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CREDIT AGREEMENT
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CHESAPEAKE ACQUISITION CORPORATION
and
CHESAPEAKE MID-CONTINENT CORP.,
as Borrowers,
CHESAPEAKE MERGER CORP.,
CHESAPEAKE ACQUISITION CORP.
CHESAPEAKE COLUMBIA CORP.,
MID-CONTINENT GAS PIPELINE COMPANY, and
ANSON GAS MARKETING
as Initial Guarantors,
UNION BANK OF CALIFORNIA, N.A.
as Agent
and CERTAIN FINANCIAL INSTITUTIONS
as Lenders
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March 9, 1998
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TABLE OF CONTENTS
Page
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CREDIT AGREEMENT ......................................................................... 1
ARTICLE I - Definitions and References ................................................... 1
Section 1.1. Defined Terms ...................................................... 1
Section 1.2. Exhibits and Schedules; Additional Definitions ..................... 15
Section 1.3. Amendment of Defined Instruments ................................... 15
Section 1.4. References and Titles .............................................. 15
Section 1.5. Calculations and Determinations .................................... 16
ARTICLE II - The Loans ................................................................... 16
Section 2.1. Commitments to Lend; Notes ......................................... 16
Section 2.2. Requests for New Loans ............................................. 16
Section 2.3. Interest Rates; Continuations and Conversions of Existing Loans .... 17
Section 2.4. Use of Proceeds .................................................... 18
Section 2.5. Fees ............................................................... 19
Section 2.6. Optional Prepayments ............................................... 19
Section 2.7. Mandatory Prepayments .............................................. 19
Section 2.8. Initial Borrowing Base ............................................. 20
Section 2.9. Subsequent Determinations of Borrowing Base ........................ 20
Section 2.10. Borrower's Reduction of the Borrowing Base ........................ 21
Section 2.11. Letters of Credit ................................................. 22
Section 2.12. Requesting Letters of Credit ...................................... 22
Section 2.13. Reimbursement and Participations .................................. 22
Section 2.14. Letter of Credit Fees ............................................. 24
Section 2.15. No Duty to Inquire ................................................ 24
Section 2.16. LC Collateral ..................................................... 25
ARTICLE III - Payments to Lenders ........................................................ 26
Section 3.1. General Procedures ................................................. 26
Section 3.2. Increased Cost and Reduced Return .................................. 27
Section 3.3. Limitation on Types of Loans ....................................... 28
Section 3.4. Illegality ......................................................... 28
Section 3.5. Treatment of Affected Loans ........................................ 29
Section 3.6. Compensation ....................................................... 29
Section 3.7. Taxes .............................................................. 30
Section 3.8. Compensation Procedure ............................................. 31
Section 3.9. Change of Applicable Lending Office ................................ 31
ARTICLE IV - Conditions Precedent to Lending ............................................. 32
Section 4.1. Documents to be Delivered .......................................... 32
Section 4.2. Closing of Mergers ................................................. 34
Section 4.3. Designated Affiliate Contracts/Structure ........................... 34
Section 4.4. Additional Conditions Precedent .................................... 34
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ARTICLE V - Representations and Warranties ............................................... 35
Section 5.1. No Default ......................................................... 35
Section 5.2. Organization and Good Standing ..................................... 35
Section 5.3. Authorization ...................................................... 36
Section 5.4. No Conflicts or Consents ........................................... 36
Section 5.5. Enforceable Obligations ............................................ 36
Section 5.6. Initial Financial Statements ....................................... 36
Section 5.7. Other Obligations and Restrictions ................................. 36
Section 5.8. Full Disclosure .................................................... 37
Section 5.9. Litigation ......................................................... 37
Section 5.10. Labor Disputes and Acts of God .................................... 37
Section 5.11. ERISA Plans and Liabilities ....................................... 37
Section 5.12. Environmental and Other Laws ...................................... 38
Section 5.13. Names and Places of Business ...................................... 38
Section 5.14. Borrower's Subsidiaries ........................................... 38
Section 5.15. Title to Properties; Licenses ..................................... 38
Section 5.16. Government Regulation ............................................. 39
Section 5.17. Insider ........................................................... 39
Section 5.18. Mergers ........................................................... 39
ARTICLE VI - Affirmative Covenants of Borrower ........................................... 40
Section 6.1. Payment and Performance ............................................ 40
Section 6.2. Books, Financial Statements and Reports ............................ 40
Section 6.3. Other Information and Inspections .................................. 42
Section 6.4. Notice of Material Events and Change of Address .................... 42
Section 6.5. Maintenance of Properties .......................................... 43
Section 6.6. Maintenance of Existence and Qualifications ........................ 43
Section 6.7. Payment of Trade Liabilities, Taxes, etc. .......................... 44
Section 6.8. Insurance .......................................................... 44
Section 6.9. Performance on Borrower's Behalf ................................... 44
Section 6.10. Interest .......................................................... 44
Section 6.11. Compliance with Agreements and Law ................................ 44
Section 6.12. Environmental Matters; Environmental Reviews ...................... 44
Section 6.13. Evidence of Compliance ............................................ 45
Section 6.14. Solvency .......................................................... 45
Section 6.15. Guaranties of Borrower's Subsidiaries ............................. 45
Section 6.16. Mergers ........................................................... 45
ARTICLE VII - Negative Covenants of Borrower ............................................. 45
Section 7.1. Indebtedness ....................................................... 46
Section 7.2. Limitation on Liens ................................................ 46
Section 7.3. Hedging Contracts .................................................. 46
Section 7.4. Limitation on Mergers, Issuances of Securities ..................... 47
Section 7.5. Limitation on Sales of Property .................................... 47
Section 7.6. Limitation on Dividends and Redemptions ............................ 48
Section 7.7. Limitation on Investments and New Businesses ....................... 48
Section 7.8. Limitation on Credit Extensions .................................... 48
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Section 7.9. Transactions with Affiliates ....................................... 48
Section 7.10. Certain Contracts; Multiemployer ERISA Plans; Designated
Affiliate Contracts ............................................. 48
Section 7.11. Corporate Requirements ............................................ 49
Section 7.12. Indenture Requirements ............................................ 49
Section 7.13. Interest Coverage ................................................. 49
Section 7.14. EBITDA Coverage ................................................... 49
Section 7.15. Tangible Net Worth ................................................ 49
Section 7.16. Current Ratio ..................................................... 50
ARTICLE VIII - Events of Default and Remedies ............................................ 50
Section 8.1. Events of Default .................................................. 50
Section 8.2. Remedies ........................................................... 52
ARTICLE IX - Agent ....................................................................... 52
Section 9.1. Appointment and Authority .......................................... 52
Section 9.2. Exculpation, Agent's Reliance, Etc. ................................ 53
Section 9.3. Credit Decisions ................................................... 53
Section 9.4. Indemnification .................................................... 53
Section 9.5. Rights as Lender ................................................... 54
Section 9.6. Sharing of Set-Offs and Other Payments ............................. 54
Section 9.7. Investments ........................................................ 55
Section 9.8. Benefit of Article IX .............................................. 55
Section 9.9. Resignation ........................................................ 55
ARTICLE X - Miscellaneous ................................................................ 55
Section 10.1. Waivers and Amendments; Acknowledgements .......................... 55
Section 10.2. Survival of Agreements; Cumulative Nature ......................... 57
Section 10.3. Notices ........................................................... 57
Section 10.4. Payment of Expenses; Indemnity .................................... 58
Section 10.5. Joint and Several Liability; Parties in Interest; Assignments ..... 59
Section 10.6. Confidentiality ................................................... 60
Section 10.7. Governing Law; Submission to Process .............................. 61
Section 10.8. Usury ............................................................. 61
Section 10.9. Termination; Limited Survival ..................................... 62
Section 10.10. Severability ..................................................... 62
Section 10.11. Counterparts ..................................................... 62
Section 10.12. Waiver of Jury Trial, Punitive Damages, etc. ..................... 62
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Schedules and Exhibits:
Lender 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 - Letter of Credit Application and Agreement
Exhibit F - Agreement of Parent Regarding Representations, Warranties and
Covenants
Exhibit G-1 - Opinion of Self, ▇▇▇▇▇▇▇ & ▇▇▇▇, Inc.
Exhibit G-2 - Opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P.
Exhibit H - Assignment and Assumption Agreement
Exhibit I-1 - Restated Certificate of Incorporation - CAC
Exhibit I-2 - Restated Certificates of Incorporation - Subsidiaries
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of March 9, 1998, by and among
CHESAPEAKE ACQUISITION CORPORATION, an Oklahoma corporation (herein called
"CAC"), CHESAPEAKE MID-CONTINENT CORP., an Oklahoma corporation (herein called
"CMC"), and a wholly owned subsidiary of CAC ("CAC and CMC collectively called
"Borrower"), CHESAPEAKE MERGER CORP., an Oklahoma corporation (herein called
"Chesapeake Merger"), CHESAPEAKE ACQUISITION CORP., a Kansas corporation (herein
called "Chesapeake Acquisition"), CHESAPEAKE COLUMBIA CORP., an Oklahoma
corporation, MID-CONTINENT GAS PIPELINE COMPANY, an Oklahoma general
partnership, and ANSON GAS MARKETING, an Oklahoma general partnership, UNION
BANK OF CALIFORNIA, N.A., individually and as administrative agent (herein
called "Agent"), certain Co-Agents named on the signature pages hereto and the
Lenders referred to below. In consideration of the mutual covenants and
agreements contained herein the parties hereto agree as follows:
ARTICLE I - Definitions and References
Section 1.1. Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it in this Section 1.1 or in the sections
and subsections referred to below:
"Acquisition Documents" means (i) the Agreement and Plan of Merger
among Parent, Chesapeake Merger and DLB Oil & Gas, Inc. dated October 22, 1997,
as amended, and (ii) the Agreement and Plan of Merger among Parent, Chesapeake
Acquisition and Hugoton Energy Corporation dated as of November 12, 1997, as
amended.
"Affiliate" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall be
deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power
(a) to vote 20% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or
managing general partners; or
(b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"Agent" means Union Bank of California, N.A., as Agent hereunder, and
its successors in such capacity.
"Agreement" means this Credit Agreement.
"Applicable Initial Borrowing Base" means (i) at any time that the DLB
Merger, but not the Hugoton Merger, has occurred, $86,813,000, (ii) at any time
that the Hugoton Merger, but not the DLB Merger, has occurred, $167,774,000,
(iii) at any time after both the DLB Merger and the Hugoton Merger have
occurred, $200,000,000.
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"Applicable Lending Office" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of Base Rate Loans and such
Lender's Eurodollar Lending Office in the case of Eurodollar Loans.
"Applicable Utilization Level" means on any date the level set forth
below that corresponds to the percentage, at the close of business on such day,
equivalent to the (i) Facility Usage divided by (ii) the Borrowing Base (the
"Utilization Percent"):
======================================================================
Applicable
Utilization Level Utilization Percent
-----------------------------------------------------------------------
Level I less than or equal to 33%
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Level II greater than 33% but less
than or equal to 60%
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Level III greater than 60% but less
than or equal to 85%
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Level IV greater than 85%
======================================================================
"Bank Parties" means Agent and all Lenders.
"Base Rate" means the higher of (a) Agent's Reference Rate and (b) the
Federal Funds Rate plus one-half percent (0.5%) per annum. As used in this
paragraph, Agent's "Reference Rate" means that variable rate of interest per
annum established by Agent from time to time as its "reference rate" (which rate
of interest may not be the lowest rate charged on similar loans). Each change in
the Base Rate shall become effective without prior notice to Borrower
automatically as of the opening of business on the date of such change in the
Base Rate. The Base Rate shall in no event, however, exceed the Highest Lawful
Rate.
"Base Rate Loan" means a Loan which bears interest at the Base Rate.
"Base Rate Margin" means, on any date, with respect to each Base Rate
portion of a Loan, the number of basis points per annum set forth below based on
the Applicable Utilization Level on such date:
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Applicable Base Rate
Utilization Level Margin
-----------------------------------------------------------------------
Level I 0 b.p.
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Level II 0 b.p.
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Level III 12.5 b.p.
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Level IV 25.0 b.p.
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Changes in the applicable Base Rate Margin will occur automatically without
prior notice as changes in the Applicable Utilization Level occur. Agent will
give notice promptly to Borrower and the Lenders of changes in the Base Rate
Margin.
"Borrower" means Chesapeake Acquisition Corporation and Chesapeake
Mid-Continent Corp., jointly and severally.
"Borrowing" means a borrowing of new Loans of a single Type pursuant to
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
amount provided for in Section 2.8 or the amount determined by Agent and
Required Lenders in accordance with the provisions of Section 2.9, as reduced by
Borrower pursuant to Section 2.10.
"Borrowing Base Fee Rate" means, on any date, the number of basis
points per annum set forth below, based on the Applicable Utilization Level on
such date:
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Applicable Borrowing Base
Utilization Level Fee Rate
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Level I 15.0 b.p.
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Level II 20.0 b.p.
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Level III 25.0 b.p.
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Level IV 30.0 b.p.
==============================================================
"Borrowing Notice" means a written or telephonic request, or a written
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
commercial banks are open for business with the public in Los Angeles,
California. 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.
"Cash Equivalents" means investments in:
(a) 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;
(b) demand deposits, and time deposits (including certificates of
deposit) maturing within 12 months from the date of deposit thereof, with any
office of any Lender or with a domestic office of any national or state bank or
trust company which is organized under the Laws of the United States of
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America or any state therein, which has capital, surplus and undivided profits
of at least $500,000,000, and whose certificates of deposit have at least the
third highest credit rating given by either Rating Agency;
(c) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (a) above entered into
with any commercial bank meeting the specifications of clause (b) above;
(d) open market commercial paper, maturing within 270 days after
acquisition thereof, which has the highest or second highest credit rating given
by either Rating Agency.
(e) investments in money market or other mutual funds substantially all
of whose assets comprise securities of the types described in clauses (a)
through (d) above.
"Change of Control" means the occurrence of any of the following
events: (i) any Person other than Parent shall acquire any beneficial ownership
of CAC, or any Person other than CAC shall acquire any beneficial ownership of
any Restricted Person (other than beneficial interests held by another
Restricted Person), (ii) 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) of 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), (iii) one-third or more of the directors of Parent shall
consist of Persons not nominated by Parent's Board of Directors (not including
as Board nominees any directors which the Board is obligated to nominate
pursuant to shareholders agreements, voting trust arrangements or similar
arrangements) or (iv) neither ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ nor ▇▇▇ ▇▇▇▇ shall be
executive officers and directors of Parent.
"Chesapeake Acquisition" means Chesapeake Acquisition Corp., a Kansas
corporation and a wholly owned subsidiary of CAC.
"Chesapeake Merger" means Chesapeake Merger Corp., an Oklahoma
corporation, and a wholly owned Subsidiary of CAC.
"CMC" means Chesapeake Mid-Continent Corp., an Oklahoma corporation,
and a wholly owned subsidiary of CAC.
"Commitment Fee Rate" means, on any date, the number of basis points
per annum set forth below based on the Applicable Utilization Level on such
date:
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===============================================================
Applicable Commitment Fee
Utilization Level Rate
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Level I 20 b.p.
----------------------------------------------------------------
Level II 25 b.p.
----------------------------------------------------------------
Level III 30 b.p.
----------------------------------------------------------------
Level IV 37.5 b.p.
===============================================================
Changes in the applicable Commitment Fee Rate will occur automatically without
prior notice as changes in the Applicable Utilization Level occur. Agent will
give notice promptly to Borrower and the Lenders of changes in the Commitment
Fee Rate.
