<PAGE>
RESTATED AND CONSOLIDATED CREDIT AGREEMENT
AMONG
CANAAN ENERGY CORPORATION;
INDIAN OIL COMPANY;
CORAL RESERVES NATURAL GAS INCOME FUND 1990 LIMITED PARTNERSHIP;
CORAL RESERVES NATURAL GAS INCOME FUND 1991 LIMITED PARTNERSHIP;
CORAL RESERVES NATURAL GAS INCOME FUND 1992 LIMITED PARTNERSHIP;
CORAL RESERVES 1993 INSTITUTIONAL LIMITED PARTNERSHIP;
CORAL RESERVES NATURAL GAS INCOME FUND 1993 LIMITED PARTNERSHIP;
CORAL RESERVES ENERGY INCOME FUND 1995 LIMITED PARTNERSHIP;
CORAL RESERVES 1996 INSTITUTIONAL LIMITED PARTNERSHIP;
CORAL RESERVES ENERGY INCOME FUND 1996 LIMITED PARTNERSHIP
AND
BANK ONE, OKLAHOMA, N.A. AND
THE INSTITUTIONS HEREIN
AS BANKS
AND
BANK ONE, OKLAHOMA, N.A.,
AS AGENT
AND
BANC ONE CAPITAL MARKETS
AS LEAD ARRANGER AND SOLE BOOK RUNNER
OCTOBER 23, 2000
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TABLE OF CONTENTS
<TABLE>
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Page No.
<S> <C> <C>
1. DEFINITIONS............................................................................2
2. COMMITMENTS OF THE BANK...............................................................12
(a) TERMS OF REVOLVING COMMITMENT..........................................12
(b) PROCEDURE FOR BORROWING................................................12
(c) LETTERS OF CREDIT......................................................13
(d) PROCEDURE FOR OBTAINING LETTERS OF CREDIT..............................14
(e) VOLUNTARY REDUCTION OF REVOLVING COMMITMENT............................14
(f) MANDATORY COMMITMENT REDUCTIONS........................................14
(g) SEVERAL OBLIGATIONS....................................................15
3. NOTES EVIDENCING LOANS................................................................15
(a) FORM OF REVOLVING NOTES................................................15
(b) ISSUANCE OF ADDITIONAL NOTES...........................................15
(c) INTEREST RATE..........................................................16
(d) PAYMENT OF INTEREST....................................................16
(e) PAYMENT OF PRINCIPAL...................................................16
(f) PAYMENT TO BANKS.......................................................16
(g) SHARING OF PAYMENTS, ETC...............................................16
(h) NON-RECEIPT OF FUNDS BY THE AGENT......................................17
4. INTEREST RATES........................................................................17
(a) OPTIONS................................................................17
(b) INTEREST RATE DETERMINATION............................................18
(c) CONVERSION OPTION......................................................18
(d) RECOUPMENT.............................................................18
5. CHANGE OF CIRCUMSTANCES...............................................................19
(a) UNAVAILABILITY OF FUNDS OR INADEQUACY OF PRICING.......................19
(b) CHANGE IN LAWS.........................................................19
(c) INCREASED COST OR REDUCED RETURN.......................................19
(d) REPLACEMENT BANKS......................................................21
(e) DISCRETION OF BANK AS TO MANNER OF FUNDING.............................22
(f) BREAKAGE FEES..........................................................22
6. COLLATERAL SECURITY...................................................................23
(a) PLEDGE OF COLLATERAL...................................................23
(b) DOCUMENTATION AND TITLE REVIEW.........................................24
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(c) LETTERS IN LIEU OF TRANSFER ORDERS.....................................24
(d) PLEDGE OF STOCK AND PARTNERSHIP INTERESTS..............................25
7. BORROWING BASE........................................................................25
(a) INITIAL BORROWING BASE.................................................25
(b) SUBSEQUENT DETERMINATIONS OF BORROWING BASE............................25
8. FEES..................................................................................27
(a) COMMITMENT FEE.........................................................27
(b) THE LETTER OF CREDIT FEE...............................................27
(c) OTHER FEES.............................................................27
9. PREPAYMENTS...........................................................................27
(a) VOLUNTARY PREPAYMENTS..................................................27
(b) MANDATORY PREPAYMENT FOR BORROWING BASE DEFICIENCY.....................27
10. REPRESENTATIONS AND WARRANTIES........................................................28
(a) CREATION AND EXISTENCE.................................................28
(b) POWER AND AUTHORITY....................................................28
(c) BINDING OBLIGATIONS....................................................28
(d) NO LEGAL BAR OR RESULTANT LIEN.........................................28
(e) NO CONSENT.............................................................28
(f) FINANCIAL CONDITION....................................................29
(g) LIABILITIES............................................................29
(h) LITIGATION.............................................................29
(i) TAXES; GOVERNMENTAL CHARGES............................................29
(j) TITLES, ETC............................................................29
(k) DEFAULTS...............................................................30
(l) CASUALTIES; TAKING OF PROPERTIES.......................................30
(m) USE OF PROCEEDS; MARGIN STOCK..........................................30
(n) LOCATION OF BUSINESS AND OFFICES.......................................30
(o) COMPLIANCE WITH THE LAW................................................30
(p) NO MATERIAL MISSTATEMENTS..............................................31
(q) ERISA..................................................................31
(r) PUBLIC UTILITY HOLDING COMPANY ACT.....................................31
(s) SUBSIDIARIES...........................................................31
(t) ENVIRONMENTAL MATTERS..................................................31
(u) LIENS..................................................................31
(v) GAS CONTRACTS..........................................................31
(w) PLAN OF COMBINATION....................................................32
11. CONDITIONS OF LENDING.................................................................32
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12. AFFIRMATIVE COVENANTS.................................................................36
(a) FINANCIAL STATEMENTS AND REPORTS.......................................36
(b) CERTIFICATES OF COMPLIANCE.............................................37
(c) TAXES AND OTHER LIENS..................................................37
(d) COMPLIANCE WITH LAWS...................................................37
(e) FURTHER ASSURANCES.....................................................38
(f) PERFORMANCE OF OBLIGATIONS.............................................38
(g) INSURANCE..............................................................38
(h) ACCOUNTS AND RECORDS...................................................38
(i) RIGHT OF INSPECTION....................................................38
(j) NOTICE OF CERTAIN EVENTS...............................................39
(k) ERISA INFORMATION AND COMPLIANCE.......................................39
(l) ENVIRONMENTAL REPORTS AND NOTICES......................................39
(m) COMPLIANCE AND MAINTENANCE.............................................40
(n) OPERATION OF PROPERTIES................................................40
(o) COMPLIANCE WITH LEASES AND OTHER INSTRUMENTS...........................40
(p) CERTAIN ADDITIONAL ASSURANCES REGARDING MAINTENANCE
AND OPERATIONS OF PROPERTIES........................................41
(q) SALE OF CERTAIN ASSETS/PREPAYMENT OF PROCEEDS..........................41
(r) TITLE MATTERS..........................................................41
(s) CURATIVE MATTERS.......................................................42
(t) CHANGE OF PRINCIPAL PLACE OF BUSINESS..................................42
(u) OPERATING ACCOUNTS.....................................................42
(v) ADDITIONAL PROPERTY....................................................42
(w) LETTERS IN LIEU OF TRANSFER ORDERS.....................................43
(x) DIVISION ORDERS........................................................43
(y) TAKE OR PAY AGREEMENT..................................................43
(z) ENTITY EXISTENCE.......................................................43
(aa) OWNERSHIP..............................................................43
(ab) PAYMENT OF DEBT........................................................43
(ac) USE OF PROCEEDS........................................................44
13. NEGATIVE COVENANTS....................................................................44
(a) NEGATIVE PLEDGE........................................................44
(b) CURRENT RATIO..........................................................45
(c) MINIMUM DEBT SERVICE COVERAGE RATIO....................................45
(d) MINIMUM TANGIBLE NET WORTH.............................................45
(e) DEBT TO EBITDA RATIO...................................................45
(f) CONSOLIDATIONS AND MERGERS.............................................45
(g) DEBTS, GUARANTIES AND OTHER OBLIGATIONS................................45
(h) DIVIDENDS OR DISTRIBUTIONS.............................................46
(i) LOANS AND ADVANCES.....................................................46
(j) SALE OR DISCOUNT OF RECEIVABLES........................................46
iii
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(k) NATURE OF BUSINESS.....................................................46
(l) TRANSACTIONS WITH AFFILIATES...........................................47
(m) HEDGING TRANSACTIONS...................................................47
(n) INVESTMENTS............................................................47
(o) AMENDMENT TO ARTICLES OF INCORPORATION OR BYLAWS.......................48
(p) LEASES.................................................................48
(q) ACCOUNTS PAYABLE.......................................................48
(r) ISSUANCE OF PREFERRED STOCK............................................48
(s) CHANGE IN OWNERSHIP OR STRUCTURE.......................................48
(t) PREPAYMENTS............................................................48
(u) STOCK OR INTEREST REPURCHASE...........................................48
(v) CHANGE IN MANAGEMENT...................................................48
14. EVENTS OF DEFAULT.....................................................................49
15. THE AGENT AND THE BANKS...............................................................51
(a) APPOINTMENT AND AUTHORIZATION..........................................51
(b) NOTE HOLDERS...........................................................52
(c) CONSULTATION WITH COUNSEL..............................................52
(d) DOCUMENTS..............................................................52
(e) RESIGNATION OR REMOVAL OF AGENT........................................52
(f) RESPONSIBILITY OF AGENT................................................53
(g) INDEPENDENT INVESTIGATION..............................................54
(h) INDEMNIFICATION........................................................55
(i) BENEFIT OF SECTION 15..................................................55
(j) PRO RATA TREATMENT.....................................................55
(k) ASSUMPTION AS TO PAYMENTS..............................................55
(l) OTHER FINANCINGS.......................................................56
(m) INTERESTS OF BANKS.....................................................56
(n) INVESTMENTS............................................................56
16. EXERCISE OF RIGHTS....................................................................56
17. NOTICES...............................................................................57
18. EXPENSES..............................................................................57
19. INDEMNITY.............................................................................57
20. GOVERNING LAW.........................................................................58
21. INVALID PROVISIONS....................................................................58
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22. MAXIMUM INTEREST RATE.................................................................59
23. AMENDMENTS............................................................................59
24. MULTIPLE COUNTERPARTS.................................................................59
25. CONFLICT..............................................................................59
26. SURVIVAL..............................................................................60
27. PARTIES BOUND.........................................................................60
28. ASSIGNMENTS AND PARTICIPATIONS........................................................60
29. CHOICE OF FORUM: CONSENT TO SERVICE OF PROCESS AND JURISDICTION.......................62
30. WAIVER OF JURY TRIAL..................................................................62
31. OTHER AGREEMENTS......................................................................62
32. FINANCIAL TERMS.......................................................................62
33. FRAUDULENT CONVEYANCE SAVINGS CLAUSE..................................................63
34. AUTHORITY OF CANAAN...................................................................63
</TABLE>
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<PAGE>
EXHIBITS
--------
Exhibit "A" - Notice of Borrowing
Exhibit "B" - Revolving Note
Exhibit "C" - Certificate of Compliance
Exhibit "D" - Form of Assignment and Acceptance Agreement
Exhibit "E" - Certificate Regarding Solvency
SCHEDULES
---------
Schedule 1 - Liens
Schedule 2 - Financial Condition
Schedule 3 - Liabilities
Schedule 4 - Litigation
Schedule 5 - Subsidiaries
Schedule 6 - Environmental Matters
Schedule 7 - Gas Contract
Schedule 8 - Title Matters
Schedule 9 - Curative Matters
vi
<PAGE>
RESTATED AND CONSOLIDATED
CREDIT AGREEMENT
THIS RESTATED AND CONSOLIDATED CREDIT AGREEMENT (hereinafter referred
to as the "Agreement") executed as of the 23rd day of October, 2000, by and
among CANAAN ENERGY CORPORATION, an Oklahoma corporation, formerly named Coral
Reserves Group, Ltd. ("Canaan"), INDIAN OIL COMPANY, an Oklahoma corporation
("Indian"); CORAL RESERVES NATURAL GAS INCOME FUND 1990 LIMITED PARTNERSHIP,
an Oklahoma limited partnership; CORAL RESERVES NATURAL GAS INCOME FUND 1991
LIMITED PARTNERSHIP, an Oklahoma limited partnership; CORAL RESERVES NATURAL
GAS INCOME FUND 1992 LIMITED PARTNERSHIP, an Oklahoma limited partnership;
CORAL RESERVES 1993 INSTITUTIONAL LIMITED PARTNERSHIP, an Oklahoma limited
partnership; CORAL RESERVES NATURAL GAS INCOME FUND 1993 LIMITED PARTNERSHIP,
an Oklahoma limited partnership; CORAL RESERVES ENERGY INCOME FUND 1995
LIMITED PARTNERSHIP, an Oklahoma limited partnership; CORAL RESERVES 1996
INSTITUTIONAL LIMITED PARTNERSHIP, an Oklahoma limited partnership; CORAL
RESERVES ENERGY INCOME FUND 1996 LIMITED PARTNERSHIP, an Oklahoma limited
partnership (collectively, the "Coral Group" and together with Canaan and
Indian the "Borrowers" and each may be individually referred to herein as a
"Borrower") and BANK ONE, OKLAHOMA, N.A., a national banking association
("Bank One"), and each of the financial institutions which is a party hereto
(as evidenced by the signature pages to this Agreement) or which may from time
to time become a party hereto pursuant to the provisions of Section 28 hereof
or any successor or assignee thereof (hereinafter collectively referred to as
"Banks", and individually, "Bank") and Bank One, as Agent ("Agent").
W I T N E S S E T H:
WHEREAS, on December 22, 1997 Indian entered into a Credit Agreement
with Bank One whereby Bank One provided Indian with a reducing revolving line
of credit in the maximum amount of $50,000,000.00 which such agreement has
been amended from time to time thereafter (the "Indian Agreement"); and
WHEREAS, pursuant to the Indian Agreement, Indian executed and
delivered various loan documents including a promissory note, mortgages, deeds
of trust and other documents (the "Indian Loan Documents"); and
WHEREAS, on varying dates, Canaan and each member of the Coral Group
entered into its own separate loan agreement with Bank One whereby Bank One
provided each member of the Coral Group with a line of credit in the combined
amount of $9,975,000.00 (the "Coral Agreements"); and
<PAGE>
WHEREAS, pursuant to the Coral Agreements, each member of the Coral
Group executed and delivered various loan agreements, promissory notes,
mortgages, deeds of trust and other documents (the "Coral Loan Documents"); and
WHEREAS, Borrowers have entered into and agreed upon a Plan of
Combination (hereafter defined) whereby, among other things (i) Canaan will
acquire all of the limited partners' interests in the Coral Group, (ii) Canaan
will acquire 100% of the stock of each general partner of each limited
partnership which is part of the Coral Group, (iii) Canaan will acquire 100%
of the stock of Indian, (iv) Canaan will acquire 100% of the stock of Canaan
Securities, Inc.; and
WHEREAS, the Borrowers and Banks have agreed to consolidate and
restate the Indian Agreement and the Coral Agreements into a credit facility
which such facility shall also add Canaan as a Borrower.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereby agree to restate the Indian
Agreement and the Coral Agreements as follows:
1. DEFINITIONS. When used herein the terms "Agent",
"Agreement", "Bank", "Banks", "Bank One", "Borrower", "Borrowers", "Coral
Agreement", "Coral Group", "Coral Loan Documents", "Indian", "Indian
Agreement", and "Indian Loan Documents" shall have the meanings indicated
above. When used herein the following terms shall have the following meanings:
"ADVANCE OR ADVANCES" shall mean a loan or loans hereunder.
"AFFILIATE" shall mean any Person which, directly or
indirectly, controls, is controlled by or is under common control with
the relevant Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall
mean a member of the board of directors, a general partner or an
executive officer of such Person, or any other Person with possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of such Person, through the ownership
(of record, as trustee, or by proxy) of voting shares, partnership
interests or voting rights, through a management contract or otherwise.
Any Person owning or controlling directly or indirectly ten percent or
more of the voting shares, partnership interests or voting rights, or
other equity interest of another Person shall be deemed to be an
Affiliate of such Person.
"ALTERNATE BASE RATE" shall mean a fluctuating rate of
interest equal to the higher of (i) a rate per annum equal to the Prime
Rate or (ii) the sum of the Federal Funds Effective Rate most recently
determined by the Agent plus one half of one percent (1/2%) per annum.
"APPLICABLE MARGIN" means the number of Basis Points per annum
set forth below, determined as a function of the Utilization
Percentage:
2
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<TABLE>
<CAPTION>
============================= ======================== ======================== =====================
LIBOR MARGIN ALTERNATE BASE RATE COMMITMENT
UTILIZATION PERCENTAGE MARGIN FEE
----------------------------- ------------------------ ------------------------ ---------------------
<S> <C> <C> <C>
GREATER THAN OR EQUAL TO 90% 225 75 50
----------------------------- ------------------------ ------------------------ ---------------------
GREATER THAN OR EQUAL TO 75%
but LESS THAN 90% 200 50 37.5
----------------------------- ------------------------ ------------------------ ---------------------
GREATER THAN OR EQUAL TO 50%
but LESS THAN 75% 175 25 37.5
----------------------------- ------------------------ ------------------------ ---------------------
LESS THAN 50% 150 0 25
============================= ======================== ======================== =====================
</TABLE>
"ASSIGNMENT AND ACCEPTANCE" shall mean a document
substantially in the form of Exhibit "D" hereto.
"BASIS POINT" means one one-hundredth of one percent (0.01%).
"BORROWING BASE" shall mean the value assigned by the Banks
from time to time to the Oil and Gas Properties pursuant to Section 7
hereof. As of the date of closing hereof, the Borrowing Base shall be
$34,250,000.00. It is contemplated that MidFirst Bank shall become one
of the Banks with a Revolving Commitment equal to that of Local
Oklahoma Bank, N.A. If MidFirst Bank does, in fact, execute this
Agreement within thirty (30) days from the date hereof, the Borrowing
Base shall increase to $42,965,000 (after allowing for a Monthly
Commitment Reduction) and shall remain at such amount until the next
determination of the Borrowing Base pursuant to Section 7(b) hereof. In
the event MidFirst Bank elects to not execute this Agreement within the
aforementioned thirty (30) day period, the Borrowing Base shall remain
at $34,250,000 as reduced by any Monthly Commitment Reductions.
Further, if Agent is required to market this facility, additional fees
may be assessed.
"BORROWING DATE" shall mean the date elected by Borrowers
pursuant to Section 2(b) hereof for an Advance on the Revolving Loan.
"BUSINESS DAY" shall mean the normal banking hours during any
day (other than Saturdays or Sundays) that banks are legally open for
business in Oklahoma City, Oklahoma.
"CHANGE OF MANAGEMENT" shall occur if there is any material
change in the management personnel of any Borrower. A material change
shall be deemed to have occurred if either John K. Penton or Leo E.
Woodard ever cease to hold a key, as determined by Banks, management
position with the Borrowers.
"COMMITMENT FEE" shall mean that certain fee payable by
Borrowers for the ratable Bank for maintaining funds available for
Borrowers and determined as set forth in the definition of Applicable
Margin based on the amount of the Revolving Commitment in effect for
the applicable period.
3
<PAGE>
"CONTESTED IN GOOD FAITH" shall mean a matter (a) which is
being contested in good faith by or on behalf of any Person, by
appropriate and lawful proceedings diligently conducted, satisfactory
to the Bank, and for which a reserve has been established in an amount
determined in accordance with GAAP, (b) in which foreclosure,
distraint, sale, forfeiture, levy, execution or other similar
proceedings have not been initiated or have been stayed and continue to
be stayed, and (c) in which a good faith contest will not materially
detract from the value of the Collateral (set forth herein in Section
3), materially jeopardize the rights of the Bank or the Borrower with
respect thereto, materially interfere with the operation by the
Borrower of its business, or otherwise have a Material Adverse Effect.
"CORPORATE BORROWERS" shall refer to those Borrowers organized
as a corporation pursuant to the laws of any state of the United States
of America.
"CURRENT ASSETS" shall mean the total of the Borrowers'
consolidated current assets determined in accordance with GAAP, plus,
as of any date, the current unused availability on the Revolving
Commitment.
"CURRENT LIABILITIES" shall mean the total of Borrowers'
consolidated current obligations as determined in accordance with GAAP,
excluding therefrom as of any date current maturities due on the
Revolving Loan.
"DEBT" shall mean, with respect to any Person, all obligations
and liabilities of such Person to any other Person including, without
limitation, all debts, claims, overdrafts, contingent liabilities and
indebtedness heretofore, now and/or from time to time hereafter owing,
due or payable, however, evidenced, created, incurred, acquired or
owing and however arising, whether under written or oral agreement,
operation of law or otherwise as shown in Borrowers' Financial
Statements..
"DEBT SERVICE COVERAGE RATIO" shall mean for any quarterly
fiscal period the sum of (i) Net Income; (ii) interest expense; (iii)
non-cash charges (such as depreciation, depletion and amortization, and
writedowns from impairment of Oil and Gas Properties); (iv) deferred
income tax expense, and excluding gains or losses arising from the sale
of capital assets less cash dividends, all as determined in accordance
with GAAP for such period, DIVIDED BY the greater of (i) the sum of the
Monthly Commitment Reductions for the quarter being tested or (ii)
1/28th of the outstanding balance of the Loan at the end of such
quarter, PLUS any other current maturities of long term debt
outstanding at such quarter end including obligations under Capital
Leases, PLUS interest expense for such quarter.
"DEFAULT" shall mean any Event of Default and the occurrence
of an event or condition which would with the giving of any requisite
notice and/or passage of time or both constitute an Event of Default.
4
<PAGE>
"DEFAULT RATE" shall mean a per annum variable rate of
interest equal to the interest rates then otherwise applicable
hereunder as then in effect plus two percent (2%) per annum, calculated
on the basis of a year of 360 days and actual number of days elapsed
(including the first day but excluding the last day), but in no event
exceeding the Maximum Rate.
"DEFAULTING BANK" the term "Defaulting Bank" is used herein as
defined in Section 3(g) hereof.
