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EXHIBIT 4.1.2
Execution
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AMENDED AND RESTATED CREDIT AGREEMENT
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INLAND PRODUCTION COMPANY
Borrower
INLAND RESOURCES INC.
as Guarantor
and
ING (U.S.) CAPITAL CORPORATION
as Agent
and CERTAIN FINANCIAL INSTITUTIONS
as Banks
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September 11, 1998
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TABLE OF CONTENTS
Page
CREDIT AGREEMENT..............................................................1
ARTICLE I - Definitions and References........................................1
Section 1.1. Defined Terms..............................................1
Section 1.2. Annexes, Exhibits and Schedules; Additional Definitions....6
Section 1.3. Amendment of Defined Instruments...........................6
Section 1.4. References and Titles......................................7
Section 1.5. Calculations and Determinations............................7
ARTICLE II - The Loans........................................................7
Section 2.1. Commitments to Lend; Notes.................................7
Section 2.2. Requests for New Loans.....................................8
Section 2.3. Continuations and Conversions of Existing Loans............8
Section 2.4. Use of Proceeds............................................9
Section 2.5. Fees......................................................10
Section 2.6. Optional Prepayments......................................10
Section 2.7. Mandatory Prepayments.....................................10
Section 2.9. Initial Borrowing Base....................................12
Section 2.10. Subsequent Determinations of Borrowing Base...............12
Section 2.11. Letters of Credit.........................................13
Section 2.12. Requesting Letters of Credit..............................13
Section 2.13. Reimbursement and Participations..........................14
Section 2.14. Letter of Credit Fees.....................................15
Section 2.15. No Duty to Inquire........................................15
Section 2.16. LC Collateral.............................................16
ARTICLE III - Payments to Banks..............................................17
Section 3.1. General Procedures........................................17
Section 3.2. Capital Reimbursement.....................................18
Section 3.3. Increased Cost of Eurodollar Loans and Letters of Credit..18
Section 3.4. Availability..............................................19
Section 3.5. Funding Losses............................................19
Section 3.6. Reimbursable Taxes........................................19
Section 3.7. Change of Applicable Lending Office.......................21
Section 3.8. Replacement of Banks......................................21
ARTICLE IV - Conditions Precedent to Effectiveness...........................21
Section 4.1. Documents to be Delivered.................................21
Section 4.2. Additional Conditions Precedent...........................22
ARTICLE V - Representations and Warranties...................................23
ARTICLE VI - Affirmative Covenants of Borrower and Parent....................23
Section 6.1. Payment and Performance...................................23
Section 6.2. Agreement to Deliver Security Documents...................23
Section 6.3. Perfection and Protection of Security Interests and
Liens.....................................................24
Section 6.4. Bank Accounts; Offset.....................................24
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Section 6.5. Guaranties of Parent's Subsidiaries.......................24
Section 6.6. Production Proceeds.......................................24
Section 6.7. TCW Debt..................................................25
ARTICLE VII - Events of Default and Remedies.................................25
Section 7.1. Events of Default.........................................25
Section 7.2. Acceleration..............................................25
Section 7.3. Remedies..................................................25
ARTICLE VIII - Agent.........................................................26
Section 8.1. Appointment and Authority.................................26
Section 8.2. Exculpation, Agent's Reliance, Etc........................26
Section 8.3. Credit Decisions..........................................26
Section 8.4. Indemnification...........................................27
Section 8.5. Rights as Bank............................................27
Section 8.6. Sharing of Set-Offs and Other Payments....................27
Section 8.7. Investments...............................................28
Section 8.8. Benefit of Article VIII...................................28
Section 8.9. Resignation...............................................28
ARTICLE IX - Miscellaneous...................................................28
Section 9.1. Waivers and Amendments; Acknowledgements..................28
Section 9.2. Survival of Agreements; Cumulative Nature.................30
Section 9.3. Notices...................................................30
Section 9.4. Payment of Expenses; Indemnity............................30
Section 9.5. Joint and Several Liability; Parties in Interest;
Assignment................................................31
Section 9.6. Confidentiality...........................................33
Section 9.7. Governing Law; Submission to Process......................33
Section 9.8. Limitation on Interest....................................34
Section 9.9. Termination; Limited Survival.............................34
Section 9.10. Severability..............................................35
Section 9.11. Counterparts..............................................35
Section 9.12. Waiver of Jury Trial, Punitive Damages, etc...............35
Section 9.13. Amendment and Restatement.................................35
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Annexes, Schedules and Exhibits:
Annex A - Common Definitions
Annex B - Common Representations and Warranties
Annex C - Common Covenants
Annex D - Common Events of Default
Schedule 1 - Disclosure Schedule
Schedule 2 - Security Schedule
Schedule 3 - Insurance Schedule
Schedule 4 - Bank Schedule
Exhibit A - Promissory Note
Exhibit B - Borrowing Notice
Exhibit C - Continuation/Conversion Notice
Exhibit D - Certificate Accompanying Financial Statements
Exhibit E - Environmental Compliance Certificate
Exhibit F-1 - Opinion of Glast, Phillips & Murray, P.C.
Exhibit G - Assignment and Assumption Agreement
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AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT is made as of September 11,
1998 by and among Inland Production Company, a Texas corporation, (herein
called "Borrower"), Inland Resources Inc., a Washington corporation (herein
called "Parent"), ING (U.S.) Capital Corporation (herein called "Agent") and
the Banks referred to below. In consideration of the mutual covenants and
agreements contained herein the parties hereto agree as follows:
ARTICLE I - Definitions and References
Section 1.1. Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it in this Section 1.1 or in the sections
and subsections referred to below:
"Agent" means ING (U.S.) Capital Corporation, as Agent hereunder
(including its capacity as LC Issuer hereunder), and its successors in such
capacity.
"Agreement" means this Amended and Restated Credit Agreement.
"Applicable Lending Office" means, with respect to each Bank, such
Bank's Domestic Lending Office in the case of Base Rate Loans and such Bank's
Eurodollar Lending Office in the case of Eurodollar Loans.
"Approval Letter" has the meaning given it in the Intercreditor
Agreement.
"Banks" means each signatory hereto (other than Borrower and Related
Persons a party hereto), including ING (U.S.) Capital Corporation in its
capacity as a Bank hereunder rather than as Agent, and the successors of each
such party as holder of a Note.
"Bank Parties" means Agent, LC Issuer, and all Banks.
"Bank Schedule" means Schedule 4 hereto.
"Base Rate" means the higher of (a) the Reference Rate and (b) the
Federal Funds Rate plus one-half percent (0.5%) per annum. For purposes of this
definition, "Reference Rate" means the arithmetic average of the rates of
interest publicly announced by The Chase Manhattan Bank, Citibank, N.A. and
Morgan Guaranty Trust Company of New York (or their respective successors) as
their respective prime commercial lending rates (or, as to any such bank that
does not announce such a rate, such bank's 'base' or other rate determined by
Agent to be the equivalent rate announced by such bank), except that, if any
such bank shall, for any period, cease to announce publicly its prime
commercial lending (or equivalent) rate, Agent shall, during such period,
determine the "Base Rate" based upon the prime commercial lending (or
equivalent) rates announced publicly by the other such banks. The Base Rate
shall in no event, however, exceed the Highest Lawful Rate.
"Base Rate Loan" means a Loan which does not bear interest at the
Eurodollar Rate.
"Borrower" means Inland Production Company, a Texas corporation.
"Borrowing" means a borrowing of new Loans of a single Type pursuant
to Section 2.2 or a continuation or conversion of existing Loans into a single
Type (and, in the case of Eurodollar Loans, with the same Interest Period)
pursuant to Section 2.3.
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"Borrowing Base" means, at the particular time in question, either the
amount provided for in Section 2.9 or the amount determined by Agent in
accordance with the provisions of Section 2.10.
"Borrowing Base Deficiency" has the meaning given it in Section 2.7(b).
"Borrowing Notice" means a written or telephonic request, or a written
confirmation, made by Borrower which meets the requirements of Section 2.2.
"Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in New York, New York.
Any Business Day in any way relating to Eurodollar Loans (such as the day on
which an Interest Period begins or ends) must also be a day on which, in the
judgment of Agent, significant transactions in dollars are carried out in the
interbank Eurocurrency market.
"Commitment Period" means the period from and including the date
hereof until and including March 31, 1999 (or, if earlier, the day on which the
Notes first become due and payable in full).
"Continuation/Conversion Notice" means a written or telephonic
request, or a written confirmation, made by Borrower which meets the
requirements of Section 2.3.
"Coverage Default" has the meaning given to such term in the TCW
Agreement.
"Coverage Deficiency" has the meaning given to such term in the TCW
Agreement.
"Default" means (a) any Event of Default and any default, event or
condition which would, with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of Default and (b) any
"Default" as defined in the TCW Agreement.
"Determination Date" has the meaning given it in Section 2.10.
"Domestic Lending Office" means, with respect to any Bank, the office
of such Bank specified as its "Domestic Lending Office" below its name on the
Bank Schedule attached hereto, or such other office as such Bank may from time
to time specify to Borrower and Agent.
"Eligible Transferee" means a Person which either (a) is a Bank, or
(b) is consented to as an Eligible Transferee by Agent and, so long as no Event
of Default is continuing by Borrower, which consents in each case will not be
unreasonably withheld (provided that no Person organized outside the United
States may be an Eligible Transferee if Borrower would be required to pay
withholding taxes on interest or principal owed to such Person).
"Eurodollar Loan" means a Loan which is properly designated as a
Eurodollar Loan pursuant to Section 2.2 or 2.3.
"Eurodollar Lending Office" means, with respect to any Bank, the
office of such Bank specified as its "Eurodollar Lending Office" below its name
on the Bank Schedule attached hereto (or, if no such office is specified, its
Domestic Lending Office), or such other office of such Bank as such Bank may
from time to time specify to Borrower and Agent.
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"Eurodollar Rate" means, with respect to each particular Eurodollar
Loan and the associated LIBOR Rate and Reserve Percentage, the rate per annum
calculated by Agent (rounded upwards, if necessary, to the next higher 0.01%)
determined on a daily basis pursuant to the following formula:
Eurodollar Rate =
LIBOR Rate + A
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100.0% - Reserve Percentage
where A means 1.75%. The Eurodollar Rate for any Eurodollar Loan shall change
whenever the Reserve Percentage changes. No Eurodollar Rate shall ever exceed
the Highest Lawful Rate.
"Event of Default" has the meaning given it in Section 7.1.
"Facility Usage" means, at the time in question, the aggregate amount
of outstanding Loans and existing LC Obligations at such time.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100th of one percent) equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the day for which such rate is
to be determined is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day, and (ii) if such rate is not
so published for any day, the Federal Funds Rate for such day shall be the
average rate quoted to Agent on such day on such transactions as determined by
Agent.
"Guarantor" means any Person who has guaranteed some or all of the
Obligations pursuant to a guaranty listed on the Security Schedule or any other
Person who has guaranteed some or all of the Obligations and who has been
accepted by Agent as a Guarantor or any Subsidiary of Parent which now or
hereafter executes and delivers a guaranty to Agent pursuant to Section 6.5.
"Highest Lawful Rate" means, with respect to each Bank, the maximum
nonusurious rate of interest that such Bank is permitted under applicable Law
to contract for, take, charge, or receive with respect to its Loan. All
determinations herein of the Highest Lawful Rate, or of any interest rate
determined by reference to the Highest Lawful Rate, shall be made separately
for each Bank as appropriate to assure that the Loan Documents are not
construed to obligate any Person to pay interest to any Bank at a rate in
excess of the Highest Lawful Rate applicable to such Bank.
"Intercreditor Agreement" means that certain Amended and Restated
Intercreditor Agreement dated of even date herewith among Agent, Banks, Tamco,
Borrower, Parent, and Noteholders (as defined therein).
"Interest Period" means, with respect to each particular Eurodollar
Loan in a Borrowing, a period of 1, 2, 3 or 6 months, as specified in the
Borrowing Notice applicable thereto, beginning on and including the date
specified in such Borrowing Notice (which must be a Business Day), and ending
on but not including the same day of the month as the day on which it began
(e.g., a period beginning on the third day of one month shall end on but not
include the third day of another month), provided that each Interest Period
which would otherwise end on a day which is not a Business Day shall end on the
next succeeding Business Day (unless such next succeeding Business Day is the
first Business Day of a
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calendar month, in which case such Interest Period shall end on the immediately
preceding Business Day). No Interest Period may be elected which would extend
past the date on which the associated Note is due and payable in full.
"Late Payment Rate" means, at the time in question, two percent (2.0%)
per annum plus the Base Rate then in effect; provided that, with respect to any
Eurodollar Loan with an Interest Period extending beyond the date such
Eurodollar Loan becomes due and payable, "Late Payment Rate" shall mean two
percent (2.0%) per annum plus the related Eurodollar Rate. The Late Payment
Rate shall never exceed the Highest Lawful Rate.
"Lenders" means Agent and all Banks.
"Lending Office" means, with respect to any Bank, the office, branch,
or agency through which it funds its Eurodollar Loans; and with respect to
Agent, the office, branch, or agency through which it administers this
Agreement.
"LC Application" means any application for a Letter of Credit
hereafter made by Borrower to LC Issuer.
"LC Collateral" has the meaning given it in Section 2.16(a).
"LC Issuer" means, collectively, ING (U.S.) Capital Corporation and
U.S. Bank National Association, or either of them, in their capacity as the
issuer or issuers of Letters of Credit hereunder, and their successors in such
capacity. Agent may, with the consent of Borrower and the Bank in question,
appoint any Bank hereunder as an LC Issuer in place of or in addition to either
such LC Issuer.
"LC Obligations" means, at the time in question, the sum of all
Matured LC Obligations plus the Maximum Drawing Amount.
"Letter of Credit" means any letter of credit issued by LC Issuer
hereunder at the application of Borrower. Each Letter of Credit shall be
classified by LC Issuer as a 'Commercial' Letter of Credit or a 'Standby'
Letter of Credit (and each Standby Letter of Credit shall be subclassified as a
'Financial Standby' Letter of Credit or a 'Performance Standby' Letter of
Credit), in accordance with the Laws and regulations applicable to LC Issuer
from time to time and in accordance with LC Issuer's customary practices at
such times for reporting to regulatory authorities.
"LIBOR Rate" means, with respect to each particular Eurodollar Loan
and the related Interest Period, the rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) reported, on the date two Business Days
prior to the first day of such Interest Period, on Telerate Access Service Page
3750 (British Bankers Association Settlement Rate) as the London Interbank
Offered Rate for dollar deposits having a term comparable to such Interest
Period and in an amount of $1,000,000 or more (or, if such Page shall cease to
be publicly available or if the information contained on such Page, in Agent's
sole judgment, shall cease to accurately reflect such London Interbank Offered
Rate, as reported by any publicly available source of similar market data
selected by Agent that, in Agent's sole judgment, accurately reflects such
London Interbank Offered Rate).
"Loan" has the meaning given it in Section 2.1.
"Loan Documents" means this Agreement, the Notes, the LC Applications,
the Letters of Credit, the Security Documents, the Intercreditor Agreement, and
all other agreements, certificates, documents,
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instruments and writings at any time delivered in connection herewith or
therewith (exclusive of term sheets, commitment letters, correspondence and
similar documents used in the negotiation hereof, except to the extent the same
contain information about Borrower or its Affiliates, properties, business or
prospects).
"Matured LC Obligations" means all amounts paid by LC Issuer on drafts
or demands for payment drawn or made under or purported to be under any Letter
of Credit and all other amounts due and owing to LC Issuer under any LC
Application for any Letter of Credit, to the extent the same have not been
repaid to LC Issuer (with the proceeds of Loans or otherwise).
"Maximum Drawing Amount" means at the time in question the sum of the
maximum amounts which LC Issuer might then or thereafter be called upon to
advance under all Letters of Credit then outstanding.
"Note" has the meaning given it in Section 2.1.
"Obligations" means all Debt from time to time owing by any Related
Person to any Lender under or pursuant to any of the Loan Documents, including
all LC Obligations. 'Obligation' means any part of the Obligations.
"Other Allowed Debt" means the TCW Debt.
"Other Loan Documents" means the TCW Documents.
"Parent Guaranty" means that certain Guaranty dated as of September
23, 1997, made by Parent in favor of Agent, as amended, supplemented, restated,
or ratified to the date hereof.
"Percentage Share" means, with respect to any Bank (a) when used in
Sections 2.1 or 2.5, in any Borrowing Notice or when no Loans are outstanding
hereunder, the percentage set forth opposite such Bank's name on the Bank
Schedule attached hereto, and (b) when used otherwise, the percentage obtained
by dividing (i) the sum of the unpaid principal balance of such Bank's Loans at
the time in question plus the Matured LC Obligations which such Bank has funded
pursuant to Section 2.13(c) plus the portion of the Maximum Drawing Amount
which such Bank might be obligated to fund under Section 2.13(c), by (ii) the
sum of the aggregate unpaid principal balance of all Loans at such time plus
the aggregate amount of LC Obligations outstanding at such time.
"Plan of Development" or "POD" means the Plan of Development as such
is approved annually beginning with the period from January 1, 1998 to December
31, 1998, by Borrower, Agent and Tamco or is modified or replaced from time to
time by agreement among Borrower, Agent and Tamco. The first such POD must be
approved by December 1, 1997.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect.
"Required Lenders" means Agent and the Banks whose aggregate
Percentage Shares (including the Percentage Share of Agent) equals seventy-five
percent (75%).
"Reserve Percentage" means, on any day with respect to each particular
Eurodollar Loan, the maximum reserve requirement, as determined by Agent
(including without limitation any basic, supplemental, marginal, emergency or
similar reserves), expressed as a percentage and rounded to the
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next higher 0.01%, which would then apply under Regulation D with respect to
"Eurocurrency liabilities," as such term is defined in Regulation D, of
$1,000,000 or more. If such reserve requirement shall change after the date
hereof, the Reserve Percentage shall be automatically increased or decreased,
as the case may be, from time to time as of the effective time of each such
change in such reserve requirement.
"Security Documents" means the instruments listed in the Security
Schedule and all other security agreements, deeds of trust, mortgages, chattel
mortgages, pledges, guaranties, financing statements, continuation statements,
extension agreements and other agreements or instruments now, heretofore, or
hereafter delivered by any Related Person to Agent in connection with this
Agreement or any transaction contemplated hereby to secure or guarantee the
payment of any part of the Obligations or the performance of any Related
Person's other duties and obligations under the Loan Documents.
"Security Schedule" means Schedule 2 hereto.
"Tamco" means TCW Asset Management Company, in its capacity as Agent
under the TCW Agreement, and its successors in such capacity.
"TCW Agreement" means that certain Amended and Restated Credit
Agreement of even date herewith among Borrower, Parent, Trust Company of the
West and Tamco, as the same may be amended, restated, or supplemented from time
to time.
"TCW Debt" means any and all Debt (whether for principal, interest,
indemnifications, expenses or otherwise) owing by Borrower under the TCW
Agreement or any other TCW Document providing for the payment of fees in
connection therewith, which Debt is subordinated to the Obligations pursuant to
the terms of the Intercreditor Agreement.
"TCW Documents" means the TCW Agreement and each note, mortgage,
security agreement, pledge agreement, guarantee, or other agreement,
certificate, document, instrument and writing at any time delivered in
connection therewith.
"Type" means, with respect to any Loans, the characterization of such
Loans as either Base Rate Loans or Eurodollar Loans.
Section 1.2. Annexes, Exhibits and Schedules; Additional Definitions.
All Annexes, Exhibits and Schedules attached to this Agreement are a part
hereof for all purposes. Reference is hereby made to Annex A and to the
Security Schedule for the meaning of certain terms defined therein and used but
not defined herein, which definitions are incorporated herein by reference.
Section 1.3. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in
this Agreement which refer to a particular agreement, instrument or document
also refer to and include all renewals, extensions, modifications, amendments
and restatements of such agreement, instrument or document, provided that
nothing contained in this section shall be construed to authorize any such
renewal, extension, modification, amendment or restatement.
Section 1.4. References and Titles. All references in this Agreement
to Annexes, Exhibits, Schedules, articles, sections, subsections and other
subdivisions refer to the Annexes, Exhibits, Schedules, articles, sections,
subsections and other subdivisions of this Agreement unless expressly provided
otherwise. Titles appearing at the beginning of any subdivisions are for
convenience only and
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do not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement," "this instrument," "herein," "hereof," "hereby," "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation." Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
Section 1.5. Calculations and Determinations. All calculations under
the Loan Documents of interest chargeable with respect to Eurodollar Loans and
of fees shall be made on the basis of actual days elapsed (including the first
day but excluding the last) and a year of 360 days. All other calculations of
interest made under the Loan Documents shall be made on the basis of actual
days elapsed (including the first day but excluding the last) and a year of 365
or 366 days, as appropriate. Each determination by a Lender of amounts to be
paid under Sections 3.2 through 3.6 or any other matters which are to be
determined hereunder by a Lender (such as any Eurodollar Rate, LIBOR Rate,
Business Day, Interest Period, or Reserve Percentage) shall, in the absence of
manifest error, be conclusive and binding. Unless otherwise expressly provided
herein or unless Required Lenders otherwise consent all financial statements
and reports furnished to any Lender hereunder shall be prepared and all
financial computations and determinations pursuant hereto shall be made in
accordance with GAAP.
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ARTICLE II - The Loans
Section 2.1. Commitments to Lend; Notes. Subject to the terms and
conditions hereof, each Bank agrees to make loans to Borrower (herein called
such Bank's 'Loans') upon Borrower's request from time to time during the
Commitment Period, provided that (a) subject to Sections 3.3, 3.4 and 3.6, all
Banks are requested to make Loans of the same Type in accordance with their
respective Percentage Shares and as part of the same Borrowing, (b) the sum of
(i) the aggregate amount of such Bank's Loans outstanding at any time plus (ii)
the Maximum Drawing Amount for which such Bank is liable to purchase
participations under Section 9.5, plus (iii) the Matured LC Obligations which
have been funded by such Bank under such section, does not exceed such Bank's
Percentage Share of the Borrowing Base determined as of the date on which the
requested Loan is to be made, and (c) after giving effect to such Loans, the
aggregate amount of all Loans plus all LC Obligations does not exceed the
Borrowing Base determined as of the date on which the requested Loans are to be
made. The aggregate amount of all Loans in any Borrowing must be greater than
or equal to $1,000,000 or must equal the remaining availability under the
Borrowing Base. Borrower may have no more than six Borrowings of Eurodollar
Loans outstanding at any time. The obligation of Borrower to repay to each Bank
the aggregate amount of all Loans made by such Bank, together with interest
accruing in connection therewith, shall be evidenced by a single promissory
note (herein called such Bank's "Note") made by Borrower payable to the order
of such Bank in the form of Exhibit A with appropriate insertions. The amount
of principal owing on any Bank's Note at any given time shall be the aggregate
amount of all Loans theretofore made by such Bank minus all payments of
principal theretofore received by such Bank on such Note. Interest on each Note
shall accrue and be due and payable as provided herein and therein, with
Eurodollar Loans bearing interest at the Eurodollar Rate and Base Rate Loans
bearing interest at the Base Rate (subject to the applicability of the Late
Payment Rate and limited by the provisions of Section 9.8). Subject to the
terms and conditions hereof, Borrower may borrow, repay, and reborrow
hereunder. It is expressly understood that Banks' commitment to make Loans is
determined only by reference to the Borrowing Base from time to time in effect,
and the aggregate amount of the Notes and the amount specified in the Security
Documents are specified at a greater amount only for the convenience of the
parties to avoid the necessity of preparing and recording supplements to the
Security Documents.
Section 2.2. Requests for New Loans. Borrower must give to Agent
written notice (or telephonic notice promptly confirmed in writing) of any
requested Borrowing of new Loans to be advanced by Banks. Each such notice
constitutes a "Borrowing Notice" hereunder and must:
(a) specify (i) the aggregate amount of any such Borrowing of
new Base Rate Loans and the date on which such Base Rate Loans are to
be advanced, or (ii) the aggregate amount of any such Borrowing of new
Eurodollar Loans, the date on which such Eurodollar Loans are to be
advanced (which shall be the first day of the Interest Period which is
to apply thereto), and the length of the applicable Interest Period;
and
(b) be received by Agent not later than 1:00 p.m., New York,
New York time, on (i) the day on which any such Base Rate Loans are to
be made, or (ii) the third Business Day preceding the day on which any
such Eurodollar Loans are to be made.
Each such written request or confirmation must be made in the form and
substance of the "Borrowing Notice" attached hereto as Exhibit B, duly
completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in such written confirmation. Upon receipt of any such
Borrowing Notice, Agent shall give each Bank prompt notice of the terms
thereof. If all conditions precedent to such new Loans have been met, each Bank
will on the date requested promptly remit to Agent at Agent's office in New
York, New York the amount of such Bank's new Loan in immediately available
funds, and upon receipt of such funds, unless to its actual knowledge any
conditions precedent to such Loans have been neither
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met nor waived as provided herein, Agent shall promptly make such Loans
available to Borrower. Unless Agent shall have received prompt notice from a
Bank that such Bank will not make available to Agent such Bank's new Loan,
Agent may in its discretion assume that such Bank has made such Loan available
to Agent in accordance with this section and Agent may if it chooses, in
reliance upon such assumption, make such Loan available to Borrower. If and to
the extent such Bank shall not so make its new Loan available to Agent, such
Bank and Borrower severally agree to pay or repay to Agent within three days
after demand the amount of such Loan together with interest thereon, for each
day from the date such amount was made available to Borrower until the date
such amount is paid or repaid to Agent, with interest at (i) the Federal Funds
Rate, if such Bank is making such payment and (ii) the interest rate applicable
at the time to the other new Loans made on such date, if Borrower is making
such repayment. If neither such Bank nor Borrower pay or repay to Agent such
amount within such three-day period, Agent shall in addition to such amount be
entitled to recover from such Bank and from Borrower, on demand, interest
thereon at the Late Payment Rate, calculated from the date such amount was made
available to Borrower. The failure of any Bank to make any new Loan to be made
by it hereunder shall not relieve any other Bank of its obligation hereunder,
if any, to make its new Loan, but no Bank shall be responsible for the failure
of any other Bank to make any new Loan to be made by such other Bank.