"Commitment Period" means the period from and including the date hereof
until and including March 9, 2002 (or, if earlier, the day on which the
commitments of the Lenders are terminated pursuant to Section 8.1, or the day
the Notes first become due and payable in full).
"Consolidated" refers to the consolidation of any Person, in accordance
with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's 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.
"Consolidated EBITDA" means, for any four-Fiscal Quarter period, the
sum of (1) the Consolidated net income of Borrower during such period, plus (2)
Consolidated Interest Expense of Borrower during such period, 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.
"Consolidated Interest Expense" means, for any four-Fiscal Quarter
period, all interest paid or accrued during such period on Indebtedness
(including, but not limited to, accrued capitalized interest, amortization of
original issue discount and the interest component of any deferred payment
obligations and capital lease obligations) which was deducted in determining
Consolidated net income of Borrower for such period.
"Consolidated Tangible Net Worth" means the remainder of all
Consolidated assets of Borrower, other than intangible assets (including without
limitation 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
Borrower's Consolidated Liabilities.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 2.3 hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.
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"Continuation/Conversion Notice" means a written or telephonic request,
or a written confirmation, made by Borrower which meets the requirements of
Section 2.3.
"Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to Section 2.3 or Article X of one Type of Loan into another Type of
Loan.
"Default" means any Event of Default and any default, event or
condition which would, with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of Default.
"Default Rate" means, at the time in question, three percent (3.0%) per
annum plus the Base Rate (plus the Base Rate Margin) 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, "Default Rate"
shall mean three percent (3.0%) per annum plus the related Eurodollar Rate (plus
the Eurodollar Margin). The Default Rate shall never exceed the Highest Lawful
Rate.
"Determination Date" has the meaning given it in Section 2.9.
"Disclosure Report" means either a notice given by Borrower under
Section 6.4 or a certificate given by Borrower's chief financial officer under
Section 6.2(b).
"Disclosure Schedule" means Schedule 1 hereto.
"Distribution" means (a) any dividend or other distribution made by a
Restricted Person on or in respect of any stock, partnership interest, or other
equity interest in such Restricted Person (including any option or warrant to
buy such an equity interest), or (b) any payment made by a Restricted Person to
purchase, redeem, acquire or retire any stock, partnership interest, or other
equity interest in such Restricted Person (including any such option or
warrant).
"DLB Merger" means the merger of Chesapeake Merger and DLB Oil & Gas,
Inc. contemplated by the Acquisition Documents.
"Designated Affiliate Contracts" has the meaning given it in Section
4.3.
"Domestic Lending Office" means, with respect to any Lender, the office
of such Lender specified as its "Domestic Lending Office" below its name on the
Lender Schedule attached hereto, or such other office as such Lender may from
time to time specify to Borrower and Agent.
"Eligible Transferee" means a Person which either (a) is a Lender or an
Affiliate of a Lender, or (b) is 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).
"Engineering Report" means the Initial Engineering Report and each
engineering report delivered pursuant to Section 6.2(f) and (g).
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"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.
"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
Restricted Person has a fixed or contingent liability.
"Eurodollar Loan" means a Loan which is properly designated as a
Eurodollar Loan pursuant to Section 2.2 or 2.3.
"Eurodollar Margin" means, on any date, with respect to each Eurodollar
portion of a Loan, the number of basis points per annum set forth below based on
the Applicable Utilization Level on such date:
======================================================
Applicable Eurodollar
Utilization Level Margin
------------------------------------------------------
Level I 75 b.p.
------------------------------------------------------
Level II 100 b.p.
------------------------------------------------------
Level III 125 b.p.
------------------------------------------------------
Level IV 150 b.p.
======================================================
Changes in the applicable Eurodollar Margin will occur automatically without
prior notice as changes in the Applicable Utilization Level occur. Agent will
give notice promptly to Borrower and the Lenders of changes in the Eurodollar
Margin
"Eurodollar Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" below its
name on the Lender Schedule attached hereto (or, if no such office is specified,
its Domestic Lending Office), or such other office of such Lender as such Lender
may from time to time specify to Borrower and Agent.
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"Eurodollar Rate" means, with respect to each particular Eurodollar
Loan 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
-------------------------
100.0% - Reserve Percentage
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 8.1.
"Facility Usage" means, at the time in question, the aggregate amount
of outstanding Loans and existing LC Obligations at such time.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded 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.
"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.
"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 Borrower
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 Parent 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 such principle or practice
to continue as a generally accepted accounting principle or practice, all
reports and financial statements required hereunder with respect to Borrower or
with respect to Borrower 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 Majority Lenders agree to such change insofar
as it affects the accounting of Borrower or of Borrower and its Consolidated
subsidiaries.
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"Guarantor" means Chesapeake Merger, Chesapeake Acquisition and each
other Subsidiary of CAC which now or hereafter executes and delivers a guaranty
to Agent pursuant to Section 6.15 and any other Person who has guaranteed some
or all of the Obligations and who has been accepted by Majority Lenders as a
Guarantor.
"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.
"Highest Lawful Rate" means, with respect to each Lender, the maximum
nonusurious rate of interest that such Lender 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 Lender as appropriate to assure that the Loan Documents are not construed
to obligate any Person to pay interest to any Lender at a rate in excess of the
Highest Lawful Rate applicable to such Lender.
"Hugoton Merger" means the merger of Chesapeake Acquisition and Hugoton
Energy Corporation contemplated by the Acquisition Documents.
"Indebtedness" of any Person means Liabilities (without duplication) in
any of the following categories:
(a) Liabilities for borrowed money,
(b) Liabilities constituting an obligation to pay the deferred purchase
price of property or services,
(c) Liabilities evidenced by a bond, debenture, note or similar
instrument,
(d) Liabilities which (i) would under GAAP be shown on such Person's
balance sheet as a liability, and (ii) are payable more than one year from the
date of creation thereof (other than reserves for taxes and reserves for
contingent obligations),
(e) Liabilities arising under futures contracts, forward contracts,
swap, cap or collar contracts, option contracts, hedging contracts, other
derivative contracts, or similar agreements,
(f) Liabilities constituting principal under leases capitalized in
accordance with GAAP,
(g) Liabilities arising under conditional sales or other title
retention agreements,
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(h) Liabilities owing under direct or indirect guaranties of
Liabilities of any other Person or constituting obligations to purchase or
acquire or to otherwise protect or insure a creditor against loss in respect of
Liabilities of any other Person (such as obligations under working capital
maintenance agreements, agreements to keep-well, or agreements to purchase
Liabilities, assets, goods, securities or services), but excluding endorsements
in the ordinary course of business of negotiable instruments in the course of
collection,
(i) Liabilities (for example, repurchase agreements) consisting of an
obligation to purchase securities or other property, if such Liabilities arises
out of or in connection with the sale of the same or similar securities or
property,
(j) Liabilities with respect to letters of credit or applications or
reimbursement agreements therefor,
(k) Liabilities 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
(l) Liabilities with respect to other obligations to deliver goods or
services in consideration of advance payments therefor;
provided, however, that the "Indebtedness" of any Person shall not include
Liabilities that were 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
Liabilities are outstanding more than 120 days past the original invoice or
billing date therefor.
"Indentures" means the Indenture of Parent dated May 15, 1995 (the
"1995 Indenture"), the Indenture of Parent dated April 1, 1996 (the "1996
Indenture") and the two Indentures of Parent dated March 15, 1997 (the "1997
Indentures").
"Initial Engineering Report" means, collectively, the engineering
reports concerning oil and gas properties to be acquired pursuant to the Mergers
dated June 30, 1997, prepared by ▇▇▇▇▇ ▇▇▇▇▇ Company (with respect to the
Hugoton Energy Corporation properties), dated January 1, 1998, prepared by
Parent (with respect to the AnSon Production Corporation properties) and dated
_______________, 1996, prepared by ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇ and ▇.▇. ▇▇▇▇ and
Associates, Inc. (with respect to the DLB Oil & Gas, Inc. properties).
"Initial Financial Statements" means (i) the audited annual
Consolidated financial statements of Parent dated as of June 30, 1997, and (ii)
the unaudited quarterly Consolidated financial statements of Parent dated as of
September 30, 1997, and (iii) the pro-forma consolidated and consolidating
financial statements of CAC, CMC (giving effect to its merger with AnSon
Production Corporation, Chesapeake Merger (giving effect to the DLB Merger) and
Chesapeake Acquisition (giving effect to the Hugoton Merger) using financial
information for AnSon Production Corporation, DLB Oil & Gas, Inc. and Hugoton
Energy Corporation as of September 30, 1997.
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"Insurance Schedule" means Schedule 2 attached hereto.
"Interest Period" with respect to each Eurodollar Loan, the period
commencing on the date of borrowing specified in the applicable Borrowing Notice
or on the date specified in an applicable Notice of Interest Rate Election and
ending one week or one, two, three, or six months thereafter, as the Borrower
may elect in such notice; provided that: (a) any Interest Period (except an
Interest Period determined pursuant to clause (c) below) which would otherwise
end on a day which is not a Business Day shall be extended to the next
succeeding Business Day unless such Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding
Business Day; (b) any Interest Period which begins on the last Business Day in a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall, subject to
clause (c) below, end on the last Business Day in a calendar month; and (c) any
Interest Period which would otherwise end after the last day of the Commitment
Period shall end on the last day of the Commitment Period (or, if the last day
of the Commitment Period is not a Business Day the next preceding Business Day).
"Investment" means any investment, in cash or by delivery of property
made, directly or indirectly in any Person, whether by acquisition of shares of
capital stock, indebtedness or other obligations or securities or by loan,
advance, capital contribution or otherwise.
"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.
"LC Application" means any application for a Letter of Credit hereafter
made by Borrower to LC Issuer.
"LC Collateral" has the meaning given it in Section 2.16(a).
"LC Issuer" means Union Bank of California, N.A. in its capacity as the
issuer of Letters of Credit hereunder, and its successors in such capacity.
Agent may, with the consent of Borrower and the Lender in question, appoint any
Lender hereunder as the LC Issuer in place of or in addition to Union Bank of
California, N.A.
"LC Obligations" means, at the time in question, the sum of all Matured
LC Obligations plus the maximum amounts which LC Issuer might then or thereafter
be called upon to advance under all Letters of Credit then outstanding.
"Lenders" means each signatory hereto (other than Borrower and
Restricted Persons a party hereto), including Union Bank of California, N.A. in
its capacity as a lender hereunder rather than as Agent or LC Issuer, and the
successors of each such party as holder of a Note.
"Lending Office" means, with respect to any Lender, the office, branch,
or agency through which it funds its Eurodollar Loans; with respect to LC
Issuer, the office, branch, or agency through which it issues Letters of Credit;
and, with respect to Agent, the office, branch, or agency through which it
administers this Agreement.
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"Letter of Credit" means any letter of credit issued by LC Issuer
hereunder at the application of Borrower.
"Letter of Credit Fee Rate" means, on any date the number of basis
points per annum set forth below based on the Applicable Utilization Level on
such date:
==============================================================
Applicable Commitment Fee
Utilization Level Rate
--------------------------------------------------------------
Level I 75 b.p.
--------------------------------------------------------------
Level II 100 b.p.
--------------------------------------------------------------
Level III 125 b.p.
--------------------------------------------------------------
Level IV 150 b.p.
==============================================================
"Liabilities" 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.
"LIBOR Rate" means, with respect to each particular Eurodollar Loan and
the related Interest Period, the rate of interest per annum determined by Agent
in accordance with its customary general practices to be representative of the
rates at which deposits of dollars are offered to Agent at approximately 9:00
a.m. New York, New York time two Business Days prior to the first day of such
Interest Period (by prime banks in the interbank eurocurrency market which have
been selected by Agent in accordance with its customary general practices) for
delivery on the first day of such Interest Period in an amount equal or
comparable to the amount of the applicable Eurodollar Loan and for a period of
time equal or comparable to the length of such Interest Period. The Eurodollar
Rate determined by Agent with respect to a particular Eurodollar Loan shall be
fixed at such rate for the duration of the associated Interest Period. If Agent
is unable so to determine the Eurodollar Rate for any Eurodollar Loan, Borrower
shall be deemed not to have elected such Eurodollar Loan.
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure Liabilities owed to him or any other
arrangement with such creditor which provides for the payment of such
Liabilities out of such property or assets or which allows him to have such
Liabilities satisfied out of such property or assets prior to the general
creditors of any owner thereof, including any lien, mortgage, security interest,
pledge, deposit, production payment, rights of a vendor under any title
retention or conditional sale agreement or lease substantially equivalent
thereto, tax lien, mechanic's or materialman's lien, or any other charge or
encumbrance for security purposes, whether arising by Law or agreement or
otherwise, but excluding any right of offset which arises without agreement in
the ordinary course of business. "Lien" also means any filed financing
statement, any registration of a pledge (such as with an issuer of
uncertificated securities), or any other arrangement or action which would serve
to perfect a Lien described in the preceding sentence, regardless of whether
such financing statement is filed, such registration is made, or such
arrangement or action is undertaken before or after such Lien exists.
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"Loan" has the meaning given it in Section 2.1.
"Loan Documents" means this Agreement, the Notes, guaranties of the
Obligations by each Subsidiary of Borrower, as listed on the Security Schedule,
the Agreement of Representations, Warranties and Covenants of Parent, the stock
pledge agreement of CAC as listed on the Security Schedule, the Letters of
Credit, the LC Applications, 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).
"Majority Lenders" means Agent and Lenders whose aggregate Percentage
Shares equal or exceed sixty-six and two-thirds percent (662/3%).
"Material Adverse Change" means a material and adverse change, from the
state of affairs presented in the Borrower's pro-forma Initial Financial
Statements or as represented or warranted in any Loan Document, to (a)
Restricted Persons' Consolidated financial condition, (b) the operations or
properties of Restricted Persons, considered as a whole, (c) Borrower's ability
to timely pay the Obligations, or (d) the enforceability of the material terms
of any Loan Documents.
"Matured LC Obligations" means all amounts paid by LC Issuer on drafts
or demands for payment drawn or made under or purported to be under any Letter
of Credit and all other amounts due and owing to LC Issuer under any LC
Application for any Letter of Credit, to the extent the same have not been
repaid to LC Issuer (with the proceeds of Loans or otherwise).
"Maximum Drawing Amount" means at the time in question the sum of the
maximum amounts which LC Issuer might then or thereafter be called upon to
advance under all Letters of Credit then outstanding.
"Mergers" means the mergers contemplated by the Acquisition Documents.
"Note" has the meaning given it in Section 2.1.
"Obligations" means all Liabilities from time to time owing by any
Restricted Person to any Bank Party under or pursuant to any of the Loan
Documents, including all LC Obligations.
"Obligation" means any part of the Obligations.
"Parent" means Chesapeake Energy Corporation, an Oklahoma corporation.
"Parent Affiliate" means Parent and each of Parent's Subsidiaries
(other than the Restricted Persons).
"Percentage Share" means, with respect to any Lender (a) when used in
Sections 2.1 or 2.5, in any Borrowing Notice or when no Loans are outstanding
hereunder, the percentage set forth opposite such Lender's name on Lender
Schedule attached hereto, and (b) when used otherwise, the percentage obtained
by dividing (i) the sum of the unpaid principal balance of such Lender's Loans
at the time in question plus the Matured LC Obligations which such Lender has
funded pursuant to Section 2.13(c)
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plus the portion of the Maximum Drawing Amount which such Lender might be
obligated to fund under Section 2.13(c), by (ii) the sum of the aggregate unpaid
principal balance of all Loans at such time plus the aggregate amount of LC
Obligations outstanding at such time.
