LOAN AGREEMENT
Dated as of
July 24, 2001
between and among
UNIT CORPORATION
MOUNTAIN FRONT PIPELINE COMPANY, INC.
UNIT DRILLING COMPANY
UNIT PETROLEUM COMPANY
PETROLEUM SUPPLY COMPANY
and
UNIT ENERGY CANADA INC.
"Borrowers"
and
BANK OF OKLAHOMA, NATIONAL ASSOCIATION
BANK OF AMERICA, N. A.
LOCAL OKLAHOMA BANK, N. A.
and
UMB BANK, N. A.
"Banks"
and
BANK OF OKLAHOMA, NATIONAL ASSOCIATION
"Agent"
LOAN AGREEMENT
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THIS LOAN AGREEMENT, dated effective as of July 24, 2001 ("Agreement"), is
entered into among UNIT CORPORATION, a Delaware corporation ("Unit"), MOUNTAIN
FRONT PIPELINE COMPANY, INC., an Oklahoma corporation, UNIT DRILLING COMPANY, an
Oklahoma corpora tion, UNIT PETROLEUM COMPANY, an Oklahoma corporation,
PETROLEUM SUPPLY COMPANY, an Oklahoma corporation, and UNIT ENERGY CANADA INC.,
an Alberta, Canada corporation, each with its principal place of business at
1000 Kensington Tower 1, 7130 South Lewis, Tulsa, Oklahoma 74136 (collectively
the "Borrowers") and BANK OF OKLAHOMA, NATIONAL ASSOCIATION, with principal
offices at Bank of Oklahoma Tower, Seven East Second Street, Tulsa, Oklahoma
74172 ("BOK"); BANK OF AMERICA, N.A., with offices at 515 South Boulder, Tulsa,
Oklahoma, 74119 ("B of A"); LOCAL OKLAHOMA BANK, N. A., with offices at 2250
East 73rd, Suite 200, Tulsa, Oklahoma 74136 ("Local Oklahoma"), and UMB BANK,
N.A., with offices at 4200 East Skelly Drive, Suite 1020, Tulsa, Oklahoma 74135
("UMB") (BOK, B of A, Local Oklahoma and UMB each being sometimes referred to
herein, individually, as a "Bank," and collectively as the "Banks"); and BOK as
agent for the Banks (in such capacity, herein referred to as the "Agent").
WITNESSETH:
WHEREAS, the Borrowers have applied to the Banks for an extension, renewal
and modification of its existing revolving line of credit in the maximum
principal amount of ONE HUNDRED MILLION AND NO/100 DOLLARS ($100,000,000);
WHEREAS, the Banks are willing to extend, renew and modify the existing
line of credit and as so extended, renewed and modified shall be evidenced by
Borrowers' joint and several promissory notes dated as of even date herewith for
the purposes of (i) paying off the aggregate unpaid balance of the existing loan
owing by the Borrowers to BOK, B of A, Local Oklahoma and Fleet Bank, N. A.,
formerly BankBoston, N. A. ("Fleet") under that certain Loan Agreement dated as
of April 30, 1998, as amended by that certain First Amendment to Loan Agreement
dated as of May 1, 1999, among Borrowers and Unit Drilling and Exploration
Company, as an additional borrower, BOK, B of A, Local Oklahoma and Fleet
(successor in interest to BankBoston, N. A.), as Banks, and BOK, as the Agent
for the Banks (collectively the "Prior Loan Agreement"), (ii) funding future
oil and gas property acquisitions and exploration and development drilling
expenses, (iii) the issuance of standby letters of credit from time to time in
accordance with and subject to the terms, provi sions and conditions hereof,
(iv) funding general working capital requirements and (v) funding drilling
operations and equipment expenditures;
WHEREAS, Fleet Bank, N.A., formerly BankBoston, is no longer a part of the
Bank group pursuant to this Agreement and has been replaced by UMB, N.A.;
WHEREAS, pursuant to the terms and provisions hereof, the unpaid principal
balance of the Credit Loan will be converted no later than May 1, 2005 to a
thirty-six (36) month term loan with a final maturity date of May 1, 2008 (the
"Term Commitment") (the Credit Loan and the Term Commitment are sometimes
collectively referred to herein as the "Commitments"); and
WHEREAS, the Banks are willing to extend the Commitments to the Borrowers
upon the terms and conditions herein set forth, all of which are material to the
Banks and without which the Banks would not extend the Commitments.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, receipt of which is
acknowledged by the parties hereto, the parties agree, as follows:
ARTICLE I
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CERTAIN DEFINITIONS
-------------------
When used herein, the following terms shall have the follow ing meanings:
1.1 "Applicable Prime Rate" shall mean the annual rate of interest
announced by Chase Manhattan Bank (National Association) New York, New York
("Chase") from time to time as its prime or base rate, which shall be the rate
used by Chase as a base or standard for pricing purposes and which shall not
necessarily be its "best" or lowest rate. Should Chase cease to announce a
prime or base rate, or should it be merged, consolidated, liqui dated or
dissolved in such a manner that it loses its separate corporate or banking
identity, then the Applicable Prime Rate shall be the Prime Rate published by
The Wall Street Journal in its "Money Rates" column, or a similar rate if such
rate ceases to be published. Any change in the Applicable Prime Rate shall
be effective as of the date of the change.
1.2 "Business Day" shall mean a day other than a Saturday, Sunday or a
day upon which banks in the State of Oklahoma are closed to business generally.
1.3 "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, together with all
regulations and rulings promulgated with respect thereto.
1.4 "Closing Date" shall mean the date of this Agreement.
1.5 "Collateral" shall mean the Current Collateral and the Additional
Collateral, as defined herein in Article IV.
1.6 "Commitments" shall collectively mean the Credit Loan and the Term
Commitment, including the Fixed Rate Loans.
1.7 "Commitment Amount" shall be that amount determined in accordance
with Article III hereof.
1.8 "Consolidated Tangible Net Worth" shall mean the sum
of (a) the par value of Unit's consolidated capital stock (excluding treasury
stock), (b) Unit's consolidated additional paid-in capital, and (c) the amount
of Unit's consolidated retained earnings minus any consolidated intangible
assets such as organizational costs or goodwill all as reflected in the
financial statements furnished to the Banks under this Agreement.
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1.9 "Conversion Date" shall have the meaning ascribed thereto in Section
2.1 hereof below.
1.10 "Corresponding Source of Funds" shall mean in the case of any Libor
Rate Funding Segment of the Libor Rate Portion, the proceeds of hypothetical
receipts by the Agent through a branch, subsidiary or affiliate of one or more
Dollar deposits in the interbank eurodollar market at the beginning of the Libor
Rate Funding Period corresponding to such Libor Rate Funding Segment, having
maturities approximately equal to such Libor Rate Funding Period and in an
aggregate amount approximately equal to such Libor Rate Funding Segment.
1.11 "Credit Loan" shall have the meaning ascribed thereto in Section 2.1
hereof below.
1.12 "Current Assets" shall mean the total amount of Unit's current assets
determined in accordance with GAAP on a consolidated basis.
1.13 "Current Liabilities" shall mean the total amount of Unit's current
liabilities determined in accordance with GAAP on a consolidated basis,
excluding, however, current maturities of indebtedness of the Borrowers to the
Banks as provided in this Agreement.
1.14 "Current Maturities of Long Term Debt" shall mean obligations under
Long Term Debt due within one year or less, as reflected on Unit's financial
statements furnished to the Banks pursuant to this Agreement.
1.15 "Current Ratio" shall mean the ratio of Current Assets to Current
Liabilities (i.e., Consolidated Working Capital Ratio).
1.16 "Default Rate" shall mean the Applicable Prime Rate plus five
percentage points (5.0%) per annum.
1.17 "Dollar," "Dollars" and the symbol "$" shall mean lawful money of the
United States of America.
1.18 "Environmental Laws" shall mean Laws, including without limitation
federal, state or local Laws, ordinances, rules, regulations, interpretations
and orders of courts or administrative agencies or authorities relating to
pollution or protection of the environment (including, without limitation,
ambient air, surface water, groundwater, land surface and subsurface strata),
including without limitation CERCLA, SARA, RCRA, HSWA, OPA, HMTA, TSCA and other
Laws relating to (i) Polluting Substances or (ii) the manufacture, processing,
distribution, use, treatment, handling, storage, disposal or transportation of
Polluting Substances.
1.19 "ERISA" shall mean the Federal Employee Retirement Income Security
Act of 1974, as amended, together with all regu lations and rulings promulgated
with respect thereto.
1.20 "Event of Default" shall mean any of the events speci fied in Section
8.1 of this Agreement, and "Default" shall mean any event, which together with
any lapse of time or giving of any notice, or both, would constitute an Event of
Default.
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1.21 "Fixed Rate" shall have the meaning ascribed thereto
in Section 2.5(a) of this Agreement.
1.22 "Fixed Rate Funding Segment" shall mean the portion of the
outstanding principal amount of the Notes (neither less than $15,000,000 nor to
exceed $50,000,000 in the aggregate) to which a Fixed Rate Option applies for
the Fixed Rate term (neither less than 2 years nor in excess of the lesser of
(a) five (5) years or (b) the months remaining until the maturity date of the
Notes). 1.23 "Fixed Rate Loans" shall mean the aggregate dollar amount of all
Fixed Rate Funding Segment Loan advanced pursuant to Section 2.1 of this
Agreement.
1.24 "Fixed Rate Margin Reduction" shall mean the dollar amount of the
risk of an interest rate increase on the outstanding Fixed Rate Loan advances
during the next succeeding six (6) months as reasonably projected and estimated
by the Majority Banks.
1.25 "Fixed Rate Option" shall mean for each of the Banks the fixed annual
percentage rate determined from time to time pursuant to the provisions of
Section 2.5(a) of this Agreement.
1.26 "GAAP" shall mean generally accepted accounting princi ples applied
on a consistent basis in all material respects to those applied in the preceding
period. Unless otherwise indicat ed herein, all accounting terms will be
defined according to
GAAP.
1.27 "Hedge Agreement" shall mean interest rate Swap, cap or collar
agreements, interest rate future or option contracts, currency future or option
contracts and other similar interest risk management agreements.
1.28 "hereby," "herein," "hereof," "hereunder" and similar such terms
shall mean and refer to this Agreement as a whole and not merely to the specific
section, paragraph or clause in which the respective word appears.
1.29 "HMTA" shall mean the Hazardous Materials Transporta tion Act, as
amended, together with all regulations and rulings promulgated with respect
thereto.
1.30 "HSWA" shall mean the Hazardous and Solid Waste Amend ments of 1984,
as amended, together with all regulations and rulings promulgated with respect
thereto.
1.31 "Indebtedness" shall mean and include any and all: (i) indebtedness,
obligations and liabilities of the Borrowers to the Banks and the Agent incurred
or which may be incurred hereafter pursuant to the terms of the Loan Documents,
and any extensions, renewals, substitutions, amendments and increases in amount
thereof, including such amounts as may be evidenced by the Notes and all lawful
interest, letters of credit fees, service fees, commitment fees and other
charges, and all reasonable costs and expenses incurred in connection with the
preparation, filing and recording of the Loan Documents, including attorneys
fees; (ii) any and all obligations, contingent or otherwise, whether now
existing or hereafter arising, of any one or more of the Borrowers or any
affiliates or subsidiaries thereof to the Banks or any one or more of them
arising under or in connection with applicable Hedge Agreements or Swaps
(including without limitation, ISDA Master Agreement[s]); (iii) subject to the
last sentence of Section 9.10, all reasonable costs and expenses, including
attorneys' fees, paid or incurred by the Banks or the Agent in enforcing or
attempting to
4
enforce collection of any Indebtedness and in enforcing or realizing upon or
attempting to enforce or realize upon any collateral or security for any
Indebtedness and in protecting and preserving the Banks' interest in the
Indebtedness or any collateral or security for any Indebtedness in any
bankruptcy or reorganization proceeding, including interest on all sums so
expended by the Banks or the Agent accruing from the date upon which such
expenditures are made until paid, at an annual rate equal to the Default Rate;
(iv) sums expended by the Banks in curing any Event of Default or Default of the
Borrowers under the terms of the Loan Documents or any other security agreement
or other writing evidencing or securing the payment of the Notes together with
interest on all sums so expended by the Banks or the Agent accruing from the
date upon which such expenditures are made until paid, at an annual rate equal
to the Default Rate; and (v) all "Indebtedness" or "Secured Indebtedness" as
said terms are defined in each of the Loan Documents.
1.32 "Intercreditor Agreement" shall mean the Intercreditor Agreement
dated of even date herewith among BOK, B of A, Local Oklahoma, UMB and the
Agent.
1.33 "Laws" shall mean all statutes, laws, ordinances, regulations,
orders, writs, injunctions, or decrees of the United States, any state or
commonwealth, any municipality, any foreign country, any territory or
possession, or any Tribunal.
1.34 "Letters of Credit" shall mean any and all letters of credit issued
by BOK pursuant to the request of any of the Borrowers in accordance with the
provisions hereof which at any time remain outstanding and subject to draw by
the beneficiary, whether in whole or in part.
