EXHIBIT 10.2
________________________________________________________________________________
U.S. $30,000,000 REVOLVING REDUCING CREDIT FACILITY
________________________________________________________________________________
CREDIT AGREEMENT
BETWEEN
NEUTRINO RESOURCES INC.
as Borrower
AND
THE FINANCIAL INSTITUTIONS NAMED IN
SCHEDULE A ANNEXED HERETO
as Lenders
AND
BANK ONE CANADA
as Agent of the Lenders
MADE AS OF
AUGUST 29, 2000
________________________________________________________________________________
McCarthy Tetrault
Burnet, Duckworth & Palmer
________________________________________________________________________________
TABLE OF CONTENTS
CREDIT AGREEMENT
ARTICLE 1
INTERPRETATION ...................................................... 2
1.1 Definitions ................................................... 2
1.3 Headings ...................................................... 22
1.4 Number; persons; including .................................... 22
1.5 Accounting Principles ......................................... 23
1.6 Reference to Agreements and Enactments ........................ 23
1.7 Schedules ..................................................... 23
ARTICLE 2
THE CREDIT FACILITY ................................................. 24
2.1 The Credit Facility ........................................... 24
2.2 Manner of Borrowing ........................................... 24
2.3 Purpose ....................................................... 24
2.4 Tender Cheques ................................................ 24
2.5 Minimum Drawdowns.............................................. 25
2.6 Notice Periods for Drawdowns and Conversions .................. 25
2.7 Conversion Option.............................................. 26
2.8 Conversions not Repayments..................................... 26
2.9 Agent's Obligations with Respect to Canadian Dollar Loans and
U.S. Base Rate Loans .......................................... 26
2.10 Lenders' and Agent's Obligations with Respect to Canadian Prime
Rate Loans and Alternate Base Rate Loans....................... 26
2.11 Irrevocability ................................................ 27
2.12 Optional Repayment ............................................ 27
2.13 Mandatory Repayment ........................................... 28
2.14 Currency Excess ............................................... 28
2.15 Takeover Notification ......................................... 29
2.16 Determination of Borrowing Base ............................... 30
ARTICLE 3
CONDITIONS PRECEDENT TO DRAWDOWNS ................................... 31
3.1 Conditions for Drawdowns ...................................... 31
3.2 Additional Conditions for First Drawdown ...................... 31
3.3 Waiver ........................................................ 32
ARTICLE 4
EVIDENCE OF DRAWDOWNS ............................................... 33
4.1 Account of Record.............................................. 33
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ARTICLE 5
PAYMENTS OF INTEREST AND FEES ....................................... 33
5.1 Interest on Canadian Prime Rate Loans ......................... 33
5.2 Interest on Alternate Base Rate Loans ......................... 33
5.3 Per Annum Calculations ........................................ 34
5.4 Interest Act (Canada) ......................................... 34
5.5 Nominal Rates; No Deemed Reinvestment ......................... 34
5.6 Stand-By Fees ................................................. 34
5.7 Facility Fee .................................................. 35
5.8 Engineering Fees .............................................. 35
5.9 Interest on Overdue Amounts ................................... 35
5.10 Waiver ........................................................ 35
5.11 Maximum Rate Permitted by Law ................................. 36
ARTICLE 6
DOCUMENTARY INSTRUMENTS ............................................. 36
6.1 Availability .................................................. 36
6.2 Form .......................................................... 36
6.3 No Conversion ................................................. 36
6.4 Reimbursement or Conversion on Presentation; Issuing Lender
Indemnity...................................................... 36
6.5 Fees .......................................................... 37
6.6 Additional Provisions ......................................... 38
ARTICLE 7
PAYMENTS............................................................. 41
7.1 Place of Payment of Principal, Interest and Fees; Payments to
Agent ......................................................... 41
7.2 Designated Accounts of the Lenders............................. 41
7.3 Funds ......................................................... 41
7.4 Application of Payments ....................................... 42
7.5 Set Off ....................................................... 42
ARTICLE 8
REPRESENTATIONS AND WARRANTIES ...................................... 43
8.1 Representations and Warranties ................................ 43
8.2 Deemed Repetition.............................................. 48
8.3 Other Documents ............................................... 49
8.4 Effective Time of Repetition .................................. 49
8.5 Nature of Representations and Warranties ...................... 49
ARTICLE 9
GENERAL COVENANTS ................................................... 49
9.1 Affirmative Covenants ......................................... 49
9.2 Negative Covenants ............................................ 56
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9.3 Financial Covenants............................................ 59
9.4 Agent May Perform Covenants.................................... 59
ARTICLE 10
SECURITY.............................................................. 60
10.1 Security....................................................... 60
10.2 Registration .................................................. 61
10.3 Forms; Additional Security; Undertaking to Grant Fixed Charge
Security....................................................... 61
10.4 Continuing Security ........................................... 62
10.5 Dealing with Security ......................................... 62
10.6 Effectiveness ................................................. 63
10.7 Saskatchewan Legislation ...................................... 63
10.8 Release and Discharge of Security ............................. 63
ARTICLE 11
EVENTS OF DEFAULT AND ACCELERATION.................................... 64
11.1 Events of Default.............................................. 64
11.2 Acceleration .................................................. 66
11.3 Conversion on Default ......................................... 67
11.4 Remedies Cumulative and Waivers ............................... 67
11.5 Termination of Lenders' Obligations............................ 67
ARTICLE 12
CHANGE OF CIRCUMSTANCES .............................................. 68
12.1 Change in Law ................................................. 68
12.2 Prepayment of Portion ......................................... 69
12.3 Illegality .................................................... 69
ARTICLE 13
COSTS, EXPENSES AND INDEMNIFICATION .................................. 70
13.1 Costs and Expenses ............................................ 70
13.2 General Indemnity.............................................. 70
13.3 Environmental Indemnity ....................................... 71
13.4 Judgment Currency.............................................. 72
ARTICLE 14
THE AGENT AND ADMINISTRATION OF THE CREDIT FACILITY................... 72
14.1 Authorization and Action....................................... 72
14.2 Procedure for Making Loans..................................... 73
14.3 Remittance of Payments......................................... 74
14.4 Redistribution of Payment...................................... 74
14.5 Duties and Obligations ........................................ 75
14.6 Prompt Notice to the Lenders .................................. 77
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14.7 Agent's and Lender's Authorities .............................. 77
14.8 Lender Credit Decision ........................................ 77
14.9 Indemnification of Agent ...................................... 78
14.10 Successor Agent ............................................... 78
14.11 Taking and Enforcement of Remedies............................. 79
14.12 Reliance Upon Agent ........................................... 80
14.13 No Liability of Agent ......................................... 80
14.14 Article for Benefit of Agents and Lenders ..................... 80
ARTICLE 15
GENERAL .............................................................. 80
15.1 Exchange and Confidentiality of Information.................... 80
15.2 Nature of Obligation under this Agreement ..................... 82
15.3 Notices ....................................................... 82
15.4 Governing Law ................................................. 83
15.5 Benefit of the Agreement ...................................... 83
15.6 Assignment .................................................... 83
15.7 Participations ................................................ 84
15.8 Severability .................................................. 84
15.9 Whole Agreement ............................................... 84
15.10 Amendments and Waivers ........................................ 84
15.11 Further Assurances ............................................ 85
15.12 Attornment .................................................... 85
15.13 Time of the Essence ........................................... 86
15.14 Credit Agreement Governs ...................................... 86
15.15 Counterparts .................................................. 86
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Schedule A -- Lenders and Commitments
Schedule B -- Compliance Certificate
Schedule C -- Conversion Notice
Schedule D -- Drawdown Notice
Schedule E -- Repayment Notice
CREDIT AGREEMENT
----------------
THIS AGREEMENT is made as of August 29, 2000
AMONG:
NEUTRINO RESOURCES INC., a corporation incorporated under
the laws of the Province of Alberta (hereinafter referred to
as the "Borrower")
-and-
BANK ONE CANADA and those other financial institutions named
on Schedule A annexed hereto, together with such other
financial institutions as become parties hereto pursuant to
Section 15.6 hereof, as lenders (hereinafter sometimes
collectively referred to as the "Lenders" and sometimes
individually referred to as a "Lender")
-and-
BANK ONE CANADA, a Canadian chartered bank, as agent of the
Lenders hereunder (hereinafter referred to as the "Agent")
WHEREAS the Borrower has requested the Credit Facility to repay the
Existing National Facility, to finance exploration, development and acquisition
of oil and gas properties and for the general corporate purposes of the
Borrower;
AND WHEREAS the Lenders have agreed to provide the Credit Facility to the
Borrower on the terms and conditions herein set forth;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
covenants and agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby conclusively
acknowledged by each of the parties hereto, the parties hereto covenant and
agree as follows:
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ARTICLE 1
INTERPRETATION
1.1 Definitions
In this Agreement and the recitals hereto, unless something in the subject
matter or context is inconsistent therewith:
"Additional Compensation" has the meaning set out in Section 12.1.
"Advance" means an advance of funds made by the Lenders or by any one or more of
them to the Borrower, but does not include any Conversion.
"Affected Loan" has the meaning set out in Section 12.2.
"Affiliate" means any person which, directly or indirectly, controls, is
controlled by or is under common control with another person; and for the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlled by" or "under common control with") means the power to
direct or cause the direction of the management and policies of any person,
whether through the ownership of Voting Shares or by contract or otherwise.
"Agent's Branch" means the branch of the Agent at BCE Place, P.O. Box 613, 161
Bay Street, Suite 4240, Toronto, Ontario M5J 2S1, or such other branch in Canada
as the Agent may from time to time designate by notice to the Borrower and the
Lenders.
"Agreement" means this agreement, as amended, modified, supplemented or restated
from time to time in accordance with the provisions hereof.
"Alternate Base Rate" means, for any day, the greater of:
(a) the rate of interest per annum, expressed on the basis of a year of
365 days, established from time to time by the Agent as the reference
rate of interest for the determination of interest rates that the
Agent will charge to customers of varying degrees of creditworthiness
in Canada for United States Dollar loans in Canada; and
(b) the rate of interest per annum, expressed on the basis of a year of
365 days, for such day or, if such day is not a Banking Day, on the
immediately preceding Banking Day, equal to the sum of the Federal
Funds Rate, plus 0.50% per annum;
provided that if both such rates are equal or if such Federal Funds Rate is
unavailable for any reason on the date of determination, then the "Alternate
Base Rate" shall be the rate specified in (a) above.
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"Alternate Base Rate Loan" means an Advance in, or Conversion into, United
States Dollars made by the Lenders to the Borrower with respect to which the
Borrower has specified or a provision hereof requires that interest is to be
calculated by reference to the Alternate Base Rate.
"Applicable LC/LG Fee Rate" means a fee calculated in accordance with Section
6.5.
"Applicable Margin" means for Canadian Prime Rate Loans and Alternate Base Rate
Loans, 0.50% per annum expressed on the basis of a year of 365 days in the case
of Alternate Base Rate Loans and on the basis of a year of 365 or 366 days, as
the case may be, in the case of Canadian Prime Rate Loans.
"Banking Day" means a day on which banks are open for business in Calgary,
Alberta and Toronto, Ontario, but does not in any event include a Saturday or a
Sunday.
"Borrowing Base" means the United States Dollar limit for Debt established from
time to time by the Agent and the Lenders as the value, for Loan purposes, of
the Mortgaged Properties, such value to be determined by the Agent and the
Lenders in accordance with the applicable definitions and provisions herein
contained, their then current engineering standards and their then current and
customary lending standards for loans of this nature.
"Canadian Dollars" and "Cdn. $" mean the lawful money of Canada.
"Canadian Prime Rate" means, for any day, the greater of:
(a) the rate of interest per annum established and reported by the Agent
to the Bank of Canada from time to time by the Agent as the reference
rate of interest for the determination of interest rates that the
Agent will charge to customers of varying degrees of creditworthiness
in Canada for Canadian Dollar loans in Canada; and
(b) the rate of interest per annum equal to the average annual yield rate
for one month Canadian Dollar bankers' acceptances which rate is shown
on the display referred to as the "CDOR Page" (or any display
substituted therefor) of Reuter Monitor Money Rates Service at 10:00
a.m. (Toronto time) on such day or, if such day is not a Banking Day,
on the immediately preceding Banking Day, plus the 0.50% per annum;
provided that if both such rates are equal or if such one month bankers'
acceptance rate is unavailable for any reason on any date of determination, then
the "Canadian Prime Rate" shall be the rate specified in (a) above.
"Canadian Prime Rate Loan" means an Advance in, or Conversion into, Canadian
Dollars made by the Lenders to the Borrower with respect to which the Borrower
has specified or a provision hereof requires that interest is to be calculated
by reference to the Canadian Prime Rate.
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"Change of Control" means or shall be deemed to have occurred if and when any
person, joint owners or persons acting jointly or in concert (within the meaning
of the Securities Act (Alberta)) shall beneficially hold more than 50.0% of the
issued and outstanding Voting Shares in the capital of the Borrower.
"Commitment" means the commitment by each Lender to provide the amount of United
States Dollars (or the Equivalent Amount thereof) set opposite its name in
Schedule A annexed hereto subject to any reduction in accordance with the
provisions hereof.
"Commodity Agreement" means any agreement for the making or taking of delivery
of any commodity (including, without limitation, Petroleum Substances), any
commodity swap agreement, floor, cap or collar agreement or commodity future or
option or other similar agreements or arrangements, or any combination thereof,
entered into by the Borrower or a Material Subsidiary where the subject matter
of the same is any commodity or the price, value or amount payable thereunder is
dependent or based upon the price of any commodity or fluctuations in the price
of any commodity.
"Compliance Certificate" means a certificate of the Borrower signed on its
behalf by the president or chief financial officer of the Borrower,
substantially in the form annexed hereto as Schedule B, to be given to the Agent
by the Borrower pursuant hereto.
"Consolidated Assets" means, as at any date of determination, the total assets
of the Borrower determined on a consolidated basis in accordance with generally
accepted accounting principles, as the same would be set forth on a consolidated
balance sheet of the Borrower for such date.
"Conversion" means a conversion or deemed conversion of a Loan into another type
of Loan pursuant to the provisions hereof.
"Conversion Date" means the date specified by the Borrower or the terms hereof
as being the date on which the Borrower has elected to convert, or this
Agreement requires the conversion of, one type of Loan into another type of Loan
and which shall be a Banking Day.
"Conversion Notice" means a notice substantially in the form annexed hereto as
Schedule C to be given to the Agent by the Borrower pursuant hereto.
"Credit Facility" means the credit facility in the maximum principal amount of
U.S. $30,000,000 or the Equivalent Amount in Canadian Dollars to be made
available to the Borrower by the Lenders in accordance with the provisions
hereof, subject to any reduction in accordance with the provisions hereof.
"Currency Hedging Agreement" means any currency swap agreement, cross-currency
agreement, forward agreement, floor, cap or collar agreement, futures or
options, insurance or other similar
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agreement or arrangement, or any combination thereof, entered into by a Borrower
or a Material Subsidiary where the subject matter of the same is currency
exchange rates or the price, value or amount payable thereunder is dependent or
based upon currency exchange rates or fluctuations in currency exchange rates as
in effect from time to time.
"Current Assets" and "Current Liabilities" of the Borrower mean the consolidated
current assets and consolidated current liabilities, respectively, of the
Borrower determined in accordance with generally accepted accounting principles
as the same would be set forth or reflected in a consolidated statement of
financial position of the Borrower, and including unused availability under this
Credit Facility.
"Debenture" means a debenture of the Borrower providing a fixed charge over
substantially all of the assets of the Borrower and a floating charge over all
of the assets of the Borrower, executed as of the date hereof.
"Default" means any event or condition which, with the giving of notice, lapse
of time or upon a declaration or determination being made (or any combination
thereof), would constitute an Event of Default.
"Debt" means, as at any date of determination, all obligations, liabilities and
indebtedness of the Borrower which would, in accordance with generally accepted
accounting principles, be classified upon a consolidated balance sheet of the
Borrower for such date as liabilities of the Borrower and, whether or not so
classified, shall include (without duplication):
(a) indebtedness of the Borrower and its Subsidiaries for borrowed money;
(b) obligations of the Borrower and its Subsidiaries arising pursuant to
bankers' acceptance facilities and commercial paper programs, or
letters of credit or indemnities issued in connection therewith;
(c) obligations of the Borrower and its Subsidiaries under guarantees,
indemnities, assurances, legally binding comfort letters or other
contingent obligations relating to the indebtedness of any other
person and all other obligations incurred for the purpose of or having
the effect of providing financial assistance to another person (other
than a Subsidiary in the ordinary course of business), including,
without limitation, endorsements of bills of exchange (other than for
collection or deposit in the ordinary course of business);
(d) all obligations of the Borrower and its Subsidiaries created or
arising under any: (i) conditional sales agreement or other title
retention agreement, (ii) capital lease, or (iii) other lease
financing (whether characterized as an operating lease under generally
accepted accounting principles or not) in each case to the extent out
of the ordinary course of business;
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(e) obligations of the Borrower or any of its Subsidiaries with respect to
Production Payments;
(f) deferred revenues relating to third party obligations; and
(g) Financial Instrument Obligations under Interest Hedging Agreements,
Currency Hedging Agreements and Commodity Agreements entered into for
speculative purposes (determined, where relevant, by reference to
generally accepted accounting principles) or other than in the
ordinary course of business; for certainty, Interest Hedging
Agreements having as a subject matter principal amounts (either
individually or in the aggregate, but determined on a net basis taking
into account transactions or agreements entered into to reverse the
position or limit the exposure under an existing Interest Hedging
Agreement) greater than the aggregate liability of the Borrower and
its Subsidiaries for borrowed money shall be for speculative purposes;
and shall exclude, in any event:
(h) current taxes payable and deferred taxes;
(i) accounts payable and accrued charges incurred in the ordinary course
of business, including cash calls or reimbursement of operators
pursuant to operating or similar agreements entered into by it in the
ordinary course of business;
(j) pension liabilities; and
(k) other deferred credits determined in accordance with generally
accepted accounting principles.
"Debt Service" shall mean quarterly Interest Expense, plus 1/20th of the
Outstanding Principal hereunder.
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"Distribution" means:
(a) distribution on or in respect of any shares in the capital of the
Borrower;
(b) the redemption, retraction, purchase, retirement or other acquisition,
in whole or in part, of any shares in the capital of the Borrower or
any securities, instruments or contractual rights capable of being
converted into, exchanged or exercised for shares in the capital of
the Borrower, including, without limitation, options, warrants,
conversion or exchange privileges and similar rights;
(c) the making of any loan or advance or any other provision of credit to
any shareholder of the Borrower; or
(d) the payment of any principal, interest, fees or other amounts on or in
respect of any loans, advances or other Debt owing at any time by the
Borrower to any shareholder of the Borrower, Affiliates of the
Borrower or shareholders of Affiliates of the Borrower.
"Documentary Instruments" means collectively, Letters of Credit and Letters of
Guarantee and "Documentary Instrument" means a Letter of Credit or a Letter of
Guarantee.
"Documents" means this Agreement, the Security and all certificates, notices,
instruments and other documents delivered or to be delivered to the Agent in
relation to the Credit Facility pursuant hereto or thereto and, when used in
relation to any person, the term "Documents" shall mean and refer to the
Documents executed and delivered by such person.
"Drafts" means drafts, bills of exchange, receipts, acceptances, demands and
other requests for payment drawn or issued under a Documentary Instrument.
"Drawdown" means:
(a) an Advance of a Canadian Prime Rate Loan or Alternate Base Rate Loan;
(b) the issue of Documentary Instruments; or
(c) the issue of Tender Cheques.
"Drawdown Date" means the date on which a Drawdown is made by the Borrower
pursuant to the provisions hereof and which shall be a Banking Day.
"Drawdown Notice" means a notice substantially in the form annexed hereto as
Schedule D to be given to the Agent pursuant hereto.
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"EBITDA" of the Borrower in any financial period means the Net Income for such
period, plus:
(a) Interest Expense, to the extent deducted in determining Net Income;
(b) all amounts deducted in the calculation of Net Income in respect of
the provision for income taxes (in accordance with generally accepted
accounting principles);
(c) all amounts deducted in the calculation of Net Income in respect of
non-cash items including depletion, depreciation, amortization and
deferred taxes; and
(d) equity loss and extraordinary and non-recurring losses except to the
extent such losses involve a payment in cash;
less:(e) equity income and extraordinary and non-recurring income and gains
except to the extent such income and gains involve receipt of a cash
payment.
"Engineering Report" means a report (in form and substance satisfactory to the
Agent, acting reasonably) prepared by an Independent Engineer, which report
shall, as of the date of such report, set forth the reserves of Petroleum
Substances attributable to substantially all of the Neutrino Assets and, for
each fiscal year: anticipated rates of production, shrinkage and reinjection of
Petroleum Substances; Crown, freehold and overriding royalties and freehold
mineral taxes with respect to Petroleum Substances produced from or attributable
to such Neutrino Assets; production, revenue, value-added, wellhead or severance
taxes, imposts or levies with respect to Petroleum Substances produced from or
attributable to such Neutrino Assets; operating costs; gathering, transporting,
processing, marketing and storage fees payable with respect to Petroleum
Substances produced from or attributable to such Neutrino Assets; capital
expenditures expected to be necessary to achieve anticipated rates of
production; and net cash flow with respect to such Neutrino Assets; but not, for
greater certainty, any overhead recoveries or operators' fees or charges from
third parties.
"Environmental Claims" means any and all administrative, regulatory or judicial
actions, suits, demands, claims, Security Interests, notices of non-compliance
or violation, investigations or proceedings relating in any way to any
Environmental Laws or to any permit issued under any such Environmental Laws
including, without limitation:
(a) any claim by a Governmental Authority for enforcement, clean-up,
removal, response, remedial or other actions or damages pursuant to
any Environmental Laws; and
(b) any claim by a person seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive or other relief resulting
from or relating to Hazardous Materials, including any Release
thereof, or arising from alleged injury or threat of injury to human
health or safety (arising from environmental matters) or the
environment.
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"Environmental Laws" means all applicable federal, provincial, regional,
municipal or local laws with respect to the environment or environmental or
occupational health and safety matters contained in statutes, regulations,
rules, ordinances, orders, judgments, approvals, notices, permits, policies,
guidelines or directives, in each case only to the extent having the force of
law.
"Environmental Orders" includes all applicable orders, directives, judgments,
decisions or the like rendered by any Governmental Authority or court of
competent jurisdiction pursuant to Environmental Laws or Environmental Permits.
"Environmental Permits" includes all permits, certificates, approvals,
registrations, licences or other instruments issued by any Governmental
Authority and relating to or required for the Borrower or its Material
Subsidiaries to carry on their businesses, activities and operations in
compliance with all Environmental Laws and Environmental Orders.
"Equivalent Amount" means, on any date, the equivalent amount in Canadian
Dollars or United States Dollars, as the case may be, after giving effect to a
conversion of a specified amount of United States Dollars to Canadian Dollars or
of Canadian Dollars to United States Dollars, as the case may be, at the noon
rate of exchange for Canadian interbank transactions established by the Bank of
Canada for the day in question, or, if such rate is for any reason unavailable,
at the spot rate quoted for wholesale transactions by the Agent at approximately
noon (Toronto time) on that date in accordance with its normal practice;
provided that, in the case of Conversions, the aforementioned currency
conversion shall be made at the noon rate or spot rate, as the case may be, in
effect on the Banking Day the Conversion Notice is received by the Agent from
the Borrower in accordance herewith.
"Event of Default" has the meaning set out in Section 11.1.
"Existing National Facility" means all credit facilities established in favour
of the Borrower prior to the date hereof by the National Bank of Canada.
"Federal Funds Rate" means, for any day, the rate of interest per annum set
forth in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Board (including any
such successor, the "H.15(519)" for such day opposite the caption "Federal Funds
(Effective)". If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate of interest per annum set
forth in the daily statistical release designated as the Composite 3:30 p.m.
