Exhibit 10.1
RESTATED
CREDIT AGREEMENT
AMONG
MIDDLE BAY OIL COMPANY, INC.,
ENEX RESOURCES CORPORATION
AND MIDDLE BAY PRODUCTION COMPANY, INC.
AS BORROWERS,
AND
BANK ONE, TEXAS, N.A.
AND THE INSTITUTIONS NAMED HEREIN
AS LENDERS,
BANK ONE, TEXAS, N.A.,
AS ADMINISTRATIVE AGENT
AND
UNION BANK OF CALIFORNIA, N.A.,
AS SYNDICATION AGENT
AND
BANC ONE CAPITAL MARKETS, INC.
AS ARRANGER
NOVEMBER 23, 1999
$250,000,000 REVOLVING CREDIT
TABLE OF CONTENTS
Page No.
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. Commitments of the Lender . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Terms of Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Procedure for Borrowing. . . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(d) Procedure for Obtaining Letters of Credit. . . . . . . . . . . . . . . . 15
(e) Voluntary Reduction of Commitment. . . . . . . . . . . . . . . . . . . . 15
(f) Mandatory Commitment Reductions. . . . . . . . . . . . . . . . . . . . . 16
(g) Several Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(h) Type and Number of Advances. . . . . . . . . . . . . . . . . . . . . . . 16
(i) Limited Liability of Enex and Production . . . . . . . . . . . . . . . . 16
3. Notes Evidencing Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(b) Issuance of Additional Notes . . . . . . . . . . . . . . . . . . . . . . 17
(c) Interest Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(d) Payment of Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(e) Payment of Principal . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(f) Payment to Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(g) Sharing of Payments, Etc.. . . . . . . . . . . . . . . . . . . . . . . . 18
(h) Non-Receipt of Funds by the Agent. . . . . . . . . . . . . . . . . . . . 18
4. Interest Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) Interest Rate Determination. . . . . . . . . . . . . . . . . . . . . . . 20
(c) Conversion Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(d) Recoupment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5. Special Provisions Relating to Loans. . . . . . . . . . . . . . . . . . . . . 20
(a) Unavailability of Funds or Inadequacy of Pricing . . . . . . . . . . . . 20
(b) Change in Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(c) Increased Cost or Reduced Return . . . . . . . . . . . . . . . . . . . . 21
(d) Discretion of Lender as to Manner of Funding . . . . . . . . . . . . . . 23
(e) Breakage Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6. Collateral Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7. Borrowing Base. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) Initial Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . 25
(b) Subsequent Determinations of Borrowing Base. . . . . . . . . . . . . . . 25
8. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(a) Unused Commitment Fee. . . . . . . . . . . . . . . . . . . . . . . . . . 26
(b) The Letter of Credit Fee . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) Agency Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Voluntary Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Mandatory Prepayment For Borrowing Base Deficiency . . . . . . . . . . . 27
10. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . 28
(a) Creation and Existence.. . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Power and Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Binding Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(d) No Legal Bar or Resultant Lien . . . . . . . . . . . . . . . . . . . . . 28
(e) No Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(f) Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(g) Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(h) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(i) Taxes; Governmental Charges. . . . . . . . . . . . . . . . . . . . . . . 29
(j) Titles, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(k) Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(l) Casualties; Taking of Properties . . . . . . . . . . . . . . . . . . . . 30
(m) Use of Proceeds; Margin Stock. . . . . . . . . . . . . . . . . . . . . . 30
(n) Location of Business and Offices . . . . . . . . . . . . . . . . . . . . 30
(o) Compliance with the Law. . . . . . . . . . . . . . . . . . . . . . . . . 30
(p) No Material Misstatements. . . . . . . . . . . . . . . . . . . . . . . . 31
(q) Not A Utility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(r) ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(s) Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . 31
(t) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(u) Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 31
(v) Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(w) Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11. Conditions of Lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(a) Financial Statements and Reports . . . . . . . . . . . . . . . . . . . . 35
(b) Certificates of Compliance . . . . . . . . . . . . . . . . . . . . . . . 36
(c) Accountants' Certificate . . . . . . . . . . . . . . . . . . . . . . . . 36
(d) Taxes and Other Liens. . . . . . . . . . . . . . . . . . . . . . . . . . 36
(e) Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(f) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(g) Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . 37
(h) Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(i) Accounts and Records . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(j) Right of Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(k) Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . 39
(l) ERISA Information and Compliance . . . . . . . . . . . . . . . . . . . . 39
(m) Environmental Reports and Notices. . . . . . . . . . . . . . . . . . . . 39
(n) Compliance and Maintenance . . . . . . . . . . . . . . . . . . . . . . . 39
(o) Operation of Properties. . . . . . . . . . . . . . . . . . . . . . . . . 40
(p) Compliance with Leases and Other Instruments . . . . . . . . . . . . . . 40
(q) Certain Additional Assurances Regarding
Maintenance and Operations of Properties . . . . . . . . . . . . . . . . 41
(r) Sale of Certain Assets/Prepayment of Proceeds. . . . . . . . . . . . . . 41
(s) Title Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(t) Curative Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(u) Change of Principal Place of Business. . . . . . . . . . . . . . . . . . 42
(v) Cash Collateral Accounts . . . . . . . . . . . . . . . . . . . . . . . . 42
(w) Year 2000 Compatibility. . . . . . . . . . . . . . . . . . . . . . . . . 42
13. Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(a) Negative Pledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(b) Current Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(c) Minimum Interest Coverage Ratio. . . . . . . . . . . . . . . . . . . . . 43
(d) Consolidations and Mergers . . . . . . . . . . . . . . . . . . . . . . . 44
(e) Debts, Guaranties and Other Obligations. . . . . . . . . . . . . . . . . 44
(f) Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(g) Loans and Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(h) Sale or Discount of Receivables. . . . . . . . . . . . . . . . . . . . . 45
(i) Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(j) Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . 45
(k) Hedging Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(l) Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(m) Amendment to Articles of Incorporation or Bylaws . . . . . . . . . . . . 46
(n) Proceeds of Production . . . . . . . . . . . . . . . . . . . . . . . . . 46
(o) Issuance of Preferred Stock . . . . . . . . . . . . . . . . . . . . . . 46
(p) Amendments to and Redemption of Preferred Stock or Other Equity. . . . . 46
(q) Payment or Pre-Payment of Other Indebtedness . . . . . . . . . . . . . . 46
(r) Subordinated Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . 47
14. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15. The Agent and the Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(a) Appointment and Authorization. . . . . . . . . . . . . . . . . . . . . . 49
(b) Note Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(c) Consultation with Counsel. . . . . . . . . . . . . . . . . . . . . . . . 50
(d) Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(e) Resignation or Removal of Agent. . . . . . . . . . . . . . . . . . . . . 51
(f) Responsibility of Agent. . . . . . . . . . . . . . . . . . . . . . . . . 51
(g) Independent Investigation. . . . . . . . . . . . . . . . . . . . . . . . 53
(h) Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(i) Benefit of Section 15. . . . . . . . . . . . . . . . . . . . . . . . . . 53
(j) Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(k) Assumption as to Payments. . . . . . . . . . . . . . . . . . . . . . . . 54
(l) Other Financings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(m) Interests of Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(n) Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
16. Exercise of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
17. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
18. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
19. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
20. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
21. Invalid Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
22. Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
23. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
24. Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
25. Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
26. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
27. Parties Bound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
28. Assignments and Participations. . . . . . . . . . . . . . . . . . . . . . . . 58
29. Choice of Forum: Consent to Service of Process and Jurisdiction . . . . . . . 60
30. Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
31. Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
32. Financial Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
EXHIBITS
Exhibit "A" - Notice of Borrowing
Exhibit "B" - Note
Exhibit "C" - Certificate of Compliance
Exhibit "D" - Form of Assignment and Acceptance Agreement
SCHEDULES
Schedule 1 - Liens
Schedule 2 - Financial Condition
Schedule 3 - Liabilities
Schedule 4 - Litigation
Schedule 5 - Subsidiaries
Schedule 6 - Environmental Matters
Schedule 7 - Title Matters
Schedule 8 - Curative Matters
RESTATED CREDIT AGREEMENT
THIS RESTATED CREDIT AGREEMENT (hereinafter referred to as the "Agreement")
executed as of the 23rd day of November, 1999, by and between MIDDLE BAY OIL
COMPANY, INC., an Alabama corporation ("Middle Bay"), ENEX RESOURCES
CORPORATION, a Delaware corporation ("Enex") and MIDDLE BAY PRODUCTION COMPANY,
INC., a Kansas corporation ("Production") (Middle Bay, Enex and Production are
hereinafter collectively referred to as "Borrowers", and individually as a
"Borrower") and BANK ONE, TEXAS, N.A., a national banking association ("Bank
One"), and each of the financial institutions which is a party hereto (as
evidenced by the signature pages to this Agreement) or which may from time to
time become a party hereto pursuant to the provisions of Section 28 hereof or
any successor or assignee thereof (hereinafter collectively referred to as
"Lenders", and individually, "Lender") and Bank One, as Administrative Agent
(the "Agent") and Union Bank of California, N.A., as Syndication Agent.
W I T N E S S E T H:
WHEREAS, as of March 27, 1998, Middle Bay entered into a Credit Agreement
with Compass Bank, as Agent for itself and Bank of Oklahoma, N.A., pursuant to
which the Lenders made available to Middle Bay a credit facility of up to
$100,000,000 (the "Credit Agreement"); and'
WHEREAS, the Lenders have acquired all of the interest of Compass Bank and
Bank of Oklahoma in the Credit Agreement and the liens securing the same; and
WHEREAS, Borrowers have requested that the Lenders restate the Credit
Agreement to make available to them a loan facility in amounts of up to
$250,000,000; and
WHEREAS, the Lenders have agreed to restate the Credit Agreement and to
make the requested facility available to Borrowers.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereby agree to restate the Credit Agreement as
follows:
1. DEFINITIONS. When used herein the terms "Agent", "Agreement", "Bank
One", "Borrower", "Borrowers", "Enex", "Lender", "Lenders", "Middle Bay" and
"Production" shall have the meanings indicated above. When used herein the
following terms shall have the following meanings:
ADVANCE OR ADVANCES means a loan or loans hereunder.
AFFILIATE means any Person which, directly or indirectly, controls, is
controlled by or is under common control with the relevant Person. For the
purposes of this definition, "control" (including, with correlative
meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean a
member of the board of directors, a partner or an officer of such
Person, or any other Person with possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of such Person, through the ownership (of record, as trustee,
or by proxy) of voting shares, partnership interests or voting rights,
through a management contract or otherwise. Any Person owning or
controlling directly or indirectly ten percent or more of the voting
shares, partnership interests or voting rights, or other equity interest
of another Person shall be deemed to be an Affiliate of such Person.
ALTERNATE BASE RATE shall mean, as of any date, a rate of interest per
annum equal to the higher of (i) the Corporate Base Rate for such date, and
(ii) the sum of the Federal Funds Effective Rate for such date plus
one-half of one percent (.50%) per annum.
ASSIGNMENT AND ACCEPTANCE means a document substantially in the form
of Exhibit "D" hereto.
BASE RATE shall mean, as of any date, the sum of the Alternate Base
Rate plus the Base Rate Margin.
BASE RATE LOANS shall mean any loan during any period which bears
interest based upon the Alternate Base Rate or which would bear interest
based upon the Alternate Base Rate if the Maximum Rate ceiling was not in
effect at that particular time.
BASE RATE MARGIN shall be:
(i) one-quarter of one percent (.25%) per annum whenever the
Borrowing Base Usage is equal to or greater than 75%; or
(ii) zero percent (0%) per annum whenever the Borrowing Base
Usage is less than 75%.
BORROWING BASE shall mean the value assigned by the Lenders from time
to time to the Oil and Gas Properties pursuant to Section 7 hereof. Until
the next determination of the Borrowing Base pursuant to Section 7(b)
hereof, the Borrowing Base shall be $95,000,000.
BORROWING BASE USAGE shall mean, as of any date, all amounts
outstanding on the Loan plus all outstanding Letters of Credit, divided by
the Borrowing Base.
BORROWING DATE means the date elected by Borrowers pursuant to
Section 2(b) hereof for an Advance on the Loan.
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BUSINESS DAY shall mean (i) with respect to any borrowing, payment or
note selection of Eurodollar Loans, a day (other than Saturdays or Sundays)
on which banks are legally open for business in Dallas, Texas and New York,
New York and on which dealings in United States dollars are carried on in
the London interbank market, and (ii) for all other purposes a day (other
than Saturdays and Sundays) on which banks are legally open for business in
Dallas, Texas.
CASH COLLATERAL ACCOUNTS is used herein as defined in Section 12(v).
CHANGE OF CONTROL shall occur if any Person (or syndicate or group of
Persons which is deemed a Person for the purposes of Sections 13(d) or
14(d)(ii) of the Securities Act of 1934, as amended) shall acquire,
directly or indirectly an amount of issued and outstanding voting stock of
Borrowers (including the acquisition of newly-issued stock) sufficient to
change the control of Borrowers by causing the election or change of a
majority of the directors of Borrowers.
CHANGE OF MANAGEMENT means a Change of Management shall occur if ▇▇▇▇▇
▇. ▇▇▇▇▇▇ ever ceases to act as President and Chief Executive Officer of
Middle Bay and a replacement for such officer, acceptable to Agent, is not
appointed within sixty (60) days thereafter.
COMMITMENT means (A) For all Lenders, the LESSER of (i) $250,000,000
or (ii) the Borrowing Base, as reduced or increased from time to time
pursuant to Sections 2 and 7 hereof, and (B) as to any Lender, its
obligation to make Advances hereunder on the Loan and purchase
participations in Letters of Credit issued hereunder by the Agent in
amounts not exceeding, in the aggregate, an amount equal to such Lender's
Commitment Percentage times the total Commitment as of any date. The
Commitment of each Lender hereunder shall be adjusted from time to time to
reflect assignments made by such Lender pursuant to Section 28 hereof.
Each reduction in the Commitment shall result in a Pro Rata reduction in
each Lender's Commitment.
COMMITMENT PERCENTAGE means for each Lender the percentage derived by
dividing its Commitment at the time of the determination by the Commitments
of all Lenders at the time of determination. The Commitment Percentage of
each Lender hereunder shall be adjusted from time to time to reflect
assignments made by such Lender pursuant to Section 28 hereof.
CONSOLIDATED CURRENT ASSETS means the total of the consolidated
current assets determined in accordance with GAAP, plus, as of any date,
the unused availability on the Commitment.
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CONSOLIDATED CURRENT LIABILITIES means the total of consolidated
current obligations as determined in accordance with GAAP, excluding
therefrom, as of any date, current maturities due on the Loans.
CONSOLIDATED EBITDA shall mean Consolidated Net Income (excluding
gains and losses from asset sales, extraordinary and non-recurring gains
and losses and non-recurring formation costs) plus the sum of (i) income
tax expense (but excluding income tax expense relating to the sales or
other disposition of assets, including capital stock, the gains and losses
from which are excluded in the determination of Consolidated Net Income),
plus (ii) Consolidated Interest Expense, plus (iii) depreciation, depletion
and amortization expense, plus (iv) other non-cash expenses.
CONSOLIDATED INTEREST EXPENSE shall mean the aggregate amount of cash
and non-cash interest expense (including capitalized interest) of Borrowers
as determined on a consolidated basis in accordance with GAAP in respect of
all indebtedness.
CONSOLIDATED NET INCOME shall mean Borrowers' consolidated net income
after income taxes calculated in accordance with GAAP.
CORPORATE BASE RATE means the rate per annum equal to the Corporate
Base Rate announced by the Agent from time to time, changing when and as
said Corporate Base Rate changes.
CURRENT RATIO means the ratio of Consolidated Current Assets for the
period being measured to the Consolidated Current Liabilities for such
period.
DEFAULT means all the events specified in Section 14 hereof,
regardless of whether there shall have occurred any passage of time or
giving of notice, or both, that would be necessary in order to constitute
such event as an Event of Default.
DEFAULTING LENDER is used herein as defined in Section 3(f) hereof.
EFFECTIVE DATE means the date of this Agreement.
ELIGIBLE ASSIGNEE means any of (i) a Lender or any Affiliate of a
Lender; (ii) a commercial bank organized under the laws of the United
States, or any state thereof, and having a combined capital and surplus of
at least $100,000,000; (iii) a commercial bank organized under the laws of
any other country which is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such
country, and having a combined capital and surplus of at least
$100,000,000.00, provided that such bank is acting through a branch or
agency located in the United States; (iv) a Person that is
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primarily engaged in the business of commercial lending and that (A) is
a subsidiary of a Lender, (B) a subsidiary of a Person of which a Lender
is a subsidiary, or (C) a Person of which a Lender is a subsidiary; (v)
any other entity (other than a natural person) which is an "accredited
investor" (as defined in Regulation D under the Securities Act) which
extends credit or buys loans as one of its businesses, including, but
not limited to, insurance companies, mutual funds, investments funds and
lease financing companies; and (vi) with respect to any Lender that is a
fund that invests in loans, any other fund that invests in loans and is
managed by the same investment advisor of such Lender or by an Affiliate
of such investment advisor (and treating all such funds so managed as a
single Eligible Assignee); provided, however, that no Affiliate of
Borrowers shall be an Eligible Assignee.
ENGINEERED VALUE is used herein as defined in Section 6 hereof.
ENVIRONMENTAL LAWS means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 U.S.C.A. Section 9601, ET
SEQ., the Resource Conservation and Recovery Act, as amended by the
Hazardous Solid Waste Amendment of 1984, 42 U.S.C.A. Section 6901, ET SEQ.,
the Clean Water Act, 33 U.S.C.A. Section 1251, et seq., the Clean Air Act,
42 U.S.C.A. Section 1251, ET SEQ., the Toxic Substances Control Act, 15
U.S.C.A. Section 2601, ET SEQ., The Oil Pollution Act of 1990, 33 U.S.G.
Section 2701, ET SEQ., and all other laws, statutes, codes, acts,
ordinances, orders, judgments, decrees, injunctions, rules, regulations,
orders, permits and restrictions of any federal, state, county, municipal
and other governments, departments, commissions, boards, agencies, courts,
authorities, officials and officers, domestic or foreign, relating to oil
pollution, air pollution, water pollution, noise control and/or the
handling, discharge, disposal or recovery of on-site or off-site asbestos,
radioactive materials, spilled or leaked petroleum products, distillates or
fractions and industrial solid waste or "hazardous substances" as defined
by 42 U.S.C. Section 9601, ET SEQ., as amended, as each of the foregoing
may be amended from time to time.
ENVIRONMENTAL LIABILITY means any claim, demand, obligation, cause of
action, order, violation, damage, injury, judgment, penalty or fine, cost
of enforcement, cost of remedial action or any other costs or expense
whatsoever, including reasonable attorneys' fees and disbursements,
resulting from the violation or alleged violation of any Environmental Law
or the release of any substance into the environment which is required to
be remediated by a regulatory agency or governmental authority or the
imposition of any Environmental Lien (as hereinafter defined) which could
reasonably be expected to individually or in the aggregate have a Material
Adverse Effect.