1.35 "Libor Rate" shall mean for any day the rate per annum of interest
(rounded upwards, if necessary, to the nearest 1/16 of 1%) (which shall be the
same for each day in the Libor Rate Funding Period selected) determined pursuant
to the following formula:
Rate
------------
Libor Rate = 1.00 - Libor Reserve Percentage
The Libor Rate for any Libor Rate Funding Period for the Libor Rate Option will
be determined by the Agent on the basis of the Libor Reserve Percentage in
effect two (2) London Business Days prior to the first day of a Libor Rate
Funding Period and the applicable Rate as described below. "Rate" means for any
day the rate per annum of interest (rounded upwards, if necessary, to the
nearest 1/16 of 1%) quoted for the "London Interbank Offered Rates (LIBOR)" by
Agent's Capital Markets Division for the selected Libor Rate Funding Period
available hereunder for the Libor Rate Option two (2) London Business Days prior
to the first day of such Libor Rate Funding Period. "Libor Reserve Percentage"
means, relative to any Libor Rate Funding Period available hereunder for the
Libor Rate Option, the reserve percentage (expressed as a decimal) equal to the
maximum aggregate reserve requirements (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements)
specified under regulations issued from time to time by the Federal Reserve
System Board and then applicable to assets or liabilities consisting of and
including "Eurocurrency Liabilities", as currently defined in Regulation D of
the Federal Reserve System Board, having a term approximately equal or
comparable to such Libor Rate Funding Period. The Agent shall give prompt
notice to the Borrowers of the Libor Rate so determined or adjusted, which
determination or adjustment shall be conclusive if made in good faith absent
manifest or demonstrable error.
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1.36 "Libor Rate Funding Period" shall have the meaning assigned to that
term or described in Section 2.5(b) hereof.
1.37 "Libor Rate Funding Segment" shall mean that portion
of the outstanding principal amount of the Notes to which a Libor Rate Option
applies for the applicable Libor Rate Funding Period beginning on a particular
day and ending on another particular day.
1.38 "Libor Rate Option" shall have the meaning assigned to that term in
Section 2.5(a) hereof.
1.39 "Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement or other similar form of public notice under the Laws of any
juris diction).
1.40 "Lien Notice" shall mean notice received or obtained by the Agent or
the Banks or knowledge obtained by the Agent or the Banks of any Lien being
claimed (whether valid or not) by any Person, other than the Agent or the Banks
or a trustee on behalf of the Agent or the Banks, with respect to the Borrowers'
assets and properties.
1.41 "Loan Documents" shall mean this Agreement, the Notes, the Security
Instruments and all other documents, instruments and certificates executed and
delivered to the Banks and the Agent by the Borrowers pursuant to the terms of
this Agreement or the Security Instruments previously delivered to the Agent
pursuant to the Prior Loan Agreement.
1.42 "Loan Value" shall have the meaning assigned to that term or
described in Section 3.1(b) hereof.
1.43 "London Business Day" shall mean a day for dealing in deposits in
Dollars by and among banks in the London interbank market which is also a
Business Day.
1.44 "Long Term Debt" shall mean all obligations of Unit and its
consolidated subsidiaries reflected on the consolidated financial statements
furnished to the Banks that are due in more than one year.
1.45 "Majority Banks" shall mean BOK and such other Banks (including
permitted assignees of any of the Banks) whose aggregate Pro Rata Shares
constitute sixty seven percent (67%).
1.46 "Mineral Interests" shall mean all of the Borrowers' mineral and
leasehold interests, including without limitation, producing oil and gas and
other working or royalty interests therein.
1.47 "Notes" shall have the meaning ascribed to it in Section 2.2 of this
Agreement together with each and every extension, renewal, modification,
replacement, substitution and change in form thereof which may be from time to
time and for any term or terms effected.
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1.48 "OPA" shall mean the Oil Pollution Act of 1990, as amended, together
with all regulations and rulings promulgated with respect thereto.
1.49 "Official Body" shall mean any government or political subdivision or
any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
1.50 "Options" shall mean the Prime Rate Option and the Libor Rate Option,
as the case may be.
1.51 "Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincor porated organization, and a
government or any department, agency or political subdivision thereof.
1.52 "Polluting Substances" shall mean all pollutants, contaminants,
chemicals or industrial, toxic or hazardous sub stances or wastes and shall
include, without limitation, any flammable explosives, radioactive materials,
oil, hazardous materials, hazardous or solid wastes, hazardous or toxic sub
stances or related materials defined in CERCLA/SARA, RCRA/HSWA and in the HMTA;
provided, in the event either CERCLA/SARA, RCRA/HSWA or HMTA is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment and, provided further,
to the extent that the Laws of any State or other Tribunal establish a meaning
for "hazardous substance," "hazardous waste," "hazard ous RCRA/HSWA material,"
"solid waste" or "toxic substance" which is broader than that specified in
CERCLA/SARA or HMTA, such broader meaning shall apply.
1.53 "Prime Rate Option" shall have the meaning assigned to that term in
Section 2.5(a) hereof.
1.54 "Pro Rata Share" shall mean for each of the Banks the percentage
determined from time to time by dividing the principal amount outstanding under
such Bank's respective Note by the aggregate principal amount outstanding under
all of the Banks' Notes, pursuant to which each of BOK and B of A's initial Pro
Rata Share will be thirty percent (30%), UMB's initial Pro Rata Share will be
twenty-five percent (25%) and Local Oklahoma's initial Pro Rata Share will be
fifteen percent (15%).
1.55 "RCRA" shall mean the Resource Conservation and Recov ery Act of
1976, as amended, together with all regulations and rulings promulgated with
respect thereto.
1.56 "Redetermination Date" shall mean April 1 and October 1 of each year.
1.57 "SARA" shall mean the Superfund Amendments and Re authorization Act
of 1987, as amended, together with all regu lations and rulings promulgated with
respect thereto.
1.58 "Security Agreement" shall have the meaning assigned to that term in
Article IV of this Agreement.
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1.59 "Security Instruments" shall mean the Security Agreement and all
other financing statements, mortgages, assign ments, security agreements,
documents or writings of any and all amendments and supplements thereto,
granting, conveying, assigning, transferring or in any manner providing the
Agent with a security interest or mortgage lien in any property as security for
the repayment of all or any part of the Indebtedness.
1.60 "Swaps" shall mean, with respect to any Person, payment obligations
with respect to interest rate or commodity swaps, currency swaps and similar
obligations obligating such Person to make payments, whether periodically or
upon the happening of a contingency. For the purposes of this Agreement, the
amount of the obligations under any Swap shall be the amount determined in
respect thereof as of the end of the then most recently ended fiscal quarter of
such Person, based on the assumption that such Swap had terminated at the end of
such fiscal quarter, and in making such determination, if any agreement relating
to such Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
1.61 "Taxes" shall mean all taxes, assessments, fees, or other charges or
levies from time to time or at any time imposed by any Laws or by any Tribunal.
1.62 "Term Loan" shall have the meaning ascribed to it in Section 2.4(a)
of this Agreement.
1.63 "Total Liabilities" shall mean the total amount of all liabilities of
Unit, as reflected on the consolidated financial statements, including
capitalized leases and excluding deferred taxes.
1.64 "Tribunal" shall mean any municipal, state, common wealth, Federal,
foreign, territorial or other sovereign, govern mental entity, governmental
department, court, commission, board, bureau, agency or instrumentality.
1.65 "TSCA" shall mean the Toxic Substances Control Act, as amended,
together with all regulations and rulings promulgated with respect thereto.
1.66 "Working Capital Provided from Operations" shall mean Unit's
consolidated net income plus (minus) Unit's consolidated depreciation,
noncurrent deferred income taxes, and other non-working capital charges
(credits), as such items are reflected in the financial statements furnished to
the Banks pursuant to this Agreement.
ARTICLE II
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LOANS
-----
2.1 Revolving Line of Credit. Each of the Banks agrees, severally and
not jointly, upon the terms and subject to the conditions hereinafter set forth,
to establish a combined revolving line of credit (the "Credit Loan") and make
advances to the Borrowers administered by the Agent from the Closing Date until
May 1, 2005 (the "Conversion Date"), in such amounts as the Borrowers may from
time to time request and BOK will issue letters of credit on Borrowers' account
so long as the
8
aggregate unpaid principal amount of the advances under the Credit Loan
(including the unfunded portions of outstanding Letters of Credit issued
pursuant to Section 2.3(b) hereof) does not exceed the lesser of (a) the
Commitment Amount or (b) the Loan Value (as determined in accordance with
Article III hereof). In no event shall any of the Banks be obligated to make
advances under this Agreement in excess of the stated principal amount of each
Bank's respective Note.
2.2 Notes. The Borrowers' obligation to repay the Credit Loan, together
with interest accruing thereon, shall be evidenced by Borrowers' four (4) joint
and several promissory notes of even date herewith, in the form of Exhibits A-1,
A-2, A-3 and A-4 attached hereto in the aggregate maximum principal amount of
$100,000,000.00 (which promissory notes, together with all extensions, renewals,
substitutions, replacements, rearrangements and changes in form thereof are each
sometimes hereinafter referred to, individually, as a "Note," and, collectively,
as the "Notes").
2.3 Advances; Letters of Credit.
(a) Advances. Subject to the terms, conditions and limitations set
forth in this Agreement, each Bank severally, and not jointly, agrees to
advance its Pro Rata Share of each advance.
Except for advances to reimburse the Banks for drafts paid under
Letters of Credit, the Banks shall not be obligated to make any advance
which is (i) in an amount less than $100,000 or, if greater than $100,000,
in an amount not an integral multiple of $50,000, (ii) requested on or
after the Conversion Date, or (iii) requested to be made while any Default
or Event of Default is in existence, or when the making of such advance
would cause a Default or an Event of Default to occur. Within such
limitations and the limitations set forth in this Agreement, Borrowers may
borrow, repay and re-borrow under the Credit Loan until the Conversion
Date.
Unit shall give Agent notice in writing (via fax) or by telephone at
or before 12:00 o'clock noon (Tulsa, Oklahoma time) on the proposed date
of any advance except that (other than for initial advance under the
Credit Loan on the Closing Date) Unit shall provide three (3) Business
Days prior notice for any advance request for which the LIBOR Option is
selected. Each such advance shall be made at the office of the Agent by
crediting the amount of the advance to Unit's demand deposit account with
the Agent styled as follows: Unit Corporation Account No. 209907163 (the
"General Account"). In consideration of Banks and the Agent permitting
Unit to make requests for advances under the Credit Loan by telephone,
Borrowers jointly state that they are fully aware of the risks attendant
thereto, and agree to accept all such risks and to hold Banks and the
Agent harmless from any loss which any Borrowers may incur by reason of
any such non-written request, other than such as result from a Bank's or
the Agent's gross negligence or wanton disregard.
(b) Letters of Credit. Upon the Borrowers' application from time to
time by use of BOK's standard form Letter of Credit Application Agreement
and subject to the terms and provisions therein and herein set forth, BOK
agrees to issue standby letters of credit on behalf of one or more of the
Borrowers under the Credit Loan, provided that (i) any letters of credit
issued on behalf of or on the account of one or more of the Borrowers with
an
9
expiry date later than the Conversion Date, will, at the Banks' sole
option, be fully secured and collateralized by cash or cash equivalent
acceptable to the Banks in their sole discretion and held thereby from and
after maturity, until expiration or cancellation of such letter(s) of
credit or payment of all draws thereon on demand of the Banks, (ii)
no letter of credit will be issued on behalf of or for the account of the
Borrowers if at the time of issuance of such requested Letter of Credit
the outstanding amount of the unpaid Credit Loan (including the aggregate
outstanding and unfunded amount of unexpired letters of credit then
existing) would exceed the lesser of the (i) then applicable Commitment
Amount or (ii) the Loan Value, and (iii) in no event shall the aggregate
amount of such out standing letters of credit exceed $20,000,000. If any
letter of credit is drawn upon at any time, each amount drawn, whether a
full or partial draw thereon, shall be paid by wire transfer and reflected
by the Banks as an advance on the Notes, based on the Banks' Pro Rata
Share, effective as of the date the sight draft is honored and such letter
of credit shall be canceled immediately, or partially reduced, as may be
appropriate, upon such wire transfer. In consideration of BOK's agreement
to issue letters of credit hereunder, the Borrowers agree to pay to the
Agent letter of credit fees equal to two percent (2%) per annum on the
face amount of each letter of credit plus normal processing fees, which
such fees shall be paid to the Agent at the time of issuance of each
applicable letter of credit by an automatic debit in such amount to the
General Account (the "Letter of Credit Fees"). All letters of credit
issued by BOK pursuant to this Agreement shall specify the volume, source
and delivery period pertaining to the transaction.
2.4 Principal. The principal balance of the Notes shall
be paid as follows:
(a) The principal balance of the Notes remaining unpaid as of the
Conversion Date shall be payable in thirty-six (36) monthly installments,
commencing on June 1, 2005, and continuing on the first (1st) day of each
month thereafter through May 1, 2008 (the "Maturity"), as more fully
described in the Notes (the "Term Loan").
(b) Except as herein provided, Borrowers may from time to time
prepay, without penalty or premium, all or any part of the Notes. Amounts
so prepaid prior to the Conversion Date or amounts of the Credit Loan
otherwise unused (subject to the other provisions of this Agreement) shall
be available to re-advance or advance, as the case may be, as one or more
advances under the Credit Loan. Prepayments made on or after the
Conversion Date shall be applied first to interest and then to the
outstanding principal balance of and principal installments due under the
Notes in the inverse order of maturity. Each payment made pursuant to
this Section 2.4(b) shall be in addition to, and not in lieu of, all other
payments of principal, interest, fees, costs, expenses and other amounts
otherwise required by the Notes. Nothing in this Section 2.4(b) shall
affect the rights of the Agent or the Banks to require payment in full of
the Notes prior to Maturity due to an acceleration of the Notes upon an
Event of Default.
