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CREDIT AGREEMENT
BETWEEN
MIDDLE BAY OIL COMPANY, INC.
AND
ENEX RESOURCES CORPORATION
AS BORROWER
AND
COMPASS BANK, AS AGENT AND A LENDER
BANK OF OKLAHOMA, NATIONAL ASSOCIATION,
AS A LENDER
AND
THE OTHER LENDERS SIGNATORY HERETO
MARCH 27, 1998
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REDUCING REVOLVING LINE OF CREDIT OF UP TO $100,000,000
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above 1
1.2 Additional Defined Terms 1
1.3 Undefined Financial Accounting Terms 15
1.4 References 15
1.5 Articles and Sections 15
1.6 Number and Gender 15
1.7 Incorporation of Schedules and Exhibits 15
ARTICLE II TERMS OF FACILITY
2.1 Revolving Line of Credit 16
2.2 Letter of Credit Facility 17
2.3 Use of Loan Proceeds and Letters of Credit. 18
2.4 Interest 19
2.5 Repayment of Loans and Interest 19
2.6 Outstanding Amounts 19
2.7 Time, Place, and Method of Payments 20
2.8 Pro Rata Treatment; Adjustments 20
2.9 Borrowing Base Determinations 21
2.10 Mandatory Prepayments 22
2.11 Voluntary Prepayments and Conversions of Loans 22
2.12 Commitment Fee 22
2.13 Facility Fee 23
2.14 Engineering Fee 23
2.15 Letter of Credit Fee 23
2.16 Agency Fee 24
2.17 Loans to Satisfy Obligations of Borrower 24
2.18 Security Interest in Accounts; Right of Offset 24
2.19 General Provisions Relating to Interest 24
2.20 Yield Protection 25
2.21 Limitation on Types of Loans 27
2.22 Illegality 27
2.23 Regulatory Change 28
2.24 Limitations on Interest Periods 28
2.25 Letters in Lieu of Transfer Orders 28
2.26 Power of Attorney 28
ARTICLE III CONDITIONS
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3.1 Receipt of Loan Documents and Other Items 29
3.2 Each Loan 32
3.3 Each Letter of Credit 33
ARTICLE IV REPRESENTATIONS AND WARRANTIES
4.1 Due Authorization 33
4.2 Corporate Existence 34
4.3 Valid and Binding Obligations 34
4.4 Security Instruments 34
4.5 Title to Assets 34
4.6 Scope and Accuracy of Financial Statements 34
4.7 No Material Misstatements 34
4.8 Liabilities, Litigation, and Restrictions 34
4.9 Compliance with Laws 35
4.10 ERISA 35
4.11 Environmental Laws 35
4.12 Compliance with Federal Reserve Regulations 35
4.13 Investment Company Act Compliance 35
4.14 Public Utility Holding Company Act Compliance 36
4.15 Proper Filing of Tax Returns; Payment of Taxes Due 36
4.16 Refunds 36
4.17 Gas Contracts 36
4.18 Intellectual Property 36
4.19 Casualties or Taking of Property 36
4.20 Locations of Borrower 37
4.21 Subsidiaries 37
ARTICLE V AFFIRMATIVE COVENANTS
5.1 Maintenance and Access to Records 37
5.2 Quarterly Financial Statements; Compliance Certificates 37
5.3 Annual Financial Statements 38
5.4 Oil and Gas Reserve Reports 38
5.5 Title Opinions; Title Defects 38
5.6 Notices of Certain Events 39
5.7 Letters in Lieu of Transfer Orders; Division Orders 40
5.8 Additional Information 40
5.9 Compliance with Laws 40
5.10 Payment of Assessments and Charges 40
5.11 Maintenance of Corporate Existence and Good Standing 40
5.12 Payment of Notes; Performance of Obligations 40
5.13 Further Assurances 41
5.14 Initial Fees and Expenses of Counsel to Agent 41
5.15 Subsequent Fees and Expenses of Agent and Lenders 41
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5.16 Operation of Oil and Gas Properties 41
5.17 Maintenance and Inspection of Properties 42
5.18 Maintenance of Insurance 42
5.19 INDEMNIFICATION 42
5.20 Operating Accounts 43
ARTICLE VI NEGATIVE COVENANTS
6.1 Indebtedness 44
6.2 Contingent Obligations 44
6.3 Liens 44
6.4 Sales of Assets 44
6.5 Leasebacks 45
6.6 Loans or Advances 45
6.7 Investments 45
6.8 Dividends and Distributions 46
6.9 Changes in Corporate Structure 46
6.10 Transactions with Affiliates 46
6.11 Lines of Business 46
6.12 Plan Obligations 46
6.13 New Subsidiaries 46
6.14 Cash Flow Coverage 46
6.15 Current Ratio 46
6.16 Change of Fiscal Year 46
ARTICLE VII EVENTS OF DEFAULT
7.1 Enumeration of Events of Default 46
7.2 Remedies 48
ARTICLE VIII THE AGENT
8.1 Appointment 49
8.2 Waivers, Amendments 49
8.3 Delegation of Duties 50
8.4 Exculpatory Provisions 50
8.5 Reliance by Agent 50
8.6 Notice of Default 51
8.7 Non-Reliance on Agent and Other Lenders 51
8.8 Indemnification 52
8.9 Restitution 52
8.10 Agent in Its Individual Capacity 53
8.11 Successor Agent 53
8.12 Applicable Parties 53
ARTICLE IX MISCELLANEOUS
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9.1 Assignments; Participations 54
9.2 Survival of Representations, Warranties, and Covenants 55
9.3 Notices and Other Communications 55
9.4 Parties in Interest 56
9.5 Rights of Third Parties 56
9.6 Renewals; Extensions 57
9.7 No Waiver; Rights Cumulative 57
9.8 Survival Upon Unenforceability 57
9.9 Amendments; Waivers 57
9.10 Controlling Agreement 57
9.11 Disposition of Collateral 57
9.12 GOVERNING LAW 58
9.13 JURISDICTION AND VENUE 58
9.14 ENTIRE AGREEMENT 58
9.15 Counterparts 58
LIST OF SCHEDULES
Schedule 4.8 - Liabilities and Litigation
Schedule 4.12 - Environmental Matters
Schedule 4.16 - Refunds
Schedule 4.17 - Gas Contracts
Schedule 4.19 - Casualties
Schedule 4.21 - Subsidiaries
LIST OF EXHIBITS
Exhibit I - Form of Notes
Exhibit II - Form of Borrowing Request
Exhibit III - Form of Compliance Certificate
Exhibit IV - Form of Borrowing Base Utilization Certificate
Exhibit V - Form of Opinion of Counsel
Exhibit VI - Form of Lender Assignment Agreement
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CREDIT AGREEMENT
This CREDIT AGREEMENT is made and entered into this 27th
day of March, 1998, by and between MIDDLE BAY OIL COMPANY, INC., an Alabama
corporation ("MIDDLE BAY"), and ENEX RESOURCES CORPORATION, a Delaware
corporation ("ENEX") (collectively, the "BORROWER", but with such entities
constituting the Borrower being jointly and severally liable for the
Obligations and each reference herein to the Borrower being applicable to
each of such entities) and COMPASS BANK, a Texas state chartered banking
institution ("COMPASS"), BANK OF OKLAHOMA, NATIONAL ASSOCIATION, a national
banking association ("BOK") and each other lender that becomes a signatory
hereto as provided in Section 9.1 (Compass and each such other lender,
together with its successors and assigns, individually a "Lender" and
collectively, the "Lenders"), and Compass, as agent for the Lenders pursuant
to the terms hereof (in such capacity, together with its successors in such
capacity pursuant to the terms hereof, (the "AGENT").
W I T N E S S E T H:
In consideration of the mutual covenants and agreements
herein contained, the Lender or Lenders hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 TERMS DEFINED ABOVE. As used in this Credit Agreement,
each of the terms "AGENT", "AGREEMENT", "BOK", "BORROWER", "COMPASS",
"LENDER" and "LENDERS" shall have the meaning assigned to such term
hereinabove.
1.2 ADDITIONAL DEFINED TERMS. As used in this Agreement,
each of the following terms shall have the meaning assigned thereto in this
Section, unless the context otherwise requires:
"ADDITIONAL COSTS" shall mean reasonable costs which the Agent
or any Lender determines are attributable to its obligation to make or
its making or maintaining any LIBO Rate Loan or issuing or
participating in Letters of Credit, or any reduction in any amount
receivable by the Agent or any Lender in respect of any such obligation
or any LIBO Rate Loan or Letter of Credit, resulting from any
Regulatory Change which (a) changes the basis of taxation of any
amounts payable to the Agent or such Lender under this Agreement or any
Note in respect of any LIBO Rate Loan or Letter of Credit (other than
taxes imposed on the overall net income of the Agent or such Lender or
its Applicable Lending Office for any such LIBO Rate Loan by the
jurisdiction in which the Agent or such Lender has its
principal office or Applicable Lending Office), (b) imposes or
modifies any reserve, special deposit, minimum capital, capital
ratio, or similar requirements (other than the Reserve Requirement
utilized in the determination of the Adjusted LIBO Rate for such
Loan) relating to any extensions of credit or other assets of, or
any deposits with or other liabilities of, the Agent or such Lender
(including LIBO Rate Loans and Dollar deposits in the London
interbank market in connection with LIBO Rate Loans), or the
Commitment of the Agent or such Lender, or the London interbank
market, or (c) imposes any other condition affecting this Agreement
or any Note or any of such extensions of credit, liabilities, or
Commitments.
"ADJUSTED LIBO RATE" shall mean, for any LIBO Rate Loan, an
interest rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) determined by the Agent to be equal to the sum of the LIBO
Rate for such Loan plus the Applicable Margin, but in no event
exceeding the Highest Lawful Rate.
"AFFILIATE" shall mean any Person directly or indirectly
controlling, or under common control with, the Borrower and includes
any Subsidiary of the Borrower and any "affiliate" of the Borrower
within the meaning of Reg. Section 240.12b-2 of the Securities Exchange
Act of 1934, as amended, with "control," as used in this definition,
meaning possession, directly or indirectly, of the power to direct or
cause the direction of management, policies or action through ownership
of voting securities, contract, voting trust, or membership in
management or in the group appointing or electing management or
otherwise through formal or informal arrangements or business
relationships.
"AGENCY FEE LETTER" shall mean the letter agreement dated
March 27, 1998, between Compass and the Borrower concerning certain
fees in connection with the transactions contemplated hereby, and any
agreements or instruments executed in connection therewith, as amended,
restated, or supplemented from time to time.
"AGREEMENT" shall mean this Credit Agreement, as it may be
amended, supplemented, restated or otherwise modified from time to
time.
"APPLICABLE LENDING OFFICE" shall mean, for each Lender and
type of Loan, the lending office of such Lender (or an affiliate of
such Lender) designated for such type of Loan on the signature pages
hereof or such other office of such Lender (or an affiliate of such
Lender) as such Lender may from time to time specify to the Agent and
the Borrower as the office by which Loans of such type are to be made
and maintained.
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"APPLICABLE MARGIN" shall mean as to each LIBO Rate Loan, the
following:
Borrowing Base LIBO Rate Loan
Utilization Applicable Margin
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equal to or greater than 75% two percent (2%)
of Borrowing Base
less than 75% but greater one and three-fourths
than 50% of Borrowing percent (1-3/4%)
Base
less than or equal to one and one-half
50% of Borrowing Base percent (1-1/2%),
with the Borrowing Base Utilization and the corresponding LIBO Rate
being set at the close of each calendar quarter for the next calendar
quarter. The Borrower shall furnish to the Agent, within five (5) days
of the end of each calendar quarter, except for the quarter ending
March 31, 1998, a Borrowing Base Utilization Certificate, substantially
in the form attached as Exhibit IV to this Agreement, which shall
stipulate the Borrowing Base Utilization level at the end of such
quarter.
"AVAILABLE COMMITMENT" shall mean, at any time, an amount
equal to the remainder, if any, of (a) the Borrowing Base in effect at
such time MINUS (b) the sum of the Loan Balance at such time and the
L/C Exposure at such time.
"BORROWING BASE" shall mean, at any time, the amount
determined by the Lenders in accordance with Section 2.9 and then in
effect.
"BORROWING BASE UTILIZATION" shall mean, at any time, the Loan
Balance, plus any L/C Exposure hereunder, expressed as a percentage of
the Borrowing Base.
"BORROWING REQUEST" shall mean each written request, in
substantially the form attached hereto as Exhibit II, by the Borrower
to the Agent for a borrowing or conversion pursuant to Sections 2.1
or 2.11, each of which shall:
(a) be signed by a Responsible Officer of the Borrower;
(b) specify the amount and type of Loan requested, and, as
applicable, the Loan to be converted and the date of the
borrowing or conversion (which shall be a Business Day);
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(c) when requesting a Floating Rate Loan, be delivered to
the Agent no later than 10:00 a.m., Central Standard or Daylight
Savings Time, as the case may be, on the Business Day of the
requested borrowing or conversion, and
(d) when requesting a LIBO Rate Loan, be delivered to the
Agent no later than 10:00 a.m., Central Standard or Daylight Savings
Time, as the case may be, two Business Days preceding the
requested borrowing or conversion and designate the Interest
Period requested with respect to such Loan.
"BUSINESS DAY" shall mean (a) for all purposes other than as
covered by clause (b) of this definition, a day other than a Saturday,
Sunday, legal holiday for commercial banks under the laws of the State
of Texas, or any other day when banking is suspended in the State of
Texas, and (b) with respect to all requests, notices, and
determinations in connection with, and payments of principal and
interest on, LIBO Rate Loans, a day which is a Business Day described
in clause (a) of this definition and which is a day for trading by and
between banks for Dollar deposits in the London interbank market.
"CASH FLOW" shall mean, for any relevant accounting period,
Net Income for such period plus, without duplication and to the extent
deducted from revenues in determining Net Income for the relevant
period, depreciation, amortization, depletion, other non-cash expenses,
exploration expenses, dry-hole expenses, and geological and geophysical
costs, less, without duplication and to the extent added to revenues in
determining Net Income for the relevant period, all non-cash revenue
and non-recurring gains of the Borrower for the relevant period.
"CLOSING DATE" shall mean the date of this Agreement.
"CODE" shall mean the United States Internal Revenue Code of
1986, as amended from time to time.
"COLLATERAL" shall mean the Mortgaged Properties and any other
Property now or at any time used or intended as security for the
payment or performance of all or any portion of the Obligations of the
Borrower or any Subsidiary or other Affiliate of the Borrower owing to
the Agent or any Lender or any branch, Subsidiary or other Affiliate of
the Agent or any Lender which is subject to a Security Instrument.
"COMMITMENTS" shall mean the several obligations of the
Lenders, subject to applicable provisions of this Agreement, to make
Loans to or for the benefit of the Borrower pursuant to Section 2.1 or
participate in the issuance of Letters of Credit pursuant to Section
2.2.
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"COMMITMENT AMOUNT" shall mean $18,850,000 as to Compass
and $10,150,000 as to BOK as of the Closing Date.
"COMMITMENT FEE" shall mean each fee payable to the Agent for
the benefit of the Lenders by the Borrower pursuant to Section 2.12.
"COMMITMENT PERIOD" shall mean the period from and including
the Closing Date to but not including the Commitment Termination Date.
"COMMITMENT TERMINATION DATE" shall mean April 1, 2001.
"COMMONLY CONTROLLED ENTITY" shall mean any Person which is
under common control with the Borrower within the meaning of Section
4001 of ERISA.
"COMPLIANCE CERTIFICATE" shall mean each certificate,
substantially in the form attached hereto as Exhibit III, executed by a
Responsible Officer of the Borrower and furnished to the Agent from
time to time in accordance with Section 5.2.