ENVIRONMENTAL LIEN means a Lien in favor of any court, governmental
agency or instrumentality or any other Person (i) for any Environmental
Liability or (ii) for damages arising from or cost incurred by such court
or governmental agency or instrumentality or
-5-
other person in response to a release or threatened release of asbestos
or "hazardous substance" into the environment, the imposition of which
Lien could reasonably be expected to have a Material Adverse Effect.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
EURODOLLAR BASE RATE shall mean, with respect to any Eurodollar Loan
for the relevant Interest Period, the rate determined by the Agent to be
the rate at which the Agent offers to place deposits in U.S. dollars with
first-class banks in the London interbank market at approximately 11:00
a.m. (London time) two (2) Business Days prior to the first date of such
Interest Period, in the approximate amount of the Agent's relevant
Eurodollar Loan and having a maturity equal to such Interest Period.
EURODOLLAR LOANS means any loans during any period which bear interest
at the Eurodollar Rate, or which would bear interest at such rate if the
Maximum Rate ceiling was not in effect at a particular time.
EURODOLLAR MARGIN shall be:
(i) one and seven-eights percent (1.875%) per annum whenever
the Borrowing Base Usage is equal to or greater than 90%;
(ii) one and three-quarters percent (1.75%) per annum whenever
the Borrowing Base Usage is equal to or greater than 75%, but less
than 90%;
(iii) one and one-half percent (1.50%) per annum whenever the
Borrowing Base Usage is equal to or greater than 50%, but less than
75%; or
(iv) one and one-quarter percent (1.25%) per annum whenever the
Borrowing Base Usage is less than 50%.
EURODOLLAR RATE means, with respect to a Eurodollar Loan for the
relevant Interest Period, the sum of (i) the quotient of (A) the Eurodollar
Base Rate applicable to such Interest Period, divided by (B) one minus the
Reserve Requirement (expressed as a decimal) applicable to such Interest
Period, plus the (iii) Eurodollar Margin. The Eurodollar Rate shall be
rounded to the next higher multiple of 1/16th of one percent if the rate is
not such a multiple.
FEDERAL FUNDS EFFECTIVE RATE shall mean, for any day, an interest rate
per annum equal to the weighted average of the rates on overnight Federal
funds transactions with
-6-
members of the Federal Reserve System arranged by Federal funds brokers
on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations at
approximately 10:00 a.m. (Dallas, Texas time) on such day on such
transactions received by the Agent from three (3) Federal funds brokers
of recognized standing selected by the Agent in its sole discretion.
FINANCIAL STATEMENTS means balance sheets, income statements,
statements of cash flow and appropriate footnotes and schedules, prepared
in accordance with GAAP.
▇▇▇▇▇ ACQUISITION means the acquisition by Borrowers of oil and gas
properties and partnership interests from ▇▇▇▇▇ Oil Company and the ▇▇▇▇▇
Participants pursuant to several Purchase Agreements between Middle Bay,
▇▇▇▇▇ Oil Company and the ▇▇▇▇▇ Participants, all of which have been
executed.
▇▇▇▇▇ EQUITY TRANSACTION means the transaction whereby a portion of
the amount paid for the oil and gas properties being acquired in the ▇▇▇▇▇
Acquisition will be paid for with common stock of Middle Bay.
▇▇▇▇▇ PARTICIPANTS means those parties to the ▇▇▇▇▇ Acquisition who
were participants in oil and gas programs sponsored by ▇▇▇▇▇ Oil from 1986
through 1993.
GAAP means generally accepted accounting principles, consistently
applied.
INTERCREDITOR AGREEMENTS means the Intercreditor Agreements among
(i) Middle Bay, the Agent and 3TEC Energy Company L.L.C., (ii) Middle Bay,
the Agent and ▇▇▇▇▇▇▇▇▇ Family Partnership, LP and (iii) Middle Bay, the
Agent and Shoeinvest II, LP, each dated November 23, 1999.
INTEREST PAYMENT DATE shall mean the last day of each calendar month
in the case of Base Rate Loans and, in the case of Eurodollar Loans, the
last day of the applicable Interest Period.
INTEREST PERIOD shall mean with respect to any Eurodollar Loan (i)
initially, the period commencing on the date such Eurodollar Loan is made
and ending one (1), two (2), three (3), or six (6) months thereafter as
selected by the Borrowers pursuant to Section 4(a)(ii), and (ii)
thereafter, each period commencing on the day following the last day of the
next preceding Interest Period applicable to such Eurodollar Loan and
ending one (1), two (2), three (3) or six (6) months thereafter, as
selected by the Borrowers pursuant to Section 4(a)(ii); provided, however,
that (i) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding
-7-
Business Day unless the result of such extension would be to extend such
Interest Period into the next calendar month, in which case such
Interest Period shall end on the immediately preceding Business Day,
(ii) if any Interest Period begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) such Interest Period shall end on the last Business Day of a
calendar month, and (iii) any Interest Period which would otherwise
expire after the Maturity Date shall end on such Maturity Date.
LETTERS OF CREDIT is used herein as defined in Section 2(c) hereof.
LIEN means any mortgage, deed of trust, pledge, security interest,
assignment, encumbrance or lien (statutory or otherwise) of every kind and
character.
LOAN OR LOANS means an Advance or Advances made under the Commitment.
LOAN DOCUMENTS means this Agreement, the Notes, the Intercreditor
Agreements, the Security Instruments and all other documents executed in
connection with the transaction described in this Agreement.
LOCKBOX ACCOUNTS is used herein as defined in Section 12(v).
MAJORITY LENDERS means Lenders holding 66-2/3% or more of the
Commitments or if the Commitments have been terminated, Lenders holding
66-2/3% of the outstanding Loans.
MATERIAL ADVERSE EFFECT shall mean a material adverse effect on
(i) the assets or properties, liabilities, financial condition, business,
operations, affairs or circumstances of the Borrowers, (ii) the ability of
the Borrowers to carry out their respective businesses as of the date of
this Agreement or as proposed at the date of this Agreement to be
conducted, (iii) the ability of Borrowers to perform fully and on a timely
basis its obligations under any of the Loan Documents, or (iv) the validity
or enforceability of any of the Loan Documents or the rights and remedies
of the Agent or the Lenders thereunder.
MATURITY DATE shall mean November 30, 2002.
MAXIMUM RATE means at any particular time in question, the maximum
non-usurious rate of interest which under applicable law may then be
charged on the Note. If such Maximum Rate changes after the date hereof,
the Maximum Rate shall be automatically increased or decreased, as the case
may be, without notice to Borrowers from time to time as the effective date
of each change in such Maximum Rate.
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MINIMUM INTEREST COVERAGE RATIO means the ratio of Consolidated EBITDA
for the period being measured to the sum of Consolidated Interest Expense
for the period being measured.
MONTHLY COMMITMENT REDUCTION is used herein, as defined in Section
2(f) hereof.
NOTES means the Notes, substantially in the form of Exhibit "B"
hereto issued or to be issued hereunder to each Lender, respectively, to
evidence the indebtedness to such Lender arising by reason of the Advances
on the Loan, together with all modifications, renewals and extensions
thereof or any part thereof.
OIL AND GAS PROPERTIES means all oil, gas and mineral properties and
interests, related personal properties, in which Borrowers grant to the
Lenders either a first and prior lien and security interest pursuant to
Section 6 hereof or a negative pledge pursuant to Section 13(a) hereof.
OPERATING ACCOUNTS is used herein as defined in Section 12(v).
OTHER FINANCING is used herein as defined in Section 15(l) hereof.
PAYOR is used herein as defined in Section 3(h)hereof.
PERMITTED LIENS shall mean (i) royalties, overriding royalties,
reversionary interests, production payments and similar burdens; (ii) sales
contracts or other arrangements for the sale of production of oil, gas or
associated liquid or gaseous hydrocarbons which would not (when considered
cumulatively with the matters discussed in clause (i) above) deprive
Borrowers of any material right in respect of any such Borrowers' assets or
properties (except for rights customarily granted with respect to such
contracts and arrangements); (iii) statutory Liens for taxes or other
assessments that are not yet delinquent (or that, if delinquent, are being
contested in good faith by appropriate proceedings, levy and execution
thereon having been stayed and continue to be stayed and for which such
Borrower has set aside on its books adequate reserves in accordance with
GAAP); (iv) easements, rights of way, servitudes, permits, surface leases
and other rights in respect to surface operations, pipelines, grazing,
logging, canals, ditches, reservoirs or the like, conditions, covenants and
other restrictions, and easements of streets, alleys, highways, pipelines,
telephone lines, power lines, railways and other easements and rights of
way on, over or in respect of Borrowers' assets or properties and that do
not individually or in the aggregate, cause a Material Adverse Effect; (v)
materialmen's, mechanic's, repairman's, employee's, warehousemen's,
landlord's, carrier's, pipeline's, contractor's, sub-contractor's,
operator's, non-operator's (arising under operating or joint operating
agreements), and other Liens (including any financing statements filed in
respect thereof) incidental to obligations
-9-
incurred by Borrowers in connection with the construction, maintenance,
development, transportation, storage or operation of Borrowers' assets
or properties to the extent not delinquent (or which, if delinquent, are
being contested in good faith by appropriate proceedings and for which
such Borrower has set aside on its books adequate reserves in accordance
with GAAP); (vi) all contracts, agreements and instruments, and all
defects and irregularities and other matters affecting Borrowers' assets
and properties which were in existence at the time Borrowers' assets and
properties were originally acquired by Borrowers and all routine
operational agreements entered into in the ordinary course of business,
which contracts, agreements, instruments, defects, irregularities and
other matters and routine operational agreements are not such as to,
individually or in the aggregate, interfere materially with the
operation, value or use of Borrowers' assets and properties, considered
in the aggregate; (vii) liens in connection with workmen's compensation,
unemployment insurance or other social security, old age pension or
public liability obligations; (viii) legal or equitable encumbrances
deemed to exist by reason of the existence of any litigation or other
legal proceeding or arising out of a judgment or award with respect to
which an appeal is being prosecuted in good faith and levy and execution
thereon have been stayed and continue to be stayed; (ix) rights reserved
to or vested in any municipality, governmental, statutory or other
public authority to control or regulate Borrowers' assets and properties
in any manner, and all applicable laws, rules and orders from any
governmental authority; (x) landlord's liens; (xi) Liens incurred
pursuant to the Security Instruments; and (xii) Liens existing at the
date of this Agreement which are identified in Schedule "1" hereto.
PERSON means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof.
PLAN means any plan subject to Title IV of ERISA and maintained by
Borrowers, or any such plan to which any Borrower is required to contribute
on behalf of its employees.
PRE-APPROVED CONTRACTS as used herein shall mean any contracts or
agreements entered into in connection with any Rate Management Transaction
designed (i) to hedge, forward sell or swap crude oil or natural gas or
otherwise sell up to 75% of the Borrowers' anticipated production from
proved, developed producing reserves of crude oil, and/or 75% of the
Borrowers' anticipated production from proved, developed producing reserves
of natural gas, during the period from the immediately preceding settlement
date (or the commencement of the term of such hedge transactions if there
is no prior settlement date) to such settlement date, (ii) with a maturity
of eighteen (18) months or less, (iii) with "strike prices" per barrel
greater than Agent's forecasted price in the most recent engineering
evaluation of Borrowers' Oil and Gas Properties, adjusted for the
difference between the forecasted price and the Borrowers' actual product
price as reasonably determined by the Agent, and (iv) with counterparties
to the hedging agreement which are reasonably
-10-
approved by Agent.
PRO RATA OR PRO RATA PART means for each Lender, (i) for all purposes
where no Loan is outstanding, such Lender's Commitment Percentage and (ii)
otherwise, the proportion which the portion of the outstanding Loans owed
to such Lender bears to the aggregate outstanding Loans owed to all Lenders
at the time in question.
RATE MANAGEMENT TRANSACTION means any transaction (including an
agreement with respect thereto) now existing or hereafter entered into
between Borrowers and Agent or the Lenders which is a rate swap, basis
swap, forward rate transaction, commodity swap, commodity option, equity or
equity index swap, equity or equity index option, bond option, interest
rate option, forward exchange transaction, cap transaction, floor
transaction, collar transaction, forward transaction, currency swap
transaction, cross-currency rate swap transaction, currency option or any
other similar transaction (including any option with respect to any of
these transactions) or any combination thereof, whether linked to one or
more interest rates, foreign currencies, commodity prices, equity prices or
other financial measures.
REGULATION D shall mean Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor
thereto and other regulation or official interpretation of said Board of
Governors relating to reserve requirements applicable to member banks of
the Federal Reserve System.
REIMBURSEMENT OBLIGATIONS means, at any time, the obligations of the
Borrowers in respect of all Letters of Credit then outstanding to reimburse
amounts paid by any Lender in respect of any drawing or drawings under a
Letter of Credit.
RELEASE PRICE is used herein as defined in Section 12(r) hereof.
REQUIRED PAYMENT is used herein as defined in Section 3(h) hereof.
RESERVE REQUIREMENT means, with respect to any Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D or
Eurocurrency liabilities.
SECURITY INSTRUMENTS is used collectively herein to mean this
Agreement, all Deeds of Trust, Mortgages, Security Agreements, Assignments
of Production and Financing Statements and other collateral documents
covering the Oil and Gas Properties and related personal property,
equipment, oil and gas inventory and proceeds of the foregoing, all such
documents to be in form and substance satisfactory to Agent.
-11-
SECURITY PURCHASE AGREEMENTS mean (i) a Securities Purchase Agreement
dated August 27, 1999 between Middle Bay and ▇▇▇▇▇▇▇▇▇ Family Partnership,
LP, (ii) a Securities Purchase Agreement dated August 27, 1999 between
Middle Bay and Shoeinvest II, LP, (iii) a Securities Purchase Agreement
dated July 1, 1999 between Middle Bay and 3TEC Energy Company, L.L.C. and
(iv) a Securities Purchase Agreement dated October 19, 1999 between Middle
Bay and The Prudential Insurance Company of America, as amended by that
certain Letter Amendment No. 1 to Middle Bay Oil Company, Inc. Security
Purchase Agreement dated November 23, 1999.
SERIES B PREFERRED STOCK means 266,667 shares of Middle Bay preferred
stock which has been designated as Series B and has a stated value of $7.50
per share, all of which is issued and outstanding.
SERIES C PREFERRED STOCK means 2,300,000 shares of Middle Bay
preferred stock which has been designated as Series C and has a stated
value of $5.00 per share, 2,177,814 shares of which is issued and
outstanding.
SUBORDINATED LENDERS 3TEC Energy Company L.L.C., ▇▇▇▇▇▇▇▇▇ Family
Partnership, LP, Shoeinvest II, LP and The Prudential Insurance Company of
America.
SUBORDINATED NOTES means promissory notes issued by Middle Bay
pursuant to the Security Purchase Agreements.
SUBSIDIARY means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by Borrowers or
another subsidiary.
TOTAL OUTSTANDINGS means, as of any date, the sum of (i) the total
principal balance outstanding on the Notes, plus (ii) the total face amount
of all outstanding Letters of Credit, plus (iii) the total amount of all
unpaid Reimbursement Obligations.
TRANCHE means a set of Eurodollar Loans made by the Lenders at the
same time and for the same Interest Period.
UNSCHEDULED REDETERMINATIONS means a redetermination of the Borrowing
Base made at any time other than on the dates set for the regular
semi-annual redetermination of the Borrowing Base which are made (A) at
the request of Borrowers (but only once between Borrowing Base
redeterminations), (B) at the request of Majority Lenders.
-12-
UNUSED COMMITMENT FEE RATE shall be:
(i) one-half of one percent (.50%) per annum whenever the
Borrowing Base Usage is equal to or greater than 90%;
(ii) three-eighths of one percent (.375%) per annum whenever
the Borrowing Base Usage is equal to or greater than 50% but less than
90%; or
(iii) one-fourth of one percent (.25%) per annum whenever the
Borrowing Base Usage is less than 50%.
2. COMMITMENTS OF THE LENDER.
(a) TERMS OF COMMITMENT. On the terms and conditions hereinafter set
forth, each Lender agrees severally to make Advances to the Borrowers from
time to time during the period beginning on the Effective Date and ending
on the Maturity Date in such amounts as the Borrowers may request up to an
amount not to exceed, in the aggregate principal amount outstanding at any
time, the Commitment less Total Outstandings. The obligation of the
Borrowers hereunder shall be evidenced by this Agreement and the Notes
issued in connection herewith, said Notes to be as described in Section 3
hereof. Notwithstanding any other provision of this Agreement, no Advance
shall be required to be made hereunder if any Event of Default (as
hereinafter defined) has occurred and is continuing or if any event or
condition has occurred or failed to occur which with the passage of time or
service of notice, or both, would constitute an Event of Default. Each
Advance under the Commitment shall be an aggregate amount of at least
$1,000,000 or any whole multiples of $100,000 in excess thereof.
Irrespective of the face amount of the Note or Notes, the Lenders shall
never have the obligation to Advance any amount or amounts in excess of the
Commitment or to increase the Commitment.
(b) PROCEDURE FOR BORROWING. Whenever the Borrowers desire an
Advance hereunder, they shall give Agent telegraphic, telex, facsimile or
telephonic notice ("Notice of Borrowing") of such requested Advance, which
in the case of telephonic notice, shall be promptly confirmed in writing.
Each Notice of Borrowing shall be in the form of Exhibit "A" attached
hereto and shall be received by Agent not later than 11:00 a.m. Dallas,
Texas time, (i) one Business Day prior to the Borrowing Date in the case of
the Base Rate Loan, or (ii) three Business Days prior to any proposed
Borrowing Date in the case of Eurodollar Loans. Each Notice of Borrowing
shall specify (i) the Borrowing Date (which, if at Base Rate Loan, shall be
a Business Day and if a Eurodollar Loan, a Business Day), (ii) the
principal amount to be borrowed, (iii) the portion of the Advance
constituting Base Rate Loans and/or Eurodollar Loans, (iv) if any portion
of the proposed Advance is to constitute Eurodollar Loans, the initial
Interest Period selected by Borrowers pursuant to Section 4
-13-
hereof to be applicable thereto, and (v) the date upon which such Advance
is required. Upon receipt of such Notice, Agent shall advise each Lender
thereof; provided, that if the Lenders have received at least one (1) day's
notice of such Advance prior to funding of a Base Rate Loan, or at least
three (3) days' notice of each Advance prior to funding in the case of a
Eurodollar Loan, each Lender shall provide Agent at its office at ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, not later than 1:00 p.m., Dallas, Texas
time, on the Borrowing Date, in immediately available funds, its pro rata
share of the requested Advance, but the aggregate of all such fundings by
each Lender shall never exceed such Lender's Commitment. Not later than
2:00 p.m., Dallas, Texas time, on the Borrowing Date, Agent shall make
available to the Borrowers at the same office, in like funds, the aggregate
amount of such requested Advance. Neither Agent nor any Lender shall incur
any liability to the Borrowers in acting upon any Notice referred to above
which Agent or such Lender believes in good faith to have been given by a
duly authorized officer or other person authorized to borrow on behalf of
Borrowers or for otherwise acting in good faith under this Section 2(b).
Upon funding of Advances by Lenders in accordance with this Agreement,
pursuant to any such Notice, the Borrowers shall have effected Advances
hereunder.
