Loan Agreement
As of September 9, 1999
Between
BORROWER
EQUITY OIL COMPANY
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BANK
BANK ONE, TEXAS, N.A.
TXI 2448
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In consideration of the creation of the reducing revolving facility
described below and the mutual covenants and agreements contained herein, and
intending to be legally bound hereby, Bank and Borrower agree as follows:
1.0 Certain Definitions. In addition to any other terms defined herein,
the following terms shall have the meaning set forth with respect thereto:
"Acceptable Hedging Agreement" means a Hedging Agreement meet-
ing all of the following criteria:
(a) the quantity of hydrocarbons owned by Borrower
subject to Hedging Agreements shall not be greater than 75% of
the monthly production of all of Borrower's proved and
producing oil and gas properties, including Mortgaged
Properties, forecast in Bank's most recent engineering
evaluation for the period covered by the Hedging Agreement;
(b) the "strike prices" under the Hedging Agreement
shall not be less than the lowest prices utilized in Bank's
most recent base case evaluation of the Mortgaged Properties
as reported to Borrower;
(c) the Hedging Agreement must have a maturity of
eighteen (18) months or less;
(d) Bank must have given its written consent to the
counterparties under the Hedging Agreement; and
(e) Bank shall have received first and prior
perfected security interests pursuant to security agreements
in form and substance satisfactory to Bank in and to the
Hedging Agreement.
"Affected Loans": See Section 4.4.
"Affidavit of Payment of Trade Bills": See Section 6.3.
"Agreement" means this Loan Agreement and all subsequent modi-
fications and amendments hereto.
"Borrowing Base": See Section 5.0.
"Borrowing Request": See Section 2.0.
"Business Day" means the normal banking hours during any day
(other than Saturdays or Sundays or legal holidays) that banks are
legally open for business in Dallas, Texas.
"Canadian Collateral Security Documents" mean all of the
following collateral security documents executed for the purpose of
creating a lien in Borrower's Mineral Interests in those Mortgaged
Properties listed on Schedule I which are located in Canada: (a) Deed
of Trust and Mortgage between Borrower and Montreal Trust Company of
Canada ("Montreal Trust") dated March 21, 1995; (b) First Supplemental
Trust Deed between Borrower and Montreal Trust dated September 9, 1999;
(c) Demand Debenture No. 1 in the principal amount of U.S. $30,000,000
issued by Borrower dated September 9, 1999; (d) Demand Debenture No. 2.
in the principal amount of U.S. $70,000,000 issued by Borrower dated as
of September 9, 1999; (e) Debenture Pledge Agreement providing for the
pledge of a Secured Demand Debenture in the principal amount of U.S.
$30,000,000 to Bank executed by Borrower September 9, 1999; (f)
Debenture Pledge Agreement providing for the pledge of a Secured Demand
Debenture in the principal amount of U.S. $70,000,000 to Bank executed
by Borrower as of September 9, 1999; and (g) all other debentures,
debenture transfer agreements, debenture pledges, trust deeds,
supplemental trust deeds, assignments, requests, receipts,
registrations, and security notices executed in connection therewith.
"Commitment" means the obligation of Bank, subject to the
terms and conditions of this Agreement to make Loans which shall not
exceed at any one time outstanding the lesser of (a) $50,000,000, or
(b) the Borrowing Base.
"Contested in Good Faith" means, as to any payment, tax,
assessment, charge, levy, lien, encumbrance or claim, contesting the
amount, applicability or validity thereof in good faith by appropriate
proceedings or other appropriate actions promptly initiated and
diligently conducted in a manner satisfactory to Bank, provided (a) in
the case of a contested tax only, a deposit of funds or other security
satisfactory to Bank in the full amount of such contested tax has been
provided for in a manner satisfactory to Bank, and (b) the enforcement
of the contested payment, tax, assessment, charge, levy, lien,
encumbrance or claim is stayed in a manner satisfactory to Bank pending
the resolution of such contest.
"Current Assets" mean the total of Borrower's consolidated
current assets determined in accordance with GAAP, including the
undrawn amount available to be borrowed under this Agreement, and
excluding intercompany receivables due from affiliates.
"Current Liabilities" mean the total of Borrower's
consolidated current obligations as determined in accordance with GAAP,
excluding therefrom (i) current maturities due on the Obligations, and
(ii) intercompany payables due to affiliates.
"Determination Date": See Section 5.1.
"EBITDA" means, as of the last day of any fiscal quarter for
the period of four consecutive fiscal quarters ending on such day, Net
Income for such period, (i) plus, without duplication and to the extent
deducted from revenues in determining Net Income, the sum of (a)
Interest Expense for such period, (b) the aggregate amount of Letter of
Credit fees paid during
such period, (c) the aggregate amount of income tax expense for such
period, (d) all amounts attributable to depreciation and amortization
for such period, (e) exploration costs, and (f) expenditures relating
to Symskaya Exploration, Inc., to the extent included in the
computation of Net Income.
"Engineered Value": see Section 10.3.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations promulgated thereunder, as in
effect as of the date hereof and any subsequent provisions which are
amendatory thereof, supplemental thereto or substituted therefor. In
addition, the terms "Commonly Controlled Entity," "Multiemployer Plan,"
"PBGC," "Plan," "Prohibited Transaction," and "Reportable Event" have
the same meanings as provided therefor in ERISA.
"Eurocurrency Reserve Requirement" means, at any time, the
maximum rate at which reserves (including, without limitation, any
marginal, special, supplemental or emergency reserves) are required to
be maintained under regulations issued from time to time by the Board
of Governors of the Federal Reserve System (or any successor) by member
banks of the Federal Reserve System against "Eurocurrency liabilities"
(as such term is used in Regulation D). Without limiting the effect of
the foregoing, the Eurocurrency Reserve Requirement shall reflect any
other reserves required to be maintained by such member banks with
respect to (i) any category of liabilities which includes deposits by
reference to which the Eurodollar Rate is to be determined, or (ii) any
category of extensions of credit or other assets which include
Eurodollar Loans. The Eurodollar Rate shall be adjusted automatically
on and as of the effective date of any change in the Eurocurrency
Reserve Requirement.
"Eurodollar Business Day" means a Business Day on which
dealings in U.S. Dollar deposits are carried on in the Eurodollar
market.
"Eurodollar Interest Period" means, with respect to any Euro-
dollar Loan:
(i) initially, the period commencing on the date such
Eurodollar Loan is made and ending on the numerically
corresponding day in the calendar month that is one month, two
months or three months thereafter, as selected by Borrower,
and
(ii) thereafter, each period commencing on the day
following the last day of the next preceding Interest Period
applicable to such Eurodollar Loan and ending one month, two
months or three months thereafter, as selected by Borrower;
provided, however, that (A) if any Eurodollar Interest Period would
otherwise expire on a day that is not a Eurodollar Business Day, such
Interest Period shall expire on the next succeeding Eurodollar Business
Day, and (B) any Eurodollar Interest Period that commences on the last
Eurodollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the last calendar month of
such Eurodollar Interest Period) shall end on the last Eurodollar
Business Day of the last calendar month of such Eurodollar Interest
Period, and (C) any Eurodollar Interest Period that would otherwise
expire after the Maturity Date shall end on the Maturity Date.
"Eurodollar Loan" means any Loan that bears interest at the
Eurodollar Rate.
"Eurodollar Margin" means one of the following:
(i) two and one-quarter percent (2.25%) per annum,
whenever the Principal Debt is equal to or greater than 75% of
the Commitment in effect at the time in question;
(ii) two percent (2.00%) per annum, whenever the
Principal Debt is equal to or greater than 50%, but less than
75%, of the Commitment in effect at the time in question; or
(iii) one and three-quarter percent (1.75%) per
annum, whenever the Principal Debt is less than 50% of the
Commitment in effect at the time in question.
"Eurodollar Rate" means, with respect to each Eurodollar Loan,
a rate per annum (rounded upward, if necessary, to the nearest 1/10 of
1%) determined by Bank as follows:
Interbank Market Rate + Eurodollar Margin
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1 - Eurocurrency Reserve Requirement
"Event of Default": See Section 11.0.
"Funding Date": See Section 7.0.
"GAAP" means generally accepted accounting principles as in
effect from time to time, applied on a basis consistent (except for
changes approved by Borrower's independent public accountant) with the
most recent financial statements of Borrower delivered to Bank.
"Hazardous Materials" include all materials defined as
hazardous materials or substances under any local, state or federal
environmental laws, rules or regulations, and petroleum, petroleum
products, oil and asbestos.
"Hedging Agreement" means any transaction (including an
agreement with respect thereto) now existing or hereafter entered into
which is a rate swap, basis swap, forward rate transaction, commodity
swap, commodity option, equity or equity index swap, equity or equity
index option, bond option, interest rate option, foreign exchange
transaction, cap transaction, forward transaction, collar transaction,
forward transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction
(including any option with respect to any of these transactions) or any
combination thereof, whether linked to one or more interest rates,
foreign currencies, commodity prices, equity prices or other financial
measures.
"Incremental Portion" means any amount which is $1,000,000 or
greater.
"Interbank Market Rate" means, for any Eurodollar Loan for the
relevant Eurodollar Interest Period therefor, the rate of interest per
annum (rounded upward, if necessary, to the nearest 1/100th of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London
interbank offered rate for deposits in dollars at approximately 11:00
a.m., London time, two (2) Eurodollar Business Days prior to the first
day of such Eurodollar Interest Period, for a term comparable to such
Eurodollar Interest Period. If for any reason such rate is not
available, the term "Interbank Market Rate" shall mean, for any
Eurodollar Loan for any Eurodollar Interest Period therefor, the rate
per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%)
appearing on Reuters Screen FRBD as the London interbank offered rate
for deposits in dollars at approximately 11:00 a.m., London time, two
(2) Eurodollar Business Days prior to the first day of such Eurodollar
Interest Period for a term comparable to such Eurodollar Interest
Period; provided however, if more than one rate is specified on Reuters
Screen FRBD, the applicable rate shall be the arithmetic mean of all
such rates (rounded upwards, if necessary, to the nearest 1/100th of
1%).
