EXHIBIT 4.1
EXECUTION
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CREDIT AGREEMENT
_______________________________________________________
INLAND PRODUCTION COMPANY
Borrower
INLAND RESOURCES INC.
as Guarantor
and
ING (U.S.) CAPITAL CORPORATION
as Agent
and CERTAIN FINANCIAL INSTITUTIONS
as Banks
_______________________________________________________
September 23, 1997
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TABLE OF CONTENTS
Page
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CREDIT AGREEMENT............................................................. 1
ARTICLE I - Definitions and References....................................... 1
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Section 1.1. Defined Terms.......................................... 1
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Section 1.2. Annexes, Exhibits and Schedules; Additional
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Definitions........................................... 5
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Section 1.3. Amendment of Defined Instruments....................... 6
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Section 1.4. References and Titles.................................. 6
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Section 1.5. Calculations and Determinations........................ 6
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ARTICLE II - The Loans....................................................... 6
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Section 2.1. Commitments to Lend; Notes............................. 6
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Section 2.2. Requests for New Loans................................. 7
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Section 2.3. Continuations and Conversions of Existing Loans........ 8
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Section 2.4. Use of Proceeds........................................ 8
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Section 2.5. Fees................................................... 9
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Section 2.6. Optional Prepayments................................... 9
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Section 2.7. Mandatory Prepayments.................................. 9
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Section 2.8. Scheduled Principal Payments...........................10
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Section 2.9. Initial Borrowing Base.................................11
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Section 2.10. Subsequent Determinations of Borrowing Base............11
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ARTICLE III - Payments to Banks..............................................11
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Section 3.1. General Procedures.....................................11
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Section 3.2. Capital Reimbursement..................................12
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Section 3.3. Increased Cost of Eurodollar Loans.....................12
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Section 3.4. Availability...........................................13
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Section 3.5. Funding Losses.........................................13
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Section 3.6. Reimbursable Taxes.....................................14
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Section 3.7. Change of Applicable Lending Office....................15
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Section 3.8. Replacement of Banks...................................15
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ARTICLE IV - Conditions Precedent to Lending.................................15
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Section 4.1. Documents to be Delivered..............................15
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Section 4.3. Additional Conditions Precedent........................17
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ARTICLE V - Representations and Warranties...................................18
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ARTICLE VI - Affirmative Covenants of Borrower and Parent....................18
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Section 6.1. Payment and Performance................................18
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Section 6.2. Agreement to Deliver Security Documents................18
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Section 6.3. Perfection and Protection of Security Interests and
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Liens.................................................19
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Section 6.4. Bank Accounts; Offset..................................19
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Section 6.5. Guaranties of Parent's Subsidiaries....................19
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Section 6.6. Production Proceeds....................................19
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Section 6.7. TCW Debt...............................................20
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ARTICLE VII - Events of Default and Remedies................................20
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Section 7.1. Events of Default......................................20
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Section 7.2. Acceleration...........................................20
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Section 7.3. Remedies...............................................20
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ARTICLE VIII - Agent.........................................................20
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Section 8.1. Appointment and Authority..............................20
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Section 8.2. Exculpation, Agent's Reliance, Etc.....................21
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Section 8.3. Credit Decisions.......................................21
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Section 8.4. Indemnification........................................21
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Section 8.5. Rights as Bank.........................................22
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Section 8.6. Sharing of Set-Offs and Other Payments.................22
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Section 8.7. Investments............................................22
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Section 8.8. Benefit of Article VIII................................23
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Section 8.9. Resignation............................................23
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ARTICLE IX - Miscellaneous...................................................23
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Section 9.1. Waivers and Amendments; Acknowledgements...............23
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Section 9.2. Survival of Agreements; Cumulative Nature..............25
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Section 9.3. Notices................................................25
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Section 9.4. Payment of Expenses; Indemnity.........................25
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Section 9.5. Joint and Several Liability; Parties in Interest;
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Assignments...........................................26
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Section 9.6. Confidentiality........................................28
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Section 9.7. Governing Law; Submission to Process...................28
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Section 9.8. Limitation on Interest.................................29
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Section 9.9. Termination; Limited Survival..........................29
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Section 9.10. Severability...........................................29
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Section 9.11. Counterparts...........................................30
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Section 9.12. Waiver of Jury Trial, Punitive Damages, etc............30
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Annexes, Schedules and Exhibits:
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Annex A - Common Definitions
Annex B - Common Representations and Warranties
Annex C - Common Covenants
Annex D - Common Events of Default
Bank Schedule
Schedule 1 - Disclosure Schedule
Schedule 2 - Security Schedule
Schedule 3 - Insurance Schedule
Exhibit A - Promissory Note
Exhibit B - Borrowing Notice
Exhibit C - Continuation/Conversion Notice
Exhibit D - Certificate Accompanying Financial Statements
Exhibit E - Environmental Compliance Certificate
Exhibit F - Opinion of Counsel for Related Persons
Exhibit G - Assignment and Assumption
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CREDIT AGREEMENT
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THIS CREDIT AGREEMENT is made as of September 23, 1997, by and among Inland
Production Company, a Texas corporation, (herein called "Borrower"), Inland
Resources Inc., a Washington corporation (herein called "Parent"), ING (U.S.)
Capital Corporation (herein called "Agent") and the Banks referred to below. In
consideration of the mutual covenants and agreements contained herein the
parties hereto agree as follows:
ARTICLE I - Definitions and References
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Section 1.1. Defined Terms. As used in this Agreement, each of the
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following terms has the meaning given it in this Section 1.1 or in the sections
and subsections referred to below:
"Agent" means ING (U.S.) Capital Corporation, as Agent hereunder, and its
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successors in such capacity.
"Agreement" means this Credit Agreement.
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"Applicable Lending Office" means, with respect to each Bank, such Bank's
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Domestic Lending Office in the case of Base Rate Loans and such Bank's
Eurodollar Lending Office in the case of Eurodollar Loans.
"Approval Letter" has the meaning given it in the Intercreditor Agreement.
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"Banks" means each signatory hereto (other than Borrower and Related
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Persons a party hereto), including ING (U.S.) Capital Corporation in its
capacity as a Bank hereunder rather than as Agent, and the successors of each
such party as holder of a Note.
"Base Rate" means the higher of (a) the Reference Rate and (b) the Federal
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Funds Rate plus one-half percent (0.5%) per annum. For purposes of this
definition, "Reference Rate" means the arithmetic average of the rates of
interest publicly announced by The Chase Manhattan Bank, Citibank, N.A. and
▇▇▇▇▇▇ Guaranty Trust Company of New York (or their respective successors) as
their respective prime commercial lending rates (or, as to any such bank that
does not announce such a rate, such bank's 'base' or other rate determined by
Agent to be the equivalent rate announced by such bank), except that, if any
such bank shall, for any period, cease to announce publicly its prime commercial
lending (or equivalent) rate, Agent shall, during such period, determine the
"Base Rate" based upon the prime commercial lending (or equivalent) rates
announced publicly by the other such banks. The Base Rate shall in no event,
however, exceed the Highest Lawful Rate.
"Base Rate Loan" means a Loan which does not bear interest at the
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Eurodollar Rate.
"Borrower" means Inland Production Company, a Texas corporation.
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"Borrowing" means a borrowing of new Loans of a single Type pursuant to
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Section 2.2 or a continuation or conversion of existing Loans into a single Type
(and, in the case of Eurodollar Loans, with the same Interest Period) pursuant
to Section 2.3.
"Borrowing Base" means, at the particular time in question, either the
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amount provided for in Section 2.9 or the amount determined by Agent in
accordance with the provisions of Section 2.10.
"Borrowing Base Deficiency" has the meaning given it in Section 2.7(b).
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"Borrowing Notice" means a written or telephonic request, or a written
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confirmation, made by Borrower which meets the requirements of Section 2.2.
"Business Day" means a day, other than a Saturday or Sunday, on which
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commercial banks are open for business with the public in New York, New York.
Any Business Day in any way relating to Eurodollar Loans (such as the day on
which an Interest Period begins or ends) must also be a day on which, in the
judgment of Agent, significant transactions in dollars are carried out in the
interbank Eurocurrency market.
"CIBC Credit Agreement" means that certain Credit Agreement dated June 30,
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1997, among Borrower, Canadian Imperial Bank of Commerce, as agent, and the
lenders named therein.
"Commitment Period" means the period from and including the date hereof
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until and including March 31, 1999 (or, if earlier, the day on which the Notes
first become due and payable in full).
"Continuation/Conversion Notice" means a written or telephonic request, or
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a written confirmation, made by Borrower which meets the requirements of Section
2.3.
"Coverage Default" has the meaning given to such term in the TCW Agreement.
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"Coverage Deficiency" has the meaning given to such term in the TCW
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Agreement.
"Default" means (a) any Event of Default and any default, event or
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condition which would, with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of Default and (b) any
"Default" as defined in the TCW Agreement.
"Determination Date" has the meaning given it in Section 2.10.
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"Domestic Lending Office" means, with respect to any Bank, the office of
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such Bank specified as its "Domestic Lending Office" below its name on the Bank
Schedule attached hereto, or such other office as such Bank may from time to
time specify to Borrower and Agent.
"Eligible Transferee" means a Person which either (a) is a Bank, or (b) is
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consented to as an Eligible Transferee by Agent and, so long as no Event of
Default is continuing by Borrower, which consents in each case will not be
unreasonably withheld (provided that no Person organized outside the United
States may be an Eligible Transferee if Borrower would be required to pay
withholding taxes on interest or principal owed to such Person).
"Eurodollar Loan" means a Loan which is properly designated as a Eurodollar
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Loan pursuant to Section 2.2 or 2.3.
"Eurodollar Lending Office" means, with respect to any Bank, the office of
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such Bank specified as its "Eurodollar Lending Office" below its name on the
Bank Schedule attached hereto (or, if no such office is specified, its Domestic
Lending Office), or such other office of such Bank as such Bank may from time to
time specify to Borrower and Agent.
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"Eurodollar Rate" means, with respect to each particular Eurodollar Loan
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and the associated LIBOR Rate and Reserve Percentage, the rate per annum
calculated by Agent (rounded upwards, if necessary, to the next higher 0.01%)
determined on a daily basis pursuant to the following formula:
Eurodollar Rate =
LIBOR Rate + A
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100.0% - Reserve Percentage
where A means 1.75%. The Eurodollar Rate for any Eurodollar Loan shall change
whenever the Reserve Percentage changes. No Eurodollar Rate shall ever exceed
the Highest Lawful Rate.
"Event of Default" has the meaning given it in Section 7.1.
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"Facility Usage" means, at the time in question, the aggregate amount of
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outstanding Loans at such time.
"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
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upwards, if necessary, to the nearest 1/100th of one percent) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate quoted to Agent on such day on such transactions as determined by Agent.
"Guarantor" means any Person who has guaranteed some or all of the
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Obligations pursuant to a guaranty listed on the Security Schedule or any other
Person who has guaranteed some or all of the Obligations and who has been
accepted by Agent as a Guarantor or any Subsidiary of Parent which now or
hereafter executes and delivers a guaranty to Agent pursuant to Section 6.5.
"Highest Lawful Rate" means, with respect to each Bank, the maximum
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nonusurious rate of interest that such Bank is permitted under applicable Law to
contract for, take, charge, or receive with respect to its Loan. All
determinations herein of the Highest Lawful Rate, or of any interest rate
determined by reference to the Highest Lawful Rate, shall be made separately for
each Bank as appropriate to assure that the Loan Documents are not construed to
obligate any Person to pay interest to any Bank at a rate in excess of the
Highest Lawful Rate applicable to such Bank.
"Intercreditor Agreement" means that certain Intercreditor Agreement dated
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of even date herewith among Agent, Banks, Tamco, Borrower and Noteholders (as
defined therein).
"Interest Period" means, with respect to each particular Eurodollar Loan in
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a Borrowing, a period of 1, 2, 3 or 6 months, as specified in the Borrowing
Notice applicable thereto, beginning on and including the date specified in such
Borrowing Notice (which must be a Business Day), and ending on but not including
the same day of the month as the day on which it began (e.g., a period beginning
on the third day of one month shall end on but not include the third day of
another month), provided that each Interest Period which would otherwise end on
a day which is not a Business Day shall end on the next succeeding Business Day
(unless such next succeeding Business Day is the first Business Day of a
calendar month, in which case such Interest Period shall end on the immediately
preceding Business Day). No Interest Period may be elected which would extend
past the date on which the associated Note is due and payable in full.
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"Late Payment Rate" means, at the time in question, two percent (2.0%) per
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annum plus the Base Rate then in effect; provided that, with respect to any
Eurodollar Loan with an Interest Period extending beyond the date such
Eurodollar Loan becomes due and payable, "Late Payment Rate" shall mean two
percent (2.0%) per annum plus the related Eurodollar Rate. The Late Payment
Rate shall never exceed the Highest Lawful Rate.
"Lenders" means Agent and all Banks.
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"Lending Office" means, with respect to any Bank, the office, branch, or
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agency through which it funds its Eurodollar Loans; and with respect to Agent,
the office, branch, or agency through which it administers this Agreement.
"LIBOR Rate" means, with respect to each particular Eurodollar Loan and the
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related Interest Period, the rate per annum (rounded upwards, if necessary, to
the nearest 1/16 of 1%) reported, on the date two Business Days prior to the
first day of such Interest Period, on Telerate Access Service Page 3750 (British
Bankers Association Settlement Rate) as the London Interbank Offered Rate for
dollar deposits having a term comparable to such Interest Period and in an
amount of $1,000,000 or more (or, if such Page shall cease to be publicly
available or if the information contained on such Page, in Agent's sole
judgment, shall cease to accurately reflect such London Interbank Offered Rate,
as reported by any publicly available source of similar market data selected by
Agent that, in Agent's sole judgment, accurately reflects such London Interbank
Offered Rate).
"Loan" has the meaning given it in Section 2.1.
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"Loan Documents" means this Agreement, the Notes, the Security Documents,
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the Intercreditor Agreement, and all other agreements, certificates, documents,
instruments and writings at any time delivered in connection herewith or
therewith (exclusive of term sheets, commitment letters, correspondence and
similar documents used in the negotiation hereof, except to the extent the same
contain information about Borrower or its Affiliates, properties, business or
prospects).
"Note" has the meaning given it in Section 2.1.
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"Obligations" means all Debt from time to time owing by any Related Person
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to any Lender under or pursuant to any of the Loan Documents. "Obligation"
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means any part of the Obligations.
"Other Allowed Debt" means the TCW Debt.
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"Other Loan Documents" means the TCW Documents.
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"Percentage Share" means, with respect to any Bank (a) when used in
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Sections 2.1 or 2.5, in any Borrowing Notice or when no Loans are outstanding
hereunder, the percentage set forth opposite such Bank's name on Bank Schedule
attached hereto, and (b) when used otherwise, the percentage obtained by
dividing (i) the sum of the unpaid principal balance of such Bank's Loans at the
time in question, by (ii) the sum of the aggregate unpaid principal balance of
all Loans at such time.
"Plan of Development" or "POD" means the Plan of Development as such is
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approved annually beginning with the period from January 1, 1998 to December 31,
1998, by Borrower, Agent and Tamco or is modified or replaced from time to time
by agreement among Borrower, Agent and Tamco. The first such POD must be
approved by December 1, 1997.
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"Regulation D" means Regulation D of the Board of Governors of the Federal
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Reserve System as from time to time in effect.
"Required Lenders" means Agent and Banks whose aggregate Percentage Shares
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(including the Percentage Share of Agent) equal or exceed sixty-six and two-
thirds percent (66 2/3%).
"Reserve Percentage" means, on any day with respect to each particular
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Eurodollar Loan, the maximum reserve requirement, as determined by Agent
(including without limitation any basic, supplemental, marginal, emergency or
similar reserves), expressed as a percentage and rounded to the next higher
0.01%, which would then apply under Regulation D with respect to "Eurocurrency
liabilities", as such term is defined in Regulation D, of $1,000,000 or more.
If such reserve requirement shall change after the date hereof, the Reserve
Percentage shall be automatically increased or decreased, as the case may be,
from time to time as of the effective time of each such change in such reserve
requirement.
"Security Documents" means the instruments listed in the Security Schedule
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and all other security agreements, deeds of trust, mortgages, chattel mortgages,
pledges, guaranties, financing statements, continuation statements, extension
agreements and other agreements or instruments now, heretofore, or hereafter
delivered by any Related Person to Agent in connection with this Agreement or
any transaction contemplated hereby to secure or guarantee the payment of any
part of the Obligations or the performance of any Related Person's other duties
and obligations under the Loan Documents.
"Security Schedule" means Schedule 2 hereto.
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"Tamco" means TCW Asset Management Company, in its capacity as Agent under
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the TCW Agreement, and its successors in such capacity.
"TCW Agreement" means that certain Credit Agreement of even date herewith
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among Borrower, Parent, Trust Company of the West and Tamco.
"TCW Debt" means any and all Debt (whether for principal, interest,
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indemnifications, expenses or otherwise) owing by Borrower under the TCW
Agreement or any other TCW Document providing for the payment of fees in
connection therewith, which Debt is subordinated to the Obligations pursuant to
the terms of the Intercreditor Agreement.
"TCW Documents" means the TCW Agreement and each note, mortgage, security
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agreement, pledge agreement, guarantee or other agreement, certificate,
document, instrument and writing at any time delivered in connection therewith.
"Type" means, with respect to any Loans, the characterization of such Loans
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as either Base Rate Loans or Eurodollar Loans.
Section 1.2. Annexes, Exhibits and Schedules; Additional Definitions.
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All Annexes, Exhibits and Schedules attached to this Agreement are a part hereof
for all purposes. Reference is hereby made to Annex A and to the Security
Schedule for the meaning of certain terms defined therein and used but not
defined herein, which definitions are incorporated herein by reference.
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Section 1.3. Amendment of Defined Instruments. Unless the context
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otherwise requires or unless otherwise provided herein the terms defined in this
Agreement which refer to a particular agreement, instrument or document also
refer to and include all renewals, extensions, modifications, amendments and
restatements of such agreement, instrument or document, provided that nothing
contained in this section shall be construed to authorize any such renewal,
extension, modification, amendment or restatement.
Section 1.4. References and Titles. All references in this Agreement to
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Annexes, Exhibits, Schedules, articles, sections, subsections and other
subdivisions refer to the Annexes, Exhibits, Schedules, articles, sections,
subsections and other subdivisions of this Agreement unless expressly provided
otherwise. Titles appearing at the beginning of any subdivisions are for
convenience only and do not constitute any part of such subdivisions and shall
be disregarded in construing the language contained in such subdivisions. The
words "this Agreement", "this instrument", "herein", "hereof", "hereby",
"hereunder" and words of similar import refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited. The phrases
"this section" and "this subsection" and similar phrases refer only to the
sections or subsections hereof in which such phrases occur. The word "or" is
not exclusive, and the word "including" (in its various forms) means "including
without limitation". Pronouns in masculine, feminine and neuter genders shall
be construed to include any other gender, and words in the singular form shall
be construed to include the plural and vice versa, unless the context otherwise
requires.
Section 1.5. Calculations and Determinations. All calculations under the
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Loan Documents of interest chargeable with respect to Eurodollar Loans and of
fees shall be made on the basis of actual days elapsed (including the first day
but excluding the last) and a year of 360 days. All other calculations of
interest made under the Loan Documents shall be made on the basis of actual days
elapsed (including the first day but excluding the last) and a year of 365 or
366 days, as appropriate. Each determination by a Lender of amounts to be paid
under Sections 3.2 through 3.6 or any other matters which are to be determined
hereunder by a Lender (such as any Eurodollar Rate, LIBOR Rate, Business Day,
Interest Period, or Reserve Percentage) shall, in the absence of manifest error,
be conclusive and binding. Unless otherwise expressly provided herein or unless
Required Lenders otherwise consent all financial statements and reports
furnished to any Lender hereunder shall be prepared and all financial
computations and determinations pursuant hereto shall be made in accordance with
GAAP.
ARTICLE II - The Loans
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Section 2.1. Commitments to Lend; Notes. Subject to the terms and
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conditions hereof, each Bank agrees to make loans to Borrower (herein called
such Bank's "Loans") upon Borrower's request from time to time during the
Commitment Period, provided that (a) subject to Sections 3.3, 3.4 and 3.6, all
Banks are requested to make Loans of the same Type in accordance with their
respective Percentage Shares and as part of the same Borrowing, and (b) after
giving effect to such Loans, the Facility Usage does not exceed the Borrowing
Base determined as of the date on which the requested Loans are to be made. The
aggregate amount of all Loans in any Borrowing must be greater than or equal to
$1,000,000 or must equal the remaining availability under the Borrowing Base.
Borrower may have no more than six Borrowings of Eurodollar Loans outstanding at
any time. The obligation of Borrower to repay to each Bank the aggregate amount
of all Loans made by such Bank, together with interest accruing in connection
therewith, shall be evidenced by a single promissory note (herein called such
Bank's "Note") made by Borrower payable to the order of such Bank in the form of
Exhibit A with appropriate insertions. The amount of principal owing on any
Bank's Note at any given time shall be the aggregate amount of all Loans
theretofore made by such Bank minus all payments of principal
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theretofore received by such Bank on such Note. Interest on each Note shall
accrue and be due and payable as provided herein and therein, with Eurodollar
Loans bearing interest at the Eurodollar Rate and Base Rate Loans bearing
interest at the Base Rate (subject to the applicability of the Late Payment Rate
and limited by the provisions of Section 9.8). Subject to the terms and
conditions hereof, Borrower may borrow, repay, and reborrow hereunder. It is
expressly understood that Banks' commitment to make Loans is determined only by
reference to the Borrowing Base from time to time in effect, and the aggregate
amount of the Notes and the amount specified in the Security Documents are
specified at a greater amount only for the convenience of the parties to avoid
the necessity of preparing and recording supplements to the Security Documents.
Section 2.2. Requests for New Loans. Borrower must give to Agent written
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notice (or telephonic notice promptly confirmed in writing) of any requested
Borrowing of new Loans to be advanced by Banks. Each such notice constitutes a
"Borrowing Notice" hereunder and must:
(a) specify (i) the aggregate amount of any such Borrowing of new
Base Rate Loans and the date on which such Base Rate Loans are to be
advanced, or (ii) the aggregate amount of any such Borrowing of new
Eurodollar Loans, the date on which such Eurodollar Loans are to be
advanced (which shall be the first day of the Interest Period which is to
apply thereto), and the length of the applicable Interest Period; and
(b) be received by Agent not later than 1:00 p.m., New York, New York
time, on (i) the day on which any such Base Rate Loans are to be made, or
(ii) the third Business Day preceding the day on which any such Eurodollar
Loans are to be made.