Quotations for U.S. Government Securities, or any successor publication,
published by the Federal Reserve Bank of New York (including any successor, the
"Composite 3:30 p.m. Quotations") for such day under the caption "Federal Funds
Effective Rate". If on any relevant day the appropriate rate per annum for such
day is not yet published in either H.15(519) or the Composite 3:30 p.m.
Quotations, the rate for such day will be the arithmetic mean of the rates per
annum for the last transaction in overnight Federal funds arranged prior to 9:00
a.m.
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(New York time) on that day by each of three major brokers of Federal funds
transactions in New York City, selected by the Agent in its sole discretion,
acting reasonably.
"Federal Reserve Board" or "Federal" means the Board of Governors of the Federal
Reserve System of the United States of America or any successor thereof.
"Financial Instrument Obligations" means obligations arising under Interest
Hedging Agreements, Currency Hedging Agreements and Commodity Agreements entered
into by a Borrower or a Material Subsidiary to the extent of the net amount due
or accruing due by the Borrower or Material Subsidiary thereunder (determined by
marking-to-market the same in accordance with their terms).
"Governmental Authority" means any federal, provincial, state, regional,
municipal or local government or any department, agency, board, tribunal or
authority thereof or other political subdivision thereof and any entity or
person exercising executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, government or the operation thereof.
"Hazardous Materials" means any substance or mixture of substances which, if
released into the environment, would likely cause, immediately or at some future
time, material harm or degradation to the environment or to human health or
safety and includes any substance determined to be a pollutant, contaminant,
waste, hazardous waste, hazardous chemical, hazardous substance, toxic substance
or dangerous good under any Environmental Law.
"Independent Engineer" means any firm of independent petroleum engineers
approved by the Agent acting reasonably.
"Initial Borrowing Base" has the meaning set out in Section 2.16.
"Interest Expense" means for any period, the total interest expense (including,
without limitation, interest expense attributable to capitalized leases) of the
Borrower on a consolidated basis for such period, determined in accordance with
GAAP.
"Interest Hedging Agreement" means any interest swap agreement, forward rate
agreement, floor, cap or collar agreement, futures or options, insurance or
other similar agreement or arrangement, or any combination thereof, entered into
by the Borrower or a Material Subsidiary where the subject matter of the same is
interest rates or the price, value or amount payable thereunder is dependent or
based upon the interest rates or fluctuations in interest rates in effect from
time to time (but, for certainty, shall exclude conventional floating rate
debt).
"Interest Payment Date" means with respect to each Canadian Prime Rate Loan and
Alternate Base Rate Loan, the first Banking Day of each calendar month, provided
that, in any case, the Maturity Date or, if applicable, any earlier date on
which the Credit Facility is fully cancelled or permanently reduced in full,
shall be an Interest Payment Date with respect to all Loans then outstanding.
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"Interest Period" means:
(a) with respect to each Canadian Prime Rate Loan and Alternate Base Rate
Loan, the period commencing on the applicable Drawdown Date or
Conversion Date, as the case may be, and terminating on the date
selected by the Borrower hereunder for the Conversion of such Loan
into another type of Loan or for the repayment of such Loan; and
(b) with respect to each Documentary Instrument, the period commencing on
the date of issuance of such Documentary Instrument and terminating on
the last day the Documentary Instrument is outstanding;
provided that in any case: (i) the last day of each Interest Period shall be
also the first day of the next Interest Period whether with respect to the same
or another Loan; (ii) the last day of each Interest Period shall be a Banking
Day and if the last day of an Interest Period selected by the Borrower is not a
Banking Day the Borrower shall be deemed to have selected an Interest Period the
last day of which is the Banking Day next following the last day of the Interest
Period selected unless such next following Banking Day falls in the next
calendar month in which event the Borrower shall be deemed to have selected an
Interest Period the last day of which is the Banking Day next preceding the last
day of the Interest Period selected by the Borrower; and (iii) the last day of
all Interest Periods hereunder shall expire on or prior to the Maturity Date.
"Internal Engineering Report" means a report in form and substance satisfactory
to the Agent prepared by or under the supervision of the chief petroleum
engineer of the Borrower which report shall, as of the date of such report,
evaluate the Mortgaged Properties.
"Investment" means (a) any purchase or other acquisition of shares or other
securities of any person, (b) any loan, advance, extension or credit, guarantee,
indemnity or other form of financial assistance to or for the benefit of any
person, (c) any capital contribution to any other person and (d) any purchase or
other acquisition of any assets of a person other than an acquisition in the
ordinary course of business of the purchaser.
"Issuing Lender" means Bank One Canada or other any Lender which assumes in
writing with the Borrower, the Lenders and the Agent the obligation of issuing
Letters of Credit or Letters of Guarantee under the Credit Facility on behalf of
the Lenders.
"joint owners" means, with respect to any subject or matter, two or more persons
who are acting, have acted, or intend to act, jointly or in concert with respect
to the subject or matter in question.
"Lenders' Counsel" means the firm of McCarthy Tetrault or such other firm of
legal counsel as the Lenders may from time to time designate.
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"Letter of Credit" or "LC" means a letter of credit in form satisfactory to and
issued by the Issuing Lender whereby the Issuing Lender, acting at the request
of and in accordance with the instructions of the Borrower, is to make payment
in accordance with the terms and conditions thereof of an amount to or to the
order of a third party.
"Letter of Guarantee" or "LG" means a guarantee in form satisfactory to and
issued by the Issuing Lender whereby the Issuing Lender, acting at the request
of and in accordance with the instructions of the Borrower, is to guarantee
payment in accordance with the terms and conditions thereof of an amount to or
to the order of a third party.
"Loan" means a Canadian Prime Rate Loan, Alternate Base Rate Loan, Tender Cheque
or Documentary Instrument outstanding hereunder.
"Majority Consent" means a consent, waiver or other approval made or given in
writing by the Majority of the Lenders in accordance with the provisions hereof.
"Majority of the Lenders" means those Lenders the Commitments of which are, in
the aggregate, at least 66 2/3% of the Commitments of all Lenders hereunder.
"Material Adverse Effect" means any material adverse effect on the business,
operations, properties, condition (financial or otherwise), or prospects of the
Borrower taken as a whole, which materially increases the risk that any of the
Obligations will not be repaid as and when due.
"Material Subsidiary" means any Subsidiary that owns more than 10% of the value
of the P&NG Rights, on a consolidated basis.
"Maturity Date" means the date which is the third anniversary of the date
hereof.
"Mortgaged Properties" means the properties set out in Schedule I to the
Debenture.
"National Security" means all of the Security Documents as defined in the
assignment agreement between National Bank of Canada, the Agent and the
Borrower, made as of the date hereof.
"Net Income" means, in respect of the period for which it is being determined,
the net income of the Borrower determined on a consolidated basis in accordance
with generally accepted accounting principles, as set forth in the consolidated
financial statements of the Borrower for such period.
"Neutrino Assets" means, collectively, all of the property (real and personal),
assets, undertakings, title, interests, rights and benefits of or possessed by
the Borrower and its Material Subsidiaries.
"Obligations" means, at any time and from time to time, all of the obligations,
indebtedness and liabilities (present or future, absolute or contingent, matured
or not) of the Borrower to the Lenders or the Agent under, pursuant or relating
to the Documents or the Credit Facility and whether the
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same are from time to time reduced and thereafter increased or entirely
extinguished and thereafter incurred again and including all interest,
commissions, legal and other costs, charges and expenses under the Agreement.
"Officer's Certificate" means a certificate or notice signed by any duly
authorized officer of the Borrower; provided, however, that Drawdown Notices,
Conversion Notices and Repayment Notices may be executed on behalf of the
Borrower by such other persons as may from time to time be designated by written
notice from the Borrower to the Agent.
"Order" has the meaning set out in Section 3.2(h) herein.
"Outstanding Principal" means, at any time, the aggregate of (a) the principal
amount of all outstanding Alternate Base Rate Loans, (b) the Equivalent Amount
in United States Dollars of the principal of all outstanding Canadian Prime Rate
Loans; (c) the maximum amount available to be drawn under all outstanding
Letters of Credit denominated in United States Dollars, (d) the Equivalent
Amount in Canadian Dollars of the maximum amount available to be drawn under all
outstanding Letters of Credit denominated in United States Dollars, (e) the
amount guaranteed under all outstanding Letters of Guarantee denominated in
United States Dollars, (f) the Equivalent Amount in United States Dollars of the
amount guaranteed under all outstanding Letters of Guarantee denominated in
Canadian Dollars and (g) the Equivalent Amount in United States Dollars of all
amounts payable under all outstanding Tender Cheques.
"Permitted Disposition" means, in respect of the Borrower or any Material
Subsidiary, any of the following:
(a) a sale or disposition by such person of P&NG Rights (and related
tangibles) resulting from any pooling, unit or farmout agreement
entered into in the ordinary course of business and in accordance with
sound industry practice when, in the reasonable judgment of such
person, it is necessary to do so in order to facilitate the orderly
exploration, development or operation of such P&NG Rights;
(b) a sale or disposition by such person in the ordinary course of
business and in accordance with sound industry practice of tangible
personal property that is obsolete, no longer useful for its intended
purpose or being replaced in the ordinary course of business;
(c) a sale or disposition by such person of current production from P&NG
Rights made in the ordinary course of business;
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(d) sales or dispositions by a Material Subsidiary to the Borrower or by
the Borrower or a Material Subsidiary to a Subsidiary which has
previously provided Subsidiary Security to the Lenders; and
(e) sales or dispositions consented to by the Agent.
"Permitted Encumbrances" means:
(a) Security Interests for taxes, assessments or governmental charges
which are not due and delinquent, or the validity of which the
Borrower or any Material Subsidiary shall be contesting in good faith
and provided the Borrower shall have established adequate reserves
therefor (in accordance with generally accepted accounting principles)
and such contestation would not reasonably be expected to have a
Material Adverse Effect and will not result in forfeiture of any
assets which are material to the Borrower and its Subsidiaries taken
as a whole;
(b) the Security Interest of any judgment rendered, or claim filed,
against the Borrower or any Material Subsidiary which the Borrower or
such Material Subsidiary shall be contesting in good faith and
provided the Borrower shall have established adequate reserves
therefor (in accordance with generally accepted accounting principles)
and such contestation would not reasonably be expected to have a
Material Adverse Effect and will not result in forfeiture of any
assets which are material to the Borrower and its Subsidiaries taken
as a whole;
(c) Security Interests, privileges or other charges imposed or permitted
by law such as statutory liens and deemed trusts, carriers' liens,
builders' liens, warehousemen's liens, mechanics' liens, materialmen's
liens, liens created by worker's compensation, unemployment insurance
and other social security or employment legislation, and other liens,
privileges or other charges of a similar nature which relate to
obligations which are not due and delinquent or if due and delinquent
the validity of which is being contested at the time in good faith and
provided the Borrower shall have established adequate reserves
therefor (in accordance with generally accepted accounting principles)
and such contestation would not reasonably be expected to have a
Material Adverse Effect and will not result in forfeiture of any
assets which are material to the Borrower and its Subsidiaries taken
as a whole;
(d) undetermined or inchoate Security Interests arising in the ordinary
course of and incidental to construction, maintenance or current
operations of the Borrower or any Material Subsidiary which relate to
obligations which are not due and delinquent, or the validity of which
the Borrower or such Material Subsidiary shall be contesting in good
faith and provided the Borrower shall have established adequate
reserves therefor (in accordance with generally accepted accounting
principles) and such contestation would not reasonably be expected to
have a Material Adverse Effect and
-15-
will not result in forfeiture of any assets which are material to the
Borrower and its Subsidiaries taken as a whole;
(e) Security Interests incurred or created in the ordinary course of
business and in accordance with sound industry practice in respect of
the exploration, development or operation of P&NG Rights, related
production or processing facilities in which such person has an
interest or the transmission of Petroleum Substances as security in
favour of any other person conducting the exploration, development,
operation or transmission of the property to which such Security
Interests relate, for the Borrower's or any Material Subsidiary's
portion of the costs and expenses of such exploration, development,
operation or transmission, provided that such costs or expenses are
not due and delinquent;
(f) overriding royalty interests, net profit interests, reversionary
interests and carried interests or other similar burdens on production
in respect of the P&NG Rights that are entered into with or granted to
arm's length third parties in the ordinary course of business and in
accordance with sound oil and gas industry practice in Alberta, and
provided the same are disclosed in the most recent Engineering Report
or Internal Engineering Report, as applicable;
(g) Security Interests for penalties arising under non-participation or
independent operations provisions of operating or similar agreements
in respect of the P&NG Rights, provided that such Security Interests
do not materially detract from the value of the property of the
Borrower and its Subsidiaries taken as a whole and would not
reasonably be expected to have a Material Adverse Effect;
(h) Security Interests in favour of a public utility or any municipality
or governmental or other public authority when required by such
utility, municipality or authority in connection with the operations
or the Borrower or any Material Subsidiary, to the extent such
security does not materially detract from the value of the property of
the Borrower and its Subsidiaries taken as a whole and would not
reasonably be expected to have a Material Adverse Effect;
(i) reservations, limitations, provisions and conditions contained in an
original grant from the Crown of any lands or interests therein and
statutory exceptions to title;
(j) the Security Interest or any right of distress reserved in or
exercisable under any real property lease for rent or otherwise to
effect compliance with the terms of such lease in respect of which the
rent or other obligations is not at the time overdue or if overdue the
validity of which is being contested at the time in good faith and
provided the Borrower shall have established adequate reserves
therefor (in accordance with generally accepted accounting principles)
and such contestation would not reasonably be expected to have a
Material Adverse Effect and will not
-16-
result in forfeiture of any assets which are material to the Borrower
and its Subsidiaries taken as a whole;
(k) Purchase Money Security Interests; provided that the foregoing
Security Interests are limited to all or any part of the property or
assets purchased or acquired and provided further that such Security
Interests shall not secure obligations which, in aggregate at any
time, exceed Cdn. $250,000;
(l) Security Interests in favour of the Lenders or the Agent on behalf of
the Lenders;
(m) such other Security Interests as may be consented to in writing by the
Agent;
(n) Security Interests not referred to in (a) through (n) above created in
the ordinary course of business, not to exceed, in the aggregate, Cdn.
$250,000 in any calendar year; and
(o) any extension, renewal or replacement (or successive extensions,
renewals or replacements), as a whole or in part, of any Security
Interest referred to in the preceding subparagraphs (a) to (n)
inclusive of this definition, so long as any such extension, renewal
or replacement of such Security Interest is limited to all or any part
of the same property that secured the Security Interest extended,
renewed or replaced (plus improvements on such property) and the
indebtedness or obligation secured thereby is not increased;
provided that nothing in this definition shall in and of itself cause the
Security or the Loans and other amounts owing by the Borrower hereunder to be
subordinated in priority to any such Permitted Encumbrance;
"Permitted Indebtedness" means:
(a) Debt which is secured by a Permitted Encumbrance;
(b) the Obligations;
(c) Financial Instrument Obligations;
(d) performance guarantees provided in the ordinary course of business to
persons other than financial institutions or Affiliates thereof;
provided that, for certainty, no such guarantee shall include a
guarantee of indebtedness for borrowed money;
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(e) Cdn. $100,000 utilized to finance insurance premiums required to
insure Neutrino Assets in accordance herewith; or
(f) such other Debt as may be consented to in writing by the Lenders.
Permitted Investments" means:
(a) Investments which, in aggregate, do not exceed Cdn. $250,000 in any
calendar year;
(b) Investments in the form of (i) debt securities issued or directly and
fully guaranteed or insured by the Canadian or United States
Government or any agency or instrumentality thereof, with maturities
of no more than one year, (ii) commercial paper of a domestic issuer
rated at the date of acquisition at least P-2 by Moody's Investor
Service, Inc. or A-2 by Standard & Poor's Corporation and with
maturities of no more than one year from the date of acquisition, or
(iii) repurchase agreements covering debt securities or commercial
paper of the type permitted in this Section, certificates of deposit,
demand deposits, eurodollar time deposits, overnight bank deposits and
bankers' acceptances, with maturities of no more than one year from
the date of acquisition, issued by or acquired from or through the
Lenders or any bank or trust company organized under the laws of
Canada or the United States or any province of state thereof and
having capital surplus and undivided profits aggregating at least U.S.
$100,000,000;
(c) other short-term Investments similar in nature and degree of risk to
those described in clause (b) of this Section;
(d) money-market funds;
(e) investments in the form of intercompany loans to, advances to or
investments in, the Borrower, any of its wholly-owned Subsidiaries,
SMC or Spruce Hills, as long as such loan, advances or investments
would not result in a Default or Event of Default; and
(f) guarantees and other Security to be provided pursuant hereto.
"Permitted Title Defects" means, in respect of any particular asset of the
Borrower or any Subsidiary, the following defects in its title thereto:
(a) Permitted Encumbrances;
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(b) title defects or irregularities which are of a minor nature and in the
aggregate will not materially impair the use of the property for the
purposes for which it held, or materially impair its saleability, or
cause a material disruption or reduction in the production or cash
flow (if any) associated therewith;
(c) all rights reserved to or vested in any person or Governmental
Authority by the terms of any lease, licence, grant or permit, or by
any statutory or regulatory provision, to terminate any such lease,
licence, grant or permit or to require annual or other periodic
payments as a condition of the continuance thereof;
(d) any right reserved to, or vested in, any Governmental Authority by the
terms of any laws or regulations or any easement, right-of-way or
servitude issued or granted pursuant thereto, to terminate any such
laws or regulation or easement, right-of-way or servitude or to
purchase, expropriate, appropriate or recapture, or designate a
purchaser of, any property;
(e) surface rights, easements, rights-of-way, servitudes, zoning or other
similar rights or restrictions in respect of land held by the Borrower
or any Material Subsidiary (including, without limitation, rights-of-
way and servitudes for railways, sewers, drains, pipe lines, gas and
water mains, electric light and power and telephone or telegraph or
cable television conduits, poles, wires and cables) which do not,
either alone or in the aggregate, materially detract from the value of
such land or materially impair its use in the operation of the
business of the Borrower or any such Material Subsidiary;
(f) reservations, limitations, provisos and conditions expressed in or
affecting any grant of real or immoveable property or any interest
therein; and
(g) title defects which are disclosed to and expressly consented to by
Majority of the Lenders as constituting Permitted Title Defects
hereunder.
"Petroleum Substances" means crude oil, crude bitumen, synthetic crude oil,
petroleum, natural gas, natural gas liquids, related hydrocarbons and any and
all other substances, whether liquid, solid or gaseous, whether hydrocarbons or
not, produced or producible in association with any of the foregoing, including
hydrogen sulphide and sulphur.
"Pledge" means the pledge agreement respecting the Debenture by the Borrower in
favour of the Agent.
"P&NG Rights" means all of the right, title, estate and interest, whether
contingent or absolute, legal or beneficial, present or future, vested or not,
and whether or not an "interest in land", of the Borrower and its Subsidiaries
in and to any of the following, by whatever name the same are known:
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(a) rights to explore for, drill for and produce, take, save or market
Petroleum Substances;
(b) rights to a share of the production of Petroleum Substances;
(c) rights to a share of the proceeds of, or to receive payments
calculated by reference to the quantity or value of, the production of
Petroleum Substances;
(d) rights to acquire any of the rights described in subparagraphs (a)
through (c) of this definition;
(e) interests in any rights described in subparagraphs (a) through (d) of
this definition; and
(f) all extensions, renewals, replacements or amendments of or to the
foregoing items described in subparagraphs (a) through (e) of this
definition;
and including, without limitation, interests and rights known as working
interests, royalty interests, overriding royalty interests, gross overriding
royalty interests, production payments, profits interests, net profits
interests, revenue interests, net revenue interests, economic interests and
other interests and fractional or undivided interests in any of the foregoing
and freehold, leasehold or other interests.
"Production Payment" means:
(a) the sale or other transfer of any Petroleum Substances, whether in
place or when produced, for a period of time until, or of an amount
such that the purchaser will realize therefrom a specified amount of
money (however determined, including by reference to interest rates or
other factors which may not be fixed) or a specified amount of such
substances; or
(b) any other interest in property of the character commonly referred to
as a "production payment".
"Purchase Money Security Interest" means:
(a) a Security Interest taken or reserved in property to secure payment of
all or part of its purchase price; and
(b) a Security Interest taken in property by a person who gives value for
the purpose of enabling the Borrower or relevant Subsidiary to acquire
rights in such property, to the extent that the value is applied to
acquire those rights;
but does not include a transaction of sale by and lease back to the seller.
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"Quarter End" means March 31, June 30, September 30 or December 31 in each year.
"Rateable Portion", as regards any Lender, with regard to any amount of money,
means in respect of the Credit Facility and Drawdowns, Conversions and Loans and
other amounts payable thereunder, the products obtained by multiplying that
amount by the quotient obtained by dividing (A) that Lender's Credit Facility
Commitment by (B) the aggregate of all of the Lenders' Credit Facility
Commitments.
"Release" means any release, spill, emission, leak, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or migration into the environment
including, without limitation, the movement of Hazardous Materials through
ambient air, soil, surface water, ground water, wetlands, land or sub-surface
strata.
"Repayment Notice" means a notice substantially in the form annexed hereto as
Schedule E to be given to the Agent by the Borrower pursuant to Section 2.12.
"Security" means the security and agreements described in Sections 10.1(1) and
10.1(2) together with any other security provided by the Borrower or any
Material Subsidiary in accordance herewith.
"Security Interest" means mortgages, charges, pledges, hypothecs, assignments by
way of security, conditional sales or other title retentions, security created
under the Bank Act (Canada), Security Interests, encumbrances, Security
Interests or other interests in property, howsoever created or arising, whether
fixed or floating, perfected or not, which secure payment or performance of an
obligation and, including, in any event, (a) rights of set-off created for the
purpose of, in effect, securing (directly or indirectly) the repayment of Debt
or Financial Instrument Obligations and (b) capital leases and any other lease
financing.
"Shareholders' Equity" means, as at any date of determination, the total amount
of shareholders' equity of the Borrower determined on a consolidated basis in
accordance with generally accepted accounting principles, as the same would be
set forth on a consolidated balance sheet of the Borrower for such date.
"shares of a publicly traded corporation" or similar expressions shall include
shares listed on any recognized exchange or traded in any over-the-counter
market quoted by any reporting system.
"SMC" means Southern Mineral Corporation, a Nevada corporation, owning all of
the shares of Spruce Hills.
"Southern Credit Facility" shall mean any and all credit facilities created
under or evidenced by the Credit Agreement between Southern Mineral Corporation,
SMC Ecuador, Inc., SMC Production Co., BEC Energy, Inc. and Spruce Hills
Production Company, Inc. and Bank One, Texas, National Association, as Agent and
Lender and The Lenders signatory thereto dated August 23, 2000, as amended from
time to time.
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"Spruce Hills" means Spruce Hills Production Company Inc., a Delaware
corporation owning all of the shares of the Borrower.
"Subsidiary" means:
(a) any corporation of which at least a majority of the outstanding shares
having by the terms thereof ordinary voting power to elect a majority
of the board of directors of such corporation (irrespective of whether
at the time shares of any other class or classes of such corporation
might have voting power by reason of the happening of any contingency,
unless the contingency has occurred and then only for as long as it
continues) is at the time directly, indirectly or beneficially owned
or controlled by the Borrower or one or more of its Subsidiaries or by
the Borrower and one or more of its Subsidiaries; and
(b) in respect of any other person, any person which is controlled,
directly or indirectly, by the Borrower or one or more of its
Subsidiaries or by the Borrower and one or more of its Subsidiaries;
and for the purposes of this subparagraph, "control" (including, with
a correlative meaning, the term "controlled by") means the power to
direct or cause the direction of the management and policies of any
person, whether through the ownership of securities or by contract or
otherwise.
