotes and
schedules, prepared in accordance with GAAP.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"INTEREST PAYMENT DATE" shall mean the earlier of (i) the last
day of each Interest Period or (ii) the last day of each calendar
month.
"INTEREST PERIOD" shall mean any Prime Rate Interest Period, or
LIBOR Interest Period, as applicable.
"LETTERS OF CREDIT" shall mean the term "Letters of Credit" is
used herein as defined in Section 2(c) hereof.
"LIBOR INTEREST PERIOD" shall mean with respect to any LIBOR Loan
(i) initially, the period commencing on the date such LIBOR Loan is
made and ending one (1), two (2), three (3) or six (6) months
thereafter as selected by the Borrowers pursuant to Section 4(a)(ii),
and (ii) thereafter, each period commencing on the day following the
last day of the next preceding Interest Period applicable to such
LIBOR Loan and ending one (1), two (2), three (3) or six (6) months
thereafter, as selected by the Borrowers pursuant to Section 4(a)(ii);
provided, however, that (i) if any LIBOR Interest Period would
otherwise expire on a day which is not a London Business Day, such
Interest Period shall expire on the next succeeding London Business
Day unless the result of such extension would be to extend such
Interest Period into the next calendar month, in which case such
Interest Period shall end on the immediately preceding London Business
Day, (ii) if any LIBOR Interest Period begins on the last London
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
-5-
Interest Period) such Interest Period shall end on the last London
Business Day of a calendar month, and (iii) any LIBOR Interest Period
which would otherwise expire after the Maturity Date shall end on such
Maturity Date.
"LIBOR LOAN" shall mean any loan during any period which bears
interest at the LIBOR Rate, or which would bear interest at such rate
if the Maximum Rate ceiling was not in effect at a particular time.
"LIBOR MARGIN" shall mean:
(i) one and three-quarters percent (1.75%) per annum
whenever the Total Outstandings are 90% or greater of the
Borrowing Base in effect at the time in question;
(ii) one and one-half percent (1.50%) per annum whenever
the Total Outstandings are equal to or greater than 75%, but less
than 90%, of the Borrowing Base in effect at the time in
question;
(iii) one and one-quarter percent (1.25%) per annum
whenever the Total Outstandings are equal to or greater than 50%
but less than 75% of the Borrowing Base in effect at the time in
question; or
(iv) one percent (1%) per annum whenever the Total
Outstandings are less than 50% of the Borrowing Base in effect at
the time in question.
"LIBOR RATE" shall mean with respect to any LIBOR Interest
Period, the offered rate of interest (rounded upward, if necessary, to
the nearest whole multiple of 1/16th of 1%) for U.S. Dollar deposits
of not less than $1,000,000 as of 11:00 A.M. City of London, England
time two (2) London Business Days prior to the first date of each
LIBOR Interest Period as shown on the display designated as "British
Bankers Assoc. Interest Settlement Rates" on the Telerate system
("Telerate"), Page 3750 or Page 3740, or such other page or pages as
may replace such pages on Telerate for the purpose of displaying such
rate. Provided, however, that if such rate is not available on
Telerate then such offered rate shall be otherwise independently
obtained by Agent from an alternate, substantially similar independent
source available to Agent or shall be calculated by Agent by
substantially similar methodology as that theretofore used to
determine such offered rate in Telerate.
"LIEN" shall mean any mortgage, deed of trust, pledge, security
interest, assignment, encumbrance or lien (statutory or otherwise) of
every kind and character.
-6-
"LOAN" shall mean the Revolving Loan.
"LOAN DOCUMENTS" shall mean this Agreement, the Notes, the
Subordination Agreement, the Security Instruments and all other
documents executed in connection with the transaction described in
this Agreement.
"LONDON BUSINESS DAY" shall mean a Business Day on which dealings
in U.S. Dollar deposits are carried on in the London interbank market.
"MAJORITY BANKS" shall mean Banks holding 66-2/3% or more of the
Revolving Commitments or if the Revolving Commitments have been
terminated, Banks holding 66-2/3% of the outstanding Loans.
"MATERIAL ADVERSE EFFECT" shall mean any circumstance or event
which could have a material adverse effect on (i) the assets or
properties, liabilities, financial condition, business, operations,
affairs or circumstances of either Borrower, or (ii) the ability of
either Borrower to carry out its respective business as of the date of
this Agreement or as proposed at the date of this Agreement to be
conducted or to meet their obligations under the Notes, this Agreement
or the other Loan Documents on a timely basis.
"MAXIMUM RATE" shall mean at any particular time in question, the
maximum non-usurious rate of interest which under applicable law may
then be charged on the Note. If such Maximum Rate changes after the
date hereof, the Maximum Rate shall be automatically increased or
decreased, as the case may be, without notice to Borrowers from time
to time as of the effective date of each change in such Maximum Rate.
"MONTHLY COMMITMENT REDUCTION" is used herein, as defined in
Section 2(f) hereof.
"NET INCOME" shall mean Borrowers' consolidated net income after
income taxes calculated in accordance with GAAP.
"1984 TRUST" shall mean the Revocable Inter Vivos Trust of ▇▇▇▇▇▇
▇. ▇▇▇▇, dated April 23, 1984, as amended.
"NOTES" shall mean the Revolving Notes, substantially in the form
of Exhibit "B" hereto issued or to be issued hereunder to each Bank,
respectively, to evidence the indebtedness to such Bank arising by
reason of the Advances on the Revolving Loan, together with all
modifications, renewals and extensions thereof or any part thereof.
-7-
"OIL AND GAS PROPERTIES" shall mean all oil, gas and mineral
properties and interests, related personal properties, in which
Borrowers grant to the Banks either a first and prior lien and
security interest pursuant to Section 6 hereof.
"OTHER FINANCING" shall mean the term "Other Financing" is used
herein as defined in Section 15(l) hereof.
"PAYOR" is used herein as defined in Section 3(h)hereof.
"PERMITTED LIENS" shall mean (i) royalties, overriding royalties,
reversionary interests, production payments and similar burdens; (ii)
joint operating agreements, sales contracts or other arrangements for
the sale of production of oil, gas or associated liquid or gaseous
hydrocarbons which would not (when considered cumulatively with the
matters discussed in clause (i) above) deprive either Borrower of any
material right in respect of any such Borrower's assets or properties
(except for rights customarily granted with respect to such contracts
and arrangements); (iii) statutory Liens for taxes or other
assessments that are not yet delinquent (or that, if delinquent, are
being contested in good faith by appropriate proceedings, levy and
execution thereon having been stayed and continue to be stayed and for
which such Borrower has set aside on its books adequate reserves in
accordance with GAAP); (iv) easements, rights of way, servitudes,
permits, surface leases and other rights in respect to surface
operations, pipelines, grazing, logging, canals, ditches, reservoirs
or the like, conditions, covenants and other restrictions, and
easements of streets, alleys, highways, pipelines, telephone lines,
power lines, railways and other easements and rights of way on, over
or in respect of either Borrower's assets or properties and that do
not individually or in the aggregate, cause a Material Adverse Effect;
(v) materialmen's, mechanic's, repairman's, employee's, warehousemen's,
landlord's, carrier's, pipeline's, contractor's, sub-contractor's,
operator's, non-operator's (arising under operating or joint operating
agreements), and other Liens (including any financing statements filed in
respect thereof) incidental to obligations incurred by either Borrower in
connection with the construction, maintenance, development,
transportation, storage or operation of such Borrower's assets or
properties to the extent not delinquent (or which, if delinquent, are
being contested in good faith by appropriate proceedings and for which
such Borrower has set aside on its books adequate reserves in accordance
with GAAP); (vi) all contracts, agreements and instruments, and all
defects and irregularities and other matters affecting either Borrower's
assets and properties which were in existence at the time such Borrower's
assets and properties were originally acquired by such Borrower and all
routine operational agreements entered into in the ordinary course of
business, which contracts, agreements, instruments, defects, irregularities
and other matters and routine operational agreements are not such as to,
individually or in the aggregate, interfere materially with the
operation, value or use of such Borrower's assets and properties,
considered in the aggregate; (vii) liens in connection with
-8-
workmen's compensation, unemployment insurance or other social security,
old age pension or public liability obligations; (viii) legal or equitable
encumbrances deemed to exist by reason of the existence of any
litigation or other legal proceeding or arising out of a judgment or
award with respect to which an appeal is being prosecuted in good
faith and levy and execution thereon have been stayed and continue to
be stayed; (ix) rights reserved to or vested in any municipality,
governmental, statutory or other public authority to control or
regulate either Borrower's assets and properties in any manner, and
all applicable laws, rules and orders from any governmental authority;
(x) landlord's liens; (xi) Liens incurred pursuant to the Security
Instruments or otherwise created in favor of the Agent or the Banks
pursuant to the Loan Documents; and (xii) Liens existing at the date
of this Agreement which have been disclosed to Banks in the Borrowers'
December 31, 1997 Financial Statements or identified in Schedule "1"
hereto and (xiii) Liens covering properties which are not Oil and Gas
Properties and the value of which is less than $500,000 in the
aggregate.
"PERSON" shall mean an individual, a corporation, a partnership,
an association, a trust or any other entity or organization, including
a government or political subdivision or an agency or instrumentality
thereof.
"PIPELINES" shall mean and include Gas' gas gathering and/or
residue pipeline systems in the State of Oklahoma associated with the
gathering and/or transportation of gas and the delivery of gas or
residue gas to purchasers or transporters (as the same now exist or as
may hereafter be extended), including, but not by way of limitation,
the Right-Of-Way Properties and all buildings, structures,
attachments, fittings and fixtures, facilities, tools, materials,
equipment, machinery, appliances, pipeline, piping, powerlines,
electrical systems, metering and calibration facilities, compressors,
dehydrators, sponge units, instrument and equipment housing, equipment
storage facilities, tanks, engines, valves, traps, pumps, motors,
instruments, fencing, office equipment, expanders, heat exchangers,
chillers, separators, cooling towers, boilers and reboilers, turbines,
generators, meters and instruments, fractionators, stills,
debutanizers, heaters, coolers, stabilizers, scrubbers, absorbers,
reabsorbers, flash towers, oil reclaimers, loading racks, injection
facilities, accumulators, economizers, fans, condensers and valves,
and appurtenances of every nature and kind whatsoever now or hereafter
forming a part of, appertaining to or used or for use in connection
with said Pipeline.
"PLANS" shall mean any plan subject to Title IV of ERISA and
maintained by either Borrower, or any such plan to which either
Borrower is required to contribute on behalf of its employees.
"PLANT" shall mean the fee property and surface leases in
Oklahoma associated with the processing of hydrocarbons and including,
but not by way of
-9-
limitation, together with all property, real or personal, associated
therewith including all buildings, structures, attachments, fittings and
fixtures, facilities, tools, materials, equipment, machinery, appliances,
pipeline, piping, powerlines, electrical systems, metering and calibration
facilities, compressors, dehydrators, sponge units, instrument and
equipment housing, equipment storage facilities, tanks, engines, valves,
traps, pumps, motors, instruments, fencing, office equipment, expanders,
heat exchangers, chillers, separators, cooling towers, boilers and
reboilers, turbines, generators, meters and instruments, fractionators,
stills, debutanizers, heaters, coolers, stabilizers, scrubbers, absorbers,
reabsorbers, flash towers, oil reclaimers, loading racks, injection
facilities, accumulators, economizers, fans, condensers and valves,
and appurtenances of every nature and kind whatsoever now or hereafter
forming a part of, located on, appertaining to or used or for use in
connection with said fee property and surface leases.
"PRIME RATE" shall mean as of any date, the fluctuating rate of
interest per annum established from time to time by Agent as its Prime
Rate (which rate of interest may not be the lowest, best or most
favorable rate of interest which Agent may charge on loans to its
customers). Each change in the Prime Rate shall become effective
without prior notice to Borrowers automatically as of the opening of
business on the date of such change in the Prime Rate.
"PRIME RATE INTEREST PERIOD" shall mean with respect to any Prime
Rate Loan, the period ending on the last day of each month, provided,
however, that (i) if any Prime Rate Interest Period would end on a day
which is not a Business Day, such Interest Period shall be extended to
the next succeeding Business Day, and (ii) if any Prime Rate Interest
Period would otherwise end after the Maturity Date such Interest
Period shall end on the Maturity Date.
"PRIME RATE LOANS" shall mean any loan during any period which
bears interest based upon the Prime Rate or which would bear interest
based upon the Prime Rate if the Maximum Rate ceiling was not in
effect at that particular time.
"PRIME RATE MARGIN" shall be zero percent (0%).
"PRO RATA OR PRO RATA PART" shall mean for each Bank, (i) for all
purposes where no Loan is outstanding, such Bank's Revolving
Commitment Percentage and (ii) otherwise, the proportion which the
portion of the outstanding Loans owed to such Bank bears to the
aggregate outstanding Loans owed to all Banks at the time in question.
"REIMBURSEMENT OBLIGATIONS" shall mean at any time, the
obligations of the Borrowers in respect of all Letters of Credit then
outstanding to reimburse amounts actually paid by any Bank in respect
of any drawing or drawings under a Letter of
-10-
Credit.
"REQUIRED PAYMENT" is used herein as defined in Section 3(h)
hereof.
"REVOLVING COMMITMENT" shall mean (A) for all Banks, the LESSER
of (i) $175,000,000 or (ii) the Borrowing Base in effect from time to
time, in each case as reduced from time to time pursuant to Sections 2
and 7 hereof, and (B) as to any Bank, its obligation to make Advances
hereunder on the Revolving Loan and purchase participations in Letters
of Credit issued hereunder by the Agent in amounts not exceeding, in
the aggregate, an amount equal to such Bank's Revolving Loan
Commitment Percentage times the total Revolving Commitment as of any
date. The Revolving Commitment of each Bank hereunder shall be
adjusted from time to time to reflect assignments made by such Bank
pursuant to Section 28 hereof. Each reduction in the Revolving
Commitment shall result in a Pro Rata reduction in each Bank's
Revolving Commitment.
"REVOLVING COMMITMENT PERCENTAGE" shall mean for each Bank the
percentage derived by dividing its Revolving Commitment at the time of
the determination by the Revolving Commitments of all Banks at the
time of determination. The Revolving Commitment Percentage of each
Bank hereunder shall be adjusted from time to time to reflect
assignments made by such Bank pursuant to Section 28 hereof.
"REVOLVING LOAN" shall mean loan or loans made under the
Revolving Commitment pursuant to Section 2 hereof.
"REVOLVING MATURITY DATE" shall mean May 14, 2001 or as such date
may be extended from time to time with the consent of all Banks.
"REVOLVING NOTES" shall mean the Revolving Notes described in
Section 3 hereof.
"RIGHT-OF-WAY PROPERTIES" shall mean and include all lands,
easements, rights-of-way, leases, surface rights, servitudes, grants,
permits, licenses, authorizations, privileges, franchises, consents,
prescriptive rights and other title and interest now or hereafter
owned by Borrower and now or hereafter necessary or useful for the
construction and operation of the Pipeline.
"SECURITY INSTRUMENTS" shall mean the term Security Instruments
is used collectively herein to mean this Agreement, all Deeds of
Trust, Mortgages, Security Agreements, Assignments of Production and
Financing Statements, and other collateral documents covering the Oil
and Gas Properties and related personal property, equipment, oil and
gas inventory and proceeds of the foregoing, all such
-11-
documents to be in form and substance satisfactory to Agent.
"SUBSIDIARY" shall mean any corporation or other entity of which
securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly
owned by either Borrower or another subsidiary.
"SUPPORT PARTIES" shall mean ▇▇▇▇▇▇ ▇▇▇▇.
"SYSTEM" shall mean and include the Pipeline, the Plants, and the
contracts and contract rights arising in connection therewith,
together with all tangible or intangible property, personal or real,
now or at any time arising out of, relating to, located in or upon,
used in connection with or obtained directly or indirectly by virtue
of the Pipeline, the Plant or the Contracts, whether now owned and
existing or hereafter acquired or arising, including, but not by way
of limitation, accounts receivable, contract rights, general
intangibles, chattel paper, documents, instruments, business goodwill,
records and books, tradenames, mineral interests, oil and gas
leasehold interests, inventory (whether consisting of hydrocarbons or
otherwise) supplies, materials and any other property.
"TANGIBLE NET WORTH" shall mean an amount equal to the Borrowers'
consolidated stockholders equity, as determined in accordance with
GAAP, plus any subordinated debt owed by either Borrower to a Support
Party less any Affiliate receivables.
"TOTAL OUTSTANDINGS" shall mean as of any date, the sum of
(i) the total principal balance outstanding on the Revolving Notes,
plus (ii) the total face amount of all outstanding Letters of Credit,
plus (iii) the total amount of all unpaid Reimbursement Obligations.
"TRANCHE" shall mean a LIBOR Loan or a Prime Rate Loan.
"UNSCHEDULED REDETERMINATIONS" shall mean a redetermination of
the Borrowing Base made at any time other than on the dates set for
the regular semi-annual redetermination of the Borrowing Base which
are made (A) at the reasonable request of Borrowers, (B) at any time
it appears to Agent or Majority Banks, in the exercise of their
reasonable discretion, that either (i) there has been an unscheduled
material decrease in the value of the Oil and Gas Properties, or (ii)
an event has occurred which is reasonably expected to have a Material
Adverse Effect.
"UNUSED FEE RATE" shall mean the percentage used to calculate the
Unused Commitment Fee (as such term is defined in Section 8(a)
hereof), which percentage shall be:
-12-
(i) one-fourth of one percent (.25%) per annum whenever
the Total Outstandings are ninety percent (90%) or greater of the
Borrowing Base in effect at the time in question;
(ii) nine-fortieth of one percent (.225%) per annum
whenever Total Outstandings are greater than seventy-five percent
(75%) but less than ninety percent (90%) of the Borrowing Base in
effect at the time in question;
(iii) three-sixteenths of one percent (.1875%) per
annum whenever Total Outstandings are seventy-five percent (75%)
or less of the Borrowing Base in effect at the time in question;
"YEAR 2000 COMPLIANT" shall have the meaning assigned to such
term in Section 10(w) hereof.