Section 2.3. Continuations and Conversions of Existing Loans. Borrower
may make the following elections with respect to Loans already outstanding: to
convert Base Rate Loans to Eurodollar Loans, to convert Eurodollar Loans to
Base Rate Loans on the last day of the Interest Period applicable thereto, or
to continue Eurodollar Loans beyond the expiration of such Interest Period by
designating a new Interest Period to take effect at the time of such
expiration. In making such elections, Borrower may combine existing Loans made
pursuant to separate Borrowings into one new Borrowing or divide existing Loans
made pursuant to one Borrowing into separate new Borrowings. To make any such
election, Borrower must give to Agent written notice (or telephonic notice
promptly confirmed in writing) of any such conversion or continuation of
existing Loans, with a separate notice given for each new Borrowing. Each such
notice constitutes a "Continuation/Conversion Notice" hereunder and must:
(a) specify the existing Loans which are to be continued or
converted;
(b) specify (i) the aggregate amount of any Borrowing of Base
Rate Loans into which such existing Loans are to be continued or
converted and the date on which such continuation or conversion is to
occur, or (ii) the aggregate amount of any Borrowing of Eurodollar
Loans into which such existing Loans are to be continued or converted,
the date on which such continuation or conversion is to occur (which
shall be the first day of the Interest Period which is to apply to
such Eurodollar Loans), and the length of the applicable Interest
Period; and
(c) be received by Agent not later than 1:00 p.m., New York,
New York time, on (i) the day on which any such continuation or
conversion to Base Rate Loans is to occur, or (ii) the third Business
Day preceding the day on which any such continuation or conversion to
Eurodollar Loans is to occur.
Each such written request or confirmation must be made in the form and
substance of the "Continuation/Conversion Notice" attached hereto as Exhibit C,
duly completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in such written confirmation. Upon receipt of any such
Borrowing Notice, Agent shall give each Bank prompt notice of the terms
thereof. Each Borrowing Notice shall be irrevocable and binding on Borrower.
During the continuance of any Default, Borrower may not make any election to
convert existing Loans into Eurodollar Loans or continue existing Loans as
Eurodollar Loans. If (due to the existence of a Default or for any other
reason) Borrower fails to timely
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and properly give any notice of continuation or conversion with respect to a
Borrowing of existing Eurodollar Loans at least three days prior to the end of
the Interest Period applicable thereto, such Eurodollar Loans shall
automatically be converted into Base Rate Loans at the end of such Interest
Period. No new funds shall be repaid by Borrower or advanced by any Bank in
connection with any continuation or conversion of existing Loans pursuant to
this section, and no such continuation or conversion shall be deemed to be a
new advance of funds for any purpose; such continuations and conversions merely
constitute a change in the interest rate applicable to already outstanding
Loans.
Section 2.4. Use of Proceeds. Borrower shall use the proceeds of all
Loans to (i) finance future proved oil and gas acquisitions and development by
Borrower, (ii) make advances to Inland Refining to finance (A) the purchase of
the Pennzoil Refinery and (B) the purchase of other fixed assets during the
year ending December 31, 1998 up to the amount of $2,500,000, (iii) provide
working capital for Borrower's and Inland Refining's operations, provided that
the advances to Inland Refining (exclusive of the capital contribution of
$10,450,000 to partially fund the acquisition of the Crysen Refinery), plus
Letters of Credit issued for the benefit of Inland Refining, plus any amounts
that have been advanced pursuant to any such Letter of Credit which have not
been reimbursed by Inland Refining to Borrower, shall not in the aggregate (but
without duplication) exceed the amount of $20,000,000 outstanding at any one
time, and (iv) refinance its Matured LC Obligations; provided, however, that
Borrower shall not use any Loans to make advances to Inland Refining, including
without limitation advances to finance any fixed assets at the Crysen Refinery,
except as specifically set forth in this Section 2.4. Borrower shall use all
Letters of Credit for its general corporate purposes and to support agreements
for the purchase by Inland Refining of refining feed stocks in the ordinary
course of business. In no event shall the funds from any Loan or any Letter of
Credit be used directly or indirectly by any Person for personal, family,
household or agricultural purposes or for the purpose, whether immediate,
incidental or ultimate, of purchasing, acquiring or carrying any "margin stock"
or any "margin securities" (as such terms are defined respectively in
Regulation U and Regulation G promulgated by the Board of Governors of the
Federal Reserve System) or to extend credit to others directly or indirectly
for the purpose of purchasing or carrying any such margin stock or margin
securities. Borrower represents and warrants that Borrower is not engaged
principally, or as one of Borrower's important activities, in the business of
extending credit to others for the purpose of purchasing or carrying such
margin stock or margin securities.
Section 2.5. Fees.
(a) Commitment Fees. In consideration of each Bank's commitment to
make Loans, Borrower will pay to Agent for the account of each Bank a
commitment fee determined on a daily basis by applying a rate of one-half of
one percent (0.5%) per annum to such Bank's Percentage Share of the unused
portion of the Borrowing Base on each day during the Commitment Period,
determined for each such day by deducting from the amount of the Borrowing Base
at the end of such day the sum of (i) the Facility Usage and (ii) the amount of
all LC Obligations outstanding at the end of such day. This commitment fee
shall be due and payable in arrears on the last Business Day after the end of
each Fiscal Quarter and at the end of the Commitment Period.
(b) Facility Fee. In addition to all other amounts due to Agent under
the Loan Documents, Borrower will pay facility fees to Agent, for its own
account, as described in that certain letter agreement executed prior to the
date hereof between Agent and Borrower.
Section 2.6. Optional Prepayments. Borrower may, upon five Business
Days' notice to each Bank, from time to time and without premium or penalty
prepay the Notes, in whole or in part, so long as the aggregate amounts of all
partial prepayments of principal on the Notes equals $1,000,000 or any
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higher integral multiple of $1,000,000, so long as Borrower does not prepay any
Eurodollar Loan, and so long as Borrower does not make any prepayments which
would reduce the unpaid principal balance of any Loan to less than $100,000
without first either (a) terminating this Agreement or (b) providing assurance
satisfactory to Agent in its discretion that Banks' legal rights under the Loan
Documents are in no way affected by such reduction. Each partial prepayment of
principal made after the end of the Commitment Period shall be applied to the
regular installments of principal due under the Notes in the inverse order of
their maturities. Each prepayment of principal under this section shall be
accompanied by all interest then accrued and unpaid on the principal so
prepaid. Any principal or interest prepaid pursuant to this section shall be in
addition to, and not in lieu of, all payments otherwise required to be paid
under the Loan Documents at the time of such prepayment.
Section 2.7. Mandatory Prepayments.
(a) Borrower will make all payments on the Obligations which are
required under the Intercreditor Agreement, including all prepayments of
principal on the Notes which are required under Section 3(a)(iv) of the
Intercreditor Agreement.
(b) If at any time the Facility Usage plus the aggregate of amount of
outstanding LC Obligations is in excess of the Borrowing Base (such excess
being herein called a "Borrowing Base Deficiency"), Borrower shall, within five
Business Days after Agent gives notice of such fact to Borrower, either:
(i) prepay the principal of the Loans in an aggregate amount
at least equal to such Borrowing Base Deficiency, or
(ii) give notice to Agent electing to prepay the principal of
the Loans in up to three monthly installments in an aggregate amount
at least equal to such Borrowing Base Deficiency, with each such
installment equal to or in excess of one-third of such Borrowing Base
Deficiency, and with the first such installment to be paid one month
after the giving of such notice and the subsequent installments to be
due and payable at one month intervals thereafter until such Borrowing
Base Deficiency has been eliminated, or
(iii) give notice to Agent that Borrower desires to provide
Agent with deeds of trust, mortgages, chattel mortgages, security
agreements, financing statements and other security documents in form
and substance satisfactory to Agent, granting, confirming, and
perfecting first and prior liens or security interests in collateral
acceptable to all Banks, to the extent needed to allow all Banks to
increase the Borrowing Base (as they in their reasonable discretion
deem consistent with prudent oil and gas banking industry lending
standards at the time) to an amount which eliminates such Borrowing
Base Deficiency, and then provide such security documents within
thirty days after Agent specifies such collateral to Borrower. If,
prior to any such specification by Agent, Required Lenders determine
that the giving of such security documents will not serve to eliminate
such Borrowing Base Deficiency, then, within five Business Days after
receiving notice of such determination, Borrower will elect to make,
and thereafter make, the prepayments specified in either of the
preceding subsections (i) or (ii) of this subsection (b).
(c) Each prepayment of principal under this section shall be
accompanied by all interest then accrued and unpaid on the principal so
prepaid. Any principal or interest prepaid pursuant to this section shall be in
addition to, and not in lieu of, all payments otherwise required to be paid
under the Loan Documents at the time of such prepayment.
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Section 2.8. Scheduled Principal Payments. Beginning on June 29, 1999,
and on each Quarterly Payment Date thereafter, Borrower will, in addition to
paying any interest then due on the Loans, make a principal payment in
accordance with the following schedule:
Quarterly Amount
Payment Date of Payment
------------ ----------
June 29, 1999 $6,222,222
Sept 29, 1999 $6,222,222
Dec 30, 1999 $6,222,222
Mar 30, 2000 $4,666,666
June 29, 2000 $4,666,666
Sept 28, 2000 $4,666,666
Dec 28, 2000 $4,666,666
Mar 29, 2001 $3,888,889
June 28, 2001 $3,888,889
Sept 27, 2001 $3,888,889
Dec 28, 2001 $3,888,889
Mar 28, 2002 $3,500,000
June 27, 2002 $3,500,000
Sept 27, 2002 $3,500,000
Dec 30, 2002 $3,500,000
Mar 28, 2003 $3,111,114
The principal installments required by this Section 2.8 are in addition to all
other principal payments required by the terms of this Agreement.
Section 2.9. Initial Borrowing Base. During the period from the date
hereof to the first Determination Date the Borrowing Base shall be 70,000,000.
Section 2.10. Subsequent Determinations of Borrowing Base. By March 1
and July 15 of each year Borrower shall furnish to each Bank all information,
reports and data which Agent has then requested concerning Related Persons'
businesses and properties (including their oil and gas properties and interests
and the reserves and production relating thereto), together with the
Engineering Report described in Section C.1(d) or C.1(e) of Annex C, as
applicable. Within thirty days after receiving such information, reports and
data, Required Lenders shall agree upon an amount for the Borrowing Base
(provided that all Banks must agree to any increase in the Borrowing Base) and
Agent shall by notice to Borrower designate such amount as the new Borrowing
Base available to Borrower hereunder, which designation shall take effect
immediately on the date such notice is sent (herein called a "Determination
Date") and shall remain in effect until but not including the next date as of
which the Borrowing Base is redetermined. If Borrower does not furnish all such
information, reports and data by the date specified in the first sentence of
this section, Agent may nonetheless designate the Borrowing Base at any amount
which Required Lenders determine and may redesignate the Borrowing Base from
time to time thereafter until each Bank receives all such information, reports
and data, whereupon Required Lenders shall
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designate a new Borrowing Base as described above. Required Lenders shall
determine the amount of the Borrowing Base based upon the loan collateral value
which they in their discretion assign to the various proved oil and gas
properties of Related Persons at the time in question and based upon such other
credit factors (including without limitation the assets, liabilities, cash
flow, hedged and unhedged exposure to price, foreign exchange rate, and
interest rate changes, business, properties, prospects, management and
ownership of Borrower and its Affiliates) as they in their discretion deem
significant. It is expressly understood that Banks and Agent have no obligation
to agree upon or designate the Borrowing Base at any particular amount, whether
in relation to the aggregate face amount of the Notes or otherwise, and that
Banks' commitments to advance funds hereunder is determined by reference to the
Borrowing Base from time to time in effect, which Borrowing Base shall be used
for calculating commitment fees under Section 2.5 and, to the extent permitted
by Law and regulatory authorities, for the purposes of capital adequacy
determination and reimbursements under Section 3.2. It is further understood
that the scheduled principal payments set forth in Section 2.8 are based upon
the Borrowing Base as in effect on the date hereof and that Banks and Agent
shall not increase the Borrowing Base without (i) an amendment to such
scheduled principal payments as determined by the Banks in connection with such
Borrowing Base increase and (ii) the consent of Tamco to such amendment to such
scheduled principal payments. In no event shall the Borrowing Base ever exceed
the Allowed Bank Indebtedness, as that term is defined in the Intercreditor
Agreement.
Section 2.11. Letters of Credit. Subject to the terms and conditions
hereof, Borrower may during the Commitment Period request either LC Issuer to
issue one or more Letters of Credit, provided that, after taking such Letter of
Credit into account:
(a) the Facility Usage does not exceed the Borrowing Base at
such time; and
(b) the aggregate amount of LC Obligations at such time does
not exceed $9,750,000; and
(c) the expiration date of such Letter of Credit is prior to
the end of the Commitment Period.
and further provided that:
(d) such Letter of Credit is to be used to support (i)
agreements for the purchase by Inland Refining of refinery feed stocks
in the ordinary course of business and (ii) up to the amount of
$200,000, obligations for diesel fuel and motor fuel taxes payable to
the State of Utah;
(e) such Letter of Credit is not directly or indirectly used
to assure payment of or otherwise support any Indebtedness of any
Person;
(f) the issuance of such Letter of Credit will be in
compliance with all applicable governmental restrictions, policies,
and guidelines and will not subject LC Issuer to any cost which is not
reimbursable under Article III;
(g) the form and terms of such Letter of Credit are
acceptable to such LC Issuer in its sole and absolute discretion; and
(h) all other conditions in this Agreement to the issuance of
such Letter of Credit have been satisfied.
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An LC Issuer will honor any such request if the foregoing conditions
(a) through (h) (in the following Section 2.12 called the "LC
Conditions") have been met as of the date of issuance of such Letter
of Credit. An LC Issuer may choose to honor any such request for any
other Letter of Credit but has no obligation to do so and may refuse
to issue any other requested Letter of Credit for any reason which
such LC Issuer in its sole discretion deems relevant.
Section 2.12. Requesting Letters of Credit. Borrower must make written
application for any Letter of Credit from any LC Issuer at least three Business
Days before the date on which Borrower desires for such LC Issuer to issue such
Letter of Credit. A copy of such application shall be simultaneously delivered
to Agent. By making any such written application Borrower shall be deemed to
have represented and warranted to each Bank that the LC Conditions described in
Section 2.11 will be met as of the date of issuance of such Letter of Credit.
Each such written application for a Letter of Credit must be made in writing in
the form and substance of Exhibit G, the terms and provisions of which are
hereby incorporated herein by reference (or in such other form as may mutually
be agreed upon by Agent, LC Issuer and Borrower). Two Business Days after the
LC Conditions for a Letter of Credit have been met as described in Section 2.11
(or if an LC Issuer otherwise desires to issue such Letter of Credit), LC
Issuer will issue such Letter of Credit at LC Issuer's office, and will provide
Agent with a specimen copy of the Letter of Credit so issued. If any provisions
of any LC Application conflict with any provisions of this Agreement, the
provisions of this Agreement shall govern and control.
Section 2.13. Reimbursement and Participations.
(a) Reimbursement by Borrower. Each Matured LC Obligation
shall constitute a loan by LC Issuer to Borrower. Borrower promises to
pay to LC Issuer, or to LC Issuer's order, on demand, the full amount
of each Matured LC Obligation, together with interest thereon at the
Late Payment Rate.
(b) Letter of Credit Advances. If the beneficiary of any
Letter of Credit makes a draft or other demand for payment thereunder
then Borrower may, during the interval between the making thereof and
the honoring thereof by LC Issuer, request Banks to make Loans to
Borrower in the amount of such draft or demand, which Loans shall be
made concurrently with LC Issuer's payment of such draft or demand and
shall be immediately used by LC Issuer to repay the amount of the
resulting Matured LC Obligation. Such a request by Borrower shall be
made in compliance with all of the provisions hereof, provided that
for the purposes of the first sentence of Section 2.1 the amount of
such Loans shall be considered but the amount of the Matured LC
Obligation to be concurrently paid by such Loans shall not be
considered.
(c) Participation by Banks. Each LC Issuer irrevocably agrees
to grant and hereby grants to each Bank, and -- to induce each LC
Issuer to issue Letters of Credit hereunder -- each Bank irrevocably
agrees to accept and purchase and hereby accepts and purchases from
such LC Issuer, on the terms and conditions hereinafter stated and for
such Bank's own account and risk, an undivided interest equal to such
Bank's Percentage Share of such LC Issuer's obligations and rights
under each Letter of Credit issued hereunder by such LC Issuer and the
amount of each Matured LC Obligation paid by such LC Issuer
thereunder. Each Bank unconditionally and irrevocably agrees with LC
Issuer that, if a Matured LC Obligation is paid under any Letter of
Credit for which such LC Issuer is not reimbursed in full by Borrower
in accordance with the terms of this Agreement and the related LC
Application (including any reimbursement by means of concurrent Loans
or by the application of LC Collateral), such Bank shall (in all
circumstances and without set-off or counterclaim) pay to such LC
Issuer on demand, in
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immediately available funds at such LC Issuer's address for notices
hereunder, such Bank's Percentage Share of such Matured LC Obligation
(or any portion thereof which has not been reimbursed by Borrower).
Each Bank's obligation to pay an LC Issuer pursuant to the terms of
this subsection is irrevocable and unconditional. If any amount
required to be paid by any Bank to an LC Issuer pursuant to this
subsection is paid by such Bank to an LC Issuer within three Business
Days after the date such payment is due, LC Issuer shall in addition
to such amount be entitled to recover from such Bank, on demand,
interest thereon calculated from such due date at the Federal Funds
Rate. If any amount required to be paid by any Bank to LC Issuer
pursuant to this subsection is not paid by such Bank to LC Issuer
within three Business Days after the date such payment is due, LC
Issuer shall in addition to such amount be entitled to recover from
such Bank, on demand, interest thereon calculated from such due date
at the Late Payment Rate.
(d) Distributions to Participants. Whenever an LC Issuer has
in accordance with this section received from any Bank payment of such
Bank's Percentage Share of any Matured LC Obligation, if such LC
Issuer thereafter receives any payment of such Matured LC Obligation
or any payment of interest thereon (whether directly from Borrower or
by application of LC Collateral or otherwise, and excluding only
interest for any period prior to such LC Issuer's demand that such
Bank make such payment of its Percentage Share), such LC Issuer will
distribute to such Bank its Percentage Share of the amounts so
received by such LC Issuer; provided, however, that if any such
payment received by an LC Issuer must thereafter be returned by such
LC Issuer, such Bank shall return to such LC Issuer the portion
thereof which such LC Issuer has previously distributed to it.
(e) Calculations. A written advice setting forth in
reasonable detail the amounts owing under this section, submitted by
an LC Issuer to Borrower or any Bank from time to time, shall be
conclusive, absent manifest error, as to the amounts thereof.
Section 2.14. Letter of Credit Fees. In consideration of LC Issuer's
issuance of any Letter of Credit, Borrower agrees to pay (a) to Agent, for the
account of all Banks in accordance with their respective Percentage Shares, a
letter of credit fee at a rate equal to one and five-eighths percent (1.625%)
per annum of the amount of all Letters of Credit, and (b) to a LC Issuer for
its own account, a letter of credit fronting fee at a rate equal to one-eighth
percent (.125%) per annum of each Letter of Credit issued by such LC Issuer.
Each such fee will be calculated on a daily basis, on the face amount of
Letters of Credit outstanding on each day at the above applicable rate and will
be payable quarterly in arrears. In addition, Borrower will pay to an LC Issuer
a minimum administrative issuance fee of $200 for each Letter of Credit issued
by such LC Issuer and an amendment fee of $65 for each Letter of Credit, each
such fee to be payable upon issuance or amendment, respectively, of a Letter of
Credit.
Section 2.15. No Duty to Inquire.
(a) Drafts and Demands. LC Issuer is authorized and
instructed to accept and pay drafts and demands for payment under any
Letter of Credit without requiring, and without responsibility for,
any determination as to the existence of any event giving rise to said
draft, either at the time of acceptance or payment or thereafter. LC
Issuer is under no duty to determine the proper identity of anyone
presenting such a draft or making such a demand (whether by tested
telex or otherwise) as the officer, representative or agent of any
beneficiary under any Letter of Credit, and payment by LC Issuer to
any such beneficiary when requested by any such purported officer,
representative or agent is hereby authorized and approved. Borrower
agrees to hold LC Issuer and each other Bank Party harmless and
indemnified against any liability or claim in connection with or
arising out of the subject matter of this section,
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WHICH INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM
IS IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY BANK PARTY, provided only
that no Bank Party shall be entitled to indemnification for that
portion, if any, of any liability or claim which is proximately caused
by its own individual gross negligence or willful misconduct, as
determined in a final judgment.
(b) Extension of Maturity. If the maturity of any Letter of
Credit is extended by its terms or by Law or governmental action, if
any extension of the maturity or time for presentation of drafts or
any other modification of the terms of any Letter of Credit is made at
the request of any Related Person, or if the amount of any Letter of
Credit is increased at the request of any Related Person, this
Agreement shall be binding upon all Related Persons with respect to
such Letter of Credit as so extended, increased or otherwise modified,
with respect to drafts and property covered thereby, and with respect
to any action taken by LC Issuer, LC Issuer's correspondents, or any
Bank Party in accordance with such extension, increase or other
modification.
(c) Transferees of Letters of Credit. If any Letter of Credit
provides that it is transferable, LC Issuer shall have no duty to
determine the proper identity of anyone appearing as transferee of
such Letter of Credit, nor shall LC Issuer be charged with
responsibility of any nature or character for the validity or
correctness of any transfer or successive transfers, and payment by LC
Issuer to any purported transferee or transferees as determined by LC
Issuer is hereby authorized and approved, and Borrower further agrees
to hold LC Issuer and each other Bank Party harmless and indemnified
against any liability or claim in connection with or arising out of
the foregoing, WHICH INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH
LIABILITY OR CLAIM IS IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR
IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY BANK
PARTY, provided only that no Bank Party shall be entitled to
indemnification for that portion, if any, of any liability or claim
which is proximately caused by its own individual gross negligence or
willful misconduct, as determined in a final judgment.
Section 2.16. LC Collateral.
(a) LC Obligations in Excess of Borrowing Base. If, after the
making of all mandatory prepayments required under Section 2.7, the
outstanding LC Obligations will exceed the Borrowing Base, then in
addition to prepayment of the Borrowing Base Deficiency Borrower will
immediately pay to LC Issuer an amount equal to such excess. LC Issuer
will hold such amount as security for the remaining LC Obligations
(all such amounts held as security for LC Obligations being herein
collectively called "LC Collateral") until such LC Obligations become
Matured LC Obligations, at which time such LC Collateral may be
applied to such Matured LC Obligations. Neither this subsection nor
the following subsection shall, however, limit or impair any rights
which LC Issuer may have under any other document or agreement
relating to any Letter of Credit or LC Obligation, including any LC
Application, or any rights which any Bank Party may have to otherwise
apply any payments by Borrower and any LC Collateral under Section
3.1.
(b) Acceleration of LC Obligations. If the Obligations or any
part thereof become immediately due and payable pursuant to Section
7.2 then, unless Required Lenders otherwise specifically elect to the
contrary (which election may thereafter by retracted by Required
Lenders
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at any time), all LC Obligations shall become immediately due and
payable without regard to whether or not actual drawings or payments
on the Letters of Credit have occurred, and Borrower shall be
obligated to pay to LC Issuer immediately an amount equal to the
aggregate LC Obligations which are then outstanding. All amounts so
paid shall first be applied to Matured LC Obligations and then held by
LC Issuer as LC Collateral until such LC Obligations become Matured LC
Obligations, at which time such LC Collateral shall be applied to such
Matured LC Obligations.
(c) Investment of LC Collateral. Pending application thereof,
all LC Collateral shall be invested by LC Issuer in such investments
as LC Issuer may choose in its sole discretion. All interest on such
investments shall be reinvested or applied to Matured LC Obligations.
When all Obligations have been satisfied in full, including all LC
Obligations, all Letters of Credit have expired or been terminated,
and all of Borrower's reimbursement obligations in connection
therewith have been satisfied in full, LC Issuer shall release any
remaining LC Collateral. Borrower hereby assigns and grants to LC
Issuer a continuing security interest in all LC Collateral paid by it
to LC Issuer, all investments purchased with such LC Collateral, and
all proceeds thereof to secure its Matured LC Obligations and its
Obligations under this Agreement, each Note, and the other Loan
Documents, and Borrower agrees that such LC Collateral and investments
shall be subject to all of the terms and conditions of the Security
Documents. Borrower further agrees that LC Issuer shall have all of
the rights and remedies of a secured party under the Uniform
Commercial Code as adopted in the State of New York with respect to
such security interest and that an Event of Default under this
Agreement shall constitute a default for purposes of such security
interest.
(d) Payment of LC Collateral. When Borrower is required to
provide LC Collateral for any reason and fails to do so on the day
when required, LC Issuer may without notice to Borrower or any other
Related Person provide such LC Collateral (whether by application of
proceeds of other Collateral, by transfers from other accounts
maintained with LC Issuer, or otherwise) using any available funds of
Borrower or any other Person also liable to make such payments. Any
such amounts which are required to be provided as LC Collateral and
which are not provided on the date required shall, for purposes of
each Security Document, be considered past due Obligations owing
hereunder, and LC Issuer is hereby authorized to exercise its
respective rights under each Security Document to obtain such amounts.