"CONTINGENT OBLIGATION" shall mean, as to any Person, any
obligation of such Person guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends, or other obligations of any other
Person (for purposes of this definition, a "PRIMARY OBLIGATION") in any
manner, whether directly or indirectly, including, without limitation,
any obligation of such Person, regardless of whether such obligation is
contingent, (a) to purchase any primary obligation or any Property
constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any primary obligation,
or (ii) to maintain working or equity capital of any other Person in
respect of any primary obligation, or otherwise to maintain the net
worth or solvency of any other Person, (c) to purchase Property,
securities or services primarily for the purpose of assuring the owner
of any primary obligation of the ability of the Person primarily liable
for such primary obligation to make payment thereof, or (d) otherwise
to assure or hold harmless the owner of any such primary obligation
against loss in respect thereof, with the amount of any Contingent
Obligation being deemed to be equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by
such Person in good faith.
"CURRENT RATIO" means the ratio of (a) consolidated current
assets of the Borrower and it Subsidiaries to (b) consolidated current
liabilities (excluding the current portion of Loans hereunder).
"DEBT SERVICE" shall mean, for each relevant accounting
period, an amount equal to (i) actual principal amounts paid on debt
other than the Obligations during
5
each quarter, plus (ii) required principal payments under the
Obligations during such quarter.
"DEFAULT" shall mean any event or occurrence which with the
lapse of time or the giving of notice or both would become an Event of
Default.
"DEFAULT RATE" shall mean a per annum interest rate equal to
the Index Rate plus five percent (5%), but in no event exceeding the
Highest Lawful Rate.
"DOLLARS" and "$" shall mean dollars in lawful currency of the
United States of America.
"ENVIRONMENTAL COMPLAINT" shall mean any written complaint,
order, directive, claim, citation, notice of environmental report or
investigation, or other notice by any Governmental Authority with
respect to (a) air emissions, (b) spills, releases, or discharges to
soils, any improvements located thereon, surface water, groundwater, or
the sewer, septic, waste treatment, storage, or disposal systems
servicing any Property of the Borrower, (c) solid or liquid waste
disposal, (d) the use, generation, storage, transportation, or disposal
of any Hazardous Substance, or (e) other environmental, health, or
safety matters affecting any Property of the Borrower or the business
conducted thereon.
"ENVIRONMENTAL LAWS" shall mean (a) the following federal laws
as they may be cited, referenced, and amended from time to time: the
Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, the
Comprehensive Environmental Response, Compensation and Liability Act,
the Endangered Species Act, the Resource Conservation and Recovery Act,
the Occupational Safety and Health Act, the Hazardous Materials
Transportation Act, the Superfund Amendments and Reauthorization Act,
and the Toxic Substances Control Act; (b) any and all equivalent
environmental statutes of any state in which Property of the Borrower
is situated, as they may be cited, referenced and amended from time to
time; (c) any rules or regulations promulgated under or adopted
pursuant to the above federal and state laws; and (d) any other
equivalent foreign, federal, state, or local statute or any
requirement, rule, regulation, code, ordinance, or order adopted
pursuant thereto, including, without limitation, those relating to the
generation, transportation, treatment, storage, recycling, disposal,
handling, or release of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations thereunder
and interpretations thereof.
"EXISTING LIENS" shall mean the liens held by BOK.
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"EVENT OF DEFAULT" shall mean any of the events
specified in Section 7.1.
"FACILITY FEE" shall mean the fee payable to the Agent for the
benefit of the Lenders by the Borrower pursuant to Section 2.13.
"FINAL MATURITY" shall mean April 1, 2001.
"FINANCIAL STATEMENTS" shall mean statements of the financial
condition of the Borrower and its consolidated Subsidiaries on a
consolidated and consolidating basis as at the point in time and for
the period indicated and consisting of at least a balance sheet and
related statements of operations, common stock and other stockholders'
equity, and cash flows, and when such statements prepared on a
consolidated basis are required by applicable provisions of this
Agreement to be audited, accompanied by the unqualified certification
of a nationally-recognized firm of independent certified public
accountants or other independent certified public accountants
acceptable to the Agent and footnotes to any of the foregoing, all of
which shall be prepared in accordance with GAAP consistently applied
and in comparative form with respect to the corresponding period of the
preceding fiscal period.
"FIXED RATE LOAN" shall mean any LIBO Rate Loan.
"FLOATING RATE" shall mean an interest rate per annum equal to
the Index Rate from time to time in effect, but in no event exceeding
the Highest Lawful Rate.
"FLOATING RATE LOAN" shall mean any Loan and any portion of
the Loan Balance which the Borrower has requested, in the initial
Borrowing Request for such Loan or a subsequent Borrowing Request for
such portion of the Loan Balance, bear interest at the Floating Rate,
or which pursuant to the terms hereof is otherwise required to bear
interest at the Floating Rate.
"GAAP" shall mean generally accepted accounting principles
established by the Financial Accounting Standards Board or the American
Institute of Certified Public Accountants and in effect in the United
States from time to time.
"GOVERNMENTAL AUTHORITY" shall mean any nation, country,
commonwealth, territory, government, state, county, parish,
municipality, or other political subdivision and any entity exercising
executive, legislative, judicial, regulatory, or administrative
functions of or pertaining to government.
"HAZARDOUS SUBSTANCES" shall mean flammables, explosives,
radioactive materials, hazardous wastes, asbestos, or any material
containing asbestos, polychlorinated biphenyls (PCBs), toxic substances
or related materials, petroleum, petroleum products, associated oil or
natural gas exploration, production, and
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development wastes, or any substances defined as "hazardous
substances," "hazardous materials," "hazardous wastes," or "toxic
substances" under the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, the Superfund
Amendments and Reauthorization Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Toxic Substances Control Act, as
amended, or any other law or regulation now or hereafter enacted or
promulgated by any Governmental Authority.
"HIGHEST LAWFUL RATE" shall mean the maximum non-usurious
interest rate, if any (or, if the context so requires, an amount
calculated at such rate), that at any time or from time to time may be
contracted for, taken, reserved, charged, or received under applicable
laws of the State of Texas or the United States of America, whichever
authorizes the greater rate, as such laws are presently in effect or,
to the extent allowed by applicable law, as such laws may hereafter be
in effect and which allow a higher maximum non-usurious interest rate
than such laws now allow.
"INDEBTEDNESS" shall mean, as to any Person, without
duplication, (a) all liabilities (excluding reserves for deferred
income taxes, deferred compensation liabilities, and other deferred
liabilities and credits) which in accordance with GAAP would be
included in determining total liabilities as shown on the liability
side of a balance sheet, (b) all obligations of such Person evidenced
by bonds, debentures, promissory notes, or similar evidences of
indebtedness, (c) all other indebtedness of such Person for borrowed
money, (d) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade
payables, which include amounts owed to drilling contractors, entered
into in the ordinary course of business on ordinary terms); (e) all
indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case
with respect to property acquired by the Person (even though the rights
and remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property)
including, without limitation, production payments, net profit
interests and other hydrocarbon interests subject to repayment out of
future oil and gas production; (f) all obligations with respect to
capital leases; (g) all net obligations with respect to derivative
contracts; and (h) all obligations, including Contingent Obligations of
others, to the extent any such obligation is secured by a Lien on the
assets of such Person (whether or not such Person has assumed or become
liable for the obligation secured by such Lien).
"INDEX RATE" shall mean the prime rate established in THE WALL
STREET JOURNAL'S "MONEY RATES" or similar table. If multiple prime
rates are quoted in the table, then the highest prime rate will be the
Index Rate. In the event that the prime rate is no longer published by
THE WALL STREET JOURNAL in the "MONEY RATES" or similar table, then
Agent may select an alternative published index based upon
8
comparable information as a substitute Index Rate. Upon the
selection of a substitute Index Rate, the applicable interest rate
shall thereafter vary in relation to the substitute index. Such
substitute index shall be the same index that is generally used as
a substitute by Agent on all Index Rate loans.
"INSOLVENCY PROCEEDING" shall mean application (whether
voluntary or instituted by another Person) for or the consent to the
appointment of a receiver, trustee, conservator, custodian, or
liquidator of any Person or of all or a substantial part of the
Property of such Person, or the filing of a petition (whether voluntary
or instituted by another Person) commencing a case under Title 11 of
the United States Code, seeking liquidation, reorganization, or
rearrangement or taking advantage of any bankruptcy, insolvency,
debtor's relief, or other similar law of the United States, the State
of Texas, or any other jurisdiction.
"INTELLECTUAL PROPERTY" shall mean patents, patent
applications, trademarks, tradenames, copyrights, technology, know-how,
and processes.
"INTEREST PERIOD" shall mean, subject to the limitations set
forth in Section 2.24, and with respect to any LIBO Rate Loan, a period
commencing on the date such Loan is made or converted from a Loan of
another type pursuant to this Agreement or the last day of the next
preceding Interest Period with respect to such Loan and ending on the
numerically corresponding day in the calendar month that is one, two,
three, or, subject to availability, six months thereafter, as the
Borrower may request in the Borrowing Request for such Loan.
"INVESTMENT" in any Person shall mean any stock, bond, note,
or other evidence of Indebtedness, or any other security (other than
current trade and customer accounts) of, investment or partnership
interest in or loan to, such Person.
"L/C EXPOSURE" shall mean, at any time, the aggregate maximum
amount available to be drawn under outstanding Letters of Credit at
such time.
"LETTER OF CREDIT" shall mean any standby letter of credit
issued by the Agent for the account of the Borrower pursuant to Section
2.2.
"LETTER OF CREDIT APPLICATION" shall mean the standard letter
of credit application employed by the Agent as the issuer of the
Letters of Credit, from time to time, in connection with Letters of
Credit.
"LETTER OF CREDIT FEE" shall mean each fee payable by the
Borrower to the Agent for the account of the Lenders pursuant to
Section 2.15 upon or in connection with the issuance or renewal of each
Letter of Credit.
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"LETTER OF CREDIT PAYMENT" shall mean any payment made by the
Agent on behalf of the Lenders under a Letter of Credit, to the extent
that such payment has not been repaid by the Borrower.
"LIBO RATE" shall mean, with respect to any Interest Period
for any LIBO Rate Loan, the lesser of (a) the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the average
of the offered quotations appearing on Telerate Page 3750 (or if such
Telerate Page shall not be available, any successor or similar service
selected by the Agent and the Borrower) as of approximately 11:00 a.m.,
Central Standard or Daylight Savings Time, as the case may be, on the
day two Business Days prior to the first day of such Interest Period
for Dollar deposits in an amount comparable to the principal amount of
such LIBO Rate Loan and having a term comparable to the Interest Period
for such LIBO Rate Loan, or (b) the Highest Lawful Rate. If neither
such Telerate Page 3750 nor any successor or similar service is
available, the term "LIBO Rate" shall mean, with respect to any
Interest Period for any LIBO Rate Loan, the lesser of (a) the rate per
annum (rounded upwards if necessary, to the nearest 1/100 of 1%) quoted
by the Agent at approximately 11:00 a.m., London time (or as soon
thereafter as practicable) two Business Days prior to the first day of
the Interest Period for such LIBO Rate Loan for the offering by the
Agent to leading banks in the London interbank market of Dollar
deposits in an amount comparable to the principal amount of such LIBO
Rate Loan and having a term comparable to the Interest Period for such
LIBO Rate Loan, or (b) the Highest Lawful Rate.
"LIBO RATE LOAN" shall mean any Loan and any portion of the
Loan Balance which the Borrower has requested, in the initial Borrowing
Request for such Loan or a subsequent Borrowing Request for such
portion of the Loan Balance, bear interest at the Adjusted LIBO Rate
and which is permitted by the terms hereof to bear interest at the
Adjusted LIBO Rate.
"LIEN" shall mean any interest in Property securing an
obligation owed to, or a claim by, a Person other than the owner of
such Property, whether such interest is based on common law, statute,
or contract, and including, but not limited to, the lien or security
interest arising from a mortgage, ship mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt, or a lease,
consignment, or bailment for security purposes (other than true leases
or true consignments), liens of mechanics, materialmen, and artisans,
maritime liens and reservations, exceptions, encroachments, easements,
rights of way, covenants, conditions, restrictions, leases, and other
title exceptions and encumbrances affecting Property which secure an
obligation owed to, or a claim by, a Person other than the owner of
such Property (for the purpose of this Agreement, the Borrower shall be
deemed to be the owner of any Property which it has acquired or holds
subject to a conditional sale agreement, financing lease, or other
arrangement pursuant to which title to the Property has been
10
retained by or vested in some other Person for security purposes),
and the filing or recording of any financing statement or other
security instrument in any public office.
"LIMITATION PERIOD" shall mean any period while any amount
remains owing on the Notes and interest on such amount, calculated at
the applicable interest rate, plus any fees or other sums payable under
any Loan Document and deemed to be interest under applicable law, would
exceed the amount of interest which would accrue at the Highest Lawful
Rate.
"LOAN" shall mean any loan made by any Lender to or for the
benefit of the Borrower pursuant to this Agreement and any payment made
by the Agent or any Lender under a Letter of Credit.
"LOAN BALANCE" shall mean, at any time, the outstanding
principal balance of the Notes at such time.
"LOAN DOCUMENTS" shall mean the Assignment, this Agreement,
the Notes, any Letter of Credit Applications, any Letters of Credit,
the Security Instruments, and all other documents and instruments now
or hereafter delivered pursuant to the terms of or in connection with
the Assignment, this Agreement, the Notes, any Letter of Credit
Applications, any Letters of Credit, or the Security Instruments, and
all renewals and extensions of, amendments and supplements to, and
restatements of, any or all of the foregoing from time to time in
effect.
"MATERIAL ADVERSE EFFECT" shall mean (a) any material adverse
effect on the business, operations, properties, condition (financial or
otherwise), or prospects of the Borrower taken as a whole, or (b) any
adverse effect upon the Collateral taken as a whole.
"MAXIMUM COMMITMENT AMOUNT" shall mean the sum of the
Commitment Amounts of all Lenders.
"MORTGAGED PROPERTIES" shall mean all Oil and Gas Properties
of the Borrower subject to a perfected first-priority Lien in favor of
the Agent for the benefit of the Lenders, subject only to Permitted
Liens, as security for the Obligations owing to the Agent or any
Lender.
"NET INCOME" shall mean, for any relevant accounting period,
the net income of the Borrower and its consolidated Subsidiaries on a
consolidated basis for such period, determined in accordance with GAAP.
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"NOTES" shall mean, collectively, each of the promissory notes
of the Borrower, in the form attached hereto as Exhibit I, together
with all renewals, extensions for any period, increases, and
rearrangements thereof.
"OBLIGATIONS" shall mean, without duplication, (a) all
Indebtedness evidenced by the Notes, (b) the undrawn, unexpired amount
of all outstanding Letters of Credit, (c) the obligation of the
Borrower for the payment of Commitment Fees, Facility Fees and Letter
of Credit Fees, and (e) all other obligations and liabilities of the
Borrower to the Agent and/or the Lenders, now existing or hereafter
incurred, under, arising out of or in connection with any Loan
Document, and to the extent that any of the foregoing includes or
refers to the payment of amounts deemed or constituting interest, only
so much thereof as shall have accrued, been earned and which remains
unpaid at each relevant time of determination.
"OIL AND GAS PROPERTIES" shall mean fee, leasehold, or other
interests in or under mineral estates or oil, gas, and other liquid or
gaseous hydrocarbon leases with respect to Properties situated in the
United States or offshore from any State of the United States,
including, without limitation, overriding royalty and royalty
interests, leasehold estate interests, net profits interests,
production payment interests, and mineral fee interests, together with
contracts executed in connection therewith and all tenements,
hereditaments, appurtenances and Properties appertaining, belonging,
affixed, or incidental thereto.
"PERCENTAGE SHARE" shall mean, as to each Lender, the
percentage such Lender's Commitment Amount constitutes of the Maximum
Commitment Amount.