Each such written request or confirmation must be made in the form and substance
of the "Borrowing Notice" attached hereto as Exhibit B, duly completed. Each
such telephonic request shall be deemed a representation, warranty,
acknowledgment and agreement by Borrower as to the matters which are required to
be set out in such written confirmation. Upon receipt of any such Borrowing
Notice, Agent shall give each Bank prompt notice of the terms thereof. If all
conditions precedent to such new Loans have been met, each Bank will on the date
requested promptly remit to Agent at Agent's office in New York, New York the
amount of such Bank's new Loan in immediately available funds, and upon receipt
of such funds, unless to its actual knowledge any conditions precedent to such
Loans have been neither met nor waived as provided herein, Agent shall promptly
make such Loans available to Borrower. Unless Agent shall have received prompt
notice from a Bank that such Bank will not make available to Agent such Bank's
new Loan, Agent may in its discretion assume that such Bank has made such Loan
available to Agent in accordance with this section and Agent may if it chooses,
in reliance upon such assumption, make such Loan available to Borrower. If and
to the extent such Bank shall not so make its new Loan available to Agent, such
Bank and Borrower severally agree to pay or repay to Agent within three days
after demand the amount of such Loan together with interest thereon, for each
day from the date such amount was made available to Borrower until the date such
amount is paid or repaid to Agent, with interest at (i) the Federal Funds Rate,
if such Bank is making such payment and (ii) the interest rate applicable at the
time to the other new Loans made on such date, if Borrower is making such
repayment. If neither such Bank nor Borrower pay or repay to Agent such amount
within such three-day period, Agent shall in addition to such amount be entitled
to recover from such Bank and from Borrower, on demand, interest thereon at the
Late Payment Rate, calculated from the date such amount was made available to
Borrower. The failure of any Bank to make any new Loan to be made by it
hereunder shall not relieve any other Bank of its obligation hereunder, if any,
to make its new Loan, but no Bank shall be responsible for the failure of any
other Bank to make any new Loan to be made by such other Bank.
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Section 2.3. Continuations and Conversions of Existing Loans. Borrower
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may make the following elections with respect to Loans already outstanding: to
convert Base Rate Loans to Eurodollar Loans, to convert Eurodollar Loans to Base
Rate Loans on the last day of the Interest Period applicable thereto, or to
continue Eurodollar Loans beyond the expiration of such Interest Period by
designating a new Interest Period to take effect at the time of such expiration.
In making such elections, Borrower may combine existing Loans made pursuant to
separate Borrowings into one new Borrowing or divide existing Loans made
pursuant to one Borrowing into separate new Borrowings. To make any such
election, Borrower must give to Agent written notice (or telephonic notice
promptly confirmed in writing) of any such conversion or continuation of
existing Loans, with a separate notice given for each new Borrowing. Each such
notice constitutes a "Continuation/Conversion Notice" hereunder and must:
(a) specify the existing Loans which are to be continued or
converted;
(b) specify (i) the aggregate amount of any Borrowing of Base Rate
Loans into which such existing Loans are to be continued or converted and
the date on which such continuation or conversion is to occur, or (ii) the
aggregate amount of any Borrowing of Eurodollar Loans into which such
existing Loans are to be continued or converted, the date on which such
continuation or conversion is to occur (which shall be the first day of the
Interest Period which is to apply to such Eurodollar Loans), and the length
of the applicable Interest Period; and
(c) be received by Agent not later than 1:00 p.m., New York, New York
time, on (i) the day on which any such continuation or conversion to Base
Rate Loans is to occur, or (ii) the third Business Day preceding the day on
which any such continuation or conversion to Eurodollar Loans is to occur.
Each such written request or confirmation must be made in the form and substance
of the "Continuation/Conversion Notice" attached hereto as Exhibit C, duly
completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in such written confirmation. Upon receipt of any such
Borrowing Notice, Agent shall give each Bank prompt notice of the terms thereof.
Each Borrowing Notice shall be irrevocable and binding on Borrower. During the
continuance of any Default, Borrower may not make any election to convert
existing Loans into Eurodollar Loans or continue existing Loans as Eurodollar
Loans. If (due to the existence of a Default or for any other reason) Borrower
fails to timely and properly give any notice of continuation or conversion with
respect to a Borrowing of existing Eurodollar Loans at least three days prior to
the end of the Interest Period applicable thereto, such Eurodollar Loans shall
automatically be converted into Base Rate Loans at the end of such Interest
Period. No new funds shall be repaid by Borrower or advanced by any Bank in
connection with any continuation or conversion of existing Loans pursuant to
this section, and no such continuation or conversion shall be deemed to be a new
advance of funds for any purpose; such continuations and conversions merely
constitute a change in the interest rate applicable to already outstanding
Loans.
Section 2.4. Use of Proceeds. Borrower shall use the proceeds of the
---------------
first Loan to pay in full the Debt outstanding under the CIBC Credit Agreement.
Borrower shall use all subsequent Loans to (i) finance future proved oil and gas
acquisitions and development by Borrower, (ii) finance the Crysen Acquisition
(but only if all Banks first approve the terms thereof) and (iii) provide
working capital for its operations. In no event shall the funds from any Loan
be used directly or indirectly by any Person for personal, family, household or
agricultural purposes or for the purpose, whether immediate, incidental or
ultimate, of purchasing, acquiring or carrying any "margin stock" or any "margin
securities" (as such terms are defined respectively in Regulation U and
Regulation G promulgated by
8
the Board of Governors of the Federal Reserve System) or to extend credit to
others directly or indirectly for the purpose of purchasing or carrying any such
margin stock or margin securities. Borrower represents and warrants that
Borrower is not engaged principally, or as one of Borrower's important
activities, in the business of extending credit to others for the purpose of
purchasing or carrying such margin stock or margin securities.
Section 2.5. Fees.
----
(a) Commitment Fees. In consideration of each Bank's commitment to make
---------------
Loans, Borrower will pay to Agent for the account of each Bank a commitment fee
determined on a daily basis by applying a rate of one-half of one percent (.50%)
per annum to such Bank's Percentage Share of the unused portion of the Borrowing
Base on each day during the Commitment Period, determined for each such day by
deducting from the amount of the Borrowing Base at the end of such day the
Facility Usage. This commitment fee shall be due and payable in arrears on the
last day of each Fiscal Quarter and at the end of the Commitment Period.
(b) Facility Fee. In addition to all other amounts due to Agent under the
------------
Loan Documents, Borrower will pay a facility fee to Agent, for its own account,
as described in a letter agreement of even date herewith between Agent and
Borrower.
Section 2.6. Optional Prepayments. Borrower may, upon five Business
--------------------
Days' notice to each Bank, from time to time and without premium or penalty
prepay the Notes, in whole or in part, so long as the aggregate amounts of all
partial prepayments of principal on the Notes equals $1,000,000 or any higher
integral multiple of $1,000,000, so long as Borrower does not prepay any
Eurodollar Loan, and so long as Borrower does not make any prepayments which
would reduce the unpaid principal balance of any Loan to less than $100,000
without first either (a) terminating this Agreement or (b) providing assurance
satisfactory to Agent in its discretion that Banks' legal rights under the Loan
Documents are in no way affected by such reduction. Each partial prepayment of
principal made after the end of the Commitment Period shall be applied to the
regular installments of principal due under the Notes in the inverse order of
their maturities. Each prepayment of principal under this section shall be
accompanied by all interest then accrued and unpaid on the principal so prepaid.
Any principal or interest prepaid pursuant to this section shall be in addition
to, and not in lieu of, all payments otherwise required to be paid under the
Loan Documents at the time of such prepayment.
Section 2.7. Mandatory Prepayments.
---------------------
(a) Borrower will make all payments on the Obligations which are required
under the Intercreditor Agreement, including all prepayments of principal on the
Notes which are required under Section 3(a)(iv) of the Intercreditor Agreement.
(b) If at any time the Facility Usage is in excess of the Borrowing Base
(such excess being herein called a "Borrowing Base Deficiency"), Borrower shall,
within five Business Days after Agent gives notice of such fact to Borrower,
either:
(i) prepay the principal of the Loans in an aggregate amount at least
equal to such Borrowing Base Deficiency, or
(ii) give notice to Agent electing to prepay the principal of the
Loans in up to three monthly installments in an aggregate amount at least
equal to such Borrowing Base Deficiency, with each such installment equal
to or in excess of one-third of such Borrowing Base
9
Deficiency, and with the first such installment to be paid one month after
the giving of such notice and the subsequent installments to be due and
payable at one month intervals thereafter until such Borrowing Base
Deficiency has been eliminated, or
(iii) give notice to Agent that Borrower desires to provide Agent with
deeds of trust, mortgages, chattel mortgages, security agreements,
financing statements and other security documents in form and substance
satisfactory to Agent, granting, confirming, and perfecting first and prior
liens or security interests in collateral acceptable to all Banks, to the
extent needed to allow all Banks to increase the Borrowing Base (as they in
their reasonable discretion deem consistent with prudent oil and gas
banking industry lending standards at the time) to an amount which
eliminates such Borrowing Base Deficiency, and then provide such security
documents within thirty days after Agent specifies such collateral to
Borrower. If, prior to any such specification by Agent, Required Lenders
determine that the giving of such security documents will not serve to
eliminate such Borrowing Base Deficiency, then, within five Business Days
after receiving notice of such determination, Borrower will elect to make,
and thereafter make, the prepayments specified in either of the preceding
subsections (i) or (ii) of this subsection (b).
(c) Each prepayment of principal under this section shall be accompanied
by all interest then accrued and unpaid on the principal so prepaid. Any
principal or interest prepaid pursuant to this section shall be in addition to,
and not in lieu of, all payments otherwise required to be paid under the Loan
Documents at the time of such prepayment.
Section 2.8. Scheduled Principal Payments. Beginning on June 28, 1999,
----------------------------
and on each Quarterly Payment Date thereafter, Borrower will, in addition to
paying any interest then due on the Loans, make a principal payment in
accordance with the following schedule:
Quarterly Amount
Payment Date of Payment
--------------- ----------
June 28, 1999 $4,000,000
Sept 28, 1999 $4,000,000
Dec 29, 1999 $4,000,000
Mar 29, 2000 $3,000,000
June 28, 2000 $3,000,000
Sept 28, 2000 $3,000,000
Dec 29, 2000 $3,000,000
Mar 28, 2001 $2,500,000
June 28, 2001 $2,500,000
Sept 28, 2001 $2,500,000
Dec 29, 2001 $2,500,000
Mar 29, 2002 $2,250,000
June 28, 2002 $2,250,000
Sept 28, 2002 $2,250,000
Dec 29, 2002 $2,250,000
Mar 29, 2003 $2,000,000
10
The principal installments required by this Section 2.8 are in addition to all
other principal payments required by the terms of this Agreement.
Section 2.9. Initial Borrowing Base. During the period from the date
----------------------
hereof to the first Determination Date the Borrowing Base shall be $45,000,000.
Section 2.10. Subsequent Determinations of Borrowing Base. By March 1
-------------------------------------------
and July 15 of each year Borrower shall furnish to each Bank all information,
reports and data which Agent has then requested concerning Related Persons'
businesses and properties (including their oil and gas properties and interests
and the reserves and production relating thereto), together with the Engineering
Report described in Section C.1(d) or C.1(e) of Annex C, as applicable. Within
thirty days after receiving such information, reports and data, Required Lenders
shall agree upon an amount for the Borrowing Base (provided that all Banks must
agree to any increase in the Borrowing Base) and Agent shall by notice to
Borrower designate such amount as the new Borrowing Base available to Borrower
hereunder, which designation shall take effect immediately on the date such
notice is sent (herein called a "Determination Date") and shall remain in effect
------------------
until but not including the next date as of which the Borrowing Base is
redetermined. If Borrower does not furnish all such information, reports and
data by the date specified in the first sentence of this section, Agent may
nonetheless designate the Borrowing Base at any amount which Required Lenders
determine and may redesignate the Borrowing Base from time to time thereafter
until each Bank receives all such information, reports and data, whereupon
Required Lenders shall designate a new Borrowing Base as described above.
Required Lenders shall determine the amount of the Borrowing Base based upon the
loan collateral value which they in their discretion assign to the various
proved oil and gas properties of Related Persons at the time in question and
based upon such other credit factors (including without limitation the assets,
liabilities, cash flow, hedged and unhedged exposure to price, foreign exchange
rate, and interest rate changes, business, properties, prospects, management and
ownership of Borrower and its Affiliates) as they in their discretion deem
significant. It is expressly understood that Banks and Agent have no obligation
to agree upon or designate the Borrowing Base at any particular amount, whether
in relation to the aggregate face amount of the Notes or otherwise, and that
Banks' commitments to advance funds hereunder is determined by reference to the
Borrowing Base from time to time in effect, which Borrowing Base shall be used
for calculating commitment fees under Section 2.5 and, to the extent permitted
by Law and regulatory authorities, for the purposes of capital adequacy
determination and reimbursements under Section 3.2. It is further understood
that the scheduled principal payments set forth in Section 2.8 are based upon
the Borrowing Base as in effect on the date hereof and that Banks and Agent
shall not increase the Borrowing Base without (i) an amendment to such scheduled
principal payments as determined by the Banks in connection with such Borrowing
Base increase and (ii) the consent of Tamco to such amendment to such scheduled
principal payments.
ARTICLE III - Payments to Banks
-----------------
Section 3.1. General Procedures. Borrower will make each payment which
------------------
it owes under the Loan Documents to Agent for the account of the Lender to whom
such payment is owed. Each such payment must be received by Agent not later
than 11:00 a.m., New York, New York time, on the date such payment becomes due
and payable, in lawful money of the United States of America, without set-off,
deduction or counterclaim, and in immediately available funds. Any payment
received by Agent after such time will be deemed to have been made on the next
following Business Day. Should any such payment become due and payable on a day
other than a Business Day, the maturity of such payment shall be extended to the
next succeeding Business Day, and, in the case of a payment of principal or past
due interest, interest shall accrue and be payable thereon for the period of
such extension as provided in the Loan Document under which such payment is due.
Each payment under a
11
Loan Document shall be due and payable at the place provided therein and, if no
specific place of payment is provided, shall be due and payable at the place of
payment of Agent's Note. When Agent collects or receives money on account of the
Obligations, Agent shall distribute all money so collected or received, and each
Lender shall apply all such money so distributed, as follows:
(a) first, for the payment of all Obligations which are then due (and
if such money is insufficient to pay all such Obligations, first to any
reimbursements due Agent under Section C.8 of Annex C of this Agreement or
Section 9.4 and then to the partial payment of all other Obligations then
due in proportion to the amounts thereof, or as Lenders shall otherwise
agree);
(b) then for the prepayment of amounts owing under the Loan Documents
(other than principal on the Notes) if so specified by Borrower;
(c) then for the prepayment of principal on the Notes, together with
accrued and unpaid interest on the principal so prepaid; and
(d) last, for the payment or prepayment of any other Obligations.
All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest in compliance with Sections
2.6 and 2.7. All distributions of amounts described in any of subsections (b),
(c) or (d) above shall be made by Agent pro rata to each Lender then owed
Obligations described in such subsection in proportion to all amounts owed to
all Lenders which are described in such subsection.
Section 3.2. Capital Reimbursement. If either (a) the introduction or
---------------------
implementation of or the compliance with or any change in or in the
interpretation of any Law, or (b) the introduction or implementation of or the
compliance with any request, directive or guideline from any central bank or
other governmental authority (whether or not having the force of Law) affects or
would affect the amount of capital required or expected to be maintained by any
Lender or any corporation controlling any Lender, then, upon demand by such
Lender, Borrower will pay to Agent for the benefit of such Lender, from time to
time as specified by such Lender, such additional amount or amounts which such
Lender shall determine to be appropriate to compensate such Lender or any
corporation controlling such Lender in light of such circumstances, to the
extent that such Lender reasonably determines that the amount of any such
capital would be increased or the rate of return on any such capital would be
reduced by or in whole or in part based on the existence of the face amount of
such Lender's Loans or commitments under this Agreement.
Section 3.3. Increased Cost of Eurodollar Loans. If any applicable Law
----------------------------------
(whether now in effect or hereinafter enacted or promulgated, including
Regulation D) or any interpretation or administration thereof by any
governmental authority charged with the interpretation or administration thereof
(whether or not having the force of Law):
(a) shall change the basis of taxation of payments to any Lender of
any principal, interest, or other amounts attributable to any Eurodollar
Loan or otherwise due under this Agreement in respect of any Eurodollar
Loan (other than taxes imposed on the overall net income of such Lender or
any lending office of such Lender by any jurisdiction in which such Lender
or any such lending office is located); or
12
(b) shall change, impose, modify, apply or deem applicable any
reserve, special deposit or similar requirements in respect of any
Eurodollar Loan (excluding those for which such Lender is fully compensated
pursuant to adjustments made in the definition of Eurodollar Rate) or
against assets of, deposits with or for the account of, or credit extended
by, such Lender; or
(c) shall impose on any Lender or the interbank Eurocurrency deposit
market any other condition affecting any Eurodollar Loan, the result of
which is to increase the cost to any Lender of funding or maintaining any
Eurodollar Loan or to reduce the amount of any sum receivable by any Lender
in respect of any Eurodollar Loan by an amount deemed by such Lender to be
material,
then such Lender shall promptly notify Agent and Borrower in writing of the
happening of such event and of the amount required to compensate such Lender for
such event (on an after-tax basis, taking into account any taxes on such
compensation), whereupon (i) Borrower shall pay such amount to Agent for the
account of such Lender and (ii) Borrower may elect, by giving to Agent and such
Lender not less than three Business Days' notice, to convert all (but not less
than all) of any such Eurodollar Loans into Base Rate Loans.
Section 3.4. Availability. If (a) any change in applicable Laws, or in
------------
the interpretation or administration thereof of or in any jurisdiction
whatsoever, domestic or foreign, shall make it unlawful or impracticable for any
Lender to fund or maintain Eurodollar Loans, or shall materially restrict the
authority of any Lender to purchase or take offshore deposits of dollars (i.e.,
"eurodollars"), or (b) any Lender determines that matching deposits appropriate
to fund or maintain any Eurodollar Loan are not available to it, or (c) any
Lender determines that the formula for calculating the Eurodollar Rate does not
fairly reflect the cost to such Lender of making or maintaining loans based on
such rate, then, upon notice by such Lender to Borrower and Agent, Borrower's
right to elect Eurodollar Loans from such Lender shall be suspended to the
extent and for the duration of such illegality, impracticability or restriction
and all Eurodollar Loans of such Lender which are then outstanding or are then
the subject of any Borrowing Notice and which cannot lawfully or practicably be
maintained or funded shall immediately become or remain, or shall be funded as,
Base Rate Loans of such Lender. Borrower agrees to indemnify each Lender and
hold it harmless against all costs, expenses, claims, penalties, liabilities and
damages which may result from any such change in Law, interpretation or
administration (other than taxes imposed on the overall net income of such
Lender or any lending office of such Lender). Such indemnification shall be on
an after-tax basis, taking into account any taxes imposed on the amounts paid as
indemnity.
Section 3.5. Funding Losses. In addition to its other obligations
--------------
hereunder, Borrower will indemnify each Lender against, and reimburse each
Lender on demand for, any loss or expense incurred or sustained by such Lender
(including any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by a Lender to fund or maintain
Eurodollar Loans), as a result of (a) any payment or prepayment (whether
authorized or required hereunder or otherwise) of all or a portion of a
Eurodollar Loan on a day other than the day on which the applicable Interest
Period ends, (b) any payment or prepayment, whether required hereunder or
otherwise, of a Loan made after the delivery, but before the effective date, of
a Continuation/ Conversion Notice, if such payment or prepayment prevents such
Continuation/Conversion Notice from becoming fully effective, (c) the failure of
any Loan to be made or of any Continuation/ Conversion Notice to become
effective due to any condition precedent not being satisfied or due to any other
action or inaction of any Related Person, or (d) any conversion (whether
authorized or required hereunder or otherwise) of all or any portion of any
Eurodollar Loan into a Base Rate Loan or into a different Eurodollar Loan on a
day other than the day on which the applicable Interest Period ends. Such
indemnification shall be on an after-tax basis, taking into account any taxes
imposed on the amounts paid as indemnity.
13
Section 3.6. Reimbursable Taxes. Borrower covenants and agrees that:
------------------
(a) Borrower will indemnify each Lender against and reimburse each
Lender for all present and future income, stamp and other taxes, levies,
costs and charges whatsoever imposed, assessed, levied or collected on or
in respect of this Agreement or any Eurodollar Loans (whether or not
legally or correctly imposed, assessed, levied or collected), excluding,
however, any taxes imposed on or measured by the overall net income of
Agent or such Lender or any lending office of such Lender by any
jurisdiction in which such Lender or any such lending office is located
(all such non-excluded taxes, levies, costs and charges being collectively
called "Reimbursable Taxes" in this section). Such indemnification shall
be on an after-tax basis, taking into account any taxes imposed on the
amounts paid as indemnity.
(b) All payments on account of the principal of, and interest on,
each Lender's Loans and Note, and all other amounts payable by Borrower to
any Lender hereunder, shall be made in full without set-off or counterclaim
and shall be made free and clear of and without deductions or withholdings
of any nature by reason of any Reimbursable Taxes, all of which will be for
the account of Borrower. In the event of Borrower being compelled by Law
to make any such deduction or withholding from any payment to any Lender,
Borrower shall pay on the due date of such payment, by way of additional
interest, such additional amounts as are needed to cause the amount
receivable by such Lender after such deduction or withholding to equal the
amount which would have been receivable in the absence of such deduction or
withholding. If Borrower should make any deduction or withholding as
aforesaid, Borrower shall within 60 days thereafter forward to such Lender
an official receipt or other official document evidencing payment of such
deduction or withholding.
(c) If Borrower is ever required to pay any Reimbursable Tax with
respect to any Eurodollar Loan, Borrower may elect, by giving to Agent and
such Lender not less than three Business Days' notice, to convert all (but
not less than all) of any such Eurodollar Loan into a Base Rate Loan, but
such election shall not diminish Borrower's obligation to pay all
Reimbursable Taxes.
(d) Notwithstanding the foregoing provisions of this section,
Borrower shall be entitled, to the extent it is required to do so by Law,
to deduct or withhold (and not to make any indemnification or reimbursement
for) income or other similar taxes imposed by the United States of America
(other than any portion thereof attributable to a change in federal income
tax Laws effected after the date hereof) from interest, fees or other
amounts payable hereunder for the account of any Lender, other than a
Lender (i) who is a U.S. person for Federal income tax purposes or (ii) who
has the Prescribed Forms on file with Agent (with copies provided to
Borrower) for the applicable year to the extent deduction or withholding of
such taxes is not required as a result of the filing of such Prescribed
Forms, provided that if Borrower shall so deduct or withhold any such
taxes, it shall provide a statement to Agent and such Lender, setting forth
the amount of such taxes so deducted or withheld, the applicable rate and
any other information or documentation which such Lender may reasonably
request for assisting such Lender to obtain any allowable credits or
deductions for the taxes so deducted or withheld in the jurisdiction or
jurisdictions in which such Lender is subject to tax. As used in this
section, "Prescribed Forms" means such duly executed forms or statements,
and in such
14
number of copies, which may, from time to time, be prescribed by Law and
which, pursuant to applicable provisions of (x) an income tax treaty
between the United States and the country of residence of the Lender
providing the forms or statements, (y) the Internal Revenue Code of 1986,
as amended from time to time, or (z) any applicable rules or regulations
thereunder, permit Borrower to make payments hereunder for the account of
such Lender free of such deduction or withholding of income or similar
taxes.
