FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (herein called this "Amendment")
made as of June 12, 1996, by and among INLAND PRODUCTION COMPANY, a Texas
corporation ("Borrower"), INLAND RESOURCES, INC., a Washington corporation
("Parent"), TRUST COMPANY OF THE WEST, as Agent, TCW ASSET MANAGEMENT COMPANY,
as Collateral Agent ("Collateral Agent"), and TCW (as defined in the Original
Agreement, as defined below),
W I T N E S S E T H:
WHEREAS, Borrower, Parent, Agent, Collateral Agent and TCW have entered
into that certain Credit Agreement dated as of November 29, 1995 ("Original
Agreement") for the purposes and consideration therein expressed, whereby TCW
made loans to Borrower as therein provided; and
WHEREAS, Borrower, Parent, Agent, Collateral Agent and TCW desire to amend
the Original Agreement for the purposes expressed herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Original Agreement and in
consideration of the loans which have been made and the loans which may
hereafter be made by TCW to Borrower, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto do hereby agree as follows:
ARTICLE I.
DEFINITIONS AND REFERENCES
Section I.1. TERMS DEFINED IN THE ORIGINAL AGREEMENT. Unless the context
otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Original Agreement shall have the same meanings whenever used in
this Amendment.
Section I.2. OTHER DEFINED TERMS. Various terms are defined throughout
this Amendment. Unless the context otherwise requires, the following additional
terms when used in this Amendment shall have the meanings assigned to them in
this Section 1.2.
"Amendment" shall mean this First Amendment to Credit Agreement.
-1-
"Amendment Documents" shall mean this Amendment, the Farmout Mortgage,
and the Farmout Royalty Conveyance.
"Credit Agreement" shall mean the Original Agreement as amended
hereby.
ARTICLE II.
AMENDMENTS TO ORIGINAL AGREEMENT; CONSENT; NO WAIVERS
Section II.1. DEFINITIONS.
The definition of "Commitment Period" in Section 1.1 of the Original
Agreement is hereby amended in its entirety to read as follows:
"COMMITMENT PERIOD" means the period from and including the date
hereof until and including the earliest to occur of: (a) December 31,
1996, (b) a Coverage Deficiency which is not cured within the 30 day period
required in Section 5.3, (c) the election by TCW, made during the
continuance of an Event of Default by notice given to Borrower, to
terminate the Commitment Period, or (d) the day on which any Note first
becomes due and payable in full.
The definition of "Farmout" is hereby added to Section 1.1 of the Original
Agreement immediately following the definition of "Event of Default":
"FARMOUT" means Farmout, Inc., a Utah corporation.
The definition of "Related Person" in Section 1.1 of the Original Agreement
is hereby amended in its entirety to read as follows:
"RELATED PERSON" means any of Parent, Borrower, Farmout, and each
Subsidiary of Parent.
Section II.2. REPRESENTATIONS AND WARRANTIES. Section 4.1(n) of the
Original Agreement is hereby amended in its entirety to read as follows:
(n) OWNERSHIP OF BORROWER AND FARMOUT. All of the outstanding shares
of each of Borrower and Farmout are owned by Parent and shall at all times
until the repayment of the Obligations be owned by Parent, provided that
Parent may merge Farmout into Borrower.
Section II.3. AFFIRMATIVE COVENANTS. The following Section 5.1(t) is
hereby added to the Original Agreement immediately following Section 5.1(s):
(t) SERIES B PROCEEDS. Borrower shall use, and has heretofore used,
the proceeds from the Series B Transaction
-2-
only to pay (i) any redemption amounts required on the Series A
Redemption, (ii) up to $350,000 for environmental remediation of the
Toiyabe Mine, and (iii) capital costs and other costs of Borrower which
are approved by TCW. For purposes of this Section 5.1(t) the term
"SERIES A REDEMPTION" means the redemption by Parent of all of its
existing Series A Preferred Stock, to be accomplished by (a) Parent's
call of its Series A Preferred Stock for redemption on or about July 31,
1996, and (b) Parent's payment or delivery to the holders of its Series
A Preferred Stock, in accordance with Parent's Articles of
Incorporation, of either cash or shares of Parent's common stock (but no
other consideration), as elected by each such holder. "SERIES B
TRANSACTION" means Borrower's issuance and sale of 1,000,000 shares of
Parent's Series B Preferred Stock to Pengo Securities Corp. and Arthur
J. Pasmas, on or about July 31, 1996, for a cash purchase price of
$10,000,000, as more fully described in that certain Agreement dated as
of June 12, 1996, among Smith Management Company, Inc., Farmout, Inc.,
Randall D. Smith, Jeffrey A. Smith, John W. Adams, Parent and Borrower
and that certain agreement dated as of June 12, 1996, among Arthur J.
Pasmas and Parent.
