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EXHIBIT 4.7
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AMENDED AND RESTATED CREDIT AGREEMENT
-------------------------------------------------------
CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP,
as Borrower
CHESAPEAKE ENERGY CORPORATION
and
CERTAIN OF ITS SUBSIDIARIES,
as Guarantors
and
UNION BANK OF CALIFORNIA, N.A.,
as Agent
and CERTAIN FINANCIAL INSTITUTIONS,
as Lenders
-------------------------------------------------------
$100,000,000
May 30, 2000
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TABLE OF CONTENTS
<TABLE>
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Page
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AMENDED AND RESTATED CREDIT AGREEMENT........................................................6
ARTICLE I - Definitions and References.......................................................6
Section 1.1. Defined Terms........................................................6
Section 1.2. Exhibits and Schedules; Additional Definitions......................21
Section 1.3. Amendment of Defined Instruments....................................22
Section 1.4. References and Titles...............................................22
Section 1.5. Calculations and Determinations.....................................22
Section 1.6. Joint Preparation; Construction of Indemnities and Releases.........22
ARTICLE II - The Loans......................................................................23
Section 2.1. Commitments to Lend; Notes..........................................23
Section 2.2. Requests for New Loans..............................................23
Section 2.3. Interest Rates; Continuations and Conversions of Existing Loans.....24
Section 2.4. Use of Proceeds.....................................................25
Section 2.5. Fees................................................................26
Section 2.6. Optional Prepayments................................................26
Section 2.7. Mandatory Prepayments...............................................26
Section 2.8. Initial Borrowing Base..............................................27
Section 2.9. Subsequent Determinations of Borrowing Base.........................27
Section 2.10. Borrower's Reduction of the Borrowing Base..........................28
Section 2.11. Letters of Credit...................................................28
Section 2.12. Requesting Letters of Credit........................................29
Section 2.13. Reimbursement and Participations....................................29
Section 2.14. Letter of Credit Fees...............................................31
Section 2.15. No Duty to Inquire..................................................31
Section 2.16. LC Collateral.......................................................32
ARTICLE III - Payments to Lenders...........................................................33
Section 3.1. General Procedures..................................................33
Section 3.2. Increased Cost and Reduced Return...................................34
Section 3.3. Limitation on Types of Loans........................................35
Section 3.4. Illegality..........................................................36
Section 3.5. Treatment of Affected Loans.........................................36
Section 3.6. Compensation........................................................37
Section 3.7. Taxes...............................................................37
Section 3.8. Compensation Procedure..............................................38
Section 3.9. Change of Applicable Lending Office.................................39
ARTICLE IV - Conditions Precedent to Lending................................................39
Section 4.1. Documents to be Delivered...........................................39
Section 4.2. Additional Conditions Precedent.....................................40
</TABLE>
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<TABLE>
<S> <C>
ARTICLE V - Representations and Warranties..................................................41
Section 5.1. No Default..........................................................41
Section 5.2. Organization and Good Standing......................................41
Section 5.3. Authorization.......................................................42
Section 5.4. No Conflicts or Consents............................................42
Section 5.5. Enforceable Obligations.............................................42
Section 5.6. Initial Financial Statements........................................42
Section 5.7. Other Obligations and Restrictions. ................................42
Section 5.8. Full Disclosure.....................................................43
Section 5.9. Litigation..........................................................43
Section 5.10. Labor Disputes and Acts of God......................................43
Section 5.11. ERISA Plans and Liabilities.........................................43
Section 5.12. Environmental and Other Laws........................................44
Section 5.13. Names and Places of Business........................................44
Section 5.14. Borrower's Subsidiaries.............................................44
Section 5.15. Title to Properties; Licenses.......................................45
Section 5.16. Government Regulation...............................................45
Section 5.17. Insider.............................................................45
Section 5.18. Officers, Directors and Shareholders................................46
Section 5.19. Solvency............................................................46
ARTICLE VI - Affirmative Covenants of Borrower..............................................46
Section 6.1. Payment and Performance.............................................46
Section 6.2. Books, Financial Statements and Reports.............................46
Section 6.3. Other Information and Inspections...................................48
Section 6.4. Notice of Material Events and Change of Address.....................48
Section 6.5. Maintenance of Properties...........................................49
Section 6.6. Maintenance of Existence and Qualifications.........................50
Section 6.7. Payment of Trade Liabilities, Taxes, etc............................50
Section 6.8. Insurance...........................................................50
Section 6.9. Performance on Borrower's Behalf....................................51
Section 6.10. Interest............................................................51
Section 6.11. Compliance with Agreements and Law..................................51
Section 6.12. Environmental Matters; Environmental Reviews........................51
Section 6.13. Evidence of Compliance..............................................51
Section 6.14. Agreement to Deliver Security Documents.............................52
Section 6.15. Perfection and Protection of Security Interests and Liens...........52
Section 6.16. Bank Accounts; Offset...............................................52
Section 6.17. Guaranties of Borrower's Subsidiaries...............................53
Section 6.18. Production Proceeds.................................................53
ARTICLE VII - Negative Covenants of Borrower................................................54
Section 7.1. Indebtedness........................................................54
Section 7.2. Limitation on Liens.................................................54
Section 7.3. Hedging Contracts...................................................55
Section 7.4. Limitation on Mergers, Issuances of Securities......................56
</TABLE>
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<TABLE>
<S> <C>
Section 7.5. Limitation on Sales of Property.....................................56
Section 7.6. Limitation on Dividends and Redemptions.............................57
Section 7.7. Limitation on Investments and New Businesses........................57
Section 7.8. Limitation on Credit Extensions.....................................58
Section 7.9. Transactions with Affiliates........................................58
Section 7.10. Certain Contracts; Amendments; Multiemployer ERISA Plans............58
Section 7.11. Current Ratio.......................................................58
Section 7.12. Fixed Charge Coverage Ratio.........................................59
ARTICLE VIII - Events of Default and Remedies...............................................59
Section 8.1. Events of Default...................................................59
Section 8.2. Remedies............................................................61
ARTICLE IX - Agent..........................................................................61
Section 9.1. Appointment and Authority...........................................61
Section 9.2. Exculpation, Agent's Reliance, Etc..................................62
Section 9.3. Credit Decisions....................................................62
Section 9.4. Indemnification.....................................................62
Section 9.5. Rights as Lender....................................................63
Section 9.6. Sharing of Set-Offs and Other Payments..............................63
Section 9.7. Investments.........................................................64
Section 9.8. Benefit of Article IX...............................................64
Section 9.9. Resignation.........................................................64
ARTICLE X - Miscellaneous...................................................................65
Section 10.1. Waivers and Amendments; Acknowledgments.............................65
Section 10.2. Survival of Agreements; Cumulative Nature...........................66
Section 10.3. Notices.............................................................67
Section 10.4. Payment of Expenses; Indemnity......................................67
Section 10.5. Joint and Several Liability; Parties in Interest; Assignments.......68
Section 10.6. Confidentiality.....................................................70
Section 10.7. Governing Law; Submission to Process................................70
Section 10.8. Limitation on Interest..............................................71
Section 10.9. Termination; Limited Survival.......................................72
Section 10.10. Severability........................................................72
Section 10.11. Counterparts........................................................72
Section 10.12. Waiver of Jury Trial, Punitive Damages, etc.........................72
Section 10.13. Amendment and Restatement...........................................73
</TABLE>
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Schedules and Exhibits:
----------------------
Schedule 1 - Disclosure Schedule
Schedule 2 - Security Schedule
Schedule 2-A - Properties to be Mortgaged at Closing
Schedule 3 - Insurance Schedule
Schedule 4 - Existing Investments
Schedule 5 - Additional Mortgaged Properties
Exhibit A - Promissory Note
Exhibit B - Borrowing Notice
Exhibit C - Continuation/Conversion Notice
Exhibit D - Certificate Accompanying Financial Statements
Exhibit E - Letter of Credit Application and Agreement
Exhibit F - Opinion of Counsel for Restricted Persons
Exhibit G - Assignment and Assumption Agreement
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AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT is made as of May 30, 2000,
by and among Chesapeake Exploration Limited Partnership, an Oklahoma limited
partnership (herein called "Borrower"), Chesapeake Energy Corporation, an
Oklahoma corporation (herein called "Parent"), certain Subsidiaries of Parent,
as Guarantors, Union Bank of California, N.A., individually and as agent (herein
called "Agent") and the Lenders referred to below. In consideration of the
mutual covenants and agreements contained herein the parties hereto agree as
follows:
ARTICLE I - Definitions and References
Section 1.1. Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it in this Section 1.1 or in the sections
and subsections referred to below:
"Affiliate" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall be
deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power
(a) to vote 20% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or
managing general partners; or
(b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"Agent" means Union Bank of California, N.A., as Agent hereunder, and
its successors in such capacity; provided, however, that until such time as a
Lender other than Union Bank of California, N.A. becomes a party hereto, "Agent"
shall mean Union Bank of California, N.A., individually.
"Agreement" means this Amended and Restated Credit Agreement.
"Applicable Lending Office" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of Base Rate Loans and such
Lender's Eurodollar Lending Office in the case of Eurodollar Loans.
"Applicable Utilization Level" means on any date the level set forth
below that corresponds to the percentage, at the close of business on such day,
equivalent to the (i) Facility Usage divided by (ii) the Borrowing Base (the
"Utilization Percent"):
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<TABLE>
<CAPTION>
Applicable Utilization Level Utilization Percent
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<S> <C>
Level I less than 20%
Level II equal to or greater than 20% but
less than 40%
Level III equal to or greater than 40% but
less than 60%
Level IV equal to or greater than 60%
</TABLE>
"Bank Parties" means Agent, LC Issuer, and all Lenders.
"Base Rate" means the Base Rate Margin plus the higher of (a) Agent's
Reference Rate and (b) the Federal Funds Rate plus one-half percent (0.5%) per
annum. As used in this paragraph, Agent's "Reference Rate" means that variable
rate of interest per annum established by Agent from time to time as its
"reference rate" (which rate of interest may not be the lowest rate charged on
similar loans). Each change in the Base Rate shall become effective without
prior notice to Borrower automatically as of the opening of business on the date
of such change in the Base Rate. The Base Rate shall in no event, however,
exceed the Highest Lawful Rate.
"Base Rate Loan" means a Loan which bears interest at the Base Rate.
"Base Rate Margin" means, on any date, with respect to each Base Rate
portion of a Loan, the number of basis points per annum set forth below based on
the Applicable Utilization Level on such date:
<TABLE>
<CAPTION>
Applicable Utilization Level Base Rate Margin
---------------------------------------- --------------------------
<S> <C>
Level I 50
Level II 75
Level III 100
Level IV 125
</TABLE>
Changes in the applicable Base Rate Margin will occur automatically without
prior notice as changes in the Applicable Utilization Level occur. Agent will
give notice promptly to Borrower and the Lenders of changes in the Base Rate
Margin.
"Borrower" means Chesapeake Exploration Limited Partnership, an
Oklahoma limited partnership.
"Borrowing" means a borrowing of new Loans of a single Type pursuant to
Section 2.2 or a Continuation or Conversion of existing Loans into a single Type
(and, in the case of Eurodollar Loans, with the same Interest Period) pursuant
to Section 2.3.
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"Borrowing Base" means, at the particular time in question, either the
amount provided for in Section 2.8 or the amount determined by Agent and
Required Lenders in accordance with the provisions of Section 2.9, as reduced by
Borrower pursuant to Section 2.10 or as reduced pursuant to Section 7.5;
provided, however, that in no event shall the Borrowing Base ever exceed the
Maximum Loan Amount.
"Borrowing Base Deficiency" has the meaning given it in Section 2.7(b).
"Borrowing Notice" means a written or telephonic request, or a written
confirmation, made by Borrower which meets the requirements of Section 2.2.
"Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in Los Angeles,
California. Any Business Day in any way relating to Eurodollar Loans (such as
the day on which an Interest Period begins or ends) must also be a day on which,
in the judgment of Agent, significant transactions in dollars are carried out in
the interbank eurocurrency market.
"Cash Equivalents" means investments in:
(a) marketable obligations, maturing within 12 months after acquisition
thereof, issued or unconditionally guaranteed by the United States of America or
an instrumentality or agency thereof and entitled to the full faith and credit
of the United States of America.
(b) demand deposits, and time deposits (including certificates of
deposit) maturing within 12 months from the date of deposit thereof, with any
office of any Lender or with a domestic office of any national or state bank or
trust company which is organized under the Laws of the United States of America
or any state therein, which has capital, surplus and undivided profits of at
least $500,000,000, and whose certificates of deposit have at least the third
highest credit rating given by either Rating Agency.
(c) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (a) above entered into
with any commercial bank meeting the specifications of clause (b) above
(d) open market commercial paper, maturing within 270 days after
acquisition thereof, which has the highest or second highest credit rating given
by either Rating Agency.
(e) money market or other mutual funds substantially all of whose
assets comprise securities of the types described in clauses (a) through (d)
above.
"Change of Control" means the occurrence of any of the following
events: (i) any Person other than Parent or one of its wholly-owned Subsidiaries
shall acquire or hold any legal or beneficial ownership of Borrower or any
Guarantor, (ii) any Person or two or more Persons acting as a group shall
acquire beneficial ownership (within the meaning of Rule 13d-3 of the SEC under
the Securities Act of 1934, as amended, and including holding proxies to vote
for the
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election of directors other than proxies held by Parent's management or their
designees to be voted in favor of Persons nominated by Parent's Board of
Directors) of 35% or more of the outstanding voting securities of Parent,
measured by voting power (including both common stock and any preferred stock or
other equity securities entitling the holders thereof to vote with the holders
of common stock in elections for directors of Parent), (iii) one-third or more
of the directors of Parent shall consist of Persons not nominated by Parent's
Board of Directors (not including as Board nominees any directors which the
Board is obligated to nominate pursuant to shareholders agreements, voting trust
arrangements or similar arrangements) or (iv) neither Aubrey K. McClendon nor
Tom Ward shall be executive officers and directors of Parent.
"Chesapeake Canada" means Chesapeake Canada Corporation, an Alberta
corporation.
"Chesapeake Marketing" means Chesapeake Marketing, Inc., an Oklahoma
corporation.
"Collateral" means all property of any kind which is subject to a Lien
in favor of Lenders (or in favor of Agent for the benefit of Lenders) or which,
under the terms of any Security Document, is purported to be subject to such a
Lien.
"Commitment Period" means the period from and including the date hereof
until and including the Maturity Date (or, if earlier, the day on which the
commitments of the Lenders are terminated pursuant to Section 8.1, or the day
the Notes first become due and payable in full).
"Consolidated" refers to the consolidation of any Person, in accordance
with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"Consolidated EBITDA" means, with respect to any period, the sum of (a)
the Consolidated Net Income of Parent and its Subsidiaries during such period,
plus (b) Consolidated interest expense which was deducted in determining such
Consolidated Net Income, plus (c) all income taxes which were deducted in
determining such Consolidated Net Income, plus (d) all depreciation,
amortization (including amortization of good will and debt issue costs) and
other non-cash charges (including any provision for the reduction in the
carrying value of assets recorded in accordance with GAAP) which were deducted
in determining such Consolidated Net Income, minus (e) all non-cash items of
income which were included in determining such Consolidated Net Income. Revenues
and expenses derived from Hedging Contracts related to interest rates or
dividend rates will be treated as adjustments to interest expense for purposes
of this definition.
"Consolidated Fixed Charges" means, with respect to any period, the sum
(without duplication) of the following (in each case, eliminating all offsetting
debits and credits between Parent and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of Consolidated
financial statements of Parent and its Subsidiaries in accordance with GAAP):
(a) all Consolidated Interest Expense during such period, plus (b) all
scheduled, required and actual payments or prepayments of principal on
Indebtedness (other than revolving
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credit Indebtedness) of Parent and its Subsidiaries during such period, plus (c)
all dividends (other than dividend payable in common stock) declared by Parent
and attributable to such period. For purposes of this Agreement a dividend is
"attributed" to the Fiscal Quarter immediately preceding the Fiscal Quarter in
which such dividend is actually declared by Parent.
"Consolidated Interest Expense" means, with respect to any period, the
sum (without duplication) of the following (in each case, eliminating all
offsetting debits and credits between Parent and its Subsidiaries and all other
items required to be eliminated in the course of the preparation of Consolidated
financial statements of Parent and its Subsidiaries in accordance with GAAP):
(a) all interest, commitment fees and loan fees in respect of Indebtedness of
Parent or any of its Subsidiaries (including imputed interest on Capital Lease
Obligations) deducted in determining Consolidated Net Income for such period,
together with all interest capitalized or deferred during such period and not
deducted in determining Consolidated Net Income for such period, plus (b) all
fees, expenses and charges in respect of letters of credit issued for the
account of Parent or any of its Subsidiaries deducted in determining
Consolidated Net Income for such period, together with all such fees, expenses
and charges in respect of letters of credit capitalized or deferred during such
period and not deducted in determining Consolidated Net Income for such period.
Revenues and expenses derived from Hedging Contracts related to interest rates
or dividend rates will be treated as adjustments to interest expense for
purposes of this definition.
"Consolidated Net Income" means, with respect to any period, Parent 's
and its Subsidiaries' gross revenues for such period, including any cash
dividends or distributions actually received from any other Person during such
period, minus Parent's and its Subsidiaries' expenses and other proper charges
against income (including but not limited to income taxes), determined on a
Consolidated basis after eliminating earnings or losses attributable to
outstanding minority interests and excluding the net earnings of any Person
other than a Subsidiary in which Parent or any of its Subsidiaries has an
ownership interest
"Continuation/Conversion Notice" means a written or telephonic request,
or a written confirmation, made by Borrower which meets the requirements of
Section 2.3.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 2.3 hereof of a Eurodollar Loan as a Eurodollar
Loan from one Interest Period to the next Interest Period.
"Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to Section 2.3 or Article III of one Type of Loan into another Type of
Loan.
"Default" means any Event of Default and any default, event or
condition which would, with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of Default.
"Default Rate" means, at the time in question, three percent (3.0%) per
annum plus the Base Rate then in effect; provided that, with respect to any
Eurodollar Loan with an Interest Period extending beyond the date such
Eurodollar Loan becomes due and payable, "Default
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Rate" shall mean three percent (3.0%) per annum plus the related Eurodollar
Rate. The Default Rate shall never exceed the Highest Lawful Rate.
"Deficiency Notice" has the meaning given it in Section 2.7.
"Determination Date" has the meaning given it in Section 2.9.
"Disclosure Report" means either a notice given by Borrower or Parent
under Section 6.4 or a certificate given by Borrower's or Parent's chief
financial officer under Section 6.2(b).
"Disclosure Schedule" means Schedule 1 hereto.
"Distribution" means (a) any dividend or other distribution made by a
Restricted Person on or in respect of any stock, partnership interest, or other
equity interest in such Restricted Person (including any option or warrant to
buy such an equity interest), or (b) any payment made by a Restricted Person to
purchase, redeem, acquire or retire any stock, partnership interest, or other
equity interest in such Restricted Person (including any such option or
warrant).
"Domestic Lending Office" means, with respect to any Lender, the office
of such Lender specified as its "Domestic Lending Office" below its name on the
Lender Schedule attached hereto, or such other office as such Lender may from
time to time specify to Borrower and Agent; and, with respect to Agent, the
office, branch, or agency through which it administers this Agreement.
"Eligible Transferee" means a Person which either (a) is a Lender or
Lender Affiliate or (b) is consented to as an Eligible Transferee by Agent and,
so long as no Event of Default is continuing, by Borrower, which consents in
each case will not be unreasonably withheld (provided that no Person organized
outside the United States may be an Eligible Transferee if Borrower would be
required to pay withholding taxes on interest or principal owed to such Person).
"Engineering Report" means the Initial Engineering Report and each
engineering report delivered pursuant to Section 6.2.
"Environmental Laws" means any and all Laws relating to the environment
or to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment including ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Affiliate" means Restricted Persons and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control
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that, together with Restricted Persons, are treated as a single employer under
Section 414 of the Internal Revenue Code of 1986, as amended.
"ERISA Plan" means any employee pension benefit plan subject to Title
IV of ERISA maintained by any ERISA Affiliate with respect to which any
Restricted Person has a fixed or contingent liability.
"Eurodollar Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" below its
name on the Lender Schedule attached hereto (or, if no such office is specified,
its Domestic Lending Office), or such other office of such Lender as such Lender
may from time to time specify to Borrower and Agent.
"Eurodollar Loan" means a Loan which is properly designated as a
Eurodollar Loan pursuant to Section 2.2 or 2.3.
"Eurodollar Margin" means, on any date, with respect to each Eurodollar
Loan, the number of basis points per annum set forth below based on the
Applicable Utilization Level on such date:
<TABLE>
<CAPTION>
Applicable Utilization Level Eurodollar Margin
---------------------------------------- --------------------------
<S> <C>
Level I 200
Level II 225
Level III 250
Level IV 275
</TABLE>
Changes in the applicable Eurodollar Margin will occur automatically without
prior notice as changes in the Applicable Utilization Level occur. Agent will
give notice promptly to Borrower and the Lenders of changes in the Eurodollar
Margin.
"Eurodollar Rate" means, with respect to each particular Eurodollar
Loan and the associated LIBOR Rate and Reserve Percentage, the rate per annum
calculated by Agent (rounded upwards, if necessary, to the next higher 0.01%)
determined on a daily basis pursuant to the following formula:
Eurodollar Rate =
LIBOR Rate + Eurodollar Margin
100.0% - Reserve Percentage
The Eurodollar Rate for any Eurodollar Loan shall change whenever the Eurodollar
Margin or the Reserve Percentage changes. No Eurodollar Rate shall ever exceed
the Highest Lawful Rate.
"Evaluation Date" means each of the following:
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(a) January 1 and July 1 of each year, beginning July 1, 2000;
(b) Each other date which either Borrower or Required Lenders, at their
respective options, specifies as a date as of which the Borrowing Base is to be
redetermined, provided that each such date must be the first or last date of a
current calendar month and that Borrower shall not be entitled to request any
such redetermination more than once during any six (6) month period beginning
with any January 1 or July 1.
"Event of Default" has the meaning given it in Section 8.1.
"Facility Usage" means, at the time in question, the aggregate amount
of outstanding Loans and existing LC Obligations at such time.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100th of one percent) equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate quoted to Agent on such day on such transactions as determined by Agent.
"Fiscal Quarter" means the fiscal quarter of Parent.
"Fiscal Year" means the fiscal year of Parent.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor) and which, in the case of Parent
and its Consolidated Subsidiaries, are applied for all periods after the date
hereof in a manner consistent with the manner in which such principles and
practices were applied to the audited Initial Financial Statements. If any
change in any accounting principle or practice is required by the Financial
Accounting Standards Board (or any such successor) in order for such principle
or practice to continue as a generally accepted accounting principle or
practice, all reports and financial statements required hereunder with respect
to Parent or with respect to Parent and its Consolidated Subsidiaries may be
prepared in accordance with such change, but all calculations and determinations
to be made hereunder may be made in accordance with such change only after
notice of such change is given to each Lender and Majority Lenders agree to such
change insofar as it affects the accounting of Parent or of Parent and its
Consolidated Subsidiaries.
"Guarantor" means any Person who has guaranteed some or all of the
Obligations pursuant to a guaranty listed on the Security Schedule or any other
Person who has guaranteed some or all of the Obligations and who has been
accepted by Agent as a Guarantor or any
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Subsidiary of Borrower which now or hereafter executes and delivers a guaranty
to Agent pursuant to Section 6.17.
"Hazardous Materials" means any substances regulated under any
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Hedging Contract" means (a) any agreement providing for options,
swaps, floors, caps, collars, forward sales or forward purchases involving
interest rates, commodities or commodity prices, equities, currencies, bonds, or
indexes based on any of the foregoing, (b) any option, futures or forward
contract traded on an exchange, and (c) any other derivative agreement or other
similar agreement or arrangement.
"Highest Lawful Rate" means, with respect to each Lender, the maximum
nonusurious rate of interest that such Lender is permitted under applicable Law
to contract for, take, charge, or receive with respect to its Loan. All
determinations herein of the Highest Lawful Rate, or of any interest rate
determined by reference to the Highest Lawful Rate, shall be made separately for
each Lender as appropriate to assure that the Loan Documents are not construed
to obligate any Person to pay interest to any Lender at a rate in excess of the
Highest Lawful Rate applicable to such Lender.