Section 3.7. Change of Applicable Lending Office. Each Lender agrees
-----------------------------------
that, upon the occurrence of any event giving rise to the operation of Sections
3.2 through 3.6 with respect to such Lender, it will, if requested by Borrower,
use reasonable efforts (subject to overall policy considerations of such Lender)
to designate another Lending Office, provided that such designation is made on
such terms that such Lender and its Lending Office suffer no economic, legal or
regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of any such section. Nothing in this section
shall affect or postpone any of the obligations of Borrower or the rights of any
Lender provided in Sections 3.2 through 3.6.
Section 3.8. Replacement of Banks. If any Lender seeks reimbursement for
--------------------
increased costs under Sections 3.2 through 3.6, then within ninety days
thereafter -- provided no Event of Default then exists -- Borrower shall have
the right (unless such Lender withdraws its request for additional compensation)
to replace such Lender by requiring such Lender to assign its Loans and Notes
and its commitments hereunder to an Eligible Transferee reasonably acceptable to
Agent and to Borrower, provided that: (i) all Obligations of Borrower owing to
such Lender being replaced (including such increased costs, but excluding
principal and accrued interest on the Notes being assigned) shall be paid in
full to such Lender concurrently with such assignment, and (ii) the replacement
Eligible Transferee shall purchase the Note being assigned by paying to such
Lender a price equal to the principal amount thereof plus accrued and unpaid
interest thereon. In connection with any such assignment Borrower, Agent, such
Lender and the replacement Eligible Transferee shall otherwise comply with
Section 9.5. Notwithstanding the foregoing rights of Borrower under this
section, however, Borrower may not replace any Lender which seeks reimbursement
for increased costs under Section 3.2 through 3.6 unless Borrower is at the same
time replacing all Lenders which are then seeking such compensation.
ARTICLE IV - Conditions Precedent to Lending
-------------------------------
Section 4.1. Documents to be Delivered. No Bank has any obligation to
-------------------------
make its first Loan, unless Agent shall have received all of the following, at
Agent's office in New York, New York, duly executed and delivered and in form,
substance and date satisfactory to Agent:
(a) This Agreement and any other documents that Banks are to execute
in connection herewith.
(b) Each Note.
(c) Each Security Document listed in the Security Schedule.
(d) The Intercreditor Agreement.
(e) The Bank Interest Rate Hedge Agreement.
(f) Certain certificates of Borrower including:
15
(i) An "Omnibus Certificate" of the Secretary and of the
Chairman of the Board or President of Borrower, which shall contain
the names and signatures of the officers of Borrower authorized to
execute Loan Documents and which shall certify to the truth,
correctness and completeness of the following exhibits attached
thereto: (1) a copy of resolutions duly adopted by the Board of
Directors of Borrower and in full force and effect at the time this
Agreement is entered into, authorizing the execution of this Agreement
and the other Loan Documents delivered or to be delivered in
connection herewith and the consummation of the transactions
contemplated herein and therein, (2) a copy of the charter documents
of Borrower and all amendments thereto, certified by the appropriate
official of Borrower's state of organization, and (3) a copy of any
bylaws of Borrower; and
(ii) A "Compliance Certificate" of the Chairman of the Board or
President and of the chief financial officer of Borrower, of even date
with such Loan, in which such officers certify to the satisfaction of
the conditions set out in subsections (a), (b), (c) and (d) of Section
4.3.
(g) A certificate (or certificates) of the due formation, valid
existence and good standing of Borrower in its state of organization,
issued by the appropriate authorities of such jurisdiction, and
certificates of Borrower's good standing and due qualification to do
business, issued by appropriate officials in any states in which Borrower
owns property subject to Security Documents.
(h) Documents similar to those specified in subsections (f)(i) and
(g) of this section with respect to each Guarantor and the execution by it
of the Loan Documents to which it is a party.
(i) A favorable opinion of Glast, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., counsel
for Related Persons, substantially in the form set forth in Exhibit F-1,
and a favorable opinion of Welborn, Sullivan, Mech & ▇▇▇▇▇▇, P.C., special
Colorado counsel for Related Persons, substantially in the form set forth
in Exhibit F-2.
(j) The Initial Engineering Report and the Initial Financial
Statements.
(k) Certificates or binders evidencing Related Persons' insurance in
effect on the date hereof.
(l) A favorable report of Pilko & Associates, Inc. regarding their
environmental assessment of the material properties of Related Persons, in
scope and results acceptable to Agent.
(m) A favorable report of Agent's professional insurance consultants
regarding their assessment of the insurance maintained by Related Persons,
in scope and results acceptable to Agent.
(n) Payment of all commitment, facility, agency and other fees
required to be paid to any Lender pursuant to any Loan Documents or any
commitment agreement heretofore entered into.
16
(o) A copy of each Equitable Acquisition Document, duly executed and
delivered by each party thereto.
(p) Documents (i) confirming the payment in full of all Debt under
the CIBC Credit Agreement and all documents executed in connection
therewith, (ii) releasing and terminating all Liens on any Related Person's
property securing such Debt (or assigning such Liens to Agent for the
benefit of Banks), and (iii) terminating the credit facility under the CIBC
Credit Agreement.
(q) A true and complete copy of each TCW Document.
(r) An amendment to the Purchase and Sale Agreement dated July 14,
1997, as amended, regarding the Crysen Acquisition.
Section 4.2. Closing of Equitable Acquisition. Contemporaneously with the
--------------------------------
first Loans hereunder, Borrower shall have consummated the transactions
contemplated under the Equitable Acquisition Documents, in form and substance
satisfactory to Agent. Borrower, for itself and on behalf of each Related
Person, hereby acknowledges and agrees that (1) the consummation of the
transactions contemplated under this Agreement and the Equitable Acquisition
Documents, including without limitation the making of the first Loans, are
intended to be simultaneous for all intents and purposes, and (2) each Related
Person shall be deemed to have executed and delivered each Loan document as set
forth in Section 4.1 above, including without limitation each Security Document,
immediately prior to or simultaneously with the making of the first Loans.
Section 4.3. Additional Conditions Precedent. No Bank has any obligation
-------------------------------
to make any Loan (including its first), unless the following conditions
precedent have been satisfied:
(a) All representations and warranties made by any Related Person in
any Loan Document shall be true on and as of the date of such Loan (except
to the extent that the facts upon which such representations are based have
been changed by the extension of credit hereunder) as if such
representations and warranties had been made as of the date of such Loan.
(b) No Default shall exist at the date of such Loan.
(c) No Material Adverse Change shall have occurred to, and no event
or circumstance shall have occurred that could cause a Material Adverse
Change to, Borrower's Consolidated financial condition or businesses since
the date of this Agreement.
(d) Each Related Person shall have performed and complied with all
agreements and conditions required in the Loan Documents to be performed or
complied with by it on or prior to the date of such Loan.
(e) The making of such Loan shall not be prohibited by any Law and
shall not subject any Bank to any penalty or other onerous condition under
or pursuant to any such Law.
(f) Agent shall have received all documents and instruments which
Agent has then requested, in addition to those described in Section 4.1
(including opinions of legal counsel for Related Persons and Agent;
corporate documents and records; documents evidencing
17
governmental authorizations, consents, approvals, licenses and exemptions;
and certificates of public officials and of officers and representatives of
Borrower and other Persons), as to (i) the accuracy and validity of or
compliance with all representations, warranties and covenants made by any
Related Person in this Agreement and the other Loan Documents, (ii) the
satisfaction of all conditions contained herein or therein, and (iii) all
other matters pertaining hereto and thereto. All such additional documents
and instruments shall be satisfactory to Agent in form, substance and date.
(g) Borrower shall, prior to the making of the first Loan (or using
the proceeds thereof), have deposited $ 7,000 with ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.,
counsel for Agent, to be held by such counsel and applied toward payment of
costs and expenses for recordation of the Security Documents, as provided
pursuant to Section 9.4(a). If such deposit exceeds the amount of such
costs and expenses, the excess shall be returned to Borrower. If such
deposit is less than such costs and expenses, the deficit shall be paid by
Borrower pursuant to Section 9.4(a).
ARTICLE V - Representations and Warranties
------------------------------
To confirm each Lender's understanding concerning Related Persons and
Related Persons' businesses, properties and obligations and to induce each
Lender to enter into this Agreement and to extend credit hereunder, Borrower and
Parent each represent and warrant to each Lender that each of the statements in
Annex B is true and correct in all respects.
ARTICLE VI - Affirmative Covenants of Borrower and Parent
--------------------------------------------
To conform with the terms and conditions under which each Lender is willing
to have credit outstanding to Borrower, and to induce each Lender to enter into
this Agreement and extend credit hereunder, Parent and Borrower each warrant,
covenant and agree that until the full and final payment of the Obligations and
the termination of this Agreement, unless Required Lenders have previously
agreed otherwise:
Section 6.1. Payment and Performance. Borrower will pay all amounts due
-----------------------
under the Loan Documents in accordance with the terms thereof and will observe,
perform and comply with every covenant, term and condition expressed or implied
in the Loan Documents, including Annex C, and Borrower and Parent will cause
each other Related Person to observe, perform and comply with every such term,
covenant and condition.
Section 6.2. Agreement to Deliver Security Documents. Parent and
---------------------------------------
Borrower agree to have any Subsidiary formed after the date hereof execute a
Guaranty for the benefit of the Lenders in form substantially similar to the
Parent Guaranty. In addition, Parent and Borrower each agree to deliver and to
cause each other Related Person to deliver, to further secure the Obligations
whenever requested by Agent in its sole and absolute discretion, deeds of trust,
mortgages, chattel mortgages, security agreements, financing statements and
other Security Documents in form and substance satisfactory to Agent for the
purpose of granting, confirming, and perfecting first and prior liens or
security interests in any real or personal property now owned or hereafter
acquired by any Related Person. Furthermore, Parent and Borrower each agree to
deliver and to cause each other Related Person to deliver whenever requested by
Agent in its sole and absolute discretion, an intercompany subordination
agreement in form and substance satisfactory to Agent. Borrower also agrees to
deliver, whenever requested by Agent in its sole and absolute discretion,
favorable title opinions from legal counsel acceptable to Agent with respect to
any Related Person's properties and interests designated by Agent,
18
based upon abstract or record examinations to dates acceptable to Agent and (a)
stating that such Related Person has good and defensible title to such
properties and interests, free and clear of all Liens other than Permitted
Liens, (b) confirming that such properties and interests are subject to Security
Documents securing the Obligations that constitute and create legal, valid and
duly perfected first deed of trust or mortgage liens in such properties and
interests and first priority assignments of and security interests in the oil
and gas attributable to such properties and interests and the proceeds thereof,
and (c) covering such other matters as Agent may request.
Section 6.3. Perfection and Protection of Security Interests and Liens.
---------------------------------------------------------
Borrower and Parent will from time to time deliver, and will cause each other
Related Person from time to time to deliver, to Agent any financing statements,
continuation statements, extension agreements and other documents, properly
completed and executed (and acknowledged when required) by Related Persons in
form and substance satisfactory to Agent, which Agent requests for the purpose
of perfecting, confirming, or protecting any Liens or other rights in Collateral
securing any Obligations.
Section 6.4. Bank Accounts; Offset. To secure the repayment of the
---------------------
Obligations Borrower and Parent each hereby grant to each Lender a security
interest, a lien, and a right of offset, each of which shall be in addition to
all other interests, liens, and rights of any Lender at common law, under the
Loan Documents, or otherwise, and each of which shall be upon and against (a)
any and all moneys, securities or other property (and the proceeds therefrom) of
Borrower or Parent now or hereafter held or received by or in transit to any
Lender from or for the account of Borrower or Parent, whether for safekeeping,
custody, pledge, transmission, collection or otherwise, (b) any and all deposits
(general or special, time or demand, provisional or final) of Borrower or Parent
with any Lender, and (c) any other credits and claims of Borrower or Parent at
any time existing against any Lender, including claims under certificates of
deposit. At any time and from time to time after the occurrence of any Default,
each Lender is hereby authorized to foreclose upon, or to offset against the
Obligations then due and payable (in either case without notice to Borrower or
Parent), any and all items hereinabove referred to. The remedies of foreclosure
and offset are separate and cumulative, and either may be exercised
independently of the other without regard to procedures or restrictions
applicable to the other.
Section 6.5. Guaranties of Parent's Subsidiaries. Each Subsidiary of
-----------------------------------
Parent now existing or created, acquired or coming into existence after the date
hereof shall, promptly upon request by Agent, execute and deliver to Agent an
absolute and unconditional guaranty of the timely repayment of the Obligations
and the due and punctual performance of the obligations of Parent hereunder,
which guaranty shall be satisfactory to Agent in form and substance. Each
Subsidiary of Parent existing on the date hereof shall duly execute and deliver
such a guaranty prior to the making of any Loan hereunder. Parent will cause
each of its Subsidiaries to deliver to Agent, simultaneously with its delivery
of such a guaranty, written evidence satisfactory to Agent and its counsel that
such Subsidiary has taken all corporate or partnership action necessary to duly
approve and authorize its execution, delivery and performance of such guaranty
and any other documents which it is required to execute.
Section 6.6. Production Proceeds. Notwithstanding that, by the terms of
-------------------
the various Security Documents, Related Persons are and will be assigning to
Agent and Banks all of the "Production Proceeds" (as defined therein) accruing
to the property covered thereby, so long as no Default has occurred Related
Persons may continue to receive from the purchasers of production all such
Production Proceeds, subject, however, to the Liens created under the Security
Documents, which Liens are hereby affirmed and ratified. Upon the occurrence of
a Default, Agent and Banks may exercise all rights and remedies granted under
the Security Documents, including the right to obtain possession of all
Production Proceeds then held by Related Persons or to receive directly from the
19
purchasers of production all other Production Proceeds. In no case shall any
failure, whether purposed or inadvertent, by Agent or Banks to collect directly
any such Production Proceeds constitute in any way a waiver, remission or
release of any of their rights under the Security Documents, nor shall any
release of any Production Proceeds by Agent or Banks to Related Persons
constitute a waiver, remission, or release of any other Production Proceeds or
of any rights of Agent or Banks to collect other Production Proceeds thereafter.
Section 6.7. TCW Debt. No Related Person will make any payment on or
--------
with respect to the TCW Debt except as expressly permitted by the terms of the
Intercreditor Agreement.
ARTICLE VII - Events of Default and Remedies
------------------------------
Section 7.1. Events of Default. Each of the events described in Annex D
-----------------
constitutes an Event of Default under this Agreement.
Section 7.2. Acceleration. Upon the occurrence of an Event of Default
------------
described in subsection D.10(a), (b) or (c) of Annex D with respect to Borrower
or the acceleration of the Other Allowed Debt under the Other Loan Documents,
all of the Obligations shall thereupon be immediately due and payable, without
demand, presentment, notice of demand or of dishonor and nonpayment, protest,
notice of protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Related Person who at any time
ratifies or approves this Agreement. Upon any such acceleration, any obligation
of any Bank to make any further Loans shall be permanently terminated. During
the continuance of any other Event of Default, Agent at any time and from time
to time may (and upon written instructions from Required Lenders, Agent shall),
without notice to Borrower or any other Related Person, do either or both of the
following: (1) terminate any obligation of Banks to make Loans hereunder, and
(2) declare any or all of the Obligations immediately due and payable, and all
such Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Related Person who at any time
ratifies or approves this Agreement.
Section 7.3. Remedies. If any Default shall occur and be continuing,
--------
each Lender may protect and enforce its rights under the Loan Documents by any
appropriate proceedings, including proceedings for specific performance of any
covenant or agreement contained in any Loan Document, and each Lender may
enforce the payment of any Obligations due it or enforce any other legal or
equitable right which it may have. All rights, remedies and powers conferred
upon Lenders under the Loan Documents shall be deemed cumulative and not
exclusive of any other rights, remedies or powers available under the Loan
Documents or at Law or in equity.
ARTICLE VIII - Agent
-----
Section 8.1. Appointment and Authority. Each Bank hereby irrevocably
-------------------------
authorizes Agent, and Agent hereby undertakes, to receive payments of principal,
interest and other amounts due hereunder as specified herein and to take all
other actions and to exercise such powers under the Loan Documents as are
specifically delegated to Agent by the terms hereof or thereof, together with
all other powers reasonably incidental thereto. The relationship of Agent to
the other Banks is only that of one commercial Bank acting as administrative
agent for others, and nothing in the Loan Documents shall be
20
construed to constitute Agent a trustee or other fiduciary for any holder of any
of the Notes or of any participation therein nor to impose on Agent duties and
obligations other than those expressly provided for in the Loan Documents. With
respect to any matters not expressly provided for in the Loan Documents and any
matters which the Loan Documents place within the discretion of Agent, Agent
shall not be required to exercise any discretion or take any action, and it may
request instructions from Banks with respect to any such matter, in which case
it shall be required to act or to refrain from acting (and shall be fully
protected and free from liability to all Banks in so acting or refraining from
acting) upon the instructions of Required Lenders (including itself), provided,
however, that Agent shall not be required to take any action which exposes it to
a risk of personal liability that it considers unreasonable or which is contrary
to the Loan Documents or to applicable Law. Upon receipt by Agent from Borrower
of any communication calling for action on the part of Banks or upon notice from
any other Bank to Agent of any Default or Event of Default, Agent shall promptly
notify each other Bank thereof.
Section 8.2. Exculpation, Agent's Reliance, Etc. Neither Agent nor any
----------------------------------
of its directors, officers, agents, attorneys, or employees shall be liable for
any action taken or omitted to be taken by any of them under or in connection
with the Loan Documents, INCLUDING THEIR NEGLIGENCE OF ANY KIND, except that
each shall be liable for its own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, Agent (a) may treat the payee of any
Note as the holder thereof until Agent receives written notice of the assignment
or transfer thereof in accordance with this Agreement, signed by such payee and
in form satisfactory to Agent; (b) may consult with legal counsel (including
counsel for Borrower), independent public accountants and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants or
experts; (c) makes no warranty or representation to any other Bank and shall not
be responsible to any other Bank for any statements, warranties or
representations made in or in connection with the Loan Documents; (d) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of the Loan Documents on the part of
any Related Person or to inspect the property (including the books and records)
of any Related Person; (e) shall not be responsible to any other Bank for the
due execution, legality, validity, enforceability, genuineness, sufficiency or
value of any Loan Document or any instrument or document furnished in connection
therewith; (f) may rely upon the representations and warranties of each Related
Person and the Banks in exercising its powers hereunder; and (g) shall incur no
liability under or in respect of the Loan Documents by acting upon any notice,
consent, certificate or other instrument or writing (including any telecopy,
telegram, cable or telex) believed by it to be genuine and signed or sent by the
proper Person or Persons.
Section 8.3. Credit Decisions. Each Bank acknowledges that it has,
----------------
independently and without reliance upon any other Bank, made its own analysis of
Borrower and the transactions contemplated hereby and its own independent
decision to enter into this Agreement and the other Loan Documents. Each Bank
also acknowledges that it will, independently and without reliance upon any
other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents.
Section 8.4. Indemnification. Each Bank agrees to indemnify Agent (to
---------------
the extent not reimbursed by Borrower within ten (10) days after demand) from
and against such Bank's Percentage Share of any and all liabilities,
obligations, claims, losses, damages, penalties, fines, actions, judgments,
suits, settlements, costs, expenses or disbursements (including reasonable fees
of attorneys, accountants, experts and advisors) of any kind or nature
whatsoever (in this section collectively called "liabilities and costs") which
to any extent (in whole or in part) may be imposed on, incurred by, or
21
asserted against Agent growing out of, resulting from or in any other way
associated with any of the Collateral, the Loan Documents and the transactions
and events (including the enforcement thereof) at any time associated therewith
or contemplated therein (including any violation or noncompliance with any
Environmental Laws by any Person or any liabilities or duties of any Person with
respect to Hazardous Materials found in or released into the environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY AGENT,
provided only that no Bank shall be obligated under this section to indemnify
Agent for that portion, if any, of any liabilities and costs which is
proximately caused by Agent's own individual gross negligence or willful
misconduct, as determined in a final judgment. Cumulative of the foregoing,
each Bank agrees to reimburse Agent promptly upon demand for such Bank's
Percentage Share of any costs and expenses to be paid to Agent by Borrower under
Section 9.4(a) to the extent that Agent is not timely reimbursed for such
expenses by Borrower as provided in such section. As used in this section the
term "Agent" shall refer not only to the Person designated as such in Section
1.1 but also to each director, officer, agent, attorney, employee,
representative and Affiliate of such Person.
Section 8.5. Rights as Bank. In its capacity as a Bank, Agent shall have
--------------
the same rights and obligations as any Bank and may exercise such rights as
though it were not Agent. Agent may accept deposits from, lend money to, act as
Trustee under indentures of, and generally engage in any kind of business with
any Related Person or their Affiliates, all as if it were not Agent hereunder
and without any duty to account therefor to any other Bank.
Section 8.6. Sharing of Set-Offs and Other Payments. Each Bank agrees
--------------------------------------
that if it shall, whether through the exercise of rights under Security
Documents or rights of banker's lien, set off, or counterclaim against Borrower
or otherwise, obtain payment of a portion of the aggregate Obligations owed to
it which, taking into account all distributions made by Agent under Section 3.1,
causes such Bank to have received more than it would have received had such
payment been received by Agent and distributed pursuant to Section 3.1, then (a)
it shall be deemed to have simultaneously purchased and shall be obligated to
purchase interests in the Obligations as necessary to cause all Banks to share
all payments as provided for in Section 3.1, and (b) such other adjustments
shall be made from time to time as shall be equitable to ensure that Agent and
all Banks share all payments of Obligations as provided in Section 3.1;
provided, however, that nothing herein contained shall in any way affect the
right of any Bank to obtain payment (whether by exercise of rights of banker's
lien, set-off or counterclaim or otherwise) of indebtedness other than the
Obligations. Borrower expressly consents to the foregoing arrangements and
agrees that any holder of any such interest or other participation in the
Obligations, whether or not acquired pursuant to the foregoing arrangements, may
to the fullest extent permitted by Law exercise any and all rights of banker's
lien, set-off, or counterclaim as fully as if such holder were a holder of the
Obligations in the amount of such interest or other participation. If all or
any part of any funds transferred pursuant to this section is thereafter
recovered from the seller under this section which received the same, the
purchase provided for in this section shall be deemed to have been rescinded to
the extent of such recovery, together with interest, if any, if interest is
required pursuant to Tribunal order to be paid on account of the possession of
such funds prior to such recovery.
Section 8.7. 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
22
determines that there is any dispute among 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 Banks, Agent shall invest such
funds pending distribution; all interest on any such investment shall be
distributed upon the distribution of such investment and in the same proportion
and to the same Persons as such investment. All moneys received by Agent for
distribution to Banks (other than to the Person who is Agent in its separate
capacity as a Bank) shall be held by Agent pending such distribution solely as
Agent for such Banks, and Agent shall have no equitable title to any portion
thereof.