"YEAR 2000 PROBLEM" shall have the meaning assigned to such term
in Section 10(w) hereof.
2. COMMITMENTS OF THE BANK.
(a) TERMS OF REVOLVING COMMITMENT. On the terms and conditions
hereinafter set forth, each Bank agrees severally to make Advances to
the Borrowers from time to time during the period beginning on the
Effective Date and ending on the Revolving Maturity Date in such
amounts as the Borrowers may request up to an amount not to exceed, in
the aggregate principal amount outstanding at any time, the Revolving
Commitment. The obligation of the Borrowers hereunder shall be
evidenced by this Agreement and the Revolving Notes issued in
connection herewith, said Revolving Notes to be as described in
Section 3 hereof. Notwithstanding any other provision of this
Agreement, no Advance shall be required to be made hereunder if any
Event of Default (as hereinafter defined) has occurred and is
continuing or if any event or condition has occurred or failed to
occur which with the passage of time or service of notice, or both,
would constitute an Event of Default. Each Advance under the
Revolving Commitment shall be an aggregate amount of at least $100,000
or a whole number multiple thereof except an Advance of the entire
remaining unborrowed Revolving Commitment. Irrespective of the face
amount of the Revolving Note or Notes, the Banks shall never have the
obligation to Advance any amount or amounts in excess of the Revolving
Commitment or to increase the Revolving Commitment. The total number
of Tranches under the Revolving Commitment which may be outstanding at
any time hereunder shall never exceed five (5), whether such Tranches
are Prime Rate Loans, LIBOR Loans, or a combination thereof. Within
the limit of each Bank's Revolving Commitment, the Borrowers may
borrow, repay and reborrow under this Section 2 prior to the Revolving
Maturity Date.
-13-
(b) PROCEDURE FOR BORROWING. Whenever the Borrowers desire an
Advance hereunder, they shall give Agent telegraphic, telex, facsimile
or telephonic notice ("Notice of Borrowing") of such requested
Advance, which in the case of telephonic notice, shall be promptly
confirmed in writing. Each Notice of Borrowing shall be in the form
of Exhibit "A" attached hereto and shall be received by Agent not
later than 11:00 a.m. Oklahoma City, Oklahoma time, (i) one Business
Day prior to the Borrowing Date in the case of the Prime Rate Loan, or
(ii) two London Business Days prior to any proposed Borrowing Date in
the case of LIBOR Loans. Each Notice of Borrowing shall specify
(i) the Borrowing Date (which, if at Prime Rate Loan, shall be a
Business Day and if a LIBOR Loan, a London Business Day), (ii) the
principal amount to be borrowed, (iii) the portion of the Advance
constituting Prime Rate Loans and/or LIBOR Loans and (iv) if any
portion of the proposed Advance is to constitute LIBOR Loans, the
initial Interest Period selected by Borrowers pursuant to Section 4
hereof to be applicable thereto. Upon receipt of such Notice, Agent
shall advise each Bank thereof; provided, that if the Banks have
received at least one (1) day's notice of such Advance prior to
funding of a Prime Rate Loan, or at least two (2) days' notice of each
Advance prior to funding in the case of a LIBOR Loan, each Bank shall
provide Agent at its office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, not later than 1:00 p.m.,Oklahoma City, Oklahoma time,
on the Borrowing Date, in immediately available funds, its pro rata
share of the requested Advance, but the aggregate of all such fundings
by each Bank shall never exceed such Bank's Revolving Commitment. Not
later than 2:00 p.m., Oklahoma City, Oklahoma time, on the Borrowing
Date, Agent shall make available to the Borrowers at the same office,
in like funds, the aggregate amount of such requested Advance.
Neither Agent nor any Bank shall incur any liability to the Borrowers
in acting upon any Notice of Borrowing which Agent or such Bank
believes in good faith to have been given by a duly authorized officer
or other person authorized to borrow on behalf of Borrowers or for
otherwise acting in good faith under this Section 2(b). Upon funding
of Advances by Banks in accordance with this Agreement, pursuant to
any such Notice, the Borrowers shall have effected Advances hereunder.
(c) LETTERS OF CREDIT. On the terms and conditions hereinafter
set forth, the Agent shall from time to time during the period
beginning on the Effective Date and ending on the Revolving Maturity
Date upon request of Borrowers issue standby and/or commercial Letters
of Credit for the account of Borrowers (the "Letters of Credit") in
such face amounts as Borrowers may request, but not to exceed in the
aggregate face amount at any time outstanding the sum of Ten Million
Dollars ($10,000,000.00). The face amount of all Letters of Credit
issued and outstanding hereunder shall be considered as Advances for
Borrowing Base purposes and all payments made by the Agent on such
Letters of Credit shall be considered as Advances under the Revolving
Notes. Each Letter of Credit issued
-14-
for the account of Borrowers hereunder shall (i) be in favor of such
beneficiaries as specifically requested by Borrowers, (ii) have an
expiration date not exceeding the earlier of (a) one year or (b) the
Revolving Maturity Date, and (iii) contain such other terms and
provisions as may be reasonably required by Bank. Each Bank (other than
Agent) agrees that, upon issuance of any Letter of Credit hereunder, it
shall automatically acquire a participation in the Agent's liability
under such Letter of Credit in an amount equal to such Bank's Revolving
Commitment Percentage of such liability, and each Bank (other than
Agent) thereby shall absolutely, unconditionally and irrevocably assume,
as primary obligor and not as surety, and shall be unconditionally
obligated to Agent to pay and discharge when due, its Revolving
Commitment Percentage of Agent's liability under such Letter of Credit.
The Borrowers hereby unconditionally agree to pay and reimburse the
Agent for the amount of each demand for payment under any Letter of
Credit that is in substantial compliance with the provisions of any such
Letter of Credit at or prior to the date on which payment is to be made
by the Agent to the beneficiary thereunder, without presentment, demand,
protest or other formalities of any kind. Upon receipt from any
beneficiary of any Letter of Credit of any demand for payment under such
Letter of Credit, the Agent shall promptly notify the Borrowers of the
demand and the date upon which such payment is to be made by the Agent
to such beneficiary in respect of such demand. Forthwith upon receipt of
such notice from the Agent, Borrowers shall advise the Agent whether or
not they intend to borrow hereunder to finance their obligations to
reimburse the Agent, and if so, submit a Notice of Borrowing as provided
in Section 2(b) hereof. If Borrowers fail to so advise Agent and
thereafter fail to reimburse Agent, the Agent shall notify each Bank of
the demand and the failure of the Borrowers to reimburse the Agent, and
each Bank shall reimburse the Agent for its Revolving Commitment
Percentage of each such draw paid by the Agent and unreimbursed by the
Borrowers. All such amounts paid by Agent and/or reimbursed by the
Banks shall be treated as an Advance or Advances under the Revolving
Commitment, which Advances shall be immediately due and payable and
shall bear interest at the Default Rate.
(d) PROCEDURE FOR OBTAINING LETTERS OF CREDIT. The amount and
date of issuance, renewal, extension or reissuance of a Letter of
Credit pursuant to the Banks' commitment above in Section 2(c) shall
be designated by Borrowers' written request delivered to Agent at
least three (3) Business Days prior to the date of such issuance,
renewal, extension or reissuance. Concurrently with or promptly
following the delivery of the request for a Letter of Credit,
Borrowers shall execute and deliver to the Agent an application and
agreement with respect to the Letters of Credit, said application and
agreement to be in the form used by the Agent. The Agent shall not be
obligated to issue, renew, extend or reissue such Letters of Credit if
(A) the amount thereon when added to the face amount of all
outstanding Letters of Credit plus any Reimbursement Obligations
exceeds Ten Million Dollars ($10,000,000.00) or (B) the amount thereof
when added to the Total Outstandings
-15-
would exceed the Revolving Commitment. Borrowers agree to pay the Agent
for the benefit of the Banks commissions for issuing the Letters of
Credit (calculated separately for each Letter of Credit) in an amount
equal to the greater of (i) one percent (1%) per annum on the maximum
face amount of the Letter of Credit or (ii) $500.00. Borrowers further
agree to pay Agent an additional fronting fee equal to one-eighth of one
percent (.125%) per annum on the maximum face amount of each Letter of
Credit. Such commissions shall be payable prior to the issuance of each
Letter of Credit and thereafter on each anniversary date of such
issuance while such Letter of Credit is outstanding.
(e) VOLUNTARY REDUCTION OF REVOLVING COMMITMENT. The Borrowers
may at any time, or from time to time, upon not less than three (3)
Business Days' prior written notice to Agent, reduce or terminate the
Revolving Commitment; provided, however, that (i) each reduction in
the Revolving Commitment must be in the amount of $500,000 or more, in
increments of $100,000 and (ii) each reduction must be accompanied by
a prepayment of the Revolving Notes in the amount by which the
outstanding principal balance of the Revolving Notes exceeds the
Revolving Commitment as reduced pursuant to this Section 2.
(f) MANDATORY COMMITMENT REDUCTIONS -
(i) MONTHLY COMMITMENT REDUCTION. The Borrowing Base and
the Revolving Commitment shall be reduced as of the first day of
each month by an amount determined by the Banks pursuant to
Section 7(b) hereof (the "Monthly Commitment Reduction"). The
Monthly Commitment Reduction shall be $0 beginning on June 1,
1998, with like reductions continuing on the first day of each
month thereafter until redetermined pursuant to Section 7(b)
hereof. If as a result of any such Monthly Commitment Reduction,
the Total Outstandings ever exceed the Revolving Commitment then
in effect, the Borrowers shall make the mandatory prepayment of
principal required pursuant to Section 9(b) hereof.
(ii) OTHER REDUCTIONS. The Borrowing Base shall be reduced
from time to time by the amount of any prepayment required by
Section 12(r) hereof upon the sale of Oil and Gas Properties.
If, as a result of any such reduction in the Borrowing Base, the
Total Outstandings ever exceed the Borrowing Base then in effect,
the Borrowers shall make the mandatory prepayment of principal
required pursuant to Section 9(b) hereof.
(g) SEVERAL OBLIGATIONS. The obligations of the Banks under the
Revolving Commitment are several and not joint. The failure of any
Bank to make an Advance required to be made by it shall not relieve
any other Bank of its obligation to make its Advance, and no Bank
shall be responsible for the failure of
-16-
any other Bank to make the Advance to be made by such other Bank.
2. NOTES EVIDENCING LOANS. The loans described above in Section 2
shall be evidenced by promissory notes of Borrowers as follows:
(a) FORM OF REVOLVING NOTES - The Revolving Loan shall be
evidenced by a Note or Notes in the aggregate face amount of
$175,000,000, and shall be in the form of Exhibit "B" hereto with
appropriate insertions (each a "Revolving Note"). Notwithstanding the
face amount of the Revolving Notes, the actual principal amount due
from the Borrowers to Banks on account of the Revolving Notes, as of
any date of computation, shall be the sum of Advances then and
theretofore made on account thereof, less all principal payments
actually received by Banks in collected funds with respect thereto.
Although the Revolving Notes may be dated as of the Effective Date,
interest in respect thereof shall be payable only for the period
during which the loans evidenced thereby are outstanding and, although
the stated amount of the Revolving Notes may be higher, the Revolving
Notes shall be enforceable, with respect to Borrowers' obligation to
pay the principal amount thereof, only to the extent of the unpaid
principal amount of the loans. Irrespective of the face amount of the
Revolving Notes, no Bank shall ever be obligated to advance on the
Revolving Commitment any amount in excess of its Revolving Commitment
then in effect.
(b) ISSUANCE OF ADDITIONAL NOTES - At the Effective Date there
shall be outstanding one Revolving Note in the aggregate face amount
of $175,000,000 payable to the order of Bank One-Oklahoma. From time
to time new Notes may be issued to other Banks as such Banks become
parties to this Agreement. Upon request from Agent, the Borrowers
shall execute and deliver to Agent any such new or additional Notes.
From time to time as new Notes are issued the Agent shall require that
each Bank exchange their Notes for newly issued Notes to better
reflect the extent of each Bank's Revolving Commitment hereunder. The
notes replaced shall be marked to indicate that they have been
replaced and/or returned to the Borrowers.
(c) INTEREST RATES - The unpaid principal balance of the Notes
shall bear interest from time to time as set forth in Section 4
hereof.
(d) PAYMENT OF INTEREST - Interest on the Notes shall be payable
on each Interest Payment Date.
(e) PAYMENT OF PRINCIPAL - Principal of the Revolving Note or
Notes shall be due and payable to the Agent for the ratable benefit of
the Banks on the Revolving Maturity Date unless earlier due in whole
or in part as a result of an acceleration of the amount due or
pursuant to the mandatory prepayment provisions
-17-
of Section 9(b) hereof.
(f) PAYMENT TO BANKS - Each Bank's Pro Rata Part of each payment
or prepayment of the Loans shall be directed by wire transfer to such
Bank by the Agent at the address provided to the Agent for such Bank
for payments no later than 2:00 p.m., Oklahoma City, Oklahoma, time on
the Business Day such payments or prepayments are deemed hereunder to
have been received by Agent; provided, however, in the event that any
Bank shall have failed to make an Advance as contemplated under
Section 2 hereof (a "Defaulting Bank") and the Agent or another Bank
or Banks shall have made such Advance, payment received by Agent for
the account of such Defaulting Bank or Banks shall not be distributed
to such Defaulting Bank or Banks until such Advance or Advances shall
have been repaid in full to the Bank or Banks who funded such Advance
or Advances. Any payment or prepayment received by Agent at any time
after 12:00 noon, Oklahoma City, Oklahoma, time on a Business Day
shall be deemed to have been received on the next Business Day.
Interest shall cease to accrue on any principal as of the end of the
day preceding the Business Day on which any such payment or prepayment
is deemed hereunder to have been received by Agent. If Agent fails to
transfer any principal amount to any Bank as provided above, then
Agent shall promptly direct such principal amount by wire transfer to
such Bank.
(g) SHARING OF PAYMENTS, ETC. - If any Bank shall obtain any
payment (whether voluntary, involuntary, or otherwise) on account of
the Loans, (including, without limitation, any set-off) which is in
excess of its Pro Rata Part of payments on either of the Loans, as the
case may be, obtained by all Banks, such Bank shall purchase from the
other Banks such participation as shall be necessary to cause such
purchasing Bank to share the excess payment pro rata with each of
them; provided that, if all or any portion of such excess payment is
thereafter recovered from such purchasing Bank, the purchase shall be
rescinded and the purchase price restored to the extent of the
recovery. The Borrowers agree that any Bank so purchasing a
participation from another Bank pursuant to this Section may, to the
fullest extent permitted by law, exercise all of its rights of payment
(including the right of offset) with respect to such participation as
fully as if such Bank were the direct creditor of the Borrowers in the
amount of such participation.
(h) NON-RECEIPT OF FUNDS BY THE AGENT - Unless the Agent shall
have been notified by a Bank or the Borrowers (the "Payor") prior to
the date on which such Bank is to make payment to the Agent of the
proceeds of a Loan to be made by it hereunder or the Borrowers are to
make a payment to the Agent for the account of one or more of the
Banks, as the case may be (such payment being herein called the
"Required Payment"), which notice shall be effective upon receipt,
that the Payor does not intend to make the Required Payment to the
Agent, the Agent may assume that the Required Payment has been made
and may, in reliance upon such
-18-
assumption (but shall not be required to), make the amount thereof
available to the intended recipient on such date and, if the Payor has
not in fact made the Required Payment to the Agent, the recipient of
such payment shall, on demand, pay to the Agent the amount made
available to it together with interest thereon in respect of the period
commencing on the date such amount was made available by the Agent until
the date the Agent recovers such amount at the rate applicable to such
portion of the applicable Loan.
(i) CAPITAL ADEQUACY - If either (i) the introduction or
implementation of or the compliance with or any change in or in the
interpretation of any law, rule or regulation or (ii) the introduction
or implementation of or the compliance with any mandatory request,
directive or guideline from any central bank or other governmental
authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by
any Bank or any corporation controlling any Bank as a result of
maintaining its Pro Rata Part of the Revolving Commitment, then within
fifteen (15) days after demand by such Bank, the Borrowers will pay to
such Bank, from time to time as specified by such Bank, such
additional amount or amounts which such Bank shall reasonably
determine to be appropriate to compensate such Bank or any corporation
controlling such Bank in light of such circumstances, to the extent
that such Bank reasonably determines that the amount of any such
capital would be increased, or the rate of return on any such capital
would be reduced in whole or in part, based on the existence of the
amount of the Loans or such Bank's Revolving Commitment under this
Agreement; provided, however, that to the extent such notice is given
by any such Bank more than 180 days after the occurrence of the event
giving rise to the additional costs of the type described in this
Section, such Bank shall not be entitled to compensation pursuant to
this Section for any amounts incurred or accruing prior to the date
180 days before the giving of such notice, except to the extent such
law, rule, regulation, request, directive or guideline shall have been
given retroactive effective affecting a period beginning more than 180
days prior to such notice.
-19-
4. INTEREST RATES.
(a) OPTIONS.
(i) PRIME RATE LOANS. On Prime Rate Loans the Borrowers
agree to pay interest on the Notes calculated on the basis of the
actual days elapsed in a year consisting of 360 days with respect
to the unpaid principal amount of each Prime Rate Loan from the
date the proceeds thereof are advanced to Borrowers until
maturity (whether by acceleration or otherwise), at a varying
rate per annum equal to the lesser of (i) the Maximum Rate
(defined herein), or (ii) the sum of the Prime Rate plus the
Prime Rate Margin. Subject to the provisions of this Agreement
as to prepayment, the principal of the Notes representing Prime
Rate Loans shall be payable as specified in Section 3(e) hereof
and the interest in respect of each Prime Rate Loan shall be
payable on each Interest Payment Date. Past due principal and,
to the extent permitted by law, past due interest in respect to
each Prime Rate Loan, shall bear interest, payable on demand, at
a rate per annum equal to the Default Rate.