Section II.4. NEGATIVE COVENANTS. Section 5.2(b)(iii)(4) of the Original
Agreement is hereby amended in its entirety to read as follows:
(4) the aggregate outstanding principal amount of Debt of the Related
Persons which is secured by such Liens and incurred for the purchase of
trucks or automobiles does not at any time after January 1, 1996, exceed
$250,000, and the aggregate principal amount of such Debt which is incurred
in any Fiscal Year does not exceed $100,000.
The foregoing amendment to Section 5.2(b) shall be deemed to have taken effect
as of January 1, 1996.
Section 5.2(e) of the Original Agreement is hereby amended by adding the
following additional sentence to the end thereof:
Notwithstanding the foregoing, Parent may at any time pay dividends in the
form of Parent's common stock to the holders of Parent's Series B Preferred
Stock.
Section II.5. AMENDMENT TO APPROVAL LETTER. The line item for Office
Equipment and Furniture in that certain Approval Letter dated November 29, 1995
for ANCF Overhead is hereby amended in its entirety to read as follows:
$150,000 for the calendar year 1996, and $50,000 for each calendar
year thereafter.
Section II.6. SECURITY. Sections 6.2 and 6.3 of the Original Agreement
obligate Borrower and Parent to deliver
-3-
various Security Documents and other items upon request by Collateral Agent.
Borrower and Parent hereby agree to cause Farmout to deliver any similar
Security Documents and other items from time to time requested by Collateral
Agent.
Section II.7. SCHEDULES. Item number 7 on Schedule 1 to the Original
Agreement is hereby deemed to be amended to provide (in addition to the
disclosures currently made therein) that Parent owns 100% of the outstanding
common stock of Farmout.
ARTICLE III.
CONDITIONS OF EFFECTIVENESS
Section III.1. EFFECTIVE DATE. This Amendment shall become effective as of
the date first above written when, and only when, Collateral Agent shall have
received, at Collateral Agent's office:
(a) a counterpart of this Amendment executed and delivered by
Borrower, Parent and TCW,
(b) evidence, satisfactory to Lender in all respects, that Farmout
has acquired and then conveyed to Borrower full beneficial and equitable
title in and to all of the wells and leases (the "Farmout Properties")
farmed out to Randall D. Smith by Parent or Borrower pursuant to that
certain Farmout Agreement dated effective July 1, 1995, among Parent,
Borrower, and Randall D. Smith,
(c) a Royalty Conveyance from Borrower covering the Farmout
Properties and such other properties of Borrower as Lender may specify (the
"Farmout Royalty Conveyance"),
(d) a Mortgage from Borrower covering the Farmout Properties and such
other properties of Borrower as Lender may specify (the "Farmout
Mortgage"),
(e) a certificate of the secretary of Borrower, which shall contain
the names and true signatures of Borrower authorized to sign this Amendment
and the other Amendment Documents and which shall certify as to the truth,
correctness and completeness of the attached copy of resolutions
authorizing the execution, delivery and performance of this Amendment and
the other Amendment Documents,
(f) a written opinion of Glast, Phillips & Murray, P.C., addressed to
Agent and Collateral Agent to the effect that this Amendment and each other
Amendment Document has been duly authorized, executed and delivered by
Borrower, Parent and Farmout and that the Credit Agreement and each
Amendment Document constitutes the legal, valid and binding
-4-
obligations of Borrower, Parent, and Farmout enforceable in accordance
with their terms (subject, as to enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency and similar loans and to
moratorium laws and other laws affecting creditors' rights generally
from time to time in effect).
Upon satisfaction of the conditions set out in Section 3.1(b), (c) and (d)
above, a "Smith Transfer" shall have occurred under the Royalty Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Section IV.1. REPRESENTATIONS AND WARRANTIES OF BORROWER, PARENT AND
FARMOUT. In order to induce TCW to enter into this Amendment, Borrower and
Parent represent and warrant to TCW that:
(a) The representations and warranties contained in Section 4.1 of
the Original Agreement are true and correct at and as of the time of the
effectiveness hereof.
(b) Borrower, Parent and Farmout are each duly authorized to execute
and deliver this Amendment and the other Amendment Documents and Borrower
is and will continue to be duly authorized to borrow monies and to perform
its obligations under the Credit Agreement. Each of Borrower, Parent and
Farmout has duly taken all corporate action necessary to authorize the
execution and delivery of this Amendment and the other Amendment Documents
and to authorize the performance of its obligations hereunder and
thereunder.
(c) The execution and delivery by each of Borrower, Parent and
Farmout of this Amendment and the other Amendment Documents, the
performance by each of Borrower, Parent and Farmout of its obligations
hereunder and thereunder, and the consummation of the transactions
contemplated hereby and thereby do not and will not conflict with any
provision of law, statute, rule or regulation or of the articles of
incorporation or bylaws of Borrower, Parent or Farmout, or of any material
agreement, judgment, license, order or permit applicable to or binding upon
any Related Person, or result in the creation of any lien, charge or
encumbrance upon any assets or properties of any Related Person. Except
for those which have been obtained, no consent, approval, authorization or
order of any court or governmental authority or third party is required in
connection with the execution and delivery by each of Borrower, Parent and
Farmout of this Amendment and the other Amendment Documents or otherwise to
consummate the transactions contemplated hereby and thereby.