"PERMITTED INDEBTEDNESS" shall mean (a) the Obligations, (b)
Indebtedness arising from endorsing negotiable instruments for deposit
or collection in the ordinary course of business, (c) current
liabilities incurred in the ordinary course of business, (d) other
Indebtedness which does not exceed an aggregate principal amount of
$250,000 during any fiscal year, and (e) Indebtedness existing by
virtue of the requirements of GAAP or any changes in the requirements
of GAAP.
"PERMITTED LIENS" shall mean (a) Liens for taxes, assessments,
or other governmental charges or levies not yet due or which (if
foreclosure, distraint, sale, or other similar proceedings shall not
have been initiated) are being contested in good faith by appropriate
proceedings, and such reserve as may be required by GAAP shall have
been made therefor, (b) Liens in connection with workers' compensation,
unemployment insurance or other social security (other than Liens
created by Section 4068 of ERISA), old-age pension, or public liability
obligations which are not yet due or which are being contested in good
faith by appropriate proceedings, if such reserve as may be required by
GAAP shall have been made therefor, (c) Liens in favor of vendors,
carriers, warehousemen, repairmen, mechanics, workmen,
12
materialmen, construction, or similar Liens arising by operation of
law in the ordinary course of business in respect of obligations
which are not yet due or which are being contested in good faith by
appropriate proceedings, if such reserve as may be required by GAAP
shall have been made therefor, (d) Liens in favor of operators and
non-operators under joint operating agreements or similar
contractual arrangements arising in the ordinary course of the
business of the Borrower to secure amounts owing, which amounts are
not yet due or are being contested in good faith by appropriate
proceedings, if such reserve as may be required by GAAP shall have
been made therefor, (e) Liens under production sales agreements,
division orders, operating agreements, and other agreements
customary in the oil and gas business for processing, producing,
and selling hydrocarbons securing obligations not constituting
Indebtedness and provided that such Liens do not secure obligations
to deliver hydrocarbons at some future date without receiving full
payment therefor within 90 days of delivery, (f) easements, rights
of way, restrictions, and other similar encumbrances, and minor
defects in the chain of title which are customarily accepted in the
oil and gas financing industry, none of which interfere with the
ordinary conduct of the business of the Borrower or materially
detract from the value or use of the Property to which they apply,
and (g) Liens in favor of the Agent for the benefit of the Lenders
and other Liens expressly permitted under the Security Instruments.
"PERSON" shall mean an individual, corporation, limited
liability company, partnership, trust, unincorporated organization,
government, any agency or political subdivision of any government, or
any other form of entity.
"PLAN" shall mean, at any time, any employee benefit plan
which is covered by ERISA and in respect of which the Borrower or any
Commonly Controlled Entity is (or, if such plan were terminated at such
time, would under Section 4069 of ERISA be deemed to be) an "employer"
as defined in Section 3(5) of ERISA.
"PRINCIPAL OFFICE" shall mean the principal office of the
Agent in Houston, Texas, presently located at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
"PROPERTY" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, tangible or intangible.
"REGULATION D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System, as the same may be amended or
supplemented from time to time.
"REGULATORY CHANGE" shall mean the passage, adoption,
institution, or amendment of any federal, state, local, or foreign
Requirement of Law (including, without limitation, Regulation D), or
any interpretation, directive, or request of any
13
Governmental Authority or monetary authority charged with the
enforcement, interpretation, or administration thereof, occurring
after the Closing Date and applying to a class of banks including
any Lender or its Applicable Lending Office.
"RELEASE OF HAZARDOUS SUBSTANCES" shall mean any emission,
spill, release, disposal, or discharge, except in accordance with the
Requirement of Law, a valid permit, license, certificate, or approval
of the relevant Governmental Authority, of any Hazardous Substance into
or upon (a) the air, (b) soils or any improvements located thereon, (c)
surface water or groundwater, or (d) the sewer or septic system, or the
waste treatment, storage, or disposal system servicing any Property of
the Borrower.
"REQUIRED LENDERS" shall mean, Lenders (including the Agent)
holding at least 75% of the then Loan Balance, or, if there is no Loan
Balance, Lenders (including the Agent) having at least 75% of the
aggregate amount of the Commitments.
"REQUIREMENT OF LAW" shall mean, as to any Person, the
certificate or articles of incorporation and by-laws or other
organizational or governing documents of such Person, and any
applicable law, treaty, ordinance, order, judgment, rule, decree,
regulation, or determination of an arbitrator, court, or other
Governmental Authority, including, without limitation, rules,
regulations, orders, and requirements for permits, licenses,
registrations, approvals, or authorizations, in each case as such now
exist or may be hereafter amended and are applicable to or binding upon
such Person or any of its Property or to which such Person or any of
its Property is subject.
"RESERVE REPORT" shall mean each report delivered to the Agent
and each Lender pursuant to Section 5.4.
"RESPONSIBLE OFFICER" shall mean, as to any Person, its President,
Chief Executive Officer, Chief Financial Officer or any Vice President.
"SCHEDULED REDUCTION AMOUNT" shall mean the amount by which
the Borrowing Base shall be reduced each calendar month as determined
by the Lenders under Section 2.9(b) from time to time.
"SECURITY INSTRUMENTS" shall mean the security instruments
executed and delivered in satisfaction of the condition set forth in
Section 3.1(f), and all other documents and instruments at any time
executed as security for all or any portion of the Obligations of the
Borrower or any Subsidiary or other Affiliate of the Borrower owing to
the Agent or any Lender or any branch, Subsidiary or other Affiliate of
the Agent or any Lender, as such instruments may be amended, restated,
or supplemented from time to time.
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"SUBSIDIARY" shall mean, as to any Person, a corporation of
which shares of stock having ordinary voting power (other than stock
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person.
"SUPERFUND SITE" shall mean those sites listed on the
Environmental Protection Agency National Priority List and eligible for
remedial action or any comparable state registries or list in any state
of the United States.
"UCC" shall mean the Uniform Commercial Code as from time to
time in effect in the State of Texas.
1.3 UNDEFINED FINANCIAL ACCOUNTING TERMS. Undefined
financial accounting terms used in this Agreement shall be defined
according to GAAP at the time in effect.
1.4 REFERENCES. References in this Agreement to Schedule,
Exhibit, Article, or Section numbers shall be to Schedules,
Exhibits, Articles, or Sections of this Agreement, unless
expressly stated to the contrary. References in this Agreement to
"hereby," "herein," "hereinafter," "hereinabove," "hereinbelow,"
"hereof," "hereunder" and words of similar import shall be to this
Agreement in its entirety and not only to the particular Schedule,
Exhibit, Article, or Section in which such reference appears.
1.5 ARTICLES AND SECTIONS. This Agreement, for
convenience only, has been divided into Articles and Sections; and
it is understood that the rights and other legal relations of the
parties hereto shall be determined from this instrument as an
entirety and without regard to the aforesaid division into Articles
and Sections and without regard to headings prefixed to such
Articles or Sections.
1.6 NUMBER AND GENDER. Whenever the context requires,
reference herein made to the single number shall be understood to
include the plural; and likewise, the plural shall be understood to
include the singular. Definitions of terms defined in the singular
or plural shall be equally applicable to the plural or singular, as
the case may be, unless otherwise indicated. Words denoting sex
shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration
shall not exclude the general but shall be construed as cumulative.
1.7 INCORPORATION OF SCHEDULES AND EXHIBITS. The Exhibits
attached to this Agreement are incorporated herein and shall be
considered a part of this Agreement for all purposes.
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ARTICLE II
TERMS OF FACILITY
2.1 REVOLVING LINE OF CREDIT. Upon the terms and conditions
(including, without limitation, the right of the Lenders to decline to make
any Loan so long as any Default or Event of Default exists) and relying on
the representations and warranties contained in this Agreement, the Lenders
severally agree, during the Commitment Period, to make Loans, in immediately
available funds at the Applicable Lending Office or the Principal Office, to
or for the benefit of the Borrower, from time to time on any Business Day
designated by the Borrower following receipt by the Agent of a Borrowing
Request; provided, however, no Loan at the time it is made shall exceed the
then existing Available Commitment.
(b) Subject to the terms of this Agreement, during the Commitment
Period, the Borrower may borrow, repay, and reborrow and convert Loans of one
type or with one Interest Period into Loans of another type or with a
different Interest Period. Except for prepayments made pursuant to Section
2.10, each borrowing, conversion, and prepayment of principal of Loans shall
be in an aggregate amount at least equal to $100,000. Each borrowing,
prepayment, or conversion of or into a Loan of a different type or, in the
case of a Fixed Rate Loan, having a different Interest Period, shall be
deemed a separate borrowing, conversion, or prepayment for purposes of the
foregoing, one for each type of Loan or Interest Period. Anything in this
Agreement to the contrary notwithstanding, the aggregate principal amount of
LIBO Rate Loans having the same Interest Period shall be at least equal to
$1,000,000; and if any LIBO Rate Loan would otherwise be in a lesser
aggregate principal amount for any period, such Loan shall be a Floating Rate
Loan during such period.
(c) The Loans shall be made and maintained at the Applicable
Lending Office or the Principal Office and shall be evidenced by the Notes.
(d) Not later than 3:00 p.m., Central Standard or Daylight Savings
Time, as the case may be, on the date specified for each borrowing, each
Lender shall make available an amount equal to its Percentage Share of the
borrowing to be made on such date to the Agent, at an account designated by
the Agent, in immediately available funds, for the account of the Borrower.
The amount so received by the Agent shall, subject to the terms and
conditions hereof, be made available to the Borrower in immediately available
funds at the Principal Office. All Loans by each Lender shall be maintained
at the Applicable Lending Office of such Lender and shall be evidenced by the
Note of such Lender.
(e) The failure of any Lender to make any Loan required to be made
by it hereunder shall not relieve any other Lender of its obligation to make
any Loan required to be made by it, and no Lender shall be responsible for
the failure of any other Lender to make any Loan.
16
(f) The face amounts of the Notes have been established as an
administrative convenience and do not commit any Lender to advance funds
hereunder in excess of the then current Borrowing Base.
2.2 LETTER OF CREDIT FACILITY. Upon the terms and conditions and
relying on the representations and warranties contained in this Agreement,
the Agent, as issuing bank for the Lenders, agrees from the date of this
Agreement until the date which is thirty days prior to the Commitment
Termination Date, to issue on behalf of the Lenders in their respective
Percentage Shares Letters of Credit for the account of the Borrower and to
renew and extend such Letters of Credit. Letters of Credit shall be issued,
renewed, or extended from time to time on any Business Day designated by the
Borrower following the receipt in accordance with the terms hereof by the
Agent of the written (or oral, confirmed promptly in writing) request by a
Responsible Officer of the Borrower therefor and a Letter of Credit
Application. Letters of Credit shall be issued in such amounts as the
Borrower may request; provided, however, that (i) no Letter of Credit shall
have an expiration date which is more than 365 days after the issuance
thereof or subsequent to the Final Maturity, (ii) each automatically
renewable Letter of Credit shall provide that it may be terminated by the
Agent at its then current expiry date by not less than 30 days' written
notice by the Agent to the beneficiary of such Letter of Credit, and (iii)
the Agent shall not be obligated to issue any Letter of Credit if (A) the
face amount thereof would exceed the Available Commitment, or (B) after
giving effect to the issuance thereof, (I) the L/C Exposure, when added to
the Loan Balance then outstanding, would exceed the lesser of the Maximum
Commitment Amount or the Borrowing Base, or (II) the L/C Exposure would
exceed $2,000,000.
(b) Prior to any Letter of Credit Payment in respect of any Letter
of Credit, each Lender shall be deemed to be a participant through the Agent
with respect to the relevant Letter of Credit in the obligation of the Agent,
as the issuer of such Letter of Credit, in an amount equal to the Percentage
Share of such Lender of the maximum amount which is or at any time may become
available to be drawn thereunder. Upon delivery by such Lender of funds
requested pursuant to Section 2.2(c), such Lender shall be treated as having
purchased a participating interest in an amount equal to such funds delivered
by such Lender to the Agent in the obligation of the Borrower to reimburse
the Agent, as the issuer of such Letter of Credit, for any amounts payable,
paid, or incurred by the Agent, as the issuer of such Letter of Credit, with
respect to such Letter of Credit.
(c) Each Lender shall be unconditionally and irrevocably liable,
without regard to the occurrence of any Default or Event of Default, to the
extent of the Percentage Share of such Lender at the time of issuance of each
Letter of Credit, to reimburse, on demand, the Agent, as the issuer of such
Letter of Credit, for the amount of each Letter of Credit Payment under such
Letter of Credit. Each Letter of Credit Payment shall be deemed to be a
Floating Rate Loan by each Lender to the extent of funds delivered by such
Lender to the Agent with respect to such Letter of Credit Payment and shall
to such extent be deemed a Floating Rate Loan under and shall be evidenced by
the Note of such Lender and shall be payable by the Borrower upon demand by
the Agent.
17
(d) EACH LENDER AGREES TO SEVERALLY INDEMNIFY THE AGENT, AS THE
ISSUER OF EACH LETTER OF CREDIT, AND THE OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES OF THE AGENT (TO THE EXTENT NOT
REIMBURSED BY THE BORROWER AND WITHOUT LIMITING THE OBLIGATION OF THE
BORROWER TO DO SO), RATABLY ACCORDING TO THE PERCENTAGE SHARE OF SUCH LENDER
AT THE TIME OF ISSUANCE OF SUCH LETTER OF CREDIT, FROM AND AGAINST ANY AND
ALL LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND WHATSOEVER
WHICH MAY AT ANY TIME (INCLUDING, WITHOUT LIMITATION, ANY TIME FOLLOWING THE
PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS
AGREEMENT) BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT AS THE
ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES IN ANY WAY RELATING TO OR ARISING OUT
OF THIS AGREEMENT OR SUCH LETTER OF CREDIT OR ANY ACTION TAKEN OR OMITTED BY
THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR IN
CONNECTION WITH ANY OF THE FOREGOING, INCLUDING, WITHOUT LIMITATION, ANY
LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS IMPOSED, INCURRED OR
ASSERTED AS A RESULT OF THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE
AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES; PROVIDED THAT
NO LENDER (OTHER THAN THE AGENT AS THE ISSUER OF A LETTER OF CREDIT) SHALL BE
LIABLE FOR THE PAYMENT OF ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR
DISBURSEMENTS RESULTING FROM THE GROSS NEGLIGENCE WHETHER SOLE OR CONCURRENT
OR WILLFUL MISCONDUCT OF THE AGENT AS THE ISSUER OF A LETTER OF CREDIT. THE
AGREEMENTS IN THIS Section 2.2(D) SHALL SURVIVE THE PAYMENT AND PERFORMANCE
OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
2.3 USE OF LOAN PROCEEDS AND LETTERS OF CREDIT. (a) Proceeds of all
Loans shall be used to refinance the existing debt with Bank of Oklahoma, for
general corporate purposes of the Borrower, including, without limitation,
costs of acquiring, exploring on and developing Oil and Gas Properties and
general working capital needs; and
(b) Letters of Credit shall be used solely for general
corporate purposes of the Borrower; provided, however, no Letter of Credit
may be used in lieu or in support of stay or appeal bonds.
18
2.4 INTEREST. Subject to the terms of this Agreement (including,
without limitation, Section 2.19), interest on the Loans shall accrue and be
payable at a rate per annum equal to the Floating Rate for each Floating Rate
Loan and the Adjusted LIBO Rate for each LIBO Rate Loan. Interest on all
Floating Rate Loans shall be computed on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed (including the first day
but excluding the last day) during the period for which payable. Interest on
all LIBO Rate Loans shall be computed on the basis of a year of 360 days, and
actual days elapsed (including the first day but excluding the last day)
during the period for which payable. Notwithstanding the foregoing, interest
on past-due principal and, to the extent permitted by applicable law,
past-due interest, shall accrue at the Default Rate, computed on the basis of
a year of 365 or 366 days, as the case may be, and actual days elapsed
(including the first day but excluding the last day) during the period for
which payable, and shall be payable upon demand by the Lenders at any time as
to all or any portion of such interest. In the event that the Borrower fails
to select the duration of any Interest Period for any Fixed Rate Loan within
the time period and otherwise as provided herein, such Loan (if outstanding
as a Fixed Rate Loan) will be automatically converted into a Floating Rate
Loan on the last day of the then current Interest Period for such Loan or (if
outstanding as a Floating Rate Loan) will remain as, or (if not then
outstanding) will be made as, a Floating Rate Loan. Interest provided for
herein shall be calculated on unpaid sums actually advanced and outstanding
pursuant to the terms of this Agreement and only for the period from the date
or dates of such advances until repayment.