(c) If at any time the aggregate amount of advances outstanding
under the Credit Loan or the Term Loan, as applicable, plus the aggregate
liability of the Banks under Letters of Credit outstanding at such time
shall exceed the lesser of the (i) then applicable Commitment Amount or
(ii) Loan Value then in effect, Borrowers shall, within thirty (30) days
after the Agent gives Borrowers written notice of such excess, (a) pay the
principal
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balance of the Notes in an amount which is equal to or greater than such
excess, together with interest on the amount so paid, or (b) comply with
the requirements of Section 4.2(a) hereof. If such payment is not
received by the Agent on or before the last day of said thirty (30) day
period, then notwithstanding Borrowers' compliance with clause (b) hereof
above within ninety (90) days after the end of said thirty (30) day
period, Borrowers shall pay the amount of such excess, as increased or
decreased since the last calculation thereof, together with interest on
the amount so paid. Any payment made pursuant to the first two (2)
sentences of this Section 2.4(c) shall be in addition to, and not in lieu
of, all other payments of principal, interest, fees, costs, expenses and
other amounts otherwise required and shall be applied first to interest
and then to principal and, if such payment is made on or after the
Conversion Date, such payment shall be applied to principal installments
due under the Notes, in the inverse order of their maturity. In the event
the Agent does not receive such payment in full on or before the last day
of said ninety (90) day period: (x) if such day occurs prior to the
Conversion Date, then, notwithstanding the terms of the Notes and this
Agreement, all obligations of the Banks to make advances under the Credit
Loan and the obligation of BOK to issue Letters of Credit shall
immediately terminate, and the aggregate principal balance of the Notes
outstanding on the last day of said ninety (90) day period shall be
payable in thirty-six (36) equal monthly installments, commencing on the
first (1st) day of the month immediately following the month in which the
end of said ninety (90) day period occurs and continuing on the first
(1st) day of each month thereafter until paid, and (y) if such day occurs
on or after the Conversion Date, then such nonpayment shall constitute an
Event of Default.
2.5 Interest. The Notes shall bear interest and be payable as follows:
(a) Available Options. Except as hereinafter provid ed, during the
period commencing on the Closing Date and continuing through the
Conversion Date, interest shall accrue on that portion of the aggregate
principal amount of the Notes from time to time outstanding and on any
past due interest prior to an Event of Default (collectively the "Debt")
according to the following interest rate matrix:
Options
Percentage that the Debt ------------------------------------
Bears to the Loan Value Prime Rate Libor Rate
------------------------ ---------- ----------
Less than 50% Applicable Prime Libor Rate plus
Rate or 1.000%
50% - up to but Applicable Prime Libor Rate plus
not including 75% Rate or 1.250%
75% or more Applicable Prime Libor Rate plus
Rate or 1.500%
11
Except as hereinafter provided, during the period commencing on the
earlier of the Conversion Date or May 1, 2005, and continuing through
Maturity, interest shall accrue on the Debt according to the following
interest rate matrix:
Options
Percentage that the Debt ------------------------------------
Bears to the Loan Value Prime Rate Libor Rate
------------------------ ---------- ----------
Less than 50% Applicable Prime Libor Rate plus
Rate or 1.250%
50% - up to but Applicable Prime Libor Rate plus
not including 75% Rate or 1.500%
75% or more Applicable Prime Libor Rate plus
Rate or 1.750%
Notwithstanding the foregoing, and at least three (3) Business Days
prior to the Conversion Date, at Borrowers' request, pursuant to a written
notice from Unit to the Agent requesting a Fixed Rate Loan (the "Fixed
Rate Election Notice"), and specifying the amount and term thereof
received at least three (3) Business Days prior to the first date of
application of the Fixed Rate (the "Fixed Rate Election Notice Date"), the
Borrowers may request the selection of a Fixed Rate for the Notes pursuant
to which the Agent, within two (2) Business Days of receipt of the Fixed
Rate Election Notice, shall notify Unit of the Banks' Fixed Rate, subject
to the terms, provisions and limitations hereinafter set forth. Fixed
Rate Loans selected by the Borrowers in accordance herewith shall accrue
interest, payable monthly on the first day of each calendar month,
commencing August 1, 2001.
As used in this Agreement, "Fixed Rate" shall mean one and three-
quarters percent (1.750%) per annum above the "Swap Rate." Once selected
by Unit and quoted by the Agent, the Fixed Rate may not be changed by the
Borrowers as to the applicable advance to which it applies. The
"Swap Rate" means the lowest bid rate acceptable to the applicable Bank or
Banks from a Swap counter-party acceptable to the applicable Bank or Banks
pursuant to Hedge Agreements, Swaps or other comparable fixed interest
rate arrangements entered into and acceptable to the applicable Bank or
Banks. The right of the Borrowers to select a Fixed Rate Loan is also
subject to the following: (i) the minimum principal sum thereof shall be
$15,000,000 and the maximum aggregate principal sum of all outstanding
Fixed Rate Loans shall be $50,000,000; (ii) the minimum term thereof shall
be two (2) years and the maximum term thereof shall not extend beyond the
earlier of (x) maturity date hereof (presently May 1, 2008) or five (5)
years from the initial date of such Fixed Rate Loan; (iii) the
amortization period for the quoted Fixed Rate shall be on an interest only
basis for the specified term thereof with all principal due and payable at
the expiration of such quoted term; (iv) interest shall be computed upon
the actual number of days elapsed based upon a 360-day year; and (v) no
partial prepayment may be made, but a prepayment in whole may be made if
accompanied by the applicable Prepayment Fee, if any, or in
12
exchange for a Prepayment Credit, if any. The Swap Rate shall be
effective as of the Fixed Rate Election Notice Date or within two (2)
Business Days thereafter. Except to the extent otherwise governed by an
ISDA Master Agreement(s) entered into by certain of the Banks and the
Borrowers, the "Prepayment Fee" means the amount payable by the Borrowers
to the Agent for the benefit of the Banks equal to the amount which the
Banks are obligated to pay to the Swap counter-party upon the Banks'
termination of the Hedge Agreement or comparable Swap or other interest
risk management agreement at the time of the Fixed Rate prepayment by the
Borrowers (i.e., the "market value" of the interest rate hedge or swap is
negative). Except to the extent otherwise governed by an ISDA Master
Agreement(s) entered into by certain of the Banks and the Borrowers, the
"Prepayment Credit" means the amount payable by the Banks to the Borrowers
equal to the amount received by the Agent on behalf of the Banks from
their Swap counter-party upon the Banks' termination of the Hedge
Agreement or comparable Swap or other interest risk management agreement
at the time of the Fixed Rate prepayment by the Borrowers (i.e., the
"market value" of the interest rate hedge or swap is positive).
In determining the percentage that the Debt bears to the Loan Value,
the "Debt" and the "Loan Value" shall be the average of such respective
amounts during the most recent calendar month preceding such
determination. The Applicable Prime Rate option described above in the
matrices is hereinafter referred to as the "Prime Rate Option," the Libor
Rate interest option described above in the matrices is hereinafter
referred to as the "Libor Rate Option" and the Fixed Rate interest option
described above is hereinafter referred to as the "Fixed Rate Option."
The Prime Rate Option shall be computed on the basis of a year of 365 or
366 days, as the case may be and the Libor Rate Option and the Fixed Rate
Option shall be based on a year of 360 days and actual days elapsed.
Within thirty (30) days of the signing date of this Agreement (as opposed
to the effective date of July 24, 2001), the Borrowers shall enter into a
Swap, Hedge Agreement or comparable ISDA Master Agreement with such one or
more of the Banks electing to require the same for such percentage of such
Fixed Rate Option Loans as may be required by such Bank(s)."
(b) Operation of Options. At the end of any applica ble Libor Rate
Funding Period, the Borrowers may either: (i) repay all outstanding
balances of principal and interest to which such Libor Rate Funding Period
applies; or (ii) select the Prime Rate Option or the Libor Rate Option to
apply to a portion or all of such amounts affected by such Libor Rate
Funding Period. During an applicable Libor Rate Funding Period, the
Borrowers may not prepay in part or in whole the outstanding principal
balance of the Note to which such Libor Rate Option applies and the
applicable Libor Rate Funding Period shall continue until the end of such
period.
If the Prime Rate Option is selected with respect to all or a portion
of the Debt, then at any time provided that no Default or Event of Default
has occurred and remains uncured, Unit, on behalf of the Borrowers may
notify the Agent that the Borrowers wish to convert all or a portion of
the Debt to the Libor Rate Option. In such event, such designated
outstanding balances of principal on the Notes shall convert to the Libor
Rate Option. As provided below in Section 2.5(g)(i), the Borrowers may
prepay in part or in whole without premium or penalty the outstanding
principal balance of the Notes to which such Prime Rate Option applies.
13
At any time when the Borrowers shall select, convert to or renew the
Libor Rate Option to apply to a portion or all of the Debt, it shall fix
one or more periods of 30, 60, 90 or 180 days during which such Option
shall apply (the "Libor Rate Funding Period") provided, that each Libor
Rate Funding Period shall begin on a London Business Day.
In order to select, convert to or renew the Libor Rate Option,
Borrowers shall provide the Agent with the date, which shall be a Business
Day, on which the Libor Rate Option is to be effective, which date shall
not be less than two (2) Business Days after the date on which the
Agent is so notified.
(c) Interest Payment Dates. Interest shall be payable on the Debt
to which the Prime Rate Option applies on the first (1st) day of each
calendar month, commencing on August 1, 2001. Interest shall be payable
on the Debt to which a Libor Rate Option applies at the conclusion of the
applicable Libor Rate Funding Period, provided, however, that in the event
that a Libor Rate Period of 180 days is selected, interest shall be
payable no less frequently than quarterly.
(d) Interest Rate After Maturity. Notwithstanding the provisions of
Sections 2.5(a), 2.5(b) and 2.5(c) hereof, after Maturity, whether by
acceleration or otherwise, the Debt shall bear interest at the fluctuating
per annum rate equal to the sum of five percent (5%) per annum plus the
Applicable Prime Rate and shall be payable on demand.
(e) Libor Rate Unascertainable - Impracticability. If
(i) on any date on which a Libor Rate would otherwise be set
the Agent shall have in good faith determined (which determination
shall be conclusive) that:
(A) adequate and reasonable means do not exist for
ascertaining such Libor Rate,
(B) a contingency has occurred which mate rially and
adversely affects the interbank euro dollar market, or
(C) the effective cost to the Banks of fund ing a proposed
Libor Rate Option from a Corre sponding Source of Funds shall
exceed the Libor Rate applicable to such Libor Rate Funding
Period, or
(ii) at any time the Majority Banks shall have determined in
good faith (which determination shall be conclusive) that the making,
maintenance or funding of the Libor Rate Option has been made
impracticable or unlawful by compliance by the Majority Banks in good
faith with any Law or guideline or interpretation or administration
thereof by any Official Body charged with the interpretation or
administration thereof or with any request or directive of any such
Official Body (whether or not having the force of law);
14
then, and in any such event, the Agent may notify the Borrowers of
such determination. Upon such date as shall be specified in such
notice (which shall not be earlier than the date such notice is
given) the obliga tion of the Agent to allow the Borrowers to select,
convert to or renew the Libor Rate Option shall be suspended until
the Agent shall have later notified the Borrowers of such Majority
Bank's determination in good faith (which determination shall be
conclusive) that the circumstances giving rise to such previous
determination no longer exists.
If the Agent notifies the Borrowers of a determi nation under
subsection (ii) of this Section 2.5(e), the Borrowers shall, as to
the Libor Rate on the date specified in such notice either convert
the designated portion of the Debt covered by any Libor Rate Option
to the Prime Rate Option in accordance with Section 2.5(f) hereof or
prepay such amount in accordance with Section 2.5(g) hereof. Absent
due notice from the Borrowers of conversion or prepayment, the Libor
Rate automatically shall be converted to the Prime Rate Option upon
such specified date.
If at the time the Majority Banks make a determination under
subsection (i) or (ii) of this Section 2.5(e) the Borrowers have
previously notified the Agent that they wish to select, convert to or
renew the Libor Rate Option with respect to a portion or all of the
Debt but such Option has not yet gone into effect, such notification
shall be deemed to pro vide for selection of, conversion to or
renewal of the Prime Rate Option instead of the Libor Rate Option.
(f) Conversion or Renewal of Interest Rate Options.
(i) Subject to the provisions of subsection 2.5(h) below,
Borrowers shall have the right to desig nate or convert their option
in accordance with the provisions hereof. Borrowers may elect to
have an alternative option apply or continue to apply to all
or a portion of the Debt. Each change in options
shall be a conversion of the rate of interest applicable to the
specified portion of the Debt. The option shall be designated or
converted in the following manner:
(A) at the expiration of any Libor Rate Funding Period
with respect to any Libor Rate Option, or
(B) on the date specified in a notice by
the Agent pursuant to Section 2.5(e) hereof with respect to
conversions from the Libor Rate
Option.
Whenever the Borrowers desire to convert or renew any interest rate
option, the Borrowers shall provide the Agent with the following
information:
(C) the date, which shall be a Business
Day, on which the proposed conversion or renewal is to be made
which date shall not be less than two (2) Business Days after
the date on which Agent is so notified; and
15
(D) the then applicable Option selected in accordance with
Section 2.5(a) hereof.
Notice having been so provided, after the date specified in such
notice (telephonic or where applicable, in writing) interest shall be
calculated upon the designated portion of the Debt as so converted or
renewed.
(ii) Absent due notice from the Borrowers of conversion or
renewal in the circumstances described in Section 2.5(f)(i)(A)
hereof, the Libor Rate for which such notice is not received shall be
converted automatically to the Prime Rate Option on the last day of
the expiring fund period.
(g) Prepayments. Subject to the provisions of Section 2.5(h)
hereof, the Borrowers shall have the right at their option from time to
time to prepay the Notes in whole or part without premium or penalty:
(i) at any time with respect to the Prime Rate Option,
(ii) at the expiration of any Libor Rate Funding Period with
respect to prepayment of the Libor Rate Option, or
(iii) on the date specified in a notice by the Agent pursuant
to Section 2.5(e) hereof with respect to the Libor Rate Option.