"Indebtedness" of any Person means Liabilities (without duplication) in
any of the following categories:
(a) Liabilities for borrowed money,
(b) Liabilities constituting an obligation to pay the deferred purchase
price of property or services,
(c) Liabilities evidenced by a bond, debenture, note or similar
instrument,
(d) Liabilities which (i) would under GAAP be shown on such Person's
balance sheet as a liability, and (ii) are payable more than one year from the
date of creation thereof (other than reserves for taxes and reserves for
contingent obligations),
(e) Liabilities arising under Hedging Contracts,
(f) Liabilities constituting principal under leases capitalized in
accordance with GAAP or arising under operating leases,
(g) Liabilities arising under conditional sales or other title
retention agreements,
(h) Liabilities owing under direct or indirect guaranties of
Liabilities of any other Person or constituting obligations to purchase or
acquire or to otherwise protect or insure a creditor against loss in respect of
Liabilities of any other Person (such as obligations under working capital
maintenance agreements, agreements to keep-well, or agreements to purchase
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<PAGE> 15
Liabilities, assets, goods, securities or services), but excluding endorsements
in the ordinary course of business of negotiable instruments in the course of
collection,
(i) Liabilities (for example, repurchase agreements, mandatorily
redeemable preferred stock and sale/leaseback agreements) consisting of an
obligation to purchase or redeem securities or other property, if such
Liabilities arises out of or in connection with the sale of or issuance of the
same or similar securities or property,
(j) Liabilities with respect to letters of credit or applications or
reimbursement agreements therefor,
(k) Liabilities with respect to payments received in consideration of
oil, gas, or other minerals yet to be acquired or produced at the time of
payment (including obligations under "take-or-pay" contracts to deliver gas in
return for payments already received and the undischarged balance of any
production payment created by such Person or for the creation of which such
Person directly or indirectly received payment),
(l) Liabilities with respect to other obligations to deliver goods or
services in consideration of advance payments therefor, or
(m) Liabilities in respect of banker's acceptances or similar
instruments issued or accepted by banks;
provided, however, that the "Indebtedness" of any Person shall not include
Liabilities that were incurred by such Person on ordinary trade terms to
vendors, suppliers, or other Persons providing goods and services for use by
such Person in the ordinary course of its business, unless and until such
Liabilities are outstanding more than 120 days past the original invoice or
billing date therefor (but excluding such Liabilities so outstanding which are
contested in good faith by appropriate proceedings and for which adequate
reserves are maintained on the books of such Person in accordance with GAAP).
"Indentures" means (i) that certain Indenture dated April 1, 1996 among
Parent, as Issuer, the Subsidiary Guarantors, as Guarantors, and United States
Trust Company of New York, as Trustee, providing for $120,000,000 in principal
amount of 9.125% Senior Notes due 2006, as supplemented prior to the date hereof
(the "`96 Indenture"), (ii) that certain Indenture dated March 15, 1997 among
Parent, as Issuer, the Subsidiary Guarantors, as Guarantors, and United States
Trust Company of New York, as Trustee, providing for $150,000,000 in principal
amount of 7.875% Senior Notes due 2004, as supplemented prior to the date
hereof, and that certain Indenture dated March 15, 1997 among Parent, as Issuer,
the Subsidiary Guarantors, as Guarantors, and United States Trust Company of New
York, as Trustee, providing for $150,000,000 in principal amount of 8.5% Senior
Notes due 2012, as supplemented prior to the date hereof (the "`97 Indenture"),
and (iii) that certain Indenture dated April 1, 1998 among Parent, as Issuer,
the Subsidiary Guarantors, as Guarantors, and United States Trust Company of New
York, as Trustee, providing for $500,000,000 in principal amount of 9 5/8%
Senior Notes due 2005 (the "`98 Indenture").
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<PAGE> 16
"Initial Engineering Report" means the following engineering reports
concerning oil and gas properties of Restricted Persons:
(i) Report dated January 1, 2000 prepared by Williamson Petroleum
Consultants, Inc.;
(ii) Report dated January 1, 2000 prepared by Ryder Scott Company; and
(iii) Report dated January 1, 2000 prepared by Parent's employee
engineers.
"Initial Financial Statements" means (i) the audited annual
Consolidated financial statements of Parent dated as of December 31, 1999, and
(ii) the unaudited quarterly Consolidated financial statements of Parent dated
as of March 31, 2000.
"Insurance Schedule" means Schedule 3 attached hereto.
"Interest Period" means, with respect to each particular Eurodollar
Loan in a Borrowing, a period of 1, 2, 3 or 6 months, as specified in the
Borrowing Notice or Continuation/Conversion Notice applicable thereto, beginning
on and including the date specified in such Borrowing Notice or
Continuation/Conversion Notice (which must be a Business Day), and ending on but
not including the same day of the month as the day on which it began (e.g., a
period beginning on the third day of one month shall end on but not include the
third day of another month), provided that each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (unless such next succeeding Business Day is the first
Business Day of a calendar month, in which case such Interest Period shall end
on the immediately preceding Business Day). No Interest Period may be elected
which would extend past the date on which the associated Note is due and payable
in full.
"Investment" means any investment, in cash or by delivery of property
made, directly or indirectly in any Person, whether by acquisition of shares of
capital stock, indebtedness or other obligations or securities or by loan,
advance, capital contribution or otherwise.
"Law" means any statute, law, regulation, ordinance, rule, treaty,
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental restriction of the United States or any state or political
subdivision thereof or of any foreign country or any department, province or
other political subdivision thereof.
"LC Application" means any application for a Letter of Credit hereafter
made by Borrower to LC Issuer.
"LC Collateral" has the meaning given to such term in Section 2.16(a).
"LC Issuer" means Union Bank of California, N.A. in its capacity as the
issuer of Letters of Credit hereunder, and its successors in such capacity.
Agent may, with the consent of Borrower and the Lender in question, appoint any
Lender hereunder as the LC Issuer in place of or in addition to Union Bank of
California, N.A.
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<PAGE> 17
"LC Obligations" means, at the time in question, the sum of all Matured
LC Obligations plus the maximum amounts which LC Issuer might then or thereafter
be called upon to advance under all Letters of Credit then outstanding.
"Lenders" means each signatory hereto (other than Borrower and
Restricted Persons that are party hereto), including Union Bank of California,
N.A. in its capacity as a Lender hereunder rather than as Agent or LC Issuer,
and the successors of each such party as holder of a Note.
"Lender Affiliate" means, with respect to a Lender, any Person that
directly or indirectly (through one or more intermediaries or otherwise)
controls, is controlled by or is under the common control with such Lender;
control meaning the power to vote more than 50% of the securities having
ordinary voting power for election of directors.
"Lending Office" means, with respect to any Lender, such Lender's
Domestic Lending Office or Eurodollar Lending Office, as applicable; with
respect to LC Issuer, the office, branch, or agency through which it issues
Letters of Credit; and, with respect to Agent, the office, branch, or agency
through which it administers this Agreement.
"Letter of Credit" means any letter of credit issued by LC Issuer
hereunder at the application of Borrower.
"Letter of Credit Fee Rate" means, on any date the number of basis
points per annum set forth below based on the Applicable Utilization Level on
such date:
<TABLE>
<CAPTION>
Applicable Utilization Level Letter of Credit Fee Rate
--------------------------------------- ---------------------------------
<S> <C>
Level I 200
Level II 225
Level III 250
Level IV 275
</TABLE>
Changes in the applicable Letter of Credit Fee Rate will occur automatically
without prior notice as changes in the Applicable Utilization Level occur. Agent
will give notice promptly to Borrower and the Lenders of changes in the Letter
of Credit Fee Rate.
"Liabilities" means, as to any Person, all indebtedness, liabilities
and obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent.
"LIBOR Rate" means, with respect to each particular Eurodollar Loan and
the related Interest Period, the rate of interest per annum determined by Agent
in accordance with its
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<PAGE> 18
customary general practices to be representative of the rates at which deposits
of dollars are offered to Agent at approximately 9:00 a.m. New York, New York
time two Business Days prior to the first day of such Interest Period (by prime
banks in the interbank eurocurrency market which have been selected by Agent in
accordance with its customary general practices) for delivery on the first day
of such Interest Period in an amount equal or comparable to the amount of the
applicable Eurodollar Loan and for a period of time equal or comparable to the
length of such Interest Period. The LIBOR Rate determined by Agent with respect
to a particular Eurodollar Loan shall be fixed at such rate for the duration of
the associated Interest Period. If Agent is unable so to determine the LIBOR
Rate for any Eurodollar Loan, Borrower shall be deemed not to have elected such
Eurodollar Loan.
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure Liabilities owed to it or any other
arrangement with such creditor which provides for the payment of such
Liabilities out of such property or assets or which allows such creditor to have
such Liabilities satisfied out of such property or assets prior to the general
creditors of any owner thereof, including any lien, mortgage, security interest,
pledge, deposit, production payment, rights of a vendor under any title
retention or conditional sale agreement or lease substantially equivalent
thereto, tax lien, mechanic's or materialman's lien, or any other charge or
encumbrance for security purposes, whether arising by Law or agreement or
otherwise, but excluding any right of offset which arises without agreement in
the ordinary course of business. "Lien" also means any filed financing
statement, any registration of a pledge (such as with an issuer of
uncertificated securities), or any other arrangement or action which would serve
to perfect a Lien described in the preceding sentence, regardless of whether
such financing statement is filed, such registration is made, or such
arrangement or action is undertaken before or after such Lien exists.
"Loan" has the meaning given to such term in Section 2.1.
"Loan Documents" means this Agreement, the Notes, the Security
Documents, the Letters of Credit, the LC Applications, and all other agreements,
certificates, documents, instruments and writings at any time delivered in
connection herewith or therewith (exclusive of term sheets, commitment letters,
correspondence and similar documents used in the negotiation hereof, except to
the extent the same contain information about Borrower or its Affiliates,
properties, business or prospects).
"Majority Lenders" means Agent and Lenders whose aggregate Percentage
Shares equal or exceed sixty-six and two-thirds percent (66 2/3%).
"Material Adverse Change" means a material and adverse change, from the
state of affairs presented in the Initial Financial Statements or as represented
or warranted in any Loan Document, to (a) Restricted Persons' Consolidated
financial condition, (b) the operations or properties of Restricted Persons,
considered as a whole, (c) Borrower's or any other Restricted Persons' ability
to timely pay the Obligations, or (d) the enforceability of the material terms
of any Loan Documents.
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<PAGE> 19
"Matured LC Obligations" means all amounts paid by LC Issuer on drafts
or demands for payment drawn or made under or purported to be under any Letter
of Credit and all other amounts due and owing to LC Issuer under any LC
Application for any Letter of Credit, to the extent the same have not been
repaid to LC Issuer (with the proceeds of Loans or otherwise).
"Maturity Date" means July 15, 2002.
"Maximum Drawing Amount" means at the time in question the sum of the
maximum amounts which LC Issuer might then or thereafter be called upon to
advance under all Letters of Credit then outstanding.
"Maximum Loan Amount" means the amount of $75,000,000.
"Moody's" means Moody's Investors Service, Inc. and any successor
thereto that is a nationally-recognized rating agency.
"Mortgaged Properties" means all properties subject to the Security
Documents.
"Note" has the meaning given it in Section 2.1.
"Obligations" means all Liabilities from time to time owing by any
Restricted Person to any Bank Party under or pursuant to any of the Loan
Documents, including all LC Obligations. "Obligation" means any part of the
Obligations.
"Parent" means Chesapeake Energy Corporation, an Oklahoma corporation.
"Percentage Share" means, with respect to any Lender (a) when used in
Sections 2.1 or 2.5, in any Borrowing Notice or when no Loans are outstanding
hereunder, the percentage set forth opposite such Lender's name on Lender
Schedule attached hereto, and (b) when used otherwise, the percentage obtained
by dividing (i) the sum of the unpaid principal balance of such Lender's Loans
at the time in question plus the Matured LC Obligations which such Lender has
funded pursuant to Section 2.13(c) plus the portion of the Maximum Drawing
Amount which such Lender might be obligated to fund under Section 2.13(c), by
(ii) the sum of the aggregate unpaid principal balance of all Loans at such time
plus the aggregate amount of LC Obligations outstanding at such time.
"Permitted Investments" means:
(i) Cash Equivalents,
(ii) Investments by any Restricted Person in any of its Subsidiaries
(other than Chesapeake Canada) provided that such Subsidiary is a Guarantor,
(iii) additional capital contributions to or other investments in
Chesapeake Canada not in excess of the aggregate amount of $60,000,000 after
August 27, 1998,
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<PAGE> 20
(iv) the entry into operating agreements, joint ventures, processing
agreements, farm-out agreements, development agreements, area of mutual interest
agreements, contracts for the sale, transportation or exchange of oil and
natural gas, unitization agreements, pooling arrangements, joint bidding
agreements, service contracts, partnership agreements (whether general or
limited) or other similar customary agreements, transactions, properties,
interests or arrangements, and investments and expenditures in connection
therewith or pursuant thereto, in each case made or entered into in the ordinary
course of the oil and gas business,
(v) Investments consisting of loans or credit extensions permitted
under Section 7.8, and
(vi) Investments existing on the date hereof listed on Schedule 4
hereto.
"Permitted Lien" has the meaning given to such term in Section 7.2.
"Person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint venture,
Tribunal, or any other legally recognizable entity.
"Rating Agency" means either S&P or Moody's or their respective
successors.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect.
"Required Lenders" means Agent and Lenders whose aggregate Percentage
Shares equal or exceed seventy-five percent (75%).
"Reserve Percentage" means, on any day with respect to each particular
Eurodollar Loan, the maximum reserve requirement, as determined by Agent
(including without limitation any basic, supplemental, marginal, emergency or
similar reserves), expressed as a percentage and rounded to the next higher
0.01%, which would then apply under Regulation D with respect to "Eurocurrency
liabilities", as such term is defined in Regulation D, of $1,000,000 or more. If
such reserve requirement shall change after the date hereof, the Reserve
Percentage shall be automatically increased or decreased, as the case may be,
from time to time as of the effective time of each such change in such reserve
requirement.
"Restricted Person" means Parent, Borrower, and each Subsidiary of
Parent, (whether or not such Subsidiary is a Guarantor).
"S&P" means Standard & Poor's Ratings Group and any successor thereto
that is a nationally-recognized rating agency.
"SEC" means the Securities and Exchange Commission.
"Security Documents" means the instruments listed in the Security
Schedule and all other security agreements, deeds of trust, mortgages, chattel
mortgages, pledges, guaranties, financing
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<PAGE> 21
statements, continuation statements, extension agreements and other agreements
or instruments now, heretofore, or hereafter delivered by any Restricted Person
to Agent in connection with this Agreement or any transaction contemplated
hereby to secure or guarantee the payment of any part of the Obligations or the
performance of any Restricted Person's other duties and obligations under the
Loan Documents.
"Security Schedule" means Schedule 2 hereto.
"Senior Debt Limit" means on any day (a) the maximum amount of
Indebtedness that Parent and its Subsidiaries may incur and secure pursuant to
the terms of each of the following: (I) clause (i) of the definition of
"Permitted Indebtedness" and clause (ii) of the definition of "Permitted Liens"
under the `96 Indenture, (II) clause (i) of Section 4.8 of the `97 Indentures
and (III) clause (i) of the definition of "Permitted Indebtedness" and clause
(ii) of the definition of "Permitted Liens" under the `98 Indenture minus (b)
the amount of Indebtedness (other than Indebtedness under the Borrowing Base)
that Parent or any of its Subsidiaries have incurred and/or secured by Liens on
such day that counts against the restrictions on the maximum amount of
Indebtedness referred to in clause (a).
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such Person.
"Termination Event" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(b)(5) or (6) of ERISA
or (ii) any other reportable event described in Section 4043(b) of ERISA other
than a reportable event not subject to the provision for 30-day notice to the
Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation
under Section 4043(a) of ERISA, or (b) the withdrawal of any ERISA Affiliate
from an ERISA Plan during a plan year in which it was a "substantial employer"
as defined in Section 4001(a)(2) of ERISA, or (c) the filing of a notice of
intent to terminate any ERISA Plan or the treatment of any ERISA Plan amendment
as a termination under Section 4041 of ERISA, or (d) the institution of
proceedings to terminate any ERISA Plan by the Pension Benefit Guaranty
Corporation under Section 4042 of ERISA, or (e) any other event or condition
which might constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any ERISA Plan.
"Tribunal" means any government, any arbitration panel, any court or
any governmental department, commission, board, bureau, agency or
instrumentality of the United States of America or any state, province,
commonwealth, nation, territory, possession, county, parish, town, township,
village or municipality, whether now or hereafter constituted or existing.
"Type" means, with respect to any Loans, the characterization of such
Loans as either Base Rate Loans or Eurodollar Loans.
Section 1.2. Exhibits and Schedules; Additional Definitions. All
Exhibits and Schedules attached to this Agreement are a part hereof for all
purposes. Reference is hereby made to the
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<PAGE> 22
Security Schedule for the meaning of certain terms defined therein and used but
not defined herein, which definitions are incorporated herein by reference.
Section 1.3. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in this
Agreement which refer to a particular agreement, instrument or document also
refer to and include all renewals, extensions, modifications, amendments and
restatements of such agreement, instrument or document, provided that nothing
contained in this section shall be construed to authorize any such renewal,
extension, modification, amendment or restatement.
Section 1.4. References and Titles. All references in this Agreement to
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation". Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
Section 1.5. Calculations and Determinations. All calculations under
the Loan Documents of interest chargeable with respect to Eurodollar Loans and
of fees shall be made on the basis of actual days elapsed (including the first
day but excluding the last) and a year of 360 days. All other calculations of
interest made under the Loan Documents shall be made on the basis of actual days
elapsed (including the first day but excluding the last) and a year of 365 or
366 days, as appropriate. Each determination by a Bank Party of amounts to be
paid under Sections 3.2 through 3.6 or any other matters which are to be
determined hereunder by a Bank Party (such as any Eurodollar Rate, LIBOR Rate,
Business Day, Interest Period, or Reserve Percentage) shall, in the absence of
manifest error, be conclusive and binding. Unless otherwise expressly provided
herein or unless Majority Lenders otherwise consent all financial statements and
reports furnished to any Bank Party hereunder shall be prepared and all
financial computations and determinations pursuant hereto shall be made in
accordance with GAAP.
Section 1.6. Joint Preparation; Construction of Indemnities and
Releases. This Agreement and the other Loan Documents have been prepared through
the joint efforts of the various parties hereto and their counsel, and all such
parties shall equally be considered to be the drafters hereof and thereof. All
indemnification and release provisions of this Agreement shall be construed
broadly (and not narrowly) in favor of the Persons receiving indemnification
from or being released.
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ARTICLE II - The Loans and Letters of Credit
Section 2.1. Commitments to Lend; Notes. Subject to the terms and
conditions hereof, each Lender agrees to make loans to Borrower (herein called
such Lender's "Loans") upon Borrower's request from time to time during the
Commitment Period, provided that (a) subject to Sections 3.3, 3.4 and 3.6, all
Lenders are requested to make Loans of the same Type in accordance with their
respective Percentage Shares and as part of the same Borrowing, (b) after giving
effect to such Loans, the Facility Usage does not exceed the Borrowing Base in
effect as of the date on which the requested Loans are to be made, (c) after
giving effect to such Loans, the Facility Usage does not exceed the Senior Debt
Limit in effect as of the date on which the requested Loans are to be made, and
(d) after giving effect to such Loans, the outstanding principal amount of each
Lender's Loans, plus such Lender's Percentage Share of LC Obligations does not
exceed such Lender's Percentage Share of the Borrowing Base in effect as of the
date on which the requested Loans are to be made. The aggregate amount of all
Loans in any Borrowing must be greater than or equal to $2,500,000 or must equal
the remaining availability under the Borrowing Base. Borrower may have no more
than five Borrowings of Eurodollar Loans outstanding at any time. The obligation
of Borrower to repay to each Lender the aggregate amount of all Loans made by
such Lender, together with interest accruing in connection therewith, shall be
evidenced by a single promissory note (herein called such Lender's "Note") made
by Borrower payable to the order of such Lender in the form of Exhibit A with
appropriate insertions. It is expressly understood that Lenders' commitment to
make Loans is determined only by reference to the Borrowing Base from time to
time in effect, and the aggregate face amount of the Notes and the amount
specified in the Security Documents are specified at a greater amount only for
the convenience of the parties to avoid the necessity of preparing and recording
supplements to the Security Documents. The amount of principal owing on any
Lender's Note at any given time shall be the aggregate amount of all Loans
theretofore made by such Lender minus all payments of principal theretofore
received by such Lender on such Note. Interest on each Note shall accrue and be
due and payable as provided herein and therein, with Eurodollar Loans bearing
interest at the Eurodollar Rate and Base Rate Loans bearing interest at the Base
Rate (subject to the applicability of the Default Rate and limited by the
provisions of Section 10.7). On the last day of the Commitment Period, unless
sooner paid as provided herein, all Loans shall be paid in full. Subject to the
terms and conditions hereof, Borrower may borrow, repay, and reborrow hereunder.
Section 2.2. Requests for New Loans. Borrower must give to Agent
written notice (or telephonic notice promptly confirmed in writing) of any
requested Borrowing of new Loans to be advanced by Lenders. Each such notice
constitutes a "Borrowing Notice" hereunder and must:
(a) specify (i) the aggregate amount of any such Borrowing of
new Base Rate Loans and the date on which such Base Rate Loans are to
be advanced, or (ii) the aggregate amount of any such Borrowing of new
Eurodollar Loans, the date on which such Eurodollar Loans are to be
advanced (which shall be the first day of the Interest Period which is
to apply thereto), and the length of the applicable Interest Period;
and
(b) be received by Agent not later than 8:00 a.m., Los
Angeles, California time, on (i) the day on which any such Base Rate
Loans are to be made, or (ii) the third Business Day preceding the day
on which any such Eurodollar Loans are to be made.
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Each such written request or confirmation must be made in the form and substance
of the "Borrowing Notice" attached hereto as Exhibit B, duly completed. Each
such telephonic request shall be deemed a representation, warranty,
acknowledgment and agreement by Borrower as to the matters which are required to
be set out in such written confirmation. Upon receipt of any such Borrowing
Notice, Agent shall give each Lender prompt notice of the terms thereof. If all
conditions precedent to such new Loans have been met, each Lender will on the
date requested promptly remit to Agent at Agent's office in Los Angeles,
California the amount of such Lender's new Loan in immediately available funds,
and upon receipt of such funds, unless to its actual knowledge any conditions
precedent to such Loans have been neither met nor waived as provided herein,
Agent shall promptly make such Loans available to Borrower. Unless Agent shall
have received prompt notice from a Lender that such Lender will not make
available to Agent such Lender's new Loan, Agent may in its discretion assume
that such Lender has made such Loan available to Agent in accordance with this
section and Agent may if it chooses, in reliance upon such assumption, make such
Loan available to Borrower. If and to the extent such Lender shall not so make
its new Loan available to Agent, such Lender and Borrower severally agree to pay
or repay to Agent within three days after demand the amount of such Loan
together with interest thereon, for each day from the date such amount was made
available to Borrower until the date such amount is paid or repaid to Agent,
with interest at (i) the Federal Funds Rate, if such Lender is making such
payment and (ii) the interest rate applicable at the time to the other new Loans
made on such date, if Borrower is making such repayment. If neither such Lender
nor Borrower pay or repay to Agent such amount within such three-day period,
Agent shall in addition to such amount be entitled to recover from such Lender
and from Borrower, on demand, interest thereon at the Default Rate, calculated
from the date such amount was made available to Borrower. The failure of any
Lender to make any new Loan to be made by it hereunder shall not relieve any
other Lender of its obligation hereunder, if any, to make its new Loan, but no
Lender shall be responsible for the failure of any other Lender to make any new
Loan to be made by such other Lender.
Section 2.3. Interest Rates; Continuations and Conversions of Existing
Loans.
(a) Interest Rates. Unless the Default Rate shall be applicable, Base
Rate Loans from time to time outstanding shall bear interest on each day
outstanding at the sum of the Base Rate in effect on such day, but in no event
in excess of the Highest Lawful Rate. Unless the Default Rate shall be
applicable, each Eurodollar Loan shall bear interest on each day during the
related Interest Period at the related Eurodollar Rate in effect on such day,
but in no event in excess of the Highest Lawful Rate. Such interest shall be
payable on the dates specified in the Note. After the occurrence and during the
continuance of an Event of Default and a notice to the Borrower by Agent that
the Default Rate shall apply, all Loans shall bear interest on each day at the
Default Rate in effect on such day, and such interest shall be due and payable
daily as it accrues.