2.5 REPAYMENT OF LOANS AND INTEREST. Accrued and unpaid interest on
each outstanding Floating Rate Loan shall be due and payable monthly
commencing on the first day of May, 1998, and continuing on the first day of
each calendar month thereafter while any Floating Rate Loan remains
outstanding, the payment in each instance to be the amount of interest which
has accrued and remains unpaid in respect of the relevant Loan. Accrued and
unpaid interest on each outstanding Fixed Rate Loan shall be due and payable
on the last day of the Interest Period for such Fixed Rate Loan and, in the
case of any Interest Period in excess of three months, on the day of the
third calendar month following the commencement of such Interest Period
corresponding to the day of the calendar month on which such Interest Period
commenced, the payment in each instance to be the amount of interest which
has accrued and remains unpaid in respect of the relevant Loan. The Loan
Balance, together with all accrued and unpaid interest thereon, shall be due
and payable at Final Maturity. At the time of making each payment hereunder
or under the Notes, the Borrower shall specify to the Agent the Loans or
other amounts payable by the Borrower hereunder to which such payment is to
be applied. In the event the Borrower fails to so specify, or if an Event of
Default has occurred and is continuing, the Agent may apply such payment as
it may elect in its sole discretion.
2.6 OUTSTANDING AMOUNTS. The Loan Balance reflected by the
notations by the Lenders on their records shall be deemed rebuttably
presumptive evidence of the Loan Balance. The liability for payment of
principal and interest evidenced by the Notes shall be limited to principal
amounts actually advanced and outstanding pursuant to this Agreement and
interest on such amounts calculated in accordance with this Agreement.
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2.7 TIME, PLACE, AND METHOD OF PAYMENTS. All payments required
pursuant to this Agreement or the Notes shall be made in lawful money of the
United States of America and in immediately available funds, shall be deemed
received by the Lenders on the next Business Day following receipt if such
receipt is after 2:00 p.m., Central Standard or Daylight Savings Time, as the
case may be, on any Business Day, and shall be made to the Agent at the
Principal Office. Except as provided to the contrary herein, if the due date
of any payment hereunder or under the Notes would otherwise fall on a day
which is not a Business Day, such date shall be extended to the next
succeeding Business Day, and interest shall be payable for any principal so
extended for the period of such extension.
2.8 PRO RATA TREATMENT; ADJUSTMENTS. Except to the extent otherwise
expressly provided herein, (i) each borrowing made pursuant to this Agreement
shall be from the Lenders pro rata in accordance with their Percentage
Shares, (ii) each payment by the Borrower of Commitment Fees shall be made
for the account of the Lenders pro rata in accordance with their respective
Percentage Shares, (iii) Facility Fees and Letter of Credit Fees shall be
made for the account of the Lenders in accordance with each Lender's
Percentage Share of any increase in the Commitment Amount or any Letter of
Credit issued, (iv) each payment of principal of Loans shall be made for the
account of the Lenders pro rata in accordance with their respective
Percentage Shares of the Loan Balance, and (v) each payment of interest on
Loans shall be made for the account of the Lenders pro rata in accordance
with their Percentage Shares of the aggregate amount of interest due and
payable to the Lenders.
(b) The Agent shall distribute all payments with respect to the
Obligations to the Lenders promptly upon receipt in like funds as received.
In the event that any payments made hereunder by the Borrower at any
particular time are insufficient to satisfy in full the Obligations due and
payable at such time, such payments shall be applied (a) first, to fees and
expenses due pursuant to the terms of this Agreement or any other Loan
Document, (b) second, to accrued interest, (c) third, to the Loan Balance,
and (d) last, to any other Obligations.
(c) If any Lender (for purposes of this Section, a "benefitted
Lender") shall at any time receive any payment of all or part of its portion
of the Obligations, or receive any Collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings
of the nature referred to in Sections 7.1(f) or 7.1(g), or otherwise) in an
amount greater than such Lender was entitled to receive pursuant to the terms
hereof, such benefitted Lender shall purchase for cash from the other Lenders
such portion of the Obligations of such other Lenders or shall provide such
other Lenders with the benefits of any such Collateral or the proceeds
thereof as shall be necessary to cause such benefitted Lender to share the
excess payment or benefits of such Collateral or proceeds with each of the
Lenders according to the terms hereof. If all or any portion of such excess
payment or benefits is thereafter recovered from such benefitted Lender, such
purchase shall be rescinded and the purchase price and benefits returned by
such Lender, to the extent of such recovery, but without interest. The
Borrower agrees that each such Lender so purchasing a portion of the
Obligations of another Lender may exercise all rights of payment (including,
without limitation, rights of set-off) with respect to such portion as fully
as if such Lender
20
were the direct holder of such portion. If any Lender ever receives, by
voluntary payment, exercise of rights of set-off or banker's lien,
counterclaim, cross-action or otherwise, any funds of the Borrower to be
applied to the Obligations, or receives any proceeds by realization on or
with respect to any Collateral, all such funds and proceeds shall be
immediately forwarded to the Agent for distribution in accordance with the
terms of this Agreement.
2.9 BORROWING BASE DETERMINATIONS. (a) The Borrowing Base as of the
Closing Date is acknowledged by the Borrower and the Lenders to be
$29,000,000 and shall reduce to a level of $27,500,000 within ten days of the
Closing Date. Commencing on May 1, 1998, and continuing thereafter on the
first day of each calendar month until the earlier of the date such amount is
redetermined or the Commitment Termination Date, the Scheduled Reduction
Amount shall be $275,000.
(b) The Borrowing Base and the Scheduled Reduction Amount shall be
redetermined semi-annually by unanimous consent of the Lenders beginning
October 1, 1998, on the basis of information supplied by the Borrower in
compliance with the provisions of this Agreement, including, without
limitation, Reserve Reports, and all other information available to the
Lenders. In addition, the Lenders shall, in the normal course of business
following a request of the Borrower, redetermine the Borrowing Base;
provided, however, the Lenders shall not be obligated to respond to more than
four such requests during any calendar year, and in no event shall the
Lenders be required to redetermine the Borrowing Base more than twice in any
three-month period, including, without limitation, each scheduled semi-annual
redetermination provided for above. Notwithstanding the foregoing, the
Lenders may at their discretion and by unanimous consent redetermine the
Borrowing Base and the Scheduled Reduction Amount at any time and from time
to time.
(c) Upon each determination of the Borrowing Base and the Scheduled
Reduction Amount by the Lenders, the Agent shall notify the Borrower orally
(confirming such notice promptly in writing) of such determination, and the
Borrowing Base and the Scheduled Reduction Amount shall become effective upon
such written notification and shall remain in effect until the next
subsequent determination of the Borrowing Base. Upon request, Agent will
furnish detailed information as to the determination of the Borrowing Base.
(d) The Borrowing Base shall represent the determination by the
Lenders, in accordance with the applicable definitions and provisions herein
contained and their customary lending practices for loans of this nature, of
the value, for loan purposes, of the Mortgaged Properties, plus certain other
Oil and Gas Properties to be determined in sole discretion of the Lenders
subject, in the case of any increase in the Borrowing Base, to the credit
approval process of the Lenders. Furthermore, the Borrower acknowledges that
the determination of the Borrowing Base contains an equity cushion (market
value in excess of loan value), which is acknowledged by the Borrower to be
essential for the adequate protection of the Lenders. The Borrowing Base
shall be determined in the sole discretion of the Lenders by using the
Lenders' then current engineering and credit standards.
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2.10 MANDATORY PREPAYMENTS. If at any time the sum of the Loan
Balance and the L/C Exposure exceeds the Borrowing Base then in effect, the
Borrower shall, within 60 days of notice from the Agent of such occurrence,
(a) prepay, or make arrangements acceptable to the Lenders for the prepayment
of, the amount of such excess for application on the Loan Balance, (b)
provide additional Collateral, of character and value satisfactory to the
Lenders in their sole discretion, to secure the amount of such excess by the
execution and delivery to the Agent for the benefit of the Lenders of
Security Instruments in form and substance satisfactory to the Agent, or (c)
effect any combination of the alternatives described in clauses (a) and (b)
of this Section and acceptable to the Lenders in their sole discretion. In
the event that a mandatory prepayment is required under this Section and the
Loan Balance is less than the amount required to be prepaid, the Borrower
shall repay the entire Loan Balance and, in accordance with the provisions of
the relevant Letter of Credit Applications executed by the Borrower or
otherwise to the satisfaction of the Lenders, deposit with the Agent for the
benefit of the Lenders, as additional collateral securing the Obligations, an
amount of cash, in immediately available funds, equal to the L/C Exposure
minus the lesser of the aggregate Commitment Amounts or the Borrowing Base.
The cash deposited with the Agent for the benefit of the Lenders in
satisfaction of the requirement provided in this Section may be invested, at
the sole discretion of the Lenders and then only at the express direction of
the Borrower as to investment vehicle and maturity (which shall be no later
than the latest expiry date of any then outstanding Letter of Credit), for
the account of the Borrower in cash or cash equivalent investments offered by
or through the Agent.
2.11 VOLUNTARY PREPAYMENTS AND CONVERSIONS OF LOANS. Subject to
applicable provisions of this Agreement, the Borrower shall have the right at
any time or from time to time to prepay Loans without penalty and to convert
Loans of one type or with one Interest Period into Loans of another type or
with a different Interest Period; provided, however, that (a) the Borrower
shall give the Agent notice of each such prepayment or conversion of all or
any portion of a Fixed Rate Loan no less than two Business Days prior to
prepayment or conversion, (b) any Fixed Rate Loan may be prepaid or converted
only on the last day of an Interest Period for such Loan, (c) the Borrower
shall pay all accrued and unpaid interest on the amounts prepaid or
converted, and (d) no such prepayment or conversion shall serve to postpone
the repayment when due of any Obligation.
2.12 COMMITMENT FEE. In addition to interest on the Notes as
provided herein and other fees payable hereunder and to compensate the
Lenders for maintaining funds available, the Borrower shall pay to the Agent,
for the account of the Lenders, in immediately available funds, on the first
day of April, 1998, and on the first day of each third calendar month
thereafter during the Commitment Period and on the Commitment Termination
Date, a fee in the amount per annum as set forth below, calculated on the
basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed (including the first day but excluding the last day), on the average
daily amount of the Available Commitment during the preceding quarterly
period as follows:
22
Borrowing Base
Utilization Commitment Fee
-------------------------------------------------------
greater than 50% one-half percent (1/2%)
of Borrowing Base
less than or equal to 50% three-eighths percent (3/8%)
of Borrowing Base
The Borrowing Base Utilization and the corresponding Commitment Fee
shall be set at the close of each calendar quarter for the next such quarter.
2.13 FACILITY FEE. In addition to interest on the Notes as provided
herein and other fees payable hereunder and to compensate the Lenders for the
costs of the extension of credit hereunder, the Borrower shall pay to the
Agent for the account of the Lenders, in immediately available funds, an
initial facility fee in the amount of $108,750. Such fee shall be paid on the
Closing Date to the Agent for the benefit of the Lenders as of the Closing
Date. In addition, the Borrower shall pay to the Agent for the account of the
Lenders three-eighths percent (3/8%) on any future increase in the Borrowing
Base within five days of written notice.
2.14 ENGINEERING FEE. In addition to the interest on the Notes as
provided herein and other fees payable hereunder and to compensate the Agent
for costs of evaluating the Mortgaged Properties and reviewing the Reserve
Reports, the Borrower shall pay to the Agent, in immediately available funds,
an engineering fee of $5,000 per each semi-annual Borrowing Base review and
to the Agent for the benefit of the Lenders other than the Agent, an
engineering fee of $2,500 per each semi-annual Borrowing Base review. The
Borrower shall pay to the Agent an engineering fee of $2,500 per each interim
Borrowing Base review and to the Agent for the benefit of the Lenders other
than the Agent, an engineering fee of $1,250 per each interim Borrowing Base
review.
2.15 LETTER OF CREDIT FEE. In addition to interest on the Notes as
provided herein and Commitment Fees and Facility Fees payable hereunder, the
Borrower agrees to pay to the Agent, for the account of the Lenders, on the
date of issuance or renewal of each Letter of Credit, a fee equal to the
greater of (a) $500 or (b) one and one-half percent (1 1/2%) per annum
calculated on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed (including the first day but excluding the last day), on
the face amount of such Letter of Credit and for the period for which such
Letter of Credit is issued or renewed; provided, however, in the event such
Letter of Credit is canceled prior to its original expiry date or a payment
is made by the Agent for the account of the Lenders with respect to such
Letter of Credit, the Agent and the Lenders shall, within 30 days after such
cancellation or the making of such payment, rebate to the Borrower the
unearned portion of any such fee. The Borrower also agrees to pay on demand
to the Agent, for its own account as the issuer of the Letters of Credit, its
reasonable customary letter of credit transactional fees, including, without
limitation, amendment fees, payable with respect to each Letter of Credit.
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2.16 AGENCY FEE. The Borrower shall pay to the Agent, for its own
account, all fees owing or which may become owing under the Agency Fee Letter
as provided therein.
2.17 LOANS TO SATISFY OBLIGATIONS OF BORROWER. The Lenders may, by
unanimous consent, but shall not be obligated to, make Loans for the benefit
of the Borrower and apply proceeds thereof to the satisfaction of any
condition, warranty, representation, or covenant of the Borrower contained in
this Agreement or any other Loan Document. Any such Loan shall be evidenced
by the Notes and shall be made as a Floating Rate Loan.
2.18 SECURITY INTEREST IN ACCOUNTS; RIGHT OF OFFSET. As security
for the payment and performance of the Obligations, the Borrower hereby
transfers, assigns, and pledges to the Agent, for the benefit of the Lenders,
and grants to the Agent, for the benefit of the Lenders, a security interest
in all funds of the Borrower now or hereafter or from time to time on deposit
with the Agent or any Lender, with such interest of the Lenders to be
retransferred, reassigned, and/or released by the Agent and each Lender, as
the case may be, at the expense of the Borrower upon payment in full and
complete performance by the Borrower of all Obligations. All remedies as
secured party or assignee of such funds shall be exercisable by the Agent and
each Lender upon the occurrence of any Event of Default, regardless of
whether the exercise of any such remedy would result in any penalty or loss
of interest or profit with respect to any withdrawal of funds deposited in a
time deposit account prior to the maturity thereof. Furthermore, the Borrower
hereby grants to the Agent and each Lender the right, exercisable at such
time as any Obligation shall mature, whether by acceleration of maturity or
otherwise, of offset or banker's lien against all funds of the Borrower now
or hereafter or from time to time on deposit with the Agent and each Lender,
regardless of whether the exercise of any such remedy would result in any
penalty or loss of interest or profit with respect to any withdrawal of funds
deposited in a time deposit account prior to the maturity thereof.
2.19 GENERAL PROVISIONS RELATING TO INTEREST. It is the intention
of the parties hereto to comply strictly with the usury laws of the State of
Texas to the extent applicable to each Lender and the United States of
America. In this connection, there shall never be collected, charged, or
received on the sums advanced hereunder interest in excess of that which
would accrue at the Highest Lawful Rate. For purposes of Tex. Fin. Code ▇▇▇.