Whenever the Borrowers desire to prepay any part of the Debt, they shall
provide notice to the Agent in writing setting forth the following
information:
(iv) the date, which shall be a Business Day, on which the
proposed prepayment is to be made; and
(v) the aggregate principal amount of such prepayment, which
shall be an integral multiple of $100,000.
(h) Additional Compensation in Certain Circumstances. With respect
to the portion of the Debt covered by the Libor Rate Option, if any:
(i) if any Law or guideline or interpretation or application
thereof by any Official Body charged with the interpretation or
administration thereof or compliance with any request or directive of
any Official Body (whether or not having the force of law):
(A) subjects any of the Banks to any tax or changes the
basis of taxation with respect to this Agreement, the Notes, the
Credit Loan or payments by the Borrowers of principal, interest
or other amounts due from the Borrowers hereunder or under the
Notes (except for taxes on the overall net income of such
Bank(s) imposed by the jurisdiction in which such Bank(s)'
principal office is located),
16
(B) imposes, modifies or deems applicable any reserve,
special deposit or similar require ment against assets held by,
credit extended by, deposits with or for the account of, or
other acquisition of funds by, such Bank(s) (other than
requirements expressly included herein in the determination of
the Libor Rate hereunder), or
(C) imposes upon any of the Banks any other condition or
expense with respect to this Agreement, the Notes or its making,
maintenance or funding of any part of the Credit Loan, the Notes
or any security therefor,
and the result of any of the foregoing is to increase the cost to,
reduce the income receivable by or impose any expense (including loss
of margin) upon the Agent or such Banks with respect to this
Agreement, the Notes or the funding of any part of the Credit Loan by
an amount which such Bank(s) deem to be material (such Bank(s) being
deemed for this purpose to have made, maintained or funded each
funding period of the applicable Libor Rate Option from a
Corresponding Source of Funds), the Agent shall from time to time
notify the Borrowers of the amount determined in good faith by such
Bank(s) (which determination shall be conclusive absent manifest or
demonstrable error) to be necessary to compensate such Bank(s) for
such increase in cost, reduction in income or additional expense.
Such amount shall be due and payable by the Borrowers to such Bank(s)
ten (10) Business Days after such notice is given.
(ii) In addition to the compensation required by subsection
(i) of this Section 2.5(h), the Borrowers shall indemnify such
Bank(s) against any loss or expense (including loss of margin) which
such Bank(s) have sustained or incurred as a consequence of any:
(A) payment, prepayment or conversion of the applicable
Libor Rate Option on a day other than the last day of the Libor
Rate Funding Period (whether or not such payment, prepayment
or conversion is mandatory or automatic and whether or not such
payment or prepayment is then due), or
(B) attempt by the Borrowers to revoke (ex pressly, by
later inconsistent notices or other wise) in whole or part any
notice stated herein to be irrevocable (the Agent having in its
sole discretion the options (A) to give effect to such attempted
revocation and obtain indemnity under this Section 2.5(h) or (B)
to treat such attempted revocation as having no force or
effect, as if never made).
If any of the Banks sustain or incur any such loss or expense, the
Agent shall from time to time notify the Borrowers of the amount
determined in good faith by such Bank(s) (which determination shall
be conclusive absent manifest or demonstrable error) to be necessary
to indemnify such Bank(s) for such loss or expense (such
17
Bank(s) being deemed for this purpose to have made, maintained or
funded each Libor Rate Funding Segment of the applicable Libor Rate
Option from a Corresponding Source of Funds). Such amount shall be
due and payable by the Borrowers to the Agent for the benefit of such
Bank(s) ten (10) Business Days after such notice is given.
2.6 Commitment Fees. Borrowers jointly and severally agree to pay the
Agent on behalf of the Banks, within ten (10) days of their receipt of the
invoice therefor, commitment fees ("Commitment Fee" or "Commitment Fees"),
payable quarterly in arrears. The Commitment Fees payable with respect to any
Period shall be determined by applying the rate of three-eights of one percent
(3/8ths of 1%) per annum to an amount which is equal to the unused portion of
the Commitment Amount which is in effect during such Period. No Commitment Fee
shall be assessed on the Term Loan or Fixed Rate Loan from and after conversion
thereto from the Credit Loan. For purposes of this Section 2.6, the term
"Period" shall mean each calendar quarter (or portion thereof) ending before the
Conversion Date. Commitment Fees shall be calculated on the basis of the actual
number of days elapsed (365 or 366) in a year of 365 days.
2.7 Reductions in Commitment Amount. Borrowers may from time to time
prior to the Conversion Date but no more frequently than once per calendar
quarter, upon at least ten (10) days' prior written notice to the Agent signed
by Unit on behalf of Borrowers, permanently reduce the Commitment Amount
(initially set at $60,000,000), but only upon repayment of the amount, if any,
plus the interest accrued and unpaid thereon, by which the aggregate unpaid
principal balance of the Notes exceeds the reduced Commitment Amount. Any such
change shall be in the amount of $100,000 or an integral multiple thereof.
2.8 Origination Fee. On or prior to the Closing Date, Borrower shall pay
to the Agent for and on behalf of the Banks a loan origination fee in the
aggregate amount of $60,000.
2.9 Payments/Withholdings. All payments and prepayments of principal,
interest, Commitment Fees, Origination Fee, and Letter of Credit Fees, shall be
made as and when due hereunder by Borrowers to the Agent and applied by the
Agent for and on behalf of the Banks as set forth in the Intercreditor
Agreement. All payments by the Borrowers hereunder and under any of the other
Loan Documents shall be made without setoff or counterclaim and free and clear
of and without deduction for any taxes, levies, imposts, duties, charges, fees,
deductions, withholdings, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or any political
subdivision thereof or taxing or other authority therein unless the Borrowers
are compelled by law to make such deduction or withholding. If any such
obligation is imposed upon the Borrowers with respect to any amount payable by
it hereunder or under any of the other Loan Documents, the Borrowers will pay to
the Agent, for the account of the Banks or (as the case may be) the Agent, on
the date on which such amount is due and payable hereunder or under such other
Loan Documents, such additional amount in Dollars as shall be necessary to
enable the banks or the Agent to receive the same net amount which the Banks or
the Agent would have received on such due date had no such obligation been
imposed upon the Borrowers. The Borrowers will deliver promptly to the Agent
certificates or other valid vouchers for all taxes or other charges deducted
from or paid with respect to payments made by the Borrowers hereunder or under
such other Loan Documents.
18
ARTICLE III
-----------
LOAN VALUE
----------
3.1 Initial Determination of Loan Value/Commitment Amount. For the
period beginning on the Closing Date and continuing through September 30, 2001,
the Loan Value shall be One Hundred Twenty-Nine Million Dollars ($129,000,000)
and the Commitment Amount shall be Sixty Million Dollars ($60,000,000).
3.2 Redetermination of Loan Value.
(a) During each subsequent period thereafter beginning on a
Redetermination Date, commencing with October 1, 2001 and ending on the
day immediately preceding the next occurring Redetermination Date, the
Loan Value shall be redetermined, as hereinafter defined, as of the
Redetermination Date which is the first day of such period. Prior to each
Redetermination Date, the Agent shall make a determination of (x) the
amount of the loan value of the Current Collateral which shall be deemed
to be the greater of (i) fifty percent (50%) of the most current rig
appraisal or (ii) 2 x the trailing twelve (12) months cash flow from
Borrowers' drilling operations (drilling revenues minus direct drilling
expenses), but in no event to exceed $20,000,000, and (y) the loan value
of the Mineral Inter ests (the sum of clauses (x) and (y) above being
collectively referred to herein as the "Loan Value"). Upon such
redetermination the Agent shall promptly notify the other Banks in writing
of its determination of the Loan Value (including the Agent's
determination of the value of the Mineral Interests portion of the Loan
Value), as reduced by the Fixed Margin Reduction as determined by the
Majority Banks effective as of each semi-annual Redetermination Date. The
Agent shall notify the Borrowers of the Fixed Rate Margin Reduction
concurrent with the notification thereby of the redeternined Loan Value.
The Banks shall be deemed to have approved the Agent's redetermination of
the Loan Value unless proper and timely objection is made pursuant to
Section 3.1(c) below. If no such objection is made, the Agent shall
notify the Borrowers of the redetermined Loan Value;
(b) If any Bank objects to the Agent's redetermination of the value
of the Mineral Interests, it shall notify the Agent in writing within
three (3) Business Days of its receipt of the Agent's notice of the
redetermined Loan Value. The objecting Bank shall also provide the Agent
with a copy of its calculations and determination of the value of the
Mineral Interests. Notwithstanding such objection, the Agent's
determination thereof shall be deemed accepted by all of the Banks unless
(x) the Majority Banks object to the Agent's Mineral Interest
redetermination, and (y) the value of the Mineral Interests as calculated
by at least two of such objecting Banks varies by more than five percent
(5%) from such value thereof as redetermined by the Agent. In such case,
the value of the Mineral Interests shall be redetermined based on the
average of the values calculated by all of the Banks for the Mineral
Interests; and
(c) The Agent's and, to the extent applicable, each Bank's
determination of the value of the Mineral Interests shall be made in good
faith and in accordance with such party's then applicable and customary
practices and standards for energy loans of this type.
3.3 Increase in Loan Value. Unit may, at any time, on behalf of the
Borrowers, submit a written request to the Agent that the Loan Value be
increased to take into account assets acquired or
19
proposed to be acquired by any of the Borrowers since the then most recent
determination of the Loan Value pursuant to Section 3.2 of this Agreement or
this Section 3.3. Following receipt of such request and such descriptions,
reports and other information the Banks may reasonably request with respect to
such assets, such assets will be evaluated and a determination will be made
whether to increase the Loan Value, and if so, by what amount, due to the
acquisition or proposed acquisition of assets by the Borrowers using the method
described above in Section 3.2(a).
Borrowers acknowledge that any increase in the Loan Value as a result of a
proposed acquisition of assets shall not be effective until all of the Banks
shall be reasonably satisfied that the condition of title to and the value of
those assets is consistent with the descriptions, reports and other information
provided by Unit or Borrowers with respect thereto, and Borrowers or Unit have,
by contract or otherwise, obtained the right to acquire such assets.
3.4 Reduction of the Loan Value Upon Sales of Collateral. In the event
of a sale, transfer, assignment, lease or other conveyance of any of the
Collateral as permitted under this Agreement, the Loan Value may be reduced by
an amount to be determined by the Agent with the approval of the other Banks in
accordance with their respective customary standards for loans of this type on
account of such sale, transfer, assignment, lease or other conveyance and
Borrowers shall make an immediate payment of the Notes to the extent, if any,
that the outstanding Line Loan advances or the Term Loan, as applicable, plus
the undrawn face amount of all Letters of Credit outstanding exceed the lesser
of (i) such reduced Loan Value or (ii) the then applicable Commitment Amount.
3.5 Adjustment to Commitment Amount. Any increase in the Loan Value as a
result of a redetermination shall not increase the Commitment Amount without the
separate and explicit written approval of all of the Banks nor increase the
individual commitment of any of the Banks or the aggregate Commitment Amount
without the prior written approval of such Bank. Borrowers acknowledge that any
increase in the Loan Value as a result of a proposed acquisition of assets shall
not be effective until all of the Banks shall be reasonably satisfied that the
condition of title to and the value of those assets is consistent with the
descriptions, reports and other information provided by Unit or Borrowers with
respect thereof, and Borrowers or Unit have, by contract or otherwise, obtained
the right to acquire such assets.
ARTICLE IV
----------
SECURITY
--------
4.1 Current Collateral. As security for the Indebtedness, including the
Notes, and the obligations of the Borrowers to reimburse the Banks for drafts
paid under Letters of Credit, Unit Drilling Company hereby grants to the Agent,
as nominee and collateral agent for the Banks, a continuing first priority
security interest in all of the property described in the Security Agreement
from Unit Drilling Company to the Agent and dated as of April 30, 1998, as
amended, modified and restated from time to time, including that certain First
Amended Security Agreement dated effective as of July 24, 2001 ("First Amended
Security Agreement"), except only as otherwise expressly permitted in Section
6.14(v) hereof (collectively the "Security Agreement"), and also in: (a) all
drilling rigs and related equipment acquired by Unit Drilling Company after the
date hereof and reflected on financial statements of Unit Drilling Company as
fixed assets, together with (b) all
20
related parts, drill pipe, equipment, tools and supplies, (c) all additions and
accessions thereto and replacements and substitutions thereof, and (d) all
proceeds of any of the foregoing (collectively, all of the foregoing shall be
referred to as the "Current Collateral").
4.2 Additional Collateral. Subject to the occurrence of the events
described below in Section 4.2(a) and 4.2(b), Borrowers shall grant to the Agent
as nominee and collateral agent for the Banks a first mortgage lien and/or deed
of trust on and security interest in all of Borrowers' Mineral Interests and
related inventory, intangibles, accounts, equipment, fixtures and personal
property (collectively referred to herein as the "Additional Collateral") to
secure the Indebtedness, by instruments satisfactory to the Agent and the Banks,
as follows:
(a) No later than thirty (30) days after the Agent notifies
Borrowers in writing that the aggregate amount of advances of the Credit
Loan or the Term Loan, as applicable, outstanding at one time, plus the
aggregate liability of BOk under Letters of Credit outstanding at such
time, exceeds the lesser of the (i) then applicable Commitment Amount or
(ii) Loan Value then in effect if, by the last day of said thirty (30) day
period, Borrowers have not made a payment on the aggregate balance of the
Notes in an amount equal to such excess, plus the unpaid accrued interest
on the amount so paid as of the date of such payment.