"Subsidiary Security" means, collectively:
(a) an unconditional guarantee of the payment and performance by the
Borrower of all Obligations and all other obligations, liabilities and
indebtedness of the Borrower to the Lenders; and
(b) as collateral security for such guarantee a floating charge demand
debenture in favour of the Agent on behalf of the Lenders, pledged to
the Agent pursuant to a debenture pledge agreement with the Agent;
each in form and substance satisfactory to the Agent in its sole discretion,
provided or to be provided by a Material Subsidiary hereunder, and, where the
context so requires, shall mean any and all such guarantees and security
provided or to be provided by Material Subsidiaries in accordance herewith.
"Successor" has the meaning set out in Section 9.2(i).
"Tangible Net Worth" means, as at any date of determination, the Shareholders'
Equity less the aggregate amount of the following items which appear on the
consolidated balance sheet of the Borrower for such date as assets, namely,
goodwill, intellectual property and other intangible assets, all as determined
in accordance with generally accepted accounting principles.
-22-
"Taxes" means all taxes, levies, imposts, stamp taxes, duties, fees, deductions,
withholdings, charges, compulsory loans or restrictions or conditions resulting
in a charge which are imposed, levied, collected, withheld or assessed by any
country or political subdivision or taxing authority thereof now or at any time
in the future, together with interest thereon and penalties, charges or other
amounts with respect thereto, if any (but excluding any taxes, franchise taxes,
levies, imposts or charges imposed, levied or assessed in respect of or applied
on the overall net income or capital of any of the Lenders) and "Tax" and
"Taxation" shall be construed accordingly.
"Tender Cheque" means a cheque or draft drawn in Canadian Dollars issued by the
Agent at the request of the Borrower pursuant hereto intended for use in
connection with the purchase of P&NG Rights.
"United States Dollars" and "U.S. $" means the lawful money of the United States
of America.
"Voting Shares" means shares of any class of a corporation:
(a) carrying voting rights in all circumstances; or
(b) which carry the right to vote conditional on the happening of an event
if such event shall have occurred and be continuing,
provided that subparagraph (b) above shall not include voting rights created
solely by statute, such as those rights created pursuant to section 183(4) of
the Business Corporations Act (Alberta) as in effect on the date hereof.
1.3 Headings
The division of this Agreement into Articles and Sections and the insertion
of headings are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement. The terms "this Agreement",
"hereof", "hereunder" and similar expressions refer to this Agreement and not to
any particular Article, Section or other portion hereof and include any
agreement supplemental hereto. Unless something in the subject matter or
context is inconsistent therewith, references herein to Articles and Sections
are to Articles and Sections of this Agreement.
1.4 Number; persons; including
Words importing the singular number only shall include the plural and vice
versa, words importing the masculine gender shall include the feminine and
neuter genders and vice versa, words importing persons shall include
individuals, partnerships, associations, trusts, unincorporated organizations
and corporations and vice versa and words and terms denoting inclusiveness (such
as "include" or "includes" or "including"), whether or not so stated, are not
limited by their context or by the words or phrases which precede or succeed
them.
-23-
1.5 Accounting Principles
Wherever in this Agreement reference is made to generally accepted
accounting principles or GAAP, such reference shall be deemed to be to the
generally accepted accounting principles established by the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants and in
effect in the United States from time to time. Where the character or amount of
any asset or liability or item of revenue or expense or amount of equity is
required to be determined, or any consolidation or other accounting computation
is required to be made for the purpose of this Agreement or any other Document,
such determination or calculation shall, to the extent applicable and except as
otherwise specified herein or as otherwise agreed in writing by the parties, be
made in accordance with generally accepted accounting principles applied on a
consistent basis.
1.6 Reference to Agreements and Enactments
Reference herein to any agreement, instrument, licence or other document
shall be deemed to include reference to such agreement, instrument, licence or
other document as the same may from time to time be amended, supplemented or
restated in accordance with the provisions of this Agreement; and reference
herein to any enactment shall be deemed to include reference to such enactment
as re-enacted, amended or extended from time to time and to any successor
enactment.
1.7 Schedules
The following are the Schedules annexed hereto and incorporated by
reference and deemed to be part hereof:
Schedule A - Lenders and Commitments
Schedule B - Compliance Certificate
Schedule C - Conversion Notice
Schedule D - Drawdown Notice
Schedule E - Repayment Notice
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ARTICLE 2
THE CREDIT FACILITY
2.1 The Credit Facility
Subject to the terms and conditions hereof, each of the Lenders,
individually and not jointly and severally, shall make available to the Borrower
such Lender's Rateable Portion of the Credit Facility. Subject to Section 2.14,
the Outstanding Principal shall not exceed the maximum principal amount of the
Credit Facility.
2.2 Manner of Borrowing
(1) Under the Credit Facility, the Borrower may, prior to the Maturity
Date, increase or decrease Loans in Canadian Dollars, make Drawdowns,
repayments and further Drawdowns, and Conversions of Canadian Prime Rate
Loans and Drawdowns, repayments and further Drawdowns of Documentary
Instruments and Tender Cheques and may, in United States Dollars, make
Drawdowns, repayments and further Drawdowns and Conversions of Alternate
Base Rate Loans and Drawdowns, repayments and further Drawdowns of
Documentary Instruments.
(2) The Borrower shall have the option, subject to the other terms and
conditions hereof, to determine which types of Loans shall be drawn down
and in which combinations or proportions.
2.3 Purpose
The Credit Facility is being made available to repay in full the Existing
National Facility of the Borrower, to finance exploration, development and
acquisition of oil and gas properties and for the general corporate purposes of
the Borrower.
2.4 Tender Cheques
(1) The Borrower may give the Agent notice that Tender Cheques will be
required under the Credit Facility pursuant to a Drawdown. Loans will be
available by way of Tender Cheques to a maximum, in aggregate, of Cdn. $
100,000; the issuance of Tender Cheques shall reduce the availability of
the Credit Facility by the amount payable under such Tender Cheques. When a
Tender Cheque is presented for payment, the Borrower shall be deemed to
have effected a Conversion of the Tender Cheques to an advance to the
Borrower under the Credit Facility by way of a Canadian Prime Rate Loan.
Each unnegotiated Tender Cheque shall be returned to the Agent for
cancellation not more than 7 days after its issuance; should any
unnegotiated Tender Cheque not be returned and cancelled within the
aforesaid period, the amount payable thereunder shall thereupon be deemed
to be converted into a
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Canadian Prime Rate Loan under the Credit Facility until return of the
unnegotiated Tender Cheque to the Agent for cancellation.
(2) Except as provided in Section 2.4(1), the Borrower may not effect a
Conversion of Tender Cheques.
(3) The Borrower shall pay to the Agent for the account of all Lenders a
cheque issuance fee in Canadian Dollars equal to .25% per annum calculated
on the face amount of each Tender Cheque for the period of time elapsed
from and including the date of issuance to but excluding the date of
negotiation or its return to the Agent unnegotiated (such period not to
exceed 7 days) in a year of 365 or 366 days, as the case may be; such fee
shall be payable on the earlier of the negotiation of the Tender Cheque or
expiry of the aforementioned 7 day period.
2.5 Minimum Drawdowns
(1) Drawdowns of the following types of Loans shall be in the following
amounts indicated:
(a) Canadian Prime Rate Loans in minimum principal amounts of Cdn.
$100,000 and Drawdowns in excess thereof in integral multiples of Cdn.
$100,000; and
(b) Alternate Base Rate Loans in minimum principal amounts of U.S.
$100,000 and Drawdowns in excess thereof in integral multiples of U.S.
$100,000.
2.6 Notice Periods for Drawdowns and Conversions
(1) Subject to the provisions hereof, the Borrower may make a Drawdown or
Conversion under the Credit Facility by delivering a Drawdown Notice or
Conversion Notice as the case may be (executed in accordance with the
definition of Officer's Certificate), with respect to a specified type of
Loan to the Agent not later than:
(a) 9:00 a.m. (Calgary time) two Banking Days prior to the proposed
Drawdown Date for Drawdowns of or Conversions into Canadian Prime Rate
Loans and/or Alternate Base Rate Loans where such Loans are, in
aggregate, greater than $100,000 in the respective currencies of the
Loans requested;
(b) 9:00 a.m. (Calgary time) one Banking Day prior to the proposed
Drawdown Date or Conversion Date for Drawdowns of or Conversions into
Canadian Prime Rate Loans and/or Alternate Base Rate Loans where such
Loans are, in aggregate, equal to or less than $100,000 in the
respective currencies of the Loans requested;
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(c) 9:00 a.m. (Calgary time) one Banking Day prior to the proposed
Drawdown Date for Drawdowns of Documentary Instruments; and
(d) 9:00 a.m. (Calgary time) on the proposed Drawdown Date for Tender
Cheques.
2.7 Conversion Option
Subject to the provisions of this Agreement, the Borrower may convert at
the Equivalent Amount, if applicable, the whole or any part of any type of Loan
into any other type of Loan by giving the Agent a Conversion Notice in
accordance herewith; provided that the Borrower may not convert a portion only
or the whole of an outstanding Loan unless both the unconverted portion and
converted portion of such Loan are equal to or exceed, in the relevant currency
of each such portion, the minimum amounts required for Drawdowns of Loans of the
same type as that portion (as set forth in Section 2.5 above).
2.8 Conversions not Repayments
Any amount converted shall be a Loan of the type converted to upon such
Conversion taking place, but such Conversion (to the extent of the amount
converted) shall not of itself constitute a repayment or a fresh utilization of
any part of the amount available under the Credit Facility.
2.9 Agent's Obligations with Respect to Canadian Dollar Loans and U.S. Base
Rate Loans
Upon receipt of a Drawdown Notice or Conversion Notice with respect to a
Canadian Dollar Loan or a U.S. Base Rate Loan, the Agent shall forthwith notify
the Lenders of the requested type of Loan, the proposed Drawdown Date or
Conversion Date, each Lender's Rateable Portion of such Loan and, if applicable,
the account of the Agent to which each Lender's Rateable Portion is to be
credited.
2.10 Lenders' and Agent's Obligations with Respect to Canadian Prime Rate Loans
and Alternate Base Rate Loans
Each Lender shall, for same day value on the Drawdown Date specified by the
Borrower in a Drawdown Notice with respect to a Canadian Prime Rate Loan or an
Alternate Base Rate Loan credit the Agent's account specified in the Agent's
notice given under Section 2.9 with such Lender's Rateable Portion of each such
requested Loan and for same day value on the same date the Agent shall pay to
the Borrower the full amount of the amounts so credited in accordance with any
payment instructions set forth in the applicable Drawdown Notice.
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2.1 Irrevocability
A Drawdown Notice, Conversion Notice or Repayment Notice given by the
Borrower hereunder shall be irrevocable and, subject to any options the Lenders
may have hereunder in regard thereto and the Borrower's rights hereunder in
regard thereto, shall oblige the Borrower to take the action contemplated on the
date specified therein.
2.11 Optional Repayment
(1) The Borrower may at any time and from time to time repay to the Agent
for the account of the Lenders without penalty or, in the case of
Documentary Instruments provide for the funding of, the whole or any part
of any Loan outstanding to the Borrower together with accrued interest
thereon (provided that if such repayment is not made on an Interest Payment
Date in the case of Canadian Prime Rate Loans and Alternate Base Rate
Loans, accrued interest on such Loans shall be paid on the next Interest
Payment Date applicable to the Loan being repaid) to the date of such
repayment provided that:
(a) the Borrower shall give a Repayment Notice (executed in accordance
with the definition of Officer's Certificate) to the Agent not later
than: (i) 9:00 a.m. (Calgary time) 2 Banking Days prior to the
proposed repayment for Documentary Instruments; and (ii) 11:00 a.m.
(Calgary time) one Banking Day prior to the date of the proposed
repayment, for Canadian Prime Rate Loans and Alternate Base Rate
Loans;
(b) repayments pursuant to this Section may only be made on a Banking Day;
(c) unexpired Documentary Instruments may only be prepaid by providing
funding therefor in accordance with the following provisions;
(d) each such repayment shall be in a minimum amount of the lesser of: (i)
the minimum amount required pursuant to Section 2.5 for Drawdowns of
the type of Loan proposed to be repaid and (ii) the Outstanding
Principal of all Loans immediately prior to such repayment; any
repayment in excess of such amount shall be in integral multiples of
the amount referred to in Section 2.12(1)(d)(i) above; and
(e) the Borrower may not repay a portion only of an outstanding Loan
unless the unpaid portion is equal to or exceeds, in the relevant
currency, the minimum amount required pursuant to Section 2.5 for
Drawdowns of the type of Loan proposed to be repaid.
(2) With respect to the funding of the repayment of unexpired Documentary
Instruments, it is agreed that the Borrower shall provide for the funding
in full of the repayment of unexpired Documentary Instruments by depositing
with the Agent amounts equal to the maximum amount of the relevant
Documentary Instruments (in each case in the respective
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currency in which the relevant Loans are denominated); such amounts
deposited by the Borrower shall belong to the Borrower and shall be held by
the Agent in interest bearing cash collateral accounts with interest to be
credited to the Borrower at rates prevailing at the time of deposit. Such
cash collateral accounts shall be assigned to the Agent as security for the
obligations of the Borrower in relation to such Documentary Instruments and
the Security Interest of the Agent thereby created in such cash collateral
shall rank in priority to all other Security Interests and adverse claims
against such cash collateral. Such cash collateral shall be applied to
satisfy the obligations of the Borrower for such Documentary Instruments as
payments are made thereunder and the Agent is hereby irrevocably directed
by the Borrower to so apply any such cash collateral. Amounts held in such
cash collateral accounts may not be withdrawn by the Borrower without the
consent of the Lenders; however, interest on such deposited amounts shall
be for the account of the Borrower and may be withdrawn by the same. If
after maturity or expiry, as the case may be, of the Loans for which such
funds are held and application by the Agent of the amounts in such cash
collateral accounts to satisfy the obligations of the Borrower hereunder
with respect to the Loans being repaid, any excess remains, such excess
shall be promptly paid by the Agent to the Borrower.
2.13 Mandatory Repayment
Subject to Section 11.2, all Obligations owing hereunder shall be repaid or
paid, as the case may be, by the Borrower on or before the Maturity Date.
2.14 Currency Excess
(1) The Agent shall determine the Outstanding Principal as at the day of
any requested reduction or cancellation of the Credit Facility, on any
Drawdown or Conversion (after giving effect to the requested Drawdown and
any actual or notional repayment of Loans on the proposed Drawdown Date or
Conversion Date) and as at the last Banking Day of each calendar month in
each year, and on any other day selected by the Agent in its sole
discretion (each, a "Currency Test Date"). If on a Currency Test Date the
aggregate Outstanding Principal exceeds or would exceed the Borrowing Base,
after giving effect to any reductions thereto on such date (the amount of
such excess is herein called the "Currency Excess"), and such Currency
Excess remains unremedied for a period of 3 Business Days, then upon the
request in writing of the Agent (which request shall detail the applicable
Currency Excess) the Borrower shall, in the sole discretion of the Lenders
acting reasonably, either: (i) reduce the amount of requested Loans on such
date or repay an amount of Canadian Prime Rate Loans or Alternate Base Rate
Loans within 30 Banking Days after receipt of such request, or a
combination of the foregoing, such that, except as otherwise contemplated
in Section 2.14(2), the Equivalent Amount in United States Dollars of the
reductions or payments is, in the aggregate, at least equal to the Currency
Excess; (ii) provide additional collateral, of character and value
satisfactory to the Lenders in their sole discretion acting reasonably, to
secure the Obligations by the execution and delivery to the Lenders of
security instruments in form and substance satisfactory to the Lenders
acting reasonably, or (iii) effect any
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combination of the alternatives described in clauses (i) and (ii) of this
Section and acceptable to the Lenders in their sole discretion acting
reasonably.
(2) If, in respect of any Currency Excess existing as at any Currency Test
Date, the actions taken by the Borrower in accordance with Section 2.14(1)
have not completely removed such Currency Excess (the remainder thereof
being herein called the "Currency Excess Deficiency"), the Borrower shall,
within 5 Banking Days after such Currency Test Date, place an amount equal
to the Currency Excess Deficiency on deposit with the Agent in an interest-
bearing account in the Borrower's name with interest at rates prevailing at
the time of deposit for the account of the Borrower, to be assigned to the
Agent by instrument satisfactory to the Agent and to be applied to
Documentary Instruments as payments are made thereunder (converted if
necessary at the exchange rate for determining the Equivalent Amount on the
date of such application). The Agent is hereby irrevocably directed by the
Borrower to apply any such sums on deposit to Loans as provided in the
preceding sentence. In lieu of providing funds for the Currency Excess
Deficiency, as provided in the preceding provisions of this Section
2.14(2), the Borrower may within the said period of 5 Banking Days provide
to the Agent an irrevocable standby letter of credit in an amount equal to
the Currency Excess Deficiency and for a term which expires not sooner than
10 Banking Days after the expiry of the relevant Documentary Instruments,
such letter of credit shall be issued by a financial institution and shall
be on terms and conditions acceptable to the Agent in its sole discretion.
The Agent is hereby authorized and directed to draw upon such letter of
credit and apply the proceeds of the same to Documentary Instruments as
payments are made thereunder. Upon the Currency Excess being eliminated as
aforesaid or by virtue of subsequent changes in the exchange rate for
determining the Outstanding Principal, such funds on deposit, together with
interest thereon, or such letters of credit shall be returned to the
Borrower, in the case of funds on deposit, or shall be cancelled or reduced
in amount, in the case of letters of credit.
2.15 Takeover Notification
The Agent shall have no obligation to make Drawdowns for the purpose of
enabling the Borrower (either directly or indirectly, through a Subsidiary or
otherwise) to acquire shares of a publicly traded corporation, the acquisition
of which requires disclosure pursuant to the requirements of applicable
securities law or any securities commission or exchange or other Governmental
Authority having jurisdiction over the sale or the issuance of securities of the
Borrower or such publicly traded corporation, if the Agent determines (in its
sole discretion having regard to such considerations as it deems appropriate)
that the utilization of Drawdowns for such purpose would result in it being in a
conflict of interest. At least 5 Banking Days prior to the giving of any notice
pursuant to Section 2.5 requesting Drawdowns intended to be utilized for such
purpose, the Borrower shall provide, in strict confidence, details of such
proposed acquisition (including the name of such publicly traded corporation) to
the Agent so that the Agent can make the determination referred to above;
provided that, such details shall be made available by the Agent only to persons
that need to know such details in order to make such determination. The Agent
shall advise the
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Borrower whether such conflict of interest exists within 3 Banking Days after
receipt from the Borrower of such details. Failure by the Agent to so advise the
Borrower of a conflict shall be deemed to be a determination that no conflict
exists for the Agent.
2.16 Determination of Borrowing Base
(a) the Borrowing Base as of August 1, 2000, is acknowledged by the
Borrower and the Lenders to be U.S. $10,815,000 (the "Initial
Borrowing Base"). Commencing on September 1, 2000, and continuing
thereafter on the first day of each calendar month through the
Maturity Date, the amount of the Borrowing Base shall be reduced by
U.S. $185,000;
(b) the Borrowing Base shall be redetermined semi-annually by unanimous
consent of the Lenders beginning December 1, 2000 (and on the first
days of June and December thereafter), on the basis of information
supplied by the Borrower in compliance with the provisions of this
Agreement, including, without limitation, Engineering Reports, and all
other information available to the Lenders. In addition, the Lenders
shall, in the normal course of business following a request of the
Borrower, redetermine the Borrowing Base; provided, however, the
Lenders shall not be obligated to respond to more than four such
requests during any calendar year, and in no event shall the Lenders
be required to redetermine the Borrowing Base more than once in any
three-month period, including, without limitation, each scheduled
semi-annual redetermination provided for above. Notwithstanding the
foregoing, the Lenders may at their discretion and by unanimous
consent redetermine the Borrowing Base and the amount by which the
Borrowing Base shall be reduced each calendar month as set forth in
Section 2.16(a) at any time and from time to time.
(c) upon each determination of the Borrowing Base by the Lenders, the
Agent shall notify the Borrower orally (confirming such notice
promptly in writing) of such determination, and the Borrowing Base and
the amount by which the Borrowing Base shall be reduced or increased
so communicated to the Borrower shall become effective upon such
written notification and shall remain in effect until the next
subsequent determination of the Borrowing Base and the amount by which
the Borrowing Base shall be reduced.
(d) the Borrowing Base shall represent the determination by the Lenders,
in accordance with the applicable definitions and provisions herein
contained, their then current engineering standards and their then
current and customary lending standards for loans of this nature, of
the value, for loan purposes, of the Mortgaged Properties, subject, in
the case of any increase in the Borrowing Base, to the credit approval
process of the Lenders. Furthermore, the Borrower acknowledges that
the determination of the Borrowing Base contains an equity cushion
(market value in
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excess of loan value), which is acknowledged by the Borrower to be
essential for the adequate protection of the Lenders.
ARTICLE 3
CONDITIONS PRECEDENT TO DRAWDOWNS
3.1 Conditions for Drawdowns
On or before each Drawdown hereunder the following conditions shall be
satisfied:
(a) the Agent shall have received a proper and timely Drawdown Notice from
the Borrower;
(b) the representations and warranties set forth in Section 8.1 shall be
true and accurate in all material respects on and as of the date of
the requested Drawdown;
(c) no event shall have occurred which would constitute an Event of
Default or a Default nor shall the Drawdown result in the occurrence
of any such event; and
(d) after giving effect to the proposed Drawdown, the Outstanding
Principal of all Loans shall not exceed the maximum amount of the
Credit Facility.
3.2 Additional Conditions for First Drawdown
In addition to the conditions set forth in Section 3.1, on or before the
first Drawdown hereunder the following further conditions shall be satisfied:
(a) the Security shall have been executed and delivered by the Borrower
and all registrations, filings or recordings necessary or desirable to
preserve, protect or perfect the Security Interests constituted by
such Security shall have been delivered to the appropriate registry
for registration, filing or recording;
(b) the National Security shall have been duly assigned and all
registrations, filings or recordings necessary or desirable to
preserve, protect or perfect the Security Interests constituted by
such assignment of the National Security shall have been delivered to
the appropriate registry for registration, filing or recording;
(c) the Borrower shall have delivered to the Agent a certificate of
status, compliance or good standing, as the case may be, in respect of
its jurisdiction of incorporation (dated not more than 10 days earlier
than the date of such Drawdown) and certified copies, dated the date
of such Drawdown, of its constating documents, by-laws and the
resolutions authorizing the Documents and transactions hereunder and
an
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Officer's Certificate as to the incumbency of the officers of the
Borrower signing this Agreement and any other Documents;
(d) the Agent shall have received confirmation, acceptable to the Agent,
that the title of the Borrower to the Mortgaged Properties is
confirmed, and is free and clear of all Security Interests other than
Permitted Security Interests;
(e) the Borrower shall have delivered to the Agent copies of all
operating, lease, sublease, royalty, sales, exchange, processing,
farmout, bidding, pooling, unitization, and other similar agreements
relating to the Mortgaged Properties as requested by the Agent;
(f) the Borrower shall have delivered to the Agent Engineering Reports
relating to the Mortgaged Properties;
(g) the Borrower shall have delivered to the Agent a certified copy of a
final and non-appealable order (the "Order") by the U.S. Bankruptcy
Court for the Southern District of Texas in jointly administered case
No. 99-60359-V2-11 confirming the Second Amended Plan of
Reorganization filed May 2, 2000, as such plan was modified on June
19, 2000, and further modified on each of June 29, 2000 and July 5,
2000, respecting Southern Mineral Corporation, SMC Ecuador, Inc., SMC
Production Co., and BEC Energy, Inc.;
(h) the Borrower shall, within 3 days of the date hereof, enter into a
Commodity Agreement acceptable to the Agent with respect to a minimum
of 50% of the Borrower's current production of Petroleum Substances
for a minimum of 24 months;
(i) the Borrower shall deliver such other agreements, documents,
instruments, opinions, certificates, waivers and consents as the Agent
may reasonably request; and
(j) an opinion of Borrower's legal counsel in form and substance
satisfactory to the Agent, and an opinion of Lenders' Counsel in form
and substance satisfactory to the Agent and each of the Lenders, each
dated the date of such Drawdown, shall have been delivered to the
Agent.