"Permitted Investments" means (i) Cash Equivalents and (ii) investments
by Borrower in its wholly owned Subsidiaries provided that such Subsidiary is a
Guarantor.
"Permitted Lien" has the meaning given to such term in Section 7.2.
"Person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint venture,
Tribunal, or any other legally recognizable entity.
"Rating Agency" means either Standard & Poor's Ratings Group (a
division of McGraw Hill, Inc.) or ▇▇▇▇▇'▇ Investors Service, Inc., or their
respective successors.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect.
"Required Lenders" means Agent and Lenders whose aggregate Percentage
Shares equal or exceed seventy-five percent (75%).
"Restricted Person" means any of Borrower and each Subsidiary of
Borrower.
"Reserve Percentage" means, on any day with respect to each particular
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 Schedule" means Schedule 3 attached hereto.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such Person.
"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
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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.
"Type" means, with respect to any Loans, the characterization of such
Loans as either Base Rate Loans or Eurodollar Loans.
Section 1.2. Exhibits and Schedules; Additional Definitions. All
Exhibits and Schedules attached to this Agreement are a part hereof for all
purposes. Reference is hereby made 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.
Section 1.3. Amendment of Defined Instruments. Unless the context
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
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the 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 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 Bank Party of amounts to be
paid under Sections 3.2 through 3.8 or any other matters which are to be
determined hereunder by a Bank Party (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 Majority Lenders
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otherwise consent all financial statements and reports furnished to any Bank
Party hereunder shall be prepared and all financial computations and
determinations pursuant hereto shall be made in accordance with GAAP.
ARTICLE II - The Loans and Letters of Credit
Section 2.1. Commitments to Lend; Notes. Subject to the terms and
conditions hereof, each Lender agrees to make loans to Borrower (herein called
such Lender'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
Lenders are requested to make Loans of the same Type in accordance with their
respective Percentage Shares and as part of the same Borrowing, (b) after giving
effect to such Loans, the Facility Usage does not exceed the Borrowing Base in
effect as of the date on which the requested Loans are to be made and (c) after
giving effect to such Loans, the outstanding principal amount of each Lender's
Loans, plus such Lender's Percentage Share of LC Obligations does not exceed
such Lender's Percentage Share of the Borrowing Base in effect 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 $2,500,000 or must equal the
remaining availability under the Borrowing Base. Borrower may have no more than
five Borrowings of Eurodollar Loans outstanding at any time. The obligation of
Borrower to repay to each Lender the aggregate amount of all Loans made by such
Lender, together with interest accruing in connection therewith, shall be
evidenced by a single promissory note (herein called such Lender's "Note") made
by Borrower payable to the order of such Lender in the form of Exhibit A with
appropriate insertions. The amount of principal owing on any Lender's Note at
any given time shall be the aggregate amount of all Loans theretofore made by
such Lender minus all payments of principal theretofore received by such Lender
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 plus the Eurodollar Margin and Base Rate Loans bearing interest
at the Base Rate plus the Base Rate Margin (subject to the applicability of the
Default Rate and limited by the provisions of Section 10.8). Subject to the
terms and conditions hereof, Borrower may borrow, repay, and reborrow hereunder,
provided that on the last day of the Commitment Period, unless sooner paid as
provided herein, all Loans shall be repaid in full.
Section 2.2. Requests for New Loans. Borrower must give to Agent
written notice (or telephonic notice promptly confirmed in writing) of any
requested Borrowing of new Loans to be advanced by Lenders. 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 8:00 a.m., Los Angeles,
California 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.
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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 Lender prompt notice of the terms thereof. If all
conditions precedent to such new Loans have been met, each Lender will on the
date requested promptly remit to Agent at Agent's office in Los Angeles,
California the amount of such Lender'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 Lender that such Lender will not make
available to Agent such Lender's new Loan, Agent may in its discretion assume
that such Lender 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 Lender shall not so
make its new Loan available to Agent, such Lender 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 Lender 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 Lender
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 Lender
and from Borrower, on demand, interest thereon at the Default Rate, calculated
from the date such amount was made available to Borrower. The failure of any
Lender to make any new Loan to be made by it hereunder shall not relieve any
other Lender of its obligation hereunder, if any, to make its new Loan, but no
Lender shall be responsible for the failure of any other Lender to make any new
Loan to be made by such other Lender.
Section 2.3. Interest Rates; Continuations and Conversions of Existing
Loans.
(a) Interest Rates. 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 sum of the Base Rate in effect on such day plus the Base
Rate Margin in effect on such day, but in no event in excess of the Highest
Lawful Rate. 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 plus the Eurodollar Margin in
effect on such day, but in no event in excess of the Highest Lawful Rate. Such
interest shall be payable on the dates specified in the Note. All past due
principal of and past due interest on the Loan shall bear interest on each day
outstanding at the Default Rate in effect on such day, and such interest shall
be due and payable daily as it accrues.
(b) Continuations and Conversions. Borrower 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, provided that Borrower may have no more than five
Borrowings of Eurodollar Loans outstanding at any time. To make any such
election, Borrower must give to Agent written notice (or telephonic notice
promptly confirmed in writing) of any
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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:
(i) specify the existing Loans which are to be continued or
converted;
(ii) specify (A) 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 (B) 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
(iii) be received by Agent not later than 8:00 a.m., Los Angeles,
California time, on (A) the day on which any such continuation or
conversion to Base Rate Loans is to occur, or (B) 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
Continuation/Conversion Notice, Agent shall give each Lender prompt notice of
the terms thereof. Each Continuation/Conversion 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 Lender 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 all Loans: (i) to
repay existing indebtedness of Hugoton Energy Corporation contemporaneously with
the Hugoton Merger up to the amount of $105,000,000.00 plus accrued and unpaid
interest, (ii) to repay existing indebtedness of DLB Oil & Gas, Inc.
contemporaneously with the DLB Merger up to the amount of $85,000,000.00, (iii)
to pay the purchase price for other acquisitions approved by Majority Lenders,
(iv) to finance developmental drilling, (v) to finance capital expenditures,
(vi) to refinance Matured LC Obligations, (vii) provide working capital for its
operations and (viii) for other general business purposes, provided, that until
both Mergers have been consummated, no Loans may be requested for the purposes
under clauses (iii) through (viii) which cause the Applicable Initial Borrowing
Base, minus the Facility Usage, to be less than the amounts to be available for
the purposes under clauses (i) and (ii), as applicable. Borrower shall not use
any Loans for the purpose of financing an acquisition of a Person which is
opposed by the Board of Directors of the Person being acquired. Borrower shall
use all Letters of Credit to assure the payment or performance of obligations or
commitments arising the ordinary course of business and for
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other general business purposes, but it shall not use Letters of Credit directly
or indirectly to secure the payment of Indebtedness. In no event shall the funds
from any Loan or any Letter of Credit 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 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 Lender's commitment to
make Loans, Borrower will pay to Agent for the account of each Lender a
commitment fee determined on a daily basis by applying the Commitment Fee Rate
to such Lender'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
March, June, September and December and at the end of the Commitment Period.
(c) Agent's Fees. In addition to all other amounts due to Agent under
the Loan Documents, Borrower will pay fees to Agent 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 Lender, 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. 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) 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, after Agent gives notice of such fact to Borrower (a "Deficiency
Notice"):
(i) within thirty (30) days after the Deficiency Notice give
notice to Agent electing to prepay the principal of the Loans in a
single payment, in which event Borrower shall prepay the principal of
the Loans in an aggregate amount at least equal to such Borrowing Base
Deficiency (or, if the Loans have been paid in full, pay to LC Issuer
LC Collateral as required under Section 2.16(a)) on or before the date
which is sixty (60) days after the Deficiency Notice, or
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(ii) within 30 days after the Deficiency Notice give notice to
Agent electing to prepay the principal of the Loans in installments, in
which event Borrower shall prepay the principal of the Loans in six
consecutive monthly installments, in an aggregate amount at least equal
to such Borrowing Base Deficiency (or, if the Loans have been paid in
full, pay to LC Issuer LC Collateral as required under Section
2.16(a)), with the first such installment due 30 days after the
Deficiency Notice, the next five such installments due on the same day
of each consecutive month, each such installment being in the amount of
one-sixth of such Borrowing Base Deficiency, or
(iii) within 30 days after the Deficiency Notice, certify to
Agent that Borrower has marketable title, free of any Liens, to oil and
gas properties not included in such existing Borrowing Base, which
properties were not acquired with Indebtedness, in an amount which
eliminates such Borrowing Base Deficiency, and provide to each Lender
the same information regarding such property as would be required for
an evaluation by Required Lenders under Section 2.9. If Required
Lenders determine that such properties 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 (a).
(b) 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.
(c) During the pendency of a Borrowing Base Deficiency, or at any time
after the occurrence and during the continuance of an Event of Default, all net
proceeds of any securities issued by any Restricted Person or of any asset sale
shall be applied to prepay the obligations.
Section 2.8. Initial Borrowing Base. During the period from the date
hereof to the first Determination Date the Borrowing Base shall be the
Applicable Initial Borrowing Base.
Section 2.9. Subsequent Determinations of Borrowing Base.
(a) By March 15 and September 15 of each year, Borrower shall furnish
to each Lender all information, reports and data which Agent has then requested
concerning Restricted Persons' businesses and properties (including their oil
and gas properties and interests and the reserves and production relating
thereto), together with the Engineering Reports described in Section 6.2(f) and
(g). Borrower or Required Lenders shall each have the right to request
additional redeterminations of the Borrowing Base by notice to the other,
whereupon to the extent requested by any Lender, Borrower shall promptly, and in
any event within forty-five (45) days after such notice, furnish to each Lender
the same information required by the preceding sentence together with the
Engineering Report described in Section 6.2(g). Within forty-five (45) days
after receiving such information, reports and data, or as promptly thereafter as
practicable, Required Lenders shall agree upon an amount for 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
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information, reports and data by the date specified above in 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 Lender 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 (i) the loan value which they in their discretion assign to the various oil
and gas properties of Restricted Persons at the time in question and (ii) upon
such other 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 Lenders and Agent have no obligation to agree upon or
designate the Borrowing Base at any particular amount, whether in relation to
the aggregate face amounts of the Notes or otherwise, and that Lenders'
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. Any determination of the
Borrowing Base at an amount in excess of the lesser of (i) $300,000,000 or (ii)
150% of the Applicable Initial Borrowing Base shall require the determination
and agreement of all Lenders.
(b) Borrowing Base Fees. In consideration of each increase of the
Borrowing Base over the highest Borrowing Base previously in effect (but
specifically excluding any increase to an amount less than or equal to
$220,000,000, such increase being governed by the fees specified in the letter
agreement of even date herewith between Agent and Borrower), Borrower will pay
to Agent for the account of each Lender a fee determined by applying the
applicable Borrowing Base Fee Rate to such Lender's portion of such Borrowing
Base increase. This fee shall be due and payable no later than 15 days after the
date of the Determination Date.
Section 2.10. Borrower's Reduction of the Borrowing Base. Borrower may,
during the fifteen-day period beginning on each Determination Date (each such
period being called in this section an "Option Period"), reduce the Borrowing
Base from the amount designated by Agent to any lesser amount. To exercise such
option Borrower must within an Option Period send notice to Agent of the amount
of the Borrowing Base chosen by Borrower. If Borrower does not affirmatively
exercise this option during an Option Period, the Borrowing Base shall be the
amount designated by Agent. Any choice by Borrower of a Borrowing Base shall be
effective as of the first day of the Option Period during which such choice was
made and shall continue in effect until the next date as of which the Borrowing
Base is redetermined.
Section 2.11. Letters of Credit. Subject to the terms and conditions
hereof, Borrower may during the Commitment Period request LC Issuer to issue one
or more Letters of Credit, provided that, after taking such Letter of Credit
into account:
(a) the Facility Usage does not exceed the Borrowing Base at such
time; and
(b) the aggregate amount of LC Obligations at such time does not
exceed $15,000,000; and
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(c) the expiration date of such Letter of Credit is prior to the
end of the Commitment Period;
(d) such Letter of Credit is to be used for general corporate
purposes of Borrower;
(e) such Letter of Credit is not directly or indirectly used to
assure payment of or otherwise support any Indebtedness of any Person;
(f) the issuance of such Letter of Credit will be in compliance
with all applicable governmental restrictions, policies, and guidelines
and will not subject LC Issuer to any cost which is not reimbursable
under Article III;
(g) the form and terms of such Letter of Credit are acceptable to
LC Issuer in its sole discretion; and
(h) all other conditions in this Agreement to the issuance of
such Letter of Credit have been satisfied.
LC Issuer will honor any such request if the foregoing conditions (a) through
(h) (in the following Section 2.12 called the "LC Conditions") have been met as
of the date of issuance of such Letter of Credit. LC Issuer may choose to honor
any such request for any other Letter of Credit but has no obligation to do so
and may refuse to issue any other requested Letter of Credit for any reason
which LC Issuer in its sole discretion deems relevant.
Section 2.12. Requesting Letters of Credit. Borrower must make written
application for any Letter of Credit at least five Business Days before the date
on which Borrower desires for LC Issuer to issue such Letter of Credit. By
making any such written application Borrower shall be deemed to have represented
and warranted that the LC Conditions described in Section 2.11 will be met as of
the date of issuance of such Letter of Credit. Each such written application for
a Letter of Credit must be made in writing in the form and substance of Exhibit
E, the terms and provisions of which are hereby incorporated herein by reference
(or in such other form as may mutually be agreed upon by LC Issuer and
Borrower). Two Business Days after the LC Conditions for a Letter of Credit have
been met as described in Section 2.11 (or if LC Issuer otherwise desires to
issue such Letter of Credit), LC Issuer will issue such Letter of Credit at LC
Issuer's office in Los Angeles, California. If any provisions of any LC
Application conflict with any provisions of this Agreement, the provisions of
this Agreement shall govern and control.
Section 2.13. Reimbursement and Participations.
(a) Reimbursement by Borrower. Each Matured LC Obligation shall
constitute a loan by LC Issuer to Borrower. Borrower promises to pay to LC
Issuer, or to LC Issuer's order, on demand, the full amount of each Matured LC
Obligation, together with interest thereon at the Base Rate plus the Base Rate
Margin from the date such matured LC obligation accrues until the third Business
Day after demand, and thereafter at the Default Rate until paid, but in no event
in excess of the Highest Lawful Rate.
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(b) Letter of Credit Advances. If the beneficiary of any Letter of
Credit makes a draft or other demand for payment thereunder then Borrower may,
during the interval between the making thereof and the honoring thereof by LC
Issuer, request Lenders to make Loans to Borrower in the amount of such draft or
demand, which Loans shall be made concurrently with LC Issuer's payment of such
draft or demand and shall be immediately used by LC Issuer to repay the amount
of the resulting Matured LC Obligation. Such a request by Borrower shall be made
in compliance with all of the provisions hereof, provided that for the purposes
of the first sentence of Section 2.1 the amount of such Loans shall be
considered but the amount of the Matured LC Obligation to be concurrently paid
by such Loans shall not be considered.