(b) No later than thirty (30) days after the Agent notifies
Borrowers in writing that an Event of Default has occurred, unless the
circumstances giving rise to such Event of Default have been cured prior
to the lapse of such thirty (30) days.
4.3 Rig Appraisals. The Agent, on behalf of the Banks, shall be entitled
to request that Borrowers obtain an updated, current rig appraisal from Harvey
Davis or another drilling rig appraiser acceptable to the Agent not more
frequently than once every two (2) calendar years, commencing calendar year
2002, at Borrowers' sole cost and expense. Upon receipt of such written request
from the Agent, Borrowers shall diligently engage such acceptable appraiser and
deliver a full and complete copy of the drilling rig appraisal no later than
ninety (90) days after receipt of the Agent's written request therefor.
ARTICLE V
---------
CONDITIONS PRECEDENT TO LOANS
-----------------------------
5.1 Conditions Precedent. The obligation of the Banks to make any
advance under this Agreement or issue any Letters of Credit hereunder and to
convert the same to the Term Loan on the Conversion Date is subject to the
satisfaction of all of the following conditions (in addition to the other terms
and conditions set forth herein):
(a) No Default. There shall exist no Event of Default or Default on
the Closing Date or the date of such Credit Loan advance or Letter of
Credit issuance or Conversion Date, as applicable.
21
(b) Representations and Warranties. The representa tions,
warranties and covenants set forth in Article VII shall be true and
correct on and as of the Closing Date with the same effect as though made
on and as of the Closing Date.
(c) Certificates. Each of the Borrowers shall have delivered to the
Agent a Certificate, dated as of the Closing Date, and signed by its
President or Vice President and its Secretary or Assistant Secretary
certifying (i) to the matters covered by the conditions specified in
subsec tions (a) and (b) of this Section 5.1, (ii) that it has per formed
and complied with all agreements and conditions required to be performed
or complied with by it prior to or on the Closing Date, (iii) to the name
and signature of each officer authorized to execute and deliver the Loan
Documents and any other documents, certificates or writings and to borrow
under this Agreement, and (iv) to such other matters in connection with
this Agreement which the Banks shall reasonably determine to be advisable,
including without limitation good standing certificates from each of the
Borrowers from the state of its incorporation and from such other states
in which qualification as a foreign corporation is required by applicable
Law (including, insofar as Unit is concerned, Oklahoma, but otherwise
subject to the provisions of Section 7.1 hereof below). The Banks may
conclusively rely on such Certificate until they receive notice in writing
to the contrary.
(d) Proceedings. On or before the Closing Date, all corporate
proceedings of each of the Borrowers shall have been taken in connection
with the transactions contemplated by the Loan Documents and shall be
satisfactory in form and substance to the Agent and its counsel; and the
Banks shall have received certified copies, in form and substance satis
factory to the Agent and its counsel, of the Articles or Certificate of
Incorporation and Bylaws of the Borrowers and the resolutions of the Board
of Directors of the Borrowers, as adopted, authorizing the execution and
delivery of the Loan Documents and the borrowings under this Agreement.
(e) Loan Documents/Security Instruments. The Borrowers shall have
delivered to the Agent this Loan Agreement and the First Amended Security
Agreement, each appropriately executed by the appropriate parties and,
where applicable, acknowledged to the satisfaction of the Banks and dated
as of the Closing Date, together with such financing statements, transfer
orders, letters in lieu and other documents as shall be necessary and
appropriate to perfect the security interests in the Current Collateral
covered by said Security Instruments.
(f) Notes/Prior Loan Agreement. The Borrowers shall have delivered
the Notes to the order of the Banks, appropriately executed and the
outstanding Indebtedness under the Prior Loan Agreement must be paid in
full (including accrued interest and fees outstanding, as applicable)
concurrent with the earlier of the initial Credit Loan advance requested
on the Notes or the initial Letter of Credit issuance requested hereunder.
Fleet shall have surrendered its Note to the Agent and UMB shall have paid
to the Agent in immediately available funds an amount equal to its Pro
Rata Share of the Credit Loan assigned hereunder thereto by Fleet, for
concurrent remittance by the Agent to Fleet in exchange for its return of
the Note held by Fleet, as the successor in interest to BankBoston, to the
Agent. UMB shall have paid to the Agent in immediately available funds an
amount equal to the unpaid principal balance of the Fleet Note being
surrendered thereby to the Agent.
22
(g) Other Information. The Banks shall have received such other
information, certificates, resolutions, documents and assurances as shall
be reasonably requested by the Banks.
ARTICLE VI
----------
COVENANTS
---------
The Borrowers covenant and agree with the Banks that from the date hereof
and so long as this Agreement is in effect (by extension, amendment or
otherwise) and until payment in full of all Indebtedness and the performance of
all other obligations of the Borrowers under this Agreement, unless the Banks
shall other wise consent in writing:
6.1 Payment of Taxes and Claims. The Borrowers will pay and discharge or
cause to be paid and discharged all Taxes imposed upon the income or profits of
the Borrowers or upon the property, real, personal or mixed, or upon any part
thereof, belonging to Borrowers before the same shall be in default, and all
lawful claims for labor, rentals, materials and supplies which, if unpaid, might
become a Lien upon its property or any part thereof in excess of $500,000 in the
aggregate at any time; provided however, that the Borrowers shall not be
required to pay and discharge or cause to be paid or discharged any such Tax,
assessment or claim so long as the validity thereof shall be contested in good
faith by appropriate proceedings, and adequate book reserves shall be
established with respect thereto, and the Borrowers shall pay such Tax, charge
or claim before any property subject thereto shall become subject to execution.
6.2 Maintenance of Existence. Each of the Borrowers will use its best
efforts to preserve and keep in full force and effect its corporate existence,
rights and franchises and will continue to conduct and operate its business
substantially as being conducted and operated presently. Each of the Borrowers
will become and remain qualified to conduct business in each jurisdiction where
the nature of the business or ownership of property by such Borrowers may
require such qualification.
6.3 Preservation of Property. Each of the Borrowers will use its best
efforts at all times to maintain, preserve and protect all of its properties
which are used or useful in the conduct of its respective businesses whether
owned in fee or otherwise, or leased, in good repair and operating condition;
from time to time make, or cause to be made, all needful and proper repairs,
renewals, replacements, betterments and improvements thereto so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; and comply with all material leases to which it is
a party or under which it occupies property so as to prevent any material loss
or forfeiture thereunder.
6.4 Insurance. To the extent possible, each of the Borrowers will keep
or cause to be kept adequately insured by financially sound and reputable
insurers Borrowers' property of a character usually insured by businesses
engaged in the same or similar businesses, including the Collateral. Upon
demand by the Agent or any of the Banks any insurance policies covering the
Collateral shall be endorsed to provide for payment of losses to the Agent as
its interest may appear,
23
to provide that such policies may not be canceled, reduced or affected in any
manner for any reason without thirty (30) days prior notice to the Banks.
6.5 Compliance with Applicable Laws. Each of the Borrowers will comply
in all material respects with the requirements of all applicable Laws and orders
of any Tribunal and obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership of Borrowers' properties
or to the conduct of Borrowers' businesses.
6.6 Environmental Covenants. Upon its receipt, each of the Borrowers
will immediately notify the Agent of and provide the Agent with copies of any
notifications of discharges or releases or threatened releases or discharges of
a Polluting Substance on, upon, into or from properties owned by Borrowers which
are given or required to be given by or on behalf of the Borrowers to any
federal, state or local Tribunal if any of the foregoing may materially and
adversely affect Borrowers or any material part of their properties, and such
copies of notifications shall be delivered to the Agent at the same time as they
are delivered to the Tribunal. Borrowers further agree to promptly undertake
and diligently pursue to completion any appropriate and legally required or
authorized remedial containment and cleanup action in the event of any release
or discharge or threatened release or discharge of a Polluting Substance on,
upon, into or from the Borrowers' Mineral Interests which are under the control
of Borrowers. To the extent required by applicable law, each of the Borrowers
will maintain and retain complete and accurate records of all releases,
discharges or other disposal of Polluting Substances on, onto, into or from
Borrowers' Mineral Interests which are under the control of Borrowers,
including, without limitation, records of the quantity and type of any Polluting
Substances disposed of on or off such properties.
6.7 Environmental Indemnities. Each of the Borrowers hereby agree to
indemnify, defend and hold harmless the Banks and their respective officers,
directors, employees, agents, consul tants, attorneys, contractors and their
respective affiliates, successors or assigns, or transferees from and against,
and reimburse said Persons in full with respect to, any and all loss, liability,
damage, fines, penalties, costs and expenses, of every kind and character,
including reasonable attorneys' fees and court costs, known or unknown, fixed or
contingent, occasioned by or associated with any claims, demands, causes of
action, suits and/or enforcement actions, including any administrative or
judicial proceedings, and any remedial, removal or response actions ever
asserted, threatened, instituted or requested by any Persons, including any
Tribunal, arising out of or related to: (a) the breach of any representation or
warranty of Borrowers contained in Section 7.7 set forth herein; (b) the failure
of Borrowers to perform any of their respective covenants contained in Section
6.5 or 6.6 hereunder; (c) the ownership, construction, occupancy, operation, use
of the Borrowers' properties prior to the earlier of the date on which (i) the
Indebtedness and obligations secured hereby have been paid and performed in full
and the Security Instruments have been released, or (ii) the Borrowers'
properties has been sold by Agent or by the Banks following such parties'
ownership of the Borrowers' properties by way of foreclosure of the Liens
granted pursuant hereto, deed in lieu of such foreclosure or otherwise (the
"Release Date"); provided, however, this indemnity shall not apply with respect
to matters caused by or arising solely from the Agent's or the Banks' activities
during any period of time the Agent or the Banks acquire ownership of the
Borrowers' properties.
The indemnities contained in this Section 6.7 apply, without limitation,
to any violation on or before the Release Date of any Environmental Laws and any
liability or obligation relating to the environmental conditions on, under or
about the Borrowers' properties on or prior to the Release Date (including,
without limitation: (a) the presence on, upon or in the Borrowers' properties
or
24
release, discharge or threatened release on, upon or from the Borrowers'
properties of any Polluting Substances generated, used, stored, treated,
disposed of or otherwise released prior to the Release Date, and (b) any and all
damage to real or personal property or natural resources and/or harm or injury
including wrongful death, to persons alleged to have resulted from such release
of any Polluting Substances regardless of whether the act, omission, event or
circumstances constituted a violation of any Environmental Law at the time of
its existence or occurrence). The term "release" shall have the meaning
specified in CERCLA/SARA and the terms "stored," "treated" and "disposed" shall
have the meanings specified in RCRA/HSWA; provided, however, any broader
meanings of such terms provided by applicable laws of the State of Oklahoma
shall apply.
The provisions of this Section 6.7 shall be in addition to any other
obligations and liabilities Borrowers may have to the Agent or the Banks at
common law and shall survive the Release Date and shall continue thereafter in
full force and effect.
The Agent and the Banks agree that in the event that such claim, suit or
enforcement action is asserted or threatened in writing or instituted against
them or any of their officers, employers, agents or contractors or any such
remedial, removal or response action is requested of them or any of their
officers, employees, agents or contractors for which the Agent or the Banks may
desire indemnity or defense hereunder, the Agent or the Banks shall give written
notification thereof to the Borrowers.
Notwithstanding anything to the contrary stated herein, the indemnities
created by this Section 6.7 shall only apply to losses, liabilities, damages,
fines, penalties, costs and expens es actually incurred by the Agent or the
Banks as a result of claims, demands, actions, suits or proceedings brought by
Persons who are not the beneficiaries of any such indemnity. The Agent
or the Banks shall act as the exclusive agent for all indemnified Persons under
this Section 6.7. With respect to any claims or demands made by such
indemnified Persons, the Agent shall notify the Borrowers within thirty (30)
days after the Agent's receipt of a writing advising the Agent of such claim or
demand. Such notice shall identify (i) when such claim or demand was first
made, (ii) the identity of the Person making it, (iii) the indemnified Person
and (iv) the substance of such claim or demand. Failure by the Agent to so
notify the Borrowers within said thirty (30) day period shall reduce the amount
of the Borrowers' obligations and liabilities under this Section 6.7 by an
amount equal to any damages or losses suffered by the Borrowers resulting from
any prejudice caused the Borrowers by such delay in notification from the Agent.
Upon receipt of such notice, the Borrowers shall have the exclusive right and
obligation to contest, defend, negotiate or settle any such claim or demand
through counsel of their own selection (but reasonably satisfactory to the Agent
and the Banks) and solely at Borrowers' own cost, risk and expense; provided,
that the Agent and the Banks, at their own cost and expense, shall have the
right to participate in any such contest, defense, negotiations or settle ment.
The settlement of any claim or demand hereunder by the Borrowers, unless such
settlement fully releases the Banks from any and all liability thereon, may be
made only upon the prior approval of the Banks of the terms of the settlement,
which approval shall not be unreasonably withheld.
6.8 Financial Statements and Reports. The Borrowers shall deliver the
following to each of the Banks:
25
(a) As soon as available and in any event within forty-five (45)
days after the end of each of the first three fiscal quarters of each
fiscal year of Unit,
(i) Unaudited balance sheets of Unit and its consolidated
subsidiaries, prepared on a consolidated basis, as of the end of such
quarterly period; and
(ii) Unaudited statements of income of Unit and its consolidated
subsidiaries, prepared on a consolidated basis, for the portion of
such fiscal year ended with such quarterly period setting forth in
detail, in each case, figures derived on a consistent basis and
presented in comparative form for the corre sponding periods of the
previous fiscal year.