"Interest Coverage Ratio" means the ratio of (a) EBITDA minus
Permitted Symskaya Investments beginning after January 1, 2000, and
minus the greater of:
(i) $210,000, or
(ii) the actual amount of fixed exploration overhead
as determined by Borrower,
in each case for the fiscal quarter ending as of the last day of the
fiscal quarter for which the Interest Coverage Ratio is being
calculated, to (b) Interest Expense, as of the last day of the fiscal
quarter for which the Interest Coverage Ratio is being calculated, for
the period of four consecutive fiscal quarters ending on such day.
"Interest Expense" means, for any period, the interest
expense, both expensed and capitalized (including the interest
component in respect of capital lease obligations), accrued or paid by
Borrower during such period, and Letter of Credit fees paid by Borrower
during such period, determined on a consolidated basis in accordance
with GAAP.
"Interest Period" means any Prime Rate Interest Period or
Eurodollar Interest Period, as is applicable.
"Letter of Credit": See Section 2.6.
"Loan": See Section 2.0.
"Loan Documents" means this Agreement, the Note, the Oil and
Gas Mortgages, the UCC-1 financing statements, the Property
Certificates, the Affidavit of Payment of Trade Bills, the Officer's
Certificate, the Section 26.02 Notice, the Canadian Collateral Security
Documents, and all other documents, instruments, guarantees, security
agreements, deeds of trust, pledge agreements, certificates and
agreements executed and/or delivered by Borrower, or any guarantor or
third party in connection with any Loan.
"Maturity Date" means September 9, 2002.
"Maximum Rate" means the lesser of Prime Rate plus 4% from
time to time and in effect on the date for which a determination of
interest accrued hereunder is made, or the maximum rate permitted by
applicable law.
"Midland" means HSBC Investment Bank plc, which is the
successor in interest to Midland Bank plc, New York Branch.
"Mineral Interests" means (a) all present and future interests
and estates existing under an oil and gas lease including without
limitation working interests, royalties, over-riding royalties,
production payments and net profits interests, (b) all present and
future rights in mineral fee interests and rights therein, including
without limitation, any reversionary or carried interests relating
thereto, (c) all rights, titles and interests created by or arising
under the terms of all present and future unitization, communitization,
and pooling arrangements (and all properties covered and units created
thereby) whether arising by contract or operation of law which now or
hereafter include all or any part of the foregoing, and (d) all rights,
remedies, powers and privileges with respect to all of the foregoing.
"Monthly Reduction Amount": See Section 5.5.
"Mortgaged Properties" means all present and future Mineral
Interests of Borrower in those oil and gas properties described on
Schedule I and in all other properties in which Borrower hereafter
grants to Bank a mortgage or lien.
"Net Income" means, for any period, net income or loss (after
income taxes) of Borrower for such period determined on a consolidated
basis in accordance with GAAP, provided, there shall be excluded (a)
extraordinary gains, (b) gains due to sale or writeup of assets, (c)
earnings of any entity newly acquired, if earned prior to acquisition,
(d) gains due to acquisitions of any securities of any entity, (e) all
other non-cash revenue and charges, and (f) gains or losses from sale
of assets.
"No Cure Period Covenants" mean any term, covenant or
agreement set forth in Section 5.5, Section 5.6, Sections 8.1 through
8.4, Sections 9.1 through 9.16, Section 14.0 and Section 15.8 hereof.
"Note" means that certain promissory note made by Borrower
payable to the order of Bank in the original principal sum of
$50,000,000 dated September 9, 1999, and all renewals, extensions,
modifications and amendments thereto, and substitutions therefor.
"Obligations" means the obligations of Borrower:
(a) to pay all indebtedness arising out of this
Agreement, any future advances under this Agreement, and all
renewals, extensions or amendments of such indebtedness or any
part thereof or any such future advances;
(b) to pay the principal of and interest on the Note
in accordance with the terms thereof, and all renewals,
extensions, modifications and amendments of such Note or any
part thereof, and any future advances made pursuant thereto;
(c) to repay to Bank all amounts advanced by Bank
hereunder or under the other Loan Documents on behalf of
Borrower, including, without limitation, advances for
principal or interest payments to prior secured parties,
mortgagees, or lienors, or for taxes, levies, insurance, rent,
repairs to or maintenance or storage of any of the collateral;
(d) to pay any and all other indebtedness of Borrower
to Bank of every kind, nature and description, direct or
indirect, primary or secondary, secured or unsecured
(including overdrafts), joint or several, absolute or
contingent, due or to become due, now existing or hereafter
arising, regardless of how it may be evidenced, including
without limitation all future advances, whether or not
presently contemplated by the parties hereto;
(e) to pay any and all obligations, contingent or
otherwise, whether now existing or hereafter arising of
Borrower to Bank arising under or in connection with any
Hedging Agreement which Borrower may have with Bank, or any
affiliate of Bank;
(f) to perform fully all of the terms and provisions
of each of the instruments constituting the Loan Documents;
and
(g) to reimburse Bank, on demand, for all of Bank's
expenses and costs, which Borrower is obligated to pay
pursuant to the terms of the Loan Documents.
"Officer's Certificate": See Section 6.7.
"Oil and Gas Mortgage": See Section 2.4.
"Other Taxes": See Section 4.6.
"Permitted Liens" mean (a) liens in favor of Bank, and liens
in favor of the Canadian trustee under the Canadian Collateral Security
Documents, (b) liens for taxes, assessments or
similar charges, incurred in the ordinary course of business that are
not yet due and payable, (c) liens of mechanics, materialmen,
warehousemen, carriers, operators and other like liens securing
obligations incurred in the ordinary course of business that are not
yet due and payable, (d) landlord's liens for rentals not yet due and
payable, (e) royalties, overriding royalties, reversionary interests,
production payments and similar burdens, (f) sales contracts or other
arrangements for the sale of hydrocarbons which would not (when
considered cumulatively with the matters discussed in clause (e)
immediately preceding) deprive Borrower of any material right in
respect of Borrower's assets or properties, (g) liens permitted by the
Oil and Gas Mortgages, and (h) purchase-money mortgages, liens or
security interests on any property hereafter acquired.
"Permitted Symskaya Investments" mean investments in, or
capital expenditures or distributions of any nature to, Symskaya
Exploration, Inc., which may be made by Borrower subject to the
following limitations:
(a) no such payments may be made at any time an Event
of Default then exists or will occur as the result of such
payment; and
(b) the aggregate amount of such payments in any
fiscal year may not exceed $200,000, without prior written
consent of Bank.
"Plan" means, at any time, any employee benefit plan which is
covered by ERISA and in respect of which Borrower or any Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under ERISA be deemed to be) an "employer" as defined in ERISA.
"Potential Default" means any condition, event or act, which
with the giving of notice or the lapse of time, or both, will
constitute an Event of Default hereunder.
"Prime Rate" means the variable rate of interest per annum
established from time to time by Bank as its Prime Rate (which rate of
interest may or may not be the lowest rate or best charged by Bank on
similar loans, and Bank may make various commercial or other loans at
rates of interest having no relationship to such rate). Each change in
the Prime Rate shall become effective without prior notice to Borrower
automatically as of the opening of business on the date of such change
in the Prime Rate.
"Prime Rate Interest Period" means, with respect to any Prime
Rate Loan, the period ending on the last day of each month; provided,
however, that (i) if any Prime Rate Interest Period would end on a day
that is not a Business Day, such Interest Period shall end on the next
succeeding Business Day, and (ii) if any Prime Rate Interest Period
would otherwise end after the Maturity Date, such Interest Period shall
end on the Maturity Date.
"Prime Rate Loan" means any Loan that bears interest at the
Prime Rate.
"Principal Debt": See Section 2.2.
"Property Certificates": See Section 6.4.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System as amended or supplemented from time to
time.
"Reserve Report" means a report in form and substance
satisfactory to Bank prepared by Borrower's in-house engineers and
audited by an independent petroleum consulting firm acceptable to Bank
evaluating the oil and gas reserves attributable to the Mineral
Interests of Borrower in all of its oil and gas properties as of each
January 1 and which shall, among other things, (a) identify
the ▇▇▇▇▇ covered thereby, (b) specify such engineers' opinions with
respect to the total volume of reserves (the "available reserves") of
hydrocarbons (using the terms or categories "proved developed producing
reserves," "proved developed nonproducing reserves" and "proved
undeveloped reserves") which Borrower has advised such engineers that
the Borrower has the right to produce for its own account, (c) set
forth such engineers' opinions with respect to the projected future
cash proceeds from the available reserves, discounted for present value
at a rate acceptable to Bank, for each calendar year or portion thereof
after the date of such findings and data, (d) set forth such engineers'
opinions with respect to the projected future rate of production of the
available reserves, (e) contain such other information as requested by
Bank with respect to the projected rate of production, gross revenues,
operating expenses, taxes, capital costs, net revenues and present
value of future net revenues attributable to such reserves and
production therefrom, and (f) contain a statement of the price and
escalation parameters, procedures and assumptions upon which such
determinations were based.
"Section 26.02 Notice": See Section 6.8.
"Tangible Net Worth" means the sum of the excess of total
assets over total liabilities, total assets and total liabilities each
being determined on a consolidated basis in accordance with GAAP
consistent with those applied in the preparation of the financial
statements previously furnished to Bank, excluding however, from the
determination of total assets all assets which would be classified as
intangible assets under tax basis principles, including without
limitation, good will, patents, trademarks, trade names, copyrights,
and franchises.
"Year 2000 Problem": See Section 10.14.
2.0 Loan. Bank agrees, subject to the terms and conditions hereof, to
lend Borrower at any time and from time to time on or before the Maturity Date
sums (each herein called a "Loan" and collectively the "Loans") which may be
repaid and reborrowed pursuant to the terms hereof and which shall not exceed at
any one time outstanding the amount of the Commitment. Whenever Borrower desires
a Loan hereunder, Borrower shall give Bank notice in the form of Exhibit "A"
attached hereto (a "Borrowing Request") specifying (a) the date (which shall be
a Business Day in the case of a Prime Rate Loan or a Eurodollar Business Day in
the case of a Eurodollar Loan) of the proposed borrowing, (b) the amount to be
borrowed, (c) the portion of the borrowing constituting a Prime Rate Loan and/or
a Eurodollar Loan (which Eurodollar Loan may only be in Incremental Portions),
and (d) if any portion of the proposed borrowing constitutes a Eurodollar Loan,
the initial Eurodollar Interest Period selected by Borrower (one month, two
months or three months). Such notice shall be given by 10 a.m. (Dallas, Texas
time) on the date of the proposed borrowing in the case of a Prime Rate Loan,
and by 10 a.m. (Dallas, Texas time) two (2) Business Days prior to the date of
the proposed borrowing in the case of a Eurodollar Loan. The notice required may
be given telephonically by Borrower to Bank, but upon giving such telephonic
notice Borrower shall immediately thereafter provide Bank with the written
notice attached hereto as Exhibit "A". All notices given under this Section 2.0
shall be irrevocable. Not later than 12 noon (Dallas, Texas time) on the date of
the proposed borrowing and upon fulfillment of all other conditions required by
this Agreement, Bank will make such Loan available to Borrower by crediting the
amount thereof to Borrower's account with Bank or otherwise disbursing it as
Borrower shall request in writing. No Loans may be obtained after the Maturity
Date.
