EXHIBIT 10.5
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FIFTH AMENDMENT TO CREDIT AGREEMENT
BY AND BETWEEN GMX RESOURCES, INC.
AND LOCAL OKLAHOMA BANK, N.A.
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (the "Amendment") is
executed to be effective as of the 16th day of January, 2004 by and between GMX
RESOURCES INC., an Oklahoma corporation, ENDEAVOR PIPELINE INC., an Oklahoma
corporation, and EXPEDITION NATURAL RESOURCES INC., an Oklahoma corporation (the
"Borrowers") and LOCAL OKLAHOMA BANK (the "Bank").
W I T N E S S E T H:
WHEREAS, effective October 31, 2000 Borrowers and Bank entered into
that certain Credit Agreement (the "Original Agreement") whereby Bank provided
Borrowers with a revolving line of credit in an amount governed by a Borrowing
Base which shall not exceed $15,000,000.00, as evidenced by reducing revolving
promissory note with a stated like amount of even date with the Original
Agreement (the "Original Note").
WHEREAS, as of June 18, 2001, Borrowers and Bank amended the
Original Agreement for the first time (the "First Amendment") in order to permit
certain preferred stock dividends and to evidence certain other changes as set
forth therein.
WHEREAS, as of May 28, 2002, Borrowers and Bank amended the Original
Agreement as amended by the First Amendment for the second time (the "Second
Amendment") in order to increase the rate of interest, include a termination
fee, alter the reporting requirements and to make such additional changes as are
set forth therein.
WHEREAS, as of August 14, 2002 Borrowers and Bank amended the
Original Agreement as amended by the First and Second Amendments for the third
time (the "Third Amendment") in order to modify certain financial covenants as
referenced therein.
WHEREAS, certain portions of the Original Agreement as amended by
First, Second and Third Amendments were amended by a Loan Modification and
Forbearance Agreement in May of 2003 and a Second Loan Modification and
Forbearance Agreement in June 2003 (the "Forbearance Agreements").
WHEREAS, as of August 31, 2003 Borrowers and Bank amended the
Original Agreement, as amended by the First, Second and Third Amendments for the
fourth time (the "Fourth Amendment") in order to extend the maturity date of the
Note, and to modify certain financial covenants as set forth therein (the
Original Agreement as amended by the First and Second, Third, and Fourth
Amendments and as further modified by the Forbearance Agreements is referred to
herein as the "Agreement")
WHEREAS, the obligations described in the Agreement are secured by,
among other things not specifically set forth herein, certain oil and gas
properties and other properties as set forth in the Agreement; and
WHEREAS, all capitalized terms not otherwise defined herein shall
have those meanings assigned to such terms in the Agreement;
WHEREAS, Borrowers and Bank desire to amend the Agreement for the
fifth time in order to evidence such changes to the Agreement as more
particularly set forth herein;
NOW THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrowers and the
Bank hereby agree to amend the Agreement as follows:
A. CHANGES TO THE AGREEMENT
1. Section 6.2 of the Agreement, Quarterly Financial Statements, is
hereby amended and restated in its entirety as follows in order to change it
from a quarterly requirement to a monthly requirement, as follows:
6.2 Monthly Financial Statements. Beginning with the
month ending December 31, 2003, deliver to the Lender, (a) on or
before the 45th day after the close of each calendar month, a copy
of the unaudited Financial Statements of Borrowers prepared on a
consolidated basis as of the last day of such monthly period , such
Financial Statement to be certified by a Responsible Officer of the
Borrowers as having been prepared in accordance with GAAP and in a
manner consistent with the annual audited Financial Statements,
consistently applied, and as a fair presentation of the financial
condition of the Borrowers , and (b) concurrent with (a) above, a
Compliance Certificate executed by Borrowers' Responsible Officer
stating that such Officers, after due inquiry, has no knowledge of
a Default or Event of Default and containing a computation of, and
demonstrating compliance with, each financial covenant set forth in
Section 7 herein.