(b) As soon as available and in any event within one hundred twenty
(120) days following the close of each
fiscal year of Unit:
(i) Audited balance sheets of Unit and its consolidated
subsidiaries, prepared on a consolidated basis, as of the end of such
year;
(ii) Audited statements of income of Unit and its consolidated
subsidiaries, prepared on a consolidated basis, for the year then
ended; and
(iii) Audited statements of shareholders' equity and cash
flows of Unit and its consolidated subsidiaries, prepared on a
consolidated basis, for such year setting forth, in each case,
figures derived on a consistent basis and presented in comparative
form for the previous fiscal year.
(c) Concurrently with the furnishing of the annual audited financial
statements pursuant to Section 6.8(b), (i) a separate certificate of the
independent certified public accountants (such certified public
accountants must be nationally recognized) who audited and prepared such
statements, stating that the statements were prepared in conformity with
GAAP on a consistent basis (except for such standard variations as are
noted and approved by such independent certified public accountants), and
fairly present the consolidated financial condition of Unit and its
consolidated subsidiaries, which certificate shall not be qualified or
limited because of restricted or limited examination by such accountants
of any material portion of the records of Unit or any of its subsidiaries;
and (ii) written computations, signed by the Controller or Treasurer of
Unit, of the ratios and amounts described in Sections 6.l7, 6.18(A), 6.20,
6.23, 6.24, 6.25, 6.26 and 6.27 hereof; and five (5) copies of the 10-K
statement of Unit and its consolidated subsidiaries filed with the
Securities and Exchange Commission for such fiscal year.
(d) Concurrently with the furnishing of the quarterly statements
pursuant to Section 6.8(a) hereof, there shall be furnished to each of the
Banks: (a) a certificate signed by the Treasurer or Controller of Unit
stating to the best of his knowledge after performance of due diligence:
(i) that the statements were prepared (subject to year-end audit
adjustments) in conformity with GAAP, applied on a consistent basis
(except for adjustments with which the independent certified public
accountants preparing such annual audited financial statements concur);
(ii) that a review of the activities of each of the
26
Borrowers for the period covered by the financial statements has been made
under his supervision with a view to determining whether each of the
Borrowers has kept, observed, performed and fulfilled all its obligations
under the Agreement, the Notes and other Loan Documents to which it is a
party; and (iii) that each of the Borrowers has kept, observed and
fulfilled each and every obligation under this Agreement, the Notes and
other Loan Documents to which it is a party, and is not at that time in
default in the observance, performance or fulfillment of any such
obligations, or if any of the Borrowers shall be in default, specifying in
said certificate such default and the nature, period of existence and
status thereof; (b) a written report (i) naming the operator and the
location (state and county) of each drilling rig included in the
Collateral as of the end of such quarter, and (ii) describing in
reasonable detail any material disposition or substitution of any of the
Collateral; (c) computations of the ratios and amounts described in
Sections 6.17, 6.18(A), 6.20, 6.23, 6.24, 6.25, 6.26 and 6.27 hereof and
calculation of the drilling operations' cash flow as described in Section
3.1(b) hereof; and (d) five (5) copies of the 10-Q statement of Unit and
its consolidated subsidiaries filed with the Securities and Exchange
Commission with respect to such quarter.
(e) As soon as available but in no event later than March 1 of each
year, Borrowers shall deliver to each of the Banks one copy of a report,
prepared by Borrowers' in-house engineers, in form and substance
satisfactory to Agent (and, if requested in writing by the Agent at the
direction of the Majority Banks), audited by an independent petroleum
engineer selected by Borrowers and satisfactory to the Majority Banks,
setting forth the proven oil and gas reserves of Borrowers' Mineral
Interests, the projection of the rate of production and net operating
income with respect thereto, as of December 31 of the immediately
preceding year. As soon as available, Borrowers shall deliver to each of
the Banks a copy of a report, prepared by Borrowers' in-house engineers,
in form and substance satisfactory to Agent and based on the best
information available to Borrowers at the time, setting forth information
regarding any over-balancing or under-balancing of natural gas that totals
50,000 or more mcf per well and a statement as to the aggregate amount of
over-balancing or under-balancing for all of Borrowers' wells.
6.9 Notice of Default. With reasonable promptness after the happening of
any condition or event which constitutes an Event of Default or Default, Unit
will give the Agent a written notice thereof specifying the nature and period of
existence thereof and what actions, if any, the Borrowers are taking and propose
to take with respect thereto.
6.10 Notice of Litigation. With reasonable promptness after becoming
aware of the existence of any action, suit or proceeding at law or in equity
before any Tribunal, an adverse outcome in which would (i) materially impair the
ability of any of the Borrowers to carry on their business substantially as now
conducted, (ii) materially and adversely affect the condition (financial or
otherwise) of any of the Borrowers, or (iii) result in monetary damages in
excess of $1,000,000, the Borrowers will give the Agent a written notice
specifying the nature thereof and what actions, if any, the Borrowers are taking
and propose to take with respect thereto.
6.11 Requested Information. With reasonable promptness, the Borrowers
will give the Agent or the Banks such other data and information as from time to
time may be reasonably requested by the Agent or any of the Banks.
27
6.12 Inspection. Borrowers will keep complete and accurate books and
records with respect to the Collateral and their other properties, business and
operations and will permit employees and representatives of the Banks, upon
reasonable notice, to audit, inspect and examine all such books and records,
with the exception of the portion thereof covered by an attorney-client
privilege or constituting attorney work product, and to make copies thereof and
extracts therefrom during normal business hours. Upon any Default or Event of
Default of the Borrowers, they will surrender all of such records relating to
the Collateral to the Agent or the Banks upon receipt of any request therefor
from the Agent or the Banks.
6.13 Maintenance of Employee Benefit Plans. The Borrowers will maintain
each employee benefit plan as to which they may have any liability or
responsibility in compliance with ERISA and all other Laws applicable thereto.
6.14 Limitation on Liens. Borrowers will not create or suffer to exist
any Lien upon any of their properties or assets except (i) Liens in favor of the
Agent securing the Indebtedness; (ii) pledges, deposits or Liens not delinquent
under workmen's compensation, unemployment insurance or similar statutes,
mechanics', landlords', workmen's, repairmen's, materialmen's, carriers' liens
and liens of operators of, and participants in, any oil, gas or mineral
properties of any of the Borrowers or other similar liens arising in the
ordinary course of business, or deposits or pledges to obtain the release of any
such Liens so long as such Liens do not include any deposits, advances,
borrowed money or the deferred purchase price of property or services; (iii)
Liens for taxes, assessments, governmental charges or levies, not yet due or
delinquent or which can thereaf ter be paid without penalty, and statutory liens
which do not and will not materially impair the use of the property of any of
the Borrowers or the value of such property for the purposes of its business
unless, as to all Liens described above for amounts due and owing, such Liens
are being contested in good faith by appropriate proceedings in such a manner as
not to permit the foreclosure of such Liens and Liens, judgments or awards
pending appeal, if, as to all the preceding matters referred to in this Section
6.14(iii), in the opinion of the Banks adequate reserves are set aside and
maintained with respect thereto; (iv) Liens expressly permitted to exist under
the terms of any of the Security Instruments; and (v) consensual liens or
security interests in gas compressor equipment of Borrowers.
6.15 Disposition/Negative Pledge Regarding Encumbrance of Collateral and
Other Assets. Borrowers will not sell or encumber any of the Current Collateral
(or any of the Additional Collateral if and to the extent mortgaged or liened
(via deed of trust or otherwise) to the Agent as provided in Section 4.2 of this
Agreement) and Borrowers will not sell, lease, transfer, scrap or otherwise
dispose of or mortgage, pledge, grant a security interest in or otherwise
encumber any of Borrowers' other properties or assets, whether for replacement
or not, unless such sale or disposition shall (a) be in the ordinary course of
business and for a reasonable value; and (b) such sale(s) do not exceed
$1,000,000 in the aggregate (sales made by Petroleum Supply Company in the
ordinary course of its business shall not be subject to the limitation set forth
in this Section 6.15[b]), without obtaining the prior consent of the Banks.
6.16 Other Agreements. Borrowers will not enter into or permit to exist
any agreement (i) which would cause an Event of Default or a Default hereunder;
or (ii) which contains any provision which would be violated or breached by the
performance of Borrowers' obligations hereunder or under any of the other
Loan Documents.
28
6.17 Limitation on Other Indebtedness. Neither the Borrowers nor their
subsidiaries will create, incur, assume, become or be liable in any manner in
respect of, or suffer to exist, any indebtedness whether evidenced by a note,
bond, debenture, agreement, letter of credit or similar or other obligation, or
accept any deposits or advances of any kind, in excess of $7,500,000 in the
aggregate at any time, including the existing item(s) of indebtedness more
particularly described on Schedule I annexed hereto, except (i) plugging bonds,
surface damage bonds, bonds with respect to self insured workers compensation
insurance or bonds, undertakings or contracts and obligations for trade payables
and current indebtedness (other than for borrowed money) incurred in, and
deposits and advances accepted in, the ordinary course of business and which are
not past due or delinquent; (ii) usual and customary insurance premiums financed
in the normal course of business; and (iii) the Indebtedness.
6.18 Contingent Liabilities; Advances. Except for (A) guarantees by Unit
of indebtedness of a Person or Persons up to the aggregate amount of $200,000;
(B) guarantees for the repayment of any indebtedness owed by one of the
Borrowers to another one of the Borrowers; (C) the payment of the obligation
of any Borrower to repurchase any property or interests under any partnership
agreement under which any of the Borrowers serves as general partner up to the
aggregate annual amount of $500,000; or (D) Unit's limited payment guarantee
(not to exceed the principal amount of $2,000,000) of the line of credit of
Superior Pipeline Company, L.L.C. in an amount not in excess of $4,000,000; the
Borrowers will not either directly or indirectly, (i) guarantee, become surety
for, discount, endorse, agree (contingently or otherwise) to purchase,
repurchase or otherwise acquire or supply or advance funds in respect of, or
otherwise become or be contin gently liable upon the indebtedness, obligation or
liability of any Person, (ii) guarantee the payment of any dividends or other
distributions upon the stock of any corporation, (iii) discount or sell with
recourse or for less than the face value thereof, any of its notes receivable,
accounts receivable or chattel paper; (iv) loan, agree to loan, or advance money
to any Person; or (v) enter into any agreement for the purchase or other
acquisition of any goods, products, materials or supplies, or for the making of
any shipments or for the payment of services, if in any such case payment
therefor is to be made regardless of the non-delivery of such goods, products,
materials or supplies or the non-furnishing of the transportation of services;
provided, however that the foregoing shall not be applicable to endorsement of
negotiable instruments presented to or deposited with a bank for collection or
deposit in the ordinary course of business.
6.19 Merger, Consolidation, Acquisition. None of the Bor rowers will
merge or consolidate with or into any other Person or permit any other Person to
consolidate with or merge into any of the Borrowers; or adopt or effect any
plan of reorganization, recapitalization, liquidation or dissolution; provided,
however, Borrowers may merge into or with each other and/or (subject to the
execution and delivery of such supplemental or additional Security Instruments
deemed appropriate to continue the Banks' security interest in the Collateral)
may enter into letter(s) of intent pertaining to merger, consolidation or
acquisition subject to obtaining the Banks' written consent thereto prior to
consummation of the transactions contemplated by such letter(s) of intent.
6.20 Dividends. The Borrowers will not permit Unit to pay dividends
(other than stock dividends) on or make any other distribution on account of any
class of its capital stock or purchase or retire any class of its capital stock,
unless such purchase or retirement is made by substituting
29
another class of capital stock, whether now or hereafter existing, except cash
dividends of not more than twenty-five percent (25%) of Unit's consolidated
after-tax profits, as reflected in the financial statements furnished to the
Agent pursuant to this Agreement for Unit's immediately preceding fiscal year,
and only if Working Capital Provided from Operations during said year is equal
to or greater than 175% of Current Maturities of Long Term Debt at the end of
such year.
6.21 Articles of Incorporation and By-Laws. The Borrowers will not amend,
alter, modify or restate their Articles or Certificates of Incorporation or By-
Laws in any way which would in any manner adversely affect the Borrowers'
obligations or covenants to the Banks hereunder, including without limitation,
reorganizing in a state or jurisdiction other than such state or jurisdiction of
the applicable Borrower as set forth in the initial paragraph of this Agreement
or otherwise change or alter its organizational entity status).
6.22 Assumed Names/Additional Subsidiaries. The Borrowers promptly shall
advise the Agent if any of the Borrowers amend, alter, modify or restate their
Articles or Certificates of Incorporation or Bylaws in any way which would
change the corporate name or adopt a trade name for any of the Borrowers. The
Borrowers may create such additional wholly-owned subsidiaries as may be needed
to conduct their operations, including Borrowers' proposed South American
operations, provided that the Agent is promptly supplied with full and complete
copies of the filed organizational documents pertaining thereto and, to the
extent deemed necessary by the Agent, the newly created wholly-owned
subsidiaries promptly execute supplemental or amended Security Instruments and
such other loan documents reasonably deemed necessary by Banks to protect the
Banks' security interests in the Collateral and the continuing
priorities thereof.
6.23 Consolidated Working Capital Ratio (Current Ratio). The Borrowers
will not permit the Consolidated Working Capital Ratio (i.e., Current Ratio) to
be less than 1.0 to 1.0 on any quarterly or annual reporting date.
6.24 Minimum Tangible Net Worth. The Borrowers will not permit the
Consolidated Tangible Net Worth to be less than One hundred twenty-five Million
Dollars ($125,000,000), as tested quarterly effective as of the close of each
fiscal quarter and annually effective as of the close of each fiscal year end,
based on the quarterly and annual financial statement reporting requirements of
Section 6.8 (a) and (b), respectively.