(ii) LIBOR LOANS. On LIBOR Loans the Borrowers agree to pay
interest calculated on the basis of a year consisting of 360 days
with respect to the unpaid principal amount of each LIBOR Loan
from the date the proceeds thereof are advanced to Borrowers
until maturity (whether by acceleration or otherwise), at a
varying rate per annum equal to the lesser of (i) the Maximum
Rate, or (ii) the LIBOR Rate plus the LIBOR Margin. Subject to
the provisions of this Agreement with respect to prepayment, the
principal of the Notes shall be payable as specified in Section
3(e) hereof and the interest with respect to each LIBOR Loan
shall be payable on each Interest Payment Date. Past due
principal and, to the extent permitted by law, past due interest
shall bear interest, payable on demand, at a rate per annum equal
to the Default Rate. Upon three (3) London Business Days'
written notice prior to the making by the Banks of any LIBOR Loan
(in the case of the initial Interest Period therefor) or the
expiration date of each succeeding Interest Period (in the case
of subsequent Interest Periods therefor), Borrowers shall have
the option, subject to compliance by Borrowers with all of the
provisions of this Agreement, as long as no Event of Default
exists, to specify whether the Interest Period commencing on any
such date shall be a one (1), two (2), three (3) or six (6) month
period. If Agent shall not have received timely notice of a
designation of such Interest Period as herein provided, Borrowers
shall be deemed to have elected to convert all maturing LIBOR
Loans to Prime Rate Loans.
-20-
(b) INTEREST RATE DETERMINATION. The Agent shall determine each
interest rate applicable to the Loans hereunder in accordance with the
provisions of this Agreement. The Agent shall give prompt notice to
the Borrowers and the Banks of each rate of interest so determined and
its determination thereof shall be conclusive absent error.
(c) CONVERSION OPTION. Borrowers may elect from time to time
(i) to convert all or any part of its LIBOR Loans to Prime Rate Loans
by giving Agent irrevocable notice of such election in writing prior
to 10:00 a.m. (Oklahoma City, Oklahoma time) on the conversion date
and such conversion shall be made on the requested conversion date,
provided that any such conversion of a LIBOR Loan shall only be made
on the last day of the LIBOR Interest Period with respect thereof,
(ii) to convert all or any part of its Prime Rate Loans to LIBOR Loans
by giving the Agent irrevocable written notice of such election three
(3) London Business Days prior to the proposed conversion and such
conversion shall be made on the requested conversion date or, if such
requested conversion date is not a London Business Day or a Business
Day, as the case may be, on the next succeeding London Business Day or
Business Day, as the case may be. Any such conversion shall not be
deemed to be a prepayment of any of the loans for purposes of this
Agreement or the Notes.
(d) RECOUPMENT. If at any time the applicable rate of interest
selected pursuant to Sections 4(a)(i) or 4(a)(ii) above shall exceed
the Maximum Rate, thereby causing the interest on the Notes to be
limited to the Maximum Rate, then any subsequent reduction in the
interest rate so selected or subsequently selected shall not reduce
the rate of interest on the Notes below the Maximum Rate until the
total amount of interest accrued on the Note equals the amount of
interest which would have accrued on the Notes if the rate or rates
selected pursuant to Sections 4(a)(i) or (ii), as the case may be, had
at all times been in effect.
5. CHANGE OF CIRCUMSTANCES.
(a) UNAVAILABILITY OF FUNDS OR INADEQUACY OF PRICING. In the
event that, in connection with any proposed LIBOR Loan, the Agent
determines, which determination shall, absent manifest error, be
final, conclusive and binding upon all parties, due to changes in
circumstances since the date hereof, adequate and fair means do not
exist for determining the LIBOR Rate or such rate will not accurately
reflect the costs to the Banks of funding LIBOR Loans for such LIBOR
Interest Period, the Agent shall give notice of such determination to
the Borrowers and the Banks, whereupon, until the Agent notifies the
Borrowers and the Banks that the circumstances giving rise to such
suspension no longer exist, the obligations of the Banks to make,
continue or convert Loans into LIBOR Loans shall be suspended, and all
loans to Borrowers shall be Prime Rate Loans during the period of
-21-
suspension.
(b) CHANGE IN LAWS. If at any time any new law or any change in
existing laws or in the interpretation of any new or existing laws
shall make it unlawful for any Bank to make or continue to maintain or
fund LIBOR Loans hereunder, then such Bank shall promptly notify
Borrowers in writing and such Bank's obligation to make, continue or
convert Loans into LIBOR Loans under this Agreement shall be suspended
until it is no longer unlawful for such Bank to make or maintain LIBOR
Loans. Upon receipt of such notice, Borrowers shall either repay the
outstanding LIBOR Loans owed to the Banks, without penalty, on the
last day of the current Interest Periods (or, if any Bank may not
lawfully continue to maintain and fund such LIBOR Loans, immediately),
or Borrowers may convert such LIBOR Loans at such appropriate time to
Prime Rate Loans.
(c) INCREASED COST OR REDUCED RETURN.
(i) If, after the date hereof, the adoption of any
applicable law, rule, or regulation, or any change in any
applicable law, rule, or regulation, or any change in the
interpretation or administration thereof by any governmental
authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by any
Bank with any request or directive (whether or not having the
force of law) of any such governmental authority, central bank,
or comparable agency:
(A) shall subject such Bank to any tax, duty, or other
charge with respect to any LIBOR Loans, its Notes, or its
obligation to make LIBOR Loans, or change the basis of
taxation of any amounts payable to such Bank under this
Agreement or its Notes in respect of any LIBOR Loans (other
than franchise taxes and taxes imposed on the overall net
income of such Bank);
(B) shall impose, modify, or deem applicable any
reserve, special deposit, assessment, or similar requirement
(other than reserve requirements, if any, taken into account
in the determination of the LIBOR Rate) relating to any
extensions of credit or other assets of, or any deposits
with or other liabilities or commitments of, such Bank,
including the Revolving Commitment of such Bank hereunder;
or
(C) shall impose on such Bank or on the London
interbank market any other condition affecting this
Agreement or its Notes or any of such extensions of credit
or liabilities or commitments;
-22-
and the result of any of the foregoing is to increase the cost to
such Bank of making, converting into, continuing, or maintaining
any LIBOR Loans or to reduce any sum received or receivable by
such Bank under this Agreement or its Notes with respect to any
LIBOR Loans, then Borrowers shall pay to such Bank on demand
such amount or amounts as will compensate such Bank for such
increased cost or reduction. If any Bank requests compensation
by Borrowers under this Section 5(c), Borrowers may, by notice to
such Bank (with a copy to Agent), suspend the obligation of such
Bank to make or continue LIBOR Loans, or to convert all or part
of the Prime Rate Loan owing to such Bank to LIBOR Loans, until
the event or condition giving rise to such request ceases to be
in effect (in which case the provisions of Section 5(c) shall be
applicable); PROVIDED that such suspension shall not affect the
right of such Bank to receive the compensation so requested.
(ii) If, after the date hereof, any Bank shall have
determined that the adoption of any applicable law, rule, or
regulation regarding capital adequacy or any change therein or in
the interpretation or administration thereof by any governmental
authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the
force of law) of any such governmental authority, central bank,
or comparable agency, has or would have the effect of reducing
the rate of return on the capital of such Bank or any corporation
controlling such Bank as a consequence of such Bank's obligations
hereunder to a level below that which such Bank or such
corporation could have achieved but for such adoption, change,
request, or directive (taking into consideration its policies
with respect to capital adequacy), then from time to time upon
demand Borrowers shall pay to such Bank such additional amount or
amounts as will compensate such Bank for such reduction.
(iii) Each Bank shall promptly notify Borrowers and
Agent of any event of which it has knowledge, occurring after the
date hereof, which will entitle such Bank to compensation
pursuant to this Section 5(c) will designate a separate lending
office, if applicable, if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in
the judgment of such Bank, be otherwise disadvantageous to it.
Any Bank claiming compensation under this Section 5(c) shall
furnish to Borrowers and Agent a statement setting forth the
additional amount or amounts to be paid to it hereunder which
shall be conclusive in the absence of manifest error. In
determining such amount, such Bank may use any reasonable
averaging and attribution methods.
-23-
(iv) Any Bank giving notice to the Borrowers through the
Agent, pursuant to Section 5(c) shall give to the Borrowers a
statement signed by an officer of such Bank setting forth in
reasonable detail the basis for, and the calculation of such
additional cost, reduced payments or capital requirements, as the
case may be, and the additional amounts required to compensate
such Bank therefor.
(v) Within five (5) Business Days after receipt by the
Borrowers of any notice referred to in Section 5(c), the
Borrowers shall pay to the Agent for the account of the Bank
issuing such notice such additional amounts as are required to
compensate such Bank for the increased cost, reduce payments or
increase capital requirements identified therein, as the case may
be; provided, that the Borrowers shall not be obligated to
compensate such Bank for any increased costs, reduced payments or
increased capital requirements to the extent that such Bank
incurs the same prior to a date six (6) months before such Bank
gives the required notice.
(d) DISCRETION OF BANK AS TO MANNER OF FUNDING. Notwithstanding
any provisions of this Agreement to the contrary, each Bank shall be
entitled to fund and maintain its funding of all or any part of its
Loans in any manner it sees fit, it being understood, however, that
for the purposes of this Agreement all determinations hereunder shall
be made as if each Bank had actually funded and maintained each LIBOR
Loan through the purchase of deposits having a maturity corresponding
to the last day of the LIBOR Interest Period applicable to such LIBOR
Loan and bearing an interest rate to the applicable interest rate for
such LIBOR Period.
(e) BREAKAGE FEES. Without duplication under any other
provision hereof, if any Bank incurs any loss, cost or expense
(including, without limitation, any loss of profit and loss, cost,
expense or premium reasonably incurred by reason of the liquidation or
re-employment of deposits or other funds acquired by such Bank to fund
or maintain any LIBOR Loan or the relending or reinvesting of such
deposits or amounts paid or prepaid to the Banks) as a result of any
of the following events other than any such occurrence as a result in
the change of circumstances described in Sections 5(a) and (b):
(i) any payment, prepayment or conversion of a LIBOR Loan
on a date other than the last day of its LIBOR Interest Period
(whether by acceleration, prepayment or otherwise);
(ii) any failure to make a principal payment of a LIBOR Loan
on the due date thereof; or
-24-
(iii) any failure by the Borrowers to borrow, continue,
prepay or convert to a LIBOR Loan on the dates specified in a
notice given pursuant to Section 2(b) or 4(c) hereof;
then the Borrowers shall pay to such Bank such amount as will
reimburse such Bank for such loss, cost or expense. If any Bank makes
such a claim for compensation, it shall furnish to Borrowers and Agent
a statement setting forth the amount of such loss, cost or expense in
reasonable detail (including an explanation of the basis for and the
computation of such loss, cost or expense) and the amounts shown on
such statement shall be conclusive and binding absent manifest error.
6. COLLATERAL SECURITY.
(a) PLEDGE OF COLLATERAL. To secure the performance by
Borrowers of their obligations hereunder, and under the Notes and
Security Instruments, whether now or hereafter incurred, matured or
unmatured, direct or contingent, joint or several, or joint and
several, including extensions, modifications, renewals and increases
thereof, and substitutions therefore, Borrowers have heretofore
granted and assigned to Bank One-Oklahoma a first and prior lien on
certain of their Oil and Gas Properties, certain related equipment,
oil and gas inventory and the proceeds of the foregoing.
Contemporaneously with the execution of this Agreement and the Notes,
the Borrowers shall grant and assign to Agent for the ratable benefit
of the Banks a first and prior Lien on certain of its Oil and Gas
Properties, certain related equipment, oil and gas inventory, certain
bank accounts, the System, the Plant and proceeds of the foregoing.
The Liens held by Bank One-Oklahoma on the Oil and Gas Properties
shall be assigned, as of the Effective Date, to the Agent for the
ratable benefit of the Banks. The Oil and Gas Properties heretofore
and herewith mortgaged to the Agent shall represent not less than 90%
of the Engineered Value (as hereinafter defined) of Borrowers' Oil and
Gas Properties as of the Effective Date. All Oil and Gas Properties
and other collateral in which Borrowers have heretofore granted to
Bank One-Oklahoma, or herewith grant or hereafter grant to Agent for
the ratable benefit of the Banks a first and prior Lien (to the
satisfaction of the Agent) in accordance with this Section 6, as such
properties and interests are from time to time constituted, are
hereinafter collectively called the "Collateral".
(b) DOCUMENTATION AND TITLE REVIEW. The granting and assigning
of such security interests and Liens by Borrowers shall be pursuant to
Security Instruments in form and substance reasonably satisfactory to
the Agent. Concurrently with the delivery of each of the Security
Instruments or within a reasonable time thereafter, Borrowers shall
furnish to the Agent mortgage and title opinions and other title
information satisfactory to Agent with respect to the title and Lien
status of Borrowers' interests in not less than 80% of the Engineered
Value of the Oil and Gas Properties covered by the Security
Instruments as Agent shall
-25-
have designated. "Engineered Value" for this purpose shall mean future
net revenues discounted at the discount rate being used by the Agent as
of the date of any such determination utilizing the pricing parameters
used in the engineering report furnished to the Agent for the ratable
benefit of the Banks, pursuant to Sections 7 and 12 hereof. Borrowers
will cause to be executed and delivered to the Agent, in the future,
additional Security Instruments if the Agent reasonably deems such are
necessary to insure perfection or maintenance of Banks' security
interests and Liens in the Collateral or any part thereof.
(c) LETTERS IN LIEU OF TRANSFER ORDERS. The Borrowers shall
provide the Agent for the benefit of the Banks, undated letters in
lieu of transfer orders, in form and substance satisfactory to Agent,
from the Borrowers to each purchaser of hydrocarbons and disburser
proceeds of hydrocarbons from and attributable to the Oil and Gas
Properties, together with additional letters with addresses left blank
authorizing and directing the addressees to make future payments
attributable to hydrocarbons from the Oil and Gas Properties directly
to the Agent for the benefit of the Banks. The Banks agree that none
of the letters in lieu of transfer orders provided by the Borrowers
pursuant to this Section 6(c) will be sent to the address prior to the
occurrence of an Event of Default, at which time the Agent may, at its
option and in addition to the exercise of any of its other rights and
remedies, send any and all of such letters to such addressees;
provided, however, that upon the occurrence of an Event of Default
other than those specified in Sections 14(f) and (g), the Agent shall
not send any or all of such letters until the applicable period to
cure, if any, such Default has lapsed without such Default being
cured. Borrowers hereby designate the Agent as its agent and
attorney-in-fact, to act in its name, place and stead for the purpose
of completing and delivering any and all letters in lieu of transfer
orders delivered by the Borrowers to the Agent for the benefit of the
Banks pursuant to Sections 6(c) and 11(a)(x) hereof, including,
without limitation, completing any blanks contained in such letters
and attaching exhibits thereto describing the relevant Collateral.
Borrowers hereby ratify and confirm all that the Agent shall lawfully
do or cause to be done by virtue of this power of attorney and the
rights granted with respect to such power of attorney. This power of
attorney is coupled with the interests of the Agent in the Collateral,
shall commence and be in full force and effect as of the Effective
Date and shall remain in full force and effect and shall be
irrevocable until the obligations, if any, of the Agent hereunder have
terminated and the full satisfaction of all obligations due hereunder
or under the Notes. The powers conferred on Agent by this appointment
may only be exercised by the Agent by execution by any Person who, at
the time of exercise, is an officer of the Agent, and are solely to
protect the interests of the Agent and the Banks under the Loan
Documents and shall not impose any duty upon the Agent to exercise any
such powers. The Agent shall be accountable only for amounts that it
actually receives or has expressly directed that others receive as a
result of the exercise of such powers and shall not be responsible to
the Borrowers, or any other Person for
-26-
any act or failure to act with respect to such powers, except for gross
negligence or willful misconduct.
7. BORROWING BASE.
(a) INITIAL BORROWING BASE. At the Effective Date, the Borrowing
Base shall be $175,000,000.00.