3.3 Waiver
The conditions set forth in Sections 3.1 and 3.2 are inserted for the sole
benefit of the Lenders and the Agent and may be waived by the Lenders, in whole
or in part (with or without terms or conditions), without prejudicing the right
of the Lenders or the Agent at any time to assert such waived conditions in
respect of any subsequent Drawdown.
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ARTICLE 4
EVIDENCE OF DRAWDOWNS
4.1 Account of Record
The Agent shall open and maintain books of account evidencing all Loans and
all other amounts owing by the Borrower to the Lenders hereunder. The Agent
shall enter in the foregoing accounts details of all amounts from time to time
owing, paid or repaid by the Borrower hereunder. The information entered in the
foregoing accounts shall, absent manifest error, constitute prima facie evidence
of the obligations of the Borrower to the Lenders hereunder with respect to all
Loans and all other amounts owing by the Borrower to the Lenders hereunder.
After a request by the Borrower, the Agent shall promptly advise the Borrower of
such entries made in the Agent's books of account.
ARTICLE 5
PAYMENTS OF INTEREST AND FEES
5.1 Interest on Canadian Prime Rate Loans
The Borrower shall pay interest on each Canadian Prime Rate Loan owing by
it during each Interest Period applicable thereto in Canadian Dollars at a rate
per annum equal to the Canadian Prime Rate in effect from time to time during
such Interest Period plus the Applicable Margin. Each determination by the
Agent of the Canadian Prime Rate applicable from time to time during an Interest
Period shall, in the absence of manifest error, be conclusive evidence thereof.
Such interest shall accrue daily and shall be payable in arrears on each
Interest Payment Date for such Loan for the period from and including the
Drawdown Date or the preceding Conversion Date or Interest Payment Date, as the
case may be, for such Loan to and including the day preceding such Interest
Payment Date and shall be calculated on the principal amount of the Canadian
Prime Rate Loan outstanding during such period and on the basis of the actual
number of days elapsed in a year of 365 days or 366 days, as the case may be.
Changes in the Canadian Prime Rate shall cause an immediate adjustment of the
interest rate applicable to such Loan without the necessity of any notice to the
Borrower.
5.2 Interest on Alternate Base Rate Loans
The Borrower shall pay interest on each Alternate Base Rate Loan owing by
it during each Interest Period applicable thereto in United States Dollars at a
rate per annum, calculated on the basis of a 365 day year, equal to the
Alternate Base Rate in effect from time to time during such Interest Period plus
the Applicable Margin. Each determination by the Agent of the Alternate Base
Rate applicable from time to time during an Interest Period shall, in the
absence of manifest error, be conclusive evidence thereof. Such interest shall
be payable in arrears on each Interest Payment Date for such Loan for the period
from and including the Drawdown Date or the preceding Conversion Date or
Interest Payment Date, as the case may be, for such Loan to and including the
day preceding
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such Interest Payment Date and shall be calculated on the principal amount of
the Alternate Base Rate Loan outstanding during such period and on the basis of
the actual number of days elapsed divided by 365. Changes in the Alternate Base
Rate shall cause an immediate adjustment of the interest rate applicable to such
Loan without the necessity of any notice to the Borrower.
5.3 Per Annum Calculations
Unless otherwise stated, wherever in this Agreement reference is made to a
rate of interest "per annum" or a similar expression is used, such interest
shall be calculated on the basis of a calendar year of 365 days or 366 days, as
the case may be.
5.4 Interest Act (Canada)
Whenever a rate of interest hereunder is calculated on the basis of a year
(the "deemed year") which contains fewer days than the actual number of days in
the calendar year of calculation, such rate of interest shall be expressed as a
yearly rate for purposes of the Interest Act (Canada) by multiplying such rate
of interest by the actual number of days in the calendar year of calculation and
dividing it by the number of days in the deemed year.
5.5 Nominal Rates; No Deemed Reinvestment
The principle of deemed reinvestment of interest shall not apply to any
interest calculation under this Agreement; all interest payments to be made
hereunder shall be paid without allowance or deduction for deemed reinvestment
or otherwise, before and after maturity, default and judgment. The rates of
interest specified in this Agreement are intended to be nominal rates and not
effective rates. Interest calculated hereunder shall be calculated using the
nominal rate method and not the effective rate method of calculation.
5.6 Stand-By Fees
(1) The Borrower shall pay to the Agent for the account of the Lenders a
stand-by fee in United States Dollars calculated at the rate of 0.50% per
annum on the amount, if any, by which the amount of the Outstanding
Principal for each day in the period of determination is less than the
amount for each such day of the Borrowing Base. Fees determined in
accordance with this Section shall accrue daily from and after the date
hereof and be payable by the Borrower quarterly in arrears and on
cancellation in full of the Credit Facility or the Maturity Date.
(2) As of: (a) January 1, April 1, July 1 and October 1 in each year, (b)
the date of any cancellation in full of the Credit Facility, and (c) the
Maturity Date, the Agent shall determine the stand-by fees under this
Section for the period from and including the date hereof or the date of
the immediately preceding determination, as the case may be, to but
excluding that date of determination and shall deliver to the Borrower a
written request for
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payment of the stand-by fees so determined, as detailed therein. The
Borrower shall pay to the Agent for the account of the Lenders the stand-by
fees referred to above within 5 Banking Days after receipt of each such
written request.
5.7 Facility Fee
The Borrower shall pay to the Agent on or before the date hereof a facility
fee in United States Dollars equal to 0.50% of the Initial Borrowing Base, of
which U.S. $13,750 has already been paid by the Borrower to the Agent and the
Agent hereby acknowledges receipt thereof. The Borrower shall pay to the Agent
on the date of each and every increase in the Borrowing Base, a further facility
fee in United States Dollars equal to .50% of such increase in the Borrowing
Base. The Agent shall determine the facility fees payable under this Section on
or prior to the foregoing dates and shall deliver to the Borrower a written
request for payment of the facility fee so determined, as detailed therein.
5.8 Engineering Fees
The Borrower shall pay to the Agent on or before the date of each
redetermination of the Borrowing Base an engineering fee in the amount of U.S.
$10,000.
5.9 Interest on Overdue Amounts
In the event that any amount due hereunder (including, without limitation,
any interest payment) is not paid when due (whether by acceleration or
otherwise), the Borrower shall pay interest on such unpaid amount (including,
without limitation, interest on interest), if and to the fullest extent
permitted by applicable law, from the date that such amount is due until the
date that such amount is paid in full (but excluding the date of such payment if
the payment is received for value at the required place of payment on the date
of such payment), and such interest shall accrue daily, be calculated and
compounded monthly and be payable on demand, after as well as before maturity,
default and judgment, at a rate per annum that is equal to (a) in respect of
amounts due in Canadian Dollars, the interest rate applicable hereunder to
Canadian Prime Rate Loans plus 5.0% per annum or (b) in respect of amounts due
in United States Dollars, the interest rate applicable hereunder to Alternate
Base Rate Loans plus 5.0% per annum.
5.10 Waiver
To the extent permitted by applicable law, the covenant of the Borrower to
pay interest at the rates provided herein shall not merge in any judgment
relating to any obligation of the Borrower to the Lenders or the Agent. To the
extent permitted by applicable law, any provision of the Interest Act (Canada),
Judgment Interest Act (Alberta), Pre-Judgment Interest Act (Saskatchewan),
Executions Act (Saskatchewan) or other similar legislation which restricts any
rate of interest set forth herein shall be inapplicable to this Agreement and is
hereby waived by the Borrower.
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5.11 Maximum Rate Permitted by Law
No interest or fee to be paid hereunder shall be paid at a rate exceeding
the maximum rate permitted by applicable law. In the event that such interest
or fee exceeds such maximum rate, such interest or fees shall be reduced or
refunded, as the case may be, so as to be payable at the highest rate
recoverable under applicable law.
ARTICLE 6
DOCUMENTARY INSTRUMENTS
6.1 Availability
Subject to the provisions hereof, the Issuing Lender shall issue, renew or
extend Documentary Instruments under the Credit Facility in accordance with the
Drawdown Notices of the Borrower; provided that the aggregate outstanding
Principal represented by all outstanding Documentary Instruments shall not
exceed U.S. $500,000 or the Equivalent Amount in Canadian Dollars. The issuance
of Documentary Instruments shall constitute Drawdowns hereunder and shall reduce
the availability of the Credit Facility by the amount of such Documentary
Instruments.
6.2 Form
Documentary Instruments shall be in a form satisfactory to the Issuing
Lender and shall have an expiration date not in excess of one year from the date
of issue.
6.3 No Conversion
Except as provided in Section 6.4, the Borrower may not effect a Conversion
of a Documentary Instrument.
6.4 Reimbursement or Conversion on Presentation; Issuing Lender Indemnity
(1) On presentation of a Documentary Instrument and payment thereunder by
the Issuing Lender, the Borrower shall forthwith pay to and
reimburse the Issuing Lender for all amounts paid by the Issuing
Lender pursuant to such Documentary Instrument; failing such payment,
the Borrower shall be deemed to have effected a Conversion of such
Documentary Instrument into: (a) a Canadian Prime Rate Loan, in the
case of a Documentary Instrument denominated in Canadian Dollars; and
(b) an Alternate Base Rate Loan, in the case of a Documentary
Instrument denominated in United States Dollars, in each case to the
extent of the payment of the Issuing Lender thereunder.
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(2) (a) If the Issuing Lender makes payment under any Documentary
Instrument and the Borrower does not fully reimburse the Issuing
Lender on or before the date of payment, then Section 6.4(1)
shall apply to deem a Loan to be outstanding to the Borrower
under this Agreement in the manner therein set out. Each Lender
shall, on request by the Issuing Lender, immediately pay to the
Issuing Lender an amount equal to such Lender's Rateable Portion
of the amount paid by the Issuing Lender such that each Lender is
participating in the deemed Loan in accordance with its Rateable
Portion.
(b) Each Lender shall immediately on demand indemnify the Issuing
Lender to the extent of such Lender's Rateable Portion of any
amount paid or liability incurred by the Issuing Lender under
each Documentary Instrument issued by it to the extent that the
Borrower does not full reimburse the Issuing Lender therefor.
(c) For certainty, the obligations in this Section 6.4(2) shall
continue as obligations of the persons who were Lenders at the
time each such Documentary Instrument was issued notwithstanding
that such Lender may assign its rights and obligations hereunder,
unless the Issuing Lender specifically releases such Lender from
such obligations in writing.
6.5 Fees
The Borrower shall pay to the Issuing Lender for the account of all Lenders
an issuance fee (in the currency which the Documentary Instrument is
denominated) in advance on the date each Documentary Instrument is issued equal
to the greater of $500, or one percent (1%) per annum, calculated on the basis
of a year of 365 or 366, as the case may be, and actual days elapsed (including
the first day but excluding the last), on the face amount of such Documentary
Instrument during the period for which such Documentary Instrument is issued;
provided however, in the event such Documentary Instrument is cancelled prior to
its original expiry date or a payment is made by the Issuing Lender with respect
to such Documentary Instrument, the Issuing Lender shall, within 30 days after
such cancellation or the making of such payment, rebate the Borrower the
unearned portion of such fee. In addition, with respect to all Documentary
Instruments the Borrower shall from time to time pay to the Issuing Lender its
usual and customary fees (at the then prevailing rates) for the amendment,
delivery and administration of letters of credit and letters of guarantee such
as the Documentary Instruments.
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6.6 Additional Provisions
(a) Indemnity and No Lender Liability
---------------------------------
The Borrower shall indemnify and save harmless the Lenders, the
Issuing Lender and the Agent against all claims, losses, costs,
expenses or damages to the Lenders, Issuing Lender or Agent arising
out of or in connection with any Documentary Instrument, the issuance
thereof, any payment thereunder or any action taken by the Lenders,
the Issuing Lender or the Agent or any other person in connection
therewith, including, without limitation, all costs relating to any
legal process or proceeding instituted by any party restraining or
seeking to restrain the Issuing Lender from accepting or paying any
Draft or any amount under any such Documentary Instrument, but
excepting from the foregoing those which result from the Agent's or a
Lender's gross negligence or wilful misconduct. The Borrower also
agrees that the Lenders, the Issuing Lender and the Agent shall have
no liability to it for any reason in respect of or in connection with
any Documentary Instrument, the issuance thereof, any payment
thereunder or any other action taken by the Lenders, or any other
person in connection therewith, except as a result of the Lenders',
Issuing Lender's or Agent's gross negligence or wilful misconduct.
(b) No Obligation to Inquire
------------------------
The Borrower hereby acknowledges and confirms to the Issuing Lender
that the Issuing Lender shall not be obliged to make any inquiry or
investigation as to the right of any beneficiary to make any claim or
Draft or request any payment under a Documentary Instrument and
payment by the Issuing Lender pursuant to a Documentary Instrument
shall not be withheld by the Issuing Lender by reason of any matters
in dispute between the beneficiary thereof and the Borrower. The sole
obligation of the Issuing Lender with respect to Documentary
Instruments is to cause to be paid a Draft drawn or purporting to be
drawn in accordance with the terms of the applicable Documentary
Instrument and for such purpose the Issuing Lender is only obliged to
determine that the Draft purports to comply with the terms and
conditions of the relevant Documentary Instrument.
The Issuing Lender shall not have any responsibility or liability for
or any duty to inquire into the form, sufficiency (other than to the
extent provided in the preceding paragraph), authorization, execution,
signature, endorsement, correctness (other than to the extent provided
in the preceding paragraph), genuineness or legal effect of any Draft,
certificate or other document presented to it pursuant to a
Documentary Instrument and the Borrower unconditionally assumes all
risks with respect to the same. The Borrower agrees that it assumes
all risks of the acts or omissions of the beneficiary of any
Documentary Instrument with respect to the use by such beneficiary of
the relevant Documentary Instrument.
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(c) The obligations of a Borrower hereunder with respect to all
Documentary Instruments shall be absolute, unconditional and
irrevocable and shall not be reduced by any event, circumstance or
occurrence including, without limitation, any lack of validity or
enforceability of a Documentary Instrument, or any Draft paid or acted
upon by the Issuing Lender or any of its correspondents being
fraudulent, forged, invalid or insufficient in any respect, or any
defenses or claims which the Borrower may have against any beneficiary
or transferee of any Documentary Instrument. The obligations of a
Borrower hereunder shall remain in full force and effect and shall
apply to any alteration to or extension of the expiration date of any
Documentary Instrument or any letter of credit or letter of guarantee
issued to replace, extend or alter any Documentary Instrument.
(d) Issuing Lender Actions
----------------------
Any action, inaction or omission taken or suffered by the Issuing
Lender or by any of the Issuing Lender's correspondents under or in
connection with a Documentary Instrument or any Draft made thereunder,
if in good faith and in conformity with foreign or domestic laws,
regulation or customs applicable thereto shall be binding upon the
Borrower and shall not place the Issuing Lender or any of its
correspondents under any resulting liability to the Borrower. Without
limiting the generality of the foregoing, the Issuing Lender and its
correspondents may receive, accept or pay as complying with the terms
of a Documentary Instrument, any Draft thereunder, otherwise in order
which may be signed by, or issued to, the administrator or any
executor of, or the trustee in bankruptcy of, or the receiver for any
property of, or any person or entity acting as a representative or in
the place of, such beneficiary or its successors and assigns. The
Borrower covenants that it will not take any steps, issue any
instructions to the Issuing Lender or any of its correspondents or
institute any proceedings intended to derogate from the right or
ability of the Issuing Lender or its correspondents to honour and pay
any Documentary Instrument or any Drafts.
(e) Payment of Contingent Liabilities
---------------------------------
The Borrower shall pay to the Issuing Lender an amount equal to the
maximum amount available to be drawn under any unexpired Documentary
Instrument which becomes the subject of any order, judgment,
injunction or other such determination (an "Order"), or any petition,
proceeding or other application for any Order by the Borrower or any
other party, restricting payment by the Issuing Lender under and in
accordance with such Documentary Instrument or extending the Issuing
Lender's liability under such Documentary Instrument beyond the
expiration date stated therein (a "Proceeding"); payment in respect of
each such Documentary Instrument shall be due forthwith upon demand in
the currency in which such Documentary Instrument is denominated.
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Any amount paid to the Issuing Lender pursuant to the preceding
paragraph shall be held by the Issuing Lender in interest bearing cash
collateral accounts (with interest payable for the account of the
Borrower at the rates and in accordance with the then prevailing
practices of the Issuing Lender for accounts of such type) as
continuing security for the Obligations and shall, prior to an Event
of Default be applied by the Issuing Lender against the Obligations
for, or (at the option of the Issuing Lender) be applied in payment
of, such Documentary Instrument if payment is required thereunder;
after an Event of Default the Issuing Lender may apply such amounts
against any Obligations as it sees fit.
The Issuing Lender shall release to the Borrower any amount remaining
in the cash collateral accounts after applying the amounts necessary
to discharge the Obligations relating to such Documentary Instrument,
upon the later of:
(i) if the Documentary Instrument is subject to an Order or is the
subject of an outstanding Proceeding, the date on which any
final and non-appealable order, judgment or other determination
has been rendered or issued either terminating any applicable
Order or Proceeding or permanently enjoining the Issuing Lender
from paying under such Documentary Instrument or, in the case
of a Proceeding, it has been terminated by the agreement of the
parties thereto;
(ii) the earlier of:
A. the date on which either the original counterpart of such
Documentary Instrument is returned to the Issuing Lender
for cancellation or the Issuing Lender is released by the
beneficiary thereof from any other obligation in respect
of such Documentary Instrument; and
B. the expiry of such Documentary Instrument; and
(iii) if an Event of Default has occurred and is continuing, the
payment and satisfaction of all Obligations and the
cancellation or termination of the Credit Facility.
(f) Uniform Customs and Practice
----------------------------
The Uniform Customs and Practice for Documentary Credits as most
recently published by the International Chamber of Commerce (the
"Uniform Customs") shall in all respects apply to each Letter of
Credit unless expressly provided to the contrary therein and shall be
deemed for such purpose to be a part of this Agreement as if fully
incorporated herein. In the event of any conflict or inconsistency
between the Uniform Customs and the governing law of this Agreement,
the Uniform Customs
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shall, to the extent permitted by applicable law, prevail to the
extent necessary to remove the conflict or inconsistency.
ARTICLE 7
PAYMENTS
7.1 Place of Payment of Principal, Interest and Fees; Payments to Agent
All payments of principal, interest, fees and other amounts to be made by
the Borrower to the Agent and the Lenders pursuant to this Agreement shall be
made to the Agent (for, as applicable, the account of the Lenders or its own
account) in the currency in which the Loan is outstanding for value on the day
such amount is due, and if such day is not a Banking Day on the Banking Day next
following, by deposit or transfer thereof to the account or accounts of the
Agent maintained at the Agent's Branch and designated by the Agent for such
purpose or at such other place as the Borrower and the Agent may from time to
time agree. Notwithstanding anything to the contrary expressed or implied in
this Agreement, the receipt by the Agent in accordance with this Agreement of
any payment made by the Borrower for the account of any of the Lenders shall,
insofar as the Borrower's obligations to the relevant Lenders are concerned, be
deemed also to be receipt by such Lenders and the Borrower shall have no
liability in respect of any failure or delay on the part of the Agent in
disbursing and/or accounting to the relevant Lenders in regard thereto.
7.2 Designated Accounts of the Lenders
All payments of principal, interest, fees or other amounts to be made by
the Agent to the Lenders pursuant to this Agreement shall be made for value on
the day required hereunder, provided the Agent receives funds from the Borrower
for value on such day, and if such funds are not so received from the Borrower
or if such day is not a Banking Day, on the Banking Day next following, by
deposit or transfer thereof at the time specified herein to the account of each
Lender designated by such Lender to the Agent for such purpose or to such other
place or account as the Lenders may from time to time notify the Agent.
7.3 Funds
Each amount advanced, disbursed or paid hereunder shall be advanced,
disbursed or paid, as the case may be, in such form of funds as may from time to
time be customarily used for Canadian Dollars in Calgary, Alberta and Toronto,
Ontario or for United States Dollars in New York, New York in the settlement of
banking transactions similar to the banking transactions required to give effect
to the provisions of this Agreement on the day such advance, disbursement or
payment is to be made.
-42-
7.4 Application of Payments
All payments made by the Borrower hereunder shall be applied in the
following order:
(a) to amounts due hereunder as costs and expenses;
(b) to amounts due hereunder as default interest;
(c) to amounts due hereunder as stand-by fees;
(d) to amounts due hereunder as fees other than stand-by fees;
(e) to amounts due hereunder as interest; and
(f) to amounts due hereunder as principal.
7.5 Set Off
(1) The Obligations shall be paid by the Borrower without any set-off,
withholding or deduction whatsoever.
(2) In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, upon the occurrence of
an Event of Default which remains unremedied (whether or not the Loans have
been accelerated hereunder), the Agent and each Lender shall have the right
(and are hereby authorized by the Borrower) at any time and from time to
time to combine all or any of the Borrower's accounts with the Agent or the
Lenders, as the case may be, and to set off and to appropriate and to apply
any and all deposits (general or special, term or demand) including, but
not limited to, indebtedness evidenced by certificates of deposit whether
matured or unmatured, and any other indebtedness at any time held by the
Borrower or owing by such Lender or the Agent, as the case may be, to or
for the credit or account of the Borrower against and towards the
satisfaction of any Obligations, and may do so notwithstanding that the
balances of such accounts and the liabilities are expressed in different
currencies, and the Agent and each Lender are hereby authorized to effect
any necessary currency conversions at the noon spot rate of exchange
announced by the Bank of Canada on the Banking Day before the day of
conversion.
(3) The Agent or the applicable Lender, as the case may be, shall notify
the Borrower of any such set-off from the Borrower's accounts within a
reasonable period of time thereafter, although the Agent or the Lender, as
the case may be, shall not be liable to the Borrower for its failure to so
notify.
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ARTICLE 8
REPRESENTATIONS AND WARRANTIES
8.1 Representations and Warranties
The Borrower hereby represents and warrants as follows to the Agent and the
Lenders and acknowledges and confirms that the Agent and the Lenders are relying
upon such representations and warranties:
(a) Corporate Status
----------------
The Borrower is a corporation duly incorporated and validly existing
under the laws of the Province of Alberta and has all necessary
corporate power and authority to own its properties and carry on its
business as presently carried on and is duly licensed, registered or
qualified in all jurisdictions where the character of its property
owned or leased or the nature of the activities conducted by it makes
such licensing, registration or qualification necessary.
(b) Corporate Authority
-------------------
The Borrower has full corporate power and authority to enter into this
Agreement and the Documents to which it is a party and to do all acts
and execute and deliver all other documents as are required hereunder
or thereunder to be done, observed or performed by it in accordance
with their respective terms.
(c) Valid Authorization
-------------------
The Borrower has taken all necessary corporate and other action to
authorize the creation, execution, delivery and performance of this
Agreement and the other Documents and to observe and perform the
provisions of each in accordance with their respective terms.
(d) Validity of Documents and Enforceability; No Resulting Violation
----------------------------------------------------------------
This Agreement constitutes and, when executed and delivered, each of
the Documents will constitute valid and legally binding obligations of
the Borrower enforceable against it in accordance with their
respective terms subject to applicable bankruptcy, insolvency and
other laws of general application limiting the enforceability of
creditors' rights and to the fact that specific performance is an
equitable remedy available only in the discretion of the court.