(b) Continuations and Conversions. Borrower may make the following
elections with respect to Loans already outstanding: to Convert Base Rate Loans
to Eurodollar Loans, to Convert Eurodollar Loans to Base Rate Loans on the last
day of the Interest Period applicable thereto, or to Continue Eurodollar Loans
beyond the expiration of such Interest Period by designating a new Interest
Period to take effect at the time of such expiration. In making such
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elections, Borrower may combine existing Loans made pursuant to separate
Borrowings into one new Borrowing or divide existing Loans made pursuant to one
Borrowing into separate new Borrowings, provided that Borrower may have no more
than five Borrowings of Eurodollar Loans outstanding at any time. To make any
such election, Borrower must give to Agent written notice (or telephonic notice
promptly confirmed in writing) of any such Conversion or Continuation of
existing Loans, with a separate notice given for each new Borrowing. Each such
notice constitutes a "Continuation/Conversion Notice" hereunder and must:
(i) specify the existing Loans which are to be Continued or
Converted;
(ii) specify (A) the aggregate amount of any Borrowing of Base
Rate Loans into which such existing Loans are to be Continued or
Converted and the date on which such Continuation or Conversion is to
occur, or (B) the aggregate amount of any Borrowing of Eurodollar Loans
into which such existing Loans are to be Continued or Converted, the
date on which such Continuation or Conversion is to occur (which shall
be the first day of the Interest Period which is to apply to such
Eurodollar Loans), and the length of the applicable Interest Period;
and
(iii) be received by Agent not later than 8:00 a.m., Los
Angeles, California time, on (A) the day on which any such Continuation
or Conversion to Base Rate Loans is to occur, or (B) the third Business
Day preceding the day on which any such Continuation or Conversion to
Eurodollar Loans is to occur.
Each such written request or confirmation must be made in the form and substance
of the "Continuation/Conversion Notice" attached hereto as Exhibit C, duly
completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in such written confirmation. Upon receipt of any such
Continuation/Conversion Notice, Agent shall give each Lender prompt notice of
the terms thereof. Each Continuation/Conversion Notice shall be irrevocable and
binding on Borrower. During the continuance of any Default, Borrower may not
make any election to Convert existing Loans into Eurodollar Loans or Continue
existing Loans as Eurodollar Loans. If (due to the existence of a Default or for
any other reason) Borrower fails to timely and properly give any notice of
Continuation or Conversion with respect to a Borrowing of existing Eurodollar
Loans at least three days prior to the end of the Interest Period applicable
thereto, such Eurodollar Loans shall automatically be Converted into Base Rate
Loans at the end of such Interest Period. No new funds shall be repaid by
Borrower or advanced by any Lender in connection with any Continuation or
Conversion of existing Loans pursuant to this section, and no such Continuation
or Conversion shall be deemed to be a new advance of funds for any purpose; such
Continuations and Conversions merely constitute a change in the interest rate
applicable to already outstanding Loans.
Section 2.4. Use of Proceeds. Borrower shall use all Loans to finance
capital expenditures, to refinance existing Indebtedness of Borrower to Agent,
and provide working capital for its operations and for other general business
purposes. Borrower shall use all Letters of Credit for its general corporate
purposes. In no event shall the funds from any Loan or any Letter of Credit be
used directly or indirectly by any Person for personal, family, household or
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agricultural purposes or for the purpose, whether immediate, incidental or
ultimate, of purchasing, acquiring or carrying any "margin stock" (as such term
is defined in Regulation U and Regulation G promulgated by the Board of
Governors of the Federal Reserve System) or to extend credit to others directly
or indirectly for the purpose of purchasing or carrying any such margin stock.
Borrower represents and warrants that Borrower is not engaged principally, or as
one of Borrower's important activities, in the business of extending credit to
others for the purpose of purchasing or carrying such margin stock.
Section 2.5. Fees.
(a) Commitment Fees. In consideration of each Lender's commitment to
make Loans, Borrower will pay to Agent for the account of each Lender a
commitment fee determined on a daily basis at the rate of one-half of one
percent (.50%) per annum times such Lender's Percentage Share of the unused
portion of the Borrowing Base on each day during the Commitment Period,
determined for each such day by deducting the Facility Usage from the amount of
the Borrowing Base at the end of such day. This commitment fee shall be due and
payable in arrears on the last day of each September, December, March, and June,
and at the end of the Commitment Period.
(b) Agent's Fees. In addition to all other amounts due to Agent under
the Loan Documents, Borrower will pay fees to Agent as described in a letter
agreement of even date herewith between Agent and Borrower.
Section 2.6. Optional Prepayments. Borrower may, upon three Business
Days' notice to each Lender, from time to time and without premium or penalty
prepay the Notes, in whole or in part, so long as the aggregate amounts of all
partial prepayments of principal on the Notes equals $1,000,000 or any higher
integral multiple of $1,000,000, so long as Borrower does not prepay any
Eurodollar Loan, and so long as Borrower does not make any prepayments which
would reduce the unpaid principal balance of any Loan to less than $100,000
without first either (a) terminating this Agreement or (b) providing assurance
satisfactory to Agent in its discretion that Lenders' legal rights under the
Loan Documents are in no way affected by such reduction. Each prepayment of
principal under this section shall be accompanied by all interest then accrued
and unpaid on the principal so prepaid. Any principal or interest prepaid
pursuant to this section shall be in addition to, and not in lieu of, all
payments otherwise required to be paid under the Loan Documents at the time of
such prepayment.
Section 2.7. Mandatory Prepayments.
(a) If at any time the Facility Usage exceeds the Maximum Loan Amount
(whether due to a reduction in the Maximum Loan Amount in accordance with this
Agreement, or otherwise), Borrower shall immediately prepay the principal of the
Loans in an amount at least equal to such excess.
(b) If at any time the Facility Usage is less than the Maximum Loan
Amount but in excess of the Borrowing Base (such excess being herein called a
"Borrowing Base Deficiency"),
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Agent shall give notice of such fact to Borrower (herein called a "Deficiency
Notice"), and Borrower shall:
(i) within thirty (30) days after the Deficiency Notice give
notice to Agent electing to prepay the principal of the Loans in a
single payment, in which event Borrower shall prepay the principal of
the Loans in an aggregate amount at least equal to such Borrowing Base
Deficiency (or, if the Loans have been paid in full, pay to LC Issuer
LC Collateral as required under Section 2.16(a)) on or before the date
which is sixty (60) days after the Deficiency Notice, or
(ii) within 30 days after the Deficiency Notice give notice to
Agent electing to prepay the principal of the Loans in installments, in
which event Borrower shall prepay the principal of the Loans in six
consecutive monthly installments, in an aggregate amount at least equal
to such Borrowing Base Deficiency (or, if the Loans have been paid in
full, pay to LC Issuer LC Collateral as required under Section
2.16(a)), with the first such installment due 30 days after the
Deficiency Notice, the next five such installments due on the same day
of each consecutive month, each such installment being in the amount of
one-sixth of such Borrowing Base Deficiency, or
(iii) within 30 days after the Deficiency Notice, certify to
Agent that Borrower has marketable title, free of any Liens, to oil and
gas properties not included in such existing Borrowing Base, which
properties are not subject to any Liens except Permitted Liens, in an
amount which eliminates such Borrowing Base Deficiency, and provide to
each Lender the same information regarding such property as would be
required for an evaluation by Required Lenders under Section 2.9. If
Required Lenders determine that such properties will not serve to
eliminate such Borrowing Base Deficiency, then, within five Business
Days after receiving notice of such determination, Borrower will elect
to make, and thereafter make, the prepayments specified in either of
the preceding subsections (i) or (ii) of this subsection (b).
(c) Each prepayment of principal under this section shall be
accompanied by all interest then accrued and unpaid on the principal so prepaid.
Any principal or interest prepaid pursuant to this section shall be in addition
to, and not in lieu of, all payments otherwise required to be paid under the
Loan Documents at the time of such prepayment.
Section 2.8. Initial Borrowing Base. During the period from the date
hereof to the first Determination Date, the Borrowing Base shall be $75,000,000.
Section 2.9. Subsequent Determinations of Borrowing Base. Within 90
days after each Evaluation Date commencing October 1, 2000, Borrower shall
furnish to each Lender all information, reports and data which Agent has then
requested concerning Restricted Persons' businesses and properties (including
their oil and gas properties and interests and the reserves and production
relating thereto), together with the Engineering Report described in Section
6.2. Within forty-five days after receiving such information, reports and data,
or as promptly thereafter as practicable, Required Lenders shall agree upon an
amount for the Borrowing Base (provided that all Lenders must agree to any
increase in the Borrowing Base) and Agent shall by
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notice to Borrower designate such amount as the new Borrowing Base available to
Borrower hereunder, which designation shall take effect immediately on the date
such notice is sent (herein called a "Determination Date") and shall remain in
effect until but not including the next date as of which the Borrowing Base is
redetermined. If Borrower does not furnish all such information, reports and
data by the date specified in the first sentence of this section, Agent may
nonetheless designate the Borrowing Base at any amount which Required Lenders
determine and may redesignate the Borrowing Base from time to time thereafter
until each Lender receives all such information, reports and data, whereupon
Required Lenders shall designate a new Borrowing Base as described above.
Required Lenders shall determine the amount of the Borrowing Base based (i) upon
the total debt of Restricted Persons and upon the loan value which they in their
discretion assign to the various oil and gas properties of Restricted Persons at
the time in question and (ii) based upon such other credit factors (including
without limitation the assets, liabilities, cash flow, hedged and unhedged
exposure to price, foreign exchange rate, and interest rate changes, business,
properties, prospects, management and ownership of Restricted Persons) as they
in their discretion deem significant. It is expressly understood that Lenders
and Agent have no obligation to agree upon or designate the Borrowing Base at
any particular amount, whether in relation to the Maximum Loan Amount or
otherwise, and that Lenders' commitments to advance funds hereunder is
determined by reference to the Borrowing Base from time to time in effect, which
Borrowing Base shall be used for calculating commitment fees under Section 2.5
and, to the extent permitted by Law and regulatory authorities, for the purposes
of capital adequacy determination and reimbursements under Section 3.2.
Section 2.10. Borrower's Reduction of the Borrowing Base.
Until the termination of the Commitment Period Borrower may, during the
fifteen-day period beginning on each Determination Date (each such period being
called in this section an "Option Period"), reduce the Borrowing Base from the
amount designated by Agent to any lesser amount. To exercise such option
Borrower must within an Option Period send notice to Agent of the amount of the
Borrowing Base chosen by Borrower. If Borrower does not affirmatively exercise
this option during an Option Period, the Borrowing Base shall be the amount
designated by Agent. Any choice by Borrower of a Borrowing Base shall be
effective as of the first day of the Option Period during which such choice was
made and shall continue in effect until the next date as of which the Borrowing
Base is redetermined.
Section 2.11. Letters of Credit. Subject to the terms and conditions
hereof, Borrower may during the Commitment Period request LC Issuer to issue one
or more Letters of Credit, provided that, after taking such Letter of Credit
into account:
(a) the Facility Usage does not exceed the Borrowing Base at
such time;
(b) the aggregate amount of LC Obligations at such time does
not exceed $15,000,000;
(c) the expiration date of such Letter of Credit is prior to
the earlier of (i) twelve (12) months after the date of issuance of
such Letter of Credit or (ii) 30 days before the Maturity Date;
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(d) such Letter of Credit is to be used for general corporate
purposes of Borrower;
(e) such Letter of Credit is not directly or indirectly used
to assure payment of or otherwise support any Indebtedness of any
Person, except for Liabilities of any Restricted Person in respect of
Hedging Contracts permitted pursuant to Section 7.3;
(f) the issuance of such Letter of Credit will be in
compliance with all applicable governmental restrictions, policies, and
guidelines and will not subject LC Issuer to any cost which is not
reimbursable under Article III;
(g) the form and terms of such Letter of Credit are acceptable
to LC Issuer in its sole discretion; and
(h) all other conditions in this Agreement to the issuance of
such Letter of Credit have been satisfied.
LC Issuer will honor any such request if the foregoing conditions (a) through
(h) (in the following Section 2.12 called the "LC Conditions") have been met as
of the date of issuance of such Letter of Credit. LC Issuer may choose to honor
any such request for any other Letter of Credit but has no obligation to do so
and may refuse to issue any other requested Letter of Credit for any reason
which LC Issuer in its sole discretion deems relevant.
Section 2.12. Requesting Letters of Credit. Borrower must make written
application for any Letter of Credit at least five Business Days before the date
on which Borrower desires for LC Issuer to issue such Letter of Credit. By
making any such written application Borrower shall be deemed to have represented
and warranted that the LC Conditions described in Section 2.11 will be met as of
the date of issuance of such Letter of Credit. Each such written application for
a Letter of Credit must be made in writing in the form and substance of Exhibit
E, the terms and provisions of which are hereby incorporated herein by reference
(or in such other form as may mutually be agreed upon by LC Issuer and
Borrower). Two Business Days after the LC Conditions for a Letter of Credit have
been met as described in Section 2.11 (or if LC Issuer otherwise desires to
issue such Letter of Credit), LC Issuer will issue such Letter of Credit at LC
Issuer's office in Los Angeles, California. If any provisions of any LC
Application conflict with any provisions of this Agreement, the provisions of
this Agreement shall govern and control.
Section 2.13. Reimbursement and Participations.
(a) Reimbursement by Borrower. Each Matured LC Obligation shall
constitute a loan by LC Issuer to Borrower. Borrower promises to pay to LC
Issuer, or to LC Issuer's order, on demand, the full amount of each Matured LC
Obligation, together with interest thereon at the Base Rate from the date such
matured LC obligation accrues until the third Business Day after demand, and
thereafter at the Default Rate until paid, but in no event in excess of the
Highest Lawful Rate.
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(b) Letter of Credit Advances. If the beneficiary of any Letter of
Credit makes a draft or other demand for payment thereunder then Borrower may,
during the interval between the making thereof and the honoring thereof by LC
Issuer, request Lenders to make Loans to Borrower in the amount of such draft or
demand, which Loans shall be made concurrently with LC Issuer's payment of such
draft or demand and shall be immediately used by LC Issuer to repay the amount
of the resulting Matured LC Obligation. Such a request by Borrower shall be made
in compliance with all of the provisions hereof, provided that for the purposes
of the first sentence of Section 2.1 the amount of such Loans shall be
considered but the amount of the Matured LC Obligation to be concurrently paid
by such Loans shall not be considered.
(c) Participation by Lenders. LC Issuer irrevocably agrees to grant and
hereby grants to each Lender, and -- to induce LC Issuer to issue Letters of
Credit hereunder -- each Lender irrevocably agrees to accept and purchase and
hereby accepts and purchases from LC Issuer, on the terms and conditions
hereinafter stated and for such Lender's own account and risk an undivided
interest equal to such Lender's Percentage Share of LC Issuer's obligations and
rights under each Letter of Credit issued hereunder and the amount of each
Matured LC Obligation paid by LC Issuer thereunder. Each Lender unconditionally
and irrevocably agrees with LC Issuer that, if a Matured LC Obligation is paid
under any Letter of Credit for which LC Issuer is not reimbursed in full by
Borrower in accordance with the terms of this Agreement and the related LC
Application (including any reimbursement by means of concurrent Loans or by the
application of LC Collateral), such Lender shall (in all circumstances and
without set-off or counterclaim) pay to LC Issuer on demand, in immediately
available funds at LC Issuer's address for notices hereunder, such Lender's
Percentage Share of such Matured LC Obligation (or any portion thereof which has
not been reimbursed by Borrower). Each Lender's obligation to pay LC Issuer
pursuant to the terms of this subsection is irrevocable and unconditional. If
any amount required to be paid by any Lender to LC Issuer pursuant to this
subsection is paid by such Lender to LC Issuer within three Business Days after
the date such payment is due, LC Issuer shall in addition to such amount be
entitled to recover from such Lender, on demand, interest thereon calculated
from such due date at the Federal Funds Rate. If any amount required to be paid
by any Lender to LC Issuer pursuant to this subsection is not paid by such
Lender to LC Issuer within three Business Days after the date such payment is
due, LC Issuer shall in addition to such amount be entitled to recover from such
Lender, on demand, interest thereon calculated from such due date at the Default
Rate.
(d) Distributions to Participants. Whenever LC Issuer has in accordance
with this section received from any Lender payment of such Lender's Percentage
Share of any Matured LC Obligation, if LC Issuer thereafter receives any payment
of such Matured LC Obligation or any payment of interest thereon (whether
directly from Borrower or by application of LC Collateral or otherwise, and
excluding only interest for any period prior to LC Issuer's demand that such
Lender make such payment of its Percentage Share), LC Issuer will distribute to
such Lender its Percentage Share of the amounts so received by LC Issuer;
provided, however, that if any such payment received by LC Issuer must
thereafter be returned by LC Issuer, such Lender shall return to LC Issuer the
portion thereof which LC Issuer has previously distributed to it.
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(e) Calculations. A written advice setting forth in reasonable detail
the amounts owing under this section, submitted by LC Issuer to Borrower or any
Lender from time to time, shall be conclusive, absent manifest error, as to the
amounts thereof.
Section 2.14. Letter of Credit Fees. In consideration of LC Issuer's
issuance of any Letter of Credit, Borrower agrees to pay (a) to Agent, for the
account of all Lenders, a letter of credit fee determined on a daily basis by
applying the Letter of Credit Fee Rate to such Lender's Percentage Share of the
face amount of the Letter of Credit (but in no event less than $500 per annum),
and (b) to such LC Issuer for its own account, a letter of credit fronting fee
at a rate equal to one-eighth percent (.125%) per annum times the face amount of
such Letter of Credit (but in no event less than $250 per annum). The letter of
credit fee and the letter of credit fronting fee will be calculated on the face
amount of each Letter of Credit outstanding on each day at the above-applicable
rates and will be due and payable in arrears on the last day of each March,
June, September and December.
Section 2.15. No Duty to Inquire.
(a) Drafts and Demands. LC Issuer is authorized and instructed to
accept and pay drafts and demands for payment under any Letter of Credit without
requiring, and without responsibility for, any determination as to the existence
of any event giving rise to said draft, either at the time of acceptance or
payment or thereafter. LC Issuer is under no duty to determine the proper
identity of anyone presenting such a draft or making such a demand (whether by
tested telex or otherwise) as the officer, representative or agent of any
beneficiary under any Letter of Credit, and payment by LC Issuer to any such
beneficiary when requested by any such purported officer, representative or
agent is hereby authorized and approved. Borrower agrees to hold LC Issuer and
each other Bank Party harmless and indemnified against any liability or claim in
connection with or arising out of the subject matter of this section, WHICH
INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY
OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION
OF ANY KIND BY ANY BANK PARTY, provided only that no Bank Party shall be
entitled to indemnification for that portion, if any, of any liability or claim
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment.
(b) Extension of Maturity. If the maturity of any Letter of Credit is
extended by its terms or by Law or governmental action, if any extension of the
maturity or time for presentation of drafts or any other modification of the
terms of any Letter of Credit is made at the request of any Restricted Person,
or if the amount of any Letter of Credit is increased at the request of any
Restricted Person, this Agreement shall be binding upon all Restricted Persons
with respect to such Letter of Credit as so extended, increased or otherwise
modified, with respect to drafts and property covered thereby, and with respect
to any action taken by LC Issuer, LC Issuer's correspondents, or any Bank Party
in accordance with such extension, increase or other modification.
(c) Transferees of Letters of Credit. If any Letter of Credit provides
that it is transferable, LC Issuer shall have no duty to determine the proper
identity of anyone appearing as transferee of such Letter of Credit, nor shall
LC Issuer be charged with responsibility of any
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nature or character for the validity or correctness of any transfer or
successive transfers, and payment by LC Issuer to any purported transferee or
transferees as determined by LC Issuer is hereby authorized and approved, and
Borrower further agrees to hold LC Issuer and each other Bank Party harmless and
indemnified against any liability or claim in connection with or arising out of
the foregoing, WHICH INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR
CLAIM IS IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY BANK PARTY, provided only that no
Bank Party shall be entitled to indemnification for that portion, if any, of any
liability or claim which is proximately caused by its own individual gross
negligence or willful misconduct, as determined in a final judgment.
Section 2.16. LC Collateral.
(a) LC Obligations in Excess of Borrowing Base. If, after the making of
all mandatory prepayments required under Section 2.7, the principal balance of
the Loans is zero, but the outstanding LC Obligations will exceed the Borrowing
Base, then in addition to such prepayment of the entire principal balance of the
Loans Borrower will immediately pay to LC Issuer an amount equal to such excess.
LC Issuer will hold such amount as security for the remaining LC Obligations
(all such amounts held as security for LC Obligations being herein collectively
called "LC Collateral") until (i) such LC Obligations become Matured LC
Obligations, at which time such LC Collateral may be applied to such Matured LC
Obligations or (ii) such LC Obligations expire at which time any LC Collateral
in excess of any remaining LC Obligations will be returned to Borrower. Neither
this subsection nor the following subsection shall, however, limit or impair any
rights which LC Issuer may have under any other document or agreement relating
to any Letter of Credit, LC Collateral or LC Obligation, including any LC
Application, or any rights which any Bank Party may have to otherwise apply any
payments by Borrower and any LC Collateral under Section 3.1.
(b) Acceleration of LC Obligations. If the Obligations or any part
thereof become immediately due and payable pursuant to Section 8.1 then, unless
Majority Lenders otherwise specifically elect to the contrary (which election
may thereafter be retracted by Majority Lenders at any time), all LC Obligations
shall become immediately due and payable without regard to whether or not actual
drawings or payments on the Letters of Credit have occurred, and Borrower shall
be obligated to pay to LC Issuer immediately an amount equal to the aggregate LC
Obligations which are then outstanding. All amounts so paid shall first be
applied to Matured LC Obligations and then held by LC Issuer as LC Collateral
until such LC Obligations become Matured LC Obligations, at which time such LC
Collateral shall be applied to such Matured LC Obligations.
(c) Investment of LC Collateral. Pending application thereof, all LC
Collateral shall be invested by LC Issuer in such investments as LC Issuer may
choose in its sole discretion. All interest on such investments shall be
reinvested or applied to Matured LC Obligations. When all Obligations have been
satisfied in full, including all LC Obligations, all Letters of Credit have
expired or been terminated, and all of Borrower's reimbursement obligations in
connection therewith have been satisfied in full, LC Issuer shall release any
remaining LC Collateral. Borrower hereby assigns and grants to LC Issuer a
continuing security interest in all LC
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Collateral paid by it to LC Issuer, all investments purchased with such LC
Collateral, and all proceeds thereof to secure its Matured LC Obligations and
its Obligations under this Agreement, each Note, and the other Loan Documents,
and Borrower agrees that such LC Collateral and investments shall be subject to
all of the terms and conditions of the Security Documents. Borrower further
agrees that LC Issuer shall have all of the rights and remedies of a secured
party under the Uniform Commercial Code as adopted in the State of Texas with
respect to such security interest and that an Event of Default under this
Agreement shall constitute a default for purposes of such security interest.
(d) Payment of LC Collateral. When Borrower is required to provide LC
Collateral for any reason and fails to do so on the day when required, LC Issuer
may without notice to Borrower or any other Restricted Person provide such LC
Collateral (whether by application of proceeds of other Collateral, by transfers
from other accounts maintained with LC Issuer, or otherwise) using any available
funds of Borrower or any other Person also liable to make such payments. Any
such amounts which are required to be provided as LC Collateral and which are
not provided on the date required shall, for purposes of each Security Document,
be considered past due Obligations owing hereunder, and LC Issuer is hereby
authorized to exercise its respective rights under each Security Document to
obtain such amounts.
ARTICLE III - Payments to Lenders
Section 3.1. General Procedures. Borrower will make each payment which
it owes under the Loan Documents to Agent for the account of the Bank Party to
whom such payment is owed. Each such payment must be received by Agent not later
than 10:00 a.m., Los Angeles, California time, on the date such payment becomes
due and payable, in lawful money of the United States of America, without
set-off, deduction or counterclaim, and in immediately available funds. Any
payment received by Agent after such time will be deemed to have been made on
the next following Business Day. Should any such payment become due and payable
on a day other than a Business Day, the maturity of such payment shall be
extended to the next succeeding Business Day, and, in the case of a payment of
principal or past due interest, interest shall accrue and be payable thereon for
the period of such extension as provided in the Loan Document under which such
payment is due. Each payment under a Loan Document shall be due and payable at
the place provided therein and, if no specific place of payment is provided,
shall be due and payable at the place of payment of Agent's Note. When Agent
collects or receives money on account of the Obligations, Agent shall distribute
all money so collected or received, and each Bank Party shall apply all such
money so distributed, as follows:
(a) first, for the payment of all Obligations which are then
due (and if such money is insufficient to pay all such Obligations,
first to any reimbursements due Agent under Section 6.9 or 10.4 and
then to the partial payment of all other Obligations then due in
proportion to the amounts thereof, or as Bank Parties shall otherwise
agree);
(b) then for the prepayment of amounts owing under the Loan
Documents (other than principal on the Notes) if so specified by
Borrower;
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(c) then for the prepayment of principal on the Notes,
together with accrued and unpaid interest on the principal so prepaid;
and
(d) last, for the payment or prepayment of any other
Obligations.