(c) LETTERS OF CREDIT. On the terms and conditions hereinafter set
forth, the Agent shall from time to time during the period beginning on the
Effective Date and ending on the Maturity Date upon request of Borrowers
issue standby Letters of Credit for the account of Borrowers (the "Letters
of Credit") in such face amounts as Borrowers may request, but not to
exceed in the aggregate face amount at any time outstanding the sum of Five
Million Dollars ($5,000,000). The face amount of all Letters of Credit
issued and outstanding hereunder shall be considered as Advances on the
Commitment for Borrowing Base purposes and all payments made by the Agent
on such Letters of Credit shall be considered as Advances under the Notes.
Each Letter of Credit issued for the account of Borrowers hereunder shall
(i) be in favor of such beneficiaries as specifically requested by
Borrowers, (ii) have an expiration date not exceeding the earlier of
(a) one year or (b) the Maturity Date, and (iii) contain such other terms
and provisions as may be required by issuing Lender. Each Lender (other
than Agent) agrees that, upon issuance of any Letter of Credit hereunder,
it shall automatically acquire a participation in the Agent's liability
under such Letter of Credit in an amount equal to such Lender's Commitment
Percentage of such liability, and each Lender (other than Agent) thereby
shall absolutely, unconditionally and irrevocably assume, as primary
obligor and not as surety, and shall be unconditionally obligated to Agent
to pay and discharge when due, its Commitment Percentage of Agent's
liability under such Letter of Credit. The Borrowers hereby
unconditionally agree to pay and reimburse the Agent for the amount of each
demand for payment under any Letter of Credit that is in substantial
compliance with the provisions of any such Letter of Credit at or prior to
the date on which payment is to be made by the Agent to the beneficiary
thereunder, without presentment, demand, protest or other formalities of
any kind. Upon receipt from any beneficiary of any Letter of Credit of any
demand for payment under such Letter of
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Credit, the Agent shall promptly notify the Borrowers of the demand and
the date upon which such payment is to be made by the Agent to such
beneficiary in respect of such demand. Forthwith upon receipt of such
notice from the Agent, Borrowers shall advise the Agent whether or not
they intend to borrow hereunder to finance their obligations to
reimburse the Agent, and if so, submit a Notice of Borrowing as provided
in Section 2(b) hereof. If Borrowers fail to so advise Agent and
thereafter fail to reimburse Agent, the Agent shall notify each Lender
of the demand and the failure of the Borrowers to reimburse the Agent,
and each Lender shall reimburse the Agent for its Commitment Percentage
of each such draw paid by the Agent and unreimbursed by the Borrowers.
All such amounts paid by Agent and/or reimbursed by the Lenders shall be
treated as an Advance or Advances under the Commitment, which Advances
shall be immediately due and payable and shall bear interest at the
Maximum Rate.
(d) PROCEDURE FOR OBTAINING LETTERS OF CREDIT. The amount and date
of issuance, renewal, extension or reissuance of a Letter of Credit
pursuant to the Lenders' commitments above in Section 2(c) shall be
designated by Borrowers' written request delivered to Agent at least three
(3) Business Days prior to the date of such issuance, renewal, extension or
reissuance. Concurrently with or promptly following the delivery of the
request for a Letter of Credit, Borrowers shall execute and deliver to the
Agent an application and agreement with respect to the Letters of Credit,
said application and agreement to be in the form used by the Agent. The
Agent shall not be obligated to issue, renew, extend or reissue such
Letters of Credit if (A) the amount thereon when added to the face amount
of the outstanding Letters of Credit plus any Reimbursement Obligations
exceeds Five Million Dollars ($5,000,000) or (B) the amount thereof when
added to the Total Outstandings would exceed the Commitment. Borrowers
agree to pay the Agent for the benefit of the Lenders commissions for
issuing the Letters of Credit (calculated separately for each Letter of
Credit) in an amount equal to the greater of (i) the Eurodollar Margin then
in effect times the maximum face amount of the Letter of Credit or
(ii) $500.00. Borrowers further agree to pay Agent an additional fronting
fee equal to one-eighth of one percent (0.125%) per annum on the maximum
face amount of each Letter of Credit. Such commissions shall be payable
prior to the issuance of each Letter of Credit and thereafter on each
anniversary date of such issuance while such Letter of Credit is
outstanding.
(e) VOLUNTARY REDUCTION OF COMMITMENT. The Borrowers may at any
time, or from time to time, upon not less than three (3) Business Days'
prior written notice to Agent, reduce or terminate the Commitment;
provided, however, that (i) each reduction in the Commitment must be in the
amount of $1,000,000 or more, in increments of $1,000,000 and (ii) each
reduction must be accompanied by a prepayment of the Notes in the amount by
which the outstanding principal balance of the Notes exceeds the Commitment
as reduced pursuant to this Section 2.
-15-
(f) MANDATORY COMMITMENT REDUCTIONS -
(i) MONTHLY COMMITMENT REDUCTION. The Borrowing Base and the
Commitment shall be reduced as of the first day of each month by an
amount determined by the Lenders pursuant to Section 7(b) hereof (the
"Monthly Commitment Reduction"). The Monthly Commitment Reduction
shall be $0 per month until redetermined pursuant to Section 7(b)
hereof. If as a result of any such Monthly Commitment Reduction, the
Total Outstandings ever exceed the Commitment then in effect, the
Borrowers shall make the mandatory prepayment of principal required
pursuant to Section 9(b) hereof.
(ii) OTHER REDUCTIONS. The Borrowing Base shall be reduced
from time to time by the amount of any prepayment required by
Section 12(r) hereof upon the sale of assets, provided, however, that
such reduction shall only remain in effect until the next
redetermination of the Borrowing Base is made pursuant to Section 7(b)
hereof. Such temporary reduction of the Borrowing Base shall not
result in a reduction of the Commitment unless the Borrowers elect to
permanently reduce the Commitment pursuant to the provisions of
Section 2(e) hereof. If, as a result of any such reduction in the
Borrowing Base, the Total Outstandings ever exceed the Borrowing Base
then in effect, the Borrowers shall make the mandatory prepayment of
principal required pursuant to Section 9(b) hereof.
(g) SEVERAL OBLIGATIONS. The obligations of the Lenders under the
Commitments are several and not joint. The failure of any Lender to make
an Advance required to be made by it shall not relieve any other Lender of
its obligation to make its Advance, and no Lender shall be responsible for
the failure of any other Lender to make the Advance to be made by such
other Lender. No Lender shall be required to lend hereunder any amount in
excess of its legal lending limit.
(h) TYPE AND NUMBER OF ADVANCES. Any Advance of the Commitment may
be a Base Rate Loan or a Eurodollar Loan, or a combination thereof, as
selected by the Borrowers pursuant to Section 4 hereof. The total number
of Tranches which may be outstanding at any time shall never exceed four
(4).
(i) LIMITED LIABILITY OF ENEX AND PRODUCTION. While the obligations
of the Borrowers under the Agreement and the Notes shall be joint and
several obligations of Middle Bay, Enex and Production, the liability of
Enex and Production thereunder shall be limited to the maximum amount of
liability that can be incurred without rendering the obligations of Enex
and Production under the Loan Documents voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer, and not for any
greater amount.
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3. NOTES EVIDENCING LOANS. The loans described above in Section 2 shall
be evidenced by promissory notes of Borrowers as follows:
(a) FORM OF NOTES. The Loan shall be evidenced by a Note or Notes in
the aggregate face amount of $250,000,000, and shall be in the form
of Exhibit "B" hereto with appropriate insertions (each a "Note").
Notwithstanding the face amount of the Notes, the actual principal amount
due from the Borrowers to Lenders on account of the Notes, as of any date
of computation, shall be the sum of Advances then and theretofore made on
account thereof, less all principal payments actually received by Lenders
in collected funds with respect thereto. Although the Notes may be dated
as of the Effective Date, interest in respect thereof shall be payable only
for the period during which the loans evidenced thereby are outstanding
and, although the stated amount of the Notes may be higher, the Notes shall
be enforceable, with respect to Borrowers' obligation to pay the principal
amount thereof, only to the extent of the unpaid principal amount of the
Loans. Irrespective of the face amount of the Notes, no Lender shall ever
be obligated to advance on the Commitment any amount in excess of its
Commitment then in effect.
(b) ISSUANCE OF ADDITIONAL NOTES. At the Effective Date there shall
be outstanding Notes in the aggregate face amount of $250,000,000 payable
to the order of Lenders. From time to time new Notes may issued to other
Lenders as such Lenders become parties to this Agreement. Upon request
from Agent, the Borrowers shall execute and deliver to Agent any such new
or additional Notes. From time to time as new Notes are issued the Agent
shall require that each Lender exchange its Note(s) for newly issued
Note(s) to better reflect the extent of each Lender's Commitments
hereunder.
(c) INTEREST RATES. The unpaid principal balance of the Notes shall
bear interest from time to time as set forth in Section 4 hereof.
(d) PAYMENT OF INTEREST. Interest on the Notes shall be payable on
each Interest Payment Date.
(e) PAYMENT OF PRINCIPAL. Principal of the Note or Notes shall be
due and payable to the Agent for the ratable benefit of the Lenders on the
Maturity Date unless earlier due in whole or in part as a result of an
acceleration of the amount due or pursuant to the mandatory prepayment
provisions of Section 9(b) hereof.
(f) PAYMENT TO LENDERS. Each Lender's Pro Rata Part of payment or
prepayment of the Loans shall be directed by wire transfer to such Lender
by the Agent at the address provided to the Agent for such Lender for
payments no later than 2:00 p.m., Dallas, Texas, time on the Business Day
such payments or prepayments are deemed hereunder to have been received by
Agent; provided, however, in the event that any Lender
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shall have failed to make an Advance as contemplated under Section 2
hereof (a "Defaulting Lender") and the Agent or another Lender or
Lenders shall have made such Advance, payment received by Agent for the
account of such Defaulting Lender or Lenders shall not be distributed to
such Defaulting Lender or Lenders until such Advance or Advances shall
have been repaid in full to the Lender or Lenders who funded such
Advance or Advances. Any payment or prepayment received by Agent at any
time after 12:00 noon, Dallas, Texas, time on a Business Day shall be
deemed to have been received on the next Business Day. Interest shall
cease to accrue on any principal as of the end of the day preceding the
Business Day on which any such payment or prepayment is deemed hereunder
to have been received by Agent. If Agent fails to transfer any
principal amount to any Lender as provided above, then Agent shall
promptly direct such principal amount by wire transfer to such Lender.
(g) SHARING OF PAYMENTS, ETC. If any Lender shall obtain any payment
(whether voluntary, involuntary, or otherwise) on account of the Loans,
(including, without limitation, any set-off) which is in excess of its Pro
Rata Part of payments on either of the Loans, as the case may be, obtained
by all Lenders, such Lender shall purchase from the other Lenders such
participation as shall be necessary to cause such purchasing Lender to
share the excess payment pro rata with each of them; provided that, if all
or any portion of such excess payment is thereafter recovered from such
purchasing Lender, the purchase shall be rescinded and the purchase price
restored to the extent of the recovery. The Borrowers agree that any
Lender so purchasing a participation from another Lender pursuant to this
Section may, to the fullest extent permitted by law, exercise all of its
rights of payment (including the right of offset) with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrowers in the amount of such participation.
(h) NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Agent shall have
been notified by a Lender or the Borrowers (the "Payor") prior to the date
on which such Lender is to make payment to the Agent of the proceeds of a
Loan to be made by it hereunder or the Borrowers are to make a payment to
the Agent for the account of one or more of the Lenders, as the case may be
(such payment being herein called the "Required Payment"), which notice
shall be effective upon receipt, that the Payor does not intend to make the
Required Payment to the Agent, the Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption (but shall
not be required to), make the amount thereof available to the intended
recipient on such date and, if the Payor has not in fact made the Required
Payment to the Agent, the recipient of such payment shall, on demand, pay
to the Agent the amount made available to it together with interest thereon
in respect of the period commencing on the date such amount was made
available by the Agent until the date the Agent recovers such amount at the
rate applicable to such portion of the applicable Loan.
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4. INTEREST RATES.
(a) OPTIONS.
(i) BASE RATE LOANS. On all Base Rate Loans the
Borrowers agree to pay interest on the Notes calculated on the
basis of the actual days elapsed in a year consisting of 360 days
with respect to the unpaid principal amount of each Base Rate
Loan from the date the proceeds thereof are made available to
Borrowers until maturity (whether by acceleration or otherwise),
at a varying rate per annum equal to the lesser of (i) the
Maximum Rate (defined herein), or (ii) the Base Rate. Subject to
the provisions of this Agreement as to prepayment, the principal
of the Notes representing Base Rate Loans shall be payable as
specified in Section 3(e) hereof and the interest in respect of
each Base Rate Loan shall be payable on each Interest Payment
Date. Past due principal and, to the extent permitted by law,
past due interest in respect to each Base Rate Loan, shall bear
interest, payable on demand, at a rate per annum equal to the
Maximum Rate.
(ii) EURODOLLAR LOANS. On all Eurodollar Loans the
Borrowers agree to pay interest calculated on the basis of a year
consisting of 360 days with respect to the unpaid principal
amount of each Eurodollar Loan from the date the proceeds thereof
are made available to Borrowers until maturity (whether by
acceleration or otherwise), at a varying rate per annum equal to
the lesser of (i) the Maximum Rate, or (ii) the Eurodollar Rate.
Subject to the provisions of this Agreement with respect to
prepayment, the principal of the Notes shall be payable as
specified in Section 3(e) hereof and the interest with respect to
each Eurodollar Loan shall be payable on each Interest Payment
Date. Past due principal and, to the extent permitted by law,
past due interest shall bear interest, payable on demand, at a
rate per annum equal to the Maximum Rate. Upon three (3)
Business Days' written notice prior to the making by the Lenders
of any Eurodollar Loan (in the case of the initial Interest
Period therefor) or the expiration date of each succeeding
Interest Period (in the case of subsequent Interest Periods
therefor), Borrowers shall have the option, subject to compliance
by Borrowers with all of the provisions of this Agreement, as
long as no Event of Default exists, to specify whether the
Interest Period commencing on any such date shall be a one (1),
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two (2), three (3) or six (6) month period. If Agent shall not
have received timely notice of a designation of such Interest
Period as herein provided, Borrowers shall be deemed to have
elected to convert all maturing Eurodollar Loans to Base Rate
Loans.
(b) INTEREST RATE DETERMINATION. The Agent shall determine each
interest rate applicable to the Loans hereunder. The Agent shall give
prompt notice to the Borrowers and the Lenders of each rate of interest so
determined and its determination thereof shall be conclusive absent error.
(c) CONVERSION OPTION. Borrowers may elect from time to time (i) to
convert all or any part of its Eurodollar Loans to Base Rate Loans by
giving Agent irrevocable notice of such election in writing prior to 10:00
a.m. (Dallas, Texas time) on the conversion date and such conversion shall
be made on the requested conversion date, provided that any such conversion
of Eurodollar Loan shall only be made on the last day of the Interest
Period with respect thereof, (ii) to convert all or any part of its Base
Rate Loans to Eurodollar Loans by giving the Agent irrevocable written
notice of such election three (3) Business Days prior to the proposed
conversion and such conversion shall be made on the requested conversion
date or, if such requested conversion date is not a Business Day, on the
next succeeding Business Day. Any such conversion shall not be deemed to
be a prepayment of any of the loans for purposes of this Agreement on the
Notes.
(d) RECOUPMENT. If at any time the applicable rate of interest
selected pursuant to Sections 4(a)(i) or 4(a)(ii) above shall exceed the
Maximum Rate, thereby causing the interest on the Notes to be limited to
the Maximum Rate, then any subsequent reduction in the interest rate so
selected or subsequently selected shall not reduce the rate of interest on
the Notes below the Maximum Rate until the total amount of interest accrued
on the Note equals the amount of interest which would have accrued on the
Notes if the rate or rates selected pursuant to Sections 4(a)(i) or (ii),
as the case may be, had at all times been in effect.
5. SPECIAL PROVISIONS RELATING TO LOANS.
(a) UNAVAILABILITY OF FUNDS OR INADEQUACY OF PRICING. In the event
that, in connection with any proposed Eurodollar Loan, the Agent reasonably
determines, which determination shall, absent manifest error, be final,
conclusive and binding upon all parties, due to changes in circumstances
since the date hereof, adequate and fair means do not exist for determining
the Eurodollar Rate or such rate will not accurately reflect the costs to
the Lenders of funding Eurodollar Loan for such Interest Period, the Agent
shall give notice of such determination to the Borrowers and the Lenders,
whereupon, until the Agent notifies the Borrowers and the Lenders that the
circumstances giving rise to such suspension no
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longer exist, the obligations of the Lenders to make, continue or
convert Loan into Eurodollar Loan shall be suspended, and all loans to
Borrowers shall be Base Rate Loan during the period of suspension.
(b) CHANGE IN LAWS. If at any time any new law or any change in
existing laws or in the interpretation of any new or existing laws shall
make it unlawful for any Lender to make or continue to maintain or fund
Eurodollar Loan hereunder, then such Lender shall promptly notify Borrowers
in writing and such Lender's obligation to make, continue or convert Loan
into Eurodollar Loan under this Agreement shall be suspended until it is no
longer unlawful for such Lender to make or maintain Eurodollar Loan. Upon
receipt of such notice, Borrowers shall either repay the outstanding
Eurodollar Loan owed to the Lenders, without penalty, on the last day of
the current Interest Periods (or, if any Lender may not lawfully continue
to maintain and fund such Eurodollar Loan, immediately), or Borrowers may
convert such Eurodollar Loan at such appropriate time to Base Rate Loan.
(c) INCREASED COST OR REDUCED RETURN.
(i) If, after the date hereof, the adoption of any applicable
law, rule, or regulation, or any change in any applicable law, rule,
or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank, or comparable
agency charged with the interpretation or administration thereof, or
compliance by any Lender with any request or directive (whether or not
having the force of law) of any such governmental authority, central
bank, or comparable agency:
(A) shall subject such Lender to any tax, duty, or
other charge with respect to any Eurodollar Loan, its Notes, or
its obligation to make Eurodollar Loan, or change the basis of
taxation of any amounts payable to such Lender under this
Agreement or its Notes in respect of any Eurodollar Loan (other
than franchise taxes and taxes imposed on the overall net income
of such Lender);
(B) shall impose, modify, or deem applicable any
reserve, special deposit, assessment, or similar requirement
(other than reserve requirements, if any, taken into account in
the determination of the Eurodollar Rate) relating to any
extensions of credit or other assets of, or any deposits with or
other liabilities or commitments of, such Lender, including the
Commitment of such Lender hereunder; or
(C) shall impose on such Lender or on the London
interbank market any other condition affecting this Agreement or
its Notes or any
-21-
of such extensions of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such
Lender of making, converting into, continuing, or maintaining any
Eurodollar Loan or to reduce any sum received or receivable by such
Lender under this Agreement or its Notes with respect to any
Eurodollar Loan, then Borrowers shall pay to such Lender on demand
such amount or amounts as will reasonably compensate such Lender for
such increased cost or reduction. If any Lender requests compensation
by Borrowers under this Section 5(c), Borrowers may, by notice to such
Lender (with a copy to Agent), suspend the obligation of such Lender
to make or continue Eurodollar Loan, or to convert all or part of the
Base Rate Loan owing to such Lender to Eurodollar Loan, until the
event or condition giving rise to such request ceases to be in effect
(in which case the provisions of Section 5(c) shall be applicable);
PROVIDED that such suspension shall not affect the right of such
Lender to receive the compensation so requested.