Section 8.8. Benefit of Article VIII. The provisions of this Article
-----------------------
(other than the following Section 8.9) are intended solely for the benefit of
Banks, and no Related Person shall be entitled to rely on any such provision or
assert any such provision in a claim or defense against any Bank. Banks may
waive or amend such provisions as they desire without any notice to or consent
of Borrower or any Related Person.
Section 8.9. Resignation. Agent may resign at any time by giving written
-----------
notice thereof to Banks and Borrower. Each such notice shall set forth the date
of such resignation. Upon any such resignation, Required Banks shall have the
right to appoint a successor Agent. A successor must be appointed for any
retiring Agent, and such Agent's resignation shall become effective when such
successor accepts such appointment. If, within thirty days after the date of
the retiring Agent's resignation, no successor Agent has been appointed and has
accepted such appointment, then the retiring Agent may appoint a successor
Agent, which shall be a commercial bank organized or licensed to conduct a
banking or trust business under the Laws of the United States of America or of
any state thereof. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents. After any
retiring Agent's resignation hereunder the provisions of this Article VIII shall
continue to inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under the Loan Documents.
ARTICLE IX - Miscellaneous
-------------
Section 9.1. Waivers and Amendments; Acknowledgements.
----------------------------------------
(a) Waivers and Amendments. No failure or delay (whether by course of
----------------------
conduct or otherwise) by any Lender in exercising any right, power or remedy
which such Lender may have under any of the Loan Documents shall operate as a
waiver thereof or of any other right, power or remedy, nor shall any single or
partial exercise by any Lender of any such right, power or remedy preclude any
other or further exercise thereof or of any other right, power or remedy. No
waiver of any provision of any Loan Document and no consent to any departure
therefrom shall ever be effective unless it is in writing and signed as provided
below in this section, and then such waiver or consent shall be effective only
in the specific instances and for the purposes for which given and to the extent
specified in such writing. No notice to or demand on any Related Person shall
in any case of itself entitle any Related Person to any other or further notice
or demand in similar or other circumstances. This Agreement and the other Loan
Documents set forth the entire understanding between the parties hereto with
respect to the transactions contemplated herein and therein and supersede all
prior discussions and understandings with respect to the subject matter hereof
and thereof, and no waiver, consent, release, modification or amendment of or
supplement to this Agreement or the other Loan Documents shall be valid or
effective against any party hereto unless the same is in writing and signed by
(i) if such party is Borrower, by Borrower, (ii) if such party is Agent, by such
party, and (iii) if such party is a Bank, by such Bank or
23
by Agent on behalf of Banks with the written consent of Required Lenders (which
consent has already been given as to the termination of the Loan Documents as
provided in Section 9.9). Notwithstanding the foregoing or anything to the
contrary herein, Agent shall not, without the prior consent of each individual
Bank, execute and deliver on behalf of such Bank any waiver or amendment which
would: (1) waive any of the conditions specified in Article IV (provided that
Agent may in its discretion withdraw any request it has made under Section
4.3(e)), (2) reduce any fees payable to such Bank hereunder, or the principal
of, or interest on, such Bank's Note, (3) postpone any date fixed for any
payment of any such fees, principal or interest, (4) amend the definition herein
of "Required Lenders" or otherwise change the aggregate amount of Percentage
Shares which is required for Agent, Banks or any of them to take any particular
action under the Loan Documents, (5) release Borrower from its obligation to pay
such Bank's Note or any Guarantor from its guaranty of such payment, or (7)
amend any provision of the Intercreditor Agreement.
(b) Acknowledgements and Admissions. Borrower hereby represents,
-------------------------------
warrants, acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii) it has made an independent decision to enter into this Agreement and
the other Loan Documents to which it is a party, without reliance on any
representation, warranty, covenant or undertaking by Agent or any Bank, whether
written, oral or implicit, other than as expressly set out in this Agreement or
in another Loan Document delivered on or after the date hereof, (iii) there are
no representations, warranties, covenants, undertakings or agreements by any
Lender as to the Loan Documents except as expressly set out in this Agreement or
in another Loan Document delivered on or after the date hereof, (iv) no Lender
has any fiduciary obligation toward Borrower with respect to any Loan Document
or the transactions contemplated thereby, (v) the relationship pursuant to the
Loan Documents between Borrower and the other Related Persons, on one hand, and
each Lender, on the other hand, is and shall be solely that of debtor and
creditor, respectively, (vi) no partnership or joint venture exists with respect
to the Loan Documents between any Related Person and any Lender, (vii) Agent is
not Borrower's Agent, but Agent for Banks, (viii) should an Event of Default or
Default occur or exist, each Lender will determine in its sole discretion and
for its own reasons what remedies and actions it will or will not exercise or
take at that time, (ix) without limiting any of the foregoing, Borrower is not
relying upon any representation or covenant by any Lender, or any representative
thereof, and no such representation or covenant has been made, that any Lender
will, at the time of an Event of Default or Default, or at any other time,
waive, negotiate, discuss, or take or refrain from taking any action permitted
under the Loan Documents with respect to any such Event of Default or Default or
any other provision of the Loan Documents, and (x) all Lenders have relied upon
the truthfulness of the acknowledgements in this section in deciding to execute
and deliver this Agreement and to become obligated hereunder.
(c) Representation by Banks. Each Bank hereby represents that it will
-----------------------
acquire its Note for its own account in the ordinary course of its commercial
lending business; however, the disposition of such Bank's property shall at all
times be and remain within its control and, in particular and without
limitation, such Bank may sell or otherwise transfer its Note, any participation
interest or other interest in its Note, or any of its other rights and
obligations under the Loan Documents.
(d) Joint Acknowledgment. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
--------------------
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
24
Section 9.2. Survival of Agreements; Cumulative Nature. All of Related
-----------------------------------------
Persons' various representations, warranties, covenants and agreements in the
Loan Documents shall survive the execution and delivery of this Agreement and
the other Loan Documents and the performance hereof and thereof, including the
making or granting of the Loans and the delivery of the Notes and the other
Loan Documents, and shall further survive until all of the Obligations are paid
in full to each Lender and all of Lenders' obligations to Borrower are
terminated. All statements and agreements contained in any certificate or other
instrument delivered by any Related Person to any Lender under any Loan Document
shall be deemed representations and warranties by Borrower or agreements and
covenants of Borrower under this Agreement. The representations, warranties,
indemnities, and covenants made by Related Persons in the Loan Documents, and
the rights, powers, and privileges granted to Lenders in the Loan Documents, are
cumulative, and, except for expressly specified waivers and consents, no Loan
Document shall be construed in the context of another to diminish, nullify, or
otherwise reduce the benefit to any Lender of any such representation, warranty,
indemnity, covenant, right, power or privilege. In particular and without
limitation, no exception set out in this Agreement to any representation,
warranty, indemnity, or covenant herein contained shall apply to any similar
representation, warranty, indemnity, or covenant contained in any other Loan
Document, and each such similar representation, warranty, indemnity, or covenant
shall be subject only to those exceptions which are expressly made applicable to
it by the terms of the various Loan Documents.
Section 9.3. Notices. All notices, requests, consents, demands and other
-------
communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that Agent may give telephonic notices to the other Lenders), and shall be
deemed sufficiently given or furnished if delivered by personal delivery, by
telecopy or telex, by delivery service with proof of delivery, or by registered
or certified United States mail, postage prepaid, to Borrower and Related
Persons at the address of Borrower specified on the signature pages hereto and
to each Lender at its address specified on the signature pages hereto (unless
changed by similar notice in writing given by the particular Person whose
address is to be changed). Any such notice or communication shall be deemed to
have been given (a) in the case of personal delivery or delivery service, as of
the date of first attempted delivery during normal business hours at the address
provided herein, (b) in the case of telecopy or telex, upon receipt, or (c) in
the case of registered or certified United States mail, three days after deposit
in the mail; provided, however, that no Borrowing Notice shall become effective
until actually received by Agent.
Section 9.4. Payment of Expenses; Indemnity.
------------------------------
(a) Payment of Expenses. Whether or not the transactions contemplated by
-------------------
this Agreement are consummated, Borrower will promptly (and in any event, within
30 days after any invoice or other statement or notice) pay: (i) all transfer,
stamp, mortgage, documentary or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect of this Agreement or
any of the other Loan Documents or any other document referred to herein or
therein, (ii) all reasonable costs and expenses incurred by or on behalf of
Agent (including attorneys' fees, consultants' fees and engineering fees, travel
costs and miscellaneous expenses) in connection with (1) the negotiation,
preparation, execution and delivery of the Loan Documents, and any and all
consents, waivers or other documents or instruments relating thereto, (2) the
filing, recording, refiling and re-recording of any Loan Documents and any other
documents or instruments or further assurances required to be filed or recorded
or refiled or re-recorded by the terms of any Loan Document, (3) the borrowings
hereunder and other action reasonably required in the course of administration
hereof, (4) monitoring or confirming (or preparation or negotiation of any
document related to) Borrower's compliance with any covenants or conditions
contained in this Agreement or in any Loan Document, and (iii) all reasonable
costs and expenses incurred by or on behalf of any Lender (including attorneys'
25
fees, consultants' fees and accounting fees) in connection with the defense or
enforcement of any of the Loan Documents (including this section) or the defense
of any Lender's exercise of its rights thereunder. In addition to the foregoing,
until and all Obligations have been paid in full, Borrower will also pay or
reimburse Agent for all reasonable out-of-pocket costs and expenses of Agent or
its agents or employees in connection with the continuing administration of the
Loans and the related due diligence of Agent, including travel and miscellaneous
expenses and fees and expenses of Agent's outside counsel, reserve engineers and
consultants engaged in connection with the Loan Documents.
(b) Indemnity. Borrower and Parent each agree to indemnify each Lender,
---------
upon demand, from and against any and all liabilities, obligations, claims,
losses, damages, penalties, fines, actions, judgments, suits, settlements,
costs, expenses or disbursements (including reasonable fees of attorneys,
accountants, experts and advisors) of any kind or nature whatsoever (in this
section collectively called "liabilities and costs") which to any extent (in
whole or in part) may be imposed on, incurred by, or asserted against such
Lender growing out of, resulting from or in any other way associated with any of
the Collateral, the Loan Documents and the transactions and events (including
the enforcement or defense thereof) at any time associated therewith or
contemplated therein (including any violation or noncompliance with any
Environmental Laws by any Related Person or any liabilities or duties of any
Related Person or any Lender with respect to Hazardous Materials found in or
released into the environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY LENDER,
provided only that no Lender shall be entitled under this section to receive
indemnification for that portion, if any, of any liabilities and costs which is
proximately caused by its own individual gross negligence or willful misconduct,
as determined in a final judgment. If any Person (including Borrower or any of
its Affiliates) ever alleges such gross negligence or willful misconduct by any
Lender, the indemnification provided for in this section shall nonetheless be
paid upon demand, subject to later adjustment or reimbursement, until such time
as a court of competent jurisdiction enters a final judgment as to the extent
and effect of the alleged gross negligence or willful misconduct. As used in
this section the term "Lenders" shall refer not only to the Persons designated
as such in Section 1.1 but also to each director, officer, agent, attorney,
employee, representative and Affiliate of such Persons.
Section 9.5. Joint and Several Liability; Parties in Interest;
-------------------------------------------------
Assignments.
-----------
(a) All Obligations which are incurred by two or more Related Persons
shall be their joint and several obligations and liabilities. All grants,
covenants and agreements contained in the Loan Documents shall bind and inure to
the benefit of the parties thereto and their respective successors and assigns;
provided, however, that no Related Person may assign or transfer any of its
rights or delegate any of its duties or obligations under any Loan Document
without the prior consent of Required Lenders. Neither Borrower nor any
Affiliates of Borrower shall directly or indirectly purchase or otherwise retire
any Obligations owed to any Bank nor will any Bank accept any offer to do so,
unless each Bank shall have received substantially the same offer with respect
to the same Percentage Share of the Obligations owed to it. If Borrower or any
Affiliate of Borrower at any time purchases some but less than all of the
Obligations owed to all Lenders, such purchaser shall not be entitled to any
rights of any Lender under the Loan Documents unless and until Borrower or its
Affiliates have purchased all of the Obligations.
26
(b) No Bank shall sell any participation interest in its commitment
hereunder or any of its rights under its Loans or under the Loan Documents to
any Person other than an Eligible Transferee, and then only if the agreement
between such Bank and such participant at all times provides: (i) that such
participation exists only as a result of the agreement between such participant
and such Bank and that such transfer does not give such participant any right to
vote as a Bank or any other direct claims or rights against any Person other
than such Bank, (ii) that such participant is not entitled to payment from any
Related Person under Sections 3.2 through 3.6 of amounts in excess of those
payable to such Bank under such sections (determined without regard to the sale
of such participation), and (iii) unless such participant is an Affiliate of
such Bank, that such participant shall not be entitled to require such Bank to
take any action under any Loan Document or to obtain the consent of such
participant prior to taking any action under any Loan Document, except for
actions which would require the consent of all Banks under subsection (a) of
Section 9.1. No Bank selling such a participation shall, as between the other
parties hereto and such Bank, be relieved of any of its obligations hereunder as
a result of the sale of such participation. Each Bank which sells any such
participation to any Person (other than an Affiliate of such Bank) shall give
prompt notice thereof to Agent and Borrower.
(c) Except for sales of participations under the immediately preceding
subsection (b), no Bank shall make any assignment or transfer of any kind of its
commitments or any of its rights under its Loans or under the Loan Documents,
except for assignments to an Eligible Transferee, and then only if such
assignment is made in accordance with the following requirements:
(i) Each such assignment shall apply to all Obligations owing to the
assignor Bank hereunder and to the unused portion of the assignor Bank's
commitments, so that after such assignment is made the assignor Bank shall
have a fixed (and not a varying) Percentage Share in its Loans and Note and
be committed to make that Percentage Share of all future Loans, the
assignee shall have a fixed Percentage Share in such Loans and Note and be
committed to make that Percentage Share of all future Loans, and the
Percentage Share of the Borrowing Base of both the assignor and the
assignee shall equal or exceed $5,000,000.
(ii) The parties to each such assignment shall execute and deliver to
Agent, for its acceptance and recording in the "Register" (as defined below
in this section), an Assignment and Assumption in the form of Exhibit F,
appropriately completed, together with the Note subject to such assignment
and a processing fee payable to Agent of $2,500. Upon such execution,
delivery, and payment and upon the satisfaction of the conditions set out
in such Assignment and Assumption, then (i) Borrower shall issue new Notes
to such assignor and assignee upon return of the old Notes to Borrower, and
(ii) as of the "Settlement Date" specified in such Assignment and
Assumption the assignee thereunder shall be a party hereto and a Bank
hereunder and Agent shall thereupon deliver to Borrower and each Bank a
schedule showing the revised Percentage Shares of such assignor Bank and
such assignee Bank and the Percentage Shares of all other Banks.
(iii) Each assignee Bank which is not a United States person (as such
term is defined in Section 7701(a)(30) of the Internal Revenue Code of
1986, as amended) for Federal income tax purposes, shall (to the extent it
has not already done so) provide Agent and Borrower with the "Prescribed
Forms" referred to in Section 3.6(d).
27
(d) Nothing contained in this section shall prevent or prohibit any Bank
from assigning or pledging all or any portion of its Loans and Note to any
Federal Reserve Bank as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Bank; provided that no such assignment or pledge
shall relieve such Bank from its obligations hereunder.
(e) By executing and delivering an Assignment and Assumption, each
assignee Bank thereunder will be confirming to and agreeing with Borrower,
Agents and each other Bank hereunder that such assignee understands and agrees
to the terms hereof, including Article IX hereof.
(f) Agent shall maintain a copy of each Assignment and Assumption and a
register for the recordation of the names and addresses of Banks and the
Percentage Shares of, and principal amount of the Loans owing to, each Bank from
time to time (in this section called the "Register"). The entries in the
Register shall be conclusive, in the absence of manifest error, and Borrower and
each Lender may treat each Person whose name is recorded in the Register as a
Bank hereunder for all purposes. The Register shall be available for inspection
by Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
Section 9.6. Confidentiality. Each Lender agrees that it will take all
---------------
reasonable steps to keep confidential any proprietary information given to it by
any Related Person, provided, however, that this restriction shall not apply to
information which (i) has at the time in question entered the public domain,
(ii) is required to be disclosed by Law (whether valid or invalid) of any
Tribunal, (iii) is disclosed to any Lender's Affiliates, auditors, attorneys, or
agents (provided such Persons are obligated to hold such information in
confidence on the terms provided in this section), (iv) is furnished to any
other Lender or to any purchaser or prospective purchaser of participations or
other interests in any Loan or Loan Document (provided each such purchaser or
prospective purchaser first agrees to hold such information in confidence on the
terms provided in this section), or (v) is disclosed in the course of enforcing
its rights and remedies during the existence of an Event of Default.
Section 9.7. Governing Law; Submission to Process. EXCEPT TO THE EXTENT
------------------------------------
THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY ELECTED IN A LOAN DOCUMENT,
THE LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS
OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND THE LAWS OF THE UNITED
STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. BORROWER
AND PARENT EACH HEREBY AGREE THAT ANY LEGAL ACTION OR PROCEEDING AGAINST
BORROWER OR PARENT WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OF THE LOAN
DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AS LENDERS MAY ELECT,
AND, BY EXECUTION AND DELIVERY HEREOF, EACH OF BORROWER AND PARENT ACCEPTS AND
CONSENTS FOR ITSELF AND IN RESPECT TO ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS, AND FURTHER AGREES TO
A TRANSFER OF ANY SUCH PROCEEDING TO A FEDERAL COURT SITTING IN THE STATE OF NEW
YORK TO THE EXTENT THAT IT HAS SUBJECT MATTER JURISDICTION, AND OTHERWISE TO A
STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SUCH JURISDICTION SHALL BE
EXCLUSIVE, UNLESS WAIVED BY LENDERS IN WRITING, WITH RESPECT TO ANY ACTION OR
PROCEEDING BROUGHT BY IT AGAINST LENDERS AND ANY QUESTIONS RELATING TO USURY.
EACH OF PARENT AND BORROWER AGREES THAT SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK SHALL APPLY TO THE LOAN
DOCUMENTS AND WAIVES ANY RIGHT TO STAY OR TO DISMISS ANY ACTION OR PROCEEDING
BROUGHT BEFORE SAID COURTS ON THE BASIS OF FORUM NON CONVENIENS. IN FURTHERANCE
OF THE FOREGOING, EACH OF PARENT AND
28
BORROWER HEREBY IRREVOCABLY DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, AS AGENT OF BORROWER AND PARENT TO RECEIVE SERVICE
OF ALL PROCESS BROUGHT AGAINST BORROWER OR PARENT WITH RESPECT TO ANY SUCH
PROCEEDING IN ANY SUCH COURT IN NEW YORK, SUCH SERVICE BEING HEREBY ACKNOWLEDGED
BY BORROWER AND PARENT TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.
COPIES OF ANY SUCH PROCESS SO SERVED SHALL ALSO, IF PERMITTED BY LAW, BE SENT BY
REGISTERED MAIL TO BORROWER AT ITS ADDRESS SET FORTH BELOW, BUT THE FAILURE OF
BORROWER TO RECEIVE SUCH COPIES SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH
PROCESS AS AFORESAID. BORROWER SHALL FURNISH TO LENDERS A CONSENT OF CT
CORPORATION SYSTEM AGREEING TO ACT HEREUNDER PRIOR TO THE EFFECTIVE DATE OF THIS
AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDERS TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDERS TO BRING
PROCEEDINGS AGAINST BORROWER OR PARENT IN THE COURTS OF ANY OTHER JURISDICTION.
IF FOR ANY REASON CT CORPORATION SYSTEM SHALL RESIGN OR OTHERWISE CEASE TO ACT
AS BORROWER'S OR PARENT'S AGENT, BORROWER AND PARENT HEREBY IRREVOCABLY AGREE TO
(A) IMMEDIATELY DESIGNATE AND APPOINT A NEW AGENT ACCEPTABLE TO AGENT TO SERVE
IN SUCH CAPACITY AND, IN SUCH EVENT, SUCH NEW AGENT SHALL BE DEEMED TO BE
SUBSTITUTED FOR CT CORPORATION SYSTEM FOR ALL PURPOSES HEREOF AND (B) PROMPTLY
DELIVER TO LENDERS THE WRITTEN CONSENT (IN FORM AND SUBSTANCE SATISFACTORY TO
AGENT) OF SUCH NEW AGENT AGREEING TO SERVE IN SUCH CAPACITY.
Section 9.8. Limitation on Interest. Lenders, Related Persons and the
----------------------
other parties to the Loan Documents intend to contract in strict compliance with
applicable usury Law from time to time in effect. In furtherance thereof such
Persons stipulate and agree that none of the terms and provisions contained in
the Loan Documents shall ever be construed to provide for interest in excess of
the maximum amount of interest permitted to be charged by applicable Law from
time to time in effect. Neither any Related Person nor any present or future
guarantors, endorsers, or other Persons hereafter becoming liable for payment of
any Obligation shall ever be liable for unearned interest thereon or shall ever
be required to pay interest thereon in excess of the maximum amount that may be
lawfully charged under applicable Law from time to time in effect, and the
provisions of this section shall control over all other provisions of the Loan
Documents which may be in conflict or apparent conflict herewith.
Section 9.9. Termination; Limited Survival. In its sole and absolute
-----------------------------
discretion Borrower may at any time that no Obligations are owing elect in a
written notice delivered to Agent to terminate this Agreement. Upon receipt by
Agent of such a notice, if no Obligations are then owing this Agreement and all
other Loan Documents shall thereupon be terminated and the parties thereto
released from all prospective obligations thereunder. Notwithstanding the
foregoing or anything herein to the contrary, any waivers or admissions made by
any Related Person in any Loan Document, any Obligations under Sections 3.2
through 3.6, and any obligations which any Person may have to indemnify or
compensate any Lender shall survive any termination of this Agreement or any
other Loan Document. At the request and expense of Borrower, Agent shall
prepare and execute all necessary instruments to reflect and effect such
termination of the Loan Documents. Agent is hereby authorized to execute all
such instruments on behalf of all Banks, without the joinder of or further
action by any Bank.
Section 9.10. Severability. If any term or provision of any Loan
------------
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable Law.
29
Section 9.11. Counterparts. This Agreement may be separately executed in
------------
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
Section 9.12. Waiver of Jury Trial, Punitive Damages, etc. TO THE EXTENT
--------------------------------------------
PERMITTED BY LAW, LENDERS, PARENT AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY,
AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER,
OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF SUCH PERSONS, PARENT OR BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR LENDERS' ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. PARENT,
BORROWER AND EACH LENDER HEREBY FURTHER (A) IRREVOCABLY WAIVES, TO THE MAXIMUM
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
SUCH LITIGATION ANY "SPECIAL DAMAGES", AS DEFINED BELOW, (B) CERTIFIES THAT NO
PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (C)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.
AS USED IN THIS SECTION, "SPECIAL DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL,
EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE
ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR
DELIVER TO ANY OTHER PARTY HERETO.