All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest in compliance with Section
2.6. All distributions of amounts described in any of subsections (b), (c) or
(d) above shall be made by Agent pro rata to each Bank Party then owed
Obligations described in such subsection in proportion to all amounts owed to
all Bank Parties which are described in such subsection; provided that if any
Lender then owes payments to LC Issuer for the purchase of a participation under
Section 2.13(c) or to Agent under Article II or Section 9.4, any amounts
otherwise distributable under this section to such Lender shall be deemed to
belong to LC Issuer or Agent, respectively, to the extent of such unpaid
payments, and Agent shall apply such amounts to make such unpaid payments rather
than distribute such amounts to such Lender.
Section 3.2. Increased Cost and Reduced Return.
(a) 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 Lender (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of Law) of any such governmental authority, central bank, or
comparable agency:
(i) shall subject such Lender (or its Applicable Lending
Office) to any tax, duty, or other charge with respect to any
Eurodollar Loans, its Notes, or its obligation to make Eurodollar
Loans, or change the basis of taxation of any amounts payable to such
Lender (or its Applicable Lending Office) under this Agreement or its
Notes in respect of any Eurodollar Loans (other than taxes imposed on
the overall net income of such Lender by the jurisdiction in which such
Lender has its principal office or such Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any reserve,
special deposit, assessment, or similar requirement (other than the
Reserve Requirement utilized in the determination of the Eurodollar
Rate) relating to any extensions of credit or other assets of, or any
deposits with or other liabilities or commitments of, such Lender (or
its Applicable Lending Office), including the Commitment of such Lender
hereunder; or
(iii) shall impose on such Lender (or its Applicable Lending
Office) or 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 Lender
(or its Applicable Lending Office) of making, Converting into, Continuing, or
maintaining any Eurodollar Loans or
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to reduce any sum received or receivable by such Lender (or its Applicable
Lending Office) under this Agreement or its Notes with respect to any Eurodollar
Loans, then Borrower shall pay to such Lender on demand such amount or amounts
as will compensate such Lender for such increased cost or reduction. If any
Lender requests compensation by Borrower under this Section 3.2(a), Borrower
may, by notice to such Lender (with a copy to Agent), suspend the obligation of
such Lender to make or Continue Loans of the Type with respect to which such
compensation is requested, or to Convert Loans of any other Type into Loans of
such Type, until the event or condition giving rise to such request ceases to be
in effect (in which case the provisions of Section 3.5 shall be applicable);
provided that such suspension shall not affect the right of such Lender to
receive the compensation so requested.
(b) If, after the date hereof, any Lender 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
Lender or any corporation controlling such Lender as a consequence of such
Lender's obligations hereunder to a level below that which such Lender 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 Borrower shall pay to such Lender
such additional amount or amounts as will compensate such Lender for such
reduction but only to the extent that such Lender has not been compensated
therefor by an increase in the Eurodollar Rate.
(c) Each Lender shall promptly notify Borrower and Agent of any event
of which it has knowledge, occurring after the date hereof, which will entitle
such Lender to compensation pursuant to this Section and will designate a
different Applicable Lending Office if such designation will avoid the need for,
or reduce the amount of, such compensation and will not, in the judgment of such
Lender, be otherwise disadvantageous to it. Any Lender claiming compensation
under this Section shall furnish to Borrower and Agent a statement setting forth
the 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
Lender shall act in good faith and may use any reasonable averaging and
attribution methods.
Section 3.3. Limitation on Types of Loans. If on or prior to the first
day of any Interest Period for any Eurodollar Loan:
(a) Agent determines (which determination shall be conclusive) that by
reason of circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such Interest
Period; or
(b) the Majority Lenders determine (which determination shall be
conclusive) and notify Agent that the Eurodollar Rate will not adequately and
fairly reflect the cost to Lenders of funding Eurodollar Loans for such Interest
Period;
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then Agent shall give Borrower prompt notice thereof specifying the relevant
Type of Loans and the relevant amounts or periods, and so long as such condition
remains in effect, Lenders shall be under no obligation to make additional Loans
of such Type, Continue Loans of such Type, or to Convert Loans of any other Type
into Loans of such Type and Borrower shall, on the last day(s) of the then
current Interest Period(s) for the outstanding Loans of the affected Type,
either prepay such Loans or Convert such Loans into another Type of Loan in
accordance with the terms of this Agreement.
Section 3.4. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to make, maintain, or fund Eurodollar Loans hereunder,
then such Lender shall promptly notify Borrower thereof and such Lender's
obligation to make or Continue Eurodollar Loans and to Convert other Types of
Loans into Eurodollar Loans shall be suspended until such time as such Lender
may again make, maintain, and fund Eurodollar Loans (in which case the
provisions of Section 3.5 shall be applicable).
Section 3.5. Treatment of Affected Loans. If the obligation of any
Lender to make a particular Type of Eurodollar Loan or to continue, or to
Convert Loans of any other Type into, Loans of a particular Type shall be
suspended pursuant to Section 3.2 or 3.4 hereof (Loans of such Type being herein
called "Affected Loans" and such Type being herein called the "Affected Type"),
such Lender's Affected Loans shall be automatically Converted into Base Rate
Loans on the last day(s) of the then current Interest Period(s) for Affected
Loans (or, in the case of a Conversion required by Section 3.4 hereof, on such
earlier date as such Lender may specify to Borrower with a copy to Agent) and,
unless and until such Lender gives notice as provided below that the
circumstances specified in Section 3.2 or 3.4 hereof that gave rise to such
Conversion no longer exist:
(a) to the extent that such Lender's Affected Loans have been so
Converted, all payments and prepayments of principal that would otherwise be
applied to such Lender's Affected Loans shall be applied instead to its Base
Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such Lender
as Loans of the Affected Type shall be made or Continued instead as Base Rate
Loans, and all Loans of such Lender that would otherwise be Converted into Loans
of the Affected Type shall be Converted instead into (or shall remain as) Base
Rate Loans.
If such Lender gives notice to Borrower (with a copy to Agent) that the
circumstances specified in Section 3.2 or 3.4 hereof that gave rise to the
Conversion of such Lender's Affected Loans pursuant to this Section 3.5 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Loans of the Affected Type made by other
Lenders are outstanding, such Lender's Base Rate Loans shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Loans of the Affected Type, to the extent necessary so that,
after giving effect thereto, all Loans held by Lenders holding Loans of the
Affected Type and by such Lender are held pro rata (as to principal amounts,
Types, and Interest Periods) in accordance with their Percentage Shares of the
Commitment.
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Section 3.6. Compensation. Upon the request of any Lender, Borrower
shall pay to such Lender such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost, or
expense (including loss of anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or Conversion of a Eurodollar Loan for any
reason (including, without limitation, the acceleration of the Loans pursuant to
Section 8.1) on a date other than the last day of the Interest Period for such
Loan; or
(b) any failure by Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in Article IV to be
satisfied) to borrow, Convert, Continue, or prepay a Eurodollar Loan on the date
for such borrowing, Conversion, Continuation, or prepayment specified in the
relevant notice of borrowing, prepayment, Continuation, or Conversion under this
Agreement.
Section 3.7. Taxes.
(a) Any and all payments by Borrower to or for the account of any
Lender or Agent hereunder or under any other Loan Document shall be made free
and clear of and without deduction for any and all present or future taxes,
duties, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender and
Agent, taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the Laws of which such Lender (or its Applicable Lending
Office) or Agent (as the case may be) is organized or any political subdivision
thereof (all such non-excluded taxes, duties, levies, imposts, deductions,
charges, withholdings, and liabilities being hereinafter referred to as
"Taxes"). If Borrower shall be required by Law to deduct any Taxes from or in
respect of any sum payable under this Agreement or any other Loan Document to
any Lender or Agent, (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 3.7) such Lender or Agent receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) Borrower shall make such deductions, and (iii) Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable Law.
(b) In addition, Borrower agrees to pay any and all present or future
stamp or documentary taxes and any other excise or property taxes or charges or
similar levies which arise from any payment made under this Agreement or any
other Loan Document or from the execution or delivery of, or otherwise with
respect to, this Agreement or any other Loan Document (hereinafter referred to
as "Other Taxes").
(c) Borrower agrees to indemnify each Lender and Agent for the full
amount of Taxes and Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section 3.7) paid by such Lender or Agent (as the case may be) and any
liability (including penalties, interest, and expenses) arising therefrom or
with respect thereto.
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(d) Each Lender organized under the Laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender listed on the signature pages hereof and on
or prior to the date on which it becomes a Lender in the case of each other
Lender, and from time to time thereafter if requested in writing by Borrower or
Agent (but only so long as such Lender remains lawfully able to do so), shall
provide Borrower and Agent with (i) Internal Revenue Service Form 1001 or 4224,
as appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that such Lender is entitled to benefits under an income tax
treaty to which the United States is a party which reduces the rate of
withholding tax on payments of interest or certifying that the income receivable
pursuant to this Agreement is effectively connected with the conduct of a trade
or business in the United States, (ii) Internal Revenue Service Form W-8 or W-9,
as appropriate, or any successor form prescribed by the Internal Revenue
Service, and (iii) any other form or certificate required by any taxing
authority (including any certificate required by Sections 871(h) and 881(c) of
the Internal Revenue Code), certifying that such Lender is entitled to an
exemption from or a reduced rate of tax on payments pursuant to this Agreement
or any of the other Loan Documents.
(e) For any period with respect to which a Lender has failed to provide
Borrower and Agent with the appropriate form pursuant to Section 3.7(d) (unless
such failure is due to a change in treaty, Law, or regulation occurring
subsequent to the date on which a form originally was required to be provided),
such Lender shall not be entitled to indemnification under Section 3.7(a) or
3.7(b) with respect to Taxes imposed by the United States; provided, however,
that should a Lender, which is otherwise exempt from or subject to a reduced
rate of withholding tax, become subject to Taxes because of its failure to
deliver a form required hereunder, Borrower shall take such steps as such Lender
shall reasonably request to assist such Lender to recover such Taxes.
(f) If Borrower is required to pay additional amounts to or for the
account of any Lender pursuant to this Section 3.7, then such Lender will agree
to use reasonable efforts to change the jurisdiction of its Applicable Lending
Office so as to eliminate or reduce any such additional payment which may
thereafter accrue if such change, in the judgment of such Lender, is not
otherwise disadvantageous to such Lender and in the event Lender is reimbursed
for an amount paid by Borrower pursuant to this Section 3.7, it shall promptly
return such amount to Borrower.
(g) Within thirty (30) days after the date of any payment of Taxes,
Borrower shall furnish to Agent the original or a certified copy of a receipt
evidencing such payment.
(h) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in this
Section 3.7 shall survive the termination of the Commitment and the payment in
full of the Notes.
Section 3.8. Compensation Procedure. Any Lender or LC Issuer notifying
Borrower of the incurrence of additional costs under Sections 3.2 through 3.7
shall in such notice to Borrower and Agent set forth in reasonable detail the
basis and amount of its request for compensation.
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Determinations and allocations by each Lender or LC Issuer for purposes of
Sections 3.2 through 3.7 of the effect of any change in applicable laws,
treaties, rules or regulations or in the interpretation or administration
thereof, any losses or expenses incurred by reason of the liquidation or
reemployment of deposits or other funds, any Taxes imposed, or the effect of
capital maintained on its costs or rate of return of maintaining Loans or its
obligation to make Loans, or on amounts receivable by it in respect of Loans,
and of the amounts required to compensate such Lender under Sections 3.2 through
3.7, shall be conclusive and binding for all purposes, absent manifest error.
Any request for compensation under this Section 3.8 shall be paid by Borrower
within thirty (30) Business Days of the receipt by Borrower of the notice
described in this Section 3.8.
Section 3.9. Change of Applicable Lending Office. Each Bank Party
agrees that, upon the occurrence of any event giving rise to the operation of
Sections 3.2 through 3.6 with respect to such Bank Party, it will, if requested
by Borrower, use reasonable efforts (subject to overall policy considerations of
such Bank Party) to designate another Lending Office, provided that such
designation is made on such terms that such Bank Party and its Lending Office
suffer no economic, legal or regulatory disadvantage, with the object of
avoiding the consequence of the event giving rise to the operation of any such
section. Nothing in this section shall affect or postpone any of the obligations
of Borrower or the rights of any Bank Party provided in Sections 3.2 through
3.6.
ARTICLE IV - Conditions Precedent to Lending
Section 4.1. Documents to be Delivered. No Lender has any obligation to
make its first Loan, and LC Issuer has no obligation to issue the first Letter
of Credit unless Agent shall have received all of the following, at Agent's
office in Los Angeles, California, duly executed and delivered and in form,
substance and date satisfactory to Agent:
(a) This Agreement and any other documents that Lenders are to
execute in connection herewith.
(b) Each Note.
(c) Each Security Document listed in the Security Schedule.
(d) Certain certificates of Borrower including:
(i) An "Omnibus Certificate" of the Secretary and of
the Chairman of the Board or President of the general partner
of Borrower, which shall contain the names and signatures of
the officers of the general partner of Borrower authorized to
execute Loan Documents and which shall certify to the truth,
correctness and completeness of the following exhibits
attached thereto: (1) a copy of resolutions duly adopted by
the Board of Directors of the general partner of Borrower and
in full force and effect at the time this Agreement is entered
into, authorizing the execution of this Agreement and the
other Loan Documents delivered or to be
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delivered in connection herewith and the consummation of the
transactions contemplated herein and therein, (2) a copy of
the charter documents of Borrower and all amendments thereto,
certified by the appropriate official of Borrower's and
general partner's state of organization, and (3) a copy of any
bylaws of the general partner of Borrower; and
(ii) A "Compliance Certificate" of the Chairman of
the Board or President and of the Treasurer of Parent, of even
date with such Loan or such Letter of Credit, in which such
officers certify to the satisfaction of the conditions set out
in subsections (a), (b), (c) and (d) of Section 4.2.
(e) A certificate (or certificates) of the due formation,
valid existence and good standing of Borrower in its state of
organization, issued by the appropriate authorities of such
jurisdiction, and certificates of Borrower's good standing and due
qualification to do business, issued by appropriate officials in any
states in which Borrower owns property subject to Security Documents.
(f) Documents similar to those specified in subsections (d)(i)
and (e) of this Section with respect to each Guarantor and the
execution by it of its guaranty of Borrower's Obligations.
(g) A favorable opinion of Messrs. Self, Giddens and Lees,
counsel for Restricted Persons, substantially in the form set forth in
Exhibit F.
(h) The Initial Engineering Report and the Initial Financial
Statements.
(i) Certificates or binders evidencing Restricted Persons'
insurance in effect on the date hereof.
(j) Payment of all commitment, facility, agency and other fees
required to be paid to any Bank Party pursuant to any Loan Documents or
any commitment agreement heretofore entered into.
Section 4.2. Additional Conditions Precedent. No Lender has any
obligation to make any Loan (including its first), and LC Issuer has no
obligation to issue any Letter of Credit (including its first), unless the
following conditions precedent have been satisfied:
(a) All representations and warranties made by any Restricted
Person in any Loan Document shall be true on and as of the date of such
Loan or the date of issuance of such Letter of Credit (except to the
extent that the facts upon which such representations are based have
been changed by the extension of credit hereunder) as if such
representations and warranties had been made as of the date of such
Loan or the date of issuance of such Letter of Credit.
(b) No Default shall exist at the date of such Loan or the
date of issuance of such Letter of Credit.
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(c) After giving effect to all Loans and Letters of Credit
requested to be issued on such day (i) the Facility Usage does not
exceed the Borrowing Base in effect on such day and (ii) the Facility
Usage does not exceed the Senior Debt Limit in effect on such day.
(d) No Material Adverse Change shall have occurred to, and no
event or circumstance shall have occurred that could cause a Material
Adverse Change to Parent's Consolidated financial condition or
businesses or Borrower's financial condition or businesses since the
date of this Agreement.
(e) Each Restricted Person shall have performed and complied
with all agreements and conditions required in the Loan Documents to be
performed or complied with by it on or prior to the date of such Loan
or the date of issuance of such Letter of Credit.
(f) The making of such Loan or the issuance of such Letter of
Credit shall not be prohibited by any Law and shall not subject any
Lender or any LC Issuer to any penalty or other onerous condition under
or pursuant to any such Law.
(g) Agent shall have received all documents and instruments
which Agent has then requested, in addition to those described in
Section 4.1 (including opinions of legal counsel for Restricted Persons
and Agent; corporate documents and records; documents evidencing
governmental authorizations, consents, approvals, licenses and
exemptions; and certificates of public officials and of officers and
representatives of Borrower and other Persons), as to (iii) the
accuracy and validity of or compliance with all representations,
warranties and covenants made by any Restricted Person in this
Agreement and the other Loan Documents, (iv) the satisfaction of all
conditions contained herein or therein, and (v) all other matters
pertaining hereto and thereto. All such additional documents and
instruments shall be satisfactory to Agent in form, substance and date.
ARTICLE V - Representations and Warranties
To confirm each Bank Party's understanding concerning Restricted
Persons and Restricted Persons' businesses, properties and obligations and to
induce each Bank Party to enter into this Agreement and to extend credit
hereunder, Parent and Borrower represents and warrants to each Bank Party that:
Section 5.1. No Default. No Restricted Person is in default in the
performance of any of the covenants and agreements contained in any Loan
Document. No event has occurred and is continuing which constitutes a Default.
Section 5.2. Organization and Good Standing. Each Restricted Person is
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, having
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all powers required to carry on its business and enter into and carry out the
transactions contemplated hereby. Each Restricted Person is duly qualified, in
good standing, and authorized to do business in all other jurisdictions within
the United States wherein the character of the properties owned or held by it or
the nature of the business transacted by it makes such qualification necessary.
Each Restricted Person has taken all actions and procedures customarily taken in
order to enter, for the purpose of conducting business or owning property, each
jurisdiction outside the United States wherein the character of the properties
owned or held by it or the nature of the business transacted by it makes such
actions and procedures desirable.
Section 5.3. Authorization. Each Restricted Person has duly taken all
action necessary to authorize the execution and delivery by it of the Loan
Documents to which it is a party and to authorize the consummation of the
transactions contemplated thereby and the performance of its obligations
thereunder. Borrower is duly authorized to borrow funds hereunder.
Section 5.4. No Conflicts or Consents. The execution and delivery by
the various Restricted Persons of the Loan Documents to which each is a party,
the performance by each of its obligations under such Loan Documents, and the
consummation of the transactions contemplated by the various Loan Documents, do
not and will not (i) conflict with any provision of (1) any Law, (2) the
organizational documents of any Restricted Person, or (3) any agreement,
judgment, license, order or permit applicable to or binding upon any Restricted
Person, (ii) result in the acceleration of any Indebtedness owed by any
Restricted Person, (iii) result in or require the creation of any Lien upon any
assets or properties of any Restricted Person, (iv) result in or require the
creation of any guaranty by any Restricted Person of any Indebtedness of any
other Person except for the guaranties listed in the Security Schedule or (v)
violate the restrictions imposed by any of the Indentures. Except as expressly
contemplated in the Loan Documents no consent, approval, authorization or order
of, and no notice to or filing with, any Tribunal or third party is required in
connection with the execution, delivery or performance by any Restricted Person
of any Loan Document or to consummate any transactions contemplated by the Loan
Documents.
Section 5.5. Enforceable Obligations. This Agreement is, and the other
Loan Documents when duly executed and delivered will be, legal, valid and
binding obligations of each Restricted Person which is a party hereto or
thereto, enforceable in accordance with their terms except as such enforcement
may be limited by bankruptcy, insolvency or similar Laws of general application
relating to the enforcement of creditors' rights.
Section 5.6. Initial Financial Statements. Borrower has heretofore
delivered to each Bank Party true, correct and complete copies of the Initial
Financial Statements. The Initial Financial Statements fairly present Parent's
Consolidated financial position at the respective dates thereof and the
Consolidated results of Parent's operations and Parent's Consolidated cash flows
for the respective periods thereof. Since the date of the annual Initial
Financial Statements no Material Adverse Change has occurred, except as
reflected in the Disclosure Schedule. All Initial Financial Statements were
prepared in accordance with GAAP.
Section 5.7. Other Obligations and Restrictions. No Restricted Person
has any outstanding Liabilities of any kind (including contingent obligations,
tax assessments, and
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unusual forward or long-term commitments) which are, in the aggregate, material
to such Restricted Person or material with respect to Restricted Persons'
Consolidated financial condition and not shown in the Initial Financial
Statements or disclosed in the Disclosure Schedule or a Disclosure Report.
Except as shown in the Initial Financial Statements or disclosed in the
Disclosure Schedule or a Disclosure Report, no Restricted Person is subject to
or restricted by any franchise, contract, deed, charter restriction, or other
instrument or restriction which could cause a Material Adverse Change.
Section 5.8. Full Disclosure. No certificate, statement or other
information delivered herewith or heretofore by any Restricted Person to any
Bank Party in connection with the negotiation of this Agreement or in connection
with any transaction contemplated hereby contains any untrue statement of a
material fact or omits to state any material fact known to any Restricted Person
(other than industry-wide risks normally associated with the types of businesses
conducted by Restricted Persons) necessary to make the statements contained
herein or therein not misleading as of the date made or deemed made. There is no
fact known to any Restricted Person (other than industry-wide risks normally
associated with the types of businesses conducted by Restricted Persons) that
has not been disclosed to each Bank Party in writing which could cause a
Material Adverse Change. There are no statements or conclusions in any
Engineering Report which are based upon or include misleading information or
fail to take into account material information regarding the matters reported
therein, it being understood that each Engineering Report is necessarily based
upon professional opinions, estimates and projections and that no Restricted
Person warrants that such opinions, estimates and projections will ultimately
prove to have been accurate. Borrower has heretofore delivered to each Bank
Party true, correct and complete copies of the Initial Engineering Report.
Section 5.9. Litigation. Except as disclosed in the Initial Financial
Statements or in the Disclosure Schedule: (i) there are no actions, suits or
legal, equitable, arbitrative or administrative proceedings pending, or to the
knowledge of any Restricted Person threatened, against any Restricted Person
before any Tribunal which could cause a Material Adverse Change, and (ii) there
are no outstanding judgments, injunctions, writs, rulings or orders by any such
Tribunal against any Restricted Person or any Restricted Person's directors or
officers which could cause a Material Adverse Change.
Section 5.10. Labor Disputes and Acts of God. Except as disclosed in
the Disclosure Schedule or a Disclosure Report, neither the business nor the
properties of any Restricted Person has been affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance), which could cause a Material Adverse
Change.
Section 5.11. ERISA Plans and Liabilities. All currently existing ERISA
Plans are listed in the Disclosure Schedule or a Disclosure Report. Except as
disclosed in the Initial Financial Statements or in the Disclosure Schedule or a
Disclosure Report, no Termination Event has occurred with respect to any ERISA
Plan and all ERISA Affiliates are in compliance with ERISA in all material
respects. No ERISA Affiliate is required to contribute to, or has any other
absolute or contingent liability in respect of, any "multiemployer plan" as
defined in Section 4001 of ERISA. Except as set forth in the Disclosure Schedule
or a Disclosure Report: (i) no
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"accumulated funding deficiency" (as defined in Section 412(a) of the Internal
Revenue Code of 1986, as amended) exists with respect to any ERISA Plan, whether
or not waived by the Secretary of the Treasury or his delegate, and (ii) the
current value of each ERISA Plan's benefits does not exceed the current value of
such ERISA Plan's assets available for the payment of such benefits by more than
$500,000.
Section 5.12. Environmental and Other Laws. Except as disclosed in the
Disclosure Schedule or a Disclosure Report: (a) Restricted Persons are
conducting their businesses in material compliance with all applicable Laws,
including Environmental Laws, and have and are in compliance with all licenses
and permits required under any such Laws; (b) none of the operations or
properties of any Restricted Person is the subject of federal, state or local
investigation evaluating whether any material remedial action is needed to
respond to a release of any Hazardous Materials into the environment or to the
improper storage or disposal (including storage or disposal at offsite
locations) of any Hazardous Materials; (c) no Restricted Person (and to the best
knowledge of Borrower, no other Person) has filed any notice under any Law
indicating that any Restricted Person is responsible for the improper release
into the environment, or the improper storage or disposal, of any material
amount of any Hazardous Materials or that any Hazardous Materials have been
improperly released, or are improperly stored or disposed of, upon any property
of any Restricted Person; (d) no Restricted Person has transported or arranged
for the transportation of any Hazardous Material to any location which is (i)
listed on the National Priorities List under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, listed for
possible inclusion on such National Priorities List by the Environmental
Protection Agency in its Comprehensive Environmental Response, Compensation and
Liability Information System List, or listed on any similar state list or (ii)
the subject of federal, state or local enforcement actions or other
investigations which may lead to claims against any Restricted Person for
clean-up costs, remedial work, damages to natural resources or for personal
injury claims (whether under Environmental Laws or otherwise); and (e) no
Restricted Person otherwise has any known material contingent liability under
any Environmental Laws or in connection with the release into the environment,
or the storage or disposal, of any Hazardous Materials.