6.25 Minimum Cash Flow. The Borrowers will not permit Working Capital
Provided from Operations during the twelve (12) preceding month period to be
less than Forty Million Dollars ($40,000,000), tested quarterly as of the close
of each fiscal quarter of Unit for the most recent four (4) quarter rolling
average.
6.26 Long Term Debt to Consolidated Tangible Net Worth Ratio. The
Borrowers will not permit the ratio of the Long Term Debt to Consolidated
Tangible Net Worth to exceed 1.2 to 1.0 on any quarterly or annual reporting
date.
6.27 Total Liabilities to Consolidated Tangible Net Worth Ratio. The
Borrowers will not permit the ratio of Total Liabili ties to Consolidated
Tangible Net Worth to exceed 1.65 to 1.0 on any quarterly or annual reporting
date.
30
ARTICLE VII
-----------
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Banks to enter into this Agreement and to make Credit Loan
advances hereunder from time to time and to establish the Term Loan to the
Borrowers under the provisions hereof, and in consideration thereof, the
Borrowers represent, warrant and covenant as follows:
7.1 Organization and Qualification. Each of the Borrowers is duly
organized, validly existing, and in good standing under the Laws of its
respective jurisdiction of incorporation, and is duly licensed and in good
standing as a foreign corporation in each jurisdiction in which the nature of
the business transacted or the property owned is such as to require licensing or
qualification as such, except where failure to be licensed or in good standing
would not have a material adverse affect on any of the Borrowers.
7.2 Litigation. There is no action, suit, investigation or proceeding
threatened or pending before any Tribunal against or affecting any of the
Borrowers or any properties or rights of the Borrowers, which, if adversely
determined, would result in a liability of greater than $1,000,000 or would
otherwise result in any material adverse change in the business or condition,
financial or otherwise, of Borrowers that is not otherwise covered by adequate
insurance. None of the Borrowers is in default with respect to any judgment,
order, writ, injunction, decree, rule or regulation of any Tribunal.
7.3 Conflicting Agreements and Other Matters. None of the Borrowers is
in default in any material respect in the performance of any obligation,
covenant, or condition in any material agreement to which it is a party or by
which it is bound. None of the Borrowers is a party to any contract or
agreement or subject to any charter or other restriction which materially and
adversely affects its business, property or assets (in the aggregate), or
financial condition, other than permitted under this Agreement. None of the
Borrowers is a party to or otherwise subject to any contract or agreement which
restricts or otherwise affects the right or ability of the Borrowers to
execute the Loan Documents or the performance of any of their respective terms.
Neither the execution nor delivery of any of the Loan Documents nor fulfillment
of nor compliance with their respective terms and provisions will conflict with,
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the creation of any
Lien (except those created by the Loan Documents) upon any of the properties or
assets of the Borrowers pursuant to, or require any consent, approval or other
action by or any notice to or filing with any Tribunal (other than routine
filings after the Closing Date with the Securities and Exchange Commis sion, any
securities exchange and/or state blue sky authorities) pursuant to the Charter
or By-Laws of any of the Borrowers, any award of any arbitrator, or any
agreement, instrument or Law to which any of the Borrowers is subject.
7.4 Financial Statements. The Borrowers' most recent unaudited financial
statements which have been furnished to the Banks have been prepared in
conformity with GAAP, show all material liabilities, direct and contingent, and
fairly present the financial condition of the Borrowers and the results of their
operations for the periods then ended, and since such date there has been no
31
material adverse change (other than due to changes in the price of natural gas
or crude oil) in the business, financial condition or operations of the
Borrowers.
7.5 Corporate Authorization. The Boards of Directors of the Borrowers
have duly authorized the execution and delivery of each of the Loan Documents
and the performance of their respec tive terms. No other consent of any other
Person, except for the Banks, is required as a prerequisite to the validity and
enforce ability of the Loan Documents.
7.6 Title to Properties; Authority. Each of the Borrowers has full
power, authority and legal right to own and operate the properties which it now
owns and operates, and to carry on the lines of business in which it is now
engaged, and Unit Drilling Company has good and marketable title to the Current
Collateral and the applicable Borrowers who own the Additional Collateral have
good and marketable title thereto subject to no Lien of any kind except Liens
permitted by this Agreement. Borrowers have full power, authority and legal
right to execute and deliver and to perform and observe the provisions of this
Agreement and the other Loan Documents.
7.7 Environmental Representations. To the best of Bor rowers' knowledge:
(a) None of the Borrowers is subject to any liability or obligation
relating to (i) the environmental conditions on, under or about their
properties, including, without limitation, the soil and ground water
conditions at the location of any of the Borrowers' properties, or (ii)
the use, management, handling, transport, treatment, genera tion, storage,
disposal, release or discharge of any Pollut ing Substance that would or
may reasonably be expected to result in a liability in the amount of
$1,000,000 or more;
(b) The Borrowers have been issued and are in compli ance with all
material permits, licenses or similar authori zations to construct,
occupy, operate or use any buildings, improvements, facilities, fixtures
and equipment forming a part of their properties by reason of any
Environmental Laws;
(c) Each of the Borrowers has taken all reasonable steps necessary
to determine and has no reason to believe that any Polluting Substances
have been disposed of or otherwise released on, onto, into, or from their
operated Mineral Interests (the term "release" shall have the meanings
specified in CERCLA/SARA, and the term "disposal" or "disposed" shall have
the meanings specified in RCRA/HSWA) which singly has, or in the aggregate
have resulted in, or may reasonably be expected to result in a liability
in the amount of $1,000,000 or more; provided, in the event either
CERCLA/SARA or RCRA/HSWA is amended so as to broaden the meaning of any
term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment and provided further, to the extent that
the laws of any State or Tribunal establish a meaning for "release,"
"disposal" or "disposed" which is broader than that specified in
CERCLA/SARA, RCRA/HSWA or other Environmental Laws, such broader meaning
shall apply);
(d) There are no PCB's or asbestos-containing materi als, whether in
the nature of thermal insulation products such as pipe boiler or breech
coverings, wraps or blankets or sprayed-on or troweled-on products in, on
or upon the properties owned by Borrowers; and
32
(e) There is no urea formaldehyde foam insulation ("UFFI") in, on or
upon the properties owned by Borrowers.
7.8 Purposes. None of the Borrowers is engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System) and no part of the proceeds of
any borrowing hereunder will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock. If requested by the Agent or any of the Banks, the Borrowers will
furnish to the Agent or such Bank a statement in conformity with the
requirements of Federal Reserve Form U-1, referred to in Regulation U, to the
foregoing effect. None of the Borrowers nor any agent acting on their behalf
has taken or will take any action which might cause this Agreement or the Notes
to violate any regulation of the Board of Governors of the Federal Reserve
System (including Regulations G, T, U and X) or to violate any Securities Laws,
state or federal, in each case as in effect now or as the same may hereafter be
in effect.
7.9 Compliance with Applicable Laws. Each of the Borrowers is in
compliance in all material respects with all Laws, ordinances, rules,
regulations and other legal requirements applicable to it and the business
conducted thereby, the violation of which could or would have a material adverse
effect on its business condition, financial or otherwise.
7.10 Possession of Franchises, Licenses. Each of the Bor rowers possesses
all franchises, certificates, licenses, permits and other authorizations from
governmental political subdivisions or regulatory authorities, free from
burdensome restrictions, that are necessary in any material respect for the
ownership, maintenance and operation of its properties and assets, and none of
the Borrowers is in violation of any thereof in any material respect.
7.11 Leases, Easements and Rights of Way. Each of the Borrowers enjoys
peaceful and undisturbed possession of all leases, easements and rights of way
necessary in any material respect for the operation of its respective properties
and assets. All such leases, easements and rights of way are valid and
subsisting and are in full force and effect.
7.12 Taxes. Borrowers have filed all Federal, state and other income tax
returns which are required to be filed and have paid all Taxes, as shown on said
returns, and all Taxes due or payable without returns and all assessments
received to the extent that such Taxes or assessments have become due. All Tax
liabilities of the Borrowers are adequately provided for on the books of the
Borrowers, including any interest or penalties. No income tax liability of a
material nature has been asserted by taxing authorities for Taxes in excess of
those already paid.
7.13 Disclosure. Neither this Agreement nor any other Loan Document or
writing furnished to the Agent or the Banks by or on behalf of the Borrowers in
connection herewith contains any known untrue statement of a material fact nor
do such Loan Documents and writings, taken as a whole, omit to state a material
fact necessary in order to make the statements contained herein and therein not
misleading. There is no fact known to Borrowers and not reflected in the
financial statements provided to the Banks which materially adversely affects
their assets or in the
33
future may materially adversely affect the business, properties, assets or
financial condition of Borrowers which has not been set forth or described in
this Agreement, in the Loan Documents or in other documents furnished to the
Banks by or on behalf of the Borrowers prior to the date hereof in connection
with the transactions contemplated hereby.
7.14 Investment Company Act Representation. None of the Borrowers is an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
7.15 ERISA. Since the effective date of Title IV of ERISA, no Reportable
Event has occurred with respect to any Plan. For the purposes of this section
the term "Reportable Event" shall mean an event described in Section 4043(b) of
ERISA. For the purposes hereof the term "Plan" shall mean any plan subject to
Title IV of ERISA and maintained for employees of the Borrowers, or of any
member of a controlled group of corporations, as the term "controlled group of
corporations" is defined in Section 1563 of the Internal Revenue Code of 1986,
as amended (the "Code"), of which any of the Borrowers is a part. Each Plan
established or maintained by any of the Borrowers is in material compliance with
the applicable provisions of ERISA, and the Borrowers have filed all reports
required by ERISA and the Code to be filed with respect to each Plan. The
Borrowers have met all requirements with respect to funding Plans imposed by
ERISA or the Code. Since the effective date of Title IV of ERISA there have not
been any nor are there now existing any events or conditions that would permit
any Plan to be terminated under circumstances which would cause the lien
provided under Section 4068 of ERISA to attach to the assets of the Borrowers.
The value of each Plan's benefits guaranteed under Title IV of ERISA on the date
hereof does not exceed the value of such Plan's assets allocable to such
benefits on the date hereof.
7.16 Fiscal Year. The fiscal years of the respective Bor rowers end as of
December 31 of each year.
ARTICLE VIII
------------
EVENTS OF DEFAULT
-----------------
8.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default (whether such occurrence
shall be voluntary or involuntary or come about or be effected by operation of
Law or otherwise):
(a) The Borrowers shall fail to make any payment due on any of the
Notes within ten (10) Business Days after the same shall become due and
payable (whether by extension, renewal, acceleration, maturity or
otherwise) or the Borrowers shall fail to pay any other sums due to the
Banks hereunder within ten (10) Business Days after the same
shall become due and payable; or
(b) Any representation or warranty of the Borrowers made herein or
in any writing furnished in connection with or pursuant to any of the Loan
Documents shall have been false or misleading in any material respect on
the date when made; or
34
(c) Any of the Borrowers shall fail to duly observe, perform or
comply with any covenant, agreement or term (other than payment provisions
which are governed by Section 8.1(a) hereof) contained in this Agreement
or any of the Loan Documents and such default or breach shall have not
been cured or remedied within the earlier of thirty (30) days after any of
the Borrowers shall know (or should have known) of its occurrence or
thirty (30) days following receipt of notice thereof from the Bank; or
(d) Any of the Borrowers shall default in the payment of principal
or of interest on any other obligation for money borrowed or received as
an advance (or any obligation under any conditional sale or other title
retention agreement, or any obligation issued or assumed as full or
partial payment for property whether or not secured by purchase money
Lien, or any obligation under notes payable or drafts accepted
representing extensions of credit) beyond any grace period provided with
respect thereto, or shall default in the performance of any other
agreement, term or condition contained in any agreement under which such
obligation is created (or if any other default under any such agreement
shall occur and be continuing beyond any period of grace provided with
respect thereto) if the effect of such default is to cause, or to permit
the holder or holders of such obligation (or a trustee on behalf of such
holder or holders) to cause such obligation to become due prior to its
date of maturity; or
(e) Any of the following: (i) any of the Borrowers shall become
insolvent or unable to pay its debts as they mature, make an assignment
for the benefit of creditors or admit in writing its inability to pay its
debts generally as they become due or fail generally to pay its debts as
they mature; or (ii) an order, judgment or decree is entered adjudicating
any of the Borrowers insolvent or an order for relief under the United
States Bankruptcy Court is entered with respect to any of the Borrowers
within sixty (60) days of the date of its entry; or (iii) any of the
Borrowers shall petition or apply to any Tribunal for the appointment of a
trustee, receiver, custodian or liquidator of any of the Borrowers or of
any substantial part of the assets of any of the Borrowers, or shall
commence any proceedings relating to any of the Borrowers under any
bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debts, dissolution, or liquidation Law of any
jurisdiction, whether now or hereafter in effect; or (iv) any such
petition or application shall be filed, or any such proceedings shall be
commenced, of a type described in subsection (iii) above, against any of
the Borrowers and any of the Borrowers by any act shall indicate its
approval thereof, consent thereto or acquiescence therein, or an order,
judgment or decree shall be entered appointing any such trustee, receiver,
custodian or liquidator, or approving the petition in any such
proceedings, and such order, judgment or decree shall remain unstayed and
in effect, if being vigorously contested, for more than sixty (60) days;
or (v) any order, judgment or decree shall be entered in any proceedings
against any of the Borrowers decreeing the dissolution of any of the
Borrowers and such order, judgment or decree shall remain unstayed and in
effect for more than thirty (30) days; or (vi) any final order, judgment
or decree shall be entered in any proceed ings against any of the
Borrowers decreeing a split-up of any of the Borrowers which requires the
divestiture of a substantial part of the assets of any of the Borrowers,
and such order, judgment or decree shall remain unstayed and in effect for
more than sixty (60) days; or (vii) any of the Borrowers shall fail
35
to make timely payment or deposit of any amount of tax required to be
withheld by any of the Borrowers and paid to or deposited to or to the
credit of the United States of America pursuant to the provisions of the
Internal Revenue Code of 1986, as amended, in respect of any and all wages
and salaries paid to employees of the Borrowers; or
(f) Any final judgment on the merits for the payment of money in an
amount in excess of $500,000 shall be outstanding against any of the
Borrowers and such judgment shall remain unstayed and in effect and unpaid
for more than thirty (30) days; or
(g) Any Reportable Event described in Section 7.15 hereof which the
Banks determine in good faith might consti tute grounds for the
termination of a Plan therein described or for the appointment by the
appropriate United States District Court of a trustee to administer any
such Plan shall have occurred and be continuing thirty (30) days after
written notice to such effect shall have been given to any of the
Borrowers by the Agent or the Banks, or any such Plan shall be terminated,
or a trustee shall be appointed by a United States District Court to
administer any such Plan or the Pension Benefit Guaranty Corporation shall
institute proceedings to terminate any such Plan or to appoint a trustee
to administer any such Plan; or
(h) Any default or event of default occurs and is continuing beyond
any cure period with respect thereto under any of the other Loan
Documents.