30
IN WITNESS WHEREOF, this Agreement is executed as of the date first written
above.
INLAND PRODUCTION COMPANY
Borrower
By:
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Chief Financial Officer
Address:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
INLAND RESOURCES INC.
Parent
By:
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Chief Financial Officer
Address:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
31
ING (U.S.) Capital Corporation
Agent and Bank
By:
---------------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
Address:
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
32
ANNEX A
COMMON DEFINITIONS
"2% Affiliate" means, as to any Person, (a) any Person directly or
------------
indirectly owning, controlling or holding with power to vote 2% or more of the
outstanding voting securities of such Person, (b) any Person 2% or more of whose
outstanding voting securities are directly or indirectly owned, controlled or
held with power to vote by such Person, (c) any Person directly or indirectly
controlling, controlled by or under common control with such Person, and (d) any
officer, director, partner or sanguinal or affinal kin of such Person or any
Person described above in clause (c) of this paragraph.
"Affiliate" means, as to any Person, (a) any Person directly or indirectly
---------
owning, controlling or holding with power to vote 10% or more of the outstanding
voting securities of such Person, (b) any Person 10% or more of whose
outstanding voting securities are directly or indirectly owned, controlled or
held with power to vote by such Person, (c) any Person directly or indirectly
controlling, controlled by or under common control with such Person, and (d) any
officer, director, partner or sanguinal or affinal kin of such Person or any
Person described above in clause (c) of this paragraph. Pengo Securities Corp.,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and any Affiliate of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ including any trusts of
which ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or any of his heirs at law is settlor, trustee or
beneficiary shall, for purposes of such 10% test, be treated as a single Person.
"ANCF", "ANCF Capital Expenditures", "ANCF Hierarchy", "ANCF ▇▇▇", "ANCF
---- ------------------------- -------------- -------- ----
Overhead Costs", and "ANCF Transportation Costs" have the meanings given to such
-------------- -------------------------
terms in the Intercreditor Agreement.
"Bank Interest Rate Hedge Agreement" has the meaning given it in the
----------------------------------
Intercreditor Agreement.
"Change of Control" means the occurrence of either of the following events:
-----------------
(i) any Person or two or more Persons acting as a group shall acquire beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Act of 1934, as amended, and including holding
proxies to vote for the election of directors other than proxies held by
Parent's management or their designees to be voted in favor of Persons nominated
by Parent's Board of Directors) a larger percentage of the outstanding voting
securities of Parent than the aggregate percentage owned by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and
Pengo Securities Corp., and the percentage of outstanding voting securities of
Parent owed by such Person or Persons is 35% or more of the outstanding voting
securities of Parent, measured by voting power (including both common stock and
any preferred stock or other equity securities entitling the holders thereof to
vote with the holders of common stock in elections for directors of Parent) or
(ii) one-third or more of the directors of Parent shall consist of Persons not
nominated by Parent's Board of Directors (including as Board nominees any
directors which the Board is obligated to nominate pursuant to shareholders
agreements, voting trust arrangements or similar arrangements which are in place
as of the date hereof, but not those which arise after the date hereof unless
they deal with the same parties or their Affiliates and no one else).
"Collateral" means all property of any kind which is subject to a Lien in
----------
favor of Lenders or which, under the terms of any Security Document, is
purported to be subject to such a Lien.
"Consolidated" refers to the consolidation of Parent, Borrower or any other
------------
Related Person, in accordance with GAAP, with its properly consolidated
subsidiaries. References herein to a Person's
A-1
Consolidated financial statements, financial position, financial condition,
liabilities, etc. refer to the consolidated financial statements, financial
position, financial condition, liabilities, etc. of such Person and its properly
consolidated subsidiaries. "Consolidating", when used with reference to the
-------------
financial statements of Parent, means the financial statements of Parent and its
properly consolidated subsidiaries, presented in a manner acceptable to Agent
which (a) shows the net intercompany transactions between each of Parent and
such subsidiaries and (b) presents substantially the same information with
respect to Borrower which would be presented on individual financial statements
of Borrower.
"Consolidated Net Income" means, as to any Person or Persons for any
-----------------------
period, the gross revenues of such Person or Persons for such period, plus any
cash dividends or distributions actually received by such Person or Persons from
any other business entity, minus all expenses and other proper charges
(including taxes on income, to the extent imposed upon such Person or Persons),
determined on a Consolidated basis after eliminating earnings or losses
attributable to outstanding minority interests, but excluding the net earnings
of any other business entity in which such Person or Persons has an ownership
interest.
"Consolidated Tangible Net Worth" means the remainder of all Consolidated
-------------------------------
assets of Parent, other than intangible assets (including as intangible assets
such assets as patents, copyrights, licenses, franchises, goodwill, trade
names, trade secrets and leases other than oil, gas or mineral leases or leases
required to be capitalized under GAAP), minus Parent's Consolidated Debt,
provided that for purposes of this definition, Parent's Series C Convertible
Preferred Stock shall not be included in the calculation of Parent's
Consolidated Debt and shall be considered equity.
"Crysen Acquisition" means the purchase by Inland Refining of the Crysen
------------------
refinery and other assets located in ▇▇▇▇▇ Cross, Utah pursuant to the Purchase
and Sale Agreement dated July 14, 1997, as amended, among Crysen Refining, Inc.,
Sound Refining, Inc., Crysen Corporation, Parent and Inland Refining.
"Debt" means, as to any Person, all indebtedness, liabilities and
----
obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to GAAP.
"Direct Taxes" has the meaning given it in the Intercreditor Agreement.
------------
"Disclosure Report" means either a notice given by Borrower under Section
-----------------
C.3 of Annex C or a certificate given by Borrower's chief financial officer
under Section C.1 of Annex C.
"Disclosure Schedule" means Schedule 1 to this Agreement.
-------------------
"Distribution" means (a) any dividend or other distribution made by a
------------
Related Person on or in respect of any stock, partnership interest, or other
equity interest in such Related Person (including any option or warrant to buy
such an equity interest), or (b) any payment made by a Related Person to
purchase, redeem, acquire or retire any stock, partnership interest, or other
equity interest in such Related Person (including any such option or warrant).
"EBITDA" means, for any four-Fiscal Quarter period, the sum of (1) the
------
Consolidated Net Income of Parent during such period, plus (2) all cash interest
paid during such period on Restricted Debt (including amortization of original
issue discount and the interest component of any deferred payment obligations
and capital lease obligations) which was deducted in determining such
A-2
Consolidated Net Income, plus (3) all income taxes which were deducted in
determining such Consolidated Net Income, plus (4) all depreciation,
amortization (including amortization of good will and debt issue costs) and
other non-cash charges (including any provision for the reduction in the
carrying value of assets recorded in accordance with GAAP) which were deducted
in determining such Consolidated Net Income, minus (5) all non-cash items of
income which were included in determining such Consolidated Net Income.
"Eligible Mortgaged Properties" means, collectively, those Properties which
-----------------------------
(a) are owned by Borrower and mortgaged to secure the Obligations and the Other
Allowed Debt, (b) for which Agent has received title opinions and other title
information concerning such Properties in form, substance and authorship
satisfactory to Agent, and (c) are free and clear of all Liens other than
Permitted Liens.
"Engineering Report" means the Initial Engineering Report and each
------------------
engineering report delivered pursuant to Section C.1(d) or C.1(e) of Annex C.
"Environmental Laws" means any and all Laws relating to the environment or
------------------
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment including ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
"Equitable Acquisition" means the purchase by Borrower of certain Utah oil
---------------------
and gas properties pursuant to the Equitable Acquisition Documents.
"Equitable Acquisition Documents" means (a) the Purchase and Sale Agreement
-------------------------------
dated July 24, 1997 between Equitable Resources Energy Company and Borrower, (b)
the Assignment and ▇▇▇▇ of Sale by Equitable Resources Energy Company in favor
of Borrower, and (c) other agreements or instruments delivered in connection
therewith to consummate the Equitable Acquisition.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Affiliate" means Borrower and all members of a controlled group of
---------------
corporations and all trades or businesses (whether or not incorporated) under
common control that, together with Borrower, are treated as a single employer
under Section 414 of the Internal Revenue Code of 1986, as amended.
"ERISA Plan" means any employee pension benefit plan subject to Title IV of
----------
ERISA maintained by any ERISA Affiliate with respect to which any Related Person
has a fixed or contingent liability.
"Fiscal Quarter" means a three-month period ending on March 31, June 30,
--------------
September 30 or December 31 of any year.
"Fiscal Year" means a twelve-month period ending on December 31 of any
-----------
year.
"Floating Rate Debt" means any part of the Obligations which bears interest
------------------
at a floating rate.
A-3
"GAAP" means those generally accepted accounting principles and practices
----
which are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and which, in the case of Parent and its
Consolidated subsidiaries, are applied for all periods after the date hereof in
a manner consistent with the manner in which such principles and practices were
applied to the audited Initial Financial Statements. If any change in any
accounting principle or practice is required by the Financial Accounting
Standards Board (or any such successor) in order for or practice to continue as
a generally accepted accounting principle or practice, all reports and financial
statements required hereunder with respect to Parent or with respect to Parent
and its Consolidated subsidiaries may be prepared in accordance with such
change, but all calculations and determinations to be made hereunder may be made
in accordance with such change only after notice of such change is given to each
Lender and Required Lenders agree to such change insofar as it affects the
accounting of Parent or of Parent and its Consolidated subsidiaries.
"Hazardous Materials" means any substances regulated under any
-------------------
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Hedging Contract" means (a) any agreement providing for options, swaps,
----------------
floors, caps, collars, forward sales or forward purchases involving interest
rates, commodities or commodity prices, equities, currencies, bonds, or indexes
based on any of the foregoing, (b) any option, futures or forward contract
traded on an exchange, and (c) any other derivative agreement or other similar
agreement or arrangement, including "Permitted Commodity ▇▇▇▇▇▇" (as defined in
the Intercreditor Agreement).
"Hydrocarbons" means crude oil, natural gas or other liquid or gaseous
------------
hydrocarbons.
"ING Pricing" means the pricing assumptions required under Regulations S-B,
-----------
S-K or S-X , as applicable, promulgated by the Securities and Exchange
Commission.
"Initial Engineering Report" means the engineering report concerning oil
--------------------------
and gas properties of Related Persons dated July 1, 1997, prepared by ▇▇▇▇▇
▇▇▇▇▇ Company.
"Initial Financial Statements" means (i) the audited annual Consolidated
----------------------------
financial statements of Parent dated as of December 31, 1996, (ii) the
unaudited quarterly Consolidated financial statements of Parent dated as of June
30, 1997, (iii) the unaudited balance sheet of Inland Refining as of September
23, 1997, and (iv) other financial statements of Inland Refining from date of
incorporation to September 23, 1997 .
"Inland Refining" means Inland Refining, Inc. a Utah corporation.
---------------
"Insurance Schedule" means Schedule 3 to this Agreement.
------------------
"Law" means any statute, law, regulation, ordinance, rule, treaty,
---
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental restriction of the United States or any state or political
subdivision thereof or of any foreign country or any department, province or
other political subdivision thereof.
"Lien" has the meaning given it in the Intercreditor Agreement.
----
A-4
"Material Adverse Change" means a material and adverse change, from the
-----------------------
state of affairs presented in the Initial Financial Statements or in this
Agreement (including the Disclosure Schedule), to (a) Parent's and its
Subsidiaries' Consolidated financial condition, (b) the operations or properties
of Parent and its Subsidiaries, considered as a whole, (c) Borrower's ability to
timely pay the Obligations and perform its other obligations under the Loan
Documents, or (d) the validity and enforceability of the material terms of any
Loan Documents.
"NPV" means, with respect to any Proved Reserves expected to be produced
---
from any Properties, the net present value, discounted at 10% per annum, of the
future net revenues expected to accrue to Borrower's interests in such reserves
during the remaining expected economic lives of such reserves. Each calculation
of such expected future net revenues shall be made in accordance with the then
existing standards of the Society of Petroleum Engineers, provided that in any
event (i) appropriate deductions shall be made for Direct Taxes, operating,
gathering, transportation and marketing costs, and any capital expenditures
required for the production and sale of such reserves, and (ii) the pricing
assumptions and escalations used in determining NPV for any particular reserves
shall be the TCW Pricing. NPV shall be calculated hereunder in connection with
each Engineering Report, either by Borrower, Tamco or the engineering firm who
prepares such Engineering Report; in the event of any conflict, Tamco's
calculation shall be conclusive and final.
"Parent" means Inland Resources Inc., a Washington corporation.
------
"Permitted Investments" means investments:
---------------------
(a) in open market commercial paper, maturing within 270 days after
acquisition thereof, which is rated at least A-1 by Standard & Poor's Ratings
Group (a division of McGraw Hill, Inc.) or P-1 by ▇▇▇▇▇'▇ Investors Service,
Inc.
(b) in marketable obligations, maturing within 12 months after acquisition
thereof, issued or unconditionally guaranteed by the United States of America or
an instrumentality or agency thereof and entitled to the full faith and credit
of the United States of America.
(c) in demand deposits, and time deposits (including certificates of
deposit) maturing within 12 months from the date of deposit thereof, with any
office of any national or state bank or trust company which is organized under
the Laws of the United States of America or any state therein, which has
capital, surplus and undivided profits of at least $500,000,000, and whose
certificates of deposit are rated at least Aa3 by Standard & Poor's Ratings
Group (a division of McGraw Hill, Inc.) or AA- by ▇▇▇▇▇'▇ Investors Service,
Inc.
"Permitted Lien" has the meaning given to such term in Section C.19 of
--------------
Annex C.
"Person" has the meaning given it in the Intercreditor Agreement.
------
"Properties" has the meaning given in the Intercreditor Agreement.
----------
"Proved Reserves" means "Proved Reserves" as defined in the Definitions for
---------------
Oil and Gas Reserves (in this paragraph, the "Definitions") promulgated by the
Society of Petroleum Engineers (or any generally recognized successor) as in
effect at the time in question. "Proved Developed Producing Reserves" means
-----------------------------------
Proved Reserves which are categorized as both "Developed" and "Producing" in the
Definitions, "Proved Developed Nonproducing Reserves" means Proved Reserves
--------------------------------------
which are categorized as both "Developed" and "Nonproducing" in the Definitions,
and "Proved Undeveloped Reserves" means Proved Reserves which are categorized as
---------------------------
"Undeveloped" in the Definitions.
A-5
"Quarterly Payment Date" means the second to last Business Day in each
----------------------
Fiscal Quarter, beginning with December 29, 1997.
"Rating Agency" means either Standard & Poor's Ratings Group (a division of
-------------
McGraw Hill, Inc.) or ▇▇▇▇▇'▇ Investors Service, Inc. or their respective
successors
"Related Person" has the meaning given it in the Intercreditor Agreement.
--------------
"Restricted Debt" of any Person means Debt in any of the following
---------------
categories:
(a) Debt for borrowed money,
(b) Debt constituting an obligation to pay the deferred purchase price of
property or services,
(c) Debt evidenced by a bond, debenture, note or similar instrument,
(d) Debt which (i) would under GAAP be shown on such Person's balance
sheet as a liability, and (ii) is payable more than one year from the date of
creation thereof (other than reserves for taxes and reserves for contingent
obligations),
(e) Debt arising under futures contracts, forward contracts, swap, cap or
collar contracts, option contracts, hedging contracts, other derivative
contracts, or similar agreements (excluding only option contracts giving such
Person the right - and not the duty - to buy or sell goods expected to be bought
or sold by such Person in the ordinary course of its business, so long as such
Person has no obligation other than the initial payment in full of the purchase
price for the option),
(f) Debt constituting principal under leases capitalized in accordance
with GAAP,
(g) Debt arising under conditional sales or other title retention
agreements,
(h) Debt owing under direct or indirect guaranties of Debt of any other
Person or constituting obligations to purchase or acquire or to otherwise
protect or insure a creditor against loss in respect of Debt of any other Person
(such as obligations under working capital maintenance agreements, agreements to
keep-well, or agreements to purchase Debt, assets, goods, securities or
services), but excluding endorsements in the ordinary course of business of
negotiable instruments in the course of collection,
(i) Debt (for example, repurchase agreements) consisting of an obligation
to purchase securities or other property, if such Debt arises out of or in
connection with the sale of the same or similar securities or property,
(j) Debt with respect to letters of credit or applications or
reimbursement agreements therefor,
(k) Debt with respect to payments received in consideration of oil, gas,
or other minerals yet to be acquired or produced at the time of payment
(including obligations under "take-or-pay" contracts to deliver gas in return
for payments already received and the undischarged balance of any production
payment created by such Person or for the creation of which such Person directly
or indirectly received payment), or
--
A-6
(l) Debt with respect to other obligations to deliver goods or services in
consideration of advance payments therefor;
provided, however, that the "Restricted Debt" of any Person shall not include
Debt that was incurred by such Person on ordinary trade terms to vendors,
suppliers, or other Persons providing goods and services for use by such Person
in the ordinary course of its business, unless and until such Debt is
outstanding more than 90 days past the inccurence thereof, or, if earlier, when
due in accordance with its terms.
"Subsidiary" has the meaning given it in the Intercreditor Agreement.
----------
"TCW Pricing" means those prices (a) for anticipated sales of Hydrocarbons
-----------
that are hedged by a Hedging Contract with an investment grade counter party,
which Hedging Contract has been approved by Tamco, equal to the fixed price or
prices provided for in such Hedging Contract during the term thereof, and
thereafter the prices provided for in subsection (b) below; and (b) for
anticipated sales of Hydrocarbons, if such sales are not hedged by a Hedging
Contract that has been approved by Tamco, equal to the lowest of (i) the average
price received by Borrower for Hydrocarbons of such kind produced from the
Eligible Mortgaged Properties during the twelve months preceding the date of
calculation, (ii) the average price received by Borrower for Hydrocarbons of
such kind produced from the Eligible Mortgaged Properties during the six months
preceding the date of calculation, and (iii) the average of the prices on the
New York Mercantile Exchange (or any successor organization), as reported in the
Wall Street Journal for the date of calculation (or, if such date is not a
Business Day, for the first Business Day thereafter) under the twelve forward
contracts which are listed therein as the first to mature after such date of
calculation, with any necessary adjustment specified by Tamco for quality and
geographical differentials. The applicable price determined pursuant to the
preceding clause (b) shall be escalated at 3% per annum for each year after the
then current year
"Termination Event" means (a) the occurrence with respect to any ERISA Plan
-----------------
of (i) a reportable event described in Sections 4043(b)(5) or (6) of ERISA or
(ii) any other reportable event described in Section 4043(b) of ERISA other than
a reportable event not subject to the provision for 30-day notice to the Pension
Benefit Guaranty Corporation pursuant to a waiver by such corporation under
Section 4043(a) of ERISA, or (b) the withdrawal of any ERISA Affiliate from an
ERISA Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA, or (c) the filing of a notice of intent
to terminate any ERISA Plan or the treatment of any ERISA Plan amendment as a
termination under Section 4041 of ERISA, or (d) the institution of proceedings
to terminate any ERISA Plan by the Pension Benefit Guaranty Corporation under
Section 4042 of ERISA, or (e) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any ERISA Plan.
"Tribunal" means any government, any arbitration panel, any court or any
--------
governmental department, commission, board, bureau, agency or instrumentality of
the United States of America or any state, province, commonwealth, nation,
territory, possession, county, parish, town, township, village or municipality,
whether now or hereafter constituted and/or existing.
A-7
ANNEX B
COMMON REPRESENTATIONS AND WARRANTIES
Section B.1. No Default. No Related Person is in default in the
----------
performance of any of the covenants and agreements contained in any Loan
Document. No event has occurred and is continuing which constitutes a Default.
Section B.2. Organization and Good Standing. Each Related Person is duly
------------------------------
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, having all powers required to carry on its
business and enter into and carry out the transactions contemplated hereby. Each
Related Person is duly qualified, in good standing, and authorized to do
business in all other jurisdictions within the United States wherein the
character of the properties owned or held by it or the nature of the business
transacted by it makes such qualification necessary. Each Related Person has
taken all actions and procedures customarily taken in order to enter, for the
purpose of conducting business or owning property, each jurisdiction outside the
United States, if any, wherein the character of the properties owned or held by
it or the nature of the business transacted by it makes such actions and
procedures desirable.
Section B.3. Authorization. Each Related Person has duly taken all
-------------
action necessary to authorize the execution and delivery by it of the Loan
Documents to which it is a party and to authorize the consummation of the
transactions contemplated thereby and the performance of its obligations
thereunder. Borrower is duly authorized to borrow funds hereunder.
Section B.4 No Conflicts or Consents. The execution and delivery by the
------------------------
various Related Persons of the Loan Documents to which each is a party, the
performance by each of its obligations under such Loan Documents, and the
consummation of the transactions contemplated by the various Loan Documents, do
not and will not (i) conflict with any provision of (1) any Law, (2) the
organizational documents of any Related Person, or (3) any agreement, judgment,
license, order or permit applicable to or binding upon any Related Person, (ii)
result in the acceleration of any Restricted Debt owed by any Related Person, or
(iii) result in or require the creation of any Lien upon any assets or
properties of any Related Person except as expressly contemplated in the Loan
Documents. Except as expressly contemplated in the Loan Documents no consent,
approval, authorization or order of, and no notice to or filing with, any
Tribunal or third party is required in connection with the execution, delivery
or performance by any Related Person of any Loan Document or to consummate any
transactions contemplated by the Loan Documents.
Section B.5. Enforceable Obligations. This Agreement is, and the other
-----------------------
Loan Documents when duly executed and delivered will be, legal, valid and
binding obligations of each Related Person which is a party hereto or thereto,
enforceable in accordance with their terms except as such enforcement may be
limited by bankruptcy, insolvency or similar Laws of general application
relating to the enforcement of creditors' rights.
Section B.6. Initial Financial Statements. Borrower has heretofore
----------------------------
delivered to each Lender true, correct and complete copies of the Initial
Financial Statements. The Initial Financial Statements fairly present each of
Inland Refining's and Parent's Consolidated financial position at the respective
dates thereof, the results of Inland Refining's operations and Inland Refining's
cash flows for the respective periods thereof, and the Consolidated results of
Parent's operations and Parent's Consolidated cash flows for the respective
periods thereof. Since the date of the annual Initial Financial Statements no
Material Adverse Change has occurred, except as reflected in the Disclosure
Schedule or a Disclosure Report. All Initial Financial Statements were prepared
in accordance with GAAP.
B-1
Section B.7. Other Obligations and Restrictions. No Related Person has
----------------------------------
any outstanding Debt of any kind (including obligations under farm-in
agreements, other obligations to make capital expenditures, contingent
obligations, tax assessments, and unusual forward or long-term commitments)
which is, in the aggregate, material to Borrower or material with respect to
Parent's Consolidated financial condition and not shown in the Initial Financial
Statements or disclosed in the Disclosure Schedule or a Disclosure Report. All
obligations of any Related Person to make capital expenditures to drill or
otherwise develop any oil, gas or mineral properties are specified in a
Disclosure Schedule or Disclosure Report (by well or project, describing the
dollar amount of each such obligation). Except as shown in the Initial
Financial Statements or disclosed in the Disclosure Schedule or a Disclosure
Report, no Related Person is subject to or restricted by any franchise,
contract, deed, charter restriction, or other instrument or restriction which is
materially likely to cause a Material Adverse Change.