"EFFECTIVE DATE" shall mean the date of this Agreement.
"ELIGIBLE ASSIGNEE" shall mean any of (i) a Bank or any
Affiliate of a Bank; (ii) a commercial bank or federal savings
association organized under the laws of the United States, or any state
thereof, and having a combined capital and surplus of at least
$100,000,000; (iii) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such
country, and having a combined capital and surplus of at least
$100,000,000.00, provided that such bank is acting through a branch or
agency located in the United States; (iv) a Person that is primarily
engaged in the business of commercial banking and that (A) is a
subsidiary of a Bank, (B) a subsidiary of a Person of which a Bank is a
subsidiary, or (C) a Person of which a Bank is a subsidiary; (v) any
other entity (other than a natural person) which is an "accredited
investor" (as defined in Regulation D under the Securities Act) which
extends credit or buys loans as one of its businesses, including, but
not limited to, insurance companies, mutual funds, investments funds
and lease financing companies; and (vi) with respect to any Bank that
is a fund that invests in loans, any other fund that invests in loans
and is managed by the same investment advisor of such Bank or by an
Affiliate of such investment advisor (and treating all such funds so
managed as a single Eligible Assignee); provided, however, that no
Affiliate of any Borrower shall be an Eligible Assignee.
"ENVIRONMENTAL LAWS" shall mean the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended by the Super Fund Amendments and Reauthorization Act of 1986,
42 U.S.C.A. Section 9601, ET SEQ., the Resource Conservation and
Recovery Act, as amended by the Hazardous Solid Waste Amendment of
1984, 42 U.S.C.A. Section 6901, ET SEQ., the Clean Air Act, 42
U.S.C.A. Section 1251, ET SEQ., the Toxic Substances Control Act, 15
U.S.C.A. Section 2601, ET SEQ., The Oil Pollution Act of 1990, 33
U.S.G. Section 2701, ET SEQ., and all other laws, statutes, codes,
acts, ordinances, orders, judgments, decrees, injunctions, rules,
regulations, order and restrictions of any federal, state, county,
municipal and other governments, departments, commissions, boards,
agencies, courts, authorities, officials and officers, domestic or
foreign, relating to air pollution, water pollution, noise control
and/or the handling, discharge, disposal or recovery of on-site or
off-site asbestos or "hazardous substances" as defined by 42 U.S.C.
Section 9601, ET SEQ., as amended, as each of the foregoing may be
amended from time to time.
5
<PAGE>
"ENVIRONMENTAL LIABILITY" shall mean any claim, demand,
obligation, cause of action, order, violation, damage, injury,
judgment, penalty or fine, cost of enforcement, cost of remedial action
or any other costs or expense whatsoever, including reasonable
attorneys' fees and disbursements, resulting from the violation or
alleged violation of any Environmental Law or the imposition of any
Environmental Lien (as hereinafter defined) which could reasonably be
expected to individually or in the aggregate have a Material Adverse
Effect.
"ENVIRONMENTAL LIEN" shall mean a Lien in favor of any court,
governmental agency or instrumentality or any other Person (i) for any
Environmental Liability or (ii) for damages arising from or cost
incurred by such court or governmental agency or instrumentality or
other person in response to a release or threatened release of asbestos
or "hazardous substance" into the environment, the imposition of which
Lien could reasonably be expected to have a Material Adverse Effect.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, an
interest rate per annum equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as
published for such day (or, if such day is not a Business Day, for the
immediately preceding Business Day) by the Federal Reserve Bank New
York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m.
(Chicago time) on such day on such transactions received by Agent from
three Federal funds brokers of recognized standing selected by Agent in
its sole discretion.
"FINANCIAL STATEMENTS" shall mean balance sheets, income
statements, statements of cash flow and appropriate footnotes and
schedules, prepared in accordance with GAAP.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"INTEREST PAYMENT DATE" shall mean (i) the last day of each
month for Loans accruing interest based upon the Alternate Base Rate
and (ii) the last day of each Interest Period for Loans accruing
interest based upon the LIBOR Rate (except for Interest Periods longer
than three months in which event the Interest Payment Date will be on
the last day of each third month after the start of the Interest
Period.
"INTEREST PERIOD" shall mean with respect to any LIBOR Loan
(i) initially, the period commencing on the date such LIBOR Loan is
made and ending one (1), two (2), three (3) or six (6) months
thereafter as selected by the Borrowers pursuant to Section 4(a)(ii),
and (ii) thereafter, each period commencing on the day following the
last day of the next preceding Interest Period applicable to such LIBOR
Loan and ending one (1), two (2), three (3) or six
6
<PAGE>
(6) months thereafter, as selected by the Borrowers pursuant to
Section 4(a)(ii); provided, however, that (i) if any LIBOR Interest
Period would otherwise expire on a day which is not a London Business
Day, such Interest Period shall expire on the next succeeding London
Business Day unless the result of such extension would be to extend
such Interest Period into the next calendar month, in which case such
Interest Period shall end on the immediately preceding London
Business Day, (ii) if any LIBOR Interest Period begins on the last
London Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end
of such Interest Period) such Interest Period shall end on the last
London Business Day of a calendar month, and (iii) any LIBOR Interest
Period which would otherwise expire after the Maturity Date shall end
on such Maturity Date.
"LP BORROWERS" shall refer to those Borrowers hereunder
organized as a limited partnership pursuant to the laws of any state of
the United States of America.
"LETTERS OF CREDIT" the term "Letters of Credit" is used
herein as defined in Section 2(c) hereof.
"LIBOR LOAN" shall mean any loan during any period which bears
interest at the LIBOR Rate, or which would bear interest at such rate
if the Maximum Rate ceiling was not in effect at a particular time.
"LIBOR RATE" shall mean the offered rate for the period equal
to or next greater than the LIBOR Interest Period for U.S. Dollar
deposits of not less than $1,000,000.00 as of 11:00 A.M. City of
London, England time two (2) London Business Days prior to the first
day of the LIBOR Interest Period as shown on the display designated as
"British Bankers Association Interest Settlement Rates" on Reuters for
the purpose of displaying such rate. In the event that such rate is not
available on Reuters, then such offered rate shall be otherwise
independently determined by Agent from an alternate, substantially
similar independent source available to Agent or shall be calculated by
Agent by a substantially similar methodology as that theretofore used
to determine such offered rate.
"LIEN" shall mean any mortgage, deed of trust, pledge,
security interest, assignment, encumbrance or lien (statutory or
otherwise) of every kind and character.
"LOAN" shall mean the Revolving Loan.
"LOAN DOCUMENTS" shall mean this Agreement, the Notes, the
Security Instruments and all other documents executed in connection
with the transaction described in this Agreement.
"LONDON BUSINESS DAY" shall mean a Business Day on which
dealings in U.S. Dollar deposits are carried on in the London interbank
market.
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"MAJORITY BANKS" shall mean Banks holding 66 2/3% or more of
the Revolving Commitments or if the Revolving Commitments have been
terminated, Banks holding 66 2/3% or more of the outstanding Loans.
"MATERIAL ADVERSE EFFECT" shall mean any circumstance or event
which could have a material adverse effect on (i) the consolidated
assets or properties, liabilities, financial condition, business,
operations, affairs or circumstances of Canaan, taken as a whole as if
all Borrowers had merged into it, or (ii) the ability of Canaan and the
other Borrowers, taken as a whole as discussed above, to carry out
their collective business as of the date of this Agreement or as
proposed at the date of this Agreement to be conducted or to meet their
obligations under the Notes, this Agreement or the other Loan Documents
on a timely basis.
"MAXIMUM RATE" shall mean at any particular time in question,
the maximum non-usurious rate of interest which under applicable law
may then be charged on the Note. If such Maximum Rate changes after the
date hereof, the Maximum Rate shall be automatically increased or
decreased, as the case may be, without notice to Borrowers from time to
time as of the effective date of each change in such Maximum Rate.
"MONTHLY COMMITMENT REDUCTION" as used herein, as defined in
Section 2(f) hereof.
"NET INCOME" shall mean Borrowers' consolidated net income
after income taxes calculated in accordance with GAAP.
"NOTES" shall mean the Revolving Notes, substantially in the
form of Exhibit "B" hereto issued or to be issued hereunder to each
Bank, respectively, to evidence the indebtedness to such Bank arising
by reason of the Advances on the Revolving Loan, together with all
modifications, renewals and extensions thereof or any part thereof.
"OIL AND GAS PROPERTIES" shall mean all oil, gas and mineral
properties and interests, related personal properties, in which
Borrowers grant to the Banks either (i) a first and prior lien and
security interest pursuant to Section 6 hereof or (ii) a negative
pledge pursuant to Section 13(a) below.
"OTHER FINANCING" the term "Other Financing" is used herein as
defined in Section 15(l) hereof.
"PAYOR" the term "Payor" is used herein as defined in Section
3(h)hereof.
"PERMITTED LIENS" shall mean (i) royalties, overriding
royalties, reversionary interests, production payments and similar
burdens; (ii) joint operating agreements, sales contracts or other
arrangements for the sale of production of oil, gas or associated
liquid or gaseous hydrocarbons which would not (when considered
cumulatively with the matters discussed in clause (i) above) deprive
either Borrower of any material right in respect of any such
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Borrower's assets or properties (except for rights customarily
granted with respect to such contracts and arrangements); (iii)
statutory Liens for taxes or other assessments that are not yet
delinquent (or that, if delinquent, are being Contested in Good
Faith; (iv) easements, rights of way, servitudes, permits, surface
leases and other rights in respect to surface operations, pipelines,
grazing, logging, canals, ditches, reservoirs or the like,
conditions, covenants and other restrictions, and easements of
streets, alleys, highways, pipelines, telephone lines, power lines,
railways and other easements and rights of way on, over or in respect
of either Borrower's assets or properties and that do not
individually or in the aggregate, cause a Material Adverse Effect;
(v) materialmen's, mechanic's, repairman's, employee's,
warehousemen's, landlord's, carrier's, pipeline's, contractor's,
sub-contractor's, operator's, non-operator's (arising under operating
or joint operating agreements), and other Liens (including any
financing statements filed in respect thereof) incidental to
obligations incurred by any Borrower in connection with the
construction, maintenance, development, transportation, storage or
operation of such Borrower's assets or properties to the extent not
delinquent (or which, if delinquent, are being Contested in Good
Faith; (vi) all contracts, agreements and instruments, and all
defects and irregularities and other matters affecting any Borrower's
assets and properties which were in existence at the time such
Borrower's assets and properties were originally acquired by such
Borrower and all routine operational agreements entered into in the
ordinary course of business, which contracts, agreements,
instruments, defects, irregularities and other matters and routine
operational agreements are not such as to, individually or in the
aggregate, interfere materially with the operation, value or use of
such Borrower's assets and properties, considered in the aggregate;
(vii) liens in connection with workmen's compensation, unemployment
insurance or other social security, old age pension or public
liability obligations; (viii) legal or equitable encumbrances deemed
to exist by reason of the existence of any litigation or other legal
proceeding or arising out of a judgment or award with respect to
which an appeal is being prosecuted in good faith and levy and
execution thereon have been stayed and continue to be stayed; (ix)
rights reserved to or vested in any municipality, governmental,
statutory or other public authority to control or regulate any
Borrower's assets and properties in any manner, and all applicable
laws, rules and orders from any governmental authority; (x)
landlord's liens; and (xi) Liens incurred pursuant to the Security
Instruments or otherwise created in favor of the Agent or the Banks
pursuant to the Loan Documents.
"PERSON" shall mean an individual, a corporation, a
partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an
agency or instrumentality thereof.
"PLAN OF COMBINATION" shall mean that certain business
combination described in the Canaan Energy Corporation Prospectus/Proxy
Statement dated August 14, 2000.
"PLANS" shall mean any plan subject to Title IV of ERISA and
maintained by any Borrower, or any such plan to which any Borrower is
required to contribute on behalf of its employees.
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"PREVIOUS LOAN DOCUMENTS" shall mean the Indian Loan Documents
and the Coral Loan Documents.
"PRIME RATE" shall mean as of any date, the fluctuating rate
of interest per annum equal to the prime rate of interest announced
from time to time by Bank One, Oklahoma, N.A. or its parent (which is
not necessarily the lowest rate charged to any customer), changing when
and as said prime rate changes.
"PRIME RATE LOANS" shall mean any loan during any period which
bears interest based upon the Prime Rate or which would bear interest
based upon the Prime Rate if the Maximum Rate ceiling was not in effect
at that particular time.
"PRO RATA OR PRO RATA PART" shall mean for each Bank, (i) for
all purposes where no Loan is outstanding, such Bank's Revolving
Commitment Percentage and (ii) otherwise, the proportion which the
portion of the outstanding Loans owed to such Bank bears to the
aggregate outstanding Loans owed to all Banks at the time in question.
"REIMBURSEMENT OBLIGATIONS" shall mean at any time, the
obligations of the Borrowers in respect of all Letters of Credit then
outstanding to reimburse amounts actually paid by any Bank in respect
of any drawing or drawings under a Letter of Credit.
"REQUIRED PAYMENT" the term "Required Payment" is used herein
as defined in Section 3(h) hereof.
"REVOLVING COMMITMENT" shall mean (A) for all Banks, the
LESSER of (i) $100,000,000 or (ii) the Borrowing Base in effect from
time to time, in each case as reduced from time to time pursuant to
Sections 2 and 7 hereof , and (B) as to any Bank, its obligation to
make Advances hereunder on the Revolving Loan and purchase
participations in Letters of Credit issued hereunder by the Agent in
amounts not exceeding, in the aggregate, an amount equal to such Bank's
Revolving Commitment Percentage times the total Revolving Commitment as
of any date. The Revolving Commitment of each Bank hereunder shall be
adjusted from time to time to reflect assignments made by such Bank
pursuant to Section 28 hereof. Each reduction in the Revolving
Commitment shall result in a Pro Rata reduction in each Bank's
Revolving Commitment.
"REVOLVING COMMITMENT PERCENTAGE" shall mean for each Bank the
percentage derived by dividing its Revolving Commitment at the time of
the determination by the Revolving Commitments of all Banks at the time
of determination. The Revolving Commitment Percentage of each Bank
hereunder shall be adjusted from time to time to reflect assignments
made by such Bank pursuant to Section 28 hereof.
"REVOLVING LOAN" shall mean the loan or loans made under the
Revolving Commitment pursuant to Section 2 hereof.
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"REVOLVING MATURITY DATE" shall mean October 31, 2003 or as
such date may be extended from time to time with the consent of all
Banks.
"REVOLVING NOTES" shall mean the Revolving Notes described in
Section 3 hereof.
"SECURITY INSTRUMENTS" shall mean collectively this Agreement,
all deeds of trust, mortgages, security agreements, assignments of
production and financing statements, and other collateral documents
covering the Oil and Gas Properties and related personal property,
equipment, oil and gas inventory and proceeds of the foregoing, all
such documents to be in form and substance satisfactory to Agent.
"SUBSIDIARY" shall mean any corporation or other entity of
which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly
owned by any Borrower or another subsidiary.
"TANGIBLE NET WORTH" shall mean, on a consolidated basis,
Borrowers' total assets excluding all intangible assets (including,
without limitation, goodwill, trademarks, patents, copyrights,
organizational expenses, and similar intangible items) less total
liabilities excluding subordinated debt, if any. As used in this
definition, "subordinated debt" shall mean all indebtedness owing by
Borrowers, or any one or more of them, which has been subordinated by
written agreement to all indebtedness now or hereafter owing by
Borrowers, or any one or more of them, to Banks.
"TOTAL OUTSTANDINGS" shall mean as of any date, the sum of (i)
the total principal balance outstanding on the Revolving Notes, plus
(ii) the total face amount of all outstanding Letters of Credit, plus
(iii) the total amount of all unpaid Reimbursement Obligations.
"TRANCHE" shall mean a LIBOR Loan or a Prime Rate Loan.
"UNSCHEDULED REDETERMINATIONS" shall mean a redetermination of
the Borrowing Base made at any time other than on the dates set for the
regular semi-annual redetermination of the Borrowing Base which are
made (A) at the reasonable request of Borrowers, (B) at any time it
appears to Agent or Majority Banks, in the exercise of their reasonable
discretion, that either (i) there has been an unscheduled material
decrease in the value of the Oil and Gas Properties, or (ii) an event
has occurred which is reasonably expected to have a Material Adverse
Effect.
"UTILIZATION PERCENTAGE" shall mean the ratio of the Total
Outstandings to the most recent Borrowing Base, as decreased by Monthly
Commitment Reductions to date (as described in Section 2(f) below).
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2. COMMITMENTS OF THE BANK.
(a) TERMS OF REVOLVING COMMITMENT. On the terms and conditions
hereinafter set forth, each Bank agrees severally to make Advances to
the Borrowers from time to time during the period beginning on the
Effective Date and ending on the Revolving Maturity Date in such
amounts as the Borrowers may request up to an amount not to exceed, in
the aggregate principal amount outstanding at any time, the Revolving
Commitment. The obligation of the Borrowers hereunder shall be
evidenced by this Agreement and the Revolving Notes issued in
connection herewith, said Revolving Notes to be as described in Section
3 hereof. Notwithstanding any other provision of this Agreement, no
Advance shall be required to be made hereunder if any Event of Default
(as hereinafter defined) has occurred and is continuing or if any event
or condition has occurred or failed to occur which with the passage of
time or service of notice, or both, would constitute an Event of
Default. Each Advance under the Revolving Commitment shall be an
aggregate amount of at least $100,000 or a whole number multiple
thereof except an Advance of the entire remaining unborrowed Revolving
Commitment. Irrespective of the face amount of the Revolving Note or
Notes, the Banks shall never have the obligation to Advance any amount
or amounts in excess of the Revolving Commitment or to increase the
Revolving Commitment. The total number of Tranches under the Revolving
Commitment which may be outstanding at any time hereunder shall never
exceed four (4), whether such Tranches are Prime Rate Loans, LIBOR
Loans, or a combination thereof. Within the limit of each Bank's
Revolving Commitment, the Borrowers may borrow, repay and reborrow
under this Section 2 prior to the Revolving Maturity Date.
(b) PROCEDURE FOR BORROWING. Whenever the Borrowers or any
Borrower desires an Advance hereunder, they, or any one of them, shall
give Agent telegraphic, telex, facsimile or telephonic notice ("Notice
of Borrowing") of such requested Advance, which in the case of
telephonic notice, shall be promptly confirmed in writing. Each Notice
of Borrowing shall be in the form of Exhibit "A" attached hereto and
shall be received by Agent not later than 11:00 a.m. Oklahoma City,
Oklahoma time, (i) one Business Day prior to the Borrowing Date in the
case of the Prime Rate Loan, or (ii) three (3) London Business Days
prior to any proposed Borrowing Date in the case of LIBOR Loans. Each
Notice of Borrowing shall specify (i) the Borrowing Date (which, if at
Prime Rate Loan, shall be a Business Day and if a LIBOR Loan, a London
Business Day), (ii) the principal amount to be borrowed, (iii) the
portion of the Advance constituting Prime Rate Loans and/or LIBOR Loans
and (iv) if any portion of the proposed Advance is to constitute LIBOR
Loans, the initial Interest Period selected by Borrowers pursuant to
Section 4 hereof to be applicable thereto. Upon receipt of such Notice,
Agent shall advise each Bank thereof; provided, that if the Banks have
received at least one (1) day's notice of such Advance prior to funding
of a Prime Rate Loan, or at least three (3) days' notice of each
Advance prior to funding in the case of a LIBOR Loan, each Bank shall
provide Agent in care of Bank One, Texas, N.A. at its office at 1717
Main Street, Dallas, Texas 75201, not later than 1:00 p.m.,Dallas,
Texas time, on the Borrowing Date, in immediately available funds, its
pro rata share of the
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requested Advance, but the aggregate of all such fundings by each
Bank shall never exceed such Bank's Revolving Commitment. Not later
than 2:00 p.m., Dallas, Texas time, on the Borrowing Date, Agent
shall make available to the Borrowers at the same office, in like
funds, the aggregate amount of such requested Advance. Neither Agent
nor any Bank shall incur any liability to the Borrowers in acting
upon any Notice of Borrowing which Agent or such Bank believes in
good faith to have been given by a duly authorized officer or other
person authorized to borrow on behalf of Borrowers or for otherwise
acting in good faith under this Section 2(b). Upon funding of
Advances by Banks in accordance with this Agreement, pursuant to any
such Notice, the Borrowers shall have effected Advances hereunder.
(c) LETTERS OF CREDIT. On the terms and conditions hereinafter
set forth, the Agent shall from time to time during the period
beginning on the Effective Date and ending on the Revolving Maturity
Date upon request of Borrowers issue standby and/or commercial Letters
of Credit for the account of Borrowers (the "Letters of Credit") in
such face amounts as Borrowers may request, but not to exceed in the
aggregate face amount at any time outstanding the sum of Two Million
Five Hundred Thousand Dollars ($2,500,000.00). The face amount of all
Letters of Credit issued and outstanding hereunder shall be considered
as Advances for Borrowing Base purposes and all payments made by the
Agent on such Letters of Credit shall be considered as Advances under
the Revolving Notes. Each Letter of Credit issued for the account of
Borrowers hereunder shall (i) be in favor of such beneficiaries as
specifically requested by Borrowers, (ii) have an expiration date not
exceeding the earlier of (a) one year or (b) the Revolving Maturity
Date, and (iii) contain such other terms and provisions as may be
reasonably required by Bank. Each Bank (other than Agent) agrees that,
upon issuance of any Letter of Credit hereunder, it shall automatically
acquire a participation in the Agent's liability under such Letter of
Credit in an amount equal to such Bank's Revolving Commitment
Percentage of such liability, and each Bank (other than Agent) thereby
shall absolutely, unconditionally and irrevocably assume, as primary
obligor and not as surety, and shall be unconditionally obligated to
Agent to pay and discharge when due, its Revolving Commitment
Percentage of Agent's liability under such Letter of Credit. The
Borrowers hereby unconditionally agree to pay and reimburse the Agent
for the amount of each demand for payment under any Letter of Credit
that is in substantial compliance with the provisions of any such
Letter of Credit at or prior to the date on which payment is to be made
by the Agent to the beneficiary thereunder, without presentment,
demand, protest or other formalities of any kind. Upon receipt from any
beneficiary of any Letter of Credit of any demand for payment under
such Letter of Credit, the Agent shall promptly notify Canaan of the
demand and the date upon which such payment is to be made by the Agent
to such beneficiary in respect of such demand. Forthwith upon receipt
of such notice from the Agent, Canaan, on behalf of all Borrowers,
shall advise the Agent whether or not they intend to borrow hereunder
to finance their obligations to reimburse the Agent, and if so, submit
a Notice of Borrowing as provided in Section 2(b) hereof. If Borrowers
fail to so advise Agent and thereafter fail to reimburse Agent, the
Agent shall notify each Bank of the demand and the failure of the
Borrowers to reimburse the Agent, and each Bank shall reimburse the
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Agent for its Revolving Commitment Percentage of each such draw paid by
the Agent and unreimbursed by the Borrowers. All such amounts paid by
Agent and/or reimbursed by the Banks shall be treated as an Advance or
Advances under the Revolving Commitment, which Advances shall be
immediately due and payable and shall bear interest at the Default
Rate.