Section 303.301 (▇▇▇▇▇▇ 1998), the Borrower agrees that the Highest Lawful
Rate shall be the "indicated (weekly) rate ceiling" as defined in such
Article, provided that the Agent and the Lenders may also rely, to the extent
permitted by applicable laws of the State of Texas or the United States of
America, on alternative maximum rates of interest under other laws of the
State of Texas or other states or the United States of America applicable to
the Agent and/or such Lender, if greater.
(b) Notwithstanding anything herein or in the Notes to the
contrary, during any Limitation Period, the interest rate to be charged on
amounts evidenced by the Notes shall be the Highest Lawful Rate, and the
obligation, if any, of the Borrower for the payment of fees or other charges
deemed to be interest under applicable law shall be suspended. During any
period or periods of time following a Limitation Period, to the extent
permitted by applicable laws of the State of
24
Texas or other states or the United States of America, the interest rate to
be charged hereunder shall remain at the Highest Lawful Rate until such time
as there has been paid to the Agent for the account of each Lender (i) the
amount of interest in excess of that accruing at the Highest Lawful Rate that
the Agent and the Lenders would have received during the Limitation Period
had the interest rate remained at the otherwise applicable rate, and (ii) all
interest and fees otherwise payable to the Agent and the Lenders but for the
effect of such Limitation Period.
(c) If, under any circumstances, the aggregate amounts paid on the
Notes or under this Agreement or any other Loan Document include amounts
which by law are deemed interest and which would exceed the amount permitted
if the Highest Lawful Rate were in effect, the Borrower stipulates that such
payment and collection will have been and will be deemed to have been, to the
greatest extent permitted by applicable laws of the State of Texas any other
applicable states' laws or the United States of America, the result of
mathematical error on the part of the Borrower and the Agent and the Lenders;
and the Agent and the Lenders shall promptly refund the amount of such excess
(to the extent only of such interest payments in excess of that which would
have accrued and been payable on the basis of the Highest Lawful Rate) upon
discovery of such error by the Agent and the Lenders or notice thereof from
the Borrower. In the event that the maturity of any Obligation is
accelerated, by reason of an election by the Agent and the Lenders or
otherwise, or in the event of any required or permitted prepayment, then the
consideration constituting interest under applicable laws may never exceed
the Highest Lawful Rate; and excess amounts paid which by law are deemed
interest, if any, shall be credited by the Lenders on the principal amount of
the Obligations, or if the principal amount of the Obligations shall have
been paid in full, refunded to the Borrower.
(d) All sums paid, or agreed to be paid, to the Agent and the
Lenders for the use, forbearance and detention of the proceeds of any advance
hereunder shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full term hereof until paid in
full so that the actual rate of interest is uniform but does not exceed the
Highest Lawful Rate throughout the full term hereof.
2.20 YIELD PROTECTION. (a) Without limiting the effect of the other
provisions of this Section (but without duplication), the Borrower shall pay
to the Agent and each Lender from time to time upon written request such
amounts as the Agent and such Lender may determine are necessary to
compensate it for any Additional Costs incurred by the Agent and such Lender.
(b) Without limiting the effect of the other provisions of this
Section (but without duplication), the Borrower shall pay to each Lender from
time to time upon written request such amounts as each Lender may determine
are necessary to compensate each Lender for any reasonable costs attributable
to the maintenance by each Lender (or any Applicable Lending Office),
pursuant to any Regulatory Change, of capital in respect of the Commitment,
such compensation to include, without limitation, an amount equal to any
reduction of the rate of return on assets or equity of each Lender (or any
Applicable Lending Office) to a level below that which each Lender (or any
Applicable Lending Office) could have achieved but for such Regulatory Change.
25
(c) Without limiting the effect of the other provisions of this
Section (but without duplication), the Borrower shall pay to each Lender the
reasonable administrative and re-employment costs customarily charged by
Lenders as a result of:
(i) any payment, prepayment, or conversion by the Borrower of a
Fixed Rate Loan on a date other than the last day of an Interest
Period for such Loan; or
(ii) any failure by the Borrower to borrow a Fixed Rate Loan
from the Lenders on the date for such borrowing specified in the
relevant Borrowing Request;
such compensation to include, without limitation, with respect to any LIBO Rate
Loan, an amount equal to the excess, if any and only to the extent actually
incurred by such Lender, of (A) the amount of interest which would have accrued
on the principal amount so paid, prepaid, converted, or not borrowed for the
period from the date of such payment, prepayment, conversion, or failure to
borrow to the last day of the then current Interest Period for such Loan (or, in
the case of a failure to borrow, the Interest Period for such Loan which would
have commenced on the date of such failure to borrow) at the applicable rate of
interest for such Loan provided for herein over (B) the interest component (as
reasonably determined by the Lenders) of the amount (as reasonably determined by
the Agent and such Lender) the Agent and such Lender would have bid in the
London interbank market for Dollar deposits of amounts comparable to such
principal amount and maturities comparable to such period.
(d) Determinations by the Agent and any Lender for purposes of this
Section of the effect of any Regulatory Change on capital maintained, their
costs or rate of return, maintaining Loans, their obligation to make Loans or
on amounts receivable by it in respect of Loans or such obligations, and the
additional amounts required to compensate the Agent and the Lenders under
this Section shall be conclusive, absent manifest error, provided that such
determinations are made on a reasonable basis. The Agent or such Lender shall
furnish the Borrower with a certificate setting forth in reasonable detail
the basis and amount of increased costs incurred or reduced amounts
receivable as a result of any such event, and the statements set forth
therein shall be conclusive, absent manifest error. The Agent or such Lender
shall (i) notify the Borrower, as promptly as practicable after any Lender
obtains knowledge of any Additional Costs or other sums payable pursuant to
this Section and determine to request compensation therefor, of any event
occurring after the Closing Date which will entitle the Agent and such Lender
to compensation pursuant to this Section; provided that the Borrower shall
not be obligated for the payment of any Additional Costs or other sums
payable pursuant to this Section to the extent such Additional Costs or other
sums accrued more than 30 days prior to the date upon which the Borrower was
given such notice; and (ii) designate a different Applicable Lending Office
for the Loans of the Lenders affected by such event if such designation will
avoid the need for or reduce the amount of such compensation. If the Agent or
any Lender requests compensation from the Borrower under this Section, the
Borrower may, by notice to the Agent and any Lender, require that the Loans
by the Lenders of the type with
26
respect to which such compensation is requested be converted into Floating
Rate Loans in accordance with Section 2.11. Any compensation requested by the
Lenders pursuant to this Section shall be due and payable to the Lenders
within five days of delivery of any such notice by the Lenders to the
Borrower.
(e) Each Lender agrees that it shall not request, and the Borrower
shall not be obligated to pay, any Additional Costs or other sums payable
pursuant to this Section unless similar additional costs and other sums
payable are also generally assessed by the Lenders against other customers of
such Lenders similarly situated where such customers are subject to documents
providing for such assessment.
2.21 LIMITATION ON TYPES OF LOANS. Anything herein to the contrary
notwithstanding, no more than six separate Loans shall be outstanding at any
one time, with, for purposes of this Section, all Floating Rate Loans
constituting one Loan and all LIBO Rate Loans for the same Interest Period
constituting one Loan. Anything herein to the contrary notwithstanding, if,
on or prior to the determination of any interest rate for any LIBO Rate Loan
for any Interest Period therefor:
(a) the Agent determines (which determination shall be conclusive)
that quotations of interest rates for the deposits referred to in the
definition of "LIBO Rate" in Section are not being provided in the
relevant amounts or for the relevant maturities for purposes of
determining the rate of interest for such Loan as provided in this
Agreement; or
(b) the Agent determines (which determination shall be conclusive)
that the rates of interest referred to in the definition of "LIBO Rate"
in Section upon the basis of which the rate of interest for such Loan
for such Interest Period is to be determined does not accurately
reflect the cost to the Lenders of making or maintaining such Loan for
such Interest Period,
then the Agent shall give the Borrower prompt notice thereof; and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make LIBO Rate Loans or to convert Loans of any other type into LIBO Rate
Loans, and the Borrower shall, on the last day of the then current Interest
Period for each outstanding LIBO Rate Loan, either prepay such LIBO Rate Loan
or convert such Loan into another type of Loan in accordance with Section 2.11.
Before giving such notice pursuant to this Section, the Agent will designate
a different available Applicable Lending Office for LIBO Rate Loans or take
such other action as the Borrower may request if such designation or action
will avoid the need to suspend the obligation of the Lenders to make LIBO
Rate Loans hereunder and will not, in the opinion of any Lender, be
disadvantageous to the Lenders.
2.22 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to (a) honor its obligation to make any type of
Fixed Rate Loans hereunder, or (b) maintain any type of Fixed Rate
27
Loans hereunder, then such Lender shall promptly notify the Agent and the
Borrower thereof; and the obligation of such Lender hereunder to make such
type of Fixed Rate Loans and to convert other types of Loans into Fixed Rate
Loans of such type shall be suspended until such time as such Lender may
again make and maintain Fixed Rate Loans of such type, and the outstanding
Fixed Rate Loans of such type shall be converted into Floating Rate Loans in
accordance with Section 2.11. Before giving such notice pursuant to this
Section, such Lender will designate a different available Applicable Lending
Office for Fixed Rate Loans or take such other action as the Borrower may
request if such designation or action will avoid the need to suspend the
obligation of the Lenders to make Fixed Rate Loans and will not, in the
opinion of any Lender, be disadvantageous to the Lenders.
2.23 REGULATORY CHANGE. In the event that by reason of any
Regulatory Change, any Lender (a) incurs Additional Costs based on or
measured by the excess above a specified level of the amount of a category of
deposits or other liabilities of such Lender which includes deposits by
reference to which the interest rate on any Fixed Rate Loan is determined as
provided in this Agreement or a category of extensions of credit or other
assets of such Lender which includes any Fixed Rate Loan, or (b) becomes
subject to restrictions on the amount of such a category of liabilities or
assets which it may hold, then, at the election of such Lender with notice to
the Agent and the Borrower, the obligation of the Lenders to make such Fixed
Rate Loans and to convert Floating Rate Loans into such Fixed Rate Loans
shall be suspended until such time as such Regulatory Change ceases to be in
effect, and all such outstanding Fixed Rate Loans shall be converted into
Floating Rate Loans in accordance with Section 2.11.
2.24 LIMITATIONS ON INTEREST PERIODS. Each Interest Period selected
by the Borrower (a) which commences on the last Business Day of a calendar
month (or, with respect to any LIBO Rate Loan, any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar
month, (b) which would otherwise end on a day which is not a Business Day
shall end on the next succeeding Business Day (or, if such next succeeding
Business Day falls in the next succeeding calendar month, on the next
preceding Business Day), (c) which would otherwise commence before and end
after Final Maturity shall end on Final Maturity, and (d) shall have a
duration of not less than one month, as to any LIBO Rate Loan, and, if any
Interest Period would otherwise be a shorter period, the relevant Loan shall
be a Floating Rate Loan during such period.
2.25 LETTERS IN LIEU OF TRANSFER ORDERS. The Agent agrees that
none of the letters in lieu of transfer or division orders provided by the
Borrower pursuant to Section 3.1(f)(v) or Section will be sent to the
addressees thereof prior to the occurrence of an Event of Default, at which
time the Agent may, at its option and in addition to the exercise of any of
its other rights and remedies, send any or all of such letters.
2.26 POWER OF ATTORNEY. The Borrower hereby designates the Agent as
its agent and attorney-in-fact, to act in its name, place, and stead for the
purpose of completing and, upon the occurrence of an Event of Default,
delivering any and all of the letters in lieu of transfer orders
28
delivered by the Borrower to the Agent pursuant to Section 3.1(f)(v) or
Section 5.7, including, without limitation, completing any blanks contained in
such letters and attaching exhibits thereto describing the relevant
Collateral. The Borrower hereby ratifies and confirms all that the Agent
shall lawfully do or cause to be done by virtue of this power of attorney and
the rights granted with respect to such power of attorney. This power of
attorney is coupled with the interests of the Agent in the Collateral, shall
commence and be in full force and effect as of the Closing Date and shall
remain in full force and effect and shall be irrevocable so long as any
Obligation remains outstanding or unpaid or any Commitment exists. The powers
conferred on the Agent by this appointment are solely to protect the
interests of the Agent and the Lenders under the Loan Documents and shall not
impose any duty upon the Agent to exercise any such powers. The Agent shall
be accountable only for amounts that it actually receives as a result of the
exercise of such powers and shall not be responsible to the Borrower or any
other Person for any act or failure to act with respect to such powers,
except for gross negligence or willful misconduct.
ARTICLE III
CONDITIONS
The obligations of the Lenders to enter into this Agreement
and to make Loans or participate in the issuance of Letters of Credit are
subject to the satisfaction of the following conditions precedent:
3.1 RECEIPT OF LOAN DOCUMENTS AND OTHER ITEMS. The Lenders shall
have no obligation under this Agreement unless and until all matters incident
to the consummation of the transactions contemplated herein, including,
without limitation, the review by the Agent or its counsel of the title of
the Borrower shall be satisfactory to the Agent, and the Agent shall have
received, reviewed, and approved the following documents and other items,
appropriately executed when necessary and, where applicable, acknowledged by
one or more authorized officers of the Borrower all in form and substance
satisfactory to the Agent and dated, where applicable, of even date herewith
or a date prior thereto and acceptable to the Agent:
(a) multiple counterparts of this Agreement as requested by the
Lenders;
(b) the Note or Notes;
(c) copies of the Certificate of Incorporation and all amendments
thereto and the bylaws and all amendments thereto of the Borrower
accompanied by a certificate issued by the secretary or an assistant
secretary of the Borrower as the case may be, to the effect that each
such copy is correct and complete;
29
(d) a certificate of incumbency and signatures of all officers of the
Borrower who are authorized to execute Loan Documents on behalf of the
Borrower, each such certificate being executed by the secretary or an
assistant secretary of the Borrower;
(e) copies of corporate resolutions approving the Loan
Documents and authorizing the transactions contemplated herein
and therein, duly adopted by the boards of directors of the
Borrower accompanied by a certificate of the secretary or an
assistant secretary of the Borrower to the effect that such copies
are true and correct copies of resolutions duly adopted at a
meeting or by unanimous consent of the board of directors of the
Borrower and that such resolutions constitute all the resolutions
adopted with respect to such transactions, have not been
amended, modified, or revoked in any respect, and are in full force
and effect as of the date of such certificate;
(f) multiple counterparts, as requested by the Lenders,
of the following Security Instruments creating, evidencing,
perfecting, and otherwise establishing Liens in favor of the Agent
for the benefit of the Lenders in and to the Collateral as security
for the Obligations of the Borrower or any Subsidiary or other
Affiliate of the Borrower owing to the Agent or any Lender or any
branch, Subsidiary or other Affiliate of the Agent or any Lender:
(i) Assignment of Note and Liens from Bank of
Oklahoma, National Association covering Oil and Gas Properties of
Middle Bay;
(ii) Ratification of and Amendment to Mortgage, Deed
of Trust, Indenture, Security Agreement, Assignment of Production,
and Financing Statement from Middle Bay to or for the benefit of
the Agent covering the Oil and Gas Properties of Middle Bay and all
improvements, personal property, and fixtures related thereto;
(iii) Mortgage, Deed of Trust, Indenture, Security
Agreement, Assignment of Production, and Financing Statement from
the Borrower to or for the benefit of the Agent covering certain
Oil and Gas Properties of Middle Bay and Enex designated by the
Agent and all improvements, personal property, and fixtures related
thereto;
(iv) Financing Statements from Middle Bay and Enex,
as debtors, in favor of the Agent, as secured party, constituent to
the instruments described in clause (ii) or clause (iii) above;
30
(v) abundated letters, in form and substance
satisfactory to the Agent, from Middle Bay and Enex to each
purchaser of production and disburser of the proceeds of production
from or attributable to the Mortgaged Properties, together with
additional letters with the addressees left blank, authorizing and
directing the addressees to make future payments attributable to
production from the Mortgaged Properties directly to the Agent;
(vi) Security Agreement (Stock Pledge) by Middle Bay
in favor of the Agent and covering 1,064,432 shares, equal to
approximately 79% of the shares of the common stock of Enex;
(g) unaudited Financial Statements of the Borrower as of
September 30, 1997;
(h) certificates dated as of a recent date from the Secretary of
State or other appropriate Governmental Authority evidencing the existence
or qualification and good standing of the Borrower in its jurisdiction of
incorporation and in any other jurisdiction in which it conducts
business;
(i) results of searches of the UCC Records of the
Secretary of State of the States of Alabama, Arkansas, Kansas,
Louisiana, Michigan, Mississippi, New Mexico, Oklahoma, Texas, and
Wyoming from a source acceptable to the Agent and reflecting no
Liens, other than Permitted Liens, against any of the Collateral as
to which perfection of a Lien is accomplished by the filing of a
financing statement;
(j) confirmation, acceptable to the Agent, of the title of the
Borrower to the Mortgaged Properties, free and clear of Liens other than
Permitted Liens;
(k) copies of all operating, lease, sublease, royalty, sales,
exchange, processing, farmout, bidding, pooling, unitization,
communitization, and other agreements relating to the Mortgaged Properties
requested by the Agent;
(l) engineering reports covering the Mortgaged Properties;
(m) the opinion of Thrasher, Whitley, Hampton & ▇▇▇▇▇▇, counsel to the
Borrower, substantially in the form attached hereto as Exhibit V, with
such changes thereto as may be approved by the Agent;
(n) certificates evidencing the insurance coverage required pursuant
to Section 5.18, 5.19; and
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(o) such other agreements, documents, instruments, opinions,
certificates, waivers, consents, and evidence as the Agent or any Lender
may reasonably request.