Neither the execution and delivery of this Agreement or any other
Document, nor compliance with the
-44-
terms and conditions of any of them, (i) has resulted or will result
in a violation of the articles or the by-laws of the Borrower or any
resolutions passed by the directors or shareholders of the Borrower or
any applicable law, rule, regulation, order, judgment, injunction,
award or decree, (ii) has resulted or will result in a material breach
of, or constitute a default under, any material loan agreement,
indenture, trust deed or any other material agreement or instrument to
which the Borrower is a party or by which it is bound, (iii) requires
any material approval or consent of any Governmental Authority having
jurisdiction except such as has already been obtained, or (iv) has
resulted or will result in the creation of or the obligation to create
any material Security Interest on, against or in respect of any of the
material property, assets and undertakings of the Borrower and its
Material Subsidiaries except as permitted or contemplated hereby.
(e) Title to Assets
---------------
(i) No person has any agreement or right to acquire any of the
assets of the Borrower or any of its Material Subsidiaries or
any interest therein other than with respect to Permitted
Dispositions.
(ii) The Borrower and each of its Material Subsidiaries have good
title to their assets, subject to Permitted Title Defects and
Permitted Encumbrances, and have not received any notice of a
potential defect or irregularity in their title to any of their
assets which, if substantiated, would be reasonably likely to
have a Material Adverse Effect.
(iii) The Borrower and each Material Subsidiary has good and
defensible title to the P&NG Rights described in the most
recent Engineering Report provided to the Lenders, subject only
to Permitted Title Defects and Permitted Encumbrances.
(f) Engineering Reports
-------------------
The most recent Engineering Report and other related data provided by
the Borrower to the Agent in respect of the reserves attributable to
the P&NG Rights is substantially accurate and fairly reflects the
interests of the persons specified therein and thereto as of the date
thereof net of all royalties and other burdens affecting the same.
(g) Non-Default
-----------
No Default or Event of Default has occurred and is continuing.
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(h) Financial Condition
-------------------
(i) The unaudited consolidated financial statements of the Borrower
previously delivered to the Agent present fairly, in all material
respects, the consolidated financial condition of the Borrower as
at the date thereof and the results of the consolidated
operations thereof for the year then ending, all in accordance
with generally accepted accounting principles consistently
applied.
(ii) Except as has been disclosed to the Agent by written notice in
accordance with the provisions of this Agreement, no change in
the Borrower's consolidated financial condition (as disclosed or
reflected in the Borrower's most recent consolidated financial
statements delivered to the Agent) has occurred which would
reasonably be expected to have a Material Adverse Effect.
(i) Absence of Litigation
---------------------
There are no actions, suits or proceedings pending or, to the
knowledge of the Borrower, threatened against or affecting the
Borrower or any of its Subsidiaries, including without limitation any
aboriginal claims against their property or any of their undertakings
and assets, at law, in equity or before any arbitrator or before or by
any governmental department, body, commission, board, bureau, agency
or instrumentality having jurisdiction in the premises in respect of
which there is a reasonable possibility of a determination adverse to
the Borrower or any Subsidiary and which, if determined adversely,
would reasonably be expected to have a Material Adverse Effect.
(j) Compliance with Applicable Laws, Court Orders and Material Agreements
---------------------------------------------------------------------
The Borrower and its Subsidiaries and their respective businesses and
operations are in compliance with all applicable laws (including,
without limitation, all applicable Environmental Laws), all applicable
directives, judgments, decrees, injunctions and orders rendered by any
Governmental Authority or court of competent jurisdiction, its
constating documents and by-laws, all agreements or instruments to
which it is a party or by which its property or assets are bound, and
any employee benefit plans, except to the extent that non-compliance
would not reasonably be expected to have a Material Adverse Effect.
(k) Authorizations in Effect
------------------------
All authorizations, approvals, consents, licences, exemptions,
filings, registrations, notarizations and other requirements of
Governmental Authorities reasonably necessary to carry on the
businesses of the Borrower and its Subsidiaries are in full
-46-
force and effect, except to the extent that the failure to have or
maintain the same in full force and effect would not, when taken in
the aggregate, reasonably be expected to have a Material Adverse
Effect.
(l) Remittances Up to Date
----------------------
All of the remittances required to be made by the Borrower and its
Subsidiaries to the federal, provincial and municipal governments have
been made, are currently up to date and there are no outstanding
arrears, except where and to the extent the failure to remit or delay
in remitting would not, when taken in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(m) Subsidiaries
------------
The Borrower has no Subsidiaries as at the date hereof.
(n) Environmental
-------------
(i) To the best of the knowledge and belief of the Borrower, after
due inquiry, the Borrower, its Subsidiaries and the Neutrino
Assets comply in all material respects and the businesses,
activities and operations of same and the use of the Neutrino
Assets and the processes and undertakings performed thereon
comply in all material respects with all Environmental Laws,
Environmental Permits and Environmental Orders; further, the
Borrower does not know, and has no reasonable grounds to know, of
any facts which result in or constitute or are likely to give
rise to non-compliance with any Environmental Laws, Environmental
Permits or Environmental Orders which facts or non-compliance do
or could reasonably be expected to have a Material Adverse
Effect.
(ii) To the best of the knowledge and belief of the Borrower, after
due inquiry, the Borrower and its Subsidiaries have obtained all
Environmental Permits which are required of any of them to the
date hereof in relation to the Neutrino Assets or in respect of
their businesses, activities, operations, processes and
undertakings; all such Environmental Permits are valid and in
full force and effect, and no material violations thereof have
been experienced, noted or recorded which are continuing and no
proceeding is pending and, to the best of the knowledge and
belief of the Borrower, after due inquiry, no proceedings have
been or are being taken by any Governmental Authority to remove
or invalidate any of the Environmental Permits, the removal or
invalidation of which would reasonably be expected to have a
Material Adverse Effect.
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(iii) To the best of the knowledge and belief of the Borrower, after
due inquiry, the processes and undertakings associated with
the Neutrino Assets and the businesses, activities and
operations of the Borrower and its Subsidiaries have not and
will not be used to generate, manufacture, refine, treat,
transport, store, handle, dispose, transfer, produce or
process Hazardous Materials except in compliance in all
material respects with all Environmental Laws, Environmental
Permits and Environmental Orders, except to the extent that
such non-compliance would not have or would not reasonably be
expected to have a Material Adverse Effect.
(iv) To the best of the knowledge and belief of the Borrower, after
due inquiry, all contaminants and Hazardous Materials owned or
controlled by the Borrower or its Material Subsidiaries and
disposed of, treated or stored on or in relation to the
Neutrino Assets have been or are in the process of being
disposed of, treated and stored in compliance with all
Environmental Laws, Environmental Permits and Environmental
Orders except to the extent that such non-compliance would not
have or would not reasonably be expected to have a Material
Adverse Effect.
(v) The Borrower has not received written notice under any
Environmental Laws, Environmental Permits or Environmental
Orders, and has no knowledge after due inquiry, of any facts
which could give rise to any notice, of non-compliance with
any Environmental Laws, Environmental Permits and
Environmental Orders which facts or non-compliance do or could
reasonably be expected to have a Material Adverse Effect or
any notice that the Borrower or any of its Subsidiaries is a
potentially responsible party for a federal, provincial,
regional, municipal or local clean-up or corrective action in
connection with the Neutrino Assets which could reasonably be
expected to have a Material Adverse Effect.
(vi) To the best of the knowledge and belief of the Borrower, there
are no pending changes to Environmental Laws which would
render illegal or materially restrict the businesses,
activities or operations of the Borrower or its Material
Subsidiaries.
(vii) To the best of the knowledge and belief of the Borrower
neither it nor any of its Material Subsidiaries have since
their respective dates of incorporation been convicted of an
offence for non-compliance with any Environmental Laws,
Environmental Permits or Environmental Orders or been fined or
otherwise sentenced or settled such prosecution short of
conviction.
(viii) To the best of the knowledge and belief of the Borrower, after
due inquiry, the Borrower and its Material Subsidiaries have
maintained all material
-48-
environmental and operating documents and records in the
manner and for the time periods required by Environmental
Laws, Environmental Permits and Environmental Orders except to
the extent that such non-compliance would not have or would
not reasonably be expected to have a Material Adverse Effect.
(ix) The Borrower and its Material Subsidiaries have in effect a
management structure and policies and procedures that will
permit the Borrower to effectively manage environmental risk
and respond in a timely manner in compliance with the
Environmental Laws, Environmental Orders and Environmental
Permits in the event of Release of Hazardous Materials in, on
or under property of the Borrower or its Material
Subsidiaries.
(o) Taxes
-----
The Borrower and each of its Subsidiaries has duly filed on a timely
basis all tax returns required to be filed by each of them and have
paid all Taxes which are due and payable, and have paid all
assessments and reassessments, and all other Taxes, governmental
charges, governmental royalties, penalties, interest and fines claimed
against them, other than those which are being contested by them in
good faith by appropriate proceedings; they have made adequate
provision for, and all required instalment payments have been made in
respect of, Taxes payable for the current period for which returns are
not yet required to be filed; there are no agreements, waivers or
other arrangements providing for an extension of time with respect to
the filing of any tax return by them or the payment of any Taxes;
there are no actions or proceedings being taken by Revenue Canada,
Taxation or any provincial or municipal taxation authority to enforce
the payment of any Taxes by them other than those which are being
contested by them in good faith by appropriate proceedings where such
contestation would not be reasonably expected to have a Material
Adverse Effect.
8.2 Deemed Repetition
On the date of delivery by the Borrower of a Drawdown Notice to the Agent,
and again on the date of any Drawdown made by the Borrower pursuant thereto:
(a) except those representations and warranties which the Borrower has
previously notified the Agent in writing cannot be repeated for such
Drawdown and in respect of which a Majority of the Lenders have waived
in writing (with or without terms or conditions) the application of
the condition precedent in Section 31 for such Drawdown, each of the
representations and warranties contained in Section 8.1 shall be
deemed to be repeated; and
-49-
(b) the Borrower shall be deemed to have represented to the Agent and the
Lenders that, except as has otherwise been notified to the Agent in
writing and has been waived by a Majority of the Lenders in writing,
no event has occurred and remains outstanding which would constitute a
Default or an Event of Default nor will any such event occur as a
result of the aforementioned Drawdown.
8.3 Other Documents
All representations, warranties and statements contained in any Document
delivered hereunder shall constitute representations and warranties made by the
Borrower to the Agent under Section 8.1 of this Agreement.
8.4 Effective Time of Repetition
All representations and warranties, when repeated or deemed to be repeated
hereunder, shall be construed with reference to the facts and circumstances
existing at the time of repetition, unless they are stated herein to be made as
at the date hereof.
8.5 Nature of Representations and Warranties
The representations and warranties set out in this Agreement or deemed to
be made pursuant hereto shall survive the execution and delivery of this
Agreement and the making of each Drawdown, notwithstanding any investigations or
examinations which may be made by the Agent, Lenders or Lenders' Counsel. Such
representations and warranties shall survive until this Agreement has been
terminated, provided that the representations and warranties relating to
environmental matters shall survive the termination of this Agreement.
ARTICLE 9
GENERAL COVENANTS
9.1 Affirmative Covenants
So long as any Obligation is outstanding or the Credit Facility is
available hereunder, the Borrower covenants and agrees with each of the Lenders
and the Agent that, unless a Majority of the Lenders otherwise consent in
writing:
(a) Punctual Payment and Performance
--------------------------------
The Borrower shall duly and punctually pay the principal of all Loans,
all interest thereon and all fees and other amounts required to be
paid by the Borrower hereunder in the manner specified hereunder and
the Borrower shall maintain, perform and observe all of its
obligations under this Agreement and under any other Document.
-50-
(b) Corporate Existence and Conduct of Business
-------------------------------------------
Subject to Section 9.2(i), the Borrower shall maintain its corporate
existence in good standing and do or cause to be done all things
necessary to keep in full force and effect all properties, rights,
franchises, licences and qualifications to carry on business in any
jurisdiction in which it carries on business and it shall, and shall
cause its Material Subsidiaries to, maintain all of its or their
respective properties and assets and conduct their businesses,
activities and operations in a manner consistent with industry
standards.
(c) Compliance with Legislation Generally
-------------------------------------
The Borrower shall do or cause to be done, and shall cause its
Subsidiaries to do or cause to be done, all acts necessary or
desirable to comply with all applicable federal, provincial and
municipal laws, requirements or standards, except to the extent that
failure to so comply would not reasonably be expected to have a
Material Adverse Effect, and to preserve and keep in full force and
effect all franchises, licences, rights, privileges and permits
necessary to enable the Borrower and each of its Subsidiaries to
operate and conduct their respective businesses in accordance with
standard industry practice and to advise the Agent of any proposed
changes to or loss or sale of such franchises, licences, rights,
privileges and permits which would reasonably be expected to have a
Material Adverse Effect.
(d) Material Litigation
-------------------
The Borrower shall promptly give written notice to the Agent of any
litigation, proceeding or dispute affecting the Borrower or any of its
Subsidiaries which, if the result thereof was adverse to its
interests, might be reasonably expected to have a Material Adverse
Effect on the Borrower and its Subsidiaries, taken as a whole, and
from time to time furnish to the Agent all reasonable information
requested by the Agent concerning the status of any such litigation,
proceeding or dispute.
(e) Financial Statements and Other Information
------------------------------------------
The Borrower shall deliver to the Agent with sufficient copies for
each of the Lenders:
(i) Annual Financials - as soon as available and, in any event,
-----------------
within 120 days after the end of each of its fiscal years, (A)
copies of the Borrower's unaudited annual financial statements
and (B) from SMC, copies of SMC's audited annual financial
statements on a consolidated basis consisting of a balance sheet,
statement of profit and loss and surplus and statement of changes
in financial position for each such year, together with the notes
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thereto, all prepared in accordance with generally accepted
accounting principles consistently applied together with a
report of SMC's auditors thereon;
(ii) Quarterly Financials - as soon as available and, in any event
--------------------
within 60 days after the end of each of its first, second and
third fiscal quarters, copies of its unaudited quarterly
financial statements on a consolidated basis, in each case
consisting of a balance sheet, statement of profit and loss and
surplus and statement of changes in financial position for each
such period all in reasonable detail and stating in comparative
form the figures for the corresponding date and period in the
previous fiscal year, all prepared in accordance with generally
accepted accounting principles consistently applied and
certified by the Borrower's chief financial officer;
(iii) Compliance Certificate - concurrently with furnishing the
----------------------
financial statements pursuant to Sections 91 and 9.1(e)(ii), a
Compliance Certificate signed by the president or chief
financial officer of the Borrower and stating that, inter alia,
the Borrower that no Default or Event of Default has occurred
and is continuing (or, if applicable, specifying those defaults
or events notified in accordance with Section 91) and detailing
calculations determining whether or not the covenants contained
in Section 93 have been or are being complied with;
(iv) Internal Engineering Report - Internal Engineering Reports (or,
---------------------------
to the extent previously delivered and approved pursuant hereto,
an Officer's Certificate confirming that there have been no
changes thereto since the most recently delivered or detailing
any modifications or amendments thereto), no later than 30 days
prior to each scheduled Borrowing Base review, each such report
or updating certificate to be in form and containing particulars
as are satisfactory to the Majority of Lenders;
(v) Annual Engineering Report - On or prior to April 1 of each year,
-------------------------
an Engineering Report (or, to the extent previously delivered
and approved pursuant hereto, an Officer's Certificate
confirming that there have been no changes thereto since the
most recently delivered or detailing any modifications or
amendments thereto), effective as of the immediately preceding
December 31, prepared by an Independent Engineer, each such
report or updating certificate to be in form and containing
particulars as are satisfactory to the Majority of the Lenders;
and
(vi) Other - at the request of the Agent, such other information,
-----
reports, certificates, projections of income and cash flow or
other matters affecting the business, affairs, financial
condition, property or assets of the Borrower
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or the business, affairs, financial condition, property or
assets of any of its Subsidiaries as the Agent may reasonably
request, including, without limitation, legal descriptions of
real property and particulars of any serial number goods (as
such term is defined pursuant to the Personal Property Security
Act (Alberta) and the regulations thereto).
(vii) For the purposes of approving the aforementioned Internal
Engineering Report, Annual Engineering Report or relevant
updating Officer's Certificates (each, a "Report"):
A. each Lender shall advise the Agent in writing, within 20
days after receipt of the relevant Report by the Agent,
whether such Report is in a form and contains particulars
satisfactory to such Lender (acting reasonably) and, if
unsatisfactory, the reasons of such Lender for such
determination; provided that if any Lender shall fail to so
advise the Agent within such period, then such Lender shall
be deemed to have confirmed that the relevant Report is
satisfactory to such Lender;
B. if the Majority of the Lenders have advised the Agent that
the relevant Report is not satisfactory to them (acting
reasonably), then the Agent shall so notify the Borrower in
writing within 10 days after the expiry of the
aforementioned 20-day period (which notice shall include
details of the reasons of such Lenders for the same);
C. upon receipt from the Agent of the notice referenced in
Section 9.1(vii)(B) above, the Borrower shall revise and
supplement the relevant Report to take account of the
reasons for rejection provided by the Lenders and within a
further 30 days after receipt of such notice shall deliver
copies of the modified Report to the Agent for distribution
to the Lenders, whereupon the provisions of subparagraph (A)
above shall again apply to such modified Report, mutatis
mutandis; and
D. if the Majority of the Lenders have advised the Agent that
the modified Report re-submitted as in subparagraph (C)
above is not satisfactory to them (acting reasonably), then
the Agent shall promptly so notify the Borrower in writing,
whereupon the Agent and the Lenders shall redetermine the
Borrowing Base in accordance with Section 2.16.
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(f) Accuracy of Engineering Reports
-------------------------------
The Borrower shall ensure that each Engineering Report, each Internal
Engineering Report and all other related data provided by the Borrower
or any Material Subsidiary to the Agent with respect to the P&NG
Rights evaluated in such Engineering Report and Internal Engineering
Report or discussed in such related data are substantially accurate
and fairly reflect the interests of the Borrower and each Material
Subsidiary therein and thereto net of all royalties and other burdens
affecting the same.
(g) Rights of Inspection
--------------------
At any reasonable time and from time to time upon reasonable prior
notice, the Borrower shall permit the Agent or any representative
thereof (at the reasonable expense of the Borrower) or any Lender or
any representative thereof (at the expense of such Lender) to examine
and make copies of and abstracts from the records and books of account
of the Borrower or any of its Subsidiaries and to visit and inspect
the premises and properties of the Borrower or any of its Subsidiaries
(in each case at the risk of the Lenders and during normal business
hours of the Borrower) and to discuss the affairs, finances and
accounts of the Borrower or any of its Subsidiaries with any of the
officers of the Borrower or any of its Subsidiaries.
(h) Insurance
---------
The Borrower shall maintain and shall cause its Material Subsidiaries
to maintain all risks property insurance in connection with their
assets and businesses and other types of insurance, including
liability insurance with respect to claims for personal injury, death
or property damage, with respect to the operation of their businesses,
all with responsible and reputable insurance companies in such amounts
and with such deductibles as are customary in the case of businesses
of established reputation engaged in the same or similar businesses
and in any event as are acceptable to the Agent.
(i) Notice of Default or Event of Default
-------------------------------------
The Borrower shall deliver to the Agent, forthwith upon becoming aware
of a Default or the occurrence of an Event of Default, an Officer's
Certificate describing in detail such Default or such Event of Default
and specifying the steps, if any, being taken to cure or remedy the
same.
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(j) Notice of Material Adverse Effect
---------------------------------
The Borrower shall promptly notify the Agent of any event,
circumstance or condition that has had or is reasonably likely to have
a Material Adverse Effect.
(k) Notice of New Subsidiaries
--------------------------
The Borrower shall promptly give written notice to the Agent of the
acquisition, creation or existence of each new Subsidiary after the
date hereof.
(l) Payment of Taxes, Withholdings, etc.
------------------------------------
The Borrower shall, and shall cause its Material Subsidiaries to, from
time to time pay or cause to be paid all rents, taxes, rates, levies
or assessments, ordinary or extraordinary, governmental fees or dues,
and to make and remit all withholdings, lawfully levied, assessed or
imposed upon the Borrower or its Material Subsidiaries or any of the
assets of the Borrower or its Material Subsidiaries, as and when the
same become due and payable, except when and so long as the validity
of any such rents, taxes, rates, levies, assessments, fees, dues or
withholdings is in good faith being contested by the Borrower or its
Material Subsidiaries and provided that they shall have established
adequate reserves therefor (in accordance with generally accepted
accounting principles) and such contestation would not reasonably be
expected to have a Material Adverse Effect and will not involve
forfeiture of any part of its assets which are material to the
Borrower and its Subsidiaries taken as a whole.
(m) Security
--------
The Borrower shall provide the Security contemplated hereunder
registered, filed, recorded or perfected to the satisfaction of the
Agent, acting reasonably.
(n) Payment of Preferred Claims
---------------------------
The Borrower shall, and shall cause its Subsidiaries to, from time to
time pay or cause to be paid all amounts related to Taxes, wages,
workers' compensation obligations, government royalties or pension
fund obligations and any other amount which may result in a Security
Interest, charge or similar encumbrance against the assets of the
Borrower or such Subsidiary arising under statute or regulation and
which has or could reasonably be expected to have a Material Adverse
Effect.
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(o) Environmental Covenants
-----------------------
(i) Without limiting the generality of Section 9.1(c), the Borrower
shall, and shall cause its Subsidiaries and any other party
acting under their primary direction to, conduct their business
and operations so as to comply at all times with all
Environmental Laws, Environmental Permits and Environmental
Orders (to the extent applicable to them) if the consequence of
a failure to comply could reasonably be expected, either alone
or in conjunction with any other such noncompliances, to have a
Material Adverse Effect.
(ii) If the Borrower or its Material Subsidiaries shall:
A. receive or give any notice that a violation of any
Environmental Law, Environmental Permit or Environmental
Order has or may have been committed or is about to be
committed by the same, if such violation would reasonably be
expected to have a Material Adverse Effect;
B. receive any notice that a complaint, proceeding or order has
been filed or is about to be filed against the same alleging
a violation of any Environmental Law, Environmental Permit
or Environmental Order, if such violation would reasonably
be expected to have a Material Adverse Effect; or
C. receive any notice requiring the Borrower or a Subsidiary,
as the case may be, to take any action in connection with
the Release of Hazardous Materials into the environment or
alleging that the Borrower or the Material Subsidiary may be
liable or responsible for costs associated with a response
to or to clean-up a Release of Hazardous Materials into the
environment or any damages caused thereby, if such action or
liability would reasonably be expected to have a Material
Adverse Effect;
the Borrower shall promptly provide the Agent with a copy of
such notice and shall, or shall cause its Subsidiary to, furnish
to the Agent from time to time all reasonable information
requested by the Agent relating to the same.
(iii) The Borrower shall notify the Agent promptly of any event or
occurrence of which it is aware which would reasonably be
expected to result in violation of any Environmental Law,
Environmental Permit or Environmental Order if such event or
occurrence would reasonably be expected to have a Material
Adverse Effect.
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(p) Environmental Assessments
-------------------------
The Borrower shall perform or cause to be performed at its expense,
either or both independent and in-house environmental site
assessments, environmental reviews or audits of its or its Material
Subsidiaries' property:
(i) from time to time in accordance with prudent industry practice;
(ii) if such assessment or review is required by Environmental Law;
and
(iii) if a Default or an Event of Default relating to an Environmental
Claim has occurred and the Agent has made a written request to
it for such assessment, review or audit, within sixty (60) days
after such request,
and it shall provide to the Agent, on a confidential basis, a copy of
each such assessment and review.
(q) Bank Accounts
-------------
The Borrowers shall maintain all accounts and fund with the Agent or
one or any of the Lenders (or their Affiliates) or other mutually
acceptable Canadian banks.
(r) Commodity Hedging
-----------------
The Borrower shall enter into a Commodity Agreement in form and
substance acceptable to the Agent, with respect to a minimum of 50% of
the Borrower's current production of Petroleum Substances for a
minimum of 24 months.