(ii) If, after the date hereof, any Lender shall have
determined that the adoption of any applicable law, rule, or
regulation regarding capital adequacy or any change therein or in the
interpretation or administration thereof by any governmental
authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or any request or directive
regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank, or comparable agency,
has or would have the effect of reducing the rate of return on the
capital of such Lender or any corporation controlling such Lender as a
consequence of such Lender's obligations hereunder to a level below
that which such Lender or such corporation could have achieved but for
such adoption, change, request, or directive (taking into
consideration its policies with respect to capital adequacy), then
from time to time upon demand Borrowers shall pay to such Lender such
additional amount or amounts as will reasonably compensate such Lender
for such reduction.
(iii) Each Lender shall promptly notify Borrowers and Agent of
any event of which it has knowledge, occurring after the date hereof,
which will entitle such Lender to compensation pursuant to this
Section 5(c) and will designate a separate lending office, if
applicable, if such designation will avoid the need for, or reduce the
amount of, such compensation and will not, in the judgment of such
Lender, be otherwise disadvantageous to it. Any Lender claiming
compensation under this Section 5(c) shall furnish to Borrowers and
Agent a statement setting forth the additional amount or amounts to be
paid to it hereunder which shall be conclusive in the absence of
manifest error. In
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determining such amount, such Lender may use any reasonable averaging
and attribution methods.
(iv) Any Lender giving notice to the Borrowers through the
Agent, pursuant to Sections 3(k) or 5(c) shall give to the Borrowers a
statement signed by an officer of such Lender setting forth in
reasonable detail the basis for, and the calculation of such
additional cost, reduced payments or capital requirements, as the case
may be, and the additional amounts required to compensate such Lender
therefor.
(v) Within five (5) Business Days after receipt by the
Borrowers of any notice referred to in Sections 3(k) or 5(c), the
Borrowers shall pay to the Agent for the account of the Lender issuing
such notice such additional amounts as are required to compensate such
Lender for the increased cost, reduce payments or increase capital
requirements identified therein, as the case may be.
(d) DISCRETION OF LENDER AS TO MANNER OF FUNDING. Notwithstanding
any provisions of this Agreement to the contrary, each Lender shall be
entitled to fund and maintain its funding of all or any part of its Loan in
any manner it sees fit, it being understood, however, that for the purposes
of this Agreement all determinations hereunder shall be made as if each
Lender had actually funded and maintained each Eurodollar Loan through the
purchase of deposits having a maturity corresponding to the last day of the
Interest Period applicable to such Eurodollar Loan and bearing an interest
rate to the applicable interest rate for such Eurodollar Period.
(e) BREAKAGE FEES. Without duplication under any other provision
hereof, if any Lender incurs any loss, cost or expense including, without
limitation, any loss of profit and loss, cost, expense or premium
reasonably incurred by reason of the liquidation or re-employment of
deposits or other funds acquired by such Lender to fund or maintain any
Eurodollar Loan or the relending or reinvesting of such deposits or amounts
paid or prepaid to the Lenders as a result of any of the following events
other than any such occurrence as a result in the change of circumstances
described in Sections 5(a) and (b):
(i) any payment, prepayment or conversion of a Eurodollar Loan
on a date other than the last day of its Interest Period (whether by
acceleration, prepayment or otherwise);
(ii) any failure to make a principal payment of a Eurodollar
Loan on the due date thereof; or
(iii) any failure by the Borrowers to borrow, continue, prepay
or
-23-
convert to a Eurodollar Loan on the dates specified in a notice
given pursuant to Section 2(c) or 4(c) hereof;
then the Borrowers shall pay to such Lender such amount as will reimburse
such Lender for such loss, cost or expense. If any Lender makes such a
claim for compensation, it shall furnish to Borrowers and Agent a statement
setting forth the amount of such loss, cost or expense in reasonable detail
(including an explanation of the basis for and the computation of such
loss, cost or expense) and the amounts shown on such statement shall be
conclusive and binding absent manifest error.
6. COLLATERAL SECURITY. To secure the performance by Borrowers of their
obligations hereunder, and under the Notes and Security Instruments, whether now
or hereafter incurred, matured or unmatured, direct or contingent, joint or
several, or joint and several, including extensions, modifications, renewals and
increases thereof, and substitutions therefore, Borrowers shall grant and assign
to Agent for the ratable benefit of the Lenders a first and prior Lien on
certain of its Oil and Gas Properties, certain related equipment, oil and gas
inventory and proceeds of the foregoing. The Oil and Gas Properties herewith
mortgaged to the Agent shall represent not less than 85% of the Engineered Value
(as hereinafter defined) of Borrowers' Oil and Gas Properties as of the
Effective Date. Obligations arising from agreements arising from Rate
Management Transactions between Borrowers and one or more of the Lenders or an
Affiliate of any of the Lenders providing for the hedging, forward sale or swap
of crude oil or natural gas or interest rate protection shall be secured by the
Collateral (as hereinafter defined) on a pari passu basis with the indebtedness
and obligations of the Borrowers under the Loan Documents. In addition to the
foregoing, the Agent, on behalf of the Lenders, shall require that all notes and
liens currently held by Compass Bank to secure obligations under the Credit
Agreement be assigned to the Agent for the ratable benefit of the Lenders under
this Agreement. All Oil and Gas Properties and other collateral in which
Borrowers herewith grant or hereafter grant to Agent for the ratable benefit of
the Lenders a first and prior Lien (to the satisfaction of the Agent) in
accordance with this Section 6 or the Oil and Gas Properties and other
collateral in which the Agent has acquired an interest for the ratable benefit
of the Lenders from Compass Bank, as such properties and interests are from time
to time constituted, are hereinafter collectively called the "Collateral".
The granting and assigning of such security interests and Liens by
Borrowers shall be pursuant to Security Instruments in form and substance
reasonably satisfactory to the Agent. Concurrently with the delivery of each of
the Security Instruments or within a reasonable time thereafter, Borrowers shall
furnish to the Agent mortgage and title opinions and other title information
satisfactory to Agent with respect to the title and Lien status of Borrowers'
interests in not less than 90% of the Engineered Value of the Oil and Gas
Properties covered by the Security Instruments as Agent shall have designated.
"Engineered Value" for this purpose shall mean future net revenues discounted at
the discount rate being used by the Agent as of the date
-24-
of any such determination utilizing the pricing parameters used in the
engineering report furnished to the Agent for the ratable benefit of the
Lenders, pursuant to Sections 7 and 12 hereof. Borrowers will cause to be
executed and delivered to the Agent, in the future, additional Security
Instruments if the Agent reasonably deems such are necessary to insure
perfection or maintenance of Lenders' security interests and Liens in the Oil
and Gas Properties or any part thereof.
7. BORROWING BASE.
(a) INITIAL BORROWING BASE. At the Effective Date, the Borrowing Base
shall be $95,000,000.
(b) SUBSEQUENT DETERMINATIONS OF BORROWING BASE. Subsequent
determinations of the Borrowing Base shall be made by the Lenders at least
semi-annually on May 1 and November 1 of each year beginning May 1, 2000 or
as Unscheduled Redeterminations. In connection with, and as of, each
determination of the Borrowing Base, the Lenders shall also redetermine the
Monthly Commitment Reduction. The Borrowers shall furnish to the Lenders
as soon as possible but in any event no later than April 1 of each year,
beginning April 1, 2000, with an Engineering Report in form and substance
satisfactory to the Agent prepared by an independent petroleum engineering
firm or firms acceptable to Agent covering the Oil and Gas Properties
utilizing economic and pricing parameters used by Agent as established from
time to time, together with such other information concerning the value of
the Oil and Gas Properties as the Agent shall deem necessary to determine
the value of the Oil and Gas Properties. By October 1 of each year, or
within thirty (30) days after either (i) receipt of notice from Agent that
the Lenders require an Unscheduled Redetermination, or (ii) the Borrowers
give notice to Agent of its desire to have an Unscheduled Redetermination
performed, the Borrowers shall furnish to the Lenders an engineering report
in form and substance satisfactory to Agent prepared by Borrowers' in-house
engineering staff valuing the Oil and Gas Properties utilizing economic and
pricing parameters used by the Agent as established from time to time,
together with such other information, reports and data concerning the value
of the Oil and Gas Properties as Agent shall deem reasonably necessary to
determine the value of such Oil and Gas Properties. Agent shall by written
notice to the Borrowers no later than May 1 and November 1 of each year, or
within a reasonable time thereafter (herein called the "Determination
Date"), notify the Borrowers of the designation by the Lenders of the new
Borrowing Base and Monthly Commitment Reduction for the period beginning on
such Determination Date and continuing until, but not including, the next
Determination Date. If an Unscheduled Redetermination is made by the
Lenders, the Agent shall notify the Borrowers within a reasonable time
after receipt of all requested information of the new Borrowing Base and
Monthly Commitment Reduction, and such new Borrowing Base and Monthly
Commitment Reduction shall continue until the next Determination Date. If
the Borrowers do not furnish all such
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information, reports and data by any date specified in this Section
7(b), unless such failure is of no fault of the Borrowers, the
Lenders may nonetheless designate the Borrowing Base and Monthly
Commitment Reduction at any amounts which the Lenders in their
reasonable discretion determine and may redesignate the Borrowing
Base and Monthly Commitment Reduction from time to time thereafter
until the Lenders receive all such information, reports and data,
whereupon the Lenders shall designate a new Borrowing Base and
Monthly Commitment Reduction as described above. Each Lender
shall determine the amount of the Borrowing Base and Monthly
Commitment Reduction based upon the loan collateral value which
such Lender in its reasonable discretion (using such methodology,
assumptions and discounts rates as such Lender customarily uses in
assigning collateral value to oil and gas properties, oil and gas
gathering systems, gas processing and plant operations) assigns to
such Oil and Gas Properties of the Borrowers at the time in
question and based upon such other credit factors consistently
applied (including, without limitation, the assets, liabilities,
cash flow, business, properties, prospects, management and
ownership of the Borrowers and their affiliates) as such Lender
customarily considers in evaluating similar oil and gas credits,
but such Lender in its discretion shall not be required to give
any additional positive value to any Oil and Gas Property over the
current economic and pricing parameters used by such Lender for
such Determination Date which additional value is derived directly
from a hedging, forward sale or swap agreement covering such Oil
and Gas Property as of the date of such determination. All
determinations or Unscheduled Redeterminations of the Borrowing
Base and the Monthly Commitment Reduction require the approval of
Majority Lenders; provided, however, that notwithstanding anything
to the contrary herein, the amount of the Borrowing Base may not
be increased, nor may the Monthly Commitment Reduction be reduced,
without the approval of all Lenders. If the Lenders cannot
otherwise agree on the Borrowing Base or the Monthly Commitment
Reduction, the Agent shall notify each of the Lenders of such fact
or facts and each Lender will submit within five (5) days
thereafter its proposed Borrowing Base and Monthly Commitment
Reduction. The redetermined Borrowing Base and Monthly Commitment
Reduction shall be then determined based upon the weighted
arithmetic average of the proposed amounts submitted by each
Lender, said proposals to be weighted according to each Lender's
Commitment. If at any time any of the Oil and Gas Properties are
sold, the Borrowing Base then in effect shall automatically be
reduced by a sum equal to the amount of prepayment required to be
made pursuant to Section 12(r) hereof. The Borrowing Base shall
be additionally reduced from time to time pursuant to the
provisions of Sections 2(e) and 2(f) hereof. It is expressly
understood that the Lenders have no obligation to designate the
Borrowing Base or the Monthly Commitment Reduction at any
particular amounts, except in the exercise of their discretion,
whether in relation to the Commitment or otherwise. Provided,
however, that the Lenders shall not have the obligation to
designate a Borrowing Base in an amount in excess of the
Commitment.
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8. FEES.
(a) UNUSED COMMITMENT FEE. The Borrowers shall pay to Agent for the
ratable benefit of the Lenders an unused commitment fee (the "Unused
Commitment Fee") equivalent to the Unused Commitment Fee Rate times the
daily average of the unadvanced amount of the Commitment. Such Unused
Commitment Fee shall be calculated on the basis of a year consisting of 360
days. The Unused Commitment Fee shall be payable in arrears on the last
Business Day of each calendar quarter beginning December 31, 1999 with the
final fee payment due on the Maturity Date for any period then ending for
which the Unused Commitment Fee shall not have been theretofore paid. In
the event the Commitment terminates on any date prior to the end of any
such monthly period, the Borrowers shall pay to the Agent for the ratable
benefit of the Lenders, on the date of such termination, the total Unused
Commitment Fee due for the period in which such termination occurs.
(b) THE LETTER OF CREDIT FEE. Borrowers shall pay to the Agent the
Letter of Credit fees required above in Section 2(d).
(c) AGENCY FEES. The Borrowers shall pay to the Agent certain fees
for acting as Agent hereunder in amounts to be negotiated between the
Borrowers and the Agent.
9. PREPAYMENTS.
(a) VOLUNTARY PREPAYMENTS. Subject to the provisions of Section 5(g)
hereof, the Borrowers may at any time and from time to time, without
penalty or premium, prepay the Notes, in whole or in part. Each such
prepayment shall be made on at least three (3) Business Days' notice to
Agent in the case of Eurodollar Loan Tranches and without notice in the
case of Base Rate Loans and shall be in a minimum amount of (i) $500,000 or
any whole multiple of $100,000 in excess thereof (or the unpaid balance of
the Notes, whichever is less), for Base Rate Loans, plus accrued interest
thereon and (ii) $1,000,000 or any whole multiple of $100,000 in excess
thereof (or the unpaid balance on the Notes, whichever is less) for
Eurodollar Loans, plus accrued interest thereon to the date of prepayment.
(b) MANDATORY PREPAYMENT FOR BORROWING BASE DEFICIENCY. In the event
the Total Outstandings ever exceed the Borrowing Base as determined by
Lenders pursuant to Section 7(b) hereof, the Borrowers shall, within thirty
(30) days after written notification from the Agent, either (A) by
instruments reasonably satisfactory in form and substance to the Lender,
provide the Agent with collateral with value and quality in amounts
satisfactory to all of the Lenders in their discretion in order to increase
the Borrowing Base by an amount at least equal to such excess, or (B)
prepay, without premium or penalty, the principal amount of the Notes in an
amount at least equal to such excess plus accrued interest thereon to the
date of prepayment, or (C) prepay, without premium or penalty, the
principal amount
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of such excess in five (5) equal monthly installments to
be applied to principal plus accrued interest thereon with the first such
monthly payment being due upon the 30th day after receipt of notice of
such deficiency. If the Total Outstandings ever exceed the Commitment as a
result of a Monthly Commitment Reduction or any other required reduction in
the Commitment, then in such event, Borrowers shall, upon written notice,
immediately prepay the principal amount of the Notes in an amount at least
equal to such excess plus accrued interest to the date of prepayment.
10. REPRESENTATIONS AND WARRANTIES. In order to induce the Lenders to
enter into this Agreement, the Borrowers represent and warrant to the Lenders
(which representations and warranties will survive the delivery of the Notes)
that:
(a) CREATION AND EXISTENCE. Each Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it was formed and is duly qualified in all
jurisdictions wherein failure to qualify may result in a Material Adverse
Effect. Each Borrower has all power and authority to own its properties
and assets and to transact the business in which it is engaged.
(b) POWER AND AUTHORITY. Each Borrower is duly authorized and
empowered to create and issue the Notes; and is duly authorized and
empowered to execute, deliver and perform the Loan Documents, including
this Agreement; and all corporate action on each Borrower's part requisite
for the due creation and issuance of the Notes and for the due execution,
delivery and performance of the Loan Documents, including this Agreement,
has been duly and effectively taken.
(c) BINDING OBLIGATIONS. This Agreement does, and the Notes and
other Loan Documents upon their creation, issuance, execution and delivery
will, constitute valid and binding obligations of each Borrower,
enforceable in accordance with its respective terms (except that
enforcement may be subject to any applicable bankruptcy, insolvency, or
similar debtor relief laws now or hereafter in effect and relating to or
affecting the enforcement of creditors' rights generally).
(d) NO LEGAL BAR OR RESULTANT LIEN. The Notes and the Loan
Documents, including this Agreement, do not and will not, to the best of
each Borrower's knowledge violate any provisions of any contract,
agreement, law, regulation, order, injunction, judgment, decree or writ to
which any Borrower is subject, or result in the creation or imposition of
any lien or other encumbrance upon any assets or properties of any
Borrower, other than those contemplated by this Agreement.
(e) NO CONSENT. The execution, delivery and performance by each
Borrower of the Notes and the Loan Documents, including this Agreement,
does not require the
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consent or approval of any other person or entity, including
without limitation any regulatory authority or governmental body of
the United States or any state thereof or any political subdivision
of the United States or any state thereof except for consents
required for federal, state and, in some instances, private leases,
right of ways and other conveyances or encumbrances of oil and gas
leases.
(f) FINANCIAL CONDITION. The unaudited consolidated Financial
Statements of Middle Bay dated June 30, 1999, which have been delivered to
Lenders are complete and correct in all material respects, and fully and
accurately reflect in all material respects the financial condition and
results of the operations of the Borrowers on a consolidated basis as of
the date or dates and for the period or periods stated subject to normal
year-end adjustments and provided that such Financial Statements do not
contain footnotes. No change has since occurred in the condition,
financial or otherwise, of any Borrower which is reasonably expected to
have a Material Adverse Effect, except as disclosed to the Lenders in
Schedule "2" attached hereto.
(g) LIABILITIES. No Borrower has any material liability, direct or
contingent, except as disclosed to the Lenders in the Financial Statements
and on Schedule "3" attached hereto. No unusual or unduly burdensome
restrictions, restraint, or hazard exists by contract, law or governmental
regulation or otherwise relative to the business, assets or properties of
any Borrower which is reasonably expected to have a Material Adverse
Effect.
(h) LITIGATION. Except as described in the Financial Statements, or
as otherwise disclosed to the Lenders in Schedule "4" attached hereto,
there is no litigation, legal or administrative proceeding, investigation
or other action of any nature pending or, to the knowledge of the officers
of any of the Borrowers threatened against or affecting any of the
Borrowers which involves the possibility of any judgment or liability not
fully covered by insurance, and which is reasonably expected to have a
Material Adverse Effect.
(i) TAXES; GOVERNMENTAL CHARGES. Each Borrower has filed all tax
returns and reports required to be filed and has paid all taxes,
assessments, fees and other governmental charges levied upon it or its
assets, properties or income which are due and payable, including interest
and penalties, the failure of which to pay could reasonably be expected to
have a Material Adverse Effect, except such as are being contested in good
faith by appropriate proceedings and for which adequate reserves for the
payment thereof as required by GAAP has been provided and levy and
execution thereon have been stayed and continue to be stayed.