-5-
(d) When duly executed and delivered, each of this Amendment and the
Credit Agreement and the other Amendment Documents will be a legal and
binding obligation of each of Borrower, Parent and Farmout enforceable in
accordance with its terms, except as limited by bankruptcy, insolvency or
similar laws of general application relating to the enforcement of
creditors' rights and by equitable principles of general application.
ARTICLE V.
MISCELLANEOUS
Section V.1. RATIFICATION OF AGREEMENTS. The Original Agreement as
hereby amended, together with the Parent Guaranty and each other Loan Document
heretofore executed, are hereby ratified and confirmed in all respects. Any
reference to the Credit Agreement in any Loan Document shall be deemed to be a
reference to the Original Agreement as hereby amended. The execution, delivery
and effectiveness of this Amendment shall not, except as expressly provided
herein, operate as a waiver of any right, power or remedy of TCW under the
Credit Agreement, the Notes, or any other Loan Document nor constitute a waiver
of any provision of the Credit Agreement, the Notes or any other Loan Document.
Section V.2. SURVIVAL OF AGREEMENTS. All representations, warranties,
covenants and agreements of Borrower and Parent herein shall survive the
execution and delivery of this Amendment and the performance hereof, including
without limitation the making or granting of the Loans, and shall further
survive until all of the Obligations are paid in full. All statements and
agreements contained in any certificate or instrument delivered by any Related
Person hereunder or under the Credit Agreement to TCW shall be deemed to
constitute representations and warranties by, and/or agreements and covenants
of, Borrower under this Amendment and under the Credit Agreement.
Section V.3. LOAN DOCUMENTS. This Amendment and each other Amendment
Document is a Loan Document, and all provisions in the Credit Agreement
pertaining to Loan Documents (including without limitation Section 8.10 of the
Credit Agreement, which provides for waiver without limitations of jury trial)
apply hereto and thereto.
Section V.4. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance the laws of the State of California and any applicable
laws of the United States of America in all respects, including construction,
validity and performance.
Section V.5. COUNTERPARTS. This Amendment may be separately executed in
counterparts and by the different parties
-6-
hereto in separate counterparts, each of which when so executed shall be
deemed to constitute one and the same Amendment.
THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
IN WITNESS WHEREOF, this Amendment is executed as of the date first above
written.
INLAND PRODUCTION COMPANY
By:
------------------------------------
Kyle R. Miller, President and
Chief Executive Officer
INLAND RESOURCES INC.
By:
------------------------------------
Kyle R. Miller, President and
Chief Executive Officer
TRUST COMPANY OF THE WEST, a California trust
company, as Trustee of TCW Debt & Royalty Fund IVA
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
-7-
TCW ASSET MANAGEMENT COMPANY, a California
corporation, as Investment Manager pursuant to the
Investment Management and Custody Agreement dated
as of June 1, 1993, with The Trustees of Columbia
University in the City of New York and Trust
Company of the West
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
TCW ASSET MANAGEMENT COMPANY, a California
corporation, as Investment Manager under the
Investment Management Agreement dated as of March
1, 1993 with The Board of Trustees of The Leland
Stanford Junior University
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
-8-
TCW ASSET MANAGEMENT COMPANY, as Investment
Manager under the Investment Management Agreement
dated as of June 8, 1993 between the Searle Trusts
Limited Partnership X, Harris Trust and Savings
Bank, and TCW Asset Management Company
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
TCW ASSET MANAGEMENT COMPANY, a California
corporation, as Investment Manager pursuant to the
Investment Management and Custody Agreement dated
April 26, 1994, with The City and County
Employees' Retirement System of San Francisco, TCW
Asset Management Company and Trust Company of the
West
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
-9-
TCW DEBT AND ROYALTY FUND IVB, a California
limited partnership
By: TCW Asset Management Company, a California
corporation, as General Partner
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
TCW ASSET MANAGEMENT COMPANY, as Investment
Manager under the Investment Management Agreement
dated as of June 8, 1993 between the John G.
Searle Charitable Trusts Partnership, Harris Trust
and Savings Bank, and TCW Asset Management Company
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
-10-
TCW ASSET MANAGEMENT COMPANY, as Investment
Manager under the Investment Management Agreement
dated as of December 31, 1993 with Delta Air
Lines, Inc.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
TCW DEBT AND ROYALTY FUND IVC, a California
limited partnership
By: TCW Asset Management Company, a California
corporation, as General Partner
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
AGENT:
TRUST COMPANY OF THE WEST,
a California trust company, as Agent
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
-11-
COLLATERAL AGENT:
TCW ASSET MANAGEMENT COMPANY,
a California corporation, as Collateral Agent
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
-12-