(b) SUBSEQUENT DETERMINATIONS OF BORROWING BASE. Subsequent
determinations of the Borrowing Base shall be made by the Banks at
least semi-annually on May 1 and November 1 of each year beginning
November 1, 1998 or as Unscheduled Redeterminations. In connection
with, and as of, each determination of the Borrowing Base, the Banks
shall also redetermine the Monthly Commitment Reduction. The
Borrowers shall furnish to the Banks as soon as possible but in any
event no later than April 1 of each year, beginning April 1, 1999,
with an engineering report in form and substance satisfactory to the
Agent prepared by an independent petroleum engineering acceptable to
Agent covering the Oil and Gas Properties utilizing economic and
pricing parameters used by Agent as established from time to time,
together with such other information concerning the value of the Oil
and Gas Properties as the Agent shall deem necessary to determine the
value of the Oil and Gas Properties. By October 1 of each year, or
within thirty (30) days after either (i) receipt of notice from Agent
that the Banks require an Unscheduled Redetermination, or (ii) the
Borrowers give notice to Agent of their desire to have an Unscheduled
Redetermination performed, the Borrowers shall furnish to the Banks an
engineering report in form and substance satisfactory to Agent
prepared by Borrowers' in-house engineering staff valuing the Oil and
Gas Properties utilizing economic and pricing parameters used by the
Agent as established from time to time, together with such other
information, reports and data concerning the value of the Oil and Gas
Properties as Agent shall deem reasonably necessary to determine the
value of such Oil and Gas Properties. Agent shall by notice to the
Borrowers no later than May 1 and November 1 of each year, or within a
reasonable time thereafter (herein called the "Determination Date"),
notify the Borrowers of the designation by the Banks of the new
Borrowing Base and Monthly Commitment Reduction for the period
beginning on such Determination Date and continuing until, but not
including, the next Determination Date. If an Unscheduled
Redetermination is made by the Banks, the Agent shall notify the
Borrowers within a reasonable time after receipt of all requested
information of the new Borrowing Base and Monthly Commitment
Reduction, and such new Borrowing Base and Monthly Commitment
Reduction shall continue until the next Determination Date. If the
Borrowers do not furnish all such information, reports and data by any
date specified in this Section 7(b), the Banks may nonetheless
designate the Borrowing Base and Monthly Commitment Reduction at any
amounts which the Banks in their discretion determine and may
redesignate the Borrowing Base and Monthly
-27-
Commitment Reduction from time to time thereafter until the Banks
receive all such information, reports and data, whereupon the Banks
shall designate a new Borrowing Base and Monthly Commitment Reduction as
described above. Each Bank shall determine the amount of the Borrowing
Base and Monthly Commitment Reduction based upon the loan collateral
value which such Bank in its discretion (using such methodology,
assumptions and discounts rates as such Bank customarily uses in
assigning collateral value to oil and gas properties, oil and gas
gathering systems, gas processing and plant operations) assigns to such
Oil and Gas Properties and other Collateral of the Borrowers at the time
in question and based upon such other credit factors consistently
applied (including, without limitation, the assets, liabilities, cash
flow, business, properties, prospects, management and ownership of the
Borrowers and their affiliates) as such Bank customarily considers in
evaluating similar oil and gas credits, but such Bank in its discretion
shall not be required to give any additional positive value to any Oil
and Gas Property over the current economic and pricing parameters used
by such Bank for such Determination Date which additional value is
derived directly from a hedging, forward sale or swap agreement covering
such Oil and Gas Property as of the date of such determination. All
determinations or Unscheduled Redeterminations of the Borrowing Base and
the Monthly Commitment Reduction require the approval of Majority Banks;
provided, however, that notwithstanding anything to the contrary herein,
the amount of the Borrowing Base may not be increased, nor may the
Monthly Commitment Reduction be reduced, without the approval of all
Banks. If the Banks cannot otherwise agree on the Borrowing Base or the
Monthly Commitment Reduction, each Bank shall submit in writing to the
Agent its proposed Borrowing Base and Monthly Commitment Reduction and
the Borrowing Base and Monthly Commitment Reduction shall be set on the
basis of the weighted average of the Borrowing Bases and the weighted
average of the Monthly Commitment Reductions proposed by the Banks. If
at any time any of the Oil and Gas Properties are sold, the Borrowing
Base then in effect shall automatically be reduced by a sum equal to the
amount of prepayment required to be made pursuant to Section 12(r)
hereof. The Borrowing Base shall be additionally reduced from time to
time pursuant to the provisions of Sections 2(e) and 2(f) hereof. It is
expressly understood that the Banks have no obligation to designate the
Borrowing Base or the Monthly Commitment Reduction at any particular
amounts, except in the exercise of their discretion, whether in relation
to the Revolving Commitment or otherwise. Provided, however, that the
Banks shall not have the obligation to designate a Borrowing Base in an
amount in excess of the Revolving Commitment or its legal or internal
lending limits. Upon the issuance of any public note issue permitted
pursuant to Section 13(f)(iv) hereof, the Banks shall have the right to
perform an Unscheduled Redetermination of the Borrowing Base.
-28-
8. FEES.
(a) UNUSED COMMITMENT FEE. The Borrowers shall pay to Agent for
the ratable benefit of the Banks an unused commitment fee (the "Unused
Commitment Fee") equivalent to the Unused Fee Rate times the
unadvanced amount of the Revolving Commitment (calculated on a daily
basis). The Unused Commitment Fee shall be payable in arrears on the
last Business Day of each calendar quarter beginning June 30, 1998
with the final fee payment due on the Maturity Date for any period
then ending for which the Unused Commitment Fee shall not have been
theretofore paid. In the event the Revolving Commitment terminates on
any date prior to the end of any such monthly period, the Borrowers
shall pay to the Agent for the ratable benefit of the Banks, on the
date of such termination, the total Unused Commitment Fee due for the
period in which such termination occurs.
(b) THE LETTER OF CREDIT FEE. Borrowers shall pay to the Agent
the Letter of Credit fees required above in Section 2(d).
(c) AGENCY FEES. The Borrowers shall pay to the Agent certain
fees for acting as Agent hereunder in amounts to be negotiated between
the Borrowers and the Agent.
(d) OTHER FEES. The Borrowers shall pay on the Effective Date
the additional fees provided for in the Engagement Letter dated
April 20, 1998 by and among Resources, Bank One-Oklahoma and Bank One
Capital Markets, Inc.
9. PREPAYMENTS.
(a) VOLUNTARY PREPAYMENTS. Subject to the provisions of
Section 5(e) hereof, the Borrowers may at any time and from time to
time, without penalty or premium, prepay the Notes, in whole or in
part. Each such prepayment shall be made on at least three (3) London
Business Days' notice to Agent in the case of LIBOR Loan Tranches and
without notice in the case of Prime Rate Loan Tranches and shall be in
a minimum amount of $500,000 or any larger multiple thereof or the
unpaid balance on the Notes, whichever is less, plus accrued interest
thereon to the date of prepayment.
(b) MANDATORY PREPAYMENT FOR BORROWING BASE DEFICIENCY. In the
event the Total Outstandings ever exceed the Borrowing Base as
determined by Banks pursuant to Section 7(b) hereof, the Borrowers
shall, within thirty (30) days after notification from the Agent,
either (A) by instruments reasonably satisfactory in form and
substance to the Bank, provide the Agent with collateral with value
and quality in amounts satisfactory to all of the Banks in their
discretion in order to increase the Borrowing Base by an amount at
least equal to such excess, or (B)
-29-
prepay, without premium or penalty, the principal amount of the
Revolving Notes in an amount at least equal to such excess plus accrued
interest thereon to the date of prepayment. If the Total Outstandings
ever exceed the Revolving Commitment as a result of a Monthly Commitment
Reduction or any other required reduction in the Revolving Commitment,
then in such event, Borrowers shall immediately prepay the principal
amount of the Revolving Notes in an amount at least equal to such excess
plus accrued interest to the date of prepayment.
10. REPRESENTATIONS AND WARRANTIES. In order to induce the Banks to
enter into this Agreement, the Borrowers hereby, jointly and severally,
represent and warrant to the Banks (which representations and warranties will
survive the delivery of the Notes) that:
(a) CREATION AND EXISTENCE. Borrowers are each a corporation
duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it was formed and is duly qualified in
all jurisdictions wherein failure to qualify may result in a Material
Adverse Effect. Borrowers each have all power and authority to own
its properties and assets and to transact the business in which it is
engaged.
(b) POWER AND AUTHORITY. Borrowers are each duly authorized and
empowered to create and issue the Notes; and Borrowers are duly
authorized and empowered to execute, deliver and perform their
respective Loan Documents, including this Agreement; and all
corporation action on each Borrower's part requisite for the due
creation and issuance of the Notes and for the due execution, delivery
and performance of the Loan Documents, including this Agreement, has
been duly and effectively taken. Each Support Party is duly
authorized and empowered to execute, deliver and perform the
respective Loan Documents to which they are a party, including the
Subordination Agreement; and all action on each Support Party's part
requisite for the due execution, delivery and performance of such Loan
Documents has been duly and effectively taken.
(c) BINDING OBLIGATIONS. This Agreement does, and the Notes and
other Loan Documents upon their creation, issuance, execution and
delivery will, constitute valid and binding obligations of Borrowers,
enforceable in accordance with their respective terms (except that
enforcement may be subject to applicable principles of equity and the
effect of any applicable bankruptcy, insolvency, or similar debtor
relief laws now or hereafter in effect and relating to or affecting
the enforcement of creditors' rights generally). The Subordination
Agreement upon its creation, issuance, execution and delivery will
constitute valid and binding obligations of each of the Support
Parties, enforceable in accordance with their respective terms (except
that enforcement may be subject to applicable principles of equity and
the effect of any applicable bankruptcy, insolvency, or similar debtor
relief laws now or hereafter in effect and relating to or affecting
the enforcement of
-30-
creditors' rights generally).
(d) NO LEGAL BAR OR RESULTANT LIEN. The Notes and the Loan
Documents, including this Agreement, do not and will not, to the best
of each Borrower's and each Support Party's knowledge violate any
provisions of any contract, agreement, law, regulation, order,
injunction, judgment, decree or writ to which any Borrower or any
Support Party is subject which could reasonable be expected to have a
Material Adverse Effect, or result in the creation or imposition of
any lien or other encumbrance upon any assets or properties of any
Borrower or any Support Party, other than those contemplated by this
Agreement.
(e) NO CONSENT. The execution, delivery and performance by the
Borrowers of the Notes and by the Borrowers and the Support Parties of
their respective Loan Documents, including this Agreement, does not
require the consent or approval of any other person or entity,
including without limitation any regulatory authority or governmental
body of the United States or any state thereof or any political
subdivision of the United States or any state thereof except for
(i) consents required for federal, state and, in some instances,
private leases, right of ways and other conveyances or encumbrances of
oil and gas leases, if any, all of which consents have been obtained
by the Borrowers.
(f) FINANCIAL CONDITION. The unaudited Financial Statements of
Borrowers dated December 31, 1997, which have been delivered to Banks
are complete and correct in all material respects, and fully and
accurately reflect in all material respects the financial condition
and results of the operations of the Borrowers on a consolidated basis
as of the date or dates and for the period or periods stated. No
change has since occurred in the condition, financial or otherwise, of
the Borrowers which is reasonably expected to have a Material Adverse
Effect, except as disclosed to the Banks in Schedule "2" attached
hereto.
(g) LIABILITIES. Neither Borrower has any material
(individually or in the aggregate) liability, direct or contingent,
except as disclosed to the Banks in the Financial Statements or on
Schedule "3" attached hereto. No unusual or unduly burdensome
restrictions, restraint, or hazard exists by contract, law or
governmental regulation or otherwise relative to the business, assets
or properties of Borrowers which is reasonably expected to have a
Material Adverse Effect.
(h) LITIGATION. Except as described in the Financial
Statements, or as otherwise disclosed to the Banks in Schedule "4"
attached hereto, there is no litigation, legal or administrative
proceeding, investigation or other action of any nature pending or, to
the knowledge of the officers of Borrowers threatened against or
affecting Borrowers which involves the possibility of any judgment or
liability not fully covered by insurance, and which is reasonably
expected to have a Material
-31-
Adverse Effect.
(i) TAXES; GOVERNMENTAL CHARGES. Borrowers have each filed all
tax returns and reports required to be filed and has paid all taxes,
assessments, fees and other governmental charges levied upon them or
their assets, properties or income which are due and payable,
including interest and penalties, the failure of which to pay could
reasonably be expected to have a Material Adverse Effect, except such
as are being contested in good faith by appropriate proceedings and
for which adequate reserves for the payment thereof as required by
GAAP has been provided and levy and execution thereon have been stayed
and continue to be stayed.
(j) TITLES, ETC. Borrowers each have defensible title to all of
its respective assets, including without limitation, the Oil and Gas
Properties, the Plants and the Systems, free and clear of all liens or
other encumbrances except Permitted Liens, except such failure or
failures of title which in the aggregate could not reasonably be
expected to reduce the Borrowing Base by more than $500,000.
(k) DEFAULTS. Neither Borrower is in default and no event or
circumstance has occurred which, but for the passage of time or the
giving of notice, or both, would constitute a default under any loan
or credit agreement, indenture, mortgage, deed of trust, security
agreement or other agreement or instrument to which either Borrower is
a party in any respect that would be reasonably expected to have a
Material Adverse Effect. No Event of Default hereunder has occurred
and is continuing.
(l) CASUALTIES; TAKING OF PROPERTIES. Since the dates of the
latest Financial Statements of the Borrowers delivered to Banks,
neither the business nor the assets or properties of Borrowers have
been affected (to the extent it is reasonably likely to cause a
Material Adverse Effect), as a result of any fire, explosion,
earthquake, flood, drought, windstorm, accident, strike or other labor
disturbance, embargo, requisition or taking of property or
cancellation of contracts, permits or concessions by any domestic or
foreign government or any agency thereof, riot, activities of armed
forces or acts of God or of any public enemy.
(m) USE OF PROCEEDS; MARGIN STOCK. The proceeds of the
Revolving Commitment may be used by the Borrowers for the purposes of
(i) refinancing existing debt owed to Bank One-Oklahoma,
(ii) acquisition, exploration and development of oil and gas
properties or entities owning oil and gas properties, (iii) Letters of
Credit, and (iv) general corporate purposes. Neither Borrower is
engaged principally or as one of its important activities in the
business of extending credit for the purpose of purchasing or carrying
any "margin stock" as defined in Regulation U of the Board of
Governors of the Federal Reserve System (12 C.F.R. Part 221), or for
the purpose of reducing or retiring any indebtedness which was
-32-
originally incurred to purchase or carry a margin stock or for any
other purpose which might constitute this transaction a "purpose
credit" within the meaning of said Regulation G or U.
Neither Borrower nor any person or entity acting on behalf of
Borrowers has taken or will take any action which might cause the
loans hereunder or any of the Loan Documents, including this
Agreement, to violate Regulation G or U or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the
Securities Exchange Act of 1934 or any rule or regulation thereunder,
in each case as now in effect or as the same may hereafter be in
effect.
(n) LOCATION OF BUSINESS AND OFFICES. The principal place of
business and chief executive offices of the Borrowers are located at
the address stated in Section 17 hereof.
(o) COMPLIANCE WITH THE LAW. To the best of either Borrower's
knowledge, neither Borrower:
(i) is in violation of any law, judgment, decree, order,
ordinance, or governmental rule or regulation to which either
Borrower, or any of its assets or properties are subject; or
(ii) has failed to obtain any license, permit, franchise or
other governmental authorization necessary to the ownership of
any of its assets or properties or the conduct of its business;
which violation or failure is reasonably expected to have a Material
Adverse Effect.
(p) NO MATERIAL MISSTATEMENTS. No information, exhibit or
report furnished by Borrowers to the Banks in connection with the
negotiation of this Agreement contained any material misstatement of
fact or omitted to state a material fact or any fact necessary to make
the statement contained therein not materially misleading.
(q) ERISA. Borrowers are each in compliance in all material
respects with the applicable provisions of ERISA, and no "reportable
event", as such term is defined in Section 403 of ERISA, has occurred
with respect to any Plan of Borrowers.
(r) PUBLIC UTILITY HOLDING COMPANY ACT. Neither Borrower is a
"holding company", or "subsidiary company" of a "holding company", or
an "affiliate" of a "holding company" or of a"subsidiary company" of a
"holding company", or a "public utility" within the meaning of the
Public Utility Holding
-33-
Company Act of 1935, as amended.
(s) SUBSIDIARIES. All of the Borrowers' Subsidiaries are listed
on Schedule "5" hereto.
(t) ENVIRONMENTAL MATTERS. Except as disclosed on Schedule "6",
neither Borrower (i) has received notice or otherwise learned of any
Environmental Liability which would be reasonably likely to
individually or in the aggregate have a Material Adverse Effect
arising in connection with (A) any non-compliance with or violation of
the requirements of any Environmental Law or (B) the release or
threatened release of any toxic or hazardous waste into the
environment, (ii) has received notice of any threatened or actual
liability in connection with the release or notice of any threatened
release of any toxic or hazardous waste into the environment which
would be reasonably likely to individually or in the aggregate have a
Material Adverse Effect or (iii) has received notice or otherwise
learned of any federal or state investigation evaluating whether any
remedial action is needed to respond to a release or threatened
release of any toxic or hazardous waste into the environment for which
either Borrower is or may be liable which may reasonably be expected
to result in a Material Adverse Effect.
(u) LIENS. Except (i) as disclosed on Schedule "1" hereto and
(ii) for Permitted Liens, the assets and properties of the Borrowers
are free and clear of all liens and encumbrances.
(v) GAS CONTRACTS. Except as described on Schedule "7" hereto,
the Borrowers (a) are not obligated in any material respect by virtue
of any prepayment made under any contract containing a "take-or-pay,",
"recoupment," or "prepayment" provision or under any similar agreement
to deliver hydrocarbons produced from or allocated to any of the Oil
and Gas Properties at some future date without receiving full payment
therefor at the time of delivery, and (b) has not produced gas, in any
material amount, subject to, and is not, nor are any of the Oil and
Gas Properties, subject to balancing rights of third parties or
subject to balancing duties under governmental requirements, except as
to such matters for which the Borrowers have established monetary
reserves adequate in an amount to satisfy such obligations and has
segregated such reserves from other accounts or the Borrowers'
balancing obligations in the aggregate would not reasonably be
expected to have a Material Adverse Effect.
(w) YEAR 2000 COMPLIANCE. The Borrowers have (i) initiated a
review and assessment of all areas within each of theirs and their
Subsidiaries' business and operations that could be adversely affected
by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Borrowers or any of their Subsidiaries may be
unable to recognize and perform properly date-sensitive functions
involving
-34-
certain dates prior to and any date after December 31, 1999), (ii)
developed a plan and timeline for addressing the Year 2000 Problem on a
timely basis, and (iii) to date, implemented that plan in accordance
with that timetable. The Borrowers reasonably believe that all computer
applications that are material to their or any of their Subsidiaries'
business 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 Material
Adverse Effect.
(x) DELHI OAKDALE LATERAL SYSTEM. A portion of the ▇▇▇▇▇
Gathering System is not owned by either Borrower, rather, it is leased
pursuant to the Delhi Lease. The primary term of the Delhi Lease has
expired, however, the Borrowers' right to use the Delhi Oakdale
Lateral System is renewed on a month-to-month basis. The Delhi
Oakdale Lateral System is not a critical portion of the ▇▇▇▇▇
Gathering System. The Delhi Oakdale Lateral System accounts for no
more than two percent (2%) of the volume of hydrocarbons flowing
through the ▇▇▇▇▇ Gathering System.
(y) ▇▇▇▇▇ GATHERING SYSTEM. At lease ninety percent (90%) of
the hydrocarbons flowing through the ▇▇▇▇▇ Gathering System originate
from ▇▇▇▇▇ directly connected to the ▇▇▇▇▇ Gathering System or flows
through the ▇▇▇▇▇ Gathering System prior to delivery to the Oklahoma
Natural Gas Company's or other purchaser's system.