Section 5.13. Names and Places of Business. No Restricted Person has,
during the preceding five years, had, been known by, or used any other trade or
fictitious name, except as disclosed in the Disclosure Schedule. Except as
otherwise indicated in the Disclosure Schedule or a Disclosure Report, the chief
executive office and principal place of business of each Restricted Person are
(and for the preceding five years have been) located at the address of Borrower
set out in Section 10.3. Except as indicated in the Disclosure Schedule or a
Disclosure Report, no Restricted Person has any other office or place of
business.
Section 5.14. Borrower's Subsidiaries. Parent does not presently have
any Subsidiary or own any stock in any other corporation or association except
those listed in the Disclosure Schedule or a Disclosure Report. No Restricted
Person is a member of any general or limited partnership, joint venture or
association of any type whatsoever except those listed in the Disclosure
Schedule or a Disclosure Report and except those associations, joint ventures or
other relationships (a) which are established pursuant to a standard form
operating agreement or similar agreement or which are partnerships for purposes
of federal income taxation only, (b)
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which are not corporations or partnerships (or subject to the Uniform
Partnership Act) under applicable state Law, and (c) whose businesses are
limited to the exploration, development and operation of oil, gas or mineral
properties and interests owned directly by the parties in such associations,
joint ventures or relationships. Except as otherwise revealed in a Disclosure
Report, Borrower owns, directly or indirectly, the equity interest in each of
its Subsidiaries which is indicated in the Disclosure Schedule.
Section 5.15. Title to Properties; Licenses. Each Restricted Person has
good and defensible title to all of its material properties and assets, free and
clear of all Liens other than Permitted Liens and of all impediments to the use
of such properties and assets in such Restricted Person's business, except that
no representation or warranty is made with respect to any oil, gas or mineral
property or interest to which no proved oil or gas reserves are properly
attributed. Other than Liens permitted under Section 7.2, each Restricted Person
will respectively own in the aggregate, in all material respects, the net
interests in production attributable to the wells and units evaluated in the
Initial Engineering Reports. The ownership of such Properties shall not in the
aggregate in any material respect obligate such Restricted Person to bear the
costs and expenses relating to the maintenance, development and operations of
such Properties in an amount materially in excess of the working interest of
such Properties set forth in the Initial Engineering Reports. Each Restricted
Person has paid all royalties payable under the oil and gas leases to which it
is operator, except those contested in accordance with the terms of the
applicable joint operating agreement or otherwise contested in good faith by
appropriate proceedings. Upon delivery of each Engineering Report furnished to
the Lenders pursuant to Section 6.2, the statements made in the preceding
sentences of this Section 5.15 shall be true with respect to such Engineering
Reports. All information contained in the Initial Engineering Reports is true
and correct in all material respects as of the date thereof and as of the date
of the first Loan hereunder. Each Restricted Person possesses all licenses,
permits, franchises, patents, copyrights, trademarks and trade names, and other
intellectual property (or otherwise possesses the right to use such intellectual
property without violation of the rights of any other Person) which are
necessary to carry out its business as presently conducted and as presently
proposed to be conducted hereafter, and no Restricted Person is in violation in
any material respect of the terms under which it possesses such intellectual
property or the right to use such intellectual property.
Section 5.16. Government Regulation. Neither Borrower nor any other
Restricted Person owing Obligations is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Investment
Company Act of 1940 (as any of the preceding acts have been amended) or any
other Law which regulates the incurring by such Person of Indebtedness,
including Laws relating to common contract carriers or the sale of electricity,
gas, steam, water or other public utility services.
Section 5.17. Insider. No Restricted Person, nor any Person having
"control" (as that term is defined in 12 U.S.C. Section 375b(9) or in
regulations promulgated pursuant thereto) of any Restricted Person, is a
"director" or an "executive officer" or "principal shareholder" (as those terms
are defined in 12 U.S.C. Section 375b(8) or (9) or in regulations promulgated
pursuant thereto) of any Bank Party, of a bank holding company of which any Bank
Party is a Subsidiary or of any Subsidiary of a bank holding company of which
any Bank Party is a Subsidiary.
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Section 5.18. Officers, Directors and Shareholders. The officers and
directors of Parent are those persons disclosed in the definitive proxy
statement prepared by Parent and filed with the SEC in connection with Parent's
most recent annual meeting, copies of which proxy statement have been previously
furnished in connection with the negotiation hereof.
Section 5.19. Solvency. Upon giving effect to the issuance of the
Notes, the execution of the Loan Documents by Borrower and the consummation of
the transactions contemplated hereby, each Restricted Person will be "solvent"
on the date hereof (as such term is used in applicable bankruptcy, liquidation,
receivership, insolvency or similar Laws). Each Restricted Person's capital is
adequate for the businesses in which such Restricted Person is engaged and
intends to be engaged. No Restricted Person has incurred (whether hereby or
otherwise), nor does any Restricted Person intend to incur or believe that it
will incur, debts which will be beyond its ability to pay as such debts mature.
ARTICLE VI - Affirmative Covenants of Borrower
To conform with the terms and conditions under which each Bank Party is
willing to have credit outstanding to Borrower, and to induce each Bank Party to
enter into this Agreement and extend credit hereunder, Parent, Borrower and each
Guarantor warrants, covenants and agrees that until the full and final payment
of the Obligations and the termination of this Agreement, unless Majority
Lenders have previously agreed otherwise:
Section 6.1. Payment and Performance. Each Restricted Person will pay
all amounts due under the Loan Documents in accordance with the terms thereof
and will observe, perform and comply with every covenant, term and condition
expressed or implied in the Loan Documents. Borrower will cause each other
Restricted Person to observe, perform and comply with every such term, covenant
and condition.
Section 6.2. Books, Financial Statements and Reports. Each Restricted
Person will at all times maintain full and accurate books of account and
records. Parent will maintain and will cause its Subsidiaries to maintain a
standard system of accounting, will maintain its Fiscal Year, and will furnish
the following statements and reports to each Bank Party at Parent's expense:
(a) As soon as available, and in any event within ninety (90)
days after the end of each Fiscal Year, complete Consolidated and
consolidating financial statements of Parent together with all notes
thereto, prepared in reasonable detail in accordance with GAAP,
together with an unqualified opinion, based on an audit using generally
accepted auditing standards, by Price Waterhouse Coopers or another of
the five nationally recognized firms of, or other independent certified
public accountants selected by Borrower and acceptable to Agent,
stating that such Consolidated financial statements have been so
prepared. These financial statements shall contain a Consolidated and
consolidating balance sheet as of the end of such Fiscal Year and
Consolidated and consolidating statements of earnings, of cash flows,
and of changes in owners' equity for such Fiscal Year, each setting
forth in comparative form the corresponding figures for the preceding
Fiscal Year. In addition, within ninety (90) days after the end of each
Fiscal
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Year Borrower will furnish a report signed by such accountants (i)
stating that they have read this Agreement, (ii) containing
calculations showing compliance (or non-compliance) at the end of such
Fiscal Year with the requirements of Sections 7.11 and 7.12, and (iii)
further stating that in making their examination and reporting on the
Consolidated financial statements described above they did not conclude
that any Default existed at the end of such Fiscal Year or at the time
of their report, or, if they did conclude that a Default existed,
specifying its nature and period of existence.
(b) As soon as available, and in any event within forty-five
(45) days after the end of each Fiscal Quarter, Parent's Consolidated
and consolidating balance sheet as of the end of such Fiscal Quarter
and Consolidated and consolidating statements of Parent's earnings and
cash flows for the period from the beginning of the then current Fiscal
Year to the end of such Fiscal Quarter, all in reasonable detail and
prepared in accordance with GAAP, subject to changes resulting from
normal year-end adjustments. In addition Borrower will, together with
each such set of financial statements and each set of financial
statements furnished under subsection (a) of this section, furnish a
certificate in the form of Exhibit D signed by the chief financial
officer or treasurer of Parent stating that such financial statements
are accurate and complete (subject to normal year-end adjustments),
stating that he has reviewed the Loan Documents, containing
calculations showing compliance (or non-compliance) at the end of such
Fiscal Quarter with the requirements of Sections 7.11 and 7.12 and
stating that no Default exists at the end of such Fiscal Quarter or at
the time of such certificate or specifying the nature and period of
existence of any such Default.
(c) Promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent by any
Restricted Person to its stockholders and all registration statements,
periodic reports and other statements and schedules filed by any
Restricted Person with any securities exchange, the SEC or any similar
governmental authority.
(d) By April 15 of each year, an Engineering Report prepared
by independent petroleum engineers chosen by Borrower and acceptable to
Majority Lenders, concerning all oil and gas properties and interests
owned by any Restricted Person which are located in or offshore of the
United States and which have attributable to them proved oil or gas
reserves. This report shall be satisfactory to Agent, shall contain
sufficient information to enable Borrower to meet the reporting
requirements concerning oil and gas reserves contained in Regulations
S-K and S-X promulgated by the SEC, shall take into account any
"over-produced" status under gas balancing arrangements, and shall
contain information and analysis comparable in scope to that contained
in the Initial Engineering Report. Accompanying such report, Borrower
shall deliver a report reflecting, since the date reflected in the most
recent report delivered pursuant to this clause (d) or pursuant to the
following clause (e), the following (i) all property sales and pending
property sales identifying the property and sale price therefor, (ii)
all property purchases and pending property purchases identifying the
property and the purchase price therefor, and (iii) additional changes
in properties in each category from such previous report (i.e.: proven
undeveloped, proven developed non-producing, or proven producing). This
report shall
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distinguish (or shall be delivered together with a certificate from an
appropriate officer of Borrower which distinguishes) those properties
treated in the report which are Collateral from those properties
treated in the report which are not Collateral.
(e) By September 15 of each year, and promptly following
notice of an additional Evaluation Date, an engineering report prepared
as of the preceding July 1 (or the first day of the second preceding
calendar month in the case of an additional redetermination) by
petroleum engineers who are employees of Borrower (or Chesapeake
Operating Inc. under the management services agreement), together with
an accompanying report on property sales, property purchases and
changes in categories, both in the same form and scope as the reports
in (d) above.
(f) As soon as available, and in any event within ninety (90)
days after the end of each Fiscal Year, a business and financial plan
for Restricted Persons (in form reasonably satisfactory to Agent),
prepared by the chief financial officer thereof, setting forth for the
first year thereof, quarterly financial projections and budgets for
Restricted Persons, and thereafter yearly financial projections and
budgets during the Commitment Period.
(g) As soon as available, and in any event within sixty (60)
days after the end of each month, a report describing by lease or unit
the gross volume of production and sales attributable to production
during such month from the properties described in subsection (d) above
and describing the related severance taxes, other taxes, leasehold
operating expenses and capital costs attributable thereto and incurred
during such month.
(h) As soon as available, and in any event within sixty (60)
days after the end of each Fiscal Quarter, a report setting forth
volumes, prices and margins for all marketing activities of Borrower
and the other Restricted Persons and a report of all Hedging Contracts
in such detail as Agent may request.
Section 6.3. Other Information and Inspections. Each Restricted Person
will furnish to each Bank Party any information which Agent may from time to
time request in writing concerning any covenant, provision or condition of the
Loan Documents or any matter in connection with Restricted Persons' businesses
and operations. Each Restricted Person will permit representatives appointed by
Agent (including independent accountants, auditors, agents, attorneys,
appraisers and any other Persons) to visit and inspect during normal business
hours any of such Restricted Person's property, including its books of account,
other books and records, and any facilities or other business assets, and to
make extra copies therefrom and photocopies and photographs thereof, and to
write down and record any information such representatives obtain, and each
Restricted Person shall permit Agent or its representatives to investigate and
verify the accuracy of the information furnished to Agent or any Lender in
connection with the Loan Documents and to discuss all such matters with its
officers, employees and representatives.
Section 6.4. Notice of Material Events and Change of Address. Borrower
will promptly notify each Bank Party in writing, stating that such notice is
being given pursuant to this Agreement, of:
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(a) the occurrence of any Material Adverse Change,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any Indebtedness owed
by any Restricted Person or of any default by any Restricted Person
under any indenture, mortgage, agreement, contract or other instrument
to which any of them is a party or by which any of them or any of their
properties is bound, if such acceleration or default could cause a
Material Adverse Change,
(d) the occurrence of any Termination Event,
(e) any claim of $1,000,000 or more, any notice of potential
liability under any Environmental Laws which might exceed such amount,
or any other material adverse claim asserted against any Restricted
Person or with respect to any Restricted Person's properties, and
(f) the filing of any suit or proceeding against any
Restricted Person in which an adverse decision could cause a Material
Adverse Change.
Upon the occurrence of any of the foregoing Borrower and Guarantors will take
all necessary or appropriate steps to remedy promptly any such Material Adverse
Change, Default, acceleration, default or Termination Event, to protect against
any such adverse claim, to defend any such suit or proceeding, and to resolve
all controversies on account of any of the foregoing. Borrower will also notify
Agent and Agent's counsel in writing at least twenty Business Days prior to the
date that Borrower or any Guarantor changes its name or the location of its
chief executive office or principal place of business or the place where it
keeps its books and records concerning the Collateral, furnishing with such
notice any necessary financing statement amendments or requesting Agent and its
counsel to prepare the same.
Section 6.5. Maintenance of Properties.
(a) Each Restricted Person will (i) do or cause to be done all things
reasonably necessary to preserve and keep in good repair, working order and
efficiency (ordinary wear and tear excepted) all of the properties owned by each
Restricted Person, including without limitation, all equipment, machinery and
facilities, and (ii) make all the reasonably necessary repairs, renewals and
replacements so that at all times the state and condition of the properties
owned by each Restricted Person will be fully preserved and maintained, except
to the extent a portion of such properties are oil and gas properties no longer
capable of producing hydrocarbons in economically reasonable amounts.
(b) Each Restricted Person will promptly pay and discharge or cause to
be paid and discharged all delay rentals, royalties, expenses and indebtedness
accruing under, and perform or cause to be performed each and every act, matter
or thing required by, each and all of the assignments, deeds, leases,
sub-leases, contracts and agreements affecting its interests in its
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properties and will do all other things necessary to keep unimpaired each
Restricted Person's rights with respect thereto and prevent any forfeiture
thereof or a default thereunder, except to the extent a portion of oil and gas
properties is no longer capable of producing hydrocarbons in economically
reasonable amounts.
(c) Each Restricted Person will operate its properties or cause or use
commercially reasonably efforts to cause such properties to be operated in a
careful and efficient manner in accordance with the practices of the industry
and in compliance with all applicable contracts and agreements and in compliance
in all material respects with all laws.
Section 6.6. Maintenance of Existence and Qualifications. Each
Restricted Person will maintain and preserve its existence and its rights and
franchises in full force and effect and will qualify to do business in all
states or jurisdictions where required by applicable Law, except (i) for any
Restricted Person which ceases to exist as a result of a merger, consolidation
or other transaction permitted under Section 7.4 or (ii) where the failure so to
qualify will not cause a Material Adverse Change.
Section 6.7. Payment of Trade Liabilities, Taxes, etc. Each Restricted
Person will (a) timely file all required tax returns; (b) timely pay all taxes,
assessments, and other governmental charges or levies imposed upon it or upon
its income, profits or property; (c) within one hundred twenty (120) days after
the original invoice or billing date therefor pay all Liabilities owed by it on
ordinary trade terms to vendors, suppliers and other Persons providing goods and
services used by it in the ordinary course of its business; (d) pay and
discharge when due all other Liabilities now or hereafter owed by it; and (e)
maintain appropriate accruals and reserves for all of the foregoing in
accordance with GAAP. Each Restricted Person may, however, delay paying or
discharging any of the foregoing so long as it is in good faith contesting the
validity thereof by appropriate proceedings and has set aside on its books
adequate reserves therefor.
Section 6.8. Insurance. Each Restricted Person will keep or cause to be
kept insured by financially sound and reputable insurers its property in
accordance with the Insurance Schedule. Borrower will maintain the additional
insurance coverage as described in the respective Security Documents. Upon
demand by Agent any insurance policies covering Collateral shall be endorsed (a)
to provide for payment of losses to Agent as its interests may appear, (b) to
provide that such policies may not be canceled or reduced or affected in any
material manner for any reason without fifteen days prior notice to Agent, (c)
to provide for any other matters specified in any applicable Security Document
or which Agent may reasonably require; and (d) to provide for insurance against
fire, casualty and any other hazards normally insured against, in the amount of
the full value (less a reasonable deductible not to exceed amounts customary in
the industry for similarly situated businesses and properties) of the property
insured. Each Restricted Person shall at all times maintain insurance against
its liability for injury to persons or property in accordance with the Insurance
Schedule, which insurance shall be by financially sound and reputable insurers.
Without limiting the foregoing, each Restricted Person shall at all times
maintain liability insurance in accordance with the Insurance Schedule.
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Section 6.9. Performance on Borrower's Behalf. If any Restricted Person
fails to pay any taxes, insurance premiums, expenses, attorneys' fees or other
amounts it is required to pay under any Loan Document, Agent may pay the same.
Borrower shall immediately reimburse Agent for any such payments and each amount
paid by Agent shall constitute an Obligation owed hereunder which is due and
payable on the date such amount is paid by Agent.
Section 6.10. Interest. Borrower hereby promises to each Bank Party to
pay interest at the Default Rate on all Obligations (including Obligations to
pay fees or to reimburse or indemnify any Bank Party) which Borrower has in this
Agreement promised to pay to such Bank Party and which are not paid when due.
Such interest shall accrue from the date such Obligations become due until they
are paid.
Section 6.11. Compliance with Agreements and Law. Each Restricted
Person will perform all material obligations it is required to perform under the
terms of each indenture, mortgage, deed of trust, security agreement, lease,
franchise, agreement, contract or other instrument or obligation to which it is
a party or by which it or any of its properties is bound. Each Restricted Person
will conduct its business and affairs in compliance with all Laws applicable
thereto.
Section 6.12. Environmental Matters; Environmental Reviews.
(a) Each Restricted Person will comply in all material respects with
all Environmental Laws now or hereafter applicable to such Restricted Person, as
well as all contractual obligations and agreements with respect to environmental
remediation or other environmental matters and shall obtain, at or prior to the
time required by applicable Environmental Laws, all environmental, health and
safety permits, licenses and other authorizations necessary for its operations
and will maintain such authorizations in full force and effect.
(b) Each Restricted Person will promptly furnish to Agent all written
notices of violation, orders, claims, citations, complaints, penalty
assessments, suits or other proceedings received by any Restricted Person, or of
which it has notice, pending or threatened against any Restricted Person, by any
governmental authority with respect to any alleged violation of or
non-compliance in any material respect with any Environmental Laws or any
permits, licenses or authorizations in connection with its ownership or use of
its properties or the operation of its business.
(c) Each Restricted Person will promptly furnish to Agent all requests
for information, notices of claim, demand letters, and other notifications,
received by any Restricted Person in connection with its ownership or use of its
properties or the conduct of its business, relating to potential responsibility
which could if adversely determined result in fines or liability of a material
amount with respect to any investigation or clean-up of Hazardous Material at
any location.
Section 6.13. Evidence of Compliance. Each Restricted Person will
furnish to each Bank Party at such Restricted Person's or Borrower's expense all
evidence which Agent from time to
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time reasonably requests in writing as to the accuracy and validity of or
compliance with all representations, warranties and covenants made by any
Restricted Person in the Loan Documents, the satisfaction of all conditions
contained therein, and all other matters pertaining thereto.
Section 6.14. Agreement to Deliver Security Documents. Borrower agrees
to deliver and to cause each other Restricted Person to deliver, to further
secure the Obligations whenever requested by Agent in its sole and absolute
discretion, deeds of trust, mortgages, chattel mortgages, security agreements,
financing statements and other Security Documents in form and substance
satisfactory to Agent for the purpose of granting, confirming, and perfecting
first and prior liens or security interests in any properties now owned or
hereafter acquired by any Restricted Person which are Proved Developed
Properties, as that term is defined in the `96 Indenture and the `98 Indenture.
Without limiting the foregoing, Borrower also agrees to deliver deeds of trust,
mortgages, chattel mortgages, security agreements, financing statements and
other Security Documents in form and substance satisfactory to Agent for the
purpose of granting, confirming, and perfecting first and prior liens or
security interests on Proved Developed Properties (as that term is defined in
the '96 Indenture and the '98 Indenture) owned by Borrower which have a value
(determined by Agent, by the application of a 10% discount factor to determine
the net present value of projected future net revenues attributable to the
portion of reserves properly categorized as "Producing" under the Definitions
for Oil and Gas Reserves promulgated by the Society of Petroleum Engineers (or
any generally recognized successor), as of the most recent Evaluation Date) of
at least 300% of the Borrowing Base. Borrower also agrees to deliver, whenever
requested by Agent in its sole and absolute discretion, favorable title opinions
from legal counsel acceptable to Agent with respect to any Restricted Person's
properties and interests designated by Agent, based upon abstract or record
examinations to dates acceptable to Agent and (i) stating that such Restricted
Person has good and defensible title to such properties and interests, free and
clear of all Liens other than Permitted Liens, (ii) confirming that such
properties and interests are subject to Security Documents securing the
Obligations that constitute and create legal, valid and duly perfected first
deed of trust or mortgage liens in such properties and interests and first
priority assignments of and security interests in the oil and gas attributable
to such properties and interests and the proceeds thereof, and (iii) covering
such other matters as Agent may request. Without limiting the foregoing, within
ten (10) days following the date of this Agreement, Borrower shall execute and
deliver to Agent Security Documents in form and substance satisfactory to Agent,
granting to Agent first perfected Liens on and in the properties described on
Schedule 5 attached hereto.
Section 6.15. Perfection and Protection of Security Interests and
Liens. Borrower will from time to time deliver, and will cause each other
Restricted Person from time to time to deliver, to Agent any financing
statements, continuation statements, extension agreements and other documents,
properly completed and executed (and acknowledged when required) by Restricted
Persons in form and substance satisfactory to Agent, which Agent requests for
the purpose of perfecting, confirming, or protecting any Liens or other rights
in Collateral securing any Obligations.
Section 6.16. Bank Accounts; Offset. To secure the repayment of the
Obligations Borrower hereby grants to each Bank Party a security interest, a
lien, and a right of offset, each of
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which shall be in addition to all other interests, liens, and rights of any Bank
Party at common law, under the Loan Documents, or otherwise, and each of which
shall be upon and against (a) any and all moneys, securities or other property
(and the proceeds therefrom) of Borrower now or hereafter held or received by or
in transit to any Bank Party from or for the account of Borrower, whether for
safekeeping, custody, pledge, transmission, collection or otherwise, (b) any and
all deposits (general or special, time or demand, provisional or final) of
Borrower with any Bank Party, and (c) any other credits and claims of Borrower
at any time existing against any Bank Party, including claims under certificates
of deposit. At any time and from time to time after the occurrence of any
Default, each Bank Party is hereby authorized to foreclose upon, or to offset
against the Obligations then due and payable (in either case without notice to
Borrower), any and all items hereinabove referred to. The remedies of
foreclosure and offset are separate and cumulative, and either may be exercised
independently of the other without regard to procedures or restrictions
applicable to the other.
Section 6.17. Guaranties of Borrower's Subsidiaries. Each Subsidiary of
Parent other than the Borrower, Chesapeake Marketing, Chesapeake Canada, and
Chesapeake Acquisitions, Ltd., an Alberta corporation (the "Required
Guarantors") now existing or created, acquired or coming into existence after
the date hereof shall, promptly upon request by Agent, execute and deliver to
Agent an absolute and unconditional guaranty of the timely repayment of the
Obligations and the due and punctual performance of the obligations of Borrower
hereunder, which guaranty shall be satisfactory to Agent in form and substance.
Parent will cause each of the Required Guarantors to deliver to Agent,
simultaneously with its delivery of such a guaranty, written evidence
satisfactory to Agent and its counsel that such Required Guarantors has taken
all corporate or partnership action necessary to duly approve and authorize its
execution, delivery and performance of such guaranty and any other documents
which it is required to execute.
Section 6.18. Production Proceeds. Notwithstanding that, by the terms
of the various Security Documents, Restricted Persons are and will be assigning
to Agent and Lenders all of the "Production Proceeds" (as defined therein)
accruing to the property covered thereby, so long as no Default has occurred
Restricted Persons may continue to receive from the purchasers of production all
such Production Proceeds, subject, however, to the Liens created under the
Security Documents, which Liens are hereby affirmed and ratified. Upon the
occurrence of a Default, Agent and Lenders may exercise all rights and remedies
granted under the Security Documents, including the right to obtain possession
of all Production Proceeds then held by Restricted Persons or to receive
directly from the purchasers of production all other Production Proceeds. In no
case shall any failure, whether purposed or inadvertent, by Agent or Lenders to
collect directly any such Production Proceeds constitute in any way a waiver,
remission or release of any of their rights under the Security Documents, nor
shall any release of any Production Proceeds by Agent or Lenders to Restricted
Persons constitute a waiver, remission, or release of any other Production
Proceeds or of any rights of Agent or Lenders to collect other Production
Proceeds thereafter.