9.2 Negative Covenants
So long as any Obligation is outstanding or the Credit Facility is
available hereunder, the Borrower covenants and agrees with the Agent and each
of the Lenders that, unless a Majority of the Lenders otherwise consent in
writing:
(a) Change of Business
------------------
The Borrower shall not, and shall not permit any Subsidiary on the
date hereof to, change in any material respect the nature of its
business or operations or conduct businesses or operations which are
materially different from the businesses and operations carried on by
the Borrower and its Subsidiaries on the date hereof.
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(b) Negative Pledge
---------------
The Borrower shall not, nor shall it permit any of its Material
Subsidiaries to, create, issue, incur, assume or permit to exist any
Security Interests on any of their property, undertakings or assets
other than Permitted Encumbrances.
(c) Limitation on Debt
------------------
The Borrower shall not have or incur, or permit any Material
Subsidiary to have or incur, any Debt other than Permitted
Indebtedness unless, in all cases, the proceeds thereof shall be paid
to the Lenders to permanently reduce the Credit Facility and any such
repayment shall constitute a permanent reduction of the Credit
Facility equal to each such payment.
(d) No Distributions without Consent
--------------------------------
The Borrower shall not make Distributions in any calendar year except
to SMC and Spruce Hills which Distributions shall be limited to the
original capital investment made by SMC and Spruce Hills in the
Borrower.
(e) Limit on Investments
--------------------
The Borrower shall not, nor shall it permit any Material Subsidiary
to, make any Investment, other than Permitted Investments.
(f) No Dissolution
--------------
The Borrower shall not liquidate, dissolve or wind-up or take any
steps or proceedings in connection therewith.
(g) Non-Arm's Length Transactions
-----------------------------
The Borrower shall not, nor shall it permit any Material Subsidiary
to, enter into any contract whatsoever one with the other or another
or an Affiliate thereof for the sale, purchase, lease or other dealing
in any property (excluding services) other than at a consideration
which equals the fair market value of such property or other than at a
fair market rental as regards leased property, unless such contract or
transaction involves the sale, lease or other disposition of property
to transferees which are the Borrower and/or other Material
Subsidiaries.
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(h) Limit on Sale of Assets
-----------------------
Except for Permitted Dispositions, the Borrower shall not, and shall
not permit its Material Subsidiaries to, sell, transfer or otherwise
dispose of any of their respective property or assets in any calendar
year, whether in one or a series of transactions, which, in aggregate,
have a fair market value in excess of Cdn. $250,000.
(i) No Merger, Amalgamation, etc.
-----------------------------
The Borrower shall not, and shall not permit any Material Subsidiary
to, enter into any transaction whereby all or substantially all of its
undertaking, property and assets would become the property of any
other person (herein called a "Successor") whether by way of
reconstruction, reorganization, recapitalization, consolidation,
amalgamation, merger, transfer, sale or otherwise, unless:
(i) in the case of the Borrower, the Successor is a corporation with
limited liability and incorporated under the federal laws of
Canada or the laws of any province of Canada;
(ii) prior to or contemporaneously with the consummation of such
transaction the Borrower or Material Subsidiary, as the case may
be, and the Successor shall have executed such instruments and
done such things as, in the opinion of Lenders' Counsel, are
necessary or advisable to establish that upon the consummation
of such transaction:
A. the Successor will have assumed all the covenants and
obligations of the Borrower or Material Subsidiary, as the
case may be, under the Documents to which the Borrower or
Material Subsidiary is a party; and
B. this Agreement and the other Documents, as the case may be,
will be valid and binding obligations of the Successor
entitling the Agent and the Lenders, as against the
Successor, to exercise all their rights under the Documents
to which it is a party;
(iii) such transaction shall be on such terms and shall be carried out
in such manner as to preserve and not to impair any of the
rights and powers of the Agent and the Lenders hereunder or
pursuant to the Security and not to affect adversely the
potential liability of the Lenders for any present or future
Taxes or charges of whatsoever nature imposed or levied by or on
behalf of any Governmental Authority;
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(iv) such transactions shall not result in the assets of the Successor
being subject to any Security Interests other than Permitted
Encumbrances; and
(v) no Event of Default and no Default shall have occurred and be
continuing, or will occur as a result of such transaction, or
shall exist immediately after the consummation of such
transaction.
(j) No Material Expenditures
------------------------
Except for Permitted Indebtedness, the Borrower shall not make any
single acquisition annually in excess of U.S. $2,500,000.
9.3 Financial Covenants
So long as any Obligation is outstanding or the Credit Facility is
available hereunder, the Borrower covenants and agrees with the Lenders, unless
a Majority of the Lenders otherwise consent in writing:
(a) Debt Coverage Ratio
-------------------
As at each Quarter End in each calendar year, the Borrower shall not
permit the ratio of EBITDA to Debt Service to be less than 1.2:1.0.
(b) Minimum Tangible Net Worth
--------------------------
The Borrower shall not at any time permit its Tangible Net Worth to be
less than 85% of the Borrower's Tangible Net Worth at August 31, 2000,
plus 75% of the Borrower's positive quarterly net income and 100% of
----
new equity in each case received subsequent to August 31, 2000,
measured as at each Quarter End.
(c) Working Capital Ratio
---------------------
The Borrower shall not at any time permit the ratio of (i) Current
Assets to (ii) Current Liabilities to be less than 1.0:1.0.
9.4 Agent May Perform Covenants
If the Borrower fails to perform any covenants on its part herein
contained, subject to any consents or notice or cure periods required by Section
11.1, the Agent may give notice to the Borrower of such failure and if, within
10 days after such notice, such covenant remains unperformed, the Agent may, in
its discretion but need not, perform any such covenant capable of being
performed by the Agent and if the covenant requires the payment or expenditure
of money, the Agent may make such payment or expenditure and all sums so
expended shall be forthwith
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payable by the Borrower to the Agent and shall bear interest at the applicable
interest rate provided in Section 5.9 for amounts due in Canadian Dollars or
United States Dollars, as the case may be. No such performance, payment or
expenditure by the Agent shall be deemed to relieve the Borrower of any default
hereunder or under the other Documents.
ARTICLE 10
SECURITY
10.1 Security
(1) The Borrower shall execute and deliver, or shall cause to be executed
and delivered, to the Agent the following:
(a) assignment agreement with respect to the National Security;
(b) Cdn. $40,000,000 Debenture;
(c) Debenture Pledge Agreement; and
(d) a guarantee from SMC,
as continuing collateral security for the payment and performance by the
Borrower of all Obligations and all other obligations, liabilities and
indebtedness of the Borrower to the Agent and the Lenders.
(2) The Borrower shall cause to be executed and delivered to the Lender
Subsidiary Security:
(a) from Material Subsidiaries if at any time, and at such time as any
Subsidiary is or becomes a Material Subsidiary, in which case the
Borrower shall promptly, and in any event within 15 days after such
occurrence, cause such Subsidiaries to provide Subsidiary Security to
the extent required to ensure that, after provision of the same, 90%
or more of the P&NG Rights shall be directly owned or held by persons
providing Security hereunder;
(b) together with certified copies of such Subsidiary's constating
documents, by-laws and the resolutions authorizing the Subsidiary
Security, a certificate as to the incumbency of the officers of such
Subsidiary signing such Subsidiary Security and an opinion of legal
counsel to such Subsidiary, with all such certificates and opinions to
be in form and substance satisfactory to the Agent in its sole
discretion, acting reasonably; and
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(c) as continuing collateral security for the payment and performance by
the Borrower of all Obligations and all other obligations, liabilities
and indebtedness of the Borrower to the Agent and the Lenders.
10.2 Registration
The Borrower shall, at its expense, register, file or record the Security
in all offices where such registration, filing or recording is necessary or of
advantage to the creation, perfection and preserving of the security applicable
to it including, without limitation, any land registry offices. The Borrower
shall amend and renew such registrations, filings and recordings from time to
time as and when required to keep them in full force and effect or to preserve
the priority established by any prior registration, filing or recording thereof.
10.3 Forms; Additional Security; Undertaking to Grant Fixed Charge Security
(1) The forms of Security have been prepared based upon the laws of
Alberta and of Canada applicable thereto in effect at the date hereof. The
Agent shall have the right to require that: (a) any such Security be
amended to reflect any changes in such laws, whether arising as a result of
statutory amendments, court decisions or otherwise, in order to confer upon
the Agent and the Lenders the Security Interests intended to be created
thereby, and (b) the Borrower execute and deliver to the Agent such other
and further debentures, mortgages, trust deeds, assignments and security
agreements as may be reasonably required by the Agent.
(2) In addition to and without limiting Section 10.3(1), if the Agent
determines in its sole discretion that it is necessary or desirable for the
adequate protection of the Lenders, the Borrower, upon 20 days' prior
written request from the Agent, shall grant and shall cause its Material
Subsidiaries to grant to the Agent, fixed mortgages and charges, subject
only to Permitted Encumbrances, on proven producing P&NG Rights having an
aggregate fair market value of not less than 90% of the then current net
present value (as determined by the Agent) of the P&NG Rights, as security
for the Obligations and all other obligations, liabilities and indebtedness
of the Borrower to the Agent and the Lenders. In this connection, the
Borrower shall promptly provide the Agent with such information as is
reasonably required by the Agent to identify the property to be charged
pursuant to this Section and the Borrower shall, as soon as possible after
the notice period set forth in the request by the Agent (but in any event
within 20 days after the expiration of such 20 day notice period):
(a) execute and deliver, and cause to be executed and delivered, all such
mortgages, debentures, security agreements, trust deeds, guarantees,
agreements and other instruments (each in form and substance
satisfactory to the Agent) as may be necessary to create the aforesaid
fixed mortgages and charges and shall do all other things as may be
necessary to grant in favour of the Agent the aforesaid fixed
mortgages and charges;
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(b) provide and cause its Material Subsidiaries required pursuant to
Section 10.1(2) to provide to the Agent certified copies of all
corporate resolutions and other authorizations necessary for the
Borrower and such Subsidiaries to grant to the Agent the fixed
mortgages and charges as aforesaid, together with such opinions of
legal counsel to the Borrower and such Subsidiaries as the Agent may
reasonably require with respect to the due authorization, execution,
delivery and enforceability of the above agreements and instruments
and as to the registration or recording of such agreements and
instruments;
(c) assist and cause such Subsidiaries to assist the Agent in the
registration or recording of such agreements and instruments in such
public registry offices as the Agent, acting reasonably, deems
necessary to give full force and effect to the provisions of this
Section; and
(d) pay all reasonable costs and expenses incurred by the Agent and the
Lenders in connection with the preparation, execution and registration
of all agreements and instruments, including any amendments to the
Security, made in connection with this Section.
10.4 Continuing Security
Each item or part of the Security shall for all purposes be treated as a
separate and continuing collateral security and shall be deemed to have been
given in addition to and not in place of any other item or part of the Security
or any other security now held or hereafter acquired by the Agent or the
Lenders. No item or part of the Security shall be merged or be deemed to have
been merged in or by this Agreement or any documents, instruments or
acknowledgements delivered hereunder, or any simple contract debt or any
judgment, and any realization of or steps taken under or pursuant to any
security, instrument or agreement shall be independent of and not create a
merger with any other right available to the Agent or the Lenders under any
security, instruments or agreements held by it or at law or in equity.
10.5 Dealing with Security
The Agent, with the consent of all the Lenders, may grant extensions of
time or other indulgences, take and give up security (including, without
limitation, the Security or any part or parts thereof), accept compositions,
grant releases and discharges. The Agent may otherwise deal with the Borrower,
its Subsidiaries and other parties and with security (including without
limitation, the Security and each part thereof) as the Agent and the Lenders may
see fit, and may, subject to Section 7.4, apply all amounts received from the
Borrower or others or from security (including without limitation, the Security
or any part thereof) upon such part of the liabilities of the Borrower hereunder
or under any of the Security as the Agent may think best, without prejudice to
or in any
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way limiting the liability of the Borrower under this Agreement or under any of
the Security or any other collateral security.
10.6 Effectiveness
The Security and the security created by any other Document constituted or
required to be created shall be effective, and the undertakings as to the
Security herein or in any other Document shall be continuing, whether any Loans
are then outstanding or any amounts thereby secured or any part thereof shall be
owing before or after, or at the same time as, the creation of such Security
Interests or before or after or upon the date of execution of any amendments to
this Agreement.
10.7 Saskatchewan Legislation
The Land Contracts (Actions) Act (Saskatchewan) shall have no application
to any action, as defined in the said Land Contracts (Actions) Act, with respect
to this Agreement and the other Documents; and The Limitation of Civil Rights
Act (Saskatchewan) shall have no application to this Agreement and the other
Documents, any Security Interest for the payment of money made, given or created
by this Agreement or the other Documents, any agreement or instrument renewing
or extending this Agreement or the other Documents or any such Security
Interest, or the rights, powers or remedies of the Agent or any of the Lenders
under this Agreement, the other Documents or any such Security Interest. The
Borrower agrees that the provisions of both The Land Contracts (Actions) Act and
The Limitation of Civil Rights Act are hereby waived and covenants that each
Subsidiary providing security to the Lenders (if any) shall waive such
provisions in writing to the satisfaction of the Agent.
10.8 Release and Discharge of Security
The Borrower and the Material Subsidiaries shall not be discharged from the
Security or any part thereof, other than to the extent such Security applies to
a Permitted Disposition, except by a written release and discharge signed by the
Agent with the prior consent of the Lenders. If all of the Obligations,
Financial Instrument Obligations and other obligations of the Borrower to the
Agent and the Lenders have been repaid, paid, satisfied and discharged, as the
case may be, in full, the Credit Facility has been fully cancelled and the
Lenders then have no credit facilities in favour of or obligation to provide
credit to the Borrower, then the Security shall be released and discharged by
the Agent and the Lenders. The Agent, at the cost and expense of the Borrower,
shall from time to time do, execute and deliver, or cause to be done, executed
and delivered, all such agreements, instruments, certificates, financing
statements, notices and other documents and all acts, matters and things as may
be reasonably requested by the Borrower to give effect to, establish, evidence
or record the foregoing release and discharge.
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ARTICLE 11
EVENTS OF DEFAULT AND ACCELERATION
11.1 Events of Default
The occurrence of any one or more of the following events (each such event
being herein referred to as an "Event of Default") shall constitute a default
under this Agreement:
(a) if the Borrower defaults in payment of the principal of any Loan
hereunder when due and payable and such default shall not be remedied
within 3 days of the occurrence of such default;
(b) if the Borrower defaults in payment of:
(i) any interest (including, if applicable, default interest) due on
any Loan;
(ii) any fee with respect to a Documentary Instrument; or
(iii) any other amount not specifically referred to in paragraph (a)
above or in this paragraph (b) payable by the Borrower
hereunder;
in each case when due and payable and such default shall not be
remedied within 3 days of the occurrence of such default;
(c) If a default, event of default or other similar condition or event
(however described) in respect of the Borrower, any Material
Subsidiary, SMC or Spruce Hills occurs or exists under any indentures,
credit agreements, agreements or other instruments evidencing or
relating to Debt of the Borrower, any Material Subsidiary, SMC or
Spruce Hills, and such default, event or condition has resulted in a
Debt in excess of Cdn. $100,000 or the Equivalent Amount thereof
becoming, or becoming capable at such time of being declared, due and
payable thereunder before it would otherwise have been due and
payable, and the default, event or condition has not been waived and
is not being disputed in good faith by the Borrower, SMC, Spruce Hills
or such Material Subsidiary, as applicable;
(d) if the Borrower fails to observe or perform its covenant in Section
9.1(i);
(e) if the Borrower or a Material Subsidiary fails to observe or perform
any covenant or obligation herein or in any Document contained on its
part to be observed or performed (other than a covenant or condition
whose breach or default in performance is specifically dealt with
elsewhere in this Section 11.1) and, after notice has been given by
the Agent to the Borrower specifying such default and requiring the
Borrower or such Subsidiary to put an end to the same, the Borrower or
such
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Material Subsidiary shall fail to remedy such default within a period
of 30 days after the giving of such notice;
(f) if any representation or warranty made or deemed to be made by the
Borrower in this Agreement or in any certificate or other Document at
any time delivered to the Agent or the Lenders pursuant hereto shall
prove to have been incorrect or misleading in any material respect on
and as of the date made;
(g) if a decree or order of a court of competent jurisdiction is entered
adjudging the Borrower or a Material Subsidiary a bankrupt or
insolvent or approving as properly filed a petition seeking the
winding-up of the Borrower or a Material Subsidiary under the
Companies' Creditors Arrangement Act (Canada), the Bankruptcy and
Insolvency Act (Canada), the Winding Up Act (Canada) or any other
bankruptcy, insolvency or analogous laws or ordering the winding up or
liquidation of its affairs, and any such decree or order continues
unstayed and in effect for a period of 30 days;
(h) if the Borrower or a Material Subsidiary makes any assignment in
bankruptcy or makes any other assignment for the benefit of creditors,
makes any proposal under the Bankruptcy and Insolvency Act (Canada) or
any comparable law, seeks relief under the Companies' Creditors
Arrangement Act (Canada), the Winding Up Act (Canada) or any other
bankruptcy, insolvency or analogous law, files a petition or proposal
to take advantage of any act of insolvency, consents to or acquiesces
in the appointment of a trustee, receiver, receiver and manager,
interim receiver, custodian, sequestrator or other person with similar
powers with respect to the Borrower or a Material Subsidiary or of all
or any substantial portion of its assets, or files a petition or
otherwise commences any proceeding seeking any reorganization,
arrangement, composition, administration or readjustment under any
applicable bankruptcy, insolvency, moratorium, reorganization or other
similar law affecting creditors' rights or consents to, or acquiesces
in, the filing of such a petition;
(i) if a secured party, holder of a Security Interest or other
encumbrancer lawfully takes possession of any portion of the property
of the Borrower or any Material Subsidiary which is material to the
Borrower and its Subsidiaries taken as a whole or if a distress or
execution or any similar process is lawfully levied and enforced
against any such property and remains unsatisfied for a period of 30
days;
(j) if one or more judgments, decrees or orders shall be rendered against
the Borrower or a Material Subsidiary for the payment of money in
excess of Cdn. $500,000 or the Equivalent Amount thereof in the
aggregate and any of such judgments, decrees or orders shall continue
unsatisfied and in effect for a period of more than 30 Banking Days
without being vacated, discharged, satisfied or stayed pending appeal;
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(k) except for Permitted Encumbrances, if any of the Security Interests
created by the Security, to the extent such Security Interests have
been perfected by registration or otherwise, shall cease to be a valid
first priority Security Interest as against third parties;
(l) if any Document or any material provision thereof shall at any time
for any reason cease to be in full force and effect, be declared to be
void or voidable or shall be repudiated, or the validity or
enforceability thereof shall at any time be contested by the Borrower
or a Material Subsidiary, or the Borrower or a Material Subsidiary
shall deny that it has any or any further liability or obligation
thereunder, or at any time it shall be unlawful or impossible for any
of them to perform any of the Obligations;
(m) except in compliance herewith, if the Borrower shall dissolve, be
wound-up or liquidated, shall cease to carry on all or any material
part of its business as now conducted, shall sell, transfer or
otherwise dispose of all or substantially of its assets, or shall
threaten or take any step, proceeding or other action in furtherance
of any of the foregoing; or
(n) if there is a Change of Control.
11.2 Acceleration
If any Event of Default shall occur,
(a) the entire principal amount of all Loans then outstanding and all
accrued and unpaid interest thereon,
(b) an amount equal to the maximum amount available to be drawn under all
unexpired LCs,
(c) an amount equal to the maximum amount guaranteed under all unexpired
LGs, and
(d) all other Obligations outstanding hereunder,
shall, at the option of the Agent, and in accordance with Section 14.11, or upon
the request of a Majority of the Lenders, become immediately due and payable
upon written notice to that effect from the Agent to the Borrower, all without
any other notice and without presentment, protest, demand, notice of dishonour
or any other demand whatsoever (all of which are hereby expressly waived by the
Borrower). In such event and if the Borrower does not immediately pay all such
amounts upon receipt of such notice, either the Lenders or the Agent on their
behalf may, in their discretion, exercise any right or recourse and/or proceed
by any action, suit, remedy or proceeding against the Borrower authorized or
permitted by law for the recovery of all the indebtedness and liabilities of the
Borrower to the Lenders and proceed to exercise any and all rights hereunder and
under the other
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Documents and no such remedy for the enforcement of the rights of the Lenders
shall be exclusive of or dependent on any other remedy but any one or more of
such remedies may from time to time be exercised independently or in
combination.
11.3 Conversion on Default
Upon the occurrence of an Event of Default, the Agent on behalf of the
Lenders may convert, at the Equivalent Amount, if applicable, an Alternate Base
Rate Loan at any time, to a Canadian Prime Rate Loan. Interest shall accrue on
each such Canadian Prime Rate Loan at the rates provided in Section 5.1, such
interest to be calculated daily and payable on demand.
11.4 Remedies Cumulative and Waivers
For greater certainty, it is expressly understood and agreed that the
rights and remedies of the Lenders and the Agent hereunder or under any other
Document are cumulative and are in addition to and not in substitution for any
rights or remedies provided by law or by equity; and any single or partial
exercise by the Lenders or the Agent of any right or remedy for a default or
breach of any term, covenant, condition or agreement contained in this Agreement
or other Document shall not be deemed to be a waiver of or to alter, affect or
prejudice any other right or remedy or other rights or remedies to which any one
or more of the Lenders or the Agent may be lawfully entitled for such default or
breach. Any waiver by, as applicable, the Majority of the Lenders, the Lenders
or the Agent of the strict observance, performance or compliance with any term,
covenant, condition or other matter contained herein or in the other Documents
and any indulgence granted, either expressly or by course of conduct, by, as
applicable, the Majority of the Lenders, the Lenders or the Agent shall be
effective only in the specific instance and for the purpose for which it was
given and shall be deemed not to be a waiver of any rights and remedies of such
Person or Persons under this Agreement or any other Document as a result of any
other default or breach hereunder or thereunder.
11.5 Termination of Lenders' Obligations
The occurrence of a Default which is continuing shall relieve the Lenders
of all obligations to provide any further Drawdowns or Conversions hereunder;
provided that the foregoing shall not prevent the Lenders or the Agent from
disbursing money or effecting any Conversion which, by the terms hereof, they
are entitled to effect, or any Conversion requested by the Borrower and
acceptable to the Lenders and the Agent.