11. CONDITIONS OF LENDING.
(a) The effectiveness of this Agreement, and the obligation to
make the initial Advance or issue any initial Letter of Credit under
the Revolving Commitment shall be subject to satisfaction of the
following conditions precedent:
(i) EXECUTION AND DELIVERY. The Borrowers shall each have
executed and delivered the Agreement, the Notes and other
required Loan Documents, and the other Security Instruments, all
in form and substance satisfactory to the Agent;
(ii) SUBORDINATION AGREEMENTS. The Agent shall have
received executed Subordination Agreements in the form of
Exhibit "F" hereto covering all amounts now owed by the Borrowers
to any of the Support Parties;
(iii) LEGAL OPINION. The Agent shall have received from
Borrowers' and Support Party's legal counsel a favorable legal
opinion in form and substance satisfactory to it (i) as to the
matters set forth in
-35-
Subsections 10(a), (b), (c), (d), (e) and (h) hereof and (ii) as to such
other matters as Agent or its counsel may reasonably request;
(iv) CORPORATE RESOLUTIONS. The Agent shall have received
appropriate certified corporate resolutions of Borrowers;
(v) GOOD STANDING. The Agent shall have received evidence
of existence and good standing for Borrowers;
(vi) INCUMBENCY. The Agent shall have received a signed
certificate of Borrowers, certifying the names of the officers of
Borrowers authorized to sign loan documents on behalf of
Borrowers, together with the true signatures of each such
officer. The Agent may conclusively rely on such certificate
until the Agent receives a further certificate of Borrowers
canceling or amending the prior certificate and submitting
signatures of the officers named in such further certificate;
(vii) CERTIFICATE OF INCORPORATION AND BYLAWS. The Agent
shall have received copies of the Certificate of Incorporation of
Borrowers and all amendments thereto, certified by the Secretary of
State of the State of its incorporation, and a copy of the bylaws of
Borrowers and all amendments thereto, certified by Borrowers as being
true, correct and complete;
(viii) PRIORITY OF LIENS. The Agent shall have received
satisfactory evidence of the first lien status of the Liens
granted by Borrowers to the Banks;
(ix) LETTERS IN LIEU. The Agent shall have received
undated letters in lieu of transfer orders, in form and substance
satisfactory to the Agent, from the Borrowers to each purchaser
of hydrocarbons and disburser of proceeds of hydrocarbons from
and attributable to the Oil and Gas Properties, together with
additional letters with the addresses left blank, authorizing and
directing the addressees to make future payments attributable to
the hydrocarbons from the Oil and Gas Properties directly to the
Agent for the benefit of the Banks, all as required by Section 6
hereof;
(x) CLOSING OF BASS TRANSACTION. The Agent shall have
received satisfactory evidence of the closing of the transaction
described in that certain Purchase and Sale Agreement between
Bass Enterprises Production Co., et al. and Resources dated as of
March 28, 1998;
(xi) PAYMENT OF FEES. The Agent shall have received payment
of all fees due from Borrowers as of the Effective Date.
-36-
(xii) REPRESENTATION AND WARRANTIES. The
representations and warranties of Borrowers under this Agreement
are true and correct in all material respects as of such date, as
if then made (except to the extent that such representations and
warranties related solely to an earlier date);
(xiii) NO EVENT OF DEFAULT. No Event of Default shall
have occurred and be continuing nor shall any event have occurred
or failed to occur which, with the passage of time or service of
notice, or both, would constitute an Event of Default;
(xiv) OTHER DOCUMENTS. Agent shall have received such
other instruments and documents incidental and appropriate to the
transaction provided for herein as Agent or its counsel may
reasonably request, and all such documents shall be in form and
substance reasonably satisfactory to the Agent; and
(xv) LEGAL MATTERS SATISFACTORY. All legal matters
incident to the consummation of the transactions contemplated hereby
shall be reasonably satisfactory to special counsel for Agent retained
at the expense of the Borrowers.
(b) The obligation of the Banks to make any Advance or issue any
Letter of Credit under the Revolving Commitment (including the initial
Advance) shall be subject to the following additional conditions
precedent that, at the date of making each such Advance and after
giving effect thereto:
(i) REPRESENTATION AND WARRANTIES. The representations
and warranties of Borrowers under this Agreement are true and correct
in all material respects as of such date, as if then made (except
to the extent that such representations and warranties related
solely to an earlier date);
(ii) NO EVENT OF DEFAULT. No Event of Default shall have
occurred and be continuing nor shall any event have occurred or
failed to occur which, with the passage of time or service of
notice, or both, would constitute an Event of Default;
(iii) OTHER DOCUMENTS. Agent shall have received such
other instruments and documents incidental and appropriate to the
transaction provided for herein as Agent or its counsel may
reasonably request, and all such documents shall be in form and
substance reasonably satisfactory to the Agent; and
-37-
(iv) LEGAL MATTERS SATISFACTORY. All legal matters
incident to the consummation of the transactions contemplated hereby
shall be reasonably satisfactory to special counsel for Agent retained
at the expense of Borrowers.
12. Affirmative Covenants. A deviation from the provisions of this
Section 12 shall not constitute a Default or Event of Default under this
Agreement if such deviation is consented to in writing by the required
percentage of the Banks prior to the date of deviation. The Borrowers will
at all times comply with the covenants contained in this Section 12 from the
date hereof and for so long as the Revolving Commitment is in existence or
any amount is owed to the Agent or the Banks under this Agreement or the
other Loan Documents.
(a) FINANCIAL STATEMENTS AND REPORTS. Borrowers shall promptly
furnish to the Agent from time to time upon request such information
regarding the business and affairs and financial condition of
Borrowers, as the Agent may reasonably request, and will furnish to
the Agent:
(i) ANNUAL AUDITED FINANCIAL STATEMENTS. As soon as
available, and in any event within one hundred and twenty (120)
days after the close of each fiscal year beginning with the
fiscal year ended December 31, 1998, the annual audited
consolidated Financial Statements of Borrowers, prepared in
accordance with GAAP accompanied by an unqualified opinion
rendered by an independent accounting firm reasonably acceptable
to the Agent;
(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available,
and in any event within forty-five (45) days after the end of
each calendar quarter of each year, the quarterly unaudited
consolidated and consolidating Financial Statements of Borrowers
prepared in accordance with GAAP;
(iii) REPORT ON PROPERTIES. As soon as available and in
any event on or before April 1 and October 1 of each calendar
year, and at such other times as any Bank, in accordance with
Section 7 hereof, may request, the engineering reports required
to be furnished to the Agent under such Section 7 on the Oil and
Gas Properties;
(iv) MONTHLY PRODUCTION REPORTS. Within forty-five (45)
days after the end of each month, a monthly report, in form and
substance satisfactory to the Agent, indicating the immediately
preceding month's sales volume, sales revenues, production taxes,
operating expense and net operating income from or attributable
to the Oil and Gas Properties, and any material gas balance
liabilities of either Borrower, with detailed calculations and
worksheets, and, in the case of take or pay or prepayment
agreements during such month, provide copies of the same, all in
form and substance
-38-
satisfactory to Agent;
(v) ADDITIONAL INFORMATION. Promptly upon request of the
Agent from time to time any additional financial information or
other information that the Agent may reasonably request.
All such reports, information, balance sheets and Financial Statements
referred to in Subsection 12(a) above shall be in such detail as the
Agent may reasonably request and shall be prepared in a manner
consistent with the Financial Statements.
(b) CERTIFICATES OF COMPLIANCE. Concurrently with the
furnishing of the annual audited Financial Statements pursuant to
Subsection 12(a)(i) hereof and the quarterly unaudited Financial
Statements pursuant to Subsection 12(a)(ii) hereof for the months
coinciding with the end of each calendar quarter, Borrowers will
furnish or cause to be furnished to the Agent a certificate in the
form of Exhibit "C" attached hereto, signed by the President or Chief
Financial Officer of each Borrower, (i) stating that each Borrower has
fulfilled in all material respects its obligations under the Notes and
the Loan Documents, including this Agreement, and that all
representations and warranties made herein and therein continue
(except to the extent they relate solely to an earlier date) to be
true and correct in all material respects (or specifying the nature of
any change), or if a Default has occurred, specifying the Default and
the nature and status thereof; (ii) to the extent requested from time
to time by the Agent, specifically affirming compliance of each
Borrower in all material respects with any of its representations
(except to the extent they relate solely to an earlier date) or
obligations under said instruments; (iii) setting forth the
computation, in reasonable detail as of the end of each period covered
by such certificate, of compliance with Sections 13(b), (c) and (d);
and (iv) containing or accompanied by such financial or other details,
information and material as the Agent may reasonably request to
evidence such compliance.
(c) ACCOUNTANTS' CERTIFICATE. Concurrently with the furnishing
of the annual audited Financial Statement pursuant to Section 12(a)(i)
hereof, Borrowers will furnish a statement from the firm of
independent public accountants which prepared such Financial Statement
to the effect that nothing has come to their attention to cause them
to believe that there existed on the date of such statements any Event
of Default and specifically calculating Borrowers' compliance with
Sections 13(b), (c) and (d) of this Agreement.
(d) TAXES AND OTHER LIENS. The Borrowers will pay and discharge
promptly all taxes, assessments and governmental charges or levies
imposed upon the Borrowers, or upon the income or any assets or
property of Borrowers, as well as all claims of any kind (including
claims for labor, materials, supplies and rent) which, if unpaid,
might become a Lien or other encumbrance upon any or all of the
-39-
assets or property of Borrowers and which could reasonably be expected to
result in a Material Adverse Effect; provided, however, that neither
Borrower shall be required to pay any such tax, assessment, charge,
levy or claim if the amount, applicability or validity thereof shall
currently be contested in good faith by appropriate proceedings
diligently conducted, levy and execution thereon have been stayed and
continue to be stayed and if Borrowers shall have set up adequate
reserves therefor, if required, under GAAP.
(e) COMPLIANCE WITH LAWS. Borrowers will observe and comply, in
all material respects, with all applicable laws, statutes, codes,
acts, ordinances, orders, judgments, decrees, injunctions, rules,
regulations, orders and restrictions relating to environmental
standards or controls or to energy regulations of all federal, state,
county, municipal and other governments, departments, commissions,
boards, agencies, courts, authorities, officials and officers,
domestic or foreign.
(f) FURTHER ASSURANCES. Upon Agent's request, the Borrowers
will cure promptly any defects in the creation and issuance of the
Notes and the execution and delivery of the Notes and the Loan
Documents, including this Agreement. The Borrowers at their sole
expense will promptly execute and deliver to Agent upon its reasonable
request all such other and further documents, agreements and
instruments in compliance with or accomplishment of the covenants and
agreements in this Agreement, or to correct any omissions in the Notes
or more fully to state the obligations set out herein.
(g) PERFORMANCE OF OBLIGATIONS. The Borrowers will pay the
Notes and other obligations incurred by it hereunder according to the
reading, tenor and effect thereof and hereof; and Borrowers will do
and perform every act and discharge all of the obligations provided to
be performed and discharged by the Borrowers under the Loan Documents,
including this Agreement, at the time or times and in the manner
specified.
(h) INSURANCE. The Borrowers now maintain and will continue to
maintain insurance with financially sound and reputable insurers with
respect to its assets against such liabilities, fires, casualties,
risks and contingencies and in such types and amounts as is customary
in the case of persons engaged in the same or similar businesses and
similarly situated. Upon request of the Agent, the Borrowers will
furnish or cause to be furnished to the Agent from time to time a
summary of the respective insurance coverage of Borrowers in form and
substance satisfactory to the Agent, and, if requested, will furnish
the Agent copies of the applicable policies. Upon demand by Agent any
insurance policies covering any such property shall be endorsed (i) to
provide that such policies may not be canceled, reduced or affected in
any manner for any reason without fifteen (15) days prior notice to
Agent, (ii) to provide for insurance against fire, casualty and other
hazards normally
-40-
insured against, in the amount of the full value (less a reasonable
deductible not to exceed amounts customary in the industry for similarly
situated business and properties) of the property insured, and (iii) to
provide for such other matters as the Agent may reasonably require.
Additionally, the Borrowers shall at all times maintain adequate insurance
with respect to all of its other assets and ▇▇▇▇▇ in accordance with
prudent business practices.
(i) ACCOUNTS AND RECORDS. Borrowers will keep books, records
and accounts in which full, true and correct entries will be made of
all dealings or transactions in relation to its business and
activities, prepared in a manner consistent with prior years, subject
to changes suggested by such Borrowers' auditors.
(j) RIGHT OF INSPECTION. Borrowers will permit any officer,
employee or agent of the Banks to examine Borrowers' books, records
and accounts, and take copies and extracts therefrom, all at such
reasonable times during normal business hours and as often as the
Banks may reasonably request. The Banks will use best efforts to keep
all Confidential Information (as herein defined) confidential and
will not disclose or reveal the Confidential Information or any part
thereof other than (i) as required by law, and (ii) to the Banks', and
the Banks' subsidiaries', Affiliates, officers, employees, legal
counsel and regulatory authorities or advisors to whom it is necessary
to reveal such information for the purpose of effectuating the
agreements and undertakings specified herein or as otherwise required
in connection with the enforcement of the Banks' and the Agent's
rights and remedies under the Notes, this Agreement and the other Loan
Documents. As used herein, "Confidential Information" means
information about the Borrowers furnished by the Borrowers to the
Banks, but does not include information (i) which was publicly known,
or otherwise known to the Banks, at the time of the disclosure,
(ii) which subsequently becomes publicly known through no act or
omission by the Banks, or (iii) which otherwise becomes known to the
Banks, other than through disclosure by the Borrowers.
(k) NOTICE OF CERTAIN EVENTS. The Borrowers shall promptly
notify the Agent if Borrowers learn of the occurrence of (i) any event
which constitutes a Default or Event of Default together with a
detailed statement by Borrowers of the steps being taken to cure such
Event of Default; (ii) any legal, judicial or regulatory proceedings
affecting Borrowers, or any of the assets or properties of Borrowers
which, if adversely determined, could reasonably be expected to have a
Material Adverse Effect; (iii) any dispute between Borrowers and any
governmental or regulatory body or any other Person or entity which,
if adversely determined, might reasonably be expected to cause a
Material Adverse Effect; (iv) any event or circumstance which requires
the prepayment, purchase or redemption of any outstanding public note
issue, whether issued prior or subsequent to the Effective Date, with
a detailed statement of steps being taken to cure such Default or
Event of
-41-
Default, or (v) any other matter which in Borrowers' reasonable opinion
could have a Material Adverse Effect.
(l) ERISA INFORMATION AND COMPLIANCE. The Borrowers will
promptly furnish to the Agent immediately upon becoming aware of the
occurrence of any "reportable event", as such term is defined in
Section 4043 of ERISA, or of any "prohibited transaction", as such
term is defined in Section 4975 of the Internal Revenue Code of 1954,
as amended, in connection with any Plan or any trust created
thereunder, a written notice signed by the chief financial officer of
Borrowers specifying the nature thereof, what action Borrowers are
taking or proposes to take with respect thereto, and, when known, any
action taken by the Internal Revenue Service with respect thereto.
(m) ENVIRONMENTAL REPORTS AND NOTICES. The Borrowers will
deliver to the Agent (i) promptly upon its becoming available, one
copy of each report sent by Borrowers to any court, governmental
agency or instrumentality pursuant to any Environmental Law, (ii)
notice, in writing, promptly upon Borrowers' receipt of notice or
otherwise learning of any claim, demand, action, event, condition,
report or investigation indicating any potential or actual liability
arising in connection with (x) the non-compliance with or violation of
the requirements of any Environmental Law which reasonably could be
expected to have a Material Adverse Effect; (y) the release or
threatened release of any toxic or hazardous waste into the
environment which reasonably could be expected to have a Material
Adverse Effect or which release Borrower would have a duty to report
to any court or government agency or instrumentality, or (iii) the
existence of any Environmental Lien on any properties or assets of
Borrowers, and Borrowers shall immediately deliver a copy of any such
notice to Agent.
(n) COMPLIANCE AND MAINTENANCE. The Borrowers will (i) observe
and comply in all material respects with all Environmental Laws; (ii)
except as provided in Subsections 12(o) and 12(p) below, maintain the
Oil and Gas Properties and other assets and properties in good and
workable condition at all times and make all repairs, replacements,
additions, betterments and improvements to the Oil and Gas Properties
and other assets and properties as are needed and proper so that the
business carried on in connection therewith may be conducted properly
and efficiently at all times in the opinion of the Borrowers exercised
in good faith; (iii) take or cause to be taken whatever actions are
necessary or desirable to prevent an event or condition of default by
Borrowers under the provisions of any gas purchase or sales contract
or any other contract, agreement or lease comprising a part of the Oil
and Gas Properties or other collateral security hereunder which
default could reasonably be expected to result in a Material Adverse
Effect; and (iv) furnish Agent upon request evidence satisfactory to
Agent that there are no Liens, claims or encumbrances on the Oil and
Gas Properties, except laborers', vendors', repairmen's,
-42-
mechanics', worker's, or materialmen's liens arising by operation of law
or incident to the construction or improvement of property if the
obligations secured thereby are not yet due or are being contested in
good faith by appropriate legal proceedings or Permitted Liens.
(o) OPERATION OF PROPERTIES. Except as provided in Subsection
12(p) and (q) below, the Borrowers will operate, or use reasonable
efforts to cause to be operated, all Oil and Gas Properties in a
careful and efficient manner in accordance with the practice of the
industry and in compliance in all material respects with all
applicable laws, rules, and regulations, and in compliance in all
material respects with all applicable proration and conservation laws
of the jurisdiction in which the properties are situated, and all
applicable laws, rules, and regulations, of every other agency and
authority from time to time constituted to regulate the development
and operation of the properties and the production and sale of
hydrocarbons and other minerals therefrom; provided, however, that the
Borrowers shall have the right to contest in good faith by appropriate
proceedings, the applicability or lawfulness of any such law, rule or
regulation and pending such contest may defer compliance therewith, as
long as such deferment shall not subject the properties or any part
thereof to foreclosure or loss.