ARTICLE III - Payments to Banks
Section 3.1. General Procedures. Borrower will make each payment which
it owes under the Loan Documents to Agent for the account of the Lender to whom
such payment is owed. Each such payment must be received by Agent not later
than 11:00 a.m., New York, New York time, on the date such payment becomes due
and payable, in lawful money of the United States of America, without set-off,
deduction or counterclaim, and in immediately available funds. Any payment
received by Agent after such time will be deemed to have been made on the next
following Business Day. Should any such payment become due and payable on a day
other than a Business Day, the maturity of such payment shall be extended to
the next succeeding Business Day, and, in the case of a payment of principal or
past due interest, interest shall accrue and be payable thereon for the period
of such extension as provided in the Loan Document under which such payment is
due. Each payment under a Loan Document shall be due and payable at the place
provided therein and, if no specific place of payment is provided, shall be due
and payable at the place of payment of Agent's Note. When Agent collects or
receives money on account of the Obligations, Agent shall distribute all money
so collected or received, and each Lender shall apply all such money so
distributed, as follows:
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(a) first, for the payment of all Obligations which are then
due (and if such money is insufficient to pay all such Obligations,
first to any reimbursements due Agent under Section C.8 of Annex C of
this Agreement or Section 9.4 and then to the partial payment of all
other Obligations then due in proportion to the amounts thereof, or as
Lenders shall otherwise agree);
(b) then for the prepayment of amounts owing under the Loan
Documents (other than principal on the Notes) if so specified by
Borrower;
(c) then for the prepayment of principal on the Notes,
together with accrued and unpaid interest on the principal so prepaid;
and
(d) last, for the payment or prepayment of any other
Obligations.
All payments applied to principal or interest on any Note shall be applied
first to any interest then due and payable, then to principal then due and
payable, and last to any prepayment of principal and interest in compliance
with Sections 2.6 and 2.7. All distributions of amounts described in any of
subsections (b), (c), or (d) above shall be made by Agent pro rata to Agent and
each Lender then owed Obligations described in such subsection in proportion to
all amounts owed all Lenders which are described in such subsection; provided
that if any Lender then owes payments to Agent for the purchase of a
participation under Section 9.5 hereof, any amounts otherwise distributable
under this section to such Lender shall be deemed to belong to Agent, to the
extent of such unpaid payments, and Agent shall apply such amounts to make such
unpaid payments rather than distribute such amounts to such Lender.
Section 3.2. Capital Reimbursement. If either (a) the introduction or
implementation of or the compliance with or any change in or in the
interpretation of any Law, or (b) the introduction or implementation of or the
compliance with any request, directive or guideline from any central bank or
other governmental authority (whether or not having the force of Law) affects
or would affect the amount of capital required or expected to be maintained by
any Lender or any corporation controlling any Lender, then, upon demand by such
Lender, Borrower will pay to Agent for the benefit of such Lender, from time to
time as specified by such Lender, such additional amount or amounts which such
Lender shall determine to be appropriate to compensate such Lender or any
corporation controlling such Lender in light of such circumstances, to the
extent that such Lender reasonably determines that the amount of any such
capital would be increased or the rate of return on any such capital would be
reduced by or in whole or in part based on the existence of the face amount of
such Lender's Loans, commitments, or the provisions concerning the issuance of
Letters of Credit under this Agreement.
Section 3.3. Increased Cost of Eurodollar Loans and Letters of Credit.
If any applicable Law (whether now in effect or hereinafter enacted or
promulgated, including Regulation D) or any interpretation or administration
thereof by any governmental authority charged with the interpretation or
administration thereof (whether or not having the force of Law):
(i) shall change the basis of taxation of payments
to any Lender of any principal, interest, or other amounts
attributable to any Eurodollar Loan or otherwise due under
this Agreement in respect of any Eurodollar Loan or Letter of
Credit (other than taxes imposed on the overall net income of
such Lender or any lending office of such Lender by any
jurisdiction in which such Lender or any such lending office
is located); or
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(ii) shall change, impose, modify, apply or deem
applicable any reserve, special deposit or similar
requirements in respect of any Eurodollar Loan or Letter of
Credit (excluding those for which such Lender is fully
compensated pursuant to adjustments made in the definition of
Eurodollar Rate) or against assets of, deposits with or for
the account of, or credit extended by, such Lender; or
(iii) shall impose on any Lender or the interbank
Eurocurrency deposit market any other condition affecting any
Eurodollar Loan or Letter of Credit, the result of which is
to increase the cost to any Lender of funding or maintaining
any Eurodollar Loan or of issuing any Letter of Credit or to
reduce the amount of any sum receivable by any Lender in
respect of any Eurodollar Loan or Letter of Credit by an
amount deemed by such Lender to be material,
then such Lender shall promptly notify Agent and Borrower in writing
of the happening of such event and of the amount required to
compensate such Lender for such event (on an after-tax basis, taking
into account any taxes on such compensation), whereupon (iv) Borrower
shall pay such amount to Agent for the account of such Lender and (v)
Borrower may elect, by giving to Agent and such Lender not less than
three Business Days' notice, to convert all (but not less than all) of
any such Eurodollar Loans into Base Rate Loans.
Section 3.4. Availability. If (a) any change in applicable Laws, or in
the interpretation or administration thereof of or in any jurisdiction
whatsoever, domestic or foreign, shall make it unlawful or impracticable for
any Lender to fund or maintain Eurodollar Loans, or shall materially restrict
the authority of any Lender to purchase or take offshore deposits of dollars
(i.e., "eurodollars") or to issue Letters of Credit, (b) any Lender determines
that matching deposits appropriate to fund or maintain any Eurodollar Loan are
not available to it, or (c) any Lender determines that the formula for
calculating the Eurodollar Rate does not fairly reflect the cost to such Lender
of making or maintaining loans based on such rate, then, upon notice by such
Lender to Borrower and Agent, Borrower's right to elect Eurodollar Loans or to
apply for Letters of Credit from such Lender shall be suspended to the extent
and for the duration of such illegality, impracticability or restriction and
all Eurodollar Loans of such Lender which are then outstanding or are then the
subject of any Borrowing Notice and which cannot lawfully or practicably be
maintained or funded shall immediately become or remain, or shall be funded as,
Base Rate Loans of such Lender. Borrower agrees to indemnify each Lender and
hold it harmless against all costs, expenses, claims, penalties, liabilities
and damages which may result from any such change in Law, interpretation or
administration (other than taxes imposed on the overall net income of such
Lender or any lending office of such Lender). Such indemnification shall be on
an after-tax basis, taking into account any taxes imposed on the amounts paid
as indemnity.
Section 3.5. Funding Losses. In addition to its other obligations
hereunder, Borrower will indemnify each Lender against, and reimburse each
Lender on demand for, any loss or expense incurred or sustained by such Lender
(including any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by a Lender to fund or
maintain Eurodollar Loans), as a result of (a) any payment or prepayment
(whether authorized or required hereunder or otherwise) of all or a portion of
a Eurodollar Loan on a day other than the day on which the applicable Interest
Period ends, (b) any payment or prepayment, whether required hereunder or
otherwise, of a Loan made after the delivery, but before the effective date, of
a Continuation/ Conversion Notice, if such payment or prepayment prevents such
Continuation/Conversion Notice from becoming fully effective, (c) the failure
of any Loan to be made or of any Continuation/ Conversion Notice to become
effective due to any condition precedent not being satisfied or due to any
other action or inaction of any Related Person, or (d) any conversion (whether
authorized or required hereunder or otherwise) of all or any portion of any
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Eurodollar Loan into a Base Rate Loan or into a different Eurodollar Loan on a
day other than the day on which the applicable Interest Period ends. Such
indemnification shall be on an after-tax basis, taking into account any taxes
imposed on the amounts paid as indemnity.
Section 3.6. Reimbursable Taxes. Borrower covenants and agrees that:
(a) Borrower will indemnify each Lender against and reimburse
each Lender for all present and future income, stamp and other taxes,
levies, costs and charges whatsoever imposed, assessed, levied or
collected on or in respect of this Agreement or any Eurodollar Loans
or Letters of Credit (whether or not legally or correctly imposed,
assessed, levied or collected), excluding, however, any taxes imposed
on or measured by the overall net income of Agent or such Lender or
any lending office of such Lender by any jurisdiction in which such
Lender or any such lending office is located (all such non-excluded
taxes, levies, costs and charges being collectively called
'Reimbursable Taxes' in this section). Such indemnification shall be
on an after-tax basis, taking into account any taxes imposed on the
amounts paid as indemnity.
(a) All payments on account of the principal of, and interest
on, each Lender's Loans and Note, and all other amounts payable by
Borrower to any Lender hereunder, shall be made in full without
set-off or counterclaim and shall be made free and clear of and
without deductions or withholdings of any nature by reason of any
Reimbursable Taxes, all of which will be for the account of Borrower.
In the event of Borrower being compelled by Law to make any such
deduction or withholding from any payment to any Lender, Borrower
shall pay on the due date of such payment, by way of additional
interest, such additional amounts as are needed to cause the amount
receivable by such Lender after such deduction or withholding to equal
the amount which would have been receivable in the absence of such
deduction or withholding. If Borrower should make any deduction or
withholding as aforesaid, Borrower shall within 60 days thereafter
forward to such Lender an official receipt or other official document
evidencing payment of such deduction or withholding.
(b) If Borrower is ever required to pay any Reimbursable Tax
with respect to any Eurodollar Loan, Borrower may elect, by giving to
Agent and such Lender not less than three Business Days' notice, to
convert all (but not less than all) of any such Eurodollar Loan into a
Base Rate Loan, but such election shall not diminish Borrower's
obligation to pay all Reimbursable Taxes.
(c) Notwithstanding the foregoing provisions of this section,
Borrower shall be entitled, to the extent it is required to do so by
Law, to deduct or withhold (and not to make any indemnification or
reimbursement for) income or other similar taxes imposed by the United
States of America (other than any portion thereof attributable to a
change in federal income tax Laws effected after the date hereof) from
interest, fees or other amounts payable hereunder for the account of
any Lender, other than a Lender (i) who is a U.S. person for Federal
income tax purposes or (ii) who has the Prescribed Forms on file with
Agent (with copies provided to Borrower) for the applicable year to
the extent deduction or withholding of such taxes is not required as a
result of the filing of such Prescribed Forms, provided that if
Borrower shall so deduct or withhold any such taxes, it shall provide
a statement to Agent and such Lender, setting forth the amount of such
taxes so deducted or withheld, the applicable rate and any other
information or documentation which such Lender may reasonably request
for assisting such Lender to obtain any allowable credits or
deductions for the taxes so deducted or withheld in the jurisdiction
or jurisdictions in which such Lender is subject to tax. As used in
this section, "Prescribed Forms" means such duly executed forms or
statements, and in such number of copies, which may, from time to
time, be prescribed by Law and which, pursuant to applicable
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provisions of (x) an income tax treaty between the United States and
the country of residence of the Lender providing the forms or
statements, (y) the Internal Revenue Code of 1986, as amended from
time to time, or (z) any applicable rules or regulations thereunder,
permit Borrower to make payments hereunder for the account of such
Lender free of such deduction or withholding of income or similar
taxes.
Section 3.7. Change of Applicable Lending Office. Each Lender agrees
that, upon the occurrence of any event giving rise to the operation of Sections
3.2 through 3.6 with respect to such Lender, it will, if requested by Borrower,
use reasonable efforts (subject to overall policy considerations of such
Lender) to designate another Lending Office, provided that such designation is
made on such terms that such Lender and its Lending Office suffer no economic,
legal or regulatory disadvantage, with the object of avoiding the consequence
of the event giving rise to the operation of any such section. Nothing in this
section shall affect or postpone any of the obligations of Borrower or the
rights of any Lender provided in Sections 3.2 through 3.6.
Section 3.8. Replacement of Banks. If any Lender seeks reimbursement
for increased costs under Sections 3.2 through 3.6, then within ninety days
thereafter -- provided no Event of Default then exists -- Borrower shall have
the right (unless such Lender withdraws its request for additional
compensation) to replace such Lender by requiring such Lender to assign its
Loans and Notes and its commitments hereunder to an Eligible Transferee
reasonably acceptable to Agent and to Borrower, provided that: (i) all
Obligations of Borrower owing to such Lender being replaced (including such
increased costs, but excluding principal and accrued interest on the Notes
being assigned) shall be paid in full to such Lender concurrently with such
assignment, and (ii) the replacement Eligible Transferee shall purchase the
Note being assigned by paying to such Lender a price equal to the principal
amount thereof plus accrued and unpaid interest thereon. In connection with any
such assignment Borrower, Agent, such Lender and the replacement Eligible
Transferee shall otherwise comply with Section 9.5. Notwithstanding the
foregoing rights of Borrower under this section, however, Borrower may not
replace any Lender which seeks reimbursement for increased costs under Section
3.2 through 3.6 unless Borrower is at the same time replacing all Lenders which
are then seeking such compensation.
ARTICLE IV - Conditions Precedent to Effectiveness
Section 4.1. Documents to be Delivered. This Agreement shall not
become effective until Agent shall have received all of the following, at
Agent's office in New York, New York, duly executed and delivered and in form,
substance and date satisfactory to Agent:
(a) This Agreement and any other documents that Banks are to
execute in connection herewith.
(b) Each Note.
(c) Each Security Document listed in the Security Schedule.
(d) The Intercreditor Agreement.
(e) The Bank Interest Rate Hedge Agreement.
(f) Certain certificates of Borrower including:
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(i) An "Omnibus Certificate" of the Secretary and of
the Chairman of the Board or President of Borrower, which
shall contain the names and signatures of the officers of
Borrower authorized to execute Loan Documents and which shall
certify to the truth, correctness and completeness of the
following exhibits attached thereto: (1) a copy of
resolutions duly adopted by the Board of Directors of
Borrower and in full force and effect at the time this
Agreement is entered into, authorizing the execution of this
Agreement and the other Loan Documents delivered or to be
delivered in connection herewith and the consummation of the
transactions contemplated herein and therein, (2) a copy of
the charter documents of Borrower and all amendments thereto,
certified by the appropriate official of Borrower's state of
organization, and (3) a copy of any bylaws of Borrower; and
(ii) A "Compliance Certificate" of the Chairman of
the Board or President and of the chief financial officer of
Borrower, of even date with such Loan, in which such officers
certify to the satisfaction of the conditions set out in
subsections (a), (b), (c) and (d) of Section 4.2.
(g) A certificate (or certificates) of the due formation,
valid existence and good standing of Borrower in its state of
organization, issued by the appropriate authorities of such
jurisdiction, and certificates of Borrower's good standing and due
qualification to do business, issued by appropriate officials in any
states in which Borrower owns property subject to Security Documents.
(h) Documents similar to those specified in subsections
(f)(i) and (g) of this section with respect to each Guarantor and the
execution by it of the Loan Documents to which it is a party.
(i) A favorable opinion of Glast, Phillips & Murray, P.C.,
counsel for Related Persons, substantially in the form set forth in
Exhibit F-1.
(j) The Initial Financial Statements.
(k) Payment of all commitment, facility, agency and other
fees required to be paid to any Lender pursuant to any Loan Documents
or any commitment agreement heretofore entered into.
Section 4.2. Additional Conditions Precedent. No Bank has any
obligation to make any Loan (including its first) or issue any Letter of
Credit, unless the following conditions precedent have been satisfied on the
date of such Loan or the date of issuance of such Letter of Credit:
(a) All representations and warranties made by any
Related Person in any Loan Document shall be true on and as
of the date of such Loan or such Letter of Credit (except to
the extent that the facts upon which such representations are
based have been changed by the extension of credit hereunder)
as if such representations and warranties had been made as of
the date of such Loan or Letter of Credit.
(b) No Default shall exist at the date of such Loan
or Letter of Credit.
(c) No Material Adverse Change shall have occurred
to, and no event or circumstance shall have occurred that
could cause a Material Adverse Change to,
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Borrower's Consolidated financial condition or businesses
since the date of this Agreement.
(d) Each Related Person shall have performed and
complied with all agreements and conditions required in the
Loan Documents to be performed or complied with by it on or
prior to the date of such Loan or Letter of Credit.
(e) The making of such Loan or the issuance of such
Letter of Credit shall not be prohibited by any Law and shall
not subject any Bank to any penalty or other onerous
condition under or pursuant to any such Law.
(f) Agent shall have received all documents and
instruments which Agent has then requested, in addition to
those described in Section 4.1 (including opinions of legal
counsel for Related Persons and Agent; corporate documents
and records; documents evidencing governmental
authorizations, consents, approvals, licenses and exemptions;
and certificates of public officials and of officers and
representatives of Borrower and other Persons), as to (i) the
accuracy and validity of or compliance with all
representations, warranties and covenants made by any Related
Person in this Agreement and the other Loan Documents, (ii)
the satisfaction of all conditions contained herein or
therein, and (iii) all other matters pertaining hereto and
thereto. All such additional documents and instruments shall
be satisfactory to Agent in form, substance and date.
ARTICLE V - Representations and Warranties
To confirm each Lender's understanding concerning Related Persons and
Related Persons' businesses, properties and obligations and to induce each
Lender to enter into this Agreement and to extend credit hereunder, Borrower
and Parent each represent and warrant to each Lender that each of the
statements in Annex B is true and correct in all respects.
ARTICLE VI - Affirmative Covenants of Borrower and Parent
To conform with the terms and conditions under which each Lender is
willing to have credit outstanding to Borrower, and to induce each Lender to
enter into this Agreement and extend credit hereunder, Parent and Borrower each
warrant, covenant and agree that until the full and final payment of the
Obligations and the termination of this Agreement, unless Required Lenders have
previously agreed otherwise:
Section 6.1. Payment and Performance. Borrower will pay all amounts
due under the Loan Documents in accordance with the terms thereof and will
observe, perform and comply with every covenant, term and condition expressed
or implied in the Loan Documents, including Annex C, and Borrower and Parent
will cause each other Related Person to observe, perform and comply with every
such term, covenant and condition.
Section 6.2. Agreement to Deliver Security Documents. Parent and
Borrower agree to have any Subsidiary formed after the date hereof execute a
Guaranty for the benefit of the Lenders in form substantially similar to the
Parent Guaranty. In addition, Parent and Borrower each agree to deliver and to
cause each other Related Person to deliver, to further secure the Obligations
whenever requested by Agent in its sole and absolute discretion, deeds of
trust, mortgages, chattel mortgages, security
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agreements, financing statements and other Security Documents in form and
substance satisfactory to Agent for the purpose of granting, confirming, and
perfecting first and prior liens or security interests in any real or personal
property now owned or hereafter acquired by any Related Person.
Furthermore, Parent and Borrower each agree to deliver and to cause each other
Related Person to deliver whenever requested by Agent in its sole and absolute
discretion, an intercompany subordination agreement in form and substance
satisfactory to Agent. Borrower also agrees to deliver, whenever requested by
Agent in its sole and absolute discretion, favorable title opinions from legal
counsel acceptable to Agent with respect to any Related Person's properties and
interests designated by Agent, based upon abstract or record examinations to
dates acceptable to Agent and (a) stating that such Related Person has good and
defensible title to such properties and interests, free and clear of all Liens
other than Permitted Liens, (b) confirming that such properties and interests
are subject to Security Documents securing the Obligations that constitute and
create legal, valid and duly perfected first deed of trust or mortgage liens in
such properties and interests and first priority assignments of and security
interests in the oil and gas attributable to such properties and interests and
the proceeds thereof, and (c) covering such other matters as Agent may request.
Section 6.3. Perfection and Protection of Security Interests and
Liens. Borrower and Parent will from time to time deliver, and will cause each
other Related Person from time to time to deliver, to Agent any financing
statements, continuation statements, extension agreements and other documents,
properly completed and executed (and acknowledged when required) by Related
Persons in form and substance satisfactory to Agent, which Agent requests for
the purpose of perfecting, confirming, or protecting any Liens or other rights
in Collateral securing any Obligations.
Section 6.4. Bank Accounts; Offset. To secure the repayment of the
Obligations Borrower and Parent each hereby grant to each Lender a security
interest, a lien, and a right of offset, each of which shall be in addition to
all other interests, liens, and rights of any Lender at common law, under the
Loan Documents, or otherwise, and each of which shall be upon and against (a)
any and all moneys, securities or other property (and the proceeds therefrom)
of Borrower or Parent now or hereafter held or received by or in transit to any
Lender from or for the account of Borrower or Parent, whether for safekeeping,
custody, pledge, transmission, collection or otherwise, (b) any and all
deposits (general or special, time or demand, provisional or final) of Borrower
or Parent with any Lender, and (c) any other credits and claims of Borrower or
Parent at any time existing against any Lender, including claims under
certificates of deposit. At any time and from time to time after the occurrence
of any Default, each Lender is hereby authorized to foreclose upon, or to
offset against the Obligations then due and payable (in either case without
notice to Borrower or Parent), any and all items hereinabove referred to. The
remedies of foreclosure and offset are separate and cumulative, and either may
be exercised independently of the other without regard to procedures or
restrictions applicable to the other.
Section 6.5. Guaranties of Parent's Subsidiaries. Each Subsidiary of
Parent now existing or created, acquired or coming into existence after the
date hereof shall, promptly upon request by Agent, execute and deliver to Agent
an absolute and unconditional guaranty of the timely repayment of the
Obligations and the due and punctual performance of the obligations of Parent
hereunder, which guaranty shall be satisfactory to Agent in form and substance.
Each Subsidiary of Parent existing on the date hereof shall duly execute and
deliver such a guaranty prior to the making of any Loan hereunder. Parent will
cause each of its Subsidiaries to deliver to Agent, simultaneously with its
delivery of such a guaranty, written evidence satisfactory to Agent and its
counsel that such Subsidiary has taken all corporate or partnership action
necessary to duly approve and authorize its execution, delivery and performance
of such guaranty and any other documents which it is required to execute.
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Section 6.6. Production Proceeds. Notwithstanding that, by the terms
of the various Security Documents, Related Persons are and will be assigning to
Agent and Banks all of the "Production Proceeds" (as defined therein) accruing
to the property covered thereby, so long as no Default has occurred Related
Persons may continue to receive from the purchasers of production all such
Production Proceeds, subject, however, to the Liens created under the Security
Documents, which Liens are hereby affirmed and ratified. Upon the occurrence of
a Default, Agent and Banks may exercise all rights and remedies granted under
the Security Documents, including the right to obtain possession of all
Production Proceeds then held by Related Persons or to receive directly from
the purchasers of production all other Production Proceeds. In no case shall
any failure, whether purposed or inadvertent, by Agent or Banks to collect
directly any such Production Proceeds constitute in any way a waiver, remission
or release of any of their rights under the Security Documents, nor shall any
release of any Production Proceeds by Agent or Banks to Related Persons
constitute a waiver, remission, or release of any other Production Proceeds or
of any rights of Agent or Banks to collect other Production Proceeds
thereafter.
Section 6.7. TCW Debt. No Related Person will make any payment on or
with respect to the TCW Debt except as expressly permitted by the terms of the
Intercreditor Agreement.
ARTICLE VII - Events of Default and Remedies
Section 7.1. Events of Default. Each of the events described in Annex
D constitutes an Event of Default under this Agreement.
Section 7.2. Acceleration. Upon the occurrence of an Event of Default
described in subsection D.10(a), (b) or (c) of Annex D with respect to Borrower
or the acceleration of the Other Allowed Debt under the Other Loan Documents,
all of the Obligations shall thereupon be immediately due and payable, without
demand, presentment, notice of demand or of dishonor and nonpayment, protest,
notice of protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Related Person who at any time
ratifies or approves this Agreement. Upon any such acceleration, any obligation
of any Bank to make any further Loans shall be permanently terminated. During
the continuance of any other Event of Default, Agent at any time and from time
to time may (and upon written instructions from Required Lenders, Agent shall),
without notice to Borrower or any other Related Person, do either or both of
the following: (1) terminate any obligation of Banks to make Loans hereunder,
and (2) declare any or all of the Obligations immediately due and payable, and
all such Obligations shall thereupon be immediately due and payable, without
demand, presentment, notice of demand or of dishonor and nonpayment, protest,
notice of protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Related Person who at any time
ratifies or approves this Agreement.
Section 7.3. Remedies. If any Default shall occur and be continuing,
each Lender may protect and enforce its rights under the Loan Documents by any
appropriate proceedings, including proceedings for specific performance of any
covenant or agreement contained in any Loan Document, and each Lender may
enforce the payment of any Obligations due it or enforce any other legal or
equitable right which it may have. All rights, remedies and powers conferred
upon Lenders under the Loan Documents shall be deemed cumulative and not
exclusive of any other rights, remedies or powers available under the Loan
Documents or at Law or in equity.
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ARTICLE VIII - Agent
Section 8.1. Appointment and Authority. Each Bank hereby irrevocably
authorizes Agent, and Agent hereby undertakes, to receive payments of
principal, interest and other amounts due hereunder as specified herein and to
take all other actions and to exercise such powers under the Loan Documents as
are specifically delegated to Agent by the terms hereof or thereof, together
with all other powers reasonably incidental thereto. The relationship of Agent
to the other Banks is only that of one commercial Bank acting as administrative
agent for others, and nothing in the Loan Documents shall be construed to
constitute Agent a trustee or other fiduciary for any holder of any of the
Notes or of any participation therein nor to impose on Agent duties and
obligations other than those expressly provided for in the Loan Documents. With
respect to any matters not expressly provided for in the Loan Documents and any
matters which the Loan Documents place within the discretion of Agent, Agent
shall not be required to exercise any discretion or take any action, and it may
request instructions from Banks with respect to any such matter, in which case
it shall be required to act or to refrain from acting (and shall be fully
protected and free from liability to all Banks in so acting or refraining from
acting) upon the instructions of Required Lenders (including itself), provided,
however, that Agent shall not be required to take any action which exposes it
to a risk of personal liability that it considers unreasonable or which is
contrary to the Loan Documents or to applicable Law. Upon receipt by Agent from
Borrower of any communication calling for action on the part of Banks or upon
notice from any other Bank to Agent of any Default or Event of Default, Agent
shall promptly notify each other Bank thereof.
Section 8.2. Exculpation, Agent's Reliance, Etc. Neither Agent nor any
of its directors, officers, agents, attorneys, or employees shall be liable for
any action taken or omitted to be taken by any of them under or in connection
with the Loan Documents, INCLUDING THEIR NEGLIGENCE OF ANY KIND, except that
each shall be liable for its own gross negligence or willful misconduct.