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ARTICLE 12
CHANGE OF CIRCUMSTANCES
12.1 Change in Law
If the adoption of any applicable law, regulation, treaty or official
directive (whether or not having the force of law) or any change therein or in
the interpretation or application thereof by any court or by any Governmental
Authority or any other entity charged with the interpretation or administration
thereof or compliance by the Lender with any request or direction (whether or
not having the force of law) of any such authority or entity, hereafter:
(a) subjects any Lender to, or causes the withdrawal or termination of any
previously granted exemption with respect to, any tax or changes the
basis of taxation, or increases any existing tax, on payments of
principal, interest, fees or other amounts payable by the Borrower to
such Lender under this Agreement (except for taxes based on the
capital or overall income of such Lender);
(b) imposes, modifies or deems applicable any reserve, liquidity, cash
margin, capital, deposit insurance, special deposit or similar
requirements against assets held by, or deposits in or for the account
of or loans by or to or any other acquisition of funds by, or drafts
accepted by, an office of any Lender;
(c) imposes on any Lender or expects there to be maintained by any Lender
any capital adequacy or additional capital requirements in respect of
any Loans or the Credit Facility hereunder or any other condition with
respect to this Agreement; or
(d) imposes on any Lender any other conditions or requirements relevant to
the Documents or the Credit Facility,
and the result of any of the foregoing, in the sole determination of such Lender
acting reasonably and in good faith, shall be to increase the cost to, or reduce
the amount of principal, interest, fees or other amount received or receivable
by such Lender hereunder or its effective return hereunder or on its capital in
respect of the Credit Facility or the making, maintaining or funding a Loan
under the Credit Facility or cause such Lender to make any payment or forego any
interest, fees or other return hereunder, such Lender shall determine that
amount of money which shall compensate such Lender for such increase in cost,
payments to be made or reduction in income or return or interest foregone
(herein referred to as "Additional Compensation"). Upon a Lender having
determined that it is entitled to Additional Compensation in accordance with the
provisions of this Section, such Lender shall promptly so notify the Borrower
and the Agent and shall provide the Borrower and the Agent with a photocopy of
the relevant law, rule, guideline, regulation, treaty or official directive (or,
if it is impracticable to provide a photocopy, a written summary of the same)
and a certificate of a duly authorized officer of such Lender setting forth the
Additional Compensation and the basis of calculation therefor, which shall be
conclusive evidence of such Additional Compensation in the
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absence of manifest error. The Borrower shall pay to such Lender within 10
Banking Days of the giving of such notice such Lender's Additional Compensation
calculated from the later of (i) the effective date of the relevant introduction
or change and (ii) 3 months prior to the date of such notification. Each of the
Lenders shall be entitled to be paid such Additional Compensation from time to
time to the extent that the provisions of this Section are then applicable
notwithstanding that any Lender has previously been paid any Additional
Compensation. The Lenders shall endeavour to limit the incidence of any such
Additional Compensation, including (without limitation) seeking recovery for the
account of the Borrower by appealing any assessment (providing that the same
shall not be adverse to the interests of the Lenders, in their sole discretion)
at the expense of the Borrower upon the Borrower's request.
12.2 Prepayment of Portion
In addition to the other rights and options of the Borrower hereunder and
notwithstanding any contrary provisions hereof, if a Lender gives the notice
provided for in Section 12.2 with respect to any Loan (an "Affected Loan"), the
Borrower may, upon 3 Banking Days notice to that effect given to such Lender and
the Agent (which notice shall be irrevocable), prepay in full without penalty
such Lender's Rateable Portion of the Affected Loan outstanding together with
accrued and unpaid interest on the principal amount so prepaid up to the date of
such prepayment, such Additional Compensation as may be applicable to the date
of such payment and all costs, losses and expenses incurred by such Lender by
reason of the liquidation or re-deployment of deposits or other funds or for any
other reason whatsoever resulting from the repayment of such Affected Loan or
any part thereof on other than the last day of the applicable Interest Period,
and upon such payment being made that Lender's obligations to make such Affected
Loans to the Borrower under this Agreement shall terminate.
12.3 Illegality
If the adoption of any applicable law, regulation, treaty or official
directive (whether or not having the force of law) or any change therein or in
the interpretation or application thereof by any court or by any Governmental
Authority or any other entity charged with the interpretation or administration
thereof or compliance by such Lender with any request or direction (whether or
not having the force of law) of any such authority or entity, now or hereafter
makes it unlawful or impossible for such Lender to make, fund or maintain the
Credit Facility or a Loan under the Credit Facility or to give effect to its
obligations in respect of such a Loan, such Lender may, by written notice
thereof to the Borrower declare its obligations under this Agreement in respect
of such Loan to be terminated whereupon the same shall forthwith terminate, and
the Borrower shall, within the time required by such law (or at the end of such
longer period as such Lender at its discretion has agreed), either effect a
Conversion of such Loan in accordance with the provisions hereof (if such
Conversion would resolve the unlawfulness or impossibility) or prepay the
principal of such Loan together with accrued interest. If any such change shall
only affect a portion of a Lender's obligations under this Agreement which is,
in the sole opinion of such Lender, severable from the
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remainder of this Agreement so that the remainder of this Agreement may be
continued in full force and effect without otherwise affecting any of the other
obligations of such Lender or the Borrower hereunder, such Lender shall only
declare its obligations under that portion so terminated.
ARTICLE 13
COSTS, EXPENSES AND INDEMNIFICATION
13.1 Costs and Expenses
The Borrower shall pay promptly upon notice from the Agent all reasonable
costs and expenses of the Lenders and the Agent in connection with the Documents
and the establishment of the Credit Facility, including, without limitation, in
connection with preparation, printing, execution and delivery of this Agreement
and the other Documents whether or not any Drawdown has been made hereunder, and
also including, without limitation, the reasonable fees and out-of-pocket
expenses of Lenders' Counsel with respect thereto and with respect to advising
the Agent and the Lenders as to their rights and responsibilities under this
Agreement and the other Documents. Except for ordinary expenses of the Lenders
and the Agent relating to the day-to-day administration of this Agreement, the
Borrower further agrees to pay within 30 days of demand by the Agent all
reasonable costs and expenses in connection with the preparation or review of
waivers, consents and amendments pertaining to this Agreement and in connection
with the establishment of the validity and enforceability of this Agreement and
the preservation or enforcement of rights of the Lenders and the Agent under
this Agreement and other Documents, including, without limitation, all
reasonable costs and expenses sustained by the Lenders and the Agent as a result
of any failure by the Borrower to perform or observe any of its obligations
hereunder, together with interest thereon from and after such 30th day if such
payment is not made by such time.
13.2 General Indemnity
In addition to any liability of the Borrower to the Agent and the Lenders
under any other provision hereof, the Borrower shall indemnify each Lender and
the Agent and their respective Affiliates, directors, officers, agents and
employees (collectively in this Section the 'Indemnified Parties") and hold each
Indemnified Party harmless against any loss, cost, expense, damage, claim or
liability and reasonable out-of-pocket expenses and reasonable legal fees on a
solicitor and his own client basis) as a result of or in connection with:
(a) all claims, suits, debts, damages, costs, losses, liabilities,
penalties, obligations, judgments, charges, expenses and disbursements
arising in connection with any action, suit, or proceeding (whether or
not an Indemnified Party is a party or subject thereto) relating to
the Credit Facilities or the Documents;
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(b) any cost or expense incurred by reason of the liquidation or re-
deployment in whole or in part of deposits or other funds required by
any Lender to fund or maintain any Loan as a result of the Borrower's
failure to complete a Drawdown or to make any payment, repayment or
prepayment on the date required hereunder or specified by it in any
notice given hereunder;
(c) the Borrower's failure to pay any other amount, including without
limitation any interest or fee, due hereunder on its due date after
the expiration of any applicable grace or notice periods (subject,
however, to the interest obligations hereunder for overdue amounts);
(d) the Borrower's failure to give any notice required to be given by it
to the Lenders hereunder;
(e) the inaccuracy of the Borrower's representations and warranties
contained in Section 8.1;
(f) the failure of the Borrower to make any other payment due hereunder;
(g) any failure of the Borrower or any Material Subsidiary to observe or
fulfil any other Obligation not specifically referred to above; or
(h) any Default or Event of Default.
13.3 Environmental Indemnity
The Borrower shall indemnify and hold harmless the Agent and the Lenders
including a receiver, receiver-manager or similar person appointed under
applicable law and its respective Affiliates, officers, directors, employees and
agents (collectively, the "Indemnified Parties") forthwith on demand by the
Agent from and against any and all claims, suits, actions, debts, damages,
costs, losses, liabilities, penalties, obligations, judgments, charges, expenses
and disbursements (including without limitation, all reasonable legal fees and
disbursements on a solicitor and his own client basis) of any nature whatsoever,
suffered or incurred by the Indemnified Parties or any of them in connection
with the Credit Facility, whether as beneficiaries under the Documents, as
successors in interest of the Borrower or any of its Subsidiaries, or voluntary
transfer in lieu of foreclosure, or otherwise howsoever, with respect to any
Environmental Claims relating to the property of the Borrower or any of its
Subsidiaries arising under any Environmental Laws as a result of the past,
present or future operations of the Borrower or any of its Subsidiaries (or any
predecessor in interest to the Borrower or any of its Subsidiaries) relating to
the property of the Borrower or of its Subsidiaries, or the past, present or
future condition of any part of the property of the Borrower or its Subsidiaries
owned, operated or leased by the Borrower or by any of its Subsidiaries (or any
such predecessor in interest), including any liabilities arising after an
acceleration of all Loans as a result of any indemnity covering Environmental
Claims given to any
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person by the Lenders or a receiver, receiver-manager or similar person
appointed hereunder or under applicable law (collectively, the "Indemnified
Third Party"); but excluding any Environmental Claims or liabilities relating
thereto to the extent that such Environmental Claims or liabilities arise by
reason of the gross negligence or wilful misconduct of the Indemnified Party or
the Indemnified Third Party claiming indemnity hereunder. The provisions of this
Section shall survive the repayment of the Obligations.
13.4 Judgment Currency
If, for the purposes of obtaining or enforcing judgment in any court in any
jurisdiction, it becomes necessary to convert into the currency of the country
giving such judgment (the "Judgment Currency") an amount due hereunder in
different currency (the "Agreed Currency"), then the date on which the rate of
exchange for conversion is selected by that court is referred to herein as the
"Exchange Date". If there is a change in the rate of exchange between the
Judgment Currency and the Agreed Currency between the Exchange Date and the
actual receipt of any Lender of the amount due hereunder or under such judgment,
the Borrower will, notwithstanding such judgment, pay to such Lender all such
additional amounts as may be necessary to ensure that the amount received by
such Lender in the Judgment Currency, when converted at the rate of exchange
prevailing on the date of receipt, will produce the amount due in the Agreed
Currency. The Borrower's liability hereunder constitutes a separate and
independent liability which will not merge with any judgment or any partial
payment or enforcement of payment of sums due under the Documents and such
liability, together with interest thereon, shall be added to the amount payable
hereunder. The term "rate of exchange", as used in this paragraph, includes any
premiums or costs payable in connection with the currency conversion then being
effected.
ARTICLE 14
THE AGENT AND ADMINISTRATION OF THE CREDIT FACILITY
14.1 Authorization and Action
(1) Each Lender hereby irrevocably appoints and authorizes the Agent to be
its agent in its name and on its behalf to exercise such rights or powers
granted to the Agent or the Lenders under this Agreement to the extent
specifically provided herein and on the terms hereof, together with such powers
as are reasonably incidental thereto and the Agent hereby accepts such
appointment and authorization. As to any matters not expressly provided for by
this Agreement, the Agent shall not be required to exercise any discretion or
take any action, but, subject to Section 15.10, shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Majority of the Lenders and such
instructions shall be binding upon all Lenders; provided, however, that the
Agent shall not be required to take any action which exposes the Agent to
liability in such capacity or which could result in the Agent's incurring any
costs and expenses, without provision being made for indemnity of the Agent by
the Lenders against
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any loss, liability, cost or expense incurred, or to be incurred or which is
contrary to this Agreement or applicable law.
(2) The Lenders agree that all decisions as to actions to be or not to be
taken, as to consents or waivers to be given or not to be given, as to
determinations to be made and otherwise in connection with this Agreement and
the Documents, shall be made upon the decision of the Majority of the Lenders
except in respect of a decision or determination where it is specifically
provided in this Agreement that "all of the Lenders" or "the Lenders" or words
to similar effect, or the Agent alone, is to be responsible for same. Each of
the Lenders shall be bound by and agrees to abide by and adopt all decisions
made as aforesaid and covenants in all communications with the Borrower to act
in concert and to join in the action, consent, waiver, determination or other
matter decided as aforesaid.
14.2 Procedure for Making Loans
(1) The Agent shall make Loans available to the Borrower as required
hereunder by debiting the account of the Agent to which the Lenders' Rateable
Portions of such Loans have been credited in accordance with Section 2.10 (or
causing such account to be debited) and, in the absence of other arrangements
agreed to by the Agent and the Borrower in writing, by crediting the account of
the Borrower or, at the expense of the Borrower, transferring (or causing to be
transferred) like funds in accordance with the instructions of the Borrower as
set forth in the Drawdown Notice or Conversion Notice, as the case may be, in
respect of each Loan; provided that the obligation of the Agent hereunder to
effect such a transfer shall be limited to taking such steps as are commercially
reasonable to implement such instructions, which steps once taken shall
constitute conclusive and binding evidence that such funds were advanced
hereunder in accordance with the provisions relating thereto and the Agent shall
not be liable for any damages, claims or costs which may be suffered by the
Borrower and occasioned by the failure of such Loan to reach the designated
destination.
(2) Unless the Agent has been notified by a Lender at least one Banking
Day prior to the Drawdown Date or Conversion Date, as the case may be, requested
by the Borrower that such Lender will not make available to the Agent its
Rateable Portion of such Loan, the Agent may assume that such Lender has made or
will make such portion of the Loan available to the Agent on the Drawdown Date
or Conversion Date, as the case may be, in accordance with the provisions hereof
and the Agent may, but shall be in no way obligated to, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent such Lender shall not have so made its Rateable Portion of
a Loan available to the Agent, such Lender agrees to pay to the Agent forthwith
on demand such Lender's Rateable Portion of the Loan and all reasonable costs
and expenses incurred by the Agent in connection therewith together with
interest thereon (at the rate payable hereunder by the Borrower in respect of
such Loan for each day from the date such amount is made available to the
Borrower until the date such amount is paid to the Agent; provided, however,
that notwithstanding such obligation if such Lender fails to so pay, the
Borrower covenants and agrees that without prejudice to any rights the Borrower
may have against such Lender, it shall repay such amount to the Agent forthwith
after demand therefor by the Agent. The amount payable
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to the Agent pursuant hereto shall be set forth in a certificate delivered by
the Agent to such Lender and the Borrower (which certificate shall contain
reasonable details of how the amount payable is calculated) and shall be prima
facie evidence thereof, in the absence of manifest error. If such Lender makes
the payment to the Agent required herein, the amount so paid shall constitute
such Lender's Rateable Portion of the Loan for purposes of this Agreement. The
failure of any Lender to make its Rateable Portion of any Loan shall not relieve
any other Lender of its obligation, if any, hereunder to make its Rateable
Portion of such Loan on the Drawdown Date or Conversion Date, as the case may
be, but no Lender shall be responsible for the failure of any other Lender to
make the Rateable Portion of any Loan to be made by such other Lender on the
date of any Drawdown or Conversion, as the case may be.
14.3 Remittance of Payments
Forthwith after receipt of any repayment pursuant hereto or payment of
interest or fees pursuant to Article 5 or payment pursuant to Article 7, the
Agent shall remit to each Lender its Rateable Portion of such payment; provided
that, if the Agent, on the assumption that it will receive on any particular
date a payment of principal, interest or fees hereunder, remits to a Lender its
Rateable Portion of such payment and the Borrower fails to make such payment,
each of the Lenders on receipt of such remittance from the Agent agrees to repay
to the Agent forthwith on demand an amount equal to the remittance together with
all reasonable costs and expenses incurred by the Agent in connection therewith
and interest thereon at the rate and calculated in the manner applicable to the
Loan in respect of which such payment is made for each day from the date such
amount is remitted to the Lenders without prejudice to any right such Lender may
have against the Borrower. The exact amount of the repayment required to be made
by the Lenders pursuant hereto shall be as set forth in a certificate delivered
by the Agent to each Lender, which certificate shall be conclusive and binding
for all purposes in the absence of manifest error.
14.4 Redistribution of Payment
Each Lender agrees that:
(a) if it exercises any security against or right of counter-claim, set
off or banker's Security Interest or similar right with respect to the
property of the Borrower or if under any applicable bankruptcy,
insolvency or other similar law it receives a secured claim and
collateral for which it is, or is entitled to exercise any set-off
against, a debt owed by it to the Borrower, the Lender shall apportion
the amount thereof proportionately between:
(i) such Lender's Rateable Portion of all outstanding Obligations
which amounts shall be applied in accordance with Section
14.4(b); and
(ii) amounts otherwise owed to such Lender by the Borrower,
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provided that (A) any cash collateral account held by such Lender as
collateral for a letter of credit issued or accepted by such Lender on
behalf of the Borrower may be applied by such Lender to such amounts owed
by the Borrower to such Lender pursuant to such letter of credit without
apportionment and (B) these provisions do not apply to a right or claim
which arises or exists in respect of a loan or other debt in respect of
which the relevant Lender holds a Security Interest excluded from the
application of Section 9.2(b) and
(b) if, in the aforementioned circumstances, the Lender, through the
exercise of a right, or the receipt of a secured claim described in
Section 14.4(a) above or otherwise, receives payment of a proportion
of the aggregate amount of Obligations due to it hereunder which is
greater than the proportion received by any other Lender in respect of
the aggregate Obligations due to such Lender (having regard to the
respective Rateable Portions of the Lenders), the Lender receiving
such proportionately greater payment shall purchase, on a non-recourse
basis at par, and make payment for a participation (which shall be
deemed to have been done simultaneously with receipt of such payment)
in the outstanding Loans of the other Lender or Lenders so that their
respective receipts shall be pro rata to their respective Rateable
Portions; provided, however, that if all or part of such
proportionately greater payment received by such purchasing Lender
shall be recovered by or on behalf of the Borrower or any trustee,
liquidator, receiver or receiver-manager or person with analogous
powers from the purchasing Lender, such purchase shall be rescinded
and the purchase price paid for such participation shall be returned
to the extent of such recovery, but without interest unless the
purchasing Lender is required to pay interest on such amount, in which
case each selling Lender shall reimburse the purchasing Lender pro
rata in relation to the amounts received by it. Such Lender shall
exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders entitled under this Section
to share in the benefits of any recovery on such secured claims; and
(c) if the Lender does, or is required to do, any act or thing permitted
by Section 14.4(a) or (b) above, it shall promptly provide full
particulars thereof to the Agent.
14.5 Duties and Obligations
Neither the Agent nor any of its directors, officers, agents or employees
(and, for purposes hereof, the Agent shall be deemed to be contracting as agent
and trustee for and on behalf of such persons) shall be liable to the Lenders
for any action taken or omitted to be taken by it or them under or in connection
with this Agreement except for its or their own gross negligence or wilful
misconduct. Without limiting the generality of the foregoing, the Agent:
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(a) may assume that there has been no assignment or transfer by any means
by the Lenders of their rights hereunder, unless and until the Agent
receives written notice of the assignment thereof from such Lender and
the Agent receives from the assignee an executed assignment agreement
providing, inter alia, that such assignee is bound hereby as it would
have been if it had been an original Lender party hereto;
(b) may consult with legal counsel (including receiving the opinions of
Borrower's counsel required hereunder), independent public accountants
and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance
with the advice or such counsel, accountants or experts;
(c) shall incur no liability under or in respect of this Agreement by
acting upon any notice, consent, certificate or other instrument or
writing (which may be by telegram, cable, telecopier or telex)
believed by it to be genuine and signed or sent by the proper party or
parties or by acting upon any representation or warranty of the
Borrower made or deemed to be made hereunder;
(d) may assume that no Event of Default has occurred and is continuing
unless it has actual knowledge to the contrary;
(e) may rely as to any matters of fact which might reasonably be expected
to be within the knowledge of any person upon a certificate signed by
or on behalf of such person;
(f) shall not be bound to disclose to any other person any information
relating to the Borrower, any of its Subsidiaries or any other person
if such disclosure would or might in its or their opinion constitute a
breach of any applicable law, be in default of the provisions hereof
or be otherwise actionable at the suit of any other person; and
(g) may refrain from exercising any right, power or discretion vested in
it which would or might in its or their reasonable opinion be contrary
to any applicable law or any directive or otherwise render it or them
liable to any person, and may do anything which is in its or their
reasonable opinion necessary to comply with such applicable law.
Further, the Agent (i) does not make any warranty or representation to any
Lender nor shall it be responsible to any Lender for the accuracy or
completeness of the representations and warranties of the Borrower herein or the
data made available to any of the Lenders in connection with the negotiation of
this Agreement, or for any statements, warranties or representations (whether
written or oral) made in or in connection with this Agreement; (ii) shall not
have any duty to ascertain or to enquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement on the part of the
Borrower or to inspect the property (including the
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books and records) of the Borrower or any of its Subsidiaries; and (iii) shall
not be responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any
instrument or document furnished pursuant hereto.
14.6 Prompt Notice to the Lenders
Notwithstanding any other provision herein, the Agent agrees to provide to
the Lenders, with copies where appropriate, all information, notices and reports
required to be given to the Agent by the Borrower, promptly upon receipt of
same, excepting therefrom information and notices relating solely to the role of
Agent hereunder.
14.7 Agent's and Lender's Authorities
With respect to its Commitment and the Drawdowns, Conversions and Loans
made by it as a Lender, the Agent shall have the same rights and powers under
this Agreement as any other Lender and may exercise the same as though it were
not the Agent. Subject to the express provisions hereof relating to the rights
and obligations of the Agent and the Lenders in such capacities, the Agent and
each Lender may accept deposits from, lend money to, and generally engage in any
kind of business with the Borrower and its Subsidiaries or any corporation or
other entity owned or controlled by any of them and any person which may do
business with any of them without any duties to account therefor to the Agent or
the other Lenders and, in the case of the Agent, all as if it was not the Agent
hereunder.
14.8 Lender Credit Decision
It is understood and agreed by each Lender that it has itself been, and
will continue to be, solely responsible for making its own independent appraisal
of and investigations into the financial condition, creditworthiness, condition,
affairs, status and nature of the Borrower and its Subsidiaries. Each Lender
represents to the Agent that it is engaged in the business of making and
evaluating the risks associated with commercial revolving or term loans, or
both, to corporations similar to the Borrower, that it can bear the economic
risks related to the transaction contemplated hereby, that it has had access to
all information deemed necessary by it in making such decision (provided that
this representation shall not impair its rights against the Borrower) and that
it is entering into this Agreement in the ordinary course of its commercial
lending business. Accordingly, each Lender confirms with the Agent that it has
not relied, and will not hereafter rely, on the Agent (i) to check or enquire on
its behalf into the adequacy, accuracy or completeness of any information
provided by the Borrower or any other person under or in connection with this
Agreement or the transactions herein contemplated (whether or not such
information has been or is hereafter distributed to such Lender by the Agent),
or (ii) to assess or keep under review on its behalf the financial condition,
creditworthiness, condition, affairs, status or nature of the Borrower or any of
its Subsidiaries. Each Lender acknowledges that a copy of this Agreement has
been made available to it for review and each Lender acknowledges that it is
satisfied with the form and substance of this Agreement. Each Lender hereby
covenants and agrees that, subject to Section 14.4, it will not make any
arrangements
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with the Borrower for the satisfaction of any Loans or other Obligations without
the consent of all the other Lenders.
14.9 Indemnification of Agent
The Lenders hereby agree to indemnify the Agent (to the extent not
reimbursed by the Borrower), on a pro rata basis in accordance with their
respective Commitments as a proportion of the aggregate of all outstanding
Commitments, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Agent in any way relating to or arising out of this
Agreement or any action taken or omitted by the Agent under or in respect of
this Agreement in its capacity as Agent; provided that no Lender shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs expenses or disbursements resulting from the
Agent's gross negligence or wilful misconduct. If the Borrower subsequently
repays all or a portion of such amounts to the Agent, the Agent shall reimburse
the Lenders their pro rata shares (according to the amounts paid by them in
respect thereof) of the amounts received from the Borrower. Without limiting
the generality of the foregoing, each Lender agrees to reimburse the Agent
promptly upon demand for its portion (determined as above) of any out-of-pocket
expenses (including counsel fees) incurred by the Agent in connection with the
preservation of any rights of the Agent or the Lenders under, or the enforcement
of, or legal advice in respect of rights or responsibilities under, this
Agreement, to the extent that the Agent is not reimbursed for such expenses by
the Borrower.