(d) PROCEDURE FOR OBTAINING LETTERS OF CREDIT. The amount and
date of issuance, renewal, extension or reissuance of a Letter of
Credit pursuant to the Banks' commitment above in Section 2(c) shall be
designated by Canaan's, on behalf of all Borrowers, written request
delivered to Agent at least three (3) Business Days prior to the date
of such issuance, renewal, extension or reissuance. Concurrently with
or promptly following the delivery of the request for a Letter of
Credit, Canaan, on behalf of all Borrowers, shall execute and deliver
to the Agent an application and agreement with respect to the Letters
of Credit, said application and agreement to be in the form used by the
Agent. The Agent shall not be obligated to issue, renew, extend or
reissue such Letters of Credit if (A) the amount thereon when added to
the face amount of all outstanding Letters of Credit plus any
Reimbursement Obligations exceeds Two Million Five Hundred Thousand
Dollars ($2,500,000.00) or (B) the amount thereof when added to the
Total Outstandings would exceed the Revolving Commitment. Borrowers
agree to pay the Agent for the benefit of the Banks commissions for
issuing the Letters of Credit (calculated separately for each Letter of
Credit) in an amount equal to the greater of (i) the otherwise
applicable LIBOR Margin on the maximum face amount of the Letter of
Credit, or (ii) $500.00. Agent shall keep all amounts up to $500.00 of
any letter of credit fee for its own account. Amounts in excess of
$500.00 shall be shared on a pro rata basis with the Banks. In
addition, Borrowers shall also pay to the Agent, as the Letter of
Credit issuer, a fronting fee equal to fifteen (15) Basis Points on the
face amount of each Letter of Credit issued hereunder. Such commissions
shall be payable prior to the issuance of each Letter of Credit and
thereafter on each anniversary date of such issuance while such Letter
of Credit is outstanding.
(e) VOLUNTARY REDUCTION OF REVOLVING COMMITMENT. The Borrowers
may at any time, or from time to time, upon not less than three (3)
Business Days' prior written notice to Agent, reduce or terminate the
Revolving Commitment; provided, however, that (i) each reduction in the
Revolving Commitment must be in the amount of $500,000 or more, in
increments of $100,000 and (ii) each reduction must be accompanied by a
prepayment of the Revolving Notes in the amount by which the
outstanding principal balance of the Revolving Notes exceeds the
Revolving Commitment as reduced pursuant to this Section 2.
(f) MANDATORY COMMITMENT REDUCTIONS -
(i) MONTHLY COMMITMENT REDUCTION. The Borrowing Base
and the Revolving Commitment shall be reduced as of the first
(1st) day of each month by an amount determined by the Banks
pursuant to Section 7(b) hereof (the "Monthly Commitment
Reduction"). The Monthly Commitment Reduction shall be
$535,000.00 beginning as of December 1, 2000 and shall
continue at such amount
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until redetermined pursuant to Section 7(b) hereof. If as a
result of any such Monthly Commitment Reduction, the Total
Outstandings ever exceed the Revolving Commitment then in
effect, the Borrowers shall make the mandatory prepayment of
principal required pursuant to Section 9(b) hereof.
(ii) OTHER REDUCTIONS. The Borrowing Base shall be
reduced from time to time by the amount of any prepayment
required by Section 12(q) hereof upon the sale of Oil and Gas
Properties. If, as a result of any such reduction in the
Borrowing Base, the Total Outstandings ever exceed the
Borrowing Base then in effect, the Borrowers shall make the
mandatory prepayment of principal required pursuant to Section
9(b) hereof.
(g) SEVERAL OBLIGATIONS. The obligations of the Banks under
the Revolving Commitment are several and not joint. The failure of any
Bank to make an Advance required to be made by it shall not relieve any
other Bank of its obligation to make its Advance, and no Bank shall be
responsible for the failure of any other Bank to make the Advance to be
made by such other Bank.
3. NOTES EVIDENCING LOANS. The loans described above in Section 2
shall be evidenced by promissory notes of Borrowers as follows:
(a) FORM OF REVOLVING NOTES - The Revolving Loan shall be
evidenced by a Note or Notes in the aggregate face amount of
$100,000,000, and shall be in the form of Exhibit "B" hereto with
appropriate insertions (each a "Revolving Note"). Notwithstanding the
face amount of the Revolving Notes, the actual principal amount due
from the Borrowers to Banks on account of the Revolving Notes, as of
any date of computation, shall be the sum of Advances then and
theretofore made on account thereof, less all principal payments
actually received by Banks in collected funds with respect thereto.
Although the Revolving Notes may be dated as of the Effective Date,
interest in respect thereof shall be payable only for the period during
which the loans evidenced thereby are outstanding and, although the
stated amount of the Revolving Notes may be higher, the Revolving Notes
shall be enforceable, with respect to Borrowers' obligation to pay the
principal amount thereof, only to the extent of the unpaid principal
amount of the loans. Irrespective of the face amount of the Revolving
Notes, no Bank shall ever be obligated to advance on the Revolving
Commitment any amount in excess of its Revolving Commitment then in
effect.
(b) ISSUANCE OF ADDITIONAL NOTES - At the Effective Date there
shall be outstanding two (2) Revolving Notes in the aggregate face
amount of $100,000,000 payable to the order of Bank One and Local
Oklahoma Bank, N.A., respectively. From time to time new Notes may be
issued to other Banks as such Banks become parties to this Agreement.
Upon request from Agent, the Borrowers shall execute and deliver to
Agent any such new or additional Notes. From time to time as new Notes
are issued the Agent shall require that
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each Bank exchange their Notes for newly issued Notes to better
reflect the extent of each Bank's Revolving Commitment hereunder. The
Notes replaced shall be marked to indicate that they have been
replaced and/or returned to the Borrowers.
(c) INTEREST RATES - The unpaid principal balance of the Notes
shall bear interest from time to time as set forth in Section 4 hereof.
(d) PAYMENT OF INTEREST - Interest on the Notes shall be
payable on each Interest Payment Date and upon any prepayment of
principal.
(e) PAYMENT OF PRINCIPAL - Principal of the Revolving Note or
Notes shall be due and payable to the Agent for the ratable benefit of
the Banks on the Revolving Maturity Date unless earlier due in whole or
in part pursuant to Section 2(f) above or as a result of an
acceleration of the amount due or pursuant to the mandatory prepayment
provisions of Section 9(b) hereof.
(f) PAYMENT TO BANKS - Each Bank's Pro Rata Part of each
payment or prepayment of the Loans shall be directed by wire transfer
to such Bank by the Agent at the address provided to the Agent for such
Bank for payments no later than 2:00 p.m., Oklahoma City, Oklahoma,
time on the Business Day such payments or prepayments are deemed
hereunder to have been received by Agent; provided, however, in the
event that any Bank shall have failed to make an Advance as
contemplated under Section 2 hereof (a "Defaulting Bank") and the Agent
or another Bank or Banks shall have made such Advance, payment received
by Agent for the account of such Defaulting Bank or Banks shall not be
distributed to such Defaulting Bank or Banks until such Advance or
Advances shall have been repaid in full to the Bank or Banks who funded
such Advance or Advances. Any payment or prepayment received by Agent
at any time after 12:00 noon, Oklahoma City, Oklahoma, time on a
Business Day shall be deemed to have been received on the next Business
Day. Interest shall cease to accrue on any principal as of the end of
the day preceding the Business Day on which any such payment or
prepayment is deemed hereunder to have been received by Agent. If Agent
fails to transfer any principal amount to any Bank as provided above,
then Agent shall promptly direct such principal amount by wire transfer
to such Bank.
(g) SHARING OF PAYMENTS, ETC. - If any Bank shall obtain any
payment (whether voluntary, involuntary, or otherwise) on account of
the Loans, (including, without limitation, any set-off) which is in
excess of its Pro Rata Part of payments on either of the Loans, as the
case may be, obtained by all Banks, such Bank shall purchase from the
other Banks such participation as shall be necessary to cause such
purchasing Bank to share the excess payment pro rata with each of them;
provided that, if all or any portion of such excess payment is
thereafter recovered from such purchasing Bank, the purchase shall be
rescinded and the purchase price restored to the extent of the
recovery. The Borrowers agree that any Bank so purchasing a
participation from another Bank pursuant to this Section may, to the
fullest extent permitted by law, exercise all of its rights of payment
(including the right of
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offset) with respect to such participation as fully as if such Bank
were the direct creditor of the Borrowers in the amount of such
participation.
(h) NON-RECEIPT OF FUNDS BY THE AGENT - Unless the Agent shall
have been notified by a Bank or the Borrowers (the "Payor") prior to
the date on which such Bank is to make payment to the Agent of the
proceeds of a Loan to be made by it hereunder or the Borrowers are to
make a payment to the Agent for the account of one or more of the
Banks, as the case may be (such payment being herein called the
"Required Payment"), which notice shall be effective upon receipt, that
the Payor does not intend to make the Required Payment to the Agent,
the 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 on such date
and, if the Payor has not in fact made the Required Payment to the
Agent, the recipient of such payment shall, on demand, pay to the Agent
the amount made available to it together with interest thereon in
respect of the period commencing on the date such amount was made
available by the Agent until the date the Agent recovers such amount at
the overnight federal funds rate.
4. INTEREST RATES.
(a) OPTIONS.
(i) PRIME RATE LOANS. On Prime Rate Loans the
Borrowers agree to pay interest on the Notes calculated on the
basis of the actual days elapsed in a year consisting of 360
days with respect to the unpaid principal amount of each Prime
Rate Loan from the date the proceeds thereof are advanced to
Borrowers until maturity (whether by acceleration or
otherwise), at a varying rate per annum equal to the lesser of
(i) the Maximum Rate (defined herein), or (ii) the sum of the
Alternate Base Rate plus the Applicable Margin. Subject to the
provisions of this Agreement as to prepayment, the principal
of the Notes representing Prime Rate Loans shall be payable as
specified in Section 3(e) hereof and the interest in respect
of each Prime Rate Loan shall be payable on each Interest
Payment Date. Past due principal and, to the extent permitted
by law, past due interest in respect to each Prime Rate Loan,
shall bear interest, payable on demand, at a rate per annum
equal to the Default Rate.
(ii) LIBOR LOANS. On LIBOR Loans the Borrowers agree
to pay interest calculated on the basis of a year consisting
of 360 days with respect to the unpaid principal amount of
each LIBOR Loan from the date the proceeds thereof are
advanced to Borrowers until maturity (whether by acceleration
or otherwise), at a varying rate per annum equal to the lesser
of (i) the Maximum Rate, or (ii) the LIBOR Rate plus the
Applicable Margin. Subject to the provisions of this Agreement
with respect to prepayment, the
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principal of the Notes shall be payable as specified in
Section 3(e) hereof and the interest with respect to each
LIBOR Loan shall be payable on each Interest Payment Date.
Past due principal and, to the extent permitted by law, past
due interest shall bear interest, payable on demand, at a
rate per annum equal to the Default Rate. Upon three (3)
London Business Days' written notice prior to the making by
the Banks of any LIBOR Loan (in the case of the initial
Interest Period therefor) or the expiration date of each
succeeding Interest Period (in the case of subsequent
Interest Periods therefor), Borrowers shall have the option,
subject to compliance by Borrowers with all of the
provisions of this Agreement, as long as no Event of Default
exists, to specify whether the Interest Period commencing on
any such date shall be a one (1), two (2), three (3) or six
(6) month period. If Agent shall not have received timely
notice of a designation of such Interest Period as herein
provided, Borrowers shall be deemed to have elected to
convert all maturing LIBOR Loans to Prime Rate Loans.
(b) INTEREST RATE DETERMINATION. The Agent shall determine
each interest rate applicable to the Loans hereunder in accordance with
the provisions of this Agreement. The Agent shall give prompt notice to
the Borrowers and the Banks of each rate of interest so determined and
its determination thereof shall be conclusive absent error.
(c) CONVERSION OPTION. Borrowers may elect from time to time
(i) to convert all or any part of its LIBOR Loans to Prime Rate Loans
by giving Agent irrevocable notice of such election in writing prior to
10:00 a.m. (Oklahoma City, Oklahoma time) on the conversion date and
such conversion shall be made on the requested conversion date,
provided that any such conversion of a LIBOR Loan shall only be made on
the last day of the LIBOR Interest Period with respect thereof, (ii) to
convert all or any part of its Prime Rate Loans to LIBOR Loans by
giving the Agent irrevocable written notice of such election three (3)
London Business Days prior to the proposed conversion and such
conversion shall be made on the requested conversion date or, if such
requested conversion date is not a London Business Day or a Business
Day, as the case may be, on the next succeeding London Business Day or
Business Day, as the case may be. Any such conversion shall not be
deemed to be a prepayment of any of the loans for purposes of this
Agreement or the Notes.
(d) RECOUPMENT. If at any time the applicable rate of interest
selected pursuant to Sections 4(a)(i) or 4(a)(ii) above shall exceed
the Maximum Rate, thereby causing the interest on the Notes to be
limited to the Maximum Rate, then any subsequent reduction in the
interest rate so selected or subsequently selected shall not reduce the
rate of interest on the Notes below the Maximum Rate until the total
amount of interest accrued on the Note equals the amount of interest
which would have accrued on the Notes if the rate or rates selected
pursuant to Sections 4(a)(i) or (ii), as the case may be, had at all
times been in effect.
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5. CHANGE OF CIRCUMSTANCES.
(a) UNAVAILABILITY OF FUNDS OR INADEQUACY OF PRICING. In the
event that, in connection with any proposed LIBOR Loan, the Agent
determines, which determination shall, absent manifest error, be final,
conclusive and binding upon all parties, due to changes in
circumstances since the date hereof, adequate and fair means do not
exist for determining the LIBOR Rate or such rate will not accurately
reflect the costs to the Banks of funding LIBOR Loans for such LIBOR
Interest Period, the Agent shall give notice of such determination to
the Borrowers and the Banks, whereupon, until the Agent notifies the
Borrowers and the Banks that the circumstances giving rise to such
suspension no longer exist, the obligations of the Banks to make,
continue or convert Loans into LIBOR Loans shall be suspended, and all
Loans to Borrowers shall be Prime Rate Loans during the period of
suspension.
(b) CHANGE IN LAWS. If at any time any new law or any change
in existing laws or in the interpretation of any new or existing laws
shall make it unlawful for any Bank to make or continue to maintain or
fund LIBOR Loans hereunder, then such Bank shall promptly notify
Borrowers in writing and such Bank's obligation to make, continue or
convert Loans into LIBOR Loans under this Agreement shall be suspended
until it is no longer unlawful for such Bank to make or maintain LIBOR
Loans. Upon receipt of such notice, Borrowers shall either repay the
outstanding LIBOR Loans owed to the Banks, without penalty, on the last
day of the current Interest Periods (or, if any Bank may not lawfully
continue to maintain and fund such LIBOR Loans, immediately), or
Borrowers may convert such LIBOR Loans at such appropriate time to
Prime Rate Loans.
(c) INCREASED COST OR REDUCED RETURN.
(i) If, after the date hereof, the adoption of any
applicable law, rule, or regulation, or any change in any
applicable law, rule, or regulation, or any change in the
interpretation or administration thereof by any governmental
authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by any
Bank with any request or directive (whether or not having the
force of law) of any such governmental authority, central
bank, or comparable agency:
(A) shall subject such Bank to any tax,
duty, or other charge with respect to any LIBOR
Loans, its Notes, or its obligation to make LIBOR
Loans, or change the basis of taxation of any amounts
payable to such Bank under this Agreement or its
Notes in respect of any LIBOR Loans (other than
franchise taxes and taxes imposed on the overall net
income of such Bank);
(B) shall impose, modify, or deem applicable
any reserve, special deposit, assessment, or similar
requirement (other than reserve requirements,
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if any, taken into account in the determination of
the LIBOR Rate) relating to any extensions of
credit or other assets of, or any deposits with or
other liabilities or commitments of, such Bank,
including the Revolving Commitment of such Bank
hereunder; or
(C) shall impose on such Bank or on the
London interbank market any other condition affecting
this Agreement or its Notes or any of such extensions
of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost
to such Bank of making, converting into, continuing, or
maintaining any LIBOR Loans or to reduce any sum received or
receivable by such Bank under this Agreement or its Notes with
respect to any LIBOR Loans, then Borrowers shall pay to such
Bank on demand such amount or amounts as will compensate such
Bank for such increased cost or reduction. If any Bank
requests compensation by Borrowers under this Section 5(c),
Borrowers may, by notice to such Bank (with a copy to Agent),
suspend the obligation of such Bank to make or continue LIBOR
Loans, or to convert all or part of the LIBOR Loan owing to
such Bank to Prime Rate Loans, until the event or condition
giving rise to such request ceases to be in effect (in which
case the provisions of Section 5(c) shall be applicable);
PROVIDED that such suspension shall not affect the right of
such Bank to receive the compensation so requested.
(ii) If, after the date hereof, any Bank shall have
determined that the adoption of any applicable law, rule, or
regulation regarding capital adequacy or any change therein or
in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or
any request or directive regarding capital adequacy (whether
or not having the force of law) of any such governmental
authority, central bank, or comparable agency, has or would
have the effect of reducing the rate of return on the capital
of such Bank or any corporation controlling such Bank as a
consequence of such Bank's obligations hereunder to a level
below that which such Bank or such corporation could have
achieved but for such adoption, change, request, or directive
(taking into consideration its policies with respect to
capital adequacy), then from time to time upon demand
Borrowers shall pay to such Bank such additional amount or
amounts as will compensate such Bank for such reduction.
(iii) Each Bank shall promptly notify Borrowers and
Agent of any event of which it has knowledge, occurring after
the date hereof, which will entitle such Bank to compensation
pursuant to this Section 5(c) and will designate a separate
lending office, if applicable, if such designation will avoid
the need for, or reduce the amount of, such compensation and
will not, in the judgment of such Bank, be otherwise
disadvantageous to it. Any Bank claiming compensation under
this Section 5(c) shall furnish to Borrowers and Agent a
statement setting forth the
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additional amount or amounts to be paid to it hereunder
which shall be conclusive in the absence of manifest error.
In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
(iv) Any Bank giving notice to the Borrowers through
the Agent, pursuant to Section 5(c) shall give to the
Borrowers a statement signed by an officer of such Bank
setting forth in reasonable detail the basis for, and the
calculation of such additional cost, reduced payments or
capital requirements, as the case may be, and the additional
amounts required to compensate such Bank therefor.
(v) Within five (5) Business Days after receipt by
the Borrowers of any notice referred to in Section 5(c), the
Borrowers shall pay to the Agent for the account of the Bank
issuing such notice such additional amounts as are required to
compensate such Bank for the increased cost, reduce payments
or increase capital requirements identified therein, as the
case may be; provided, that the Borrowers shall not be
obligated to compensate such Bank for any increased costs,
reduced payments or increased capital requirements to the
extent that such Bank incurs the same prior to a date six (6)
months before such Bank gives the required notice.
(d) REPLACEMENT BANKS.
(i) If any Bank has notified Canaan and the Agent of
its incurring additional costs under Section 5, then the
Borrowers may, unless such Bank has notified the Borrowers
that the circumstances giving rise to such notice no longer
apply, terminate, in whole or in part, the Revolving
Commitment of such Bank (other than the Agent) (the
"TERMINATED LENDER") at any time upon five (5) Business Days'
prior written notice to the Terminated Lender and the Agent
(such notice referred to herein as a "NOTICE OF TERMINATION").
(ii) In order to effect the termination of the
Revolving Commitment of the Terminated Lender, the Borrowers
shall: (i) obtain an agreement with one or more Banks to
increase their Revolving Commitment or Commitments and/or (ii)
request any one or more other banking institutions to become
parties to this Agreement in place and instead of such
Terminated Lender and agree to accept a Revolving Commitment
or Commitments; PROVIDED, HOWEVER, that such one or more other
banking institutions are reasonably acceptable to the Agent
and become parties by executing an Assignment and Acceptance
(the Banks or other banking institutions that agree to accept
in whole or in part the Revolving Commitment of the Terminated
Lender being referred to herein as the "REPLACEMENT BANKS"),
such that the aggregate increased and/or accepted Revolving
Commitment of the Replacement Banks under clauses (i) and (ii)
above equal the Revolving Commitment of the Terminated Lender.
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(iii) The Notice of Termination shall include the
name of the Terminated Lender, the date the termination will
occur (the "LENDER TERMINATION DATE"), and the Replacement
Bank or Replacement Banks to which the Terminated Lender will
assign its Revolving Commitment and, if there will be more
than one Replacement Bank, the portion of the Terminated
Lender's Revolving Commitment to be assigned to each
Replacement Bank.