2.1 Use of Proceeds. The proceeds of Loans may be used solely
(a) for refinancing of existing indebtedness, (b) for the acquisition
and development of oil and gas properties, (c) for general corporate
purposes, including exploration, and (d) for the issuance of Letters of
Credit.
2.2 Promissory Note. The obligation of Borrower to repay the
aggregate principal balance of all Loans hereunder outstanding at any
one time (the "Principal Debt") shall be evidenced by the Note which
(a) shall be payable on or before the Maturity Date for the amount of
$50,000,000, or the Principal Debt then outstanding, whichever is less,
(b) bear interest from the date thereof until paid in the manner
provided in Section 3.0 hereof, (c) be entitled to the benefits of this
Agreement in the security provided for herein, and (d) be in such form
as is acceptable to Bank.
2.3 Amortization. Interest on the unpaid principal balance of
the Note shall be due and payable as provided in Section 3.0 hereof.
The Principal Debt then outstanding, plus accrued but unpaid interest
then outstanding, plus accrued but unpaid interest to the date of
payment, shall be due and payable on the Maturity Date. In addition,
principal payments may be required from to time in accordance with the
Borrowing Base reduction schedule set forth in Section 5.5 hereof.
2.4 Collateral. The payment and performance of the Note and
all of the other Obligations hereunder and under the Loan Documents
shall be secured by a first and superior lien against the entire
Mineral Interest of Borrower in the Mortgaged Properties pursuant to
the terms of one or more deeds of trust (each an "Oil and Gas
Mortgage"), which shall be in form and substance satisfactory to Bank.
2.5 Unused Commitment Fee. Borrower agrees to pay Bank an
unused commitment fee for the period commencing with the date of this
Agreement to the Maturity Date, computed at the rate of one-half of one
percent (0.50%) per annum on the average daily unused portion of the
Commitment. The phrase "unused portion of the Commitment" as used in
the preceding sentence means the difference between (a) the Commitment,
and (b) the Principal Debt. The commitment fee shall be payable upon
receipt of billing from Bank.
2.6 Letter of Credit Subfeature. As a subfeature under the
revolving credit facility created by this Agreement, Bank may from time
to time up to and including seven days prior to the Maturity Date,
issue Letters of Credit for the account of Borrower (each a "Letter of
Credit" and collectively, the "Letters of Credit"); provided however
that (a) the form and substance of each Letter of Credit shall be
subject to approval by Bank in its sole discretion, and (b) the
aggregate undrawn amount of all outstanding Letters of Credit shall not
at any time exceed $1,000,000. No Letter of Credit shall have an
expiration date subsequent to the Maturity Date. The undrawn amount of
all Letters of Credit plus any and all amounts paid by Bank in
connection with drawings under any Letter of Credit for which Bank has
not been reimbursed shall be reserved under the revolving credit
facility and shall not be available for Loans thereunder. Each draft
paid by Bank under a Letter of Credit shall be deemed a Loan and shall
be repaid in accordance with the terms of this Agreement; provided
however, that if a Loan is not available for any reason whatsoever at
the time any draft is paid by Bank, or, if Loans are not then available
in such amount due to any limitation on borrowing set forth in this
Agreement, then the full amount of such draft shall immediately be due
and payable, together with interest thereon, from the date such amount
is paid by Bank to the date such amount is fully repaid by Borrower, at
the rate of interest applicable to Loans under the Note. In such event,
Borrower agrees that Bank, at Bank's sole discretion, may debit
Borrower's deposit account with Bank for the amount of such draft.
Borrower shall pay Bank commissions for issuing the Letters of Credit
(calculated separately for each Letter of Credit) in an amount equal to
the greater of (i) two percent (2%) per annum on the maximum face
amount of the Letter of Credit, or (ii) $400. Such commissions shall be
payable prior to the issuance of each Letter of Credit and thereafter
on each anniversary date of such issuance while such Letter of Credit
is outstanding. Borrower shall pay Bank a $60 amendment fee for the
amendment of any Letter of Credit which is payable at the time of
amendment.
3.0 Interest Rates. The interest rate options available to Borrower for
Revolving Loans hereunder shall be for Prime Rate Loans and for Eurodollar
Loans. No more than four (4) different Eurodollar Loans and one Prime Rate Loan
may be outstanding at any one time, unless otherwise agreed.
3.1 Prime Rate Loans. Borrower agrees to pay interest
(calculated on the basis of the actual days elapsed in a year
consisting of 360 days) with respect to the unpaid principal amount of
each Prime Rate Loan from the date the proceeds thereof are made
available to Borrower until maturity (whether by acceleration or
otherwise) at a varying rate per annum equal to the lesser of (i) the
Maximum Rate or (ii) the Prime Rate. The interest in respect of each
Prime Rate Loan shall be payable on the last day of each Prime Rate
Interest Period.
3.2 Eurodollar Loans. Borrower agrees to pay interest
(calculated on the basis of actual days elapsed in a year consisting of
360 days) with respect to the unpaid principal amount of each
Eurodollar Loan from the date the proceeds thereof are made available
to Borrower until maturity (whether by acceleration or otherwise) at a
rate per annum equal to the lesser of (i) the Maximum Rate or (ii) the
Eurodollar Rate applicable to such Eurodollar Loan. Subject to the
provisions of this Agreement as to prepayment, interest with respect to
each Eurodollar Loan shall be payable on the last day of each
Eurodollar Interest Period. Subject to the provisions of this Agreement
as to prepayment, the principal of each Eurodollar Loan shall be paid
or renewed on the last day of each applicable Eurodollar Interest
Period or shall automatically be converted to a Prime Rate Loan on the
last day of such Eurodollar Interest Period as hereinafter provided. If
no Event of Default exists and Borrower desires to renew such
Eurodollar Loan and the amount thereof is at least an Incremental
Portion, Borrower shall deliver the notice required in Section 2.0
hereof and designate whether the Eurodollar Interest Period to commence
on the expiration date of the prior Eurodollar Interest Period shall be
a one month, two month or three month period. If Bank has not received
timely permissible notice of designation of such Eurodollar Interest
Period as herein provided, Borrower shall be deemed to have elected to
convert such maturing Eurodollar Loan to a Prime Rate Loan.
3.3 Interest Rate Determination. Bank shall determine each
interest rate applicable hereunder and shall give prompt notice to
Borrower of each rate of interest so determined.
3.4 Conversion Option: Prime Rate Loans to Eurodollar Loans.
Borrower may convert its Prime Rate Loans to Eurodollar Loans by giving
Bank irrevocable written notice of such election at least two (2)
Eurodollar Business Days prior to the proposed conversion date. The
notice of conversion to a Eurodollar Loan shall include (1) the amount
of the Prime Rate Loan to be converted (which must be converted in
Incremental Portions), and (2) the duration of the Eurodollar Interest
Period selected (one month, two months or three months). If no Event of
Default exists hereunder, such conversion shall be made on the
requested conversion date or, if such requested conversion date is not
a Eurodollar Business Day, on the next succeeding Eurodollar Business
Day, but if an Event of Default exists hereunder, no conversion may
occur.
3.5 Conversion Option: Eurodollar Loans to Prime Rate Loans.
Borrower may convert all or any part of its Eurodollar Loans to Prime
Rate Loans by giving Bank irrevocable written notice of such election
prior to 10 a.m. (Dallas, Texas time) on the conversion date, if such
conversion date is the last day of a Eurodollar Interest Period with
respect thereto, or at least two (2) Eurodollar Business Days prior
written notice if the conversion date is a day other than the last day
of the Eurodollar Interest Period with respect thereto. Such conversion
shall be made on the requested conversion date or, if such requested
conversion date is not a Business Day, on the next succeeding Business
Day. A conversion of a Eurodollar Loan to a Prime Rate Loan on a day
other than the last day of the Eurodollar Interest Period for the
Eurodollar Loan in question shall constitute a prepayment which may
require the payment of the breakage fee described in Section 4.6
hereof. All conversion notices given hereunder shall be irrevocable.
3.6 Prepayment of Loans. Borrower may at any time and from
time to time prepay any Prime Rate Loan, in whole or in part without
premium or penalty. Borrower may at any time and from time to time
prepay any Eurodollar Loan in whole or in part, without premium or
penalty
except as provided in Section 4.6 hereof, provided that Borrower first
complies with the conditions hereinafter set forth. Borrower shall give
Bank at least two (2) Eurodollar Business Days prior written notice of
(i) its intent to prepay a Eurodollar Loan, (ii) the amount of
principal which will be prepaid, and (iii) the date on which the
prepayment will be made. Each prepayment of principal of a Eurodollar
Loan shall be in a minimum amount of $100,000 (or the aggregate
principal amount outstanding, if less) plus accrued interest thereon to
the date of prepayment. Borrower may also be required to pay Bank the
breakage fee described in Section 4.6 hereof because such payment is
made on a date other than the last day of the applicable Eurodollar
Interest Period.
3.7 Interest Act (Canada). The parties acknowledge that some
of the Mortgaged Properties are located in Canada. For purposes of the
Interest Act (Canada), the annual rates of interest applicable to Prime
Rate Loans and Eurodollar Loans, respectively, are the rates as
determined hereunder multiplied by the actual number of days in a
period of one year commencing on the first day of the period for which
such interest is payable and divided by 360.
4.0 Change of Circumstances. The following provisions shall apply to
all Eurodollar Loans under this Agreement.