(p) COMPLIANCE WITH LEASES AND OTHER INSTRUMENTS. The Borrowers
will pay or cause to be paid and discharge all rentals, delay rentals,
royalties, production payment, and indebtedness required to be paid by
Borrowers (or required to keep unimpaired in all material respects the
rights of Borrowers in the Oil and Gas Properties) accruing under, and
perform or cause to be performed in all material respects each and
every act, matter, or thing required of Borrowers by each and all of
the assignments, deeds, leases, subleases, contracts, and agreements
in any way relating to Borrowers or any of the Oil and Gas Properties
and do all other things necessary of Borrowers to keep unimpaired in
all material respects the rights of Borrowers thereunder and to
prevent the forfeiture thereof or default thereunder; provided,
however, that nothing in this Agreement shall be deemed to require
Borrowers to perpetuate or renew any oil and gas lease or other lease
by payment of rental or delay rental or by commencement or
continuation of operations nor to prevent Borrowers from abandoning or
releasing any oil and gas lease or other lease or well thereon when,
in any of such events, in the opinion of Borrowers exercised in good
faith, it is not in the best interest of the Borrowers to perpetuate
the same.
(q) CERTAIN ADDITIONAL ASSURANCES REGARDING MAINTENANCE AND
OPERATIONS OF PROPERTIES. With respect to those Oil and Gas
Properties which are being operated by operators other than the
Borrowers, the Borrowers shall not be obligated to perform any
undertakings contemplated by the covenants and agreement contained in
Subsections 12(o) or 12(p) hereof which are performable only by such
operators and are beyond the control of the Borrowers; however, the
-43-
Borrowers agree to promptly take all reasonable actions available
under any operating agreements or otherwise to bring about the
performance of any such material undertakings required to be performed
thereunder.
(r) SALE OF CERTAIN ASSETS/PREPAYMENT OF PROCEEDS. Except with
respect to sales permitted under Section 13(a)(ii)(C) hereof, the
Borrowers will immediately pay over to the Agent for the ratable
benefit of the Banks as a prepayment of principal on the Revolving
Notes, an amount equal to 100% of the Release Price received by
Borrowers from the sale of the Oil and Gas Properties, which sale has
been approved in advance by the Majority Banks. The term "Release
Price" as used herein shall mean a price determined by the Majority
Banks in their discretion based upon the loan collateral value which
such Banks in their discretion (using such methodology, assumptions
and discounts rates as such Banks customarily use in assigning
collateral value to oil and gas properties, oil and gas gathering
systems, gas processing and plant operations) assign to such Oil and
Gas Properties at the time in question. Any such prepayment of
principal on the Revolving Notes required by this Section 12(r), shall
not be in lieu of, but shall be in addition to, any Monthly Commitment
Reduction or any mandatory prepayment of principal required to be paid
pursuant to Section 9(b) hereof.
(s) TITLE MATTERS. Within thirty (30) days after the Effective
Date with respect to the Oil and Gas Properties listed on Schedule "8"
hereto, furnish Agent with title opinions and/or title information
reasonably satisfactory to Agent showing defensible title of the
applicable Borrower to such Oil and Gas Properties subject only to the
Permitted Liens. As to any Oil and Gas Properties hereafter mortgaged
to Agent, Borrowers will promptly (but in no event more than thirty
(30) days following such mortgaging), furnish Agent with title
opinions and/or title information reasonably satisfactory to Agent
covering a sufficient value of such Oil and Gas Properties to maintain
the required level of title coverage at 72% of the Engineered Value of
the total Oil and Gas Properties. Said title information shall show
defensible title of the applicable Borrower to such Oil and Gas
Properties subject only to Permitted Liens.
(t) CURATIVE MATTERS. Within sixty (60) days after the
Effective Date with respect to matters listed on Schedule "9" and,
thereafter, within sixty (60) days after receipt by Borrowers from
Agent or its counsel of written notice of title defects the Agent
reasonably requires to be cured, Borrowers shall either (i) provide
such curative information, in form and substance satisfactory to
Agent, or (ii) substitute Oil and Gas Properties of value and quality
satisfactory to the Agent for all of Oil and Gas Properties for which
such title curative was requested but upon which Borrowers elected not
to provide such title curative information, and, within sixty (60)
days of such substitution, provide title opinions or title information
satisfactory to the Agent covering the Oil and Gas Properties so
substituted.
-44-
(u) CHANGE OF PRINCIPAL PLACE OF BUSINESS. Borrowers shall give
Agent at least thirty (30) days prior written notice of its intention
to move its principal place of business from the address set forth in
Section 17 hereof.
(v) OPERATING ACCOUNTS. Borrowers shall establish and maintain
with Agent one or more operating accounts (the "Operating Accounts"),
the maintenance of each of which shall be subject to such rules and
regulations as the Agent shall from time to time specify. Such
Operating Accounts shall be the primary oil and gas operating account
of the Borrowers and such accounts shall be maintained with the Agent
until all amounts due hereunder and under the Notes have been paid in
full. The Borrowers hereby grant a security interest to Banks in and
to the Operating Accounts and all checks, drafts and other items ever
received by any Bank for deposit therein. If any Event of Default
shall occur and be continuing, Agent shall have the immediate right,
without prior notice or demand, to take and apply against the
Borrowers' obligations hereunder any and all funds legally and
beneficially owned by the Borrowers then or thereafter on deposit in
the Operating Accounts for the ratable benefit of the Banks.
(w) YEAR 2000 COMPLIANCE. Borrowers will promptly notify the
Agent in the event the Borrowers discover or determine that any
computer application that is material to either of them or to any of
their Subsidiaries' business and operations will not be Year 2000
Compliant on a timely basis, except to the extent that such failure
could not reasonably be expected to have a Material Adverse Effect.
(x) ADDITIONAL PROPERTY. Borrowers shall, within five (5) days
after receiving a written request thereof from Agent, execute and
deliver, or cause to be executed and delivered, such mortgages, deeds
of trust, instruments, security agreements, assignments, financing
statements, and other documents, as may be reasonably necessary in the
opinion of Agent and Agent's counsel, to grant Agent valid first
mortgage liens and first, prior and perfected security interests in
and to additional oil and gas properties of such value as Agent shall
deem necessary to provide additional security for full and prompt
payment of all amounts owed hereunder and under the Notes. At Agent's
option and on request therefor, Borrowers will furnish Agent title
opinions covering such additional oil and gas properties prepared by
counsel not employed by Borrowers (or such other evidence to
Borrowers' ownership thereof and their revenue interest therein or
attributable thereto as Agent may reasonably require), in form and
substance satisfactory to Agent, subject only to title defects
approved by Agent.
(y) ▇▇▇▇▇ GATHERING SYSTEM. Substantially maintain the current
levels of throughput from ▇▇▇▇▇ directly connected to the ▇▇▇▇▇
Gathering System.
-45-
(z) LETTERS IN LIEU OF TRANSFER ORDERS. The Borrowers shall
promptly upon the reasonable request of the Agent, at any time and
from time to time and without limitation on the rights of Agent in
accordance with Section 6(c) hereof, execute such letters in lieu of
transfer orders, in addition to the letters signed by the Borrowers
and delivered to the Agent in satisfaction of the conditions set forth
in Sections 6(c) and 11(a)(x) hereof, as are necessary or appropriate
to transfer and deliver to the Agent for the benefit of the Banks
proceeds from or attributable to any Oil and Gas Property or other
Collateral; provided, however, that such letters shall only be
delivered to the addressees thereof in accordance with the provision
of Section 6(c) hereof.
(aa) DIVISION ORDERS. The Borrowers shall promptly upon request
by the Agent at any time and from time to time following the
occurrence of any Event of Default and without limitations on the
rights of the Agent in accordance with Section 6(c) hereof, execute
such division and/or transfer orders as are necessary or appropriate
to transfer and deliver to the Agent for the ratable benefit of the
Banks proceeds from the sale of hydrocarbon production from or
attributable to any Oil and Gas Property; provided, however, that the
Banks shall only send or deliver such division orders and/or transfer
orders in accordance with Section 6(c) hereof.
(bb) TAKE OR PAY AGREEMENT. The Borrowers shall, in connection
with their delivery of the engineering reports required by Sections 7
and 12 hereof, deliver to Agent copies of contracts or other
agreements concerning "take or pay" and "prepayment", and provide
notice of all gas balance liabilities of the Borrowers.
13. Negative Covenants. A deviation from the provisions of this
Section 13 shall not constitute a Default or an Event of Default under this
Agreement if such deviation is consented to in writing by the required
percentage of the Banks prior to the date of deviation. The Borrowers will
at all times comply with the covenants contained in this Section 13 from the
date hereof and for so long as the Revolving Commitment is in existence or
any amount is owed to the Agent or the Banks under this Agreement or the
other Loan Documents.
(a) NEGATIVE PLEDGE. Neither Borrower shall without the prior
written consent of the Banks:
(i) create, incur, assume or permit to exist any Lien,
security interest or other encumbrance on any of its assets or
properties except Permitted Liens; or
(ii) sell, lease, transfer or otherwise dispose of, in any
fiscal year, any of its assets except for (A) sales, leases,
transfers or other dispositions made in the ordinary course of
Borrowers' oil and gas businesses, (B) sales made with the
consent of Majority Banks which are made pursuant to, and
-46-
in full compliance with, Section 12(r) hereof; and (C) sales, leases
or transfers or other dispositions made by Borrowers during any
fiscal year, one or any series of transactions, the aggregate
value of which does not exceed $5,000,000.00 in any such year if,
and only if, such sale, lease, transfer or other disposition does
not result in the occurrence of a Default or Event of Default;
(b) CURRENT RATIO. Borrowers shall not allow their ratio of
consolidated Current Assets to consolidated Current Liabilities to be
less than 1.0 to 1.0 as of the end of any fiscal quarter.
(c) RATIO OF DEBT TO MINIMUM TANGIBLE NET WORTH. The Borrowers
will not allow their ratio of consolidated Debt to consolidated
Tangible Net Worth to ever be greater than 3.25 to 1.0 as of the end
of any fiscal quarter.
(d) MINIMUM DEBT SERVICE COVERAGE RATIO. Beginning with the
calendar quarter ending September 30, 1998, the Borrowers will not
allow their consolidated Debt Service Coverage Ratio to ever be less
than 1.20 to 1.0.
(e) CONSOLIDATIONS AND MERGERS. Neither Borrower will
consolidate or merge with or into any other Person, except that either
Borrower may merge with another Person if such Borrower is the
surviving entity in such merger and if, after giving effect thereto,
no Default or Event of Default shall have occurred and be continuing.
(f) DEBTS, GUARANTIES AND OTHER OBLIGATIONS. Without the
consent of Majority Banks, neither Borrower will incur, create, assume
or in any manner become or be liable in respect of any indebtedness,
nor will either Borrower guarantee or otherwise in any manner become
or be liable in respect of any indebtedness, liabilities or other
obligations of any other person or entity, whether by agreement to
purchase the indebtedness of any other person or entity or agreement
for the furnishing of funds to any other person or entity through the
purchase or lease of goods, supplies or services (or by way of stock
purchase, capital contribution, advance or loan) for the purpose of
paying or discharging the indebtedness of any other person or entity,
or otherwise, except that the foregoing restrictions shall not apply
to:
(i) the Notes and any renewal or increase thereof, or other
indebtedness of the Borrowers heretofore disclosed to Banks in
the Borrowers' Financial Statements or on Schedule "3" hereto; or
(ii) taxes, assessments or other government charges which
are not yet due or are being contested in good faith by
appropriate action
-47-
promptly initiated and diligently conducted, if such reserve as shall
be required by GAAP shall have been made therefor and levy and
execution thereon have been stayed and continue to be stayed; or
(iii) indebtedness (other than in connection with a loan
or lending transaction) incurred in the ordinary course of
business, including, but not limited to indebtedness for
drilling, completing, leasing and reworking oil and gas ▇▇▇▇▇ or
the treatment, distribution, transportation of sale of production
therefrom and loans or lending transactions in which the
outstanding principal balance does not exceed $500,000 at any
time and which does not result in the imposition of a Lien other
than a Permitted Lien; or; or
(iv) indebtedness issued pursuant to an indenture providing
for the sale of notes to the public not exceeding the face amount
of $200,000,000, which indebtedness (A) is expressly subordinated
(to the satisfaction of Majority Banks) to all obligations owed
the Banks hereunder and under the Notes, (B) is issued by the
Borrowers or an Affiliate of the Borrowers, within one hundred
eighty (180) days of the Effective Date, and (C) the net proceeds
of which are used in part to repay or reduce the outstanding
balance on the Notes, said indebtedness to be approved in advance
by Majority Banks, which approval will not be unreasonably
withheld; or
(v) other indebtedness owed to Affiliates of Borrowers
which is expressly made subordinate to the indebtedness owed
hereunder and under the Notes, which subordination is approved in
advance by Majority Banks, which approval will not be
unreasonably withheld; or
(vi) any renewals or extensions of (but not increases in)
any of the foregoing.
(g) DIVIDENDS OR DISTRIBUTIONS. Neither Borrower will declare,
pay or make, whether in cash or property (excluding stock dividends),
or set aside or apply any money or assets to pay or make any dividend
or distribution during any fiscal year except the foregoing
restriction shall not apply to (i) cash dividends paid by Resources to
its shareholders in amounts equal to each such shareholders' allocable
share of federal or state income taxes attributable to Resources
taxable net income and (ii) dividends made by Gas to Resources.
Provided, however, that no dividend shall be made by either Borrower
if an Event of Default has occurred and is continuing or would occur
as a result of the making of such dividends. Resources shall provide
the Agent at least annually with sufficient information from which
Agent can verify all shareholders' allocable share of such income
taxes.
-48-
(h) LOANS AND ADVANCES. Neither Borrower shall make or permit
to remain outstanding any loans or advances made by either Borrower to
or in any person or entity, except that the foregoing restriction
shall not apply to:
(i) loans or advances to any person, the material details
of which have been set forth in the Financial Statements of the
Borrowers heretofore furnished to Banks; or
(ii) advances made in the ordinary course of Borrowers' oil
and gas business; or
(iii) loans or advances among Borrowers; or
(iv) loans or advances not to exceed $2,000,000 in the
aggregate to Affiliates of the Borrowers.
(i) SALE OR DISCOUNT OF RECEIVABLES. Neither Borrower will
discount or sell with recourse, or sell for less than the greater of
the face or market value thereof, any of its notes receivable or
accounts receivable except for such discounts or sales not exceeding
$250,000 in any fiscal year.
(j) NATURE OF BUSINESS. Neither Borrower will permit any
material change to be made in the character of its business as carried
on at the date hereof.
(k) TRANSACTIONS WITH AFFILIATES. Neither Borrower will enter
into any transaction with any Affiliate (other than Borrower), except
transactions upon terms that are no less favorable to it than would be
obtained in a transaction negotiated at arm's length with an unrelated
third party.
(l) HEDGING TRANSACTIONS. Neither Borrower will enter into any
transaction providing (i) for the hedging, forward sale, swap or any
deviation thereof of crude oil or natural gas or other commodities, or
(ii) for a swap, collar, floor, cap, option, corridor, or other
contract which is intended to reduce or eliminate the risk of
fluctuation in interest rates, as such terms are referred to in the
capital markets, except the foregoing prohibitions shall not apply to
(x) transactions consented to in writing by the Banks which are on
terms acceptable to the Banks, or (y) Pre-Approved Contracts. The
term "Pre-Approved Contracts" as used herein shall mean any contract
or agreement (i) to hedge, forward, sell or swap crude oil or natural
gas or otherwise sell up to 50% of the Borrowers' monthly production
forecast for all of Borrowers', proved and producing oil and gas
properties for the period covered by the proposed hedging transaction,
and (ii) with a maturity of twelve (12) months or less.
-49-
(m) INVESTMENTS. Neither Borrower shall make any investments in
any person or entity, except such restriction shall not apply to:
(i) investments and direct obligations of the United
States of America or any agency thereof;
(ii) investments in certificates of deposit issued by the
Banks or certificates of deposit with maturities of less than one
year, issued by other commercial banks in the United States
having capital and surplus in excess of $500,000,000 and which
have a rating of (A) 50 or above by Sheshunoff and (B) "B" or
above by ▇▇▇▇-▇▇▇▇▇▇; or
(iii) investments in insured money market funds, LIBOR
investment accounts and other similar accounts at Agent or such
investment with maturities of less than ninety (90) days at other
commercial banks having capital and surplus in excess of
$500,000,000 and which have a rating of (A) 50 or above by
Sheshunoff and (B) "B" or above by ▇▇▇▇-▇▇▇▇▇▇; or
(iv) investments in oil and gas properties; or
(v) and acquisitions of controlling interests in entities
engaged primarily in owning and/or operating oil and gas
properties not exceeding in the aggregate the sum of
$5,000,000.00 inclusive of any amount invested pursuant to
Section 13(m)(vi) above; or
(vi) investments by Borrowers and their Subsidiaries made
in third-party entities by way of capital contributions, loans or
advances which do not exceed $250,000 in the aggregate
outstanding at any time.
(n) AMENDMENT TO ARTICLES OF INCORPORATION OR BYLAWS. Neither
Borrower will permit any amendment to, or any alteration of, its
Articles of Incorporation or Bylaws, which amendment or alteration
could reasonably be expected to have a Material Adverse Effect.
(o) LEASES. With the exception of the lease agreement, as it
currently exists, with ▇▇▇▇▇▇ ▇▇▇▇ regarding The Continental Center
North Building located in Enid, Oklahoma, the Borrowers will not enter
into or agree to enter into, any rental or lease agreement resulting
or which would result in aggregate rental or lease payments of the
Borrowers exceeding $250,000 in the aggregate in any fiscal year of
the Borrowers under all rental or lease agreement under which either
Borrower is a lessee of the property or assets covered thereby;
PROVIDED, HOWEVER, that the
-50-
foregoing restriction shall not apply to oil, gas and mineral leases or
permits or similar agreements entered into in the ordinary course of
business or orders of any governmental authority adjudicating the rights
or pooling the interests of the owners of oil and gas properties or lease
agreements in effect as of the date hereof.