3.2 EACH LOAN. In addition to the conditions precedent
stated elsewhere herein, the Lenders shall not be obligated to make
any Loan unless:
(a) the Borrower shall have delivered to the Agent a Borrowing Request
at least the requisite time prior to the requested date for the relevant Loan,
and each statement or certification made in such Borrowing Request shall be true
and correct in all material respects on the requested date for such Loan;
(b) no Event of Default or Default shall exist or will occur as a
result of the making of the requested Loan;
(c) if requested by the Agent or any Lender, the Borrower shall have
delivered evidence satisfactory to the Agent or such Lender substantiating
any of the matters contained in this Agreement which are necessary to enable
the Borrower to qualify for such Loan;
(d) the Agent shall have received, reviewed, and approved such
additional documents and items as described in Section as may be requested by
any Lender with respect to such Loan;
(e) no event shall have occurred which, in the reasonable opinion of
the Lenders, could have a Material Adverse Effect;
(f) each of the representations and warranties contained in this
Agreement shall be true and correct and shall be deemed to be repeated by the
Borrower as if made on the requested date for such Loan;
(g) the Security Instruments shall be in full force and effect
and provide to the Lenders the security intended thereby;
(h) neither the consummation of the transactions contemplated hereby
nor the making of such Loan shall contravene, violate, or conflict with any
Requirement of Law;
(i) the Borrower shall hold full legal title to the Collateral
pledged by such entities and be the sole beneficial owners thereof;
(j) the Agent and/or each Lender shall have received payment of all
Facility Fees, Letter of Credit Fees, and other fees payable to the Agent
and/or each Lender hereunder and reimbursement from the Borrower, or special
legal counsel for the Agent shall have received payment from the Borrower,
for (i) all reasonable fees and expenses of counsel to the Agent for which
the Borrower is responsible pursuant to applicable provisions of this
Agreement and for which invoices have been presented as of or prior to the
date of the relevant Loan, and (ii) estimated fees charged by filing
32
officers and other public officials incurred or to be incurred in connection
with the filing and recordation of any Security Instruments, for which
invoices have been presented as of or prior to the date of the requested
Loan; and
(k) all matters incident to the consummation of the transactions
hereby contemplated shall be satisfactory to the Agent and each Lender.
3.3 EACH LETTER OF CREDIT. The obligation of the Agent, as the
issuer of the Letters of Credit, to issue, renew, or extend any Letter of
Credit is subject to the satisfaction of the following additional conditions
precedent:
(a) the Borrower shall have delivered to the Agent a written (or oral,
confirmed promptly in writing) request for the issuance, renewal, or
extension of a Letter of Credit at least two Business Days prior to the
requested issuance, renewal, or extension date and a completed Letter
of Credit Application at least two Business Days prior to the requested
issuance date; and each statement or certification made in such Letter
of Credit Application shall be true and correct in all material
respects on the requested date for the issuance of such Letter of
Credit;
(b) no Default or Event of Default shall exist or will occur as a
result of the issuance, renewal, or extension of such Letter of Credit;
and
(c) the terms, provisions, and beneficiary of the Letter of Credit or
such renewal or extension shall be satisfactory to the Agent, as the
issuer of the Letters of Credit, in its sole discretion.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this
Agreement and to make the Loans and issue, or participate in the issuance of,
Letters of Credit, the Borrower represents and warrants to the Agent and the
Lenders (which representations and warranties shall survive the delivery of the
Notes) that:
4.1 DUE AUTHORIZATION. The execution and delivery by the
Borrower of this Agreement and the borrowings hereunder, the execution and
delivery by the Borrower of the Notes, the repayment of the Notes and
interest and fees provided for in the Notes and this Agreement, the execution
and delivery of the Security Instruments by the Borrower and the performance
of all obligations of the Borrower under the Loan Documents are within the
power of the Borrower, have been duly authorized by all necessary corporate
action by the Borrower, and do not and will not to our knowledge, (a) require
the consent of any Governmental Authority, (b) contravene or conflict
33
with any Requirement of Law, (c) contravene or conflict with any indenture,
instrument, or other agreement to which the Borrower is a party or by which
any Property of the Borrower may be presently bound or encumbered, or (d)
result in or require the creation or imposition of any Lien in, upon or of
any Property of the Borrower under any such indenture, instrument, or other
agreement, other than the Loan Documents.
4.2 CORPORATE EXISTENCE. The Borrower is a corporation duly
organized, legally existing, and in good standing under the laws of its state
of incorporation and is duly qualified as a foreign corporation and are in
good standing in all jurisdictions wherein the ownership of Property or the
operation of its business necessitates same, other than those jurisdictions
wherein the failure to so qualify will not have a Material Adverse Effect.
4.3 VALID AND BINDING OBLIGATIONS. All Loan Documents, when duly
executed and delivered by the Borrower, will be the legal, valid, and binding
obligations of the Borrower, enforceable against the Borrower in accordance
with their respective terms.
4.4 SECURITY INSTRUMENTS. The provisions of each Security
Instrument are effective to create in favor of the Agent for the benefit of
the Lenders, a legal, valid, and enforceable Lien in all right, title, and
interest of the Borrower in the Collateral described therein, which Liens,
assuming the accomplishment of recording and filing in accordance with
applicable laws prior to the intervention of rights of other Persons, shall
constitute fully perfected first-priority Liens on all right, title, and
interest of the Borrower in the Collateral described therein. The Existing
Liens, as assigned by BOK to the Agent for the benefit of the Lenders,
continue to constitute good and valid first-priority Liens as of the original
date of recordation thereof.
4.5 TITLE TO ASSETS. The Borrower has good and defensible title to
all of its Properties, free and clear of all Liens except Permitted Liens.
4.6 SCOPE AND ACCURACY OF FINANCIAL STATEMENTS. The Financial
Statements of the Borrower as of September 30, 1997, present fairly the
financial position and results of operations and cash flows of the Borrower
and its consolidated Subsidiaries in accordance with GAAP as at the relevant
point in time or for the period indicated, as applicable. No event or
circumstance has occurred since September 30, 1997, which could reasonably be
expected to have a Material Adverse Effect.
4.7 NO MATERIAL MISSTATEMENTS. To the knowledge of the Borrower, no
information, exhibit, statement, or report furnished to the Lenders by or at
the direction of the Borrower in connection with this Agreement contains any
material misstatement of fact or omits to state a material fact or any fact
necessary to make the statements contained therein not misleading as of the
date made or deemed made.
4.8 LIABILITIES, LITIGATION, AND RESTRICTIONS. Other than as
reflected in the Financial Statements referred to in Section 4.6 or as listed
on Schedule 4.8 attached hereto, the
34
Borrower has no liabilities, direct, or contingent, which may materially and
adversely affect its business or operations or its ownership of the
Collateral and no litigation or other action of any nature affecting the
Borrower is pending before any Governmental Authority or, to the best
knowledge of the Borrower, threatened against or affecting the Borrower which
might reasonably be expected to result in any impairment of its ownership of
any Collateral or have a Material Adverse Effect. No unusual or unduly
burdensome restriction, restraint or hazard exists by contract, Requirement
of Law, or otherwise relative to the business or operations of the Borrower
or the ownership and operation of the Collateral other than such as relate
generally to Persons engaged in business activities similar to those
conducted by the Borrower.
4.9 COMPLIANCE WITH LAWS. The Borrower and its Property, including,
without limitation, the Mortgaged Property, are in compliance with all
applicable Requirements of Law, including, without limitation, Environmental
Laws, the Natural Gas Policy Act of 1978, as amended, and ERISA, except to
the extent non-compliance with any such Requirements of Law could not
reasonably be expected to have a Material Adverse Effect.
4.10 ERISA. The Borrower does not maintain nor has it maintained
any Plan. The Borrower does not currently contribute to or have any
obligation to contribute to or otherwise have any liability with respect to
any Plan.
4.11 ENVIRONMENTAL LAWS. To the best knowledge and belief of the
Borrower, except as would not have a Material Adverse Effect or as described
on Schedule 4.11 attached hereto:
(a) no Property of the Borrower is currently on or has ever been on,
or is adjacent to any Property which is on or has ever been on, any
federal or state list of Superfund Sites;
(b) no Hazardous Substances have been generated, transported, and/or
disposed of by the Borrower at a site which was, at the time of such
generation, transportation, and/or disposal, or has since become, a
Superfund Site;
(c) except in accordance with applicable Requirements of Law or the
terms of a valid permit, license, certificate, or approval of the relevant
Governmental Authority, no Release of Hazardous Substances by the
Borrower or from, affecting, or related to any Property of the Borrower
or adjacent to any Property of the Borrower has occurred; and
(d) no Environmental Complaint has been received by the Borrower.
4.12 COMPLIANCE WITH FEDERAL RESERVE REGULATIONS. No transaction
contemplated by the Loan Documents is in violation of any regulations
promulgated by the Board of Governors of the Federal Reserve System,
including, without limitation, Regulations G, T, U, or X.
35
4.13 INVESTMENT COMPANY ACT COMPLIANCE. The Borrower is not, nor is
the Borrower directly or indirectly controlled by or acting on behalf of any
Person which is, an "investment company" or an "affiliated person" of an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
4.14 PUBLIC UTILITY HOLDING COMPANY ACT COMPLIANCE. The Borrower
is not a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
4.15 PROPER FILING OF TAX RETURNS; PAYMENT OF TAXES DUE. The
Borrower has duly and properly filed a United States income tax return and
all other tax returns which are required to be filed and has paid all taxes
due except such as are being contested in good faith and as to which adequate
provisions and disclosures have been made. The respective charges and
reserves on the books of the Borrower with respect to taxes and other
governmental charges are adequate.
4.16 REFUNDS. Except as described on Schedule 4.16 attached hereto,
no orders of, proceedings pending before, or other requirements of the
Minerals Management Service, Bureau of Land Management, the Federal Energy
Regulatory Commission, the Texas Railroad Commission, or any Governmental
Authority exist which could result in the Borrower being required to refund
any material portion of the proceeds received or to be received from the sale
of hydrocarbons constituting part of the Mortgaged Property.
4.17 GAS CONTRACTS. Except as described on Schedule 4.17 attached
hereto, the Borrower (a) is not obligated in any material respect by virtue
of any prepayment made under any contract containing a "take-or-pay" or
"prepayment" provision or under any similar agreement to deliver hydrocarbons
produced from or allocated to any of the Mortgaged Property at some future
date without receiving full payment therefor within 90 days of delivery, and
(b) has not produced gas, in any material amount, subject to, and neither the
Borrower nor any of the Mortgaged Properties is subject to, balancing rights
of third parties or subject to balancing duties under governmental
requirements or joint operating agreements, except as to such matters for
which the Borrower has established monetary reserves adequate in amount to
satisfy such obligations and have segregated such reserves from other
accounts.
4.18 INTELLECTUAL PROPERTY. The Borrower owns or is licensed to use
all Intellectual Property necessary to conduct all business material to its
condition (financial or otherwise), business, or operations as such business
is currently conducted. No claim has been asserted or is pending by any
Person with respect to the use of any such Intellectual Property or
challenging or questioning the validity or effectiveness of any such
Intellectual Property; and the Borrower knows of no valid basis for any such
claim. The use of such Intellectual Property by the Borrower does not
infringe on the rights of any Person, except for such claims and
infringements as do not, in the aggregate, give rise to any material
liability on the part of the Borrower.
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4.19 CASUALTIES OR TAKING OF PROPERTY. Except as disclosed on
Schedule 4.19 attached hereto, since September 30, 1997, neither the business
nor any Property of the Borrower has been materially adversely affected as a
result of any fire, explosion, earthquake, flood, drought, windstorm,
accident, strike or other labor disturbance, embargo, requisition or taking
of Property, or cancellation of contracts, permits, or concessions by any
Governmental Authority, riot, activities of armed forces, or acts of God.
4.20 LOCATIONS OF BORROWER. The principal place of business and
chief executive office of the Borrower is located at the address of the
Borrower set forth in Section 9.3 or at such other location as the Borrower may
have, by proper written notice hereunder, advised the Agent and the Lenders,
provided that such other location is within a state in which appropriate
financing statements from the Borrower in favor of the Agent have been filed.
4.21 SUBSIDIARIES. The Borrower has no Subsidiaries other than as
listed on Schedule 4.21 attached hereto.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any
Commitment exists, the Borrower shall:
5.1 MAINTENANCE AND ACCESS TO RECORDS. Keep adequate records, in
accordance with GAAP, of all its transactions so that at any time, and from
time to time, its true and complete financial condition may be readily
determined, and within two Business Days following the reasonable request of
the Agent or any Lender, make such records available for inspection by the
Agent or any Lender and, at the expense of the Borrower, allow the Agent or
any Lender to make and take away copies thereof.
5.2 QUARTERLY FINANCIAL STATEMENTS; COMPLIANCE CERTIFICATES.
Deliver to the Agent and each Lender, (a) on or before the 45th day after the
close of each of the first three quarterly periods of each fiscal year of the
Borrower, a copy of the unaudited consolidated and consolidating Financial
Statements of the Borrower and its consolidated Subsidiaries as at the close
of such quarterly period and from the beginning of such fiscal year to the
end of such period, such Financial Statements to be certified by a
Responsible Officer of the Borrower as having been prepared in accordance
with GAAP consistently applied and as a fair presentation of the condition of
the Borrower, subject to changes resulting from normal year-end audit
adjustments, and (b) on or before the 45th day after the close of each fiscal
quarter and on or before the 120th day after the close of each fiscal year, a
Compliance Certificate and calculations of compliance with the financial
covenants included therein.
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5.3 ANNUAL FINANCIAL STATEMENTS. (a) Deliver to the Agent and each
Lender, on or before the 120th day after the close of each fiscal year of the
Borrower, a copy of the annual audited consolidated and unaudited
consolidating Financial Statements of the Borrower.