(j) TITLES, ETC. Each Borrower has good and defensible title to all
of its assets, including without limitation, the Oil and Gas Properties,
free and clear of all liens or other encumbrances except Permitted Liens.
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(k) DEFAULTS. No Borrower is in default and no event or circumstance
has occurred which, but for the passage of time or the giving of notice, or
both, would constitute a default under any loan or credit agreement,
indenture, mortgage, deed of trust, security agreement or other agreement
or instrument to which any Borrower is a party in any respect that would be
reasonably expected to have a Material Adverse Effect. No Event of Default
hereunder has occurred and is continuing.
(l) CASUALTIES; TAKING OF PROPERTIES. Since the dates of the latest
Financial Statements of the Borrowers delivered to Lenders, neither the
business nor the assets or properties of any Borrower has been affected (to
the extent it is reasonably likely to cause a Material Adverse Effect), as
a result of any fire, explosion, earthquake, flood, drought, windstorm,
accident, strike or other labor disturbance, embargo, requisition or taking
of property or cancellation of contracts, permits or concessions by any
domestic or foreign government or any agency thereof, riot, activities of
armed forces or acts of God or of any public enemy.
(m) USE OF PROCEEDS; MARGIN STOCK. The proceeds of the Commitment
may be used by the Borrowers for the purposes of (i) refinance existing
indebtedness, (ii) acquisition and development of oil and gas properties,
(iii) Letters of Credit, (iv) working capital and (v) general corporate
purposes including redemption of the Series C Stock made in compliance with
the requirements of Section 13(f) hereof. None of the Borrowers are
engaged principally or as one of their important activities in the business
of extending credit for the purpose of purchasing or carrying any "margin
stock " as defined in Regulation U of the Board of Governors of the Federal
Reserve System (12 C.F.R. Part 221), or for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or
carry a margin stock or for any other purpose which might constitute this
transaction a "purpose credit" within the meaning of said Regulation U.
No Borrower nor any person or entity acting on behalf of the Borrowers
has taken or will take any action which might cause the loans hereunder or
any of the Loan Documents, including this Agreement, to violate Regulation
U or any other regulation of the Board of Governors of the Federal Reserve
System or to violate the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereafter be in effect.
(n) LOCATION OF BUSINESS AND OFFICES. The principal place of
business and chief executive offices of the each Borrower is located at the
address stated in Section 17 hereof.
(o) COMPLIANCE WITH THE LAW. To the best of each Borrower's
knowledge, no Borrower:
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(i) is in violation of any law, judgment, decree, order,
ordinance, or governmental rule or regulation to which Borrower, or
any of its assets or properties are subject; or
(ii) has failed to obtain any license, permit, franchise or
other governmental authorization necessary to the ownership of any of
its assets or properties or the conduct of its business;
which violation or failure is reasonably expected to have a Material
Adverse Effect.
(p) NO MATERIAL MISSTATEMENTS. No information, exhibit or report
furnished by any Borrower to the Lenders in connection with the negotiation
of this Agreement or in the preparation of the offering memo contained any
material misstatement of fact or omitted to state a material fact or any
fact necessary to make the statement contained therein not materially
misleading.
(q) NOT A UTILITY. No Borrower is an entity engaged in the State of
Texas in the (i) generation, transmission, or distribution and sale of
electric power; (ii) transportation, distribution and sale through a local
distribution system of natural or other gas for domestic, commercial,
industrial, or other use; (iii) provision of telephone or telegraph service
to others; (iv) production, transmission, or distribution and sale of steam
or water; (v) operation of a railroad; or (vii) provision of sewer service
to others.
(r) ERISA. Each Borrower is in compliance in all material respects
with the applicable provisions of ERISA, and no "reportable event", as such
term is defined in Section 403 of ERISA, has occurred with respect to any
Plan of any Borrower.
(s) PUBLIC UTILITY HOLDING COMPANY ACT. No Borrower is a "holding
company", or "subsidiary company" of a "holding company", or an "affiliate"
of a "holding company" or of a"subsidiary company" of a "holding company",
or a "public utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
(t) SUBSIDIARIES. Each of the Borrowers' Subsidiaries are listed on
Schedule "5" hereto.
(u) ENVIRONMENTAL MATTERS. Except as disclosed on Schedule "6", no
Borrower (i) has received notice or otherwise learned of any Environmental
Liability which would be reasonably likely to individually or in the
aggregate have a Material Adverse Effect arising in connection with (A) any
non-compliance with or violation of the requirements of any Environmental
Law or (B) the release or threatened release of any toxic or hazardous
waste into the environment, (ii) has received notice of any threatened or
actual
-31-
liability in connection with the release or notice of any threatened
release of any toxic or hazardous waste into the environment which would be
reasonably likely to individually or in the aggregate have a Material
Adverse Effect or (iii) has received notice or otherwise learned of any
federal or state investigation evaluating whether any remedial action is
needed to respond to a release or threatened release of any toxic or
hazardous waste into the environment for which any Borrower is or may be
liable which may reasonably be expected to result in a Material Adverse
Effect.
(v) LIENS. Except (i) as disclosed on Schedule "1" hereto and (ii)
for Permitted Liens, the assets and properties of the each Borrower are
free and clear of all liens and encumbrances.
(w) YEAR 2000 COMPLIANCE. Each Borrower represents and warrants to
Lenders that:
(i) It will use its best efforts to cause all devices,
systems, machinery, information technology, computer software and
hardware, and other date sensitive technology (jointly and severally
the "Systems") necessary for each Borrower carry on its business as
presently conducted and as contemplated to be conducted in the future
to be Year 2000 Compliant within a period of time calculated to result
in no material disruption of any of any Borrower's business
operations. For purposes of these provisions, "Year 2000 Compliant"
means that such Systems are designed to be used prior to, during and
after the Gregorian calendar year 2000 A.D. and will operate during
each such time period without error relating to date data,
specifically including any error relating to, or the product of, date
data which represents or references different centuries or more than
one century.
(ii) Each Borrower has: (A) undertaken, or will undertake, an
inventory, review, and assessment of all areas within its business and
operations that could be adversely affected by the failure of any
Borrower to be Year 2000 Compliant on a timely basis; (B) developed,
or will develop, a plan and time line for becoming Year 2000
Compliant on a timely basis; (C) to date, implemented, or will
implement, that plan in accordance with that timetable in all material
respects on a best-efforts basis.
(iii) Each Borrower has either made, or will make, written
inquiry of each of its vendors, and have obtained, or will obtain, in
writing confirmations from all such persons, as to whether such
persons have initiated programs to become Year 2000 Compliant and on
the basis of such confirmations. Each Borrower reasonably believes
that all such persons will be or become so
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compliant. For purposes hereof, "vendors" refers to those
vendors of Borrowers whose business failure would, with reasonable
probability, result in a Material Adverse Effect on the business,
properties, condition (financial or otherwise), or prospects of any
Borrower.
(iv) The fair market value of all Collateral pledged to Lenders
to secure the Loan and the Notes and all of Borrowers' obligations
hereunder are not and shall not be less than currently anticipated or
subject to deterioration in value because of the failure of such
Collateral to be Year 2000 Compliant.
11. CONDITIONS OF LENDING.
(a) The effectiveness of this Agreement, and the obligation to make
the initial Advance or issue any initial Letter of Credit under the
Commitment shall be subject to satisfaction of the following conditions
precedent:
(i) EXECUTION AND DELIVERY. Each Borrower shall have executed
and delivered the Agreement, the Notes and other required Loan
Documents, all in form and substance satisfactory to the Agent;
(ii) LEGAL OPINION. The Agent shall have received from
Borrowers' legal counsel a favorable legal opinion in form and
substance satisfactory to it (i) as to the matters set forth in
Subsections 10(a), (b), (c), (d), (e) and (h) hereof and (ii) as to
such other matters as Agent or its counsel may reasonably request;
provided that the opinion as to 10(e) and 10(h) may be limited to
knowledge;
(iii) CORPORATE RESOLUTIONS. The Agent shall have received
appropriate certified corporate resolutions of each Borrower;
(iv) GOOD STANDING. The Agent shall have received evidence of
existence and good standing for each Borrower;
(v) INCUMBENCY. The Agent shall have received a signed
certificate of each Borrower, certifying the names of the officers of
each Borrower authorized to sign loan documents on behalf of each
Borrower, together with the true signatures of each such officer. The
Agent may conclusively rely on such certificate until the Agent
receives a further certificate of any Borrower canceling or amending
the prior certificate and submitting signatures of the officers named
in such further certificate;
(vi) ARTICLES OF INCORPORATION AND BYLAWS. The Agent shall
have
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received copies of the Articles of Incorporation of each Borrower
and all amendments thereto, certified by the Secretary of State of the
State of its incorporation, and a copy of the bylaws of each Borrower
and all amendments thereto, certified by each Borrower as being true,
correct and complete;
(vii) CLOSING OF ▇▇▇▇▇ ACQUISITION. The Agent shall have
received satisfactory evidence that the ▇▇▇▇▇ Acquisition will close
concurrently with the initial funding hereunder;
(viii) INTERCREDITOR AGREEMENT. The Agent, the Borrowers and the
Subordinated Lenders shall have executed and delivered the
Intercreditor Agreements in form and substance satisfactory to the
Agent;
(ix) CLOSING OF SECURITY PURCHASE AGREEMENTS. The Agent shall
have received satisfactory evidence of the closing and funding of the
transactions described in all of the Security Purchase Agreements;
(x) REPRESENTATION AND WARRANTIES. The representations and
warranties of Borrower under this Agreement are true and correct in
all material respects as of such date, as if then made (except to the
extent that such representations and warranties related solely to an
earlier date);
(xi) NO EVENT OF DEFAULT. No Event of Default shall have
occurred and be continuing nor shall any event have occurred or failed
to occur which, with the passage of time or service of notice, or
both, would constitute an Event of Default;
(xii) OTHER DOCUMENTS. Agent shall have received such other
instruments and documents incidental and appropriate to the
transaction provided for herein as Agent or its counsel may reasonably
request, and all such documents shall be in form and substance
reasonably satisfactory to the Agent; and
(xiii) LEGAL MATTERS SATISFACTORY. All legal matters incident to
the consummation of the transactions contemplated hereby shall be
reasonably satisfactory to special counsel for Agent retained at the
expense of the Borrower.
(b) The obligation of the Lenders to make any Advance or issue any
Letter of Credit under the Commitment (including the initial Advance) shall
be subject to the following additional conditions precedent that, at the
date of making each such Advance and after giving effect thereto:
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(i) REPRESENTATION AND WARRANTIES. The representations and
warranties of Borrower under this Agreement are true and correct in
all material respects as of such date, as if then made (except to the
extent that such representations and warranties related solely to an
earlier date);
(ii) NO EVENT OF DEFAULT. No Event of Default shall have
occurred and be continuing nor shall any event have occurred or failed
to occur which, with the passage of time or service of notice, or
both, would constitute an Event of Default;
(iii) OTHER DOCUMENTS. Agent shall have received such other
instruments and documents incidental and appropriate to the
transaction provided for herein as Agent or its counsel may reasonably
request, and all such documents shall be in form and substance
reasonably satisfactory to the Agent; and
(iv) LEGAL MATTERS SATISFACTORY. All legal matters incident to
the consummation of the transactions contemplated hereby shall be
reasonably satisfactory to special counsel for Agent retained at the
expense of Borrower.
12. AFFIRMATIVE COVENANTS. A deviation from the provisions of this
Section 12 shall not constitute an Event of Default under this Agreement if such
deviation is consented to in writing by Majority Lenders prior to the date of
deviation. The Borrowers will at all times comply with the covenants contained
in this Section 12 from the date hereof and for so long as the Commitments are
in existence or any amount is owed to the Agent or the Lenders under this
Agreement or the other Loan Documents.
(a) FINANCIAL STATEMENTS AND REPORTS. Each Borrower shall promptly
furnish to the Agent from time to time upon request such information
regarding the business and affairs and financial condition of each
Borrower, as the Agent may reasonably request, and will furnish to the
Agent:
(i) ANNUAL AUDITED FINANCIAL STATEMENTS. As soon as
available, and in any event within ninety (90) days after the close of
each fiscal year beginning with the fiscal year ended December 31,
1999, the annual audited consolidated and consolidating Financial
Statements of Borrowers, prepared in accordance with GAAP accompanied
by an unqualified opinion rendered by an independent accounting firm
reasonably acceptable to the Agent;
(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and
in any event within forty-five (45) days after the end of each fiscal
quarter of each year
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beginning with the fiscal quarter ended December 31, 1999,
the quarterly unaudited, consolidated and consolidating Financial
Statements of the Borrowers prepared in accordance with GAAP;
(iii) REPORT ON PROPERTIES. As soon as available and in any
event on or before April 1 and October 1 of each calendar year, and at
such other times as any Lender, in accordance with Section 7 hereof,
may request, the engineering reports required to be furnished to the
Agent under such Section 7 on the Oil and Gas Properties;
(iv) SEC REPORTS. As soon as available, and in any event
within five (5) days of filing, copies of all filings by each Borrower
with the Securities and Exchange Commission;
(v) ADDITIONAL INFORMATION. Promptly upon request of the
Agent from time to time any additional financial information or other
information that the Agent may reasonably request.
All such reports, information, balance sheets and Financial Statements
referred to in Subsection 12(a) above shall be in such detail as the Agent
may reasonably request and shall be prepared in a manner consistent with
the Financial Statements.
(b) CERTIFICATES OF COMPLIANCE. Concurrently with the furnishing of
the annual audited Financial Statements pursuant to Subsection 12(a)(i)
hereof and the quarterly unaudited Financial Statements pursuant to
Subsection 12(a)(ii) hereof for the months coinciding with the end of each
calendar quarter, each Borrower will furnish or cause to be furnished to
the Agent a certificate in the form of Exhibit "C" attached hereto, signed
by the President or Chief Financial Officer of each Borrower, (i) stating
that each Borrower has fulfilled in all material respects its obligations
under the Notes and the Loan Documents, including this Agreement, and that
all representations and warranties made herein and therein continue (except
to the extent they relate solely to an earlier date) to be true and correct
in all material respects (or specifying the nature of any change), or if a
Default has occurred, specifying the Default and the nature and status
thereof; (ii) to the extent requested from time to time by the Agent,
specifically affirming compliance of each Borrower in all material respects
with any of its representations (except to the extent they relate solely to
an earlier date) or obligations under said instruments; (iii) setting forth
the computation, in reasonable detail as of the end of each period covered
by such certificate, of compliance with Sections 13(b) and (c); and (iv)
containing or accompanied by such financial or other details, information
and material as the Agent may reasonably request to evidence such
compliance.
(c) ACCOUNTANTS' CERTIFICATE. Concurrently with the furnishing of
the annual
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audited Financial Statement pursuant to Section 12(a)(i) hereof,
Borrowers will furnish a statement from the firm of independent public
accountants which prepared such Financial Statement to the effect that
nothing has come to their attention to cause them to believe that there
existed on the date of such statements any Event of Default and
specifically calculating Borrowers' compliance with Sections 13(b), (c) and
(d) of this Agreement.
(d) TAXES AND OTHER LIENS. Each Borrower will pay and discharge
promptly all taxes, assessments and governmental charges or levies imposed
upon each Borrower, or upon the income or any assets or property of any
Borrower, as well as all claims of any kind (including claims for labor,
materials, supplies and rent) which, if unpaid, might become a Lien or
other encumbrance upon any or all of the assets or property of any Borrower
and which could reasonably be expected to result in a Material Adverse
Effect; provided, however, that such Borrower shall not be required to pay
any such tax, assessment, charge, levy or claim if the amount,
applicability or validity thereof shall currently be contested in good
faith by appropriate proceedings diligently conducted, levy and execution
thereon have been stayed and continue to be stayed and if such Borrower
shall have set up adequate reserves therefor, if required, under GAAP.
(e) COMPLIANCE WITH LAWS. Each Borrower will observe and comply, in
all material respects, with all applicable laws, statutes, codes, acts,
ordinances, orders, judgments, decrees, injunctions, rules, regulations,
orders and restrictions relating to environmental standards or controls or
to energy regulations of all federal, state, county, municipal and other
governments, departments, commissions, boards, agencies, courts,
authorities, officials and officers, domestic or foreign.
(f) FURTHER ASSURANCES. Borrowers will cure promptly any defects in
the creation and issuance of the Notes and the execution and delivery of
the Notes and the Loan Documents, including this Agreement. Borrowers at
their sole expense will promptly execute and deliver to Agent upon its
reasonable request all such other and further documents, agreements and
instruments in compliance with or accomplishment of the covenants and
agreements in this Agreement, or to correct any omissions in the Notes or
more fully to state the obligations set out herein.
(g) PERFORMANCE OF OBLIGATIONS. Borrowers will pay the Notes and
other obligations incurred by it hereunder according to the reading, tenor
and effect thereof and hereof; and Borrowers will do and perform every act
and discharge all of the obligations provided to be performed and
discharged by the Borrowers under the Loan Documents, including this
Agreement, at the time or times and in the manner specified.
(h) INSURANCE. The Borrowers now maintain and will continue to
maintain insurance with financially sound and reputable insurers with
respect to their respective assets
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against such liabilities, fires, casualties, risks and
contingencies and in such types and amounts as is customary in the
case of persons engaged in the same or similar businesses and
similarly situated. Upon request of the Agent, the Borrowers will
furnish or cause to be furnished to the Agent from time to time a
summary of the respective insurance coverage of Borrowers in form
and substance satisfactory to the Agent, and, if requested, will
furnish the Agent copies of the applicable policies. Upon demand
by Agent any insurance policies covering any such property shall be
endorsed (i) to provide that such policies may not be canceled,
reduced or affected in any manner for any reason without fifteen
(15) days prior notice to Agent, (ii) to provide for insurance
against fire, casualty and other hazards normally insured against,
in the amount of the full value (less a reasonable deductible not
to exceed amounts customary in the industry for similarly situated
business and properties) of the property insured, and (iii) to
provide for such other matters as the Agent may reasonably require.
The Borrowers shall at all times maintain adequate insurance with
respect to all of their assets, including but not limited to, the
Oil and Gas Properties or any collateral against its liability for
injury to persons or property, which insurance shall be by
financially sound and reputable insurers and shall without
limitation provide the following coverages: comprehensive general
liability (including coverage for damage to underground resources
and equipment, damage caused by blowouts or cratering, damage
caused by explosion, damage to underground minerals or resources
caused by saline substances, broad form property damage coverage,
broad form coverage for contractually assumed liabilities and broad
form coverage for acts of independent contractors), worker's
compensation and automobile liability. The Borrowers shall at all
times maintain cost of control of well insurance with respect to
the Oil and Gas Properties which shall insure the Borrowers against
seepage and pollution expense; redrilling expense; and cost of
control of well; fires, blowouts, etc., if deemed economical in the
reasonable discretion of the Borrowers. Additionally, the
Borrowers shall at all times maintain adequate insurance with
respect to all of its other assets and ▇▇▇▇▇ in accordance with
prudent business practices.