4.1 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 Bank 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 Bank to any tax, duty, or other
charge with respect to any Eurodollar Loan, the Note, or
Bank's obligation to make Eurodollar Loans, or change the
basis of taxation of any amounts payable to Bank under this
Agreement or the Note in respect of any Eurodollar Loan (other
than taxes imposed on the overall net income of Bank by the
jurisdiction in which Bank has its principal office or its
applicable lending office);
(ii) shall impose, modify, or deem applicable any
reserve, special deposit, assessment, or similar requirement
(other than the Eurocurrency 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, Bank, including the
commitment of Bank hereunder; or
(iii) shall impose on Bank or on the London interbank
market any other condition affecting this Agreement or the
Note 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 Bank
of making, converting into, continuing, or maintaining any Eurodollar
Loan or to reduce any sum received or receivable by Bank under this
Agreement or the Note with respect to any Eurodollar Loan, then
Borrower shall pay to Bank on demand such amount or amounts as will
compensate Bank for such increased cost or reduction. If Bank requests
compensation by Borrower under this Section 4.1, Borrower may, by
notice to Bank, suspend the obligation of Bank to make or continue
Eurodollar Loans or to convert Prime Rate Loans into Eurodollar Loans
until the event or condition giving rise to such request ceases to be
in effect (in which case the provisions of Section 4.4 shall be
applicable); provided that such suspension shall not affect the right
of Bank to receive the compensation so requested.
(b) If, after the date hereof, Bank shall have determined that
the adoption of any applicable law, rule, or regulation regarding
capital adequacy or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such governmental
authority, central bank, or comparable agency, has or would have the
effect of reducing the rate of return on the capital of Bank or any
corporation controlling Bank as a consequence of Bank's obligations
hereunder to a level below that which Bank or 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 the Borrower shall pay to Bank such
additional amount or amounts as will compensate Bank for such
reduction.
(c) Bank shall promptly notify Borrower of any event of which
it has knowledge, occurring after the date hereof, which will entitle
Bank 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 Bank, be otherwise disadvantageous to it. Bank shall
furnish to Borrower 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, Bank may use any
reasonable averaging and attribution methods.
(d) The obligations of Borrower under this Section 4.1 shall
survive termination of this Agreement and payment in full of the Note
for a period of two (2) years thereafter.
4.2 Limitation on Eurodollar Loans. If on or prior to the
first day of any Eurodollar Interest Period for any Eurodollar Loan:
(i) Bank 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 Eurodollar
Interest Period (based upon factors which affect all of Bank's
customers engaging in Eurodollar transactions); or
(ii) Bank determines (which determination shall be
conclusive) that the Eurodollar Rate will not adequately and
fairly reflect the cost to the Banks of funding Eurodollar
Loans for such Eurodollar Interest Period (based upon factors
which affect all of Bank's customers engaging in Eurodollar
transactions);
then Bank shall give Borrower prompt notice thereof specifying the
relevant amounts or periods as is applicable, and so long as such
condition remains in effect, Bank shall be under no obligation to make
additional Eurodollar Loans, continue Eurodollar Loans, or to convert
Prime Rate Loans into Eurodollar Loans, and Borrower shall, on the last
day(s) of the then current Eurodollar Interest Period(s) for the
outstanding Eurodollar Loans, either prepay such Eurodollar Loans or
convert such Eurodollar Loans into Prime Rate Loans in accordance with
the terms of this Agreement.
4.3 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for Bank to maintain,
or fund Eurodollar Loans hereunder, then Bank shall, promptly notify
Borrower thereof and Bank's obligation to make or continue Eurodollar
Loans and to convert Prime Rate Loans into Eurodollar Loans shall be
suspended until such time as Bank may again make, maintain, and fund
Eurodollar Loans (in which case the provisions of Section 4.4 shall be
applicable).
4.4 Treatment of Affected Loans. If the obligation of
Bank to make Eurodollar Loans or to continue Eurodollar Loans or to
convert Prime Rate Loans into Eurodollar Loans shall
be suspended pursuant to Section 4.1 or Section 4.3 hereof (the
"Affected Loans"), the Affected Loans shall be automatically converted
into Prime Rate Loans on the last day(s) of the then current Eurodollar
Interest Period(s) for Affected Loans (or, in the case of a conversion
required by Section 4.3 hereof, on such earlier date as Bank may
specify to Borrower) and, unless and until Bank gives notice as
provided below that the circumstances specified in Section 4.1 or
Section 4.3 hereof that gave rise to such conversion no longer exist:
(i) to the extent that the Affected Loans have been
so converted, all payments and prepayments of principal that
would otherwise be applied to the Affected Loans shall be
applied instead to Prime Rate Loans; and
(ii) all Loans that would otherwise be made or
continued by Bank as Eurodollar Loans shall be made or
continued instead as Prime Rate Loans, and all Loans of Bank
that would otherwise be converted into Eurodollar Loans shall
be converted instead into (or shall remain as) Prime Rate
Loans.
4.5 Taxes. (a) Any and all payments by Borrower to or for the
account of Bank 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 Bank taxes imposed on its income, and franchise taxes
imposed on it, by the jurisdiction under the laws of which Bank (or its
applicable lending office) 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 Bank (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
4.5) Bank receives an amount equal to the sum it would have received
had no such deductions been made, (ii) Borrower shall make such
deductions, (iii) Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable law, and (iv) Borrower shall furnish to Bank the original or
a certified copy of a receipt evidencing payment thereof. The
obligations of Borrower under this Section 4.5 shall survive
termination of this Agreement and payment in full of the Note for a
period of two (2) years thereafter.
4.6 Compensation. Upon the request of Bank, Borrower shall pay
to Bank such amount or amounts as shall be sufficient (in the
reasonable opinion of Bank) to compensate it for any loss, cost, or
expense (including loss of anticipated profits) incurred by it as a
result of:
(i) any payment, prepayment, or conversion of a
Eurodollar Loan for any reason (including, without limitation,
the acceleration of the Loans pursuant to Section 11.0) on a
date other than the last day of the Eurodollar Interest Period
for such Eurodollar Loan; or
(ii) any failure by Borrower for any reason
(including, without limitation, the failure of any condition
precedent specified in Section 7.0 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.
(a) 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").
(b) The Borrower agrees to indemnify Bank 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 4.6) paid by Bank and any liability (including
penalties, interest, and expenses) arising therefrom or with respect
thereto.
(c) If the Borrower is required to pay additional amounts to
or for the account of Bank pursuant to this Section 4.6, then Bank 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 Bank, is not otherwise disadvantageous to Bank.
(d) Within thirty (30) days after the date of any payment of
Taxes, Borrower shall furnish to Bank the original or a certified copy
of a receipt evidencing such payment.
(e) Without prejudice to the survival of any other agreement
of Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 4.6 shall survive the termination of the
Commitment and the payment in full of the Note for a period of two (2)
years thereafter.
5.0 Borrowing Base. The term "Borrowing Base" means, as of the date of
determination thereof, an amount as determined by Bank in its discretion in
accordance with then-current practices, economic and pricing parameters, and
customary procedures and standards established by Bank from time to time for its
petroleum industry customers including without limitation (a) an analysis of
such reserve and production data with respect to the Mineral Interests of
Borrower in all of its oil and gas properties, including the Mortgaged
Properties, as is provided to Bank in accordance herewith, and (b) an analysis
of the assets, liabilities, cash flow, business, properties, prospects,
management and ownership of Borrower and its affiliates and such other credit
factors consistently applied as Bank customarily considers in evaluating similar
oil and gas credits. The Borrowing Base shall initially be $17,000,000.
5.1 Periodic Determinations of Borrowing Base. The Borrowing
Base shall be redetermined by Bank as of November 1 and May 1 of each
year (each a "Determination Date") until maturity, commencing November
1, 1999. The Borrowing Base, as redetermined, shall remain in effect
until the next Determination Date, provided the Borrowing Base may be
redetermined between Determination Dates in accordance with Section 5.3
hereof.
5.2 Engineering Data to be Provided Prior to Scheduled
Determination Dates.
(a) On or before March 15 of each year for the Determination
Date of May 1, Borrower shall deliver to Bank a Reserve Report and the
other data specified in Section 8.4 hereof. Bank shall then determine
the Borrowing Base for the six (6) month period commencing May 1.
(b) On or before September 15 of each year for the
Determination Date of November 1 (commencing on September 15, 1999, for
the Determination Date of November 1, 1999), Borrower shall deliver to
Bank such information, reports and data pertaining to Mineral Interests
of Borrower in all of its oil and gas properties, including those oil
and gas properties which constitute the Mortgaged Properties, as Bank
may reasonably request. Such information shall (i) set forth the
historical production data of the oil and gas reserves included in such
properties, (ii) set forth for each property prices received for
production, lease operating expenses, capital expenditures, gross
revenues, net revenues, taxes and such other information as Bank may
deem
necessary or appropriate, (iii) set forth for each property any changes
since the date of most recent Reserve Report, if any, in its working
interest or net revenue interest therein, and (iv) be accompanied by a
certification of Borrower to the effect that no material adverse
changes have occurred since the date of the last Reserve Report except
those which have previously been disclosed to Bank in writing. Bank
shall then determine the Borrowing Base for the next six (6) month
period.
(c) On March 15 and September 15 of each year, Borrower shall
pay Bank an engineering fee of $5,000 for the next following
determination of the Borrowing Base pursuant hereto.
5.3 Special Determinations of Borrowing Base. Special
determinations of the Borrowing Base may be requested by Borrower or by
Bank at any time during the term hereof. If any special determination
is requested by Borrower, it shall be accompanied by engineering data
described in Section 5.2(b) and a $5,000 fee deposit for Bank's
engineering fees (which shall be in addition to the engineering fee
described in Section 5.2(c) hereof). If any special determination is
requested by Bank, Borrower will provide Bank with the information
specified in Section 5.2(b) hereof as soon as is reasonably possible
following the request. The determination whether to increase or
decrease the Borrowing Base shall then be made by Bank in its sole
discretion in accordance with the standards set forth in Section 5.0
hereof. In the event of any special determination of the Borrowing Base
pursuant to this Section, Bank in the exercise of its discretion may
suspend the next regularly scheduled determination of the Borrowing
Base.