(iv) On the Lender Termination Date, (i) the
Terminated Lender shall by execution and delivery of an
Assignment and Acceptance assign its Revolving Commitment to
the Replacement Bank or Replacement Banks (pro rata, if there
is more than one Replacement Bank, in proportion to the
portion of the Terminated Lender's Revolving Commitment to be
assigned to each Replacement Bank) indicated in the Notice of
Termination and shall assign to the Replacement Bank or
Replacement Banks each of its Revolving Loans (if any) then
outstanding and participation interests in Letters of Credit
(if any) then outstanding pro rata as aforesaid, (ii) the
Terminated Lender shall endorse its Note, payable without
recourse, representation or warranty to the order of the
Replacement Bank or Replacement Banks (pro rata as aforesaid),
(iii) the Replacement Bank or Replacement Banks shall purchase
the Note held by the Terminated Lender (pro rata as aforesaid)
at a price equal to the unpaid principal amount thereof plus
interest and facility and other fees accrued and unpaid to the
Lender Termination Date, and (iv) the Replacement Bank or
Replacement Banks will thereupon (pro rata as aforesaid)
succeed to and be substituted in all respects for the
Terminated Lender with like effect as if becoming a Lender
pursuant to the terms of Section 28, and the Terminated Lender
will have the rights and benefits of an assignor under Section
28. To the extent not in conflict, the terms of Section 28
shall supplement the provisions of this Section 5. For each
assignment made under this Section 5, the Replacement Lender
shall pay to the Agent the processing fee provided for in
Section 28. The Borrower will be responsible for the payment
of any breakage costs associated with termination and
Replacement Lenders, as set forth herein.
(e) DISCRETION OF BANK AS TO MANNER OF FUNDING.
Notwithstanding any provisions of this Agreement to the contrary, each
Bank shall be entitled to fund and maintain its funding of all or any
part of its Loans in any manner it sees fit, it being understood,
however, that for the purposes of this Agreement all determinations
hereunder shall be made as if each Bank had actually funded and
maintained each LIBOR Loan through the purchase of deposits having a
maturity corresponding to the last day of the LIBOR Interest Period
applicable to such LIBOR Loan and bearing an interest rate to the
applicable interest rate for such LIBOR Period.
(f) BREAKAGE FEES. Without duplication under any other
provision hereof, if any Bank incurs any loss, cost or expense
(including, without limitation, any loss of profit and loss, cost,
expense or premium reasonably incurred by reason of the liquidation or
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re-employment of deposits or other funds acquired by such Bank to fund
or maintain any LIBOR Loan or the relending or reinvesting of such
deposits or amounts paid or prepaid to the Banks) as a result of any of
the following events other than any such occurrence as a result in the
change of circumstances described in Sections 5(a) and (b):
(i) any payment, prepayment or conversion of a LIBOR
Loan on a date other than the last day of its LIBOR Interest
Period (whether by acceleration, prepayment or otherwise);
(ii) any failure to make a principal payment of a
LIBOR Loan on the due date thereof; or
(iii) any failure by the Borrowers to borrow,
continue, prepay or convert to a LIBOR Loan on the dates
specified in a notice given pursuant to Section 2(b) or 4(c)
hereof;
then the Borrowers shall pay to such Bank such amount as will reimburse
such Bank for such loss, cost or expense. If any Bank makes such a
claim for compensation, it shall furnish to Borrowers and Agent a
statement setting forth the amount of such loss, cost or expense in
reasonable detail (including an explanation of the basis for and the
computation of such loss, cost or expense) and the amounts shown on
such statement shall be conclusive and binding absent manifest error.
6. COLLATERAL SECURITY.
(a) PLEDGE OF COLLATERAL. To secure the performance by
Borrowers of their obligations under the Indian Loan Documents and the
Coral Loan Documents, Borrowers have heretofore granted and assigned to
Bank One a first and prior lien on certain of their respective Oil and
Gas Properties, certain related equipment, oil and gas inventory and
the proceeds of the foregoing. The Debt evidenced by the Previous Loan
Documents is now evidenced by the Loan Documents. Contemporaneously
with the execution of this Agreement and the Notes, the Borrowers shall
(i) grant and assign to Agent for the ratable benefit of the Banks a
first and prior Lien on certain of its Oil and Gas Properties, certain
related equipment, oil and gas inventory, certain bank accounts and
proceeds of the foregoing, and/or (ii) amend and/or restate certain
Security Instruments already in place in order to memorialize the
agency relationship between Bank One and the Banks and to recognize the
increased indebtedness. The Liens held by Bank One on the Oil and Gas
Properties shall be assigned, as of the Effective Date, to the Agent
for the ratable benefit of the Banks. The Oil and Gas Properties
heretofore and herewith mortgaged to the Agent shall represent not less
than 90% of the Engineered Value (as hereinafter defined) of Borrowers'
Oil and Gas Properties as of the Effective Date. Obligations arising
from transactions between Borrowers and one or more of the Banks
providing for the hedging, forward sale or swap or crude oil or natural
gas or interest rate protection ("Hedging Obligations") shall
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be secured by the Collateral described herein. The Hedging Obligations
shall be secured and repaid on a pari passu basis with the indebtedness
and obligations of the Borrowers under the Loan Documents. All Oil and
Gas Properties and other collateral in which Borrowers have heretofore
granted to Bank One, or herewith grant or hereafter grant to Agent for
the ratable benefit of the Banks a first and prior Lien (to the
satisfaction of the Agent) in accordance with this Section 6, as such
properties and interests are from time to time constituted, are
hereinafter collectively called the "Collateral".
(b) DOCUMENTATION AND TITLE REVIEW. The granting and assigning
of such security interests and Liens by Borrowers shall be pursuant to
Security Instruments in form and substance reasonably satisfactory to
the Agent. Concurrently with the delivery of each of the Security
Instruments or within a reasonable time thereafter, Borrowers shall
furnish to the Agent mortgage and title opinions or other title
information satisfactory to Agent with respect to the title and Lien
status of Borrowers' interests in not less than 90% of the Engineered
Value of the Oil and Gas Properties covered by the Security Instruments
as Agent shall have designated. "Engineered Value" for this purpose
shall mean future net revenues discounted at the discount rate being
used by the Agent as of the date of any such determination utilizing
the pricing parameters used in the engineering report furnished to the
Agent for the ratable benefit of the Banks, pursuant to Sections 7 and
12 hereof. Borrowers will cause to be executed and delivered to the
Agent, in the future, additional Security Instruments if the Agent
reasonably deems such are necessary to insure perfection or maintenance
of Banks' security interests and Liens in the Collateral or any part
thereof.
(c) LETTERS IN LIEU OF TRANSFER ORDERS. The Borrowers shall
provide the Agent for the benefit of the Banks, undated letters in lieu
of transfer orders, in form and substance satisfactory to Agent, from
the Borrowers to each purchaser of hydrocarbons and disburser proceeds
of hydrocarbons from and attributable to the Oil and Gas Properties,
together with additional letters with addresses left blank authorizing
and directing the addressees to make future payments attributable to
hydrocarbons from the Oil and Gas Properties directly to the Agent for
the benefit of the Banks. The Banks agree that none of the letters in
lieu of transfer orders provided by the Borrowers pursuant to this
Section 6(c) will be sent to the addressee prior to the occurrence of
an Event of Default, at which time the Agent may, at its option and in
addition to the exercise of any of its other rights and remedies, send
any and all of such letters to such addressees; provided, however, that
upon the occurrence of an Event of Default other than those specified
in Sections 14(f) and (g), the Agent shall not send any or all of such
letters until the applicable period to cure, if any, such Default has
lapsed without such Default being cured. Borrowers hereby designate the
Agent as its agent and attorney-in-fact, to act in its name, place and
stead for the purpose of completing and delivering any and all letters
in lieu of transfer orders delivered by the Borrowers to the Agent for
the benefit of the Banks pursuant to Sections 6(c) and 11(a)(viii)
hereof, including, without limitation, completing any blanks contained
in such letters and attaching exhibits thereto describing the relevant
Collateral. Borrowers hereby ratify and confirm all that the Agent
shall lawfully do or cause to be done by virtue of this power of
attorney and the rights
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granted with respect to such power of attorney. This power of
attorney is coupled with the interests of the Agent in the
Collateral, shall commence and be in full force and effect as of the
Effective Date and shall remain in full force and effect and shall be
irrevocable until the obligations, if any, of the Agent hereunder
have terminated and the full satisfaction of all obligations due
hereunder or under the Notes. The powers conferred on Agent by this
appointment may only be exercised by the Agent by execution by any
Person who, at the time of exercise, is an officer of the Agent, and
are solely to protect the interests of the Agent and the Banks under
the Loan Documents and shall not impose any duty upon the Agent to
exercise any such powers. The Agent shall be accountable only for
amounts that it actually receives or has expressly directed that
others receive as a result of the exercise of such powers and shall
not be responsible to the Borrowers, or any other Person for any act
or failure to act with respect to such powers, except for gross
negligence or willful misconduct.
(d) PLEDGE OF STOCK AND PARTNERSHIP INTERESTS. As additional
security for the payment and performance of this Agreement and all
obligations represented by the Notes, Canaan shall pledge 100% of its
ownership interest in Indian, Coral Reserves, Inc., Coral Reserves
Energy Corp., and each of the LP Borrowers.
7. BORROWING BASE.
(a) INITIAL BORROWING BASE. At the Effective Date, the
Borrowing Base shall be as described in the definition of "Borrowing
Base" at Section 1 above.
(b) SUBSEQUENT DETERMINATIONS OF BORROWING BASE. Subsequent
determinations of the Borrowing Base shall be made by the Banks at
least semi-annually on November 1 and May 1 of each year beginning May
1, 2001 or as Unscheduled Redeterminations. In connection with, and as
of, each determination of the Borrowing Base, the Banks shall also
redetermine the Monthly Commitment Reduction. The Borrowers shall
furnish to the Banks as soon as possible but in any event no later than
April 1 of each year, beginning April 1, 2001 with an effective date of
December 31, 2000, with an engineering report in form and substance
satisfactory to the Agent prepared by an independent petroleum
engineering firm acceptable to Agent covering the Oil and Gas
Properties constituting the Borrowing Base based on a present worth
value discounted at ten percent utilizing economic and pricing
parameters used by Agent as established from time to time, together
with such other information concerning the value of the Oil and Gas
Properties as the Agent shall deem necessary to determine the value of
the Oil and Gas Properties. By October 1 of each year, or within thirty
(30) days after either (i) receipt of notice from Agent that the Banks
require an Unscheduled Redetermination, or (ii) Canaan gives notice to
Agent of their desire to have an Unscheduled Redetermination performed,
the Borrowers shall furnish to the Banks an engineering report in form
and substance satisfactory to Agent prepared by Borrowers' in-house
engineering staff valuing the Oil and Gas Properties utilizing economic
and pricing parameters used by the Agent as established from time to
time, together with such other information, reports and data concerning
the value of the Oil and Gas Properties as Agent
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<PAGE>
shall deem reasonably necessary to determine the value of such Oil
and Gas Properties. Agent shall by notice to the Borrowers no later
than May 1 and November 1 of each year, or within a reasonable time
thereafter (herein called the "Determination Date"), notify the
Borrowers of the designation by the Banks of the new Borrowing Base
and Monthly Commitment Reduction for the period beginning on such
Determination Date and continuing until, but not including, the next
Determination Date. If an Unscheduled Redetermination is made by the
Banks, the Agent shall notify the Borrowers within a reasonable time
after receipt of all requested information of the new Borrowing Base
and Monthly Commitment Reduction, and such new Borrowing Base and
Monthly Commitment Reduction shall continue until the next
Determination Date. If the Borrowers do not furnish all such
information, reports and data by any date specified in this Section
7(b), the Banks may nonetheless designate the Borrowing Base and
Monthly Commitment Reduction at any amounts which the Banks in their
discretion determine and may redesignate the Borrowing Base and
Monthly Commitment Reduction from time to time thereafter until the
Banks receive all such information, reports and data, whereupon the
Banks shall designate a new Borrowing Base and Monthly Commitment
Reduction as described above. Each Bank shall determine the amount of
the Borrowing Base and Monthly Commitment Reduction based upon the
loan collateral value which such Bank in its discretion (using such
methodology, assumptions and discounts rates as such Bank customarily
uses in assigning collateral value to oil and gas properties, oil and
gas gathering systems, gas processing and plant operations) assigns
to such Oil and Gas Properties and other Collateral of the Borrowers
at the time in question and based upon such other credit factors
consistently applied (including, without limitation, the assets,
liabilities, cash flow, business, properties, prospects, management
and ownership of the Borrowers and their affiliates) as such Bank
customarily considers in evaluating similar oil and gas credits, but
such Bank in its discretion shall not be required to give any
additional positive value to any Oil and Gas Property over the
current economic and pricing parameters used by such Bank for such
Determination Date which additional value is derived directly from a
hedging, forward sale or swap agreement covering such Oil and Gas
Property as of the date of such determination. All determinations or
Unscheduled Redeterminations of the Borrowing Base and the Monthly
Commitment Reduction require the approval of Majority Banks;
provided, however, that notwithstanding anything to the contrary
herein, the amount of the Borrowing Base may not be increased, nor
may the Monthly Commitment Reduction be reduced, without the approval
of all Banks. If the Banks cannot otherwise agree on the Borrowing
Base or the Monthly Commitment Reduction, each Bank shall submit in
writing to the Agent its proposed Borrowing Base and Monthly
Commitment Reduction and the Borrowing Base and Monthly Commitment
Reduction shall be set on the basis of the weighted average of the
Borrowing Bases and the weighted average of the Monthly Commitment
Reductions proposed by the Banks. If at any time any of the Oil and
Gas Properties are sold, the Borrowing Base then in effect shall
automatically be reduced by a sum equal to the amount of prepayment
required to be made pursuant to Section 12(q) hereof. The Borrowing
Base shall be additionally reduced from time to time pursuant to the
provisions of Sections 2(e) and 2(f) hereof. It is expressly
understood that the Banks have no obligation to designate the
Borrowing Base or the
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Monthly Commitment Reduction at any particular amounts, except in the
exercise of their discretion, whether in relation to the Revolving
Commitment or otherwise. Provided, however, that the Banks shall not
have the obligation to designate a Borrowing Base in an amount in
excess of the Revolving Commitment or its legal or internal lending
limits.
8. FEES.
(a) COMMITMENT FEE. The Borrowers shall pay to Agent for the
ratable benefit of the Banks the Commitment Fee (calculated on a daily
basis). The Commitment Fee shall be payable in arrears on the last
Business Day of each calendar quarter beginning December 31, 2000 with
the final fee payment due on the Maturity Date for any period then
ending for which the Commitment Fee shall not have been theretofore
paid. In the event the Revolving Commitment terminates on any date
prior to the end of any such monthly period, the Borrowers shall pay to
the Agent for the ratable benefit of the Banks, on the date of such
termination, the total Commitment Fee due for the period in which such
termination occurs.
(b) THE LETTER OF CREDIT FEE. The Borrowers shall pay to the
Agent the Letter of Credit fees required above in Section 2(d).
(c) OTHER FEES. The Borrowers shall pay to the Agent such
other fees as are set forth in that certain letter dated September 14,
2000 from Bank One to Canaan as supplemented by that certain letter
dated as of the date hereof from Bank One to Canaan.
9. PREPAYMENTS.
(a) VOLUNTARY PREPAYMENTS. Subject to the provisions of
Section 5(e) hereof, the Borrowers may at any time and from time to
time, without penalty or premium, prepay the Notes, in whole or in
part. Each such prepayment shall be made on at least three (3) London
Business Days' notice to Agent in the case of LIBOR Loan Tranches and
without notice in the case of Prime Rate Loan Tranches and shall be in
a minimum amount of $1,000,000.00 or any larger $100,000 multiple or
the unpaid balance on the Notes, whichever is less, plus accrued
interest thereon to the date of prepayment.
(b) MANDATORY PREPAYMENT FOR BORROWING BASE DEFICIENCY. In the
event the Total Outstandings ever exceed the Borrowing Base as
determined by Banks pursuant to Section 7(b) hereof, the Borrowers
shall, within thirty (30) days after notification from the Agent,
either (A) by instruments reasonably satisfactory in form and substance
to the Bank, provide the Agent with collateral with value and quality
in amounts satisfactory to all of the Banks in their discretion in
order to increase the Borrowing Base by an amount at least equal to
such excess, or (B) prepay, without premium or penalty, the principal
amount of the Revolving Notes in an amount at least equal to such
excess plus accrued interest thereon to the date of prepayment. If the
Total Outstandings ever exceed the Revolving Commitment as a result of
a Monthly Commitment Reduction or any other required reduction in the
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Revolving Commitment, then in such event, Borrowers shall immediately
prepay the principal amount of the Revolving Notes in an amount at
least equal to such excess plus accrued interest to the date of
prepayment.
10. REPRESENTATIONS AND WARRANTIES. In order to induce the Banks
to enter into this Agreement, the Borrowers hereby, jointly and severally,
represent and warrant to the Banks (which representations and warranties will
survive the delivery of the Notes) that:
(a) CREATION AND EXISTENCE. The Corporate Borrowers are each a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it was formed and is duly
qualified in all jurisdictions wherein failure to qualify may result in
a Material Adverse Effect. The LP Borrowers are each a limited
partnership duly organized, validly existing and in good standing under
the laws of the State of Oklahoma and is duly qualified in all
jurisdictions wherein failure to qualify may result in a Material
Adverse Effect. Borrowers each have all power and authority to own its
properties and assets and to transact the business in which it is
engaged.
(b) POWER AND AUTHORITY. Borrowers are each duly authorized
and empowered to create and issue the Notes; and Borrowers are duly
authorized and empowered to execute, deliver and perform their
respective Loan Documents, including this Agreement; and all
corporation or limited partnership, as the case may be, action on each
Borrower's part requisite for the due creation and issuance of the
Notes and for the due execution, delivery and performance of the Loan
Documents, including this Agreement, has been duly and effectively
taken.
(c) BINDING OBLIGATIONS. This Agreement does, and the Notes
and other Loan Documents upon their creation, issuance, execution and
delivery will, constitute valid and binding obligations of Borrowers,
enforceable in accordance with their respective terms (except that
enforcement may be subject to applicable principles of equity and the
effect of any applicable bankruptcy, insolvency, or similar debtor
relief laws now or hereafter in effect and relating to or affecting the
enforcement of creditors' rights generally).
(d) NO LEGAL BAR OR RESULTANT LIEN. The Notes and the Loan
Documents, including this Agreement, do not and will not, to the best
of each Borrower's knowledge violate any provisions of any contract,
agreement, law, regulation, order, injunction, judgment, decree or writ
to which any Borrower is subject which could reasonable be expected to
have a Material Adverse Effect, or result in the creation or imposition
of any lien or other encumbrance upon any assets or properties of any
Borrower, other than those contemplated by this Agreement.
(e) NO CONSENT. The execution, delivery and performance by the
Borrowers of the Notes and by the Borrowers of their respective Loan
Documents, including this Agreement, does not require the consent or
approval of any other person or entity, including
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without limitation any regulatory authority or governmental body of
the United States or any state thereof or any political subdivision
of the United States or any state thereof except for (i) consents
required for federal, state and, in some instances, private leases,
right of ways and other conveyances or encumbrances of oil and gas
leases, if any, all of which consents have been obtained by the
Borrowers.
(f) FINANCIAL CONDITION. The audited Financial Statements of
Borrowers dated December 31, 1999 and the unaudited Financial
Statements of Borrowers dated as of March 30, 2000, which have been
delivered to Banks are complete and correct in all material respects,
and fully and accurately reflect in all material respects the financial
condition and results of the operations of Borrowers on a separate
basis as of the date or dates and for the period or periods stated. No
change has since occurred in the condition, financial or otherwise, of
any Borrower which is reasonably expected to have a Material Adverse
Effect, except as disclosed to the Banks in Schedule "2" attached
hereto.
(g) LIABILITIES. No Borrower has any material (individually or
in the aggregate) liability, direct or contingent, except as disclosed
to the Banks in the Financial Statements or on Schedule "3" attached
hereto. No unusual or unduly burdensome restrictions, restraint, or
hazard exists by contract, law or governmental regulation or otherwise
relative to the business, assets or properties of Borrowers which is
reasonably expected to have a Material Adverse Effect.
(h) LITIGATION. Except as described in the Financial
Statements, or as otherwise disclosed to the Banks in Schedule "4"
attached hereto, there is no litigation, legal or administrative
proceeding, investigation or other action of any nature pending or, to
the knowledge of the officers of Borrowers threatened against or
affecting Borrowers which involves the possibility of any judgment or
liability not fully covered by insurance, and which is reasonably
expected to have a Material Adverse Effect.
(i) TAXES; GOVERNMENTAL CHARGES. Borrowers have each filed all
tax returns and reports required to be filed and has paid all taxes,
assessments, fees and other governmental charges levied upon them or
their assets, properties or income which are due and payable, including
interest and penalties, the failure of which to pay could reasonably be
expected to have a Material Adverse Effect, except such as are being
contested in good faith by appropriate proceedings and for which
adequate reserves for the payment thereof as required by GAAP has been
provided and levy and execution thereon have been stayed and continue
to be stayed.
(j) TITLES, ETC. Borrowers each have defensible title to all
of its respective assets, including without limitation, the Oil and Gas
Properties, free and clear of all liens or other encumbrances except
Permitted Liens.
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(k) DEFAULTS. No Borrower is in default and no event or
circumstance has occurred which, but for the passage of time or the
giving of notice, or both, would constitute a default under any loan or
credit agreement, indenture, mortgage, deed of trust, security
agreement or other agreement or instrument to which any Borrower is a
party in any respect that would be reasonably expected to have a
Material Adverse Effect. No Event of Default hereunder has occurred and
is continuing.
(l) CASUALTIES; TAKING OF PROPERTIES. Since the dates of the
latest Financial Statements of the Borrowers delivered to Banks,
neither the business nor the assets or properties of Borrowers have
been affected (to the extent it is reasonably likely to cause a
Material Adverse Effect), 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 domestic or foreign
government or any agency thereof, riot, activities of armed forces or
acts of God or of any public enemy.
(m) USE OF PROCEEDS; MARGIN STOCK. The proceeds of the
Revolving Commitment may be used by the Borrowers for the purposes of
(i) financing the Plan of Combination, (ii) refinancing existing Debt,
and (iii) general corporate purposes. Neither Borrower is engaged
principally or as one of its important activities in the business of
extending credit for the purpose of purchasing or carrying any "margin
stock " as defined in Regulation U of the Board of Governors of the
Federal Reserve System (12 C.F.R. Part 221), or for the purpose of
reducing or retiring any indebtedness which was originally incurred to
purchase or carry a margin stock or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of
said Regulation G or U.