(c) Participation by Lenders. LC Issuer irrevocably agrees to grant and
hereby grants to each Lender, and -- to induce LC Issuer to issue Letters of
Credit hereunder -- each Lender irrevocably agrees to accept and purchase and
hereby accepts and purchases from LC Issuer, on the terms and conditions
hereinafter stated and for such Lender's own account and risk an undivided
interest equal to such Lender's Percentage Share of LC Issuer's obligations and
rights under each Letter of Credit issued hereunder and the amount of each
Matured LC Obligation paid by LC Issuer thereunder. Each Lender unconditionally
and irrevocably agrees with LC Issuer that, if a Matured LC Obligation is paid
under any Letter of Credit for which LC Issuer is not reimbursed in full by
Borrower in accordance with the terms of this Agreement and the related LC
Application (including any reimbursement by means of concurrent Loans or by the
application of LC Collateral), such Lender shall (in all circumstances and
without set-off or counterclaim) pay to LC Issuer on demand, in immediately
available funds at LC Issuer's address for notices hereunder, such Lender's
Percentage Share of such Matured LC Obligation (or any portion thereof which has
not been reimbursed by Borrower). Each Lender's obligation to pay LC Issuer
pursuant to the terms of this subsection is irrevocable and unconditional. If
any amount required to be paid by any Lender to LC Issuer pursuant to this
subsection is not paid by such Lender to LC Issuer within three Business Days
after the date such payment is due, LC Issuer shall in addition to such amount
be entitled to recover from such Lender, on demand, interest thereon calculated
from such due date at the Default Rate.
(d) Distributions to Participants. Whenever LC Issuer has in accordance
with this section received from any Lender payment of such Lender's Percentage
Share of any Matured LC Obligation, if LC Issuer thereafter receives any payment
of such Matured LC Obligation or any payment of interest thereon (whether
directly from Borrower or by application of LC Collateral or otherwise, and
excluding only interest for any period prior to LC Issuer's demand that such
Lender make such payment of its Percentage Share), LC Issuer will distribute to
such Lender its Percentage Share of the amounts so received by LC Issuer;
provided, however, that if any such payment received by LC Issuer must
thereafter be returned by LC Issuer, such Lender shall return to LC Issuer the
portion thereof which LC Issuer has previously distributed to it.
(e) Calculations. A written advice setting forth in reasonable detail
the amounts owing under this section, submitted by LC Issuer to Borrower or any
Lender from time to time, shall be conclusive, absent manifest error, as to the
amounts thereof.
Section 2.14. Letter of Credit Fees. In consideration of LC Issuer's
issuance of any Letter of Credit, Borrower agrees to pay (a) to Agent, for the
account of all Lenders, a letter of credit fee determined on a daily basis by
applying the Letter of Credit Fee Rate to such Lender's Percentage Share of the
face amount of the Letter of Credit (but in no event less than $500 per annum),
and (b) to
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such LC Issuer for its own account, a letter of credit fronting fee at a rate
specified in a separate letter agreement between Borrower and such LC Issuer
(but in no event less than $250 per annum). The letter of credit fee and the
letter of credit fronting fee with respect to each Letter of Credit shall be due
and payable in arrears on the last day of each March, June, September and
December for the period that such Letter of Credit is outstanding.
Section 2.15. No Duty to Inquire.
(a) Drafts and Demands. LC Issuer is authorized and instructed to
accept and pay drafts and demands for payment under any Letter of Credit without
requiring, and without responsibility for, any determination as to the existence
of any event giving rise to said draft, either at the time of acceptance or
payment or thereafter. LC Issuer is under no duty to determine the proper
identity of anyone presenting such a draft or making such a demand (whether by
tested telex or otherwise) as the officer, representative or agent of any
beneficiary under any Letter of Credit, and payment by LC Issuer to any such
beneficiary when requested by any such purported officer, representative or
agent is hereby authorized and approved. Borrower agrees to hold LC Issuer and
each other Bank Party harmless and indemnified against any liability or claim in
connection with or arising out of the subject matter of this section, WHICH
INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY
OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION
OF ANY KIND BY ANY BANK PARTY, provided only that no Bank Party shall be
entitled to indemnification for that portion, if any, of any liability or claim
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment.
(b) Extension of Maturity. If the maturity of any Letter of Credit is
extended by its terms or by Law or governmental action, if any extension of the
maturity or time for presentation of drafts or any other modification of the
terms of any Letter of Credit is made at the request of any Restricted Person,
or if the amount of any Letter of Credit is increased at the request of any
Restricted Person, this Agreement shall be binding upon all Restricted Persons
with respect to such Letter of Credit as so extended, increased or otherwise
modified, with respect to drafts and property covered thereby, and with respect
to any action taken by LC Issuer, LC Issuer's correspondents, or any Bank Party
in accordance with such extension, increase or other modification.
(c) Transferees of Letters of Credit. If any Letter of Credit provides
that it is transferable, LC Issuer shall have no duty to determine the proper
identity of anyone appearing as transferee of such Letter of Credit, nor shall
LC Issuer be charged with responsibility of any nature or character for the
validity or correctness of any transfer or successive transfers, and payment by
LC Issuer to any purported transferee or transferees as determined by LC Issuer
is hereby authorized and approved, and Borrower further agrees to hold LC Issuer
and each other Bank Party harmless and indemnified against any liability or
claim in connection with or arising out of the foregoing, WHICH INDEMNITY SHALL
APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY OR TO ANY EXTENT
CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY
BANK PARTY, provided only that no Bank Party shall be entitled to
indemnification for that portion, if any, of any liability or claim which is
proximately caused by its own individual gross negligence or willful misconduct,
as determined in a final judgment.
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Section 2.16. LC Collateral.
(a) LC Obligations in Excess of Borrowing Base. If, after the making of
all mandatory prepayments required under Section 2.7, the principal balance of
the Loans is zero, but outstanding LC Obligations will exceed the Borrowing
Base, then in addition to such prepayment Borrower will immediately pay to LC
Issuer an amount equal to such excess. LC Issuer will hold such amount as
security for the remaining LC Obligations (all such amounts held as security for
LC Obligations being herein collectively called "LC Collateral") until such LC
Obligations become Matured LC Obligations, at which time such LC Collateral may
be applied to such Matured LC Obligations. Neither this subsection nor the
following subsection shall, however, limit or impair any rights which LC Issuer
may have under any other document or agreement relating to any Letter of Credit
or LC Obligation, including any LC Application, or any rights which any Bank
Party may have to otherwise apply any payments by Borrower and any LC Collateral
under Section 3.1.
(b) Acceleration of LC Obligations. If the Obligations or any part
thereof become immediately due and payable pursuant to Section 8.1 then, unless
Majority Lenders otherwise specifically elect to the contrary (which election
may thereafter by retracted by Majority Lenders at any time), all LC Obligations
shall become immediately due and payable without regard to whether or not actual
drawings or payments on the Letters of Credit have occurred, and Borrower shall
be obligated to pay to LC Issuer immediately an amount equal to the aggregate LC
Obligations which are then outstanding. All amounts so paid shall first be
applied to Matured LC Obligations and then held by LC Issuer as LC Collateral
until such LC Obligations become Matured LC Obligations, at which time such LC
Collateral shall be applied to such Matured LC Obligations.
(c) Investment of LC Collateral. Pending application thereof, all LC
Collateral shall be invested by LC Issuer in such investments as LC Issuer may
choose in its sole discretion. All interest on such investments shall be
reinvested or applied to Matured LC Obligations. When all Obligations have been
satisfied in full, including all LC Obligations, all Letters of Credit have
expired or been terminated, and all of Borrower's reimbursement obligations in
connection therewith have been satisfied in full, LC Issuer shall release any
remaining LC Collateral. Borrower hereby assigns and grants to LC Issuer a
continuing security interest in all LC Collateral paid by it to LC Issuer, all
investments purchased with such LC Collateral, and all proceeds thereof to
secure its Matured LC Obligations and its Obligations under this Agreement, the
Notes, and the other Loan Documents. Borrower further agrees that LC Issuer
shall have all of the rights and remedies of a secured party under the Uniform
Commercial Code as adopted in the State of Texas with respect to such security
interest and that an Event of Default under this Agreement shall constitute a
default for purposes of such security interest.
(d) Payment of LC Collateral. When Borrower is required to provide LC
Collateral for any reason and fails to do so on the day when required, LC Issuer
may without notice to Borrower or any other Restricted Person provide such LC
Collateral (whether by application of proceeds of other Collateral, by transfers
from other accounts maintained with LC Issuer, or otherwise) using any available
funds of Borrower or any other Person also liable to make such payments. Any
such amounts which are required to be provided as LC Collateral and which are
not provided on the date required shall, for purposes of each Security Document,
be considered past due Obligations owing hereunder, and LC Issuer is hereby
authorized to exercise its respective rights under each Security Document to
obtain such amounts.
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ARTICLE III - Payments to Lenders
Section 3.1. General Procedures. Borrower will make each payment which
it owes under the Loan Documents to Agent for the account of the Bank Party to
whom such payment is owed. Each such payment must be received by Agent not later
than 9:00 a.m., Los Angeles, California 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 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 Bank Party 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 6.9 or 10.4 and then to
the partial payment of all other Obligations then due in proportion to
the amounts thereof, or as Bank Parties 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 Section
2.6. All distributions of amounts described in any of subsections (b), (c) or
(d) above shall be made by Agent pro rata to each Bank Party then owed
Obligations described in such subsection in proportion to all amounts owed to
all Bank Parties which are described in such subsection; provided that if any
Lender then owes payments to LC Issuer for the purchase of a participation under
Section 2.13(c) hereof, any amounts otherwise distributable under this section
to such Lender shall be deemed to belong to LC Issuer, to the extent of such
unpaid payments, and Agent shall apply such amounts to make such unpaid payments
rather than distribute such amounts to such Lender.
Section 3.2. Increased Cost and Reduced Return.
(a) If, after the date hereof, the adoption of any applicable
law, rule, or regulation, or any change in any applicable law, rule, or
regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank, or comparable
agency
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charged with the interpretation or administration thereof, or
compliance by any Lender (or its Applicable Lending Office) with any
request or directive (whether or not having the force of law) of any
such governmental authority, central bank, or comparable agency:
(i) shall subject such Lender (or its Applicable Lending
Office) to any tax, duty, or other charge with respect to any
Eurodollar Loans, its Notes, or its obligation to make Eurodollar
Loans, or change the basis of taxation of any amounts payable to
such Lender (or its Applicable Lending Office) under this
Agreement or its Notes in respect of any Eurodollar Loans (other
than taxes imposed on the overall net income of such Lender by
the jurisdiction in which such Lender has its principal office or
such Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any reserve,
special deposit, assessment, or similar requirement (other than
the Reserve Requirement utilized in the determination of the
Eurodollar Rate) relating to any extensions of credit or other
assets of, or any deposits with or other liabilities or
commitments of, such Lender (or its Applicable Lending Office),
including the Commitment of such Lender hereunder; or
(iii) shall impose on such Lender (or its Applicable Lending
Office) or the London interbank market any other condition
affecting this Agreement or its Notes or any of such extensions
of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such
Lender (or its Applicable Lending Office) of making, Converting into,
continuing, or maintaining any Eurodollar Loans or to reduce any sum
received or receivable by such Lender (or its Applicable Lending
Office) under this Agreement or its Notes with respect to any
Eurodollar Loans, then Borrower shall pay to such Lender on demand such
amount or amounts as will compensate such Lender for such increased
cost or reduction. If any Lender requests compensation by Borrower
under this Section 3.2(a), Borrower may, by notice to such Lender (with
a copy to Agent), suspend the obligation of such Lender to make or
continue Loans of the Type with respect to which such compensation is
requested, or to Convert Loans of any other Type into Loans of such
Type, until the event or condition giving rise to such request ceases
to be in effect (in which case the provisions of Section 3.5 shall be
applicable); provided that such suspension shall not affect the right
of such Lender to receive the compensation so requested.
(b) If, after the date hereof, any Lender shall have determined
that the adoption of any applicable law, rule, or regulation regarding
capital adequacy or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such governmental
authority, central bank, or comparable agency, has or would have the
effect of reducing the rate of return on the capital of such Lender or
any corporation controlling such Lender as a consequence of such
Lender's obligations hereunder to a level below that which such Lender
or such corporation could have achieved but for such adoption, change,
request, or directive (taking into consideration its policies with
respect to capital adequacy), then from time to time upon demand
Borrower shall pay to such Lender such additional amount or
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amounts as will compensate such Lender for such reduction but only to
the extent that such Lender has not been compensated therefor by an
increase in the Eurodollar Rate.
(c) Each Lender shall promptly notify Borrower and Agent of any
event of which it has knowledge, occurring after the date hereof, which
will entitle such Lender to compensation pursuant to this Section and
will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the judgment of such Lender, be otherwise
disadvantageous to it. Any Lender claiming compensation under this
Section shall furnish to Borrower and Agent a statement setting forth
the additional amount or amounts to be paid to it hereunder which shall
be conclusive in the absence of manifest error. In determining such
amount, such Lender shall act in good faith and may use any reasonable
averaging and attribution methods.
Section 3.3. Limitation on Types of Loans. If on or prior to the first
day of any Interest Period for any Eurodollar Loan:
(a) Agent determines (which determination shall be conclusive)
that by reason of circumstances affecting the relevant market, adequate
and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period; or
(b) the Majority Lenders determine (which determination shall be
conclusive) and notify Agent that the Eurodollar Rate will not
adequately and fairly reflect the cost to Lenders of funding Eurodollar
Loans for such Interest Period;
then Agent shall give Borrower prompt notice thereof specifying the relevant
Type of Loans and the relevant amounts or periods, and so long as such condition
remains in effect, Lenders shall be under no obligation to make additional Loans
of such Type, continue Loans of such Type, or to Convert Loans of any other Type
into Loans of such Type and Borrower shall, on the last day(s) of the then
current Interest Period(s) for the outstanding Loans of the affected Type,
either prepay such Loans or Convert such Loans into another Type of Loan in
accordance with the terms of this Agreement.
Section 3.4. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to make, maintain, or fund Eurodollar Loans hereunder,
then such Lender shall promptly notify Borrower thereof and such Lender's
obligation to make or continue Eurodollar Loans and to Convert other Types of
Loans into Eurodollar Loans shall be suspended until such time as such Lender
may again make, maintain, and fund Eurodollar Loans (in which case the
provisions of Section 3.5 shall be applicable).
Section 3.5. Treatment of Affected Loans. If the obligation of any
Lender to make a particular Type of Eurodollar Loan or to continue, or to
Convert Loans of any other Type into, Loans of a particular Type shall be
suspended pursuant to Section 3.2 or 3.4 hereof (Loans of such Type being herein
called "Affected Loans" and such Type being herein called the "Affected Type"),
such Lender's Affected Loans shall be automatically Converted into Base Rate
Loans on the last day(s) of the then current Interest Period(s) for Affected
Loans (or, in the case of a Conversion required by Section 3.4 hereof, on such
earlier date as such Lender may specify to Borrower with a copy to Agent) and,
unless and until such Lender gives notice as provided below that the
circumstances specified in Section 3.2 or 3.4 hereof that gave rise to such
Conversion no longer exist:
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(a) to the extent that such Lender's Affected Loans have been so
Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Affected Loans shall be applied
instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or continued by such
Lender as Loans of the Affected Type shall be made or continued instead
as Base Rate Loans, and all Loans of such Lender that would otherwise
be Converted into Loans of the Affected Type shall be Converted instead
into (or shall remain as) Base Rate Loans.
If such Lender gives notice to Borrower (with a copy to Agent) that the
circumstances specified in Section 3.2 or 3.4 hereof that gave rise to the
Conversion of such Lender's Affected Loans pursuant to this Section 3.5 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Loans of the Affected Type made by other
Lenders are outstanding, such Lender's Base Rate Loans shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Loans of the Affected Type, to the extent necessary so that,
after giving effect thereto, all Loans held by Lenders holding Loans of the
Affected Type and by such Lender are held pro rata (as to principal amounts,
Types, and Interest Periods) in accordance with their Percentage Shares of the
Commitment.