5.4 Borrowing Base Deficiency. If by reason of any adjustment
to the Borrowing Base, the Principal Debt then outstanding exceeds the
amount of the Borrowing Base, then Bank shall notify Borrower of the
same, and Borrower shall within thirty (30) days following receipt of
such notice elect whether to (i) prepay an amount which will reduce the
Principal Debt to the amount of the Borrowing Base, or (ii) execute and
deliver to Bank instruments mortgaging such other collateral as is
acceptable to Bank, pursuant to security documents acceptable to Bank
having present values which, in the opinion of Bank, based upon Bank's
evaluation of the engineering data provided it, taken in the aggregate
are sufficient to increase the Borrowing Base to an amount at least
equal to the Principal Debt then outstanding, or (iii) do any
combination of the foregoing as is acceptable to Bank. If Borrower so
elects to mortgage additional oil and gas properties, then clause (ii)
above shall be accomplished within forty-five (45) days from Bank's
date of notification. If Borrower fails to make an election among
clauses (i) through (iii) above within thirty (30) days from Bank's
notification, then Borrower shall be deemed to have selected the
payment option specified in clause (i) thereof.
5.5 Monthly Borrowing Base Reduction. The Borrowing Base in
effect from time to time shall reduce automatically each month in the
amount (the "Monthly Reduction Amount") determined in accordance with
this Section. Initially, the Monthly Reduction Amount shall be zero.
Upon any determination of the Borrowing Base, Bank reserves the right
to revise the Monthly Reduction Amount as it deems appropriate in
accordance with then current practices, customary procedures and
standards used by Bank for its petroleum customers generally. If Bank
establishes a Monthly Reduction Amount, the reduction shall occur
automatically on the first day of each month commencing on the first
day of the month next following the Determination Date for which the
Monthly Reduction Amount was established. If by reason of the reduction
of the Borrowing Base pursuant to this Section 5.5 the Principal Debt
then outstanding exceeds the Borrowing Base as reduced, then Borrower
shall promptly pay an amount which will reduce the Principal Debt then
outstanding to an amount equal to or less than the Borrowing Base as so
reduced.
5.6 Borrowing Base Increase Fee. A fee shall be paid for
each incremental increase in the new Borrowing Base over the previously
existing Borrowing Base. The amount of each such
fee shall be one-half of one percent (0.50%) of the incremental
increase. There shall be no obligation imposed upon Borrower to accept
an increase of the Borrowing Base proposed by Bank. However, if
Borrower accepts the increase in the Borrowing Base, the fee shall be
due and payable immediately and without regard as to whether Borrower
ever borrows the increased amount available under such new Borrowing
Base. Determinations of when a fee is due shall be made by Bank and
shall be conclusive and binding on the parties absent manifest error.
6.0 Conditions Precedent to Closing. The obligations of Bank as set
forth herein are subject to the satisfaction (in the opinion of Bank), unless
waived in writing by Bank, of each of the following conditions:
6.1 Loan Origination Fee. Borrower shall have paid Bank a loan
origination fee of $127,500.
6.2 Effectiveness of Loan Documents. Each of the Loan
Documents shall be in full force and effect.
6.3 Affidavit of Payment of Trade Bills. Borrower shall have
delivered to Bank an affidavit in the form of Exhibit C attached hereto
(the "Affidavit of Payment of Trade Bills") containing the information
as provided therein, which shall be satisfactory to Bank.
6.4 Property Certificates. Borrower shall have delivered to
Bank certificates (whether one or more, the "Property Certificates")
for each producing oil and gas lease, well or unit, as appropriate,
relating to the oil and gas properties described in an Oil and Gas
Mortgage, which Property Certificates shall be in the form of Exhibit D
attached hereto containing the information as provided therein, which
shall be satisfactory to Bank.
6.5 Title. Borrower shall have delivered to Bank title
opinions and other title information and data acceptable to Bank,
covering not less than 90% of the Engineered Value of the Mortgaged
Properties, reflecting title to the Mineral Interests of Borrower in
the Mortgaged Properties which is acceptable to Bank.
6.6 Credit Opinion. There shall have been delivered a
favorable credit opinion of Messrs. ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel for
Borrower, covering those matters described in Sections 10.5, 10.6, 10.7
and 10.9 hereof, as well as such other matters incident to the Loan
Documents, if any, as Bank may reasonably request.
6.7 Documentation and Proceedings. Borrower shall have
delivered a certificate (the "Officer's Certificate") having attached
thereto resolutions of its board of directors authorizing its
execution, delivery and performance of the Loan Documents to which it
is a party.
6.8 Section 26.02 Notice. Borrower shall have executed a
notice in compliance with the provisions of Section 26.02 of the Texas
Business and Commerce Code (the "Section 26.02 Notice").
6.9 Payoff of Prior Lender. Bank shall have received
satisfactory evidence of (a) the amount necessary to payoff all
indebtedness of Borrower to Midland, and (b) upon such payoff, Midland
will execute and deliver to Bank endorsements and assignments of
Borrower's indebtedness to Midland and Midland's lien against the
Mortgaged Properties as are acceptable to Bank.
6.10 Representations and Warranties. All representations and
warranties contained herein or in the documents referred to herein or
otherwise made in writing in connection herewith or therewith shall be
true and correct with the same force and effect as though such
representations and warranties have been made on and as of this date.
6.11 Expenses. Borrower shall have paid all reasonable
expenses of Bank in connection with the preparation of the Loan
Documents and the making of the Loan, including but not limited to, the
fees and expenses of counsel for Bank.
7.0 Conditions Precedent to Subsequent Loans. The obligation of Bank to
make subsequent Loans to Borrower is subject, at the time of the funding of each
such Loan (the "Funding Date"), to the satisfaction (in the opinion of Bank),
unless waived in writing by Bank, of each of the following conditions:
7.1 Borrowing Request. Borrower shall have delivered to Bank,
within the time frame specified in Section 2.0 hereof, a Borrowing
Request appropriately completed in compliance herewith.
7.2 Availability of Commitment. The then Principal Debt plus
the amount of the requested Loan shall be equal to or less than the
Commitment then in effect.
7.3 Expenses. Borrower shall have paid all reasonable expenses
of Bank in connection with the making of the Loan.
7.4 Representations and Warranties. All representations and
warranties contained herein and in the Loan Documents shall be true and
correct in all material respects as though such representations and
warranties have been made on and as of the Funding Date.
7.5 No Default. There shall exist no Event of Default or
Potential Default hereunder.
7.6 Change in Condition. No material adverse change in
condition (financial or otherwise) of Borrower or any other event shall
have occurred which creates a possibility of materially adversely
effecting (a) the condition (financial or otherwise) of Borrower (b)
the validity or enforceability of any of the Loan Documents, or (c) the
ability of Borrower to meet and carry out its obligations under the
Loan Documents or perform the transactions contemplated hereby or
thereby.
8.0 Affirmative Covenants. Until full payment and performance of all
Obligations of Borrower under the Loan Documents, Borrower will, unless Bank
consents otherwise in writing (and without limiting any requirement of any other
Loan Document):
8.1 Financial Statements and Other Information. Deliver or
cause to be delivered to Bank (a) quarterly consolidated and
consolidating financial statements of Borrower within forty-five (45)
days after the end of the first three fiscal quarters of each fiscal
year, and annual audited consolidated and consolidating financial
statements of Borrower within ninety (90) days after the end of each
fiscal year, in each instance to include a balance sheet, an income
statement, a cash flow statement and such other financial statements
and supporting schedules or documentation required by Bank, prepared in
accordance with generally accepted accounting principles consistently
applied and presented in a format acceptable to Bank, by an independent
accounting firm acceptable to Bank, and (b) such additional
information, reports and statements with respect to the business
operations and financial condition of Borrower as Bank may reasonably
request from time to time, and (c) within ninety (90) days after the
end of each fiscal year, and within forty-five (45) days after the end
of the first three fiscal quarters of each fiscal year, a compliance
certificate in the form of Exhibit B attached hereto and (d) within
fifteen (15) days after the filing thereof, copies of any report, proxy
statement, financial statement, or other filing made by such borrower
with the Securities and Exchange Commission, any state securities
agency, or any national stock exchange or quotation service, and
promptly upon receipt thereof, copies of any notices received from the
Securities and Exchange Commission or any state securities agency
relating to any order, rule, statute, or other laws or information that
could have a material adverse effect upon the financial condition,
properties, or operations of Borrower.
8.2 Adverse Conditions or Events. Promptly advise Bank in
writing of (i) any condition, event or act which comes to its attention
that would or might materially adversely affect the financial condition
or operations of Borrower, the collateral from time to time securing
the Loan, or Bank's rights under the Loan Documents, or the rights of
the Canadian trustee under the Canadian Collateral Security Documents,
(ii) any litigation filed by or against Borrower in which the amount in
controversy exceeds $50,000, (iii) the occurrence of any Event of
Default, or of any Potential Default, or the failure of Borrower to
observe any of its undertakings hereunder or under any of the other
Loan Documents, (iv) any uninsured or partially uninsured loss through
fire, theft, liability or property damage in excess of an aggregate of
$100,000, (v) any actual, proposed or threatened testing or other
investigation of a material nature by any governmental authority or
other person or entity concerning the environmental condition of, or
relating to, any of the Mortgaged Properties which is of a material
nature or the release of a material quantity of Hazardous Materials by
or from, affecting or related to any of the Mortgaged Properties
(except such releases as are made in accordance with applicable
environmental laws), and (vi) any circumstances that constitute grounds
entitling the PBGC to institute proceedings to terminate a Plan subject
to ERISA, and the receipt of any notice to Borrower or any Commonly
Controlled Entity that the PBGC intends to terminate a Plan, and the
receipt of notice concerning the imposition of withdrawal liability in
excess of $50,000 with respect to Borrower or any Commonly Controlled
Entity.
8.3 Monthly Production Reports. Within thirty (30) days of
request from Bank, deliver to Bank internally prepared production
reports showing on a monthly basis for each month covered by Bank's
request all production of oil, gas and other hydrocarbons therefrom
during the subject month, all proceeds received during the subject
month from the sale of production from such properties, all expenses
incurred during the subject month attributed to such properties, a
description of all material operations conducted on such properties
since the last monthly report and such other information as Bank may
reasonably request.
8.4 Reserve Report. Deliver to Bank on or before March 15 of
each year (i) a Reserve Report, and (ii) a schedule comparing the net
revenue interests of each well or lease of the Mortgaged Properties as
reflected in each Oil and Gas Mortgage after giving effect to all
encumbrances listed thereon, to the net revenue interests for such
properties reflected in the Reserve Report along with an explanation as
to any material discrepancies between the two net revenue interest
disclosures.