No Borrower nor any person or entity acting on behalf of any
Borrower has taken or will take any action which might cause the loans
hereunder or any of the Loan Documents, including this Agreement, to
violate Regulation G or U or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Securities
Exchange Act of 1934 or any rule or regulation thereunder, in each case
as now in effect or as the same may hereafter be in effect.
(n) LOCATION OF BUSINESS AND OFFICES. The principal place of
business and chief executive offices of the Borrowers are located at
the address stated in Section 17 hereof.
(o) COMPLIANCE WITH THE LAW. To the best of each Borrower's
knowledge, no Borrower:
(i) is in violation of any law, judgment, decree, order,
ordinance, or governmental rule or regulation to which any
Borrower, or any of its assets or properties are subject; or
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(ii) has failed to obtain any license, permit, franchise
or other governmental authorization necessary to the
ownership of any of its assets or properties or the conduct
of its business;
which violation or failure is reasonably expected to have a Material
Adverse Effect.
(p) NO MATERIAL MISSTATEMENTS. No information, exhibit or
report furnished by Borrowers to the Banks 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.
(q) ERISA. Borrowers are each in compliance in all material
respects with the applicable provisions of ERISA, and no "reportable
event", as such term is defined in Section 403 of ERISA, has occurred
with respect to any Plan of Borrowers.
(r) PUBLIC UTILITY HOLDING COMPANY ACT. No Borrower is a
"holding company", or "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.
(s) SUBSIDIARIES. All of the Borrowers' Subsidiaries are
listed on Schedule "5" hereto.
(t) ENVIRONMENTAL MATTERS. Except as disclosed on Schedule
"6", no Borrower (i) has received notice or otherwise learned of any
Environmental Liability which would be reasonably likely to
individually or in the aggregate have a Material Adverse Effect arising
in connection with (A) any non-compliance with or violation of the
requirements of any Environmental Law or (B) the release or threatened
release of any toxic or hazardous waste into the environment, (ii) has
received notice of any threatened or actual liability in connection
with the release or notice of any threatened release of any toxic or
hazardous waste into the environment which would be reasonably likely
to individually or in the aggregate have a Material Adverse Effect or
(iii) has received notice or otherwise learned of any federal or state
investigation evaluating whether any remedial action is needed to
respond to a release or threatened release of any toxic or hazardous
waste into the environment for which either Borrower is or may be
liable which may reasonably be expected to result in a Material Adverse
Effect.
(u) LIENS. Except (i) as disclosed on Schedule "1" hereto and
(ii) for Permitted Liens, the assets and properties of the Borrowers
are free and clear of all liens and encumbrances.
(v) GAS CONTRACTS. Except as described on Schedule "7" hereto,
the Borrowers (a) are not obligated in any material respect by virtue
of any prepayment made under any
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contract containing a "take-or-pay,", "recoupment," or "prepayment"
provision or under any similar agreement to deliver hydrocarbons
produced from or allocated to any of the Oil and Gas Properties at
some future date without receiving full payment therefor at the time
of delivery, and (b) has not produced gas, in any material amount,
subject to, and is not, nor are any of the Oil and Gas Properties,
subject to balancing rights of third parties or subject to balancing
duties under governmental requirements, except as to such matters for
which the Borrowers have established monetary reserves adequate in an
amount to satisfy such obligations and has segregated such reserves
from other accounts or the Borrowers' balancing obligations in the
aggregate would not reasonably be expected to have a Material Adverse
Effect.
(w) PLAN OF COMBINATION. Canaan has received all approvals
necessary to consummate the partnership rollup transaction as described
in the Plan of Combination and has received all regulatory and legal
approvals pertaining to the Plan of Combination.
11. CONDITIONS OF LENDING.
(a) The effectiveness of this Agreement, and the obligation to
make the initial Advance or issue any initial Letter of Credit under
the Revolving Commitment shall be subject to satisfaction of the
following conditions precedent:
(i) EXECUTION AND DELIVERY. The Borrowers shall
each have executed and delivered the Agreement, the Notes
and other required Loan Documents, and the other Security
Instruments, all in form and substance satisfactory to the
Agent; Canaan shall have executed and delivered a Pledge
Agreement with respect to the Indian stock, the Coral
Reserves, Inc. stock, the Coral Reserves Energy Corp. stock
and the limited partnership interests in each member of the
Coral Group;
(ii) LEGAL OPINION. The Agent shall have received
from Borrowers' legal counsel a favorable legal opinion in
form and substance satisfactory to it (i) as to the matters
set forth in Subsections 10(a), (b), (c), (d), (e), (h) and
(w) hereof and (ii) as to such other matters as Agent or its
counsel may reasonably request;
(iii) RESOLUTIONS, CONSENTS OR AUTHORIZATIONS. The
Agent shall have received appropriate certified corporate
resolutions of the Corporate Borrowers and resolutions of the
general partner of each LP Borrower;
(iv) GOOD STANDING. The Agent shall have received
evidence of existence and good standing for Borrowers;
(v) INCUMBENCY. The Agent shall have received a
signed certificate of the secretary or assistant secretary of
the corporate Borrowers and the secretary or assistant
secretary of the general partner of each LP Borrower,
certifying the names
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of the officers of Borrowers authorized to sign loan
documents on behalf of Borrowers, together with the true
signatures of each such officer. The Agent may conclusively
rely on such certificate until the Agent receives a further
certificate of Borrowers canceling or amending the prior
certificate and submitting signatures of the officers named
in such further certificate;
(vi) CERTIFICATE OF INCORPORATION OR LIMITED
PARTNERSHIP AND BYLAWS OR PARTNERSHIP AGREEMENT. The Agent
shall have received (i) copies of the Certificate of
Incorporation of the Corporate Borrowers and all amendments
thereto, certified by the Secretary of State of the State of
its incorporation, and a copy of the bylaws of the Corporate
Borrowers and all amendments thereto, certified by the
Secretary or Assistant Secretary of such Corporate Borrowers
as being true, correct and complete and (ii) copies of the
Articles of Limited Partnership of the LP Borrowers and all
amendments thereto, certified by the Secretary of State of
Oklahoma, and a copy of the Partnership Agreement of the LP
Borrowers and all amendments thereto, certified by the general
partner of the LP Borrowers as being true, correct and
complete;
(vii) PRIORITY OF LIENS. The Agent shall have
received satisfactory evidence of the first lien status of the
Liens granted by Borrowers to the Banks;
(viii) LETTERS IN LIEU. The Agent shall have
received undated letters in lieu of transfer orders, in form
and substance satisfactory to the Agent, from the Borrowers to
each purchaser of hydrocarbons and disburser of proceeds of
hydrocarbons from and attributable to the Oil and Gas
Properties, together with additional letters with the
addresses left blank, authorizing and directing the addressees
to make future payments attributable to the hydrocarbons from
the Oil and Gas Properties directly to the Agent for the
benefit of the Banks, all as required by Section 6 hereof;
(ix) CERTIFICATE REGARDING SOLVENCY. The Agent
shall have received a Certificate substantially in the form
of Exhibit E attached hereto from the Comptroller or Chief
Financial Officer of each corporate borrower and each
general partner of the LP Borrowers.
(x) PAYMENT OF FEES. The Agent shall have received
payment of all fees due from Borrowers as of the Effective
Date.
(xi) REPRESENTATION AND WARRANTIES. The
representations and warranties of Borrowers under this
Agreement are true and correct in all material respects as of
such date, as if then made (except to the extent that such
representations and warranties related solely to an earlier
date);
(xii) NO EVENT OF DEFAULT. No Event of Default shall
have occurred and be continuing nor shall any event have
occurred or failed to occur which, with the
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passage of time or service of notice, or both, would
constitute an Event of Default hereunder under the Previous
Loan Documents or under any other material financing
obligations;
(xiii) OTHER DOCUMENTS. Agent shall have received
such other instruments and documents incidental and
appropriate to the transaction provided for herein as Agent or
its counsel may reasonably request, and all such documents
shall be in form and substance reasonably satisfactory to the
Agent;
(xiv) LEGAL MATTERS SATISFACTORY. All legal matters
incident to the consummation of the transactions contemplated
hereby shall be reasonably satisfactory to special counsel for
Agent retained at the expense of the Borrowers; and
(xv) PLAN OF COMBINATION. Borrowers shall have
delivered evidence satisfactory to Agent that (i) Borrower,
Canaan, has obtained all appropriate and requisite approvals
to consummate the Plan of Combination, and (ii) the Plan of
Combination has been consummated upon terms previously
disclosed to Agent.
(xvi) STRUCTURE. The legal structure, organization
and ownerships of each Borrower shall be satisfactory to Banks
and their counsel.
(xvii) LITIGATION. There shall be in existence no
injunction or restraining order which, in the reasonable
judgment of Agent or its counsel, which prohibit the making of
the Revolving Loans or the completion of the Plan of
Combination nor shall there be pending or threatened
litigation which would be reasonably expected to result in a
Material Adverse Effect on Borrowers or their Subsidiaries.
(xviii) DUE DILIGENCE. Agent shall have completed its
due diligence, and shall be satisfied with the results, of its
investigation of Borrowers. Further, all legal, financial,
accounting, tax and fiduciary aspects of the Plan of
Combination, the organization and ownership of Borrowers.
(xix) FINANCIAL INFORMATION. Borrowers shall have
provided Agent with (i) June 30, 2000 Financial Statements,
(ii) a Compliance Certificate as required pursuant to the
Previous Loan Documents, and (iii) an updated pro forma
balance sheet, a sources and uses of funds statement and cash
flow projections.
(xx) INITIAL ENGINEERING REPORT. Agent shall have
received a satisfactory third-party engineering report with an
effective date of December 31, 1999 on their Oil and Gas
Properties subsequent to the Plan of Combination issued by
Netherland Sewell & Associates. In addition, Borrowers must
provide Agent with an internally prepared engineering report
on the same properties with an effective date of June 30,
2000.
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(xxi) PREVIOUS DEBT. Those certain subordinated debt
obligations, referred to herein and in the Previous Loan
Documents as the MidFirst Debt, and the INDCO Note, must be
paid in full in a manner satisfactory to Agent on or prior to
the effective date of the Plan of Combination. The "Coral
Production Payment" (as defined in the Previous Loan
Documents) must be paid off if either of the following
conditions exist: (i) there exist lien rights against any
property of a Borrower hereunder securing the Coral Production
Payment or (ii) any Person, other than a Borrower, receives
any proceeds of the Coral Production Payment.
(xxii) DEBT SERVICE CAPITALIZATION. Borrowers pro
forma ratio of its Debt to Capitalization shall be no more
than 56%. For the purposes hereof, this ratio shall be
determined by dividing the Total Outstandings by (i) the Total
Outstandings plus Borrowers' reported equity (on a
consolidated basis).
(xxiii) ENVIRONMENTAL. Agent shall have received all
environmental reports available to Borrowers and Agent shall
be reasonably satisfied with the contents thereof and the
Borrower's plans with respect thereto.
(xxiv) REGULATIONS. Borrowers shall be in compliance
with all applicable requirements of Regulations U, T, and X of
the Board of Governors of the Federal Reserve System.
(b) The obligation of the Banks to make any Advance or issue
any Letter of Credit under the Revolving Commitment (including the
initial Advance) shall be subject to the following additional
conditions precedent that, at the date of making each such Advance and
after giving effect thereto:
(i) REPRESENTATION AND WARRANTIES. The
representations and warranties of Borrowers under this
Agreement are true and correct in all material respects as of
such date, as if then made (except to the extent that such
representations and warranties related solely to an earlier
date);
(ii) NO EVENT OF DEFAULT. No Event of Default shall
have occurred and be continuing nor shall any event have
occurred or failed to occur which, with the passage of time or
service of notice, or both, would constitute an Event of
Default;
(iii) OTHER DOCUMENTS. Agent shall have received such
other instruments and documents incidental and appropriate to
the transaction provided for herein as Agent or its counsel
may reasonably request, and all such documents shall be in
form and substance reasonably satisfactory to the Agent; and
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(iv) LEGAL MATTERS SATISFACTORY. All legal matters
incident to the consummation of the transactions contemplated
hereby shall be reasonably satisfactory to special counsel for
Agent retained at the expense of Borrowers.
12. AFFIRMATIVE COVENANTS. A deviation from the provisions of this
Section 12 shall not constitute a Default or Event of Default under this
Agreement if such deviation is consented to in writing by the Majority Banks
prior to the date of deviation. The Borrowers will at all times comply with the
covenants contained in this Section 12 from the date hereof and for so long as
the Revolving Commitment is in existence or any amount is owed to the Agent or
the Banks under this Agreement or the other Loan Documents.
(a) FINANCIAL STATEMENTS AND REPORTS. Borrowers shall promptly
furnish to the Agent from time to time upon request such information
regarding the business and affairs and financial condition of
Borrowers, as the Agent may reasonably request, and will furnish to the
Agent:
(i) ANNUAL AUDITED FINANCIAL STATEMENTS. As soon as
available, and in any event within ninety (90) days after the
close of each fiscal year beginning with the fiscal year ended
December 31, 2000, the annual audited consolidated Financial
Statements of Borrowers, prepared in accordance with GAAP
accompanied by an unqualified opinion rendered by an
independent accounting firm reasonably acceptable to the
Agent;
(ii) QUARTERLY FINANCIAL STATEMENTS. Beginning with
quarter ending September 30, 2000, as soon as available, and
in any event within forty-five (45) days after the end of the
first three fiscal quarters of each year, the quarterly
unaudited consolidated Financial Statements of Borrowers
prepared in accordance with GAAP;
(iii) REPORT ON PROPERTIES. As soon as available and
in any event on or before April 1 and October 1 of each
calendar year, and at such other times as any Bank, in
accordance with Section 7 hereof, may request, the engineering
reports required to be furnished to the Agent under such
Section 7 on the Oil and Gas Properties;
(iv) QUARTERLY PRODUCTION REPORTS. Within forty-five
(45) days after the end of each quarter, a report setting
forth for each month in the quarter, in form and substance
satisfactory to the Agent, indicating the immediately
preceding quarter's sales volume, sales revenues, production
taxes, operating expense and net operating income from or
attributable to the Oil and Gas Properties, and any material
gas balance liabilities of either Borrower, with detailed
calculations and worksheets, and, in the case of take or pay
or prepayment agreements during such quarter, provide copies
of the same, all in form and substance satisfactory to Agent;
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(v) ADDITIONAL INFORMATION. Promptly upon request of
the Agent from time to time any additional financial
information or other information that the Agent may reasonably
request.
All such reports, information, balance sheets and Financial Statements
referred to in Subsection 12(a) above shall be in such detail as the
Agent may reasonably request and shall be prepared in a manner
consistent with the Financial Statements.
(b) CERTIFICATES OF COMPLIANCE. Concurrently with the
furnishing of the annual audited Financial Statements pursuant to
Subsection 12(a)(i) hereof and the quarterly unaudited Financial
Statements pursuant to Subsection 12(a)(ii) hereof for the months
coinciding with the end of each calendar quarter, Canaan, on a
consolidated basis and on behalf of all Borrowers, will furnish or
cause to be furnished to the Agent a certificate in the form of Exhibit
"C" attached hereto, signed by the President of each Borrower, (i)
stating that each Borrower has fulfilled in all material respects its
obligations under the Notes and the Loan Documents, including this
Agreement, and that all representations and warranties made herein and
therein continue (except to the extent they relate solely to an earlier
date) to be true and correct in all material respects (or specifying
the nature of any change), or if a Default has occurred, specifying the
Default and the nature and status thereof; (ii) to the extent requested
from time to time by the Agent, specifically affirming compliance of
each Borrower in all material respects with any of its representations
(except to the extent they relate solely to an earlier date) or
obligations under said instruments; (iii) setting forth the
computation, in reasonable detail as of the end of each period covered
by such certificate, of compliance with Sections 13(b), (c), (d), and
(e) containing or accompanied by such financial or other details,
information and material as the Agent may reasonably request to
evidence such compliance.
(c) TAXES AND OTHER LIENS. The Borrowers will pay and
discharge promptly all taxes, assessments and governmental charges or
levies imposed upon the Borrowers, or upon the income or any assets or
property of Borrowers, as well as all claims of any kind (including
claims for labor, materials, supplies and rent) which, if unpaid, might
become a Lien or other encumbrance upon any or all of the assets or
property of Borrowers and which could reasonably be expected to result
in a Material Adverse Effect; provided, however, that neither Borrower
shall be required to pay any such tax, assessment, charge, levy or
claim if the amount, applicability or validity thereof shall currently
be contested in good faith by appropriate proceedings diligently
conducted, levy and execution thereon have been stayed and continue to
be stayed and if Borrowers shall have set up adequate reserves
therefor, if required, under GAAP.
(d) COMPLIANCE WITH LAWS. Borrowers will observe and comply,
in all material respects, with all applicable laws, statutes, codes,
acts, ordinances, orders, judgments, decrees, injunctions, rules,
regulations, orders and restrictions relating to environmental
standards or controls or to energy regulations of all federal, state,
county, municipal and other
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governments, departments, commissions, boards, agencies, courts,
authorities, officials and officers, domestic or foreign.
(e) FURTHER ASSURANCES. Upon Agent's request, the Borrowers
will cure promptly any defects in the creation and issuance of the
Notes and the execution and delivery of the Notes and the Loan
Documents, including this Agreement. The Borrowers at their sole
expense will promptly execute and deliver to Agent upon its reasonable
request all such other and further documents, agreements and
instruments in compliance with or accomplishment of the covenants and
agreements in this Agreement, or to correct any omissions in the Notes
or more fully to state the obligations set out herein.
(f) PERFORMANCE OF OBLIGATIONS. The Borrowers will pay the
Notes and other obligations incurred by it hereunder according to the
reading, tenor and effect thereof and hereof; and Borrowers will do and
perform every act and discharge all of the obligations provided to be
performed and discharged by the Borrowers under the Loan Documents,
including this Agreement, at the time or times and in the manner
specified.
(g) INSURANCE. The Borrowers now maintain and will continue to
maintain insurance with financially sound and reputable insurers with
respect to its assets against such liabilities, fires, casualties,
risks and contingencies and in such types and amounts as is customary
in the case of persons engaged in the same or similar businesses and
similarly situated. Upon request of the Agent, the Borrowers will
furnish or cause to be furnished to the Agent from time to time a
summary of the respective insurance coverage of Borrowers in form and
substance satisfactory to the Agent, and, if requested, will furnish
the Agent copies of the applicable policies. Upon demand by Agent any
insurance policies covering any properties securing the Obligations
shall be endorsed (i) to provide that such policies may not be
canceled, reduced or affected in any manner for any reason without
fifteen (15) days prior notice to Agent, (ii) to provide for insurance
against fire, casualty and other hazards normally insured against, in
the amount of the full value (less a reasonable deductible not to
exceed amounts customary in the industry for similarly situated
business and properties) of the property insured, and (iii) to provide
for such other matters as the Agent may reasonably require.
Additionally, the Borrowers shall at all times maintain adequate
insurance with respect to all of its other assets and wells in
accordance with prudent business practices.
(h) ACCOUNTS AND RECORDS. Borrowers will keep books, records
and accounts in which full, true and correct entries will be made of
all dealings or transactions in relation to its business and
activities, prepared in a manner consistent with prior years, subject
to changes suggested by such Borrowers' auditors.
(i) RIGHT OF INSPECTION. Borrowers will permit any officer,
employee or agent of the Banks to examine Borrowers' books, records and
accounts, and take copies and extracts therefrom, all at such
reasonable times during normal business hours and as often as the Banks
may reasonably request. The Banks will use best efforts to keep all
Confidential
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Information (as herein defined) confidential and will not disclose or
reveal the Confidential Information or any part thereof other than (i)
as required by law, and (ii) to the Banks', and the Banks'
subsidiaries', Affiliates, officers, employees, legal counsel and
regulatory authorities or advisors to whom it is necessary to reveal
such information for the purpose of effectuating the agreements and
undertakings specified herein or as otherwise required in connection
with the enforcement of the Banks' and the Agent's rights and remedies
under the Notes, this Agreement and the other Loan Documents. As used
herein, "Confidential Information" means information about the
Borrowers furnished by the Borrowers to the Banks, but does not
include information (i) which was publicly known, or otherwise known
to the Banks, at the time of the disclosure, (ii) which subsequently
becomes publicly known through no act or omission by the Banks, or
(iii) which otherwise becomes known to the Banks, other than through
disclosure by the Borrowers.
(j) NOTICE OF CERTAIN EVENTS. The Borrowers shall immediately
notify the Agent if Borrowers learn of the occurrence of (i) any event
which constitutes a Default or Event of Default together with a
detailed statement by Borrowers of the steps being taken to cure such
Event of Default; (ii) any legal, judicial or regulatory proceedings
affecting Borrowers, or any of the assets or properties of Borrowers
which, if adversely determined, could reasonably be expected to have a
Material Adverse Effect; (iii) any dispute between Borrowers and any
governmental or regulatory body or any other Person or entity which, if
adversely determined, might reasonably be expected to cause a Material
Adverse Effect; (iv) any event or circumstance which requires the
prepayment, purchase or redemption of any outstanding public note
issue, whether issued prior or subsequent to the Effective Date, with a
detailed statement of steps being taken to cure such default or event
of default under such instruments, or (v) any other matter which in
Borrowers' reasonable opinion could have a Material Adverse Effect.
(k) ERISA INFORMATION AND COMPLIANCE. The Borrowers will
promptly furnish to the Agent immediately upon becoming aware of the
occurrence of any "reportable event", as such term is defined in
Section 4043 of ERISA, or of any "prohibited transaction", as such term
is defined in Section 4975 of the Internal Revenue Code of 1954, as
amended, in connection with any Plan or any trust created thereunder, a
written notice signed by the chief financial officer of Borrowers
specifying the nature thereof, what action Borrowers are taking or
proposes to take with respect thereto, and, when known, any action
taken by the Internal Revenue Service with respect thereto.