Without limiting the generality of the foregoing, Agent (a) may treat the payee
of any Note as the holder thereof until Agent receives written notice of the
assignment or transfer thereof in accordance with this Agreement, signed by
such payee and in form satisfactory to Agent; (b) may consult with legal
counsel (including counsel for Borrower), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (c) makes no warranty or representation to any
other Bank and shall not be responsible to any other Bank for any statements,
warranties or representations made in or in connection with the Loan Documents;
(d) shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of the Loan Documents
on the part of any Related Person or to inspect the property (including the
books and records) of any Related Person; (e) shall not be responsible to any
other Bank for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of any Loan Document or any instrument or
document furnished in connection therewith; (f) may rely upon the
representations and warranties of each Related Person and the Banks in
exercising its powers hereunder; and (g) shall incur no liability under or in
respect of the Loan Documents by acting upon any notice, consent, certificate
or other instrument or writing (including any telecopy, telegram, cable or
telex) believed by it to be genuine and signed or sent by the proper Person or
Persons.
Section 8.3. Credit Decisions. Each Bank acknowledges that it has,
independently and without reliance upon any other Bank, made its own analysis
of Borrower and the transactions contemplated hereby and its own independent
decision to enter into this Agreement and the other Loan Documents. Each Bank
also acknowledges that it will, independently and without reliance upon any
other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents.
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Section 8.4. Indemnification. Each Bank agrees to indemnify Agent (to
the extent not reimbursed by Borrower within ten (10) days after demand) from
and against such Bank's Percentage Share of any and all liabilities,
obligations, claims, losses, damages, penalties, fines, actions, judgments,
suits, settlements, costs, expenses or disbursements (including reasonable fees
of attorneys, accountants, experts and advisors) of any kind or nature
whatsoever (in this section collectively called "liabilities and costs") which
to any extent (in whole or in part) may be imposed on, incurred by, or asserted
against Agent growing out of, resulting from or in any other way associated
with any of the Collateral, the Loan Documents and the transactions and events
(including the enforcement thereof) at any time associated therewith or
contemplated therein (including any violation or noncompliance with any
Environmental Laws by any Person or any liabilities or duties of any Person
with respect to Hazardous Materials found in or released into the environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY
CLAIM OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY AGENT,
provided only that no Bank shall be obligated under this section to indemnify
Agent for that portion, if any, of any liabilities and costs which is
proximately caused by Agent's own individual gross negligence or willful
misconduct, as determined in a final judgment. Cumulative of the foregoing,
each Bank agrees to reimburse Agent promptly upon demand for such Bank's
Percentage Share of any costs and expenses to be paid to Agent by Borrower
under Section 9.4(a) to the extent that Agent is not timely reimbursed for such
expenses by Borrower as provided in such section. As used in this section the
term "Agent" shall refer not only to the Person designated as such in Section
1.1 but also to each director, officer, agent, attorney, employee,
representative and Affiliate of such Person.
Section 8.5. Rights as Bank. In its capacity as a Bank, Agent shall
have the same rights and obligations as any Bank and may exercise such rights
as though it were not Agent. Agent may accept deposits from, lend money to, act
as Trustee under indentures of, and generally engage in any kind of business
with any Related Person or their Affiliates, all as if it were not Agent
hereunder and without any duty to account therefor to any other Bank.
Section 8.6. Sharing of Set-Offs and Other Payments. Each Bank agrees
that if it shall, whether through the exercise of rights under Security
Documents or rights of banker's lien, set off, or counterclaim against Borrower
or otherwise, obtain payment of a portion of the aggregate Obligations owed to
it which, taking into account all distributions made by Agent under Section
3.1, causes such Bank to have received more than it would have received had
such payment been received by Agent and distributed pursuant to Section 3.1,
then (a) it shall be deemed to have simultaneously purchased and shall be
obligated to purchase interests in the Obligations as necessary to cause all
Banks to share all payments as provided for in Section 3.1, and (b) such other
adjustments shall be made from time to time as shall be equitable to ensure
that Agent and all Banks share all payments of Obligations as provided in
Section 3.1; provided, however, that nothing herein contained shall in any way
affect the right of any Bank to obtain payment (whether by exercise of rights
of banker's lien, set-off or counterclaim or otherwise) of indebtedness other
than the Obligations. Borrower expressly consents to the foregoing arrangements
and agrees that any holder of any such interest or other participation in the
Obligations, whether or not acquired pursuant to the foregoing arrangements,
may to the fullest extent permitted by Law exercise any and all rights of
banker's lien, set-off, or counterclaim as fully as if such holder were a
holder of the Obligations in the amount of such interest or other
participation. If all or any part of any funds transferred pursuant to this
section is thereafter recovered from the seller under this section which
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received the same, the purchase provided for in this section shall be deemed to
have been rescinded to the extent of such recovery, together with interest, if
any, if interest is required pursuant to Tribunal order to be paid on account
of the possession of such funds prior to such recovery.
Section 8.7. Investments. Whenever Agent in good faith determines that
it is uncertain about how to distribute to Banks any funds which it has
received, or whenever Agent in good faith determines that there is any dispute
among Banks about how such funds should be distributed, Agent may choose to
defer distribution of the funds which are the subject of such uncertainty or
dispute. If Agent in good faith believes that the uncertainty or dispute will
not be promptly resolved, or if Agent is otherwise required to invest funds
pending distribution to Banks, Agent shall invest such funds pending
distribution; all interest on any such investment shall be distributed upon the
distribution of such investment and in the same proportion and to the same
Persons as such investment. All moneys received by Agent for distribution to
Banks (other than to the Person who is Agent in its separate capacity as a
Bank) shall be held by Agent pending such distribution solely as Agent for such
Banks, and Agent shall have no equitable title to any portion thereof.
Section 8.8. Benefit of Article VIII. The provisions of this Article
(other than the following Section 8.9) are intended solely for the benefit of
Banks, and no Related Person shall be entitled to rely on any such provision or
assert any such provision in a claim or defense against any Bank. Banks may
waive or amend such provisions as they desire without any notice to or consent
of Borrower or any Related Person.
Section 8.9. Resignation. Agent may resign at any time by giving
written notice thereof to Banks and Borrower. Each such notice shall set forth
the date of such resignation. Upon any such resignation, Required Banks shall
have the right to appoint a successor Agent. A successor must be appointed for
any retiring Agent, and such Agent's resignation shall become effective when
such successor accepts such appointment. If, within thirty days after the date
of the retiring Agent's resignation, no successor Agent has been appointed and
has accepted such appointment, then the retiring Agent may appoint a successor
Agent, which shall be a commercial bank organized or licensed to conduct a
banking or trust business under the Laws of the United States of America or of
any state thereof. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents. After any
retiring Agent's resignation hereunder the provisions of this Article VIII
shall continue to inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under the Loan Documents.
ARTICLE IX - Miscellaneous
Section 9.1. Waivers and Amendments; Acknowledgements.
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(a) Waivers and Amendments. No failure or delay (whether by course of
conduct or otherwise) by any Lender in exercising any right, power or remedy
which such Lender may have under any of the Loan Documents shall operate as a
waiver thereof or of any other right, power or remedy, nor shall any single or
partial exercise by any Lender of any such right, power or remedy preclude any
other or further exercise thereof or of any other right, power or remedy. No
waiver of any provision of any Loan Document and no consent to any departure
therefrom shall ever be effective unless it is in writing and signed as
provided below in this section, and then such waiver or consent shall be
effective only in the specific instances and for the purposes for which given
and to the extent specified in such writing. No notice to or demand on any
Related Person shall in any case of itself entitle any Related Person to any
other or further notice or demand in similar or other circumstances. This
Agreement and the other Loan Documents set forth the entire understanding
between the parties hereto with respect to the transactions contemplated herein
and therein and supersede all prior discussions and understandings with respect
to the subject matter hereof and thereof, and no waiver, consent, release,
modification or amendment of or supplement to this Agreement or the other Loan
Documents shall be valid or effective against any party hereto unless the same
is in writing and signed by (i) if such party is Borrower, by Borrower, (ii) if
such party is Agent, by such party, and (iii) if such party is a Bank, by such
Bank or by Agent on behalf of Banks with the written consent of Required
Lenders (which consent has already been given as to the termination of the Loan
Documents as provided in Section 9.9). Notwithstanding the foregoing or
anything to the contrary herein, Agent shall not, without the prior consent of
each individual Bank, execute and deliver on behalf of such Bank any waiver or
amendment which would: (1) waive any of the conditions specified in Article IV
(provided that Agent may in its discretion withdraw any request it has made
under Section 4.2(f)), (2) reduce any fees payable to such Bank hereunder, or
the principal of, or interest on, such Bank's Note, (3) postpone any date fixed
for any payment of any such fees, principal or interest, (4) amend the
definition herein of "Required Lenders" or otherwise change the aggregate
amount of Percentage Shares which is required for Agent, Banks or any of them
to take any particular action under the Loan Documents, (5) release Borrower
from its obligation to pay such Bank's Note or any Guarantor from its guaranty
of such payment, or (7) amend any provision of the Intercreditor Agreement.
(b) Acknowledgements and Admissions. Borrower hereby represents,
warrants, acknowledges and admits that (i) it has been advised by counsel in
the negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii) it has made an independent decision to enter into this Agreement
and the other Loan Documents to which it is a party, without reliance on any
representation, warranty, covenant or undertaking by Agent or any Bank, whether
written, oral or implicit, other than as expressly set out in this Agreement or
in another Loan Document delivered on or after the date hereof, (iii) there are
no representations, warranties, covenants, undertakings or agreements by any
Lender as to the Loan Documents except as expressly set out in this Agreement
or in another Loan Document delivered on or after the date hereof, (iv) no
Lender has any fiduciary obligation toward Borrower with respect to any Loan
Document or the transactions contemplated thereby, (v) the relationship
pursuant to the Loan Documents between Borrower and the other Related Persons,
on one hand, and each Lender, on the other hand, is and shall be solely that of
debtor and creditor, respectively, (vi) no partnership or joint venture exists
with respect to the Loan Documents between any Related Person and any Lender,
(vii) Agent is not Borrower's Agent, but Agent for Banks, (viii) should an
Event of Default or Default occur or exist, each Lender will determine in its
sole discretion and for its own reasons what remedies and actions it will or
will not exercise or take at that time, (ix) without limiting any of the
foregoing, Borrower is not relying upon any representation or covenant by any
Lender, or any representative thereof, and no such representation or covenant
has been made, that any Lender will, at the time of an Event of Default or
Default, or at any other time, waive, negotiate, discuss, or take or refrain
from taking any action permitted under the Loan Documents with respect to any
such Event of Default or Default or any other provision of the Loan Documents,
and (x) all Lenders have relied upon the
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truthfulness of the acknowledgements in this section in deciding to execute and
deliver this Agreement and to become obligated hereunder.
(c) Representation by Banks. Each Bank hereby represents that it will
acquire its Note for its own account in the ordinary course of its commercial
lending business; however, the disposition of such Bank's property shall at all
times be and remain within its control and, in particular and without
limitation, such Bank may sell or otherwise transfer its Note, any
participation interest or other interest in its Note, or any of its other
rights and obligations under the Loan Documents.
(d) Joint Acknowledgment. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 9.2. Survival of Agreements; Cumulative Nature. All of Related
Persons' various representations, warranties, covenants and agreements in the
Loan Documents shall survive the execution and delivery of this Agreement and
the other Loan Documents and the performance hereof and thereof, including the
making or granting of the Loans and the delivery of the Notes and the other
Loan Documents, and shall further survive until all of the Obligations are paid
in full to each Lender and all of Lenders' obligations to Borrower are
terminated. All statements and agreements contained in any certificate or other
instrument delivered by any Related Person to any Lender under any Loan
Document shall be deemed representations and warranties by Borrower or
agreements and covenants of Borrower under this Agreement. The representations,
warranties, indemnities, and covenants made by Related Persons in the Loan
Documents, and the rights, powers, and privileges granted to Lenders in the
Loan Documents, are cumulative, and, except for expressly specified waivers and
consents, no Loan Document shall be construed in the context of another to
diminish, nullify, or otherwise reduce the benefit to any Lender of any such
representation, warranty, indemnity, covenant, right, power or privilege. In
particular and without limitation, no exception set out in this Agreement to
any representation, warranty, indemnity, or covenant herein contained shall
apply to any similar representation, warranty, indemnity, or covenant contained
in any other Loan Document, and each such similar representation, warranty,
indemnity, or covenant shall be subject only to those exceptions which are
expressly made applicable to it by the terms of the various Loan Documents.
Section 9.3. Notices. All notices, requests, consents, demands and
other communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that Agent may give telephonic notices to the other Lenders), and shall be
deemed sufficiently given or furnished if delivered by personal delivery, by
telecopy or telex, by delivery service with proof of delivery, or by registered
or certified United States mail, postage prepaid, to Borrower and Related
Persons at the address of Borrower specified on the signature pages hereto and
to each Lender at its address specified on the signature pages hereto (unless
changed by similar notice in writing given by the particular Person whose
address is to be changed). Any such notice or communication shall be deemed to
have been given (a) in the case of personal delivery or delivery service, as of
the date of first attempted delivery during normal business hours at the
address provided herein, (b) in the case of telecopy or telex, upon receipt, or
(c) in the case of registered or certified United States mail, three days after
deposit in the mail; provided, however, that no Borrowing Notice shall become
effective until actually received by Agent.
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Section 9.4. Payment of Expenses; Indemnity.
(a) Payment of Expenses. Whether or not the transactions contemplated
by this Agreement are consummated, Borrower will promptly (and in any event,
within 30 days after any invoice or other statement or notice) pay: (i) all
transfer, stamp, mortgage, documentary or other similar taxes, assessments or
charges levied by any governmental or revenue authority in respect of this
Agreement or any of the other Loan Documents or any other document referred to
herein or therein, (ii) all reasonable costs and expenses incurred by or on
behalf of Agent (including attorneys' fees, consultants' fees and engineering
fees, travel costs and miscellaneous expenses) in connection with (1) the
negotiation, preparation, execution and delivery of the Loan Documents, and any
and all consents, waivers or other documents or instruments relating thereto,
(2) the filing, recording, refiling and re-recording of any Loan Documents and
any other documents or instruments or further assurances required to be filed
or recorded or refiled or re-recorded by the terms of any Loan Document, (3)
the borrowings hereunder and other action reasonably required in the course of
administration hereof, (4) monitoring or confirming (or preparation or
negotiation of any document related to) Borrower's compliance with any
covenants or conditions contained in this Agreement or in any Loan Document,
and (iii) all reasonable costs and expenses incurred by or on behalf of any
Lender (including attorneys' fees, consultants' fees and accounting fees) in
connection with the defense or enforcement of any of the Loan Documents
(including this section) or the defense of any Lender's exercise of its rights
thereunder. In addition to the foregoing, until and all Obligations have been
paid in full, Borrower will also pay or reimburse Agent for all reasonable
out-of-pocket costs and expenses of Agent or its agents or employees in
connection with the continuing administration of the Loans and the related due
diligence of Agent, including travel and miscellaneous expenses and fees and
expenses of Agent's outside counsel, reserve engineers and consultants engaged
in connection with the Loan Documents.
(b) Indemnity. Borrower and Parent each agree to indemnify each
Lender, upon demand, from and against any and all liabilities, obligations,
claims, losses, damages, penalties, fines, actions, judgments, suits,
settlements, costs, expenses or disbursements (including reasonable fees of
attorneys, accountants, experts and advisors) of any kind or nature whatsoever
(in this section collectively called "liabilities and costs") which to any
extent (in whole or in part) may be imposed on, incurred by, or asserted
against such Lender growing out of, resulting from or in any other way
associated with any of the Collateral, the Loan Documents and the transactions
and events (including the enforcement or defense thereof) at any time
associated therewith or contemplated therein (including any violation or
noncompliance with any Environmental Laws by any Related Person or any
liabilities or duties of any Related Person or any Lender with respect to
Hazardous Materials found in or released into the environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY
CLAIM OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY LENDER,
provided only that no Lender shall be entitled under this section to receive
indemnification for that portion, if any, of any liabilities and costs which is
proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment. If any Person (including
Borrower or any of its Affiliates) ever alleges such gross negligence or
willful misconduct by any Lender, the indemnification provided for in this
section shall nonetheless be paid upon demand, subject to later adjustment or
reimbursement, until such time as a court of competent jurisdiction enters a
final judgment
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as to the extent and effect of the alleged gross negligence or willful
misconduct. As used in this section the term "Lenders" shall refer not only to
the Persons designated as such in Section 1.1 but also to each director,
officer, agent, attorney, employee, representative and Affiliate of such
Persons.
Section 9.5. Joint and Several Liability; Parties in Interest;
Assignments.
(a) All Obligations which are incurred by two or more Related Persons
shall be their joint and several obligations and liabilities. All grants,
covenants and agreements contained in the Loan Documents shall bind and inure
to the benefit of the parties thereto and their respective successors and
assigns; provided, however, that no Related Person may assign or transfer any
of its rights or delegate any of its duties or obligations under any Loan
Document without the prior consent of Required Lenders. Neither Borrower nor
any Affiliates of Borrower shall directly or indirectly purchase or otherwise
retire any Obligations owed to any Bank nor will any Bank accept any offer to
do so, unless each Bank shall have received substantially the same offer with
respect to the same Percentage Share of the Obligations owed to it. If Borrower
or any Affiliate of Borrower at any time purchases some but less than all of
the Obligations owed to all Lenders, such purchaser shall not be entitled to
any rights of any Lender under the Loan Documents unless and until Borrower or
its Affiliates have purchased all of the Obligations.
(b) No Bank shall sell any participation interest in its commitment
hereunder or any of its rights under its Loans or under the Loan Documents to
any Person other than an Eligible Transferee, and then only if the agreement
between such Bank and such participant at all times provides: (i) that such
participation exists only as a result of the agreement between such participant
and such Bank and that such transfer does not give such participant any right
to vote as a Bank or any other direct claims or rights against any Person other
than such Bank, (ii) that such participant is not entitled to payment from any
Related Person under Sections 3.2 through 3.6 of amounts in excess of those
payable to such Bank under such sections (determined without regard to the sale
of such participation), and (iii) unless such participant is an Affiliate of
such Bank, that such participant shall not be entitled to require such Bank to
take any action under any Loan Document or to obtain the consent of such
participant prior to taking any action under any Loan Document, except for
actions which would require the consent of all Banks under subsection (a) of
Section 9.1. No Bank selling such a participation shall, as between the other
parties hereto and such Bank, be relieved of any of its obligations hereunder
as a result of the sale of such participation. Each Bank which sells any such
participation to any Person (other than an Affiliate of such Bank) shall give
prompt notice thereof to Agent and Borrower.
(c) Except for sales of participations under the immediately preceding
subsection (b), no Bank shall make any assignment or transfer of any kind of
its commitments or any of its rights under its Loans or under the Loan
Documents, except for assignments to an Eligible Transferee, and then only if
such assignment is made in accordance with the following requirements:
(i) Each such assignment shall apply to all Obligations owing
to the assignor Bank hereunder and to the unused portion of the
assignor Bank's commitments, so that after such assignment is made the
assignor Bank shall have a fixed (and not a varying) Percentage Share
in its Loans and Note and be committed to make that Percentage Share
of all future Loans, the assignee shall have a fixed Percentage Share
in such Loans and Note and be committed to make that Percentage Share
of all future Loans, and the Percentage Share of the Borrowing Base of
both the assignor and the assignee shall equal or exceed $5,000,000.
(ii) The parties to each such assignment shall execute and
deliver to Agent, for its acceptance and recording in the "Register"
(as defined below in this section), an Assignment and
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Assumption in the form of Exhibit G, appropriately completed, together
with the Note subject to such assignment and a processing fee payable
to Agent of $2,500. Upon such execution, delivery, and payment and upon
the satisfaction of the conditions set out in such Assignment and
Assumption, then (i) Borrower shall issue new Notes to such assignor
and assignee upon return of the old Notes to Borrower, and (ii) as of
the "Settlement Date" specified in such Assignment and Assumption the
assignee thereunder shall be a party hereto and a Bank hereunder and
Agent shall thereupon deliver to Borrower and each Bank a schedule
showing the revised Percentage Shares of such assignor Bank and such
assignee Bank and the Percentage Shares of all other Banks.
(iii) Each assignee Bank which is not a United States person
(as such term is defined in Section 7701(a)(30) of the Internal
Revenue Code of 1986, as amended) for Federal income tax purposes,
shall (to the extent it has not already done so) provide Agent and
Borrower with the "Prescribed Forms" referred to in Section 3.6(d).
(d) Nothing contained in this section shall prevent or prohibit any
Bank from assigning or pledging all or any portion of its Loans and Note to any
Federal Reserve Bank as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Bank; provided that no such assignment or pledge
shall relieve such Bank from its obligations hereunder.
(e) By executing and delivering an Assignment and Assumption, each
assignee Bank thereunder will be confirming to and agreeing with Borrower,
Agents and each other Bank hereunder that such assignee understands and agrees
to the terms hereof, including Article IX hereof.
(f) Agent shall maintain a copy of each Assignment and Assumption and
a register for the recordation of the names and addresses of Banks and the
Percentage Shares of, and principal amount of the Loans owing to, each Bank
from time to time (in this section called the "Register"). The entries in the
Register shall be conclusive, in the absence of manifest error, and Borrower
and each Lender may treat each Person whose name is recorded in the Register as
a Bank hereunder for all purposes. The Register shall be available for
inspection by Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
Section 9.6. Confidentiality. Each Lender agrees that it will take all
reasonable steps to keep confidential any proprietary information given to it
by any Related Person, provided, however, that this restriction shall not apply
to information which (i) has at the time in question entered the public domain,
(ii) is required to be disclosed by Law (whether valid or invalid) of any
Tribunal, (iii) is disclosed to any Lender's Affiliates, auditors, attorneys,
or agents (provided such Persons are obligated to hold such information in
confidence on the terms provided in this section), (iv) is furnished to any
other Lender or to any purchaser or prospective purchaser of participations or
other interests in any Loan or Loan Document (provided each such purchaser or
prospective purchaser first agrees to hold such information in confidence on
the terms provided in this section), or (v) is disclosed in the course of
enforcing its rights and remedies during the existence of an Event of Default.
Section 9.7. Governing Law; Submission to Process. EXCEPT TO THE
EXTENT THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY ELECTED IN A LOAN
DOCUMENT, THE LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE
UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND THE LAWS
OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW. BORROWER AND PARENT
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EACH HEREBY AGREE THAT ANY LEGAL ACTION OR PROCEEDING AGAINST BORROWER OR
PARENT WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OF THE LOAN DOCUMENTS
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES
OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AS LENDERS MAY ELECT, AND, BY
EXECUTION AND DELIVERY HEREOF, EACH OF BORROWER AND PARENT ACCEPTS AND CONSENTS
FOR ITSELF AND IN RESPECT TO ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS, AND FURTHER AGREES TO A TRANSFER OF ANY
SUCH PROCEEDING TO A FEDERAL COURT SITTING IN THE STATE OF NEW YORK TO THE
EXTENT THAT IT HAS SUBJECT MATTER JURISDICTION, AND OTHERWISE TO A STATE COURT
IN NEW YORK, NEW YORK, AND AGREES THAT SUCH JURISDICTION SHALL BE EXCLUSIVE,
UNLESS WAIVED BY LENDERS IN WRITING, WITH RESPECT TO ANY ACTION OR PROCEEDING
BROUGHT BY IT AGAINST LENDERS AND ANY QUESTIONS RELATING TO USURY. EACH OF
PARENT AND BORROWER AGREES THAT SECTIONS 5-1401 AND 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK SHALL APPLY TO THE LOAN DOCUMENTS AND
WAIVES ANY RIGHT TO STAY OR TO DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE
SAID COURTS ON THE BASIS OF FORUM NON CONVENIENS. IN FURTHERANCE OF THE
FOREGOING, EACH OF PARENT AND BORROWER HEREBY IRREVOCABLY DESIGNATES AND
APPOINTS CT CORPORATION SYSTEM, 1633 BROADWAY, NEW YORK, NEW YORK, AS AGENT OF
BORROWER AND PARENT TO RECEIVE SERVICE OF ALL PROCESS BROUGHT AGAINST BORROWER
OR PARENT WITH RESPECT TO ANY SUCH PROCEEDING IN ANY SUCH COURT IN NEW YORK,
SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY BORROWER AND PARENT TO BE EFFECTIVE
AND BINDING SERVICE IN EVERY RESPECT. COPIES OF ANY SUCH PROCESS SO SERVED
SHALL ALSO, IF PERMITTED BY LAW, BE SENT BY REGISTERED MAIL TO BORROWER AT ITS
ADDRESS SET FORTH BELOW, BUT THE FAILURE OF BORROWER TO RECEIVE SUCH COPIES
SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS AS AFORESAID. BORROWER
SHALL FURNISH TO LENDERS A CONSENT OF CT CORPORATION SYSTEM AGREEING TO ACT
HEREUNDER PRIOR TO THE EFFECTIVE DATE OF THIS AGREEMENT. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF LENDERS TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR SHALL LIMIT THE RIGHT OF LENDERS TO BRING PROCEEDINGS AGAINST BORROWER
OR PARENT IN THE COURTS OF ANY OTHER JURISDICTION. IF FOR ANY REASON CT
CORPORATION SYSTEM SHALL RESIGN OR OTHERWISE CEASE TO ACT AS BORROWER'S OR
PARENT'S AGENT, BORROWER AND PARENT HEREBY IRREVOCABLY AGREE TO (A) IMMEDIATELY
DESIGNATE AND APPOINT A NEW AGENT ACCEPTABLE TO AGENT TO SERVE IN SUCH CAPACITY
AND, IN SUCH EVENT, SUCH NEW AGENT SHALL BE DEEMED TO BE SUBSTITUTED FOR CT
CORPORATION SYSTEM FOR ALL PURPOSES HEREOF AND (B) PROMPTLY DELIVER TO LENDERS
THE WRITTEN CONSENT (IN FORM AND SUBSTANCE SATISFACTORY TO AGENT) OF SUCH NEW
AGENT AGREEING TO SERVE IN SUCH CAPACITY.