8.5 Engineering Expenses. Pay all engineering expenses
incurred by Bank (a) for a special determination of the Borrowing Base
requested by Borrower pursuant to Section 5.3 hereof, and (b) should
Bank engage an engineer in connection with Bank's administration of the
credit facility evidenced by this Agreement following the occurrence of
an Event of Default hereunder.
8.6 Taxes and Other Obligations. Pay all of Borrower's taxes,
assessments and other obligations, including, but not limited to taxes
and assessments and lawful claims which, if unpaid, might by law become
a lien against the assets of Borrower, as the same become due and
payable, except to the extent the same are being Contested in Good
Faith.
8.7 Insurance. Keep its properties of an insurable nature
insured at all times against such risks and to the extent that like
properties are customarily insured by other companies engaged in the
same or similar businesses similarly situated, maintain insurance of
the types and in the coverage amounts and with reasonable deductibles
as are usual and customary.
8.8 Compliance with Laws. Comply in all material respects with
all applicable laws (including environmental laws), rules, regulations
and orders of any governmental authority.
8.9 Compliance with Agreements. Comply in all respects with
all existing and future agreements, indentures, mortgages, or documents
which are binding upon it or affect any of its properties or business.
8.10 Maintenance of Records. Keep at all times books and
records of account in accordance with GAAP in which full, true and
correct entries will be made of all dealings or transactions in
relation to the business and affairs of Borrower, and Borrower will
provide adequate protection against loss or damage to such books of
record and account.
8.11 Inspection of Books and Records. Allow any representative
of Bank to visit and inspect the Mortgaged Properties, to examine its
books of record and account and to discuss its affairs, finances and
accounts with any of its officers, directors, employees and agents, all
at such reasonable times and as often as Bank may request.
8.12 Existence and Qualification. Preserve and maintain its
existence and good standing in the state of its incorporation and in
each other jurisdiction in which qualification is required.
8.13 Hedging Agreement. Within one hundred twenty (120) days
after the date hereof, enter into an Acceptable Hedging Agreement with
a counterparty acceptable to Bank (a) covering at least 50% of the
monthly production of all of Borrower's proved and producing oil
properties, (b) for an average price greater than or equal to $16.50
per barrel (NYMEX), and (c) having a maturity of not less than twelve
(12) months nor greater than eighteen (18) months.
8.14 Further Assurances. Make, execute or endorse, acknowledge
and deliver or file or cause the same to be done, all such vouchers,
invoices, notices, certifications and additional agreements,
undertakings, conveyances, deeds of trust, mortgages, assignments,
financing statements or other assurances, and take any and all such
other action as Bank may from time to time deem necessary or
appropriate in connection with this Agreement or any of the other Loan
Documents (a) to cure any defects in the creation of the Loan
Documents, or (ii) to evidence further or more fully describe the
collateral intended as security, or (iii) to correct any omissions in
the Loan Documents, or (iv) to state more fully the security for the
Obligations, or (v) to perfect, protect or preserve any liens pursuant
to any of the Loan Documents, or (vi) for better assuring and
confirming unto Bank all or any part of the security for such
Obligations.
9.0 Negative Covenants. Until full payment and performance of all
Obligations of Borrower under the Loan Documents, Borrower will not, without the
prior written consent of Bank (and without limiting any requirement of any other
Loan Documents):
9.1 Current Ratio. Permit at any fiscal quarter end the ratio
of its Current Assets to Current Liabilities to be less than 1.0 to
1.0.
9.2 Tangible Net Worth. Permit as of any fiscal quarter end
beginning with the fiscal quarter ending September 30, 1999, its
Tangible Net Worth to be less than the sum of the following:
(a) $22,000,000; plus
(b) 75% of Borrower's Net Income for which Net Income
is a positive number measured cumulatively for each fiscal
quarter beginning with the fiscal quarter starting January 1,
1999; plus
(c) 100% of the net proceeds of any offering of any
equity securities consummated after the date hereof; plus
(d) 100% of any capital contributions made to
Borrower after the date hereof.
9.3 Minimum Interest Coverage Ratio. Permit at any fis-
cal quarter end its Interest Coverage Ratio to be less than 2.75 to 1.0
9.4 Negative Pledge. Grant, suffer or permit, any con-
tractual or noncontractual lien on or security interest in its assets,
except for Permitted Liens.
9.5 Sale of Assets. Directly or indirectly sell, lease or
otherwise dispose of, (by farmout or otherwise) any of its assets other
than (a) sales of hydrocarbons in the ordinary course of business, and
(b) any compulsory pooling or unitization ordered by a governmental
body with jurisdiction over the Mineral Interests, and (c) other assets
sold in the ordinary course of Borrower's business provided that such
sales do not exceed $250,000 in the aggregate in any six (6) month
period commencing on a Determination Date.
9.6 Sale or Discount of Receivables. Sell with recourse or
discount, or sell for less than the greater of face or market value
thereof, any of its accounts receivable.
9.7 Merger, Etc. Enter into any merger or consolidation,
except that Borrower may merge with another entity if Borrower is the
surviving entity in such merger and if, after giving effect thereto, no
Event of Default or Potential Default shall have occurred and be
continuing.
9.8 Extensions of Credit. Make any loan or advance to any
individual, partnership, corporation or other entity without consent of
Bank, except (a) loans and intercompany adjustments between Borrower
and its subsidiaries occurring in the ordinary course of business, and
(b) advances made to employees of Borrower for the payment by them of
items for which an expense report or voucher will be filed and which
items will constitute ordinary and necessary business expenses of
Borrower, and (c) loans to employees of Borrower which do not exceed
$50,000 in the aggregate to all employees at any one time outstanding.
9.9 Borrowings. Create, incur, assume or become liable in any
manner for any indebtedness (for borrowed money, deferred payment for
the purchase of assets, lease payments, as surety or guarantor for the
debt for another, or by way of stock purchase or capital contribution,
direct or contingent, or otherwise) other than to Bank, except for (a)
normal trade debts incurred in the ordinary course of Borrower's
business; (b) existing indebtedness disclosed to Bank in writing and
acknowledged by Bank prior to the date of this Agreement; (c) leases of
personal property which are not "capital leases" under generally
accepted accounting principles and for which the lessor's remedy for a
breach by the lessee thereunder is limited to recovery of the item
leased; and (d) indebtedness of Borrower secured by purchase-money
liens and security interests which does not exceed $250,000 in the
aggregate at any one time outstanding.
9.10 Dividends and Distributions. Declare or pay any
dividends; or purchase, redeem, retire or otherwise acquire for full
value any of its capital stock now or hereafter outstanding; or make
any distribution of assets to its shareholders as such, whether in
cash, assets, or in obligations of Borrower; or allocate or otherwise
set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption, or retirement of any shares of its
capital stock; or make any other distribution by reduction of capital
or otherwise in respect of any shares of its capital stock; provided
that Borrower may make distributions to its shareholders of not more
than $100,000 in the aggregate in any fiscal year for the purchase or
redemption of its capital stock.
9.11 Principal Debt not to Exceed Commitment. Permit at
any time the Principal Debt to exceed the Commitment then in effect.
9.12 Hedging Transactions. Enter into any Hedging Agree-
ment, other than an Acceptable Hedging Agreement.
9.13 Investments. Invest in (by capital contribution or
otherwise), or acquire or purchase or make any commitment to purchase
the obligations or stock of, any entity, except (i) temporary
investments in securities of the United States having maturities not in
excess of one (1) year, (ii) certificates of deposit issued by Bank,
(iii) readily marketable commercial paper rated "A-1" by Standard &
Poor's Corporation (or similar rating by any similar organization which
rates commercial paper), (iv) readily marketable direct obligations of
any state of the United States of America or any political subdivision
of any such state given on the date of such investment a credit rating
of at least AA by Standard & Poor's Corporation due within one year
from the acquisition thereof, (v) repurchase agreements with respect to
the investments referred to in the preceding clauses with any bank or
trust company organized under the laws of the United States of America
or any state thereof and having combined capital, surplus and undivided
profits of not less than $500,000,000 (as of the date of its most
recent financial statements) and having deposits that have received one
of the two highest ratings obtainable from Standard & Poor's
Corporation, (vi) Eurodollar time accounts or Eurodollar certificates
of deposit each with banker's acceptances of any bank or trust company
organized under the laws of the United States of America or any state
thereof having combined capital, surplus and undivided profits of not
less than $500,000,000 (as of the date of its most recent financial
statements) and having deposits that have received one of the two
highest ratings obtainable from Standard & Poor's Corporation, (vii)
Permitted Symskaya Investments, and (viii) such other investments as
may be approved by Bank.
9.14 Change of Control of Borrower. Permit the change of
control of Borrower. "Change of control" as used in the preceding
sentence means (a) the acquisition of more than fifty percent (50%) of
the outstanding voting stock of Borrower by any person or entity or
group of persons or entities acting in concert, or (b) the acquisition
of more than ten percent (10%) of the outstanding voting stock of
Borrower by any person or entity or group of persons or entities acting
in concert if at any time following such acquisition of ten percent
(10%) or more of Borrower's outstanding voting stock more than fifty
percent (50%) of the persons serving on the board of directors of
Borrower are persons proposed directly or indirectly by the persons or
entities or group of persons or entities acting in concert who have
acquired such ten percent (10%) or more of Borrower's outstanding
voting stock.
9.15 Change in Nature of Business. Conduct any business other
than, or make any material change in the nature of, its business as
carried on as of the date hereof.
9.16 Arm's Length Transactions. Enter into a transaction with
any affiliate, except a transaction upon terms that are not less
favorable to it than would be obtained in a transaction negotiated at
arm's length with an unrelated third party.
10.0 Representations and Warranties. Borrower hereby represents and
warrants to Bank as follows:
10.1 No Liens. Borrower has good and defensible title to all
of the Mineral Interests in and to the oil and gas leases which
constitute the Mortgaged Properties, and none of such Mineral Interests
are subject to any security interest, mortgage, deed of trust, pledge,
lien, title retention document or encumbrance of any character, except
for Permitted Liens.
10.2 Gas Imbalances. Except for those imbalances set forth on
Schedule 10.2 and other imbalances and prepayments which individually
and in the aggregate are not material, there are no gas imbalances,
take or pay or other prepayments with respect to any of the leases
described in the Oil and Gas Mortgages for which Borrower is the
operator which would require the delivery of hydrocarbons produced from
such leases at some time in the future without then or thereafter
receiving full payment therefor.