5.4 OIL AND GAS RESERVE REPORTS. Deliver to the Agent and each
Lender, no later than April 1 of each year during the term of this Agreement,
engineering reports in form and substance satisfactory to the Agent and the
Lenders, certified by any nationally- or regionally-recognized independent
consulting petroleum engineers acceptable to the Agent and the Lenders as
fairly and accurately setting forth (i) the proven and producing, shut-in,
behind-pipe, and undeveloped oil and gas reserves (separately classified as
such) attributable to the Oil and Gas Properties as of January 1 of the year
for which such reserve reports are furnished, (ii) the aggregate present
value of the future net income with respect to such Oil and Gas Properties,
discounted at a stated per annum discount rate of proven and producing
reserves, (iii) projections of the annual rate of production, gross income,
and net income with respect to such proven and producing reserves, and (iv)
information with respect to the "take-or-pay," "prepayment," and
gas-balancing liabilities of the Borrower.
(b) Deliver to the Agent and each Lender no later than October 1 of
each year during the term of this Agreement, engineering reports in form and
substance satisfactory to the Agent and the Lenders prepared by or under the
supervision of the chief petroleum engineer of the Borrower evaluating the
Oil and Gas Properties as of July 1 of the year for which such reserve
reports are furnished and updating the information provided in the reports
pursuant to Section 5.4(a).
(c) Each of the reports provided pursuant to this Section shall be
submitted to the Agent and each Lender together with additional data
concerning pricing, quantities of production from the Oil and Gas Properties
to be determined in sole discretion of the Agent and the Lenders, volumes of
production sold, purchasers of production, gross revenues, expenses, and such
other information and engineering and geological data with respect thereto as
the Agent and the Lenders may reasonably request.
5.5 TITLE OPINIONS; TITLE DEFECTS. For additions of Oil and Gas
Properties after the Closing Date, promptly upon the request of the Agent or
any Lender, furnish to the Agent title opinions, in form and substance and by
counsel satisfactory to the Agent, or other confirmation of title acceptable
to the Agent, covering a percentage of the present value, acceptable by the
Agent in its sole discretion, of the Oil and Gas Properties of the Borrower,
and promptly, but in any event within 60 days after notice by the Agent of
any defect, material in the reasonable opinion of the Agent and the Lenders
in value, in the title of the Borrower to any of its Oil and Gas Properties,
cure such title defects, and, in the event any such title defects are not
cured in a timely manner, pay all reasonable related costs and fees incurred
by the Agent to do so. Provided, however, to the extent it is determined by
the Lenders that such title defects cannot be cured or the Borrower so
notifies the Lenders, the Lenders may reduce the Borrowing Base by the amount
equal to the value of the Oil and Gas Property affected by such title defect.
38
5.6 NOTICES OF CERTAIN EVENTS. Deliver to the Agent and each
Lender, immediately upon having knowledge of the occurrence of any of the
following events or circumstances, a written statement with respect thereto,
signed by a Responsible Officer of the Borrower and setting forth the
relevant event or circumstance and the steps being taken by the Borrower with
respect to such event or circumstance:
(a) any Default or Event of Default;
(b) any default or event of default under any contractual obligation
of the Borrower, or any litigation, investigation, or proceeding between
the Borrower and any Governmental Authority which, in either case, if not
cured or if adversely determined, as the case may be, could reasonably
be expected to have a Material Adverse Effect;
(c) any litigation or proceeding involving the Borrower as a defendant
or in which any Property of the Borrower is subject to a claim and in
which the amount involved is $500,000 or more and which is not covered
by insurance or in which injunctive or similar relief is sought;
(d) the receipt by the Borrower of any material Environmental
Complaint;
(e) any actual, proposed, or threatened testing or other investigation
by any Governmental Authority or other Person concerning the environmental
condition of, or relating to, any Property of the Borrower or adjacent
to any Property of the Borrower following any allegation of a violation
of any Requirement of Law;
(f) any Release of Hazardous Substances by the Borrower or from,
affecting, or related to any Property of the Borrower or adjacent to any
Property of the Borrower except in accordance with applicable Requirements
of Law or the terms of a valid permit, license, certificate, or approval
of the relevant Governmental Authority, or the violation of any
Environmental Law, or the revocation, suspension, or forfeiture of or
failure to renew, any permit, license, registration, approval, or
authorization which could reasonably be expected to have a Material
Adverse Effect;
(g) upon request from the Agent, the change in identity or address of
any Person remitting to the Borrower proceeds from the sale of hydrocarbon
production from or attributable to any Mortgaged Property;
(h) within two days of any change in the senior management of the
Borrower; and
(i) any other event or condition which could reasonably be expected
to have a Material Adverse Effect.
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5.7 LETTERS IN LIEU OF TRANSFER ORDERS; DIVISION ORDERS. Promptly
upon request by the Agent at any time and from time to time, execute such
letters in lieu of transfer orders, in addition to the letters signed by the
Borrower and delivered to the Agent in satisfaction of the condition set
forth in Section 3.1 (f)(v) and/or division and/or transfer orders as are
necessary or appropriate to transfer and deliver to the Agent proceeds from
or attributable to any Mortgaged Property.
5.8 ADDITIONAL INFORMATION. Furnish to the Agent and each Lender,
promptly upon the request of the Agent or any Lender, such additional
financial or other information concerning the assets, liabilities,
operations, and transactions of the Borrower as the Agent or any Lender may
from time to time reasonably request; and notify the Agent and each Lender
not less than ten Business Days prior to the occurrence of any condition or
event that may change the proper location for the filing of any financing
statement or other public notice or recording for the purpose of perfecting a
Lien in any Collateral, including, without limitation, any change in its name
or the location of its principal place of business or chief executive office;
and upon the request of the Agent or any Lender, execute such additional
Security Instruments as may be necessary or appropriate in connection
therewith.
5.9 COMPLIANCE WITH LAWS. Comply with all applicable Requirements
of Law, including, without limitation, (a) the Natural Gas Policy Act of
1978, as amended, (b) ERISA, (c) Environmental Laws, and (d) all permits,
licenses, registrations, approvals, and authorizations issued to it or of
which it has knowledge (i) related to any natural or environmental resource
or media located on, above, within, in the vicinity of, related to or
affected by any Property of the Borrower, (ii) required for the performance
of the operations of the Borrower, or (iii) applicable to the use,
generation, handling, storage, treatment, transport, or disposal of any
Hazardous Substances; and instruct all employees, crew members, agents,
contractors, subcontractors, and future lessees (pursuant to appropriate
lease provisions) of the Borrower, while such Persons are acting within the
scope of their relationship with the Borrower, to comply with all such
Requirements of Law as may be necessary or appropriate to enable the Borrower
to so comply.
5.10 PAYMENT OF ASSESSMENTS AND CHARGES. Pay all taxes,
assessments, governmental charges, rent, and other Indebtedness which, if
unpaid, might become a Lien against the Property of the Borrower, except any
of the foregoing being contested in good faith and as to which adequate
reserve in accordance with GAAP has been established or unless failure to pay
would not have a Material Adverse Effect.
5.11 MAINTENANCE OF CORPORATE EXISTENCE AND GOOD STANDING. Maintain
its corporate existence or qualification and good standing in its
jurisdiction of incorporation and in all jurisdictions wherein the Property
now owned or hereafter acquired or business now or hereafter conducted
necessitates same, unless the failure to do so would not have a Material
Adverse Effect.
5.12 PAYMENT OF NOTES; PERFORMANCE OF OBLIGATIONS. Pay the Notes
according to the reading, tenor, and effect thereof, as modified hereby, and
do and perform every act and
40
discharge all of its other Obligations. Each Borrower is jointly and
severally liable for all Obligations.
5.13 FURTHER ASSURANCES. Upon the Agent's written request, promptly
cure any defects in the execution and delivery of any of the Loan Documents
and all agreements contemplated thereby, and execute, acknowledge, and
deliver such other assurances and instruments as shall, in the opinion of the
Agent, be necessary to fulfill the terms of the Loan Documents.
5.14 INITIAL FEES AND EXPENSES OF COUNSEL TO AGENT. Upon request by
the Agent, promptly reimburse the Agent for all reasonable fees and expenses
of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P., special counsel to the Agent, for which an invoice
in reasonable detail has been provided, in connection with the preparation of
this Agreement and all documentation contemplated hereby, the satisfaction of
the conditions precedent set forth herein, the filing and recordation of
Security Instruments, and the consummation of the transactions contemplated
in this Agreement.
5.15 SUBSEQUENT FEES AND EXPENSES OF AGENT AND LENDERS. Upon
request by the Agent, promptly reimburse the Agent (to the fullest extent
permitted by law) for all amounts reasonably expended, advanced, or incurred
by or on behalf of the Agent to ratify, amend, restate, or prepare additional
Loan Documents, as the case may be and for the filing and recordation of
Security Instruments. Promptly reimburse the Agent and each Lender for all
amounts reasonably expended, advanced, or incurred to satisfy any obligation
of the Borrower under any of the Loan Documents; to collect the Obligations;
to enforce the rights of the Agent and each Lender under any of the Loan
Documents; and to protect the Properties or business of the Borrower,
including, without limitation, the Collateral, which amounts shall be deemed
compensatory in nature and liquidated as to amount upon notice to the
Borrower by the Agent and each Lender and which amounts shall include, but
not be limited to (a) all court costs, (b) reasonable attorneys' fees, (c)
reasonable fees and expenses of auditors and accountants incurred to protect
the interests of the Agent and each Lender, (d) fees and expenses incurred in
connection with the participation by the Agent and each Lender as a member of
the creditors' committee in a case commenced under any Insolvency Proceeding,
(e) fees and expenses incurred in connection with lifting the automatic stay
prescribed in Section 362 Title 11 of the United States Code, and (f) fees
and expenses incurred in connection with any action pursuant to Section 1129
Title 11 of the United States Code all reasonably incurred by the Agent and
each Lender in connection with the collection of any sums due under the Loan
Documents, together with interest at the per annum interest rate equal to the
Floating Rate, calculated on a basis of a calendar year of 365 or 366 days,
as the case may be, counting the actual number of days elapsed, on each such
amount from the date of notification that the same was expended, advanced, or
incurred by the Agent and each Lender until the date it is repaid to the
Agent and each Lender, with the obligations under this Section surviving the
non-assumption of this Agreement in a case commenced under any Insolvency
Proceeding and being binding upon the Borrower and/or a trustee, receiver,
custodian, or liquidator of the Borrower appointed in any such case.
5.16 OPERATION OF OIL AND GAS PROPERTIES. Develop, maintain, and
operate its Oil and Gas Properties in a prudent and workmanlike manner in
accordance with industry standards.
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5.17 MAINTENANCE AND INSPECTION OF PROPERTIES. Maintain all of its
tangible Properties in good repair and condition, ordinary wear and tear
excepted; make all necessary replacements thereof and operate such Properties
in a good and workmanlike manner; and permit on two Business Days prior
notice any authorized representative of the Agent or any Lender to visit and
inspect any tangible Property of the Borrower which is operated by the
Borrower.
5.18 MAINTENANCE OF INSURANCE. Maintain insurance with respect to
its Properties and businesses against such liabilities, casualties, risks,
and contingencies as is customary in the relevant industry and sufficient to
prevent a Material Adverse Effect, all such insurance to be in amounts and
from insurers acceptable to the Lenders and, within 60 days of the Closing
Date for property damage insurance covering Collateral and business
interruption insurance, if any, maintained by Borrower, naming the Agent as
loss payee, and, upon any renewal of any such insurance and at other times
upon request by the Agent or any Lender, furnish to the Agent or any Lender
evidence, satisfactory to the Agent and each Lender of the maintenance of
such insurance. The Agent shall have the right to collect, and the Borrower
hereby assigns to the Agent for the benefit of the Lenders, any and all
monies that may become payable under any policies of insurance relating to
business interruption or by reason of damage, loss, or destruction of any of
the Collateral. In the event of any damage, loss, or destruction for which
insurance proceeds relating to business interruption or Collateral exceed
$100,000, the Agent for the benefit of the Lenders may, at its option, apply
all such sums or any part thereof received by it toward the payment of the
Obligations, whether matured or unmatured, application to be made first to
interest and then to principal, and shall deliver to the Borrower the
balance, if any, after such application has been made. In the event of any
such damage, loss, or destruction for which insurance proceeds are $100,000
or less, provided that no Default or Event of Default has occurred and is
continuing, the Agent shall deliver any such proceeds received by it to the
Borrower. In the event the Agent receives insurance proceeds not attributable
to Collateral or business interruption, the Agent shall deliver any such
proceeds to the Borrower.
5.19 INDEMNIFICATION. INDEMNIFY AND HOLD THE AGENT AND EACH LENDER
AND THEIR SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT, AND AFFILIATES AND EACH TRUSTEE FOR THE BENEFIT OF THE
AGENT AND EACH LENDER UNDER ANY SECURITY INSTRUMENT HARMLESS FROM AND AGAINST
ANY AND ALL CLAIMS, LOSSES, DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES,
ADMINISTRATIVE AND JUDICIAL PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL
ACTIONS, REQUIREMENTS AND ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND
EXPENSES INCURRED IN CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION,
ATTORNEYS' FEES AND EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN
PART, FROM (A) THE PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM
ANY PROPERTY OF THE BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B)
ANY ACTIVITY CARRIED ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF THE BORROWER,
, WHETHER PRIOR TO OR DURING THE TERM HEREOF, AND WHETHER BY THE BORROWER OR
ANY PREDECESSOR IN TITLE,
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EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER OR ANY OTHER
PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY, IN CONNECTION WITH
THE HANDLING, TREATMENT, REMOVAL, STORAGE, DECONTAMINATION, CLEANUP,
TRANSPORTATION, OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME LOCATED
OR PRESENT ON OR UNDER SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON OR
UNDER ANY PROPERTY OF THE BORROWER, (D) ANY CONTAMINATION OF ANY PROPERTY OR
NATURAL RESOURCES ARISING IN CONNECTION WITH THE GENERATION, USE, HANDLING,
STORAGE, TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES BY THE
BORROWER OR ANY EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER
WHILE SUCH PERSONS ARE ACTING WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH THE
BORROWER, IRRESPECTIVE OF WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE
UNDERTAKEN IN ACCORDANCE WITH APPLICABLE REQUIREMENTS OF LAW, OR (E) THE
PERFORMANCE OF ANY LOAN DOCUMENT, ANY ALLEGATION BY ANY BENEFICIARY OF A
LETTER OF CREDIT OF A WRONGFUL DISHONOR BY THE AGENT OR ANY LENDER OF A CLAIM
OR DRAFT PRESENTED THEREUNDER, OR ANY OTHER ACT OR OMISSION IN CONNECTION
WITH OR RELATED TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING, WITHOUT LIMITATION, ANY OF THE FOREGOING IN THIS SECTION
ARISING FROM NEGLIGENCE, OTHER THAN GROSS NEGLIGENCE, WHETHER SOLE OR
CONCURRENT, ON THE PART OF THE AGENT OR ANY LENDER OR ANY OF THEIR
SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, OR
AFFILIATES OR ANY TRUSTEE FOR THE BENEFIT OF THE AGENT OR ANY LENDER UNDER
ANY SECURITY INSTRUMENT; WITH THE FOREGOING INDEMNITY SURVIVING SATISFACTION
OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT, UNLESS ALL SUCH
OBLIGATIONS HAVE BEEN SATISFIED WHOLLY IN CASH FROM THE BORROWER AND NOT BY
WAY OF REALIZATION AGAINST ANY COLLATERAL OR THE CONVEYANCE OF ANY PROPERTY
IN LIEU THEREOF, PROVIDED THAT SUCH INDEMNITY SHALL NOT EXTEND TO ANY ACT OR
OMISSION BY THE AGENT OR ANY LENDER WITH RESPECT TO ANY PROPERTY SUBSEQUENT
TO THE AGENT OR ANY LENDER BECOMING THE OWNER OF SUCH PROPERTY AND WITH
RESPECT TO WHICH PROPERTY SUCH CLAIM, LOSS, DAMAGE, LIABILITY, FINE, PENALTY,
CHARGE, PROCEEDING, ORDER, JUDGMENT, ACTION, OR REQUIREMENT ARISES SUBSEQUENT
TO THE ACQUISITION OF TITLE THERETO BY THE AGENT OR ANY LENDER.