(l) ENVIRONMENTAL REPORTS AND NOTICES. The Borrowers will
deliver to the Agent (i) promptly upon its becoming available, one copy
of each report sent by Borrowers to any court, governmental agency or
instrumentality pursuant to any Environmental Law, (ii) notice, in
writing, promptly upon Borrowers' receipt of notice or otherwise
learning of any claim, demand, action, event, condition, report or
investigation indicating any potential or actual liability arising in
connection with (x) the non-compliance with or violation of the
requirements of any Environmental Law which reasonably could be
expected to have a
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Material Adverse Effect; (y) the release or threatened release of any
toxic or hazardous waste into the environment which reasonably could
be expected to have a Material Adverse Effect or which release
Borrower would have a duty to report to any court or government agency
or instrumentality, or (iii) the existence of any Environmental Lien
on any properties or assets of Borrowers, and Borrowers shall
immediately deliver a copy of any such notice to Agent.
(m) COMPLIANCE AND MAINTENANCE. The Borrowers will (i) observe
and comply in all material respects with all Environmental Laws
(including, but not limited to, "CERCLA") and all laws pertaining to
ERISA; (ii) except as provided in Subsections 12(o) and 12(p) below,
maintain the Oil and Gas Properties and other assets and properties in
good and workable condition at all times and make all repairs,
replacements, additions, betterments and improvements to the Oil and
Gas Properties and other assets and properties as are needed and proper
so that the business carried on in connection therewith may be
conducted properly and efficiently at all times in the opinion of the
Borrowers exercised in good faith; (iii) take or cause to be taken
whatever actions are necessary or desirable to prevent an event or
condition of default by Borrowers under the provisions of any gas
purchase or sales contract or any other contract, agreement or lease
comprising a part of the Oil and Gas Properties or other collateral
security hereunder which default could reasonably be expected to result
in a Material Adverse Effect; and (iv) furnish Agent upon request
evidence satisfactory to Agent that there are no Liens on the Oil and
Gas Properties, except Permitted Liens.
(n) OPERATION OF PROPERTIES. Except as provided in Subsection
12(p) and (q) below, the Borrowers will operate, or use reasonable
efforts to cause to be operated, all Oil and Gas Properties in a
careful and efficient manner in accordance with the practice of the
industry and in compliance in all material respects with all applicable
laws, rules, and regulations, and in compliance in all material
respects with all applicable proration and conservation laws of the
jurisdiction in which the properties are situated, and all applicable
laws, rules, and regulations, of every other agency and authority from
time to time constituted to regulate the development and operation of
the properties and the production and sale of hydrocarbons and other
minerals therefrom; provided, however, that the Borrowers shall have
the right to contest in good faith by appropriate proceedings, the
applicability or lawfulness of any such law, rule or regulation and
pending such contest may defer compliance therewith, as long as such
deferment shall not subject the properties or any part thereof to
foreclosure or loss.
(n) COMPLIANCE WITH LEASES AND OTHER INSTRUMENTS. The
Borrowers will pay or cause to be paid and discharged all rentals,
delay rentals, royalties, production payment, and indebtedness required
to be paid by Borrowers (or required to keep unimpaired in all material
respects the rights of Borrowers in the Oil and Gas Properties)
accruing under, and perform or cause to be performed in all material
respects each and every act, matter, or thing required of Borrowers by
each and all of the assignments, deeds, leases, subleases, contracts,
and agreements in any way relating to Borrowers or any of the Oil and
Gas Properties and do all other things necessary of Borrowers to keep
unimpaired in all material respects the rights of
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Borrowers thereunder and to prevent the forfeiture thereof or default
thereunder; provided, however, that nothing in this Agreement shall be
deemed to require Borrowers to perpetuate or renew any oil and gas
lease or other lease by payment of rental or delay rental or by
commencement or continuation of operations nor to prevent Borrowers
from abandoning or releasing any oil and gas lease or other lease or
well thereon when, in any of such events, in the opinion of Borrowers
exercised in good faith, it is not in the best interest of the
Borrowers to perpetuate the same.
(p) CERTAIN ADDITIONAL ASSURANCES REGARDING MAINTENANCE AND
OPERATIONS OF PROPERTIES. With respect to those Oil and Gas Properties
which are being operated by operators other than the Borrowers, the
Borrowers shall not be obligated to perform any undertakings
contemplated by the covenants and agreement contained in Subsections
12(o) or 12(p) hereof which are performable only by such operators and
are beyond the control of the Borrowers; however, the Borrowers agree
to promptly take all reasonable actions available under any operating
agreements or otherwise to bring about the performance of any such
material undertakings required to be performed thereunder.
(q) SALE OF CERTAIN ASSETS/PREPAYMENT OF PROCEEDS. Except with
respect to sales permitted under Section 13(a)(ii)(C) and (D) hereof,
the Borrowers will immediately pay over to the Agent for the ratable
benefit of the Banks as a prepayment of principal on the Revolving
Notes, an amount equal to 100% of the Release Price received by
Borrowers from the sale of the Oil and Gas Properties, which sale has
been approved in advance by the Majority Banks. The term "Release
Price" as used herein shall mean a price determined by the Majority
Banks in their discretion based upon the loan collateral value which
such Banks in their discretion (using such methodology, assumptions and
discounts rates as such Banks customarily use in assigning collateral
value to oil and gas properties, oil and gas gathering systems, gas
processing and plant operations) assign to such Oil and Gas Properties
at the time in question. Any such prepayment of principal on the
Revolving Notes required by this Section 12(q), shall not be in lieu
of, but shall be in addition to, any Monthly Commitment Reduction or
any mandatory prepayment of principal required to be paid pursuant to
Section 9(b) hereof.
(r) TITLE MATTERS. Within ninety (90) days after the Effective
Date with respect to the Oil and Gas Properties listed on Schedule "8"
hereto, furnish Agent with title opinions and/or title information
reasonably satisfactory to Agent showing defensible title of the
applicable Borrower to such Oil and Gas Properties subject only to the
Permitted Liens. As to any Oil and Gas Properties hereafter mortgaged
to Agent, Borrowers will promptly (but in no event more than thirty
(30) days following such mortgaging), furnish Agent with title opinions
and/or title information reasonably satisfactory to Agent covering a
sufficient value of such Oil and Gas Properties to maintain the
required level of title coverage at 81% of the Engineered Value of the
total Oil and Gas Properties. Said title information shall show
defensible title of the applicable Borrower to such Oil and Gas
Properties subject only to Permitted Liens.
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(s) CURATIVE MATTERS. Within sixty (60) days after the
Effective Date with respect to matters listed on Schedule "9" and,
thereafter, within sixty (60) days after receipt by Borrowers from
Agent or its counsel of written notice of title defects the Agent
reasonably requires to be cured, Borrowers shall either (i) provide
such curative information, in form and substance satisfactory to Agent,
or (ii) substitute Oil and Gas Properties of value and quality
satisfactory to the Agent for all of Oil and Gas Properties for which
such title curative was requested but upon which Borrowers elected not
to provide such title curative information, and, within sixty (60) days
of such substitution, provide title opinions or title information
satisfactory to the Agent covering the Oil and Gas Properties so
substituted.
(t) CHANGE OF PRINCIPAL PLACE OF BUSINESS. Borrowers shall
give Agent at least thirty (30) days prior written notice of its
intention to move its principal place of business from the address set
forth in Section 17 hereof.
(u) OPERATING ACCOUNTS. Borrowers shall establish and maintain
with Agent one or more operating accounts (the "Operating Accounts"),
the maintenance of each of which shall be subject to such rules and
regulations as the Agent shall from time to time specify. Such
Operating Accounts shall be the primary oil and gas operating account
of the Borrowers for the purpose of depositing proceeds from oil and
gas sales received from the Collateral and such accounts shall be
maintained with the Agent until all amounts due hereunder and under the
Notes have been paid in full. The Borrowers hereby grant a security
interest to Banks in and to the Operating Accounts and all checks,
drafts and other items ever received by any Bank for deposit therein.
If any Event of Default shall occur and be continuing, Agent shall have
the immediate right, without prior notice or demand, to take and apply
against the Borrowers' obligations hereunder any and all funds legally
and beneficially owned by the Borrowers then or thereafter on deposit
in the Operating Accounts for the ratable benefit of the Banks.
Borrowers shall not redirect the payment of such proceeds of production
without the consent of Agent. The setoff rights discussed above apply
only to (i) each Borrower's separate depository accounts, and (ii) each
Borrower's separate funds in any combined revenue distribution account.
(v) ADDITIONAL PROPERTY. Borrowers shall, within five (5) days
after receiving a written request thereof from Agent, execute and
deliver, or cause to be executed and delivered, such mortgages, deeds
of trust, instruments, security agreements, assignments, financing
statements, and other documents, as may be reasonably necessary in the
opinion of Agent and Agent's counsel, to grant Agent valid first
mortgage liens and first, prior and perfected security interests in and
to additional Oil and Gas Properties of such value as Agent shall deem
necessary to provide additional security for full and prompt payment of
all amounts owed hereunder and under the Notes. At Agent's option and
on request therefor, Borrowers will furnish Agent title opinions
covering such additional Oil and Gas Properties prepared by counsel not
employed by Borrowers (or such other evidence to Borrowers' ownership
thereof and their revenue interest therein or attributable thereto as
Agent may
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reasonably require), in form and substance satisfactory to Agent,
subject only to title defects approved by Agent.
(w) LETTERS IN LIEU OF TRANSFER ORDERS. The Borrowers shall
promptly upon the reasonable request of the Agent, at any time and from
time to time and without limitation on the rights of Agent in
accordance with Section 6(c) hereof, execute such letters in lieu of
transfer orders, in addition to the letters signed by the Borrowers and
delivered to the Agent in satisfaction of the conditions set forth in
Sections 6(c) and 11(a)(x) hereof, as are necessary or appropriate to
transfer and deliver to the Agent for the benefit of the Banks proceeds
from or attributable to any Oil and Gas Property or other Collateral;
provided, however, that such letters shall only be delivered to the
addressees thereof in accordance with the provision of Section 6(c)
hereof.
(x) DIVISION ORDERS. The Borrowers shall promptly upon request
by the Agent at any time and from time to time following the occurrence
of any Event of Default and without limitations on the rights of the
Agent in accordance with Section 6(c) hereof, execute such division
and/or transfer orders as are necessary or appropriate to transfer and
deliver to the Agent for the ratable benefit of the Banks proceeds from
the sale of hydrocarbon production from or attributable to any Oil and
Gas Property; provided, however, that the Banks shall only send or
deliver such division orders and/or transfer orders in accordance with
Section 6(c) hereof.
(y) TAKE OR PAY AGREEMENT. The Borrowers shall, in connection
with their delivery of the engineering reports required by Sections 7
and 12 hereof, deliver to Agent copies of contracts or other agreements
concerning "take or pay" and "prepayment", and provide notice of all
gas balance liabilities of the Borrowers.
(z) ENTITY EXISTENCE. With the exception of those actions
permitted by Section 13(f) below, each Borrower shall preserve and
maintain its existence as a corporation or a limited partnership, as
the case may be, and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business, and
conduct its business in an orderly and efficient manner consistent with
good practices and in accordance with all valid regulations and orders
of any governmental authority.
(aa) OWNERSHIP. With the exception of those actions permitted
by Section 13(f) below and except as set forth in the Plan of
Combination, Canaan shall continue to own 100% of the outstanding
voting stock of Indian and of each general partner of the Coral Group
and shall continue to own 100% of all limited partnership interests in
each member of the Coral Group.
(ab) PAYMENT OF DEBT. Borrowers shall pay and discharge (i)
all taxes, assessments and governmental charges or levies imposed upon
it or upon its income or profits, or upon any property belonging to it,
before delinquent, (ii) all lawful claims (including claims for labor,
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materials and supplies), which, if unpaid, might give rise to a Lien
upon any of its property, and (iii) all of its other indebtedness,
except as prohibited hereunder; provided, however, that Borrowers shall
not be required to pay any such tax, assessment, charge or levy if and
so long as the amount, applicability or validity thereof shall
concurrently be contested in good faith by appropriate proceedings and
appropriate accruals and cash reserves therefor have been established
in accordance with generally accepted accounting principles.
(ac) USE OF PROCEEDS. Borrowers shall only use the proceeds to
(i) finance the Plan of Combination, including up to $1,000,000.00 for
the repurchase of partnership interests in each member of the Coral
Group, (ii) refinance existing debts, and (iii) other general corporate
or partnership purposes.
13. NEGATIVE COVENANTS. A deviation from the provisions of this
Section 13 shall not constitute a Default or an Event of Default under this
Agreement if such deviation is consented to in writing by the Majority Banks
prior to the date of deviation. The Borrowers will at all times comply with the
covenants contained in this Section 13 from the date hereof and for so long as
the Revolving Commitment is in existence or any amount is owed to the Agent or
the Banks under this Agreement or the other Loan Documents.
(a) NEGATIVE PLEDGE. Neither Borrowers nor any of their
subsidiaries shall without the prior written consent of the Majority
Banks:
(i) create, incur, assume or permit to exist any
Lien, security interest or other encumbrance on any of its
assets or properties except Permitted Liens; or
(ii) sell, lease, transfer or otherwise dispose of,
in any fiscal year, any of its oil and gas assets except for
(A) sales of production from Borrowers' Oil and Gas Properties
made in the ordinary course of Borrowers' oil and gas
businesses, (B) sales made with the consent of Majority Banks
which are made pursuant to, and in full compliance with,
Section 12(q) hereof; (C) sales, leases or transfers or other
dispositions of Oil and Gas Properties made by Borrowers
during any fiscal year, in one or any series of transactions,
the aggregate value of which does not exceed $500,000.00
between consecutive Determination Dates if, and only if, such
sale, lease, transfer or other disposition does not result in
the occurrence of a Default or Event of Default; and (D) an
overriding royalty revenue interest in Oil and Gas Properties
acquired subsequent to the date hereof of up to one percent
(1%) of the interest acquired by the Borrowers per
acquisition, in the aggregate and not by individual Borrowers,
to distribute to certain employees of Borrowers; provided,
however, it is understood that the interest conveyed shall not
be included in calculations of the Borrowing Base. Further,
Neither Borrowers nor any of their Subsidiaries shall, without
the prior written consent of Majority Banks, sell, lease,
transfer or otherwise dispose of any oil and gas assets to any
other Borrower or Subsidiary unless such disposition is
permitted by Section 13(f).
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(b) CURRENT RATIO. Canaan, on behalf of all Borrowers, shall
not allow its ratio of consolidated Current Assets to consolidated
Current Liabilities to be less than 1.0 to 1.0 as of the end of any
fiscal quarter.
(c) MINIMUM DEBT SERVICE COVERAGE RATIO. Canaan, on behalf of
all Borrowers, will not allow its consolidated Debt Service Coverage
Ratio to ever be less than 1.10 to 1.0 for any quarterly fiscal period.
(d) MINIMUM TANGIBLE NET WORTH. The Borrowers' consolidated
Tangible Net Worth shall be no less than 80% of the Tangible Net Worth
as of October 31, 2000. The Tangible Net Worth shall increase each
quarter beginning December 31, 2000 by (i) 50% of Net Income for the
quarter then ended with no adjustment for losses PLUS (ii) 75% of the
proceeds of any issuance of equity.
(e) DEBT TO EBITDA RATIO. Canaan will maintain, on a
consolidated basis, as of each fiscal quarter end a ratio of (a) total
liabilities excluding (i) accounts arising from the purchase of goods
and services in the ordinary course of business, (ii) accrued expenses
or losses, and (iii) deferred revenues or gains to (b) Net Income, plus
depletion, amortization, depreciation, interest expense and income
taxes, for the quarter then ended, annualized, of less than 3.00:1.00
for the quarter then ended.
(f) CONSOLIDATIONS AND MERGERS. No Borrower will consolidate
or merge with or into any other Person, except that any Borrower may
(i) merge with another Person if such Borrower is the surviving entity
in such merger and if, after giving effect thereto, no Default or Event
of Default shall have occurred and be continuing; or (ii) after prior
notification is sent to Agent, merge or consolidate into any other
Borrower.
(g) DEBTS, GUARANTIES AND OTHER OBLIGATIONS. Without the
consent of Majority Banks, no Borrower will incur, create, assume or in
any manner become or be liable in respect of any indebtedness
(including Letters of Credit other than those Letters of Credit
permitted hereunder) in excess of $200,000.00 in the aggregate for all
Borrowers, nor will any Borrower guarantee or otherwise in any manner
become or be liable in respect of any indebtedness, liabilities or
other obligations of any other person or entity, whether by agreement
to purchase the indebtedness of any other person or entity or agreement
for the furnishing of funds to any other person or entity through the
purchase or lease of goods, supplies or services (or by way of stock
purchase, capital contribution, advance or loan) for the purpose of
paying or discharging the indebtedness of any other person or entity,
or otherwise, except that the foregoing restrictions shall not apply
to:
(i) the Notes and any renewal or increase thereof, or
other indebtedness of the Borrowers heretofore disclosed to
Banks in the Borrowers' Financial Statements or on Schedule
"3" hereto; or
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(ii) taxes, assessments or other government charges
which are not yet due or are being contested in good faith by
appropriate action promptly initiated and diligently
conducted, if such reserve as shall be required by GAAP shall
have been made therefor and levy and execution thereon have
been stayed and continue to be stayed; or
(iii) indebtedness (other than in connection with a
loan or lending transaction) incurred in the ordinary course
of business, including, but not limited to indebtedness for
drilling, completing, leasing and reworking oil and gas wells
or the treatment, distribution, transportation of sale of
production therefrom;
(iv) any renewals or extensions of (but not increases
in) any of the foregoing; or
(v) indebtedness to other Borrowers.
(h) DIVIDENDS OR DISTRIBUTIONS. No Borrower will declare, pay
or make, whether in cash or property, or set aside or apply any money
or assets to pay or make any dividend or distribution during any fiscal
year. Notwithstanding the above, this negative covenant shall not
prohibit Borrowers, other than Canaan, from declaring, paying or
making, whether in cash or property, dividends or distributions to
Canaan.
(i) LOANS AND ADVANCES. No Borrower shall make or permit to
remain outstanding any loans or advances made by any Borrower to or in
any person or entity, except that the foregoing restriction shall not
apply to:
(i) loans or advances to any person, the material
details of which have been set forth in the Financial
Statements of the Borrowers heretofore furnished to Banks; or
(ii) advances made in the ordinary course of
Borrowers' oil and gas business; or
(iii) loans or advances among Borrowers.
(j) SALE OR DISCOUNT OF RECEIVABLES. No Borrower will discount
or sell with recourse, or sell for less than the greater of the face or
market value thereof, any of its notes receivable or accounts
receivable.
(k) NATURE OF BUSINESS. No Borrower will permit any material
change to be made in the character of its business as carried on at the
date hereof.
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(l) TRANSACTIONS WITH AFFILIATES. No Borrower will enter into
any transaction with any Affiliate (other than another Borrower),
except transactions upon terms that are no less favorable to it than
would be obtained in a transaction negotiated at arm's length with an
unrelated third party.
(m) HEDGING TRANSACTIONS. No Borrower will enter into any
transaction providing (i) for the hedging, forward sale, swap or any
derivative thereof of crude oil or natural gas or other commodities, or
(ii) for a swap, collar, floor, cap, option, corridor, or other
contract which is intended to reduce or eliminate the risk of
fluctuation in interest rates, as such terms are referred to in the
capital markets, except the foregoing prohibitions shall not apply to
(x) transactions consented to in writing by the Majority Banks which
are on terms acceptable to the Majority Banks, or (y) Pre-Approved
Contracts. The term "Pre-Approved Contracts" as used herein shall mean
any contract or agreement (i) to hedge, forward sell or swap crude oil
or natural gas or otherwise sell up to 75% of the Borrowers' monthly
production forecast for all of Borrowers' (A) proved and producing oil
properties for the period covered by the proposed hedging transaction,
and (B) proved and producing gas properties for the period covered by
the proposed hedging transaction, (ii) with a term of eighteen (18)
months or less, (iii) with "strike prices" per barrel or MCF as
applicable greater than the Agent's forecasted price in the most recent
engineering evaluation, and (iv) with counter-parties approved by
Agent.
(n) INVESTMENTS. No Borrower shall make any investments in any
person or entity, except such restriction shall not apply to:
(i) investments and direct obligations of the United
States of America or any agency thereof;
(ii) investments in certificates of deposit issued by
the Banks or certificates of deposit with maturities of less
than one year, issued by other commercial banks in the United
States having capital and surplus in excess of $500,000,000
and which have a senior unsecured debt rating of A+ by
Standard & Poor's Ratings Group or A1 by Moody's Investors
Service, Inc.; or
(iii) investments in insured money market funds,
LIBOR investment accounts and other similar accounts at Agent
or such investment with maturities of less than ninety (90)
days at other commercial banks having capital and surplus in
excess of $500,000,000 and which have a senior unsecured debt
rating of A+ by Standard & Poor's Ratings Group or A1 by
Moody's Investors Service, Inc.; or
(iv) investments in oil and gas properties; or
(v) investments in other Borrowers; provided such
investments shall not require a transfer of assets other than
cash.
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(o) AMENDMENT TO ARTICLES OF INCORPORATION OR BYLAWS. No
Borrower will permit any amendment to, or any alteration of, its
Articles of Incorporation or Bylaws or partnership agreement, which
amendment or alteration could reasonably be expected to have a Material
Adverse Effect.
(p) LEASES. No Borrower will enter into or agree to enter
into, any rental or lease agreement resulting or which would result in
aggregate rental or lease payments of the Borrowers exceeding
$300,000.00 in the aggregate in any fiscal year of the Borrowers under
all rental or lease agreement under which any Borrower is a lessee of
the property or assets covered thereby; PROVIDED, HOWEVER, that the
foregoing restriction shall not apply to oil, gas and mineral leases or
permits or similar agreements entered into in the ordinary course of
business or orders of any governmental authority adjudicating the
rights or pooling the interests of the owners of oil and gas properties
or lease agreements in effect as of the date hereof.
(q) ACCOUNTS PAYABLE. No Borrower shall allow any account
payable to become in excess of 90 days past due, from the date of
invoice, except such accounts payable as are being Contested in Good
Faith.