Section 3.6. Compensation. Upon the request of any Lender, Borrower
shall pay to such Lender such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost, or
expense (including loss of anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or Conversion of a Eurodollar Loan
for any reason (including, without limitation, the acceleration of the
Loans pursuant to Section 8.1) on a date other than the last day of the
Interest Period for such Loan; or
(b) any failure by Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in Article
IV to be satisfied) to borrow, Convert, continue, or prepay a
Eurodollar Loan on the date for such borrowing, Conversion,
continuation, or prepayment specified in the relevant notice of
borrowing, prepayment, continuation, or Conversion under this
Agreement.
Section 3.7. Taxes.
(a) Any and all payments by Borrower to or for the account of any
Lender or Agent hereunder or under any other Loan Document shall be
made free and clear of and without deduction for any and all present or
future taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in
the case of each Lender and Agent, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the laws of
which such Lender (or its Applicable Lending Office) or Agent (as the
case may be) is organized or any political subdivision thereof (all
such non-excluded taxes, duties, levies, imposts, deductions, charges,
withholdings, and liabilities being hereinafter referred to as
"Taxes"). If Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable under this Agreement or any other Loan
Document to any Lender or Agent, (i) the sum payable shall be increased
as necessary so that after making
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all required deductions (including deductions applicable to additional
sums payable under this Section 3.7) such Lender or Agent receives an
amount equal to the sum it would have received had no such deductions
been made, (ii) Borrower shall make such deductions, and (iii) Borrower
shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.
(b) In addition, Borrower agrees to pay any and all present or
future stamp or documentary taxes and any other excise or property
taxes or charges or similar levies which arise from any payment made
under this Agreement or any other Loan Document or from the execution
or delivery of, or otherwise with respect to, this Agreement or any
other Loan Document (hereinafter referred to as "Other Taxes").
(c) Borrower agrees to indemnify each Lender and Agent for the
full amount of Taxes and Other Taxes (including, without limitation,
any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 3.7) paid by such Lender or Agent
(as the case may be) and any liability (including penalties, interest,
and expenses) arising therefrom or with respect thereto.
(d) Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and
delivery of this Agreement in the case of each Lender listed on the
signature pages hereof and on or prior to the date on which it becomes
a Lender in the case of each other Lender, and from time to time
thereafter if requested in writing by Borrower or Agent (but only so
long as such Lender remains lawfully able to do so), shall provide
Borrower and Agent with (i) Internal Revenue Service Form 1001 or 4224,
as appropriate, or any successor form prescribed by the Internal
Revenue Service, certifying that such Lender is entitled to benefits
under an income tax treaty to which the United States is a party which
reduces the rate of withholding tax on payments of interest or
certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the
United States, (ii) Internal Revenue Service Form W-8 or W-9, as
appropriate, or any successor form prescribed by the Internal Revenue
Service, and (iii) any other form or certificate required by any taxing
authority (including any certificate required by Sections 871(h) and
881(c) of the Internal Revenue Code), certifying that such Lender is
entitled to an exemption from or a reduced rate of tax on payments
pursuant to this Agreement or any of the other Loan Documents.
(e) For any period with respect to which a Lender has failed to
provide Borrower and Agent with the appropriate form pursuant to
Section 3.7(d) (unless such failure is due to a change in treaty, law,
or regulation occurring subsequent to the date on which a form
originally was required to be provided), such Lender shall not be
entitled to indemnification under Section 3.7(a) or 3.7(b) with respect
to Taxes imposed by the United States; provided, however, that should a
Lender, which is otherwise exempt from or subject to a reduced rate of
withholding tax, become subject to Taxes because of its failure to
deliver a form required hereunder, Borrower shall take such steps as
such Lender shall reasonably request to assist such Lender to recover
such Taxes.
(f) If Borrower is required to pay additional amounts to or for
the account of any Lender pursuant to this Section 3.7, then such
Lender will agree to use reasonable efforts to
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change the jurisdiction of its Applicable Lending Office so as to
eliminate or reduce any such additional payment which may thereafter
accrue if such change, in the judgment of such Lender, is not otherwise
disadvantageous to such Lender and in the event Lender is reimbursed
for an amount paid by Borrower pursuant to this Section 3.7, it shall
promptly return such amount to Borrower.
(g) Within thirty (30) days after the date of any payment of
Taxes, Borrower shall furnish to Agent the original or a certified copy
of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower
contained in this Section 3.7 shall survive the termination of the
Commitment and the payment in full of the Notes.
Section 3.8. Compensation Procedure. Any Lender or LC Issuer notifying
Borrower of the incurrence of additional costs under Sections 3.2 through 3.7
shall in such notice to Borrower and Agent set forth in reasonable detail the
basis and amount of its request for compensation. Determinations and allocations
by each Lender or LC Issuer for purposes of Sections 3.2 through 3.7 of the
effect of any change in applicable laws, treaties, rules or regulations or in
the interpretation or administration thereof, any losses or expenses incurred by
reason of the liquidation or reemployment of deposits or other funds, any taxes,
levies, costs and charges imposed, or the effect of capital maintained on its
costs or rate of return of maintaining Loans or its obligation to make Loans, or
on amounts receivable by it in respect of Loans, and of the amounts required to
compensate such Lender under Sections 3.2 through 3.7, shall be conclusive and
binding for all purposes, absent manifest error. Any request for compensation
under this Section 3.8 shall be paid by Borrower within thirty (30) Business
Days of the receipt by Borrower of the notice described in this Section 3.8.
Section 3.9. Change of Applicable Lending Office. Each Bank Party
agrees that, upon the occurrence of any event giving rise to the operation of
Sections 3.2 through 3.6 with respect to such Bank Party, it will, if requested
by Borrower, use reasonable efforts (subject to overall policy considerations of
such Bank Party) to designate another Lending Office, provided that such
designation is made on such terms that such Bank Party 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 Bank Party provided in Sections 3.2 through
3.6.
ARTICLE IV - Conditions Precedent to Lending
Section 4.1. Documents to be Delivered. No Lender has any obligation to
make its first Loan, and LC Issuer has no obligation to issue the first Letter
of Credit, unless Agent shall have received all of the following, at Agent's
office in Los Angeles, California, duly executed and delivered and in form,
substance and date satisfactory to Agent:
(a) This Agreement and any other documents that Lenders are to
execute in connection herewith.
(b) Each Note.
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(c) The guaranties, stock pledge agreements and financing
statements listed on the Security Schedule.
(d) The Agreement of Representations, Warranties and Covenant of
Parent in the form attached hereto as Exhibit F.
(e) Certain certificates of each Borrower including:
(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 or such Letter of Credit, in which such
officers certify to the satisfaction of the conditions set out in
subsections (a), (b), (c) and (d) of Section 4.4.
(f) 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.
(g) Documents similar to those specified in subsections (e)(i)
and (f) of this section with respect to each other Restricted Person
and the execution by it of its guaranty and the other Loan Documents to
which it is a party.
(h) Documents similar to those specified in subsections (e)(i)
and (f) of this section with respect to Parent.
(i) A favorable opinion of Messrs. Self, ▇▇▇▇▇▇▇ and ▇▇▇▇ counsel
for Restricted Persons, substantially in the form set forth in Exhibit
G-1.
(j) A favorable opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P., counsel for
Restricted Persons in the form of Exhibit G-2, and other evidence
requested by Agent that (i) each Restricted Person is an "Unrestricted
Subsidiary," as that term is used in the 1995 Indenture and the ▇▇▇▇
▇▇▇▇▇▇▇▇▇ and no Restricted Person is required to be or become a
Guarantor under the 1997 Indentures, (ii) no Restricted Person is
otherwise subject to the covenants contained in the Indentures,
including but not limited to any covenant requiring the granting of any
guaranty or Lien to the holders of any notes subject to the Indentures
or any covenant prohibiting any of the covenants
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made herein by the Restricted Persons, and (iii) that the
representations and warranties contained in Section 5.4 are true and
correct insofar as they relate to the Indentures.
(k) The Initial Engineering Report and the Initial Financial
Statements.
(l) Certificates or binders evidencing Restricted Persons'
insurance in effect on the date hereof.
(m) An environmental report issued by a consultant acceptable to
the Agent regarding their environmental assessment of a selected number
of the properties part of the Mergers and their environmental review of
the companies that are party to the Mergers, in scope and results
acceptable to Agent.
(n) A certificate signed by the chief executive officer of
Borrower in form and detail acceptable to Agent confirming the
insurance that is in effect as of the date hereof and certifying that
such insurance is customary for the businesses conducted by Restricted
Persons and is in compliance with the requirements of this Agreement.
(o) Payment of all commitment, facility, agency and other fees
required to be paid to any Bank Party pursuant to any Loan Documents or
any commitment agreement heretofore entered into.
(p) A copy of each Acquisition Document, duly executed and
delivered by each party thereto.
(q) Evidence that Borrower has obtained approvals or applicable
waiting periods have expired as required pursuant to the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement Act of 1976, as amended.
Section 4.2. Closing of Mergers. (a) Prior to or contemporaneously with
the first Loan hereunder, Borrower shall have consummated either the DLB Merger
or the Hugoton Merger. Prior to the funding of any Loan to refinance
indebtedness in connection with either of the Mergers, (i) such Merger shall
have been consummated, in form and substance satisfactory to Agent, (ii) after
giving effect to such Merger, all representations and warranties made by any
Restricted Person in any Loan Document shall be true (including, but not limited
to, the contemporaneous payment and release of any Liens and Indebtedness not
permitted by Sections 7.1 or 7.2), and (iii) Agent shall have received all
documents and instruments which Agent has then requested, including, but not
limited to, supplements or restatements of the opinions and certificates set
forth in Section 4.1. Each Restricted Person hereby acknowledges and agrees that
each Restricted Person shall be deemed to have executed and delivered each Loan
Document as set forth in Section 4.1 above, including without limitation each
guaranty, immediately prior to or simultaneously with the making of the Loans
hereunder.
(b) If the DLB Merger shall occur prior to the Hugoton Merger and the
existing indebtedness of DLB exceeds the Borrowing Base, prior to or
contemporaneously with the consummation of the DLB Merger, Borrower shall have
received a cash equity contribution from Parent in the amount of such excess and
shall have applied such contribution to such existing indebtedness of DLB.
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Section 4.3. Designated Affiliate Contracts/Structure.
Contemporaneously with the first Loan hereunder, Restricted Persons shall have
satisfied the following additional conditions:
(a) Restricted Persons shall have entered into contracts, in
form, scope, and substance satisfactory to Lenders with Chesapeake
Operating Inc. regarding management services, leasehold operating
services and other operating services and compensation for such
services (the "Designated Affiliate Contracts"), and
(b) Each Restricted Person shall have adopted Restated
Certificates of Incorporation in the form attached hereto as Exhibit
I-1 or Exhibit I-2 and shall have delivered to Agent a certificate in
form satisfactory to Agent that each Restricted Person is in compliance
with the requirements of such Restated Certificates of Incorporation.
Section 4.4. Additional Conditions Precedent. No Lender has any
obligation to make any Loan (including its first), and LC Issuer has no
obligation to issue any Letter of Credit (including its first), unless the
following conditions precedent have been satisfied:
(a) All representations and warranties made by Parent or any
Restricted Person in any Loan Document shall be true on and as of the
date of such Loan or the date of issuance of such Letter of Credit
(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 or the date of issuance of such Letter of Credit.
(b) No Default shall exist at the date of such Loan or the date
of issuance of such Letter of Credit.
(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) Parent and each Restricted 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 or the date of issuance of such Letter of Credit.
(e) The making of such Loan or the issuance of such Letter of
Credit shall not be prohibited by any Law and shall not subject any
Lender or any LC Issuer 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 Restricted Persons and Agent;
corporate documents and records; documents evidencing 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 Restricted 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
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thereto. All such additional documents and instruments shall be
satisfactory to Agent in form, substance and date.
ARTICLE V - Representations and Warranties
To confirm each Bank Party's understanding concerning Restricted
Persons and Restricted Persons' businesses, properties and obligations and to
induce each Bank Party to enter into this Agreement and to extend credit
hereunder, each Restricted Person represents and warrants to each Bank Party
that:
Section 5.1. No Default. No Restricted 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 5.2. Organization and Good Standing. Each Restricted 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
Restricted 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 Restricted 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 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 5.3. Authorization. Each Restricted 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 5.4. No Conflicts or Consents. The execution and delivery by
Parent and the various Restricted 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 Parent or any Restricted Person, or (3) any
agreement, judgment, license, order or permit applicable to or binding upon
Parent or any Restricted Person, (ii) result in the acceleration of any
Indebtedness owed by Parent or any or Restricted Person, (iii) result in or
require the creation of any Lien upon any assets or properties of Parent or any
Restricted Person, or (iv) result in or require the creation of any guaranty by
any Restricted Person of any Indebtedness of any other Person except for the
guaranties listed on the Security Schedule. 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 Parent or any Restricted Person
of any Loan Document or to consummate any transactions contemplated by the Loan
Documents.
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Section 5.5. Enforceable Obligations. This Agreement is, and the other
Loan Documents when duly executed and delivered will be, legal, valid and
binding obligations of each Restricted 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 5.6. Initial Financial Statements. Borrower has heretofore
delivered to each Bank Party true, correct and complete copies of the Initial
Financial Statements. The Initial Financial Statements fairly present (i)
Parent's Consolidated financial position at the dates thereof and the
Consolidated results of Parent's operations and Parent's Consolidated cash flows
for the respective periods thereof, (ii) Borrower's pro forma financial position
at the date thereof after giving effect to the merger of AnSon Production
Corporation with and into CMC, (iii) Borrower's pro forma financial condition as
of the date thereof after giving effect to the Hugoton Merger, (iv) Borrower's
Consolidated pro forma financial condition as of the date thereof after giving
effect to the DLB Merger and (v) Borrower's Consolidated pro forma financial
condition as of the date thereof after giving effect to both Mergers. Since the
date of the annual Initial Financial Statements no Material Adverse Change has
occurred from the financial condition reflected in the Initial Financial
Statements, except as reflected in Parent's quarterly Initial Financial
Statements or in the Disclosure Schedule. All Initial Financial Statements were
prepared in accordance with GAAP.
Section 5.7. Other Obligations and Restrictions. No Restricted Person
has any outstanding Liabilities of any kind (including contingent obligations,
tax assessments, and unusual forward or long-term commitments) which are, in the
aggregate, material to such Restricted Person or material with respect to
Restricted Persons' Consolidated financial condition and not shown in the
Initial pro forma Financial Statements of Borrower or disclosed in the
Disclosure Schedule or a Disclosure Report. Except as shown in the Initial
Financial Statements or disclosed in the Disclosure Schedule or a Disclosure
Report, no Restricted Person is subject to or restricted by any franchise,
contract, deed, charter restriction, or other instrument or restriction which
could cause a Material Adverse Change.
Section 5.8. Full Disclosure. No certificate, statement or other
information delivered herewith or heretofore by any Restricted Person to any
Bank Party in connection with the negotiation of this Agreement or in connection
with any transaction contemplated hereby (including, but not limited to, the
final Proxy Statements for each of the Mergers) contains any untrue statement of
a material fact or omits to state any material fact known to any Restricted
Person (other than industry-wide risks normally associated with the types of
businesses conducted by Restricted 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 Restricted Person (other than industry-wide risks
normally associated with the types of businesses conducted by Restricted
Persons) that has not been disclosed to each Bank Party in writing which could
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 no Related Person
warrants that such opinions, estimates and projections will ultimately prove to
have been accurate. Parent and Borrower have heretofore delivered to each Bank
Party true, correct and complete copies of the Initial Engineering Report.