5.20 OPERATING ACCOUNTS. The Borrower shall maintain their
principal operating accounts with the Agent.
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ARTICLE VI
NEGATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any
Commitment exists, the Borrower will not and will not allow any of its
Subsidiaries or other Affiliates to:
6.1 INDEBTEDNESS. Create, incur, assume, or suffer to exist any
Indebtedness, whether by way of loan or otherwise; provided, however, the
foregoing restriction shall not apply to (a) the Obligations, (b) Permitted
Indebtedness, and (c) unsecured accounts payable incurred in the ordinary
course of business, which are not unpaid in excess of 60 days beyond receipt
date or are being contested in good faith, and (d) crude oil, natural gas, or
other hydrocarbon floor, collar, cap, price protection, or swap agreements,
in form and substance and with a Person acceptable to the Lenders, provided
that (i) such agreements shall not be entered into with respect to Mortgaged
Properties constituting more than 75% of the monthly production of proven
producing reserves as forecast in Lenders' most recent engineering
evaluation, (ii) that the strike prices in connection with option and swap
agreements are not less than the prices used by the Lenders in their most
recent Borrowing Base determination, (iii) the counterparty shall be approved
by Lenders, (iv) Borrowers and/or Co-Borrowers shall notify Lenders within
five days of executing a hedge transaction of the strike price and the volume
of production, as well as the duration of the transaction, (v) Borrowers
and/or Co-Borrowers shall only enter into hedge transactions with durations
of eighteen months or less, (vi) Borrower and/or Co-Borrowers shall pay any
liabilities created under the hedge transactions as they become due and in
any event no later than 60 days from the date such liability was incurred;
and (vii) the Lenders shall receive a security interest in the hedging
contracts.
6.2 CONTINGENT OBLIGATIONS. Create, incur, assume, or suffer to
exist any Contingent Obligation not otherwise prohibited by Section 6.1;
provided, however, the foregoing restriction shall not apply to (a)
performance guarantees and performance surety or other bonds provided in the
ordinary course of business, or (b) trade credit incurred or operating leases
entered into in the ordinary course of business.
6.3 LIENS. Create, incur, assume, or suffer to exist any Lien on
any of its Oil and Gas Properties or any other Property, whether now owned or
hereafter acquired; provided, however, the foregoing restrictions shall not
apply to Permitted Liens.
6.4 SALES OF ASSETS. Without the prior written consent of the Agent
and the Lenders, Borrower shall sell, transfer, or otherwise dispose of any
assets, if such assets are material to the operations of Borrower, other than
(a) sales of inventory in the ordinary course of business, (b) occasional
sales, leases or other dispositions of immaterial assets for consideration
not less than fair market value, (c) sales, leases or other dispositions of
assets that are obsolete or have negligible fair market value, and (d) sales
of equipment for fair and adequate consideration. The Agent and the Lenders
will consent to sales of assets representing up to 10% in the aggregate of
the net present
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value of the Oil and Gas Properties which comprise the Borrowing Base, as
calculated by the Agent and the Lenders pursuant to the terms of this
Agreement, provided that the Borrowing Base shall be reduced, and if
necessary, proceeds from such sale shall be applied to Loan Balance in an
amount equal to the loan value attributable to such assets sold.
6.5 LEASEBACKS. Enter into any agreement to sell or transfer any
Property and thereafter rent or lease as lessee such Property or other
Property intended for the same use or purpose as the Property sold or
transferred.
6.6 LOANS OR ADVANCES. Make or agree to make or allow to remain
outstanding any loans or advances to any Person, other than to the other
entity also constituting a Borrower in excess of $100,000 in the aggregate;
provided, however, the foregoing restrictions shall not apply to (a) advances
or extensions of credit in the form of accounts receivable incurred in the
ordinary course of business and upon terms common in the industry for such
accounts receivable, or (b) advances to employees of the Borrower for the
payment of expenses in the ordinary course of business.
6.7 INVESTMENTS. Acquire Investments in, or purchase or otherwise
acquire all or substantially all of the assets of, any Person which exceeds
$250,000 in the aggregate during any calendar year, without the prior consent
of the Lenders provided, however, such restriction shall not apply to the
following Investments:
(a) marketable obligations issued or unconditionally
guaranteed by the United States Government or issued
by any of its agencies and backed by the full faith
and credit of the United States of America;
(b) short-term investment grade domestic or Eurodollar
certificates of deposit or time deposits that are
fully insured by the Federal Deposit Insurance
Corporation;
(c) commercial paper and similar obligations rated "P-1"
or better by ▇▇▇▇▇'▇ Investors Services, Inc. or
"A-1" or better by Standard & Poors Corporation;
(d) intercompany loans to, advances to or investments in,
wholly owned Subsidiaries;
(e) readily marketable tax-free municipal bonds of a
domestic issuer or rated "aaa" or better by ▇▇▇▇▇'▇
Investors Services, Inc. or "AAA" by Standard & Poors
Corporation; and
(f) demand deposit accounts maintained in the ordinary course
of business.
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6.8 DIVIDENDS AND DISTRIBUTIONS. Declare, pay, or make, any cash
dividend or distribution on, or purchase, redeem, or otherwise acquire for
value, any share of any class of its capital stock.
6.9 CHANGES IN CORPORATE STRUCTURE. Enter into any transaction of
consolidation, merger, or amalgamation; or liquidate, wind up, or dissolve
(or suffer any liquidation or dissolution).
6.10 TRANSACTIONS WITH AFFILIATES. Directly or indirectly, enter
into any transaction (including the sale, lease, or exchange of Property or
the rendering of service) with any of its Affiliates, other than upon fair
and reasonable terms no less favorable than could be obtained in an arm's
length transaction with a Person which was not an Affiliate.
6.11 LINES OF BUSINESS. Expand, on their own or through any
Subsidiary, into any line of business other than those in which the Borrower
is engaged as of the date hereof.
6.12 PLAN OBLIGATIONS. Assume or otherwise become subject to an
obligation to contribute to or maintain any Plan not set forth in Schedule
6.12 or acquire any Person which has at any time had an obligation to
contribute to or maintain any Plan.
6.13 NEW SUBSIDIARIES. Form any new Subsidiaries without the prior
written consent of the Lenders.
6.14 CASH FLOW COVERAGE. Permit, as of the close of any fiscal
quarter of Borrower, the ratio of Cash Flow to Debt Service to be less than
1.25 to 1.00.
6.15 CURRENT RATIO. Permit, as of the close of any fiscal quarter
of Borrower, the Current Ratio to be less than .90 to 1.00. Receivables from
Bay City Energy Group and the current portion of the Loan Balance shall be
excluded from calculation of Current Ratio.
6.16 CHANGE OF FISCAL YEAR. The Borrower will not change its
fiscal year.
ARTICLE VII
EVENTS OF DEFAULT
7.1 ENUMERATION OF EVENTS OF DEFAULT. Any of the following events
shall constitute an Event of Default:
(a) default shall be made in the payment when due of any installment
of principal or interest under this Agreement or the Notes or in the
payment when due of any fee or other sum payable under any Loan
Document.
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(b) default shall be made by the Borrower in the due observance or
performance of any obligation of the Borrower under the Loan Documents,
and such default shall continue for 30 days after the earlier of
written notice thereof to the Borrower by the Agent or actual knowledge
thereof by the Borrower;
(c) any representation or warranty made by the Borrower in any of the
Loan Documents proves to have been untrue in any material respect or any
representation, statement (including Financial Statements), certificate,
or data furnished or made to the Agent and/or the Lenders in connection
herewith proves to have been untrue in any material respect as of the date
the facts therein set forth were stated or certified;
(d) default shall be made by the Borrower (as principal or guarantor
or other surety) in the payment or performance of any Indebtedness in
excess of $100,000 and such default shall remain unremedied for in
excess of the period of grace, if any, with respect thereto;
(e) the Borrower shall be unable to satisfy any condition or cure any
circumstance specified in Article , the satisfaction or curing of which
is a condition precedent to the right of the Borrower to obtain a Loan
or for the issuance of a Letter of Credit, and such inability shall
continue for a period in excess of 30 days;
(f) the Borrower shall (i) apply for or consent to the appointment of
a receiver, trustee, or liquidator of their or all or a substantial part
of its assets, (ii) file a voluntary petition commencing an Insolvency
Proceeding, (iii) make a general assignment for the benefit of
creditors, (iv) be unable, or admit in writing its inability, to pay
its debts generally as they become due, or (v) file an answer admitting
the material allegations of a petition filed against it in any
Insolvency Proceeding;
(g) an order, judgment, or decree shall be entered against the
Borrower by any court of competent jurisdiction or by any other duly
authorized authority, on the petition of a creditor or otherwise,
granting relief in any Insolvency Proceeding or approving a petition
seeking reorganization or an arrangement of its debts or appointing a
receiver, trustee, conservator, custodian, or liquidator of their or
all or any substantial part of its assets, and such order, judgment,
or decree shall not be dismissed or stayed within 90 days;
(h) the levy against any significant portion of the Property of the
Borrower or any execution, garnishment, attachment, sequestration, or
other writ or similar proceeding which is not permanently dismissed or
discharged within 30 days after the levy;
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(i) a final and non-appealable order, judgment, or decree shall be
entered against the Borrower for money damages and/or Indebtedness due in
an amount in excess of $100,000, and such order, judgment, or decree shall
not be dismissed or stayed within 30 days;
(j) any charges are filed or any other action or proceeding is
instituted by any Governmental Authority against the Borrower under the
Racketeering Influence and Corrupt Organizations Statute (18 U.S.C.
Section 1961 ET SEQ.), the result of which could be the forfeiture or
transfer of any material Property of the Borrower subject to a Lien in
favor of the Agent for the benefit of the Lenders without (i)
satisfaction or provision for satisfaction of such Lien, or (ii) such
forfeiture or transfer of such Property being expressly made subject to
such Lien;
(k) the Borrower shall have (i) concealed, removed, or diverted, or
permitted to be concealed, removed, or diverted, any part of their
Property, with intent to hinder, delay, or defraud its creditors or any
of them, (ii) made or suffered a transfer of any of its Property which
may be fraudulent under any bankruptcy, fraudulent conveyance, or
similar law, or (iii) shall have suffered or permitted, while
insolvent, any creditor to obtain a Lien upon any of its Property
through legal proceedings or distraint which is not vacated within 30
days from the date thereof;
(l) any Security Instrument shall for any reason (other than the
Agent's or the Lender's fault or negligence) not, or cease to, create
valid and perfected first-priority Liens against the Collateral
purportedly covered thereby and not cured within 30 days; and
(m) the occurrence of a Material Adverse Effect and the same shall
remain unremedied for in excess of 30 days after notice given by the
Agent.
7.2 REMEDIES. Upon the occurrence of an Event of Default specified
in Sections 7.1(f) or 7.1(g), immediately and without notice, (i) all
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest, notice of protest, default, or dishonor, notice
of intent to accelerate maturity, notice of acceleration of maturity, or
`other notice of any kind, except as may be provided to the contrary
elsewhere herein, all of which are hereby expressly waived by the Borrower;
(ii) the Commitments shall immediately cease and terminate unless and until
reinstated by the Agent and the Lenders in writing; and (iii) to the extent
permitted by and in compliance with applicable law, the Agent and the Lenders
may set-off and apply any and all deposits (general or special, time or
demand, provisional or final) held by the Agent and the Lenders and any and
all other indebtedness at any time owing by the Agent and the Lenders to or
for the credit or account of the Borrower against any and all of the
Obligations although such Obligations may be unmatured.
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(b) Upon the occurrence of any Event of Default other than those
specified in Sections 7.1(f) or 7.1(g), (i) the Agent and the Lenders may, by
notice to the Borrower, declare all Obligations immediately due and payable,
without presentment, demand, protest, notice of protest, default, or
dishonor, notice of intent to accelerate maturity, notice of acceleration of
maturity, or other notice of any kind, except as may be provided to the
contrary elsewhere herein, all of which are hereby expressly waived by the
Borrower; (ii) the Commitments shall immediately cease and terminate unless
and until reinstated by the Agent and the Lenders in writing; and (iii) to
the extent permitted by and in compliance with applicable law, the Agent and
the Lenders may set-off and apply any and all deposits (general or special,
time or demand, provisional or final) held by the Agent and the Lenders and
any and all other indebtedness at any time owing by the Agent and the Lenders
to or for the credit or account of the Borrower against any and all of the
Obligations although such Obligations may be unmatured.
(c) Upon the occurrence of any Event of Default, the Agent and the
Lenders may, in addition to the foregoing in this Section, exercise any or
all of their rights and remedies provided by law or pursuant to the Loan
Documents.
ARTICLE VIII
THE AGENT
8.1 APPOINTMENT. Each Lender hereby designates and appoints the
Agent as the agent of such Lender under this Agreement and the other Loan
Documents. Each Lender authorizes the Agent, as the agent for such Lender, to
take such action on behalf of such Lender under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to the Agent by the terms of
this Agreement and the other Loan Documents, together with such other powers
as are reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere in this Agreement or in any other Loan Document, the Agent
shall not have any duties or responsibilities except those expressly set
forth herein or in any other Loan Document or any fiduciary relationship with
any Lender; and no implied covenants, functions, responsibilities, duties,
obligations, or liabilities on the part of the Agent shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
8.2 WAIVERS, AMENDMENTS. The provisions of this Agreement and of
each other Loan Document may from time to time be amended, modified or
waived, if such amendment, modification, or waiver is in writing and
consented to by the Borrower and the Required Lenders; provided, however,
that no such amendment, modification or waiver would: (a) modify any
requirement hereunder that any particular action be taken by all of the
Lenders or by the Required Lenders unless consented to by each Lender; (b)
modify this Section 8.2, change the definition of "Required Lenders", or
change the Commitment Amount or Percentage Share of any Lender, reduce the
fees described in Article II, extend the Commitment Termination Date or Final
Maturity, release any Security Instrument or Lien, or initiate any
foreclosure, enforcement or collection procedure
49
without the consent of each Lender; (c) extend the due date for, (or reduce
the amount of any scheduled repayment or prepayment of principal of or
interest on any Loan) without the consent of the holder of that Note
evidencing such Loan; (d) affect, adversely the interests, rights, or
obligations of the Agent without the consent of the Agent; or (e) modify the
Borrowing Base or modify the Scheduled Reduction Amount.
8.3 DELEGATION OF DUTIES. The Agent may execute any of its duties
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it
with reasonable care.
8.4 EXCULPATORY PROVISIONS. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates shall
be (a) required to initiate or conduct any litigation or collection
proceedings hereunder, except with the concurrence of the Lenders and
contribution by each Lender of its Percentage Share of costs reasonably
expected by the Agent to be incurred in connection therewith, (b) liable for
any action lawfully taken or omitted to be taken by it or such Person under
or in connection with this Agreement or any other Loan Document (except for
gross negligence or willful misconduct of the Agent or such Person), or (c)
responsible in any manner to any Lender for any recitals, statements,
representations or warranties made by the Borrower or any officer thereof
contained in this Agreement or any other Loan Document or in any certificate,
report, statement or other document referred to or provided for in, or
received by the Agent under or in connection with, this Agreement or any
other Loan Document, or for the sufficiency, accuracy, or completeness of any
materials provided by the Agent, or the failure of the Agent to provide any
materials or disclose any matter to any Lender except as may be expressly
required herein, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
for any failure of the Borrower to perform its obligations hereunder or
thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower.
8.5 RELIANCE BY AGENT. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any Note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by the Agent.
The Agent may deem and treat the payee of any Note as the owner thereof for
all purposes unless and until an executed Lender Assignment Agreement shall
have been received by the Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Lenders as it deems appropriate and contribution by each Lender of its
Percentage Share of costs reasonably
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