(r) ISSUANCE OF PREFERRED STOCK. No Borrower shall issue any
preferred stock after the date hereof without the consent of the
Majority Banks. As of the date hereof, Borrowers represent and warrant
that none of them have any preferred stock issued and outstanding.
(s) CHANGE IN OWNERSHIP OR STRUCTURE. With the exception of
Canaan, no Borrower shall permit or suffer to exist any change in its
current ownership or a change or amendment to its current corporate or
limited partnership structure except as set forth in Section 13(f).
(t) PREPAYMENTS. Except as may be otherwise permitted herein,
Borrowers shall not directly or indirectly make any payments upon any
Debt other than regularly scheduled installments of principal and
interest.
(u) STOCK OR INTEREST REPURCHASE. Except as may be otherwise
set forth herein or in the Plan of Combination, Borrowers shall not
repurchase nor set aside any funds to repurchase any stock or
partnership interests. Notwithstanding the above, Borrowers shall be
entitled to utilize up to $500,000.00, in the aggregate, to repurchase
Canaan stock from the date hereof through April 23, 2001. Except as may
be otherwise set forth herein or in the Plan of Combination, Borrowers'
ability to repurchase Canaan stock will expire at 12:01 a.m. April 24,
2001.
(v) CHANGE IN MANAGEMENT. No Borrower shall not make, permit
or suffer to exist a Change in Management.
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14. EVENTS OF DEFAULT. Any one or more of the following events
shall be considered an "Event of Default" as that term is used herein:
(a) The Borrowers shall fail to pay when due or declared due
the principal of, and the interest on, the Notes, or any fee or any
other indebtedness of the Borrowers incurred pursuant to this Agreement
or any other Loan Document and such failure to pay is not cured within
three days after written notice of such failure is sent by Agent to
Canaan, on behalf of all Borrowers; or
(b) Any representation or warranty made by Borrowers under
this Agreement, or in any certificate or statement furnished or made to
the Banks pursuant hereto, or in connection herewith, or in connection
with any document furnished hereunder, shall prove to be untrue in any
material respect as of the date on which such representation or
warranty is made (or deemed made), or any representation, statement
(including financial statements), certificate, report or other data
furnished or to be furnished or made by Borrowers under any Loan
Document, including this Agreement, proves to have been untrue in any
material respect, as of the date as of which the facts therein set
forth were stated or certified; or
(c) Default shall be made in the due observance or performance
of any of the covenants or agreements of the Borrowers contained in the
Loan Documents (any such default under a Security Instrument other than
failure to pay must be such as would have a Material Adverse Effect),
including this Agreement (excluding covenants contained in Section 13
of the Agreement for which there is no cure period), and such default
shall continue for more than thirty (30) days after notice thereof from
Agent to Borrowers; or
(d) Default shall be made in the due observance or performance
of the covenants of Borrowers contained in Section 13 of this
Agreement; or
(e) Default shall be made in respect of any obligation for
borrowed money in excess of $250,000, other than the Notes, for which
Borrowers are liable (directly, by assumption, as guarantor or
otherwise), or any obligations secured by any mortgage, pledge or other
security interest, lien, charge or encumbrance with respect thereto, on
any asset or property of Borrowers in respect of any agreement relating
to any such obligations unless Borrowers are not liable for same (i.e.,
unless remedies or recourse for failure to pay such obligations is
limited to foreclosure of the collateral security therefor), and if
such default shall continue beyond the applicable grace period, if any;
or
(f) Borrowers shall commence a voluntary case or other
proceedings seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking an appointment
of a trustee, receiver, liquidator, custodian or other similar official
of it or any substantial part of its property, or shall consent to any
such relief or to the appointment of or
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taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts
as they become due, or shall take any corporate action authorizing the
foregoing; or
(g) An involuntary case or other proceeding, shall be
commenced against Borrowers seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy,
insolvency or similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of sixty (60) days; or an order for relief shall
be entered against Borrowers under the federal bankruptcy laws as now
or hereinafter in effect; or
(h) A final judgment or order for the payment of money in
excess of $250,000 (or judgments or orders aggregating in excess of
$250,000) shall be rendered against Borrowers and such judgments or
orders shall continue unsatisfied and unstayed for a period of thirty
(30) days; or
(i) In the event the Total Outstandings shall at any time
exceed the Borrowing Base established for the Revolving Notes, and the
Borrowers shall fail to comply with the provisions of Section 9(b)
hereof; or
(j) A Change of Management shall occur; or
(k) Any Security Instrument shall for any reason not, or cease
to, create valid and perfected first-priority Liens against the
Collateral purportedly covered thereby and such occurrence would have a
Material Adverse Effect; or
Upon occurrence of any Event of Default specified in
Subsections 14(f) and (g) hereof, the entire principal amount due under
the Notes and all interest then accrued thereon, and any other
liabilities of the Borrowers hereunder, shall become immediately due
and payable all without notice and without presentment, demand,
protest, notice of protest or dishonor or any other notice of default
of any kind, all of which are hereby expressly waived by the Borrowers.
In any other Event of Default, the Agent, upon request of Majority
Banks, shall by notice to the Borrowers declare the principal of, and
all interest then accrued on, the Notes and any other liabilities
hereunder to be forthwith due and payable, whereupon the same shall
forthwith become due and payable without presentment, demand, protest,
notice of intent to accelerate, notice of acceleration or other notice
of any kind, all of which the Borrowers hereby expressly waive,
anything contained herein or in the Note to the contrary
notwithstanding. Nothing contained in this Section 14 shall be
construed to limit or amend in any way the Events of Default enumerated
in the Note, or any other document executed in connection with the
transaction contemplated herein.
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Upon the occurrence and during the continuance of any Event of
Default, the Banks are hereby authorized at any time and from time to
time, without notice to the Borrowers (any such notice being expressly
waived by the Borrowers), to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by any of the Banks to or
for the credit or the account of the Borrowers against any and all of
the indebtedness of the Borrowers under the Notes and the Loan
Documents, including this Agreement, irrespective of whether or not the
Banks shall have made any demand under the Loan Documents, including
this Agreement or the Notes and although such indebtedness may be
unmatured. Any amount set-off by any of the Banks shall be applied
against the indebtedness owed the Banks by the Borrowers pursuant to
this Agreement and the Notes. The Banks agree promptly to notify the
Borrowers after any such setoff and application, provided that the
failure to give such notice shall not affect the validity of such
set-off and application. The rights of the Bank under this Section are
in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Banks may have.
The setoff rights discusses above apply only to (i) each
Borrower's separate depository accounts and (ii) each Borrower's
separate funds in any combined revenue distribution accounts.
15. THE AGENT AND THE BANKS.
(a) APPOINTMENT AND AUTHORIZATION. Each Bank hereby appoints
Agent as its nominee and agent, in its name and on its behalf: (i) to
act as nominee for and on behalf of such Bank in and under all Loan
Documents; (ii) to arrange the means whereby the funds of Banks are to
be made available to the Borrowers under the Loan Documents; (iii) to
take such action as may be requested by any Bank under the Loan
Documents (when such Bank is entitled to make such request under the
Loan Documents); (iv) to receive all documents and items to be
furnished to Banks under the Loan Documents; (v) to be the secured
party, mortgagee, beneficiary, and similar party in respect of, and to
receive, as the case may be, any collateral for the benefit of Banks;
(vi) to promptly distribute to each Bank all material information,
requests, documents and items received from the Borrowers under the
Loan Documents; (vii) to promptly distribute to each Bank such Bank's
Pro Rata Part of each payment or prepayment (whether voluntary, as
proceeds of insurance thereon, or otherwise) in accordance with the
terms of the Loan Documents and (viii) to deliver to the appropriate
Persons requests, demands, approvals and consents received from Banks.
Each Bank hereby authorizes Agent to take all actions and to exercise
such powers under the Loan Documents as are specifically delegated to
Agent by the terms hereof or thereof, together with all other powers
reasonably incidental thereto. With respect to its commitments
hereunder and the Notes issued to it, Agent and any successor Agent
shall have the same rights under the Loan Documents as any other Bank
and may exercise the same as though it were not the Agent; and the term
"Bank" or "Banks" shall, unless otherwise expressly indicated, include
Agent and any successor Agent in its capacity as a Bank. Agent and any
successor Agent and its Affiliates
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may accept deposits from, lend money to, act as trustee under
indentures of and generally engage in any kind of business with the
Borrowers, and any person which may do business with the Borrowers,
all as if Agent and any successor Agent was not Agent hereunder and
without any duty to account therefor to the Banks; provided that, if
any payments in respect of any property (or the proceeds thereof) now
or hereafter in the possession or control of Agent which may be or
become security for the obligations of the Borrowers arising under the
Loan Documents by reason of the general description of indebtedness
secured or of property contained in any other agreements, documents or
instruments related to any such other business shall be applied to
reduction of the obligations of the Borrowers arising under the Loan
Documents, then each Bank shall be entitled to share in such
application according to its pro rata part thereof. Each Bank, upon
request of any other Bank, shall disclose to all other Banks all
indebtedness and liabilities, direct and contingent, of the Borrowers
to such Bank as of the time of such request.
(b) NOTE HOLDERS. From time to time as other Banks become a
party to this Agreement, Agent shall obtain execution by the Borrowers
of additional Notes in amounts representing the Commitment of each such
new Bank, up to an aggregate face amount of all Revolving Notes not
exceeding $100,000,000.00. The obligation of such Bank shall be
governed by the provisions of this Agreement, including but not limited
to, the obligations specified in Section 2 hereof. From time to time,
Agent may require that the Banks exchange their Notes for newly issued
Notes to better reflect the Commitments of the Banks. Agent may treat
the payee of any Note as the holder thereof until written notice of
transfer has been filed with it, signed by such payee and in form
satisfactory to Agent.
(c) CONSULTATION WITH COUNSEL. Banks agree that Agent may
consult with legal counsel selected by Agent and shall not be liable
for any action taken or suffered in good faith by it in accordance with
the advice of such counsel.
(d) DOCUMENTS. Agent shall not be under a duty to examine or
pass upon the validity, effectiveness, enforceability, genuineness or
value of any of the Loan Documents or any other instrument or document
furnished pursuant thereto or in connection therewith, and Agent shall
be entitled to assume that the same are valid, effective, enforceable
and genuine and what they purport to be.
(e) RESIGNATION OR REMOVAL OF AGENT. Subject to the
appointment and acceptance of a successor Agent as provided below,
Agent may resign at any time by giving written notice thereof to Banks
and the Borrowers, and Agent may be removed at any time with or without
cause by all Banks. If no successor Agent has been so appointed by all
Banks (and approved by the Borrowers) and has accepted such appointment
within 30 days after the retiring Agent's giving of notice of
resignation or removal of the retiring Agent, then the retiring Agent
may, on behalf of Banks, appoint a successor Agent. Any successor Agent
must be approved by Borrowers, which approval will not be unreasonably
withheld. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor
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Agent shall thereupon succeed to and become vested with all the rights
and duties of the retiring Agent, and the retiring Agent, shall be
discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Agent, the
provisions of this Section 15 shall continue in effect for its benefit
in respect to any actions taken or omitted to be taken by it while it
was acting as Agent. To be eligible to be an Agent hereunder the party
serving, or to serve, in such capacity must own a Pro Rata Part of the
Commitments equal to the level of Commitment required to be held by
any Bank pursuant to Section 28 hereof.
(f) RESPONSIBILITY OF AGENT. Agent agrees to act, subject to
the express conditions contained in this Section 15, in substantially
the same manner that it would act in dealing with a loan held for its
own account. It is expressly understood and agreed that the obligations
of Agent under the Loan Documents are only those expressly set forth in
the Loan Documents as to each and that Agent, shall be entitled to
assume that no Default or Event of Default has occurred and is
continuing, unless Agent has actual knowledge of such fact or has
received notice from a Bank or the Borrowers that such Bank or the
Borrowers considers that a Default or an Event of Default has occurred
and is continuing and specifying the nature thereof. Neither Agent nor
any of its directors, officers, attorneys or employees shall be liable
for any action taken or omitted to be taken by them under or in
connection with the Loan Documents, except for its or their own gross
negligence or willful misconduct. Agent shall not incur liability under
or in respect of any of the Loan Documents by acting upon any notice,
consent, certificate, warranty or other paper or instrument believed by
it to be genuine or authentic or to be signed by the proper party or
parties, or with respect to anything which it may do or refrain from
doing in the reasonable exercise of its judgment, or which may seem to
it to be necessary or desirable.
Agent shall not be responsible to Banks for any of the
Borrowers' recitals, statements, representations or warranties
contained in any of the Loan Documents, or in any certificate or other
document referred to or provided for in, or received by any Bank under,
the Loan Documents, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of or any of the Loan
Documents or for any failure by the Borrowers to perform any of its
obligations hereunder or thereunder. Agent may employ agents and
attorneys-in-fact and shall not be answerable, except as to money or
securities received by it or its authorized agents, for the negligence
or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care.
The relationship between Agent and each Bank is only that of
agent and principal and has no fiduciary aspects. Nothing in the Loan
Documents or elsewhere shall be construed to impose on Agent any duties
or responsibilities other than those for which express provision is
therein made. In performing its duties and functions hereunder, Agent
does not assume and shall not be deemed to have assumed, and hereby
expressly disclaims, any obligation or responsibility toward or any
relationship of agency or trust with or for the Borrower or any of its
beneficiaries or other creditors. As to any matters not expressly
provided for by the
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Loan Documents, Agent shall not be required to exercise any discretion
or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from
acting) upon the instructions of all Banks and such instructions shall
be binding upon all Banks and all holders of the Notes; provided,
however, that Agent shall not be required to take any action which is
contrary to the Loan Documents or applicable law.
Agent shall have the right to exercise or refrain from
exercising, without notice or liability to the Banks, any and all
rights afforded to Agent by the Loan Documents or which Agent may have
as a matter of law; provided, however, Agent shall not (i) except as
provided in Section 7(b) hereof, without the consent of Majority Banks
designate the amount of the Borrowing Base or the Monthly Commitment
Reduction or (ii) without the consent of all Banks, take any other
action with regard to amending the Loan Documents, waiving any default
under the Loan Documents or taking any other action with respect to the
Loan Documents which requires consent of all Banks. Provided further,
however, that no amendment, waiver, or other action shall be effected
pursuant to the preceding clause (ii) without the consent of all Banks
which: (i) would increase the Borrowing Base or decrease the Monthly
Commitment Reduction, (ii) would reduce any fees hereunder, or the
principal of, or the interest on, any Bank's Note or Notes, (iii) would
postpone any date fixed for any payment of any fees hereunder, or any
principal or interest of any Bank's Note or Notes, (iv) would
materially increase any Bank's obligations hereunder or would
materially alter Agent's obligations to any Bank hereunder, (v) would
release Borrowers from their obligation to pay any Bank's Note or
Notes, (vi) release any of the Collateral, (vii) would change the
definition of Majority Banks, (viii) would amend, modify or change any
provision of this Agreement requiring the consent of all the Banks,
(ix) would waive any of the conditions precedent to the Effective Date
or the making of any Loan or issuance of any Letter of Credit or (x)
would extend the Revolving Maturity Date or (xi) would amend this
sentence or the previous sentence. Agent shall not have liability to
Banks for failure or delay in exercising any right or power possessed
by Agent pursuant to the Loan Documents or otherwise unless such
failure or delay is caused by the gross negligence of the Agent, in
which case only the Agent responsible for such gross negligence shall
have liability therefor to the Banks.
(g) INDEPENDENT INVESTIGATION. Each Bank severally represents
and warrants to Agent that it has made its own independent
investigation and assessment of the financial condition and affairs of
the Borrowers in connection with the making and continuation of its
participation hereunder and has not relied exclusively on any
information provided to such Bank by Agent in connection herewith, and
each Bank represents, warrants and undertakes to Agent that it shall
continue to make its own independent appraisal of the credit worthiness
of the Borrowers while the Notes are outstanding or its commitments
hereunder are in force. Agent shall not be required to keep itself
informed as to the performance or observance by the Borrowers of this
Agreement or any other document referred to or provided for herein or
to inspect the properties or books of the Borrowers. Other than as
provided in this Agreement, Agent shall not have any duty,
responsibility or liability to provide any Bank with
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any credit or other information concerning the affairs, financial
condition or business of the Borrowers which may come into the
possession of Agent.
(h) INDEMNIFICATION. Banks agree to indemnify Agent, ratably
according to their respective Commitments on a Pro Rata basis, from and
against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
of any proper and reasonable kind or nature whatsoever which may be
imposed on, incurred by or asserted against Agent in any way relating
to or arising out of the Loan Documents or any action taken or omitted
by Agent under the Loan Documents, provided that no Bank shall be
liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from Agent's gross negligence or willful
misconduct. Each Bank shall be entitled to be reimbursed by the Agent
for any amount such Bank paid to Agent under this Section 15(h) to the
extent the Agent has been reimbursed for such payments by the Borrowers
or any other Person. THE PARTIES INTEND FOR THE PROVISIONS OF THIS
SECTION TO APPLY TO AND PROTECT THE AGENT FROM THE CONSEQUENCES OF ANY
LIABILITY INCLUDING STRICT LIABILITY IMPOSED OR THREATENED TO BE
IMPOSED ON AGENT AS WELL AS FROM THE CONSEQUENCES OF ITS OWN
NEGLIGENCE, WHETHER OR NOT THAT NEGLIGENCE IS THE SOLE, CONTRIBUTING OR
CONCURRING CAUSE OF ANY SUCH LIABILITY.
(i) BENEFIT OF SECTION 15. The agreements contained in this
Section 15 are solely for the benefit of Agent and the Banks and are
not for the benefit of, or to be relied upon by, the Borrowers, any
affiliate of the Borrowers or any other person.
(j) PRO RATA TREATMENT. Subject to the provisions of this
Agreement, each payment (including each prepayment) by the Borrowers
and collection by Banks (including offsets) on account of the principal
of and interest on the Notes and fees provided for in this Agreement,
payable by the Borrowers shall be made Pro Rata; provided, however, in
the event that any Defaulting Bank shall have failed to make an Advance
as contemplated under Section 3 hereof and Agent or another Bank or
Banks shall have made such Advance, payment received by Agent for the
account of such Defaulting Bank or Banks shall not be distributed to
such Defaulting Bank or Banks until such Advance or Advances shall have
been repaid in full to the Bank or Banks who funded such Advance or
Advances.
(k) ASSUMPTION AS TO PAYMENTS. Except as specifically provided
herein, unless Agent shall have received notice from the Borrowers
prior to the date on which any payment is due to Banks hereunder that
the Borrowers will not make such payment in full, Agent may, but shall
not be required to, assume that the Borrowers have made such payment in
full to Agent on such date and Agent may, in reliance upon such
assumption, cause to be distributed to each Bank on such due date an
amount equal to the amount then due such Bank. If and to the extent the
Borrowers shall not have so made such payment in full to Agent, each
Bank shall repay to Agent forthwith on demand such amount distributed
to such Bank together with interest thereon, for each day from the date
such amount is distributed to such Bank until the
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date such Bank repays such amount to Agent, at an interest rate equal
to the overnight federal funds rate.
(l) OTHER FINANCINGS. Without limiting the rights to which any
Bank otherwise is or may become entitled, such Bank shall have no
interest, by virtue of this Agreement or the Loan Documents, in (a) any
present or future loans from, letters of credit issued by, or leasing
or other financial transactions by, any other Bank to, on behalf of, or
with the Borrowers (collectively referred to herein as "Other
Financings") other than the obligations hereunder; (b) any present or
future guarantees by or for the account of the Borrowers which are not
contemplated by the Loan Documents; (c) any present or future property
taken as security for any such Other Financings; or (d) any property
now or hereafter in the possession or control of any other Bank which
may be or become security for the obligations of the Borrowers arising
under any loan document by reason of the general description of
indebtedness secured or property contained in any other agreements,
documents or instruments relating to any such Other Financings.
(m) INTERESTS OF BANKS. Nothing in this Agreement shall be
construed to create a partnership or joint venture between Banks for
any purpose. Agent, Banks and the Borrowers recognize that the
respective obligations of Banks under the Revolving Commitment shall be
several and not joint and that neither Agent nor any of Banks shall be
responsible or liable to perform any of the obligations of the other
under this Agreement. Each Bank is deemed to be the owner of an
undivided interest in and to all rights, titles, benefits and interests
belonging and accruing to Agent under the Security Instruments,
including, without limitation, liens and security interests in any
collateral, fees and payments of principal and interest by the
Borrowers under the Revolving Commitment on a Pro Rata basis. Each Bank
shall perform all duties and obligations of Banks under this Agreement
in the same proportion as its ownership interest in the Loans
outstanding at the date of determination thereof.
(n) INVESTMENTS. Whenever Agent in good faith determines that
it is uncertain about how to distribute to Banks any funds which it has
received, or whenever Agent in good faith determines that there is any
dispute among the Banks about how such funds should be distributed,
Agent may choose to defer distribution of the funds which are the
subject of such uncertainty or dispute. If Agent in good faith believes
that the uncertainty or dispute will not be promptly resolved, or if
Agent is otherwise required to invest funds pending distribution to the
Banks, Agent may invest such funds pending distribution (at the risk of
the Borrowers). All interest on any such investment shall be
distributed upon the distribution of such investment and in the same
proportions and to the same Persons as such investment. All monies
received by Agent for distribution to the Banks (other than to the
Person who is Agent in its separate capacity as a Bank) shall be held
by the Agent pending such distribution solely as Agent for such Banks,
and Agent shall have no equitable title to any portion thereof.
16 EXERCISE OF RIGHTS. No failure to exercise, and no delay in
exercising, on the part of the Agent or the Banks, any right hereunder shall
operate as a waiver thereof, nor shall any single or
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partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right. The rights of the Agent and the Banks hereunder
shall be in addition to all other rights provided by law. No modification or
waiver of any provision of the Loan Documents, including this Agreement, or the
Note nor consent to departure therefrom, shall be effective unless in writing,
and no such consent or waiver shall extend beyond the particular case and
purpose involved. No notice or demand given in any case shall constitute a
waiver of the right to take other action in the same, similar or other
circumstances without such notice or demand.