(i) ACCOUNTS AND RECORDS. Each Borrower will keep books, records and
accounts in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and activities,
prepared in a manner consistent with prior years, subject to changes
suggested by such Borrower's auditors.
(j) RIGHT OF INSPECTION. Each Borrower will permit any officer,
employee or agent of the Lenders to examine such Borrower's books, records
and accounts, and take copies and extracts therefrom, all at such
reasonable times during normal business hours and as often as the Lenders
may reasonably request. The Lenders will use best efforts to keep all
Confidential Information (as herein defined) confidential and will not
disclose or reveal the Confidential Information or any part thereof other
than (i) as required by law, and (ii) to the Lenders', and the Lenders'
subsidiaries', Affiliates, officers, employees, legal counsel and
regulatory authorities or advisors to whom it is necessary to reveal such
information for the
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purpose of effectuating the agreements and undertakings specified
herein or as otherwise required in connection with the enforcement
of the Lenders' and the Agent's rights and remedies under the
Notes, this Agreement and the other Loan Documents. As used
herein, "Confidential Information" means information about the
Borrowers furnished by the Borrowers to the Lenders, but does not
include information (i) which was publicly known, or otherwise
known to the Lenders, at the time of the disclosure, (ii) which
subsequently becomes publicly known through no act or omission by
the Lenders, or (iii) which otherwise becomes known to the Lenders,
other than through disclosure by the Borrowers.
(k) NOTICE OF CERTAIN EVENTS. The Borrowers shall promptly notify the
Agent if Borrowers learn of the occurrence of (i) any event which
constitutes an Event of Default together with a detailed statement by
Borrowers of the steps being taken to cure such Event of Default; (ii) any
legal, judicial or regulatory proceedings affecting Borrowers or any of the
assets or properties of Borrowers which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect; (iii) any dispute
between Borrowers and any governmental or regulatory body or any other
Person or entity which, if adversely determined, might reasonably be
expected to cause a Material Adverse Effect; (iv) any other matter which in
Borrowers' reasonable opinion could have a Material Adverse Effect.
(l) ERISA INFORMATION AND COMPLIANCE. The Borrowers will promptly
furnish to the Agent immediately upon becoming aware of the occurrence of
any "reportable event", as such term is defined in Section 4043 of ERISA,
or of any "prohibited transaction", as such term is defined in Section 4975
of the Internal Revenue Code of 1954, as amended, in connection with any
Plan or any trust created thereunder, a written notice signed by the chief
financial officer of Borrowers specifying the nature thereof, what action
Borrowers are taking or proposes to take with respect thereto, and, when
known, any action taken by the Internal Revenue Service with respect
thereto.
(m) ENVIRONMENTAL REPORTS AND NOTICES. The Borrowers will deliver to
the Agent (i) promptly upon its becoming available, one copy of each report
sent by any Borrower to any court, governmental agency or
instrumentality pursuant to any Environmental Law, (ii) notice, in
writing, promptly upon any Borrower's receipt of notice or otherwise
learning of any claim, demand, action, event, condition, report or
investigation indicating any potential or actual liability arising in
connection with (x) the non-compliance with or violation of the
requirements of any Environmental Law which reasonably could be expected
to have a Material Adverse Effect; (y) the release or threatened release
of any toxic or hazardous waste into the environment which reasonably
could be expected to have a Material Adverse Effect or which release any
Borrower would have a duty to report to any court or government agency
or instrumentality, or (iii) the existence of any Environmental Lien on
any properties or assets of any Borrower, and Borrowers shall
immediately deliver a copy of any such notice to Agent.
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(n) COMPLIANCE AND MAINTENANCE. The Borrowers will (i) observe and
comply in all material respects with all Environmental Laws; (ii) except as
provided in Subsections 12(o) and 12(p) below, maintain the Oil and Gas
Properties and other assets and properties in good and workable condition
at all times and make all repairs, replacements, additions, betterments and
improvements to the Oil and Gas Properties and other assets and properties
as are needed and proper so that the business carried on in connection
therewith may be conducted properly and efficiently at all times in the
opinion of the Borrowers exercised in good faith; (iii) take or cause to be
taken whatever actions are necessary or desirable to prevent an event or
condition of default by Borrowers under the provisions of any gas purchase
or sales contract or any other contract, agreement or lease comprising a
part of the Oil and Gas Properties or other collateral security hereunder
which default could reasonably be expected to result in a Material Adverse
Effect; and (iv) furnish Agent upon request evidence satisfactory to Agent
that there are no Liens, claims or encumbrances on the Oil and Gas
Properties, except laborers', vendors', repairmen's, mechanics', worker's,
or materialmen's liens arising by operation of law or incident to the
construction or improvement of property if the obligations secured thereby
are not yet due or are being contested in good faith by appropriate legal
proceedings or Permitted Liens.
(o) OPERATION OF PROPERTIES. Except as provided in Subsection 12(p)
and (q) below, the Borrowers will operate, or use reasonable efforts to
cause to be operated, all Oil and Gas Properties in a careful and efficient
manner in accordance with the practice of the industry and in compliance in
all material respects with all applicable laws, rules, and regulations, and
in compliance in all material respects with all applicable proration and
conservation laws of the jurisdiction in which the properties are situated,
and all applicable laws, rules, and regulations, of every other agency and
authority from time to time constituted to regulate the development and
operation of the properties and the production and sale of hydrocarbons and
other minerals therefrom; provided, however, that the Borrowers shall have
the right to contest in good faith by appropriate proceedings, the
applicability or lawfulness of any such law, rule or regulation and pending
such contest may defer compliance therewith, as long as such deferment
shall not subject the properties or any part thereof to foreclosure or
loss.
(p) COMPLIANCE WITH LEASES AND OTHER INSTRUMENTS. The Borrowers will
pay or cause to be paid and discharge all rentals, delay rentals,
royalties, production payment, and indebtedness required to be paid by
Borrowers (or required to keep unimpaired in all material respects the
rights of Borrowers in Oil and Gas Properties) accruing under, and perform
or cause to be performed in all material respects each and every act,
matter, or thing required of Borrowers by each and all of the assignments,
deeds, leases, subleases, contracts, and agreements in any way relating to
Borrowers or any of the Oil and Gas Properties and do all other things
necessary of Borrowers to keep unimpaired in all material respects the
rights of Borrowers thereunder and to prevent the forfeiture thereof or
default thereunder;
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provided, however, that nothing in this Agreement shall be deemed to
require Borrowers to perpetuate or renew any oil and gas lease or other
lease by payment of rental or delay rental or by commencement or
continuation of operations nor to prevent Borrowers from abandoning or
releasing any oil and gas lease or other lease or well thereon when, in
any of such events, in the opinion of Borrowers exercised in good faith,
it is not in the best interest of the Borrowers to perpetuate the same.
(q) CERTAIN ADDITIONAL ASSURANCES REGARDING MAINTENANCE AND
OPERATIONS OF PROPERTIES. With respect to those Oil and Gas Properties
which are being operated by operators other than the Borrowers, the
Borrowers shall not be obligated to perform any undertakings contemplated
by the covenants and agreement contained in Subsections 12(o) or 12(p)
hereof which are performable only by such operators and are beyond the
control of the Borrowers; however, the Borrowers agree to promptly take all
reasonable actions available under any operating agreements or otherwise to
bring about the performance of any such material undertakings required to
be performed thereunder.
(r) SALE OF CERTAIN ASSETS/PREPAYMENT OF PROCEEDS. The Borrowers
will immediately pay over to the Agent for the ratable benefit of the
Lenders as a prepayment of principal on the Notes, an amount equal to 100%
of the Release Price from the proceeds of the sale of the Oil and Gas
Properties, which sale has been approved in advance by the Majority
Lenders. The term "Release Price" as used herein shall mean a price
determined by the Majority Lenders in their discretion based upon the loan
collateral value of the Oil and Gas Properties being sold by Borrowers
which such Lenders in their discretion (using such methodology, assumptions
and discounts rates as such Lenders customarily use in assigning collateral
value to oil and gas properties, oil and gas gathering systems, gas
processing and plant operations) assign to such Oil and Gas Properties at
the time in question. Any such prepayment of principal on the Notes
required by this Section 12(r), shall not be in lieu of, but shall be in
addition to, any Monthly Commitment Reduction or any mandatory prepayment
of principal required to be paid pursuant to Section 9(b) hereof.
(s) TITLE MATTERS. Within ninety (90) days after the Effective Date
with respect to the Oil and Gas Properties listed on Schedule "7" hereto,
Borrowers shall furnish Agent with title opinions and/or title information
reasonably satisfactory to Agent showing good and defensible title of
Borrowers to such Oil and Gas Properties subject only to the Permitted
Liens. As to any Oil and Gas Properties hereafter mortgaged to Agent,
Borrowers will promptly (but in no event more than thirty (30) days
following such mortgaging), furnish Agent with title opinions and/or title
information reasonably satisfactory to Agent showing good and defensible
title of Borrowers to such Oil and Gas Properties subject only to Permitted
Liens.
(t) CURATIVE MATTERS. Within sixty (60) days after the Effective
Date with
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respect to matters listed on Schedule "8" and, thereafter, within
sixty (60) days after receipt by Borrowers from Agent or its counsel of
written notice of title defects the Agent reasonably requires to be cured,
Borrowers shall either (i) provide such curative information, in form and
substance satisfactory to Agent, or (ii) substitute Oil and Gas Properties
of value and quality satisfactory to the Agent for all of Oil and Gas
Properties for which such title curative was requested but upon which
Borrowers elected not to provide such title curative information, and,
within sixty (60) days of such substitution, provide title opinions or
title information satisfactory to the Agent covering the Oil and Gas
Properties so substituted. If the Borrowers fail to satisfy (i) or (ii)
above within the time specified, the loan collateral value assigned by the
Lenders to the Oil and Gas Properties for which such curative information
was requested shall be deducted from the Borrowing Base resulting in a
reduction thereof.
(u) CHANGE OF PRINCIPAL PLACE OF BUSINESS. Borrowers shall give
Agent at least thirty (30) days prior written notice of its intention to
move its principal place of business from the address set forth in
Section 17 hereof.
(v) CASH COLLATERAL ACCOUNTS. Each Borrower shall establish and
maintain with Agent one or more operating accounts (the "Operating
Accounts"), the maintenance of each of which shall be subject to such rules
and regulations as Agent from time to time specify. Such Operating
Accounts shall be the sole operating accounts of the Borrowers. Such
accounts shall be maintained with the Agent until all amounts due hereunder
and under the Notes have been paid in full. To the extent not already so
instructed, Borrowers shall within sixty (60) days of the Effective Date
instruct and cause all monetary proceeds of production from the Oil and Gas
Properties to be remitted to their respective Operating Accounts. Such
proceeds of production shall not be redirected without the prior written
consent of the Agent until such time as all indebtedness due Lenders by
Borrowers has been paid in full and the Commitments have been terminated.
Each Borrower hereby grants a security interest to Lenders in and to their
respective Operating Accounts (collectively, the "Cash Collateral
Accounts") and all checks, drafts and other items ever received by any
Lender for deposit therein. If any Event of Default shall occur and be
continuing, Agent shall have the immediate right, without prior notice or
demand, to take and apply against the Borrowers' obligations hereunder any
and all funds legally and beneficially owned by the Borrowers then or
thereafter on deposit in the Cash Collateral Accounts for the ratable
benefit of the Lenders.
(w) YEAR 2000 COMPATIBILITY. Borrowers covenant and agree with
Lenders that it will:
(i) Furnish such additional information, statements and
other reports with respect to Borrowers' activities, course of
action and progress
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towards becoming Year 2000 Compliant as Lenders may reasonably
request from time to time;
(ii) In the event of any change in circumstances that
causes or will likely cause any of Borrowers' representations and
warranties with respect to its being or becoming Year 2000
Compliant to no longer be true (hereinafter, referred to as a
"Change in Circumstances") then Borrowers shall promptly, and in
any event within ten (10) days of receipt of information
regarding a Change in Circumstances, provide Lenders with written
notice (the "Notice") that describes in reasonable detail the
Change in Circumstances and how such Change in Circumstances
caused or will likely cause Borrowers' representations and
warranties with respect to being or becoming Year 2000 Compliant
no longer to be true. Borrowers shall, within ten (10) days of a
request, also provide Lenders with any additional information
Lenders reasonably request of Borrowers in connection with the
Notice and/or a Change in Circumstances.
13. NEGATIVE COVENANTS. A deviation from the provisions of this Section
13 shall not constitute an Event of Default under this Agreement if such
deviation is consented to in writing by Majority Lenders prior to the date of
deviation. The Borrowers will at all times comply with the covenants contained
in this Section 13 from the date hereof and for so long as the Commitment is in
existence or any amount is owed to the Agent or the Lenders under this Agreement
or the other Loan Documents.
(a) NEGATIVE PLEDGE. Borrowers shall not without the prior written
consent of the Lenders:
(i) create, incur, assume or permit to exist any Lien,
security interest or other encumbrance on any of its assets or
properties except Permitted Liens; or
(ii) sell, lease, transfer or otherwise dispose of, in any
fiscal year, any of its assets except for (A) sales, leases, transfers
or other dispositions made in the ordinary course of Borrowers' oil
and gas businesses, (B) sales, leases or transfers or other
dispositions made by Borrowers between Borrowing Base Determination
Dates which do not exceed $4,000,000 (based upon Borrowing Base values
assigned by the Agent to such properties at the last Borrowing Base
redetermination) in the aggregate between such Determination Dates,
and (C) other sales, leases, transfer or other dispositions made with
the consent of Majority Lenders which are made pursuant to, and in
full compliance with, Section 12(r) hereof;
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(b) CURRENT RATIO. Borrowers shall not allow their ratio Current
Ratio to be less than 1.0 to 1.0 as of the end of any fiscal quarter.
(c) MINIMUM INTEREST COVERAGE RATIO. The Borrowers will not allow
their Minimum Interest Coverage Ratio to be less than (i) 2.5 to 1.0 for
the one quarter period ending December 31, 1999, (ii) 2.5 to 1.0 for the
two quarter period ending ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇▇) 2.5 to 1.0 for the three
quarter period ending June 30, 2000, (iv) 2.5 to 1.0 for the four quarter
period ending September 30, 2000 and each four quarter period thereafter.
(d) CONSOLIDATIONS AND MERGERS. No Borrower will consolidate or
merge with or into any other Person, except that any Borrower may merge
with another Person if such Borrower is the surviving entity in such merger
and if, after giving effect thereto, no Default or Event of Default shall
have occurred and be continuing, and except that (i) Middle Bay may merge
with 3TEC Energy Corporation, a Delaware corporation in a transaction
described in the Middle Bay Definitive Proxy Statement as filed with the
Securities and Exchange Commission on October 25, 1999 ("Proxy Statement")
and (ii) Enex and Production may merge into Middle Bay.
(e) DEBTS, GUARANTIES AND OTHER OBLIGATIONS. Without the consent of
Majority Lenders, no Borrower will incur, create, assume or in any manner
become or be liable in respect of any indebtedness, nor will any Borrower
guarantee or otherwise in any manner become or be liable in respect of any
indebtedness, liabilities or other obligations of any other person or
entity, whether by agreement to purchase the indebtedness of any other
person or entity or agreement for the furnishing of funds to any other
person or entity through the purchase or lease of goods, supplies or
services (or by way of stock purchase, capital contribution, advance or
loan) for the purpose of paying or discharging the indebtedness of any
other person or entity, or otherwise, except that the foregoing
restrictions shall not apply to:
(i) the Notes and any renewal or increase thereof, or other
indebtedness of the Borrowers heretofore disclosed to Lenders in the
Borrower's Financial Statements or on Schedule "4" hereto; or
(ii) taxes, assessments or other government charges which are
not yet due or are being contested in good faith by appropriate action
promptly initiated and diligently conducted, if such reserve as shall
be required by GAAP shall have been made therefor and levy and
execution thereon have been stayed and continue to be stayed; or
(iii) indebtedness (other than in connection with a loan or
lending transaction) incurred in the ordinary course of business,
including, but not limited
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to indebtedness for drilling, completing, leasing and reworking oil
and gas ▇▇▇▇▇; or
(iv) indebtedness evidenced by the Subordinated Notes; or
(v) any renewals or extensions of (but not increases in) any
of the foregoing.
(f) DIVIDENDS. No Borrower will declare or pay any cash dividend,
purchase, redeem or otherwise acquire for value any of its stock now or
hereafter outstanding, return any capital to its stockholders, or make any
distribution of its assets to its stockholders as such, except the
foregoing shall not apply to (i) dividends on the Series C Preferred Stock
and (ii) the redemption of the Series C Preferred Stock but such redemption
shall be allowed only if (x) such redemption is made prior to May 1, 2000,
(y) the ▇▇▇▇▇ Equity Transaction has occurred and (z) at least $5,000,000
of availability exists under the Commitment immediately after such
redemption; provided, however, that immediately before and after giving
effect thereto no (i) Default or Event of Default or (ii) Borrowing Base
deficiency or requirement to make any mandatory prepayment of principal
pursuant to Section 9(b) hereof, shall exist.
(g) LOANS AND ADVANCES. Borrowers shall not make or permit to remain
outstanding any loans or advances to or in any person or entity, except
that the foregoing restriction shall not apply to:
(i) loans or advances to any person, the material details of
which have been set forth in the Financial Statements of the Borrowers
heretofore furnished to Lenders; or
(ii) advances made in the ordinary course of Borrowers' oil and
gas business; or
(iii) loans or advances to Affiliates and non-related third
parties not exceeding $100,000 in the aggregate during the existence
of the Commitment.
(h) SALE OR DISCOUNT OF RECEIVABLES. Borrowers will not discount or
sell with recourse, or sell for less than the greater of the face or market
value thereof, any of their notes receivable or accounts receivable.
(i) NATURE OF BUSINESS. Borrowers will not permit any material
change to be made in the character of their respective businesses as
carried on at the date hereof.
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(j) TRANSACTIONS WITH AFFILIATES. Borrowers will not enter into any
transaction with any Affiliate, except transactions upon terms that are no
less favorable to it than would be obtained in a transaction negotiated at
arm's length with an unrelated third party.
(k) HEDGING TRANSACTIONS. Borrowers will not enter into any Rate
Management Transactions, except the foregoing prohibitions shall not apply
to (x) transactions consented to in writing by the Majority Lenders which
are on terms acceptable to the Majority Lenders, or (y) Pre-Approved
Contracts.
(l) INVESTMENTS. Borrowers shall not make any investments in any
person or entity, except such restriction shall not apply to:
(i) investments and direct obligations of the United
States of America or any agency thereof;
(ii) investments in certificates of deposit issued by the
Lenders or certificates of deposit with maturities of less than
one year, issued by other commercial banks in the United States
having capital and surplus in excess of $500,000,000 and which
have a rating of (A) 50 or above by Sheshunoff and (B) "B" or
above by ▇▇▇▇-▇▇▇▇▇▇; or
(iii) investments in insured money market funds, Eurodollar
investment accounts and other similar accounts at Agent or such
investment with maturities of less than ninety (90) days at other
commercial banks having capital and surplus in excess of
$500,000,000 and which have a rating of (A) 50 or above by
Sheshunoff and (B) "B" or above by ▇▇▇▇-▇▇▇▇▇▇.