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Section 5.9. 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 Restricted Person threatened, against any Restricted 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 Restricted Person or any Restricted Person's stockholders,
partners, directors or officers which could cause a Material Adverse Change.
Section 5.10. Labor Disputes and Acts of God. Except as disclosed in
the Disclosure Schedule or a Disclosure Report, neither the business nor the
properties of Parent or any Restricted 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 5.11. 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 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 5.12. Environmental and Other Laws. Except as disclosed in the
Disclosure Schedule or a Disclosure Report: (a) Restricted Persons are
conducting their businesses in material compliance with all applicable Laws,
including Environmental Laws, and have and are in compliance with all licenses
and permits required under any such Laws; (b) none of the operations or
properties of any Restricted Person is the subject of federal, state or local
investigation evaluating whether any material remedial action is needed to
respond to a release of any Hazardous Materials into the environment or to the
improper storage or disposal (including storage or disposal at offsite
locations) of any Hazardous Materials; (c) no Restricted Person (and to the best
knowledge of Borrower, no other Person) has filed any notice under any Law
indicating that any Restricted Person is responsible for the improper release
into the environment, or the improper storage or disposal, of any material
amount of any Hazardous Materials or that any Hazardous Materials have been
improperly released, or are improperly stored or disposed of, upon any property
of any Restricted Person; (d) no Restricted Person has transported or arranged
for the transportation of any Hazardous Material to any location which is (i)
listed on the National Priorities List under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, listed for
possible inclusion on such National Priorities List by the Environmental
Protection Agency in its Comprehensive Environmental Response, Compensation and
Liability Information System List, or listed on any similar state list or (ii)
the subject of federal, state or local enforcement actions or other
investigations which may lead to claims against any Restricted Person for
clean-up costs, remedial work, damages to natural resources or for personal
injury claims (whether under Environmental Laws or otherwise); and (e) no
Restricted Person otherwise has any
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known material contingent liability under any Environmental Laws or in
connection with the release into the environment, or the storage or disposal, of
any Hazardous Materials.
Section 5.13. Names and Places of Business. No Restricted 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 Restricted Person are
(and for the preceding five years have been) located at the address of Borrower
set out in Section 10.3. Except as indicated in the Disclosure Schedule or a
Disclosure Report, no Restricted Person has any other office or place of
business.
Section 5.14. Borrower's Subsidiaries. All of the outstanding stock of
any class of CAC is owned by Parent. All of the outstanding stock of any class
of CMC, Chesapeake Merger, Chesapeake Acquisition and Chesapeake Columbia Corp.,
Inc. is owned by CAC. All of the partnership interests of Mid-Continent Gas
Pipeline Company and AnSon Gas Marketing are owned by CAC and CMC. Neither CAC
nor CMC has any Subsidiary or own any stock in any other corporation or
association except those listed in the Disclosure Schedule or a Disclosure
Report. Neither Borrower nor any Restricted Person is a member of any general or
limited partnership, joint venture or association of any type whatsoever. Except
as otherwise revealed in a Disclosure Report, Borrower owns, directly or
indirectly, the equity interest in each of its Subsidiaries which is indicated
in the Disclosure Schedule.
Section 5.15. Title to Properties; Licenses. Each Restricted Person has
good and defensible title to all of its material properties and assets, free and
clear of all Liens other than Permitted Liens and of all impediments to the use
of such properties and assets in such Restricted Person's business, except that
no representation or warranty is made with respect to any oil, gas or mineral
property or interest to which no proved oil or gas reserves are properly
attributed. Other than Liens permitted under Section 7.02, each Restricted
Person will respectively own in the aggregate, in all material respects, the net
interests in production attributable to the ▇▇▇▇▇ and units evaluated in the
Initial Reserve Reports. The ownership of such Properties shall not in the
aggregate in any material respect obligate such Restricted Person to bear the
costs and expenses relating to the maintenance, development and operations of
such Properties in an amount materially in excess of the working interest of
such Properties set forth in the Initial Engineering Reports. Each Restricted
Person has paid all royalties payable under the oil and gas leases to which it
is operator, except those contested in accordance with the terms of the
applicable joint operating agreement or otherwise contested in good faith by
appropriate proceedings. Upon delivery of each Engineering Report furnished to
the Lenders pursuant to Sections 6.02(f) and (g), the statements made in the
preceding sentences of this Section 5.15 shall be true with respect to such
Engineering Reports. All information contained in the Initial Engineering
Reports is true and correct in all material respects as of the date thereof and
as of the date of the first Loan hereunder. Each Restricted 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 Restricted 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 5.16. Government Regulation. Neither Parent nor Borrower nor
any other Restricted Person owing Obligations is subject to regulation under the
Public Utility Holding Company Act of
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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 Indebtedness, including Laws relating to common contract
carriers or the sale of electricity, gas, steam, water or other public utility
services.
Section 5.17. Insider. Neither Parent nor any Restricted Person, nor
any Person having "control" (as that term is defined in 12 U.S.C. ss. 375b(9) or
in regulations promulgated pursuant thereto) of any Restricted Person, is a
"director" or an "executive officer" or "principal shareholder" (as those terms
are defined in 12 U.S.C. ss. 375b(8) or (9) or in regulations promulgated
pursuant thereto) of any Bank Party, of a bank holding company of which any Bank
Party is a Subsidiary or of any Subsidiary of a bank holding company of which
any Bank Party is a Subsidiary.
Section 5.18. Mergers. The merger of AnSon Production Company with and
into CMC has been duly consummated in compliance with the agreement therefor and
all requirements of Law. The Hugoton Merger and the DLB Merger, when required to
be consummated under Section 4.2, will have been duly consummated in compliance
with the terms of the respective Acquisition Documents and requirements of Law,
including, but not limited to, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, the Securities Act of 1933 and the Securities Exchange Act of 1934,
each as amended, and the applicable corporation act of each applicable state. As
of the date of each of the Acquisition Documents and as of the date of
consummation of each of the Mergers, each of the representations and warranties
of each parties to such Acquisition Document was and will be true, complete and
correct in all material respects.
ARTICLE VI - Affirmative Covenants of Borrower
To conform with the terms and conditions under which each Bank Party is
willing to have credit outstanding to Borrower, and to induce each Bank Party to
enter into this Agreement and extend credit hereunder, each Restricted Person
warrants, covenants and agrees that until the full and final payment of the
Obligations and the termination of this Agreement, unless Majority Lenders have
previously agreed otherwise:
Section 6.1. Payment and Performance. Each Restricted Person 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.
Section 6.2. Books, Financial Statements and Reports. Each Restricted
Person will at all times maintain full and accurate books of account and
records. Each Restricted Person will maintain a standard system of accounting,
will maintain its Fiscal Year, and will furnish the following statements and
reports to each Bank Party at Borrower'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 the Restricted Persons together
with all notes thereto, prepared in reasonable detail in accordance
with
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GAAP, together with an unqualified opinion, based on an audit using
generally accepted auditing standards, by one of the six nationally
recognized firms of independent certified public accountants selected
by Borrower, 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, Borrower 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 7.13, 7.14,
7.15 and 7.16, 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 forty-five (45)
days after the end of each Fiscal Quarter, the Restricted Persons'
Consolidated and consolidating balance sheet as of the end of such
Fiscal Quarter and Consolidated and consolidating statements of the
Restricted Persons' 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, Borrower 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 each Borrower
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 7.13, 7.14, 7.15 and 7.16 and stating that no Default
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.
(c) 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 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 one of the six nationally recognized firms of
independent certified public accountants as may be selected by Parent,
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.
(d) As soon as available, and in any event within forty-five (45)
days after the end of each Fiscal Quarter, Parent's Consolidated
balance sheet as of the end of such Fiscal Quarter and Consolidated and
consolidating statements of Parent's 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.
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(e) Promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent by
Parent or any Restricted Person to its stockholders and all
registration statements, periodic reports and other statements and
schedules filed by any Restricted Person with any securities exchange,
the Securities and Exchange Commission or any similar governmental
authority.
(f) By March 15 of each year, beginning March 15, 1998, an
engineering report prepared as of the preceding January 1 by
independent petroleum engineers chosen by Borrower and acceptable to
Majority Lenders, concerning all oil and gas properties and interests
owned by any Restricted Person which are located in or offshore of the
United States and which have attributable to them proved oil or gas
reserves. This report shall be satisfactory to Agent, shall contain
sufficient information to enable Borrower to meet the reporting
requirements concerning oil and gas reserves contained in Regulations
S-K and S-X promulgated by the Securities and Exchange Commission,
shall take into account any "over-produced" status under gas balancing
arrangements, and shall contain information and analysis comparable in
scope to that contained in the Initial Engineering Report. Accompanying
such report, the Borrower shall deliver a report reflecting, since the
date reflected in the most recent report delivered pursuant to this
clause (f) or pursuant to the following clause (g), the following: (i)
all property sales and pending property sales identifying the property
and the sale price therefor, (ii) all property purchases and pending
property purchases identifying the property and the purchase price
therefor, and (iii) additional and changes in properties in each
category from such previous report (i.e.: proven undeveloped, proven
developed non-producing, or proven producing). The report delivered as
of March 15, 1998 shall reflect all oil and gas properties and
interests that will be owned by the Restricted Persons on a pro forma
basis after giving effect to the Mergers.
(g) By September 15 of each year, and promptly following notice
of an additional Borrowing Base redetermination under Section 2.9, an
engineering report prepared as of the preceding July 1 (or the first
day of the preceding calendar month in the case of an additional
redetermination) by petroleum engineers who are employees of Borrower
(or Chesapeake Operating Inc. under the management services agreement),
together with an accompanying report on property sales, property
purchases and changes in categories, both in the same form and scope as
the reports in (f) above.
(h) As soon as available, and in any event within ninety (90)
days after the end of each Fiscal Year, a business and financial plan
for Borrower (in form reasonably satisfactory to Agent), prepared by
the chief financial officer thereof, setting forth for the first year
thereof, quarterly financial projections and budgets for Borrower, and
thereafter yearly financial projections and budgets during the
Commitment Period.
(i) As soon as available, and in any event within sixty (60) days
after the end of each month, a report describing by lease or unit the
gross volume of production and sales attributable to production during
such month from the properties described in subsection (g) above and
describing the related severance taxes, other taxes, leasehold
operating expenses and capital costs attributable thereto and incurred
during such month.
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(j) As soon as available, and in any event within sixty (60) days
after the end of each Fiscal Quarter, a report setting forth volumes,
prices and margins for all marketing activities of Borrower and the
other Restricted Persons and a report of all forward, future, swap or
hedging contracts in such detail as Agent may request.
Section 6.3. Other Information and Inspections. Each Restricted Person
will furnish to each Bank Party 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 Parent's or Restricted Persons'
businesses and operations. Each Restricted 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 Restricted 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 any information such representatives obtain, and each
Restricted 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 6.4. Notice of Material Events and Change of Address. Borrower
will promptly notify each Bank Party 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,
(c) the acceleration of the maturity of any Indebtedness owed by
any Restricted Person or of any default by any Restricted 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 $500,000 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 Restricted
Person or with respect to any Restricted Person's properties, and
(f) the filing of any suit or proceeding against any Restricted
Person in which an adverse decision could cause a Material Adverse
Change.
Upon the occurrence of any of the foregoing, Restricted 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 Restricted 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.
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Section 6.5. Maintenance of Properties.
(a) Each Restricted Person will: (i) do or cause to be done all things
reasonably necessary to preserve and keep in good repair, working order and
efficiency (ordinary wear and tear excepted) all of the properties owned by each
Restricted Person, including, without limitation, all equipment, machinery and
facilities, and (ii) make all the reasonably necessary repairs, renewals and
replacements so that at all times the state and condition of the properties
owned by each Restricted Person will be fully preserved and maintained, except
to the extent a portion of such properties are oil and gas properties no longer
capable of producing hydrocarbons in economically reasonable amounts.
(b) Each Restricted Person will promptly pay and discharge or cause to
be paid and discharged all delay rentals, royalties, expenses and indebtedness
accruing under, and perform or cause to be performed each and every act, matter
or thing required by, each and all of the assignments, deeds, leases,
sub-leases, contracts and agreements affecting its interests in its properties
and will do all other things necessary to keep unimpaired each Restricted
Person's rights with respect thereto and prevent any forfeiture thereof or a
default thereunder, except to the extent a portion of oil and gas properties is
no longer capable of producing hydrocarbons in economically reasonable amounts.
(c) Each Restricted Person will operate its properties or cause or use
commercially reasonably efforts to cause such properties to be operated in a
careful and efficient manner in accordance with the practices of the industry
and in compliance with all applicable contracts and agreements and in compliance
in all material respects with all laws.
Section 6.6. Maintenance of Existence and Qualifications. Each
Restricted 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 where required by applicable Law, except where the
failure so to qualify will not cause a Material Adverse Change.
Section 6.7. Payment of Trade Liabilities, Taxes, etc. Each Restricted
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 ninety (90) days after the same
becomes due pay all Liabilities 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
Liabilities now or hereafter owed by it; and (e) maintain appropriate accruals
and reserves for all of the foregoing in accordance with GAAP. Each Restricted
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 6.8. Insurance. Each Restricted Person will keep or cause to be
kept insured by financially sound and reputable insurers its property in
accordance with the Insurance Schedule. Each Restricted Person shall at all
times maintain insurance against its liability for injury to persons or property
in accordance with the Insurance Schedule, which insurance shall be by
financially sound and reputable insurers. Without limiting the foregoing, each
Restricted Person shall at all time maintain liability insurance in the amounts
set out on the Insurance Schedule.
Section 6.9. Performance on Borrower's Behalf. If any Restricted Person
fails to pay any taxes, insurance premiums, expenses, attorneys' fees or other
amounts it is required to pay under any
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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 6.10. Interest. Borrower hereby promises to each Bank Party to
pay interest at the Default Rate on all Obligations (including Obligations to
pay fees or to reimburse or indemnify any Bank Party) which Borrower has in this
Agreement promised to pay to such Bank Party and which are not paid when due.
Such interest shall accrue from the date such Obligations become due until they
are paid.
Section 6.11. Compliance with Agreements and Law. Each Restricted
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 Restricted Person
will conduct its business and affairs in compliance with all Laws applicable
thereto.
Section 6.12. Environmental Matters; Environmental Reviews.
(a) Each Restricted Person will comply in all material respects with
all Environmental Laws now or hereafter applicable to such Restricted 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) Each Restricted Person will promptly furnish to Agent all written
notices of violation, orders, claims, citations, complaints, penalty
assessments, suits or other proceedings received by any Restricted Person, or of
which it has notice, pending or threatened against any Restricted Person, by any
governmental authority with respect to any alleged violation of or
non-compliance in any material respect 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) Each Restricted Person will promptly furnish to Agent all requests
for information, notices of claim, demand letters, and other notifications,
received by any Restricted Person in connection with its ownership or use of its
properties or the conduct of its business, relating to potential responsibility
which could if adversely determined result in fines or liability of a material
amount with respect to any investigation or clean-up of Hazardous Material at
any location.
Section 6.13. Evidence of Compliance. Each Restricted Person will
furnish to each Bank Party at such Restricted 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 Restricted Person in the Loan Documents, the satisfaction
of all conditions contained therein, and all other matters pertaining thereto.