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ARTICLE VII - Negative Covenants of Borrower
To conform with the terms and conditions under which each Bank Party is
willing to have credit outstanding to Borrower, and to induce each Bank Party to
enter into this Agreement and make the Loans, Parent, Borrower and each
Guarantor warrants, covenants and agrees that until the full and final payment
of the Obligations and the termination of this Agreement, unless Majority
Lenders have previously agreed otherwise:
Section 7.1. Indebtedness. No Restricted Person will in any manner owe
or be liable for Indebtedness except:
(a) the Obligations.
(b) obligations under operating leases entered into in the ordinary
course of such Restricted Person's business in arm's length transactions at
competitive market rates under competitive terms and conditions in all respects,
provided that the obligations required to be paid in any Fiscal Year under any
such operating leases do not in the aggregate exceed $500,000.
(c) unsecured Indebtedness among the Restricted Persons arising in the
ordinary course of business.
(d) Indebtedness outstanding under the instruments and agreements
described on the Disclosure Schedule, including any renewals or extensions of
such Liabilities which (i) extend the maturity date thereof but not increase the
principal amount thereof, (ii) provide for an interest rate at then prevailing
market rates, and (iii) provide no additional restrictive covenants, negative
covenants, defaults, or events of default than contained in the original of such
documents.
(e) Indebtedness arising under Hedging Contracts permitted under
Section 7.3.
(f) Indebtedness of Chesapeake Marketing, in respect of Letters of
Credit issued for the Account of Chesapeake Marketing for use in the ordinary
course of its marketing business in an aggregate principal amount at any one
time outstanding not to exceed $10,000,000.
(g) Liabilities with respect to accrued revenues and royalties due to
others during the period the payment thereof has been properly suspended in
accordance with applicable agreements and applicable law.
Section 7.2. Limitation on Liens. No Restricted Person will create,
assume or permit to exist any Lien upon any of the properties or assets which it
now owns or hereafter acquires, except, to the extent not otherwise forbidden by
the Security Documents the following ("Permitted Liens"):
(a) Liens which secure Obligations only.
(b) statutory Liens for taxes, statutory or contractual mechanics' and
materialmen's Liens incurred in the ordinary course of business, and other
similar Liens incurred in the ordinary course of business, provided such Liens
do not secure Indebtedness and secure only obligations which are not delinquent
or which are being contested as provided in Section 6.7.
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(c) as to property which is Collateral, any Liens expressly permitted
to encumber such Collateral under any Security Document covering such
Collateral.
(d) margins consisting of letters of credit or cash required to be put
up pursuant to any Hedging Contract not to exceed at any time the actual
liquidation liability of the Restricted Person thereon.
(e) Liens existing on the date hereof and listed on the Disclosure
Schedule.
(f) Liens on accounts receivable and cash of Chesapeake Marketing
securing Indebtedness permitted by Section 7.1(f).
Section 7.3. Hedging Contracts. No Restricted Person will be a party to
or in any manner be liable on any Hedging Contract, except:
(a) Hedging Contracts entered into with the purpose and effect of
fixing prices on oil or gas expected to be produced by Restricted Persons,
provided that at all times: (1) no such contract fixes a price for a term of
more than eighteen (18) months; (2) the aggregate monthly production covered by
all such contracts (determined, in the case of contracts that are not settled on
a monthly basis, by a monthly proration acceptable to Agent) for any single
month does not in the aggregate exceed seventy-five percent (75%) of Restricted
Persons' aggregate Projected Oil and Gas Production anticipated to be sold in
the ordinary course of Restricted Persons' businesses for such month, and (3)
each such contract is with a counterparty or has a guarantor of the obligation
of the counterparty who (unless such counterparty is a Bank Party or one of its
Affiliates) at the time the contract is made has long-term obligations rated AA
or Aa2 or better, respectively, by either Rating Agency or is an investment
grade-rated industry participant. As used in this subsection, the term
"Projected Oil and Gas Production" means the projected production of oil or gas
(measured by volume unit or BTU equivalent, not sales price) for the term of the
contracts or a particular month, as applicable, from properties and interests
owned by any Restricted Person which are located in or offshore of the United
States and which have attributable to them proved oil or gas reserves, as such
production is projected in the most recent report delivered pursuant to Section
6.2(d), after deducting projected production from any properties or interests
sold or under contract for sale that had been included in such report and after
adding projected production from any properties or interests that had not been
reflected in such report but that are reflected in a separate or supplemental
reports meeting the requirements of such Section 6.3(d) above and otherwise are
satisfactory to Agent.
(b) Hedging Contracts entered into by a Restricted Person with the
purpose and effect of (i) fixing interest rates on a principal amount of
indebtedness of such Restricted Person that is accruing interest at a variable
rate, provided that the aggregate notional amount of such contracts never
exceeds seventy-five percent (75%) of the anticipated outstanding principal
balance of the indebtedness to be hedged by such contracts or an average of such
principal balances calculated using a generally accepted method of matching
interest swap contracts to declining principal balances, and the floating rate
index of each such contract generally matches the index used to determine the
floating rates of interest on the corresponding indebtedness to be hedged by
such
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contract, or (ii) contracting for variable interest rates on a principal amount
of indebtedness or liquidation preference on preferred stock of such Restricted
Person that is accruing interest or dividends at a fixed rate, provided that the
aggregate notional amount of such contracts never exceeds the amount of the then
liquidation preference on the Parent's 7% Cumulative Convertible Preferred Stock
(to the extent issued prior to the date hereof); and the fixed rate index of
each such contract generally matches the interest on the corresponding
obligation to be hedged by such contract; provided further that in either (i) or
(ii) each such contract is with a counterparty or has a guarantor of the
obligation of the counterparty who (unless such counterparty is a Bank Party or
one of its Affiliates) at the time the contract is made has long-term
obligations rated AA or Aa2 or better, respectively, by either Rating Agency.
Section 7.4. Limitation on Mergers, Issuances of Securities. Except as
expressly provided in this subsection no Restricted Person will merge or
consolidate with or into any other business entity. Any Subsidiary of Parent
may, however, be merged into or consolidated with (i) another Subsidiary of
Parent (other than Borrower), so long as a Guarantor is the surviving business
entity, (ii) Borrower, so long as Borrower is the surviving business entity, or
(iii) Parent, so long as Parent is the surviving business entity and Borrower
shall not be a party to such merger or consolidation. Parent will not issue any
securities or any option, warrant or other right to acquire shares or other
securities other than (a) shares of its common stock and any options or warrants
giving the holders thereof only the right to acquire such shares and (b) the
Parent's 7% Cumulative Convertible Preferred Stock outstanding on the date of
this Agreement. No Subsidiary of Parent will issue any additional shares of its
capital stock or other securities or any options, warrants or other rights to
acquire such additional shares or other securities except to Parent and only to
the extent not otherwise forbidden under the terms hereof. No Subsidiary of
Borrower which is a partnership will allow any diminution of Borrower's interest
(direct or indirect) therein.
Section 7.5. Limitation on Sales of Property. No Restricted Person will
sell, transfer, lease, exchange, alienate or dispose of any of its material
assets or properties or any material interest therein except, to the extent not
otherwise forbidden under the Security Documents:
(a) equipment which is worthless or obsolete or which is replaced by
equipment of equal suitability and value.
(b) inventory (including oil and gas sold as produced and seismic data)
which is sold in the ordinary course of business on ordinary trade terms.
(c) interests in oil and gas properties, or portions thereof, to which
no proved reserves of oil, gas or other liquid or gaseous hydrocarbons are
properly attributed.
(d) other property which is sold for fair consideration to a Person who
is not an Affiliate not to exceed, in the aggregate with respect to all sales of
property after the date of this Agreement, the amount of $100,000,000; provided
that to the extent the aggregate net proceeds of all such sales after the date
of this Agreement exceeds $25,000,000 (i) so long as no Default or Event of
Default shall have occurred and be continuing, the amount of such excess shall
be placed in a segregated account (and, in the case of proceeds of Proved
Developed Properties as
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that term is defined in the `96 Indenture and the `98 Indenture, subject to a
perfected, first-priority Lien to secure the Obligations) and within four months
following the receipt of such proceeds by the Restricted Person, shall be either
applied to permanently repay outstanding Indebtedness of any Restricted Person
or to pay the purchase price of proved oil and gas properties acquired by a
Restricted Person or to pay development costs with respect to proved oil and gas
properties then owned by a Restricted Person, or (ii) if a Default or Event of
Default shall have occurred and be continuing, the amount of such excess shall
be applied to repay the Obligations and the Borrowing Base shall be reduced by
the amount so applied; provided however no such sale shall include Collateral
unless, in connection with such sale, the Borrowing Base has been redetermined
by Required Lenders pursuant to Section 2.9 giving effect to such transaction
and the Facility Usage will not exceed such Borrowing Base after giving effect
to such transaction. The value of sales under this clause shall be the greater
of the sale price or the discounted present value of the projected future net
revenues (at 10% discount rate) reflected in the most recently delivered
Engineering Report under Section 6.2. Any sale of property, other than as
provided above, shall be subject to the prior written approval of Majority
Lenders, in their sole discretion, which approval may be conditioned upon a
redetermination and reduction of the Borrowing Base after giving effect to such
sale.
No Restricted Person will sell, transfer or otherwise dispose of capital stock
of any of Parent's Subsidiaries. No Restricted Person will discount, sell,
pledge or assign any notes payable to it, accounts receivable or future income
except to the extent expressly permitted under the Loan Documents.
Section 7.6. Limitation on Dividends and Redemptions. No Restricted
Person will declare or pay any dividends on, or make any other distribution in
respect of, any class of its capital stock or any partnership or other interest
in it, nor will any Restricted Person directly or indirectly make any capital
contribution to or purchase, redeem, acquire or retire any shares of the capital
stock of or partnership interests in any Restricted Person (whether such
interests are now or hereafter issued, outstanding or created), or cause or
permit any reduction or retirement of the capital stock of any Restricted
Person, except as expressly provided in this section. Dividends, distributions,
contributions, purchases, redemptions, acquisitions, retirements or reductions
may be made by any Restricted Person to another Restricted Person. No other
dividends of any type to any Person shall be paid without the prior written
consent of the Agent and Required Lenders.
Section 7.7. Limitation on Investments and New Businesses. No
Restricted Person will (i) make any expenditure or commitment or incur any
obligation or enter into or engage in any transaction except in the ordinary
course of business, (ii) engage directly or indirectly in any business or
conduct any operations except in connection with or incidental to its present
businesses and operations, (iii) make any acquisitions of or capital
contributions to or other investments in any Person, other than Permitted
Investments, or (iv) make any acquisitions or investments in any properties or
assets (other than a Person) other than: (a) oil and gas properties, (b) gas
gathering, treating and processing assets and assets directly related thereto,
(c) inventory and equipment incidental to its business, (d) general and
administrative assets such as vehicles, offices and office equipment, and (e)
other types of assets not in excess of $500,000 in the aggregate; provided,
however, Restricted Persons may make acquisitions of, capital contributions
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to, or other investments in any Person or make acquisitions of or investments in
any properties or assets, in each case which are not otherwise permitted by the
foregoing, so long as the aggregate amount thereof made after the date of this
Agreement does not exceed $2,500,000.
Section 7.8. Limitation on Credit Extensions. Except for Permitted
Investments, no Restricted Person will extend credit, make advances or make
loans other than (i) normal and prudent extensions of credit to customers buying
goods and services in the ordinary course of business, which extensions shall
not be for longer periods than those extended by similar businesses operated in
a normal and prudent manner, (ii) loans to Borrower or to any Guarantor (iii)
extensions of credit to executive officers pursuant to board of directors'
authorizations so long as the aggregate amount of all such loans made by all
Restricted Persons does not exceed the principal amount of such credit extended
as of the date of this Agreement, and (iv) other extensions of credit to
employees of any Restricted Person, so long as the aggregate amount of such
loans to any single employee does not exceed $100,000 and the aggregate amount
of all such loans made by all Restricted Persons does not exceed $500,000.
Section 7.9. Transactions with Affiliates. No Restricted Person will
engage in any material transaction with any of its Affiliates on terms which are
less favorable to it than those which would have been obtainable at the time in
arm's-length dealing with Persons other than such Affiliates, provided that such
restriction shall not apply to transactions among the Restricted Persons.
Section 7.10. Certain Contracts; Amendments; Multiemployer ERISA Plans.
Except as expressly provided for in the Loan Documents, no Restricted Person
will, directly or indirectly, enter into, create, or otherwise allow to exist
any contract or other consensual restriction on the ability of any Subsidiary of
Borrower to: (i) pay dividends or make other distributions to Borrower, (ii) to
redeem equity interests held in it by Borrower, (iii) to repay loans and other
indebtedness owing by it to Borrower, or (iv) to transfer any of its assets to
Borrower. No Restricted Person will enter into any "take-or-pay" contract or
other contract or arrangement for the purchase of goods or services which
obligates it to pay for such goods or service regardless of whether they are
delivered or furnished to it. No Restricted Person will amend or permit any
amendment to any contract or lease which releases, qualifies, limits, makes
contingent or otherwise detrimentally affects the rights and benefits of Agent
or any Lender under or acquired pursuant to any Security Documents. No ERISA
Affiliate will incur any obligation to contribute to any "multiemployer plan" as
defined in Section 4001 of ERISA.
Section 7.11. Current Ratio. The ratio of (i) the sum of Consolidated
current assets of Parent and the other Restricted Persons plus the portion, if
any, of the Borrowing Base which exceeds the Facility Usage to (ii) Consolidated
current liabilities of Parent and the other Restricted Persons will never be
less than 1.0 to 1.0. For purposes of this section, all LC Obligations shall be
included as current liabilities, regardless of whether or not contingent (but
without duplication) and current liabilities shall exclude current maturities of
long term debt and current maturities of the Loans.
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Section 7.12. Fixed Charge Coverage Ratio. The ratio of (a)
Consolidated EBITDA for any Fiscal Quarter to (b) Consolidated Fixed Charges for
such Fiscal Quarter shall never be less than 2.0 to 1.0.
ARTICLE VIII - Events of Default and Remedies
Section 8.1. Events of Default. Each of the following events
constitutes an Event of Default under this Agreement:
(a) Borrower or any Guarantor fails to pay the principal component of
any Obligation when due and payable, whether at a date for the payment of a
fixed installment or as a contingent or other payment becomes due and payable or
as a result of acceleration or otherwise;
(b) Borrower or any Guarantor fails to pay any Obligation (other than
the Obligations in subsection (a) above) when due and payable, whether at a date
for the payment of a fixed installment or as a contingent or other payment
becomes due and payable or as a result of acceleration or otherwise, within
three Business Days after the same becomes due;
(c) Any "default" or "event of default" occurs under any Loan Document
which defines either such term, and the same is not remedied within the
applicable period of grace (if any) provided in such Loan Document;
(d) Borrower or any Guarantor fails to duly observe, perform or comply
with any covenant, agreement or provision of Section 6.4 or Article VII;
(e) Borrower or any Guarantor fails (other than as referred to in
subsections (a), (b), (c) or (d) above) to duly observe, perform or comply with
any covenant, agreement, condition or provision of any Loan Document, and such
failure remains unremedied for a period of thirty (30) days after notice of such
failure is given by Agent to Borrower;
(f) Any representation or warranty previously, presently or hereafter
made in writing by or on behalf of any Restricted Person in connection with any
Loan Document shall prove to have been false or incorrect in any material
respect on any date on or as of which made, or any Loan Document at any time
ceases to be valid, binding and enforceable as warranted in Section 5.5 for any
reason other than its release or subordination by Agent;
(g) Any Restricted Person fails to duly observe, perform or comply with
any agreement with any Person or any term or condition of any instrument, if
such agreement or instrument is materially significant to Parent or to Parent
and its Subsidiaries on a Consolidated basis or materially significant to any
Guarantor, and such failure is not remedied within the applicable period of
grace (if any) provided in such agreement or instrument;
(h) Any Restricted Person (i) fails to pay any portion, when such
portion is due, of any of its Indebtedness in excess of $1,000,000, or (ii)
breaches or defaults in the performance of any agreement or instrument by which
any such Indebtedness is issued, evidenced, governed, or
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secured, and any such failure, breach or default continues beyond any applicable
period of grace provided therefor;
(i) Either (i) any "accumulated funding deficiency" (as defined in
Section 412(a) of the Internal Revenue Code of 1986, as amended) in excess of
$100,000 exists with respect to any ERISA Plan, whether or not waived by the
Secretary of the Treasury or his delegate, or (ii) any Termination Event occurs
with respect to any ERISA Plan and the then current value of such ERISA Plan's
benefit liabilities exceeds the then current value of such ERISA Plan's assets
available for the payment of such benefit liabilities by more than $100,000 (or
in the case of a Termination Event involving the withdrawal of a substantial
employer, the withdrawing employer's proportionate share of such excess exceeds
such amount); and
(j) Any Restricted Person:
(i) suffers the entry against it of a judgment, decree or
order for relief by a Tribunal of competent jurisdiction in an
involuntary proceeding commenced under any applicable bankruptcy,
insolvency or other similar Law of any jurisdiction now or hereafter in
effect, including the federal Bankruptcy Code, as from time to time
amended, or has any such proceeding commenced against it which remains
undismissed for a period of thirty days; or
(ii) commences a voluntary case under any applicable
bankruptcy, insolvency or similar Law now or hereafter in effect,
including the federal Bankruptcy Code, as from time to time amended; or
applies for or consents to the entry of an order for relief in an
involuntary case under any such Law; or makes a general assignment for
the benefit of creditors; or fails generally to pay (or admits in
writing its inability to pay) its debts as such debts become due; or
takes corporate or other action to authorize any of the foregoing; or
(iii) suffers the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of all or a substantial part of its assets or of any
part of the Collateral in a proceeding brought against or initiated by
it, and such appointment or taking possession is neither made
ineffective nor discharged within thirty days after the making thereof,
or such appointment or taking possession is at any time consented to,
requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for the
payment of money in excess of $1,000,000 (not covered by insurance
satisfactory to Majority Lenders in their discretion), unless the same
is discharged within thirty days after the date of entry thereof or an
appeal or appropriate proceeding for review thereof is taken within
such period and a stay of execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or any similar
process to be issued by any Tribunal against all or any substantial
part of its assets or any part of the Collateral, and such writ or
warrant of attachment or any similar process is not stayed or
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released within thirty days after the entry or levy thereof or after
any stay is vacated or set aside; and
(k) Any Change in Control occurs; and
(l) Any Material Adverse Change occurs.
Upon the occurrence of an Event of Default described in subsection (j)(i),
(j)(ii) or (j)(iii) of this section with respect to Borrower, all of the
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Guarantor who at any time ratifies
or approves this Agreement. Upon any such acceleration, any obligation of any
Lender to make any further Loans and any obligation of LC Issuer to issue
Letters of Credit hereunder shall be permanently terminated. During the
continuance of any other Event of Default, Agent at any time and from time to
time may (and upon written instructions from Majority Lenders, Agent shall),
without notice to Borrower or any Guarantor, do either or both of the following:
(1) terminate any obligation of Lenders to make Loans hereunder and any
obligation of LC Issuer to issue Letters of Credit hereunder, and (2) declare
any or all of the Obligations immediately due and payable, and all such
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Guarantor who at any time ratifies
or approves this Agreement.
Section 8.2. Remedies. If any Default shall occur and be continuing,
each Bank Party may protect and enforce its rights under the Loan Documents by
any appropriate proceedings, including proceedings for specific performance of
any covenant or agreement contained in any Loan Document, and each Bank Party
may enforce the payment of any Obligations due it or enforce any other legal or
equitable right which it may have. All rights, remedies and powers conferred
upon Bank Parties under the Loan Documents shall be deemed cumulative and not
exclusive of any other rights, remedies or powers available under the Loan
Documents or at Law or in equity.
ARTICLE IX - Agent
Section 9.1. Appointment and Authority. Each Bank Party hereby
irrevocably authorizes Agent, and Agent hereby undertakes, to receive payments
of principal, interest and other amounts due hereunder as specified herein and
to take all other actions and to exercise such powers under the Loan Documents
as are specifically delegated to Agent by the terms hereof or thereof, together
with all other powers reasonably incidental thereto. The relationship of Agent
to the other Bank Parties is only that of one commercial lender acting as
administrative agent for others, and nothing in the Loan Documents shall be
construed to constitute Agent a trustee or other fiduciary for any holder of any
of the Notes or of any participation therein nor to impose on Agent duties and
obligations other than those expressly provided for in the Loan Documents.
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With respect to any matters not expressly provided for in the Loan Documents and
any matters which the Loan Documents place within the discretion of Agent, Agent
shall not be required to exercise any discretion or take any action, and it may
request instructions from Lenders with respect to any such matter, in which case
it shall be required to act or to refrain from acting (and shall be fully
protected and free from liability to all Lenders in so acting or refraining from
acting) upon the instructions of Majority Lenders (including itself), provided,
however, that Agent shall not be required to take any action which exposes it to
a risk of personal liability that it considers unreasonable or which is contrary
to the Loan Documents or to applicable Law. Upon receipt by Agent from Borrower
of any communication calling for action on the part of Lenders or upon notice
from any other Bank Party to Agent of any Default or Event of Default, Agent
shall promptly notify each other Bank Party thereof.
Section 9.2. Exculpation, Agent's Reliance, Etc. Neither Agent nor any
of its directors, officers, agents, attorneys, or employees shall be liable for
any action taken or omitted to be taken by any of them under or in connection
with the Loan Documents, INCLUDING THEIR NEGLIGENCE OF ANY KIND, except that
each shall be liable for its own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, Agent (a) may treat the payee of any
Note as the holder thereof until Agent receives written notice of the assignment
or transfer thereof in accordance with this Agreement, signed by such payee and
in form satisfactory to Agent; (b) may consult with legal counsel (including
counsel for Borrower), independent public accountants and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants or
experts; (c) makes no warranty or representation to any other Bank Party and
shall not be responsible to any other Bank Party for any statements, warranties
or representations made in or in connection with the Loan Documents; (d) shall
not have any duty to ascertain or to inquire as to the performance or observance
of any of the terms, covenants or conditions of the Loan Documents on the part
of any Restricted Person or to inspect the property (including the books and
records) of any Restricted Person; (e) shall not be responsible to any other
Bank Party for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of any Loan Document or any instrument or
document furnished in connection therewith; (f) may rely upon the
representations and warranties of each Restricted Person and the Lenders in
exercising its powers hereunder; and (g) shall incur no liability under or in
respect of the Loan Documents by acting upon any notice, consent, certificate or
other instrument or writing (including any facsimile, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper Person or Persons.
Section 9.3. Credit Decisions. Each Bank Party acknowledges that it
has, independently and without reliance upon any other Bank Party, made its own
analysis of Borrower and the transactions contemplated hereby and its own
independent decision to enter into this Agreement and the other Loan Documents.
Each Bank Party also acknowledges that it will, independently and without
reliance upon any other Bank Party and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Loan Documents.
Section 9.4. Indemnification. Each Lender agrees to indemnify Agent (to
the extent not reimbursed by Borrower within ten (10) days after demand) from
and against such Lender's
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Percentage Share of any and all liabilities, obligations, claims, losses,
damages, penalties, fines, actions, judgments, suits, settlements, costs,
expenses or disbursements (including reasonable fees of attorneys, accountants,
experts and advisors) of any kind or nature whatsoever (in this section
collectively called "liabilities and costs") which to any extent (in whole or in
part) may be imposed on, incurred by, or asserted against Agent growing out of,
resulting from or in any other way associated with any of the Collateral, the
Loan Documents and the transactions and events (including the enforcement
thereof) at any time associated therewith or contemplated therein (whether
arising in contract or in tort or otherwise and including any violation or
noncompliance with any Environmental Laws by any Person or any liabilities or
duties of any Person with respect to Hazardous Materials found in or released
into the environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY AGENT,
provided only that no Lender shall be obligated under this section to indemnify
Agent for that portion, if any, of any liabilities and costs which is
proximately caused by Agent's own individual gross negligence or willful
misconduct, as determined in a final judgment. Cumulative of the foregoing, each
Lender agrees to reimburse Agent promptly upon demand for such Lender's
Percentage Share of any costs and expenses to be paid to Agent by Borrower under
Section 10.4(a) to the extent that Agent is not timely reimbursed for such
expenses by Borrower as provided in such section. As used in this section the
term "Agent" shall refer not only to the Person designated as such in Section
1.1 but also to each director, officer, agent, attorney, employee,
representative and Affiliate of such Person.