Section 9.8. Limitation on Interest. Lenders, Related Persons and the
other parties to the Loan Documents intend to contract in strict compliance
with applicable usury Law from time to time in effect. In furtherance thereof
such Persons stipulate and agree that none of the terms and provisions
contained in the Loan Documents shall ever be construed to provide for interest
in excess of the maximum amount of interest permitted to be charged by
applicable Law from time to time in effect. Neither any Related Person nor any
present or future guarantors, endorsers, or other Persons hereafter becoming
liable for payment of any Obligation shall ever be liable for unearned interest
thereon or shall ever be required to pay interest thereon in excess of the
maximum amount that may be lawfully charged under applicable Law from time to
time in effect, and the provisions of this section shall control over all other
provisions of the Loan Documents which may be in conflict or apparent conflict
herewith.
Section 9.9. Termination; Limited Survival. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
written notice delivered to Agent to terminate this Agreement. Upon receipt by
Agent of such a notice, if no Obligations are then owing this Agreement
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and all other Loan Documents shall thereupon be terminated and the parties
thereto released from all prospective obligations thereunder. Notwithstanding
the foregoing or anything herein to the contrary, any waivers or admissions
made by any Related Person in any Loan Document, any Obligations under Sections
3.2 through 3.6, and any obligations which any Person may have to indemnify or
compensate any Lender shall survive any termination of this Agreement or any
other Loan Document. At the request and expense of Borrower, Agent shall
prepare and execute all necessary instruments to reflect and effect such
termination of the Loan Documents. Agent is hereby authorized to execute all
such instruments on behalf of all Banks, without the joinder of or further
action by any Bank.
Section 9.10. Severability. If any term or provision of any Loan
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable Law.
Section 9.11. Counterparts. This Agreement may be separately executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
Section 9.12. Waiver of Jury Trial, Punitive Damages, etc. TO THE
EXTENT PERMITTED BY LAW, LENDERS, PARENT AND BORROWER HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF SUCH PERSONS, PARENT OR BORROWER. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR LENDERS' ENTERING INTO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS. PARENT, BORROWER AND EACH LENDER HEREBY FURTHER
(A) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY "SPECIAL DAMAGES,"
AS DEFINED BELOW, (B) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR
AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVERS, AND (C) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS SECTION. AS USED IN THIS SECTION, "SPECIAL
DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES
(REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY
PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY
HERETO.
Section 9.13. Amendment and Restatement. This Agreement amends and
restates in its entirety that certain Credit Agreement dated as of September
23, 1997, by among Borrower, Parent, Agent, and Banks, as amended, restated, or
supplemented to the date hereof (the "Existing Agreement"). Borrower and Parent
hereby represent and warrant that as of the date hereof all conditions under
Section 4.1 of this Agreement have been met. Borrower and Parent hereby agree
that (i) the Loans outstanding under the Existing Agreement and all accrued and
unpaid interest thereon, (ii) all Letters of Credit issued and outstanding
under the Existing Agreement, and (iii) all accrued and unpaid fees under the
Existing Agreement shall be deemed to be outstanding under and governed by this
Agreement.
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40
IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
INLAND PRODUCTION COMPANY
Borrower
By:
--------------------------------
Bill I. Pennington
Chief Financial Officer
Address:
410 17th Street, Suite 700
Denver, Colorado 80202
Attention: Kyle R. Miller
Telephone: (303) 893-0102
Telecopy: (303) 893-0103
INLAND RESOURCES INC.
Parent
By:
--------------------------------
Bill I. Pennington
Chief Financial Officer
Address:
475 17th Street, Suite 1500
Denver, Colorado 80202
Attention: Kyle R. Miller
Telephone: (303) 893-0102
Telecopy: (303) 893-0103
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41
ING (U.S.) Capital Corporation
Agent and Bank
By:
--------------------------------
Christopher R. Wagner
Vice President
Address:
135 East 57th Street, 8th Floor
New York, New York 10022-2101
Attention: Christopher R. Wagner
Telephone: (212) 409-1717
Telecopy: (212) 832-3616
U.S. BANK NATIONAL ASSOCIATION
By:
--------------------------------
Monte E. Deckerd
Vice President
Address:
918 Seventeenth Street
Denver, Colorado 80202
Attention: Monte Deckerd
Telephone: (303) 585-4212
Telecopy: (303) 585-4362
MEESPIERSON CAPITAL CORPORATION
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
Address:
300 Crescent Court, Suite 1750
Dallas, Texas 75201
Attention: Darrell Holley
Telephone: (214) 754-0009
Telecopy: (212) 754-5981
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ANNEX A
COMMON DEFINITIONS
"2% Affiliate" means, as to any Person, (a) any Person directly or
indirectly owning, controlling or holding with power to vote 2% or more of the
outstanding voting securities of such Person, (b) any Person 2% or more of
whose outstanding voting securities are directly or indirectly owned,
controlled or held with power to vote by such Person, (c) any Person directly
or indirectly controlling, controlled by or under common control with such
Person, and (d) any officer, director, partner or sanguinal or affinal kin of
such Person or any Person described above in clause (c) of this paragraph.
"Affiliate" means, as to any Person, (a) any Person directly or
indirectly owning, controlling or holding with power to vote 10% or more of the
outstanding voting securities of such Person, (b) any Person 10% or more of
whose outstanding voting securities are directly or indirectly owned,
controlled or held with power to vote by such Person, (c) any Person directly
or indirectly controlling, controlled by or under common control with such
Person, and (d) any officer, director, partner or sanguinal or affinal kin of
such Person or any Person described above in clause (c) of this paragraph.
Pengo Securities Corp., Randall D. Smith and any Affiliate of Randall D. Smith
including any trusts of which Randall D. Smith or any of his heirs at law is
settlor, trustee or beneficiary shall, for purposes of such 10% test, be
treated as a single Person.
"ANCF," "ANCF Capital Expenditures," "ANCF Hierarchy," "ANCF LOE,"
"ANCF Overhead Costs," "ANCF Transportation Costs," and "Affiliates' ANCF" have
the meanings given to such terms in the Intercreditor Agreement.
"Bank Interest Rate Hedge Agreement" has the meaning given it in the
Intercreditor Agreement.
"Bank Mortgage" means, collectively, that certain Deed of Trust,
Mortgage, Line of Credit Mortgage, Assignment, Security Agreement, Fixture
Filing and Financing Statement from Borrower to Agent dated as of September 30,
1997, as amended, and that certain Deed of Trust, Assignment of Rents and
Leases, Security Agreement and Financing Statement from Inland Refining to
Agent dated as of May 29, 1998, as amended.
"Change of Control" means the occurrence of either of the following
events: (i) any Person or two or more Persons acting as a group shall acquire
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Act of 1934, as amended, and including
holding proxies to vote for the election of directors other than proxies held
by Parent's management or their designees to be voted in favor of Persons
nominated by Parent's Board of Directors) a larger percentage of the
outstanding voting securities of Parent than the aggregate percentage owned by
Randall D. Smith and Pengo Securities Corp., and the percentage of outstanding
voting securities of Parent owed by such Person or Persons is 35% or more of
the outstanding voting securities of Parent, measured by voting power
(including both common stock and any preferred stock or other equity securities
entitling the holders thereof to vote with the holders of common stock in
elections for directors of Parent) or (ii) one-third or more of the directors
of Parent shall consist of Persons not nominated by Parent's Board of Directors
(including as Board nominees any directors which the Board is obligated to
nominate pursuant to shareholders agreements, voting trust arrangements or
similar arrangements which are in place as of the date hereof, but not those
which arise after the date hereof unless they deal with the same parties or
their Affiliates and no one else).
"Collateral" means all property of any kind which is subject to a Lien
in favor of Lenders or which, under the terms of any Security Document, is
purported to be subject to such a Lien.
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"Consolidated" refers to the consolidation of Parent, Borrower or any
other Related Person, in accordance with GAAP, with its properly consolidated
subsidiaries. References herein to a Person's Consolidated financial
statements, financial position, financial condition, liabilities, etc. refer to
the consolidated financial statements, financial position, financial condition,
liabilities, etc. of such Person and its properly consolidated subsidiaries.
"Consolidating," when used with reference to the financial statements of
Parent, means the financial statements of Parent and its properly consolidated
subsidiaries, presented in a manner acceptable to Agent which (a) shows the net
intercompany transactions between each of Parent and such subsidiaries and (b)
presents substantially the same information with respect to Borrower which
would be presented on individual financial statements of Borrower.
"Consolidated Net Income" means, as to any Person or Persons for any
period, the gross revenues of such Person or Persons for such period, plus any
cash dividends or distributions actually received by such Person or Persons
from any other business entity, minus all expenses and other proper charges
(including taxes on income, to the extent imposed upon such Person or Persons),
determined on a Consolidated basis after eliminating earnings or losses
attributable to outstanding minority interests, but excluding the net earnings
of any other business entity in which such Person or Persons has an ownership
interest.
"Consolidated Tangible Net Worth" means the remainder of all
Consolidated assets of Parent, other than intangible assets (including as
intangible assets such assets as patents, copyrights, licenses, franchises,
goodwill, trade names, trade secrets and leases other than oil, gas or mineral
leases or leases required to be capitalized under GAAP), minus Parent's
Consolidated Debt, provided that for purposes of this definition, Parent's
Series C Convertible Preferred Stock shall not be included in the calculation
of Parent's Consolidated Debt and shall be considered equity.
"Crysen Refinery" means that certain refinery located in Woods Cross,
Utah.
"Debt" means, as to any Person, all indebtedness, liabilities and
obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to GAAP.
"Direct Taxes" has the meaning given it in the Intercreditor Agreement.
"Disclosure Report" means either a notice given by Borrower under
Section C.3 of Annex C or a certificate given by Borrower's chief financial
officer under Section C.1 of Annex C.
"Disclosure Schedule" means Schedule 1 to this Agreement.
"Distribution" means (a) any dividend or other distribution made by a
Related Person on or in respect of any stock, partnership interest, or other
equity interest in such Related Person (including any option or warrant to buy
such an equity interest), or (b) any payment made by a Related Person to
purchase, redeem, acquire or retire any stock, partnership interest, or other
equity interest in such Related Person (including any such option or warrant).
"EBITDA" means, for any four-Fiscal Quarter period, the sum of (1) the
Consolidated Net Income of Parent during such period, plus (2) all cash
interest paid during such period on Restricted Debt (including amortization of
original issue discount and the interest component of any deferred payment
obligations and capital lease obligations) which was deducted in determining
such Consolidated Net Income, plus (3) all income taxes which were deducted in
determining such Consolidated Net
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Income, plus (4) all depreciation, amortization (including amortization of good
will and debt issue costs) and other non-cash charges (including any provision
for the reduction in the carrying value of assets recorded in accordance with
GAAP) which were deducted in determining such Consolidated Net Income, minus
(5) all non-cash items of income which were included in determining such
Consolidated Net Income.
"Eligible Mortgaged Properties" means, collectively, those Properties
which (a) are owned by Borrower and mortgaged to secure the Obligations and the
Other Allowed Debt, (b) for which Agent has received title opinions and other
title information concerning such Properties in form, substance and authorship
satisfactory to Agent, and (c) are free and clear of all Liens other than
Permitted Liens.
"Engineering Report" means the Initial Engineering Report and each
engineering report delivered pursuant to Section C.1(d) or C.1(e) of Annex C.
"Environmental Affiliate" means, as to any Person, any other Person
which by virtue of its control of, or common control with, such Person, may
incur any liability with respect to any claims, consent agreements, citations,
complaints, penalty assessments, suits or other proceedings with respect to any
alleged liability under, violation of or non-compliance with any Environmental
Laws.
"Environmental Laws" means any and all Laws relating to the
environment or to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment including ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Affiliate" means Borrower and all members of a controlled group
of corporations and all trades or businesses (whether or not incorporated)
under common control that, together with Borrower, are treated as a single
employer under Section 414 of the Internal Revenue Code of 1986, as amended.
"ERISA Plan" means any employee pension benefit plan subject to Title
IV of ERISA maintained by any ERISA Affiliate with respect to which any Related
Person has a fixed or contingent liability.
"Farmout Agreement" means that certain Farmout Agreement by Inland
Production Company and Inland Resources Inc. as Farmor, Smith Management LLC as
Farmee, and Inland Production Company as Operator dated as of June 1, 1998.
"Fiscal Quarter" means a three-month period ending on March 31, June
30, September 30 or December 31 of any year.
"Fiscal Year" means a twelve-month period ending on December 31 of any
year.
"Floating Rate Debt" means any part of the Obligations which bears
interest at a floating rate.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor) and which, in the case of Parent
and its Consolidated subsidiaries, are applied for all periods after the
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date hereof in a manner consistent with the manner in which such principles and
practices were applied to the audited Initial Financial Statements. If any
change in any accounting principle or practice is required by the Financial
Accounting Standards Board (or any such successor) in order for or practice to
continue as a generally accepted accounting principle or practice, all reports
and financial statements required hereunder with respect to Parent or with
respect to Parent and its Consolidated subsidiaries may be prepared in
accordance with such change, but all calculations and determinations to be made
hereunder may be made in accordance with such change only after notice of such
change is given to each Lender and Required Lenders agree to such change
insofar as it affects the accounting of Parent or of Parent and its
Consolidated subsidiaries.
"Hazardous Materials" means any substances regulated under any
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Hedging Contract" means (a) any agreement providing for options,
swaps, floors, caps, collars, forward sales or forward purchases involving
interest rates, commodities or commodity prices, equities, currencies, bonds,
or indexes based on any of the foregoing, (b) any option, futures or forward
contract traded on an exchange, and (c) any other derivative agreement or other
similar agreement or arrangement, including "Permitted Commodity Hedges" (as
defined in the Intercreditor Agreement).
"Hydrocarbons" means crude oil, natural gas or other liquid or gaseous
hydrocarbons.
"ING Pricing" means the pricing assumptions required under Regulations
S-B, S-K or S-X , as applicable, promulgated by the Securities and Exchange
Commission.
"Initial Engineering Report" means the engineering report concerning
oil and gas properties of Related Persons dated July 1, 1997, prepared by Ryder
Scott Company.
"Initial Financial Statements" means (i) the audited annual
Consolidated financial statements of Parent dated as of December 31, 1997, (ii)
the unaudited quarterly Consolidated financial statements of Parent dated as of
June 30, 1998, (iii) the unaudited balance sheet of Inland Refining as of June
30, 1998, and (iv) other financial statements of Inland Refining from date of
incorporation to June 30, 1998.
"Inland Refining" means Inland Refining, Inc. a Utah corporation.
"Inland Refining Contract" means any contract between Borrower and
Inland Refining for the sale of hydrocarbons by Borrower to Inland Refining,
which has been approved by Required Lenders in their sole and absolute
discretion.
"Insurance Schedule" means Schedule 3 to this Agreement.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan, guarantee of Debt or other extension of credit or capital
contribution to (by means of any transfer of cash or other property to others
or any payment for property or services for the account or use of others), or
any purchase or acquisition by such Person of any capital stock, bonds, notes,
debentures or other securities or evidences of Debt issued by, any other
Person.
"Law" means any statute, law, regulation, ordinance, rule, treaty,
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental restriction of the United States
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or any state or political subdivision thereof or of any foreign country or any
department, province or other political subdivision thereof.
"Lien" has the meaning given it in the Intercreditor Agreement.
"Material Adverse Change" means a material and adverse change, from
the state of affairs presented in the Initial Financial Statements or in this
Agreement (including the Disclosure Schedule), to (a) Parent's and its
Subsidiaries' Consolidated financial condition, (b) the operations or
properties of Parent and its Subsidiaries, considered as a whole, (c)
Borrower's ability to timely pay the Obligations and perform its other
obligations under the Loan Documents, or (d) the validity and enforceability of
the material terms of any Loan Documents.
"Mortgages" means the Bank Mortgage and the TCW Mortgage.
"NPV" means, with respect to any Proved Reserves expected to be
produced from any Properties, the net present value, discounted at 10% per
annum, of the future net revenues expected to accrue to Borrower's interests in
such reserves during the remaining expected economic lives of such reserves.
Each calculation of such expected future net revenues shall be made in
accordance with the then existing standards of the Society of Petroleum
Engineers, provided that in any event (i) appropriate deductions shall be made
for Direct Taxes, operating, gathering, transportation and marketing costs, and
any capital expenditures required for the production and sale of such reserves,
and (ii) the pricing assumptions and escalations used in determining NPV for
any particular reserves shall be the TCW Pricing. NPV shall be calculated
hereunder in connection with each Engineering Report, either by Borrower, Tamco
or the engineering firm who prepares such Engineering Report; in the event of
any conflict, Tamco's calculation shall be conclusive and final.
"Parent" means Inland Resources Inc., a Washington corporation.
"Pennzoil Refinery" means that certain refinery in Roosevelt, Utah,
presently owned by Pennzoil Products Company which Parent, as of the date of
this Agreement, has under contract to purchase (which contract shall be
assigned to Inland Refining prior to closing of such contract), the closing of
the purchase of which is scheduled to take place on or about September 15,
1998.
"Permitted Investment" means Investments:
(a) in open market commercial paper, maturing within 270 days
after acquisition thereof, which is rated at least A-1 by Standard &
Poor's Ratings Group (a division of McGraw Hill, Inc.) or P-1 by
Moody's Investors Service, Inc.
(b) in marketable obligations, maturing within 12 months
after acquisition thereof, issued or unconditionally guaranteed by the
United States of America or an instrumentality or agency thereof and
entitled to the full faith and credit of the United States of America.
(c) in demand deposits, and time deposits (including
certificates of deposit) maturing within 12 months from the date of
deposit thereof, with any office of any national or state bank or
trust company which is organized under the Laws of the United States
of America or any state therein, which has capital, surplus and
undivided profits of at least $500,000,000, and whose certificates of
deposit are rated at least Aa3 by Standard & Poor's Ratings Group (a
division of McGraw Hill, Inc.) or AA- by Moody's Investors Service,
Inc.
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"Permitted Lien" has the meaning given to such term in Section C.19 of
Annex C.
"Person" has the meaning given it in the Intercreditor Agreement.
"Production/Refining Credit Agreement" means that certain Credit
Agreement by and between Borrower and Inland Refining dated as of May 29, 1998,
as amended, supplemented, or restated.
"Production/Refining Loan" means those loans to be extended to Inland
Refining by Borrower pursuant to the Production/Refining Credit Agreement.
"Properties" has the meaning given in the Intercreditor Agreement.
"Proved Reserves" means "Proved Reserves" as defined in the
Definitions for Oil and Gas Reserves (in this paragraph, the "Definitions")
promulgated by the Society of Petroleum Engineers (or any generally recognized
successor) as in effect at the time in question. "Proved Developed Producing
Reserves" means Proved Reserves which are categorized as both "Developed" and
"Producing" in the Definitions, "Proved Developed Nonproducing Reserves" means
Proved Reserves which are categorized as both "Developed" and "Nonproducing" in
the Definitions, and "Proved Undeveloped Reserves" means Proved Reserves which
are categorized as "Undeveloped" in the Definitions.
"Quarterly Payment Date" means the second to last Business Day in each
Fiscal Quarter, beginning with December 29, 1997.
"Rating Agency" means either Standard & Poor's Ratings Group (a
division of McGraw Hill, Inc.) or Moody's Investors Service, Inc. or their
respective successors.
"Related Person" has the meaning given it in the Intercreditor
Agreement.
"Restricted Debt" of any Person means Debt in any of the following
categories:
(a) Debt for borrowed money,
(b) Debt constituting an obligation to pay the deferred purchase price
of property or services,
(c) Debt evidenced by a bond, debenture, note or similar instrument,
(d) Debt which (i) would under GAAP be shown on such Person's balance
sheet as a liability, and (ii) is payable more than one year from the date of
creation thereof (other than reserves for taxes and reserves for contingent
obligations),
(e) Debt arising under futures contracts, forward contracts, swap, cap
or collar contracts, option contracts, hedging contracts, other derivative
contracts, or similar agreements (excluding only option contracts giving such
Person the right - and not the duty - to buy or sell goods expected to be
bought or sold by such Person in the ordinary course of its business, so long
as such Person has no obligation other than the initial payment in full of the
purchase price for the option),
(f) Debt constituting principal under leases capitalized in accordance
with GAAP,
(g) Debt arising under conditional sales or other title retention
agreements,
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(h) Debt owing under direct or indirect guaranties of Debt of any
other Person or constituting obligations to purchase or acquire or to otherwise
protect or insure a creditor against loss in respect of Debt of any other
Person (such as obligations under working capital maintenance agreements,
agreements to keep-well, or agreements to purchase Debt, assets, goods,
securities or services), but excluding endorsements in the ordinary course of
business of negotiable instruments in the course of collection,
(i) Debt (for example, repurchase agreements) consisting of an
obligation to purchase securities or other property, if such Debt arises out of
or in connection with the sale of the same or similar securities or property,
(j) Debt with respect to letters of credit or applications or
reimbursement agreements therefor,
(k) Debt with respect to payments received in consideration of oil,
gas, or other minerals yet to be acquired or produced at the time of payment
(including obligations under "take-or-pay" contracts to deliver gas in return
for payments already received and the undischarged balance of any production
payment created by such Person or for the creation of which such Person
directly or indirectly received payment), or
(l) Debt with respect to other obligations to deliver goods or
services in consideration of advance payments therefor;
provided, however, that the "Restricted Debt" of any Person shall not include
Debt that was incurred by such Person on ordinary trade terms to vendors,
suppliers, or other Persons providing goods and services for use by such Person
in the ordinary course of its business, unless and until such Debt is
outstanding more than 90 days past the incurrence thereof, or, if earlier, when
due in accordance with its terms.
"SJCC" means San Jacinto Carbon Company, a Texas corporation.
"Sound Refinery" means that certain refinery located in Tacoma,
Washington.
"Sound Refining Deed of Trust" means that certain Amended and Restated
Deed of Trust (with Security Agreement) dated as of December 24, 1997, executed
by SJCC for the benefit of Inland Refining, encumbering the Crysen Refinery.
"Sound Refining Note" means that certain Amended and Restated
Promissory Note dated as of December 24, 1997, in the original principal amount
of $1,500,000 made by SJCC payable to the order of Inland Refining, which note
has been executed in restatement of that certain Promissory Note dated as of
December 24, 1997, in the original principal amount of $1,500,000, made by
Sound Refining, Inc. payable to the order of Banque Paribas, which note was
assumed by SJCC.
"Subsidiary" has the meaning given it in the Intercreditor Agreement.
"TCW Mortgage" means, collectively, that certain Deed of Trust,
Mortgage, Line of Credit Mortgage, Assignment, Security Agreement, Fixture
Filing and Financing Statement from Borrower to Tamco dated as of September 30,
1997, as amended, and that certain Deed of Trust, Assignment of Rents and
Leases, Security Agreement and Financing Statement from Inland Refining to
Tamco dated as of May 29, 1998, as amended.
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"TCW Pricing" means those prices (a) for anticipated sales of
Hydrocarbons that are hedged by a Hedging Contract with an investment grade
counter party, which Hedging Contract has been approved by Tamco, equal to the
fixed price or prices provided for in such Hedging Contract during the term
thereof, and thereafter the prices provided for in subsection (b) below; and
(b) for anticipated sales of Hydrocarbons, if such sales are not hedged by a
Hedging Contract that has been approved by Tamco, equal to the lowest of (i)
the average price received by Borrower for Hydrocarbons of such kind produced
from the Eligible Mortgaged Properties during the twelve months preceding the
date of calculation, (ii) the average price received by Borrower for
Hydrocarbons of such kind produced from the Eligible Mortgaged Properties
during the six months preceding the date of calculation, and (iii) the average
of the prices on the New York Mercantile Exchange (or any successor
organization), as reported in the Wall Street Journal for the date of
calculation (or, if such date is not a Business Day, for the first Business Day
thereafter) under the twelve forward contracts which are listed therein as the
first to mature after such date of calculation, with any necessary adjustment
specified by Tamco for quality and geographical differentials. The applicable
price determined pursuant to the preceding clause (b) shall be escalated at 3%
per annum for each year after the then current year
"Termination Event" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(b)(5) or (6) of ERISA
or (ii) any other reportable event described in Section 4043(b) of ERISA other
than a reportable event not subject to the provision for 30-day notice to the
Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation
under Section 4043(a) of ERISA, or (b) the withdrawal of any ERISA Affiliate
from an ERISA Plan during a plan year in which it was a "substantial employer"
as defined in Section 4001(a)(2) of ERISA, or (c) the filing of a notice of
intent to terminate any ERISA Plan or the treatment of any ERISA Plan amendment
as a termination under Section 4041 of ERISA, or (d) the institution of
proceedings to terminate any ERISA Plan by the Pension Benefit Guaranty
Corporation under Section 4042 of ERISA, or (e) any other event or condition
which might constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any ERISA Plan.
"Tribunal" means any government, any arbitration panel, any court or
any governmental department, commission, board, bureau, agency or
instrumentality of the United States of America or any state, province,
commonwealth, nation, territory, possession, county, parish, town, township,
village or municipality, whether now or hereafter constituted and/or existing.
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ANNEX B
COMMON REPRESENTATIONS AND WARRANTIES
Section B.1. No Default. No Related Person is in default in the
performance of any of the covenants and agreements contained in any Loan
Document. No event has occurred and is continuing which constitutes a Default.
Section B.2. Organization and Good Standing. Each Related Person is
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, having all powers required to carry on its
business and enter into and carry out the transactions contemplated hereby.
Each Related Person is duly qualified, in good standing, and authorized to do
business in all other jurisdictions within the United States wherein the
character of the properties owned or held by it or the nature of the business
transacted by it makes such qualification necessary. Each Related Person has
taken all actions and procedures customarily taken in order to enter, for the
purpose of conducting business or owning property, each jurisdiction outside
the United States, if any, wherein the character of the properties owned or
held by it or the nature of the business transacted by it makes such actions
and procedures desirable.
Section B.3. Authorization. Each Related Person has duly taken all
action necessary to authorize the execution and delivery by it of the Loan
Documents to which it is a party and to authorize the consummation of the
transactions contemplated thereby and the performance of its obligations
thereunder. Borrower is duly authorized to borrow funds hereunder.