Section 6.14. Solvency. Upon giving effect to the issuance of the
Notes, the execution of the Loan Documents by each Restricted Person, the
consummation of each of the Mergers and the consummation of the transactions
contemplated hereby, each Restricted Person will be solvent (as such term is
used in applicable bankruptcy, liquidation, receivership, insolvency or similar
laws).
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Section 6.15. Guaranties of Borrower's Subsidiaries. Each Subsidiary of
Borrower 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 Borrower
hereunder, which guaranty shall be satisfactory to Agent in form and substance.
Each Subsidiary of Borrower existing on the date hereof shall duly execute and
deliver such a guaranty prior to the making of any Loan hereunder. Borrower 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 6.16. Mergers. Chesapeake Acquisition and Chesapeake Merger
shall cause the Mergers to be consummated as provided in Section 4.2. Promptly
following each Merger, the Restricted Persons shall file certificates evidencing
such Merger in each county in which such entity owns material property. Within
sixty (60) days after the consummation of each Merger, the Restricted Person
which is the surviving entity from such Merger shall have been merged with and
into CMC, and certificates of merger with respect thereto shall be promptly
filed in each county in which such entity owns material property.
ARTICLE VII - Negative Covenants of Borrower
To conform with the terms and conditions under which each Bank Party is
willing to have credit outstanding to Borrower, and to induce each Bank Party to
enter into this Agreement and make the Loans, each Restricted Person warrants,
covenants and agrees that until the full and final payment of the Obligations
and the termination of this Agreement, unless Majority Lenders have previously
agreed otherwise:
Section 7.1. Indebtedness. No Restricted Person will in any manner owe
or be liable for Indebtedness except:
(a) the Obligations.
(b) obligations under operating leases entered into in the ordinary
course of such Restricted Person's business in arm's length transactions at
competitive market rates under competitive terms and conditions in all respects,
provided that the obligations required to be paid in any Fiscal Year under any
such operating leases do not in the aggregate exceed $50,000.
(c) unsecured Indebtedness among the Restricted Persons arising in the
ordinary course of business.
(d) Indebtedness arising under futures contracts or swap contracts
permitted under Section 7.3
(e) capital leases in an aggregate principal amount not to exceed
$1,000,000 at any time.
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Section 7.2. Limitation on Liens. No Restricted 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 the following ("Permitted Liens"):
(a) Liens which secure Obligations only.
(b) statutory Liens for taxes, statutory or contractual 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 Indebtedness and secure only obligations which are not delinquent
or which is being contested as provided in Section 6.7.
Section 7.3. Hedging Contracts. No Restricted Person will be a party to
or in any manner be liable on any forward, future, swap or hedging contract,
except:
(a) contracts entered into with the purpose and effect of fixing prices
on oil or gas expected to be produced by Restricted Persons, provided that at
all times: (1) no such contract fixes a price for a term of more than twelve
(12) months; (2) the aggregate monthly production covered by all such contracts
(determined, in the case of contracts that are not settled on a monthly basis,
by a monthly proration acceptable to Agent) for any single month does not in the
aggregate exceed seventy-five percent (75%) of Restricted Persons' aggregate
Projected Oil and Gas Production anticipated to be sold in the ordinary course
of Restricted Persons' businesses for such month, (3) no such contract requires
any Restricted Person to put up money, assets, letters of credit or other
security against the event of its nonperformance prior to actual default by such
Restricted Person in performing its obligations thereunder, and (4) each such
contract is with a counterparty or has a guarantor of the obligation of the
counterparty who (unless such counterparty is a Bank Party or one of its
Affiliates) at the time the contract is made has long-term obligations rated AA
or Aa2 or better, respectively, by either Rating Agency or is an investment
grade-rated industry participant. As used in this subsection, the term
"Projected Oil and Gas Production" means the projected production of oil or gas
(measured by volume unit or BTU equivalent, not sales price) for the term of the
contracts or a particular month, as applicable, from properties and interests
owned by any Restricted Person which are located in or offshore of the United
States and which have attributable to them proved oil or gas reserves, as such
production is projected in the most recent report delivered pursuant to Section
6.2(f), after deducting projected production from any properties or interests
sold or under contract for sale that had been included in such report and after
adding projected production from any properties or interests that had not been
reflected in such report but that are reflected in a separate or supplemental
reports meeting the requirements of such Section 6.2(f) above and otherwise are
satisfactory to Agent.
(b) contracts entered into by a Restricted Person with the purpose and
effect of fixing interest rates on a principal amount of indebtedness of such
Restricted Person that is accruing interest at a variable rate, provided that
(1) the aggregate notional amount of such contracts never exceeds one hundred
percent (100%) of the anticipated outstanding principal balance of the
indebtedness to be hedged by such contracts or an average of such principal
balances calculated using a generally accepted method of matching interest swap
contracts to declining principal balances, (2) the floating rate index of each
such contract generally matches the index used to determine the floating rates
of interest on the corresponding indebtedness to be hedged by such contract and
(3) each such contract is with a counterparty or has a guarantor of the
obligation of the counterparty who (unless such counterparty is a Bank Party or
one of its Affiliates) at the time the contract is made has long-term
obligations rated AA
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or Aa2 or better, respectively, by either Rating Agency or is an investment
grade-rated industry participant.
Section 7.4. Limitation on Mergers, Issuances of Securities. Except as
expressly provided in this Section, no Restricted Person will merge or
consolidate with or into any other entity. Any Subsidiary of CAC may, however,
be merged into or consolidated with another wholly owned Subsidiary of CAC (but
not into CAC itself). CAC will not issue any securities other than shares of its
common stock issued to Parent. No Subsidiary of CAC 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 CAC
and only to the extent not otherwise forbidden under the terms hereof. No
Subsidiary of CAC which is a partnership will allow any diminution of CAC's
interest (direct or indirect) therein.
Section 7.5. Limitation on Sales of Property. No Restricted Person will
sell, transfer, lease, exchange, alienate or dispose of any of its material
assets or properties or any material interest therein except:
(a) equipment which is worthless or obsolete or which is replaced by
equipment of equal suitability and value.
(b) 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) interests in oil and gas properties, or portions thereof, to which
no proved reserves of oil, gas or other liquid or gaseous hydrocarbons are
properly attributed.
(d) other property which is sold for fair consideration to a Person who
is not an Affiliate, provided that, without the prior written consent of the
Majority Lenders, the aggregate amount of such sales during the period between
any two consecutive scheduled Determination Dates, plus sales prior to the first
of such two Determination Dates of properties which were included in the
information submitted to the Agent for the first of such two Determination
Dates, shall not exceed $5,000,000. The value of sales under this clause shall
be the greater of the sale price or the discounted present value of projected
future net revenues (at 10% discount rate) reflected in the most recently
delivered Engineering Report under Section 6.2.
No Restricted Person will sell, transfer or otherwise dispose of capital stock
of any of CAC's Subsidiaries. No Restricted 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 7.6. Limitation on Dividends and Redemptions. No Restricted
Person will declare or pay any dividends on, or make any other distribution in
respect of, any class of its capital stock or any partnership or other interest
in it, nor will any Restricted Person directly or indirectly make any capital
contribution to or purchase, redeem, acquire or retire any shares of the capital
stock of or partnership interests in any Restricted 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 Restricted
Person, except as expressly provided in this section. Such dividends,
distributions, contributions, purchases,
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redemptions, acquisitions, retirements or reductions may be made to CAC by its
Subsidiaries or to CAC's Subsidiaries by another of its Subsidiaries.
Section 7.7. Limitation on Investments and New Businesses. No
Restricted 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 acquisitions or investments in any properties, in
excess of $500,000 in the aggregate at any one time outstanding, other than oil
and gas properties, gas gathering, treating and processing properties and assets
directly related thereto. No Restricted Person will make any investment in any
Parent Affiliate.
Section 7.8. Limitation on Credit Extensions. Except for Permitted
Investments, no Restricted Person will extend credit, make advances or make
loans other than (i) 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, and (ii) loans among Restricted Persons.
Section 7.9. Transactions with Affiliates. No Restricted Person will
engage in any material transaction with any of their Affiliates; provided that
such restriction shall not apply to the Designated Affiliate Contracts or to
transactions among Restricted Persons. Borrower shall have no Subsidiaries that
are not wholly owned Subsidiaries.
Section 7.10. Certain Contracts; Multiemployer ERISA Plans; Designated
Affiliate Contracts. Except as expressly provided for in the Loan Documents, no
Restricted 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) pay dividends or make other 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 Restricted 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 ERISA Affiliate will incur any obligation
to contribute to any "multiemployer plan" as defined in Section 4001 of ERISA.
No Restricted Person will cause or permit (i) any Designated Affiliate Contract
to be amended, modified, terminated or waived or (ii) any general or
administrative expenses, management services expenses or any operating expenses
to exceed the amount properly determined under the applicable Designated
Affiliate Contract.
Section 7.11. Corporate Requirements. Except as required by Section
4.3(b), no Restricted Person will amend its Certificates of Incorporation, nor
violate or fail to comply with any of the requirements of its Certificates of
Incorporation, including without limitation, the requirements of paragraph 7,
Restrictions on Corporate Action, paragraph 8, Independent Director, paragraph
9, Reservation of Right to Amend Certificate of Incorporation, or paragraph 10,
Corporate Procedures and Maintenance of Separate Business.
Section 7.12. Indenture Requirements. Each Restricted Person shall at
all times remain designated as "Unrestricted Subsidiaries" under the 1995
Indenture and the 1996 Indenture. No
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Restricted Person shall take any action which would cause any Restricted Person
to not be properly designated as an "Unrestricted Subsidiary" under the 1995
Indenture or the 1996 Indenture. CAC shall not own or lease (as lessor or
lessee) any property capable of producing oil or gas or minerals or any
processing or manufacturing plant or pipeline. No Restricted Person shall ever
assume or become liable in any manner (whether as a co-maker, guarantor or
otherwise) on any Indebtedness under any of the Indentures or any other
Indebtedness or Liability of Parent or any Parent Affiliate.
Section 7.13. Interest Coverage. At the end of any Fiscal Quarter,
beginning with the Fiscal Quarter ending September 30, 1998, the ratio of (a)
Borrower's Consolidated EBITDA to (b) Cash Interest Expense for the four-Fiscal
Quarter period ending with such Fiscal Quarter (or with respect to the Fiscal
Quarters ending on September 30, 1998 and December 31, 1998, for the period from
April 1, 1998 to the end of such Fiscal Quarter) will never be less than 3.0 to
1.0. As used herein, "Cash Interest Expense" means interest paid, plus
amortization of original issue discount, plus interest component of capital
lease obligations, in each case by Borrower and its Subsidiaries.
Section 7.14. EBITDA Coverage. At the end of any Fiscal Quarter,
beginning with the Fiscal Quarter ending September 30, 1998, the ratio of (a)
Borrower's Consolidated total Indebtedness at the end of each Fiscal Quarter to
Borrower's Consolidated EBITDA for the four-Fiscal Quarter period ending with
such Fiscal Quarter will never be greater than 3.5 to 1.0; provided, however,
with respect to the Fiscal Quarters ending on September 30, 1998 and December
31, 1998, EBITDA shall be annualized by multiplying the EBITDA for the period
from April 1, 1998 to the end of such applicable Fiscal Quarter by a fraction
the denominator of which is the number of days in such period and the numerator
of which is 365.
Section 7.15. Tangible Net Worth. Borrower's Consolidated Tangible Net
Worth will never be less than the sum of (i) 85% of Borrower's Consolidated
Tangible Net Worth as of March 31, 1998, plus (ii) 50% of Transactional
Increases to Tangible Net Worth occurring after March 31, 1998 (or 85% in the
case of the Hugoton Merger or the DLB Merger, if either Merger occurs after
March 31, 1998), plus (iii) the amount equal to 50% of Borrower's Consolidated
net income (if positive) for the period from March 31, 1998 through December 31,
1998, plus (iv) the amount equal to 50% of Borrower's Consolidated net income
(if positive) for each fiscal year from and including the fiscal year ending
December 31, 1999. As used herein "Transactional Increases to Tangible Net
Worth" means the resulting increase to Borrower's Consolidated Tangible Net
Worth from (a) sale or issuance of any equity security by any Restricted Person,
(b) any other form of capital contribution or equity investment into any
Restricted Person, and whether consisting of contribution of cash or other
asset, or (c) any merger or consolidation to which any Restricted Person is a
party.
Section 7.16. Current Ratio. The ratio of Borrower's Consolidated
current assets, plus the unused portion of the Borrowing Base, to Borrower's
Consolidated current liabilities will never be less than 1.0 to 1.0. For
purposes of this section, current liabilities will include LC Obligations,
regardless of whether or not contingent (but without duplication) but will
exclude the current portion of long term debt.
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ARTICLE VIII - Events of Default and Remedies
Section 8.1. Events of Default. Each of the following events
constitutes an Event of Default under this Agreement:
(a) Any Restricted 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;
(b) Any Restricted Person fails to pay any Obligation (other than the
Obligations in clause (a) 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 three Business
Days after the same becomes due;
(c) 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;
(d) Any Restricted Person fails to duly observe, perform or comply with
any covenant, agreement or provision of Section 6.4 or Article VII;
(e) Any Restricted Person fails (other than as referred to in
subsections (a), (b), (c) or (d) 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;
(f) Any representation or warranty previously, presently or hereafter
made in writing by or on behalf of any Restricted 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 5.5 for any
reason other than its release or subordination by Agent;
(g) Any Restricted Person fails to duly observe, perform or comply with
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
Borrower and its Subsidiaries on a Consolidated basis or materially significant
to any Guarantor, and such failure is not remedied within the applicable period
of grace (if any) provided in such agreement or instrument;
(h) Any Restricted Person or any Parent Affiliate (i) fails to pay any
portion, when such portion is due, of any of its Indebtedness in excess of
$100,000 in the case of a Restricted Person, or in excess of $1,000,000 in the
case of any Parent Affiliate, or (ii) breaches or defaults in the performance of
any agreement or instrument by which any such Indebtedness is issued, evidenced,
governed, or secured, and any such failure, breach or default continues beyond
any applicable period of grace provided therefor;
(i) Either (i) 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 (ii) any Termination Event occurs
with respect to any ERISA Plan and the then current value of such ERISA Plan's
benefit
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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); and
(j) Any Restricted Person or any Parent Affiliate:
(i) 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 thirty days; or
(ii) 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
(iii) 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 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
(iv) suffers the entry against it of a final judgment for the
payment of money in excess of $500,000 (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
(v) 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, 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; and
(k) Any Change in Control occurs; and
(l) Any Material Adverse Change occurs.
Upon the occurrence of an Event of Default described in subsection (j)(i),
(j)(ii) or (j)(iii) of this section with respect to Borrower, 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 Restricted
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Person who at any time ratifies or approves this Agreement. Upon any such
acceleration, any obligation of any Lender 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
Majority Lenders, Agent shall), without notice to Borrower or any other
Restricted Person, do either or both of the following: (1) terminate any
obligation of Lenders 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 Restricted Person who at any time ratifies or approves this
Agreement.
Section 8.2. Remedies. If any Default shall occur and be continuing,
Agent may protect and enforce Lenders' 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 Agent may enforce the
payment of any Obligations due Lenders or enforce any other legal or equitable
right which it may have. All rights, remedies and powers conferred upon Bank
Parties 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 IX - Agent
Section 9.1. Appointment and Authority. Each Bank Party 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 Bank Parties is only that of one commercial lender acting as agent
for others, and nothing in the Loan Documents shall be 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
Lenders 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 Lenders in so acting or refraining from acting) upon the
instructions of Majority 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 Lenders or upon notice from any
other Bank Party to Agent of any Default or Event of Default, Agent shall
promptly notify each other Bank Party thereof. No Lender designated as a
Co-Agent shall have any duties nor any liabilities hereunder by reason of such
Co-Agent designation.