(m) AMENDMENT TO ARTICLES OF INCORPORATION OR BYLAWS. Borrowers will
not permit any material amendment to, or any alteration of, its Articles
of Incorporation or Bylaws except such amendments or alterations as may be
contemplated by the Proxy Statement.
(n) PROCEEDS OF PRODUCTION. Borrowers shall not redirect the payment
of the proceeds of production from the Oil and Gas Properties to anyone or
any place other than to the Operating Accounts at the Agent.
(o) ISSUANCE OF PREFERRED STOCK. Borrowers shall not issue any
additional preferred stock after the Effective Date without the consent of
Majority Lenders.
(p) AMENDMENTS TO AND REDEMPTION OF PREFERRED STOCK OR OTHER EQUITY.
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Borrowers shall not (i) amend any outstanding equity issue after the
Effective Date without the consent of Majority Lenders, or (ii) redeem any
preferred stock (other than the Series C Preferred Stock which may be
redeemed pursuant to Section 13(f)) without the consent of Majority
Lenders.
(q) PAYMENT OR PRE-PAYMENT OF OTHER INDEBTEDNESS. Except as
otherwise provided for in this Agreement, Borrowers shall not make any
unscheduled payments on or redeem any of its indebtedness (other than
indebtedness owed the Lenders hereunder) or purchase or redeem any of their
equity unless such payment, pre-payment or redemption is approved by
Majority Lenders.
(r) SUBORDINATED INDEBTEDNESS. Borrowers shall not fail in any
respect to comply with all of the provisions of the Intercreditor
Agreements or the subordination provisions of the Security Purchase
Agreements and shall not make any payments on the Subordinated Notes in
violation of the provisions thereof. Middle Bay shall not amend in any
respect the provisions of the Subordinated Notes or the Security Purchase
Agreements, except as permitted by the provisions of the Intercreditor
Agreements or any of the Security Purchase Agreements.
14. EVENTS OF DEFAULT. Any one or more of the following events shall be
considered an "Event of Default" as that term is used herein:
(a) The Borrowers shall fail to pay when due or declared due the
principal of, and the interest on, the Notes, or any fee or any other
indebtedness of the Borrowers incurred pursuant to this Agreement or any
other Loan Document; or
(b) Any representation or warranty made by Borrowers under this
Agreement, or in any certificate or statement furnished or made to the
Lenders pursuant hereto, or in connection herewith, or in connection with
any document furnished hereunder, shall prove to be untrue in any material
respect as of the date on which such representation or warranty is made (or
deemed made), or any representation, statement (including financial
statements), certificate, report or other data furnished or to be furnished
or made by Borrowers under any Loan Document, including this Agreement,
proves to have been untrue in any material respect, as of the date as of
which the facts therein set forth were stated or certified; or
(c) Default shall be made in the due observance or performance of any
of the covenants or agreements of the Borrowers contained in the Loan
Documents, including this Agreement (excluding covenants contained in
Section 13 of the Agreement for which there is no cure period), and such
default shall continue for more than thirty (30) days after written notice
is received by Borrowers; or
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(d) Default shall be made in the due observance or performance of the
covenants of Borrowers contained in Section 13 of this Agreement; or
(e) Default shall be made in respect of any obligation for borrowed
money, other than the Notes, for which Borrowers are liable (directly, by
assumption, as guarantor or otherwise), or any obligations secured by any
mortgage, pledge or other security interest, lien, charge or encumbrance
with respect thereto, on any asset or property of any Borrower or in
respect of any agreement relating to any such obligations unless such
Borrower is not liable for same (i.e., unless remedies or recourse for
failure to pay such obligations is limited to foreclosure of the collateral
security therefor), and if such default shall continue beyond the
applicable grace period, if any; or
(f) Borrowers shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself
or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking an appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of their property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary
case or other proceeding commenced against them, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay
their debts as they become due, or shall take any corporate action
authorizing the foregoing; or
(g) An involuntary case or other proceeding, shall be commenced
against Borrowers seeking liquidation, reorganization or other relief with
respect to them or their debts under any bankruptcy, insolvency or similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of sixty (60)
days; or an order for relief shall be entered against Borrowers under the
federal bankruptcy laws as now or hereinafter in effect; or
(h) A final judgment or order for the payment of money in excess of
$1,000,000 (or judgments or orders aggregating in excess of $1,000,000)
shall be rendered against Borrowers and such judgments or orders shall
continue unsatisfied and unstayed for a period of thirty (30) days; or
(i) In the event the Total Outstandings shall at any time exceed the
Borrowing Base established for the Notes, and the Borrowers shall fail to
comply with the provisions of Section 9(b) hereof; or
(j) A Change of Control shall occur; or
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(k) A Change of Management shall occur.
Upon occurrence of any Event of Default specified in Subsections 14(f) and
(g) hereof, the entire principal amount due under the Notes and all interest
then accrued thereon, and any other liabilities of the Borrowers hereunder,
shall become immediately due and payable all without notice and without
presentment, demand, protest, notice of protest or dishonor or any other notice
of default of any kind, all of which are hereby expressly waived by the
Borrowers. In any other Event of Default, the Agent, upon request of Majority
Lenders, shall by written notice to the Borrowers declare the principal of, and
all interest then accrued on, the Notes and any other liabilities hereunder to
be forthwith due and payable, whereupon the same shall forthwith become due and
payable without presentment, demand, protest, notice of intent to accelerate,
notice of acceleration or other notice of any kind, all of which the Borrowers
hereby expressly waive, anything contained herein or in the Note to the contrary
notwithstanding. Nothing contained in this Section 14 shall be construed to
limit or amend in any way the Events of Default enumerated in the Note, or any
other document executed in connection with the transaction contemplated herein.
Upon the occurrence and during the continuance of any Event of Default, the
Lenders are hereby authorized at any time and from time to time, without notice
to the Borrowers (any such notice being expressly waived by the Borrowers), to
set-off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by any of the Lenders to or for the credit or the account of the Borrowers
against any and all of the indebtedness of the Borrowers under the Notes and the
Loan Documents, including this Agreement, irrespective of whether or not the
Lenders shall have made any demand under the Loan Documents, including this
Agreement or the Notes and although such indebtedness may be unmatured. Any
amount set-off by any of the Lenders shall be applied against the indebtedness
owed the Lenders by the Borrowers pursuant to this Agreement and the Notes. The
Lenders agree promptly to notify the Borrowers after any such setoff and
application, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Lender under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Lenders may have.
15. THE AGENT AND THE LENDERS.
(a) APPOINTMENT AND AUTHORIZATION. Each Lender hereby appoints Agent
as its nominee and agent, in its name and on its behalf: (i) to act as
nominee for and on behalf of such Lender in and under all Loan Documents;
(ii) to arrange the means whereby the funds of Lenders are to be made
available to the Borrowers under the Loan Documents; (iii) to take such
action as may be requested by any Lender under the Loan Documents (when
such Lender is entitled to make such request under the Loan Documents);
(iv) to receive all
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documents and items to be furnished to Lenders under the Loan Documents;
(v) to be the secured party, mortgagee, beneficiary, and similar party
in respect of, and to receive, as the case may be, any collateral for
the benefit of Lenders; (vi) to promptly distribute to each Lender all
material information, requests, documents and items received from the
Borrowers under the Loan Documents; (vii) to promptly distribute to each
Lender such Lender's Pro Rata Part of each payment or prepayment
(whether voluntary, as proceeds of insurance thereon, or otherwise) in
accordance with the terms of the Loan Documents and (viii) to deliver to
the appropriate Persons requests, demands, approvals and consents
received from Lenders. Each Lender hereby authorizes Agent to take all
actions and to exercise such powers under the Loan Documents as are
specifically delegated to Agent by the terms hereof or thereof, together
with all other powers reasonably incidental thereto. With respect to
its commitments hereunder and the Notes issued to it, Agent and any
successor Agent shall have the same rights under the Loan Documents as
any other Lender and may exercise the same as though it were not the
Agent; and the term "Lender" or "Lenders" shall, unless otherwise
expressly indicated, include Agent and any successor Agent in its
capacity as a Lender. Agent and any successor Agent and its Affiliates
may accept deposits from, lend money to, act as trustee under indentures
of and generally engage in any kind of business with the Borrowers, and
any person which may do business with the Borrowers, all as if Agent and
any successor Agent was not Agent hereunder and without any duty to
account therefor to the Lenders; provided that, if any payments in
respect of any property (or the proceeds thereof) now or hereafter in
the possession or control of Agent which may be or become security for
the obligations of the Borrowers arising under the Loan Documents by
reason of the general description of indebtedness secured or of property
contained in any other agreements, documents or instruments related to
any such other business shall be applied to reduction of the obligations
of the Borrowers arising under the Loan Documents, then each Lender
shall be entitled to share in such application according to its pro rata
part thereof. Each Lender, upon request of any other Lender, shall
disclose to all other Lenders all indebtedness and liabilities, direct
and contingent, of the Borrowers to such Lender as of the time of such
request.
(b) NOTE HOLDERS. From time to time as other Lenders become a party
to this Agreement, Agent shall obtain execution by the Borrowers of
additional Notes in amounts representing the Commitment of each such new
Lender, up to an aggregate face amount of all Notes not exceeding
$250,000,000. The obligation of such Lender shall be governed by the
provisions of this Agreement, including but not limited to, the obligations
specified in Section 2 hereof. From time to time, Agent may require that
the Lenders exchange their Notes for newly issued Notes to better reflect
the Commitments of the Lenders. Agent may treat the payee of any Note as
the holder thereof until written notice of transfer has been filed with it,
signed by such payee and in form satisfactory to Agent.
(c) CONSULTATION WITH COUNSEL. Lenders agree that Agent may consult
with
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legal counsel selected by Agent and shall not be liable for any action
taken or suffered in good faith by it in accordance with the advice of such
counsel. LENDERS ACKNOWLEDGE THAT GARDERE & ▇▇▇▇▇, L.L.P. IS COUNSEL FOR
BANK ONE, BOTH AS AGENT AND AS A LENDER, AND THAT SUCH FIRM DOES NOT
REPRESENT ANY OF THE OTHER LENDERS IN CONNECTION WITH THIS TRANSACTION.
(d) DOCUMENTS. Agent shall not be under a duty to examine or pass
upon the validity, effectiveness, enforceability, genuineness or value of
any of the Loan Documents or any other instrument or document furnished
pursuant thereto or in connection therewith, and Agent shall be entitled to
assume that the same are valid, effective, enforceable and genuine and what
they purport to be.
(e) RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment and
acceptance of a successor Agent as provided below, Agent may resign at any
time by giving written notice thereof to Lenders and the Borrowers, and
Agent may be removed at any time with or without cause by all Lenders. If
no successor Agent has been so appointed by all Lenders (and approved by
the Borrowers) and has accepted such appointment within 30 days after the
retiring Agent's giving of notice of resignation or removal of the retiring
Agent, then the retiring Agent may, on behalf of Lenders, appoint a
successor Agent. Any successor Agent must be approved by Borrowers, which
approval will not be unreasonably withheld. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights and duties
of the retiring Agent, and the retiring Agent, as the case may be, shall be
discharged from its duties and obligations hereunder. After any retiring
Agent's resignation or removal hereunder as Agent, the provisions of this
Section 15 shall continue in effect for its benefit in respect to any
actions taken or omitted to be taken by it while it was acting as Agent.
To be eligible to be an Agent hereunder the party serving, or to serve, in
such capacity must own a Pro Rata Part of the Commitments equal to the
level of Commitment required to be held by any Lender pursuant to
Section 28 hereof.
(f) RESPONSIBILITY OF AGENT. It is expressly understood and agreed
that the obligations of Agent under the Loan Documents are only those
expressly set forth in the Loan Documents as to each and that Agent, shall
be entitled to assume that no Default or Event of Default has occurred and
is continuing, unless Agent has actual knowledge of such fact or has
received notice from a Lender or the Borrowers that such Lender or the
Borrowers considers that a Default or an Event of Default has occurred and
is continuing and specifying the nature thereof. Neither Agent nor any of
its directors, officers, attorneys or employees shall be liable for any
action taken or omitted to be taken by them under or in connection with the
Loan Documents, except for its or their own gross negligence or willful
misconduct. Agent shall not incur liability under or in respect of any of
the Loan Documents by acting upon any notice, consent, certificate,
warranty or other paper or instrument
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believed by it to be genuine or authentic or to be signed by the proper
party or parties, or with respect to anything which it may do or refrain
from doing in the reasonable exercise of its judgment, or which may seem
to it to be necessary or desirable.
Agent shall not be responsible to Lenders for any of the Borrowers'
recitals, statements, representations or warranties contained in any of the
Loan Documents, or in any certificate or other document referred to or
provided for in, or received by any Lender under, the Loan Documents, or
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of or any of the Loan Documents or for any failure by the
Borrowers to perform any of its obligations hereunder or thereunder. Agent
may employ agents and attorneys-in-fact and shall not be answerable, except
as to money or securities received by it or its authorized agents, for the
negligence or misconduct of any such agents or attorneys-in-fact selected
by it with reasonable care.
The relationship between Agent and each Lender is only that of agent
and principal and has no fiduciary aspects. Nothing in the Loan Documents
or elsewhere shall be construed to impose on Agent any duties or
responsibilities other than those for which express provision is therein
made. In performing its duties and functions hereunder, Agent does not
assume and shall not be deemed to have assumed, and hereby expressly
disclaims, any obligation or responsibility toward or any relationship of
agency or trust with or for the Borrowers or any of their beneficiaries or
other creditors. As to any matters not expressly provided for by the Loan
Documents, Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of all Lenders and such instructions shall be binding upon all
Lenders and all holders of the Notes; provided, however, that Agent shall
not be required to take any action which is contrary to the Loan Documents
or applicable law.
Agent shall have the right to exercise or refrain from exercising,
without notice or liability to the Lenders, any and all rights afforded to
Agent by the Loan Documents or which Agent may have as a matter of law;
provided, however, Agent shall not (i) except as provided herein and in
Section 7(b) hereof, without the consent of Majority Lenders designate the
amount of the Borrowing Base or the Monthly Commitment Reduction or (ii)
take any other action with regard to amending the Loan Documents, waiving
any default under the Loan Documents or taking any other action with
respect to the Loan Documents. Provided further, however, that no
amendment, waiver, or other action shall be effected pursuant to the
preceding clause (ii) without the consent of all Lenders which: (i) would
increase the Borrowing Base or decrease the Monthly Commitment Reduction,
(ii) would reduce any fees hereunder, or the principal of, or the interest
on, any Lender's Note or Notes, (iii) would postpone any date fixed for any
payment of any fees hereunder, or any principal or interest of any Lender's
Note or Notes, (iv) would materially increase any Lender's
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obligations hereunder or would materially alter Agent's obligations to
any Lender hereunder, (v) would release Borrowers from their obligation
to pay any Lender's Note or Notes, (vi) release any of the Collateral
except as permitted by Sections 12(r) and 13(a)(ii) hereof, (vii) would
change the definition of Majority Lenders, (viii) would amend, modify or
change any provision of this Agreement requiring the consent of all the
Lenders, (ix) would waive any of the conditions precedent to the
Effective Date or the making of any Loan or issuance of any Letter of
Credit or (x) would extend the Maturity Date or (xi) would amend this
sentence or the previous sentence. Agent shall not have liability to
Lenders for failure or delay in exercising any right or power possessed
by Agent pursuant to the Loan Documents or otherwise unless such failure
or delay is caused by the gross negligence of the Agent, in which case
only the Agent responsible for such gross negligence shall have
liability therefor to the Lenders.
(g) INDEPENDENT INVESTIGATION. Each Lender severally represents and
warrants to Agent that it has made its own independent investigation and
assessment of the financial condition and affairs of the Borrowers in
connection with the making and continuation of its participation hereunder
and has not relied exclusively on any information provided to such Lender
by Agent in connection herewith, and each Lender represents, warrants and
undertakes to Agent that it shall continue to make its own independent
appraisal of the credit worthiness of the Borrowers while the Notes are
outstanding or its commitments hereunder are in force. Agent shall not be
required to keep itself informed as to the performance or observance by the
Borrowers of this Agreement or any other document referred to or provided
for herein or to inspect the properties or books of the Borrowers. Other
than as provided in this Agreement, Agent shall not have any duty,
responsibility or liability to provide any Lender with any credit or other
information concerning the affairs, financial condition or business of the
Borrowers which may come into the possession of Agent.
(h) INDEMNIFICATION. Lenders agree to indemnify Agent, ratably
according to their respective Commitments on a Pro Rata basis, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any proper
and reasonable kind or nature whatsoever which may be imposed on, incurred
by or asserted against Agent in any way relating to or arising out of the
Loan Documents or any action taken or omitted by Agent under the Loan
Documents, provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent's gross
negligence or willful misconduct. Each Lender shall be entitled to be
reimbursed by the Agent for any amount such Lender paid to Agent under this
Section 15(h) to the extent the Agent has been reimbursed for such payments
by the Borrowers or any other Person. THE PARTIES INTEND FOR THE
PROVISIONS OF THIS SECTION TO APPLY TO AND PROTECT THE AGENT FROM THE
CONSEQUENCES OF ANY LIABILITY INCLUDING STRICT LIABILITY IMPOSED OR
THREATENED TO BE IMPOSED ON AGENT AS WELL AS FROM THE CONSEQUENCES OF ITS
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OWN NEGLIGENCE, WHETHER OR NOT THAT NEGLIGENCE IS THE SOLE, CONTRIBUTING OR
CONCURRING CAUSE OF ANY SUCH LIABILITY.
(i) BENEFIT OF SECTION 15. The agreements contained in this
Section 15 are solely for the benefit of Agent and the Lenders and are not
for the benefit of, or to be relied upon by, the Borrowers, any affiliate
of the Borrowers or any other person.
(j) PRO RATA TREATMENT. Subject to the provisions of this Agreement,
each payment (including each prepayment) by the Borrowers and collection by
Lenders (including offsets) on account of the principal of and interest on
the Notes and fees provided for in this Agreement, payable by the Borrowers
shall be made Pro Rata; provided, however, in the event that any Defaulting
Lender shall have failed to make an Advance as contemplated under Section 3
hereof and Agent or another Lender or Lenders shall have made such Advance,
payment received by Agent for the account of such Defaulting Lender or
Lenders shall not be distributed to such Defaulting Lender or Lenders until
such Advance or Advances shall have been repaid in full to the Lender or
Lenders who funded such Advance or Advances.
(k) ASSUMPTION AS TO PAYMENTS. Except as specifically provided
herein, unless Agent shall have received notice from the Borrowers prior to
the date on which any payment is due to Lenders hereunder that the
Borrowers will not make such payment in full, Agent may, but shall not be
required to, assume that the Borrowers have made such payment in full to
Agent on such date and Agent may, in reliance upon such assumption, cause
to be distributed to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent the Borrowers shall not
have so made such payment in full to Agent, each Lender shall repay to
Agent forthwith on demand such amount distributed to such Lender together
with interest thereon, for each day from the date such amount is
distributed to such Lender until the date such Lender repays such amount to
Agent, at the interest rate applicable to such portion of the Loan.