2. Section 6.5 of the Agreement, Production Reports, is hereby
amended and restated and re-captioned in its entirety in order to change the
reporting requirement from quarterly to monthly as follows:
6.5 Production Reports. Within forty-five (45) days
from each calendar month end, furnish Lender a monthly summary
report of oil and gas production for said period indicating the
immediately preceding quarter's sales volume, sales revenues,
production taxes, operating expenses, capital expenditures and net
operating income from or attributable to the Borrowers' Oil and Gas
Properties pledged to secure the Obligations hereunder, with
detailed calculations and worksheets, and, in the case of take or
pay or prepayment agreements during such quarter, provide copies of
same.
3. Section 7.1 of the Agreement, Adjusted Current Ratio, and Section
7.2 of the Agreement, Debt Service Coverage Ratio, are hereby amended and
restated in their entirety as follows:
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7.1 Adjusted Current Ratio. For the month ending
December 31, 2003, maintain a minimum Adjusted Current Ratio,
calculated and submitted on a monthly basis of, at least, .90:1.00.
Beginning with the month ended January 31, 2004 and for each month
thereafter, Borrower shall maintain a minimum Adjusted Current
Ratio, calculated and submitted on a monthly basis of, at least,
1.00:1.00. The "Adjusted Current Ratio" is defined as (i) Current
Assets plus the Available Commitment minus any assets resulting
from "▇▇▇▇-to-market" accounting treatment for hedging contracts
divided by (ii) Current Liabilities, minus any liabilities
resulting from "▇▇▇▇-to-market" accounting treatment for hedging
contracts, minus any balance outstanding on this credit facility
that would otherwise be accounted for as a Current Liability.
7.2 Debt Service Coverage Ratio. Beginning with the
month ending November 30, 2003, maintain a fiscal year to date Debt
Service Coverage Ratio, calculated and submitted on a monthly
basis, of not less than 1.00:1.00 For purposes of this calculation,
the Debt Service Coverage Ratio is defined as the quotient of:
the cumulative sum of consolidated Net Income, MINUS
dividends, PLUS interest, depletion, depreciation, and
amortization and any other noncash expenses (all for the
fiscal year-to-date),
DIVIDED BY
the cumulative sum of year-to-date (assume for the
purposes hereof) monthly principal reductions of
$90,000.00 on the Note, PLUS year-to-date actual
accrued interest expense, PLUS any other current
maturities of any other long term debt (including
Capital Lease Obligations) realized during the
year-to-date then ended.
4. Section 8.1 of the Agreement, Indebtedness, is hereby amended and
restated in its entirety in order to permit certain "Subordinated Notes" as
follows:
8.1 Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, whether by way of loan or otherwise which
exceeds, in the aggregate, the sum of $100,000.00 ; provided
however, the foregoing restriction shall not apply to (a) the
Obligations, or (b) current accounts payable incurred in the
ordinary course of business, or (c) subject to restrictions on
payments of principal and interest set forth below, those certain
"Subordinated Notes" in the aggregate principal amount of
$1,000,000 issued pursuant to that certain Subordinated Note
Purchase Agreement ("Subordinated Note Purchase Agreement") dated
as of even date herewith between GMX and the noteholders listed on
the schedule attached thereto (the "Subordinated Notes");
Notwithstanding anything to the contrary set forth
above, Borrower shall not be permitted to make any payments of
either principal or interest to the extent such payment would be in
violation of that certain Intercreditor and Subordination
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Agreement of even date herewith by and between GMX, the Bank and
those certain noteholders a party thereto. By way of example,
Borrowers are permitted to make up to a $100,000 per fiscal year
principal reduction on the Subordinated Notes; provided, however,
such principal reduction shall be expressly conditioned upon each
of the following: (X) Borrower shall have notified Bank, at least,
three (3) business days prior to making the reduction; (Y) there is
not then existing any Event of Default nor would such an Event of
Default exist by virtue of the principal reduction including, but
not limited to, satisfaction of all financial covenants set forth
in ARTICLE VII hereof; and (Z) GMX shall have, at least,
$400,000.00 in Adjusted Working Capital (hereafter defined) at the
time of the principal reduction. For the purposes hereof, the term
Adjusted Working Capital shall mean (i) Current Assets plus the
Available Commitment minus any assets resulting from
"▇▇▇▇-to-market" accounting treatment for hedging contracts minus
(ii) Current Liabilities, minus any liabilities resulting from
"▇▇▇▇-to-market" accounting treatment for hedging contracts, minus
any balance outstanding on this credit facility that would
otherwise be accounted for as a Current Liability.
5. Except as otherwise set forth above, all other terms, covenants,
and conditions of the Agreement and all loans and/or notes are unaffected by
this Amendment.
B. REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants to Bank that:
1. Each Borrower is a corporation, duly organized,
legally existing, and in good standing under the laws of the State of Oklahoma,
and is duly qualified as a foreign corporation and in good standing in all other
states wherein the nature of its business or its assets make such qualification
necessary.
2. Each Borrower's execution and delivery of this
Amendment and performance of its obligations hereunder: (a) are and will be
within its powers; (b) are duly authorized by its board of directors; (c) are
not and will not be in contravention of any law, statute, rule or regulation,
the terms of its articles or incorporation and bylaws, nor of any agreement or
undertaking to which any Borrower or any of its properties are bound; (d) do not
require any consent or approval (including governmental) which has not been
given; and (e) will not result in the imposition of liens, charges or
encumbrances on any of its properties or assets, except those in favor of Bank
hereunder.
3. This Amendment, when duly executed and delivered,
will constitute the legal, valid and binding obligations of Borrowers,
enforceable in accordance with its terms.
4. All financial statements, balance sheets, income
statements and other financial data which have been or are hereafter furnished
to Bank by Borrowers to induce Bank to make the loans hereunder due, and as to
subsequent financial statements will, fairly represent each Borrower's financial
condition as of the dates for which the same are furnished. All such financial
statements, reports, papers and other data furnished to Bank are and will be,
when
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furnished: prepared in accordance with generally accepted accounting principles
consistently applied; accurate and correct in all material respects; and
complete insofar as completeness may be necessary to give Bank a true and
accurate knowledge of the subject matter. Since the date of the last such
financial statements, no material adverse change has occurred in the operations
or condition, financial or otherwise and other financial data provided to Bank;
of any Borrower, nor, to the best of their knowledge, has any Borrower incurred,
any material liabilities or made any material investment or guarantees, direct
or contingent, in any single case or in the aggregate, which has not been
disclosed to Bank.
5. The Borrowers are the sole and lawful owner of the
Collateral, pledged, mortgaged or assigned by it, and Borrowers have, and as to
after acquired property or new properties will have, good right to cause the
Collateral to be hypothecated to Bank as security for the obligations described
in the Agreement, as amended hereby. Further, the ownership interests set forth
in that certain Engineering Report dated August 8, 2003 from ▇▇▇▇▇▇▇ ▇▇▇▇, Jr.
purported to be owned by Borrowers, or any one of them, are true and correct and
Borrowers do, in fact, own such interests in such Collateral.
6. The Collateral set forth on that certain Engineering
Report dated August 8, 2003 from ▇▇▇▇▇▇▇ ▇▇▇▇, Jr. is free and clear of all
mortgages, liens and encumbrances, except for Permitted Liens. Further,
Borrowers have no invoices for labor related to such properties or materials
provided to such properties which have not been paid within 90 days from the
date such invoice is due and payable.
7. All of each Borrower's other representations and
warranties set forth in Section 8 of the Agreement, Representations and
Warranties, are true and correct on and as of the date hereof with the same
effect as though made and repeated by such Borrower as of the date hereof.
C. CONDITIONS
Bank's obligations under the Agreement, as hereby amended, are
subject to the following conditions:
1. Bank and Borrowers shall have executed and delivered
this Amendment.
2. Borrowers shall have paid Bank an amendment fee in
the amount of $10,000.00.
3. GMX, shall have executed the Subordinated Notes
together with the Subordinated Note Purchase Agreement.
4. GMX, the Bank, and those noteholders executing the
Subordinated Note Purchase Agreement shall have executed a mutually
acceptable Intercreditor and Subordination Agreement.
5. Borrowers shall, or will from time to time, have
executed such additional mortgages, deeds of trust, financing
statement and such other documents
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as are deemed necessary by Bank in order to perfect a lien in favor
of Bank in and to those Oil and Gas Properties necessary to achieve
the percentages required by the covenants set forth herein.
6. Each Borrower's representations and warranties set
forth in Section B hereof shall be true and correct on and as of the
date hereof, and the date of any subsequent advance with the same
effect as though such representation and warranty had been on and as
of such date.
7. Borrowers shall have satisfied all conditions set
forth in the Agreement.
8. As of the date hereof, and the date of any subsequent
Advance, no Event of Default nor any event which, with the giving
of notice or lapse of time, would constitute an Event of Default
shall have occurred and be continuing.
D. OTHER NOTICES, COVENANTS AND MISCELLANEOUS TERMS
1. If and when any of the warrants being issued pursuant
to the Subordinated Note Purchase Agreement are exercised, Borrower shall make a
mandatory prepayment of principal from the proceeds generated from such
exercise.
2. The Bank hereby notifies Borrower that from the date
hereof the Borrowing Base shall be $6,490,000.00 and the Monthly Commitment
Reduction is $90,000.00 beginning February 1, 2004.
3. Except as expressly amended and supplemented hereby,
the Agreement shall remain unchanged and in full force and effect, and the same
is hereby ratified and extended.
4. The obligations described in the Agreement, as
amended hereby, including but not limited to the indebtedness evidenced by the
Note executed in conjunction with the Agreement, shall continue to be secured by
the Collateral, without interruption or impairment of any kind.
5. Borrowers agree to execute such additional mortgages,
deeds of trust and/or amendments to such documents already in place as Bank
deems necessary to adequately secure the loan at any time and from time to time
hereafter.
6. The Borrowers hereby agree to pay all reasonable
attorney fees and legal expenses incurred by Bank in preparation, execution and
implementation of this Amendment and any mortgages, guaranty agreements,
subordination agreements, deeds of trust, security agreements, pledge agreements
or any amendments thereto.
7. This Amendment shall be construed in accordance with
and governed by the laws of the State of Oklahoma, and shall be binding on and
inure to the benefit of the Borrower and Bank, and their respective successors
and assigns. All obligations of the Borrowers under the Agreement and all rights
of Bank and any other holder of the Note, whether expressed herein or in any
Note, shall be in addition to and not in limitation of those provided by
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applicable law. Borrowers irrevocably agree that, subject to Bank's sole
election, all suits or proceedings arising from or related to the Agreement, as
amended, or the Note may be litigated in courts (whether State or Federal)
sitting in Oklahoma City, Oklahoma, and the Borrowers hereby irrevocably waives
any objection to such jurisdiction and venue.
8. This Amendment may be executed in as many
counterparts as are deemed necessary or convenient, and it shall not be
necessary for the signature of more than any one party to appear on any single
counterpart. Each counterpart shall be deemed an original, but all shall be
construed together as one and the same instrument. The failure of any party to
sign shall not affect or limit the liability of any party executing any such
counterpart.
E. RELEASE. Borrowers hereby remise, release, and forever discharge
Bank, its successors and assigns, its officers, directors, employees, agents and
attorneys (collectively, "Released Parties") of and from all actions, causes of
action, suits, proceedings, debts, contracts, claims, damages, liability and
demands whatsoever, known or unknown, in law or equity, which Borrowers ever had
or now has, by reason of any matter, cause, or thing whatsoever arising from the
actions or inactions of the Released Parties in any matter relating to the
Agreement, Note, and other Loan Documents (collectively, "Released Matters");
and Borrowers covenant not to ▇▇▇ any of the Released Parties with respect to
the Released Matters. The release and covenant not to ▇▇▇ set forth in this
provision are intended by the parties to be as broad and comprehensive as
possible.
So executed effective the 16th day of January, 2004.
BORROWERS:
GMX RESOURCES INC.,
an Oklahoma corporation
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
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By: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
Title: Chief Financial Officer
ENDEAVOR PIPELINE INC.,
an Oklahoma corporation
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
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By: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
Title: Chief Financial Officer
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EXPEDITION NATURAL RESOURCES INC.,
an Oklahoma corporation
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
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By: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
Title: Chief Financial Officer
BANK:
LOCAL OKLAHOMA BANK
/s/ ▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
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By: ▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Title: Senior Vice President
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