14. EVENTS OF DEFAULT. Any one or more of the following events shall
be considered an "Event of Default" as that term is used herein:
(a) The Borrowers shall fail to pay when due or declared due the
principal of, and the interest on, the Notes, or any fee or any other
indebtedness of the Borrowers incurred pursuant to this Agreement or
any other Loan Document; or
(b) Any representation or warranty made by Borrowers under this
Agreement, or in any certificate or statement furnished or made to the
Banks pursuant hereto, or in connection herewith, or in connection
with any document furnished hereunder, shall prove to be untrue in any
material respect as of the date on which such representation or
warranty is made (or deemed made), or any representation, statement
(including financial statements), certificate, report or other data
furnished or to be furnished or made by Borrowers under any Loan
Document, including this Agreement, proves to have been untrue in any
material respect, as of the date as of which the facts therein set
forth were stated or certified; or
(c) Default shall be made in the due observance or performance
of any of the covenants or agreements of the Borrowers contained in
the Loan Documents, including this Agreement (excluding covenants
contained in Section 13 of the Agreement for which there is no cure
period), and such default shall continue for more than thirty (30)
days after notice thereof from Agent to Borrowers; or
(d) Default shall be made in the due observance or performance
of the covenants of Borrowers contained in Section 13 of this
Agreement; or
(e) Default shall be made in respect of any obligation for
borrowed money in excess of $250,000, other than the Notes, for which
Borrowers are liable (directly, by assumption, as guarantor or
otherwise), or any obligations secured by any mortgage, pledge or
other security interest, lien, charge or encumbrance with respect
thereto, on any asset or property of Borrowers in respect of any
agreement relating to any such obligations unless Borrowers are not
liable for same (i.e., unless remedies or recourse for failure to pay
such obligations is limited to foreclosure of the collateral security
therefor), and if such default shall continue beyond the applicable
grace period, if any; or
(f) Borrowers shall commence a voluntary case or other
proceedings seeking liquidation, reorganization or other relief with
respect to itself or its debts
-51-
under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking an appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts
as they become due, or shall take any corporate action authorizing the
foregoing; or
(g) An involuntary case or other proceeding, shall be commenced
against Borrowers seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, and such involuntary case
or other proceeding shall remain undismissed and unstayed for a period
of sixty (60) days; or an order for relief shall be entered against
Borrowers under the federal bankruptcy laws as now or hereinafter in
effect; or
(h) A final judgment or order for the payment of money in excess
of $1,500,000 (or judgments or orders aggregating in excess of
$1,500,000) shall be rendered against Borrowers and such judgments or
orders shall continue unsatisfied and unstayed for a period of thirty
(30) days; or
(i) In the event the Total Outstandings shall at any time exceed
the Borrowing Base established for the Revolving Notes, and the
Borrowers shall fail to comply with the provisions of Section 9(b)
hereof; or
(j) A Change of Management shall occur; or
(k) Any Security Instrument shall for any reason not, or cease
to, create valid and perfected first-priority Liens against the
Collateral purportedly covered thereby and such occurrence would have
a Material Adverse Effect; or
(l) The good faith determination by the Agent that a Material
Adverse Effect has occurred or will occur or that the value of the
Collateral has, or will be, materially decreased.
Upon occurrence of any Event of Default specified in Subsections
14(f) and (g) hereof, the entire principal amount due under the Notes
and all interest then accrued thereon, and any other liabilities of
the Borrowers hereunder, shall become immediately due and payable all
without notice and without presentment, demand, protest, notice of
protest or dishonor or any other notice of default of any kind, all of
which are hereby expressly waived by the Borrowers. In any other
Event of Default, the Agent, upon request of Majority Banks, shall by
notice to the
-52-
Borrowers declare the principal of, and all interest then accrued on, the
Notes and any other liabilities hereunder to be forthwith due and payable,
whereupon the same shall forthwith become due and payable without
presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other notice of any kind, all of which the Borrowers hereby
expressly waive, anything contained herein or in the Note to the contrary
notwithstanding. Nothing contained in this Section 14 shall be construed
to limit or amend in any way the Events of Default enumerated in the Note,
or any other document executed in connection with the transaction
contemplated herein.
Upon the occurrence and during the continuance of any Event of
Default, the Banks are hereby authorized at any time and from time to
time, without notice to the Borrowers (any such notice being expressly
waived by the Borrowers), to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by any of the Banks to
or for the credit or the account of the Borrowers against any and all
of the indebtedness of the Borrowers under the Notes and the Loan
Documents, including this Agreement, irrespective of whether or not
the Banks shall have made any demand under the Loan Documents,
including this Agreement or the Notes and although such indebtedness
may be unmatured. Any amount set-off by any of the Banks shall be
applied against the indebtedness owed the Banks by the Borrowers
pursuant to this Agreement and the Notes. The Banks agree promptly to
notify the Borrowers after any such setoff and application, provided
that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Bank under this
Section are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Banks may have.
15. THE AGENT AND THE BANKS.
(a) APPOINTMENT AND AUTHORIZATION. Each Bank hereby appoints
Agent as its nominee and agent, in its name and on its behalf: (i) to
act as nominee for and on behalf of such Bank in and under all Loan
Documents; (ii) to arrange the means whereby the funds of Banks are to
be made available to the Borrowers under the Loan Documents; (iii) to
take such action as may be requested by any Bank under the Loan
Documents (when such Bank is entitled to make such request under the
Loan Documents); (iv) to receive all documents and items to be
furnished to Banks under the Loan Documents; (v) to be the secured
party, mortgagee, beneficiary, and similar party in respect of, and to
receive, as the case may be, any collateral for the benefit of Banks;
(vi) to promptly distribute to each Bank all material information,
requests, documents and items received from the Borrowers under the
Loan Documents; (vii) to promptly distribute to each Bank such Bank's
Pro Rata Part of each payment or prepayment (whether voluntary, as
proceeds of insurance thereon, or otherwise) in accordance with the
terms of the Loan Documents and (viii) to
-53-
deliver to the appropriate Persons requests, demands, approvals and
consents received from Banks. Each Bank hereby authorizes Agent to take
all actions and to exercise such powers under the Loan Documents as are
specifically delegated to Agent by the terms hereof or thereof, together
with all other powers reasonably incidental thereto. With respect to its
commitments hereunder and the Notes issued to it, Agent and any successor
Agent shall have the same rights under the Loan Documents as any other Bank
and may exercise the same as though it were not the Agent; and the
term "Bank" or "Banks" shall, unless otherwise expressly indicated,
include Agent and any successor Agent in its capacity as a Bank.
Agent and any successor Agent and its Affiliates may accept deposits
from, lend money to, act as trustee under indentures of and generally
engage in any kind of business with the Borrowers, and any person
which may do business with the Borrowers, all as if Agent and any
successor Agent was not Agent hereunder and without any duty to
account therefor to the Banks; provided that, if any payments in
respect of any property (or the proceeds thereof) now or hereafter in
the possession or control of Agent which may be or become security for
the obligations of the Borrowers arising under the Loan Documents by
reason of the general description of indebtedness secured or of
property contained in any other agreements, documents or instruments
related to any such other business shall be applied to reduction of
the obligations of the Borrowers arising under the Loan Documents,
then each Bank shall be entitled to share in such application
according to its pro rata part thereof. Each Bank, upon request of
any other Bank, shall disclose to all other Banks all indebtedness and
liabilities, direct and contingent, of the Borrowers to such Bank as
of the time of such request.
(b) NOTE HOLDERS. From time to time as other Banks become a
party to this Agreement, Agent shall obtain execution by the Borrowers
of additional Notes in amounts representing the Commitment of each
such new Bank, up to an aggregate face amount of all Revolving Notes
not exceeding $175,000,000. The obligation of such Bank shall be
governed by the provisions of this Agreement, including but not
limited to, the obligations specified in Section 2 hereof. From time
to time, Agent may require that the Banks exchange their Notes for
newly issued Notes to better reflect the Commitments of the Banks.
Agent may treat the payee of any Note as the holder thereof until
written notice of transfer has been filed with it, signed by such
payee and in form satisfactory to Agent.
(c) CONSULTATION WITH COUNSEL. Banks agree that Agent may
consult with legal counsel selected by Agent and shall not be liable
for any action taken or suffered in good faith by it in accordance
with the advice of such counsel.
(d) DOCUMENTS. Agent shall not be under a duty to examine or
pass upon the validity, effectiveness, enforceability, genuineness or
value of any of the Loan Documents or any other instrument or document
furnished pursuant thereto or
-54-
in connection therewith, and Agent shall be entitled to assume that the
same are valid, effective, enforceable and genuine and what they purport
to be.
(e) RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment
and acceptance of a successor Agent as provided below, Agent may
resign at any time by giving written notice thereof to Banks and the
Borrowers, and Agent may be removed at any time with or without cause
by all Banks. If no successor Agent has been so appointed by all
Banks (and approved by the Borrowers) and has accepted such
appointment within 30 days after the retiring Agent's giving of notice
of resignation or removal of the retiring Agent, then the retiring
Agent may, on behalf of Banks, appoint a successor Agent. Any
successor Agent must be approved by Borrowers, which approval will not
be unreasonably withheld. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights and duties
of the retiring Agent, and the retiring Agent, shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this
Section 15 shall continue in effect for its benefit in respect to any
actions taken or omitted to be taken by it while it was acting as
Agent. To be eligible to be an Agent hereunder the party serving, or
to serve, in such capacity must own a Pro Rata Part of the Commitments
equal to the level of Commitment required to be held by any Bank
pursuant to Section 28 hereof.
(f) RESPONSIBILITY OF AGENT. It is expressly understood and
agreed that the obligations of Agent under the Loan Documents are only
those expressly set forth in the Loan Documents as to each and that
Agent, shall be entitled to assume that no Default or Event of Default
has occurred and is continuing, unless Agent has actual knowledge of
such fact or has received notice from a Bank or the Borrowers that
such Bank or the Borrowers considers that a Default or an Event of
Default has occurred and is continuing and specifying the nature
thereof. Neither Agent nor any of its directors, officers, attorneys
or employees shall be liable for any action taken or omitted to be
taken by them under or in connection with the Loan Documents, except
for its or their own gross negligence or willful misconduct. Agent
shall not incur liability under or in respect of any of the Loan
Documents by acting upon any notice, consent, certificate, warranty or
other paper or instrument believed by it to be genuine or authentic or
to be signed by the proper party or parties, or with respect to
anything which it may do or refrain from doing in the reasonable
exercise of its judgment, or which may seem to it to be necessary or
desirable.
Agent shall not be responsible to Banks for any of the Borrowers'
recitals, statements, representations or warranties contained in any
of the Loan Documents, or in any certificate or other document
referred to or provided for in, or received by any Bank under, the
Loan Documents, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of or any of the Loan
Documents or for
-55-
any failure by the Borrowers to perform any of its obligations hereunder
or thereunder. Agent may employ agents and attorneys-in-fact and shall
not be answerable, except as to money or securities received by it or its
authorized agents, for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.
The relationship between Agent and each Bank is only that of
agent and principal and has no fiduciary aspects. Nothing in the Loan
Documents or elsewhere shall be construed to impose on Agent any
duties or responsibilities other than those for which express
provision is therein made. In performing its duties and functions
hereunder, Agent does not assume and shall not be deemed to have
assumed, and hereby expressly disclaims, any obligation or
responsibility toward or any relationship of agency or trust with or
for the Borrower or any of its beneficiaries or other creditors. As
to any matters not expressly provided for by the Loan Documents, Agent
shall not be required to exercise any discretion or take any action,
but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the
instructions of all Banks and such instructions shall be binding upon
all Banks and all holders of the Notes; provided, however, that Agent
shall not be required to take any action which is contrary to the Loan
Documents or applicable law.
Agent shall have the right to exercise or refrain from
exercising, without notice or liability to the Banks, any and all
rights afforded to Agent by the Loan Documents or which Agent may have
as a matter of law; provided, however, Agent shall not (i) except as
provided in Section 7(b) hereof, without the consent of Majority Banks
designate the amount of the Borrowing Base or the Monthly Commitment
Reduction or (ii) without the consent of all Majority Banks, take any
other action with regard to amending the Loan Documents, waiving any
default under the Loan Documents or taking any other action with
respect to the Loan Documents which requires consent of all Banks.
Provided further, however, that no amendment, waiver, or other action
shall be effected pursuant to the preceding clause (ii) without the
consent of all Banks which: (i) would increase the Borrowing Base or
decrease the Monthly Commitment Reduction, (ii) would reduce any fees
hereunder, or the principal of, or the interest on, any Bank's Note or
Notes, (iii) would postpone any date fixed for any payment of any fees
hereunder, or any principal or interest of any Bank's Note or Notes,
(iv) would materially increase any Bank's obligations hereunder or
would materially alter Agent's obligations to any Bank hereunder, (v)
would release Borrowers from their obligation to pay any Bank's Note
or Notes, (vi) release any of the Collateral, (vii) would change the
definition of all Banks, (viii) would amend, modify or change any
provision of this Agreement requiring the consent of all the Banks,
(ix) would waive any of the conditions precedent to the Effective Date
or the making of any Loan or issuance of any Letter of Credit or
(x) would extend the Revolving Maturity Date or (xi) would
-56-
amend this sentence or the previous sentence. Agent shall not have
liability to Banks for failure or delay in exercising any right or power
possessed by Agent pursuant to the Loan Documents or otherwise unless such
failure or delay is caused by the gross negligence of the Agent, in
which case only the Agent responsible for such gross negligence shall
have liability therefor to the Banks.
(g) INDEPENDENT INVESTIGATION. Each Bank severally represents
and warrants to Agent that it has made its own independent
investigation and assessment of the financial condition and affairs of
the Borrowers in connection with the making and continuation of its
participation hereunder and has not relied exclusively on any
information provided to such Bank by Agent in connection herewith, and
each Bank represents, warrants and undertakes to Agent that it shall
continue to make its own independent appraisal of the credit
worthiness of the Borrowers while the Notes are outstanding or its
commitments hereunder are in force. Agent shall not be required to
keep itself informed as to the performance or observance by the
Borrowers of this Agreement or any other document referred to or
provided for herein or to inspect the properties or books of the
Borrowers. Other than as provided in this Agreement, Agent shall not
have any duty, responsibility or liability to provide any Bank with
any credit or other information concerning the affairs, financial
condition or business of the Borrowers which may come into the
possession of Agent.
(h) INDEMNIFICATION. Banks agree to indemnify Agent, ratably
according to their respective Commitments on a Pro Rata basis, from
and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
of any proper and reasonable kind or nature whatsoever which may be
imposed on, incurred by or asserted against Agent in any way relating
to or arising out of the Loan Documents or any action taken or omitted
by Agent under the Loan Documents, provided that no Bank shall be
liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from Agent's gross negligence or willful
misconduct. Each Bank shall be entitled to be reimbursed by the Agent
for any amount such Bank paid to Agent under this Section 15(h) to the
extent the Agent has been reimbursed for such payments by the
Borrowers or any other Person. THE PARTIES INTEND FOR THE PROVISIONS
OF THIS SECTION TO APPLY TO AND PROTECT THE AGENT FROM THE
CONSEQUENCES OF ANY LIABILITY INCLUDING STRICT LIABILITY IMPOSED OR
THREATENED TO BE IMPOSED ON AGENT AS WELL AS FROM THE CONSEQUENCES OF
ITS OWN NEGLIGENCE, WHETHER OR NOT THAT NEGLIGENCE IS THE SOLE,
CONTRIBUTING OR CONCURRING CAUSE OF ANY SUCH LIABILITY.
(i) BENEFIT OF SECTION 15. The agreements contained in this
Section 15 are solely for the benefit of Agent and the Banks and are
not for the benefit of, or to be relied upon by, the Borrowers, any
affiliate of the Borrowers or any other person.
-57-
(j) PRO RATA TREATMENT. Subject to the provisions of this
Agreement, each payment (including each prepayment) by the Borrowers
and collection by Banks (including offsets) on account of the
principal of and interest on the Notes and fees provided for in this
Agreement, payable by the Borrowers shall be made Pro Rata; provided,
however, in the event that any Defaulting Bank shall have failed to
make an Advance as contemplated under Section 3 hereof and Agent or
another Bank or Banks shall have made such Advance, payment received
by Agent for the account of such Defaulting Bank or Banks shall not be
distributed to such Defaulting Bank or Banks until such Advance or
Advances shall have been repaid in full to the Bank or Banks who
funded such Advance or Advances.
(k) ASSUMPTION AS TO PAYMENTS. Except as specifically provided
herein, unless Agent shall have received notice from the Borrowers
prior to the date on which any payment is due to Banks hereunder that
the Borrowers will not make such payment in full, Agent may, but shall
not be required to, assume that the Borrowers have made such payment
in full to Agent on such date and Agent may, in reliance upon such
assumption, cause to be distributed to each Bank on such due date an
amount equal to the amount then due such Bank. If and to the extent
the Borrowers shall not have so made such payment in full to Agent,
each Bank shall repay to Agent forthwith on demand such amount
distributed to such Bank together with interest thereon, for each day
from the date such amount is distributed to such Bank until the date
such Bank repays such amount to Agent, at the interest rate applicable
to such portion of the Revolving Loan.
(l) OTHER FINANCINGS. Without limiting the rights to which any
Bank otherwise is or may become entitled, such Bank shall have no
interest, by virtue of this Agreement or the Loan Documents, in
(a) any present or future loans from, letters of credit issued by, or
leasing or other financial transactions by, any other Bank to, on
behalf of, or with the Borrowers (collectively referred to herein as
"Other Financings") other than the obligations hereunder; (b) any
present or future guarantees by or for the account of the Borrowers
which are not contemplated by the Loan Documents; (c) any present or
future property taken as security for any such Other Financings; or
(d) any property now or hereafter in the possession or control of any
other Bank which may be or become security for the obligations of the
Borrowers arising under any loan document by reason of the general
description of indebtedness secured or property contained in any other
agreements, documents or instruments relating to any such Other
Financings.
(m) INTERESTS OF BANKS. Nothing in this Agreement shall be
construed to create a partnership or joint venture between Banks for
any purpose. Agent, Banks and the Borrowers recognize that the
respective obligations of Banks under the Revolving Commitment shall
be several and not joint and that neither Agent nor
-58-
any of Banks shall be responsible or liable to perform any of the
obligations of the other under this Agreement. Each Bank is deemed to
be the owner of an undivided interest in and to all rights, titles,
benefits and interests belonging and accruing to Agent under the
Security Instruments, including, without limitation, liens and security
interests in any collateral, fees and payments of principal and interest
by the Borrowers under the Revolving Commitment on a Pro Rata basis.