Section B.8. Full Disclosure. No certificate, statement or other
---------------
information delivered herewith or heretofore by any Related Person to any Lender
in connection with the negotiation of this Agreement or in connection with any
transaction contemplated hereby contains any untrue statement of a material fact
or omits to state any material fact known to any Related Person (other than
industry-wide risks normally associated with the types of businesses conducted
by Related Persons) necessary to make the statements contained herein or therein
not misleading as of the date made or deemed made. There is no fact known to
any Related Person (other than industry-wide risks normally associated with the
types of businesses conducted by Related Persons) that has not been disclosed to
each Lender in writing which is materially likely to cause a Material Adverse
Change. There are no statements or conclusions in any Engineering Report which
are based upon or include misleading information or fail to take into account
material information regarding the matters reported therein, it being understood
that each Engineering Report is necessarily based upon professional opinions,
estimates and projections and that Borrower does not warrant that such opinions,
estimates and projections will ultimately prove to have been accurate. Borrower
has heretofore delivered to each Lender true, correct and complete copies of the
Initial Engineering Report.
Section B.9. Litigation. Except as disclosed in the Initial Financial
----------
Statements or in the Disclosure Schedule: (i) there are no actions, suits or
legal, equitable, arbitrative or administrative proceedings pending, or to the
knowledge of any Related Person threatened, against any Related Person before
any Tribunal which could cause a Material Adverse Change, and (ii) there are no
outstanding judgments, injunctions, writs, rulings or orders by any such
Tribunal against any Related Person or any Related Person's stockholders,
partners, directors or officers which could cause a Material Adverse Change.
Section B.10. Labor Disputes and Acts of God. Except as disclosed in the
------------------------------
Disclosure Schedule or a Disclosure Report, neither the business nor the
properties of any Related Person has been affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance), which could cause a Material Adverse
Change.
Section B.11. ERISA Plans and Liabilities. All currently existing ERISA
---------------------------
Plans are listed in the Disclosure Schedule or a Disclosure Report. Except as
disclosed in the Initial Financial Statements or in the Disclosure Schedule or a
Disclosure Report, no Termination Event has occurred with respect
B-2
to any ERISA Plan and all ERISA Affiliates are in compliance with ERISA in all
material respects. No ERISA Affiliate is required to contribute to, or has any
other absolute or contingent liability in respect of, any "multiemployer plan"
as defined in Section 4001 of ERISA. Except as set forth in the Disclosure
Schedule or a Disclosure Report: (i) no "accumulated funding deficiency" (as
defined in Section 412(a) of the Internal Revenue Code of 1986, as amended)
exists with respect to any ERISA Plan, whether or not waived by the Secretary of
the Treasury or his delegate, and (ii) the current value of each ERISA Plan's
benefits does not exceed the current value of such ERISA Plan's assets available
for the payment of such benefits by more than $500,000.
Section B.12. Environmental and Other Laws. As used in this section:
----------------------------
"CERCLA" means the Comprehensive Environmental Response, Compensation and
-------
Liability Act of 1980, as amended, "CERCLIS" means the Comprehensive
-------
Environmental Response, Compensation and Liability Information System List of
the Environmental Protection Agency, and "Release" has the meaning given such
-------
term in 42 U.S.C. (S) 9601(22). Except as set forth in the Disclosure Schedule
or a Disclosure Report:
(a) Related Persons are conducting their businesses in compliance with all
applicable Laws, including Environmental Laws, and have all permits, licenses
and authorizations required in connection with the conduct of their businesses,
except to the extent failure to have any such permit, license or authorization
could not cause a Material Adverse Change. Each Related Person is in compliance
with the terms and conditions of all such permits, licenses and authorizations,
and is also in compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any applicable Environmental Law or in any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply could
not cause a Material Adverse Change.
(b) No notice, notification, demand, request for information, citation,
summons or order has been issued, no complaint has been filed, no penalty has
been assessed, and no investigation or review is pending or threatened by any
Tribunal or any other Person with respect to (i) any alleged generation,
treatment, storage, recycling, transportation, disposal, or Release of any
Hazardous Materials, either by any Related Person or on any property owned by
any Related Person, (ii) any material remedial action which might be needed to
respond to any such alleged generation, treatment, storage, recycling,
transportation, disposal, or Release, or (1) any alleged failure by any Related
Person to have any permit, license or authorization required in connection with
the conduct of its business or with respect to any such generation, treatment,
storage, recycling, transportation, disposal, or Release.
(c) No Related Person otherwise has any known material contingent
liability in connection with any alleged generation, treatment, storage,
recycling, transportation, disposal, or Release of any Hazardous Materials.
(d) No Related Person has handled any Hazardous Materials, other than as a
generator, on any properties now or previously owned or leased by any Related
Person to an extent that such handling has caused, or could cause, a Material
Adverse Change; and
(i) no PCBs are or have been present at any properties now or previously
owned or leased by any Related Person;
(ii) no asbestos is or has been present at any properties now or previously
owned or leased by any Related Person;
B-3
(iii) there are no underground storage tanks for Hazardous Materials,
active or abandoned, at any properties now or previously owned or leased by
any Related Person;
(iv) no Hazardous Materials have been Released, in a reportable quantity,
where such a quantity has been established by statute, ordinance, rule,
regulation or order, at, on or under any properties now or previously owned
or leased by any Related Person;
(v) no Hazardous Materials have been otherwise Released at, on or under any
properties now or previously owned or leased by any Related Person to an
extent that such release has caused, or could cause, a Material Adverse
Change.
(e) No Related Person has transported or arranged for the transportation
of any Hazardous Material to any location which is listed on the National
Priorities List under CERCLA, listed for possible inclusion on the National
Priorities List by the Environmental Protection Agency in CERCLIS, or listed on
any similar state list or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims against any
Related Person for clean-up costs, remedial work, damages to natural resources
or for personal injury claims, including, but not limited to, claims under
CERCLA.
(f) No Hazardous Material generated by any Related Person has been
recycled, treated, stored, disposed of or released by any Related Person at any
location other than those listed in Disclosure Schedule.
(g) No oral or written notification of a Release of a Hazardous Material
has been filed by or on behalf of any Related Person (and to the best knowledge
of Borrower, no such notification has been filed with respect to any Related
Person by any other Person), and no property now or previously owned or leased
by any Related Person is listed or proposed for listing on the National Priority
list promulgated pursuant to CERCLA, in CERCLIS, or on any similar state list of
sites requiring investigation or clean-up.
(h) There are no Liens arising under or pursuant to any Environmental Laws
on any of the real properties or properties owned or leased by any Related
Person, and no government actions have been taken or are in process which could
subject any of such properties to such Liens; nor would any Related Person be
required to place any notice or restriction relating to the presence of
Hazardous Materials at any properties owned by it in any deed to such
properties.
(i) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by or which are in the possession of
any Related Person in relation to any properties or facility now or previously
owned or leased by any Related Person which have not been made available to
Agent.
Section B.13. Names and Places of Business. No Related Person has,
----------------------------
during the preceding five years, had, been known by, or used any other trade or
fictitious name, except as disclosed in the Disclosure Schedule. Except as
otherwise indicated in the Disclosure Schedule or a Disclosure Report, the chief
executive office and principal place of business of each Related Person are (and
for the preceding five years have been) located at the address of Borrower set
out in Section 9.3. Except as indicated in the Disclosure Schedule or a
Disclosure Report, no Related Person has any other office or place of business.
B-4
Section B.14. Subsidiaries. Neither Borrower nor Parent presently has
------------
any Subsidiary or owns any stock in any corporation or association except those
listed in the Disclosure Schedule or a Disclosure Report. Neither Borrower nor
any Related Person is a member of any general or limited partnership, joint
venture or association of any type whatsoever except those listed in the
Disclosure Schedule or a Disclosure Report. Except as otherwise revealed in a
Disclosure Report, Parent owns, directly or indirectly, the equity interest in
each of its Subsidiaries which is indicated in the Disclosure Schedule.
Section B.15. Licenses. Each Related Person possesses all licenses,
--------
permits, franchises, patents, copyrights, trademarks and trade names, and other
intellectual property (or otherwise possesses the right to use such intellectual
property without violation of the rights of any other Person) which are
necessary to carry out its business as presently conducted and as presently
proposed to be conducted hereafter, and no Related Person is in violation in any
material respect of the terms under which it possesses such intellectual
property or the right to use such intellectual property.
Section B.16. Government Regulation. Neither Borrower nor any other
---------------------
Related Person owing Obligations is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Investment
Company Act of 1940 (as any of the preceding acts have been amended) or any
other Law which regulates the incurring by such Person of Restricted Debt,
including Laws relating to common contract carriers or the sale of electricity,
gas, steam, water or other public utility services.
Section B.17. Ownership of Borrower and Inland Refining. All of the
-----------------------------------------
outstanding shares of Borrower and Inland Refining are owned and shall at all
times be owned by Parent.
Section B.18. Taxes. Each Related Person has filed all United States
-----
Federal income tax returns and all other material tax returns that are required
to be filed by it and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by any Related Person and all other
penalties or charges. The charges, accruals and revenues on the books of each
Related Person in respect of taxes and other governmental charges are, in the
opinion of Parent, adequate. No Related Person has not given or been requested
to give a waiver of the statute of limitations relating to the payment of any
federal or other taxes, except as listed in the Disclosure Schedule or a
Disclosure Report.
▇-▇
▇▇▇▇▇ ▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇.▇. Books, Financial Statements and Reports. Parent, acting
---------------------------------------
through or on behalf of the Related Persons, will at all times maintain full and
accurate books of account and records and a standard system of accounting, will
maintain its Fiscal Year, and will furnish the following statements and reports
to each Lender at Parent's expense:
(a) As soon as available, and in any event within ninety (90) days
after the end of each Fiscal Year, complete Consolidated and consolidating
financial statements of Parent together with all notes thereto, prepared in
reasonable detail in accordance with GAAP, together with an unqualified
opinion, based on an audit using generally accepted auditing standards, by
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, L.L.P., or other independent certified public accountants
selected by Parent and acceptable to Required Lenders, stating that such
Consolidated financial statements have been so prepared. These financial
statements shall contain a Consolidated and consolidating balance sheet as
of the end of such Fiscal Year and Consolidated and consolidating
statements of earnings, of cash flows, and of changes in owners' equity for
such Fiscal Year, each setting forth in comparative form the corresponding
figures for the preceding Fiscal Year. In addition, within ninety (90)
days after the end of each Fiscal Year Parent will furnish a report signed
by such accountants (i) stating that they have read this Agreement, (ii)
containing calculations showing compliance (or non-compliance) at the end
of such Fiscal Year with the requirements of Sections ▇.▇▇, ▇.▇▇, ▇.▇▇,
▇.▇▇, ▇.▇▇, ▇.▇▇, ▇.▇▇ and C.30 of this Annex C and (iii) further stating
that in making their examination and reporting on the Consolidated
financial statements described above they did not conclude that any Default
existed at the end of such Fiscal Year or at the time of their report, or,
if they did conclude that a Default existed, specifying its nature and
period of existence.
(b) As soon as available, and in any event within fifty (50) days
after the end of each Fiscal Quarter, Parent's Consolidated and
consolidated balance sheet as of the end of such Fiscal Quarter and
Consolidated and consolidating statements of earnings and cash flows for
the period from the beginning of the then current Fiscal Year to the end of
such Fiscal Quarter, all in reasonable detail and prepared in accordance
with GAAP, subject to changes resulting from normal year-end adjustments.
In addition, Parent will, together with each such set of financial
statements and each set of financial statements furnished under subsection
(a) of this section, furnish a certificate in the form of Exhibit D signed
by the chief financial officer of Parent stating that such financial
statements are accurate and complete (subject to normal year-end
adjustments), stating that he has reviewed the Loan Documents, containing
calculations showing compliance (or non-compliance) at the end of such
Fiscal Quarter with the requirements of Sections ▇.▇▇, ▇.▇▇, ▇.▇▇, ▇.▇▇,
▇.▇▇, ▇.▇▇, ▇.▇▇ and C.30 of this Annex C and stating that no Default or
Coverage Deficiency exists at the end of such Fiscal Quarter or at the time
of such certificate or specifying the nature and period of existence of any
such Default or Coverage Deficiency.
(c) Promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent by any Related
Person to its stockholders and all registration statements, periodic
reports and other statements and schedules filed by any Related Person with
any securities exchange, the Securities and Exchange Commission or any
similar governmental authority.
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(d) By March 1 following the end of each Fiscal Year, beginning on
March 1, 1998, an engineering report prepared as of the end of such Fiscal
Year by ▇▇▇▇▇ ▇▇▇▇▇ Company or other independent petroleum engineers chosen
by Borrower and acceptable to Required Lenders, concerning the Properties.
The report (1) shall separately report on Proved Producing Reserves, Proved
Developed Nonproducing Reserves, Proved Undeveloped Reserves and probable
reserves and separately calculate the NPV of each such category of Proved
Reserves (and the similar net present value of such probable reserves), (2)
shall be prepared in two versions, the first using ING Pricing and the
second using TCW Pricing, and each using a 10% discount factor, (3) shall
address the various factors to be taken into account in calculating ANCF so
that projected ANCF can be readily calculated from the report, (4) shall
take into account Borrower's actual experiences with leasehold operating
expenses and other costs in determining projected leasehold operating
expenses and other costs, (5) shall identify and take into account any
"over-produced" or "under-produced" status under gas balancing
arrangements, (6) shall contain information and analysis comparable in
scope to that contained in the Initial Engineering Reports, and (7) shall
otherwise be in form and substance satisfactory to Required Lenders. The
report shall distinguish (or shall be delivered together with a certificate
from an appropriate officer of Borrower which distinguishes) those
Properties treated in the report which are Eligible Mortgaged Properties
from those properties treated in the report which are not Eligible
Mortgaged Properties. In the event that Borrower and Tamco disagree over
whether or not any workovers or other remedial capital expenditures should
be included in the report for the purposes of calculating NPV, the
engineers preparing such report shall resolve such disagreement by
determining whether such expenditures are likely to be required in
accordance with prudent industry practice and shall include or exclude such
expenditures based on such determination.
(e) By July 15 of each year an engineering report prepared by in-
house petroleum engineers employed by Borrower, concerning all oil and gas
properties and interests owned by any Related Person which are located in
or offshore of the United States and which have attributable to them proved
oil and gas reserves. This report shall be substantially in the form and
substance as the reports delivered under subsection (d) above and otherwise
shall be satisfactory to Required Lenders.
(f) Within fifty (50) days after the end of each Fiscal Quarter, a
report in detail acceptable to Required Lenders with respect to the
Properties during the Fiscal Quarter immediately prior thereto:
(1) describing by well and field the net quantities of oil, gas,
natural gas liquids, and water produced (and the quantities of water
injected) during such Fiscal Quarter;
(2) describing by well and field the quantities of oil, gas and
natural gas liquids sold during such Fiscal Quarter out of production
from the Properties and calculating the average sales prices of such
oil, natural gas, and natural gas liquids;
(3) regardless of whether the same are included in the
calculation of ANCF, specifying any leasehold operating expenses,
overhead charges, gathering costs, transportation costs, and other
costs with respect to the Properties of the kind chargeable as direct
charges or overhead under an Onshore ▇▇▇▇▇ Accounting Procedure for
Joint Operations (1984 form published by the Council of Petroleum
Accountants Societies);
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(4) setting forth the amount of Direct Taxes on the Properties
during such Fiscal Quarter and the amount of royalties paid with
respect to the Properties during such Fiscal Quarter;
(5) describing all activities carried out during such Fiscal
Quarter in furtherance of the Plan of Development, all other capital
expenditures during such Fiscal Quarter, and all projections of
capital expenditures projected to be made on any of the Eligible
Mortgaged Properties; and
(6) describing all workover work and drilling during such Fiscal
Quarter, including the cost and status of each well drilled or worked
over during such Fiscal Quarter, test reports for each well tested
during such Fiscal Quarter, reports on prices and volumes received for
such Fiscal Quarter, reports for each well completed during such
Fiscal Quarter, and accompanying authorizations for expenditures.
(g) As soon as available, and in any event within forty-five (45)
days after the end of each Fiscal Quarter, a list, by name and address, of
those Persons who have purchased production during such Fiscal Quarter from
the properties described in subsection (d) above, giving each such
purchaser's owner number for Borrower and each such purchaser's property
number for each such property.
(h) As soon as available, and in any event within thirty (30) days
after the end of each Fiscal Year, Borrower shall deliver to Agent an
environmental compliance certificate signed by the president or chief
executive officer of Borrower in the form attached hereto as Exhibit E.
Further, if requested by Agent, Borrower shall permit and cooperate with an
environmental and safety review made in connection with the operations of
Borrower's oil and gas properties one time during each Fiscal Year
beginning with the Fiscal Year 1998, by Pilko & Associates, Inc. or other
consultants selected by Agent which review shall, if requested by Agent, be
arranged and supervised by environmental legal counsel for Agent, all at
Borrower's cost and expense. The consultant shall render a verbal or
written report, as specified by Agent, based upon such review at Borrower's
cost and expense.
(i) Concurrently with the annual renewal of the Borrower's insurance
policies, Borrower shall, if requested by Agent in writing, cause a
certificate or report to be issued by Agent's professional insurance
consultants or other insurance consultants satisfactory to Agent certifying
that Borrower's insurance for the next succeeding year after such renewal
(or for such longer period for which such insurance is in effect) complies
with the provisions of this Agreement and the Security Documents.
(i) By November 1 of each year, beginning with November 1, 1998, a
proposed Plan of Development for the next succeeding year.
Section C.2. Other Information and Inspections. Each Related Person will
---------------------------------
furnish to each Lender any information which Agent may from time to time request
in writing concerning any covenant, provision or condition of the Loan Documents
or any matter in connection with Related Persons' businesses and operations.
Each Related Person will permit representatives appointed by Agent (including
independent accountants, auditors, agents, attorneys, appraisers and any other
Persons) to visit and inspect during normal business hours any of such Related
Person's property, including its books of account, other books and records, and
any facilities or other business assets, and to make extra copies therefrom and
photocopies and photographs thereof, and to write down and record
C-3
any information such representatives obtain, and each Related Person shall
permit Agent or its representatives to investigate and verify the accuracy of
the information furnished to Agent or any Lender in connection with the Loan
Documents and to discuss all such matters with its officers, employees and
representatives.
Section C.3. Notice of Material Events and Change of Address. Borrower
-----------------------------------------------
and Parent will promptly notify each Lender in writing, stating that such notice
is being given pursuant to this Agreement, of:
(a) the occurrence of any Material Adverse Change,
(b) the occurrence of any Default or Coverage Deficiency,
(c) the acceleration of the maturity of any Restricted Debt owed by
any Related Person or of any default by any Related Person under any
indenture, mortgage, agreement, contract or other instrument to which any
of them is a party or by which any of them or any of their properties is
bound, if such acceleration or default could cause a Material Adverse
Change,
(d) the occurrence of any Termination Event,
(e) any claim of $50,000 or more, any notice of potential liability
under any Environmental Laws which might exceed such amount, or any other
material adverse claim asserted against any Related Person or with respect
to any Related Person's properties,
(f) the filing of any suit or proceeding against any Related Person
in which an adverse decision could cause a Material Adverse Change, and
(g) the receipt by any Related Person of a notice of any "Event of
Default" under the Other Loan Documents.
Upon the occurrence of any of the foregoing Related Persons will take all
necessary or appropriate steps to remedy promptly any such Material Adverse
Change, Default, acceleration, default or Termination Event, to protect against
any such adverse claim, to defend any such suit or proceeding, and to resolve
all controversies on account of any of the foregoing. Borrower will also notify
Agent and Agent's counsel in writing at least twenty Business Days prior to the
date that any Related Person changes its name or the location of its chief
executive office or principal place of business or the place where it keeps its
books and records concerning the Collateral, furnishing with such notice any
necessary financing statement amendments or requesting Agent and its counsel to
prepare the same.
Section C.4. Maintenance of Properties. Each Related Person will
-------------------------
maintain, preserve, protect, and keep all Collateral and all other property used
or useful in the conduct of its business in good condition and in compliance
with all applicable Laws, and will from time to time make all repairs, renewals
and replacements needed to enable the business and operations carried on in
connection therewith to be conducted at all times consistent with prudent
industry practices.
Section C.5. Maintenance of Existence and Qualifications. Each Related
-------------------------------------------
Person will maintain and preserve its existence and its rights and franchises in
full force and effect and will qualify to do business in all states or
jurisdictions (a) where Collateral is located and (b) where required by
applicable Law, except where the failure so to qualify will not cause a Material
Adverse Change.
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Section C.6. Payment of Trade Debt, Taxes, etc. Each Related Person will
----------------------------------
(a) timely file all required tax returns; (b) timely pay all taxes, assessments,
and other governmental charges or levies imposed upon it or upon its income,
profits or property; (c) within 90 days past the original invoice or billing
date thereof, or, if earlier, when due in accordance with its terms, all Debt
owed by it on ordinary trade terms to vendors, suppliers and other Persons
providing goods and services used by it in the ordinary course of its business;
(d) pay and discharge when due all other Debt now or hereafter owed by it; and
(e) maintain appropriate accruals and reserves for all of the foregoing in
accordance with GAAP. Each Related Person may, however, delay paying or
discharging any of the foregoing so long as it is in good faith contesting the
validity thereof by appropriate proceedings and has set aside on its books
adequate reserves therefor.
Section C.7. Bonding and Insurance. The Related Persons will maintain
---------------------
all bonds and letters of credit in lieu of bonds which they are required to
maintain (by law, lease terms, or consistent with prudent industry practices) in
order to carry out development and production operations on, the Properties.
Each Related Person will keep or cause to be kept adequately insured by
financially sound and reputable insurers its and its Subsidiaries' vehicles and
all other property in accordance with Schedule 3. Any insurance policies
covering Collateral shall be endorsed (i) to provide for payment of losses to
Agent, on behalf of Lenders, as their interests may appear, pursuant to a
mortgage clause (without contribution) of standard form made part of the
applicable policy, (ii) to provide that such policies may not be cancelled,
reduced or adversely affected in any manner for any reason without fifteen days
prior notice to Agent, (iii) to provide for any other matters specified in any
applicable Security Document or which Agent may reasonably require; and (iv) to
provide for insurance against fire, casualty and any other hazards normally
insured against, in the amount of the full value (less a reasonable deductible
not to exceed amounts customary in the industry for similarly situated
businesses and properties) of the property insured. (To the extent that the
Mortgage or any other Security Document contains other additional requirements
for such endorsement, each Related Person shall also comply with such additional
requirements.) Each Related Person shall at all times maintain adequate
insurance against its liability for injury to persons or property, which
insurance shall be by financially sound and reputable insurers and shall without
limitation provide the following coverages: comprehensive general liability
(including coverage for damage to underground resources and equipment, damage
caused by blowouts or cratering, damage caused by explosion, damage to
underground minerals or resources caused by saline substances, broad form
property damage coverage, broad form coverage for contractually assumed
liabilities and broad form coverage for acts of independent contractors),
worker's compensation and automobile liability. Each Related Person shall at
all times maintain cost of control of well insurance with respect to all ▇▇▇▇▇
being drilled or deepened, which shall insure against the following costs: cost
of control of well; fires, blowouts, etc.; redrilling expense; and seepage and
pollution expense.