14.10 Successor Agent
(1) The Agent may, as hereinafter provided, resign at any time by giving
45 days' prior written notice thereof to the Lenders and the Borrower. Upon any
such resignation, the Lenders shall have the right to appoint another Lender as
a successor agent (the "Successor Agent") who shall be acceptable to the
Borrower, acting reasonably. If no Successor Agent shall have been so appointed
by the Lenders and shall have accepted such appointment within 30 days after the
retiring Agent's giving of notice of resignation, then the retiring Agent shall,
on behalf of the Lenders, appoint a Successor Agent who shall be a Lender
acceptable to the Borrower, acting reasonably. Upon the acceptance of any
appointment as Agent hereunder by a Successor Agent, such Successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall thereupon be
discharged from its further duties and obligations as Agent under this
Agreement. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article shall continue to enure to its benefit as to any
actions taken or omitted to be taken by it as Agent or in its capacity as Agent
while it was Agent hereunder.
(2) Notwithstanding Section 14.10(1), no Lender shall become the Agent
unless such Lender's Commitment constitutes 10.0% or more of all outstanding
Commitments; accordingly, an Agent may not resign unless the Successor Agent
meets this requirement.
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14.11 Taking and Enforcement of Remedies
Each of the Lenders hereby acknowledges that, to the extent permitted by
applicable law, the remedies provided hereunder to the Lenders are for the
benefit of the Lenders collectively and acting together and not severally and
further acknowledges that its rights hereunder are to be exercised not
severally, but collectively by the Agent upon the decision of the Majority of
the Lenders regardless of whether acceleration was made pursuant to Section
11.2. Notwithstanding any of the provisions contained herein, each of the
Lenders hereby covenants and agrees that it shall not be entitled to
individually take any action with respect to the Credit Facilities, including,
without limitation, any acceleration under Section 11.2, but that any such
action shall be taken only by the Agent with the prior written agreement or
instructions of the Majority of the Lenders; provided that, notwithstanding the
foregoing, if (i) the Agent, having been adequately indemnified against costs
and expenses of so doing by the Lenders, shall fail to carry out any such
instructions of a Majority of the Lenders, any Lender may do so on behalf of all
Lenders and shall, in so doing, be entitled to the benefit of all protections
given the Agent hereunder or elsewhere, and (ii) in the absence of instructions
from the Majority of the Lenders and where in the sole opinion of the Agent the
exigencies of the situation warrant such action, the Agent may without notice to
or consent of the Lenders or any of them take such action on behalf of the
Lenders as it deems appropriate or desirable in the interests of the Lenders.
Each of the Lenders hereby further covenants and agrees that upon any such
written consent being given by the Majority of the Lenders, or upon a Lender or
the Agent taking action as aforesaid, it shall cooperate fully with the Lender
or the Agent to the extent requested by the Lender or the Agent in the
collective realization including, without limitation, and, if applicable, the
appointment of a receiver, or receiver and manager to act for their collective
benefit. Each Lender covenants and agrees to do all acts and things and to
make, execute and deliver all agreements and other instruments, including,
without limitation, any instruments necessary to effect any registrations, so as
to fully carry out the intent and purpose of this Section; and each of the
Lenders hereby covenants and agrees that, subject to Section 14.4 and Section
9.2(b) it has not heretofore and shall not seek, take, accept or receive any
security for any of the obligations and liabilities of the Borrower hereunder or
under any other document, instrument, writing or agreement ancillary hereto and
shall not enter into any agreement with any of the parties hereto or thereto
relating in any manner whatsoever to the Credit Facilities, unless all of the
Lenders shall at the same time obtain the benefit of any such security or
agreement.
With respect to any enforcement, realization or the taking of any rights
or remedies to enforce the rights of the Lenders hereunder, the Agent shall be a
trustee for each Lender, and all monies received from time to time by the Agent
in respect of the foregoing shall be held in trust and shall be trust assets
within the meaning of applicable bankruptcy or insolvency legislation and shall
be considered for the purposes of such legislation to be held separate and apart
from the other assets of the Agent, and each Lender shall be entitled to their
Rateable Portion of such monies. In its capacity as trustee, the Agent shall be
obliged to exercise only the degree of care it would exercise in the conduct and
management of its own business and in accordance with its usual practice
concurrently employed or hereafter instituted for other substantial commercial
loans.
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14.12 Reliance Upon Agent
The Borrower shall be entitled to rely upon any certificate, notice or
other document or other advice, statement or instruction provided to it by the
Agent pursuant to this Agreement, and the Borrower shall generally be entitled
to deal with the Agent with respect to matters under this Agreement which the
Agent is authorized to deal with without any obligation whatsoever to satisfy
itself as to the authority of the Agent to act on behalf of the Lenders and
without any liability whatsoever to the Lenders for relying upon any
certificate, notice or other document or other advice, statement or instruction
provided to it by the Agent, notwithstanding any lack of authority of the Agent
to provide the same.
14.13 No Liability of Agent
The Agent shall have no responsibility or liability to the Borrower on
account of the failure of any Lender to perform its obligations hereunder
(unless such failure was caused, in whole or in part, by the Agent's failure to
observe or perform its obligations hereunder), or to any Lender on account of
the failure of the Borrower or any Lender to perform its obligations hereunder.
14.14 Article for Benefit of Agents and Lenders
The provisions of this Article Fourteen which relate to the rights and
obligations of the Lenders to each other or to the rights and obligations
between the Agent and the Lenders shall be for the exclusive benefit of the
Agent and the Lenders, and, except to the extent provided in Sections 14.1,
14.2, 14.6, 14.10, 14.11, 14.12, 14.13 and this Section 14.14, the Borrower
shall not have any rights or obligations thereunder or be entitled to rely for
any purpose upon such provisions. Any Lender may waive in writing any right or
rights which it may have against the Agent or the other Lenders hereunder
without the consent of or notice to the Borrower.
ARTICLE 15
GENERAL
15.1 Exchange and Confidentiality of Information
(1) The Borrower agrees that the Agent and each Lender may provide any
assignee or participant or any prospective assignee or participant pursuant to
Sections 16.6 or 16.7 with any information concerning the financial condition of
the Borrower and its Subsidiaries provided such party agrees in writing with the
Agent or such Lender for the benefit of the Borrower to be bound by a like duty
of confidentiality to that contained in this Section.
(2) Each of the Agent and the Lenders acknowledges the confidential nature
of the financial, operational and other information and data provided and to be
provided to them by the
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Borrower pursuant hereto (the "Information") and agrees to use all reasonable
efforts to prevent the disclosure thereof provided, however, that:
(a) the Agent and the Lenders may if, in their reasonable opinion,
disclosure is required in connection with any actual or threatened
judicial, administrative or governmental proceedings including,
without limitation, proceedings initiated under or in respect of this
Agreement disclose all or any part of the Information pursuant to
those proceedings;
(b) the Agent and the Lenders shall incur no liability in respect of any
Information required to be disclosed by any applicable law or
regulation, or by applicable order, policy or directive having the
force of law, to the extent of such requirement;
(c) the Agent and the Lenders may provide Lenders' Counsel and their other
agents and professional advisors with any Information; provided that
such persons shall have agreed to be under a like duty of
confidentiality to that contained in this Section;
(d) the Agent and each of the Lenders shall incur no liability in respect
of any Information: (i) which is or becomes readily available to the
public (other than by a breach hereof) or which has been made readily
available to the public by the Borrower or its Subsidiaries, (ii)
which the Agent or the relevant Lender can show was, prior to receipt
thereof from the Borrower, lawfully in the Agent's or Lender's
possession and not then subject to any obligation on its part to the
Borrower to maintain confidentiality, or (iii) which the Agent or the
relevant Lender received from a third party who was not, to the
knowledge of the Agent or such Lender, under a duty of confidentiality
to the Borrower at the time the information was so received;
(e) the Agent and the Lenders may disclose the information to other
financial institutions in connection with the syndication by the Agent
or Lenders of the Credit Facilities or the granting by a Lender of a
participation in the Credit Facilities where such financial
institution agrees to be under a like duty of confidentiality to that
contained in this Section; and
(f) the Agent and the Lenders may disclose all or any part of the
Information so as to enable the Agent and the Lenders to initiate any
lawsuit against the Borrower or to defend any lawsuit commenced by the
Borrower the issues of which touch on the Information, but only to the
extent such disclosure is necessary to the initiation or defense of
such lawsuit.
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15.2 Nature of Obligation under this Agreement
(1) The obligations of each Lender and of the Agent under this Agreement
are several. The failure of any Lender to carry out its obligations hereunder
shall not relieve the other Lenders, the Agent or the Borrower of any of their
respective obligations hereunder.
(2) Neither the Agent nor any Lender shall be responsible for the
obligations of any other Lender hereunder.
15.3 Notices
Any demand, notice or communication to be made or given hereunder (a
"Communication") shall be in writing and shall be made or given by personal
delivery or by transmittal by telecopy or other electronic means of
communication addressed to the respective parties as follows:
To the Borrower:
Neutrino Resources Inc.
c/o Southern Minerals Corporation
1201 Louisiana, Suite 3350
Houston, Texas 77002
Attention: Michael E. Luttrell
Telecopy No.: (713) 658-9447
To the Lenders:
Bank One Canada
BCE Place, P.O. Box 613
161 Bay Street, Suite 4240
Toronto, Ontario M5J 2S1
Attention: First Vice President
Telecopy No.: (416) 363-7574
with a copy (other than copies of Drawdown
Notices, Conversion Notices, Rollover Notices
and Repayment Notices given hereunder) to:
Bank One, Texas N.A.
910 Travis Street, 6/th/ Floor
Houston, Texas 77002
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Attention: Jonathan Gregory, Vice President
Telecopy No.: (713) 751-7894
or to such other address or telecopy number as either party may from time to
time notify the other in accordance with this provision. Any Communication made
or given hereunder during normal business hours at the place of receipt on a
Banking Day shall be conclusively deemed to have been made or given at the time
of actual delivery or receipt of Communication, as the case may be, on such
Banking Day. Any Communication made or given hereunder after normal business
hours at the place of receipt or otherwise than on a Banking Day shall be
conclusively deemed to have been made or given by 9:00 a.m. (Calgary time) on
the first Banking Day following actual delivery or receipt of Communication, as
the case may be. Any Communication made or given hereunder on a Banking Day
before normal business hours at the place of receipt shall be conclusively
deemed to have been made or given at 9:00 a.m. (Calgary time) on the date of
actual delivery or receipt of Communication, as the case may be.
15.4 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the Province of Alberta and the federal laws of Canada applicable
therein.
15.5 Benefit of the Agreement
This Agreement shall enure to the benefit of and be binding upon the
Borrower, the Agent and the Lenders and their respective successors and
permitted assigns.
15.6 Assignment
Any Lender may, without the consent of the Borrower during the continuance
of an Event of Default and at all other times with the prior written consent of
the Borrower and the Agent, which consents shall not be unreasonably withheld,
sell, assign, transfer or grant an interest in its Commitments and its Rateable
Portion of the Loans; provided that, without the consent of the Borrower and the
Agent, no Lender shall sell, assign, transfer or grant an interest in any
Commitment or Loan if the effect of the same would be to have a Lender with
aggregate Commitments which represent less than 25% of the aggregate Commitments
of all Lenders; and further provided that, it shall be a precondition to any
such sale, assignment, transfer or grant that the contemplated assignee Lender
shall have paid to the Agent, for the Agent's own account, a transfer fee to be
determined by the Agent. Upon any such sale, assignment, transfer or grant ,
the granting Lender shall have no further obligation hereunder with respect to
such interest except in case of a grant to a person affiliated with the granting
Lender (determined in accordance with the Bank Act (Canada)), in which case such
Lender shall remain obligated hereunder with respect to such interest. Upon any
such sale, assignment, transfer or grant, the granting Lender, the new Lender,
the Agent and the Borrower shall execute and deliver an assignment agreement.
Subject to the provisions of Section 9.2(i), the Borrower shall not assign its
rights or obligations hereunder without the prior written consent of all
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of the Lenders. The Borrower shall assist the Agent in connection with any such
assignment or participations referred to in Section 15.7 including, without
limitation and at the Borrower's expense (i) providing all information
reasonably required by the Agent to successfully complete such assignment, (ii)
assisting the Agent, on the Agent's request in the preparation of a syndication
memorandum and all other marketing materials to be used in connection with the
syndication, (iii) participating in syndication presentations and meetings and
(iv) using the Borrower's best efforts to make use of the relationships of the
Borrower with other financial institutions to benefit the syndication efforts.
15.7 Participations
Any Lender may, without the consent of the Borrower, grant one or more
participations in its Commitment and its Rateable Portion of the Loans to other
financial institutions, provided that the granting of such a participation shall
be at the Lender's own cost and shall not affect the obligations of such Lender
hereunder nor shall it increase the costs to the Borrower hereunder or under any
of the other Documents and such Lender shall remain solely liable and
responsible for all of its Commitment in respect of all of the Documents and the
Borrower shall be entitled to deal exclusively with such Lender in relation
thereto.
15.8 Severability
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall not invalidate the remaining provisions hereof and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
15.9 Whole Agreement
This Agreement and the other Documents constitute the whole and entire
agreement between the parties hereto regarding the subject matter hereof and
thereof and cancel and supersede any prior agreements, undertakings,
declarations, commitments, representations, written or oral, in respect thereof.
15.10 Amendments and Waivers
Any provision of this Agreement (including, without limitation, any Event
of Default) may be amended only if the Borrower and the Majority of the Lenders
so agree in writing and, except as otherwise specifically provided herein, may
be waived only if the Majority of the Lenders so agree in writing, but:
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(a) an amendment or waiver which changes or relates to (i) the amount of
the Loans available hereunder or any Lender's Commitment, (ii) the
rate or dates of payment of interest, Bankers' Acceptance or
Documentary Instrument fees, or mandatory repayments of principal,
(iii) Sections 2.5 and 2.6, (iv) the amount or dates of payment of
fees hereunder, (v) the definition of "Majority Consent" and "Majority
of the Lenders", (vi) any provision hereof contemplating or requiring
consent, approval or agreement of "all Lenders", "the Lenders" or
similar expressions or permitting waiver of conditions or covenants or
agreements by "all Lenders", "the Lenders" or similar expressions,
(vii) Sections 10.3(d) and 10.4, (viii) the definition of "Event of
Default", or (ix) this Section, shall require the agreement or waiver
of all the Lenders and also (in the case of an amendment) of the other
parties hereto; and
(b) an amendment or waiver which changes or relates to the rights and/or
obligations of the Agent shall also require the agreement of the Agent
thereto.
Any such waiver and any consent by the Agent, any Lender, the Majority of
the Lenders or all of the Lenders under any provision of this Agreement must be
in writing and may be given subject to any conditions thought fit by the person
giving that waiver or consent. Any waiver or consent shall be effective only in
the instance and for the purpose for which it is given.
15.11 Further Assurances
Each of the Borrower, the Lenders and the Agent shall promptly cure any
default by it in the execution and delivery of this Agreement, the Documents or
of any the agreements provided for hereunder to which it is a party. The
Borrower, at its expense, shall promptly execute and deliver to the Agent, upon
request by the Agent (acting reasonably), all such other and further deeds,
agreements, opinions, certificates, instruments, affidavits, registration
materials and other documents reasonably necessary for the Borrower's compliance
with, or accomplishment of the covenants and agreements of the Borrower
hereunder or more fully to state the obligations of the Borrower as set out
herein or to make any registration, recording, file any notice or obtain any
consent, all as may be reasonably necessary or appropriate in connection
therewith.
15.12 Attornment
The parties hereto each hereby attorn and submit to the jurisdiction of
the courts of the Province of Alberta in regard to legal proceedings relating to
the Documents. For the purpose of all such legal proceedings, this Agreement
shall be deemed to have been performed in the Province of Alberta and the courts
of the Province of Alberta shall have jurisdiction to entertain any action
arising under this Agreement. Notwithstanding the foregoing, nothing in this
Section shall be construed nor operate to limit the right of any party hereto to
commence any action relating hereto in any other jurisdiction, nor to limit the
right of the courts of any other jurisdiction to take jurisdiction over any
action or matter relating hereto.
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15.13 Time of the Essence
Time shall be of the essence of this Agreement.
15.14 Credit Agreement Governs
In the event of any conflict or inconsistency between the provisions of
this Agreement and the provisions of the other Documents, the provisions of this
Agreement, to the extent of the conflict or inconsistency, shall govern and
prevail.
15.15 Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which taken together shall be
deemed to constitute one and the same instrument, and it shall not be necessary
in making proof of this Agreement to produce or account for more than one such
counterpart.
IN WITNESS WHEREOF the parties hereto have executed this Agreement.
NEUTRINO RESOURCES INC.
By:__________________________
Steven H. Mikel
President
c/s
By:__________________________
Michael E. Luttrell
Vice President Finance and Chief
Financial Officer
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BANK ONE CANADA, in its capacity as the Agent
By:___________________________
Jeanie Harman
First Vice President
BANK ONE CANADA, in its capacity as Lender
By:___________________________
Jeanie Harman
First Vice President
SCHEDULE A
LENDERS AND COMMITMENTS
-----------------------
Lender and Address Commitments
- ------------------ -----------
Bank One Canada Commitment: U.S. $30,000,000
BCE Place, P.O. Box 613
161 Bay Street, Suite 4240
Toronto, Ontario M5J 2S1
Attention: First Vice-President
Telecopy No.: (416) 363-7574
SCHEDULE B
to the Credit Agreement
dated August 29, 2000 between
Neutrino Resources Inc. and
Bank One Canada
________________________________________________________________________________
COMPLIANCE CERTIFICATE
----------------------
TO: BANK ONE CANADA (the "Bank")
Reference is made to the credit agreement dated August 29, 2000 between
Neutrino Resources Inc. and the Bank, as amended, modified, supplemented or
restated (the "Credit Agreement"). Capitalized terms used herein, and not
otherwise defined herein, shall have the meanings attributed to such terms in
the Credit Agreement.
This Compliance Certificate is delivered to the Bank pursuant to the Credit
Agreement.
The undersigned, [name], [title] of the Borrower, hereby certifies that, as
of the date of this Compliance Certificate:
1. I have made or caused to be made such investigations as are necessary or
appropriate for the purposes of this Compliance Certificate.
2. To the best of my knowledge after due enquiry:
(a) the financial statements for the [fiscal quarter OR fiscal year]
--
ending [],[] provided to the Bank pursuant to Section 9.1(e) of the
Credit Agreement were prepared in accordance with generally accepted
accounting principles and present fairly, in all material respects,
the financial position of the Borrower as at the date thereof;
(b) the representations and warranties made by the Borrower in Section 8.1
of the Credit Agreement are true and correct in all material respects,
except as has heretofore been notified to the Bank by the Borrower in
writing [or except as described in Schedule ___ hereto];
(c) the Borrower is in compliance in all respects with all covenants in
the Credit Agreement including the financial tests set forth in
Section 9.3 as at [date], being the most recently completed fiscal
[quarter OR year] of the Borrower as evidenced by the calculations of
--
such financial tests as attached hereto, except as has heretofore been
notified to the Bank by the Borrower in writing [or except as
described in Schedule ____ hereto]; and
(d) no Default or Event of Default has occurred and is continuing except
as has heretofore been notified to the Bank by the Borrower in writing
[or except as described in Schedule ____ hereto].
3. Except as has heretofore been notified to the Bank by the Borrower in
writing [or except as described in Schedule _____ hereto], to the best of
my knowledge after due enquiry:
(a) all properties of the Borrower and its Material Subsidiaries are
owned, leased, controlled and operated in compliance with all
Environmental Laws except to the extent such non-compliance would not
have or would not reasonably be expected to have a Material Adverse
Effect;
(b) there are not existing, pending or threatened any:
(i) claims, complaints, notices or requests for information received
from a Governmental Authority by the Borrower or any of its
Material Subsidiaries, or which any of them is otherwise aware,
with respect to any alleged violation of or alleged liability
under any Environmental Law; or
(ii) stop, clean-up or preventative orders, directions, cautions or
requests, notice of which has been received from a Governmental
Authority by the Borrower or any of its Material Subsidiaries, or
of which any of them is otherwise aware, relating to the
environment which requires any work, repair, remediation, clean-
up, construction or capital expenditure with respect to any
property owned, leased, managed, controlled or operated by the
Borrower or any of its Material Subsidiaries; and
(c) the result of which would be a Material Adverse Effect on the Borrower
or its Material Subsidiaries except in compliance with all
Environmental Laws, no contaminant or hazardous substance has been
received, handled, used, stored, treated or shipped at or from, and
there has been no discharge or release of a contaminant or hazardous
substances at, on, from or under any property owned, leased, managed,
controlled or operated by the Borrower or any of its Material
Subsidiaries except to the extent such non-compliance would not have
or would not reasonably be expected to have a Material Adverse Effect.
I give this Compliance Certificate on behalf of the Borrower and in my
capacity as the [title] of the Borrower, and no personal liability is created
against or assumed by me in the giving of this Certificate.
Dated at [], this [] day of [], [].
______________________
Name:
Title:
SCHEDULE C
to the Credit Agreement
dated August 29, 2000 between
Neutrino Resources Inc. and
Bank One Canada
________________________________________________________________________________
CONVERSION NOTICE
-----------------
TO: BANK ONE CANADA (the "Bank")
DATE:
________________________________________________________________________________
1. This Conversion Notice is delivered to you pursuant to the terms and
conditions of the credit agreement dated August 29, 2000 between the undersigned
and the Bank relating to the establishment of a U.S. $30,000,000 credit facility
in favour of the undersigned, as amended, modified, supplemented or restated
(the "Credit Agreement"). All defined terms set forth in this Conversion Notice
shall have the respective meanings set forth in the Credit Agreement.
2. The Borrower hereby requests a Conversion as follows:
(a) Conversion Date:_________________________________________
(b) Conversion of the following Loan:
(i) Type of Loan:______________________________________
(ii) Amount:____________________________________________
INTO the following Loan:
(iii) Type of Loan:______________________________________
(iv) Amount being converted:____________________________
(c) Payment, delivery or issuance instructions (if any):_____
________________________________
Yours very truly,
NEUTRINO RESOURCES INC.
Per: _______________________
Name:
Title:
SCHEDULE D
to the Credit Agreement
dated August 29, 2000 between
Neutrino Resources Inc. and
Bank One Canada
________________________________________________________________________________
DRAWDOWN NOTICE
---------------
TO: BANK ONE CANADA (the "Bank")
DATE:
________________________________________________________________________________
1. This Drawdown Notice is delivered to you pursuant to the terms and
conditions of the credit agreement dated August 29, 2000 between the undersigned
and the Bank relating to the establishment of a U.S. $30,000,000 credit facility
in favour of the undersigned, as amended, modified, supplemented or restated
(the "Credit Agreement"). All defined terms set forth in this Drawdown Notice
shall have the respective meanings set forth in the Credit Agreement.
2. The Borrower hereby requests a Drawdown as follows:
(a) Drawdown Date: _______________________________________________
(b) Amount of Drawdown:___________________________________________
(c) Type of Loan:_________________________________________________
(d) Payment, delivery or issuance instructions (if any):__________
_______________________________
3. The Borrower hereby certifies and represents and warrants to the Bank that
no Default or Event of Default has occurred and remains outstanding nor will any
such event occur as a result of the aforementioned Drawdown.
Yours very truly,
NEUTRINO RESOURCES INC.
Per:____________________________
Name:
Title:
SCHEDULE E
to the Credit Agreement
dated August 29, 2000 between
Neutrino Resources Inc. and
Bank One Canada
________________________________________________________________________________
REPAYMENT NOTICE
----------------
TO: Bank One Canada (the "Bank")
DATE: ____________________
1. This Repayment Notice is delivered to you pursuant to the credit agreement
dated August 29, 2000 between Neutrino Resources Inc. and the Bank relating to
the establishment of a U.S.. $30,000,000 credit facility in favour of the
undersigned, as amended, modified, supplemented or restated (the "Credit
Agreement"). All defined terms set forth in this Repayment Notice shall have
the respective meanings set forth in the Credit Agreement.
2. The Borrower hereby gives notice of a repayment as follows:
(a) Date of repayment:________________________________
(b) Loan(s):__________________________________________
(c) Principal amount:_________________________________
Yours very truly,
NEUTRINO RESOURCES INC.
Per:________________
Name:
Title: