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EXHIBIT 10.2
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of October 22, 1999
Among
QUEEN SAND RESOURCES, INC.,
a Delaware corporation,
as Guarantor,
QUEEN SAND RESOURCES, INC.,
a Nevada corporation,
as Borrower,
FOOTHILL CAPITAL CORPORATION,
as Administrative Agent,
and
ABLECO FINANCE LLC,
as Collateral Agent
and
The Lenders Signatory Hereto
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ARTICLE I Definitions and Accounting Matters......................................................................2
Section 1.01.Terms Defined in Recitals...................................................................2
Section 1.02.Certain Defined Terms.......................................................................2
Section 1.03.Accounting Terms and Determinations........................................................26
ARTICLE II Commitments...........................................................................................26
Section 2.01.Loans......................................................................................26
Section 2.02.Borrowings.................................................................................27
Section 2.03.Changes of Commitments.....................................................................29
Section 2.04.Fees.......................................................................................29
Section 2.05.Several Obligations........................................................................30
Section 2.06.Loan Account...............................................................................30
Section 2.07.Prepayments................................................................................30
Section 2.08.Borrowing Base.............................................................................31
Section 2.09.Registered Notes...........................................................................33
Section 2.10.Securitization.............................................................................33
Section 2.11.Administrative Procedures and Settlement...................................................34
Section 2.12.Administrative Agent Advances..............................................................36
Section 2.13.Optional Overadvances......................................................................36
Section 2.14.Apportionment, Application, and Reversal of Payments.......................................37
Section 2.15.Cash Management............................................................................38
Section 2.16.Letter of Credit Subfacility...............................................................40
ARTICLE III Payments of Principal and Interest...................................................................44
Section 3.01.Repayment of Loans.........................................................................44
Section 3.02.Interest...................................................................................44
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ARTICLE IV Payments; Pro Rata Treatment; Computations; Etc.......................................................44
Section 4.01.Payments...................................................................................44
Section 4.02.Pro Rata Treatment.........................................................................45
Section 4.03.Computations...............................................................................45
Section 4.04.Non-receipt of Funds by the Administrative Agent...........................................45
Section 4.05.Set-off- Sharing of Payments, Etc..........................................................46
Section 4.06.Taxes......................................................................................47
Section 4.07.Disposition of Proceeds ...................................................................50
ARTICLE V [intentionally omitted]................................................................................50
ARTICLE VI Conditions Precedent and Subsequent...................................................................50
Section 6.01.Initial Funding............................................................................50
Section 6.02.Initial and Subsequent Loans...............................................................52
Section 6.03.Conditions Relating to Letters of Credit...................................................53
Section 6.04.Certificate Regarding Incurrence of Debt under Senior Indenture............................53
Section 6.05.Conditions Subsequent......................................................................53
ARTICLE VII Representations and Warranties.......................................................................54
Section 7.01.Corporate Existence........................................................................54
Section 7.02.Financial Condition........................................................................55
Section 7.03.Litigation.................................................................................56
Section 7.04.No Breach..................................................................................56
Section 7.05.Authority..................................................................................56
Section 7.06.Approvals..................................................................................57
Section 7.07.Use of Loans...............................................................................57
Section 7.08.ERISA......................................................................................57
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Section 7.09.Taxes......................................................................................58
Section 7.10.Titles, etc................................................................................58
Section 7.11.No Material Misstatements..................................................................59
Section 7.12.Investment Company Act.....................................................................59
Section 7.13.Public Utility Holding Company Act.........................................................59
Section 7.14.Subsidiaries and Partnership...............................................................59
Section 7.15.Location of Business and Offices...........................................................60
Section 7.16.Defaults...................................................................................60
Section 7.17.Environmental Matters......................................................................60
Section 7.18.Compliance with the Law....................................................................61
Section 7.19.Insurance..................................................................................62
Section 7.20.Risk Management Agreements.................................................................62
Section 7.21.Restriction on Liens.......................................................................62
Section 7.22.Gas Imbalances.............................................................................62
Section 7.23.Material Agreements........................................................................63
Section 7.24.Solvency...................................................................................63
Section 7.25.Brokerage Fees.............................................................................63
ARTICLE VIII Affirmative Covenants...............................................................................63
Section 8.01.Financial Statements and Collateral Reports................................................64
Section 8.02.Litigation.................................................................................67
Section 8.03.Maintenance, Etc...........................................................................67
Section 8.04.Environmental Matters......................................................................69
Section 8.05.Further Assurances.........................................................................69
Section 8.06.Performance of Obligations.................................................................70
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Section 8.07.Engineering Reports........................................................................70
Section 8.08.Title Information..........................................................................71
Section 8.09.Additional Collateral......................................................................72
Section 8.10.ERISA Information and Compliance...........................................................73
Section 8.11.Hedging Program............................................................................73
ARTICLE IX Negative Covenants....................................................................................74
Section 9.01.Debt.......................................................................................74
Section 9.02.Liens......................................................................................75
Section 9.03.Investments, Loans and Advances............................................................75
Section 9.04.Dividends, Distributions and Redemptions...................................................76
Section 9.05.Sales and Leasebacks.......................................................................77
Section 9.06.Nature of Business.........................................................................77
Section 9.07.Limitation on Leases.......................................................................77
Section 9.08.Mergers, Etc...............................................................................77
Section 9.09.Proceeds of Loans..........................................................................77
Section 9.10.ERISA Compliance...........................................................................78
Section 9.11.Sale or Discount of Receivables............................................................79
Section 9.12.Current Ratio and Interest Coverage Ratio..................................................79
Section 9.13.Accounts Payable...........................................................................79
Section 9.14.Sale of Oil and Gas Properties.............................................................80
Section 9.15.Environmental Matters......................................................................80
Section 9.16.Transactions with Affiliates...............................................................80
Section 9.17.Subsidiaries and Partnerships..............................................................80
Section 9.18.Negative Pledge Agreements.................................................................81
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Section 9.19.Gas Imbalances, Take-or-Pay or Other Prepayments...........................................81
Section 9.20.Material Agreements........................................................................81
Section 9.21.Repayment of Other Debt....................................................................81
Section 9.22.Limitations on Capital Expenditures........................................................82
Section 9.23.Preferred Stock............................................................................82
Section 9.24.Securities Accounts........................................................................82
Section 9.25.QSR Canada.................................................................................82
ARTICLE X Events of Default; Remedies............................................................................83
Section 10.01.Events of Default.........................................................................83
Section 10.02.Remedies..................................................................................84
ARTICLE XI The Agent.............................................................................................85
Section 11.01.Appointment, Powers and Immunities........................................................85
Section 11.02.Reliance by Agent.........................................................................87
Section 11.03.Defaults..................................................................................87
Section 11.04.Rights as a Lender........................................................................88
Section 11.05.COSTS AND EXPENSES; INDEMNIFICATION.......................................................88
Section 11.06.Non-Reliance on Agent and other Lenders...................................................89
Section 11.07.Action by Agents..........................................................................90
Section 11.08.Resignation or Removal of Agent...........................................................90
Section 11.09.Collateral Sub-Agents.....................................................................91
Section 11.10.Communications by Obligors................................................................91
Section 11.11.Collateral Matters........................................................................92
Section 11.12.Restrictions on Actions by the Agents and the Lenders; Sharing Payments...................92
Section 11.13.Several Obligations; No Liability.........................................................93
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ARTICLE XII Miscellaneous........................................................................................94
Section 12.01.Waiver....................................................................................94
Section 12.02.Notices...................................................................................94
Section 12.03.Payment of Expenses, Indemnities, etc.....................................................94
Section 12.04.Amendments, Etc...........................................................................96
Section 12.05.Successors and Assigns....................................................................97
Section 12.06.Assignments and Participations............................................................97
Section 12.07.Invalidity................................................................................99
Section 12.08.Counterparts..............................................................................99
Section 12.09.References................................................................................99
Section 12.10.Survival..................................................................................99
Section 12.11.Captions.................................................................................100
Section 12.12.NO ORAL AGREEMENTS.......................................................................100
Section 12.13.GOVERNING LAW; SUBMISSION TO JURISDICTION................................................100
Section 12.14.Interest.................................................................................101
Section 12.15.Confidentiality..........................................................................103
Section 12.16.EXCULPATION PROVISIONS...................................................................104
Section 12.17.Designated Senior Indebtedness...........................................................104
Section 12.18.Amendments to Prior Loan Documents.......................................................105
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Schedule C-1 - List of Commitments
Schedule S-1 - List of Security Instruments
Schedule P-1 List of Principal Properties
Exhibit B - Form of Borrowing, Continuation and Conversion Request
Exhibit C - Form of Compliance Certificate
Exhibit D - List of Security Instruments
Exhibit E-1 - Form of Assignment Agreement
Exhibit 2.02 - Notices
Exhibit N-1 Form of NYMEX Quote
Exhibit PV-1 Basis Differential to NYMEX Swap Price
Exhibit T-1 Form of Transfer Order Letters
Schedule 2.15 Cash Management Bank Accounts
Schedule 7.01 Capitalization
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.10 - Titles, etc.
Schedule 7.14 - Subsidiaries and Partnerships
Schedule 7.17 - Environmental Matters
Schedule 7.19 - Insurance
Schedule 7.20 - Risk Management Agreements
Schedule 7.21 - Restrictions of Liens
Schedule 7.22 - Gas Imbalances
Schedule 7.23 - Material Agreements
Schedule 9.01 - Debt
Schedule 9.02 - Liens
Schedule 9.03 - Investments, Loans and Advances
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THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of October 22,
1999, is among: QUEEN SAND RESOURCES, INC., a corporation formed under the laws
of the State of Delaware ("QSRD"); QUEEN SAND RESOURCES, INC., a corporation
formed under the laws of the State of Nevada (the "Borrower"); each of the
lenders that is a signatory hereto or which becomes a signatory hereto as
provided in Section 12.06 (individually, together with its successors and
assigns, a "Lender" and, collectively, the "Lenders"); FOOTHILL CAPITAL
CORPORATION, as administrative agent for the Lenders (in such capacity, together
with its successors in such capacity, the "Administrative Agent"); and ABLECO
FINANCE LLC, as collateral agent for the Lenders (in such capacity, together
with its successors in such capacity, the "Collateral Agent").
R E C I T A L S
A. QSRD, the Borrower, certain lenders (the "Prior Lenders") and the
Bank of Montreal, as agent for the Prior Lenders (the "Prior Agent"), are
parties to that certain Amended and Restated Credit Agreement dated as of April
17, 1998, as amended by that certain First Amendment to Amended and Restated
Credit Agreement dated as of July 1, 1998, as further amended by that certain
Second Amendment to Amended and Restated Credit Agreement dated as of November
10, 1998, as further amended by that certain Third Amendment to Amended and
Restated Credit Agreement dated as of November 13, 1998, and as further amended
by that certain Fourth Amendment to Credit Agreement dated as of May 14, 1999
(such credit agreement, as amended, the "Prior Credit Agreement").
B. QSRD, the Borrower, certain lenders and the Prior Agent were parties
to that certain Credit Agreement dated as of August 1, 1997, as amended by that
certain First Amendment to Credit Agreement dated as of December 3, 1997, as
further amended by that certain Second Amendment to Credit Agreement dated as of
December 29, 1997, as further amended by that certain Third Amendment to Credit
Agreement dated as of February 10, 1998, and as further amended by that certain
Fourth Amendment to Credit Agreement dated as of March 20, 1998 (such credit
agreement, as amended, the "Original Credit Agreement"). The Original Credit
Agreement was amended and restated, in its entirety, by the Prior Credit
Agreement.
C. QSRD and the Borrower have requested that (i) the Lenders assume the
obligations of the Prior Lenders under the Prior Credit Agreement, (ii) the
Administrative Agent and the Collateral Agent assume the agency responsibilities
of the Prior Agent under the Prior Credit Agreement, and (iii) the
Administrative Agent, the Collateral Agent, and the Lenders amend and restate
the Prior Credit Agreement and make credit available to the Borrower on the
terms and conditions stated herein.
D. The Administrative Agent, the Collateral Agent, and the Lenders,
subject to the terms and conditions stated herein, are willing to amend and
restate the Prior Credit Agreement and to make such credit facilities available.
E. NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as follows:
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ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01. Terms Defined in Recitals. As used in this Agreement, the
terms defined in the Recitals, shall have the meanings indicated in the
Recitals.
Section 1.02. Certain Defined Terms. As used herein, including the
Recitals, the following terms shall have the following meanings (all terms
defined in this Article I or in other provisions of this Agreement in the
singular to have the same meanings when used in the plural and vice versa):
"Account Debtor" shall mean any Person who is or who may become
obligated under, with respect to, or on account of, an Account.
"Accounts" shall mean all currently and hereafter arising accounts,
contract rights, and all other forms of obligations owing to an Obligor whether
arising out of the sale of goods or the rendition of services by an Obligor,
irrespective of whether earned by performance, or from any other transaction,
and any and all credit insurance, guaranties, or security therefor.
"Acquisition" shall mean (a) the acquisition of all or substantially
all of the Stock of any Person or all or substantially all of the Property of
any Person, so long as the Property of such Person is Oil and Gas Property and
other Property reasonably related thereto, or (b) the acquisition of Oil and Gas
Properties from Persons other than Affiliates; provided that the term
"Acquisition" shall not include capital expenditures made in the ordinary course
of business.
"Additional Liquidity Reserve" shall mean a reserve against each
alternative determination of the Borrowing Base in an initial amount of
$5,000,000, as such amount may be decreased from time to time by the consent of
the Agents, such amount to reduce to zero (0) on March 31, 2000 in the event
that no Event of Default shall have occurred on or prior to such date.
"Administrative Agent" shall mean Foothill Capital Corporation, a
California corporation, solely in its capacity as administrative agent for the
Lenders, and shall include any successor administrative agent.
"Administrative Agent's Account" shall mean an account at a bank
designated by Administrative Agent from time to time as the account into which
the Borrower shall make all payments to Administrative Agent for the benefit of
the Lender Group, and into which the Lender Group shall make all payments to
Administrative Agent, under this Agreement and the other Loan Documents.
Initially, until Administrative Agent notifies Borrower and the Lender Group to
the contrary, the Administrative Agent Account shall be that certain deposit
account bearing account number 323-266193 and maintained by Administrative Agent
with The Chase Manhattan Bank, N.A., 4 New York Plaza, 15th Floor, New York, New
York 10004, ABA #021-000-021.
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"Administrative Agent Advances" has the meaning set forth in Section
2.12.
"Agent" shall mean the Administrative Agent or the Collateral Agent, or
either or both, as the context requires.
"Affiliate" of any Person shall mean (i) any Person directly or
indirectly controlled by, controlling or under common control with such first
Person, (ii) any director or officer of such first Person or of any Person
referred to in clause (i) above, and (iii) if any Person in clause (i) above is
an individual, any member of the immediate family (including parents, spouse and
children) of such individual and any trust whose principal beneficiary is such
individual or one or more members of such immediate family and any Person who is
controlled by any such member or trust. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean any Person which owns directly or indirectly 10% or
more of the securities having ordinary voting power for the election of
directors or other governing body of a corporation or 10% or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such corporation
or other Person.
"Agent-Related Person" shall mean Administrative Agent and any
successor agents thereto, and Collateral Agent and any successor agents thereto,
together with their respective Affiliates, and the officers, directors,
employees, counsel, accountants, experts, agents, and attorneys-in-fact of such
Persons and their Affiliates.
"Agent Reserves" shall have the meaning assigned to such term in the
definition of "Borrowing Base".
"Agreement" shall mean this Amended and Restated Credit Agreement, as
amended from time to time.
"Aggregate Commitments" at any time shall equal the amount calculated
in accordance with Section 2.03(a).
"Aggregate Maximum Credit Amount" at any time shall equal the sum of
the Maximum Credit Amounts of the Lenders, as the same may be reduced pursuant
to Section 2.03(b).
"Applicable Margin" shall mean, for each day a Loan is outstanding, the
following rate per annum as applicable:
----------------------------------------------------------------------------------
REVOLVING FACILITY
USAGE APPLICABLE MARGIN
----------------------------------------------------------------------------------
Less than $25,000,000 2.00%
----------------------------------------------------------------------------------
Equal to or greater than 4.50%
$25,000,000
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"Assignment" shall have the meaning assigned such term in Section
12.06(d).
"Availability" shall mean, as of any date of determination, the amount
of Loans that the Borrower is entitled to borrow hereunder, such amount being
the difference derived when (a) the Revolving Facility Usage (including any
amounts that the Lender Group may have paid for the account of the Borrower
pursuant to any of the Loan Documents and that have not been reimbursed by the
Borrower) is subtracted from (b) the lesser of (i) the Borrowing Base and (ii)
the Maximum Credit Amount. If the Revolving Facility Usage is equal to or
greater than the lesser of the Borrowing Base or the Maximum Credit Amount,
Availability is zero (-0-).
"Base Rate" shall mean, with respect to any Base Rate Loan, for any
day, the higher of (i) the Federal Funds Rate for any such day plus 1/2 of 1%,
(ii) seven and three quarters percent (7.75%) per annum, or (iii) the Reference
Rate for such day. Each change in any interest rate provided for herein based
upon the Base Rate resulting from a change in the Base Rate shall take effect at
the time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based
upon the Base Rate.
"Borrowing Base" shall mean at any time an amount (which, in the
absence of the occurrence and continuation of an Event of Default, shall be
determined no less frequently than monthly), determined in accordance with
Section 2.08, equal to the least of:
(a) $50,000,000 minus the Liquidity Reserve and minus the
Additional Liquidity Reserve,
(b) an amount equal to the result of (i) sum of (A) 65% of the
PV-10 Value of the Borrower's Proved Developed Producing Reserves, as reflected
in the most recent report delivered pursuant to Section 8.07(a), (b) or (e),
that are subject to a recorded mortgage or deed of trust that creates a first
priority perfected Lien in such Oil and Gas Properties in favor of Collateral
Agent for the benefit of the Lender Group, (B) 45% of the PV-10 Value of the
Borrower's Proved Developed Non-producing Reserves, as reflected in the most
recent report delivered pursuant to Section 8.07(a), (b) or (e), that are
subject to a recorded mortgage or deed of trust that creates a first priority
perfected Lien in such Oil and Gas Properties in favor of Collateral Agent for
the benefit of the Lender Group, and (C) 40% of the PV-10 Value of the
Borrower's Proved Undeveloped Reserves, as reflected in the most recent report
delivered pursuant to Section 8.07(a), (b) or (e), that are subject to a
recorded mortgage or deed of trust that creates a first priority perfected Lien
in such Oil and Gas Properties in favor of Collateral Agent for the benefit of
the Lender Group., minus (ii) the sum of (A) the aggregate amount of Agent
Reserves (as hereinafter defined), (B) the
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Liquidity Reserve, and (C) the Additional Liquidity Reserve, and
(c) the maximum aggregate amount of Indebtedness permitted to
be incurred by the Borrower pursuant to the terms and conditions of the Senior
Indenture minus the Liquidity Reserve and minus the Additional Liquidity
Reserve.
Anything to the contrary in this Agreement notwithstanding, the
Administrative Agent may, and shall at the request of the Required Lenders,
create reserves against the Borrowing Base or reduce the advance rates against
the stated categories of oil and gas reserves without declaring an Event of
Default as Administrative Agent determines, in its reasonable judgment (from the
perspective of an asset-based lender), as being appropriate to reflect
impediments to Collateral Agent's ability to realize upon the Collateral or
impairments or reductions to the value of the Collateral (in each case, an
"Agent Reserve", and collectively, the "Agent Reserves"). Without limiting the
generality of the foregoing, Agent Reserves may include (but are not limited to)
reserves based upon (i) past due or accrued taxes or other governmental changes,
including ad valorem, personal property and other taxes which may have priority
over the Liens or security interests of Collateral Agent in the Collateral; (ii)
Liens in favor of third Persons (whether or not such Liens are Excepted Liens);
(iii) estimates of present and future costs, expenses, deposits and liabilities
related to the plugging and abandonment of the Oil and Gas Properties (net of
the amount thereof which has been taken into account in the most recent Reserve
Report or is fully secured by an escrow arrangement acceptable to Agents), and
(iv) without duplication of the foregoing, amounts owing by such Borrower to any
Person to the extent secured by a Lien (whether or not such Lien is a Excepted
Lien) on, or trust (constructive or otherwise) over, any of the Collateral
(including proceeds thereof or collections from the sale of Hydrocarbons which
may from time to time come into the possession of any of the Lender Group or its
agents), which Lien or trust, in the reasonable determination of Administrative
Agent (from the perspective of an asset-based lender), has a reasonable
possibility of having a priority superior to the Collateral Agent's Liens (such
as landlord liens, ad valorem taxes, production taxes, severance taxes, sales
taxes, collections attributable to sale of Hydrocarbons of Persons other than
Borrower) in and to such item of Collateral, proceeds or collection.. Borrower
and Agent understand and agree that any amount of Agent Reserves shall not be
considered a disbursement bearing interest hereunder, but rather simply shall be
an amount that is not available for borrowing by Borrower.
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in New York, New York or Los Angeles,
California.
"Change of Control" shall mean each occurrence of any of the following:
(a) the acquisition, directly or indirectly, by any person or group
(within the meaning of Section 13(d)(3) of the Exchange Act), other than the
Permitted Holders, of beneficial ownership of more than 30% of the aggregate
outstanding voting power of the Stock of QSRD; or
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(b) during any period of two consecutive years, individuals, other than
directors elected by the Permitted Holders), who at the beginning of such period
constituted the Board of Directors of QSRD (together with any new directors
whose election or appointment by such board or whose nomination for election by
the stockholders of QSRD was approved by a vote of a majority of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of QSRD then
in office other than directors elected by the Permitted Holders; or
(c) less than 100% of all of the Stock of any Obligor (other than QSRD)
shall be owned and controlled, beneficially, directly, and of record, by QSRD or
the Borrower.
"Closing Date" shall mean October 22, 1999.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and any successor statute.
"Collateral" shall mean all present or hereafter acquired Property
(including the Mortgage Property) that is the subject of Liens in favor of the
Collateral Agent for the benefit of the Lender Group pursuant to the terms and
provisions of the Security Instruments.
"Collateral Agent" shall mean Ableco Finance LLC, a Delaware limited
liability company, solely in its capacity as collateral agent for the Lenders,
and shall include any successor collateral agent.
"Commitment" shall mean, for any Lender, its obligation to make Loans
up to the lesser of such Lender's Maximum Credit Amount or the Lender's
Percentage Share of the then effective Borrowing Base.
"Confidential Information" shall mean any confidential, proprietary, or
non-public information supplied to any member of the Lender Group by the
Obligors pursuant to this Agreement or the other Loan Documents which is
identified in writing by Borrower on behalf of the Obligors as being
confidential pursuant to this definition or otherwise at, or reasonably
concurrent with, the time the same is delivered to such member of the Lender
Group (and which at the time is not, and does not thereafter become, publicly
available or available to such member of the Lender Group from another source
not known by such member of the Lender Group to be subject to a confidentiality
obligation not to disclose such information). The foregoing provision relative
to timing of Borrower's identification of such information as being confidential
notwithstanding, the following categories of information that is confidential,
proprietary, or non-public hereby are designated by Borrower as confidential for
purposes of this definition (subject to the same not being publicly available or
available to such member of the Lender Group from another source not known by
such member of the Lender Group to be subject to a confidentiality obligation
not to disclose such information): all non-public geological, seismic,
geophysical, engineering, and reserve data related to the oil and gas
acquisition, exploration and production activities of the Obligors.
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"Consolidated Net Income" shall mean with respect to QSRD and its
Consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of QSRD and its Consolidated Subsidiaries after allowances for taxes for
such period, determined on a consolidated basis in accordance with GAAP;
provided that there shall be excluded from such net income (to the extent
otherwise included therein) the following: (i) the net income of any Person in
which QSRD or any Consolidated Subsidiary has an interest (which interest does
not cause the net income of such other Person to be consolidated with the net
income of QSRD and its Consolidated Subsidiaries in accordance with GAAP),
except to the extent of the amount of dividends or distributions actually paid
in such period by such other Person to QSRD or to a Consolidated Subsidiary, as
the case may be; (ii) the net income (but not loss) of any Consolidated
Subsidiary to the extent that the declaration or payment of dividends or similar
distributions or transfers or loans by that Consolidated Subsidiary is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument or Governmental Requirement applicable to such Consolidated
Subsidiary, or is otherwise restricted or prohibited in each case determined in
accordance with GAAP; (iii) the net income (or loss) of any Person acquired in a
pooling-of-interests transaction for any period prior to the date of such
transaction; (iv) any extraordinary gains, including gains attributable to
Property sales not in the ordinary course of business and any gains or losses
attributable to the termination or liquidation of Risk Management Agreements;
(v) the cumulative effect of a change in accounting principles and any gains or
losses attributable to write-ups or writedowns of assets; and (vi) any
writedowns of non-current assets, provided however, that any ceiling limitation
writedowns under SEC guidelines shall be treated as capitalized costs, as if
such writedowns had not occurred.
"Consolidated Subsidiaries" shall mean each Subsidiary of QSRD or other
Person owned by QSRD, whether now existing or hereafter created or acquired,
which are not Non-Recourse Subsidiaries and the financial statements of which
shall be (or should have been) consolidated with the financial statements of
QSRD in accordance with GAAP.
"Control Agreement" shall mean a control agreement, in form and
substance reasonably satisfactory to Collateral Agent, among the applicable
Obligor, Collateral Agent, and the applicable securities intermediary with
respect to the applicable Securities Account and related Investment Property.
"Debt" shall mean, for any Person the sum of the following (without
duplication): (i) all obligations of such Person for borrowed money or evidenced
by bonds, debentures, notes or other similar instruments (including principal,
interest, fees and charges); (ii) all obligations of such Person (whether
contingent or otherwise) in respect of bankers' acceptances, letters of credit,
surety or other bonds and similar instruments; (iii) all obligations of such
Person to pay the deferred purchase price of Property or services (other than
for borrowed money); (iv) all obligations under leases which shall have been, or
should have been, in accordance with GAAP, recorded as capital leases in respect
of which such Person is liable (whether contingent or otherwise); (v) all Debt
and other obligations of others secured by a Lien on any asset of such Person,
whether or not such Debt is assumed by such Person; (vi) all Debt and other
obligations of others guaranteed by such Person or in
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which such Person otherwise assures a creditor against loss of the debtor or
obligations of others; (vii) all obligations or undertakings of such Person to
maintain or cause to be maintained the financial position or covenants of others
or to purchase the Debt or Property of others (other than the purchase of
Property in the ordinary course of business); (viii) the undischarged balance of
any production payment created by such Person or for the creation of which such
Person directly or indirectly received payment; (ix) all obligations of such
Person or any of its Subsidiaries to deliver goods or services including
Hydrocarbons in consideration of advance payments; (x) the undischarged balance
of any production payment or net profits interest created by such Person or any
of its Subsidiaries or for the creation of which such Person or any of its
Subsidiaries directly or indirectly received payment; and (xi) the net mark to
market value of all obligations of such Person under Risk Management Agreements.
"Default" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"Defaulting Lender" shall mean any Lender with a Commitment that fails
to make any payment to Administrative Agent that it is required to make
hereunder on any Settlement Date and that has not cured such failure by making
such payment within 1 Business Day after written demand upon it by
Administrative Agent to do so.
"Defaulting Lenders Rate" shall mean the Federal Funds Rate for the
first 3 days from and after the date the relevant payment is due and,
thereafter, at the interest rate then applicable to the relevant Loan.
"DEM Subordinated Debt" shall mean the Series A DEM 5,000,000 12% notes
issued by QSRD and being due and payable on July 15, 2000, and any renewals,
extensions or replacements (but not increases in principal amount) thereof.
"Designated Account" shall mean account number 7701-7429 of the
Borrower maintained with the Borrower's Designated Account Bank, or such other
deposit account of the Borrower (located within the United States) for the
benefit of the Borrower that has been designated as such, in writing, by
Borrower to Administrative Agent.
"Designated Account Bank" shall mean Compass Bank, whose office is
located at 8080 N. Central Expressway, Dallas, Texas 75206, whose mailing
address is P. O. Box 650561, Dallas, Texas 75265-0561, and whose ABA number is
113 010 547.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"EBITDA" shall mean, for any period, the sum, determined (without
duplication) for QSRD and its Consolidated Subsidiaries of (i) Consolidated Net
Income plus (ii) Interest Expense for such period to the extent deducted in the
determination of Consolidated Net Income plus (iii) depreciation, depletion,
amortization and other similar non-cash items (with the exception of non-cash
charges that require an accrual or reserve for cash charges for any future
period and normally recurring accruals) to the extent deducted in the
determination of
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17
Consolidated Net Income plus (iv) all taxes accrued for such period on or
measured by income to the extent deducted in the determination of Consolidated
Net Income.
"ECT" shall mean Enron North America Corp., formerly known as Enron
Capital & Trade Resources Corp.
"ECT Subordinated Debt" shall mean collectively, (i) the Subordinated
Revolving Credit Loan Agreement dated as of December 29, 1997 among the
Borrower, ECT, as agent for itself and the other lenders from time to time
parties thereto, and such lenders, (ii) the promissory note(s) in the aggregate
principal amount of $10,000,000 issued by the Borrower thereunder, and (iii) all
agreements, instruments and documents given by the Borrower, QSRD or any Obligor
to secure the obligations of the Borrower under the agreement and instruments
described in clauses (i) and (ii).
"Eligible Counterparty" shall mean ECT, Statoil Energy, Inc., Bank of
Montreal, any bank or trust company meeting the requirements contained in
Section 9.03(e) hereof, or any investment grade counterparty, rated BBB+ or
better or the equivalent, engaged (as one of its principle businesses) in
entering into Risk Management Agreements.
"Engineering Reports" shall have the meaning assigned such term in
Section 2.08(b).
"Environmental Laws" shall mean any and all Governmental Requirements
pertaining to health, safety or the environment in effect in any and all
jurisdictions in which QSRD or any of its Subsidiaries is conducting or at any
time has conducted business, or where any Property of any such Person is
located, including without limitation, the Oil Pollution Act of 1990 ("OPA"),
the Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection laws. The term "oil" shall
have the meaning specified in OPA, the terms "hazardous substance" and "release"
(or "threatened release") have the meanings specified in CERCLA, and the terms
"solid waste" and "disposal" (or "disposed") have the meanings specified in
RCRA; provided, however, that (i) in the event either OPA, CERCLA or RCRA is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment and (ii)
to the extent the laws of the state in which any Property of QSRD or any of its
Subsidiaries is located establish a meaning for "oil," "hazardous substance,"
"release," "solid waste" or "disposal" which is broader than that specified in
either OPA, CERCLA or RCRA, such broader meaning shall apply.
"Equity Offering" shall mean any sale or issuance for cash of any
equity securities of QSRD or warrants or options with respect thereto (whether
done by a registered public offering or an exempt private placement of such
securities) occurring after the Closing Date;
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provided the foregoing shall not include any warrants, options, rights or class
of Preferred Stock or Debt outstanding prior to the Closing Date or which arise
after the Closing Date but are attributable to agreements in effect prior to the
Closing Date.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time and any successor statute.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with QSRD or any of its Affiliates would be deemed
to be a "single employer" within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.
"ERISA Event" shall mean (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder, (ii) the withdrawal of QSRD
or any ERISA Affiliate from a Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, (iii) the
filing of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under Section 4041 of ERISA, (iv) the institution of
proceedings to terminate a Plan by the PBGC or (v) 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 Plan.
"Escrow Agreement" shall mean the Escrow Agreement entered into among
Morgan Guaranty Trust Company of New York, as trustee, the Borrower, and Chase
Bank of Texas, National Association, as escrow agent, pursuant to Section 2.2 of
the Purchase and Sale Agreement.
"Estoppel Letter" shall mean that certain Estoppel Letter, dated as of
the Closing Date, executed and delivered to the Agents and the Lenders by each
of the Obligors in connection with the transactions contemplated by the Purchase
Agreements.
"Event of Default" shall have the meaning assigned such term in Section
10.01.
"Excepted Liens" shall mean: (i) Liens for taxes, assessments or other
governmental charges or levies not yet due or which are being contested in good
faith by appropriate action and for which appropriate reserves have been
maintained; (ii) Liens in connection with workmen's compensation, unemployment
insurance or other social security, old age pension or public liability
obligations not yet due or which are being contested in good faith by
appropriate action and for which appropriate reserves have been maintained in
accordance with GAAP; (iii) operators', vendors', carriers', warehousemen's,
repairmen's, mechanics', workmen's, materialmen's, construction or other like
Liens arising by operation of law in the ordinary course of business or incident
to the exploration, development, operation and maintenance of Oil and Gas
Properties or statutory landlord's Liens, each of which is in respect of
obligations that have not been outstanding more than 90 days or which are being
contested in good faith by appropriate proceedings and for which appropriate
reserves have been maintained in accordance with GAAP; (iv) any Liens reserved
in leases or farmout agreements for rent or royalties and for compliance with
the terms of the farmout agreements
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19
or leases in the case of leasehold estates, to the extent that any such Lien
referred to in this clause does not materially impair the use of the Property
covered by such Lien for the purposes for which such Property is held by QSRD or
any of its Subsidiaries or materially impair the value of such Property subject
thereto; (v) Liens (on cash collateral deposit accounts or other cash equivalent
collateral in an amount not to exceed $4,000,000 minus Letter of Credit Usage)
securing Borrower's obligations under Risk Management Agreements outstanding as
of the Closing Date and other Risk Management Accounts entered into by Borrower
after the Closing Date in compliance with Section 8.11; and (vi) encumbrances
(other than to secure the payment of borrowed money or the deferred purchase
price of Property or services), easements, restrictions, servitudes, permits,
conditions, covenants, exceptions or reservations in any rights of way or other
Property of QSRD or any of its Subsidiaries for the purpose of roads, pipelines,
transmission lines, transportation lines, distribution lines for the removal of
gas, oil, coal or other minerals or timber, and other like purposes, or for the
joint or common use of real estate, rights of way, facilities and equipment, and
defects, irregularities, zoning restrictions and deficiencies in title of any
rights of way or other Property which in the aggregate do not materially impair
the use of such rights of way or other Property for the purposes of which such
rights of way and other Property are held by any such Person or materially
impair the value of such Property subject thereto.
"Excess Availability" shall mean the amount, as of the date any
determination thereof is to be made, equal to Availability minus the aggregate
amount, if any, of all trade payables of the Borrower in excess of 60 days past
due and all book overdrafts in excess of its historical practices, in each case
as determined by Administrative Agent in its reasonable credit judgment.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to, and any successor act thereto.
"Existing Preferred Stock" shall mean (i) QSRD's Series A Participating
Convertible Preferred Stock, par value $0.01 per share; (ii) QSRD's Series B
Participating Convertible Preferred Stock; and (iii) QSRD's Series C Convertible
Preferred Stock issued pursuant to the Certificate of Designation of Series C
Convertible Preferred Stock adopted as of December 23, 1997, together with any
and all amendments and modifications thereto up to the Closing Date and such
other amendments or modifications entered into after the Closing Date in
compliance with Section 9.21(a).
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight federal funds transactions with a
member 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 date 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
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20
Federal Funds Rate for such day shall be the average rate charged to the
Affiliates of the Administrative Agent on such day on such transactions as
determined by the Administrative Agent.
"Fee Letter" shall mean that certain letter agreement, dated as of the
Closing Date, between the Borrower and Collateral Agent, setting forth certain
fees payable to Collateral Agent.
"Fee Split Letter" shall mean that certain letter agreement, dated as
of the Closing Date, between Foothill Capital Corporation, in its individual
capacity, and Collateral Agent, setting forth the allocation to Foothill Capital
Corporation of certain fees payable by Borrower to Collateral Agent pursuant to
the Fee Letter.
"Financial Statements" shall mean the financial statement or statements
of QSRD and its Consolidated Subsidiaries described or referred to in Section
7.02(a).
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"Governmental Authority" shall include the country, the state, county,
city and political subdivisions in which any Person or such Person's Property is
located or which exercises valid jurisdiction over any such Person or such
Person's Property, and any court, agency, department, commission, board, bureau
or instrumentality of any of them including monetary authorities which exercises
valid jurisdiction over any such Person or such Person's Property. Unless
otherwise specified, all references to Governmental Authority herein shall mean
a Governmental Authority having jurisdiction over, where applicable, QSRD or any
of its Subsidiaries or any of their Properties or the Agents or any Lender.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other directive or
requirement (whether or not having the force of law), including, without
limitation, Environmental Laws, energy regulations and occupational, safety and
health standards or controls, of any Governmental Authority.
"Highest Lawful Rate" shall mean, with respect to the Agents or a
Lender, the maximum non-usurious interest rate, if any, that at any time or from
time to time may be contracted for, taken, reserved, charged or received on the
Indebtedness under laws applicable to the Agents or such Lender which are
currently in effect or, to the extent allowed by law, under such applicable laws
which may hereafter be in effect and which allow a higher maximum non-usurious
interest rate than applicable laws now allow.
"Hydrocarbon Interests" shall mean all rights, titles, interests and
estates now or hereafter acquired in and to oil and gas leases, oil, gas and
mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee
interests, overriding royalty and royalty interests, net profit interests and
production payment interests, including any reserved or residual interests of
whatever nature.
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21
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all constituents, elements and compounds thereof, and all
products refined or separated therefrom.
"Indebtedness" shall mean any and all amounts owing or to be owing by
QSRD, the Borrower or any Obligor to the Agents and/or Lenders in connection
with the Loan Documents now or hereafter arising between QSRD or the Borrower
and any Lender, and all renewals, extensions and/or rearrangements of any of the
above.
"Indemnified Parties" shall have the meaning assigned such term in
Section 12.03(b).
"Indemnity Matters" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands and
causes of action made or threatened against an Indemnified Party and, in
connection therewith, all losses, liabilities, damages (including, without
limitation, consequential damages) or reasonable costs and expenses of any kind
or nature whatsoever incurred by such Indemnified Party whether caused by the
sole or concurrent negligence of the Indemnified Party seeking indemnification.
"Initial Funding" shall mean the date of the consummation of the
transactions contemplated by the Purchase Agreement.
"Initial Reserve Report" shall mean collectively, (i) the report of H.
J. Gruy & Associates dated August 2, 1999 with respect to the Oil and Gas
Properties set forth therein as of June 30, 1999, and (ii) the report of Ryder
Scott Company dated July 26, 1999 with respect to the Oil and Gas Properties set
forth therein as of June 30, 1999.
"Insolvency Proceeding" shall mean any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, or
proceedings seeking reorganization, arrangement, liquidation or other similar
relief, or formal or informal moratoria, compositions, or extensions made or
agreed to generally with such Person's creditors.
"Intercompany Subordination Agreement" shall mean a Subordination
Agreement, dated as of the Closing Date, in form and substance satisfactory to
the Agents, by each of the Obligors in favor of the Lender Group.
"Interest Expense" shall mean, for any period, the sum (determined
without duplication) of the aggregate amount of interest expense accruing during
such period on Debt of QSRD and its Consolidated Subsidiaries, including the
interest portion of payments under capitalized leases and any capitalized
interest, but excluding amortization of debt discount and expense.
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22
"Investment Property" shall mean "investment property" as that term is
defined in of the New York Uniform Commercial Code, whether now owned or
hereafter acquired by the Obligors.
"JEDI" shall mean Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership.
"L/C" has the meaning set forth in Section 2.16(a).
"L/C Commitment" at any time shall mean $5,000,000.
"L/C Guaranty" has the meaning set forth in Section 2.16(a).
"Lender" and "Lenders" have the respective meanings set forth in the
preamble hereto, and shall include any other Person made a party to this
Agreement in accordance with the provisions of Section 12.06.
"Lender Group" shall mean, individually and collectively, each of the
individual Lenders, Administrative Agent, and Collateral Agent.
"Lender Group Expenses" shall mean all (a) costs or expenses (including
taxes, and insurance premiums) required to be paid by any Obligor under any of
the Loan Documents that are paid or incurred by the Lender Group, (b) fees or
charges paid or incurred by one or more members of the Lender Group in
connection with one or more members of the Lender Group's transactions with any
Obligor, including, fees or charges for photocopying, notarization, couriers and
messengers, telecommunication, public record searches (including tax lien,
litigation, and UCC searches and including searches with the patent and
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, appraisal, real estate title policies and
endorsements, allocated internal collateral examination and monitoring charges,
and environmental audits, (c) costs and expenses incurred by one or more members
of the Lender Group in the disbursement of funds to the Borrower (by wire
transfer or otherwise), (d) charges paid or incurred by one or more members of
the Lender Group resulting from the dishonor of checks, (e) costs and expenses
paid or incurred by one or members of the Lender Group to correct any default or
enforce any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral, or any portion thereof,
irrespective of whether a sale is consummated, (f) costs and expenses paid or
incurred by one or more members of the Lender Group in examining the books and
records of any Obligor, (g) costs and expenses of third party claims or any
other suit paid or incurred by one or more members of the Lender Group in
enforcing or defending the Loan Documents or in connection with the transactions
contemplated by the Loan Documents or one or more members of the Lender Group's
relationship with any Obligor, and (h) fees and expenses (including
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23
attorneys fees) incurred by one or more members of the Lender Group in advising,
structuring, drafting, reviewing, negotiating, syndicating, investigating,
preparing, executing and delivering, recording or filing of, enforcement of, and
refinancing, renegotiating or restructuring, administering, amending,
terminating, enforcing (including attorneys fees and expenses, and expenses of
third party consultants or advisors, incurred in connection with a "workout," a
"restructuring," or an Insolvency Proceeding concerning any Obligor), defending,
or concerning the Loan Documents, irrespective of whether suit is brought.
"Lender Group Side Letter" shall mean a side letter, dated as of the
Closing Date, between and among the Lenders, the Collateral Agent, and the
Administrative Agent.
"Letter of Credit" shall mean an L/C or an L/C Guaranty, as the context
requires.
"Letter of Credit Agreements" shall mean the written agreements with
the Administrative Agent, as issuing bank for any Letter of Credit, executed or
hereafter executed in connection with the issuance by the Administrative Agent
of the Letters of Credit, such agreements to be on the Administrative Agent's
customary form for letters of credit of comparable amount and purpose as from
time to time in effect or as otherwise agreed to by the Borrower and the
Administrative Agent.
"Letter of Credit Usage" shall mean the sum of (a) the undrawn amount
of uncancelled Letters of Credit, plus (b) the amount of unreimbursed drawings
under Letters of Credit, minus (c) the aggregate amount of cash collateral
securing outstanding Letters of Credit pursuant to Section 2.16(e).
"Lien" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and whether such
obligation or claim is fixed or contingent, and including but not limited to (i)
the lien or security interest arising from a mortgage, charge, encumbrance,
pledge, lien (statutory or otherwise), security agreement, conditional sale or
trust receipt or a lease, consignment or bailment for security purposes, or
preferential arrangement of any kind or nature whatsoever (including, any
agreement to give or grant a lien), or (ii) production payments and the like
payable out of Oil and Gas Properties. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property. For the purposes of this Agreement, QSRD or any of its
Subsidiaries shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement, or leases under a
financing lease or other arrangement pursuant to which title to the Property has
been retained by or vested in some other Person in a transaction intended to
create a financing.
"Liquidity Reserve" shall mean a reserve against each alternative
determination of the Borrowing Base in the amount of $5,000,000, as such amount
may be decreased from time to time by the consent of the Agents.
"Loan" shall mean the loans as provided for by Section 2.01 (a).
"Loan Account" has the meaning set forth in Section 2.06.
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24
"Loan Documents" shall mean this Agreement, the Fee Letter, the Side
Letter, the Intercompany Subordination Agreement, the Security Instruments, and
any note or notes executed by the Borrower and payable to a Lender including any
Registered Note, and any other agreement entered into, now or in the future, in
connection with this Agreement.
"Majority Lenders" shall mean, at any time while no Loans are
outstanding, Lenders having at least fifty-one percent (51%) of the Aggregate
Commitments and, at any time while Loans are outstanding, Lenders holding at
least fifty-one percent (51%) of the outstanding aggregate principal amount of
the Loans (without regard to any sale by a Lender of a participation in any Loan
under Section 12.06(e)).
"Material Adverse Effect" shall mean (i) any material and adverse
effect on the assets, liabilities, financial condition, business, operations,
prospects or affairs of QSRD and its Consolidated Subsidiaries taken as a whole
different from those reflected in the financial statements most recently
delivered pursuant to Sections 7.02(a) or 8.01 hereof or from the facts
represented or warranted in this Agreement or any Loan Document, or (ii) any
material and adverse effect on the ability of QSRD and its Consolidated
Subsidiaries, taken as a whole, to carry out its business as at the Closing Date
or as proposed as of the Closing Date to be conducted or meet its obligations
under the Loan Documents on a timely basis. The foregoing notwithstanding, the
failure of QSRD to maintain a listing on the NASDAQ Small Cap Exchange in and of
itself shall not be deemed a Material Adverse Effect.
"Material Agreements" shall mean each of the instruments, contracts or
agreements described in Schedule 7.23, as the same may be amended, modified or
replaced from time to time in accordance with the terms of Section 9.21.
"Maturity Date" shall mean, unless the Aggregate Maximum Credit Amounts
are sooner terminated under Section 2.03(b) or the Indebtedness is sooner
accelerated under Section 10.02 hereof, October 22, 2001.
"Maximum Credit Amount" shall mean, as to each Lender, the amount set
forth opposite such Lender's name on Annex I under the caption "Maximum Credit
Amounts" (as the same may be reduced pursuant to Section 2.03(b) pro rata to
each Lender based on its Percentage Share), as modified from time to time to
reflect any assignments permitted by Section 12.06(d) or amendments to this
Agreement.
"Moody's" shall mean Moody's Investors Service, Inc. and any successor
thereto.
"Mortgaged Property" shall mean the Property owned by any Obligor and
which is subject to the Liens existing and to exist under the terms of the
Security Instruments.
"Multiemployer Plan" shall mean a Plan defined as such in Section 3(37)
or 4001(a)(3) of ERISA.
"Non-Recourse Debt" shall mean Debt of any Non-Recourse Subsidiary (i)
as to which neither QSRD, Borrower, nor any Subsidiary Guarantor is directly or
indirectly liable
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25
(by virtue of such Person or any Subsidiary Guarantor being the primary obligor
on, guarantor of, or otherwise liable in any respect to, such Debt); (ii) which,
upon the occurrence of a default with respect thereto, does not result in, or
permit any holder of any Debt of QSRD, the Borrower or any Subsidiary Guarantor
to declare a default on such Debt of such Person or cause the payment thereof to
be accelerated or payable prior to its stated maturity; and (iii) that is not
secured by a Lien upon any Property of QSRD, the Borrower or any Subsidiary
Guarantor (other than stock or other equity interests of a Non-Recourse
Subsidiary).
"Non-Recourse Subsidiary" shall mean any Subsidiary of QSRD organized
or acquired after the Closing Date as to which all of the following conditions
apply: (i) neither such Subsidiary nor any of its Subsidiaries provides credit
support for any of the Indebtedness or any other Debt of QSRD, the Borrower or
any Subsidiary Guarantor; (ii) neither QSRD, the Borrower nor any Subsidiary
Guarantor is liable, directly or indirectly, with respect to any Debt of such
Subsidiary; (iii) no Oil and Gas Properties of such Non-Recourse Subsidiary is
included in the Borrowing Base; and (iv) the Board of Directors of QSRD shall
have designated such Subsidiary to be a Non-Recourse Subsidiary by a written
resolution. Any such designation by the Board of Directors of QSRD shall be
evidenced to the Agents by delivering to them a resolution giving effect to such
designation and an officers' certificate certifying that such designation
complies with the foregoing conditions. The Board of Directors of QSRD may (i)
designate any of its Subsidiaries as a Non-Recourse Subsidiary or (ii) designate
any Non-Recourse Subsidiary to be a Subsidiary Guarantor; provided that, in
either such case, no Default or Event of Default would occur or be continuing
after giving effect to such designation. Any Subsidiary of a Non-Recourse
Subsidiary shall be a Non-Recourse Subsidiary for purposes of this Agreement,
provided that, with respect to such Subsidiary, each of the conditions set forth
in the first sentence of this paragraph are applicable.
"NYMEX Swap Price" shall mean, as of the date of the determination
thereof, the lower of the fixed price side of a 5 year swap (using the NYMEX
Henry Hub (for gas) and West Texas Intermediate, Cushing (for crude oil) as the
floating price indexes) as quoted by (i) ECT, or (ii) Statoil Energy Inc., Risk
Management Services, in each case delivered by Borrower to Agents in the form
attached hereto as Exhibit N-1, (or in either case, as quoted by another
Eligible Counterparty on its standard quote sheet).
"Obligor" shall mean any or all of QSRD, the Borrower or the Subsidiary
Guarantors, as appropriate.
"Oil and Gas Properties" shall mean Hydrocarbon Interests; the
Properties now or hereafter pooled or unitized with Hydrocarbon Interests; all
presently existing or future unitization, pooling agreements and declarations of
pooled units and the units created thereby (including without limitation all
units created under orders, regulations and rules of any Governmental Authority)
which may affect all or any portion of the Hydrocarbon Interests; all operating
agreements, contracts and other agreements which relate to any of the
Hydrocarbon Interests or the production, sale, purchase, exchange or processing
of
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26
Hydrocarbons from or attributable to such Hydrocarbon Interests; all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, including all oil in tanks, the lands covered thereby
and all rents, issues, profits, proceeds, products, revenues and other incomes
from or attributable to the Hydrocarbon Interests; all tenements, hereditaments,
appurtenances and Properties in any manner appertaining, belonging, affixed, or
incidental to the Hydrocarbon Interests; and all Properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereinafter acquired and situated upon,
used, held for use or useful in connection with the operating, working or
development of any such Hydrocarbon Interests or Property (excluding drilling
rigs, automotive equipment or other personal property which may be on such
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil wells, gas wells, injection wells or other wells,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.
"Other Taxes" shall have the meaning assigned such term in Section
4.06(b).
"Overadvance" shall mean the amount, if any, by which the Revolving
Facility Usage exceeds the lesser of (a) the Borrowing Base, or (b) the Maximum
Credit Amount.
"Pay-Off Letter" shall mean a letter, in form and substance reasonably
satisfactory to Agents, from ECT respecting the amount necessary to repay in
full all of the obligations of Borrower owing to ECT related to the ECT
Subordinated Debt, the termination of the ECT Subordinated Debt credit facility
by ECT, and the agreement by ECT to provide the Agents with duly executed
terminations or releases of all Liens existing in favor of ECT in and to the
properties or assets of QSRD, Borrower, or any other Subsidiary of QSRD.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions.
"Percentage Share" shall mean the percentage of the Aggregate
Commitments to be provided by a Lender under this Agreement as indicated on
Schedule C-1 hereto, as modified from time to time to reflect any assignments
permitted by Section 12.06(b) or amendments to this Agreement.
"Permitted Acquisition" shall mean an Acquisition to be consummated by
the Borrower if each of the following conditions shall have been satisfied:
(A) after giving effect to the payment of the cash
portion of the purchase price of such Acquisition, there shall be
Excess Availability of not less than $10,000,000;
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(B) the Borrower shall have furnished to the Lender
Group at least 10 Business Days prior to the consummation of such
Acquisition (1) an executed term sheet and/or commitment letter
(setting forth in reasonable detail the terms and conditions of such
Acquisition) and, at the request of Administrative Agent or Collateral
Agent, such other information and documents that Administrative Agent
or Collateral Agent may reasonably request, including, without
limitation, executed counterparts of the respective agreements,
documents or instruments pursuant to which such Acquisition is to be
consummated (including, without limitation, any related management,
non-compete, employment, option or other material agreements), any
schedules to such agreements, documents or instruments and all other
material ancillary agreements, instruments and documents to be executed
or delivered in connection therewith, (2) pro forma financial
statements (for the 12 month period ending as of the last day of the
month preceding the date of such Acquisition) of QSRD and its
Subsidiaries giving effect to the consummation of such Acquisition, (3)
a certificate of a Responsible Officer of the Borrower demonstrating on
a pro forma basis (for the 12 month period ending as of the last day of
the month preceding the date of such Acquisition) compliance with all
covenants set forth in Section 9.12 after the consummation of such
Acquisition, and (4) copies of such other agreements, instruments and
other documents (including, without limitation, the Loan Documents
required by Section 8.05) as Collateral Agent shall reasonably request;
(C) the agreements, instruments and other documents
referred to in paragraph (B) above shall provide that (1) neither any
Obligor nor any of its Subsidiaries shall, in connection with such
Acquisition, assume or remain liable in respect of any Debt of the
Seller or Sellers (nor shall any Person that is the subject of an
Acquisition remain obligated with respect to such Debt) (except for
obligations incurred in the ordinary course of business in operating
the property so acquired and necessary and desirable to the continued
operation of such property and except for Debt that the Lender Group
otherwise expressly consents to in writing (in its sole discretion)
after its review of the terms of the proposed Acquisition), and (2) all
property to be so acquired in connection with such Acquisition shall be
free and clear of any and all Liens, except for Permitted Liens (and,
if any such property is subject to any Lien not permitted by this
clause (2) then, concurrently with such Acquisition such Lien shall be
released);
(D) the Person or property to be acquired as a result
of such Acquisition shall be engaged in the same business as the
Borrower and any Person to be acquired shall be a direct wholly-owned
Subsidiary of the Borrower;
(E) such Acquisition shall be effected in such a
manner so that the acquired Stock or property are owned either by the
Borrower or a wholly-owned Subsidiary of the Borrower and, if effected
by merger involving the Borrower, the Borrower shall be the surviving
Person;
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(F) any such acquired Person shall execute and
deliver the agreements, instruments and other documents required by
Section 8.05; and
(G) the Majority Lenders, Administrative Agent, and
Collateral Agent shall have consented (in their sole discretion) to the
Acquisition; provided, however, in the event that the proposed
Acquisition involves only the direct acquisition of Oil and Gas
Properties and the consideration paid or payable for the proposed
Acquisition, or series of related transactions, is less than
$2,000,000, and the aggregate consideration paid or payable with
respect to all Acquisitions made by Borrower without the consent of the
Majority Lenders, Administrative Agent and Collateral Agent during the
12 month period ending as of the last day of the month during which
such Acquisition is to occur has not exceeded or would not exceed,
after giving effect to such Acquisition, $10,000,000, the consent of
Majority Lenders, Administrative Agent, and Collateral Agent shall not
be required.
"Permitted Holders" shall mean each of JEDI or Enron Corp. or its
Affiliates or the controlling persons thereof.
"Permitted Preferred Stock" shall mean, collectively, (a) the Existing
Preferred Stock, and (b) any other Preferred Stock issued by QSRD that is not
Prohibited Preferred Stock.
"Person" shall mean any individual, corporation, limited liability
company, voluntary association, partnership, joint venture, trust,
unincorporated organization or government or any agency, instrumentality or
political subdivision thereof, or any other form of entity.
"Plan" shall mean any employee pension benefit plan, as defined in
Section 3(2) of ERISA, which (i) is currently or hereafter sponsored, maintained
or contributed to by QSRD or any of its Subsidiaries or an ERISA Affiliate or
(ii) was at any time during the preceding six calendar years sponsored,
maintained or contributed to, by QSRD or any of its ERISA Affiliates.
"Pledge Agreement" shall mean a Pledge Agreement, dated as of the
Closing Date, made by the Obligors in favor of Collateral Agent for the benefit
of the Lender Group, in form and substance satisfactory to Collateral Agent.
"Post-Default Rate" shall mean a rate per annum, equal to the sum of
(a) 3.00% per annum, (b) the Applicable Margin, and (c) the Base Rate, but in no
event to exceed the Highest Lawful Rate.
"Preferred Stock" shall mean, with respect to any Person, any class or
series of Stock of such Person that is entitled, upon distribution of assets of
such Person, whether by dividend or liquidation, to a preference over another
class or series of Stock of such Person.
"Principal Properties" shall mean those Oil and Gas Properties listed
on Schedule P-1, as such Schedule may be revised from time to time by the
Administrative Agent to include
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significant Oil and Gas Properties included in the Borrowing Base through
Acquisitions by the Borrower.
"Prohibited Preferred Stock" shall mean (a) any Preferred Stock of any
Obligor (other than QSRD), and (b) any Preferred Stock of QSRD (other than
Existing Preferred Stock) the terms and conditions of issuance, and rights and
preferences, of which are not approved in writing by the Majority Lenders in
their sole discretion, including any Preferred Stock of an Obligor that by its
terms is mandatorily redeemable or subject to any other payment obligation
(including any obligation to pay dividends, other than dividends of Preferred
Stock of the same class and series payable in kind or dividends of common stock)
on or before a date not earlier than 1 year after the Maturity Date or, on or
before a date not earlier than 1 year after the Maturity Date, is redeemable at
the option of the holder thereof for cash (or assets or securities other than
distributions in kind of Preferred Stock of the same class and series or of
common stock).
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Proved Developed Non-Producing Reserves" shall mean those Oil and Gas
Properties designated as "proved developed non-producing" (in accordance with
the Definitions for Oil and Gas Reserves approved by the Board of Directors of
the Society for Petroleum Engineers, Inc. from time to time) in the Reserve
Report and used in establishing the Borrowing Base.
"Proved Developed Producing Reserves" shall mean those Oil and Gas
Properties designated as "proved developed producing" (in accordance with the
Definitions for Oil and Gas Reserves approved by the Board of Directors of the
Society for Petroleum Engineers, Inc. from time to time) in the Reserve Report
and used in establishing the Borrowing Base.
"Proved Reserves" shall mean those Oil and Gas Properties designated as
"proved" (in accordance with the Definitions for Oil and Gas Reserves approved
by the Board of Directors of the Society for Petroleum Engineers, Inc. from time
to time) in the Reserve Report and used in establishing the Borrowing Base.
"Proved Undeveloped Reserves" shall mean those Oil and Gas Properties
designated as "proved undeveloped" (in accordance with the Definitions for Oil
and Gas Reserves approved by the Board of Directors of the Society for Petroleum
Engineers, Inc. from time to time) in the Reserve Report and used in
establishing the Borrowing Base.
"Purchase Agreement" shall mean that certain Assignment and Acceptance,
dated as of the Closing Date, executed and delivered among each of the Prior
Lenders and each of the Lenders relative to the assignment and delegation by the
Prior Lenders and the acceptance and assumption by the Lenders of the rights and
duties of the Prior Lenders under the Prior Credit Agreement.
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"Purchase and Sale Agreement" shall mean that certain Purchase and Sale
Agreement dated as of March 19, 1998 among Morgan Guaranty Trust Company of New
York, as Trustee, Investment Royalty Corporation and Milam Royalty Corporation,
as sellers, and the Borrower, as purchaser.
"PV-10 Value" shall mean the future net revenues before income taxes
from Proved Reserves, estimated utilizing the NYMEX Swap Price for the
appropriate category of oil or gas as of the date of determination of PV-10
Value, as such price is further increased or decreased, as applicable, adjusted
by the appropriate "Basis Differential" with respect to Hydrocarbons produced
from specific Oil and Gas Properties of the Borrower as set forth on Exhibit
PV-1, as such Exhibit may from time to time be amended at the request of the
Borrower with the consent of the Agents, which consent shall not be unreasonably
withheld, conditioned or delayed, and assuming that oil and natural gas prices
and production costs thereafter remain constant, then discounted at the rate of
10% per year to obtain the present value, and otherwise applying the financial
accounting and reporting standards prescribed by the SEC for application of the
full cost method of accounting under Rule 4-10 of Regulation S-X as promulgated
by the SEC from time to time.
"Quarterly Dates" shall mean the last day of each March, June,
September and December, in each year, the first of which shall be December 31,
1999; provided, however, that if any such day is not a Business Day, such
Quarterly Date shall be the next succeeding Business Day.
"QSR Canada" shall mean Queen Sand Resources (Canada), Inc., an
Ontario, Canada corporation.
"Rating Agencies" has the meaning specified therefor in Section 2.10.
"Reference Bank" shall mean Wells Fargo Bank, National Association and
its successors or any other commercial bank designated by written notice from
the Collateral Agent to Borrower from time to time.
"Reference Rate" shall mean the rate of interest publicly announced by
the Reference Bank from time to time as its prime rate or base rate. The prime
rate or base rate is determined from time to time by the Reference Bank as a
means of pricing some loans to its borrowers and neither is tied to any external
rate of interest or index nor necessarily reflects the lowest rate of interest
actually charged by the Reference Bank to any particular class or category of
customers. Each change in the Reference Rate shall be effective from and
including the date such change is publicly announced as being effective.
"Re-determination Date" shall have the meaning assigned such term in
Section 2.08(a).
"Registered Loan" has the meaning specified therefor in Section 2.09.
"Registered Note" has the meaning specified therefor in Section 2.09.
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"Required Lenders" shall mean with respect to any re-determination of
the Borrowing Base: (i) all of the Lenders in the case of any increase in the
Borrowing Base, and (ii) the Majority Lenders in all other cases.
"Required Payment" shall have the meaning assigned such term in Section
4.04.
"Reserve Report" shall mean a report, in form and substance
satisfactory to the Agents, setting forth, as of each June 30 or December 31, as
applicable (or such other date in the event of an unscheduled re-determination):
(i) for the December 31st Reserve Report, the volumetric quantity and the PV-10
Value, and for the June 30th Reserve Report, the volumetric quantity and both
the PV-10 Value and the SEC Value, of the oil and gas reserves attributable to
the Oil and Gas Properties to compose the Borrowing Base together with a
projection of the rate of production and future net income, taxes, operating
expenses and capital expenditures with respect thereto as of such date, and (ii)
such other information as the Agents may reasonably request.
"Resignation and Appointment Letter" shall mean that certain Agreement,
dated as of the Closing Date, executed and delivered to the Prior Agent and the
Agents in connection with the transactions contemplated by the Purchase
Agreements.
"Responsible Officer" shall mean, as to any Person, the Chief Executive
Officer, the President or any Vice President of such Person and, with respect to
financial matters, the term "Responsible Officer" shall include the Chief
Financial Officer or Vice President-Finance of such Person. Unless otherwise
specified, all references to a Responsible Officer herein shall mean a
Responsible Officer of QSRD or the Borrower, as applicable.
"Revolving Credit Period" shall mean the period commencing on the
Closing Date and ending on the Revolving Credit Termination Date.
"Revolving Credit Termination Date" shall mean, unless the Commitments
are sooner terminated pursuant to Sections 2.03(b) or 10.02 hereof, the Business
Day immediately prior to the Maturity Date.
"Revolving Facility Usage" shall mean, as of any date of determination,
the sum of (a) the aggregate amount of Loans outstanding, plus (b) the Letter of
Credit Usage.
"Risk Management Agreements" shall mean any commodity, interest rate or
currency swap, rate cap, rate floor, rate collar, forward agreement or other
exchange, price or rate protection agreements or any option with respect to any
such transaction.
"Scheduled Re-determination Date" shall have the meaning assigned such
term in Section 2.08(d).
"SEC" shall mean the Securities and Exchange Commission or any
successor Governmental Authority.
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"SEC Value" shall mean the future net revenues before income taxes from
Proved Reserves, estimated utilizing the spot price for the appropriate category
of oil or gas as of the date of determination and assuming that oil and natural
gas prices and production costs thereafter remain constant, then discounted at
the rate of 10% per year to obtain the present value, and otherwise applying the
financial accounting and reporting standards prescribed by the SEC for
application of the full cost method of accounting under Rule 4-10 of Regulation
S-X as promulgated by the SEC from time to time.
"Securities Account" shall mean a "securities account" as that term is
defined in Section 8-501 of the New York Uniform Commercial Code.
"Securitization" has the meaning specified therefor in Section 2.11.
"Securitization Party" has the meaning specified therefor in Section
2.11.
"Security Agreement" shall mean a Security Agreement, dated as of the
Closing Date, between each of the Obligors, as debtors, and Collateral Agent,
for the benefit of the Lender Group, in form and substance satisfactory to
Collateral Agent.
"Security Instruments" shall mean the Letters of Credit, the Letter of
Credit Agreements, the Pledge Agreement, the Security Agreement, and all of the
agreements or instruments described or referred to in Schedule S-1, and any and
all other agreements or instruments now or hereafter executed and delivered by
QSRD, the Borrower, any Obligor or any other Person (other than Assignments,
participation or similar agreements between any Lender and any other lender or
creditor with respect to any Indebtedness pursuant to this Agreement) in
connection with, or as security for the payment or performance of the
Indebtedness or this Agreement, as such agreements may be amended, supplemented
or restated from time to time.
"Seller" shall mean any Person that sells Stock or other property to
the Borrower or a Subsidiary of the Borrower in a Permitted Acquisition.
"Senior Indenture" shall mean the Indenture, dated as of July 1, 1998,
among QSRD, as issuer, the Borrower, Queen Sand Operating Co. (formerly known as
Northland Operating Co.), a Nevada corporation, and Corrida Resources, Inc., a
Nevada corporation, as initial subsidiary guarantors, and Harris Trust & Savings
Bank, as trustee, pursuant to which the Senior Notes were issued, as modified,
amended or replaced from time to time in a manner permitted by this Agreement.
"Senior Indenture Indebtedness" shall mean the Senior Notes, the
guarantees thereof and any other Indebtedness of any Obligor under the Senior
Indenture, together with any refinancings thereof permitted by the terms of
Section 9.22(a).
"Senior Note Documents" shall mean the collective reference to the
Senior Notes, the Senior Indenture, the Senior Note Offering Memorandum and each
agreement, instrument
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and document delivered in connection therewith or relating thereto, as modified,
amended or replaced from time to time in a manner permitted by this Agreement.
"Senior Notes" shall mean the 12-1/2 % $125,000,000 Senior Notes due
2008 of QSRD issued pursuant to the Senior Indenture, as modified, amended or
replaced from time to time in a manner permitted by this Agreement.
"Side Letter" shall mean a Side Letter Agreement, dated as of the
Closing Date, between and among QSRD, the Borrower, and each of the Lenders, the
form and substance of which is satisfactory to the Lenders.
"Standard & Poor's" shall mean Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., and any successor thereto.
"Stock" shall mean all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
corporation, a limited liability company, or equivalent entity, whether voting
or nonvoting, including common stock, preferred stock, or any other "equity
security" (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the SEC under the Exchange Act).
"Subordinated Debt" shall mean the DEM Subordinated Debt; provided that
the characterization of any such Debt as "Subordinated Debt" for purposes of
this Agreement and the Loan Documents shall not affect the characterization of
such Debt for purposes of any other agreement or instrument or as between the
holders of any such Debt and others; the concept herein expressed being that for
purposes of this Agreement and the Loan Documents, the parties hereto expect all
such Debt to be junior and subordinated to the Indebtedness either contractually
or by virtue of junior Lien positions, but only to the extent such Debt is
expressly contractually subordinated or junior by operation of law.
"Subsidiary" shall mean, for any Person, any Person of which at least a
majority of the outstanding shares of stock or other equity interests having by
the terms thereof ordinary voting power to elect a majority of the board of
directors or manager of such Person (irrespective of whether or not at the time
stock or other interests of any other class or classes of such Person shall have
or might have voting power by reason of the happening of any contingency) is at
the time directly or indirectly owned or controlled by such Person or one or
more of its Subsidiaries or by such Person and one or more of its Subsidiaries.
Unless otherwise indicated, a reference to a Subsidiary in any Loan Document is
to a Subsidiary of QSRD.
"Subsidiary Guarantor" shall mean each of Queen Sand Operating Co.
(formerly known as Northland Operating Co.), a Nevada corporation, Corrida
Resources, Inc., a Nevada corporation, and all future Subsidiaries of QSRD
executing and delivering a guarantee under Section 9.17 other than the Borrower
and the Non-Recourse Subsidiaries.
"Taxes" shall have the meaning assigned such term in Section 4.06(a).
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"Termination Agreement" shall mean that certain Termination Agreement,
dated as of the Closing Date, between ECT, QSRD, Borrower, Queen Sand Operating
Co. (formerly known as Northland Operating Co.), a Nevada corporation, and
Corrida Resources, Inc., a Nevada corporation
"Transfer Order Letters" shall mean transfer order letters in the form
of Exhibit T-1 attached hereto containing the information as provided for
therein.
"Triggering Event" shall mean the occurrence of one or more of the
following: (a) a Default or an Event of Default, or (b) Borrower shall have had
Excess Availability of less than $5,000,000, or (c) a Material Adverse Effect.
Section 1.03. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Agents or the Lenders hereunder shall be
prepared, in accordance with GAAP, applied on a basis consistent with the
Financial Statements (except for changes concurred with by QSRD's independent
certified public accountants). Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation". The word "will" shall be construed to have the same
meaning and effect as the word "shall". Unless the context requires otherwise,
(a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or
other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (b) any reference herein to any Person shall be construed to
include such Person's successors and assigns, (c) the words "herein", "hereof'"
and "hereunder", and words of similar import, shall be construed to refer to
this Agreement in its entirety and not to any particular provision hereof, (d)
all references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
ARTICLE II
COMMITMENTS
Section 2.01. Loans.
(a) Loans. Each Lender severally agrees, on the terms of this
Agreement, to make Loans to the Borrower during the Revolving Credit Period in
an aggregate principal amount at any one time outstanding up to but not
exceeding the amount of such Lender's Commitment as then in effect; provided,
however, that the sum of (i) the aggregate principal
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amount of all Loans by all Lenders hereunder at any one time outstanding plus
(ii) the Letter of Credit Usage shall not exceed the Aggregate Commitments.
Subject to the terms of this Agreement, during the Revolving Credit Period, the
Borrower may borrow, repay and reborrow the amount described in this Section
2.01(a).
(b) Letters of Credit. During the Revolving Credit Period, the
Administrative Agent, as issuer for the Lenders, agrees to extend credit for the
account of the Borrower at any time and from time to time by issuing renewing,
extending or reissuing Letters of Credit; provided however, the Letter of Credit
Usage at any one time outstanding shall not exceed the lesser of (i) the LC
Commitment or (ii) the Aggregate Commitments, as then in effect, minus the
aggregate principal amount of all Loans then outstanding. Each Lender shall
participate in such Letters of Credit according to its Percentage Share.
(c) [intentionally omitted].
(d) Loans under Prior Credit Agreement. On the Closing Date:
(i) the Borrower shall pay all accrued and unpaid
commitment fees outstanding under the Prior Credit Agreement for the
account of each Prior Lender under the Prior Credit Agreement;
(ii) each "Base Rate Loan" under the Prior Credit
Agreement shall be deemed to be a Base Rate Loan under this Agreement;
and
(iii) each "Eurodollar Loan" under the Prior Credit
Agreement shall be deemed to be converted into a Base Rate Loan under
this Agreement; and
(iv) the Prior Credit Agreement and the commitments
thereunder shall be superseded by this Agreement and such commitments
shall terminate.
Section 2.02. Borrowings.
(a) Borrowings. The Borrower shall give the Administrative
Agent (which shall promptly notify the Lenders) advance notice as hereinafter
provided of each borrowing hereunder, which shall specify the aggregate amount
of such borrowing, and the date (which shall be a Business Day) of the Loans to
be borrowed.
(b) Minimum Amounts. All Base Rate Loan borrowings shall be in
amounts of at least $1,000,000 or the remaining balance of the Aggregate
Commitments, if less, or any whole multiple of $100,000 in excess thereof.
(c) Notices. All borrowings shall require advance written
notice to the Administrative Agent (which shall promptly notify the Lenders) in
the form of Exhibit 2.02 hereto (or telephonic notice promptly confirmed by such
a written notice), which in each case shall be irrevocable, from the Borrower to
be received by the Administrative Agent
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either (i) not later than 10:00 a.m. (Los Angeles time) at least 5 Business Days
prior to the date of each borrowing, provided that not more than one such
borrowing request shall be made in any period of 7 consecutive days, or (ii) on
such shorter period of prior notice or with greater frequency of requests as to
which the Administrative Agent shall, in its discretion, consent. Without in any
way limiting the Borrower's obligation to confirm in writing any telephonic
notice, the Administrative Agent may act without liability upon the basis of
telephonic notice believed by the Administrative Agent in good faith to be from
the Borrower prior to receipt of written confirmation. In each such case, the
Borrower hereby waives the right to dispute the Administrative Agent's record of
the terms of such telephonic notice except in the case of manifest error, gross
negligence or willful misconduct by the Administrative Agent.
(d) [intentionally omitted].
(e) [intentionally omitted].
(f) Advances. With respect to a funding meeting the prior
notice and frequency conditions set forth in Section 2.02(c)(i), not later than
12:00 p.m. (Los Angeles time) on the date specified for each borrowing
hereunder, each Lender shall make available the amount of the Loan to be made by
it on such date to the Administrative Agent, to the Administrative Agent's
Account in immediately available funds, for the account of the Borrower. The
amounts so received by the Administrative Agent shall, subject to the terms and
conditions of this Agreement, be made available to the Borrower by depositing
the same not later than 1:00 p.m. (Los Angeles time), in immediately available
funds, in the Designated Account. With respect to a funding not meeting the
prior notice and frequency conditions set forth in Section 2.02(c)(i), the
Administrative Agent shall, subject to the terms and conditions of this
Agreement, deposit the amount of the Loan to be made on the date specified for
such borrowing not later than 1:00 p.m. (Los Angeles time), in immediately
available funds, in the Designated Account.
(g) Letters of Credit. The Borrower shall give the
Administrative Agent (which shall promptly notify the Collateral Agent and the
Lenders of such request and advise the Lenders of their Percentage Share of such
Letter of Credit) advance notice to be received by the Agent not later than
12:00 p.m. (Los Angeles time) not less than three (3) Business Days prior
thereto of each request for the issuance, the renewal or extension of a Letter
of Credit hereunder which request shall specify the amount of such Letter of
Credit, the date (which shall be a Business Day) such Letter of Credit is to be
issued, renewed or extended, the duration thereof, the name and address of the
beneficiary thereof, the form of the Letter of Credit and such other information
as the Administrative Agent may reasonably request all of which shall be
reasonably satisfactory to the Administrative Agent. Subject to the terms and
conditions of this Agreement, on the date specified for the issuance, renewal or
extension of a Letter of Credit, the Administrative Agent shall issue such
Letter of Credit to the beneficiary thereof.
In conjunction with the issuance of each Letter of Credit, the Borrower
shall execute a Letter of Credit Agreement. In the event of any conflict between
any provision of a Letter of
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Credit Agreement and this Agreement, QSRD, the Borrower, the Agents and the
Lenders hereby agree that the provisions of this Agreement shall govern.
The Administrative Agent will send to the Borrower, the Collateral
Agent, and each Lender, immediately upon issuance of any Letter of Credit, or an
amendment thereto, a true and complete copy of such Letter of Credit, or such
amendment thereto.
Section 2.03. Changes of Commitments.
(a) The Aggregate Commitments shall at all times be equal to
the lesser of (i) the Aggregate Maximum Credit Amounts, after adjustments
resulting from reductions pursuant to Sections 2.03(b), or (ii) the Borrowing
Base as determined from time to time.
(b) The Borrower shall have the right to terminate or to
reduce the amount of the Aggregate Maximum Credit Amounts at any time or from
time to time upon not less than three (3) Business Days prior notice to the
Administrative Agent (which shall promptly notify the Lenders) of each such
termination or reduction, which notice shall specify the effective date thereof
and the amount of any such reduction (which shall not be less than $5,000,000 or
any whole multiple of $1,000,000 in excess thereof) and shall be irrevocable and
effective only upon receipt by the Administrative Agent.
(c) The Aggregate Maximum Credit Amounts once terminated or
reduced may not be reinstated.
Section 2.04. Fees.
(a) Financial Examination and Appraisal Fees. The Borrower
shall pay to the Administrative Agent, for the sole and separate account of
Administrative Agent: (i) Administrative Agent's customary fee of $750 per day
per examiner, plus Administrative Agent's reasonable out-of-pocket expenses for
each financial analysis and examination (i.e., audits) of the Obligors performed
by personnel employed by Administrative Agent; and (ii) Administrative Agent's
out-of-pocket expenses for each appraisal of the Collateral performed by
personnel employed by Administrative Agent; and (iii) the actual charges paid or
incurred by Administrative Agent if it elects to employ the services of one or
more third Persons to perform such financial analyses and examinations (i.e.,
audits) of the Obligors or to appraise the Collateral.
(b) Fee Letter Fees. Borrower shall pay to the Collateral
Agent the fees set forth in the Fee Letter in accordance with the terms thereof,
and such fees constitute Indebtedness hereunder.
(c) Letter of Credit Fee. Borrower shall pay Administrative
Agent, for the sole and separate account of the Collateral Agent, a fee (in
addition to the charges, commissions, fees, and costs set forth in Section
2.16(d)) equal to 3.0% per annum times the amount of the undrawn Letters of
Credit. Notwithstanding the foregoing, at any time that an Event of Default has
occurred and is continuing and Borrower has not provided cash collateral to the
Administrative Agent pursuant to Section 2.16(e), the Letter of Credit fee
payable by the
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Borrower pursuant to this Section 2.04(c) shall equal to 6.0% per annum times
the amount of the undrawn Letters of Credit. Such fees shall be due and payable
monthly, in arrears, on the first day of each month during the term hereof.
Section 2.05. Several Obligations. The failure of any Lender to make
any Loan to be made by it or to provide disbursements or reimbursements under
Letters of Credit on the date specified therefor shall not relieve any other
Lender of its obligation to make its Loan or provide funds on such date, but no
Lender shall be responsible for the failure of any other Lender to make a Loan
to be made by such other Lender or to provide funds to be provided by such other
Lender.
Section 2.06. Loan Account. The Administrative Agent shall maintain an
account on its books in the name of the Borrower (the "Loan Account") on which
the Borrower will be charged with all Loans made by Administrative Agent or the
Lenders to the Borrower or for the Borrower's account, including, accrued
interest, Lender Group Expenses, and any other Indebtedness. Administrative
Agent shall render monthly statements regarding the Loan Account to the Borrower
(with copies to the Lenders), including principal, interest, fees, and including
an itemization of all charges and expenses constituting Lender Group Expenses
owing, and such statements shall be conclusively presumed to be correct and
accurate and constitute an account stated between the Borrower and the Lender
Group unless, within 30 days after receipt thereof by the Borrower and the
Lenders, the Borrower or any Lender shall deliver to Administrative Agent
written objection thereto describing the error or errors contained in any such
statements. The Borrower hereby authorizes Administrative Agent to, and
Administrative Agent may, from time to time charge the Loan Account with all
Indebtedness (including all Loans as and when advanced and all interest accrued
thereon as and when due and payable hereunder and all Lender Group Expenses as
and when incurred) and any other amount due and payable under any Loan Document
to which the Borrower is a party, whether or not any Event of Default or Default
shall have occurred or be continuing or whether any of the conditions precedent
in Section 6.02 have been satisfied. Any amount charged to the Loan Account
shall be deemed a Loan hereunder made by the Lenders to the Borrower. The
Borrower confirms that any charges which Administrative Agent may so make to the
Loan Account as herein provided will be made as an accommodation to the Borrower
and solely at Administrative Agent's discretion. Whenever any payment to be made
under any such Loan Document shall be stated to be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall in such case be included in the computation of
interest or fees, as the case may be, provided that, if any such payment is made
by a charge to the Loan Account, such charge may be made by Administrative Agent
for the benefit of the Lender Group on any day, whether or not a Business Day.
Section 2.07. Prepayments.
(a) Generally. The Borrower may prepay Base Rate Loans upon
written or telephonic notice to the Administrative Agent (which shall promptly
notify the Lenders) on or prior to 11:00 a.m. (Los Angeles time) on the date of
prepayment, which notice, if
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telephonic, shall be immediately confirmed in writing. The notice shall specify
the prepayment date (which shall be a Business Day) and the amount of the
prepayment and shall be irrevocable and effective only upon receipt by the
Administrative Agent, provided that interest on the principal prepaid, accrued
to the prepayment date, shall be paid on the prepayment date. Prepayments shall
be by wire transfer of immediately available federal funds and if received by
the Administrative Agent on a non-Business Day or after 11:00 a.m. (Los Angeles
time) on a Business Day shall be deemed to have been received by the
Administrative Agent as of the opening of business on the immediately following
Business Day.
(b) Following Reduction of Credit Amounts. If, after giving
effect to any termination or reduction of the Aggregate Maximum Credit Amounts
pursuant to Section 2.03(b), the outstanding aggregate principal amount of the
Loans plus the Letter of Credit Usage exceeds the Aggregate Maximum Credit
Amounts, the Borrower shall prepay the Loans on the date of such termination or
reduction in an aggregate principal amount equal to the excess, together with
interest on the principal amount paid accrued to the date of such prepayment.
(c) Following Re-determination. Upon any re-determination or
adjustment of the amount of the Borrowing Base in accordance with Section 2.08
or adjustment in accordance with Sections 8.08(b) or 9.14, if the re-determined
or adjusted Borrowing Base is less than the sum of the aggregate outstanding
principal amount of the Loans plus the Letter of Credit Usage, then the Borrower
shall, within 3 Business Days of such determination or adjustment, prepay the
Loans in an aggregate principal amount equal to such excess, together with
interest on the principal amount paid accrued to the date of such prepayment.
(d) No Premium; Penalty. Prepayments permitted or required
under this Section 2.07 shall be without premium or penalty. Any prepayment may
be reborrowed during the Revolving Credit Period subject to the then effective
Aggregate Commitments.
Section 2.08. Borrowing Base.
(a) The Borrowing Base shall be determined (as to reserve
quantities and price) in accordance with Section 2.08(b) by the Administrative
Agent with the concurrence of the Required Lenders and is subject to
re-determination in accordance with Section 2.08(d). Upon any re-determination
of the Borrowing Base, such re-determination shall remain in effect until the
next successive Re-determination Date. "Re-determination Date" shall mean the
date that the re-determined Borrowing Base becomes effective subject to the
notice requirements specified in Section 2.08(e) both for scheduled
re-determinations and unscheduled re-determinations. So long as any of the
Commitments are in effect or any Loans are outstanding hereunder, this Agreement
shall be governed by the then effective Borrowing Base. During the period from
and after the Closing Date until the first Re-determination Date to occur after
the Closing Date, unless re-determined pursuant to Section 2.08(d) or adjusted
pursuant to Sections 2.08(c), 8.08(b) or 9.14, the amount of the
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Borrowing Base shall be $25,000,000, subject to monthly price adjustment as
provided in Section 2.08(f).
(b) Upon receipt of the reports required by Section 8.07(a)
through (d) and such other reports, data and supplemental information as may
from time to time be reasonably requested by the Agents (the "Engineering
Reports"), the Administrative Agent will calculate a re-determination of the
Borrowing Base. Such calculation will be in accordance with the provisions
contained in the definition of the term "Borrowing Base" in Section 1.02;
provided, however, the effect of any Risk Management Agreements or fixed price
sales contracts with investment grade counterparties, or purchasers shall be
taken into consideration by the Administrative Agent in making such calculation
and the resulting Borrowing Base shall be increased or decreased as the
Administrative Agent shall reasonably determined based upon such consideration.
The Administrative Agent shall notify the Lenders of the new Borrowing Base by
no later than the earlier of (i) 30 days following receipt by the Administrative
Agent of the Engineering Reports or (ii) 10 days prior to the next Scheduled
Re-determination Date, in each case assuming its receipt of the Engineering
Reports in a timely and complete manner.
(c) The Administrative Agent may exclude any Oil and Gas
Property or portion of production therefrom or any income from any other
Property from the Borrowing Base, at any time, because title information is not
reasonably satisfactory or such Property is not Mortgaged Property. Without
limitation of the forgoing, if the Escrow Agreement is terminated and the
Property subject thereof is not vested with the Borrower, then the Borrowing
Base shall be reduced by an amount equal to the value assigned such Property in
the most recently determined Borrowing Base.
(d) So long as any of the Commitments are in effect and until
payment in full of all Loans hereunder, on or around the 15th day of each March
and September, commencing March 15, 2000 (each being a "Scheduled
Re-determination Date"), the amount of the Borrowing Base shall be determined in
accordance with Section 2.08(b). Without limitation of the foregoing, the
Majority Lenders may initiate two (2) unscheduled re-determinations of the
Borrowing Base during any consecutive twelve (12) month period by specifying in
writing to the Borrower, with a copy to the Administrative Agent, the date on
which the Borrower is to furnish a Reserve Report in accordance with Section
8.07(b) and the date on which such re-determination is to occur. The Borrower
may also request two (2) unscheduled re-determinations during any consecutive
twelve (12) month period.
(e) The Administrative Agent shall promptly notify in writing
QSRD, the Borrower and the Lenders of the new Borrowing Base. Any
re-determination of the Borrowing Base shall not be in effect until written
notice is received by the Borrower.
(f) In addition to the re-determination of the Borrowing Base
as provided above, the valuation of the oil and gas reserves set forth in the
most recent Reserve Report shall be adjusted monthly by the Administrative Agent
with the concurrence of the Required Lenders, based upon the monthly pricing
report provided by the Borrower to the Administrative Agent pursuant to Section
8.07(e), such revaluation to be made by the
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Administrative Agent within 5 Business Days of its receipt of each such report,
and the Administrative Agent shall promptly notify in writing QSRD, the Borrower
and the Lenders of the revalued Borrowing Base. Any revaluation of the Borrowing
Base shall not be in effect until written notice is received by the Borrower.
Section 2.09. Registered Notes. The Borrower agrees to record each Loan
on the Register referred to in Section 12.06. Each Loan recorded on the Register
(the "Registered Loan") may not be evidenced by promissory notes other than
Registered Notes. Upon the registration of any Loan, the Borrower agrees, at the
request of any Lender, to execute and deliver to such Lender a promissory note,
in conformity with the terms of this Agreement, in registered form to evidence
such Registered Loan, in form and substance reasonably satisfactory to such
Lender, and registered as provided in Section 12.06(a) (a "Registered Note"),
payable to the order of such Lender and otherwise duly completed. Once recorded
on the Register, the Loan or Loans evidenced by such Registered Note may not be
removed from the Register so long as it remains outstanding, and a Registered
Note may not be exchanged for a promissory note that is not a Registered Note.
Section 2.10. Securitization.
The Borrower hereby acknowledges that the Lenders and any of their
Affiliates may sell or securitize the Loans (a "Securitization") through the
pledge of the Loans as collateral security for loans to such Lenders or their
Affiliates or through the sale of the Loans or the issuance of direct or
indirect interests in the Loans, which loans to such Lenders or their Affiliates
or direct or indirect interests will be rated by Moody's, Standard & Poor's or
one or more other rating agencies (the "Rating Agencies"). The Borrower (and
QSRD, if applicable) shall cooperate reasonably with such Lenders and their
Affiliates to effect the Securitization including, without limitation, by (a)
amending this Agreement and the other Loan Documents, and executing such
additional documents, as reasonably requested by such Lenders, in connection
with the Securitization; provided that (i) any such amendment or additional
documentation does not impose material additional costs on the Obligors, and
(ii) any such amendment or additional documentation does not materially
adversely affect the rights, or materially increase the obligations (including
administrative duties or reporting obligations), of the Obligors under the Loan
Documents or change or affect in a manner adverse to the Borrower the financial
terms of the Loans, (b) providing such information as may be reasonably
requested by such Lenders in connection with the rating of the Loans or the
Securitization, (c) providing in connection with any rating of the Loans, a
certificate (i) agreeing to indemnify such Lenders and any of their Affiliates,
any of the Rating Agencies, or any party providing credit support or otherwise
participating in the Securitization (collectively, the "Securitization Parties")
for any losses, claims, damages or liabilities (the "Liabilities") to which such
Lenders, their Affiliates or such Securitization Parties may become subject
insofar as the Liabilities arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any Loan Document
or in any writing delivered by or on behalf of the Obligors and their respective
Affiliates to the Lender Group in connection with any Loan Document or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary
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in order to make the statements therein, in light of the circumstances under
which they were made, not misleading and such indemnity shall survive any
transfer by such Lenders or their successors or assigns of the Loans and (ii)
agreeing to reimburse such Lenders and any of their Affiliates and other
Securitization Parties for any legal or other expenses reasonably incurred by
such Persons in connection with defending the Liabilities; and (d) providing
such information regarding the Obligors, the Collateral and other property,
assets and business of the Obligors (including appraisals and valuations) as may
be reasonably requested by such Lenders or their successors or assignees.
Section 2.11. Administrative Procedures and Settlement.
(a) Anything contained herein to the contrary notwithstanding,
the becoming due of any amount required to be paid under this Agreement, the Fee
Letter, any Registered Note, or any other Loan Document, whether of principal or
interest or fees or expenses or for any other Indebtedness, shall be deemed
irrevocably to be a request by the Borrower for a Loan on the due date in the
amount required to pay such principal, interest, fee, expense, or other
Indebtedness.
(b) Administrative Agent shall from time to time, but no less
frequently than weekly, notify each Lender of the date such Lender is to fund
its Loans, and the amount to be made available by it. If and to the extent that
a Lender and Administrative Agent so agree, at Administrative Agent's
discretion, the amount to be made available by such Lender on any date may be
netted against any amount owing to such Lender and otherwise payable by
Administrative Agent on account of payments received by it from the Borrower on
such date. The amount to be made available by each Lender on any date (which
date shall be a Business Day) shall be made available by it on such date to
Administrative Agent at the Administrative Agent Account, in immediately
available funds, not later than 12:00 p.m. (Los Angeles time). The obligation of
each Lender to Administrative Agent (as opposed to the Borrower) to fund its
Loans on the date specified by Administrative Agent is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including (i) any set off, counterclaim, recoupment, defense or other right
which such Lender may have against Administrative Agent, the Borrower or any
other Person for any reason whatsoever, (ii) the financial condition or
prospects of the Borrower, (iii) the failure of any other such Lender to make
funds available to Administrative Agent with respect to its Loans, (iv) the
occurrence or continuation of an Event of Default, whether the same shall occur
before or after Administrative Agent shall have made the Loans, or (v) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.
(c) The Borrower and the Lender Group hereby irrevocably
authorize Administrative Agent to disburse the proceeds of each Loan requested,
or deemed to be requested, pursuant to this Agreement as follows: (i) the
proceeds of each Loan requested shall (if Administrative Agent so requires,
subject to receipt by Administrative Agent of funds from the Lenders) be
disbursed by Administrative Agent in lawful money of the United States of
America in immediately available funds, in the case of the initial borrowing, in
accordance with the terms of a written disbursement letter from the Borrower,
and in the
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case of each subsequent borrowing, by wire transfer to the Designated Account or
such other bank account as may be agreed upon in writing by Borrower and
Administrative Agent from time to time, and (ii) the proceeds of each Loan
deemed made pursuant to Section 2.06 hereof shall be charged to the Loan Account
and disbursed by Administrative Agent by way of direct payment of the relevant
interest or other Indebtedness. The Borrower agrees to establish and maintain
the Designated Account with the Designated Account Bank for the purpose of
receiving the proceeds of the Loans requested by Borrower and made by
Administrative Agent or the Lenders hereunder.
(d) The Borrower and the Lender Group hereby irrevocably
authorizes and directs Administrative Agent to charge to the Borrower's Loan
Account hereunder, as a Loan deemed made to the Borrower, a sum sufficient to
pay all interest accrued on the Indebtedness during the immediately preceding
month and to pay all Lender Group Expenses at any time owed by any Obligor to
the Lender Group hereunder or under any of the Loan Documents; provided,
however, that Administrative Agent may, but shall not be required to, so charge
the Borrower's Loan Account during the existence of an Event of Default or if a
Default would result therefrom. Amounts so charged pursuant to this Section
shall be deemed Loans requested by the Borrower pursuant hereto.
(e) (i) Loans and payments will be settled among
Administrative Agent and the Lenders according to such procedures as
Administrative Agent and such Lenders may agree from time to time. These
procedures notwithstanding, each such Lender's obligation to fund its portion of
the Loans shall commence on the date such Loans are made by Administrative
Agent; however, if the Administrative Agent makes a Loan in compliance with
Section 2.02(c)(ii), such Lender's obligation to remit its portion of the Loans
shall occur on that date on which its obligation to remit its portion of the
Loans otherwise would have occurred had the prior notice and frequency
requirements of Section 2.02(c)(i) been satisfied. The foregoing shall not
relieve any Lender of its obligations to fund hereunder, but merely affects the
time within which it is to perform such obligations. Such payments to
Administrative Agent will be made by such Lenders without set-off, counterclaim
or reduction of any kind.
(ii) Subject to subsection (e)(i) above, Administrative
Agent may require the Lenders to settle Loans and payments on a daily basis (or
such lesser frequency as Administrative Agent may determine) (each day of
settlement being a "Settlement Date"). Administrative Agent will advise each
Lender by telephone or telecopy of the amount of each such Lender's Percentage
Share (in accordance with its Commitment) of the Revolving Facility Usage as of
the close of business of the Business Day immediately preceding the Settlement
Date. In the event that payments are necessary to adjust such Lender's actual
Percentage Share (in accordance with its Commitment) of the Revolving Facility
Usage as of any Settlement Date to equal the amount of such Lender's required
Percentage Share (in accordance with its Commitment) of the Revolving Facility
Usage, the party from which such payment is due will pay the other, in same day
funds, by wire transfer to the other's account not later than the applicable
time set forth in subsection (b) above.
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(iii) If any such payment is not made to
Administrative Agent by any such Lender on the Settlement Date applicable
thereto to the extent required by the terms hereof, such Lender shall be a
Defaulting Lender and Administrative Agent shall be entitled to recover for its
account such amount on demand from such Lender together with interest thereon at
the Defaulting Lenders Rate. Administrative Agent shall not be obligated to
transfer to a Defaulting Lender any payments made by Borrower to Administrative
Agent for the Defaulting Lender's benefit on account of its Loans. Any such
amounts payable to a Defaulting Lender shall instead be paid to or retained by
Administrative Agent. Administrative Agent may hold and, in its discretion,
re-lend to Borrower as Loans the amount of any or all such payments received or
retained by it for the account of such Defaulting Lender. Solely for the
purposes of voting or consenting to matters with respect to the Loan Documents
and determining Required Lenders, Defaulting Lender shall be deemed not to be a
"Lender" (in respect of its Loans and Commitment). This section shall remain
effective with respect to such Lender until (x) the Indebtedness under this
Agreement shall have been declared or shall have become immediately due and
payable or (y) the Lenders that are non-Defaulting Lenders and Administrative
Agent shall have waived such Lender's default in writing. The operation of this
section shall not be construed to increase or otherwise affect the Commitments
of any Lender other than such Defaulting Lender, or relieve or excuse the
performance by the Borrower of its duties and obligations hereunder.
Section 2.12. Administrative Agent Advances.
(a) Subject to the limitations set forth in the proviso
contained in this Section 2.12, Administrative Agent hereby is authorized by the
Borrower and the Lenders, from time to time in Administrative Agent's sole
discretion, (i) after the occurrence and during the continuance of a Default, or
(ii) at any time that any of the other applicable conditions precedent set forth
in Section 6.02 have not been satisfied, to make Loans to the Borrower on behalf
of the Lenders that Administrative Agent, in its discretion, deems necessary or
desirable (A) to preserve or protect the Collateral, or any portion thereof, (B)
to enhance the likelihood of repayment of the Indebtedness, or (C) to pay any
other amount chargeable to the Borrower pursuant to the terms of this Agreement,
including Lender Group Expenses and the costs, fees, and expenses described
herein (any of the Loans described in this Section 2.12 being hereinafter
referred to as "Administrative Agent Advances"); provided, however, that at no
time shall the aggregate amount of outstanding Administrative Agent Advances
under this Section 2.12(a) exceed the result of (1) the lesser of (A)
$2,500,000, and (B) 7.5% of the Borrowing Base then in effect, minus (2) the
amount of optional Overadvance Loans made by the Administrative Agent to the
Borrower pursuant to Section 2.13(a).
(b) Administrative Agent Advances shall be repayable on
demand, shall be secured by the Collateral Agent's Liens on the Collateral,
shall constitute Loans and Indebtedness hereunder, shall be allocated between
the Lenders (based upon their respective Percentage Shares), and shall bear
interest at the rate applicable from time to time to the Loans pursuant to
Section 3.02 hereof.
Section 2.13. Optional Overadvances.
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(a) Any contrary provision of this Agreement notwithstanding,
if the condition precedent set forth in Section 6.02(d) will not be satisfied in
respect to a particular Borrowing, the Lenders nonetheless hereby authorize
Administrative Agent and Administrative Agent may, but is not obligated to,
knowingly and intentionally continue to make Loans (on behalf of the Lenders) to
the Borrower such failure of condition notwithstanding, so long as, at any time,
(i) the outstanding Revolving Facility Usage does not exceed the Borrowing Base
by the result of (A) the lesser of (1) $2,500,000, and (2) 7.5% of the Borrowing
Base then in effect, minus (B) the amount of Administrative Agent Advances made
by the Administrative Agent to the Borrower pursuant to Section 2.12(a), and
(ii) the outstanding Revolving Facility Usage (except for and excluding amounts
charged to the Loan Account for interest, fees, or Lender Group Expenses) does
not exceed $50,000,000. The foregoing provisions are for the sole and exclusive
benefit of the Agents and the Lenders and are not intended to benefit the
Obligors in any way. The Loans that are made pursuant to this Section shall be
subject to the same terms and conditions as any other Loan, except that the rate
of interest applicable thereto shall be the Post-Default Rate without regard to
the presence or absence of a Default or Event of Default and the Administrative
Agent may make any such Loan without regard to the 5 Business Day notice
requirement set forth in Section 2.02(c).
(b) In the event Administrative Agent obtains actual knowledge
that the Revolving Facility Usage exceeds the amounts permitted by the preceding
paragraph, regardless of the amount of or reason for such excess, Administrative
Agent shall notify Lenders as soon as practicable (and prior to making any (or
any further) intentional Overadvances (except for and excluding amounts charged
to the Loan Account for interest, fees, or Lender Group Expenses) unless
Administrative Agent determines that prior notice would result in imminent harm
to the Collateral, or its value, and the Lenders thereupon shall, together with
Administrative Agent, jointly determine the terms of arrangements that shall be
implemented with the Borrower intended to reduce, within a reasonable time, the
outstanding principal amount of the Loans to an amount permitted by the
preceding paragraph. In the event any Lender disagrees over the terms of
reduction or repayment of any Overadvance, the terms of reduction or repayment
thereof shall be implemented according to the determination of the Majority
Lenders.
Each Lender shall be obligated to settle with
Administrative Agent as provided in Section 2.12 for the amount of such Lender's
Percentage Share of any unintentional Overadvances by Administrative Agent
reported to such Lender, any intentional Overadvances made as permitted under
this Section, and any Overadvances resulting from the charging to the Loan
Account of interest, fees, or Lender Group Expenses.
Section 2.14. Apportionment, Application, and Reversal of Payments. (i)
Except as otherwise provided with respect to Defaulting Lenders, and subject to
the Administrative Agent reservation of the right, in its sole discretion, to
exclude from any such payment collections that the Administrative Agent
determines may constitute amounts attributable to trust fund taxes or
Hydrocarbon Interests of third persons and subject to any other agreement among
the Lenders regarding the application of payments, aggregate principal and
interest payments shall be apportioned ratably among the Lenders (according to
the unpaid principal balance of the Indebtedness to which such payments relate
held by each individual Lender, but subject to the Fee Split Letter) and
payments of fees and expenses (other than fees
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designated for Administrative Agent's or Collateral Agent's sole and separate
accounts) shall, as applicable, be apportioned ratably among the Lenders (in
accordance with their applicable Percentage Share, but subject to the Fee Split
Letter). All payments on account of the payment of the Indebtedness shall be
remitted to Administrative Agent and all such payments and all proceeds of
Collateral received by any Agent, shall be applied as follows:
first, to pay any fees or Lender Group Expenses then due to
the Agents under the Loan Documents until paid in full,
second, to pay any fees or Lender Group Expenses then due
under the Loan Documents to the Lenders, in respect of their
Percentage Share thereof,
third, ratably to pay interest due in respect of all Loans
until paid in full;
fourth, ratably to pay principal of all Loans until paid in
full;
fifth, to be held by Administrative Agent as cash collateral
in accordance with Section 2.16(e) hereof with respect to
unreimbursed obligations in respect of Letters of Credit;
sixth, if an Event of Default has occurred and is continuing,
to pay any other Indebtedness due to the Agents or any Lender,
on a ratable basis, and
seventh, to Borrower and wired to its Designated Account.
Administrative Agent shall promptly distribute to each Lender, pursuant
to the applicable wire transfer instructions received from each Lender in
writing, such funds as it may be entitled to receive as provided above, subject
to a settlement delay as provided in Section 2.11.
(ii) For purposes of the foregoing,
"paid in full" with respect to interest shall include interest accrued after the
commencement of any Insolvency Proceeding irrespective of whether a claim for
such interest is allowable in such Insolvency Proceeding.
(iii) In the event of a direct
conflict between the priority provisions of this Section 2.14 and other
provisions contained in any other Loan Document, it is the intention of the
parties hereto that both such priority provisions in such documents shall be
read together and construed, to the fullest extent possible, to be in concert
with each other. In the event of any actual, irreconcilable conflict that cannot
be resolved as aforesaid, the terms and provisions of this Section 2.14 shall
control and govern.
Section 2.15. Cash Management.
(a) The Borrower shall (i) establish and maintain lock boxes
("Lockboxes") at one or more banks set forth on Schedule 2.15, and shall request
in writing and otherwise take
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such reasonable steps to ensure that all Account Debtors forward payment
directly to such Lockboxes, and (ii) deposit and cause QSRD and the Subsidiary
Guarantors to deposit or cause to be deposited promptly, and in any event no
later than the first Business Day after the date of receipt thereof, all cash,
checks, drafts or other similar items of payment made in respect of any and all
Collateral (whether or not otherwise delivered to a Lockbox) into bank accounts
in such Obligor's name (each a "Collection Account" and, collectively, the
"Collection Accounts") at banks set forth on Schedule 2.15 (each a "Collection
Account Bank" and, collectively, the "Collection Account Banks"). Each Obligor
shall establish and maintain a concentration account in its name (each a
"Concentration Account" and, collectively, the "Concentration Accounts") at the
bank or banks which shall be designated as the concentration account bank for
each such Obligor on Schedule 2.15 (each a "Concentration Account Bank" and,
collectively, the "Concentration Account Banks"), which banks shall be
satisfactory to the Administrative Agent.
(b) Each Concentration Account Bank, the Designated Account
Bank, and all Collection Account Banks shall establish and maintain tri-party
blocked account agreements with the Administrative Agent and the applicable
Obligor, in form and substance acceptable to the Administrative Agent. Each such
blocked account agreement shall provide, among other things, that (i) all items
of payment deposited in such accounts and proceeds thereof deposited in the
applicable Concentration Account are held by such banks as agent or
bailee-in-possession for the Administrative Agent, (ii) the bank executing such
agreement has no rights of setoff or recoupment or any other claim against such
account, as the case may be, other than for payment of its service fee and other
charges directly related to the administration of such account and for returned
checks or other items of payment, and (iii)(A) with respect to each bank at
which a Collection Account is located, such bank agrees, from and after a
receipt of a notice (an "Activation Notice") from the Administrative Agent
(which Activation Notice may be given by Administrative Agent at any time at
which a Triggering Event shall have occurred and is continuing), to forward
immediately all amounts in each Collection Account to such Obligor's
Concentration Account Bank and to commence the process of daily sweeps from such
Collection Account into the applicable Concentration Account, and (B) with
respect to each Concentration Account Bank, such bank agrees from and after the
receipt of an Activation Notice from Administrative Agent upon the occurrence
and during the continuance of a Triggering Event, to immediately forward all
amounts received in the applicable Concentration Account to the Administrative
Agent's Account; provided, however, that Administrative Agent reserves the
right, in its sole discretion, to require that collections representing amounts
attributable to trust fund taxes or Hydrocarbon Interests of third Persons be
segregated by the Collection Account Banks and held in a separate account, (it
being the intent of the Administrative Agent, to the extent it has sufficient
information to do so, to so segregate trust fund taxes or Hydrocarbon Interests
of third Persons, and avoid the deposit of such funds into the Administrative
Agent's Account). From and after the date Administrative Agent has delivered an
Activation Notice to any bank with respect to any Collection's Account(s), no
Obligor shall, or shall cause or permit any Subsidiary thereof to, accumulate or
maintain cash in disbursement or payroll accounts as of any date of
determination in excess of checks outstanding against such accounts as of that
date and amounts necessary to meet minimum balance requirements.
(c) So long as no Default or Event of Default has occurred and
is continuing, the Obligors may amend Schedule 2.15 to add or replace a
Collection Account Bank, Lockbox or Collection Account or to replace any
Concentration Account or the Designated Account;
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provided, however, that (i) Administrative Agent shall have consented in writing
in advance to the opening of such account or Lockbox with the relevant bank and
(ii) prior to the time of the opening of such account or Lockbox, the applicable
Obligor or the Subsidiaries thereof, as applicable, and such bank shall have
executed and delivered to Administrative Agent a tri-party blocked account
agreement, in form and substance satisfactory to Administrative Agent. The
Obligors shall close any of their accounts (and establish replacement accounts
in accordance with the foregoing sentence) promptly and in any event within 30
days of notice from Agent that the creditworthiness of any bank holding an
account is no longer acceptable in Administrative Agent's reasonable judgment,
or as promptly as practicable and in any event within 60 days of notice from
Administrative Agent that the operating performance, funds transfer or
availability procedures or performance with respect to accounts or lockboxes of
the bank holding such accounts or Administrative Agent's liability under any
tri-party blocked account agreement with such bank is no longer acceptable in
Administrative Agent's reasonable judgment.
(d) The Lockboxes, Collection Accounts, Designated Account and
the Concentration Accounts shall be cash collateral accounts, with all cash,
checks and similar items of payment in such accounts securing payment of the
Loans and all other Indebtedness, and in which each Obligor and each Subsidiary
Guarantor shall have granted a Lien to Administrative Agent pursuant to the
Security Agreement.
(e) Each Obligor shall and shall cause its Affiliates,
officers, employees, agents, directors or other Persons acting for or in concert
with such Obligor (each a "Related Person") to (i) hold in trust for
Administrative Agent all checks, cash and other items of payment received by
Obligor or any such Related Person, and (ii) within one (1) Business day after
receipt by such Obligor or any Related Person of any checks, cash or other items
of payment, deposit the same into an Obligor Account of such Obligor. Each
Obligor and each Related Person thereof acknowledges and agrees that all cash,
checks or items of payment constituting proceeds of Collateral are the property
of Collateral Agent for the benefit of the Lenders. All proceeds of the sale or
other disposition of any Collateral, shall be deposited directly into the
applicable Obligor Account.
Section 2.16. Letter of Credit Subfacility.
(a) Subject to the terms and conditions of this Agreement,
Administrative Agent agrees to issue letters of credit for the account of
Borrower (each, an "L/C") or to issue guarantees of payment, indemnities,
participations and/or undertakings (each such guaranty, indemnity, participation
or undertaking an "L/C Guaranty") with respect to letters of credit issued by an
issuing bank for the account of Borrower. Agent shall have no obligation to
issue a Letter of Credit if any of the following would result:
(i) the aggregate amount of all Letter of Credit Usage
would exceed the Borrowing Base minus the amount of all outstanding
Loans; or
(ii) the aggregate amount of all Letter of Credit Usage
would exceed the Maximum Credit Amount minus the amount of all
outstanding Loans; or
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(iii) the outstanding Indebtedness would exceed the
Maximum Credit Amount; or
(iv) the aggregate amount of all Letters of Credit Usage
would exceed the L/C Commitment.
Borrower expressly understands and agrees that Administrative Agent shall have
no obligation to arrange for the issuance by issuing banks of the letters of
credit that are to be the subject of L/C Guarantees. Borrower and the Lender
Group acknowledge and agree that certain of the letters of credit that are to be
the subject of L/C Guarantees may be outstanding on the Closing Date. Each
Letter of Credit shall have an expiry date no later than as provided in Section
6.03 and all such Letters of Credit shall be in form and substance acceptable to
Administrative Agent in its sole discretion. If the Lender Group is obligated to
advance funds under a Letter of Credit, Borrower immediately shall reimburse
such amount to Administrative Agent and, in the absence of such reimbursement,
the amount so advanced immediately and automatically shall be deemed to be a
Loan hereunder and, thereafter, shall bear interest at the rate then applicable
to such Advances under Section 3.02.
(b) Borrower hereby agrees to indemnify, save, defend, and
hold the Lender Group harmless from any loss, cost, expense, or liability,
including payments made by the Lender Group, expenses, and reasonable attorneys
fees incurred by the Lender Group arising out of or in connection with any
Letter of Credit, other than those resulting from the gross negligence or
willful misconduct of any member of the Lender Group. Borrower agrees to be
bound by the issuing bank's regulations and interpretations of any Letters of
Credit guaranteed by the Lender Group and opened to or for Borrower's account or
by Administrative Agent's interpretations of any L/C issued by the Lender Group
to or for Borrower's account, even though this interpretation may be different
from Borrower's own, and Borrower understands and agrees that the Lender Group
shall not be liable for any error, negligence, or mistake, whether of omission
or commission, in following Borrower's instructions or those contained in the
Letter of Credit or any modifications, amendments, or supplements thereto.
Borrower understands that the L/C Guarantees may require the Lender Group to
indemnify the issuing bank for certain costs or liabilities arising out of
claims by Borrower against such issuing bank. Borrower hereby agrees to
indemnify, save, defend, and hold the Lender Group harmless with respect to any
loss, cost, expense (including reasonable attorneys fees), or liability incurred
by the Lender Group under any L/C Guaranty as a result of the Lender Group's
indemnification of any such issuing bank, other than those resulting from the
gross negligence or willful misconduct of any member of the Lender Group.
(c) Borrower hereby authorizes and directs any bank that
issues a letter of credit guaranteed by the Lender Group to deliver to
Administrative Agent all instruments, documents, and other writings and property
received by the issuing bank pursuant to such letter of credit, and to accept
and rely upon Administrative Agent's instructions and agreements with respect to
all matters arising in connection with such letter of credit and the related
application. Borrower may or may not be the "applicant" or "account party" with
respect to such letter of credit.
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(d) Any and all charges, commissions, fees, and costs incurred
by Administrative Agent relating to the letters of credit guaranteed by the
Lender Group shall be considered Lender Group Expenses for purposes of this
Agreement and immediately shall be reimbursable by Borrower to Administrative
Agent.
(e) Immediately upon the termination of this Agreement,
Borrower agrees to either (i) provide cash collateral to be held by
Administrative Agent in an amount equal to 105% of the maximum amount of the
Lender Group's obligations under outstanding Letters of Credit, or (ii) cause to
be delivered to Administrative Agent releases of all of the Lender Group's
obligations under outstanding Letters of Credit. At Administrative Agent's
discretion, any proceeds of Collateral received by Administrative Agent after
the occurrence and during the continuation of an Event of Default may be held as
the cash collateral required by this Section 2.16(e).
(f) If by reason of (i) any change in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application
by any governmental authority of any such applicable law, treaty, rule, or
regulation, or (ii) compliance by the issuing bank or Administrative Agent with
any direction, request, or requirement (irrespective of whether having the force
of law) of any governmental authority or monetary authority including, without
limitation, Regulation D of the Board of Governors of the Federal Reserve System
as from time to time in effect (and any successor thereto):
(A) any reserve, deposit, or similar
requirement is or shall be imposed or modified in respect of any Letters of
Credit issued hereunder, or
(B) there shall be imposed on any Agent, the
issuing bank, or any member of the Lender Group any other condition regarding
any letter of credit, or Letter of Credit, as applicable, issued pursuant
hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to the issuing bank or the Lender Group of issuing, making, guaranteeing, or
maintaining any letter of credit, or Letter of Credit, as applicable, or to
reduce the amount receivable in respect thereof by such issuing bank or the
Lender Group, then, and in any such case, the Lender Group may, at any time
within a reasonable period after the additional cost is incurred or the amount
received is reduced, notify Borrower, and Borrower shall pay on demand such
amounts as the issuing bank or Administrative Agent may specify to be necessary
to compensate the issuing bank or the Lender Group for such additional cost or
reduced receipt, together with interest on such amount from the date of such
demand until payment in full thereof at the rate set forth in Section 3.02(a) or
(b), as applicable. The determination by the issuing bank or Administrative
Agent, as the case may be, of any amount due pursuant to this Section 2.16(f),
as set forth in a certificate setting forth the calculation thereof in
reasonable detail, shall, in the absence of manifest or demonstrable error, be
final and conclusive and binding on all of the parties hereto.
(g) Participations:
(i) Immediately upon issuance of any Letter of Credit in
accordance with this Section 2.16, each Lender shall be deemed to have
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irrevocably and unconditionally purchased and received without recourse
or warranty, an undivided interest and participation in the credit
support or enhancement provided through Administrative Agent to such
issuer in connection with the issuance of such Letter of Credit, equal
to such Lender's Percentage Share of the face amount of such Letter of
Credit (including, without limitation, all obligations of Borrower with
respect thereto, and any security therefor or guaranty pertaining
thereto).
(ii) Upon the request of any Lender, Administrative Agent
shall furnish to such Lender copies of any Letter of Credit,
reimbursement agreements executed in connection therewith, application
for any Letter of Credit and credit support or enhancement provided
through Administrative Agent in connection with the issuance of any
Letter of Credit, and such other documentation as may reasonably be
requested by such Lender.
(iii) The obligations of each Lender to make payments to
Administrative Agent with respect to any Letter of Credit or with
respect to any credit support or enhancement provided through
Administrative Agent with respect to a Letter of Credit, and the
obligations of Borrower to make payments to Administrative Agent, for
the account of the Lenders, shall be irrevocable, not subject to any
qualification or exception whatsoever, including any of the following
circumstances:
(A) any lack of validity or
enforceability of this Agreement or any of the other Loan Documents;
(B) the existence of any claim,
setoff, defense or other right which Borrower may have at any time against a
beneficiary named in a Letter of Credit or any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), any Lender,
any Agent, the issuer of such Letter of Credit, or any other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transactions between Borrower or any other Person and the beneficiary named in
any Letter of Credit);
(C) any draft, certificate or any
other document presented under the Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(D) the surrender or impairment of
any security for the performance or observance of any of the terms of any of the
Loan Documents; or
(E) the occurrence of any Default or
Event of Default.
(h) In the event any payment by or on behalf of Borrower
received by Administrative Agent with respect to any Letter of Credit (or any
guaranty by Borrower or reimbursement obligation of Borrower relating thereto)
and distributed by the Administrative Agent to the Lenders on account of their
respective participations therein, is thereafter set aside,
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avoided or recovered from Administrative Agent in connection with any
receivership, liquidation or bankruptcy proceeding, the Lenders shall, upon
demand by Administrative Agent, pay to Administrative Agent their respective
Percentage Shares of such amount set aside, avoided or recovered, together with
interest at the rate required to be paid by Administrative Agent upon the amount
required to be repaid by it.
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01. Repayment of Loans. The Borrower will pay to the
Administrative Agent, for the account of each Lender, the entire amount of the
Indebtedness on the Maturity Date.
Section 3.02. Interest.
(a) The Borrower will pay to the Administrative Agent, for
account of each Lender, interest on the unpaid principal amount of each Loan
made by such Lender for the period commencing on the date such Loan is made to
but excluding the date such Loan shall be paid in full, at the Base Rate (as in
effect from time to time) plus the Applicable Margin, but in no event to exceed
the Highest Lawful Rate; provided, however, that, so long as no Default has
occurred and is continuing, that portion, if any, of the Applicable Margin in
excess of 2.00% per annum shall, in the absence of an election by the Borrower
to pay such interest in cash, be paid-in-kind by being added to the principal
balance of the Loans; provided further, however, that the Borrower may, on or
prior to the date that is 5 Business Days prior to the due date thereof, elect
to pay all accrued and unpaid interest under this Section 3.02(a) in cash.
(b) Notwithstanding the foregoing, at any time that an Event
of Default has occurred and is continuing, the Borrower will pay to the
Administrative Agent, for the account of each Lender, interest at the applicable
Post-Default Rate on the unpaid principal of each Loan made by such Lender, and
(to the fullest extent permitted by law) on each other amount payable by the
Borrower hereunder or under any other Loan Document to or for account of such
Lender.
(c) Accrued interest on Base Rate Loans shall be payable
monthly, in arrears, on the first day of each month and on the Maturity Date.
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01. Payments. Except to the extent otherwise provided herein,
all payments of principal, interest, Letter of Credit fees, and other amounts to
be made by the Borrower under this Agreement and any other Loan Document shall
be made in Dollars, in immediately available funds, to the Administrative Agent
at the Administrative Agent's
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Account, not later than 10:00 a.m. Los Angeles time on the date on which such
payments shall become due (each such payment made after such time on such due
date to be deemed to have been made on the next succeeding Business Day). Such
payments shall be made without (to the fullest extent permitted by applicable
law) defense, set-off or counterclaim, but shall not constitute a waiver,
release or estoppel with respect to any such defense, set-off or counterclaim.
Each payment to be made to the Administrative Agent under this Agreement or any
other Loan Document for account of a Lender shall be paid promptly by
Administrative Agent to such Lender in immediately available funds.
Section 4.02. Pro Rata Treatment. Except to the extent otherwise
provided herein (or otherwise agreed to between the Lenders), each Lender agrees
that: (i) each borrowing from the Lenders under Section 2.01 shall be made from
each Lender pro rata in accordance with its Percentage Share and each
termination or reduction of the amount of the Aggregate Maximum Credit Amounts
under Section 2.03(b) shall be applied to the Commitment of each Lender, pro
rata in accordance with its Percentage Share; (ii) each payment of principal of
Loans by the Borrower shall be made for account of the Lenders pro rata in
accordance with the respective unpaid principal amount of the Loans held by the
Lenders; (iii) each payment of interest on Loans by the Borrower shall be made
for account of the Lenders pro rata in accordance with the amounts of interest
due and payable to the respective Lenders; and (iv) each reimbursement by the
Borrower of disbursements under Letters of Credit shall be made for account of
the Administrative Agent or, if funded by the Lenders, pro rata for the account
of the Lenders in accordance with the amounts of reimbursement obligations due
and payable to each respective Lender.
Section 4.03. Computations. Interest on Loans shall be computed on the
basis of a year of 360 days and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which such interest is
payable, unless such calculation would exceed the Highest Lawful Rate, in which
case interest shall be calculated on the per annum basis of a year of 365 or 366
days, as the case may be.
Section 4.04. Non-receipt of Funds by the Administrative Agent. Unless
the Administrative Agent shall have been notified by a Lender or the Borrower
prior to the date on which such notifying party is scheduled to make payment to
the Administrative Agent (in the case of a Lender) of the proceeds of a Loan or
a payment under a Letter of Credit to be made by it hereunder or (in the case of
the Borrower) a payment to the Administrative Agent for account of one or more
of the Lenders hereunder (such payment being herein called the "Required
Payment"), which notice shall be effective upon receipt, that it does not intend
to make the Required Payment to the Administrative Agent, the Administrative
Agent may assume that the Required Payment has been made and may, in reliance
upon such assumption (but shall not be required to), make the amount thereof
available to the intended recipient(s) on such date; and, if such Lender or the
Borrower (as the case may be) has not in fact made the Required Payment to the
Administrative Agent, the recipient(s) of such payment shall, on demand, repay
to the Administrative Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Administrative Agent until but excluding the
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date the Administrative Agent recovers such amount at a rate per annum which,
for any Lender as recipient, will be equal to the Federal Funds Rate, and for
the Borrower as recipient, will be equal to the Base Rate plus the Applicable
Margin.
Section 4.05. Set-off- Sharing of Payments, Etc.
(a) The Borrower agrees that, in addition to (and without
limitation of) any right of set-off, bankers' lien or counterclaim a Lender may
otherwise have, after the occurrence and during the continuation of a Default,
each Lender shall have the right and be entitled (after consultation with the
Collateral Agent), at its option, to offset balances held by it or by any of its
Affiliates for account of any Obligor at any of its offices, in Dollars or in
any other currency, against any principal of or interest on any of such Lender's
Loans, or any other amount payable to such Lender hereunder, which is not paid
when due (regardless of whether such balances are then due to such Obligor), in
which case it shall promptly notify such Obligor and the Collateral Agent
thereof, provided that such Lender's failure to give such notice shall not
affect the validity thereof.
(b) If any Lender shall obtain payment of any principal of or
interest on any Loan made by it to any Obligor under this Agreement or any other
Loan Document through the exercise of any right of set-off, banker's lien or
counterclaim or similar right or otherwise, and, as a result of such payment,
such Lender shall have received a greater percentage of the principal or
interest then due hereunder by the Borrower to such Lender than the percentage
received by any other Lenders, it shall promptly (i) notify the Administrative
Agent and each other Lender thereof and (ii) purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Loans made by such other Lenders (or in interest due thereon,
as the case may be) in such amounts, and make such other adjustments from time
to time as shall be equitable, to the end that all the Lenders shall share the
benefit of such excess payment (net of any expenses which may be incurred by
such Lender in obtaining, or preserving such excess payment) pro rata in
accordance with the unpaid principal and/or interest on the Loans held by each
of the Lenders. To such end all the Lenders shall make appropriate adjustments
among themselves (by the resale of participations sold or otherwise) if such
payment is rescinded or must otherwise be restored. QSRD and the Borrower agree
that any Lender so purchasing a participation (or direct interest) in the Loans
made by other Lenders (or in interest due thereon, as the case may be) may
exercise all rights of set-off, banker's lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender were a direct
holder of Loans in the amount of such participation. Nothing contained herein
shall require any Lender to exercise any such right or shall affect the right of
any Lender to exercise, and retain the benefits of exercising, any such right
with respect to any other indebtedness or obligation of such Obligor. If under
any applicable bankruptcy, insolvency or other similar law, any Lender receives
a secured claim in lieu of a set-off to which this Section 4.05 applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders entitled
under this Section 4.05 to share the benefits of any recovery on such secured
claim.
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Section 4.06. Taxes.
(a) Payments Free and Clear. Any and all payments by any
Obligor hereunder or under any other Loan Document shall be made, in accordance
with Section 4.01, free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding, in the case of each Lender
and the Agents, taxes imposed on its income, and franchise or similar taxes
imposed on it, by (i) any jurisdiction (or political subdivision thereof) of
which the Agents or such Lender, as the case may be, is a citizen or resident
(ii) the jurisdiction (or any political subdivision thereof) in which the Agents
or such Lender is organized, or (iii) any jurisdiction (or political subdivision
thereof) in which such Lender or the Agents is presently doing business which
taxes are imposed solely as a result of doing business in such jurisdiction (all
such non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If such Obligor shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to the Lenders or the Agents: (i) the sum payable shall be increased
by the amount necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 4.06) such
Lender or the Agents (as the case may be) shall receive an amount equal to the
sum it would have received had no such deductions been made, (ii) such Obligor
shall make such deductions and (iii) such Obligor shall pay the full amount
deducted to the relevant taxing authority or other Governmental Authority in
accordance with applicable law.
(b) Other Taxes. In addition, to the fullest extent permitted
by applicable law, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, any
Assignment or any other Loan Document (hereinafter referred to as "Other
Taxes").
(c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE BORROWER WILL INDEMNIFY EACH LENDER AND THE AGENTS FOR THE
FULL AMOUNT OF TAXES AND OTHER TAXES (INCLUDING, BUT NOT LIMITED TO, ANY TAXES
OR OTHER TAXES IMPOSED BY ANY GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE UNDER
THIS SECTION 4.06) PAID BY SUCH LENDER OR THE AGENTS (ON THEIR BEHALF OR ON
BEHALF OF ANY LENDER), AS THE CASE MAY BE, AND ANY LIABILITY (INCLUDING
PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO,
WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED
UNLESS THE PAYMENT OF SUCH TAXES WAS NOT CORRECTLY OR LEGALLY ASSERTED AND SUCH
LENDER'S PAYMENT OF SUCH TAXES OR OTHER TAXES WAS THE RESULT OF ITS GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. ANY PAYMENT PURSUANT TO SUCH INDEMNIFICATION
SHALL BE MADE WITHIN THIRTY ~30) DAYS
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AFTER THE DATE ANY LENDER OR THE AGENTS, AS THE CASE MAY BE, MAKES WRITTEN
DEMAND THEREFOR. IF ANY LENDER OR THE AGENTS RECEIVES A REFUND OR CREDIT IN
RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH SUCH LENDER OR THE AGENTS HAS
RECEIVED PAYMENT FROM THE BORROWER IT SHALL PROMPTLY NOTIFY THE BORROWER OF SUCH
REFUND OR CREDIT AND SHALL, IF NO DEFAULT HAS OCCURRED AND IS CONTINUING, WITHIN
THIRTY (30) DAYS AFTER RECEIPT OF A REQUEST BY THE BORROWER (OR PROMPTLY UPON
RECEIPT, IF THE BORROWER HAS REQUESTED APPLICATION FOR SUCH REFUND OR CREDIT
PURSUANT HERETO), PAY AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT TO THE BORROWER
WITHOUT INTEREST (BUT WITH ANY INTEREST SO REFUNDED OR CREDITED), PROVIDED THAT
THE BORROWER, UPON THE REQUEST OF SUCH LENDER OR THE AGENTS, AGREES TO RETURN
SUCH REFUND OR CREDIT (PLUS PENALTIES, INTEREST OR OTHER CHARGES) TO SUCH LENDER
OR THE AGENTS IN THE EVENT SUCH LENDER OR THE AGENTS ARE REQUIRED TO REPAY SUCH
REFUND OR CREDIT.
(d) Lender Representations.
(i) Each Lender represents that it is either (i) organized
under the laws of the United States of America or any state thereof or
(ii) it is entitled to complete exemption from United States
withholding tax imposed on or with respect to any payments, including
fees, to be made to it pursuant to this Agreement and the other Loan
Documents (A) under an applicable provision of a tax convention to
which the United States of America is a party or (B) because it is
acting through a branch, agency or office in the United States of
America and any payment to be received by it hereunder is effectively
connected with a trade or business in the United States of America.
Each Lender that is not a corporation organized under the laws of the
United States of America or any state thereof agrees to provide to the
Borrower and the Administrative Agent on the Closing Date, or on the
date of its delivery of the Assignment pursuant to which it becomes a
Lender, and at such other times as required by United States law or as
the Borrower or the Administrative Agent shall reasonably request, two
accurate and complete original signed copies of either (A) Internal
Revenue Service Form 4224 (or successor form) certifying that all
payments to be made to it hereunder will be effectively connected to a
United States trade or business (the "Form 4224 Certification") or (B)
Internal Revenue Service Form 1001 (or successor form) certifying that
it is entitled to the benefit of a provision of a tax convention to
which the United States of America is a party which completely exempts
from United States withholding tax all payments to be made to it
hereunder (the "Form 1001 Certification"). In addition, each Lender
agrees that if it previously filed a Form 4224 Certification, it will
deliver to the Borrower and the Administrative Agent a new Form 4224
Certification prior to the first
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payment date occurring in each of its subsequent taxable years; and if
it previously filed a Form 1001 Certification, it will deliver to the
Borrower and the Administrative Agent a new certification prior to the
first payment date falling in the third year following the previous
filing of such certification. Each Lender also agrees to deliver to the
Borrower and the Administrative Agent such other or supplemental forms
as may at any time be required as a result of changes in applicable law
or regulation in order to confirm or maintain in effect its entitlement
to exemption from United States withholding tax on any payments
hereunder, provided that the circumstances of such Lender at the
relevant time and applicable laws permit it to do so. If a Lender
determines, as a result of any change in either (i) a Governmental
Requirement or (ii) its circumstances, that it is unable to submit any
form or certificate that it is obligated to submit pursuant to this
Section 4.06, or that it is required to withdraw or cancel any such
form or certificate previously submitted, it shall promptly notify the
Borrower and the Administrative Agent of such fact. If a Lender is
organized under the laws of a jurisdiction outside the United States of
America, unless the Borrower and the Administrative Agent have received
a Form 1001 Certification or Form 4224 Certification satisfactory to
them indicating that all payments to be made to such Lender hereunder
are not subject to United States withholding tax, the Administrative
Agent (in consultation with the Borrower) shall withhold taxes from
such payments at the applicable statutory rate. Each Lender agrees to
indemnify and hold harmless from any United States taxes, penalties,
interest and other expenses, costs and losses incurred or payable by
(i) the Borrower or the Administrative Agent as a result of such
Lender's failure to submit any form or certificate that it is required
to provide pursuant to this Section 4.06 or (ii) the Borrower or the
Administrative Agent as a result of their reliance on any such form or
certificate which such Lender has provided to them pursuant to this
Section 4.06.
(ii) For any period with respect to which a Lender has
failed to provide the Borrower with the form required pursuant to this
Section 4.06, if any (other than if such failure is due to a change in
a Governmental Requirement occurring subsequent to the date on which a
form originally was required to be provided), such Lender shall not be
entitled to indemnification under Section 4.06 with respect to taxes
imposed by the United States which taxes would not have been imposed
but for such failure to provide such forms; provided, however, that
should a Lender, which is otherwise exempt from or subject to a reduced
rate of withholding tax becomes subject to taxes because of its failure
to deliver a form required hereunder, the Borrower shall take such
steps as such Lender shall reasonably request to assist such Lender to
recover such taxes.
(iii) Any Lender claiming any additional amounts payable
pursuant to this Section 4.06 shall use reasonable efforts (consistent
with legal
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and regulatory restrictions) to file any certificate or document
requested by the Borrower or the Administrative Agent or to change the
jurisdiction of its lending office or to contest any tax imposed if the
making of such a filing or change or contesting such tax would avoid
the need for or reduce the amount of any such additional amounts that
may thereafter accrue and would not, in the sole determination of such
Lender, be otherwise disadvantageous to such Lender.
Section 4.07. Disposition of Proceeds . The Security Instruments
contain an assignment unto and in favor of the Collateral Agent for the benefit
of the Lenders of all production and all proceeds attributable thereto which may
be produced from or allocated to the Mortgaged Property, and the Security
Instruments further provide in general for the application of such proceeds to
the satisfaction of the Indebtedness and other obligations described therein and
secured thereby. Notwithstanding the assignment contained in such Security
Instruments, until the occurrence of an Event of Default, the Lenders agree that
they will neither notify the purchaser or purchasers of such production nor take
any other action to cause such proceeds to be remitted to the Lenders, but the
Lenders will instead permit such proceeds to be paid to QSRD and its
Subsidiaries. In addition, until the occurrence of an Event of Default, the
Lenders will, upon written request of the Borrower given to the Collateral
Agent, execute and deliver, at the Borrower's expense, such transfer orders and
other instruments reasonably necessary to allow payment of production proceeds
directly to QSRD and its Subsidiaries.
ARTICLE V
[INTENTIONALLY OMITTED]
ARTICLE VI
CONDITIONS PRECEDENT AND SUBSEQUENT
Section 6.01. Initial Funding. The obligation of the Lenders to make
the Initial Funding is subject to: (i) the receipt by the Agents of all fees
payable pursuant to Section 2.04 or otherwise payable under this Agreement, and
(ii) the receipt by the Agents of the following documents and satisfaction of
the other conditions provided in this Section 6.01, each of which shall be
satisfactory to the Agents in form and substance:
(a) A certificate of the Secretary or an Assistant Secretary
of the Borrower setting forth (i) resolutions of its board of directors with
respect to the authorization of the Borrower to execute and deliver the Loan
Documents to which it is a party and to enter into the transactions contemplated
in the Loan Documents, (ii) the officers of the Borrower (y) who are authorized
to sign the Loan Documents to which Borrower is a party and (z) who will, until
replaced by another officer or officers duly authorized for that purpose, act as
its representative for the purposes of signing Loan Documents and giving notices
and other communications in connection with this Agreement, the other Loan
Documents and the transactions contemplated hereby, (iii) specimen signatures of
the authorized officers, and (iv) the articles or certificate of incorporation
and bylaws of the Borrower, certified as being
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true and complete. The Agents and the Lenders may conclusively rely on such
certificate until the Agents receive notice in writing from the Borrower to the
contrary.
(b) A certificate of the Secretary or an Assistant Secretary
of QSRD and each Subsidiary Guarantor setting forth (i) resolutions of its board
of directors with respect to the authorization of such Person to execute and
deliver the Loan Documents to which it is a party and to enter into the
transactions contemplated in the Loan Documents, (ii) its officers (y) who are
authorized to sign the Loan Documents to which it is a party and (z) who will,
until replaced by another officer or officers duly authorized for that purpose,
act as its representative for the purposes of signing Loan Documents and giving
notices and other communications in connection with this Agreement, the other
Loan Documents and the transactions contemplated hereby, (iii) specimen
signatures of the authorized officers, and (iv) the articles or certificate of
incorporation and bylaws of such Person, certified as being true and complete.
The Agents and the Lenders may conclusively rely on such certificate until the
Agents receive notice in writing from the Borrower to the contrary.
(c) Certificates of the appropriate state agencies with
respect to the existence, qualification and good standing of QSRD, the Borrower
and each Subsidiary Guarantor.
(d) A compliance certificate which shall be substantially in
the form of Exhibit C-1, duly and properly executed by a Responsible Officer and
dated as of the date of the Initial Funding.
(e) The Security Instruments described on Schedule S-1 duly
completed and executed in sufficient number of counterparts for recording, if
necessary.
(f) The Transfer Order Letters to the purchasers, the holders
of the working interests (with respect to payments due to the holders of net
revenue, overriding royalty and similar Hydrocarbon Interests), paying agents or
others responsible for the payment of the proceeds of Hydrocarbon production
with respect to each Oil and Gas Property of the Borrower, in each case in form
and substance satisfactory to the Agents.
(g) The following opinions:
(i) an opinion of Haynes and Boone, L.L.P., special
counsel to the Borrower, in form and substance reasonably satisfactory
to the Agents.
(ii) an opinion of local counsel in each of the following
jurisdictions: Louisiana, Oklahoma, Nevada, Kansas, Wyoming, Kentucky,
(if available, and, if not, as a condition subsequent under Section
6.05), and New Mexico, in each case in form and substance satisfactory
to the Agents.
(h) A certificate of insurance coverage of QSRD evidencing
that QSRD and its Subsidiaries are carrying insurance in accordance with Section
7.19 hereof.
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(i) The Agents and the Lenders shall be reasonably satisfied
with the status of title and the environmental condition of the Properties of
the Borrower and the Subsidiary Guarantors.
(j) Multiple originals of the Security Instruments and
accompanying financing statements covering the Collateral for filing and
recordation in the appropriate offices to establish and perfect the Liens
created thereby; and the Agents shall be reasonably satisfied that, upon such
filing and recordation, the Security Instruments create valid and perfected,
first priority Liens on not less than 95% of each of proved producing and the
total proved PV-10 Value of the Oil and Gas Properties included in the Initial
Reserve Report, and on 100% of the Principal Properties.
(k) The Agents shall have been furnished with appropriate UCC
search certificates reflecting no prior Liens except those contemplated by
Section 9.02.
(l) The Initial Reserve Reports.
(m) The Pay-Off Letter together with the Termination
Agreement, in each case in form and substance satisfactory to the Agents, duly
executed and delivered by all parties thereto.
(n) The Estoppel Letter duly executed and delivered by all
parties thereto.
(o) The Fee Letter duly executed and delivered by all parties
thereto.
(p) The Side Letter duly executed and delivered by all parties
thereto.
(q) The Purchase Agreement duly executed and delivered by all
parties thereto.
(r) The Resignation and Appointment Agreement duly executed
and delivered by all parties thereto.
(s) The Intercompany Subordination Agreement duly executed and
delivered to all parties thereto.
(t) Borrower shall have Excess Availability of no less than
$5,000,000.
(u) Such other documents as the Agents or any Lender or
special counsel to the Agents may reasonably request.
Section 6.02. Initial and Subsequent Loans. The obligation of the
Lenders to make Loans to the Borrower upon the occasion of each borrowing
hereunder and to issue, renew, extend or reissue Letters of Credit for the
account of the Borrower (including the Initial Funding) is subject to the
further conditions precedent that, as of the date of such Loans or issuance,
renewal, extension, or reissuance of a Letter of Credit, and after giving effect
thereto: (a) no Default shall have occurred and be continuing; (b) no Material
Adverse Effect
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shall have occurred; (c) the representations and warranties made by QSRD and its
Subsidiaries in Article VII and in the Loan Documents shall be true on and as of
the date of the making of such Loans or issuance, renewal, extension, or
reissuance of a Letter of Credit with the same force and effect as if made on
and as of such date and following such new borrowing or issuance, renewal,
extension, or reissuance of a Letter of Credit, except to the extent such
representations and warranties are expressly limited to an earlier date or the
Agents and the Majority Lenders may expressly consent in writing to the
contrary; and (d) after giving effect to any proposed borrowing or issuance,
renewal, extension, or reissuance of a Letter of Credit, the amount of the
Availability is greater than zero (0).
Section 6.03. Conditions Relating to Letters of Credit. In addition to
the satisfaction of all other conditions precedent set forth in this Article VI,
the issuance, renewal, extension or reissuance of the Letters of Credit referred
to in Section 2.01(b) hereof is subject to the following conditions precedent:
(a) At least three (3) Business Days prior to the date of the
issuance, renewal, extension or reissuance of each Letter of Credit, the
Administrative Agent shall have received a written request for a Letter of
Credit.
(b) Each of the Letters of Credit shall (i) be issued by the
Administrative Agent, (ii) contain such terms and provisions as are reasonably
required by the Administrative Agent, (iii) be for the account of the Borrower,
and (iv) expire not later than the Maturity Date.
(c) The Borrower shall have duly and validly executed and
delivered to the Agent a Letter of Credit Agreement pertaining to the Letter of
Credit.
Section 6.04. Certificate Regarding Incurrence of Debt under Senior
Indenture. The obligation of the Lenders to make Loans plus Letter of Credit
Usage to the Borrower in an aggregate amount in excess of $35,000,000 is subject
to the further condition precedent that QSRD deliver a certificate from a
Responsible Officer of QSRD, in form and substance reasonably satisfactory to
the Administrative Agent, certifying that, as of the date of such incurrence,
QSRD and the Borrower are permitted to incur such Indebtedness (including
outstanding Letter of Credit Usage) under the Senior Indenture (because either
(i) such Indebtedness will constitute "Permitted Indebtedness" under the Senior
Indenture or (ii) such Indebtedness (including outstanding Letter of Credit
Usage) may be incurred without violation of the then applicable Consolidated
Interest Coverage Ratio set forth in the Senior Indenture) and setting forth
in reasonable detail calculations to support the certification.
Section 6.05. Conditions Subsequent. As a condition subsequent to the
Initial Funding, Borrower shall perform or cause to be performed the following
(the failure by Borrower to so perform or cause to be performed constituting an
Event of Default):
(a) Within 15 days of the Closing Date, deliver to Collateral
Agent mortgages or deeds of trust, as appropriate, duly executed and in
recordable form, and in form and substance satisfactory to the Agents, granting
a first priority Lien in favor of Collateral Agent for
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the benefit of the Lender Group, in the NasGas Property in Breckinridge, Meade
and Hardin Counties, Kentucky (the "New Mortgage").
(b) Within 15 days of the Closing Date, deliver to Collateral
Agent the opinion of local counsel in Kentucky with respect to the New Mortgage,
in form and substance satisfactory to the Agents.
(c) Within 15 days of the Closing Date, either deliver to
Collateral Agent a Control Agreement in form and substance satisfactory to the
Agents, with respect to the Dreyfus Cash Management Accounts set forth on
Schedule 9.03, duly executed and delivered by all parties thereto, or terminate
the Dreyfus Cash Management Accounts.
(d) Within 15 days of the Closing Date, deliver to Collateral
Agent a notification letter, in form and substance satisfactory to Agents, duly
acknowledged by Chase Bank of Texas, National Association, as escrow agent under
the Escrow Agreement, with respect to the security interest of the Collateral
Agent for the benefit of the Lender Group in such rights, title and interests
Borrower may have in the escrow account which is the subject of the Escrow
Agreement.
(e) Within 15 days of the Closing Date, establish a cash
management system in compliance with the requirements of Section 2.15, to the
satisfaction of the Agents.
(f) Within 30 days of the Closing Date, either deliver to
Collateral Agent duly executed Lien releases or terminations terminating all of
ECT's Liens in the Property of QSRD and its Subsidiaries to the satisfaction of
the Agents, or demonstrate to the satisfaction of the Agents that Borrower is
diligently pursuing its remedies to enforce ECT's further assurance obligations
under the Termination Agreement..
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
QSRD and the Borrower represent and warrant to the Agents and the
Lenders that (each representation and warranty herein is given as of the Closing
Date and shall be deemed repeated and reaffirmed on the dates of each borrowing
and issuance, renewal, extension or reissuance of a Letter of credit as provided
in Section 6.02, except that the representations contained in Section 7.02 shall
be deemed to be made with respect to the most recent financial statements
delivered to the Administrative Agent pursuant to Section 8.01):
Section 7.01. Corporate Existence.
(a) Each of QSRD, the Borrower and its Subsidiaries: (i) is a
corporation duly organized, legally existing and in good standing under the laws
of the jurisdiction of its incorporation; (ii) has all requisite corporate
power, and has all material governmental licenses, authorizations, consents and
approvals necessary to own its assets and carry on its business as now being or
as proposed to be conducted; and (iii) is qualified to do business in all
jurisdictions
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in which the nature of the business conducted by it makes such qualification
necessary and where failure so to qualify would have a Material Adverse Effect.
(b) Set forth on Schedule 7.01, is a complete and accurate
description of the authorized capital Stock of Borrower, by class, and, as of
the Closing Date, a description of the number of shares of each such class that
are issued and outstanding and the number of such shares that are held in
Borrower's treasury. All such outstanding shares have been validly issued and,
as of the Closing Date, are fully paid, nonassessable shares free of contractual
preemptive rights. The issuance and sale of all such shares have been in
compliance with all applicable federal and state securities laws. Other than as
described on Schedule 7.01, there are no subscriptions, options, warrants, or
calls relating to any shares of Borrower's capital Stock, including any right of
conversion or exchange under any outstanding security or other instrument.
Neither Borrower nor any of its Subsidiaries is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital Stock or any security convertible into or exchangeable for
any of its capital Stock.
(c) Set forth on Schedule 7.01, is a complete and accurate
list of Borrower's direct and indirect Subsidiaries as of the Closing Date,
showing: (i) the jurisdiction of their incorporation; (ii) the number of shares
of each class of common and preferred Stock authorized for each of such
Subsidiaries; and (iii) the number and the percentage of the outstanding shares
of each such class owned directly or indirectly by Borrower. All of the
outstanding capital Stock of each such Subsidiary has been validly issued and is
fully paid and non-assessable. As of the Closing Date, Borrower has no interest
in any partnerships (other than tax partnerships which are not partnerships
under applicable state law). QSR Canada has no assets in excess of $200,000 in
the aggregate or liabilities in excess of $150,000 in the aggregate, and its
business operations are limited to providing general and administrative
services, including management services, to QSRD and its Subsidiaries.
(d) Except as set forth on Schedule 7.01, no capital Stock (or
any securities, instruments, warrants, options, purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for capital Stock) of any direct or indirect Subsidiary of
Borrower is subject to the issuance of any security, instrument, warrant,
option, purchase right, conversion or exchange right, call, commitment or claim
of any right, title, or interest therein or thereto.
Section 7.02. Financial Condition.
(a) The audited consolidated balance sheet of QSRD and its
Consolidated Subsidiaries, as at June 30, 1999 and the related consolidated
statement of operations, stockholders' equity and cash flow of QSRD and its
Consolidated Subsidiaries, for the fiscal year ended on said date, with the
audit report thereon of Ernst & Young L.L.P. heretofore furnished to each of the
Lenders, and the unaudited consolidated balance sheet of QSRD and its
Consolidated Subsidiaries as at August 31, 1999 and their related consolidated
statements of operations, and cash flow of QSRD and its Consolidated
Subsidiaries for the 2-month period ended on such date heretofore furnished to
the Lenders are complete and correct in all material respects and fairly present
the consolidated financial condition of QSRD and its Consolidated Subsidiaries
as at said dates and the results of its operations for the fiscal year
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and the 2-month period ending on said dates, in accordance with GAAP with
respect to the audited financial statements, and on a modified accrual basis
with respect to interim financial statements, in each case applied on a
consistent basis (subject, in the case of the interim financial statements, to
normal year-end adjustments).
(b) Neither QSRD nor any of its Subsidiaries has on the
Closing Date any material Debt, contingent liabilities interpreted in accordance
with GAAP, liabilities for taxes, unusual forward or long-term commitments for
the purchase or sale of Oil and Gas Properties, or unrealized or anticipated
losses from any unfavorable commitments, in each case except for customary
purchase price adjustments, prorations, indemnities, and other typical
obligations arising under or in connection with the purchase or sale of Oil and
Gas Properties or the acquisition or issuance of securities, and except as
referred to or reflected or provided for in the Financial Statements or in
Schedule 7.02 which could reasonably be expected to have a Material Adverse
Effect. Since June 30, 1999, there has been no change or event having a Material
Adverse Effect. Since June 30, 1999, neither the business nor the Properties of
QSRD or any of its Subsidiaries have been materially and adversely affected as a
result of any fire, explosion, earthquake, flood, drought, windstorm, accident,
strike or other labor disturbance, embargo, requisition or taking of Property or
cancellation of contracts, permits or concessions by any Governmental Authority,
riot, activities of armed forces or acts of God or of any public enemy.
Section 7.03. Litigation. Except as disclosed to the Lenders in
Schedule 7.03 hereto, at the Closing Date there is no litigation, legal,
administrative or arbitration proceeding, investigation or other action of any
nature pending or, to the knowledge of QSRD and the Borrower threatened against
or affecting QSRD or any of its Subsidiaries which involves the possibility of
any judgment or liability against QSRD or any of its Subsidiaries not fully
covered by insurance (except for normal deductibles), and which would have a
Material Adverse Effect.
Section 7.04. No Breach. Neither the execution and delivery of the Loan
Documents nor compliance with the terms and provisions hereof will conflict with
or result in a breach of, or require any consent which has not been obtained as
of the Closing Date or which if not obtained would have a Material Adverse
Effect under, the respective charter or by-laws of QSRD or any of its
Subsidiaries, including the Borrower, or any material Governmental Requirement,
agreement or instrument to which QSRD or any of its Subsidiaries, including the
Borrower, is a party or by which it is bound or to which it or its Properties
are subject, or constitute a default under any such agreement or instrument, or
result in the creation or imposition of any Lien upon any of the revenues or
assets of QSRD or any of its Subsidiaries, including the Borrower, pursuant to
the terms of any such agreement or instrument other than the Liens created by
the Loan Documents.
Section 7.05. Authority. QSRD and each of its Subsidiaries, including
the Borrower, have all necessary corporate power and authority to execute,
deliver and perform its obligations under the Loan Documents to which it is a
party; and the execution, delivery and performance by QSRD and each of its
Subsidiaries, including the Borrower, of the Loan
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Documents to which it is a party have been duly authorized by all necessary
corporate action on its part; and the Loan Documents constitute the legal, valid
and binding obligations of each such Person, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights and general
principles of equity.
Section 7.06. Approvals. No authorizations, approvals or consents of,
and no filings or registrations with, any Governmental Authority are necessary
for the execution, delivery or performance by QSRD or any of its Subsidiaries,
including the Borrower, of the Loan Documents or for the validity or
enforceability thereof.
Section 7.07. Use of Loans. The proceeds of the Loans shall be used for
general corporate purposes (consistent with the covenants contained herein and
in the other Loan Documents), including the following: i) to meet the Borrower's
capital expenditure requirements, ii) to finance Permitted Acquisitions, and
iii) to repay, in full, the DEM Subordinated Debt (in a maximum amount of DEM
1,700,000). The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying margin stock (within
the meaning of Regulation T, U or X of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan or Letter of Credit
hereunder will be used to buy or carry any margin stock.
Section 7.08. ERISA.
(a) QSRD and its ERISA Affiliates have complied in all
material respects with ERISA and, where applicable, the Code regarding each
Plan.
(b) Each Plan is, and has been, maintained in substantial
compliance with ERISA and, where applicable, the Code.
(c) To the best knowledge of QSRD, no act, omission or
transaction has occurred which could result in imposition on QSRD or any of its
ERISA Affiliates (whether directly or indirectly) of (i) either a civil penalty
assessed pursuant to section 502(c), (i) or (1) of ERISA or a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary
duty liability damages under section 4.09 of ERISA.
(d) No Plan (other than a defined contribution plan) or any
trust created under any such Plan has been terminated since September 2, 1974.
No liability to the PBGC (other than for the payment of current premiums which
are not past due) by QSRD or any of its ERISA Affiliates has been or is expected
by QSRD to be incurred with respect to any Plan. No ERISA Event with respect to
any Plan has occurred.
(e) Full payment when due has been made of all amounts which
QSRD and/or its ERISA Affiliates is required under the terms of each Plan or
applicable law to have paid as contributions to such Plan, and no accumulated
funding deficiency (as defined in
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section 302 of ERISA and section 412 of the Code), whether or not waived, exists
with respect to any Plan.
(f) The actuarial present value of the benefit liabilities
under each Plan which is subject to Tide IV of ERISA does not, as of the end of
QSRD's most recently ended fiscal year, exceed the current value of the assets
(computed on a plan termination basis in accordance with Title IV of ERISA) of
such Plan allocable to such benefit liabilities. The term "actuarial present
value of the benefit liabilities" shall have the meaning specified in section
4041 of ERISA.
(g) None of QSRD or its ERISA Affiliates sponsors, maintains,
or contributes to an employee welfare benefit plan, as defined in section 3(l)
of ERISA, including, without limitation, any such plan maintained to provide
benefits to former employees of such entities, that may not be terminated by
QSRD or any of its ERISA Affiliates in its sole discretion at any time without
any material liability.
(h) None of QSRD or its ERISA Affiliates sponsors, maintains
or contributes to, or has at any time in the preceding six calendar years,
sponsored, maintained or contributed to, any Multiemployer Plan.
(i) None of QSRD or its ERISA Affiliates is required to
provide security under section 401(a)(29) of the Code due to a Plan amendment
that results in an increase in current liability for the Plan.
Section 7.09. Taxes. Each of QSRD and its Subsidiaries, including the
Borrower, has filed all required United States Federal income tax returns that
are currently due and, to the best of QSRD's knowledge, all other tax returns
which are required to be filed by them and have paid all material taxes due
pursuant to such returns or pursuant to any assessment received by QSRD or any
of its Subsidiaries, including the Borrower, except for those being contested in
good faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. The charges, accruals and reserves on the
books of QSRD and its Subsidiaries in respect of taxes and other governmental
charges are, in the opinion of QSRD, adequate. No tax Lien has been filed and,
to the knowledge of QSRD, no claim is being asserted with respect to any such
tax, fee or other charge which could reasonably be expected to have a Material
Adverse Effect.
Section 7.10. Titles, etc.
(a) Except as set out in Schedule 7.10, each of QSRD and its
Subsidiaries has good and defensible title to its material (individually or in
the aggregate) Properties, free and clear of all Liens except Liens permitted by
Section 9.02. Except as set forth in Schedule 7.10, after giving full effect to
the Excepted Liens, QSRD and its Subsidiaries, as applicable, owns the net
interests in production attributable to the lands and leases reflected in the
most recently delivered Reserve Report and the ownership of such Properties
shall not in any material respect obligate such Person to bear the costs and
expenses relating to the maintenance, development and operations of each such
Property in an amount in excess of
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the working interest of each Property set forth in the most recently delivered
Reserve Report. All information contained in the most recently delivered Reserve
Report is true and correct in all material respects as of the date thereof.
(b) All material leases and agreements necessary for the
conduct of the business of QSRD and its Subsidiaries are valid and subsisting
and are in full force and effect. There exists no default or event or
circumstance which with the giving of notice or the passage of time or both
would give rise to a default under any such lease or leases which would affect
in any material respect the conduct of the business of QSRD and its Subsidiaries
taken as a whole or which would have a Material Adverse Effect.
(c) The rights, properties and other assets presently owned,
leased or licensed by QSRD and its Subsidiaries including, without limitation,
all easements and rights of way, include all rights, Properties and other assets
reasonably necessary to permit QSRD and its Subsidiaries to conduct their
business in all material respects in the same manner as its business has been
conducted prior to the Closing Date.
(d) All of the assets and Properties of QSRD and its
Subsidiaries which are reasonably necessary for the operation of its business
are in good working condition and are maintained in accordance with prudent
business standards.
Section 7.11. No Material Misstatements. No written information,
statement, exhibit, certificate, document or report furnished to the Agents or
the Lenders (or any of them) by QSRD or any of its Subsidiaries in connection
with the negotiation of this Agreement contained any material misstatement of
fact or omitted to state a material fact or any fact necessary to make the
statement contained therein not materially misleading in the light of the
circumstances in which made. There is no fact known to QSRD which has a Material
Adverse Effect or in the future is reasonably likely to have (so far as QSRD can
now foresee) a Material Adverse Effect and which has not been set forth in this
Agreement or the other documents, certificates and statements furnished to the
Agents by or on behalf of QSRD or any of its Subsidiaries prior to, or on, the
Closing Date in connection with the transactions contemplated hereby.
Section 7.12. Investment Company Act. Neither QSRD nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Section 7.13. Public Utility Holding Company Act. QSRD and its
Subsidiaries are not subject to regulation, or are exempt from regulation, as a
"holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," or a "public utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
Section 7.14. Subsidiaries and Partnership. Except as set forth on
Schedule 7.14, as such Schedule shall from time to time be revised to reflect
the creation of additional Subsidiaries by QSRD or the Borrower or their
Subsidiaries in accordance with Section 9.17,
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QSRD has no Subsidiaries and has no interest in any partnerships; and the
Borrower has no Subsidiaries and has no interest in any partnerships. Schedule
7.14 sets forth the principal place of business of each such Subsidiary and the
ownership interest of QSRD and the Borrower in such Subsidiary.
Section 7.15. Location of Business and Offices. Each of QSRD and the
Borrower's principal place of business and chief executive offices are located
at the address stated on the signature page of this Agreement. The principal
place of business and chief executive office of each Subsidiary are located at
the addresses stated on Schedule 7.14.
Section 7.16. Defaults. Neither QSRD nor any of its Subsidiaries is in
default nor has any event or circumstance occurred which, but for the expiration
of any applicable grace period or the giving of notice, or both, would
constitute a default under any Material Agreement to which any such Person is a
party or by which any such Person is bound which default would have a Material
Adverse Effect. No Default hereunder has occurred and is continuing.
Section 7.17. Environmental Matters. Except (i) as provided in Schedule
7.17 or (ii) as would not have a Material Adverse Effect (or with respect to
(c), (d) and (e) below, where the failure to take such actions would not have a
Material Adverse Effect):
(a) Neither any Property of QSRD or any of its Subsidiaries
nor the operations conducted thereon violate any order or requirement of any
court or Governmental Authority or any Environmental Laws.
(b) Without limitation of clause (a) above, no Property of
QSRD or any of its Subsidiaries nor the operations currently conducted thereon
or, to the best knowledge of QSRD, by any prior owner or operator of such
Property or operation, are in violation of or subject to any existing, pending
or (to the knowledge of QSRD) threatened action, suit, investigation, inquiry or
proceeding by or before any court or Governmental Authority or to any remedial
obligations under Environmental Laws.
(c) All notices, permits, licenses or similar authorizations,
if any, required to be obtained or filed in connection with the operation or use
of any and all Property of QSRD and each of its Subsidiaries, including without
limitation past or present treatment, storage, disposal or release of a
hazardous substance or solid waste into the environment, have been duly obtained
or filed, and QSRD and each of its Subsidiaries are in compliance with the terms
and conditions of all such notices, permits, licenses and similar
authorizations.
(d) All hazardous substances, solid waste, and oil and gas
exploration and production wastes, if any, generated at any and all Property of
QSRD or any of its Subsidiaries have in the past been transported, treated and
disposed of in accordance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment, and, to the best knowledge of QSRD, all such transport carriers and
treatment and disposal facilities have been and are operating in compliance with
Environmental Laws and so as not to pose an imminent and substantial
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endangerment to public health or welfare or the environment, and are not the
subject of any existing, pending or (to the knowledge of QSRD) threatened
action, investigation or inquiry by any Governmental Authority in connection
with any Environmental Laws.
(e) QSRD has taken all steps reasonably necessary to determine
and has determined that no hazardous substances, solid waste, or oil and gas
exploration and production wastes, have been disposed of or otherwise released
and there has been no threatened release of any hazardous substances on or to
any Property of QSRD or any of its Subsidiaries except in compliance with
Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment.
(f) To the extent applicable, all Property of QSRD and each of
its Subsidiaries currently satisfies all design, operation, and equipment
requirements imposed by OPA or scheduled as of the Closing Date to be imposed by
OPA during the term of this Agreement, and QSRD does not have any reason to
believe that such Property, to the extent subject to OPA, will not be able to
maintain compliance with the OPA requirements during the term of this Agreement.
(g) Neither QSRD nor any of its Subsidiaries has any known
contingent liability in connection with any release or threatened release of any
oil, hazardous substance or solid waste into the environment.
Section 7.18. Compliance with the Law. Neither QSRD nor any of its
Subsidiaries has violated any Governmental Requirement or failed to obtain any
license, permit, franchise or other governmental authorization necessary for the
ownership of any of its Properties or the conduct of its business, which
violation or failure would have (in the event such violation or failure were
asserted by any Person through appropriate action) a Material Adverse Effect.
Except for such acts, or failures to act as would not have a Material Adverse
Effect, the Oil and Gas Properties (and Properties unitized therewith) have been
maintained, operated and developed in a good and workmanlike manner and in
substantial conformity with all applicable laws and all rules, regulations and
orders of all duly constituted authorities having jurisdiction and in
substantial conformity with the provisions of all leases, subleases or other
contracts comprising a part of the Hydrocarbon Interests and other contracts and
agreements forming a part of the Oil and Gas Properties; specifically in this
connection, (i) after the Closing Date, no Oil and Gas Property is subject to
having allowable production reduced below the full and regular allowable
(including the maximum permissible tolerance) because of any overproduction
(whether or not the same was permissible at the time) prior to the Closing Date
and (ii) none of the wells comprising a part of the Oil and Gas Properties (or
properties unitized therewith) are deviated from the vertical more than the
maximum permitted by applicable laws, regulations, rules and orders, and such
wells are, in fact, bottomed under and are producing from, and the well bores
are wholly within, the Oil and Gas Properties (or in the case of wells located
on Properties unitized therewith, such unitized Properties).
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Section 7.19. Insurance. Schedule 7.19 attached hereto contains an
accurate and complete description of all material policies of fire, liability,
workmen's compensation and other forms of insurance owned or held by QSRD and
each of its Subsidiaries. All such policies are in full force and effect, all
premiums with respect thereto covering all periods up to and including the
Closing Date have been paid, and no notice of cancellation or termination has
been received with respect to any such policy. Such policies are sufficient for
substantial compliance with all requirements of law and of all agreements to
which QSRD or any of its Subsidiaries is a party; are valid, outstanding and
enforceable policies; provide adequate insurance coverage in at least such
amounts and against at least such risks (but including in any event public
liability) as are usually insured against in the same general area by similarly
situated companies engaged in the same or a similar business for the assets and
operations of QSRD and each of its Subsidiaries; will remain in full force and
effect through the respective dates set forth in Schedule 7.19 without the
payment of additional premiums; and will not in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated by this
Agreement. Schedule 7.19 identifies all material risks, if any, which QSRD and
its Subsidiaries and their respective Board of Directors or officers have
designated as being self insured. Neither QSRD nor any of its Subsidiaries has
been refused any insurance with respect to its assets or operations, nor has its
coverage been limited below usual and customary policy limits, by an insurance
carrier to which it has applied for any such insurance or with which it has
carried insurance during the last three years.
Section 7.20. Risk Management Agreements. Schedule 7.20 sets forth, as
of the Closing Date, a true and complete list of all Risk Management Agreements
(including commodity price swap agreements, forward agreements or contracts of
sale which provide for prepayment for deferred shipment or delivery of oil, gas
or other commodities) of QSRD and each of its Subsidiaries, the material terms
thereof (including the type, term, effective date, termination date and notional
amounts or volumes), all credit support agreements relating thereto (including
any margin required or supplied), and the counterparty to each such agreement.
Section 7.21. Restriction on Liens. Except as set forth on Schedule
7.21, neither QSRD nor any of its Subsidiaries (other than Non-Recourse
Subsidiaries) is a party to any agreement or arrangement or subject to any
order, judgment, writ or decree, which either restricts or purports to restrict
its ability to grant Liens to other Persons on or in respect of their respective
assets or Properties; provided that such restrictions do not impair the ability
of QSRD or any of its Subsidiaries (other than Non-Recourse Subsidiaries) to
grant Liens to the Collateral Agent for the benefit of the Lender Group.
Section 7.22. Gas Imbalances. Except as set forth on Schedule 7.22 or
on the most recent certificate delivered pursuant to Section 8.07(c), on a net
basis there are no gas imbalances, take or pay or other prepayments with respect
to QSRD and its Subsidiaries' Oil and Gas Properties which would require such
Person to either make cash settlements for such production or deliver
Hydrocarbons produced from such Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor exceeding five
percent
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(5%) of the then current monthly production of gas from the Oil and Gas
Properties of QSRD and its Subsidiaries in the aggregate.
Section 7.23. Material Agreements.
(a) Set forth on Schedule 7.23 hereto is a complete and
correct list of all Material Agreements in effect or to be in effect as of the
Closing Date (other than Risk Management Agreements) providing for, evidencing,
securing or otherwise relating to any Debt of QSRD or any of its Subsidiaries,
and such list correctly sets forth the names of the debtor or lessee and
creditor or lessor with respect to the Debt or lease obligations outstanding or
to be outstanding and the Property subject to any Lien securing such Debt or
lease obligation. Also set forth on Schedule 7.23 hereto is a complete and
correct list of all material agreements and other instruments of QSRD and its
Subsidiaries relating to the purchase, transportation by pipeline, gas
processing, marketing, sale and supply of natural gas and other Hydrocarbons,
but in any event, any such agreement or other instrument that will account for
more than 20% of the sales of QSRD and its Subsidiaries during QSRD's current
fiscal year.
(b) QSRD has delivered to the Agents true and complete copies
of each of the agreements evidencing the Subordinated Debt and each Material
Agreement, as each may have been amended, that have been requested by the
Agents.
Section 7.24. Solvency. QSRD and its Consolidated Subsidiaries, taken
as a whole, (i) are not insolvent as of the date hereof and will not be rendered
insolvent as a result of the transactions contemplated by this Agreement and the
other Loan Documents, (ii) are not engaged in business or a transaction, or
about to engage in a business or a transaction, for which any Property or assets
remaining with QSRD and its Consolidated Subsidiaries constitutes unreasonably
small capital, and (iii) do not intend to incur, or believe any of them will
incur, debts that will be beyond their ability to pay as such debts mature.
Section 7.25. Brokerage Fees. Except for any and all brokerage fees
payable by Borrower to Durham Capital Corporation ("Durham") on the Closing Date
for the services rendered to Borrower by Durham, no brokerage commission or
finders fees has or shall be incurred or payable in connection with or as a
result of Borrower's obtaining financing from the Lender Group under this
Agreement, and neither QSRD, Borrower nor any of their Subsidiaries has utilized
the services of any broker or finder in connection with Borrower's obtaining
financing from the Lender Group under this Agreement.
ARTICLE VIII
AFFIRMATIVE COVENANTS
QSRD and the Borrower covenant and agree that, so long as any of the
Commitments are in effect and until payment in full of all Loans hereunder, all
interest thereon and all other amounts payable by the Borrower hereunder and any
Obligor under any Loan Document:
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Section 8.01. Financial Statements and Collateral Reports. QSRD shall
deliver, or shall cause to be delivered, to each Agent with sufficient copies of
each for the Lenders:
(a) As soon as available and in any event within 120 days
after the end of each fiscal year of QSRD, the audited consolidated statements
of operations, stockholders' equity, and cash flow of QSRD and its Consolidated
Subsidiaries for such fiscal year, and the related consolidated and unaudited
consolidating balance sheets of QSRD and its Consolidated Subsidiaries as at the
end of such fiscal year, and setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year, and accompanied by the
related audit report of independent certified public accountants of recognized
national standing acceptable to the Agents which audit report shall state that
said financial statements fairly present, in all material respects, the
consolidated financial condition and results of operations of QSRD and its
Consolidated Subsidiaries as at the end of, and for, such fiscal year and that
such financial statements have been prepared in accordance with GAAP except for
such changes in such principles with which the independent certified public
accountants shall have concurred and such audit report shall be consistent with
the standard audit report format promulgated by the relevant regulatory
authorities governing such reports and shall not contain a "going concern" or
like qualification or exception.
(b) As soon as available and in any event within 30 days after
the end of each of the fiscal monthly periods of each fiscal year of QSRD not
constituting a fiscal quarter end, consolidated statements of operations and
cash flow of QSRD and its Consolidated Subsidiaries for such period and for the
period from the beginning of the respective fiscal year to the end of such
period, and the related consolidated balance sheets as at the end of such
period, and setting forth in each case in comparative form the corresponding
figures for the corresponding period in the preceding fiscal year, together with
management's discussion and analysis of such results, all of which shall be in
form and substance reasonably satisfactory to the Agents, and accompanied by the
certificate of a Responsible Officer, which certificate shall state that said
financial statements fairly present the consolidated financial condition and
results of operations of QSRD and its Consolidated Subsidiaries as prepared by
QSRD on a modified accrual basis and consistent with the August 31, 1999 interim
financial statements heretofore furnished to the Lenders, as at the end of, and
for, such period (subject to normal year-end audit adjustments).
(c) Within 30 days following the end of each fiscal month, a
summary of the operating and financial results of QSRD and its Subsidiaries
(other than Non-Recourse Subsidiaries) for such preceding calendar month,
together with management's discussion and analysis of such results if not
duplicative of management's discussion and analysis provided in conjunction with
the delivery of the monthly financial statements pursuant to Section 8.01(b),
all of which shall be in form and substance reasonably satisfactory to the
Agents, and, in conjunction with the report delivered pursuant to Section
8.07(e), shall include: (i) a detailed statement of sales and revenues derived
from all products produced from the Oil and Gas Properties, for the previous
month, including prices received, prior period adjustments to such revenues and
prices, and any Material Adverse Effect affecting the sales or marketing
agreements or arrangements with the purchasers of such products; (ii) a detailed
aging of QSRD's and each of its Subsidiaries' unpaid lease operating expenses
and unpaid other
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liabilities, for the previous month, with respect to which a mineral lien,
subcontractor's lien, mechanic's lien, materialmen's lien or other Lien against
any of the Collateral may arise which may have a priority superior to Collateral
Agent's Lien on such Collateral; (iii) notice of all claims, disputes, and
litigation that have arisen since the date of the most recent statement to
Agents pursuant to this Section 8.01(c); except (A) ongoing collection matters
in which QSRD or any of its Subsidiaries is the claimant or plaintiff; and (B)
matters that, if decided adversely to QSRD or any of its Subsidiaries, do not
result in and reasonably could not be expected to result in a Material Adverse
Effect; (iv) (A) a listing the total amount actually paid by QSRD and its
Subsidiaries during the preceding month for: (1) plugging and abandonment costs
for previous or ongoing plugging and abandonment operations pertaining to the
Oil and Gas Properties, and (2) general bond and supplemental bond payments
pertaining to plugging and abandonment costs; and (B) estimating the future
payments for (1) and (2), above, for the succeeding 6 month period; and (v) a
statement of the balances remaining on hand in any prepaid development or other
deposit or trust account of funds previously delivered to QSRD or any of its
Subsidiaries.
(d) As soon as available and in any event within 45 days after
the end of each of the first three fiscal quarters of each fiscal year of QSRD,
consolidated statements of operations and cash flow of QSRD and its Consolidated
Subsidiaries for such period and for the period from the beginning of the
respective fiscal year to the end of such period, and the related consolidated
balance sheets as at the end of such period, and setting forth in each case in
comparative form the corresponding figures for the corresponding period in the
preceding fiscal year, accompanied by the certificate of a Responsible Officer,
which certificate shall state that said financial statements fairly present the
consolidated financial condition and results of operations of QSRD and its
Consolidated Subsidiaries as prepared in accordance with GAAP, as at the end of,
and for, such period (subject to normal year-end audit adjustments).
(e) Promptly after QSRD or the Borrower knows that any Default
or Material Adverse Effect has occurred, a notice of such Default or Material
Adverse Effect, describing the same in reasonable detail and the action QSRD or
the Borrower proposes to take with respect thereto.
(f) Promptly upon receipt thereof, a copy of each other
material report or letter submitted to QSRD by its independent accountants in
connection with any annual, interim or special audit made by them of the books
of QSRD and its Consolidated Subsidiaries and a copy of any response by QSRD or
its Board of Directors to such letter or report.
(g) Promptly upon its becoming available, each financial
statement, report, notice or proxy statement sent by QSRD to stockholders
generally and each regular or periodic report and any registration statement,
prospectus or written communication (other than transmittal letters) in respect
thereof filed by QSRD with or received by QSRD in connection therewith from any
securities exchange or the SEC.
(h) Upon request of Administrative Agent, copies of well files
and well reports (including information regarding the locations of and equipment
located on each well) in
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the possession or control of QSRD or any of its Subsidiaries or which otherwise
can be obtained without commercially unreasonable cost or expense.
(i) From time to time such other information regarding the
business, affairs or financial condition of QSRD or any of its Subsidiaries,
including the Borrower (including, without limitation, any Plan or Multiemployer
Plan and any reports or other information required to be filed under ERISA), as
any Lender or any Agent may reasonably request.
(j) As soon as available and in any event within 45 days after
each Quarterly Date, a report, in form and substance satisfactory to the
Administrative Agent, setting forth as of the last Business Day of such
Quarterly Date, (i) a summary of its hedging positions under all Risk Management
Agreements (including commodity price swap agreements, forward agreements or
contracts of sale which provide for prepayment for deferred shipment or delivery
of oil, gas or other commodities) of QSRD and each of its Subsidiaries,
including the type, term, effective date, termination date and notional
principal amounts or volumes, the hedged price(s), interest rate(s) or exchange
rates(s), as applicable, and any new credit support agreements relating thereto,
and (ii) a listing of the identity and address of any person remitting to the
Borrower proceeds from the sale of Hydrocarbon production from or attributable
to any Oil and Gas Properties, which listing shall include a general description
of the Oil and Gas Properties for which such Person is remitting proceeds,
together with such additional information that Administrative Agent may
reasonably request in order to keep current and accurate the addressees for the
Transfer Order Letters.
(k) Within two (2) Business Days following receipt by QSRD or
the Borrower, a copy of the notice from JEDI of its intent to sell, or otherwise
dispose of, to any Person its interests in the Series A Preferred Stock of QSRD
if such sale or disposition reduces the aggregate remaining shares of such class
of Preferred Stock owned by JEDI or its Affiliates below 75% of the total
shares of such class of Preferred Stock owned by JEDI as of the Closing Date.
(l) Promptly after QSRD knows that any "mandatory redemption
event" in respect of any class of Permitted Preferred Stock has occurred, a
notice thereof, describing the same in reasonable detail and the action QSRD
proposes to take with respect thereto; and if any mandatory redemption notices
are given or received in respect of any class of Permitted Preferred Stock, a
copy thereof.
(m) With the delivery of the June 30th Reserve Report, the
Borrower shall also provide projections and budgets of QSRD and its Subsidiaries
for the forthcoming fiscal year, which shall include, on a monthly basis for the
forthcoming fiscal year, an operating and capital budget, income and cash flow
statements and balance sheets, in each case together with the analysis and
discussion of management of such projections, all certified by a Responsible
Officer of the Borrower as being prepared based on the assumptions and
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assessments believed by the Borrower to be reasonable and appropriate both as of
the date of such projections and as of the date of submission thereof to the
Administrative Agent.
QSRD and the Borrower will furnish to the Administrative Agent, at the
time QSRD furnishes each set of financial statements pursuant to paragraph (a)
or (b) above, a certificate substantially in the form of Exhibit C-1 hereto
executed by a Responsible Officer (i) certifying as to the matters set forth
therein and stating that no Default has occurred and is continuing (or, if any
Default has occurred and is continuing, describing the same in reasonable
detail), and (ii) setting forth in reasonable detail the computations necessary
to determine whether QSRD and the Borrower are in compliance with Sections 9.12,
9.13 and 9.22 as of the end of the respective fiscal month or fiscal year.
Section 8.02. Litigation. QSRD shall promptly give to the
Administrative Agent notice of all legal or arbitration proceedings, and of all
proceedings before any Governmental Authority affecting QSRD or any of its
Subsidiaries, including the Borrower, except proceedings which, if adversely
determined, could not reasonably be expected to have a Material Adverse Effect.
QSRD will, and will cause each of its Subsidiaries to, promptly notify the
Administrative Agent and each of the Lenders of any claim, judgment, Lien or
other encumbrance affecting any Property of QSRD or any of its Subsidiaries if
the value of the claim, judgment, Lien or other encumbrance affecting such
Property shall exceed $250,000.
Section 8.03. Maintenance, Etc.
(a) The Borrower and QSRD shall, and QSRD shall cause each of
its Subsidiaries to: preserve and maintain its corporate existence and all of
its material rights, privileges and franchises (except for mergers or
dissolutions upon transfer of all or substantially all assets permitted pursuant
to Section 9.08); keep books of record and account in which full, true and
correct entries will be made of all dealings or transactions in relation to its
business and activities in accordance with GAAP; comply with all Governmental
Requirements if failure to comply with such requirements will have a Material
Adverse Effect; pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for any
such tax, assessment, charge or levy (other than production taxes, severance
taxes, payroll taxes or taxes that are the subject of a United States federal
tax lien) the payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained; permit
representatives of the Agents or any Lender, during normal business hours, to
examine, copy and make extracts from its books and records, to inspect its
Properties, and to discuss its business and affairs with its officers, all to
the extent reasonably requested by such Lender or the Agents (as the case may
be); and keep, or cause to be kept, insured by financially sound and reputable
insurers all Property of a character usually insured by Persons engaged in the
same or similar business similarly situated against loss or damage of the kinds
and in the amounts customarily insured against by such Persons, and reasonably
acceptable to the Agents, and carry such other insurance as is usually carried
by such Persons, or as may be reasonably required by the Agents,
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including, without limitation, environmental risk insurance to the extent
reasonably available.
(b) Contemporaneously with the delivery of the financial
statements required by Section 8.01(a) to be delivered for each year, QSRD will
furnish or cause to be furnished to the Administrative Agent and the Lenders a
certificate of insurance coverage from its insurer(s) in form and substance
satisfactory to the Administrative Agent and, if requested, will furnish the
Administrative Agent and the Lenders copies of the applicable policies.
(c) The Borrower and QSRD shall, and shall cause each of its
Subsidiaries to, operate its Properties or cause such Properties to be operated
in a careful and efficient manner in accordance with the usual and customary
practices of the industry and in substantial compliance with all applicable
contracts and agreements and in compliance in all material respects with all
Governmental Requirements.
(d) The Borrower and QSRD shall, and shall cause each of its
Subsidiaries to, at its own expense, do or cause to be done all things
reasonably necessary to preserve and keep in good repair, working order and
efficiency all of its Oil and Gas Properties and other material Properties
including, without limitation, all equipment, machinery and facilities, and from
time to time will make all the reasonably necessary repairs, renewals and
replacements so that at all times the state and condition of its Oil and Gas
Properties and other material Properties will be fully preserved and maintained,
except to the extent a portion of such Properties is no longer capable of
producing Hydrocarbons in economically reasonable amounts. The Borrower and
QSRD, shall and QSRD shall cause each of its Subsidiaries to, promptly: (i) pay
and discharge in accordance with the usual and customary practices of the
industry, or make reasonable and customary efforts to cause to be paid and
discharged, all delay rentals, royalties, expenses and indebtedness accruing
under the leases or other agreements affecting or pertaining to its Oil and Gas
Properties, (ii) perform or make reasonable and customary efforts to cause to be
performed, in accordance with usual and customary industry standards, the
obligations required by each and all of the assignments, deeds, leases,
sub-leases, contracts and agreements affecting its interests in its Oil and Gas
Properties and other material Properties, (iii) will and will cause each of its
Subsidiaries to do all other things necessary to keep unimpaired, except for
Liens described in Section 9.02, its rights with respect thereto and prevent any
forfeiture thereof or a default thereunder, except to the extent a portion of
such Properties is no longer capable of producing Hydrocarbons in economically
reasonable amounts. The Borrower and QSRD shall, and QSRD shall, cause each of
its Subsidiaries to, operate its Oil and Gas Properties and other material
Properties or cause or make reasonable and customary efforts to cause such Oil
and Gas Properties and other material Properties to be operated in a careful and
efficient manner in accordance with the usual and customary practices of the
industry and in substantial compliance with all applicable contracts and
agreements and in compliance in all material respects with all Governmental
Requirements.
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(e) In the event that all or any portion of any Oil and Gas
Property owned by QSRD and its Subsidiaries is composed of interests in the
Hydrocarbon Property which are not working interests or which are operated by a
Person or Persons other than QSRD or one of its Subsidiaries, then, with respect
to such interests and Properties, QSRD shall, and shall cause such Subsidiary
to, use reasonable efforts consistent with usual and customary industry practice
to obtain compliance with the foregoing covenants contained in this Section 8.03
by the working interest owners or the operator or operators of such interests or
Properties.
Section 8.04. Environmental Matters.
(a) QSRD will, and will cause each of its Subsidiaries to,
establish and implement such procedures as may be reasonably necessary,
consistent with its ownership interests, to continuously determine and assure
that any failure of the following does not have a Material Adverse Effect: (i)
all Property of such Persons and the operations conducted thereon are in
compliance with and do not violate the requirements of any Environmental Laws,
(ii) no oil, hazardous substances or solid wastes are disposed of or otherwise
released on or to any Property owned by any such party except in compliance with
Environmental Laws, (iii) no hazardous substance will be released on or to any
such Property in a quantity equal to or exceeding that quantity which requires
reporting pursuant to Section 103 of CERCLA, and (iv) no oil, oil and gas
exploration and production wastes or hazardous substance is released on or to
any such Property so as to pose an imminent and substantial endangerment to
public health or welfare or the environment.
(b) QSRD will promptly notify the Agents and the Lenders in
writing of any threatened action, investigation or inquiry by any Governmental
Authority of which QSRD has knowledge in connection with any Environmental Laws,
excluding routine testing and corrective action.
(c) QSRD will, and will cause each of its Subsidiaries to,
provide environmental audits and tests in accordance with American Society of
Testing and Mechanics standards as reasonably requested by the Agents or the
Lenders or as otherwise required to be obtained by the Agents or the Lenders by
any Governmental Authority in connection with any future acquisitions of Oil and
Gas Properties or other material Properties.
Section 8.05. Further Assurances. QSRD and the Borrower will and will
cause each of its respective Subsidiaries to cure promptly any defects in the
execution and delivery of the Loan Documents and this Agreement. QSRD at its
expense will, and will cause each of its Subsidiaries to, promptly execute and
deliver to the Collateral Agent upon request all such other documents,
agreements and instruments to comply with or accomplish the covenants and
agreements of QSRD or any of its Subsidiaries, as the case may be, in the Loan
Documents and this Agreement, or to further evidence and more fully describe the
collateral intended as security for the Indebtedness, or to correct any
omissions in the Security Instruments, or to state more fully the security
obligations set out herein or in any of the
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Security Instruments, or to perfect, protect or preserve any Liens created
pursuant to any of the Security Instruments, or to make any recordings, to file
any notices or obtain any consents, all as may be reasonably necessary or
appropriate in connection therewith.
Section 8.06. Performance of Obligations. The Borrower will pay the
Indebtedness according to the terms and conditions of the Loan Documents; and
QSRD will and will cause each of its Subsidiaries, including the Borrower, to do
and perform every act and discharge all of the obligations to be performed and
discharged by them under the Loan Documents, at the time or times and in the
manner specified.
Section 8.07. Engineering Reports.
(a) No later than 30 days prior to each Scheduled
Re-determination Date, commencing with the Scheduled Re-determination Date to
occur on March 15, 2000 the Borrower shall furnish to the Agents and the Lenders
a Reserve Report. The June 30 Reserve Report of each year shall be prepared by
certified independent petroleum engineers or other independent petroleum
consultant(s) acceptable to the Administrative Agent and the December 31 Reserve
Report of each year shall be prepared by or under the supervision of the chief
engineer of the Borrower who shall certify such Reserve Report to be true and
accurate and to have been prepared in accordance with the procedures used in the
immediately proceeding June 30 Reserve Report.
(b) In the event of an unscheduled re-determination, the
Borrower shall, at the Administrative Agent's request (or at the request of the
Majority Lenders pursuant to Section 2.08(d)), furnish to the Administrative
Agent and the Lenders a Reserve Report prepared by or under the supervision of
the chief engineer of the Borrower who shall certify such Reserve Report to be
true and accurate and to have been prepared in accordance with the procedures
used in the immediately preceding Reserve Report. For any unscheduled
re-determination requested by the Administrative Agent (or as requested by the
Majority Lenders pursuant to Section 2.08(d)), the Borrower shall provide such
Reserve Report with an "as of" date as required by the Majority Lenders as soon
as possible, but in any event no later than 45 days following the receipt of the
request by the Administrative Agent (or receipt of the request of the Majority
Lenders pursuant to Section 2.08(d)).
(c) With the delivery of each Reserve Report, the Borrower
shall provide to the Administrative Agent and the Lenders, a certificate from a
Responsible Officer certifying that, to the best of his knowledge and in all
material respects: (i) the information contained in the Reserve Report and any
other information delivered in connection therewith is true and correct, (ii)
the Borrower or a Subsidiary Guarantor, as applicable, owns good and defensible
title to its Oil and Gas Properties evaluated in such Reserve Report and such
Properties are free of all Liens except for Liens permitted by Section 9.02,
(iii) except as set forth on an exhibit to the certificate, on a net basis there
are no gas imbalances, take or pay or other prepayments with respect to its Oil
and Gas Properties evaluated in such Reserve Report which would require the
Borrower or a Subsidiary to deliver Hydrocarbons produced from such Oil and Gas
Properties at some future time without then or thereafter receiving full
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payment therefor, (iv) none of its Oil and Gas Properties have been sold since
the date of the last Borrowing Base determination except as set forth on an
exhibit to the certificate, which certificate shall list all of its Oil and Gas
Properties sold and in such detail as reasonably required by the Agents, (v)
attached to the certificate is a list of its Oil and Gas Properties added to and
deleted from the immediately prior Reserve Report and a list of all Persons
disbursing proceeds to the Borrower or a Subsidiary Guarantor, as applicable,
from its Oil and Gas Properties, (vi) except as set forth on a schedule attached
to the certificate all of the Oil and Gas Properties evaluated by such Reserve
Report are Mortgaged Property and (vii) any change in working interest or net
revenue interest in its Oil and Gas Properties occurring and the reason for such
change.
(d) As soon as available and in any event within 45 days after
the end of each fiscal quarter, the Borrower shall provide (i) a production
report, in the form currently prepared internally by the Borrower and which has
been approved by the Administrative Agent, and (ii) a summary of all general and
administrative costs of QSRD and its Consolidated Subsidiaries for such quarter
which are not reflected in the Consolidated Net Income for such quarter for its
Oil and Gas Properties, which reports shall include quantities or volume of
production, revenue, realized product prices, operating expenses, taxes, capital
expenditures and lease operating costs which have accrued to the account of
QSRD, the Borrower or any Subsidiary (other than Non-Recourse Subsidiaries) in
such period, and such other information with respect thereto as the Agents or
any Lender may reasonably require.
(e) As soon as available and in any event within 30 days after
the end of each month ending after the Closing Date, a report setting forth, in
form reasonably acceptable to the Agents, the revaluation of the PV-10 Value of
the oil and gas reserves composing the Borrowing Base as determined by the most
recently delivered Reserve Report provided by Borrower under Section 8.07(a) or
(b), as applicable, such revaluation calculated by multiplying the volumetric
quantity of the categories of estimated Proved Reserves provided in such Reserve
Report less aggregate projected production of Proved Reserves since the date of
and as provided in such Reserve Report by the applicable NYMEX Swap Price as of
last Business Day of the month preceding the date of the delivery by Borrower of
such report to the Agents; each such monthly report shall also include a
discussion of any changes since the date of the most recent Reserve Report in
the categorization of any or all Oil and Gas Properties among Proved Developed
Non-Producing Reserves, Proved Developed Producing Reserves, Proved Undeveloped
Reserves, and "other", any changes in any Obligor's working interest or net
revenue interest in the Oil and Gas Properties, and such other information as
the Administrative Agent shall reasonably consider appropriate or necessary from
the perspective of an asset-based lender; each such monthly report shall be
accompanied by a certificate of a Responsible Officer of the Borrower certifying
to the completeness and accuracy of the report including the calculations of the
revalued Proved Reserves.
Section 8.08. Title Information.
(a) On or before the delivery to the Agent and the Lenders of
each Reserve Report required by Section 8.07(a) or (b), as applicable, the
Borrower will deliver title information in form and substance reasonably
satisfactory to the Administrative Agent
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covering the Oil and Gas Properties evaluated by such Reserve Report and
included in the Borrowing Base that were not included in the immediately
preceding Borrowing Base evaluation, so that the Administrative Agent shall have
received together with title information previously delivered to the
Administrative Agent, satisfactory title information on at least 85% of the
PV-10 Value of the Oil and Gas Properties (to include 100% of the Principal
Properties) evaluated by such Reserve Report and included in the Borrowing Base.
The Borrower shall cure any title defects or exceptions which are not Excepted
Liens raised by the title information within 60 days after a request by the
Administrative Agent or the Lenders to cure such defects or exceptions.
(b) If the Borrower is unable to cure any title defect
requested by the Administrative Agent or the Lenders to be cured within the 60
day period, such default shall not be a Default or an Event of Default, but
instead the Administrative Agent and the Lenders shall have the right to
exercise the following remedy in their sole discretion from time to time, and
any failure to so exercise this remedy at any time shall not be a waiver as to
future exercise of the remedy by the Administrative Agent or the Lenders. To the
extent that the Administrative Agent or the Lenders are not satisfied with title
to any Oil and Gas Property after the time period in Section 8.08(a) has
elapsed, such unacceptable Oil and Gas Property shall not count towards the 85%
requirement (or the 100% of Principal Properties requirement), and the
Administrative Agent may send a notice to the Borrower and the Lenders that the
then outstanding Borrowing Base shall be reduced by an amount as determined by
all of the Lenders to cause the Borrower to be in compliance with the
requirement to provide acceptable title information on 85% of the PV-10 Value of
the Oil and Gas Properties (including 100% of the Principal Properties) included
in the Borrowing Base. This new Borrowing Base shall become effective
immediately after receipt of such notice.
Section 8.09. Additional Collateral.
(a) QSRD and the Borrower will, and will cause each Subsidiary
Guarantor to, grant to the Collateral Agent as security for the Indebtedness a
first-priority Lien (subject only to Excepted Liens and to the extent
applicable, Liens permitted by Section 9.02) on such Person's interest in any
Oil and Gas Properties not already subject to a Lien of the Security Instruments
such that the Mortgaged Property shall include at least 85% (including 100% of
the Principal Properties) (and will use reasonable efforts to maintain 95%
(including 100% of the Principal Properties)) of its and such Subsidiaries'
PV-10 Value of each of proved producing and the total Proved Reserves at all
times, which Lien will be created and perfected by and in accordance with the
provisions of deeds of trust, security agreements and financing statements, or
other Security Instruments, all in form and substance satisfactory to the Agent
in its sole discretion and in sufficient executed (and acknowledged where
necessary or appropriate) counterparts for recording purposes. If the Collateral
Agent so requests in writing, QSRD and the Borrower will, and will cause each
Subsidiary Guarantor to, within 30 days following such request, grant to the
Collateral Agent as security for the Indebtedness a first-priority Lien interest
(subject only to Excepted Liens and, to the extent applicable, Liens permitted
by Section 9.02) on such Person's interest in
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any Oil, and Gas Properties not already subject to a Lien of the Security
Instruments such that the Mortgaged Property shall include a percentage
requested by the Collateral Agent (not to exceed 95% (but including 100% of the
Principal Properties)) of its and such Subsidiaries' PV-10 Value of each of
proved producing and the total Proved Reserves at all times.
(b) Concurrently with the granting of the Lien or other action
referred to in Section 8.09(a) above, the Borrower will (i) provide to the
Collateral Agent title information in form and substance satisfactory to the
Collateral Agent in its sole discretion with respect to the relevant Obligor's
interests in such Oil and Gas Properties; and (ii) promptly after the filing of
any new Security Instrument in any state, upon the reasonable request of the
Collateral Agent, provide to the Collateral Agent an opinion addressed to the
Collateral Agent for the benefit of the Lenders in form and substance
satisfactory to the Collateral Agent in its sole discretion from counsel
acceptable to Collateral Agent, stating that the Security Instrument is valid,
binding and enforceable in accordance with its terms and in legally sufficient
form for such jurisdiction.
Section 8.10. ERISA Information and Compliance. QSRD will promptly
furnish and will cause its ERISA Affiliates to promptly furnish to the Agents
with sufficient copies to the Lenders (i) promptly after the filing thereof with
the United States Secretary of Labor, the Internal Revenue Service or the PBGC,
copies of each annual and other report with respect to each Plan or any trust
created thereunder, (ii) immediately upon becoming aware of the occurrence of
any ERISA Event or of any prohibited transaction," as described in section 406
of ERISA or in section 4975 of the Code, in connection with any Plan or any
trust created thereunder, a written notice signed by a Responsible Officer
specifying the nature thereof, what action QSRD or any ERISA Affiliate is taking
or proposes to take with respect thereto, and, when known, any action taken or
proposed by the Internal Revenue Service, the Department of Labor or the PBGC
with respect thereto, and (iii) immediately upon receipt thereof, copies of any
notice of the PBGC's intention to terminate or to have a trustee appointed to
administer any Plan. With respect to each Plan (other than a Multiemployer
Plan), QSRD will, and will cause each of its ERISA Affiliates to, (i) satisfy in
full and in a timely manner, without incurring any late payment or underpayment
charge or penalty and without giving rise to any Lien, all of the contribution
and funding requirements of section 412 of the Code (determined without regard
to subsections (d), (e), (0 and (k) thereof) and of section 302 of ERISA
(determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay,
or cause to be paid, to the PBGC in a timely manner, without incurring any late
payment or underpayment charge or penalty, all premiums required pursuant to
sections 4006 and 4007 of ERISA.
Section 8.11. Hedging Program. The Borrower shall maintain in effect
one or more Risk Management Agreements with one or more Eligible Counterparties,
the effective term of such Risk Management Agreements to expire no earlier than
March 31, 2002, and the aggregate notional volumes of Hydrocarbons subject of
such Risk Management Agreements shall constitute, (i) in the event that the Risk
Management Agreements with Prior Agent as counterparty are terminated on or
prior to the Closing Date, for the period from the Closing
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Date through December 10, 1999, not less than thirty-five percent (35%), and
thereafter not less than fifty percent (50%), or (ii) in the event that the Risk
Management Agreements with Prior Agent as counterparty are not terminated on or
prior to the Closing Date, not less than fifty percent (50%), of the Obligors'
forecasted production for such period from Oil and Gas Properties classified as
Proved Developed Producing Reserves.
ARTICLE IX
NEGATIVE COVENANTS
QSRD and the Borrower covenant and agree that, so long as any of the
Commitments are in effect and until payment in full of Loans hereunder, all
interest thereon and all other amounts payable by the Borrower hereunder or any
Obligor under any Loan Document:
Section 9.01. Debt. Neither QSRD nor any of its Subsidiaries, including
the Borrower, will incur, create, assume or suffer to exist any Debt, except:
(a) the Indebtedness or any guaranty of or suretyship
arrangement for the Indebtedness including Debt to issuers of letters of credit
that are the subject of L/C Guarantees;
(b) the Debt of any Obligor existing on and not repaid on the
Closing Date which is disclosed in Schedule 9.01, and any renewals or extensions
(but not increases) thereof,
(c) accounts payable (for the deferred purchase price of
Property or services) from time to time incurred in the ordinary course of
business which, if greater than 90 days past the invoice or billing date, are
being contested in good faith by appropriate proceedings if reserves adequate
under GAAP shall have been established therefor;
(d) Debt under capital leases (as required to be reported on
the financial statements of QSRD pursuant to GAAP) and other Debt of QSRD and
the Borrower not otherwise permitted under this Section 9.01 in an aggregate
principal amount not to exceed $500,000 at any one time outstanding;
(e) Debt of the Borrower under Risk Management Agreements with
any Eligible Counterparty;
(f) Debt associated with bonds or surety obligations required
by Governmental Requirements in connection with the operation of the Oil and Gas
Properties;
(g) the Subordinated Debt;
(h) intercompany Debt to the extent permitted by Section 9.03;
(i) Debt arising from or related to any of the Liens described
in clauses (iii) to (v) of the definition of "Excepted Liens";
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(j) Non-Recourse Debt of any Non-Recourse Subsidiary; and
(k) Debt of QSRD and its Subsidiaries, including the Borrower,
incurred pursuant to the Senior Note Documents.
Section 9.02. Liens. Neither QSRD nor any of its Subsidiaries,
including the Borrower, will create, incur, assume or permit to exist any Lien
on any of its Properties (now owned or hereafter acquired), except:
(a) Liens securing the payment of any Indebtedness;
(b) Excepted Liens;
(c) Liens securing capital leases (but not other Debt) allowed
under Section 9.01(d) but only on the Property under lease;
(d) Liens disclosed on Schedule 9.02;
(e) Liens on cash or securities of the Borrower securing the
Debt described in Section 9.01(f); and
(f) Liens on Property of a Non-Recourse Subsidiary to secure
Debt permitted by Section 9.01(j) and Liens on stock or other equity interests
of any Non-Recourse Subsidiary.
Section 9.03. Investments, Loans and Advances. Neither QSRD nor any of
its Subsidiaries, including the Borrower, will make or permit to remain
outstanding any loans or advances to or investments in any Person, except that
the foregoing restriction shall not apply to:
(a) investments, loans or advances reflected in the Financial
Statements or which are disclosed to the Lenders in Schedule 9.03;
(b) accounts receivable arising in the ordinary course of
business;
(c) direct obligations of the United States or any agency
thereof, or obligations guaranteed by the United States or any agency thereof,
in each case maturing within one year from the date of creation thereof;
(d) commercial paper maturing within 180 days from the date of
creation thereof rated in the highest grade by Standard & Poor's Ratings Service
or Moody's Investors Service, Inc.;
(e) deposits maturing within one year from the date of
creation thereof with, including certificates of deposit issued by, any Lender
or any office located in the United States or any other bank or trust company
which is organized under the laws of the United States or any state thereof, has
capital, surplus and undivided profits aggregating at
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least $100,000,000 (as of the date of such Lender's or bank or trust company's
most recent financial reports) and has a short term deposit rating of no lower
than A2 or P2, as such rating is set forth from time to time, by Standard &
Poor's Rating Service or Moody's Investors Service, Inc., respectively;
(f) in money market funds investing exclusively in investments
described in Section 9.03(c), 9.03(d) or 9.03(e);
(g) investments, loans or advances made by (i) QSRD in or to
the Borrower or any Subsidiary Guarantor, (ii) the Borrower in or to QSRD or any
Subsidiary Guarantor, and (iii) any Subsidiary of QSRD (other than the Borrower)
in or to any Subsidiary Guarantor, QSRD or the Borrower;
(h) investments by the Borrower in Permitted Acquisitions;
(i) investments by the Borrower in Oil and Gas Properties
through indirect ownership such as joint venture, partnership or other
participation arrangements in an amount not to exceed $2,000,000 outstanding at
any one time;
(j) advances to operators under operating agreements entered
into by QSRD or any of its Subsidiaries in the ordinary course of business;
(k) investments, loans or advances made by (i) the Borrower or
any Subsidiary Guarantor to any Non-Recourse Subsidiary not to exceed at any one
time outstanding $100,000 in the aggregate, or (ii) a Non-Recourse Subsidiary to
any other Non-Recourse Subsidiary; provided that QSRD may make loans, advances
or investments to QSR Canada to satisfy its obligations under any employment
agreements to which it is a party and for (A) fixtures, furniture and equipment,
provided that the aggregate amount spent under this clause (A) shall not exceed
$150,000 in the aggregate during any twelve-month period and (B) normal general
and administrative expenses incurred in the ordinary course of its business and
for which QSR Canada is ultimately entitled to reimbursement from QSRD and/or
its Subsidiaries; and
(l) loans or advances to officers, directors and employees of
QSRD or any Subsidiary in the ordinary course of business not to exceed $250,000
in the aggregate outstanding at any time.
Section 9.04. Dividends, Distributions and Redemptions. QSRD shall not
declare or pay any dividend, purchase, redeem or otherwise acquire for value any
of its capital stock now or hereafter outstanding, return any capital to its
stockholders or make any distribution of its assets to its stockholders, except
for (i) dividends or distributions payable solely in capital stock of QSRD; and
(ii) the repurchase or redemption of any shares of the Series C Preferred Stock
with the aggregate net cash proceeds in excess of $50,000,000 of any Equity
Offering(s) occurring after the Closing Date, provided that (A) no Default or
Event of Default has occurred at the time such shares are repurchased or
redeemed or would result
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from such repurchase or redemption and (B) the Excess Availability is not less
than $10,000,000 prior and after giving effect to such repurchase or redemption.
Section 9.05. Sales and Leasebacks. Neither QSRD nor any of its
Subsidiaries will enter into any arrangement, directly or indirectly, with any
Person whereby QSRD or any of its Subsidiaries shall sell or transfer any of its
Property, whether now owned or hereafter acquired, and whereby QSRD or any of
its Subsidiaries shall then or thereafter rent or lease as lessee such Property
or any part thereof or other Property which QSRD or any of its Subsidiaries
intends to use for substantially the same purpose or purposes as the Property
sold or transferred.
Section 9.06. Nature of Business. Neither QSRD, nor any of its
Subsidiaries will allow any material change to be made in the character of its
business as an independent oil and gas exploration and production company.
Section 9.07. Limitation on Leases. Neither QSRD nor any of its
Subsidiaries will create, incur, assume or suffer to exist any obligation for
the payment of rent or hire of Property of any kind whatsoever (real or
personal, including capital leases but excluding leases of Hydrocarbon Interests
and leases directly related to oil and gas field operations), under leases or
lease agreements which would cause the aggregate amount of all payments made by
such Persons pursuant to such leases or lease agreements to exceed $500,000 in
any period of twelve consecutive calendar months in the aggregate. Neither QSRD
nor any of its Subsidiaries will create, incur, assume or suffer to exist any
obligation for the payment of rent or hire of Property of any kind whatsoever
(real or personal, including capital leases but excluding royalty payments under
leases of Hydrocarbon Interests), for oil and gas field operations under leases
or lease agreements (other than leases for any drilling, workover or other rig
related activities, but including leases of vehicles, compressors, and the like)
which would cause the aggregate amount of all payments made by such Persons
pursuant to such leases or lease agreements to exceed $4,000,000 in any period
of twelve consecutive calendar months.
Section 9.08. Mergers, Etc. Neither QSRD nor any of its Subsidiaries
will merge into or with or consolidate with any other Person, or sell, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its Property or assets to any other Person; provided
that (i) any Subsidiary Guarantor may merge with any other Subsidiary Guarantor
or may merge with the Borrower so long as the Borrower is the surviving entity,
and (ii) any Non-Recourse Subsidiary may merge with any Person; provided that if
such Non-Recourse Subsidiary merges with QSRD, the Borrower or any Subsidiary
Guarantor, no Default or Event of Default would occur or be continuing after
giving effect to such merger and QSRD, the Borrower or such Subsidiary
Guarantor, as the case may be, shall be the surviving entity.
Section 9.09. Proceeds of Loans. The Borrower will not permit the
proceeds of the Loans to be used for any purpose other than those permitted by
Section 7.07. Neither the Borrower nor any Person acting on behalf of the
Borrower has taken or will take any action
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which might cause any of the Loan Documents to violate Regulation T, U or X or
any other regulation of the Board of Governors of the Federal Reserve System or
to violate Section 7 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect.
Section 9.10. ERISA Compliance. QSRD will not at any time:
(a) Engage in, or permit any of its ERISA Affiliates to engage
in, any transaction in connection with which QSRD or any of its ERISA Affiliates
could be subjected to either a civil penalty assessed pursuant to section
502(c), (i) or (t) of ERISA or a tax imposed by Chapter 43 of Subtitle D of the
Code;
(b) Terminate, or permit any of its ERISA Affiliates to
terminate, any Plan in a manner, or take any other action with respect to any
Plan, which could reasonably be expected result in any liability to QSRD or any
of its ERISA Affiliates to the PBGC in excess of $100,000;
(c) Fail to make, or permit any of its ERISA Affiliates to
fail to make, full payment when due of all amounts which, under the provisions
of any Plan, agreement relating thereto or applicable law, QSRD or any of its
ERISA Affiliates is required to pay as contributions thereto;
(d) Permit to exist, or allow any of its ERISA Affiliates to
permit to exist, any accumulated funding deficiency within the meaning of
Section 302 of ERISA or section 412 of the Code in excess of $ 100,000, whether
or not waived, with respect to any Plan;
(e) Permit, or allow any of its ERISA Affiliates to permit,
the actuarial present value of the benefit liabilities under any Plan maintained
by QSRD of its ERISA Affiliates which is regulated under Title IV of ERISA to
exceed the current value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such benefit
liabilities in an amount which exceeds $100,000; and for purposes of this
Agreement, the term "actuarial present value of the benefit liabilities" shall
have the meaning specified in section 4041 of ERISA;
(f) Contribute to or assume an obligation to contribute to, or
permit any of its ERISA Affiliates to contribute to or assume an obligation to
contribute to, any Multiemployer Plan;
(g) Acquire, or permit any of its ERISA Affiliates to acquire,
an interest in any Person that causes such Person to become an ERISA Affiliate
with respect to QSRD or any of its ERISA Affiliates if such Person sponsors,
maintains or contributes to, or at any time in the six-year period preceding
such acquisition has sponsored, maintained, or contributed to, (1) any
Multiemployer Plan, or (2) any other Plan that is subject to Title IV of ERISA
under which the actuarial present value of the benefit liabilities under such
Plan exceeds the current value of the assets (computed on a plan termination
basis in accordance
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with Title IV of ERISA) of such Plan allocable to such benefit liabilities in an
amount which exceeds $100,000;
(h) Incur, or permit any of its ERISA Affiliates to incur, a
liability to or on account of a Plan under sections 515, 4062, 4063, 4064, 4201
or 4204 of ERISA in an amount which exceeds $100,000;
(i) Contribute to or assume an obligation to contribute to, or
permit any of its ERISA Affiliates to contribute to or assume an obligation to
contribute to, any employee welfare benefit plan, as defined in section 3(1) of
ERISA, including, without limitation, any such plan maintained to provide
benefits to former employees of such entities, that may not be terminated by
such entities in their sole discretion at any time without any material
liability; or
(j) Amend or permit any of its ERISA Affiliates to amend, a
Plan resulting in an increase in current liability such that QSRD or any of its
ERISA Affiliates is required to provide security to such Plan under section
401(a)(29) of the Code.
Section 9.11. Sale or Discount of Receivables. Neither QSRD nor any of
its Subsidiaries will discount or sell (with or without recourse) any of its
notes receivable or accounts receivable.
Section 9.12. Current Ratio and Interest Coverage Ratio.
(a) Consolidated Current Ratio. QSRD's ratio of (i)
consolidated current assets plus unused availability under the Aggregate
Commitments to (ii) consolidated current liabilities (excluding current
maturities of the Indebtedness) shall not be less than 1.50 to 1.00 as of the
last day of any month commencing October 31, 1999.
(b) Consolidated Interest Coverage Ratio. QSRD's ratio, as of
the last day of any month commencing October 31, 1999, of (i) consolidated
EBITDA for the 12 month period then ended, to (ii) the sum of (a) consolidated
Interest Expense for such 12 month period (but excluding any costs or expenses
incurred in terminating any Risk Management Agreements involving the Bank of
Montreal to the extent included in the determination of consolidated Interest
Expense), and (b) dividends paid in cash on Permitted Preferred Stock during
such 12 month period, shall not be less than 1.00 to 1.00.
Section 9.13. Accounts Payable. QSRD will, and will cause its
Subsidiaries to, pay their respective trade account payables when due in
accordance with their terms and usual and customary industry practices (which
shall not, in any event exceed 90 days from the date of invoice), except for
such payable which are being contested in good faith by appropriate proceedings
diligently pursued and for which adequate reserves under GAAP are being
maintained. QSRD and its Subsidiaries will not permit the weighted average
maturity of their trade accounts payables (excluding payables being contested
pursuant to the foregoing sentence) to exceed 60 days (measured quarterly as of
the last day of each fiscal quarter).
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Section 9.14. Sale of Oil and Gas Properties. QSRD and the Borrower
will not, and will not permit any Subsidiary to, sell, assign, farm-out, convey
or otherwise transfer any Oil and Gas Property or any interest in any Oil and
Gas Property except for (i) sales of Hydrocarbons in the ordinary course of
business, (ii) sales of assets which are worn-out or obsolete and are not
material to the continuation of its business, (iii) intercompany sales or other
dispositions by any Obligor to the Borrower or by any Subsidiary Guarantor to
another Subsidiary Guarantor, provided the foregoing shall not permit
dispositions to Non-Recourse Subsidiaries, except to the extent permitted by
Section 9.03(j)), (iv) dispositions of equipment when substantially similar
equipment has been or will be acquired, (v) any transfer or conveyance required
pursuant to the terms of the Escrow Agreement, and (vi) so long as no Event of
Default has occurred and is continuing, and no Overadvance would result
therefrom, sales or other dispositions of Oil and Gas Properties or other assets
which shall not exceed $1,000,000 in the aggregate in any fiscal year; provided
that the Borrowing Base shall be adjusted by an amount equal to the value, if
any, assigned such Property or asset in the most recently determined Borrowing
Base; and provided, further, at or prior to the effective date of any such sale,
assignment, farm-out, conveyance or other transfer of any Oil and Gas
Properties, and as a condition to Borrower's authority to do so, Borrower shall
deliver to the Administrative Agent a certificate executed by a Responsible
Officer of Borrower certifying (i) that no Event of Default has occurred and is
continuing, (ii) to the valuation of the Oil and Gas Properties involved
utilizing the NYMEX Swap Price for valuation purposes, (iii) that the
disposition proposed will not violate any of the Dollar limitations or other
conditions set forth in this Section 9.14, (iv) that the disposition will not
result in an Overadvance, and (v) the consideration and manner of the payment
thereof to be received by Borrower for the disposition of the Oil and Gas
Properties involved.
Section 9.15. Environmental Matters. Neither QSRD nor any of its
Subsidiaries will cause or permit any of its Property to be in violation of, or
do anything or permit anything to be done which will subject any such Property
to any remedial obligations under any Environmental Laws, assuming disclosure to
the applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to such Property where such violations or
remedial obligations would have a Material Adverse Effect.
Section 9.16. Transactions with Affiliates. Neither QSRD nor any
Subsidiary will enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of Property or the rendering of any service,
with any Affiliate (other than QSRD, the Borrower or any Subsidiary Guarantor)
unless such transactions are in the ordinary course of its business and are upon
fair and reasonable terms no less favorable to it than it would obtain in a
comparable arm's length transaction with a Person not an Affiliate.
Section 9.17. Subsidiaries and Partnerships. Without the prior written
consent of the Agent, QSRD and the Borrower shall not, and shall not permit any
of its respective Subsidiaries to, create any additional Subsidiaries or
partnerships, unless such Subsidiary or partnership becomes a Subsidiary
Guarantor hereunder or is designated by QSRD to be Non-Recourse Subsidiary. QSRD
shall not and shall not permit any of its Subsidiaries to sell or issue any
shares of stock of any class of one of its Subsidiaries or any interest in a
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partnership except to QSRD or any of its Subsidiaries (other than Non-Recourse
Subsidiaries).
Section 9.18. Negative Pledge Agreements. Neither QSRD nor any of its
Subsidiaries will create, incur, assume or suffer to exist any contract,
agreement or understanding (other than this Agreement, the Security Instruments
and the documents and agreements listed on Schedule 7.23) which in any way
prohibits or restricts the granting, conveying, creation or imposition of any
Lien on any of its Property or restricts any of its Subsidiaries from paying
dividends to QSRD or the Borrower, or which requires the consent of other
Persons in connection therewith.
Section 9.19. Gas Imbalances, Take-or-Pay or Other Prepayments. QSRD
and the Borrower will not, and will not permit any Subsidiary Guarantor to,
enter into any contracts or agreements which warrant production of Hydrocarbons
(other than Risk Management Agreements otherwise permitted hereunder) and will
not hereafter allow gas imbalances, take-or-pay or other prepayments with
respect to their Oil and Gas Properties which would require such Person to
deliver Hydrocarbons produced on Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor to exceed, during any
monthly period, five percent (5%) of the current aggregate monthly gas
production for such monthly period from the Mortgaged Properties.
Section 9.20. Material Agreements. QSRD and the Borrower shall not, and
shall not permit any Subsidiary to, amend or modify in any material respect or
terminate any of the Material Agreements. Without limitation of the generality
of the foregoing, the Borrower will not amend, modify or supplement in any
material respect the Purchase and Sale Agreement or the Escrow Agreement
referred to therein; and neither QSRD nor the Borrower will waive any condition
precedent or requirement associated with the release of funds held in escrow
pursuant to the terms of the Escrow Agreement. QSRD and the Borrower will, and
will cause each of their Subsidiaries to, perform and comply in all material
respects with all of their obligations under each Material Agreement in such a
manner as to at all times not be in default of any material provisions
thereunder.
Section 9.21. Repayment of Other Debt.
(a) QSRD and the Borrower shall not, and shall not permit any
Subsidiary to, amend, supplement or modify any Senior Note Document or repay the
principal of, or make any other payment in relation to, the Senior Notes;
provided, so long as no Borrowing Base deficiency then exists under Section
2.07(c) or would result therefrom, and no Default or Event of Default has
occurred and is continuing or would result therefrom, the foregoing shall not
prohibit (i) the payment of interest on the Senior Notes, (ii) the repayment of
the Senior Notes with the proceeds of any refinancing thereof (provided that
such refinancing Debt is on terms substantially similar to the Senior Notes),
(iii) modifications or amendments to the Senior Notes or the Senior Note
Documents if the effect thereof could not be expected to have a Material Adverse
Effect and otherwise do not involve the amendment or modification of provisions
which would increase interest rates, principal or interest payment
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amounts, total principal amounts, or require payment of any such amounts at
earlier times, or similar terms and provisions, and (iv) the consummation of the
transactions permitted under the Side Letter.
(b) QSRD and the Borrower shall not, and shall not permit any
Subsidiary to, amend, supplement, or modify the DEM Subordinated Debt in any
material respect; provided, however, that nothing contained herein shall
prohibit the prepayment of the DEM Subordinated Debt prior to its scheduled
maturity upon terms not more onerous that those contained in the agreements
governing the DEM Subordinated Debt as in effect on the Closing Date.
Section 9.22. Limitations on Capital Expenditures. QSRD and the
Borrower shall not, and shall not permit any Subsidiaries to, make or pay any
capital expenditures (other than maintenance and emergency capital expenditures
and capital expenditures constituting Permitted Acquisitions) if, after giving
effect thereto, the aggregate of all such expenditures would exceed (i) in the
aggregate during any 12 month period, on a cumulative basis for the first 12
months commencing July 1, 1999, and for each 12 month period ending at the end
of each month thereafter, $12,000,000, or (ii) in the aggregate, for the period
from the Closing Date through the Maturity Date, $18,000,000.
Section 9.23. Preferred Stock. QSRD and the Borrower shall not, and
shall not permit any Subsidiary to, issue any Preferred Stock other than
Permitted Preferred Stock.
Section 9.24. Securities Accounts. Borrower shall not establish or
maintain any Securities Account unless Agent shall have received a Control
Agreement, duly executed and in full force and effect, in respect of such
Securities Account. Borrower agrees that it will not transfer assets out of any
Securities Accounts; provided, however, that, so long as no Event of Default has
occurred and is continuing or would result therefrom, Borrower may use such
assets to the extent permitted by this Agreement. Upon the occurrence and during
the continuance of a Default or Event of Default, Collateral Agent may notify
any securities intermediary to liquidate or transfer the applicable Securities
Account or any related investment property maintained or held thereby and remit
the proceeds thereof to the Administrative Agent's Account.
Section 9.25. QSR Canada. Borrower shall not permit QSR Canada to
acquire any assets in the aggregate amount in excess of $200,000, incur any
indebtedness or other liabilities in the aggregate amount in excess of $150,000
to any Persons other than the Lender Group, or conduct any business other than
the provision of general and administrative services, including management
services, to QSRD and its Subsidiaries. Borrower shall not, and shall not permit
any of its Subsidiaries to, conduct any transactions with or make any loans or
advances to or investment in QSR Canada.
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ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01. Events of Default. One or more of the following events
shall constitute an "Event of Default":
(a) the Borrower or any Obligor shall default in the payment
or prepayment when due of any principal of or interest on any Loan, or the
Borrower or any Obligor shall default in the payment of any fees or other amount
payable by it hereunder or under any Loan Document and such default shall
continue unremedied for a period of 3 Business Days; or
(b) QSRD, the Borrower or any Subsidiary Guarantor shall
default in the payment when due of any principal of or interest on any of its
Debt (including the Subordinated Debt) aggregating $500,000 or more, or any
event specified in any note, agreement, indenture or other document evidencing
or relating to any such Debt shall occur if the effect of such event is to
permit, or (with the giving of any notice or the lapse of time or both) to
permit the holder or holders of such Debt (or a trustee or agent on behalf of
such holder or holders) to cause, such Debt to become due prior to its stated
maturity; or QSRD shall become obligated to mandatorily redeem any of the
Preferred Stock or a "mandatory redemption event" shall occur under the
Certificate of Designation for any class of Preferred Stock; or
(c) any representation, warranty or certification made or
deemed made herein or in any Security instrument by QSRD, the Borrower or any
Subsidiary Guarantor, or any certificate furnished to any Lender or the Agent
pursuant to the provisions hereof or any Loan Document, shall prove to have been
false or misleading as of the time made or furnished in any material respect; or
(d) QSRD or the Borrower shall default in the performance of
any of its obligations or any requirement shall not be complied with under
Article IX; or QSRD, the Borrower or any Subsidiary Guarantor shall default in
the performance of any of its obligations under Article VIII, under any other
Article of this Agreement other than under Article IX or any Loan Document
(other than the payment of amounts due which shall be governed by Section
10.01(a)) and such default shall continue unremedied for a period of 15 days
after the occurrence thereof, with the exception of those provisions that
contain separately stated time periods during which performance is to occur, as
to which the permissible period for such default to continue unremedied shall be
5 days; or
(e) QSRD or the Borrower shall admit in writing its inability
to, or be generally unable to, pay its debts as such debts become due; or
(f) QSRD or the Borrower shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its Property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence a
voluntary case under the Federal Bankruptcy Code (as now or
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hereafter in effect), (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Federal Bankruptcy Code, or (vi) take any
corporate action for the purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without the
application or consent of QSRD or the Borrower, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution or
winding-up, or the composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of either
QSRD or the Borrower of all or any substantial part of its assets, or (iii)
similar relief in respect of such Person under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of debts,
and such proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 60 days; or (iv) an order for relief
against either QSRD or the Borrower shall be entered in an involuntary case
under the Federal Bankruptcy Code; or
(h) a judgment or judgments for the payment of money in excess
of $100,000 in the aggregate shall be rendered by a court against QSRD, the
Borrower or any Subsidiary Guarantor and the same shall not be discharged (or
provision shall not be made for such discharge), or a stay of execution thereof
shall not be procured, within thirty (30) days from the date of entry thereof
and QSRD, the Borrower or such Subsidiary shall not, within said period of 30
days, or such longer period during which execution of the same shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed during
such appeal; or
(i) the Security Instruments after delivery thereof shall for
any reason, except to the extent permitted by the terms thereof, cease to be in
full force and effect and valid, binding and enforceable in accordance with
their terms, or cease to create a valid and perfected Lien of the priority
required thereby on any of the collateral purported to be covered thereby,
except to the extent permitted by the terms of this Agreement, or QSRD, the
Borrower, any Subsidiary Guarantor or any Person on their behalf shall so state
in writing; or
(j) any Subsidiary Guarantor takes, suffers or permits to
exist any of the events or conditions referred to in paragraphs (e), (f) or (g)
hereof; or
(k) the occurrence of a Change of Control.
Section 10.02. Remedies. If any Event of Default shall have occurred
and be continuing, or, with respect to clause (d) below, also upon the
occurrence and during the continuance of any other Triggering Event, then:
(a) in the case of an Event of Default other than one referred
to in clauses (e), (f) or (g) of Section 10.01 or in clause (j) to the extent it
relates to clauses (e), (f) or (g), the Administrative Agent may and, upon
request of the Majority Lenders, shall, by notice to
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the Borrower, cancel the Commitments and/or declare the principal amount then
outstanding of, and the accrued interest on, the Loans and all other amounts
payable by the Borrower hereunder and under the other Loan Documents to be
forthwith due and payable, whereupon such amounts shall be immediately due and
payable without presentment, demand, protest, notice of intent to accelerate,
notice of acceleration or other formalities of any kind, all of which are hereby
expressly waived by the Borrower.
(b) in the case of the occurrence of an Event of Default
referred to in clauses (e), (f) or (g) of Section 10.01 or in clause (j) to the
extent it relates to clauses (e), (f) or (g), the Commitments shall be
automatically canceled and the principal amount then outstanding of, and the
accrued interest on, the Loans and all other amounts payable by the Borrower
hereunder and under the other Loan Documents shall become automatically
immediately due and payable without presentment, demand, protest, notice of
intent to accelerate, notice of acceleration or other formalities of any kind,
all of which are hereby expressly waived by the Borrower.
(c) All proceeds received after maturity of the Indebtedness,
whether by acceleration or otherwise shall be applied in accordance with the
provisions of Section 2.15 hereof.
(d) Administrative Agent may distribute the Transfer Order
Letters to the addressees thereof as it shall determine.
ARTICLE XI
THE AGENT
Section 11.01. Appointment, Powers and Immunities.
(a) Each member of the Lender Group hereby designates and
appoints Administrative Agent as its administrative agent under this Agreement
and the other Loan Documents and Collateral Agent as its collateral agent under
this Agreement and the other Loan Documents. Each member of the Lender Group
hereby irrevocably authorizes each such Agent to take such action on its behalf
under the provisions of this Agreement and each other Loan Document and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Each such Agent agrees to act as
such on the express conditions contained in this Article XI. The provisions of
this Article XI are solely for the benefit of the Administrative Agent,
Collateral Agent, and the Lenders. No Obligor shall have any rights as a third
party beneficiary of any of the provisions contained herein. Any provision to
the contrary contained elsewhere in this Agreement or in any other Loan Document
notwithstanding, each such Agent shall not have any duties or responsibilities,
except those expressly set forth herein, nor shall each such Agent have or be
deemed to have any fiduciary relationship with any other member of the Lender
Group, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against each such Agent; it being expressly
understood and agreed that the use of the word "Agent" is for convenience only
and that each such Agent is merely the representative
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of the other members of the Lender Group, and has only the contractual duties
set forth in this Agreement and the other Loan Documents. Except as expressly
otherwise provided in this Agreement, each such Agent shall have and may use its
sole discretion with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any actions which such
Agent is expressly entitled to take or assert under or pursuant to this
Agreement and the other Loan Documents. No member of the Lender Group shall have
any right of action whatsoever against each such Agent as a result of such Agent
acting or failing to act hereunder pursuant to such discretion (other than any
action taken or failure to act arising out of such Agent's gross negligence or
willful misconduct) and any such action taken or failure to act pursuant to such
discretion shall be binding on the Lender Group. Without limiting the generality
of the foregoing, or of any other provision of the Loan Documents that provides
rights or powers to Administrative Agent or Collateral Agent, each of the
members of the Lender Group agree that, as long as this Agreement remains in
effect: (i) (A) Administrative Agent shall have the right to maintain, in
accordance with its customary business practices, ledgers and records reflecting
the status of the Indebtedness, the Loans, the Letters of Credit, payments made
by the Borrower, and related matters, and (B) Collateral Agent shall have the
right to maintain, in accordance with its customary business practices, ledgers
and records reflecting the status of the Collateral and related matters; (ii)
Collateral Agent shall have the right to execute or file any and all financing
or similar statements or notices, amendments, renewals, supplements, documents,
instruments, proofs of claim, notices and other written agreements with respect
to the Loan Documents; (iii) Administrative Agent shall have the right to make
the Loans, and the Letters of Credit, for itself or on behalf of the applicable
Lenders as provided in the Loan Documents; (iv) [intentionally omitted]; (v)
[intentionally omitted]; (vi) (A) Administrative Agent shall have the right to
perform, exercise, and enforce any and all other rights and remedies of the
Lender Group with respect to the Obligors, the Indebtedness, or otherwise
related to any of same to the extent reasonably incidental to the exercise by
Administrative Agent of the rights and remedies specifically authorized to be
exercised by Administrative Agent by the terms of the Loan Documents, and (B)
Collateral Agent shall have the right to perform, exercise, and enforce such
other rights and remedies of the Lender Group with respect to the Obligors, the
Indebtedness, the Collateral, or otherwise related to any of same to the extent
reasonably incidental to the exercise by Collateral Agent of the rights and
remedies specifically authorized to be exercised by Collateral Agent by the
terms of the Loan Documents ; and (vii) Administrative Agent and Collateral
Agent each shall have the right to incur and pay such fees and Lender Group
Expenses under the Loan Documents as such Agent reasonably may deem necessary or
appropriate for the performance and fulfillment of its functions and powers
pursuant to the Loan Documents. Administrative Agent may deem and treat the
payee of any Indebtedness as the holder thereof for all purposes of the Loan
Documents unless and until a notice of the assignment or transfer of such
Indebtedness shall have been filed with Administrative Agent. Each member of the
Lender Group further consents to (y) the execution, delivery, and performance by
Administrative Agent or Collateral Agent of each Loan Document entered into by
such Agent on behalf of the Lender Group as contemplated by this Agreement, and
(z) the terms of such Loan Documents.
(b) Except as otherwise provided in this section, each of
Administrative Agent and Collateral Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Each of Administrative Agent and
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Collateral Agent shall not be responsible for the negligence or misconduct of
any agent or attorney-in-fact that it selects as long as such selection was made
in compliance with this section and without gross negligence or willful
misconduct.
(c) None of the Agent-Related Persons shall (i) be liable for
any action taken or omitted to be taken by any of them under or in connection
with this Agreement or any other Loan Document or the transactions contemplated
hereby (except for its own gross negligence or willful misconduct), or (ii) be
responsible in any manner to any members of the Lender Group for any recital,
statement, representation or warranty made by any Obligor or any Subsidiary or
Affiliate thereof, or any officer or director thereof, contained in this
Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by
Administrative Agent or Collateral Agent under or in connection with, this
Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of any Obligor or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any member of the Lender Group to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Obligor or any
of its Subsidiaries or Affiliates.
Section 11.02. Reliance by Agent. Each Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent, or made by the proper Person,
and upon advice and statements of legal counsel (including counsel to the
Obligors or counsel to any member of the Lender Group), independent accountants
and other experts selected by such Agent. Each Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it first shall receive such advice or concurrence of the Lenders
as it deems appropriate and until such instructions are received, such Agent
shall act, or refrain from acting, as it deems advisable. If any Agent so
requests, it first shall be indemnified to its reasonable satisfaction by the
Lender Group against any and all liability and expense that may be incurred by
it by reason of taking or continuing to take any such action. Each Agent in all
cases shall be fully protected in acting, or in refraining from acting, under
this Agreement or any other Loan Document in accordance with a request or
consent of the Lender Group and such request and any action taken or failure to
act pursuant thereto shall be binding upon all members of the Lender Group.
Section 11.03. Defaults. Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest, fees, and
Lender Group Expenses required to be paid to Administrative Agent for the
account of the Lender Group or the failure of Borrower to reimburse for Letter
of Credit drawings, except with respect to Events of Default of which
Administrative Agent has actual knowledge, and unless Administrative Agent shall
have received written notice from a Lender or Borrower referring to this
Agreement, describing such Default or Event of Default, and stating that such
notice is a
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"Notice of Default." Administrative Agent promptly will notify the Lender Group
of its receipt of any such notice or of any Event of Default of which
Administrative Agent has actual knowledge. If any Lender obtains actual
knowledge of any Event of Default, such Lender promptly shall notify the other
Lenders and each Agent of such Event of Default. Each Lender shall be solely
responsible for giving any notices to its Participants, if any. Subject to
Sections 11.02 and 11.07, each Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Required Lenders in
accordance with Article X; provided, however, that unless and until such Agent
has received any such request, such Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable.
Section 11.04. Rights as a Lender.
(a) With respect to its Commitment and the Loans made by it
and its participation in the issuance of Letters of Credit, Foothill Capital
Corporation (and any successor acting as Administrative Agent, if any, as
permitted by Section 11.08(a) hereof) in its capacity as a Lender under the Loan
Documents shall have the same rights, privileges and powers under the Loan
Documents as any other Lender and may exercise the same as though it were not
acting as Administrative Agent, and the term "Lender" or "Lenders" shall, unless
the context otherwise indicates, include Administrative Agent in its individual
capacity. Foothill Capital Corporation (and any successor acting as
Administrative Agent) and its affiliates may (without having to account for the
same to any member of the Lender Group) accept deposits from, lend money to,
make investments in and generally engage in any kind of banking, trust or other
business with Borrower (and any of its Subsidiaries or Affiliates) as if it were
not acting as Administrative Agent, and Foothill Capital Corporation (and its
successors) and its affiliates may accept fees and other consideration from
Borrower for services in connection with this Agreement or otherwise without
having to account for the same to the Lender Group.
(b) With respect to its Commitment and the Loans made by it,
Ableco Finance LLC (and any successor acting as Collateral Agent, if any, as
permitted by Section 11.08(b) hereof) in its capacity as a Lender under the Loan
Documents shall have the same rights, privileges and powers under the Loan
Documents as any other Lender and may exercise the same as though it were not
acting as Collateral Agent, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include Collateral Agent in its individual
capacity. Ableco Finance LLC (and any successor acting as Collateral Agent) and
its affiliates may (without having to account for the same to any member of the
Lender Group) accept deposits from, lend money to, make investments in and
generally engage in any kind of banking, trust or other business with Borrower
(and any of its Subsidiaries or Affiliates) as if it were not acting as
Collateral Agent, and Ableco Finance LLC and its affiliates may accept fees and
other consideration from Borrower for services in connection with this Agreement
or otherwise without having to account for the same to the Lender Group.
Section 11.05. COSTS AND EXPENSES; INDEMNIFICATION. EACH AGENT MAY
INCUR AND PAY FEES, COSTS, AND LENDER GROUP EXPENSES UNDER THE LOAN DOCUMENTS TO
THE EXTENT SUCH AGENT DEEMS
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REASONABLY NECESSARY OR APPROPRIATE FOR THE PERFORMANCE AND FULFILLMENT OF ITS
FUNCTIONS, POWERS, AND OBLIGATIONS PURSUANT TO THE LOAN DOCUMENTS, INCLUDING
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, COURT COSTS, REASONABLE
ATTORNEYS FEES AND EXPENSES, COSTS OF COLLECTION BY OUTSIDE COLLECTION AGENCIES
AND AUCTIONEER FEES AND COSTS OF SECURITY GUARDS OR INSURANCE PREMIUMS PAID TO
MAINTAIN THE COLLATERAL, WHETHER OR NOT BORROWER IS OBLIGATED TO REIMBURSE THE
LENDER GROUP FOR SUCH EXPENSES PURSUANT TO THE LOAN AGREEMENT OR OTHERWISE. EACH
LENDER HEREBY AGREES THAT IT IS AND SHALL BE OBLIGATED TO PAY TO OR REIMBURSE
AGENT FOR THE AMOUNT OF SUCH LENDER'S PERCENTAGE SHARE THEREOF. WHETHER OR NOT
THE TRANSACTIONS CONTEMPLATED HEREBY ARE CONSUMMATED, THE LENDERS SHALL
INDEMNIFY UPON DEMAND THE AGENT-RELATED PERSONS (WITHOUT LIMITING THE OBLIGATION
OF THE OBLIGORS TO DO SO), ACCORDING TO THEIR PERCENTAGE SHARES, FROM AND
AGAINST ANY AND ALL INDEMNIFIED LIABILITIES (INCLUDING WITHOUT LIMITATION
INDEMNIFIED LIABILITIES ARISING UNDER ANY ENVIRONMENTAL LAW AS PROVIDED HEREIN);
PROVIDED, HOWEVER, THAT NO LENDER SHALL BE LIABLE FOR THE PAYMENT TO THE
AGENT-RELATED PERSONS OF ANY PORTION OF SUCH INDEMNIFIED LIABILITIES RESULTING
SOLELY FROM SUCH PERSON'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT
LIMITATION OF THE FOREGOING, EACH LENDER SHALL REIMBURSE ADMINISTRATIVE AGENT OR
COLLATERAL AGENT, AS THE CASE MAY BE, UPON DEMAND FOR SUCH LENDER'S RATABLE
SHARE OF ANY COSTS OR OUT-OF-POCKET EXPENSES (INCLUDING ATTORNEYS FEES AND
EXPENSES) INCURRED BY SUCH AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION,
DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT OR ENFORCEMENT (WHETHER
THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS OR OTHERWISE) OF, OR LEGAL ADVICE IN
RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT, OR ANY DOCUMENT CONTEMPLATED BY OR REFERRED TO HEREIN . THE
UNDERTAKING IN THIS SECTION SHALL SURVIVE THE PAYMENT OF ALL INDEBTEDNESS AND
OTHER OBLIGATIONS HEREUNDER AND THE RESIGNATION OR REPLACEMENT OF ANY AGENT.
Section 11.06. Non-Reliance on Agent and other Lenders. Each
Lender acknowledges that none of the Agent-Related Persons has made any
representation or warranty to it, and that no act by any Agent hereinafter
taken, including any review of the affairs or Property of the Obligors and their
Subsidiaries or Affiliates, shall be deemed to constitute any representation or
warranty by any Agent-Related Person to any Lender. Each Lender represents to
each Agent that it has, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it has
deemed
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appropriate, made its own appraisal of and investigation into the business,
prospects, operations, Property, financial and other condition and
creditworthiness of QSRD and its Subsidiaries, including the Borrower, and any
other Person (other than the Lender Group) party to a Loan Document, and all
applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to Borrower. Each Lender also represents that it will, independently and
without reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of Borrower and any
other Person (other than the Lender Group) party to a Loan Document. Except for
notices, reports and other documents expressly herein required to be furnished
to the Lender Group by an Agent, no Agent shall have any duty or responsibility
to provide any member of the Lender Group with any credit or other information
concerning the business, prospects, operations, Property, financial and other
condition or creditworthiness of QSRD and its Subsidiaries, including the
Borrower, and any other Person (other than the Lender Group) party to a Loan
Document that may come into the possession of any of the Agent-Related Persons.
Section 11.07. Action by Agents. Except for action or other matters
expressly required of any Agent hereunder, such Agent shall in all cases be
fully justified in failing or refusing to take any action under this Agreement
or any other Loan Document unless it shall (i) receive written instructions from
the Majority Lenders specifying the action to be taken, and (ii) be indemnified
to its satisfaction by the Lenders against any and all liability and expenses
which may be incurred by it by reason of taking, not taking or continuing to
take any such action. The instructions of the Majority Lenders and any action
taken or failure to act pursuant thereto by such Agent shall be binding on all
of the Lenders. If a Default has occurred and is continuing, such Agent shall
take such action with respect to such Default as shall be directed by the
Majority Lenders in the written instructions (with indemnities) described in
this Section 11.07, provided that, unless and until such Agent shall have
received such directions, such Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default as
it shall deem advisable in the best interests of the Lenders. In no event,
however, shall any Agent be required to take any action which exposes such Agent
to personal liability or which is contrary to this Agreement and the Loan
Documents or applicable law.
Section 11.08. Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, Administrative Agent may resign at any time by notice to the Lender Group
and Borrower (for the benefit of the Obligors). Upon any such resignation, the
Majority Lenders shall have the right to appoint a successor Administrative
Agent. If no successor Administrative Agent shall have been appointed by the
Majority Lenders and have accepted such appointment within 30 days after the
retiring Administrative Agent's giving of notice of resignation, then the
retiring Administrative Agent may, on behalf of Lenders, appoint a successor
Administrative Agent. Upon the acceptance of
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any appointment as Administrative Agent by a successor Administrative Agent,
such successor Administrative Agent shall thereupon succeed to and become vested
with all the rights, remedies, powers, privileges, duties and obligations of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations, under the Loan Documents. After any
retiring Administrative Agent's resignation as Administrative Agent, the
provisions of this Article XI and Section 12.03 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Administrative Agent. If no successor Administrative Agent has
accepted appointment as Administrative Agent by the date which is 45 days
following a retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless become effective and the
Majority Lenders shall perform all of the duties of Administrative Agent until
such time, if any, as the Majority Lenders appoint a successor Administrative
Agent as provided above.
(b) Subject to the appointment and acceptance of a successor
Collateral Agent as provided below, Collateral Agent may resign at any time by
notice to the Lender Group and Borrower (for the benefit of the Obligors). Upon
any such resignation, the Majority Lenders shall have the right to appoint a
successor Collateral Agent. If no successor Collateral Agent shall have been
appointed by the Majority Lenders and have accepted such appointment within 30
days after the retiring Collateral Agent's giving of notice of resignation, then
the retiring Collateral Agent may, on behalf of Lenders, appoint a successor
Collateral Agent. Upon the acceptance of any appointment as Collateral Agent by
a successor Collateral Agent, such successor Collateral Agent shall thereupon
succeed to and become vested with all the rights, remedies, powers, privileges,
duties and obligations of the retiring Collateral Agent, and the retiring
Collateral Agent shall be discharged from its duties and obligations, under the
Loan Documents. After any retiring Collateral Agent's resignation as Collateral
Agent, the provisions of this Article XI and Section 12.03 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as Collateral Agent. If no successor Collateral Agent has
accepted appointment as Collateral Agent by the date which is 45 days following
a retiring Collateral Agent's notice of resignation, the retiring Collateral
Agent's resignation shall nevertheless become effective and the Majority Lenders
shall perform all of the duties of Collateral Agent until such time, if any, as
the Majority Lenders appoint a successor Collateral Agent as provided above.
Section 11.09. Collateral Sub-Agents. Each member of the Lender Group
by its execution and delivery of this Agreement (or any joinder hereto or any
Assignment hereunder) agrees that, in the event it shall hold any monies or
other investments on account of Borrower or any other Obligor, such monies or
other investments shall be held in the name and under the control of such member
of the Lender Group, and such member of the Lender Group shall hold such monies
or other investments as a collateral sub-agent for Collateral Agent under this
Agreement and the other Loan Documents. Each Obligor by its execution and
delivery of this Agreement hereby consents to the foregoing.
Section 11.10. Communications by Obligors. Except as otherwise provided
in this Agreement, the Obligors' communications with respect to the Loan
Documents shall be with Administrative Agent or Collateral Agent, as the case
may be, and the Obligors shall not be under any obligation to communicate
directly with the Lenders.
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Section 11.11. Collateral Matters.
(a) The Lenders hereby irrevocably authorize Collateral Agent,
at its option and in its sole discretion, to release any Lien on any Collateral
(i) upon the termination of the Commitments and payment and satisfaction in full
of all Indebtedness; (ii) constituting property being sold or disposed of if a
release is required or desirable in connection therewith and if Borrower
certifies in writing to Collateral Agent that the sale or disposition is
permitted under this Agreement or the other Loan Documents (and Collateral Agent
may rely conclusively on any such certificate, without further inquiry); (iii)
constituting property in which Borrower and the other Obligors owned no interest
at the time the security interest was granted or at any time thereafter; (iv)
constituting property leased to Borrower or any other Obligor under a lease that
has expired or is terminated in a transaction permitted under this Agreement, or
(v) which, in the aggregate with all other dispositions of Collateral, has a
fair market value or book value, whichever is less, of $1,000,000 or less.
Except as provided above or expressly provided in any other Loan Document,
Collateral Agent will not execute and deliver a release of any Lien on any
Collateral without the prior written authorization of all of the Lenders. Upon
request by Collateral Agent or Borrower at any time, Administrative Agent and
the Lenders will confirm in writing Collateral Agent's authority to release any
such Liens on particular types or items of Collateral pursuant to this Section
11.11; provided, however, that (1) Collateral Agent shall not be required to
execute any document necessary to evidence such release on terms that, in
Collateral Agent's opinion, would expose Collateral Agent to liability or create
any obligation or entail any consequence other than the release of such Lien
without recourse, representation, or warranty, and (2) such release shall not in
any manner discharge, affect, or impair the Indebtedness or any Liens (other
than those expressly being released) upon (or obligations of Borrower or the
other Obligors in respect of) all interests retained by Borrower or the other
Obligors, including, the proceeds of any sale, all of which shall continue to
constitute part of the Collateral.
(b) Collateral Agent shall have no obligation whatsoever to
any other member of the Lender Group to assure that the Collateral exists or is
owned by Borrower or any other Obligor or is cared for, protected, or insured or
has been encumbered, or that the Collateral Agent's Liens have been properly or
sufficiently or lawfully created, perfected, protected, or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or available to
Collateral Agent pursuant to any of the Loan Documents, it being understood and
agreed that in respect of the Collateral, or any act, omission or event related
thereto, subject to the terms and conditions contained herein, Collateral Agent
may act in any manner it may deem appropriate, absent the Collateral Agent's
gross negligence or willful misconduct, in its sole discretion given Collateral
Agent's own interest in the Collateral in its capacity as one of the Lenders and
that Collateral Agent shall have no other duty or liability whatsoever to any
other member of the Lender Group as to any of the foregoing, except as otherwise
provided herein.
Section 11.12. Restrictions on Actions by the Agents and the Lenders;
Sharing Payments.
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(a) Each of the Agents and each of the Lenders agrees that it
shall not, without the express consent of the Agents, and that it shall, to the
extent it is lawfully entitled to do so, upon the request of Collateral Agent,
set off against the Indebtedness, any amounts owing by such member of the Lender
Group to Borrower or any other Obligor or any accounts of Borrower or any other
Obligor now or hereafter maintained with such member of the Lender Group. Each
of the Agents and each of the Lenders further agrees that it shall not, unless
specifically requested to do so by Collateral Agent , take or cause to be taken
any action, including, the commencement of any legal or equitable proceedings,
to foreclose any Lien on, or otherwise enforce any security interest in, any of
the Collateral the purpose of which is, or could be, to give such member of the
Lender Group any preference or priority against the other members of the Lender
Group with respect to the Collateral.
(b) Subject to Section 11.04, if, at any time or times any
Lender shall receive (i) by payment, foreclosure, setoff or otherwise, any
proceeds of Collateral or any payments with respect to the Indebtedness arising
under, or relating to, this Agreement or the other Loan Documents, except for
any such proceeds or payments received by such Lender from Administrative Agent
pursuant to the terms of this Agreement, or (ii) payments from Administrative
Agent in excess of such Lender's ratable portion of all such distributions by
Administrative Agent, such Lender promptly shall turn the same over to
Administrative Agent, in kind, and with such endorsements as may be required to
negotiate the same to Administrative Agent, or in same day funds, as applicable,
for the account of the Lender Group and for apportionment and application to the
Indebtedness in accordance with Section 2.14 hereof.
Section 11.13. Several Obligations; No Liability. Notwithstanding that
certain of the Loan Documents now or hereafter may have been or will be executed
only by or in favor of an Agent in its capacity as such, and not by or in favor
of the Lenders, any and all obligations on the part of Administrative Agent (if
any) to make any credit available hereunder shall constitute the several (and
not joint) obligations of the respective Lenders on a ratable basis, according
to their Percentage Shares, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any member of the Lender
Group any interest in, or subject any member of the Lender Group to any
liability for, or in respect of, the business, assets, profits, losses, or
liabilities of any other member of the Lender Group. Each Lender shall be solely
responsible for notifying its participants of any matters relating to the Loan
Documents to the extent any such notice may be required, and no member of the
Lender Group shall have any obligation, duty, or liability to any participant of
any other Lender. Except as provided in Section 11.05, no Agent or any Lender
shall have any liability for the acts of the other Agent or any other Lender. No
Lender shall be responsible to Borrower, any other Obligor, or any other Person
for any failure by any other Lender to fulfill its obligations to make credit
available hereunder, nor to advance for it or on its behalf in connection with
its Commitment, nor to take any other action on its behalf hereunder or in
connection with the financing contemplated herein.
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ARTICLE XII
MISCELLANEOUS
Section 12.01. Waiver. No failure on the part of the Agents or any
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under any of the Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under any of the Loan Documents preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
Section 12.02. Notices. All notices and other communications provided
for herein and in the Loan Documents (including, without Limitation, any
modifications of, or waivers or consents under, this Agreement or the Loan
Documents) shall be given or made by telecopy, courier or U.S. Mail or in
writing and telecopied, mailed or delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof or
in the Loan Documents or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement or in the Loan Documents, all such communications
shall be deemed to have been duly given when transmitted by telecopier,
delivered to the telegraph or cable office or personally delivered or, in the
case of a mailed notice, three (3) Business Days after the date deposited in the
mails, postage prepaid, or in the case of overnight courier, one (1) Business
Day after the date deposited with such courier, in each case given or addressed
as aforesaid.
Section 12.03. PAYMENT OF EXPENSES, INDEMNITIES, ETC. THE BORROWER
AGREES:
(a) WHETHER OR NOT THE TRANSACTIONS HEREBY CONTEMPLATED ARE
CONSUMMATED, TO PAY ALL LENDER GROUP EXPENSES; AND PROMPTLY REIMBURSE THE AGENTS
FOR ALL AMOUNTS EXPENDED, ADVANCED OR INCURRED BY THE AGENTS OR THE LENDERS TO
SATISFY ANY OBLIGATION OF ANY OBLIGOR UNDER THIS AGREEMENT OR ANY SECURITY
INSTRUMENT;
(b) TO INDEMNIFY THE AGENTS AND EACH LENDER AND EACH OF THEIR
AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES AND
AGENTS ("INDEMNIFIED PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND
PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY MATTERS
WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF THEM (WHETHER OR
NOT ANY OF THEM IS DESIGNATED A PARTY THERETO) AS A RESULT OF, ARISING OUT OF OR
IN ANY WAY RELATED TO (1) ANY ACTUAL OR PROPOSED USE BY THE BORROWER OF THE
PROCEEDS OF ANY OF THE LOANS, (11) THE EXECUTION, DELIVERY AND PERFORMANCE OF
THE LOAN DOCUMENTS, (III) THE OPERATIONS OF THE BUSINESS OF QSRD AND ITS
SUBSIDIARIES, (IV) THE FAILURE OF QSRD OR ANY OF ITS SUBSIDIARIES TO COMPLY WITH
THE TERMS OF ANY LOAN DOCUMENT, THIS AGREEMENT OR WITH
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ANY GOVERNMENTAL REQUIREMENT, (V) ANY INACCURACY OF ANY REPRESENTATION OR ANY
BREACH OF ANY WARRANTY OF ANY OBLIGOR SET FORTH IN ANY OF THE LOAN DOCUMENTS,
(VI) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE ANY AMOUNTS
RECEIVED PURSUANT TO THE LOAN DOCUMENTS OR (VII) ANY OTHER ASPECT OF THE LOAN
DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS
OF COUNSEL AND ALL OTHER EXPENSES INCURRED IN CONNECTION WITH INVESTIGATING,
DEFENDING OR PREPARING TO DEFEND ANY SUCH ACTION, SUIT, PROCEEDING (INCLUDING
ANY INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM AND INCLUDING ALL
INDEMNITY MATTERS ARISING BY REASON OF THE ORDINARY NEGLIGENCE OF ANY
INDEMNIFIED PARTY, BUT EXCLUDING ALL INDEMNITY MATTERS ARISING SOLELY BY REASON
OF CLAIMS BETWEEN THE LENDERS OR ANY LENDER AND THE AGENTS OR A LENDER'S
SHAREHOLDERS AGAINST THE AGENTS OR LENDER OR BY REASON OF THE GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT ON THE PART OF THE INDEMNIFIED PARTY; AND
(c) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE
INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST RECOVERY
ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND LIABILITIES TO WHICH
ANY SUCH PERSON MAY BECOME SUBJECT (I) UNDER ANY ENVIRONMENTAL LAW APPLICABLE TO
QSRD OR ANY OF ITS SUBSIDIARIES OR ANY OF THEIR PROPERTIES, INCLUDING WITHOUT
IMITATION, THE TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF THEIR
PROPERTIES, (II) AS A RESULT OF THE BREACH OR NON-COMPLIANCE BY QSRD OR ANY OF
ITS SUBSIDIARIES WITH ANY ENVIRONMENTAL LAW APPLICABLE TO QSRD OR ANY OF ITS
SUBSIDIARIES, (III) DUE TO PAST OWNERSHIP BY QSRD OR ANY OF ITS SUBSIDIARIES OF
ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH,
THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT
LIABILITY, (IV) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT OR DISPOSAL OF
HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY QSRD OR
ANY OF ITS SUBSIDIARIES, OR (V) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY
CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, PROVIDED, HOWEVER, NO INDEMNITY
SHALL BE AFFORDED UNDER THIS SECTION 12.03(C) IN RESPECT OF ANY PROPERTY FOR ANY
OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS OF THE AGENTS OR ANY LENDER DURING
THE PERIOD AFTER WHICH SUCH PERSON, ITS SUCCESSORS OR ASSIGNS SHALL HAVE
OBTAINED POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED IN LIEU OF
FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE).
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(d) NO INDEMNIFIED PARTY MAY SETTLE ANY CLAIM TO BE
INDEMNIFIED WITHOUT THE CONSENT OF THE INDEMNITOR, SUCH CONSENT NOT TO BE
UNREASONABLY WITHHELD; PROVIDED, THAT THE INDEMNITOR MAY NOT REASONABLY WITHHOLD
CONSENT TO ANY SETTLEMENT THAT AN INDEMNIFIED PARTY PROPOSES IF THE INDEMNITOR
DOES NOT HAVE THE FINANCIAL ABILITY TO PAY ALL ITS OBLIGATIONS OUTSTANDING AND
ASSERTED AGAINST THE INDEMNITOR AT THAT TIME, INCLUDING THE MAXIMUM POTENTIAL
CLAIMS AGAINST THE INDEMNIFIED PARTY TO BE INDEMNIFIED PURSUANT TO THIS SECTION
12.03.
(e) IN THE CASE OF ANY INDEMNIFICATION HEREUNDER, THE AGENTS
OR LENDERS, AS APPROPRIATE, SHALL GIVE NOTICE TO THE BORROWER OF ANY SUCH CLAIM
OR DEMAND BEING MADE AGAINST THE INDEMNIFIED PARTY AND THE BORROWER SHALL HAVE
THE NON-EXCLUSIVE RIGHT TO JOIN IN THE DEFENSE AGAINST ANY SUCH CLAIM OR DEMAND.
(f) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED
PARTIES NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR
AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE
INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON
ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN INDEMNIFIED
PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL CONTINUE BUT
SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED TO HAVE OCCURRED BY
REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
INDEMNIFIED PARTY.
(g) THE BORROWER'S OBLIGATIONS UNDER THIS SECTION 12.03 SHALL
SURVIVE ANY TERMINATION OF THIS AGREEMENT AND THE PAYMENT OF THE INDEBTEDNESS
AND SHALL CONTINUE THEREAFTER IN FULL FORCE AND EFFECT.
(h) THE BORROWER SHALL PAY ANY AMOUNTS DUE UNDER THIS SECTION
12.03 WITHIN 30 DAYS OF THE RECEIPT BY THE BORROWER OF NOTICE OF THE AMOUNT DUE.
Section 12.04. Amendments, Etc. Any provision of this Agreement, or any
Security Instrument may be amended, modified or waived with QSRD's, the
Borrower's and the Majority Lenders' prior written consent; provided that (i) no
amendment, modification or waiver which extends or delays the date fixed by this
Agreement or any other Loan Document for any payment of principal, interest,
fees or other payments due to Lenders (or any of them) hereunder or under any
other Loan Document, increases the Aggregate Maximum Credit Amounts, modifies
any term herein providing for the determination of the Borrowing Base, forgives
any Indebtedness outstanding under this Agreement, releases any Obligor from any
obligation for the payment of money, releases the Collateral Agent's Lien
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upon Collateral (except as expressly required by the terms of this Agreement)
the aggregate PV-10 Value of which exceeds $1,000,000 during any fiscal year,
reduces the interest rate applicable to the Loans or the fees payable to the
Lenders generally, affects Section 2.03(a), 2.9, 2.10, 2.14, , this Section
12.04 or Section 12.06, subordinates the Collateral Agent's Liens to the Liens
of any other creditor of an Obligor, or modifies the definition of "Borrowing
Base", "Majority Lenders", "Percentage Share" or "Required Lenders" shall be
effective without consent of all Lenders; (ii) no amendment, modification or
waiver which changes the Maximum Credit Amount or extends the Commitments of any
Lender shall be effective without the consent of such Lender; and (iii) no
amendment, modification or waiver which modifies the rights, duties or
obligations of any Agent shall be effective without the consent of such Agent.
Section 12.05. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
Section 12.06. Assignments and Participations.
(a) Borrower shall maintain, or cause to be maintained, a
register (the "Register") on which it enters the name of each Lender as the
registered owner of the Loans held by such Lender. A Registered Loan (and the
Registered Note, if any, evidencing the same) may be assigned or sold in whole
or in part only by registration of such assignment or sale on the Register (and
each Registered Note shall expressly so provide). Any assignment or sale of all
or part of such Registered Loan (and the Registered Note, if any, evidencing the
same) may be effected only by registration of such assignment or sale on the
Register, together with the surrender of the Registered Note, if any, evidencing
the same duly endorsed by (or accompanied by a written instrument of assignment
or sale duly executed by) the holder of such Registered Note, whereupon, at the
request of the designated assignee(s) or transferee(s), one or more new
Registered Notes in the same aggregate principal amount shall be issued to the
designated assignee(s) or transferee(s). Prior to the registration of assignment
or sale of any Registered Loan (and the Registered Note, if any evidencing the
same), the Borrower shall treat the Person in whose name such Loan (and the
Registered Note, if any, evidencing the same) is registered as the owner thereof
for the purpose of receiving all payments thereon and for all other purposes,
notwithstanding notice to the contrary.
(b) In the event that any Lender sells participations in the
Registered Loan, such Lender shall maintain a register on which it enters the
name of all participants in the Registered Loans held by it (the "Participant
Register"). A Registered Loan (and the Registered Note, if any, evidencing the
same) may be participated in whole or in part only by registration of such
participation on the Participant Register (and each Registered Note shall
expressly so provide). Any participation of such Registered Loan (and the
Registered Note, if any, evidencing the same) may be effected only by the
registration of such participation on the Participant Register.
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(c) No Obligor, including the Borrower, may assign its rights
or obligations hereunder or under any other Loan Documents without the prior
consent of all of the Lenders and the Agents.
(d) Any Lender may, upon the written consent of the Agents
and, unless an Event of Default has occurred and is continuing, the written
consent Borrower (which consent will not be unreasonably withheld and which
consent is not required for assignments to Affiliates of a Lender), assign to
one or more assignees all or a portion of its rights and obligations under this
Agreement pursuant to an Assignment Agreement substantially in the form of
Exhibit E-1 (an "Assignment") provided, however, that (i) any such assignment
shall be in the amount of at least $5,000,000 or such lesser amount to which the
Borrower has consented and (ii) the assignee shall pay to the Administrative
Agent a processing and recordation fee of $5,000 for each assignment. Any such
assignment will become effective upon the execution and delivery to the
Administrative Agent of the Assignment and the consent of the Agents. Promptly
after receipt of an executed Assignment, the Administrative Agent shall send to
the Borrower a copy of such executed Assignment. Upon the effectiveness of any
assignment pursuant to this Section 12.06(b), the assignee will become a
"Lender," if not already a "Lender," for all purposes of this Agreement and the
Security Instruments. The assignor shall be relieved of its obligations
hereunder to the extent of such assignment (and if the assigning Lender no
longer holds any rights or obligations under this Agreement, such assigning
Lender shall cease to be a "Lender" hereunder except that its rights under
Sections 4.06 and 12.03 shall not be affected). The Administrative Agent will
prepare on the last Business Day of each month during which an assignment has
become effective pursuant to this Section 12.06(b), a new Schedule C-1 giving
effect to all such assignments effected during such month, and will promptly
provide the same to the Borrower and each of the Lenders. Anything contained
herein to the contrary notwithstanding, the consent of the Agents or the
Borrower shall not be required (and payment of any fees shall not be required)
if such assignment is in connection with any merger, consolidation, sale,
transfer, or other disposition of all or any substantial portion of the business
or loan portfolio of such Lender or the assignee is an Affiliate (other than
individuals) of, or a fund, money market account, investment account or other
account managed by, a Lender.
(e) Each Lender may transfer, grant or assign participations
in all or any part of such Lender's interests hereunder pursuant to this Section
12.06(e) to any Person, provided that: (i) such Lender shall remain a "Lender"
for all purposes of this Agreement and the transferee of such participation
shall not constitute a "Lender" hereunder; and (ii) no participant under any
such participation shall have rights to approve any amendment to or waiver of
any of the Loan Documents except to the extent such amendment or waiver would
(w) forgive or reduce the amount of principal due hereunder, (x) extend the
Revolving Credit Termination Date or the Maturity Date, (y) reduce the interest
rate (other than as a result of waiving the applicability of any post-default
increases in interest rates) or fees applicable to any of the Commitments or
Loans in which such participant is participating, or postpone the payment of any
thereof, or (z) release all or substantially all of the Collateral or any
guarantor (except as expressly provided herein or in any Loan Document)
supporting any of the Commitments or Loans in which such participant is
participating. In the case of any such
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participation, the participant shall not have any rights under this Agreement or
any of the Loan Documents (the participant's rights against the granting Lender
in respect of such participation to be those set forth in the agreement with
such Lender creating such participation), and all amounts payable by the
Borrower hereunder shall be determined as if such Lender had not sold such
participation, provided that such participant shall be entitled to be
indemnified under Section 12.03 as if it were a Lender. In addition, each
agreement creating any participation must include an agreement by the
participant to be bound by the provisions of Section 12.15.
(f) The Lenders may furnish any information concerning the
Obligors in the possession of the Lenders from time to time to assignees and
participants (including prospective assignees and participants); provided that,
such Persons agree to be bound by the provisions of Section 12.15 hereof.
(g) Notwithstanding anything in this Section 12.06 to the
contrary, any Lender may assign and pledge its portion of the Indebtedness to
any Federal Reserve Bank or the United States Treasury 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 System and/or such
Federal Reserve Bank. No such assignment and/or pledge shall release the
assigning and/or pledging Lender from its obligations hereunder.
(h) Notwithstanding any other provisions of this Section
12.06, no transfer or assignment of the interests or obligations of any Lender
or any grant of participations therein shall be permitted if such transfer,
assignment or grant would require QSRD or the Borrower to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any
state.
Section 12.07. Invalidity. In the event that any one or more of the
provisions contained in any of the Loan Documents shall, for any reason, be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement or any
other Loan Document.
Section 12.08. Counterparts. Each Loan Document may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 12.09. References. The words "herein," "hereof," "hereunder"
and other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular article, section or subsection.
Any reference herein to a Section shall be deemed to refer to the applicable
Section of this Agreement unless otherwise stated herein. Any reference herein
to an exhibit or schedule shall be deemed to refer to the applicable exhibit or
schedule attached hereto unless otherwise stated herein.
Section 12.10. Survival. The obligations of the parties under Section
4.06, and Sections 11.05 and 12.03 shall survive the repayment of the Loans and
the termination of the Commitments. To the extent that any payments on the
Indebtedness or proceeds of any
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collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent, the Indebtedness so satisfied shall be
revived and continue as if such payment or proceeds had not been received and
the Collateral Agent's Liens, security interests, rights, powers and remedies
under this Agreement and each Loan Document shall continue in full force and
effect. In such event, each Loan Document shall be automatically reinstated and
QSRD and the Borrower shall take and shall cause each Subsidiary Guarantor to
take, such action as may be reasonably requested by the Agents and the Lenders
to effect such reinstatement.
Section 12.11. Captions. Captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
Section 12.12. NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER
AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THE 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 12.13. GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT HAS BEEN NEGOTIATED, EXECUTED, AND
DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN NEW YORK, NEW YORK. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK; PROVIDED, HOWEVER, THAT IF ANY OF THE COLLATERAL SHALL BE
LOCATED IN ANY JURISDICTION OTHER THAN NEW YORK, THE LAWS OF SUCH JURISDICTION
SHALL GOVERN THE METHOD, MANNER, AND PROCEDURE FOR FORECLOSURE OF COLLATERAL
AGENT'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF THE LENDER GROUP'S
OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH
JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF NEW YORK. AS
PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT
OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF QSRD, BORROWER OR THE
LENDER GROUP, QSRD AND BORROWER HEREBY CONSENT AND AGREE THAT THE SUPREME COURT
OF NEW YORK, NEW YORK, OR, AT AGENTS' OPTION, THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR
AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN QSRD, BORROWER AND THE LENDER GROUP
PERTAINING TO THIS AGREEMENT OR TO ANY MATTER
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ARISING OUT OF OR RELATED TO THIS AGREEMENT. QSRD AND BORROWER EXPRESSLY SUBMIT
AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN
ANY SUCH COURT, AND QSRD AND BORROWER HEREBY WAIVE ANY OBJECTION THAT QSRD OR
BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE, OR
FORUM NON CONVENIENS, HEREBY CONSENT TO THE EXERCISE OF PERSONAL JURISDICTION OF
SUCH COURT, AND HEREBY CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF
AS IS DEEMED APPROPRIATE BY SUCH COURT. QSRD AND BORROWER HEREBY WAIVE PERSONAL
SERVICE OF THE SUMMONS, COMPLAINT, AND OTHER PROCESS ISSUED IN ANY SUCH ACTION
OR SUIT AND AGREE THAT SERVICE OF SUCH SUMMONS, COMPLAINT, AND OTHER PROCESS MAY
BE MADE UPON BOTH QSRD AND BORROWER BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO
BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF
OR 3 DAYS AFTER DEPOSIT IN THE U.S. MAIL, PROPER POSTAGE PREPAID. NOTHING IN
THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF THE LENDER
GROUP TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO
PRECLUDE THE ENFORCEMENT BY THE LENDER GROUP OF ANY JUDGMENT OR ORDER OBTAINED
IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME
IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
(b) EACH OF QSRD, THE BORROWER AND EACH LENDER HEREBY (I)
IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW,
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
ANY SECURITY INSTRUMENT AND FOR ANY COUNTERCLAIM THEREIN; (II) IRREVOCABLY
WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES;
(III) CERTIFY 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 (IV) ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT, THE SECURITY INSTRUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED
IN THIS SECTION 12.13.
Section 12.14. Interest. It is the intention of the parties hereto that
the Agent or each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby or by any other Loan
Document would be usurious as to the Agent or
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any Lender under laws applicable to it-(including the laws of the United States
of America and the State of New York or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in any of the Loan Documents or any agreement entered into in connection with or
as security for the Indebtedness, it is agreed as follows: (i) the aggregate of
all consideration which constitutes interest under law applicable to the Agents
or any Lender that is contracted for, taken, reserved, charged or received by
the Agents or such Lender under any of the Loan Documents or agreements or
otherwise in connection with the Indebtedness shall under no circumstances
exceed the maximum amount allowed by such applicable law, and any excess shall
be canceled automatically and if theretofore paid shall be credited by the Agent
or such Lender on the principal amount of the Indebtedness (or, to the extent
that the principal amount of the Indebtedness shall have been or would thereby
be paid in full, refunded by the Agent or such Lender, as applicable, to the
Borrower); and (ii) in the event that the maturity of the Indebtedness is
accelerated by reason of any Event of Default under this Agreement or otherwise,
or in the event of any required or permitted prepayment, then such consideration
that constitutes interest under law applicable to the Agents or any Lender may
never include more than the maximum amount allowed by such applicable law, and
excess interest, if any, provided for in this Agreement or otherwise shall be
canceled automatically by the Agents or such Lender, as applicable, as of the
date of such acceleration or prepayment and, if theretofore paid, shall be
credited by the Agents or such Lender, as applicable, on the principal amount of
the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by the
Agents or such Lender to the Borrower). All sums paid or agreed to be paid to
the Agents or any Lender for the use, forbearance or detention of sums due
hereunder shall, to the extent permitted by law applicable to the Agents or such
Lender, be amortized, prorated, allocated and spread throughout the full term of
the Loans until payment in full so that the rate or amount of interest on
account of any Loans hereunder does not exceed the maximum amount allowed by
such applicable law. If at any time and from time to time (i) the amount of
interest payable to the Agents or any Lender on any date shall be computed at
the Highest Lawful Rate applicable to the Agents or such Lender pursuant to this
Section 12.14 and (ii) in respect of any subsequent interest computation period
the amount of interest otherwise payable to the Agents or such Lender would be
less than the amount of interest payable to the Agents or such Lender computed
at the Highest Lawful Rate applicable to the Agents or such Lender, then the
amount of interest payable to the Agents or such Lender in respect of such
subsequent interest computation period shall continue to be computed at the
Highest Lawful Rate applicable to the Agents or such Lender until the total
amount of interest payable to the Agents or such Lender shall equal the total
amount of interest which would have been payable to the Agents or such Lender if
the total amount of interest had been computed without giving effect to this
Section 12.14
For purposes of this Section 12.14, the term "applicable law" shall
mean that law in effect from time to time and applicable to the loan transaction
between Borrower and the Lender Group that lawfully permits the charging and
collection of the highest permissible, lawful non-usurious rate of interest on
such loan transaction and this Agreement, including laws of the State of New
York and, to the extent controlling, laws of the United States of
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America. It is intended that, in the event that, notwithstanding the parties'
express choice of other law to be applicable to this Agreement, the laws of the
State of Texas are included in determining applicable law, Chapters 301 through
306 of the Texas Finance Code shall be included in any such determination, and
that, for the purpose of applying the Texas Finance Code to this Agreement, the
maximum interest rate shall be the "weekly ceiling" (as such term is used in
Chapter 303 of the Texas Finance Code) from time to time in effect. Any Lender
may, from time to time, as to current and future balances, implement any other
ceiling under Chapter 303 of the Texas Finance Code by notice to Borrower, if
and to the extent permitted by Chapter 303 of the Texas Finance Code. The
parties hereto expressly agree, pursuant to Section 346.004 of the Texas Finance
Code, that Chapter 346 of the Texas Finance Code shall not apply to this
Agreement or to any Loan and that neither this Agreement nor any Loan shall be
governed by or subject to the provisions of Chapter 346 in any manner
whatsoever.
The right to accelerate the maturity of the Indebtedness does not
include the right to accelerate any interest that has not accrued as of the date
of acceleration.
Section 12.15. Confidentiality. Each member of the Lender Group agrees
(on behalf of itself and each of its affiliates, directors, officers, employees
and representatives) to use reasonable precautions to keep confidential, in
accordance with its customary procedures for handling confidential information
of this nature and in accordance with safe and sound practices of comparable
commercial finance companies, the Confidential Information and to use reasonable
precautions to prevent such member of the Lender Group's unauthorized use of the
Confidential Information; provided, however, that nothing herein shall limit the
disclosure of any Confidential Information (a) to the extent required by
statute, rule, regulation or judicial process, (b) (i) to any other member of
the Lender Group, (ii) to counsel for such member of the Lender Group on a "need
to know" basis if such disclosure is reasonably determined by the disclosing
party to be reasonably necessary to such Person in connection with the
Indebtedness or the Loan Documents or the transactions contemplated thereunder,
or (iii) to counsel for any other member of the Lender Group on a "need to know"
basis if such disclosure is reasonably determined by the disclosing party to be
reasonably necessary to such Person in connection with the Indebtedness or the
Loan Documents or the transactions contemplated thereunder, (c) to examiners,
auditors, accountants or Securitization Parties on a "need to know" basis if
such disclosure is reasonably determined by the disclosing party to be
reasonably necessary to such Person in connection with the Indebtedness or the
Loan Documents or the transactions contemplated thereunder and the disclosing
party is reasonably certain that such Person will hold the Confidential
Information in confidence as if such Person were bound by confidentiality
provisions similar in substance to this Section 12.15 in all material respects,
(d) in connection with any litigation to which the Lender Group is a party, (e)
to any assignee or participant (or prospective assignee or participant) so long
as such assignee or participant (or prospective assignee or participant) first
agrees, in writing, to be bound by confidentiality provisions similar in
substance to this Section 12.15 in all material respects, or (f) pursuant to the
sale of the relevant Collateral by the Lender Group in connection with the
exercise of the Lender Group's remedies upon the occurrence and during the
continuation of an Event of Default.
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The Lender Group agrees that, upon receipt of a request or identification of the
requirement for disclosure pursuant to clauses (a) or (d) hereof, it will make
reasonable efforts to keep Borrower on behalf of the Obligors informed of such
request or identification (and, unless prohibited by applicable law, statute,
regulation, or court order, concurrently with, or where practicable, prior to
the disclosure thereof); provided, however, that each Obligor acknowledges that
the Lender Group may make disclosure as required or requested by any
Governmental Authority or representative thereof and that the Lender Group may
be subject to review by Securitization Parties or other regulatory agencies and
may be required to provide to, or otherwise make available for review by, the
representatives of such parties or agencies any such non-public information, and
that Borrower shall be kept informed reasonably of such requests and review of
Confidential Information.
Section 12.16. EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND RAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD
NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
"CONSPICUOUS."
Section 12.17. Designated Senior Indebtedness. QSRD and the Borrower
hereby designate all Indebtedness outstanding under this Agreement and the other
Loan Documents to be "Designated Senior Indebtedness" (as defined in the
Offering Memorandum dated July 15, 1995 relating to the DEM Subordinated Debt)
for purposes of the DEM Subordinated Debt and to be "designated senior
indebtedness," "guarantor senior indebtedness," "designated guarantor senior
indebtedness" or any other similar or equivalent classification under any debt
instrument or agreement to which either QSRD or the Borrower is now or hereafter
a party.
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Section 12.18. Amendments to Prior Loan Documents. The loan documents
executed and delivered in connection with the Prior Credit Agreement are being
amended and restated contemporaneously with this Agreement. Each Lender hereby
consents to such action.
The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.
[SIGNATURES BEGIN ON THE NEXT PAGE]
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QUEEN SAND RESOURCES, INC.,
a Delaware corporation
By:
------------------------------------
Robert P. Lindsay
Chief Operating Officer
By:
------------------------------------
Ronald I. Benn
Chief Financial Officer
QUEEN SAND RESOURCES, INC.,
a Nevada corporation
By:
------------------------------------
Robert P. Lindsay
Vice President
By:
------------------------------------
Ronald I. Benn
Vice President
Address for Notices for QSRD and the Borrower:
Queen Sand Resources, Inc.
13760 Noel Road, Suite 1030
Dallas, Texas 75240
Attention: Robert P. Lindsay
Telephone: (972) 233-9906
Facsimile: (972) 233-9575
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with a copy to:
Queen Sand Resources, Inc.
30 Metcalfe Street
Ottawa, Canada KIP 5L4
Attention: Mr. Ronald Benn
Telephone: (613) 230-7211
Facsimile: (613) 230-6055
and
Haynes & Boone LLP
901 Main Street, Suite 3100
Dallas, Texas 75202-3789
Attention: Mr. William L. Boeing
Telephone: (214) 651-5553
Facsimile: (214) 651-5940
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COLLATERAL AGENT: ABLECO FINANCE LLC, as Collateral Agent
By:
------------------------------------
Kevin P. Genda
Senior Vice President and
Chief Credit Officer
Address for Notices:
450 Park Avenue.
New York, New York 10022
Attention: Kevin P. Genda
Telephone: (212) 891-2117
Facsimile: (212) 755-3009
with a copy to:
BROBECK PHLEGER & HARRISON LLP
550 South Hope Street, Suite 2100
Los Angeles, California 90071
Telephone: (213) 489-4060
Facsimile: (213) 745-3345
Attention: John Francis Hilson, Esq.
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ADMINISTRATIVE AGENT: FOOTHILL CAPITAL CORPORATION
By:
------------------------------------
Brian Duffy
Vice President
Address for Notices
11111 Santa Monica Boulevard
Los Angeles, California 90025
Attention: Business Finance Division Manager
Telephone: (310) 996-7000
Facsimile: (310) 478-9788
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LENDER: ABLECO FINANCE LLC
By:
------------------------------------
Kevin P. Genda
Senior Vice President and
Chief Credit Officer
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LENDER: FOOTHILL CAPITAL CORPORATION
By:
------------------------------------
Brian Duffy
Vice President
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ANNEX I
MAXIMUM CREDIT AMOUNTS AND PERCENTAGE SHARES
Lender Max. Credit Amt. Percentage Share
Ableco Finance LLC $27,500,000 55.00%
Foothill Capital $22,500,000 45.00%
Corporation
- --------------------------------------------------------------------------------------------------
Total $50,000,000 100%
Annex I-1