Section B.4 No Conflicts or Consents. The execution and delivery by
the various Related Persons of the Loan Documents to which each is a party, the
performance by each of its obligations under such Loan Documents, and the
consummation of the transactions contemplated by the various Loan Documents, do
not and will not (i) conflict with any provision of (1) any Law, (2) the
organizational documents of any Related Person, or (3) any agreement, judgment,
license, order or permit applicable to or binding upon any Related Person, (ii)
result in the acceleration of any Restricted Debt owed by any Related Person,
or (iii) result in or require the creation of any Lien upon any assets or
properties of any Related Person except as expressly contemplated in the Loan
Documents. Except as expressly contemplated in the Loan Documents no consent,
approval, authorization or order of, and no notice to or filing with, any
Tribunal or third party is required in connection with the execution, delivery
or performance by any Related Person of any Loan Document or to consummate any
transactions contemplated by the Loan Documents.
Section B.5. Enforceable Obligations. This Agreement is, and the other
Loan Documents when duly executed and delivered will be, legal, valid and
binding obligations of each Related Person which is a party hereto or thereto,
enforceable in accordance with their terms except as such enforcement may be
limited by bankruptcy, insolvency or similar Laws of general application
relating to the enforcement of creditors' rights.
Section B.6. Initial Financial Statements. Borrower has heretofore
delivered to each Lender true, correct and complete copies of the Initial
Financial Statements. The Initial Financial Statements fairly present each of
Inland Refining's and Parent's Consolidated financial position at the
respective dates thereof, the results of Inland Refining's operations and
Inland Refining's cash flows for the respective periods thereof, and the
Consolidated results of Parent's operations and Parent's Consolidated cash
flows for the respective periods thereof. Since the date of the annual Initial
Financial Statements no
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Material Adverse Change has occurred, except as reflected in the Disclosure
Schedule or a Disclosure Report. All Initial Financial Statements were prepared
in accordance with GAAP.
Section B.7. Other Obligations and Restrictions. No Related Person has
any outstanding Debt of any kind (including obligations under farm-in
agreements, other obligations to make capital expenditures, contingent
obligations, tax assessments, and unusual forward or long-term commitments)
which is, in the aggregate, material to Borrower or material with respect to
Parent's Consolidated financial condition and not shown in the Initial
Financial Statements or disclosed in the Disclosure Schedule or a Disclosure
Report. All obligations of any Related Person to make capital expenditures to
drill or otherwise develop any oil, gas or mineral properties are specified in
a Disclosure Schedule or Disclosure Report (by well or project, describing the
dollar amount of each such obligation). Except as shown in the Initial
Financial Statements or disclosed in the Disclosure Schedule or a Disclosure
Report, no Related Person is subject to or restricted by any franchise,
contract, deed, charter restriction, or other instrument or restriction which
is materially likely to cause a Material Adverse Change.
Section B.8. Full Disclosure. No certificate, statement or other
information delivered herewith or heretofore by any Related Person to any
Lender in connection with the negotiation of this Agreement or in connection
with any transaction contemplated hereby contains any untrue statement of a
material fact or omits to state any material fact known to any Related Person
(other than industry-wide risks normally associated with the types of
businesses conducted by Related Persons) necessary to make the statements
contained herein or therein not misleading as of the date made or deemed made.
There is no fact known to any Related Person (other than industry-wide risks
normally associated with the types of businesses conducted by Related Persons)
that has not been disclosed to each Lender in writing which is materially
likely to cause a Material Adverse Change. There are no statements or
conclusions in any Engineering Report which are based upon or include
misleading information or fail to take into account material information
regarding the matters reported therein, it being understood that each
Engineering Report is necessarily based upon professional opinions, estimates
and projections and that Borrower does not warrant that such opinions,
estimates and projections will ultimately prove to have been accurate. Borrower
has heretofore delivered to each Lender true, correct and complete copies of
the Initial Engineering Report.
Section B.9. Litigation. Except as disclosed in the Initial Financial
Statements or in the Disclosure Schedule: (i) there are no actions, suits or
legal, equitable, arbitrative or administrative proceedings pending, or to the
knowledge of any Related Person threatened, against any Related Person before
any Tribunal which could cause a Material Adverse Change, and (ii) there are no
outstanding judgments, injunctions, writs, rulings or orders by any such
Tribunal against any Related Person or any Related Person's stockholders,
partners, directors or officers which could cause a Material Adverse Change.
Section B.10. Labor Disputes and Acts of God. Except as disclosed in
the Disclosure Schedule or a Disclosure Report, neither the business nor the
properties of any Related Person has been affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance), which could cause a Material Adverse
Change.
Section B.11. ERISA Plans and Liabilities. All currently existing
ERISA Plans are listed in the Disclosure Schedule or a Disclosure Report.
Except as disclosed in the Initial Financial Statements or in the Disclosure
Schedule or a Disclosure Report, no Termination Event has occurred with respect
to any ERISA Plan and all ERISA Affiliates are in compliance with ERISA in all
material respects. No ERISA Affiliate is required to contribute to, or has any
other absolute or contingent liability in respect of, any
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"multiemployer plan" as defined in Section 4001 of ERISA. Except as set forth
in the Disclosure Schedule or a Disclosure Report: (i) no "accumulated funding
deficiency" (as defined in Section 412(a) of the Internal Revenue Code of 1986,
as amended) exists with respect to any ERISA Plan, whether or not waived by the
Secretary of the Treasury or his delegate, and (ii) the current value of each
ERISA Plan's benefits does not exceed the current value of such ERISA Plan's
assets available for the payment of such benefits by more than $500,000.
Section B.12. Environmental and Other Laws. As used in this section:
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, "CERCLIS" means the Comprehensive
Environmental Response, Compensation and Liability Information System List of
the Environmental Protection Agency, and "Release" has the meaning given such
term in 42 U.S.C. ss. 9601(22). Except as set forth in the Disclosure Schedule
or a Disclosure Report:
(a) Related Persons are conducting their businesses in compliance with
all applicable Laws, including Environmental Laws, and have all permits,
licenses and authorizations required in connection with the conduct of their
businesses, except to the extent failure to have any such permit, license or
authorization could not cause a Material Adverse Change. Each Related Person is
in compliance with the terms and conditions of all such permits, licenses and
authorizations, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Environmental Law or in
any regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder, except to
the extent failure to comply could not cause a Material Adverse Change.
(b) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed, and no investigation or review is pending or
threatened by any Tribunal or any other Person with respect to (i) any alleged
generation, treatment, storage, recycling, transportation, disposal, or Release
of any Hazardous Materials, either by any Related Person or on any property
owned by any Related Person, (ii) any material remedial action which might be
needed to respond to any such alleged generation, treatment, storage,
recycling, transportation, disposal, or Release, or (1) any alleged failure by
any Related Person to have any permit, license or authorization required in
connection with the conduct of its business or with respect to any such
generation, treatment, storage, recycling, transportation, disposal, or
Release.
(c) No Related Person otherwise has any known material contingent
liability in connection with any alleged generation, treatment, storage,
recycling, transportation, disposal, or Release of any Hazardous Materials.
(d) No Related Person has handled any Hazardous Materials, other than
as a generator, on any properties now or previously owned or leased by any
Related Person to an extent that such handling has caused, or could cause, a
Material Adverse Change; and
(i) no PCBs are or have been present at any properties now or
previously owned or leased by any Related Person;
(ii) no asbestos is or has been present at any properties now or
previously owned or leased by any Related Person;
(iii) there are no underground storage tanks for Hazardous
Materials, active or abandoned, at any properties now or
previously owned or leased by any Related Person;
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(iv) no Hazardous Materials have been Released, in a reportable
quantity, where such a quantity has been established by
statute, ordinance, rule, regulation or order, at, on or
under any properties now or previously owned or leased by any
Related Person;
(v) no Hazardous Materials have been otherwise Released at, on or
under any properties now or previously owned or leased by any
Related Person to an extent that such release has caused, or
could cause, a Material Adverse Change.
(e) No Related Person has transported or arranged for the
transportation of any Hazardous Material to any location which is listed on the
National Priorities List under CERCLA, listed for possible inclusion on the
National Priorities List by the Environmental Protection Agency in CERCLIS, or
listed on any similar state list or which is the subject of federal, state or
local enforcement actions or other investigations which may lead to claims
against any Related Person for clean-up costs, remedial work, damages to
natural resources or for personal injury claims, including, but not limited to,
claims under CERCLA.
(f) No Hazardous Material generated by any Related Person has been
recycled, treated, stored, disposed of or released by any Related Person at any
location other than those listed in Disclosure Schedule.
(g) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of any Related Person (and to the best
knowledge of Borrower, no such notification has been filed with respect to any
Related Person by any other Person), and no property now or previously owned or
leased by any Related Person is listed or proposed for listing on the National
Priority list promulgated pursuant to CERCLA, in CERCLIS, or on any similar
state list of sites requiring investigation or clean-up.
(h) There are no Liens arising under or pursuant to any Environmental
Laws on any of the real properties or properties owned or leased by any Related
Person, and no government actions have been taken or are in process which could
subject any of such properties to such Liens; nor would any Related Person be
required to place any notice or restriction relating to the presence of
Hazardous Materials at any properties owned by it in any deed to such
properties.
(i) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by or which are in the possession of
any Related Person in relation to any properties or facility now or previously
owned or leased by any Related Person which have not been made available to
Agent.
Section B.13. Names and Places of Business. No Related Person has,
during the preceding five years, had, been known by, or used any other trade or
fictitious name, except as disclosed in the Disclosure Schedule. Except as
otherwise indicated in the Disclosure Schedule or a Disclosure Report, the
chief executive office and principal place of business of each Related Person
are (and for the preceding five years have been) located at the address of
Borrower set out in Section 9.3. Except as indicated in the Disclosure Schedule
or a Disclosure Report, no Related Person has any other office or place of
business.
Section B.14. Subsidiaries. Neither Borrower nor Parent presently has
any Subsidiary or owns any stock in any corporation or association except those
listed in the Disclosure Schedule or a Disclosure Report. Neither Borrower nor
any Related Person is a member of any general or limited partnership, joint
venture or association of any type whatsoever except those listed in the
Disclosure Schedule or a
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Disclosure Report. Except as otherwise revealed in a Disclosure Report, Parent
owns, directly or indirectly, the equity interest in each of its Subsidiaries
which is indicated in the Disclosure Schedule.
Section B.15. Licenses. Each Related Person possesses all licenses,
permits, franchises, patents, copyrights, trademarks and trade names, and other
intellectual property (or otherwise possesses the right to use such
intellectual property without violation of the rights of any other Person)
which are necessary to carry out its business as presently conducted and as
presently proposed to be conducted hereafter, and no Related Person is in
violation in any material respect of the terms under which it possesses such
intellectual property or the right to use such intellectual property.
Section B.16. Government Regulation. Neither Borrower nor any other
Related Person owing Obligations is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Investment
Company Act of 1940 (as any of the preceding acts have been amended) or any
other Law which regulates the incurring by such Person of Restricted Debt,
including Laws relating to common contract carriers or the sale of electricity,
gas, steam, water or other public utility services.
Section B.17. Ownership of Borrower and Inland Refining. All of the
outstanding shares of Borrower and Inland Refining are owned and shall at all
times be owned by Parent.
Section B.18. Taxes. Each Related Person has filed all United States
Federal income tax returns and all other material tax returns that are required
to be filed by it and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by any Related Person and all other
penalties or charges. The charges, accruals and revenues on the books of each
Related Person in respect of taxes and other governmental charges are, in the
opinion of Parent, adequate. No Related Person has not given or been requested
to give a waiver of the statute of limitations relating to the payment of any
federal or other taxes, except as listed in the Disclosure Schedule or a
Disclosure Report.
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ANNEX C
COMMON COVENANTS
Section C.1. Books, Financial Statements and Reports. Parent, acting
through or on behalf of the Related Persons, will at all times maintain full
and accurate books of account and records and a standard system of accounting,
will maintain its Fiscal Year, and will furnish the following statements and
reports to each Lender at Parent's expense:
(a) As soon as available, and in any event within ninety (90)
days after the end of each Fiscal Year, complete Consolidated and
consolidating financial statements of Parent together with all notes
thereto, prepared in reasonable detail in accordance with GAAP,
together with an unqualified opinion, based on an audit using
generally accepted auditing standards, by Arthur Anderson, L.L.P., or
other independent certified public accountants selected by Parent and
acceptable to Required Lenders, stating that such Consolidated
financial statements have been so prepared. These financial statements
shall contain a Consolidated and consolidating balance sheet as of the
end of such Fiscal Year and Consolidated and consolidating statements
of earnings, of cash flows, and of changes in owners' equity for such
Fiscal Year, each setting forth in comparative form the corresponding
figures for the preceding Fiscal Year. In addition, within ninety (90)
days after the end of each Fiscal Year Parent will furnish a report
signed by such accountants (i) stating that they have read this
Agreement, (ii) containing calculations showing compliance (or
non-compliance) at the end of such Fiscal Year with the requirements
of Sections C.18, C.21, C.23, C.27, C.28, C.29 and C.30 of this Annex
C and (iii) further stating that in making their examination and
reporting on the Consolidated financial statements described above
they did not conclude that any Default existed at the end of such
Fiscal Year or at the time of their report, or, if they did conclude
that a Default existed, specifying its nature and period of existence.
(b) As soon as available, and in any event within fifty (50)
days after the end of each Fiscal Quarter, Parent's Consolidated and
consolidated balance sheet as of the end of such Fiscal Quarter and
Consolidated and consolidating statements of earnings and cash flows
for the period from the beginning of the then current Fiscal Year to
the end of such Fiscal Quarter, all in reasonable detail and prepared
in accordance with GAAP, subject to changes resulting from normal
year-end adjustments. In addition, Parent will, together with each
such set of financial statements and each set of financial statements
furnished under subsection (a) of this section, furnish a certificate
in the form of Exhibit D signed by the chief financial officer of
Parent stating that such financial statements are accurate and
complete (subject to normal year-end adjustments), stating that he has
reviewed the Loan Documents, containing calculations showing
compliance (or non-compliance) at the end of such Fiscal Quarter with
the requirements of Sections C.18, C.21, C.23, C.27, C.28, C.29 and
C.30 of this Annex C and stating that no Default or Coverage
Deficiency exists at the end of such Fiscal Quarter or at the time of
such certificate or specifying the nature and period of existence of
any such Default or Coverage Deficiency.
(c) Promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent by
any Related Person to its stockholders and all registration
statements, periodic reports and other statements and schedules filed
by any Related Person with any securities exchange, the Securities and
Exchange Commission or any similar governmental authority.
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(d) By March 1 following the end of each Fiscal Year,
beginning on March 1, 1998, an engineering report prepared as of the
end of such Fiscal Year by Ryder Scott Company or other independent
petroleum engineers chosen by Borrower and acceptable to Required
Lenders, concerning the Properties. The report (1) shall separately
report on Proved Producing Reserves, Proved Developed Nonproducing
Reserves, Proved Undeveloped Reserves and probable reserves and
separately calculate the NPV of each such category of Proved Reserves
(and the similar net present value of such probable reserves), (2)
shall be prepared in two versions, the first using ING Pricing and the
second using TCW Pricing, and each using a 10% discount factor, (3)
shall address the various factors to be taken into account in
calculating ANCF so that projected ANCF can be readily calculated from
the report, (4) shall take into account Borrower's actual experiences
with leasehold operating expenses and other costs in determining
projected leasehold operating expenses and other costs, (5) shall
identify and take into account any "over-produced" or "under-produced"
status under gas balancing arrangements, (6) shall contain information
and analysis comparable in scope to that contained in the Initial
Engineering Reports, and (7) shall otherwise be in form and substance
satisfactory to Required Lenders. The report shall distinguish (or
shall be delivered together with a certificate from an appropriate
officer of Borrower which distinguishes) those Properties treated in
the report which are Eligible Mortgaged Properties from those
properties treated in the report which are not Eligible Mortgaged
Properties. In the event that Borrower and Tamco disagree over whether
or not any workovers or other remedial capital expenditures should be
included in the report for the purposes of calculating NPV, the
engineers preparing such report shall resolve such disagreement by
determining whether such expenditures are likely to be required in
accordance with prudent industry practice and shall include or exclude
such expenditures based on such determination.
(e) By July 15 of each year an engineering report prepared by
in-house petroleum engineers employed by Borrower, concerning all oil
and gas properties and interests owned by any Related Person which are
located in or offshore of the United States and which have
attributable to them proved oil and gas reserves. This report shall be
substantially in the form and substance as the reports delivered under
subsection (d) above and otherwise shall be satisfactory to Required
Lenders.
(f) Within fifty (50) days after the end of each Fiscal
Quarter, a report in detail acceptable to Required Lenders with
respect to the Properties during the Fiscal Quarter immediately prior
thereto:
(1) describing by well and field the net quantities
of oil, gas, natural gas liquids, and water produced (and the
quantities of water injected) during such Fiscal Quarter;
(2) describing by well and field the quantities of
oil, gas and natural gas liquids sold during such Fiscal
Quarter out of production from the Properties and calculating
the average sales prices of such oil, natural gas, and
natural gas liquids;
(3) regardless of whether the same are included in
the calculation of ANCF, specifying any leasehold operating
expenses, overhead charges, gathering costs, transportation
costs, and other costs with respect to the Properties of the
kind chargeable as direct charges or overhead under an
Onshore COPAS Accounting Procedure for Joint Operations (1984
form published by the Council of Petroleum Accountants
Societies);
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(4) setting forth the amount of Direct Taxes on the
Properties during such Fiscal Quarter and the amount of
royalties paid with respect to the Properties during such
Fiscal Quarter;
(5) describing all activities carried out during
such Fiscal Quarter in furtherance of the Plan of
Development, all other capital expenditures during such
Fiscal Quarter, and all projections of capital expenditures
projected to be made on any of the Eligible Mortgaged
Properties; and
(6) describing all workover work and drilling during
such Fiscal Quarter, including the cost and status of each
well drilled or worked over during such Fiscal Quarter, test
reports for each well tested during such Fiscal Quarter,
reports on prices and volumes received for such Fiscal
Quarter, reports for each well completed during such Fiscal
Quarter, and accompanying authorizations for expenditures.
(g) As soon as available, and in any event within forty-five
(45) days after the end of each Fiscal Quarter, a list, by name and
address, of those Persons who have purchased production during such
Fiscal Quarter from the properties described in subsection (d) above,
giving each such purchaser's owner number for Borrower and each such
purchaser's property number for each such property.
(h) As soon as available, and in any event within thirty (30)
days after the end of each Fiscal Year, Borrower shall deliver to
Agent an environmental compliance certificate signed by the president
or chief executive officer of Borrower in the form attached hereto as
Exhibit E. Further, if requested by Agent, Borrower shall permit and
cooperate with an environmental and safety review made in connection
with the operations of Borrower's oil and gas properties one time
during each Fiscal Year beginning with the Fiscal Year 1998, by Pilko
& Associates, Inc. or other consultants selected by Agent which review
shall, if requested by Agent, be arranged and supervised by
environmental legal counsel for Agent, all at Borrower's cost and
expense. The consultant shall render a verbal or written report, as
specified by Agent, based upon such review at Borrower's cost and
expense.
(i) Concurrently with the annual renewal of the Borrower's
insurance policies, Borrower shall, if requested by Agent in writing,
cause a certificate or report to be issued by Agent's professional
insurance consultants or other insurance consultants satisfactory to
Agent certifying that Borrower's insurance for the next succeeding
year after such renewal (or for such longer period for which such
insurance is in effect) complies with the provisions of this Agreement
and the Security Documents.
(i) By November 1 of each year, beginning with November 1,
1998, a proposed Plan of Development for the next succeeding year.
Section C.2. Other Information and Inspections. Each Related Person
will furnish to each Lender any information which Agent may from time to time
request in writing concerning any covenant, provision or condition of the Loan
Documents or any matter in connection with Related Persons' businesses and
operations. Each Related Person will permit representatives appointed by Agent
(including independent accountants, auditors, agents, attorneys, appraisers and
any other Persons) to visit and inspect during normal business hours any of
such Related Person's property, including its books of account, other books and
records, and any facilities or other business assets, and to make extra copies
therefrom and photocopies and photographs thereof, and to write down and record
any information such
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representatives obtain, and each Related Person shall permit Agent or its
representatives to investigate and verify the accuracy of the information
furnished to Agent or any Lender in connection with the Loan Documents and to
discuss all such matters with its officers, employees and representatives.
Section C.3. Notice of Material Events and Change of Address. Borrower
and Parent will promptly notify each Lender in writing, stating that such
notice is being given pursuant to this Agreement, of:
(a) the occurrence of any Material Adverse Change,
(b) the occurrence of any Default or Coverage Deficiency,
(c) the acceleration of the maturity of any Restricted Debt
owed by any Related Person or of any default by any Related Person
under any indenture, mortgage, agreement, contract or other instrument
to which any of them is a party or by which any of them or any of
their properties is bound, if such acceleration or default could cause
a Material Adverse Change,
(d) the occurrence of any Termination Event,
(e) any claim of $50,000 or more, any notice of potential
liability under any Environmental Laws which might exceed such amount,
or any other material adverse claim asserted against any Related
Person or with respect to any Related Person's properties,
(f) the filing of any suit or proceeding against any Related
Person in which an adverse decision could cause a Material Adverse
Change, and
(g) the receipt by any Related Person of a notice of any
"Event of Default" under the Other Loan Documents.
Upon the occurrence of any of the foregoing Related Persons will take all
necessary or appropriate steps to remedy promptly any such Material Adverse
Change, Default, acceleration, default or Termination Event, to protect against
any such adverse claim, to defend any such suit or proceeding, and to resolve
all controversies on account of any of the foregoing. Borrower will also notify
Agent and Agent's counsel in writing at least twenty Business Days prior to the
date that any Related Person changes its name or the location of its chief
executive office or principal place of business or the place where it keeps its
books and records concerning the Collateral, furnishing with such notice any
necessary financing statement amendments or requesting Agent and its counsel to
prepare the same.
Section C.4. Maintenance of Properties. Each Related Person will
maintain, preserve, protect, and keep all Collateral and all other property
used or useful in the conduct of its business in good condition and in
compliance with all applicable Laws, and will from time to time make all
repairs, renewals and replacements needed to enable the business and operations
carried on in connection therewith to be conducted at all times consistent with
prudent industry practices.
Section C.5. Maintenance of Existence and Qualifications. Each Related
Person will maintain and preserve its existence and its rights and franchises
in full force and effect and will qualify to do business in all states or
jurisdictions (a) where Collateral is located and (b) where required by
applicable Law, except where the failure so to qualify will not cause a
Material Adverse Change.
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Section C.6. Payment of Trade Debt, Taxes, etc. Each Related Person
will (a) timely file all required tax returns; (b) timely pay all taxes,
assessments, and other governmental charges or levies imposed upon it or upon
its income, profits or property; (c) within 90 days past the original invoice
or billing date thereof, or, if earlier, when due in accordance with its terms,
all Debt owed by it on ordinary trade terms to vendors, suppliers and other
Persons providing goods and services used by it in the ordinary course of its
business; (d) pay and discharge when due all other Debt now or hereafter owed
by it; and (e) maintain appropriate accruals and reserves for all of the
foregoing in accordance with GAAP. Each Related Person may, however, delay
paying or discharging any of the foregoing so long as it is in good faith
contesting the validity thereof by appropriate proceedings and has set aside on
its books adequate reserves therefor.
Section C.7. Bonding and Insurance. The Related Persons will maintain
all bonds and letters of credit in lieu of bonds which they are required to
maintain (by law, lease terms, or consistent with prudent industry practices)
in order to carry out development and production operations on, the Properties.
Each Related Person will keep or cause to be kept adequately insured by
financially sound and reputable insurers its and its Subsidiaries' vehicles and
all other property in accordance with Schedule 3. Any insurance policies
covering Collateral shall be endorsed (i) to provide for payment of losses to
Agent, on behalf of Lenders, as their interests may appear, pursuant to a
mortgage clause (without contribution) of standard form made part of the
applicable policy, (ii) to provide that such policies may not be canceled,
reduced or adversely affected in any manner for any reason without fifteen days
prior notice to Agent, (iii) to provide for any other matters specified in any
applicable Security Document or which Agent may reasonably require; and (iv) to
provide for insurance against fire, casualty and any other hazards normally
insured against, in the amount of the full value (less a reasonable deductible
not to exceed amounts customary in the industry for similarly situated
businesses and properties) of the property insured. (To the extent that the
Mortgages or any other Security Document contains other additional requirements
for such endorsement, each Related Person shall also comply with such
additional requirements.) Each Related Person shall at all times maintain
adequate insurance against its liability for injury to persons or property,
which insurance shall be by financially sound and reputable insurers and shall
without limitation provide the following coverages: comprehensive general
liability (including coverage for damage to underground resources and
equipment, damage caused by blowouts or cratering, damage caused by explosion,
damage to underground minerals or resources caused by saline substances, broad
form property damage coverage, broad form coverage for contractually assumed
liabilities and broad form coverage for acts of independent contractors),
worker's compensation and automobile liability. Each Related Person shall at
all times maintain cost of control of well insurance with respect to all wells
being drilled or deepened, which shall insure against the following costs: cost
of control of well; fires, blowouts, etc.; redrilling expense; and seepage and
pollution expense.
Section C.8. Performance on Borrower's Behalf. If any Related Person
fails to pay any taxes, insurance premiums, expenses, attorneys' fees or other
amounts it is required to pay under any Loan Document, Agent may pay the same.
Borrower shall immediately reimburse Agent for any such payments and each
amount paid by Agent shall constitute an Obligation owed hereunder which is due
and payable on the date such amount is paid by Agent.
Section C.9. Interest. Borrower hereby promises to each Lender to pay
interest at the Late Payment Rate on all Obligations (including Obligations to
pay fees or to reimburse or indemnify any Lender) which Borrower has in this
Agreement promised to pay to such Lender and which are not paid when due. Such
interest shall accrue from the date such Obligations become due until they are
paid.
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Section C.10. Compliance with Agreements and Law. Each Related Person
will perform all material obligations it is required to perform under the terms
of each indenture, mortgage, deed of trust, security agreement, lease,
franchise, agreement, contract or other instrument or obligation to which it is
a party or by which it or any of its properties is bound. Each Related Person
will conduct its business and affairs in compliance with all Laws applicable
thereto.