10.3 Concerning the Mortgaged Properties. The Mortgaged
Properties are described in and covered by the engineering reports
which have previously been delivered to and relied upon by Bank in
connection with this Agreement, and Borrower owns at least the decimal
percentage Mineral Interests in such properties as are specified in
such engineering reports. The Mortgaged Properties represent not less
than 90% of the Engineered Value of all of Borrower's oil and gas
properties. "Engineered Value" as used in the preceding sentence means
future net revenues discounted at the discount rate being used by the
Bank as of the date of any such determination utilizing the pricing
parameters used in the most recent Reserve Report furnished Bank
pursuant hereto.
10.4 Financial Statements. The financial statements of
Borrower heretofore delivered to Bank have been prepared in accordance
with GAAP and fairly present Borrower's financial condition as of the
date or dates thereof, and there have been no material adverse changes
in Borrower's financial condition or operation since the date or dates
thereof.
10.5 Good Standing. Borrower is a corporation, duly organized,
validly existing and in good standing under the laws of Colorado and
has the power and authority to own its property and to carry on its
business in Texas and in each other jurisdiction in which Borrower does
business.
10.6 Authority. Borrower has full power and authority to
execute, deliver and perform the Loan Documents and to incur and
perform the obligations provided for therein. No consent or approval of
any public authority or other third party is required as a condition to
the validity or performance of any Loan Document.
10.7 Binding Agreements. This Agreement and the other Loan
Documents executed by Borrower constitute valid and legally binding
obligations of Borrower, enforceable in accordance with their terms,
except (a) as may otherwise be limited by the foreclosure laws of the
various jurisdictions where the Mortgaged Properties are located, and
(b) with respect to various provisions in the Loan Documents which
purport to indemnify a person or entity from the consequences of his or
its negligence, and (c) as limited by bankruptcy, insolvency, or other
laws of general application relating to the enforcement of creditors'
rights.
10.8 Litigation. There is no proceeding involving Borrower
pending or, to the knowledge of Borrower, threatened before any court
or governmental authority, agency or arbitration authority, except (a)
as disclosed to Bank in writing and acknowledged by Bank prior to the
date of this Agreement, or (b) for those matters where the amount in
controversy does not exceed $100,000.
10.9 No Conflicting Agreements. There is no charter, bylaw,
stock provision, partnership agreement or other document pertaining to
the power or authority of Borrower and no provision of any existing
agreement, mortgage, indenture or contract binding on Borrower or
affecting any property of Borrower, which would conflict with or in any
way prevent the execution, delivery or carrying out of the terms of
this Agreement and the other Loan Documents.
10.10 Taxes. All taxes and assessments due and payable by
Borrower has been paid or are being Contested in Good Faith, and the
Borrower has filed all tax returns which it is required to file.
10.11 Accuracy of Information. To the best of Borrower's
knowledge, all factual information furnished to Bank in connection with
this Agreement and the other Loan Documents is and will be accurate and
complete on the date as of which such information is delivered to Bank
and is not and will not be incomplete by the omission of any material
fact necessary to make such information not misleading.
10.12 ERISA. Borrower is in compliance in all material
respects with all applicable provisions of ERISA. Neither a Reportable
Event nor a Prohibited Transaction has occurred and is continuing with
respect to any Plan; no notice of intent to terminate a Plan has been
filed, nor has any Plan been terminated; neither Borrower nor any
Commonly Controlled Entity has completely or partially withdrawn from a
Multiemployer Plan; and Borrower and each Commonly Controlled Entity
have met their minimum funding requirements under ERISA with respect to
all of their Plans.
10.13 Environmental. The conduct of Borrower's business
operations and the condition of Borrower's properties operated or
managed by Borrower does not and will not, and to the knowledge of
Borrower the condition of Borrower's properties which are operated or
managed by others does not and will not, violate any federal laws,
rules or ordinances for environmental protection, or regulations of the
Environmental Protection Agency, or any applicable local or state law,
rule, regulation or rule of common law, or any judicial interpretation
thereof relating primarily to the environment or Hazardous Materials.
10.14 Year 2000 Compliance. Borrower has made inquiry of its
own business and of each business entity in which Borrower holds a
material interest with respect to the "Year 2000 Problem" (that is, the
risk that computer applications may not be able to perform properly
date- sensitive functions after December 31, 1999). Based on this
inquiry, Borrower does not believe that the Year 2000 Problem will
cause it or any business entity in which it holds a material interest
to suffer a material adverse change in its business condition
(financial or otherwise), operations, properties or prospects or affect
its ability to repay the Obligations. For purposes of this section, a
business entity in which a Borrower holds a "material interest" means
any business entity that is of material importance to the financial
well-being of such Borrower.
10.15 Compliance With Laws. Borrower is in compliance in all
material respects with all applicable laws to which Borrower, or any of
its assets or properties, are subject, provided that this warranty is
made to Borrower's knowledge with respect to its assets or properties
which are operated or managed by others.
10.16 Not a Utility. Borrower is not engaged in the State of
Texas in the (i) generation, transmission, or distribution and sale of
electric power, (ii) transportation, distribution and sale through a
local distribution system of natural or other gas for domestic,
commercial, industrial, or other use, (iii) provision of telephone or
telegraph service to others, (iv) production, transmission, or
distribution and sale of steam or water, (v) operation of a railroad,
or (vi) provision of sewer service to others.
10.17 Public Utility Holding Company Act. Borrower is not a
"holding company," or "subsidiary company" of a "holding company," or
an affiliate of a "holding company" or of a "subsidiary company" of a
"holding company," or a "public utility" within the meaning of the
Public Utility Holding Act of 1935, as amended.
10.18 Subsidiaries. Borrower has no subsidiaries other than
Symskaya Exploration, Inc.
10.19 Continuation of Representations and Warranties. All
representations and warranties made under this Agreement shall be
deemed to be made at and as of the date hereof and at and as of the
date of any future Loan and in all instances shall be true and correct.
11.0 Default. Any of the following shall constitute events of default
(each an "Event of Default"):
11.1 Nonpayment. (a) Borrower shall default in the due and
punctual payment of any principal or interest of the Note when due and
payable, whether at maturity or otherwise, or (b) Borrower shall
default in the due and punctual payment of any of the other Obligations
when due and payable.
11.2 Representations and Warranties. Any representation,
warranty or statement made by Borrower herein or otherwise in writing
in connection herewith or in connection with any of the other Loan
Documents and the agreements referred to herein or therein or in any
financial statement, certificate or statement signed by any officer or
employee of Borrower and furnished pursuant to any provision of the
Loan Documents shall be breached, or shall be materially false,
incorrect or incomplete when made.
11.3 Default in Covenants Under Agreement. (a) Borrower shall
default in the due performance or observance by it of any term,
covenant or agreement set forth in any of the No Cure Period Covenants;
or, (b) Borrower shall default in the due performance or observance of
any term, covenant or agreement contained in this Agreement other than
those specified in the No Cure Period Covenants, and such default
continues unremedied for a period of thirty (30) days after notice
thereof from Bank or Bank is notified of such default or should have
been so notified pursuant to the provisions of Section 8.2 hereof,
whichever is earlier.
11.4 Default in Other Loan Documents. Borrower shall default
in the due performance of or observance of any term, covenant or
agreement on such person's part to be performed pursuant to the terms
of any of the other Loan Documents and the default shall continue
unremedied beyond any grace or cure period therein provided.
11.5 Default in Other Debt. An event of default shall occur
under the provisions of any instrument (other than the Loan Documents)
evidencing indebtedness of Borrower for the payment of borrowed money
or of any agreement relating thereto (including capital leases), the
effect of which is to permit the holder or holders of such instrument
to cause the indebtedness evidenced by such instrument to become due
and payable prior to its stated maturity (whether or not the holder
actually exercises such option).
11.6 Validity of Loan Documents. Any of the Loan Documents
shall cease to be a legal, valid and binding agreement enforceable
against any party executing the same in accordance with the respective
terms thereof, or shall in any way be terminated, or become or be
declared ineffective or inoperative, or shall in any way whatsoever
cease to give or provide the respective rights, remedies, powers and
privileges intended to be created thereby; provided that it shall not
be
an Event of Default under this Section 11.6 if a court determines that
a particular Loan Document is not enforceable as a matter of law.
11.7 Bankruptcy. Borrower shall suspend or discontinue its
business operations, or shall generally fail to pay its debts as they
mature, or shall file a petition commencing a voluntary case concerning
Borrower under any chapter of the United States Bankruptcy Code; or any
involuntary case shall be commenced against Borrower under the United
States Bankruptcy Code; or Borrower shall become insolvent (howsoever
such insolvency may be evidenced).
11.8 Judgments and Decrees. Borrower shall suffer a final
judgment for the payment of money and shall not discharge the same
within a period of thirty (30) days unless, pending further
proceedings, execution has not been commenced, or, if commenced, has
been effectively stayed. Any order, judgment or decree shall be entered
in any proceeding against Borrower decreeing the dissolution or split
up of such entity and such order shall remain undischarged or unstayed
for a period in excess of thirty (30) days.
11.9 ERISA. Any of the following events shall occur or exist
with respect to Borrower and any Commonly Controlled Entity under ERISA
and the regulations promulgated thereunder:
(a) any Reportable Event shall occur;
(b) complete or partial withdrawal from any
Multiemployer Plan shall take place;
(c) any Prohibited Transaction shall occur;
(d) a notice of intent to terminate a Plan shall be
filed, or a Plan shall be terminated; or
(e) circumstances shall exist which constitute
grounds entitling the PBGC to institute proceedings to
terminate a Plan, or the PBGC shall institute such
proceedings;
and in each case above, such event or condition, together with all
other events or conditions, if any, could subject Borrower to any tax,
penalty or other liability which in the aggregate may exceed $250,000.
11.10 Hedging Agreement. The occurrence or existence of any
default, event of default or other similar condition or event (however
described) with respect to any Hedging Agreement between Borrower and
Bank.
11.11 Change in Executive Management. ▇▇▇▇ ▇. ▇▇▇▇▇▇ shall for
any reason cease being the President and Chief Executive Officer of
Borrower, and a successor or successors acceptable to Bank are not
appointed within ninety (90) days thereof.