(l) OTHER FINANCINGS. Without limiting the rights to which any
Lender otherwise is or may become entitled, such Lender shall have no
interest, by virtue of this Agreement or the Loan Documents, in (a) any
present or future loans from, letters of credit issued by, or leasing or
other financial transactions by, any other Lender to, on behalf of, or with
the Borrowers (collectively referred to herein as "Other Financings") other
than the obligations hereunder; (b) any present or future guarantees by or
for the account of the Borrowers which are not contemplated by the Loan
Documents; (c) any present or future property taken as security for any
such Other Financings; or (d) any property now or hereafter in the
possession or control of any other Lender which may be or become security
for the obligations of the Borrowers arising under any loan document by
reason of the general description of indebtedness secured or property
contained in any other agreements,
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documents or instruments relating to any such Other Financings.
(m) INTERESTS OF LENDERS. Nothing in this Agreement shall be
construed to create a partnership or joint venture between Lenders for any
purpose. Agent, Lenders and the Borrowers recognize that the respective
obligations of Lenders under the Commitments shall be several and not joint
and that neither Agent nor any of Lenders shall be responsible or liable to
perform any of the obligations of the other under this Agreement. Each
Lender is deemed to be the owner of an undivided interest in and to all
rights, titles, benefits and interests belonging and accruing to Agent
under the Security Instruments, including, without limitation, liens and
security interests in any collateral, fees and payments of principal and
interest by the Borrowers under the Commitments on a Pro Rata basis. Each
Lender shall perform all duties and obligations of Lenders under this
Agreement in the same proportion as its ownership interest in the Loans
outstanding at the date of determination thereof.
(n) INVESTMENTS. Whenever Agent in good faith determines that it is
uncertain about how to distribute to Lenders any funds which it has
received, or whenever Agent in good faith determines that there is any
dispute among the Lenders about how such funds should be distributed, Agent
may choose to defer distribution of the funds which are the subject of such
uncertainty or dispute. If Agent in good faith believes that the
uncertainty or dispute will not be promptly resolved, or if Agent is
otherwise required to invest funds pending distribution to the Lenders,
Agent may invest such funds pending distribution (at the risk of the
Borrowers). All interest on any such investment shall be distributed upon
the distribution of such investment and in the same proportions and to the
same Persons as such investment. All monies received by Agent for
distribution to the Lenders (other than to the Person who is Agent in its
separate capacity as a Lender) shall be held by the Agent pending such
distribution solely as Agent for such Lenders, and Agent shall have no
equitable title to any portion thereof.
16. EXERCISE OF RIGHTS. No failure to exercise, and no delay in
exercising, on the part of the Agent or the Lenders, any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right. The rights of the Agent and the Lenders hereunder shall be in addition
to all other rights provided by law. No modification or waiver of any provision
of the Loan Documents, including this Agreement, or the Note nor consent to
departure therefrom, shall be effective unless in writing, and no such consent
or waiver shall extend beyond the particular case and purpose involved. No
notice or demand given in any case shall constitute a waiver of the right to
take other action in the same, similar or other circumstances without such
notice or demand.
17. NOTICES. Any notices or other communications required or permitted to
be given by this Agreement or any other documents and instruments referred to
herein must be given in
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writing (which may be by facsimile transmission) and must be personally
delivered or mailed by prepaid certified or registered mail to the party to
whom such notice or communication is directed at the address of such party as
follows: (a) BORROWERS: c/o MIDDLE BAY OIL COMPANY, INC., ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
and Chief Executive Officer, Facsimile (▇▇▇) ▇▇▇-▇▇▇▇; (b) AGENT: BANK ONE,
TEXAS, N.A., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Facsimile No. (214)
290-2332, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, First Vice President. Any such notice
or other communication shall be deemed to have been given (whether actually
received or not) on the day it is personally delivered or delivered by
facsimile as aforesaid or, if mailed, on the third day after it is mailed as
aforesaid. Any party may change its address for purposes of this Agreement
by giving notice of such change to the other party pursuant to this Section
17. Any notice required to be given to the Lenders shall be given to the
Agent and distributed to all Lenders by the Agent.
18. EXPENSES. The Borrowers shall pay (i) all reasonable and necessary
out-of-pocket expenses of the Lenders, including reasonable fees and
disbursements of special counsel for the Agent, in connection with the
preparation of this Agreement, any waiver or consent hereunder or any amendment
hereof or any default or Event of Default or alleged default or Event of Default
hereunder, (ii) all reasonable and necessary out-of-pocket expenses of the
Agent, including reasonable fees and disbursements of special counsel for the
Agent in connection with the preparation of any participation agreement for a
participant or participants requested by the Borrowers or any amendment thereof
and (iii) if a default or an Event of Default occurs, all reasonable and
necessary out-of-pocket expenses incurred by the Lenders, including fees and
disbursements of counsel, in connection with such default and Event of Default
and collection and other enforcement proceedings resulting therefrom. THE
BORROWERS HEREBY ACKNOWLEDGE THAT GARDERE & ▇▇▇▇▇, L.L.P. IS SPECIAL COUNSEL TO
BANK ONE, AS AGENT AND AS A LENDER, UNDER THIS AGREEMENT AND THAT IT IS NOT
COUNSEL TO, NOR DOES IT REPRESENT THE BORROWERS IN CONNECTION WITH THE
TRANSACTIONS DESCRIBED IN THIS AGREEMENT. The Borrowers are relying on separate
counsel in the transaction described herein. The Borrowers shall indemnify the
Lenders against any transfer taxes, document taxes, assessments or charges made
by any governmental authority by reason of the execution, delivery and filing of
the Loan Documents. The obligations of this Section 18 shall survive any
termination of this Agreement, the expiration of the Loans and the payment of
all indebtedness of the Borrowers to the Lenders hereunder and under the Notes.
19. INDEMNITY. The Borrowers agree to indemnify and hold harmless the
Lenders and their respective officers, employees, agents, attorneys and
representatives (singularly, an "Indemnified Party", and collectively, the
"Indemnified Parties") from and against any loss, cost, liability, damage or
expense (including the reasonable fees and out-of-pocket expenses of counsel to
the Lenders, including all local counsel hired by such counsel) ("Claim")
incurred by the Lenders in investigating or preparing for, defending against, or
providing evidence,
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producing documents or taking any other action in respect of any commenced or
threatened litigation, administrative proceeding or investigation under any
federal securities law, federal or state environmental law, or any other
statute of any jurisdiction, or any regulation, or at common law or
otherwise, which is alleged to arise out of or is based upon any acts,
practices or omissions or alleged acts, practices or omissions of the
Borrowers or their agents or arises in connection with the duties,
obligations or performance of the Indemnified Parties in negotiating,
preparing, executing, accepting, keeping, completing, countersigning,
issuing, selling, delivering, releasing, assigning, handling, certifying,
processing or receiving or taking any other action with respect to the Loan
Documents and all documents, items and materials contemplated thereby even if
any of the foregoing arises out of an Indemnified Party's ordinary
negligence. The indemnity set forth herein shall be in addition to any other
obligations or liabilities of the Borrowers to the Lenders hereunder or at
common law or otherwise, and shall survive any termination of this Agreement,
the expiration of the Loans and the payment of all indebtedness of the
Borrowers to the Lenders hereunder and under the Notes, provided that the
Borrowers shall have no obligation under this Section to the Lender with
respect to any of the foregoing arising out of the gross negligence or
willful misconduct of the Lender. If any Claim is asserted against any
Indemnified Party, the Indemnified Party shall endeavor to notify the
Borrowers of such Claim (but failure to do so shall not affect the
indemnification herein made except to the extent of the actual harm caused by
such failure). The Indemnified Party shall have the right to employ, at the
Borrowers' expense, counsel of the Indemnified Parties' choosing and to
control the defense of the Claim. The Borrowers may at their own expense
also participate in the defense of any Claim. Each Indemnified Party may
employ separate counsel in connection with any Claim to the extent such
Indemnified Party believes it reasonably prudent to protect such Indemnified
Party. THE PARTIES INTEND FOR THE PROVISIONS OF THIS SECTION TO APPLY TO AND
PROTECT EACH INDEMNIFIED PARTY FROM THE CONSEQUENCES OF ANY LIABILITY
INCLUDING STRICT LIABILITY IMPOSED OR THREATENED TO BE IMPOSED ON AGENT AS
WELL AS FROM THE CONSEQUENCES OF ITS OWN NEGLIGENCE, WHETHER OR NOT THAT
NEGLIGENCE IS THE SOLE, CONTRIBUTING, OR CONCURRING CAUSE OF ANY CLAIM.
20. GOVERNING LAW. THIS AGREEMENT IS BEING EXECUTED AND DELIVERED, AND IS
INTENDED TO BE PERFORMED, IN DALLAS, DALLAS COUNTY, TEXAS, AND THE SUBSTANTIVE
LAWS OF TEXAS SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND
INTERPRETATION OF THIS AGREEMENT AND ALL OTHER DOCUMENTS AND INSTRUMENTS
REFERRED TO HEREIN, UNLESS OTHERWISE SPECIFIED THEREIN.
21. INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term of this Agreement, such provisions shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement, and the
remaining provisions of the Agreement shall remain in full force and effect
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and shall not be affected by the illegal, invalid or unenforceable provision
or by its severance from this Agreement.
22. MAXIMUM INTEREST RATE. Regardless of any provisions contained in this
Agreement or in any other documents and instruments referred to herein, the
Lenders shall never be deemed to have contracted for or be entitled to receive,
collect or apply as interest on the Notes any amount in excess of the Maximum
Rate, and in the event any Lender ever receives, collects or applies as interest
any such excess, or if an acceleration of the maturities of any Notes or if any
prepayment by the Borrowers results in the Borrowers having paid any interest in
excess of the Maximum Rate, such amount which would be excessive interest shall
be applied to the reduction of the unpaid principal balance of the Notes for
which such excess was received, collected or applied, and, if the principal
balance of such Note is paid in full, any remaining excess shall forthwith be
paid to the Borrowers. All sums paid or agreed to be paid to the Lenders for
the use, forbearance or detention of the indebtedness evidenced by the Notes
and/or this Agreement shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full so that the rate or amount of interest on
account of such indebtedness does not exceed the Maximum Rate. In determining
whether or not the interest paid or payable under any specific contingency
exceeds the Maximum Rate of interest permitted by law, the Borrowers and the
Lenders shall, to the maximum extent permitted under applicable law, (i)
characterize any non-principal payment as an expense, fee or premium, rather
than as interest; and (ii) exclude voluntary prepayments and the effect thereof;
and (iii) compare the total amount of interest contracted for, charged or
received with the total amount of interest which could be contracted for,
charged or received throughout the entire contemplated term of the Note at the
Maximum Rate.
23. AMENDMENTS. This Agreement may be amended only by an instrument in
writing executed by an authorized officer of the party against whom such
amendment is sought to be enforced.
24. MULTIPLE COUNTERPARTS. This Agreement may be executed in a number of
identical separate counterparts, each of which for all purposes is to be deemed
an original, but all of which shall constitute, collectively, one agreement. No
party to this Agreement shall be bound hereby until a counterpart of this
Agreement has been executed by all parties hereto.
25. CONFLICT. In the event any term or provision hereof is inconsistent
with or conflicts with any provision of the Loan Documents, the terms or
provisions contained in this Agreement shall be controlling.
26. SURVIVAL. All covenants, agreements, undertakings, representations
and warranties made in the Loan Documents, including this Agreement, the Notes
or other documents and instruments referred to herein shall survive all closings
hereunder and shall not
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be affected by any investigation made by any party.
27. PARTIES BOUND. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns, heirs,
legal representatives and estates, provided, however, that the Borrowers may
not, without the prior written consent of all of the Lenders, assign any rights,
powers, duties or obligations hereunder.
28. ASSIGNMENTS AND PARTICIPATIONS.
(a) Each Lender shall have the right to sell, assign or transfer
all or any part of its Note or Notes, its Commitment and its rights and
obligations hereunder to one or more Affiliates, Lenders, financial
institutions, pension plans, insurance companies, investment funds, or
similar Persons who are Eligible Assignees or to a Federal Reserve Bank;
PROVIDED, that in connection with each sale, assignment or transfer
(other than to an Affiliate, a Bank or a Federal Reserve Bank), shall
require the consent of Agent and the Borrowers, which consents will not
be unreasonably withheld; provided, however, that if an Event of Default
has occurred and is continuing, the consent of the Borrowers shall not
be required. Any such assignee, transferee or recipient shall have, to
the extent of such sale, assignment, or transfer, the same rights,
benefits and obligations as it would if it were such Lender and a holder
of such Note, Commitment and rights and obligations, including, without
limitation, the right to vote on decisions requiring consent or approval
of all Lenders or Majority Lenders and the obligation to fund its
Commitment; provided, that (1) each such sale, assignment, or transfer
(other than to an Affiliate, a Bank or a Federal Reserve Bank) shall be
in an aggregate principal amount not less than $5,000,000, (2) each
remaining Lender shall at all times maintain Commitment then outstanding
in an aggregate principal amount at least equal to $5,000,000; (3) each
such sale, assignment or transfer shall be of a Pro Rata portion of such
Lender's Commitment, (4) no Lender may offer to sell its Note or Notes,
Commitment, rights and obligations or interests therein in violation of
any securities laws; and (5) no such assignments (other than to a
Federal Reserve Bank) shall become effective until the assigning Lender
and its assignee delivers to Agent and Borrowers an Assignment and
Acceptance and the Note or Notes subject to such assignment and other
documents evidencing any such assignment. An assignment fee in the
amount of $3,500 for each such assignment (other than to an Affiliate, a
Bank or the Federal Reserve Bank) will be payable to Agent by assignor
or assignee. Within five (5) Business Days after its receipt of copies
of the Assignment and Acceptance and the other documents relating
thereto and the Note or Notes, the Borrowers shall execute and deliver
to Agent (for delivery to the relevant assignee) a new Note or Notes
evidencing such assignee's assigned Commitment and if the assignor
Lender has retained a portion of its Commitment, a replacement Note in
the principal amount of the Commitment retained by the assignor (except
as provided in the last sentence of this paragraph (a) such Note or
Notes to be in exchange for, but not in payment of, the Note or Notes
held by such Lender). On and after the effective date of an assignment
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hereunder, the assignee shall for all purposes be a Lender, party to
this Agreement and any other Loan Document executed by the Lenders and
shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party thereto,
and no further consent or action by Borrowers, Lenders or the Agent
shall be required to release the transferor Lender with respect to its
Commitment assigned to such assignee and the transferor Lender shall
henceforth be so released.
(b) Each Lender shall have the right to grant participations in all
or any part of such Lender's Notes and Commitment hereunder to one or more
pension plans, investment funds, insurance companies, financial
institutions or other Persons, provided, that:
(i) each Lender granting a participation shall retain the
right to vote hereunder, and no participant shall be entitled to
vote hereunder on decisions requiring consent or approval of
Lender or Majority Lenders (except as set forth in (iii) below);
(ii) in the event any Lender grants a participation
hereunder, such Lender's obligations under the Loan Documents
shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for the performance of
such obligations, such Lender shall remain the holder of any such
Note or Notes for all purposes under the Loan Documents, and
Agent, each Lender and Borrowers shall be entitled to deal with
the Lender granting a participation in the same manner as if no
participation had been granted; and
(iii) no participant shall ever have any right by reason of
its participation to exercise any of the rights of Lenders
hereunder, except that any Lender may agree with any participant
that such Lender will not, without the consent of such
participant (which consent may not be unreasonably withheld)
consent to any amendment or waiver requiring approval of all
Lenders.
(c) It is understood and agreed that any Lender may provide to
assignees and participants and prospective assignees and participants
financial information and reports and data concerning Borrowers' properties
and operations which was provided to such Lender pursuant to this
Agreement.
(d) Upon the reasonable request of either Agent or Borrowers, each
Lender will identify those to whom it has assigned or participated any part
of its Notes and
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Commitment, and provide the amounts so assigned or participated.
29. CHOICE OF FORUM: CONSENT TO SERVICE OF PROCESS AND JURISDICTION. THE
OBLIGATIONS OF BORROWERS UNDER THE LOAN DOCUMENTS ARE PERFORMABLE IN DALLAS
COUNTY, TEXAS. ANY SUIT, ACTION OR PROCEEDING AGAINST THE BORROWERS WITH
RESPECT TO THE LOAN DOCUMENTS OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT
THEREOF, MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS, COUNTY OF DALLAS,
OR IN THE UNITED STATES COURTS LOCATED IN DALLAS COUNTY, TEXAS AND THE BORROWERS
HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE PURPOSE
OF ANY SUCH SUIT, ACTION OR PROCEEDING. THE BORROWERS HEREBY IRREVOCABLY
CONSENT TO SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING IN SAID COURT BY
THE MAILING THEREOF BY LENDER BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
TO THE BORROWERS, AS APPLICABLE, AT THE ADDRESS FOR NOTICES AS PROVIDED IN
SECTION 17. THE BORROWERS HEREBY IRREVOCABLY WAIVE ANY OBJECTION WHICH THEY MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT BROUGHT IN THE COURTS LOCATED IN
THE STATE OF TEXAS, COUNTY OF DALLAS, AND HEREBY FURTHER IRREVOCABLY WAIVES ANY
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
30. WAIVER OF JURY TRIAL. THE BORROWERS HEREBY WAIVE, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
31. OTHER AGREEMENTS. THIS WRITTEN CREDIT AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
32. FINANCIAL TERMS. All accounting terms used in this Agreement which
are not specifically defined herein shall be construed in accordance with GAAP.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
BORROWERS:
MIDDLE BAY OIL COMPANY, INC.
an Alabama corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Title: President and Chief Executive Officer
----------------------------------------
ENEX RESOURCES CORPORATION
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Title: President and Chief Executive Officer
----------------------------------------
MIDDLE BAY PRODUCTION COMPANY, INC.
a Kansas corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Title: President and Chief Executive Officer
----------------------------------------
LENDERS:
BANK ONE, TEXAS, N.A.,
a national banking association
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, First Vice President
-▇▇-
▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
By: /s/ F.C.H. ▇▇▇▇▇
-------------------------------------------
Name: F.C.H. ▇▇▇▇▇
-----------------------------------------
Title: Senior Manager Loan Operations
----------------------------------------
UNION BANK OF CALIFORNIA, N.A.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Vice President
By: /s/ ▇▇▇ ▇▇▇▇▇
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▇▇▇ ▇▇▇▇▇, Investment Banking Officer
▇▇▇▇▇ FARGO BANK
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Vice President
CIBC, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Title: Authorized Signatory
----------------------------------------
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ADMINISTRATIVE AGENT:
BANK ONE, TEXAS, N.A.,
a national banking association
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, First Vice President
SYNDICATION AGENT:
UNION BANK OF CALIFORNIA, N.A.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Vice President
By: /s/ ▇▇▇ ▇▇▇▇▇
-------------------------------------------
▇▇▇ ▇▇▇▇▇, Investment Banking Officer
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