Section C.11. Environmental Matters; Environmental Reviews.
(a) Each Related Person will comply in all material respects
with all Environmental Laws now or hereafter applicable to such
Related Person and shall obtain, at or prior to the time required by
applicable Environmental Laws, all environmental, health and safety
permits, licenses and other authorizations necessary for its
operations and will maintain such authorizations in full force and
effect.
(b) Borrower will promptly furnish to Agent all written
notices of violation, orders, claims, citations, complaints, penalty
assessments, suits or other proceedings received by Borrower, or of
which it has notice, pending or threatened against Borrower, by any
governmental authority with respect to any alleged violation of or
non-compliance with any Environmental Laws or any permits, licenses or
authorizations in connection with its ownership or use of its
properties or the operation of its business.
(c) Borrower will promptly furnish to Agent all requests for
information, notices of claim, demand letters, and other
notifications, received by Borrower in connection with its ownership
or use of its properties or the conduct of its business, relating to
potential responsibility with respect to any investigation or clean-up
of Hazardous Material at any location.
Section C.12. Evidence of Compliance. Each Related Person will furnish
to each Lender at such Related Person's or Borrower's expense all evidence
which Agent from time to time reasonably requests in writing as to the accuracy
and validity of or compliance with all representations, warranties and
covenants made by any Related Person in the Loan Documents, the satisfaction of
all conditions contained therein, and all other matters pertaining thereto.
Section C.13. Solvency. Upon giving effect to the issuance of the
Notes, the execution of the Loan Documents by Borrower and the consummation of
the transactions contemplated hereby, Borrower will be solvent (as such term is
used in applicable bankruptcy, liquidation, receivership, insolvency or similar
laws).
Section C.14. Completion of Activities. Borrower will (1) timely
develop the Eligible Mortgaged Properties in accordance with the Plan of
Development, and (2) except to the extent regulatory approval has not yet been
obtained, have each producing and injection well which is hereafter completed
put into normal operation. Borrower will make capital expenditures for the
drilling and development of the Eligible Mortgaged Properties in accordance
with the Plan of Development. The Plan of Development designates certain
operations as "Primary Phases" and others, which are contingent upon the
success of the "Primary Phases," are designated as "Secondary Phases." Prior to
Borrower making capital expenditures with respect to "Secondary Phase"
operations, if a specific measure of success with respect to the "Primary
Phase" operations is set forth in the Plan of Development, such measure must
have been achieved, or if no specific measure is set forth, Agent and Borrower
must have agreed that the "Primary Phase" operation has been successful.
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Section C.15. Hedging Contracts. No Related Person will be a party to
or in any manner be liable on any forward, future, swap or hedging contract,
other than (a) existing hedging contracts listed in the Disclosure Schedule,
(b) interest rate hedges under the Bank Interest Rate Hedge Agreement required
under Section C.17 of this Annex C, and (c) any other commodity floors approved
by Required Lenders from time to time, including terms, duration and
counterparty.
Section C.16. Reviews. Borrower will meet with Agent, at Borrower's
expense, from time to time (as frequently as monthly and in any event at least
once per Fiscal Quarter), at the offices of Agent or at such other location as
Agent and Borrower may agree, to review all operational activities of Borrower
with respect to the Eligible Mortgaged Properties and all financial reports of
the Related Persons since the date of the prior review. Each review shall be in
scope satisfactory to Agent, but will include at a minimum, an update by
Borrower on the development activities made pursuant to the Plan of
Development, any requests by Borrower that changes be made to the Plan of
Development, any cost or expense overruns or underruns, any mechanical problems
incurred, and any differences in reserves or production estimates.
Section C.17. Interest Hedging Contracts. Until the Floating Rate Debt
is paid in full, Borrower will maintain Hedging Contracts under the Bank
Interest Rate Hedge Agreement with respect to the Floating Rate Debt. Such
Hedging Contracts shall: (i) during that portion of the Commitment Period prior
to December 31, 1998, have notional amounts of not less than 50% of the
principal amount of Floating Rate Debt reasonably projected by Borrower to be
outstanding during the term of such Hedging Contracts, (ii) during that portion
of the Commitment Period on or after December 31, 1998, have notional amounts
of not less than 80% of the principal amount of the Floating Rate Debt
reasonably projected by Borrower to be outstanding during the term of such
Hedging Contracts, (iii) at all times after the Commitment Period, have
notional amounts equal to the principal amount of the Floating Rate Debt
projected by Borrower to be outstanding during the term of such Hedging
Contracts, (iv) fix a cap for Borrower's exposure to increases in the interest
rates payable on the Floating Rate Debt for an initial term of three (3) years,
and (v) effectively fix a cap at eight and one-half percent (8.5%) or less for
Borrower's exposure to increases in the interest rates payable on the Floating
Rate Debt. Borrower shall enter into replacement Hedging Contracts at the end
of each expiring Hedging Contract and, concurrently with any increase in the
amount of the Floating Rate Debt, shall enter into such additional Hedging
Contracts as may be required to keep Borrower in compliance with this Section
C.17.
Section C.18. Restricted Debt. No Related Person will in any manner
owe or be liable for Restricted Debt except:
(a) the Obligations.
(b) the Other Allowed Debt.
(c) Hedging transactions required under Section C.17 or
permitted under Section C.15 of this Annex C.
(d) any Restricted Debt assumed or incurred by any Related
Person after the date hereof to finance all or any part of the
purchase price of property acquired by such Related Person, provided
that:
(i) such Restricted Debt shall be secured only by
the property so acquired and the improvements thereon,
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(ii) each Lien securing such Restricted Debt shall
attach or be existing at the time of acquisition,
(iii) only the Related Person that acquired such
property shall be liable on such Restricted Debt,
(iv) the principal amount of such Restricted Debt in
respect of such property shall not exceed the lower of the
acquisition price of or market value of the property at the
time of acquisition thereof by such Related Person,
(v) the aggregate outstanding principal amount of
such Restricted Debt of the Related Persons incurred for the
purchase of trucks or automobiles does not at any time exceed
$250,000, and the aggregate principal amount of such
Restricted Debt which is incurred for such purpose in any
Fiscal Year does not exceed $100,000, and
(vi) the aggregate outstanding principal amount of
such Restricted Debt of the Related Persons incurred for
purposes other than the purchase of trucks or automobiles,
does not at any time exceed $200,000, and the aggregate
principal amount of such Restricted Debt which is incurred
for such other purposes in any Fiscal Year does not exceed
$50,000.
(e) the Carmen promissory note described in paragraph C.18 of
the Disclosure Schedule, as from time to time extended (but not
increased).
(f) Parent's Series C Convertible Preferred Stock.
(g) the Debt of Inland Refining evidenced by the
Production/Refining Credit Agreement, provided that the principal
amount of such Debt thereof (including without limitation advances and
the face amount of letters of credit) shall not exceed $20,000,000 at
any time outstanding.
(h) guaranties by Parent, in form and substance acceptable to
Required Lenders in their sole discretion, of obligations of Inland
Refining under agreements for the purchase of refinery feed stocks in
the ordinary course of business; provided, however, that each such
guaranty shall specify a maximum aggregate liability for Parent under
such guaranty, and the maximum aggregate amount of such specified
maximum liability of Parent under all such guaranties shall not exceed
$6,000,000 at any one time.
(i) miscellaneous items of Restricted Debt not described in
subsections (a) through (h) which do not in the aggregate (taking into
account all such Restricted Debt of all Related Persons) exceed
$150,000 at any one time outstanding.
Section C.19. Limitation on Liens. No Related Person will create,
assume or permit to exist any Lien upon any of the properties or assets which
it now owns or hereafter acquires, except, to the extent not otherwise
forbidden by the Security Documents the following ("Permitted Liens"):
(a) Liens which secure Obligations only.
(b) Liens which secure the Other Allowed Debt, provided that
such Liens are subject to the Intercreditor Agreement.
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(c) statutory Liens for taxes, statutory mechanics' and
materialmen's Liens incurred in the ordinary course of business, and
other similar Liens incurred in the ordinary course of business,
provided such Liens do not secure Restricted Debt and secure only
Restricted Debt which is not delinquent or which is being contested as
provided in Section C.6.
(d) Liens securing the Restricted Debt permitted by Section
C.18 (d), (e) or (i) of this Annex C.
Section C.20. No Mergers. No Related Person will merge or consolidate
with or into any other business entity. No Subsidiary of Parent will issue any
additional shares of its capital stock or other securities or any options,
warrants or other rights to acquire such additional shares or other securities
except to Parent or another wholly-owned Subsidiary of Parent. No Subsidiary of
Parent which is a partnership will allow any diminution of Parent's interest
(direct or indirect) therein. No Related Person shall create or own any
Subsidiary other than those listed in the Disclosure Schedule.
Section C.21. Limitation on Dividends and Redemptions. No Related
Person will make any Distribution in respect of any class of its capital stock
or any partnership or other interest in it, nor will any Related Person
directly or indirectly make any Distribution in respect of any shares of the
capital stock of or partnership interests in any Related Person (whether such
interests are now or hereafter issued, outstanding or created), or cause or
permit any reduction or retirement of the capital stock of any Related Person,
except that (a) Parent may at any time make Distributions in the form of
Parent's common stock to the holders of Parent's Series C Convertible Preferred
Stock, (b) Inland Refining may at any time make payments to Borrower pursuant
to the Production/Refining Credit Agreement, and (c) Inland Refining may make
any other Distribution or loan either in favor of or for the benefit of
Borrower or Parent for the purpose of applying such Distribution to Affiliates'
ANCF, as contemplated by Section 3 of the Intercreditor Agreement.
Section C.22. Limitation on Sales of Property. No Related Person will
sell, transfer, lease, exchange, alienate or dispose of any of its material
assets or properties or any material interest therein except, to the extent not
otherwise forbidden under the Security Documents:
(a) equipment which is worthless or obsolete or which is
replaced by equipment of equal suitability and value.
(b) personal property inventory (including oil and gas sold
as produced and seismic data) which is sold in the ordinary course of
business on ordinary trade terms.
(c) specific properties not subject to the Mortgages (or
specific portions thereof), provided the same are abandoned and not
otherwise disposed of and further provided that no well situated on
the property to be abandoned, or located on any unit containing all or
any part thereof, is capable (or is subject to being made capable
through commercially feasible
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operations) of producing oil, gas or other hydrocarbons or minerals in
paying quantities (with such determination of paying quantities being
made taking into account the prudent operation of any unit in which
such property is located).
(d) farmouts on terms and conditions reasonably acceptable to
Required Lenders.
Neither Parent nor any of Parent's Subsidiaries will sell, transfer or
otherwise dispose of capital stock of any of Parent's Subsidiaries except that
any Subsidiary of Parent may sell or issue its own capital stock to the extent
not otherwise prohibited hereunder. No Related Person will discount, sell,
pledge or assign any notes payable to it, accounts receivable or future income
except to the extent expressly permitted under the Loan Documents.
Section C.23. Limitation on Investments. No Related Person will make
any Investment other than (a) Permitted Investments, (b) Investments in oil and
gas properties, (c) Investments of Parent in (i) Inland Refining and (ii)
Inland Production existing as of the date hereof, (d) Investments in the Sound
Refining Note existing as of the date hereof, (e) normal and prudent extensions
of credit to customers buying goods and services in the ordinary course of
business, which extensions shall not be for longer periods than those extended
by similar businesses operated in a normal and prudent manner, (f) the
Production/Refining Loan permitted under Section C.37, and (g) the purchase by
Inland Refining of the Pennzoil Refinery for a purchase price not to exceed
$2,250,000 exclusive of prorations and expenses.
Section C.24. INTENTIONALLY OMITTED
Section C.25. Transactions with Affiliates. No Related Person will
engage in any material transaction with any of its Affiliates other than (i)
for customary director compensation paid to such Affiliates, (ii) for issuances
of equity to Affiliates for fair value, provided that such issuances are
permitted by Section C.21, (iii) transactions between Borrower or Guarantor and
any Affiliate other than Inland Refining, the terms of which are no less
favorable than those which would have been obtainable at the time in
arm's-length dealings with Persons other than an Affiliate, (iv) the
Production/Refining Loan, (v) the Parent guaranties set forth in Section
C.18(h), (vi) the Inland Refining Contract, and (vii) the Farmout Agreement.
Section C.26. Certain Contracts; Amendments; Multiemployer ERISA
Plans. Except as expressly provided for in the Loan Documents, no Related
Person will, directly or indirectly, enter into, create, or otherwise allow to
exist any contract or other consensual restriction on the ability of any
Subsidiary of Borrower to: (i) make Distributions to Borrower, (ii) to redeem
equity interests held in it by Borrower, (iii) to repay loans and other
indebtedness owing by it to Borrower, or (iv) to transfer any of its assets to
Borrower. No Related Person will enter into any "take-or-pay" contract or other
contract or arrangement for the purchase of goods or services which obligates
it to pay for such goods or service regardless of whether they are delivered or
furnished to it. No Related Person will amend or permit any amendment to any
contract or lease which releases, qualifies, limits, makes contingent or
otherwise detrimentally affects the rights and benefits of any Lender under or
acquired pursuant to any Security Documents. No ERISA Affiliate will incur any
obligation to contribute to any "multiemployer plan" as defined in Section 4001
of ERISA.
Section C.27. Working Capital. Parent's Consolidated Working Capital
will never be less than $1,000,000. As used herein, "Working Capital" means
Parent's Consolidated current assets minus Parent's Consolidated current
liabilities, provided that for the purposes of determining Working Capital: (i)
Consolidated current assets will be calculated without including (1) any
accounts receivable or other Debts owed to Parent by its Affiliates, employees
or shareholders, and (2) any account receivable unpaid
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more than 120 days after its original invoice date, and (ii) for so long as no
Event of Default exists, Consolidated current liabilities will be calculated
without including any payments of principal on the Obligations and the Other
Allowed Debt which are required to be made within one year from the time of
calculation.
Section C.28. Tangible Net Worth. Parent's Consolidated Tangible Net
Worth plus any contributions made pursuant to the Farmout Agreement to Smith
Management LLC in the form of common stock of Borrower will never be less than
$35,000,000.
Section C.29 EBITDA. At the end of any Fiscal Quarter, beginning with
the Fiscal Quarter ending September 30, 1998, the ratio of (i) Parent's EBITDA
to (ii) required interest payments on Parent's Consolidated Debt, for the
four-Fiscal Quarter period ending with such Fiscal Quarter will not be less
than (a) 1.30 to 1.00 for any Fiscal Quarter ending on or before December 31,
1998, (b) 1.50 to 1.00 for any Fiscal Quarter ending after December 31, 1998
and on or before March 31, 1999, (c) 1.70 to 1.00 for any Fiscal Quarter ending
after March 31, 1999 and on or before June 30, 1999, and (d) 3.00 to 1.00 for
any Fiscal Quarter thereafter.
Section C.30. General and Administrative Expenses. Parent's
Consolidated general and administrative expenses in any Fiscal Year shall not
exceed the ANCF Overhead Costs for such Fiscal Year.
Section C.31. No Public Announcements. No Related Person may make any
public announcement or disclosure of the transactions contemplated by this
Agreement or any other Loan Document, except as required by law or approved by
Agent, in its sole and absolute discretion prior to the making of any such
public announcement or disclosure.
Section C.32. Refinery Acquisitions. No Related Person will enter into
an acquisition of a refinery (regardless of whether or not the proceeds of any
Loan are used to finance such acquisition), other than such Investments
existing as of September 11, 1998 and the acquisition of the Pennzoil Refinery,
unless all aspects of such acquisition, including the structure of the
acquisition, related documentation, additional Security Documents, liabilities
to be assumed by any Related Person in connection therewith, and environmental
inspections, have been reviewed and approved by Lenders in their absolute
discretion.
Section C.33. Transactions Regarding Pennzoil Refinery. If Inland
Refining does not acquire the Pennzoil Refinery for any reason, but such
Pennzoil Refinery is acquired by any Affiliate or any 2% Affiliate of a Related
Person, then no Related Person shall enter into any contract for the sale,
purchase, processing, refining or treatment of hydrocarbons with the owner,
operator or lessee of such Pennzoil Refinery unless such contract is on terms
and conditions that are no less favorable than those which would have been
obtained in an arms length transaction with Persons other than Affiliates,
which shall be determined by Agent in its reasonable discretion, and unless
Agent has been provided with thirty (30) days prior written notice of the
contract.
Section C.34. Sound Refining Note. Neither Inland Refining nor any
Environmental Affiliate of Inland Refining shall institute any foreclosure
proceedings, take possession of, manage, operate, or exert controlling
influence over any property or facility which secures the Sound Refining Note
and is encumbered by the Sound Refining Deed of Trust, without first obtaining
the prior written consent of Agent, which consent may be granted or withheld in
Agent's sole and absolute discretion.
Section C.35. Inland Refining. As of the date hereof, Inland Refining
shall (a) act solely in its own name and through its duly authorized directors
and officers in the conduct of its business, and shall
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conduct its business so as not to mislead others as to the identity of the
entity with which they are concerned, (b) keep in full effect its existence and
rights as a corporation under the laws of the State of Utah by taking all
actions required by the corporation laws of Utah, including convening regular
meetings of shareholders and directors, (c) cause not less than two of its
three directors to be Independent Directors, (d) cause its employees and
officers to not be officers, directors or employees of Borrower or Parent, (e)
cause all its actions to be taken by a duly authorized officer of Inland
Refining, (f) maintain corporate minutes, books and accounts separate from
those of Parent, (g) maintain capitalization adequate to meet its obligations
and business objectives and (h) design and implement an environmental
management plan to ensure compliance with and manage liability under
Environmental Laws. For purposes of this Section C.34, the term 'Independent
Director' means any Person who is not and for the prior five years has not been
an officer, director, or employee of either Parent or Borrower.
Section C.36. Parent's and other Related Persons' Actions Regarding
Inland Refining. With respect to Inland Refining, neither Parent nor Borrower
shall (a) either directly or indirectly, provide any additional funds to Inland
Refining, either through an equity investment, loan, loan guarantee or any
other means, except for (i) the Production/Refining Credit Agreement permitted
pursuant to Section C.37, (ii) the Parent guaranties permitted pursuant to
Section C.18(h), and (iii) funds required to finance the acquisition of the
Pennzoil Refinery, (b) pay the salaries of Inland Refining's employees or
reimburse Inland Refining for any costs, expenses or losses incurred by Inland
Refining, (c) have direct involvement with or direct control over any
environmental management plan and/or remediation program concerning any
property owned by Inland Refining, including the Crysen Refinery, and (d) have
direct control over the day-to-day management and operations or the financial
affairs of Inland Refining.
Section C.37. Inventory and Accounts Receivable. Except for the
inventory and accounts receivable which Inland Refining purchased in connection
with the sale of the Sound Refinery to SJCC, Inland Refining shall not purchase
or have any ownership interest in any inventory or accounts receivable located
on, arising from or associated with the Sound Refinery.
Section C.38. Production/Refining Loan. Borrower shall be permitted to
make loans or advances to Inland Refining, and may cause Letters of Credit to
be issued for the benefit of Inland Refining pursuant to the Bank Agreement, in
each case under the Production/Refining Credit Agreement, provided that the
aggregate principal amount of all loans to Inland Refining plus the aggregate
amount of Letters of Credit issued to or for the account of Inland Refining,
plus any amounts that have been advanced pursuant to any such Letter of Credit
which have not been reimbursed by Inland Refining to Borrower, shall not exceed
$20,000,000 in the aggregate at any one time outstanding.
Section C.39. Inland Refining Contract. Parent and Borrower hereby
agree that they shall not amend the Inland Refining Contract without obtaining
the prior written consent of Required Lenders, which consent may be given or
withheld in Required Lenders' sole and absolute discretion.
Section C.40. Capital Expenditures. Inland Refining agrees that it
will not make any capital expenditures relating to the Crysen Refinery and the
Pennzoil Refinery in an amount exceeding $3,000,000 in the aggregate during any
Fiscal Year ending on or prior to December 31, 1997 or in an amount exceeding
$5,000,000 in the aggregate after January 1, 1998, without first obtaining the
prior written consent of Required Lenders, which consent may be given or
withheld in Required Lenders' sole and absolute discretion; provided, however,
that Inland Refining shall make any capital expenditures with respect to
modifications, repairs or improvements to the Crysen Refinery required to
comply with or address liability under any Law applicable to the Crysen
Refinery, including any Environmental Law, after providing advance written
notice to Agent concerning the applicability of such requirements.
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Section C.41. Farmout Transactions. On or before December 31, 1998,
Parent shall have received at least $17,000,000 in proceeds from the Farmout
Agreement which shall have been or shall be applied to drilling, completing and
equipping wells pursuant to the Farmout Agreement. Parent shall not make nor
shall Parent permit any Related Person to make any payment of cash or other
property to the Farmee (as such term is defined in the Farmout Agreement)
pursuant to the Farmout Agreement, whether in respect of production from wells
or otherwise, other than payments in the form of Parent's common stock pursuant
to the Farmout Agreement. Parent shall not allow nor shall Parent permit any
Restricted Person to allow proceeds of production from any Earned Drillsite (as
such term is defined in the Farmout Agreement) or any well thereon or other
cash to be retained by Farmee in lieu of receiving a payment or distribution in
the form of Parent's common stock pursuant to the Farmout Agreement. Parent (i)
shall not amend or modify the Farmout Agreement in any material respect and
(ii) will give prompt notice to Agent of any breach by any Restricted Person or
by Farmee (as such term is defined in the Farmout Agreement) under the Farmout
Agreement.
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ANNEX D
COMMON EVENTS OF DEFAULT
Section D.1 Any Related Person fails to pay the principal component of
any Obligation when due and payable, whether at a date for the payment of a
fixed installment or as a contingent or other payment becomes due and payable
or as a result of acceleration or otherwise, and such failure is not remedied
in full within one (1) Business Day thereafter.
Section D.2. Any Related Person fails to pay any Obligation (other
than the Obligations in Section D.1 above) when due and payable, whether at a
date for the payment of a fixed installment or as a contingent or other payment
becomes due and payable or as a result of acceleration or otherwise, within one
(1) Business Day after the same becomes due in the case of interest or fifteen
(15) days thereafter in the case of any other Obligation.
Section D.3. Any "default" or "event of default" occurs under any Loan
Document which defines either such term, and the same is not remedied within
the applicable period of grace (if any) provided in such Loan Document.
Section D.4. Any Related Person fails to duly observe, perform or
comply with any covenant, agreement or provision of Section C.3 or any of
Sections C.17 through and including C.41 of Annex C.
Section D.5. Any Related Person fails (other than as referred to in
Sections D.1, D.2, D.3 or D.4 above) to duly observe, perform or comply with
any covenant, agreement, condition or provision of any Loan Document, and such
failure remains unremedied for a period of thirty (30) days after notice of
such failure is given by Agent to Borrower.
Section D.6. Any representation or warranty previously, presently or
hereafter made in writing by or on behalf of any Related Person in connection
with any Loan Document shall prove to have been false or incorrect in any
material respect on any date on or as of which made, or any Loan Document at
any time ceases to be valid, binding and enforceable as warranted in Section
B.5 of Annex B for any reason other than its release or subordination by Agent.
Section D.7. Any Related Person fails to duly observe, perform or
comply with (a) any agreement with any Person or any term or condition of any
instrument, if such agreement or instrument is materially significant to
Borrower or to Parent and its Subsidiaries on a Consolidated basis or
materially significant to any Guarantor, or (b) any provision of any Other Loan
Document and, in either case, such failure is not remedied within the
applicable period of grace (if any) provided in such agreement or instrument.
Section D.8. Any Related Person (iii) fails to pay any portion, when
such portion is due, of any of its Restricted Debt in excess of $100,000 (other
than the Obligations, the Other Allowed Debt and Debt described in Section C.6
of Annex C which is not required to be paid so long as the Related Person is in
good faith contesting the validity thereof by appropriate proceedings), or (iv)
breaches or defaults in the performance of any agreement or instrument by which
any such Restricted Debt is issued, evidenced, governed, or secured, and any
such failure, breach or default continues beyond any applicable period of grace
provided therefor.
Section D.9. Either (v) any "accumulated funding deficiency" (as
defined in Section 412(a) of the Internal Revenue Code of 1986, as amended) in
excess of $100,000 exists with respect to any ERISA
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Plan, whether or not waived by the Secretary of the Treasury or his delegate,
or (vi) any Termination Event occurs with respect to any ERISA Plan and the
then current value of such ERISA Plan's benefit liabilities exceeds the then
current value of such ERISA Plan's assets available for the payment of such
benefit liabilities by more than $100,000 (or in the case of a Termination
Event involving the withdrawal of a substantial employer, the withdrawing
employer's proportionate share of such excess exceeds such amount).
Section D.10. Any Related Person:
(a) suffers the entry against it of a judgment, decree or
order for relief by a Tribunal of competent jurisdiction in an
involuntary proceeding commenced under any applicable bankruptcy,
insolvency or other similar Law of any jurisdiction now or hereafter
in effect, including the federal Bankruptcy Code, as from time to time
amended, or has any such proceeding commenced against it which remains
undismissed for a period of sixty days; or
(b) commences a voluntary case under any applicable
bankruptcy, insolvency or similar Law now or hereafter in effect,
including the federal Bankruptcy Code, as from time to time amended;
or applies for or consents to the entry of an order for relief in an
involuntary case under any such Law; or makes a general assignment for
the benefit of creditors; or fails generally to pay (or admits in
writing its inability to pay) its debts as such debts become due; or
takes corporate or other action to authorize any of the foregoing; or
(c) suffers the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of all or a substantial part of its assets or of any
part of the Collateral in a proceeding brought against or initiated by
it, and such appointment or taking possession is neither made
ineffective nor discharged within thirty days after the making
thereof, or such appointment or taking possession is at any time
consented to, requested by, or acquiesced to by it; or
(d) suffers the entry against it of a final judgment for the
payment of money in excess of $100,000 (not covered by insurance
satisfactory to Agent in its discretion), unless the same is
discharged within thirty days after the date of entry thereof or an
appeal or appropriate proceeding for review thereof is taken within
such period and a stay of execution pending such appeal is obtained;
or
(e) suffers a writ or warrant of attachment or any similar
process to be issued by any Tribunal against all or any substantial
part of its assets or any part of the Collateral, and such writ or
warrant of attachment or any similar process is not stayed or released
within thirty days after the entry or levy thereof or after any stay
is vacated or set aside.