12.0 Remedies. Upon the occurrence of an Event of Default described in
Section 11.7 hereof, the entire principal of and accrued interest on the Note
shall forthwith be due and payable without demand, presentment for payment,
notice of nonpayment, protest, notice of protest, notice of intent to
accelerate, notice of acceleration and all other notices and further actions of
any kind, all of which are hereby expressly waived by Borrower. In the event
that any other Event of Default occur and be continuing, Bank may, without
demand or notice of its election terminate its obligation to make further Loans
hereunder and/or declare the entire unpaid balance of the Note and all other
indebtedness of Borrower to Bank, or any part thereof, immediately due and
payable, whereupon the principal of and accrued interest on such Note and other
indebtedness shall be forthwith due and payable without demand, presentment for
payment,
notice of nonpayment, protest, notice of protest, notice of intent to
accelerate, notice of acceleration and all other notices and further actions of
any kind, all of which are hereby expressly waived by Borrower. Upon the
occurrence and during the continuance of any Event of Default, Bank may (a)
exercise any and all rights under or pursuant to any of the Loan Documents, (b)
exercise any and all rights afforded to Bank by the laws of the State of Texas
or any other applicable jurisdiction or in equity or otherwise, as Bank may deem
appropriate, and (c) terminate the Commitment.
13.0 Notices. All notices, requests or demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing (including telegraphic, telex and facsimile
transmission) delivered to the other party at the addresses set forth on the
first page of this Agreement or to such other address as any party may designate
by written notice to the other party. Each such notice, request and demand shall
be deemed given or made (whether actually received or not) (a) if sent by mail,
upon the earlier of the date of receipt or five (5) days after deposit in the
U.S. Mail, first class postage prepaid, and (b) if sent by any other means, upon
delivery. Unless otherwise changed by notice given pursuant to this Section, the
facsimile transmission number for Borrower shall be (801) 521- 3534, and the
facsimile transmission number for Bank shall be (▇▇▇) ▇▇▇-▇▇▇▇.
14.0 Costs, Expenses and Attorneys' Fees. Borrower shall pay to Bank
immediately upon demand the full amount of all costs and expenses, including
reasonable attorneys' fees, incurred by Bank in connection with (a) the
syndication, negotiation, preparation and delivery of this Agreement and each of
the Loan Documents, and all other costs and attorneys' fees incurred by Bank for
which Borrower is obligated to pay in accordance with the terms of the Loan
Documents, and (b) any modifications of or consents or waivers under or
amendments to or interpretations of this Agreement, the Note, or the other Loan
Documents. Borrower further agrees to pay on demand all costs and expenses of
Bank, if any (including without limitation reasonable attorneys' fees and
expenses and the cost of internal counsel), in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of the Loan
Documents. Borrower further agrees to indemnify Bank and its employees and
agents, from and hold them harmless against any and all losses, liabilities,
claims, damages or expenses which any of them suffers or incurs as a result of
Bank's entering into this Agreement and the Loan Documents, or the consummation
of the transactions contemplated by this Agreement and the Loan Documents, or
the use or contemplated use of the proceeds of the Loan, or due to a release or
alleged release of Hazardous Materials, including, without limitation, the fees
and disbursements of counsel incurred in connection with any litigation,
arbitration or other proceeding arising out of or by reason of any of the
aforesaid. IT IS THE INTENTION OF THE PARTIES THAT THE FOREGOING INDEMNITIES
SHALL APPLY TO LOSSES, LIABILITIES, CLAIMS, DAMAGES OR EXPENSES WHICH IN WHOLE
OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF AN INDEMNIFIED PARTY.
No such indemnified party, however, shall be entitled to be indemnified for its
or his own gross negligence or willful misconduct. In the case of an
investigation, litigation or other proceeding to which the indemnity in this
Section applies, such indemnities shall be effective whether or not such
investigation, litigation or proceeding is brought by Borrower, its directors,
shareholders or creditors, or by an indemnified party and whether or not the
transactions hereby are consummated. Borrower shall defend any claim for which
an indemnified party is entitled to seek indemnity pursuant to the preceding
sentence, and the indemnified party shall cooperate with the defense. The
indemnified party may have separate counsel, and Borrower will pay the expenses
and reasonable fees of such separate counsel if either counsel for Borrower or
counsel for the indemnified party shall advise the indemnified party that the
interests of both Borrower and the indemnified party with respect to such claim
are or with reasonable certainty will become adverse. The agreements and
obligations of Borrower contained in this Section shall survive payment in full
of the Obligations.
15.0 Miscellaneous. Borrower and Bank further covenant and agree as
follows, without limiting any requirement of any other Loan Document:
15.1 Cumulative Rights and No Waiver. Each and every right
granted to Bank under any Loan Document, or allowed it by law or equity
shall be cumulative of each other and may be exercised in addition to
any and all other rights of Bank, and no delay in exercising any right
shall operate as a waiver thereof, nor shall any single or partial
exercise by Bank of any right preclude any other or future exercise
thereof or the exercise of any other right. Borrower expressly waives
any presentment, demand, protest or other notice of any kind, including
but not limited to notice of intent to accelerate and notice of
acceleration. No notice to or demand on Borrower in any case shall, of
itself, entitle Borrower to any other or future notice or demand in
similar or other circumstances.
15.2 Choice of Law and Venue. (a) THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS (BUT NOT THE
RULES GOVERNING CONFLICTS OF LAWS) OF THE STATE OF TEXAS AND SHALL BE
PERFORMABLE IN DALLAS COUNTY, TEXAS. The parties hereto irrevocably
submit themselves to the jurisdiction of any Texas state court or any
United States court located in the state of Texas (or any court having
jurisdiction over appeals from any such court) in any proceeding
between or among them arising out of or in any way relating to this
Agreement or the Loan Documents whether arising in contract, tort or
otherwise. Any suit, action or proceeding may be brought in the courts
of the State of Texas, County of Dallas, or in the United States
District Court for the Northern District of Texas, Dallas Division. All
parties hereto irrevocably consent to the service of process in any
suit, action or proceeding in said court by the mailing thereof, by
registered or certified mail, postage prepaid, to its address for
notices set forth in this Agreement. Service shall be deemed effective
five (5) days after such mailing. If requested to do so by any party,
each party hereto agrees to waive service of process and to execute any
and all documents necessary to implement such waiver in accordance with
the Texas Rules of Civil Procedure. All parties hereto irrevocably
waive any objections which any may now or hereafter have (including any
based on the grounds of forum non conveniens) to the laying of venue of
any suit, action or proceeding arising out of or relating to this
Agreement or the Loan Documents brought in the courts located in the
State of Texas, County of Dallas. Nothing herein impairs the right to
bring proceedings in the courts of any other jurisdiction or to effect
service of process in any other manner permitted.
(b) The parties recognize that courts outside of Dallas
County, Texas, may also have jurisdiction over suits, actions or
proceedings arising out of this Agreement and the Loan Documents.
Except for proceedings brought by Bank in those jurisdictions where the
Mortgaged Properties are located, in the event any party shall
institute a proceeding involving this Agreement or the Loan Documents
in a jurisdiction outside Dallas County, Texas, the party instituting
such litigation shall indemnify the other parties for any losses and
expenses that may result from the breach of the foregoing covenant to
institute such proceeding only in a state or federal court in Dallas
County, Texas, including without limitation any additional expenses
incurred as the result of litigating in another jurisdiction, such as
the expenses and reasonable fees of local counsel and travel and
lodging expenses of the indemnified parties, its witnesses, experts and
support personnel.
15.3 Amendment. No modification, consent, amendment or waiver
of any provision of this Agreement, nor consent to any departure by
Borrower therefrom, shall be effective unless the same shall be in
writing and signed by an officer of Bank, and then shall be effective
only in the specified instance and for the purpose for which given.
This Agreement is binding upon Borrower, its successors and assigns,
and inures to the benefit of Bank, its successors and assigns; however,
no assignment or other transfer of Borrower's rights or obligations
hereunder shall be made or be effective without Bank's prior written
consent, nor shall it relieve Borrower of any obligations hereunder.
There is no third party beneficiary of this Agreement.
15.4 Documents. All documents, certificates and other items
required under this Agreement to be executed and/or delivered to Bank
shall be in form and content satisfactory to Bank and its counsel.
15.5 Partial Invalidity. The unenforceability or invalidity of
any provision of this Agreement shall not affect the enforceability or
validity of any other provision herein and the invalidity or
unenforceability of any provision of any Loan Document to any person or
circumstance shall not affect the enforceability or validity of such
provision as it may apply to other persons or circumstances.
15.6 Survivability. All covenants, agreements, representations
and warranties made herein or in the other Loan Documents shall survive
the making of the initial Loan and shall continue in full force and
effect so long as the Obligations are outstanding or the Commitment has
not expired.
15.7 Accounting Terms. Unless specified elsewhere herein, all
accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements to
be delivered hereunder shall be prepared in accordance with GAAP.
15.8 Environmental. Borrower shall immediately notify Bank of
any remedial action of a material nature taken by Borrower under
environmental laws with respect to Borrower's business operations.
Borrower will not use or permit any other party to use any Hazardous
Materials at any of Borrower's places of business or at any other
property owned by Borrower except such materials as are incidental to
Borrower's normal course of business, maintenance and repairs and which
are handled in compliance with all applicable environmental laws.
Borrower agrees to permit Bank, its agents, contractors and employees
to enter and inspect any of Borrower's places of business or any other
property of Borrower at any reasonable times upon three (3) days prior
notice for the purposes of conducting an environmental investigation
and audit (including taking physical samples) to insure that Borrower
is complying with this covenant and Borrower shall reimburse Bank on
demand for the costs of any such environmental investigation and audit.
Borrower shall provide Bank, its agents, contractors, employees and
representatives with access to and copies of any and all data and
documents relating to or dealing with any Hazardous Materials used,
generated, manufactured, stored or disposed of by Borrower's business
operations within five (5) days of the request therefore.
16.0 Agreement Controlling. In the event of a conflict between the
terms and provisions of this Agreement and the terms and provisions of any of
the other Loan Documents, the terms and provisions of this Agreement shall
control. This Agreement replaces and supersedes in its entirety that certain
commitment letter between the parties dated as of June 21, 1999 (accepted by
Borrower on June 22, 1999).
17.0 Notice of Final Agreement. THIS WRITTEN AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
18.0 Waiver of Jury Trial. BORROWER HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
EQUITY OIL COMPANY
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
President
BANK ONE, TEXAS, N.A.
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President