8.2 Remedies. Upon the occurrence of any Event of Default referred to in
Section 8.1(e), the Credit Loan (to the extent on or prior to the Conversion
Date shall immediately and automatical ly terminate and the Notes (whether
before or after the Conversion Date) and all other Indebtedness shall be
immediately due and payable, without notice of any kind. Upon the occurrence of
any other Event of Default, and without prejudice to any right or remedy of the
Banks under the Loan Documents or under appli cable Law or under any other
instrument or document delivered in connection herewith, the Agent or the
Majority Banks may (i) declare the Commitments terminated or (ii) declare both
of the Commitments terminated and declare the Notes and the other Indebtedness,
or any part thereof, to be forthwith due and payable, whereupon the Notes and
the other Indebtedness, or such portion as is designated by the Banks shall
forthwith become due and payable, without presentment, demand, notice or protest
of any kind, all of which are hereby expressly waived by the Borrow ers. No
delay or omission on the part of the Agent or the Banks in exercising any power
or right hereunder or under the Notes, the Loan Documents or under applicable
law shall impair such right or power or be construed to be a waiver of any
default or any acquiescence therein, nor shall any single or partial exercise by
the Agent or the Banks of any such power or right preclude other or further
exercise thereof or the exercise of any other such power or right by the Agent
or the Banks in accordance with applicable Laws. In the event that all or part
of the Indebtedness becomes or is declared to be forthwith due and pay able as
herein provided, the Banks shall have the right to set off the amount of all the
Indebtedness of the Borrowers owing to the Banks against, and shall have a lien
upon and security interest in, all property of the Borrowers in the Banks'
possession at or subsequent to such default, regardless of the capacity in which
the Banks possess such property, including but not limited to any balance or
share of any deposit, demand, collection or agency account, subject to Section
9.3 hereof. At any time after the occurrence of any Event of Default, the Banks
may, at their option, cause an audit of any and/or all of the books,
36
records and documents of the Borrowers, with the exception of the portion
thereof covered by an attorney-client privilege or constituting attorney work
product, to be made by auditors satis factory to the Banks. The Banks also
shall have, and may exercise, each and every right and remedy granted to them
for default under the terms of the other Loan Documents in accordance with
applicable Laws.
ARTICLE IX
----------
MISCELLANEOUS
-------------
9.1 Notices. Unless otherwise provided herein, all notic es, requests,
consents and demands shall be in writing and shall be either hand-delivered (by
courier or otherwise), sent by fax or telecopy to the respective fax or telecopy
number specified below or mailed by certified mail, postage prepaid, to the
respective addresses specified below, or, as to any party, to such other address
as may be designated by it in written notice to the other parties:
If to the Borrowers, to:
Unit Corporation
1000 Kensington Tower 1
7130 South Lewis
Tulsa, Oklahoma 74172
Attention: Chief Financial Officer
FAX NO: (918) 493-7711
If to BOK, to:
Bank of Oklahoma, National Association
P. O. Box 2300
101 East Second Street
Tulsa, Oklahoma 74192
Attention: Energy Department
FAX NO: (918) 588-6880
If to B of A, to:
Bank of America, N.A.
515 South Boulder Avenue, 10th Floor
Tulsa, Oklahoma 74103-4207
Attention: Credit Products
FAX NO: (918) 591-8487
If to UMB, to:
UMB, N.A.
4200 East Skelly Drive, Suite 1020
Tulsa, Oklahoma 74135
Attention: Derek K. Duncan, Vice President
FAX NO: (918) 496-8368
37
If to Local Oklahoma, to:
Local Oklahoma Bank, N. A.
2250 East 73rd
Suite 200
Tulsa, Oklahoma 74136
Attention: Mr. James N. Young, Jr.
Executive Vice-President
FAX NO: (918) 495-1284
If to the Agent, to:
Bank of Oklahoma, National Association
P. O. Box 2300
101 East Second Street
Tulsa, Oklahoma 74192
Attention: Energy Department
FAX NO: (918) 588-6880
All notices, requests, consents and demands hereunder will be effective when
hand-delivered to the applicable notice addresses of any party hereto or when
sent by fax or telecopy to the applicable fax or telecopy numbers of any party
hereto or when mailed by certified mail, postage prepaid, addressed as aforesaid
by any party hereto.
9.2 Place of Payment. All sums payable hereunder shall be paid in
immediately available funds to the Agent, at its principal banking offices at
Bank of Oklahoma Tower, 101 East Second Street, One Williams Center in Tulsa,
Oklahoma, or at such other place as the Agent shall notify the Borrowers in
writing. If any interest, principal or other payment falls due on a date other
than a Business Day, then (unless otherwise provided herein) such due date shall
be extended to the next succeeding Business Day, and such extension of time will
in such case be included in computing interest, if any, in connection with such
payment.
9.3 Setoff. Any indebtedness owing from any of the Banks to any of the
Borrowers, including, without limitation, any general or special deposit account
(excluding, however, the following accounts at BOK; Account Nos. 1-01174868, 1-
026-5743-7, 1-035-7018-4, 1-038-4862-7, 1-038-4077-3, 2-079-1154-3, 2-079-2793-
3, 2-079-2310-4, 2-079-2864-8, 2-079-3738-2, 2-083-0274-7, 2-083-0798-3, 2-083-
1249-3, 2-083-1818-0, 2-083-2450-5, 2-083-3118-2, 2-083-3575-8 and 2-083-3208-
4), may be set off or otherwise applied by the Banks under a general lien and
security interest covering such indebtedness which is hereby granted on any
indebtedness or liability of Borrowers under any Loan Document to the Banks, at
any time and from and after the occurrence of an Event of Default, either before
or after Maturity, and without demand or notice to anyone. It is understood
that if any one or more of the Banks sell sub-participations in the Notes to an
affiliate of such Bank that any such sub-participant shall have the right of
setoff or other application under the general lien as herein granted to the
Banks.
38
9.4 Survival of Agreements. All covenants, agreements, representations
and warranties made herein shall survive the execution and the delivery of Loan
Documents. All statements contained in any certificate or other instrument
executed and delivered by the Borrowers hereunder shall be deemed to
constitute representations and warranties by the Borrowers.
9.5 Parties in Interest. All covenants, agreements and obligations
contained in this Agreement shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto, except that the
Borrowers may not assign their rights or obligations hereunder without the prior
written consent of the Banks. Each of the Banks may sell participations in its
interest hereunder and under its Note without the prior written consent of Unit
(for and on behalf of all of the Borrowers) but only if and to the extent such
Bank retains all of its voting rights under the Intercreditor Agreement or and
further that the Banks may sell, assign or transfer such interests with such
prior consent of Unit (which consent Unit will not unreasonably withhold),
provided that no such consent shall be required in the case of a sale, transfer
or assignment to any affiliate of any of the Banks. Notwithstanding anything to
the contrary provided herein, each Bank may, at any time, without the consent of
the Borrowers, assign all or any portion of its rights under this Agreement and
its Note to a Federal Reserve Bank, provided that no such assignment shall
release any Bank from its obligations hereunder.
9.6 Governing Law. This Agreement, the Notes and the Security Instruments
shall be deemed to have been made or in curred under the Laws of the State of
Oklahoma and shall be construed and enforced in accordance with and governed by
the Laws of Oklahoma.
9.7 SUBMISSION TO JURISDICTION. THE PARTIES HEREBY CONSENT TO THE
JURISDICTION OF ANY OF THE STATE AND FEDERAL COURTS LOCATED WITHIN TULSA COUNTY,
OKLAHOMA AND WAIVE ANY OBJECTION WHICH PARTIES MAY HAVE BASED ON IMPROPER VENUE
OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT.
9.8 Maximum Interest Rate. Regardless of any provision herein, the Agent
and the Banks shall never be entitled to receive, collect or apply, as interest
on the Indebtedness any amount in excess of the maximum rate of interest
permitted to be charged by the Banks by applicable Law, and, in the event the
Agent or the Banks shall ever receive, collect or apply, as interest, any such
excess, such amount which would be excessive interest shall be applied to other
Indebtedness and then to the reduction of principal; and, if the other
Indebtedness and principal are paid in full, then any remaining excess shall
forthwith be paid to the Borrowers.
9.9 No Waiver; Cumulative Remedies. No failure to exer cise, and no delay
in exercising, on the part of the Agent or any of the Banks, any right, power or
privilege hereunder or under any other Loan Document or applicable Law shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege of the Agent or any of the Banks. The rights and
remedies herein provided are cumulative and not exclusive of any other rights or
remedies provided by any other instrument or by law. No amendment, modification
or waiver of any provision of this Agreement or any other Loan Document shall be
effective unless the same shall be in writing and signed by the Agent and the
Banks. No notice to or demand on the Borrowers in any case shall entitle the
Borrowers to any other or further notice or demand in similar or other
circumstances.
39
9.10 Costs. The Borrowers agree to pay to the Agent for the benefit of the
Banks on demand all recording fees and filing costs and all reasonable attorneys
fees and legal expenses incurred or accrued by the Banks in connection with the
preparation, negotiation, closing, administration of the Loan Documents and the
filing and recording of the Security Instruments or any amendment, waiver,
consent or modification to and of the Loan Documents. In any action to enforce
or construe the provisions of this Agreement or any of the Loan Documents,
the prevailing party shall be entitled to recover its reasonable attorneys' fees
and all costs and expenses related thereto.
9.11 Change of Agent. Upon receipt of notice of the name and address of a
new Agent, duly executed by the Banks, the Borrowers shall thereafter direct to
the new Agent all reports, payments and other information required to be
delivered to the Agent pursuant to the terms of this Agreement and all other
Loan Documents.
9.12 Headings. The article and section headings of this Agreement are for
convenience of reference only and shall not constitute a part of the text hereof
nor alter or otherwise affect the meaning hereof.
9.13 Severability. The unenforceability or invalidity as determined by a
Tribunal of competent jurisdiction, of any provision or provisions of this
Agreement shall not render un enforceable or invalid any other provision or
provisions hereof.
9.14 Counterparts and Execution. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument. Notwithstanding the single execution of this Agreement by the
President of each of the Borrowers, each of the Borrowers is jointly and
severally bound by the terms of this Agreement.
9.15 WAIVER OF JURY TRIAL. BORROWERS, BANKS AND AGENTS FULLY, VOLUNTARILY
AND EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED (OR WHICH MAY IN THE FUTURE BE
DELIVERED) IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT, THE NOTES AND/OR THE SECURITY
INSTRUMENTS. BORROWERS, BANKS AND AGENT AGREE THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
40
IN WITNESS WHEREOF, the Borrowers have caused this Agreement to be executed
and delivered to the Banks in Tulsa, Oklahoma as of the day and year first above
written by the undersigned duly authorized corporate officer of each thereof.
"Borrowers"
UNIT CORPORATION, a Delaware corporation
MOUNTAIN FRONT PIPELINE COMPANY, INC., an Oklahoma
corporation
UNIT PETROLEUM COMPANY,
an Oklahoma corporation
UNIT DRILLING COMPANY,
an Oklahoma corporation
PETROLEUM SUPPLY COMPANY,
an Oklahoma corporation, and
UNIT ENERGY CANADA INC.,
an Alberta, Canada corporation
By
John G. Nikkel, President of
UNIT CORPORATION,
MOUNTAIN FRONT PIPELINE COMPANY, INC., UNIT
PETROLEUM COMPANY, UNIT DRILLING COMPANY,
PETROLEUM SUPPLY COMPANY and UNIT ENERGY CANADA
INC.
41
"Agent"
BANK OF OKLAHOMA, NATIONAL ASSOCIATION
By
Pam Schloeder, Senior Vice President
P. O. Box 2300
Tulsa, Oklahoma 74192
"Banks"
BANK OF OKLAHOMA, NATIONAL ASSOCIATION
By
Pam Schloeder, Senior Vice President
P. O. Box 2300
Tulsa, Oklahoma 74192
42
UMB Bank, N.A.
By
Derek K. Duncan, Vice President
4200 East Skelly Drive
Suite 1020
Tulsa, Oklahoma 74135
43
BANK OF AMERICA, N.A.
By
J. Stephen Howe
Senior Vice President
515 South Boulder Avenue, 10th Floor
Tulsa, Oklahoma 74103-4207
Attention: Credit Products
44
LOCAL OKLAHOMA BANK, N. A.
By
Elisabeth F. Blue
Senior Vice President
2250 East 73rd, Suite 200
Tulsa, Oklahoma 74136
45