17. NOTICES. Any notices or other communications required or
permitted to be given by this Agreement or any other documents and instruments
referred to herein must be given in writing (which may be by facsimile
transmission) and must be personally delivered or mailed by prepaid certified
or registered mail to the party to whom such notice or communication is
directed at the address of such party as follows: (a) BORROWERS: c/o CANAAN
ENERGY CORPORATION, 119 North Robinson, Suite 600, Oklahoma City, Oklahoma
73102, Facsimile No.: 405/232-2226, Attention: Michael S. Mewbourn; (b) AGENT:
BANK ONE, OKLAHOMA, N.A., 15 East Fifth Street, Tulsa, Oklahoma, 74103,
Attention: Coy Gallatin. Any such notice or other communication shall be deemed
to have been given (whether actually received or not) on the day it is
personally delivered or delivered by facsimile as aforesaid or, if mailed, on
the third day after it is mailed as aforesaid. Any party may change its address
for purposes of this Agreement by giving notice of such change to the other
party pursuant to this Section 17. Any notice required to be given to the Banks
shall be given to the Agent and distributed to all Banks by the Agent.
18. EXPENSES. The Borrowers shall pay (i) all reasonable and
necessary out-of-pocket expenses of the Banks, including reasonable fees and
disbursements of special counsel for the Agent, in connection with the
preparation of this Agreement, any waiver or consent hereunder or any amendment
hereof or any default or Event of Default or alleged default or Event of
Default hereunder, (ii) all reasonable and necessary out-of-pocket expenses of
the Agent, including reasonable fees and disbursements of special counsel for
the Agent in connection with the preparation of any participation agreement for
a participant or participants requested by the Borrowers or any amendment
thereof and (iii) if a Default or an Event of Default occurs, all reasonable
and necessary out-of-pocket expenses incurred by the Banks, including
reasonable fees and disbursements of counsel, in connection with such Default
and Event of Default and collection and other enforcement proceedings resulting
therefrom. The Borrowers shall indemnify the Banks against any transfer taxes,
document taxes, assessments or charges made by any governmental authority by
reason of the execution, delivery and filing of the Loan Documents. The
obligations of this Section 18 shall survive any termination of this Agreement,
the expiration of the Loans and the payment of all indebtedness of the
Borrowers to the Banks hereunder and under the Notes.
19. INDEMNITY. The Borrowers agree to indemnify and hold harmless
the Banks and their respective officers, employees, agents, attorneys and
representatives (singularly, an "Indemnified Party", and collectively, the
"Indemnified Parties") from and against any loss, cost, liability, damage or
expense (including the reasonable fees and out-of-pocket expenses of counsel to
the Banks, including all local counsel hired by such counsel) ("Claim") incurred
by the Banks in investigating
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or preparing for, defending against, or providing evidence, producing documents
or taking any other action in respect of any commenced or threatened
litigation, administrative proceeding or investigation under any federal
securities law, federal or state environmental law, or any other statute of any
jurisdiction, or any regulation, or at common law or otherwise, which is
alleged to arise out of or is based upon any acts, practices or omissions or
alleged acts, practices or omissions of the Borrowers or their agents or arises
in connection with the duties, obligations or performance of the Indemnified
Parties in negotiating, preparing, executing, accepting, keeping, completing,
countersigning, issuing, selling, delivering, releasing, assigning, handling,
certifying, processing or receiving or taking any other action with respect to
the Loan Documents and all documents, items and materials contemplated thereby
even if any of the foregoing arises out of an Indemnified Party's ordinary
negligence. The indemnity set forth herein shall be in addition to any other
obligations or liabilities of the Borrowers to the Banks hereunder or at common
law or otherwise, and shall survive any termination of this Agreement, the
expiration of the Loans and the payment of all indebtedness of the Borrowers to
the Banks hereunder and under the Notes, provided that the Borrowers shall have
no obligation under this Section to the Bank with respect to any of the
foregoing arising out of the gross negligence or willful misconduct of the
Bank. If any Claim is asserted against any Indemnified Party, the Indemnified
Party shall endeavor to notify the Borrowers of such Claim (but failure to do
so shall not affect the indemnification herein made except to the extent of the
actual harm caused by such failure). The Indemnified Party shall have the right
to employ, at the Borrowers' expense, counsel of the Indemnified Parties'
choosing and to control the defense of the Claim. The Borrowers may at their
own expense also participate in the defense of any Claim. Each Indemnified
Party may employ separate counsel in connection with any Claim to the extent
such Indemnified Party believes it reasonably prudent to protect such
Indemnified Party. THE PARTIES INTEND FOR THE PROVISIONS OF THIS SECTION TO
APPLY TO AND PROTECT EACH INDEMNIFIED PARTY FROM THE CONSEQUENCES OF ANY
LIABILITY INCLUDING STRICT LIABILITY IMPOSED OR THREATENED TO BE IMPOSED ON
AGENT AS WELL AS FROM THE CONSEQUENCES OF ITS OWN NEGLIGENCE, WHETHER OR NOT
THAT NEGLIGENCE IS THE SOLE, CONTRIBUTING, OR CONCURRING CAUSE OF ANY CLAIM.
20. GOVERNING LAW. THIS AGREEMENT IS BEING EXECUTED AND
DELIVERED, AND IS INTENDED TO BE PERFORMED, IN OKLAHOMA, OKLAHOMA COUNTY,
OKLAHOMA, AND THE SUBSTANTIVE LAWS OF OKLAHOMA SHALL GOVERN THE VALIDITY,
CONSTRUCTION, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND ALL OTHER
DOCUMENTS AND INSTRUMENTS REFERRED TO HEREIN, UNLESS OTHERWISE SPECIFIED
THEREIN.
21. INVALID PROVISIONS. If any provision of this Agreement is
held to be illegal, invalid, or unenforceable under present or future laws
effective during the term of this Agreement, such provisions shall be fully
severable and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part of this
Agreement, and the remaining provisions of the Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Agreement.
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22. MAXIMUM INTEREST RATE. It is the intention of the parties
hereto to comply strictly with any applicable usury laws as in effect from time
to time and, in this regard, there shall never be taken, received, contracted
for, collected, charged or received on any sums advanced hereunder interest in
excess of that which would accrue at the Maximum Rate.
If, under any circumstances, the aggregate amounts paid on the Notes or
under this Agreement or any other Loan Document include amounts which by law are
deemed interest and which would exceed the amount permitted if the Maximum Rate
were in effect, the Borrowers stipulate that such payment and collection will
have been and will be deemed to have been, to the fullest extent permitted by
applicable laws of the State of Oklahoma or the United States of America, the
result of mathematical error on the part of the Borrowers and the Agent; and the
Agent shall promptly credit the amount of such excess to the principal amount
due on the Notes, or if the principal amount due on the Notes shall have been
paid in full, refund the amount of such excess to the Borrowers (to the extent
only of such interest payments in excess of that which would have accrued and
been payable on the basis of the Maximum Rate) upon discovery of such error by
the Agent or notice thereof from the Borrowers.
If the maturity of the Notes is accelerated by reason of an election of
the Agent resulting from any Event of Default or otherwise in accordance with
this Agreement, or in the event any prepayment, then such consideration that
constitutes interest under applicable laws may never include amounts which are
more than the Maximum Rate, and the amount of such excess, if any, provided for
in this Agreement or otherwise shall be canceled automatically by the Agent as
of the date of such acceleration or prepayment and, if theretofore paid, shall
be credited by the Agent on the principal amount due on the Notes, or if the
principal amount due on the Notes shall have been paid in full, refunded by the
Agent to the Borrowers.
All sums paid, or agreed to be paid, to the Agent for the use,
forbearance and detention of the proceeds of any Advance hereunder shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term hereof until paid in full so that the actual rate of
interest is uniform but does not exceed the Maximum Rate throughout the full
term hereof.
23. AMENDMENTS. This Agreement may be amended only by an
instrument in writing executed by an authorized officer of the party against
whom such amendment is sought to be enforced.
24. MULTIPLE COUNTERPARTS. This Agreement may be executed in a
number of identical separate counterparts, each of which for all purposes is to
be deemed an original, but all of which shall constitute, collectively, one
agreement. No party to this Agreement shall be bound hereby until a counterpart
of this Agreement has been executed by all parties hereto.
25. CONFLICT. In the event any term or provision hereof is
inconsistent with or conflicts with any provision of the Loan Documents, the
terms or provisions contained in this Agreement shall be controlling.
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26. SURVIVAL. All covenants, agreements, undertakings,
representations and warranties made in the Loan Documents, including this
Agreement, the Notes or other documents and instruments referred to herein shall
survive all closings hereunder and shall not be affected by any investigation
made by any party.
27. PARTIES BOUND. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors, assigns,
heirs, legal representatives and estates, provided, however, that the Borrowers
may not, without the prior written consent of all of the Banks, assign any
rights, powers, duties or obligations hereunder.
28. ASSIGNMENTS AND PARTICIPATIONS.
(a) Each Bank shall have the right to sell, assign or
transfer all or any part of its Note or Notes, its Commitments
and its rights and obligations hereunder to one or more
Affiliates, Banks, financial institutions, pension plans,
insurance companies, investment funds, or similar Persons who
are Eligible Assignees or to a Federal Reserve Bank; PROVIDED,
that in connection with each sale, assignment or transfer
(other than to an Affiliate, a Bank or a Federal Reserve
Bank), the applicable Bank will consider the opinion and
recommendation of Borrowers, which opinion and recommendation
shall in no way be binding upon such Bank, and each such sale,
assignment, or transfer (other than to an Affiliate, a Bank or
a Federal Reserve Bank), shall require the consent of Agent,
which consent will not be unreasonably withheld, and the
assignee, transferee or recipient shall have, to the extent of
such sale, assignment, or transfer, the same rights, benefits
and obligations as it would if it were such Bank and a holder
of such Note, Commitments and rights and obligations,
including, without limitation, the right to vote on decisions
requiring consent or approval of all Banks or Majority Banks
and the obligation to fund its Commitments; provided, further,
that (1) each such sale, assignment, or transfer (other than
to an Affiliate, a Bank or a Federal Reserve Bank) shall be in
an aggregate principal amount not less than $5,000,000, (2)
each remaining Bank shall at all times maintain Commitments
then outstanding in an aggregate principal amount at least
equal to $5,000,000; (3) each such sale, assignment or
transfer shall be of a Pro Rata portion of such Bank's
Revolving Commitment, (4) no Bank may offer to sell its Note
or Notes, Commitments, rights and obligations or interests
therein in violation of any securities laws; and (5) no such
assignments (other than to a Federal Reserve Bank) shall
become effective until the assigning Bank and its assignee
delivers to Agent and Borrowers an Assignment and Acceptance
and the Note or Notes subject to such assignment and other
documents evidencing any such assignment. An assignment fee in
the amount of $3,500 for each such assignment (other than to
an Affiliate, a Bank or the Federal Reserve Bank) will be
payable to Agent by assignor or assignee. Within five (5)
Business Days after its receipt of copies of the Assignment
and Acceptance and the other documents relating thereto and
the Note or Notes, the Borrowers shall execute and deliver to
Agent (for delivery to the relevant assignee)
60
<PAGE>
a new Note or Notes evidencing such assignee's assigned
Commitments and if the assignor Bank has retained a portion
of its Commitments, a replacement Note in the principal
amount of the Commitments retained by the assignor (except
as provided in the last sentence of this paragraph (a) such
Note or Notes to be in exchange for, but not in payment of,
the Note or Notes held by such Bank). On and after the
effective date of an assignment hereunder, the assignee
shall for all purposes be a Bank, party to this Agreement
and any other Loan Document executed by the Banks and shall
have all the rights and obligations of a Bank under the Loan
Documents, to the same extent as if it were an original
party thereto, and no further consent or action by
Borrowers, Banks or the Agent shall be required to release
the transferor Bank with respect to its Commitments assigned
to such assignee and the transferor Bank shall henceforth be
so released.
(b) Each Bank shall have the right to grant participations in
all or any part of such Bank's Notes and Commitments hereunder to one
or more pension plans, investment funds, insurance companies, financial
institutions or other Persons, provided, that:
(i) each Bank granting a participation shall retain
the right to vote hereunder, and no participant shall be
entitled to vote hereunder on decisions requiring consent or
approval of Bank or Majority Banks (except as set forth in
(iii) below);
(ii) in the event any Bank grants a participation
hereunder, such Bank's obligations under the Loan Documents
shall remain unchanged, such Bank shall remain solely
responsible to the other parties hereto for the performance of
such obligations, such Bank shall remain the holder of any
such Note or Notes for all purposes under the Loan Documents,
and Agent, each Bank and Borrowers shall be entitled to deal
with the Bank granting a participation in the same manner as
if no participation had been granted; and
(iii) no participant shall ever have any right by
reason of its participation to exercise any of the rights of
Banks hereunder, except that any Bank may agree with any
participant that such Bank will not, without the consent of
such participant (which consent may not be unreasonably
withheld) consent to any amendment or waiver requiring
approval of all Banks.
(c) It is understood and agreed that any Bank may provide to
assignees and participants and prospective assignees and participants
financial information and reports and data concerning Borrowers'
properties and operations which was provided to such Bank pursuant to
this Agreement.
61
<PAGE>
(d) Upon the reasonable request of either Agent or Borrowers,
each Bank will identify those to whom it has assigned or participated
any part of its Notes and Commitment, and provide the amounts so
assigned or participated.
29. CHOICE OF FORUM: CONSENT TO SERVICE OF PROCESS AND
JURISDICTION. THE OBLIGATIONS OF BORROWERS UNDER THE LOAN DOCUMENTS ARE
PERFORMABLE IN OKLAHOMA COUNTY, OKLAHOMA. ANY SUIT, ACTION OR PROCEEDING
AGAINST THE BORROWERS WITH RESPECT TO THE LOAN DOCUMENTS OR ANY JUDGMENT
ENTERED BY ANY COURT IN RESPECT THEREOF, MAY BE BROUGHT IN THE COURTS OF THE
STATE OF OKLAHOMA, COUNTY OF OKLAHOMA, OR IN THE UNITED STATES COURTS LOCATED
IN OKLAHOMA COUNTY, OKLAHOMA AND THE BORROWERS HEREBY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE PURPOSE OF ANY SUCH SUIT,
ACTION OR PROCEEDING. THE BORROWERS HEREBY IRREVOCABLY CONSENT TO SERVICE OF
PROCESS IN ANY SUIT, ACTION OR PROCEEDING IN SAID COURT BY THE MAILING THEREOF
BY BANK BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWERS, AS
APPLICABLE, AT THE ADDRESS FOR NOTICES AS PROVIDED IN SECTION 17. THE
BORROWERS HEREBY IRREVOCABLY WAIVE ANY OBJECTION WHICH THEY MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT BROUGHT IN THE COURTS LOCATED
IN THE STATE OF OKLAHOMA, COUNTY OF OKLAHOMA, AND HEREBY FURTHER IRREVOCABLY
WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
30. WAIVER OF JURY TRIAL. THE BORROWERS, THE AGENT AND THE BANKS
(BY THEIR ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND
UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THE
BORROWERS, THE AGENT AND THE BANKS, ARISING OUT OF OR IN ANY WAY RELATED TO
THIS DOCUMENT, THE NOTES, ANY OTHER RELATED DOCUMENT, OR ANY RELATIONSHIP
BETWEEN THE AGENT, THE BANKS AND THE BORROWERS. THIS PROVISION IS A MATERIAL
INDUCEMENT TO THE AGENT AND THE BANKS TO PROVIDE THE FINANCING DESCRIBED
HEREIN.
31. OTHER AGREEMENTS. THIS WRITTEN CREDIT AGREEMENT REPRESENTS
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.
32. FINANCIAL TERMS. All accounting terms used in this Agreement
which are not specifically defined herein shall be defined in accordance with
GAAP.
62
<PAGE>
33. FRAUDULENT CONVEYANCE SAVINGS CLAUSE. Notwithstanding any
provision of this Agreement to the contrary, it is intended that this
Agreement shall not constitute a "Fraudulent Conveyance" (as defined below) as
to any Borrower. Consequently, each Borrower agrees that if this Agreement
would, but for the application of this sentence, constitute a Fraudulent
Conveyance as to any such Borrower, the obligations of such Borrower under
this Agreement shall be valid and enforceable against such Borrower only to
the maximum extent that would not cause this Agreement to constitute a
Fraudulent Conveyance as to such Borrower, and this Agreement shall
automatically be deemed to have been amended accordingly at all relevant
times. For purposes hereof, a "FRAUDULENT CONVEYANCE" means a fraudulent
conveyance under Section 548 of the Bankruptcy Code (or any successor section)
or a fraudulent conveyance or fraudulent transfer under the provisions of any
applicable fraudulent conveyance or fraudulent transfer law or similar law of
any state or other governmental unit, as in effect from time to time.
34. AUTHORITY OF CANAAN. Each Borrower hereby designates Canaan
as its agent and attorney-in-fact, to act in its name, place and stead for the
purpose of completing and delivering and/or receiving any and all
certificates, notices or reports, financial or otherwise. Any documents
executed by Canaan or requests delivered by Canaan shall be deemed given by
each Borrower herein, unless otherwise indicated. Agent shall be held harmless
by each Bank for acting upon any such document or request and shall be
entitled to rely upon the authority granted herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
63
<PAGE>
BORROWERS:
CANAAN ENERGY CORPORATION,
an Oklahoma corporation
/s/ John K. Penton
-------------------------------
By: John K. Penton
Title: President
Address:
119 N. Robinson, Suite 600
Oklahoma City, Oklahoma 73102
Telephone: 405/232-3222
Facsimile: 405/232-2226
<PAGE>
INDIAN OIL COMPANY,
an Oklahoma corporation
/s/ John K. Penton
-------------------------------
By: John K. Penton
Title: President
Address:
119 N. Robinson, Suite 600
Oklahoma City, Oklahoma 73102
Telephone: 405/232-3222
Facsimile: 405/232-2226
<PAGE>
CORAL RESERVES NATURAL GAS INCOME
FUND 1990 LIMITED PARTNERSHIP,
an Oklahoma limited partnership
By: Coral Reserves, Inc.,
Managing General Partner
/s/ John K. Penton
--------------------------
By: John K. Penton
Title: President
Address:
119 N. Robinson, Suite 600
Oklahoma City, Oklahoma 73102
Telephone: 405/232-3222
Facsimile: 405/232-2226
<PAGE>
CORAL RESERVES NATURAL GAS INCOME
FUND 1991 LIMITED PARTNERSHIP,
an Oklahoma limited partnership
By: Coral Reserves Energy Corp.,
Managing General Partner
/s/ John K. Penton
----------------------------
By: John K. Penton
Title: President
Address:
119 N. Robinson, Suite 600
Oklahoma City, Oklahoma 73102
Telephone: 405/232-3222
Facsimile: 405/232-2226
<PAGE>
CORAL RESERVES NATURAL GAS INCOME
FUND 1992 LIMITED PARTNERSHIP,
an Oklahoma limited partnership
By: Coral Reserves Energy Corp.,
Managing General Partner
/s/ John K. Penton
----------------------------
By: John K. Penton
Title: President
Address:
119 N. Robinson, Suite 600
Oklahoma City, Oklahoma 73102
Telephone: 405/232-3222
Facsimile: 405/232-2226
<PAGE>
CORAL RESERVES 1993 INSTITUTIONAL
LIMITED PARTNERSHIP,
an Oklahoma limited partnership
By: Coral Reserves, Inc.,
Managing General Partner
/s/ John K. Penton
-------------------------
By: John K. Penton
Title: President
Address:
119 N. Robinson, Suite 600
Oklahoma City, Oklahoma 73102
Telephone: 405/232-3222
Facsimile: 405/232-2226
<PAGE>
CORAL RESERVES NATURAL GAS INCOME
FUND 1993 LIMITED PARTNERSHIP,
an Oklahoma limited partnership
By: Coral Reserves Energy Corp.,
Managing General Partner
/s/ John K. Penton
----------------------------
By: John K. Penton
Title: President
Address:
119 N. Robinson, Suite 600
Oklahoma City, Oklahoma 73102
Telephone: 405/232-3222
Facsimile: 405/232-2226
<PAGE>
CORAL RESERVES ENERGY INCOME
FUND 1995 LIMITED PARTNERSHIP,
an Oklahoma limited partnership
By: Coral Reserves Energy Corp.,
Managing General Partner
/s/ John K. Penton
----------------------------
By: John K. Penton
Title: President
Address:
119 N. Robinson, Suite 600
Oklahoma City, Oklahoma 73102
Telephone: 405/232-3222
Facsimile: 405/232-2226
<PAGE>
CORAL RESERVES 1996 INSTITUTIONAL
LIMITED PARTNERSHIP,
an Oklahoma limited partnership
By: Coral Reserves, Inc.,
Managing General Partner
/s/ John K. Penton
--------------------------
By: John K. Penton
Title: President
Address:
119 N. Robinson, Suite 600
Oklahoma City, Oklahoma 73102
Telephone: 405/232-3222
Facsimile: 405/232-2226
<PAGE>
CORAL RESERVES ENERGY INCOME
FUND 1996 LIMITED PARTNERSHIP,
an Oklahoma limited partnership
By: Coral Reserves Energy Corp.,
Managing General Partner
/s/ John K. Penton
----------------------------
By: John K. Penton
Title: President
Address:
119 N. Robinson, Suite 600
Oklahoma City, Oklahoma 73102
Telephone: 405/232-3222
Facsimile: 405/232-2226
<PAGE>
BANKS:
BANK ONE, OKLAHOMA, N.A.,
a national banking association
/s/ Coy Gallatin
-------------------------------
By: Coy Gallatin
Title: Vice President
Address:
15 East Fifth Street
Tulsa, Oklahoma 74103
Telephone: 918/586-5203
Facsimile: 918/586-5474
<PAGE>
LOCAL OKLAHOMA BANK, N.A.,
a national banking association
/s/ John K. Slay, Jr.
------------------------------
By: John K. Slay, Jr.
Title: Senior Vice President
Address:
3601 N.W. 63rd Street
Oklahoma City, Oklahoma 73116-2087
Telephone: 405/841-2179
Facsimile: 405/841-2175