Section D.11. Any Change in Control occurs.
Section D.12. Any "Event of Default" (as defined in the Other Loan
Documents) occurs under the Other Loan Documents.
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SCHEDULE 1
DISCLOSURE SCHEDULE
To supplement the following sections of the Agreement of which this
Schedule is a part, Parent and Borrower hereby make the following disclosures:
1. Section B.6 Initial Financial Statements:
No Material Adverse Change.
2. Section B.7 Other Obligations:
a. Swap Agreement with Joint Energy Development
Investments Limited Partnership, dated November 22,
1994, structured as a costless collar with a floor
price of $18.00 per barrel and a ceiling price of
$20.55 per barrel using the average settlement price
for the prompt month of NYMEX Light Sweet Crude Oil
for the following remaining quantities and periods
of time:
January 1, 1998 through December 31, 1998 12,500 barrels per month
January 1, 1999 through December 31, 1999 14,000 barrels per month
January 1, 2000 through December 31, 2000 14,000 barrels per month
b. Swap Agreement with Koch Oil Company, dated January
1, 1997, structured as a reverse collar with a Put
price of $18.00 per barrel and a Call strike price
of $20.55 per barrel using the average settlement
price for the prompt month of NYMEX Light Sweet
Crude Oil for the following quantities and periods
of time:
January 1, 1998 through December 31, 1998 12,500 barrels per month
January 1, 1999 through December 31, 1999 14,000 barrels per month
January 1, 2000 through December 31, 2000 14,000 barrels per month
c. Swap Agreement with Enron Capital and Trade
Resources dated March 12, 1998, structured as a
costless collar with a floor price of $14.50 per
barrel and a ceiling price of $17.70 per barrel
using the average settlement price for the prompt
month of NYMEX Light Sweet Crude Oil for the
following remaining quantities and periods of time:
April 1, 1998 through December 31, 1998 75,000 barrels per month
3. Section B.9 Litigation:
None.
4. Section B.10 Labor Disputes and Acts of God:
None.
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5. Section B.11 ERISA Liabilities:
a. Inland Resources Inc. 401(k) Plan.
b. Inland Resources Inc. Section 125 Cafeteria Plan.
c. Inland Resources Inc. Medical Plan through Cigna Healthcare
6. Sections B.12 Environmental Laws and Other:
None. However, upon closing the purchase of the Pennzoil
Refinery, there is an environmental clean-up taking place
which is the contractual responsibility of Pennzoil Products
Company.
7. Sections B.13 Names and Places of Business:
a. On April 28, 1993, the name of Inland Gold and Silver Corp.
was changed to Inland Resources Inc. for the past five
years, Parent's places of business have been:
February 1998 until Present
410 Seventeenth Street,
Suite 700 Denver CO 80202
June 1993 until February 1998
475 Seventeenth Street, Suite 1500
Denver CO 80202
b. On July 1, 1995, the name of Lomax Exploration Company was
changed to Inland Production Company. For the past five
years, Borrower's places of business have been:
February 1998 until Present
410 Seventeenth Street,
Suite 700 Denver CO 80202
October 1994 until February 1998
P.O. Box 1446 Also 475 Seventeenth Street
West Pole Road Suite 1500
Roosevelt UT 80466 Denver CO 80202
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June 1993 through September 1994
77 West, 200 South, Suite 402
Salt Lake City UT 84101
8. Section B.14 Subsidiaries and Stockholdings:
Subsidiaries
a. Borrower is 100% owned by Parent
b. Inland Refining is 100% owned by Parent
Partnership Interest
a. Borrower is a General Partner in the following Limited
Partnerships:
LOEX Properties 1983, LTD, a Texas Limited
Partnership, Borrower has a 0.62% interest in the
partnership. The partnership's principal place of
business is 410 Seventeenth Street, Suite 700, Denver
CO 80202.
LOEX Properties 1984, LTD, a Texas Limited
Partnership, Borrower has a 0.57% interest in the
partnership. The partnership's principal place of
business is 410 Seventeenth Street, Suite 700, Denver
CO 80202.
b. Borrower is a Managing Partner in the following General
Partnerships:
West Monument Butte Pipeline Company, a Texas General
Partnership, Borrower has an 80.96% interest in the
partnership. The partnership's principal place of
business is 410 Seventeenth Street, Suite 700, Denver
CO 80202.
9. Section C.18. Restricted Debt:
All-Inclusive Promissory note secured by All-Inclusive Deed
of Trust payable to the Carmen Family Investment Company
dated May 1, 1995, for a total of $202,906.67 principal
balance to be paid in fourteen annual installments of
$26,797.54 including interest (interest rate is 9.5% per
annum). The All-Inclusive Deed of Trust includes lands in
Township 8 South, Range 17 East, S.L.M. in Sections 20 (NE
1/4 of the SE 1/4), 21 (SE 1/4) and 28 (N 1/2 of the NW 1/4)
in Duchess County, Utah.
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SCHEDULE 2
SECURITY SCHEDULE
1. First Amendment to Deed of Trust, Mortgage, Assignment, Security
Agreement, Fixture Filing and Financing Statement from Borrower to
Agent dated of even date with the Agreement
2. First Amendment to Deed of Trust, Assignment of Rents and Leases,
Security Agreement and Financing Statement from Inland Refining to
Agent of even date with the Agreement
3. First Amendment to Security Agreement by Borrower
4. First Amendment to Security Agreement by Inland Refining
5. First Amendment to Guaranty by Parent
6. First Amendment to Guaranty by Inland Refining
7. Second Amendment to Pledge Agreement by Parent
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SCHEDULE 3
INSURANCE SCHEDULE
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SCHEDULE 4
BANK SCHEDULE
Bank Percentage of Note Amount
- ---- Borrowing Base -----------
--------------
ING (U.S.) Capital Corporation 38.5714286% $30,857,142.86
135 East 57th Street
New York, New York 10022
U.S. Bank National Association 30.7142857% $24,571,428.57
950 Seventeenth Street, Suite 300
Denver, Colorado 80202
MeesPierson Capital Corp. 30.7142857% $24,571,428.57
300 Crescent Court, Suite 1750
Dallas, Texas 75201
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EXHIBIT A
PROMISSORY NOTE
$_________________ New York, New York *[Date]
FOR VALUE RECEIVED, the undersigned, Inland Production Company, a
Texas corporation (herein called "Borrower"), hereby promises to pay to the
order of ________________________________________________, a *[____________
state banking corporation] *[national banking association] (herein called
"Bank"), the principal sum of
__________________________________________________________________ Dollars
($__________), or, if greater or less, the aggregate unpaid principal amount of
the Loan made under this Note by Bank to Borrower pursuant to the terms of the
Credit Agreement (as hereinafter defined), together with interest on the unpaid
principal balance thereof as hereinafter set forth, both principal and interest
payable as herein provided in lawful money of the United States of America at
the offices of the Agent under the Credit Agreement, 135 East 57th Street, New
York, New York or at such other place as from time to time may be designated by
the holder of this Note.
This Note (a) is issued and delivered under that certain Amended and
Restated Credit Agreement of even date herewith among Borrower, Inland
Resources Inc., ING (U.S.) Capital Corporation, as Agent, and the Banks
(including Bank) referred to therein (herein, as from time to time
supplemented, amended or restated, called the "Credit Agreement"), and is a
"Note" as defined therein, (b) is subject to the terms and provisions of the
Credit Agreement, which contains provisions for payments and prepayments
hereunder and acceleration of the maturity hereof upon the happening of certain
stated events, and (c) is secured by and entitled to the benefits of certain
Security Documents (as identified and defined in the Credit Agreement).
Payments on this Note shall be made and applied as provided herein and in the
Credit Agreement. Reference is hereby made to the Credit Agreement for a
description of certain rights, limitations of rights, obligations and duties of
the parties hereto and for the meanings assigned to terms used and not defined
herein and to the Security Documents for a description of the nature and extent
of the security thereby provided and the rights of the parties thereto.
For the purposes of this Note, the following terms have the meanings
assigned to them below:
"Base Rate Payment Date" means (i) each Quarterly Payment
Date, beginning September 29, 1998, and (ii) any day on which past due
interest or principal is owed hereunder and is unpaid. If the terms
hereof or of the Credit Agreement provide that payments of interest or
principal hereon shall be deferred from one Base Rate Payment Date to
another day, such other day shall also be a Base Rate Payment Date.
"Eurodollar Rate Payment Date" means, with respect to any
Eurodollar Loan: (i) the day on which the related Interest Period ends
(and, if such Interest Period is three months or longer, the
three-month anniversary of the first day of such Interest Period), and
(ii) any day on which past due interest or past due principal is owed
hereunder with respect to such Eurodollar Loan and is unpaid. If the
terms hereof or of the Credit Agreement provide that payments of
interest or principal with respect to such Eurodollar Loan shall be
deferred from one Eurodollar Rate Payment Date to another day, such
other day shall also be a Eurodollar Rate Payment Date.
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The principal amount of this Note shall be due and payable quarterly
as provided in the Credit Agreement. On March 28, 2003, the unpaid principal
balance of this Note and all interest accrued hereon shall be due and payable
in full.
Base Rate Loans (exclusive of any past due principal or interest) from
time to time outstanding shall bear interest on each day outstanding at the
Base Rate in effect on such day. On each Base Rate Payment Date Borrower shall
pay to the holder hereof all unpaid interest which has accrued on the Base Rate
Loans to but not including such Base Rate Payment Date. Each Eurodollar Loan
(exclusive of any past due principal or interest) shall bear interest on each
day during the related Interest Period at the related Eurodollar Rate in effect
on such day. On each Eurodollar Rate Payment Date relating to such Eurodollar
Loan, Borrower shall pay to the holder hereof all unpaid interest which has
accrued on such Eurodollar Loan to but not including such Eurodollar Rate
Payment Date. All past due principal of and past due interest on the Loan shall
bear interest on each day outstanding at the Late Payment Rate in effect on
such day, and such interest shall be due and payable daily as it accrues.
Notwithstanding the foregoing paragraph and all other provisions of
this Note, in no event shall the interest payable hereon, whether before or
after maturity, exceed the maximum interest which, under applicable Law, may be
charged on this Note, and this Note is expressly made subject to the provisions
of the Credit Agreement which more fully set out the limitations on how
interest accrues hereon.
If this Note is placed in the hands of an attorney for collection
after default, or if all or any part of the indebtedness represented hereby is
proved, established or collected in any court or in any bankruptcy,
receivership, debtor relief, probate or other court proceedings, Borrower and
all endorsers, sureties and guarantors of this Note jointly and severally agree
to pay reasonable attorneys' fees and collection costs to the holder hereof in
addition to the principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note
hereby severally waive demand, presentment, notice of demand and of dishonor
and nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in
any of its terms, provisions and covenants, or any releases or substitutions of
any security, or any delay, indulgence or other act of any trustee or any
holder hereof, whether before or after maturity.
This Note is in renewal and extension, but not in extinguishment or
novation, of that certain promissory note dated as of April 22, 1998, made by
Borrower payable to the order of Bank in the original principal amount of
$30,769,230.76.
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THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW), EXCEPT TO THE EXTENT THE SAME ARE GOVERNED BY APPLICABLE
FEDERAL LAW.
INLAND PRODUCTION COMPANY
By:
----------------------------------
Name:
Title:
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EXHIBIT B
BORROWING NOTICE
Reference is made to that certain Amended and Restated Credit
Agreement dated as of September 11, 1998 (as from time to time amended, the
"Agreement"), by and among Inland Production Company, as Borrower, Inland
Resources Inc., ING (U.S.) Capital Corporation, as Agent, and certain financial
institutions, as Banks. Terms which are defined in the Agreement are used
herein with the meanings given them in the Agreement.
Borrower hereby requests a Borrowing of new Loans to be advanced
pursuant to Section 2.2 of the Agreement as follows:
Aggregate amount of Borrowing: $
------------------
Type of Loans in Borrowing:
------------------
Date on which Loans are to be advanced:
------------------
Length of Interest Period for Eurodollar
Loans (1, 2, 3 or 6 months): months
-----------
Borrower hereby represents, warrants, acknowledges, and agrees to and
with each Lender that:
(a) The officer of Borrower signing this instrument is the
duly elected, qualified and acting officer of Borrower as indicated
below such officer's signature hereto having all necessary authority
to act for Borrower in making the request herein contained.
(b) The representations and warranties of Borrower set forth
in the Agreement and the other Loan Documents are true and correct on
and as of the date hereof (except to the extent that the facts on
which such representations and warranties are based have been changed
by the extension of credit under the Agreement), with the same effect
as though such representations and warranties had been made on and as
of the date hereof.
(c) There does not exist on the date hereof any condition or
event which constitutes a Default which has not been waived in writing
as provided in Section 9.1(a) of the Agreement; nor will any such
Default exist upon Borrower's receipt and application of the Loans
requested hereby. Borrower will use the Loans hereby requested in
compliance with Section 2.4 of the Agreement.
(d) Except to the extent waived in writing as provided in
Section 9.1(a) of the Agreement, Borrower has performed and complied
with all agreements and conditions in the Agreement required to be
performed or complied with by Borrower on or prior to the date hereof,
and each of the conditions precedent to Loans contained in the
Agreement remains satisfied.
(e) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any
course of dealing, or by any other means not provided for in Section
9.1(a) of the Agreement. The Agreement and the other Loan Documents
are hereby ratified, approved, and confirmed in all respects.
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The officer of Borrower signing this instrument hereby certifies in
his capacity as an officer of Borrower and in the name and on behalf of
Borrower, that to the best of his knowledge after due inquiry, the above
representations, warranties, acknowledgements, and agreements of Borrower are
true, correct and complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________,
199__.
INLAND PRODUCTION COMPANY
By:
----------------------------------
Name:
Title:
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EXHIBIT C
CONTINUATION/CONVERSION NOTICE
Reference is made to that certain Amended and Restated Credit
Agreement dated as of September 11, 1998 (as from time to time amended, the
"Agreement"), by and among Inland Production Company, as Borrower, Inland
Resources Inc., ING (U.S.) Capital Corporation, as Agent, and certain financial
institutions, as Banks. Terms which are defined in the Agreement are used
herein with the meanings given them in the Agreement.
Borrower hereby requests a conversion or continuation of existing
Loans into a new Borrowing pursuant to Section 2.3 of the Agreement as follows:
Existing Borrowing(s) to be continued or converted:
$________ of Eurodollar Loans with Interest Period ending _________
$________ of Base Rate Loans
Aggregate amount of new Borrowing: $
------------------
Type of Loans in new Borrowing:
------------------
Date of continuation or conversion:
------------------
Length of Interest Period for Eurodollar
Loans (1, 2, 3 or 6 months): months
-----------
Borrower hereby represents, warrants, acknowledges, and agrees to and
with each Lender that:
(a) The officer of Borrower signing this instrument is the
duly elected, qualified and acting officer of Borrower as indicated
below such officer's signature hereto having all necessary authority
to act for Borrower in making the request herein contained.
(b) There does not exist on the date hereof any condition or
event which constitutes a Default which has not been waived in writing
as provided in Section 9.1(a) of the Agreement; nor will any such
Default exist upon Borrower's receipt and application of the Loans
requested hereby.
(c) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any
course of dealing, or by any other means not provided for in Section
9.1(a) of the Agreement. The Agreement and the other Loan Documents
are hereby ratified, approved, and confirmed in all respects.
The officer of Borrower signing this instrument hereby certifies in
his capacity as an officer of Borrower and in the name and on behalf of
Borrower, that to the best of his knowledge after due inquiry, the above
representations, warranties, acknowledgements, and agreements of Borrower are
true, correct and complete.
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IN WITNESS WHEREOF, this instrument is executed as of ____________,
199__.
INLAND PRODUCTION COMPANY
By:
----------------------------------
Name:
Title:
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EXHIBIT D
CERTIFICATE ACCOMPANYING
FINANCIAL STATEMENTS
Reference is made to that certain Amended and Restated Credit
Agreement dated as of September 11, 1998 (as from time to time amended, the
"Agreement"), by and among Inland Production Company ("Borrower"), Inland
Resources Inc., ING (U.S.) Capital Corporation, as Agent, and certain financial
institutions ("Banks"), which Agreement is in full force and effect on the date
hereof. Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement.
This Certificate is furnished pursuant to Section C.2(b) of Annex C of
the Agreement. Together herewith Borrower is furnishing to Agent and each Bank
Parent's *[audited/unaudited] financial statements (the "Financial Statements")
as at ____________ (the "Reporting Date"). Borrower hereby represents,
warrants, and acknowledges to Agent and each Bank that:
(a) the officer of Parent signing this instrument is the duly
elected, qualified and acting ____________ of Parent and as such is
Parent's chief financial officer;
(b) the Financial Statements are accurate and complete and
satisfy the requirements of the Agreement;
(c) attached hereto is a schedule of calculations showing
Parent's compliance as of the Reporting Date with the requirements of
Sections ____________ of the Agreement *[and Parent's non-compliance
as of such date with the requirements of Section(s) ____________ of
the Agreement];
(d) on the Reporting Date Parent and Borrower were, and on
the date hereof Parent and Borrower are, in full compliance with the
disclosure requirements of Section C.4 of Annex C of the Agreement,
and no Default otherwise existed on the Reporting Date or otherwise
exists on the date of this instrument *[except for Default(s) under
Section(s) ____________ of the Agreement, which *[is/are] more fully
described on a schedule attached hereto].
(e) *[Unless otherwise disclosed on a schedule attached
hereto,] The representations and warranties of Borrower and Parent set
forth in the Agreement and the other Loan Documents are true and
correct on and as of the date hereof (except to the extent that the
facts on which such representations and warranties are based have been
changed by the extension of credit under the Agreement), with the same
effect as though such representations and warranties had been made on
and as of the date hereof.
The officer of Parent signing this instrument hereby certifies in his
capacity as an officer of Borrower and in the name and on behalf of Borrower,
that he has reviewed the Loan Documents and the Financial Statements and has
otherwise undertaken such inquiry as is in his opinion necessary to enable him
to express an informed opinion with respect to the above representations,
warranties and acknowledgments of Parent and, to the best of his knowledge,
such representations, warranties, and acknowledgments are true, correct and
complete.
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IN WITNESS WHEREOF, this instrument is executed as of ____________,
19__.
INLAND RESOURCES INC.
By:
----------------------------------
Name:
Title:
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EXHIBIT E
ENVIRONMENTAL COMPLIANCE CERTIFICATE
Reference is made to that certain Amended and Restated Credit
Agreement dated as of September 11, 1998 (as from time to time amended, the
"Agreement"), by and among Inland Production Company ("Borrower"), Inland
Resources Inc., ING (U.S.) Capital Corporation as Agent, and certain financial
institutions. Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement. The undersigned, being the
*[President/Chief Executive Officer] of Borrower, hereby certifies to Agent and
Banks as follows:
1. For the Fiscal Year ending immediately prior to the date
hereof, Borrower has complied and is complying with Section C.12 of
Annex C of the Credit Agreement *[except as set forth in Schedule I
attached hereto];
2. To the best knowledge of the undersigned after due
inquiry, Borrower is on the date hereof in compliance with all
applicable Environmental Laws, noncompliance with which could cause a
Material Adverse Change;
3. Borrower has taken (and continues to take) steps to
minimize the generation of potentially harmful effluents;
4. Borrower has established an ongoing program of conducting
an internal audit of each operating facility of Borrower to identify
actual or potential environmental liabilities which could cause a
Material Adverse Change; and
5. Borrower has established an ongoing program of training
its employees in issues of environmental, health and safety
compliance, and Borrower presently has one or more individuals in
charge of implementing such training program.
The officer of Borrower signing this instrument hereby certifies in
his capacity as an officer of Borrower and in the name and on behalf of
Borrower, that to the best of his knowledge after due inquiry and consultation
with the operating officers of Borrower, the above representations, warranties,
acknowledgements, and agreements of Borrower are true, correct and complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________,
19__.
INLAND PRODUCTION COMPANY
By:
----------------------------------
Name:
Title:
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EXHIBIT G
ASSIGNMENT AND ASSUMPTION AGREEMENT
Date _______________, 199__
Reference is made to that certain Amended and Restated Credit
Agreement dated as of September 11, 1998 (as from time to time amended, the
"Agreement"), by and among by and among Inland Production Company, as Borrower,
Inland Resources Inc., ING (U.S.) Capital Corporation, as Agent, and certain
financial institutions, as Banks, which Agreement is in full force and effect
on the date hereof. Terms which are defined in the Agreement are used herein
with the meanings given them in the Agreement.
_________________ ("Assignor") and _________________ ("Assignee")
hereby agree as follows:
1. Assignor hereby sells and assigns to Assignee without recourse and
without representation or warranty (other than as expressly provided herein),
and Assignee hereby purchases and assumes from Assignor, that interest in and
to all of Assignor's rights and duties under the Agreement as of the date
hereof which represents the percentage interest specified in Item 3 of Annex I
hereto (the "Assigned Share") of all of the outstanding rights and obligations
of all Banks under the Agreement, including, without limitation, all rights and
obligations with respect to the Assigned Share in Assignor's Loans and Note.
After giving effect to such sale and assignment, Assignee's Percentage Share
(and Assignor's remaining Percentage Share) will be as set forth in Item 3 of
Annex I hereto.
2. Assignor: (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Agreement, the
other Loan Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Agreement, the other Loan Documents or
any other instrument or document furnished pursuant thereto; and (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Borrower, any other Related Person or the performance or
observance by any of them of any of their respective obligations under the
Agreement, the other Loan Documents, or any other instrument or document
furnished pursuant thereto.
3. Assignee: (i) confirms that it has received a copy of the
Agreement, together with copies of the financial statements most recently
delivered thereunder and such other Loan Documents and other documents and
information as it has deemed appropriate to make its own analysis of Borrower
and the transactions contemplated by the Agreement and its own independent
decision to enter into this Assignment and Assumption Agreement; (ii) agrees
that it will, independently and without reliance upon Assignor or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Agreement; (iii) confirms that it is a an Eligible Transferee
under the Agreement; (iv) appoints and authorizes Agent to take such action as
agent on its behalf and to exercise such powers under the Agreement and the
other Loan Documents as are specifically delegated to them, together with all
other powers reasonably incidental thereto; and (v) agrees that it will perform
in accordance with their terms all of the obligations which by the terms of the
Agreement are required to be performed by it as a Bank (including the
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obligation to make future Loans). [; and (vi) attaches the "Prescribed Forms"
described in Section 3.6(d) of the Agreement.]
4. Following the execution of this Assignment and Assumption Agreement
by Assignor and Assignee, an executed original hereof (together with all
attachments) will be delivered to Agent. The effective date of this Assignment
and Assumption Agreement (the "Settlement Date") shall be the date specified in
Item 4 of Annex I hereto; provided that this Assignment and Assumption
Agreement shall not be deemed to have taken effect unless (i) the consent
hereto of Agent and Borrower has been obtained (to the extent required in the
Agreement), (ii) Agent has received a fully executed original hereof, and (iii)
Agent has received the processing fee referred to in Section 9.5(c)(ii) of the
Agreement.
5. Upon the satisfaction of the foregoing conditions, then as of the
Settlement Date: (i) Assignee shall be a party to the Agreement and, to the
extent provided in this Assignment and Assumption Agreement, have the rights
and obligations of a Bank thereunder and under the other Loan Documents and
(ii) Assignor shall, to the extent provided in this Assignment and Assumption
Agreement, relinquish its rights and be released from its duties under the
Agreement and the other Loan Documents.
6. All interest, fees and other amounts that would otherwise accrue
pursuant to the Agreement and Assignor's Note for the account of Assignor from
and after the Settlement Date shall, instead accrue for the account of, and be
payable to, Assignor and Assignee, as the case may be, in accordance with their
respective interests as reflected in Item 3 to Annex I hereto. All payments of
principal that would otherwise be payable from and after the Settlement Date to
or for the account of Assignor pursuant to the Agreement and Assignor's Note
shall, instead, be payable to or for the account of Assignor and Assignee, as
the case may be, in accordance with their respective interests as reflected in
Item 3 to Annex I hereto. On the Settlement Date, Assignee shall pay to
Assignor an amount specified by Assignor in writing which represents the
portion of Assignor's Loans which is being assigned and which is outstanding on
the Settlement Date, net of any closing costs. Assignor and Assignee shall make
all appropriate adjustments in payments under the Agreement for periods prior
to the Settlement Date directly between themselves on the Settlement Date.
7. Each of the parties to this Assignment and Assumption Agreement
agrees that at any time and from time to time upon the written request of any
other party, it will execute and deliver such further documents and do such
further acts and things as such other party may reasonably request in order to
effect the purposes of this Assignment and Assumption Agreement.
8. This Assignment and Assumption Agreement shall be governed by, and
construed in accordance with, the Laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Assignment and Assumption
Agreement, as of the date first above written, such execution also being made
on Annex I hereto.
[NAME OF ASSIGNOR]
as Assignor
By:
---------------------
Title:
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[NAME OF ASSIGNEE]
By:
---------------------
Title:
CONSENTED TO AND ACKNOWLEDGED:
ING (U.S.) CAPITAL CORPORATION
as Agent
By:
---------------------------
Title:
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ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT
ANNEX I
1. Borrower: Inland Production Company
2. Date of Assignment Agreement:
3. Amounts (as of date of item #2 above):
Assignor Assignee
(as Revised) (New)
----------- --------
a. Percentage Share(1) % %
-------- --------
b. Percentage Share of
Borrowing Base: $ $
---------- ----------
4. Settlement Date:
5. Notices:
ASSIGNEE:
--------------------
--------------------
--------------------
Attention:
Telephone:
Telecopy:
6. Wiring Instructions:
--------------------
--------------------
--------------------
- -----------------------------
(1) Percentage taken to 12 decimal places.