Section 9.5. Rights as Lender. In its capacity as a Lender, Agent shall
have the same rights and obligations as any Lender and may exercise such rights
as though it were not Agent. Agent may accept deposits from, lend money to, act
as Trustee under indentures of, and generally engage in any kind of business
with any Restricted Person or their Affiliates, all as if it were not Agent
hereunder and without any duty to account therefor to any other Lender.
Section 9.6. Sharing of Set-Offs and Other Payments. Each Bank Party
agrees that if it shall, whether through the exercise of rights under Security
Documents or rights of banker's lien, set off, or counterclaim against Borrower
or otherwise, obtain payment of a portion of the aggregate Obligations owed to
it which, taking into account all distributions made by Agent under Section 3.1,
causes such Bank Party to have received more than it would have received had
such payment been received by Agent and distributed pursuant to Section 3.1,
then (a) it shall be deemed to have simultaneously purchased and shall be
obligated to purchase interests in the Obligations as necessary to cause all
Bank Parties to share all payments as provided for in Section 3.1, and (b) such
other adjustments shall be made from time to time as shall be equitable to
ensure that Agent and all Lenders share all payments of Obligations as provided
in Section 3.1; provided, however, that nothing herein contained shall in any
way affect the right of any Bank Party to obtain payment (whether by exercise of
rights of banker's lien, set-off or counterclaim or otherwise) of indebtedness
other than the Obligations. Borrower expressly consents to the foregoing
arrangements and agrees that any holder of any such interest or other
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participation in the Obligations, whether or not acquired pursuant to the
foregoing arrangements, may to the fullest extent permitted by Law exercise any
and all rights of banker's lien, set-off, or counterclaim as fully as if such
holder were a holder of the Obligations in the amount of such interest or other
participation. If all or any part of any funds transferred pursuant to this
section is thereafter recovered from the seller under this section which
received the same, the purchase provided for in this section shall be deemed to
have been rescinded to the extent of such recovery, together with interest, if
any, if interest is required pursuant to the order of a Tribunal to be paid on
account of the possession of such funds prior to such recovery.
Section 9.7. Investments. Whenever Agent in good faith determines that
it is uncertain about how to distribute to Lenders any funds which it has
received, or whenever Agent in good faith determines that there is any dispute
among Lenders 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 Lenders, Agent shall invest such funds pending
distribution; all interest on any such investment shall be distributed upon the
distribution of such investment and in the same proportion and to the same
Persons as such investment. All moneys received by Agent for distribution to
Lenders (other than to the Person who is Agent in its separate capacity as a
Lender) shall be held by Agent pending such distribution solely as Agent for
such Lenders, and Agent shall have no equitable title to any portion thereof.
Section 9.8. Benefit of Article IX. The provisions of this Article
(other than the following Section 9.9) are intended solely for the benefit of
Bank Parties, and no Restricted Person shall be entitled to rely on any such
provision or assert any such provision in a claim or defense against any Bank
Party. Bank Parties may waive or amend such provisions as they desire without
any notice to or consent of Borrower or any Restricted Person.
Section 9.9. Resignation. Agent may resign at any time by giving
written notice thereof to Lenders and Borrower. Each such notice shall set forth
the date of such resignation. Upon any such resignation, Majority Lenders shall
have the right to appoint a successor Agent. A successor must be appointed for
any retiring Agent, and such Agent's resignation shall become effective when
such successor accepts such appointment. If, within thirty days after the date
of the retiring Agent's resignation, no successor Agent has been appointed and
has accepted such appointment, then the retiring Agent may appoint a successor
Agent, which shall be a commercial bank organized or licensed to conduct a
banking or trust business under the Laws of the United States of America or of
any state thereof. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents. After any
retiring Agent's resignation hereunder the provisions of this Article IX shall
continue to inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under the Loan Documents.
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ARTICLE X - Miscellaneous
Section 10.1. Waivers and Amendments; Acknowledgments.
(a) Waivers and Amendments. No failure or delay (whether by course of
conduct or otherwise) by any Bank Party in exercising any right, power or remedy
which such Bank Party may have under any of the Loan Documents shall operate as
a waiver thereof or of any other right, power or remedy, nor shall any single or
partial exercise by any Bank Party of any such right, power or remedy preclude
any other or further exercise thereof or of any other right, power or remedy. No
waiver of any provision of any Loan Document and no consent to any departure
therefrom shall ever be effective unless it is in writing and signed as provided
below in this section, and then such waiver or consent shall be effective only
in the specific instances and for the purposes for which given and to the extent
specified in such writing. No notice to or demand on Borrower or any Guarantor
shall in any case of itself entitle Borrower or any Guarantor to any other or
further notice or demand in similar or other circumstances. This Agreement and
the other Loan Documents set forth the entire understanding between the parties
hereto with respect to the transactions contemplated herein and therein and
supersede all prior discussions and understandings with respect to the subject
matter hereof and thereof, and no waiver, consent, release, modification or
amendment of or supplement to this Agreement or the other Loan Documents shall
be valid or effective against any party hereto unless the same is in writing and
signed by (i) if such party is Borrower, by Borrower, (ii) if such party is
Agent or LC Issuer, by such party, and (iii) if such party is a Lender, by such
Lender or by Agent on behalf of Lenders with the written consent of Majority
Lenders (which consent has already been given as to the termination of the Loan
Documents as provided in Section 10.9). Notwithstanding the foregoing or
anything to the contrary herein, Agent shall not, without the prior consent of
each individual Lender, execute and deliver on behalf of such Lender any waiver
or amendment which would: (1) waive any of the conditions specified in Article
IV (provided that Agent may in its discretion withdraw any request it has made
under Section 4.2(e)), (2) increase the Borrowing Base above the Maximum Loan
Amount which requires the agreement of all Lenders pursuant to Section 2.9, (3)
increase the Maximum Loan Amount of such Lender or subject such Lender to any
additional obligations, (4) reduce any fees payable to such Lender hereunder, or
the principal of, or interest on, such Lender's Note, (5) postpone any date
fixed for any payment of any such fees, principal or interest, (6) amend the
definition herein of "Majority Lenders" or otherwise change the aggregate amount
of Percentage Shares which is required for Agent, Lenders or any of them to take
any particular action under the Loan Documents, or (7) release Borrower from its
obligation to pay such Lender's Note or any Guarantor from its guaranty of such
payment.
(b) Acknowledgments and Admissions. Borrower hereby represents,
warrants, acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii) it has made an independent decision to enter into this Agreement and
the other Loan Documents to which it is a party, without reliance on any
representation, warranty, covenant or undertaking by Agent or any Lender,
whether written, oral or implicit, other than as expressly set out in this
Agreement or in another Loan Document delivered on or after the date hereof,
(iii) there are no representations, warranties, covenants, undertakings or
agreements by any Bank Party as to the Loan Documents except as expressly set
out in this Agreement or in another Loan Document delivered on or after the date
hereof, (iv) no Bank Party has any fiduciary obligation toward Borrower with
respect to any Loan Document or the transactions contemplated thereby, (v) the
relationship pursuant to the Loan Documents between Borrower and the Guarantors,
on one hand, and each Bank Party, on the
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other hand, is and shall be solely that of debtor and creditor, respectively,
(vi) no partnership or joint venture exists with respect to the Loan Documents
between any Restricted Person and any Bank Party, (vii) Agent is not Borrower's
Agent, but Agent for Lenders, (viii) should an Event of Default or Default occur
or exist, each Bank Party will determine in its sole discretion and for its own
reasons what remedies and actions it will or will not exercise or take at that
time, (ix) without limiting any of the foregoing, Borrower is not relying upon
any representation or covenant by any Bank Party, or any representative thereof,
and no such representation or covenant has been made, that any Bank Party will,
at the time of an Event of Default or Default, or at any other time, waive,
negotiate, discuss, or take or refrain from taking any action permitted under
the Loan Documents with respect to any such Event of Default or Default or any
other provision of the Loan Documents, and (x) all Bank Parties have relied upon
the truthfulness of the acknowledgments in this section in deciding to execute
and deliver this Agreement and to become obligated hereunder.
(c) Representation by Lenders. Each Lender hereby represents that it
will acquire its Note for its own account in the ordinary course of its
commercial lending business; however, the disposition of such Lender's property
shall at all times be and remain within its control and, in particular and
without limitation, such Lender may sell or otherwise transfer its Note, any
participation interest or other interest in its Note, or any of its other rights
and obligations under the Loan Documents, subject, however, to the provisions of
Section 10.5.
(d) Joint Acknowledgment. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 10.2. Survival of Agreements; Cumulative Nature. All of
Restricted Persons' various representations, warranties, covenants and
agreements in the Loan Documents shall survive the execution and delivery of
this Agreement and the other Loan Documents and the performance hereof and
thereof, including the making or granting of the Loans and the delivery of the
Notes and the other Loan Documents, and shall further survive until all of the
Obligations are paid in full to each Bank Party and all of Bank Parties'
obligations to Borrower are terminated. All statements and agreements contained
in any certificate or other instrument delivered by Borrower or any Guarantor to
any Bank Party under any Loan Document shall be deemed representations and
warranties by Borrower or agreements and covenants of Borrower under this
Agreement. The representations, warranties, indemnities, and covenants made by
Restricted Persons in the Loan Documents, and the rights, powers, and privileges
granted to Bank Parties in the Loan Documents, are cumulative, and, except for
expressly specified waivers and consents, no Loan Document shall be construed in
the context of another to diminish, nullify, or otherwise reduce the benefit to
any Bank Party of any such representation, warranty, indemnity, covenant, right,
power or privilege. In particular and without limitation, no exception set out
in this Agreement to any representation, warranty, indemnity, or covenant herein
contained shall apply to any similar representation, warranty, indemnity, or
covenant contained in any other Loan Document, and each such similar
representation, warranty, indemnity, or
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covenant shall be subject only to those exceptions which are expressly made
applicable to it by the terms of the various Loan Documents.
Section 10.3. Notices. All notices, requests, consents, demands and
other communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that Agent may give telephonic notices to the other Bank Parties), and shall be
deemed sufficiently given or furnished if delivered by personal delivery, by
facsimile or other electronic transmission, by delivery service with proof of
delivery, or by registered or certified United States mail, postage prepaid, to
Borrower and Restricted Persons at the address of Borrower specified on the
signature pages hereto and to each Bank Party at its address specified on the
signature pages hereto (unless changed by similar notice in writing given by the
particular Person whose address is to be changed). Any such notice or
communication shall be deemed to have been given (a) in the case of personal
delivery or delivery service, as of the date of first attempted delivery during
normal business hours at the address provided herein, (b) in the case of
facsimile or other electronic transmission, upon receipt, or (c) in the case of
registered or certified United States mail, three days after deposit in the
mail; provided, however, that no Borrowing Notice shall become effective until
actually received by Agent.
Section 10.4. Payment of Expenses; Indemnity.
(a) Payment of Expenses. Whether or not the transactions contemplated
by this Agreement are consummated, Borrower will promptly (and in any event,
within 30 days after any invoice or other statement or notice) pay: (i) all
transfer, stamp, mortgage, documentary or other similar taxes, assessments or
charges levied by any governmental or revenue authority in respect of this
Agreement or any of the other Loan Documents or any other document referred to
herein or therein, (ii) all reasonable costs and expenses incurred by or on
behalf of Agent (including, without limitation, attorneys' fees, consultants'
fees and engineering fees, travel costs and miscellaneous expenses) in
connection with (1) the negotiation, preparation, execution and delivery of the
Loan Documents, and any and all consents, waivers or other documents or
instruments relating thereto, (2) the filing, recording, refiling and
re-recording of any Loan Documents and any other documents or instruments or
further assurances required to be filed or recorded or refiled or re-recorded by
the terms of any Loan Document, (3) the borrowings hereunder and other action
reasonably required in the course of administration hereof, (4) monitoring or
confirming (or preparation or negotiation of any document related to) Borrower's
compliance with any covenants or conditions contained in this Agreement or in
any Loan Document, and (iii) all reasonable costs and expenses incurred by or on
behalf of any Bank Party (including, without limitation, attorneys' fees,
consultants' fees and accounting fees) in connection with the defense or
enforcement of any of the Loan Documents (including this section) or the defense
of any Bank Party's exercise of its rights thereunder. In addition to the
foregoing, until and all Obligations have been paid in full, Borrower will also
pay or reimburse Agent for all reasonable out-of-pocket costs and expenses of
Agent or its agents or employees in connection with the continuing
administration of the Loans and the related due diligence of Agent, including
travel and miscellaneous expenses and fees and expenses of Agent's outside
counsel, reserve engineers and consultants engaged in connection with the Loan
Documents.
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(b) Indemnity. Borrower agrees to indemnify each Bank Party, upon
demand, from and against any and all liabilities, obligations, claims, losses,
damages, penalties, fines, actions, judgments, suits, settlements, costs,
expenses or disbursements (including reasonable fees of attorneys, accountants,
experts and advisors) of any kind or nature whatsoever (in this section
collectively called "liabilities and costs") which to any extent (in whole or in
part) may be imposed on, incurred by, or asserted against such Bank Party
growing out of, resulting from or in any other way associated with any of the
Collateral, the Loan Documents and the transactions and events (including the
enforcement or defense thereof) at any time associated therewith or contemplated
therein (whether arising in contract or in tort or otherwise and including any
violation or noncompliance with any Environmental Laws by any Restricted Person
or any liabilities or duties of any Restricted Person or any Bank Party with
respect to Hazardous Materials found in or released into the environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY BANK PARTY,
provided only that no Bank Party shall be entitled under this section to receive
indemnification for that portion, if any, of any liabilities and costs which is
proximately caused by its own individual gross negligence or willful misconduct,
as determined in a final judgment. If any Person (including Borrower or any of
its Affiliates) ever alleges such gross negligence or willful misconduct by any
Bank Party, the indemnification provided for in this section shall nonetheless
be paid upon demand, subject to later adjustment or reimbursement, until such
time as a court of competent jurisdiction enters a final judgment as to the
extent and effect of the alleged gross negligence or willful misconduct. As used
in this section the term "Bank Parties" shall refer not only to the Persons
designated as such in Section 1.1 but also to each director, officer, agent,
attorney, employee, representative and Affiliate of such Persons.
Section 10.5. Joint and Several Liability; Parties in Interest;
Assignments. All Obligations which are incurred by Borrower and/or two or more
Guarantors shall be their joint and several obligations and liabilities. All
grants, covenants and agreements contained in the Loan Documents shall bind and
inure to the benefit of the parties thereto and their respective successors and
assigns; provided, however, that no Borrower or Guarantor may assign or transfer
any of its rights or delegate any of its duties or obligations under any Loan
Document without the prior consent of all of the Lenders. Neither Borrower nor
any Affiliates of Borrower shall directly or indirectly purchase or otherwise
retire any Obligations owed to any Lender nor will any Lender accept any offer
to do so, unless each Lender shall have received substantially the same offer
with respect to the same Percentage Share of the Obligations owed to it. If
Borrower or any Affiliate of Borrower at any time purchases some but less than
all of the Obligations owed to all Bank Parties, such purchaser shall not be
entitled to any rights of any Bank Party under the Loan Documents unless and
until Borrower or its Affiliates have purchased all of the Obligations.
(b) No Lender shall sell any participation interest in its commitment
hereunder or any of its rights under its Loans or under the Loan Documents to
any Person only if the agreement
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between such Lender and such participant at all times provides: (i) that such
participation exists only as a result of the agreement between such participant
and such Lender and that such transfer does not give such participant any right
to vote as a Lender or any other direct claims or rights against any Person
other than such Lender, (ii) that such participant is not entitled to payment
from any Borrower or Guarantor under Sections 3.2 through 3.7 of amounts in
excess of those payable to such Lender under such sections (determined without
regard to the sale of such participation), and (iii) unless such participant is
an Affiliate of such Lender, that such participant shall not be entitled to
require such Lender to take any action under any Loan Document or to obtain the
consent of such participant prior to taking any action under any Loan Document,
except for actions which would require the consent of all Lenders under the
next-to-last sentence of subsection (a) of Section 10.1. No Lender selling such
a participation shall, as between the other parties hereto and such Lender, be
relieved of any of its obligations hereunder as a result of the sale of such
participation. Each Lender which sells any such participation to any Person
(other than an Affiliate of such Lender) shall give prompt notice thereof to
Agent and Borrower.
(c) Except for sales of participations under the immediately preceding
subsection (b), no Lender shall make any assignment or transfer of any kind of
its commitments or any of its rights under its Loans or under the Loan
Documents, except for assignments to an Eligible Transferee, and then only if
such assignment is made in accordance with the following requirements:
(i) Each such assignment shall apply to all Obligations owing
to the assignor Lender hereunder and to the unused portion of the
assignor Lender's commitments, so that after such assignment is made
the assignor Lender shall have a fixed (and not a varying) Percentage
Share in its Loans and Note and be committed to make that Percentage
Share of all future Loans, the assignee shall have a fixed Percentage
Share in such Loans and Note and be committed to make that Percentage
Share of all future Loans, and the Percentage Share of the Maximum Loan
Amount of both the assignor and assignee shall equal or exceed
$5,000,000.
(ii) The parties to each such assignment shall execute and
deliver to Agent, for its acceptance and recording in the "Register"
(as defined below in this section), an Assignment and Acceptance in the
form of Exhibit G, appropriately completed, together with the Note
subject to such assignment and a processing fee payable to Agent of
$3,500. Upon such execution, delivery, and payment and upon the
satisfaction of the conditions set out in such Assignment and
Acceptance, then (i) Borrower shall issue new Notes to such assignor
and assignee upon return of the old Notes to Borrower, and (ii) as of
the "Settlement Date" specified in such Assignment and Acceptance the
assignee thereunder shall be a party hereto and a Lender hereunder and
Agent shall thereupon deliver to Borrower and each Lender a schedule
showing the revised Percentage Shares of such assignor Lender and such
assignee Lender and the Percentage Shares of all other Lenders.
(iii) Each assignee Lender which is not a United States person
(as such term is defined in Section 7701(a)(30) of the Internal Revenue
Code of 1986, as amended) for
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Federal income tax purposes, shall (to the extent it has not already
done so) provide Agent and Borrower with the "Prescribed Forms"
referred to in Section 3.6(d).
(d) Nothing contained in this section shall prevent or prohibit any
Lender from assigning or pledging all or any portion of its Loans and Note to
any Federal Reserve Bank as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Bank; provided that no such assignment or pledge
shall relieve such Lender from its obligations hereunder.
(e) By executing and delivering an Assignment and Acceptance, each
assignee Lender thereunder will be confirming to and agreeing with Borrower,
Agent and each other Lender hereunder that such assignee understands and agrees
to the terms hereof, including Article IX hereof.
(f) Agent shall maintain a copy of each Assignment and Acceptance and a
register for the recordation of the names and addresses of Lenders and the
Percentage Shares of, and principal amount of the Loans owing to, each Lender
from time to time (in this section called the "Register"). The entries in the
Register shall be conclusive, in the absence of manifest error, and Borrower and
each Bank Party may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes. The Register shall be available for
inspection by Borrower or any Bank Party at any reasonable time and from time to
time upon reasonable prior notice.
Section 10.6. Confidentiality. Each Bank Party agrees that it will take
all reasonable steps to keep confidential any proprietary information given to
it by any Restricted Person, provided, however, that this restriction shall not
apply to information which (i) has at the time in question entered the public
domain, (ii) is required to be disclosed by Law (whether valid or invalid) of
any Tribunal, (iii) is disclosed to any Bank Party's Affiliates, auditors,
attorneys, or agents, (iv) is furnished to any other Bank Party or to any
purchaser or prospective purchaser of participations or other interests in any
Loan or Loan Document, or (v) is disclosed in the course of enforcing its rights
and remedies during the existence of an Event of Default.
Section 10.7. Governing Law; Submission to Process. EXCEPT TO THE
EXTENT THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY ELECTED IN A LOAN
DOCUMENT, THE LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE
UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF
THE UNITED STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
CHAPTER 346 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT
LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) DOES NOT APPLY TO THIS AGREEMENT
OR TO THE NOTES. BORROWER AND EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS ITSELF
TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE STATE OF
TEXAS AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY
LEGAL PROCEEDING RELATING TO THE LOAN DOCUMENTS OR THE OBLIGATIONS BY ANY MEANS
ALLOWED UNDER TEXAS OR FEDERAL LAW. ANY LEGAL PROCEEDING ARISING OUT OF OR IN
ANY WAY RELATED TO ANY OF THE LOAN DOCUMENTS SHALL BE BROUGHT AND LITIGATED
EXCLUSIVELY IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
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TEXAS, DALLAS DIVISION, TO THE EXTENT IT HAS SUBJECT MATTER JURISDICTION, AND
OTHERWISE IN THE TEXAS DISTRICT COURTS SITTING IN DALLAS COUNTY, TEXAS. THE
PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO ASSERT, BY WAY OF MOTION, AS A
DEFENSE OR OTHERWISE, THAT ANY SUCH PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM OR THAT THE VENUE THEREOF IS IMPROPER, AND FURTHER AGREE TO A TRANSFER OF
ANY SUCH PROCEEDING TO A FEDERAL COURT SITTING IN THE STATE OF TEXAS TO THE
EXTENT THAT IT HAS SUBJECT MATTER JURISDICTION, AND OTHERWISE TO A STATE COURT
IN DALLAS, TEXAS. IN FURTHERANCE THEREOF, BORROWER AND BANK PARTIES EACH HEREBY
ACKNOWLEDGE AND AGREE THAT IT WAS NOT INCONVENIENT FOR THEM TO NEGOTIATE AND
RECEIVE FUNDING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT IN SUCH
COUNTY AND THAT IT WILL BE NEITHER INCONVENIENT NOR UNFAIR TO LITIGATE OR
OTHERWISE RESOLVE ANY DISPUTES OR CLAIMS IN A COURT SITTING IN SUCH COUNTY.
Section 10.8. Limitation on Interest. Bank Parties, Borrower,
Guarantors and any other parties to the Loan Documents intend to contract in
strict compliance with applicable usury Law from time to time in effect. In
furtherance thereof such Persons stipulate and agree that none of the terms and
provisions contained in the Loan Documents shall ever be construed to create a
contract to pay, for the use, forbearance or detention of money, interest in
excess of the maximum amount of interest permitted to be charged by applicable
Law from time to time in effect. Neither any Borrower or Guarantors nor any
present or future guarantors, endorsers, or other Persons hereafter becoming
liable for payment of any Obligation shall ever be liable for unearned interest
thereon or shall ever be required to pay interest thereon in excess of the
maximum amount that may be Lawfully charged under applicable Law from time to
time in effect, and the provisions of this section shall control over all other
provisions of the Loan Documents which may be in conflict or apparent conflict
herewith. Bank Parties expressly disavow any intention to charge or collect
excessive unearned interest or finance charges in the event the maturity of any
Obligation is accelerated. If (a) the maturity of any Obligation is accelerated
for any reason, (b) any Obligation is prepaid and as a result any amounts held
to constitute interest are determined to be in excess of the legal maximum, or
(c) any Bank Party or any other holder of any or all of the Obligations shall
otherwise collect moneys which are determined to constitute interest which would
otherwise increase the interest on any or all of the Obligations to an amount in
excess of that permitted to be charged by applicable Law then in effect, then
all sums determined to constitute interest in excess of such legal limit shall,
without penalty, be promptly applied to reduce the then outstanding principal of
the related Obligations or, at such Bank Party's or holder's option, promptly
returned to Borrower or the other payor thereof upon such determination. In
determining whether or not the interest paid or payable, under any specific
circumstance, exceeds the maximum amount permitted under applicable Law, Bank
Parties and Borrower and Guarantors (and any other payors thereof) shall to the
greatest extent permitted under applicable Law, (i) characterize any
non-principal payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of the instruments evidencing the Obligations in accordance
with the amounts outstanding from time to time thereunder and the maximum legal
rate of interest from time to time in effect under applicable Law in order to
Lawfully charge the maximum amount of interest permitted under applicable Law.
In the event applicable Law provides for an interest ceiling under Section 303
of the Texas Finance Code (the "Texas Finance Code") for that day, the ceiling
shall
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be the "weekly ceiling" as defined in the Texas Finance Code, provided that if
any applicable Law permits greater interest, the Law permitting the greatest
interest shall apply. As used in this section the term "applicable Law" means
the Laws of the State of Texas or the Laws of the United States of America,
whichever Laws allow the greater interest, as such Laws now exist or may be
changed or amended or come into effect in the future.