Section 9.2. 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.
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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 Party and shall not be responsible to any other Bank Party 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 Restricted Person or to inspect the property
(including the books and records) of any Restricted Person; (e) shall not be
responsible to any other Bank Party 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 Restricted Person and the Lenders 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 9.3. Credit Decisions. Each Bank Party acknowledges that it
has, independently and without reliance upon any other Bank Party, 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 Party also acknowledges that it will, independently and without
reliance upon any other Bank Party 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 9.4. Indemnification. Each Lender agrees to indemnify Agent (to
the extent not reimbursed by Borrower within ten (10) days after demand) from
and against such Lender'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 asserted
against Agent growing out of, resulting from or in any other way associated with
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 Lender 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
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Lender agrees to reimburse Agent promptly upon demand for such Lender's
Percentage Share of any costs and expenses to be paid to Agent by Borrower under
Section 10.4(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 9.5. Rights as Lender. In its capacity as a Lender, Agent shall
have the same rights and obligations as any Lender 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 Restricted Person or their Affiliates, all as if it were not Agent
hereunder and without any duty to account therefor to any other Lender.
Section 9.6. Sharing of Set-Offs and Other Payments. Each Bank Party
agrees that if it shall, whether through the exercise of 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 Party 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 Bank Parties 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 Lenders 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 Party 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 9.7. Investments. Whenever Agent in good faith determines that
it is uncertain about how to distribute to Lenders any funds which it has
received, or whenever Agent in good faith determines that there is any dispute
among Lenders 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 Lenders, 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
Lenders (other than to the Person who is Agent in its separate capacity as a
Lender) shall be held by Agent pending such distribution solely as Agent for
such Lenders, and Agent shall have no equitable title to any portion thereof.
Section 9.8. Benefit of Article IX. The provisions of this Article
(other than the following Section 9.9) are intended solely for the benefit of
Bank Parties, and no Restricted Person shall be
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entitled to rely on any such provision or assert any such provision in a claim
or defense against any Bank Party. Bank Parties may waive or amend such
provisions as they desire without any notice to or consent of Borrower or any
Restricted Person.
Section 9.9. Resignation. Agent may resign at any time by giving
written notice thereof to Lenders and Borrower. Each such notice shall set forth
the date of such resignation. Upon any such resignation, Majority Lenders 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 IX 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 X - Miscellaneous
Section 10.1. Waivers and Amendments; Acknowledgements.
(a) Waivers and Amendments. No failure or delay (whether by course of
conduct or otherwise) by any Bank Party in exercising any right, power or remedy
which such Bank Party 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 Bank Party 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 Restricted Person shall
in any case of itself entitle any Restricted 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 or LC
Issuer, by such party, and (iii) if such party is a Lender, by such Lender or by
Agent on behalf of Lenders with the written consent of Majority Lenders (which
consent has already been given as to the termination of the Loan Documents as
provided in Section 10.9). Notwithstanding the foregoing or anything to the
contrary herein, Agent shall not, without the prior consent of each individual
Lender, execute and deliver on behalf of such Lender 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
4.4(f)), (2) increase the Borrowing Base above the maximum amount which requires
the agreement of all Lenders pursuant to the last sentence of Section 2.09(a) or
subject such Lender to any additional obligations, (3) reduce any fees payable
to such Lender hereunder, or the
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principal of, or interest on, such Lender's Note, (4) postpone any date fixed
for any payment of any such fees, principal or interest, (5) amend the
definition herein of "Majority Lenders", "Required Lenders" or otherwise change
the aggregate amount of Percentage Shares which is required for Agent, Lenders
or any of them to take any particular action under the Loan Documents, or (6)
release Borrower from its obligation to pay such Lender's Note or any Guarantor
from its guaranty of such payment.
(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 Lender,
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 Bank Party 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 Bank Party 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
Restricted Persons, on one hand, and each Bank Party, 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
Restricted Person and any Bank Party, (vii) Agent is not Borrower's Agent, but
Agent for Lenders, (viii) should an Event of Default or Default occur or exist,
each Bank Party 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 Bank Party, or any representative thereof, and
no such representation or covenant has been made, that any Bank Party 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 Bank Parties 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) 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.
Section 10.2. Survival of Agreements; Cumulative Nature. All of
Restricted 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 Bank Party and all of Bank Parties'
obligations to Borrower are terminated. All statements and agreements contained
in any certificate or other instrument delivered by any Restricted Person to any
Bank Party under any Loan Document shall be deemed representations and
warranties by Borrower or agreements
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and covenants of Borrower under this Agreement. The representations, warranties,
indemnities, and covenants made by Restricted Persons in the Loan Documents, and
the rights, powers, and privileges granted to Bank Parties 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 Bank Party 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 10.3. 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 Bank Parties), 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 Restricted
Persons at the address of Borrower specified on the signature pages hereto and
to each Bank Party 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 10.4. 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 Bank Party
(including attorneys' 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 Bank Party'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
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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 agrees to indemnify each Bank Party, 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 Bank Party
growing out of, resulting from or in any other way associated with 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 Restricted Person
or any liabilities or duties of any Restricted Person or any Bank Party 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 BANK PARTY,
provided only that no Bank Party 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
Bank Party, 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 "Bank Parties" 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 10.5. Joint and Several Liability; Parties in Interest;
Assignments. All Obligations which are incurred by two or more Restricted
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 Restricted 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 all of the Lenders. Neither Borrower nor
any Affiliates of Borrower shall directly or indirectly purchase or otherwise
retire any Obligations owed to any Lender nor will any Lender accept any offer
to do so, unless each Lender 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 Bank Parties, such purchaser shall not be
entitled to any rights of any Bank Party under the Loan Documents unless and
until Borrower or its Affiliates have purchased all of the Obligations.
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(b) No Lender 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 only if the agreement between such Lender and such participant at all
times provides: (i) that such participation exists only as a result of the
agreement between such participant and such Lender and that such transfer does
not give such participant any right to vote as a Lender or any other direct
claims or rights against any Person other than such Lender, (ii) that such
participant is not entitled to payment from any Restricted Person under Sections
3.2 through 3.6 of amounts in excess of those payable to such Lender under such
sections (determined without regard to the sale of such participation), and
(iii) unless such participant is an Affiliate of such Lender, that such
participant shall not be entitled to require such Lender 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 Lenders under the next-to-last sentence of subsection
(a) of Section 10.1. No Lender selling such a participation shall, as between
the other parties hereto and such Lender, be relieved of any of its obligations
hereunder as a result of the sale of such participation. Each Lender which sells
any such participation to any Person (other than an Affiliate of such Lender)
shall give prompt notice thereof to Agent and Borrower.
(c) Except for sales of participations under the immediately preceding
subsection (b), no Lender 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 Lender hereunder and to the unused portion of the assignor
Lender's commitments, so that after such assignment is made the
assignor Lender 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 Maximum Loan Amount
of both the assignor and 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 Acceptance in the
form of Exhibit H, 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
Acceptance, 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 Acceptance the
assignee thereunder shall be a party hereto and a Lender hereunder and
Agent shall thereupon deliver to Borrower and each Lender a schedule
showing the revised Percentage Shares of such assignor Lender and such
assignee Lender and the Percentage Shares of all other Lenders.
(iii) Each assignee Lender 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).
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(d) Nothing contained in this section shall prevent or prohibit any
Lender 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 Lender from its obligations hereunder.
(e) By executing and delivering an Assignment and Acceptance, each
assignee Lender thereunder will be confirming to and agreeing with Borrower,
Agent and each other Lender 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 Acceptance and a
register for the recordation of the names and addresses of Lenders and the
Percentage Shares of, and principal amount of the Loans owing to, each Lender
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 Bank Party may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes. The Register shall be available for
inspection by Borrower or any Bank Party at any reasonable time and from time to
time upon reasonable prior notice.
Section 10.6. Confidentiality. Each Bank Party agrees that it will take
all reasonable steps to keep confidential any proprietary information given to
it by any Restricted 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 Bank Party's Affiliates, auditors,
attorneys, or agents, (iv) is furnished to any other Bank Party or to any
purchaser or prospective purchaser of participations or other interests in any
Loan or Loan Document, or (v) is disclosed in the course of enforcing its rights
and remedies during the existence of an Event of Default.
Section 10.7. 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 TEXAS AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF
THE UNITED STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
CHAPTER 15 OF TEXAS REVISED CIVIL STATUTES ANNOTATED ARTICLE 5069 (WHICH
REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY
ACCOUNTS) DOES NOT APPLY TO THIS AGREEMENT OR TO THE NOTES. BORROWER HEREBY
IRREVOCABLY SUBMITS ITSELF AND EACH OTHER RESTRICTED PERSON TO THE NON-EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE STATE OF TEXAS AND
AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT OR ANY
RESTRICTED PERSON IN ANY LEGAL PROCEEDING RELATING TO THE LOAN DOCUMENTS OR THE
OBLIGATIONS BY ANY MEANS ALLOWED UNDER TEXAS OR FEDERAL LAW. ANY LEGAL
PROCEEDING ARISING OUT OF OR IN ANY WAY RELATED TO ANY OF THE LOAN DOCUMENTS
SHALL BE BROUGHT AND LITIGATED EXCLUSIVELY IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION, TO THE EXTENT IT HAS
SUBJECT MATTER JURISDICTION, AND OTHERWISE IN THE TEXAS DISTRICT COURTS SITTING
IN DALLAS COUNTY, TEXAS. THE PARTIES
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HERETO HEREBY WAIVE AND AGREE NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR
OTHERWISE, THAT ANY SUCH PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT
THE VENUE THEREOF IS IMPROPER, AND FURTHER AGREE TO A TRANSFER OF ANY SUCH
PROCEEDING TO A FEDERAL COURT SITTING IN THE STATE OF TEXAS TO THE EXTENT THAT
IT HAS SUBJECT MATTER JURISDICTION, AND OTHERWISE TO A STATE COURT IN DALLAS,
TEXAS. IN FURTHERANCE THEREOF, BORROWER AND BANK PARTIES EACH HEREBY ACKNOWLEDGE
AND AGREE THAT IT WAS NOT INCONVENIENT FOR THEM TO NEGOTIATE AND RECEIVE FUNDING
OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT IN SUCH COUNTY AND THAT IT
WILL BE NEITHER INCONVENIENT NOR UNFAIR TO LITIGATE OR OTHERWISE RESOLVE ANY
DISPUTES OR CLAIMS IN A COURT SITTING IN SUCH COUNTY.
Section 10.8. Usury. Bank Parties, Restricted Persons and any 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 create a contract to pay, for the
use, forbearance or detention of money, interest in excess of the maximum amount
of interest permitted to be charged by applicable law from time to time in
effect. Neither any Restricted 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. Bank Parties
expressly disavow any intention to charge or collect excessive unearned interest
or finance charges in the event the maturity of any Obligation is accelerated.
If (a) the maturity of any Obligation is accelerated for any reason, (b) any
Obligation is prepaid and as a result any amounts held to constitute interest
are determined to be in excess of the legal maximum, or (c) any Bank Party or
any other holder of any or all of the Obligations shall otherwise collect moneys
which are determined to constitute interest which would otherwise increase the
interest on any or all of the Obligations to an amount in excess of that
permitted to be charged by applicable law then in effect, then all sums
determined to constitute interest in excess of such legal limit shall, without
penalty, be promptly applied to reduce the then outstanding principal of the
related Obligations or, at such Bank Party's or holder's option, promptly
returned to Borrower or the other payor thereof upon such determination. In
determining whether or not the interest paid or payable, under any specific
circumstance, exceeds the maximum amount permitted under applicable law, Bank
Parties and Restricted Persons (and any other payors thereof) shall to the
greatest extent permitted under applicable law, (i) characterize any
non-principal payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of the instruments evidencing the Obligations in accordance
with the amounts outstanding from time to time thereunder and the maximum legal
rate of interest from time to time in effect under applicable law in order to
lawfully charge the maximum amount of interest permitted under applicable law.
In the event applicable law provides for an interest ceiling under ss.303 of the
Texas Finance Code (the "Texas Finance Code") and Chapter 1D of Title 79, Tex.
Rev. Civ. Stats. 1925 ("Chapter 1D") as amended, respectively, for any day, the
ceiling shall be the "indicated rate ceiling" or "weekly ceiling" as defined in
the Texas Finance Code and Chapter 1D, provided that if any applicable law
permits greater interest, the law permitting the greatest interest shall apply.
As used in this section the term "applicable law" means the Laws of the State of
Texas or the Laws of the United States of America,
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whichever Laws allow the greater interest, as such Laws now exist or may be
changed or amended or come into effect in the future.
Section 10.9. 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 Restricted 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 Bank Party 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 Lenders, without the joinder of or further action by any
Lender.
Section 10.10. 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.
Section 10.11. 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 10.12. Waiver of Jury Trial, Punitive Damages, etc. BORROWER
AND EACH BANK PARTY HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND
IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH
THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED
THEREWITH, BEFORE OR AFTER MATURITY; (B) 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, (C) 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 (D)
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.
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IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
CHESAPEAKE ACQUISITION CORPORATION
BORROWER
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
Treasurer
CHESAPEAKE MID-CONTINENT CORP.
BORROWER
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
Treasurer
CHESAPEAKE MERGER CORP.
INITIAL GUARANTOR
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
Treasurer
CHESAPEAKE ACQUISITION CORP.
INITIAL GUARANTOR
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
Treasurer
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CHESAPEAKE COLUMBIA CORP.
INITIAL GUARANTOR
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
Treasurer
MID-CONTINENT GAS PIPELINE COMPANY
INITIAL GUARANTOR
By: Chesapeake Mid-Continent Corp.,
Managing General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
Treasurer
ANSON GAS MARKETING
INITIAL GUARANTOR
By: Chesapeake Mid-Continent Corp.,
Managing General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
Treasurer
Address for Borrowers and Initial Guarantors:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇
Attention: Treasurer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
S-2
70
With copy to:
Self, ▇▇▇▇▇▇▇ & ▇▇▇▇, Inc.
2725 Oklahoma Tower
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: C. ▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
S-3
▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇, N.A.
Agent, LC Issuer and Lender
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Sr. Vice President
Address:
500 North ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
▇-▇
▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ASA
Co-Agent and Lender
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Title: Vice President
By: /s/ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
Address:
Three ▇▇▇▇▇ Center
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
S-5
▇▇
▇▇▇▇ ▇▇▇, ▇▇▇▇▇, N.A.
Co-Agent and Lender
By: /s/ W. ▇▇▇▇ ▇▇▇▇▇▇▇
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Name: W. ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
Address:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Wm. ▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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THE FIRST NATIONAL BANK OF CHICAGO
Co-Agent and Lender
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
By:
----------------------------------------
Name:
Title:
Address:
One First National Plaza
0634, 1FNP, 10
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with copy to:
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▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, Lender
By: /s/ ▇▇▇▇▇ ▇▇▇▇ TAT
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Name: ▇▇▇▇▇ ▇▇▇▇ Tat
Title: Vice President
Address:
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Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇ Tat
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ AGENCY,
Lender
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
Title: Vice President
Address:
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Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
S-9
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▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Lender
By: /s/ M. D. ▇▇▇▇▇
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Name: M. D. ▇▇▇▇▇
Title: Agent Operations
Address:
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Attention:
Telephone:
Telecopy:
S-10