Each Bank shall perform all duties and obligations of Banks under this
Agreement in the same proportion as its ownership interest in the Loans
outstanding at the date of determination thereof.
(n) INVESTMENTS. Whenever Agent in good faith determines that
it is uncertain about how to distribute to Banks any funds which it
has received, or whenever Agent in good faith determines that there is
any dispute among the Banks about how such funds should be
distributed, Agent may choose to defer distribution of the funds which
are the subject of such uncertainty or dispute. If Agent in good
faith believes that the uncertainty or dispute will not be promptly
resolved, or if Agent is otherwise required to invest funds pending
distribution to the Banks, Agent may invest such funds pending
distribution (at the risk of the Borrowers). All interest on any such
investment shall be distributed upon the distribution of such
investment and in the same proportions and to the same Persons as such
investment. All monies received by Agent for distribution to the
Banks (other than to the Person who is Agent in its separate capacity
as a Bank) shall be held by the Agent pending such distribution solely
as Agent for such Banks, and Agent shall have no equitable title to
any portion thereof.
16. EXERCISE OF RIGHTS. No failure to exercise, and no delay in
exercising, on the part of the Agent or the Banks, any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right. The rights of the Agent and the Banks hereunder shall be in addition to
all other rights provided by law. No modification or waiver of any provision of
the Loan Documents, including this Agreement, or the Note nor consent to
departure therefrom, shall be effective unless in writing, and no such consent
or waiver shall extend beyond the particular case and purpose involved. No
notice or demand given in any case shall constitute a waiver of the right to
take other action in the same, similar or other circumstances without such
notice or demand.
17. NOTICES. Any notices or other communications required or
permitted to be given by this Agreement or any other documents and instruments
referred to herein must be given in writing (which may be by facsimile
transmission) and must be personally delivered or mailed by prepaid certified or
registered mail to the party to whom such notice or communication is directed at
the address of such party as follows: (a) BORROWERS: c/o CONTINENTAL RESOURCES,
INC., ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Facsimile No.: 580/548-5281,
Attention: ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇; (b) AGENT: BANK ONE, OKLAHOMA, N.A.,
P.O. Box 25848, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Facsimile
No.405/231-6661, Attention: ▇▇▇▇
-59-
▇. ▇▇▇▇, ▇▇., Senior Vice President. Any such notice or other communication
shall be deemed to have been given (whether actually received or not) on the
day it is personally delivered or delivered by facsimile as aforesaid or, if
mailed, on the third day after it is mailed as aforesaid. Any party may
change its address for purposes of this Agreement by giving notice of such
change to the other party pursuant to this Section 17. Any notice required to
be given to the Banks shall be given to the Agent and distributed to all
Banks by the Agent.
18. EXPENSES. The Borrowers shall pay (i) all reasonable and
necessary out-of-pocket expenses of the Banks, including reasonable fees and
disbursements of special counsel for the Agent, in connection with the
preparation of this Agreement, any waiver or consent hereunder or any amendment
hereof or any default or Event of Default or alleged default or Event of Default
hereunder, (ii) all reasonable and necessary out-of-pocket expenses of the
Agent, including reasonable fees and disbursements of special counsel for the
Agent in connection with the preparation of any participation agreement for a
participant or participants requested by the Borrowers or any amendment thereof
and (iii) if a default or an Event of Default occurs, all reasonable and
necessary out-of-pocket expenses incurred by the Banks, including reasonable
fees and disbursements of counsel, in connection with such default and Event of
Default and collection and other enforcement proceedings resulting therefrom.
The Borrowers shall indemnify the Banks against any transfer taxes, document
taxes, assessments or charges made by any governmental authority by reason of
the execution, delivery and filing of the Loan Documents. The obligations of
this Section 18 shall survive any termination of this Agreement, the expiration
of the Loans and the payment of all indebtedness of the Borrowers to the Banks
hereunder and under the Notes.
19. INDEMNITY. The Borrowers agree to indemnify and hold harmless
the Banks and their respective officers, employees, agents, attorneys and
representatives (singularly, an "Indemnified Party", and collectively, the
"Indemnified Parties") from and against any loss, cost, liability, damage or
expense (including the reasonable fees and out-of-pocket expenses of counsel to
the Banks, including all local counsel hired by such counsel) ("Claim") incurred
by the Banks in investigating or preparing for, defending against, or providing
evidence, producing documents or taking any other action in respect of any
commenced or threatened litigation, administrative proceeding or investigation
under any federal securities law, federal or state environmental law, or any
other statute of any jurisdiction, or any regulation, or at common law or
otherwise, which is alleged to arise out of or is based upon any acts, practices
or omissions or alleged acts, practices or omissions of the Borrowers or their
agents or arises in connection with the duties, obligations or performance of
the Indemnified Parties in negotiating, preparing, executing, accepting,
keeping, completing, countersigning, issuing, selling, delivering, releasing,
assigning, handling, certifying, processing or receiving or taking any other
action with respect to the Loan Documents and all documents, items and materials
contemplated thereby even if any of the foregoing arises out of an Indemnified
Party's ordinary negligence. The indemnity set forth herein shall be in
addition to any other obligations or liabilities of the Borrowers to the Banks
hereunder or at common law or otherwise, and shall survive any termination of
this Agreement, the expiration of the Loans and the payment of all indebtedness
of the Borrowers to the Banks hereunder and under the Notes, provided that the
Borrowers shall have no obligation under this Section to the Bank with respect
to
-60-
any of the foregoing arising out of the gross negligence or willful
misconduct of the Bank. If any Claim is asserted against any Indemnified
Party, the Indemnified Party shall endeavor to notify the Borrowers of such
Claim (but failure to do so shall not affect the indemnification herein made
except to the extent of the actual harm caused by such failure). The
Indemnified Party shall have the right to employ, at the Borrowers' expense,
counsel of the Indemnified Parties' choosing and to control the defense of
the Claim. The Borrowers may at their own expense also participate in the
defense of any Claim. Each Indemnified Party may employ separate counsel in
connection with any Claim to the extent such Indemnified Party believes it
reasonably prudent to protect such Indemnified Party. THE PARTIES INTEND FOR
THE PROVISIONS OF THIS SECTION TO APPLY TO AND PROTECT EACH INDEMNIFIED PARTY
FROM THE CONSEQUENCES OF ANY LIABILITY INCLUDING STRICT LIABILITY IMPOSED OR
THREATENED TO BE IMPOSED ON AGENT AS WELL AS FROM THE CONSEQUENCES OF ITS OWN
NEGLIGENCE, WHETHER OR NOT THAT NEGLIGENCE IS THE SOLE, CONTRIBUTING, OR
CONCURRING CAUSE OF ANY CLAIM.
20. GOVERNING LAW. THIS AGREEMENT IS BEING EXECUTED AND DELIVERED,
AND IS INTENDED TO BE PERFORMED, IN OKLAHOMA, OKLAHOMA COUNTY, OKLAHOMA, AND THE
SUBSTANTIVE LAWS OF OKLAHOMA SHALL GOVERN THE VALIDITY, CONSTRUCTION,
ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND ALL OTHER DOCUMENTS AND
INSTRUMENTS REFERRED TO HEREIN, UNLESS OTHERWISE SPECIFIED THEREIN.
21. INVALID PROVISIONS. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under present or future laws effective
during the term of this Agreement, such provisions shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement, and the
remaining provisions of the Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement.
22. MAXIMUM INTEREST RATE. It is the intention of the parties hereto
to comply strictly with any applicable usury laws as in effect from time to time
and, in this regard, there shall never be taken, received, contracted for,
collected, charged or received on any sums advanced hereunder interest in excess
of that which would accrue at the Maximum Rate.
If, under any circumstances, the aggregate amounts paid on the Notes
or under this Agreement or any other Loan Document include amounts which by law
are deemed interest and which would exceed the amount permitted if the Maximum
Rate were in effect, the Borrowers stipulate that such payment and collection
will have been and will be deemed to have been, to the fullest extent permitted
by applicable laws of the State of Oklahoma or the United States of America, the
result of mathematical error on the part of the Borrowers and the Agent; and the
Agent shall promptly credit the amount of such excess to the principal amount
due on the Notes, or if the principal amount due on the Notes shall have been
paid in full, refund the amount of such excess to the Borrowers (to the extent
only of such interest payments in excess of that which would have accrued and
been payable on the basis of the Maximum Rate) upon discovery of such error by
-61-
the Agent or notice thereof from the Borrowers.
If the maturity of the Notes is accelerated by reason of an election
of the Agent resulting from any Event of Default or otherwise in accordance with
this Agreement, or in the event any prepayment, then such consideration that
constitutes interest under applicable laws may never include amounts which are
more than the Maximum Rate, and the amount of such excess, if any, provided for
in this Agreement or otherwise shall be canceled automatically by the Agent as
of the date of such acceleration or prepayment and, if theretofore paid, shall
be credited by the Agent on the principal amount due on the Notes, or if the
principal amount due on the Notes shall have been paid in full, refunded by the
Agent to the Borrowers.
All sums paid, or agreed to be paid, to the Agent for the use,
forbearance and detention of the proceeds of any Advance hereunder shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term hereof until paid in full so that the actual rate of
interest is uniform but does not exceed the Maximum Rate throughout the full
term hereof.
23. AMENDMENTS. This Agreement may be amended only by an instrument
in writing executed by an authorized officer of the party against whom such
amendment is sought to be enforced.
24. MULTIPLE COUNTERPARTS. This Agreement may be executed in a
number of identical separate counterparts, each of which for all purposes is to
be deemed an original, but all of which shall constitute, collectively, one
agreement. No party to this Agreement shall be bound hereby until a counterpart
of this Agreement has been executed by all parties hereto.
25. CONFLICT. In the event any term or provision hereof is
inconsistent with or conflicts with any provision of the Loan Documents, the
terms or provisions contained in this Agreement shall be controlling.
26. SURVIVAL. All covenants, agreements, undertakings,
representations and warranties made in the Loan Documents, including this
Agreement, the Notes or other documents and instruments referred to herein shall
survive all closings hereunder and shall not be affected by any investigation
made by any party.
27. PARTIES BOUND. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns,
heirs, legal representatives and estates, provided, however, that the Borrowers
may not, without the prior written consent of all of the Banks, assign any
rights, powers, duties or obligations hereunder.
28. ASSIGNMENTS AND PARTICIPATIONS.
(a) Each Bank shall have the right to sell, assign or transfer
all or any
-62-
part of its Note or Notes, its Commitments and its rights and
obligations hereunder to one or more Affiliates, Banks, financial
institutions, pension plans, insurance companies, investment funds, or
similar Persons who are Eligible Assignees or to a Federal Reserve Bank;
PROVIDED, that in connection with each sale, assignment or transfer
(other than to an Affiliate, a Bank or a Federal Reserve Bank), the
applicable Bank will consider the opinion and recommendation of
Borrowers, which opinion and recommendation shall in no way be binding
upon such Bank, and each such sale, assignment, or transfer (other than
to an Affiliate, a Bank or a Federal Reserve Bank), shall require the
consent of Agent, which consent will not be unreasonably withheld, and
the assignee, transferee or recipient shall have, to the extent of such
sale, assignment, or transfer, the same rights, benefits and obligations
as it would if it were such Bank and a holder of such Note, Commitments
and rights and obligations, including, without limitation, the right to
vote on decisions requiring consent or approval of all Banks or Majority
Banks and the obligation to fund its Commitments; provided, further,
that (1) each such sale, assignment, or transfer (other than to an
Affiliate, a Bank or a Federal Reserve Bank) shall be in an aggregate
principal amount not less than $5,000,000, (2) each remaining Bank shall
at all times maintain Commitments then outstanding in an aggregate
principal amount at least equal to $5,000,000; (3) each such sale,
assignment or transfer shall be of a Pro Rata portion of such Bank's
Revolving Commitment and its Bridge Loan Commitment, (4) no Bank may
offer to sell its Note or Notes, Commitments, rights and obligations or
interests therein in violation of any securities laws; and (5) no such
assignments (other than to a Federal Reserve Bank) shall become
effective until the assigning Bank and its assignee delivers to Agent
and Borrowers an Assignment and Acceptance and the Note or Notes subject
to such assignment and other documents evidencing any such assignment.
An assignment fee in the amount of $5,000 for each such assignment
(other than to an Affiliate, a Bank or the Federal Reserve Bank) will be
payable to Agent by assignor or assignee. Within five (5) Business Days
after its receipt of copies of the Assignment and Acceptance and the
other documents relating thereto and the Note or Notes, the Borrowers
shall execute and deliver to Agent (for delivery to the relevant
assignee) a new Note or Notes evidencing such assignee's assigned
Commitments and if the assignor Bank has retained a portion of its
Commitments, a replacement Note in the principal amount of the
Commitments retained by the assignor (except as provided in the last
sentence of this paragraph (a) such Note or Notes to be in exchange for,
but not in payment of, the Note or Notes held by such Bank). On and
after the effective date of an assignment hereunder, the assignee shall
for all purposes be a Bank, party to this Agreement and any other Loan
Document executed by the Banks and shall have all the rights and
obligations of a Bank under the Loan Documents, to the same extent as if
it were an original party thereto, and no further consent or action by
Borrowers, Banks or the Agent shall be required to release the
transferor Bank with respect to its Commitments assigned to such
assignee and the transferor Bank shall henceforth be so released.
-63-
(b) Each Bank shall have the right to grant participations in
all or any part of such Bank's Notes and Commitments hereunder to one
or more pension plans, investment funds, insurance companies,
financial institutions or other Persons, provided, that:
(i) each Bank granting a participation shall retain the
right to vote hereunder, and no participant shall be entitled to
vote hereunder on decisions requiring consent or approval of Bank
or Majority Banks (except as set forth in (iii) below);
(ii) in the event any Bank grants a participation hereunder,
such Bank's obligations under the Loan Documents shall remain
unchanged, such Bank shall remain solely responsible to the other
parties hereto for the performance of such obligations, such Bank
shall remain the holder of any such Note or Notes for all
purposes under the Loan Documents, and Agent, each Bank and
Borrowers shall be entitled to deal with the Bank granting a
participation in the same manner as if no participation had been
granted; and
(iii) no participant shall ever have any right by reason
of its participation to exercise any of the rights of Banks
hereunder, except that any Bank may agree with any participant
that such Bank will not, without the consent of such participant
(which consent may not be unreasonably withheld) consent to any
amendment or waiver requiring approval of all Banks.
(c) It is understood and agreed that any Bank may provide to
assignees and participants and prospective assignees and participants
financial information and reports and data concerning Borrowers'
properties and operations which was provided to such Bank pursuant to
this Agreement.
(d) Upon the reasonable request of either Agent or Borrowers,
each Bank will identify those to whom it has assigned or participated
any part of its Notes and Commitment, and provide the amounts so
assigned or participated.
29. CHOICE OF FORUM: CONSENT TO SERVICE OF PROCESS AND JURISDICTION.
THE OBLIGATIONS OF BORROWERS UNDER THE LOAN DOCUMENTS ARE PERFORMABLE IN
OKLAHOMA COUNTY, OKLAHOMA. ANY SUIT, ACTION OR PROCEEDING AGAINST THE BORROWERS
WITH RESPECT TO THE LOAN DOCUMENTS OR ANY JUDGMENT ENTERED BY ANY COURT IN
RESPECT THEREOF, MAY BE BROUGHT IN THE COURTS OF THE STATE OF OKLAHOMA, COUNTY
OF OKLAHOMA, OR IN THE UNITED STATES COURTS LOCATED IN OKLAHOMA COUNTY, OKLAHOMA
AND THE BORROWERS HEREBY SUBMIT TO THE NON-
-64-
EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE PURPOSE OF ANY SUCH SUIT,
ACTION OR PROCEEDING. THE BORROWERS HEREBY IRREVOCABLY CONSENT TO SERVICE OF
PROCESS IN ANY SUIT, ACTION OR PROCEEDING IN SAID COURT BY THE MAILING
THEREOF BY BANK BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
BORROWERS, AS APPLICABLE, AT THE ADDRESS FOR NOTICES AS PROVIDED IN SECTION 17.
THE BORROWERS HEREBY IRREVOCABLY WAIVE ANY OBJECTION WHICH THEY MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT BROUGHT IN THE COURTS LOCATED
IN THE STATE OF OKLAHOMA, COUNTY OF OKLAHOMA, AND HEREBY FURTHER IRREVOCABLY
WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
30. WAIVER OF JURY TRIAL. THE BORROWERS, THE AGENT AND THE BANKS (BY
THEIR ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND
UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THE
BORROWERS, THE AGENT AND THE BANKS, ARISING OUT OF OR IN ANY WAY RELATED TO THIS
DOCUMENT, ANY OTHER RELATED DOCUMENT, OR ANY RELATIONSHIP BETWEEN THE AGENT, THE
BANKS AND THE BORROWERS. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE AGENT
AND THE BANKS TO PROVIDE THE FINANCING DESCRIBED HEREIN.
31. OTHER AGREEMENTS. THIS WRITTEN CREDIT AGREEMENT 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.
32. FINANCIAL TERMS. All accounting terms used in this Agreement
which are not specifically defined herein shall be defined in accordance with
GAAP.
-65-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
BORROWERS:
CONTINENTAL RESOURCES, INC.
an Oklahoma corporation
Attest: By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ ----------------------------------
▇▇▇▇▇▇ ▇▇▇▇, President
CONTINENTAL GAS, INC.
an Oklahoma corporation
Attest: By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, President
BANKS:
BANK ONE, OKLAHOMA, N.A.,
a national banking association
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
▇▇▇▇ ▇. ▇▇▇▇, ▇▇.,
Senior Vice President
AGENT:
BANK ONE, OKLAHOMA, N.A.,
a national banking association
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
▇▇▇▇ ▇. ▇▇▇▇, ▇▇.,
Senior Vice President
-66-