Section 10.9. Termination; Limited Survival. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
written notice delivered to Agent to terminate this Agreement. Upon receipt by
Agent of such a notice, if no Obligations are then owing this Agreement and all
other Loan Documents shall thereupon be terminated and the parties thereto
released from all prospective obligations thereunder. Notwithstanding the
foregoing or anything herein to the contrary, any waivers or admissions made by
any Borrower or any Guarantor in any Loan Document, any Obligations under
Sections 3.2 through 3.6, and any obligations which any Person may have to
indemnify or compensate any Bank Party shall survive any termination of this
Agreement or any other Loan Document. At the request and expense of Borrower,
Agent shall prepare and execute all necessary instruments to reflect and effect
such termination of the Loan Documents. Agent is hereby authorized to execute
all such instruments on behalf of all Lenders, without the joinder of or further
action by any Lender.
Section 10.10. Severability. If any term or provision of any Loan
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable Law.
Section 10.11. Counterparts. This Agreement may be separately executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
Section 10.12. Waiver of Jury Trial, Punitive Damages, etc. BORROWER
AND EACH BANK PARTY HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND
IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH
THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED
THEREWITH, BEFORE OR AFTER MATURITY; (B) WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY "SPECIAL DAMAGES", AS DEFINED BELOW, (C) CERTIFIES THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (D)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.
AS USED IN THIS SECTION, "SPECIAL DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL,
EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE
ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR
DELIVER TO ANY OTHER PARTY HERETO.
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Section 10.13. Amendment and Restatement. This Agreement amends and
restates in its entirety that certain Credit Agreement dated as of August 27,
1998, by Borrower, Parent, certain Subsidiaries of Parent, Agent and certain
financial institutions, as "Lenders", as amended, restated, or supplemented to
the date hereof (the "Existing Agreement"). Borrower and Parent hereby represent
and warrant that as of the date hereof all conditions under Section 4.1 of this
Agreement have been met. Borrower and Parent hereby agree that (i) the Loans
outstanding under the Existing Agreement and all accrued and unpaid interest
thereon, (ii) all Letters of Credit issued and outstanding under the Existing
Agreement, and (iii) all accrued and unpaid fees under the Existing Agreement
shall be deemed to be outstanding under and governed by this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP,
BORROWER
By: Chesapeake Operating, Inc.,
its general partner
By:
-----------------------------------------
Martha A. Burger
Treasurer
CHESAPEAKE ENERGY CORPORATION,
GUARANTOR
By:
-----------------------------------------
Martha A. Burger
Treasurer
CHESAPEAKE PANHANDLE LIMITED PARTNERSHIP,
GUARANTOR
By: Chesapeake Operating, Inc.,
its general partner
By:
-----------------------------------------
Martha A. Burger
Treasurer
CHESAPEAKE LOUISIANA, L.P.,
GUARANTOR
By: Chesapeake Operating, Inc.,
its general partner
By:
-----------------------------------------
Martha A. Burger
Treasurer
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CHESAPEAKE ACQUISITION CORPORATION,
GUARANTOR
By:
-----------------------------------------
Martha A. Burger
Treasurer
CHESAPEAKE OPERATING, INC.,
GUARANTOR
By:
-----------------------------------------
Martha A. Burger
Treasurer
CHESAPEAKE ENERGY LOUISIANA CORPORATION,
GUARANTOR
By:
-----------------------------------------
Martha A. Burger
Treasurer
CHESAPEAKE ROYALTY COMPANY,
GUARANTOR
By:
-----------------------------------------
Martha A. Burger
Treasurer
ARKOMA PITTSBURG HOLDING CORPORATION,
GUARANTOR
By:
-----------------------------------------
Martha A. Burger
Treasurer
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Address for Borrower and Guarantors:
6100 North Western
Oklahoma City, Oklahoma
Attention: Treasurer
Telephone: (405) 848-8000
Telecopy: (405) 879-9587
With copy to:
Self, Giddens & Lees, Inc.
2725 Oklahoma Tower
210 Park Avenue
Oklahoma City, Oklahoma 73102
Attention: C. Ray Lees
Telephone: (405) 232-3001
Telecopy: (405) 232-5553
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UNION BANK OF CALIFORNIA, N.A.,
Agent, LC Issuer and Lender
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
Address:
500 North Akard
4200 Lincoln Center
Dallas, Texas 75201
Telephone: (214) 922-4200
Telecopy: (214) 922-4209
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SCHEDULE 2
SECURITY SCHEDULE
1. Guaranty dated May 30, 2000, executed by Parent in favor of
Agent.
2. Guaranty dated May 30, 2000, executed by the Subsidiary
Guarantors in favor of Agent.
3. Second Amendment to that certain Deed of Trust, Mortgage, Line
of Credit Mortgage, Assignment, Security Agreement, Fixture
Filing and Financing Statement dated August 27, 1998, executed
by Borrower in favor of Agent.
4. First Amendment to that certain Mortgage, Assignment, Security
Agreement, Fixture Filing and Financing Statement
dated December 16, 1998, executed by Borrower in favor of
Agent.
5. First Amendment to that certain Mortgage, Assignment, Security
Agreement, Fixture Filing and Financing Statement
dated April 30, 1999, executed by Borrower in favor of Agent
(which shall include, without limitation, the addition of the
properties referenced on Schedule 2-A attached hereto).
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<PAGE> 79
EXHIBIT A
PROMISSORY NOTE
$100,000,000 May _, 2000
FOR VALUE RECEIVED, the undersigned, Chesapeake Exploration Limited
Partnership, an Oklahoma limited partnership (herein called "Borrower"), hereby
promises to pay to the order of Union Bank of California, N.A., a national
banking association (herein called "Lender"), the principal sum of One Hundred
Million Dollars ($100,000,000), or, if less, the aggregate unpaid principal
amount of the Loan made under this Note by Lender to Borrower pursuant to the
terms of the Credit Agreement (as hereinafter defined), together with interest
on the unpaid principal balance thereof as hereinafter set forth, both principal
and interest payable as herein provided in lawful money of the United States of
America at the offices of the Agent, 445 South Figueroa Street, Los Angeles,
California 90071, or at such other place, as from time to time may be designated
by the Agent.
This Note (a) is issued and delivered under that certain Amended and
Restated Credit Agreement dated May _, 2000, among Chesapeake Energy
Corporation, Borrower, certain Guarantors and Union Bank of California, N.A., as
Agent, and the lenders (the "Credit Agreement"), and is a Note as defined
therein, (b) is subject to the terms and provisions of the Credit Agreement,
which contains provisions for payments and prepayments hereunder and
acceleration of the maturity hereof upon the happening of certain stated events,
and (c) is secured by and entitled to the benefits of certain Security Documents
(as identified and defined in the Credit Agreement). Payments on this Note shall
be made and applied as provided herein and in the Credit Agreement. Reference is
hereby made to the Credit Agreement for a description of certain rights,
limitations of rights, obligations and duties of the parties hereto and for the
meanings assigned to terms used and not defined herein and to the Security
Documents for a description of the nature and extent of the security thereby
provided and the rights of the parties thereto. This Note is given in
replacement and renewal of (but not in extinguishment or novation of) that
certain Promissory Note dated May 11, 2000, made by Borrower payable to the
order of Lender in the original principal amount of $50,000,000. Any interest
accrued and unpaid on such Promissory Note dated May 11, 2000 shall not be
extinguished but shall be carried forward hereby and shall be payable on the
applicable date provided for herein.
For the purposes of this Note, the following terms have the meanings
assigned to them below:
"Base Rate Payment Date" means (i) the last day of each March,
June, September and December, beginning June 30, 2000, and (ii) any day
on which past due interest or principal is owed hereunder and is
unpaid. If the terms hereof or of the Credit Agreement provide that
payments of interest or principal hereon shall be deferred from one
Base Rate Payment Date to another day, such other day shall also be a
Base Rate Payment Date.
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<PAGE> 80
"Eurodollar Rate Payment Date" means, with respect to any
Eurodollar Loan: (i) the day on which the related Interest Period ends
and, if such Interest Period is three months or longer, the three-month
anniversary of the first day of such Interest Period, and (ii) any day
on which past due interest or past due principal is owed hereunder with
respect to such Eurodollar Loan and is unpaid. If the terms hereof or
of the Credit Agreement provide that payments of interest or principal
with respect to such Eurodollar Loan shall be deferred from one
Eurodollar Rate Payment Date to another day, such other day shall also
be a Eurodollar Rate Payment Date.
The principal amount of this Note, together with all interest accrued
hereon, shall be due and payable in full on July 15, 2002.
Unless the Default Rate shall be applicable, Base Rate Loans from time
to time outstanding shall bear interest on each day outstanding at the Base Rate
in effect on such day. On each Base Rate Payment Date Borrower shall pay to the
holder hereof all unpaid interest which has accrued on each Base Rate Loan to
but not including such Base Rate Payment Date. Unless the Default Rate shall be
applicable, each Eurodollar Loan shall bear interest on each day during the
related Interest Period at the related Eurodollar Rate in effect on such day. On
each Eurodollar Rate Payment Date relating to such Eurodollar Loan, Borrower
shall pay to the holder hereof all unpaid interest which has accrued on such
Eurodollar Loan to but not including such Eurodollar Rate Payment Date. After
the occurrence and during the continuance of an Event of Default and a notice to
Borrower by Agent that the Default Rate shall apply, all Loans shall bear
interest on each day outstanding at the Default Rate in effect on such day, and
such interest shall be due and payable daily as it accrues. Notwithstanding the
foregoing provisions of this paragraph: (a) this Note shall never bear interest
in excess of the Highest Lawful Rate, and (b) if at any time the rate at which
interest is payable on this Note is limited by the Highest Lawful Rate (by the
foregoing clause (a) or by reference to the Highest Lawful Rate in the
definitions of Base Rate, Eurodollar Rate and Default Rate), this Note shall
bear interest at the Highest Lawful Rate and shall continue to bear interest at
the Highest Lawful Rate until such time as the total amount of interest accrued
hereon equals (but does not exceed) the total amount of interest which would
have accrued hereon had there been no Highest Lawful Rate applicable hereto.
Notwithstanding the foregoing paragraph and all other provisions of
this Note, in no event shall the interest payable hereon, whether before or
after maturity, exceed the maximum amount of interest which, under applicable
law, may be charged on this Note, and this Note is expressly made subject to the
provisions of the Credit Agreement which more fully set out the limitations on
how interest accrues hereon. In the event applicable law provides for a ceiling
under Section 303 of the Texas Finance Code, that ceiling shall be the weekly
ceiling and shall be used in this Note for calculating the Highest Lawful Rate
and for all other purposes. The term "applicable law" as used in this Note shall
mean the laws of the State of Texas or the laws of the United States, whichever
laws allow the greater interest, as such laws now exist or may be changed or
amended or come into effect in the future.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, Borrower and all endorsers, sureties
and guarantors of this Note jointly and severally agree to pay reasonable
80
<PAGE> 81
attorneys' fees and collection costs to the holder hereof in addition to the
principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
81
<PAGE> 82
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW), EXCEPT TO THE EXTENT THE SAME ARE GOVERNED BY APPLICABLE
FEDERAL LAW.
CHESAPEAKE EXPLORATION LIMITED
PARTNERSHIP
By: Chesapeake Operating, Inc.,
its general partner
By:
---------------------------------
Martha A. Burger
Treasurer
82
<PAGE> 83
EXHIBIT B
REQUEST FOR ADVANCE
Reference is made to that certain Amended and Restated Credit Agreement
dated as of May _, 2000, among Chesapeake Energy Corporation, Chesapeake
Exploration Limited Partnership ("Borrower"), certain Guarantors, Union Bank of
California, N.A., as Agent ("Agent"), and Lenders from time to time party
thereto (herein, as from time to time supplemented, amended or restated called
the "Agreement"). Terms which are defined in the Agreement are used herein with
the meanings given them in the Agreement. Pursuant to the terms of the Agreement
Borrower hereby requests Lenders to make an Advance to Borrower in the principal
amount of $ __________ and specifies ____________, 20__, as the date Borrower
desires for Lenders to make such Advance and to deliver to Borrower the proceeds
thereof.
To induce Lenders to make such Advance, Parent and Borrower hereby
represent, warrant, acknowledge, and agree that:
(a) The officer of Parent and Borrower signing this instrument
is the duly elected, qualified and acting officer of Parent and
Borrower as indicated below such officer's signature hereto having all
necessary authority to act for Parent and Borrower in making the
request herein contained.
(b) The representations and warranties of Restricted Persons
set forth in the Agreement and the other Loan Documents are true and
correct on and as of the date hereof (except to the extent that the
facts on which such representations and warranties are based have been
changed by the extension of credit under the Agreement), with the same
effect as though such representations and warranties had been made on
and as of the date hereof.
(c) There does not exist on the date hereof any condition or
event which constitutes a Default which has not been waived in writing
as provided in Section 10.1(a) of the Agreement; nor will any such
Default exist upon Borrower's receipt and application of the Advance
requested hereby. Borrower will use the Advance hereby requested in
compliance with Section 2.4 of the Agreement.
(d) Except to the extent waived in writing as provided in
Section 10.1(a) of the Agreement, each Restricted Person has performed
and complied with all agreements and conditions in the Agreement
required to be performed or complied with by such Restricted Person on
or prior to the date hereof, and each of the conditions precedent to
Advances contained in the Agreement remains satisfied.
(e) The unpaid principal balance of the Loan, after the making
of the Advance requested hereby, will not be in excess of the Borrowing
Base on the date requested for the making of such Advance.
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<PAGE> 84
(f) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any
course of dealing, or by any other means not provided for in Section
10.1(a) of the Agreement. The Agreement and the other Loan Documents
are hereby ratified, approved, and confirmed in all respects.
The officers of Parent and Borrower signing this instrument hereby
certify that, to the best of their knowledge after due inquiry, the above
representations, warranties, acknowledgments, and agreements of Parent and
Borrower are true, correct and complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________,
20__.
CHESAPEAKE ENERGY CORPORATION
By:
-----------------------------------
Name:
Title:
CHESAPEAKE EXPLORATION LIMITED
PARTNERSHIP
By: Chesapeake Operating, Inc.,
its general partner
By:
-----------------------------------
Name:
Title:
84
<PAGE> 85
EXHIBIT C
CONTINUATION/CONVERSION NOTICE
Reference is made to that certain Amended and Restated Credit Agreement
dated May _, 2000 among CHESAPEAKE ENERGY CORPORATION, CHESAPEAKE EXPLORATION
LIMITED PARTNERSHIP ("Borrower"), certain Guarantors and UNION BANK OF
CALIFORNIA, as Agent ("Agent"), and Lenders from time to time party thereto
(herein, as from time to time supplemented, amended or restated, called the
"Agreement"). Terms which are defined in the Agreement and which are used but
not defined herein are used herein with the meanings given them in the
Agreement. Pursuant to the terms of the Agreement Borrower hereby elects to
[Continue the following Eurodollar Loan][Convert a Base Rate Loan to a
Eurodollar Loan][in the amount of $ __________ with an Interest Period beginning
on __________________ and continuing for a period of __________________]
[Convert the following Eurodollar Loan to a Base Rate Loan]:
To meet the conditions set out in the Agreement for the making of such
election, Parent and Borrower hereby represent, warrant, acknowledge and agree
that:
(a) The officer of Parent and Borrower signing this instrument
is the duly elected, qualified and acting officer of Parent and
Borrower as indicated below such officer's signature hereto having all
necessary authority to act for Parent and Borrower in making the
election herein contained.
(b) There does not exist on the date hereof any condition or
event which constitutes a Default which has not been waived in writing
as provided in Section 10.1(a) of the Agreement.
(c) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any
course of dealing, or by any other means not provided for in Section
10.1(a) of the Agreement. The Agreement and the other Loan Documents
are hereby ratified, approved, and confirmed in all respects.
The officers of Parent and Borrower signing this instrument hereby
certifies that, to the best of their knowledge after due inquiry, the above
representations, warranties, acknowledgments, and agreements of Parent and
Borrower are true, correct and complete.
1
<PAGE> 86
IN WITNESS WHEREOF this instrument is executed as of _______________.
CHESAPEAKE ENERGY CORPORATION
By:
-----------------------------------
Name:
Title:
CHESAPEAKE EXPLORATION LIMITED
PARTNERSHIP
By: Chesapeake Operating, Inc.,
its general partner
By:
-----------------------------------
Name:
Title:
2
<PAGE> 87
EXHIBIT D
CERTIFICATE ACCOMPANYING
FINANCIAL STATEMENTS
Reference is made to that certain Amended and Restated Credit Agreement
dated as of May _, 2000, among Chesapeake Energy Corporation, Chesapeake
Exploration Limited Partnership ("Borrower"), certain Guarantors, Union Bank of
California, N.A., as Agent ("Agent"), and Lenders from time to time party
thereto (herein, as from time to time supplemented, amended or restated called
the "Agreement"), which Agreement is in full force and effect on the date
hereof. Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement.
This Certificate is furnished pursuant to Section 6.2(b) of the
Agreement. Together herewith Parent and Borrower are furnishing to Lenders
[Parent's][Borrower's] financial statements (the "Financial Statements") as at
____________ (the "Reporting Date"). Parent and Borrower hereby represent,
warrant, and acknowledge to Lenders that:
(a) the officer of Parent and Borrower signing this instrument is the
duly elected, qualified and acting [Chief Financial Officer][Treasurer] of
Parent and Borrower;
(b) the Financial Statements are accurate and complete and satisfy, the
requirements of the Agreement, and fairly present the consolidated financial
conditions and results of operations of [Parent and its Subsidiaries][Borrower];
(c) a review of the activities of each Restricted Person during *[the
Fiscal Quarter ending on the Reporting Date and during the portion of the Fiscal
Year Ending on the Reporting Date]* *[the Fiscal Year Ending on the Reporting
Date] has been made under the supervision of the undersigned and to the
knowledge of the undersigned, each Restricted Person is in full compliance with
the disclosure requirements of Section 6.2(d) of the Agreement and has observed,
performed and fulfilled each and every other obligation and covenant contained
in each of the Loan Documents (except to the extent properly waived as provided
herein) and no Restricted Person was in Default under the Loan Documents as of
the Reporting Date nor is in default as of the date hereof *[except for
Default(s) under Section(s) ____________ of the Agreement, which *[is/are] more
fully described on a schedule attached hereto].
The officer of Parent and Borrower signing this instrument hereby
certifies that he has reviewed the Loan Documents and the Financial Statements
and has otherwise undertaken such inquiry as is in his opinion necessary to
enable him to express an informed opinion with respect to the above
representations, warranties and acknowledgments of Borrower and, to the best of
his knowledge, such representations, warranties, and acknowledgments are true,
correct and complete.
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<PAGE> 88
IN WITNESS WHEREOF, this instrument is executed as of ____________,
20__.
CHESAPEAKE ENERGY CORPORATION
By:
-----------------------------------
Name:
Title:
CHESAPEAKE EXPLORATION LIMITED
PARTNERSHIP
By: Chesapeake Operating, Inc.,
its general partner
By:
-----------------------------------
Name:
Title:
2
<PAGE> 89
EXHIBIT G
ASSIGNMENT AND ASSUMPTION AGREEMENT
Date _______________, 200__
Reference is made to that certain Amended and Restated Credit Agreement
dated as of May _, 2000 (as from time to time amended, the "Agreement"), by and
among Chesapeake Energy Corporation, Chesapeake Exploration Limited Partnership,
as Borrower, certain Guarantors, Union Bank of California, N.A., as Agent, and
certain financial institutions, as Lenders, which Agreement is in full force and
effect on the date hereof. Terms which are defined in the Agreement are used
herein with the meanings given them in the Agreement.
____________________ ("Assignor") and ____________________ ("Assignee")
hereby agree as follows:
1. Assignor hereby sells and assigns to Assignee without recourse and
without representation or warranty (other than as expressly provided herein),
and Assignee hereby purchases and assumes from Assignor, that interest in and to
all of Assignor's rights and duties under the Agreement as of the date hereof
which represents the percentage interest specified in Item 3 of Annex I hereto
(the "Assigned Share") of all of the outstanding rights and obligations of all
Lenders under the Agreement, including, without limitation, all rights and
obligations with respect to the Assigned Share in Assignor's Loans and Note.
After giving effect to such sale and assignment, Assignee's Percentage Share
[(and Assignor's remaining Percentage Share)] will be as set forth in Item 3 of
Annex I hereto.
2. Assignor: (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Agreement, the
other Loan Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Agreement, the other Loan Documents or
any other instrument or document furnished pursuant thereto; and (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Borrower, any other Related Person or the performance or
observance by any of them of any of their respective obligations under the
Agreement, the other Loan Documents, or any other instrument or document
furnished pursuant thereto.
3. Assignee: (i) confirms that it has received a copy of the Agreement,
together with copies of the financial statements most recently delivered
thereunder and such other Loan Documents and other documents and information as
it has deemed appropriate to make its own analysis of Borrower and the
transactions contemplated by the Agreement and its own independent decision to
enter into this Assignment and Assumption Agreement; (ii) agrees that it will,
independently and without reliance upon Assignor or any other Bank Party and
based on such documents and information as it shall deem appropriate at the
time, continue to make its
3
<PAGE> 90
own credit decisions in taking or not taking action under the Agreement; (iii)
confirms that it is a an Eligible Transferee under the Agreement; (iv) appoints
and authorizes Agent to take such action as agent on its behalf and to exercise
such powers under the Agreement and the other Loan Documents as are specifically
delegated to them, together with all other powers reasonably incidental thereto;
and (v) agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Agreement are required to be performed by
it as a Lender (including the obligation to make future Loans). [; and (vi)
attaches the "Prescribed Forms" described in Section 3.7(d) of the Agreement.]
4. Following the execution of this Assignment and Assumption Agreement
by Assignor and Assignee, an executed original hereof (together with all
attachments) will be delivered to Agent. The effective date of this Assignment
and Assumption Agreement (the "Settlement Date") shall be the date specified in
Item 4 of Annex I hereto; provided that this Assignment and Assumption Agreement
shall not be deemed to have taken effect unless (i) the consent hereto of Agent
and Borrower has been obtained (to the extent required in the Agreement), (ii)
Agent has received a fully executed original hereof, and (iii) Agent has
received the processing fee referred to in Section 10.5(c)(ii) of the Agreement.
5. Upon the satisfaction of the foregoing conditions, then as of the
Settlement Date: (i) Assignee shall be a party to the Agreement and, to the
extent provided in this Assignment and Assumption Agreement, have the rights and
obligations of a Lender thereunder and under the other Loan Documents and (ii)
Assignor shall, to the extent provided in this Assignment and Assumption
Agreement, relinquish its rights and be released from its duties under the
Agreement and the other Loan Documents.
6. All interest, fees and other amounts that would otherwise accrue
pursuant to the Agreement and Assignor's Note for the account of Assignor from
and after the Settlement Date shall, instead accrue for the account of, and be
payable to, Assignor and Assignee, as the case may be, in accordance with their
respective interests as reflected in Item 3 to Annex I hereto. All payments of
principal that would otherwise be payable from and after the Settlement Date to
or for the account of Assignor pursuant to the Agreement and Assignor's Note
shall, instead, be payable to or for the account of Assignor and Assignee, as
the case may be, in accordance with their respective interests as reflected in
Item 3 to Annex I hereto. On the Settlement Date, Assignee shall pay to Assignor
an amount specified by Assignor in writing which represents the portion of
Assignor's Loans which is being assigned and which is outstanding on the
Settlement Date, net of any closing costs. Assignor and Assignee shall make all
appropriate adjustments in payments under the Agreement for periods prior to the
Settlement Date directly between themselves on the Settlement Date.
7. Each of the parties to this Assignment and Assumption Agreement
agrees that at any time and from time to time upon the written request of any
other party, it will execute and deliver such further documents and do such
further acts and things as such other party may reasonably request in order to
effect the purposes of this Assignment and Assumption Agreement.
8. This Assignment and Assumption Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Texas.
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<PAGE> 91
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Assignment and Assumption
Agreement, as of the date first above written, such execution also being made on
Annex I hereto.
[NAME OF ASSIGNOR]
as Assignor
By:
-------------------------
Title:
[NAME OF ASSIGNEE]
By:
-------------------------
Title:
CONSENTED TO AND ACKNOWLEDGED:
UNION BANK OF CALIFORNIA, N.A.
as Agent
By:
-------------------------
Title:
By:
-------------------------
Title:
5
<PAGE> 92
ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT
ANNEX I
1. Borrower: Chesapeake Energy Corporation and Chesapeake Exploration
Limited Partnership
2. Date of Assignment Agreement:
3. Amounts (as of date of item #2 above):
<TABLE>
<CAPTION>
[Assignor Assignee
(as Revised)] (New)
------------- ---------
<S> <C> <C>
a. Percentage Share [__________%] __________%
b. Percentage Share of
Borrowing Base: [$__________] $__________
</TABLE>
4. Settlement Date:
5. Notices:
ASSIGNEE:
------------------------
------------------------
------------------------
------------------------
Attention:
--------------
Telephone:
--------------
Telecopy:
--------------
6. Wiring Instructions:
------------------------
------------------------
------------------------