Section C.8. Performance on Borrower's Behalf. If any Related Person
--------------------------------
fails to pay any taxes, insurance premiums, expenses, attorneys' fees or other
amounts it is required to pay under any Loan Document, Agent may pay the same.
Borrower shall immediately reimburse Agent for any such payments and each amount
paid by Agent shall constitute an Obligation owed hereunder which is due and
payable on the date such amount is paid by Agent.
Section C.9. Interest. Borrower hereby promises to each Lender to pay
--------
interest at the Late Payment Rate on all Obligations (including Obligations to
pay fees or to reimburse or indemnify any Lender) which Borrower has in this
Agreement promised to pay to such Lender and which are not paid when due. Such
interest shall accrue from the date such Obligations become due until they are
paid.
C-5
Section C.10. Compliance with Agreements and Law. Each Related Person
----------------------------------
will perform all material obligations it is required to perform under the terms
of each indenture, mortgage, deed of trust, security agreement, lease,
franchise, agreement, contract or other instrument or obligation to which it is
a party or by which it or any of its properties is bound. Each Related Person
will conduct its business and affairs in compliance with all Laws applicable
thereto.
Section C.11. Environmental Matters; Environmental Reviews.
--------------------------------------------
(a) Each Related Person will comply in all material respects with all
Environmental Laws now or hereafter applicable to such Related Person and
shall obtain, at or prior to the time required by applicable Environmental
Laws, all environmental, health and safety permits, licenses and other
authorizations necessary for its operations and will maintain such
authorizations in full force and effect.
(b) Borrower will promptly furnish to Agent all written notices of
violation, orders, claims, citations, complaints, penalty assessments,
suits or other proceedings received by Borrower, or of which it has notice,
pending or threatened against Borrower, by any governmental authority with
respect to any alleged violation of or non-compliance with any
Environmental Laws or any permits, licenses or authorizations in connection
with its ownership or use of its properties or the operation of its
business.
(c) Borrower will promptly furnish to Agent all requests for
information, notices of claim, demand letters, and other notifications,
received by Borrower in connection with its ownership or use of its
properties or the conduct of its business, relating to potential
responsibility with respect to any investigation or clean-up of Hazardous
Material at any location.
Section C.12. Evidence of Compliance. Each Related Person will furnish
----------------------
to each Lender at such Related Person's or Borrower's expense all evidence which
Agent from time to time reasonably requests in writing as to the accuracy and
validity of or compliance with all representations, warranties and covenants
made by any Related Person in the Loan Documents, the satisfaction of all
conditions contained therein, and all other matters pertaining thereto.
Section C.13. Solvency. Upon giving effect to the issuance of the Notes,
--------
the execution of the Loan Documents by Borrower and the consummation of the
transactions contemplated hereby, Borrower will be solvent (as such term is used
in applicable bankruptcy, liquidation, receivership, insolvency or similar
laws).
Section C.14. Completion of Activities. Borrower will (1) timely develop
------------------------
the Eligible Mortgaged Properties in accordance with the Plan of Development,
and (2) except to the extent regulatory approval has not yet been obtained, have
each producing and injection well which is hereafter completed put into normal
operation. Borrower will make capital expenditures for the drilling and
development of the Eligible Mortgaged Properties in accordance with the Plan of
Development. The Plan of Development designates certain operations as "Primary
Phases" and others, which are contingent upon the success of the "Primary
Phases", are designated as "Secondary Phases". Prior to Borrower making capital
expenditures with respect to "Secondary Phase" operations, if a specific measure
of success with respect to the "Primary Phase" operations is set forth in the
Plan of Development, such measure must have been achieved, or if no specific
measure is set forth, Agent and Borrower must have agreed that the "Primary
Phase" operation has been successful.
C-6
Section C.15. Hedging Contracts. No Related Person will be a party to or
-----------------
in any manner be liable on any forward, future, swap or hedging contract, other
than (a) existing hedging contracts listed in the Disclosure Schedule, (b)
interest rate ▇▇▇▇▇▇ under the Bank Interest Rate Hedge Agreement required under
Section C.17 of this Annex C, and (c) any other commodity floors approved by
Required Lenders from time to time, including terms, duration and counterparty.
Section C.16. Reviews. Borrower will meet with Agent, at Borrower's
-------
expense, from time to time (as frequently as monthly and in any event at least
once per Fiscal Quarter), at the offices of Agent or at such other location as
Agent and Borrower may agree, to review all operational activities of Borrower
with respect to the Eligible Mortgaged Properties and all financial reports of
the Related Persons since the date of the prior review. Each review shall be in
scope satisfactory to Agent, but will include at a minimum, an update by
Borrower on the development activities made pursuant to the Plan of Development,
any requests by Borrower that changes be made to the Plan of Development, any
cost or expense overruns or underruns, any mechanical problems incurred, and any
differences in reserves or production estimates.
Section C.17. Interest Hedging Contracts. Until the Floating Rate Debt
--------------------------
is paid in full, Borrower will maintain Hedging Contracts under the Bank
Interest Rate Hedge Agreement with respect to the Floating Rate Debt. Such
Hedging Contracts shall: (i) during the Commitment Period, have notional
amounts of not less than 80% of the principal amount of the Floating Rate Debt
projected by Borrower to be outstanding during the term of such Hedging
Contracts, (ii) at all times after the Commitment Period, have notional amounts
equal to the principal amount of the Floating Rate Debt projected by Borrower
to be outstanding during the term of such Hedging Contracts, (iii) fix a cap for
Borrower's exposure to increases in the interest rates payable on the Floating
Rate Debt for an initial term of three (3) years, and (iv) effectively fix a cap
at eight and one-half percent (8.5%) or less for Borrower's exposure to
increases in the interest rates payable on the Floating Rate Debt. Borrower
shall enter into replacement Hedging Contracts at the end of each expiring
Hedging Contract and, concurrently with any increase in the amount of the
Floating Rate Debt, shall enter into such additional Hedging Contracts as may be
required to keep Borrower in compliance with this Section C.17.
Section C.18. Restricted Debt. No Related Person will in any manner owe
---------------
or be liable for Restricted Debt except:
(a) the Obligations.
(b) the Other Allowed Debt.
(c) Hedging transactions required under Section C.17 or permitted
under Section C.15 of this Annex C.
(d) any Restricted Debt assumed or incurred by any Related Person
after the date hereof to finance all or any part of the purchase price of
property acquired by such Related Person, provided that:
(i) such Restricted Debt shall be secured only by the property
so acquired and the improvements thereon,
(ii) each Lien securing such Restricted Debt shall attach or be
existing at the time of acquisition,
C-7
(iii) only the Related Person that acquired such property shall
be liable on such Restricted Debt,
(iv) the principal amount of such Restricted Debt in respect of
such property shall not exceed the lower of the acquisition price of
or market value of the property at the time of acquisition thereof by
such Related Person,
(v) the aggregate outstanding principal amount of such
Restricted Debt of the Related Persons incurred for the purchase of
trucks or automobiles does not at any time exceed $250,000, and the
aggregate principal amount of such Restricted Debt which is incurred
for such purpose in any Fiscal Year does not exceed $100,000, and
(vi) the aggregate outstanding principal amount of such
Restricted Debt of the Related Persons incurred for purposes other
than the purchase of trucks or automobiles, does not at any time
exceed $200,000, and the aggregate principal amount of such Restricted
Debt which is incurred for such other purposes in any Fiscal Year does
not exceed $50,000.
(e) the ▇▇▇▇▇▇ promissory note described in paragraph C.18 of the
Disclosure Schedule, as from time to time extended (but not increased).
(f) Parent's Series C Convertible Preferred Stock.
(g) miscellaneous items of Restricted Debt not described in
subsections (a) through (f) which do not in the aggregate (taking into
account all such Restricted Debt of all Related Persons) exceed $150,000 at
any one time outstanding.
Section C.19. Limitation on Liens. No Related Person will create, assume
-------------------
or permit to exist any Lien upon any of the properties or assets which it now
owns or hereafter acquires, except, to the extent not otherwise forbidden by the
Security Documents the following ("Permitted Liens"):
(a) Liens which secure Obligations only.
(b) Liens which secure the Other Allowed Debt, provided that such
Liens are subject to the Intercreditor Agreement.
(c) statutory Liens for taxes, statutory mechanics' and materialmen's
Liens incurred in the ordinary course of business, and other similar Liens
incurred in the ordinary course of business, provided such Liens do not
secure Restricted Debt and secure only Restricted Debt which is not
delinquent or which is being contested as provided in Section C.6.
(d) Liens securing the Restricted Debt permitted by Section C.18(d),
(e) or (g) of this Annex C.
Section C.20. No Mergers. No Related Person will merge or consolidate
----------
with or into any other business entity. No Subsidiary of Parent will issue any
additional shares of its capital stock or other securities or any options,
warrants or other rights to acquire such additional shares or other securities
except to Parent or another wholly-owned Subsidiary of Parent. No Subsidiary of
Parent which is a partnership will allow any diminution of Parent's interest
(direct or indirect) therein. No Related Person shall create or own any
Subsidiary other than those listed in the Disclosure Schedule.
C-8
Section C.21. Limitation on Dividends and Redemptions. No Related Person
---------------------------------------
will make any Distribution in respect of any class of its capital stock or any
partnership or other interest in it, nor will any Related Person directly or
indirectly make any Distribution in respect of any shares of the capital stock
of or partnership interests in any Related Person (whether such interests are
now or hereafter issued, outstanding or created), or cause or permit any
reduction or retirement of the capital stock of any Related Person, except that
Parent may at any time make Distributions in the form of Parent's common stock
to the holders of Parent's Series C Convertible Preferred Stock.
Section C.22. Limitation on Sales of Property. No Related Person will
-------------------------------
sell, transfer, lease, exchange, alienate or dispose of any of its material
assets or properties or any material interest therein except, to the extent not
otherwise forbidden under the Security Documents:
(a) equipment which is worthless or obsolete or which is replaced by
equipment of equal suitability and value.
(b) personal property inventory (including oil and gas sold as
produced and seismic data) which is sold in the ordinary course of business
on ordinary trade terms.
(c) specific properties not subject to the Mortgage (or specific
portions thereof), provided the same are abandoned and not otherwise
disposed of and further provided that no well situated on the property to
be abandoned, or located on any unit containing all or any part thereof, is
capable (or is subject to being made capable through commercially feasible
operations) of producing oil, gas or other hydrocarbons or minerals in
paying quantities (with such determination of paying quantities being made
taking into account the prudent operation of any unit in which such
property is located).
(d) farmouts on terms and conditions reasonably acceptable to
Required Lenders.
Neither Parent nor any of Parent's Subsidiaries will sell, transfer or otherwise
dispose of capital stock of any of Parent's Subsidiaries except that any
Subsidiary of Parent may sell or issue its own capital stock to the extent not
otherwise prohibited hereunder. No Related Person will discount, sell, pledge
or assign any notes payable to it, accounts receivable or future income except
to the extent expressly permitted under the Loan Documents.
Section C.23. Limitation on Investments and New Businesses. No Related
--------------------------------------------
Person will (i) make any expenditure or commitment or incur any obligation or
enter into or engage in any transaction except in the ordinary course of
business, (ii) engage directly or indirectly in any business or conduct any
operations except in connection with or incidental to its present businesses and
operations, (iii) make any acquisitions of or capital contributions to or other
investments in any Person, other than Permitted Investments, or (iv) make any
significant acquisitions or investments in any properties other than oil and gas
properties.
Section C.24. Limitation on Credit Extensions. Except for Permitted
-------------------------------
Investments, no Related Person will extend credit, make advances or make loans
other than normal and prudent extensions of credit to customers buying goods and
services in the ordinary course of business, which extensions shall not be for
longer periods than those extended by similar businesses operated in a normal
and prudent manner.
Section C.25. Transactions with Affiliates. Borrower will not engage in
----------------------------
any material transaction with any of its Affiliates other than for customary
director compensation paid to such
C-9
Affiliates and for issuances of equity to Affiliates for fair value, provided
that such issuances are permitted by Section C.21, unless the terms of such
transaction are no less favorable than those which would have been obtainable at
the time in arm's-length dealings with Persons other than an Affiliate.
Section C.26. Certain Contracts; Amendments; Multiemployer ERISA Plans.
--------------------------------------------------------
Except as expressly provided for in the Loan Documents, no Related Person will,
directly or indirectly, enter into, create, or otherwise allow to exist any
contract or other consensual restriction on the ability of any Subsidiary of
Borrower to: (i) make Distributions to Borrower, (ii) to redeem equity interests
held in it by Borrower, (iii) to repay loans and other indebtedness owing by it
to Borrower, or (iv) to transfer any of its assets to Borrower. No Related
Person will enter into any "take-or-pay" contract or other contract or
arrangement for the purchase of goods or services which obligates it to pay for
such goods or service regardless of whether they are delivered or furnished to
it. No Related Person will amend or permit any amendment to any contract or
lease which releases, qualifies, limits, makes contingent or otherwise
detrimentally affects the rights and benefits of any Lender under or acquired
pursuant to any Security Documents. No ERISA Affiliate will incur any
obligation to contribute to any "multiemployer plan" as defined in Section 4001
of ERISA.
Section C.27. Working Capital. Working Capital will never be less than
---------------
$1,000,000. As used herein, "Working Capital" means Borrower's current assets
minus Borrower's current liabilities, provided that for the purposes of
determining Working Capital: (i) current assets will be calculated without
including (1) any accounts receivable or other Debts owed to Borrower by its
Affiliates, employees or shareholders, and (2) any account receivable unpaid
more than 120 days after its original invoice date, and (ii) for so long as no
Event of Default exists, current liabilities will be calculated without
including any payments of principal on the Obligations and the Other Allowed
Debt which are required to be made within one year from the time of calculation.
Section C.28. Tangible Net Worth. Parent's Consolidated Tangible Net
------------------
Worth will never be less than $35,000,000 plus (a) an aggregate amount equal to
fifty percent (50%) of Parent's cumulative Consolidated Net Income beginning
with the Fiscal Quarter ending December 31, 1997, plus (b) the aggregate amount
of net proceeds from the sale of any of Parent's stock by Parent on or after the
date hereof.
Section C.29. EBITDA. At the end of any Fiscal Quarter, beginning with
------
the Fiscal Quarter ending December 31, 1997, the ratio of (a) Parent's EBITDA to
(b) required interest payments on Parent's Consolidated Debt, for the four-
Fiscal Quarter period ending with such Fiscal Quarter will not be less than 3 to
1 for any such period.
Section C.30. General and Administrative Expenses. Parent's Consolidated
-----------------------------------
general and administrative expenses in any Fiscal Year shall not exceed the ANCF
Overhead Costs for such Fiscal Year.
Section C.31. No Public Announcements. No Related Person may make any
-----------------------
public announcement or disclosure of the transactions contemplated by this
Agreement or any other Loan Document, except as required by law or approved by
Agent, in its sole and absolute discretion prior to the making of any such
public announcement or disclosure.
Section C.32. Refinery Acquisitions. No Related Person will enter into
---------------------
the Crysen Acquisition or any other acquisition of a refinery (regardless of
whether or not the proceeds of any Loan are used to finance such acquisition)
unless all aspects of such acquisition, including the structure of the
acquisition, related documentation, additional Security Documents, liabilities
to be assumed by any Related Person in connection therewith, and environmental
inspections, have been reviewed and approved by Lenders in their absolute
discretion.
C-10
Section C.33 Transactions Regarding Crysen Refinery. If Inland
--------------------------------------
Refining does not acquire the Crysen Refinery for any reason, but such Crysen
Refinery is acquired by any Affiliate or any 2% Affiliate of a Related Person,
then no Related Person shall enter into any contract for the sale, purchase,
processing, refining or treatment of hydrocarbons with the owner, operator or
lessee of such Crysen Refinery unless such contract is on terms and conditions
that are no less favorable than those which would have been obtained in an arms
length transaction with Persons other than Affiliates, which shall be determined
by Agent in its reasonable discretion, and unless Agent has been provided with
thirty (30) days prior written notice of the contract.
C-11
ANNEX D
COMMON EVENTS OF DEFAULT
Section D.1 Any Related Person fails to pay the principal component of
any Obligation when due and payable, whether at a date for the payment of a
fixed installment or as a contingent or other payment becomes due and payable or
as a result of acceleration or otherwise, and such failure is not remedied in
full within one (1) Business Day thereafter.
Section D.2. Any Related Person fails to pay any Obligation (other than
the Obligations in Section D.1 above) when due and payable, whether at a date
for the payment of a fixed installment or as a contingent or other payment
becomes due and payable or as a result of acceleration or otherwise, within one
(1) Business Day after the same becomes due in the case of interest or fifteen
(15) days thereafter in the case of any other Obligation.
Section D.3. Any "default" or "event of default" occurs under any Loan
Document which defines either such term, and the same is not remedied within the
applicable period of grace (if any) provided in such Loan Document.
Section D.4. Any Related Person fails to duly observe, perform or comply
with any covenant, agreement or provision of Section C.3 or any of Sections C.17
through and including C.32 of Annex C.
Section D.5. Any Related Person fails (other than as referred to in
Sections D.1, D.2, D.3 or D.4 above) to duly observe, perform or comply with any
covenant, agreement, condition or provision of any Loan Document, and such
failure remains unremedied for a period of thirty (30) days after notice of such
failure is given by Agent to Borrower.
Section D.6. Any representation or warranty previously, presently or
hereafter made in writing by or on behalf of any Related Person in connection
with any Loan Document shall prove to have been false or incorrect in any
material respect on any date on or as of which made, or any Loan Document at any
time ceases to be valid, binding and enforceable as warranted in Section B.5 of
Annex B for any reason other than its release or subordination by Agent.
Section D.7. Any Related Person fails to duly observe, perform or comply
with (a) any agreement with any Person or any term or condition of any
instrument, if such agreement or instrument is materially significant to
Borrower or to Parent and its Subsidiaries on a Consolidated basis or materially
significant to any Guarantor, or (b) any provision of any Other Loan Document
and, in either case, such failure is not remedied within the applicable period
of grace (if any) provided in such agreement or instrument.
Section D.8. Any Related Person (i) fails to pay any portion, when such
portion is due, of any of its Restricted Debt in excess of $100,000 (other than
the Obligations, the Other Allowed Debt and Debt described in Section C.6 of
Annex C which is not required to be paid so long as the Related Person is in
good faith contesting the validity thereof by appropriate proceedings), or (ii)
breaches or defaults in the performance of any agreement or instrument by which
any such Restricted Debt is issued, evidenced, governed, or secured, and any
such failure, breach or default continues beyond any applicable period of grace
provided therefor.
D-1
Section D.9. Either (iii) any "accumulated funding deficiency" (as defined
in Section 412(a) of the Internal Revenue Code of 1986, as amended) in excess of
$100,000 exists with respect to any ERISA Plan, whether or not waived by the
Secretary of the Treasury or his delegate, or (iv) any Termination Event occurs
with respect to any ERISA Plan and the then current value of such ERISA Plan's
benefit liabilities exceeds the then current value of such ERISA Plan's assets
available for the payment of such benefit liabilities by more than $100,000 (or
in the case of a Termination Event involving the withdrawal of a substantial
employer, the withdrawing employer's proportionate share of such excess exceeds
such amount).
Section D.10. Any Related Person:
(a) suffers the entry against it of a judgment, decree or order for
relief by a Tribunal of competent jurisdiction in an involuntary proceeding
commenced under any applicable bankruptcy, insolvency or other similar Law
of any jurisdiction now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended, or has any such proceeding
commenced against it which remains undismissed for a period of sixty days;
or
(b) commences a voluntary case under any applicable bankruptcy,
insolvency or similar Law now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended; or applies for or consents
to the entry of an order for relief in an involuntary case under any such
Law; or makes a general assignment for the benefit of creditors; or fails
generally to pay (or admits in writing its inability to pay) its debts as
such debts become due; or takes corporate or other action to authorize any
of the foregoing; or
(c) suffers the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of all or a substantial part of its assets or of any part of the Collateral
in a proceeding brought against or initiated by it, and such appointment or
taking possession is neither made ineffective nor discharged within thirty
days after the making thereof, or such appointment or taking possession is
at any time consented to, requested by, or acquiesced to by it; or
(d) suffers the entry against it of a final judgment for the payment
of money in excess of $100,000 (not covered by insurance satisfactory to
Agent in its discretion), unless the same is discharged within thirty days
after the date of entry thereof or an appeal or appropriate proceeding for
review thereof is taken within such period and a stay of execution pending
such appeal is obtained; or
(e) suffers a writ or warrant of attachment or any similar process to
be issued by any Tribunal against all or any substantial part of its assets
or any part of the Collateral, and such writ or warrant of attachment or
any similar process is not stayed or released within thirty days after the
entry or levy thereof or after any stay is vacated or set aside.
Section D.11. Any Change in Control occurs.
Section D.12. Any "Event of Default" (as defined in the Other Loan
Documents) occurs under the Other Loan Documents.
D-2
SCHEDULE 1
DISCLOSURE SCHEDULE
-------------------
To supplement the following sections of the Agreement of which this
Schedule is a part, Parent and Borrower hereby make the following disclosures:
1. Section B.6 Initial Financial Statements:
----------------------------
No Material Adverse Change.
2. Section B.7 Other Obligations:
-----------------
a. Swap Agreement with Joint Energy Development Investments Limited
Partnership, dated November 22, 1994, structured as a costless
collar with a floor price of $18.00 per barrel and a ceiling
price of $20.55 per barrel using the average settlement price for
the prompt month of NYMEX Light Sweet Crude Oil for the following
remaining quantities and periods of time:
January 1, 1997 through December 31, 1997 10,900 barrels per
month
January 1, 1998 through December 31, 1998 12,500 barrels per
month
January 1, 1999 through December 31, 1999 14,000 barrels per
month
January 1, 2000 through December 31, 2000 14,000 barrels per
month
b. Swap Agreement with ▇▇▇▇ Oil Company, dated January 1, 1997,
structured as a reverse collar with a Put price of $18.00 per
barrel and a Call strike price of $20.55 per barrel using the
average settlement price for the prompt month of NYMEX Light
Sweet Crude Oil for the following quantities and periods of time:
January 1, 1998 through December 31, 1998 12,500 barrels per
month
January 1, 1999 through December 31, 1999 14,000 barrels per
month
January 1, 2000 through December 31, 2000 14,000 barrels per
month
3. Section B.9 Litigation:
----------
None.
4. Section B.10 Labor Disputes and Acts of God:
------------------------------
None.
1
5. Section B.11 ERISA Liabilities:
-----------------
a. Inland Resources Inc. 401(k) Plan.
b. Inland Resources Inc. Section 125 Cafeteria Plan.
c. Inland Resources Inc. Medical Plan through United Healthcare
Choice Plus/PPO
6. Sections B.12 Environmental Laws and Other:
----------------------------
None.
7. Sections B.13 Names and Places of Business:
----------------------------
a. On April 28, 1993, the name of Inland Gold and Silver Corp. was
changed to Inland Resources Inc. for the past five years,
Parent's places of business have been:
June 1993 until Present
-----------------------
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Prior to June 1993
------------------
b. On July 1, 1995, the name of ▇▇▇▇▇ Exploration Company was
changed to Inland Production Company. For the past five years,
Borrower's places of business have been:
October 1994 until Present
------------------------------
▇.▇. ▇▇▇ ▇▇▇▇ Also ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
June 1993 through September 1994
--------------------------------
77 West, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇
Prior to June 1993
------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
8. Section B.14 Subsidiaries and Stockholdings:
------------------------------
Subsidiaries
------------
a. Borrower is 100% owned by Parent
b. Inland Refining is 100% owned by Parent
2
Partnership Interest
--------------------
a. Borrower is a General Partner in the following Limited
Partnerships:
LOEX Properties 1983, LTD, a Texas Limited Partnership,
Borrower has a 0.62% interest in the partnership. The
partnership's principal place of business is ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇.
LOEX Properties 1984, LTD, a Texas Limited Partnership,
Borrower has a 0.57% interest in the partnership. The
partnership's principal place of business is ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇.
b. Borrower is a Managing Partner in the following General
Partnerships:
West Monument Butte Pipeline Company, a Texas General
Partnership, Borrower has an 80.96% interest in the
partnership. The partnership's principal place of business
is ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇.
Castle Peak Pipeline Company, a Texas General Partnership,
Borrower has a 49.45% interest in the partnership. The
partnership's principal place of business is ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇.
9. Section C.18. Restricted Debt:
---------------
All-Inclusive Promissory note secured by All-Inclusive Deed of Trust
payable to the ▇▇▇▇▇▇ Family Investment Company dated May 1, 1995, for
a total of $202,906.67 principal balance to be paid in fourteen annual
installments of $26,797.54 including interest (interest rate is 9.5%
per annum). The All-Inclusive Deed of Trust includes lands in
Township 8 South, Range 17 East, S.L.M. in Sections 20 (NE 1/4 of the
SE 1/4), 21 (SE 1/4) and 28 (N 1/2 of the NW 1/4) in Duchess County,
Utah.
Existing Commodity Floor Contracts:
----------------------------------
a. Put option with ▇▇▇▇, dated July 8, 1996, with a strike price of
$15.00 per barrel using the average settlement price for the
prompt month of NYMEX Light Sweet Crude Oil for the following
quantities and periods of time:
January 1, 1997 through December 31, 1997 60,000 barrels per
month
b. Put option with Enron Capital and Trade Resources Corp., dated
May 12, 1997, with a strike price of $16.000 per barrel using the
average settlement price for the prompt month of NYMEX Light
Sweet Crude Oil for the following quantities and periods of time:
January 1, 1998 through March 31, 1998 100,000 barrels per month
3
4
SCHEDULE 2
SECURITY SCHEDULE
-----------------
1. Guaranty of even date herewith executed by Parent for the benefit of Agent
(the "Parent Guaranty").
2. Guaranty of even date herewith executed by Inland Refining for the benefit
of Agent.
3. Deed of Trust, Mortgage, Line of Credit Mortgage, Assignment, Security
Agreement, Fixture Filing and Financing Statement from Borrower to Agent
dated as of September 30, 1997 (the "Mortgage").
4. Pledge Agreement (the "Pledge Agreement") from Parent to Agent, dated of
even date herewith.
5. Security Agreement (the "Security Agreement") from Borrower to Agent, dated
of even date herewith.
6. Financing Statements signed by Borrower for filing with the Secretaries of
State of Colorado and Utah in connection with the Mortgage.
7. Financing Statements signed by Parent for filing with the Secretaries of
State of Colorado and Texas in connection with the Pledge Agreement.
8. Financing Statement signed by Borrower for filing with the Secretaries of
State of Colorado and Utah in connection with the Security Agreement.
1
EXHIBIT A
PROMISSORY NOTE
---------------
$_________________ New York, New York *[Date]
FOR VALUE RECEIVED, the undersigned, Inland Production Company, a Texas
corporation, (herein called "Borrower"), hereby promises to pay to the order of
________________________________________________, a *[____________ state banking
corporation] *[national banking association] (herein called "Bank"), the
principal sum of
__________________________________________________________________ Dollars ($
__________), or, if greater or less, the aggregate unpaid principal amount of
the Loan made under this Note by Bank to Borrower pursuant to the terms of the
Credit Agreement (as hereinafter defined), together with interest on the unpaid
principal balance thereof as hereinafter set forth, both principal and interest
payable as herein provided in lawful money of the United States of America at
the offices of the Agent under the Credit Agreement, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ or at such other place as from time to time may be designated by
the holder of this Note.
This Note (a) is issued and delivered under that certain Credit Agreement
of even date herewith among Borrower, Inland Resources Inc., ING (U.S.) Capital
Corporation, as Agent, and the Banks (including Bank) referred to therein
(herein, as from time to time supplemented, amended or restated, called the
"Credit Agreement"), and is a "Note" as defined therein, (b) is subject to the
terms and provisions of the Credit Agreement, which contains provisions for
payments and prepayments hereunder and acceleration of the maturity hereof upon
the happening of certain stated events, and (c) is secured by and entitled to
the benefits of certain Security Documents (as identified and defined in the
Credit Agreement). Payments on this Note shall be made and applied as provided
herein and in the Credit Agreement. Reference is hereby made to the Credit
Agreement for a description of certain rights, limitations of rights,
obligations and duties of the parties hereto and for the meanings assigned to
terms used and not defined herein and to the Security Documents for a
description of the nature and extent of the security thereby provided and the
rights of the parties thereto.
For the purposes of this Note, the following terms have the meanings
assigned to them below:
"Base Rate Payment Date" means (i) each Quarterly Payment Date,
beginning December 29, 1997, and (ii) any day on which past due interest or
principal is owed hereunder and is unpaid. If the terms hereof or of the
Credit Agreement provide that payments of interest or principal hereon
shall be deferred from one Base Rate Payment Date to another day, such
other day shall also be a Base Rate Payment Date.
"Eurodollar Rate Payment Date" means, with respect to any Eurodollar
Loan: (i) the day on which the related Interest Period ends (and, if such
Interest Period is three months or longer, the three-month anniversary of
the first day of such Interest Period), and (ii) any day on which past due
interest or past due principal is owed hereunder with respect to such
Eurodollar Loan and is unpaid. If the terms hereof or of the Credit
Agreement provide that payments of interest or principal with respect to
such Eurodollar Loan shall be deferred from one Eurodollar Rate Payment
Date to another day, such other day shall also be a Eurodollar Rate Payment
Date.
1
The principal amount of this Note s hall be due and payable quarterly as
provided in the Credit Agreement. On March 29, 2003, the unpaid principal
balance of this Note and all interest accrued hereon shall be due and payable in
full.
Base Rate Loans (exclusive of any past due principal or interest) from time
to time outstanding shall bear interest on each day outstanding at the Base Rate
in effect on such day. On each Base Rate Payment Date Borrower shall pay to the
holder hereof all unpaid interest which has accrued on the Base Rate Loans to
but not including such Base Rate Payment Date. Each Eurodollar Loan (exclusive
of any past due principal or interest) shall bear interest on each day during
the related Interest Period at the related Eurodollar Rate in effect on such
day. On each Eurodollar Rate Payment Date relating to such Eurodollar Loan,
Borrower shall pay to the holder hereof all unpaid interest which has accrued on
such Eurodollar Loan to but not including such Eurodollar Rate Payment Date.
All past due principal of and past due interest on the Loan shall bear interest
on each day outstanding at the Late Payment Rate in effect on such day, and such
interest shall be due and payable daily as it accrues.
Notwithstanding the foregoing paragraph and all other provisions of this
Note, in no event shall the interest payable hereon, whether before or after
maturity, exceed the maximum interest which, under applicable Law, may be
charged on this Note, and this Note is expressly made subject to the provisions
of the Credit Agreement which more fully set out the limitations on how interest
accrues hereon.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, Borrower and all endorsers, sureties
and guarantors of this Note jointly and severally agree to pay reasonable
attorneys' fees and collection costs to the holder hereof in addition to the
principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
2
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK, (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW), EXCEPT TO THE EXTENT THE SAME ARE GOVERNED BY APPLICABLE FEDERAL LAW.
INLAND PRODUCTION COMPANY
By:
-----------------------------------
Name:
Title:
3
EXHIBIT B
BORROWING NOTICE
----------------
Reference is made to that certain Credit Agreement dated as of September
23, 1997 (as from time to time amended, the "Agreement"), by and among Inland
Production Company, as Borrower, Inland Resources Inc., ING (U.S.) Capital
Corporation, as Agent, and certain financial institutions, as Banks. Terms
which are defined in the Agreement are used herein with the meanings given them
in the Agreement.
Borrower hereby requests a Borrowing of new Loans to be advanced pursuant
to Section 2.2 of the Agreement as follows:
Aggregate amount of Borrowing: $__________________
Type of Loans in Borrowing: __________________
Date on which Loans are to be advanced: __________________
Length of Interest Period for Eurodollar
Loans (1, 2, 3 or 6 months): ___________ months
Borrower hereby represents, warrants, acknowledges, and agrees to and with
each Lender that:
(a) The officer of Borrower signing this instrument is the duly
elected, qualified and acting officer of Borrower as indicated below such
officer's signature hereto having all necessary authority to act for
Borrower in making the request herein contained.
(b) The representations and warranties of Borrower set forth in the
Agreement and the other Loan Documents are true and correct on and as of
the date hereof (except to the extent that the facts on which such
representations and warranties are based have been changed by the extension
of credit under the Agreement), with the same effect as though such
representations and warranties had been made on and as of the date hereof.
(c) There does not exist on the date hereof any condition or event
which constitutes a Default which has not been waived in writing as
provided in Section 9.1(a) of the Agreement; nor will any such Default
exist upon Borrower's receipt and application of the Loans requested
hereby. Borrower will use the Loans hereby requested in compliance with
Section 2.4 of the Agreement.
(d) Except to the extent waived in writing as provided in Section
9.1(a) of the Agreement, Borrower has performed and complied with all
agreements and conditions in the Agreement required to be performed or
complied with by Borrower on or prior to the date hereof, and each of the
conditions precedent to Loans contained in the Agreement remains satisfied.
(e) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any course of
dealing, or by any other means not provided for in Section 9.1(a) of the
Agreement. The Agreement and the other Loan Documents are hereby ratified,
approved, and confirmed in all respects.
1
The officer of Borrower signing this instrument hereby certifies in his
capacity as an officer of Borrower and in the name and on behalf of Borrower,
that to the best of his knowledge after due inquiry, the above representations,
warranties, acknowledgements, and agreements of Borrower are true, correct and
complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________, 199__.
INLAND PRODUCTION COMPANY
By:
------------------------------------
Name:
Title:
2
EXHIBIT C
CONTINUATION/CONVERSION NOTICE
------------------------------
Reference is made to that certain Credit Agreement dated as of September
23,1997 (as from time to time amended, the "Agreement"), by and among Inland
Production Company, as Borrower, Inland Resources Inc., ING (U.S.) Capital
Corporation, as Agent, and certain financial institutions, as Banks. Terms
which are defined in the Agreement are used herein with the meanings given them
in the Agreement.
Borrower hereby requests a conversion or continuation of existing Loans
into a new Borrowing pursuant to Section 2.3 of the Agreement as follows:
Existing Borrowing(s) to be continued or converted:
$__________ of Eurodollar Loans with Interest Period ending __________
$__________ of Base Rate Loans
Aggregate amount of new Borrowing: $__________________
Type of Loans in new Borrowing: __________________
Date of continuation or conversion: __________________
Length of Interest Period for Eurodollar
Loans (1, 2, 3 or 6 months): ___________ months
Borrower hereby represents, warrants, acknowledges, and agrees to and with
each Lender that:
(a) The officer of Borrower signing this instrument is the duly
elected, qualified and acting officer of Borrower as indicated below such
officer's signature hereto having all necessary authority to act for
Borrower in making the request herein contained.
(b) There does not exist on the date hereof any condition or event
which constitutes a Default which has not been waived in writing as
provided in Section 9.1(a) of the Agreement; nor will any such Default
exist upon Borrower's receipt and application of the Loans requested
hereby.
(c) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any course of
dealing, or by any other means not provided for in Section 9.1(a) of the
Agreement. The Agreement and the other Loan Documents are hereby ratified,
approved, and confirmed in all respects.
The officer of Borrower signing this instrument hereby certifies in his
capacity as an officer of Borrower and in the name and on behalf of Borrower,
that to the best of his knowledge after due inquiry, the above representations,
warranties, acknowledgements, and agreements of Borrower are true, correct and
complete.
1
IN WITNESS WHEREOF, this instrument is executed as of ____________, 199__.
INLAND PRODUCTION COMPANY
By:
---------------------------
Name:
Title:
2
EXHIBIT D
CERTIFICATE ACCOMPANYING
FINANCIAL STATEMENTS
------------------------
Reference is made to that certain Credit Agreement dated as of September
23, 1997 (as from time to time amended, the "Agreement"), by and among Inland
Production Company ("Borrower"), Inland Resources Inc., ING (U.S.) Capital
Corporation, as Agent, and certain financial institutions ("Banks"), which
Agreement is in full force and effect on the date hereof. Terms which are
defined in the Agreement are used herein with the meanings given them in the
Agreement.
This Certificate is furnished pursuant to Section C.2(b) of Annex C of the
Agreement. Together herewith Borrower is furnishing to Agent and each Bank
Parent's *[audited/unaudited] financial statements (the "Financial Statements")
as at ____________ (the "Reporting Date"). Borrower hereby represents, warrants,
and acknowledges to Agent and each Bank that:
(a) the officer of Parent signing this instrument is the duly
elected, qualified and acting ____________ of Parent and as such is
Parent's chief financial officer;
(b) the Financial Statements are accurate and complete and satisfy
the requirements of the Agreement;
(c) attached hereto is a schedule of calculations showing Parent's
compliance as of the Reporting Date with the requirements of Sections
____________ of the Agreement *[and Parent's non-compliance as of such date
with the requirements of Section(s) ____________ of the Agreement];
(d) on the Reporting Date Parent and Borrower were, and on the date
hereof Parent and Borrower are, in full compliance with the disclosure
requirements of Section C.4 of Annex C of the Agreement, and no Default
otherwise existed on the Reporting Date or otherwise exists on the date of
this instrument *[except for Default(s) under Section(s) ____________ of
the Agreement, which *[is/are] more fully described on a schedule attached
hereto].
(e) *[Unless otherwise disclosed on a schedule attached hereto,] The
representations and warranties of Borrower and Parent set forth in the
Agreement and the other Loan Documents are true and correct on and as of
the date hereof (except to the extent that the facts on which such
representations and warranties are based have been changed by the extension
of credit under the Agreement), with the same effect as though such
representations and warranties had been made on and as of the date hereof.
The officer of Parent signing this instrument hereby certifies in his
capacity as an officer of Borrower and in the name and on behalf of Borrower,
that he has reviewed the Loan Documents and the Financial Statements and has
otherwise undertaken such inquiry as is in his opinion necessary to enable him
to express an informed opinion with respect to the above representations,
warranties and acknowledgments of Parent and, to the best of his knowledge, such
representations, warranties, and acknowledgments are true, correct and complete.
1
IN WITNESS WHEREOF, this instrument is executed as of ____________, 19__.
INLAND RESOURCES INC.
By:
----------------------------
Name:
Title:
2
EXHIBIT E
ENVIRONMENTAL COMPLIANCE CERTIFICATE
------------------------------------
Reference is made to that certain Credit Agreement dated as of September
23, 1997 (as from time to time amended, the "Agreement"), by and among Inland
Production Company ("Borrower"), Inland Resources Inc., ING (U.S.) Capital
Corporation as Agent, and certain financial institutions. Terms which are
defined in the Agreement are used herein with the meanings given them in the
Agreement. The undersigned, being the *[President/Chief Executive Officer] of
Borrower, hereby certifies to Agent and Banks as follows:
1. For the Fiscal Year ending immediately prior to the date hereof,
Borrower has complied and is complying with Section C.12 of Annex C of the
Credit Agreement *[except as set forth in Schedule I attached hereto];
2. To the best knowledge of the undersigned after due inquiry,
Borrower is on the date hereof in compliance with all applicable
Environmental Laws, noncompliance with which could cause a Material Adverse
Change;
3. Borrower has taken (and continues to take) steps to minimize the
generation of potentially harmful effluents;
4. Borrower has established an ongoing program of conducting an
internal audit of each operating facility of Borrower to identify actual or
potential environmental liabilities which could cause a Material Adverse
Change; and
5. Borrower has established an ongoing program of training its
employees in issues of environmental, health and safety compliance, and
Borrower presently has one or more individuals in charge of implementing
such training program.
The officer of Borrower signing this instrument hereby certifies in his
capacity as an officer of Borrower and in the name and on behalf of Borrower,
that to the best of his knowledge after due inquiry and consultation with the
operating officers of Borrower, the above representations, warranties,
acknowledgements, and agreements of Borrower are true, correct and complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________, 19__.
INLAND PRODUCTION COMPANY
By:
-------------------------------------
Name:
Title:
1
EXHIBIT F
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
Date _______________, 199__
Reference is made to that certain Credit Agreement dated as of September
23, 1997 (as from time to time amended, the "Agreement"), by and among by and
among Inland Production Company, as Borrower, Inland Resources Inc., ING (U.S.)
Capital Corporation, as Agent, and certain financial institutions, as Banks,
which Agreement is in full force and effect on the date hereof. Terms which are
defined in the Agreement are used herein with the meanings given them in the
Agreement.
____________________ ("Assignor") and ____________________ ("Assignee")
hereby agree as follows:
1. Assignor hereby sells and assigns to Assignee without recourse and
without representation or warranty (other than as expressly provided herein),
and Assignee hereby purchases and assumes from Assignor, that interest in and to
all of Assignor's rights and duties under the Agreement as of the date hereof
which represents the percentage interest specified in Item 3 of Annex I hereto
(the "Assigned Share") of all of the outstanding rights and obligations of all
Banks under the Agreement, including, without limitation, all rights and
obligations with respect to the Assigned Share in Assignor's Loans and Note.
After giving effect to such sale and assignment, Assignee's Percentage Share
(and Assignor's remaining Percentage Share) will be as set forth in Item 3 of
Annex I hereto.
2. Assignor: (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Agreement, the
other Loan Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Agreement, the other Loan Documents or
any other instrument or document furnished pursuant thereto; and (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Borrower, any other Related Person or the performance or
observance by any of them of any of their respective obligations under the
Agreement, the other Loan Documents, or any other instrument or document
furnished pursuant thereto.
3. Assignee: (i) confirms that it has received a copy of the Agreement,
together with copies of the financial statements most recently delivered
thereunder and such other Loan Documents and other documents and information as
it has deemed appropriate to make its own analysis of Borrower and the
transactions contemplated by the Agreement and its own independent decision to
enter into this Assignment and Assumption Agreement; (ii) agrees that it will,
independently and without reliance upon Assignor or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Agreement; (iii) confirms that it is a an Eligible Transferee under the
Agreement; (iv) appoints and authorizes Agent to take such action as agent on
its behalf and to exercise such powers under the Agreement and the other Loan
Documents as are specifically delegated to them, together with all other powers
reasonably incidental thereto; and (v) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Agreement are
required to
1
be performed by it as a Bank (including the obligation to make future Loans). [;
and (vi) attaches the "Prescribed Forms" described in Section 3.6(d) of the
Agreement.]
4. Following the execution of this Assignment and Assumption Agreement by
Assignor and Assignee, an executed original hereof (together with all
attachments) will be delivered to Agent. The effective date of this Assignment
and Assumption Agreement (the "Settlement Date") shall be the date specified in
Item 4 of Annex I hereto; provided that this Assignment and Assumption Agreement
shall not be deemed to have taken effect unless (i) the consent hereto of Agent
and Borrower has been obtained (to the extent required in the Agreement), (ii)
Agent has received a fully executed original hereof, and (iii) Agent has
received the processing fee referred to in Section 9.5(c)(ii) of the Agreement.
5. Upon the satisfaction of the foregoing conditions, then as of the
Settlement Date: (i) Assignee shall be a party to the Agreement and, to the
extent provided in this Assignment and Assumption Agreement, have the rights and
obligations of a Bank thereunder and under the other Loan Documents and (ii)
Assignor shall, to the extent provided in this Assignment and Assumption
Agreement, relinquish its rights and be released from its duties under the
Agreement and the other Loan Documents.
6. All interest, fees and other amounts that would otherwise accrue
pursuant to the Agreement and Assignor's Note for the account of Assignor from
and after the Settlement Date shall, instead accrue for the account of, and be
payable to, Assignor and Assignee, as the case may be, in accordance with their
respective interests as reflected in Item 3 to Annex I hereto. All payments of
principal that would otherwise be payable from and after the Settlement Date to
or for the account of Assignor pursuant to the Agreement and Assignor's Note
shall, instead, be payable to or for the account of Assignor and Assignee, as
the case may be, in accordance with their respective interests as reflected in
Item 3 to Annex I hereto. On the Settlement Date, Assignee shall pay to
Assignor an amount specified by Assignor in writing which represents the portion
of Assignor's Loans which is being assigned and which is outstanding on the
Settlement Date, net of any closing costs. Assignor and Assignee shall make all
appropriate adjustments in payments under the Agreement for periods prior to the
Settlement Date directly between themselves on the Settlement Date.
7. Each of the parties to this Assignment and Assumption Agreement agrees
that at any time and from time to time upon the written request of any other
party, it will execute and deliver such further documents and do such further
acts and things as such other party may reasonably request in order to effect
the purposes of this Assignment and Assumption Agreement.
8. This Assignment and Assumption Agreement shall be governed by, and
construed in accordance with, the Laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Assignment and Assumption Agreement, as of
the date first above written, such execution also being made on Annex I hereto.
[NAME OF ASSIGNOR]
as Assignor
By:
-----------------------------
Title:
2
[NAME OF ASSIGNEE]
By:
-----------------------------
Title:
CONSENTED TO AND ACKNOWLEDGED:
ING (U.S.) CAPITAL CORPORATION
as Agent
By:
-----------------------------
Title:
3
ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT
ANNEX I
1. Borrower: Inland Production Company
2. Date of Assignment Agreement:
3. Amounts (as of date of item #2 above):
Assignor Assignee
(as Revised) (New)
------------ --------
a. Percentage Share/1/ ________% ________%
b. Percentage Share of
Borrowing Base: $________ $________
4. Settlement Date:
5. Notices:
ASSIGNEE:
____________________
____________________
____________________
Attention:
Telephone:
Telecopy:
6. Wiring Instructions:
____________________
____________________
____________________
--------------------
/1/ Percentage taken to 12 decimal places.